Aurora Investment Trust plc Intermediaries Offer

Transcription

1 Aurora Investment Trust plc Intermediaries Offer This financial promotion has been approved by Phoenix Asset Management Partners Limited ("PAMP") for the purposes of section 21 of the Financial Services and Markets Act 2000 ("FSMA 2000"). PAMP is authorised and regulated by the Financial Conduct Authority. This document has been prepared for general information purposes only and must not be relied upon in connection with any investment decision. Potential investors should seek independent financial advice from a financial advisor who is authorised under FSMA 2000 before making any investment decision. The "Important Information" section at the end of this document should be read in conjunction with this document.

2 Value Investing in Quality Stocks Aurora Investment Trust plc is a closed-end fund that invests in UK equities and trades daily on the London Stock Exchange. Since January 2016 the portfolio has been managed by the specialist investment boutique, Phoenix Asset Management Partners. Phoenix have a unique, very focused approach to stock picking that has beaten the FTSE All Share Index by 358.2% over the last 19 years.* Overview The opportunity to invest in the Phoenix style has previously only been available to professional investors in the offshore Phoenix UK Fund. Now that Phoenix are investment managers to Aurora, retail investors have easy access to the same investment strategy.** Phoenix was founded by Gary Channon in He was inspired to create a fund management business using the value investing principles of great US investors such as Warren Buffett and Phillip Fisher. Over the last 19 years the Phoenix style has evolved, now applying value principles to buying a small number of high quality businesses, temporarily cheap due to short term bad news. All investment ideas are generated in-house. The research is unique, aiming to understand what differentiates a great business from an average one. This includes: mystery shopping; competitor analysis; attending trade conventions; meeting current and ex-employees; price tracking; product analysis. Aurora has a fee structure which aligns Phoenix s interests with those of investors. There is no management fee. Instead, each year, Phoenix earns one third of the outperformance above the FTSE All Share. Investors are protected from subsequent underperformance by a clawback mechanism. *Data provided as at 31 August Performance figure relates to the Phoenix UK Fund (an unregulated collective investment scheme unavailable to retail investors) which is managed with the same investment strategy as the Aurora Investment Trust plc. **Whilst the investment strategy is the same in all material respects, the portfolio holdings will not necessarily be the same and investors in Aurora will have no exposure to the investment performance of the Phoenix UK Fund. Please refer to the important information the end of this document.

3 Phoenix Investment Track Record Phoenix also applies the value-investing approach followed by the Aurora Investment Trust plc to the Phoenix UK Fund. Given the relatively short period of time Phoenix have managed Aurora Investment Trust plc, for illustrative purposes, the below chart shows the value of 1,000 invested at the launch of the Phoenix UK Fund in 1998 to 31 August 2017, which is worth 6,347 today. Annualised 10% return (net) since inception in 1998 vs. annualised 5.4% FTSE return Value of 1,000 invested at launch of the Phoenix UK Fund to 31 August 2017 These returns relate to the offshore open-ended Phoenix UK Fund only and do not relate to the returns of Aurora Investment Trust plc. Past performance is not a guide to future performance. * Data from 30th April 1998, All-Share Index Returns with dividends reinvested In relation to the Phoenix UK Fund, Phoenix have made a total of 108 investments since launch in This chart shows how many of those ideas made a positive return ( winners ) versus how many made a negative return ( losers ). Phoenix UK Fund Stock Picking Strike Ratio Since % 79% Winners Losers

4 Aurora s Top Holdings Top 10 Stocks as at 31 August 2017 Aurora Weighting Share Price: Phoenix Estimate of Value: Lloyds 10.2% Bellway 9.2 % Sports Direct 9.1% Tesco 8.9% Vesuvius 6.1% Randall & Quilter 6.0% Morrisons 5.5% JD Wetherspoon 4.1% GlaxoSmithKline 3.9% Redrow 3.8% Investment Case Market for air travel doubles every 15 years EasyJet earns a high return on capital because it has limited competition at the busy, convenient airports it flies from Passengers pay a premium for convenience Flag carriers have much higher costs and EasyJet can steal significant market share from them Research Catalogue and analyse 2,600 Ryanair and EasyJet routes to learn about competitive landscape (every 6 months) Monitor ticket prices for completing route, verifying that easyjet maintain their price premium over Ryanair (monthly) Share Price: Phoenix Estimate of Value: Share Price: 1.81 Phoenix Estimate of Value: 4.00 Investment Case Research Investment Case Research There is an undersupply of housing in the UK due to strict planning laws High barriers to entry limit new competition Fear of falling house prices is a red herring as falling land prices mitigate the negative impact on earnings Bellway is a national business with growth potential We regularly pretend to be house hunters and obtain real-time stock availability for 90 building sites From this we estimate how many houses are being sold The land market is of critical importance to a housebuilder We spend time with land buyers to develop a deeper understanding We meet management Lost focus on customers & wasted money on unproven ventures e.g. Fresh & Easy in California This gave Aldi & Lidl breathing room But Management have gone back to basics Efficiency gains will increase margins Clear market leader with 28% share of grocery market 40% share of online grocery market We have visited hundreds of supermarkets asking, is the turnaround working? We check for: Customer service Stock availability Cleanliness Monthly price check against major competitors: 42 item shopping basket Regional market share analysis Aldi & Lidl still far behind Tesco, Morrisons & Asda in those areas where they have had stores 25 years Aldi & Lidl threat is over-estimated Share prices as at 31 August 2017 This stock information does not constitute any offer or inducement to enter into any investment activity.

5 How we do it We find great companies. We consider that the value of a company is the amount of cash it will generate over its lifetime. We are drawn to companies where this is easiest to estimate. Often these will be companies with a strong business franchise and some control over their profitability. We call this pricing power and it can come from: strong brands; a leading market position; a unique product; lowest cost of production; patents, etc. We have a wide investment universe which means we are not unnecessarily constrained by sector or size criteria. Our main concern is whether we can understand and value the business and buy it cheap enough to make great investment returns. We look for businesses that earn a return on capital of at least 15%. Most of the money generated by a business is re-invested. If we want our investments to do well over the long term then that money needs to be reinvested at high rates. A consistent high rate of return is a sign of a great business. We look for strong management teams. When buying shares in a company we are relying on the management team to do sensible things and explain them in a straightforward way. Integrity is an important quality for management to have; we want them to act in the interests of shareholders, not themselves or their colleagues. Having found great companies and good managements, we wait for the opportunity to invest at attractive prices. This can take years and may never happen. Great companies rarely trade very cheaply and if they do, it is usually because there is some recent bad news about the company, its sector or the economy. We specialise in determining whether the factors causing the share price to fall are temporary or not. Occasionally, the stock market overreacts to short term negative developments and we get a great opportunity to invest with a long-term horizon. We buy to hold. Although we are buying shares, we consider ourselves as buying a whole business. Ideally, we look for a company whose prospects are so good we could hold them forever. We stick to what we know. We have developed a deep expertise in some areas and don t operate beyond that. We are focused. We typically hold 15 to 20 stocks in the portfolio because we believe in backing our best ideas. This gives us sufficient diversification and allows us to concentrate our efforts on what we own. The ride can be bumpy. Buying a focused portfolio of stocks that are out of favour can result in a lot of volatility. Unlike most of the financial services industry, we don t consider volatility to be risk. Volatile markets provide investment opportunity.

6 What makes us different? The depth of our research. It gives us the confidence to have an unusually concentrated portfolio. Our research involves everything from hanging around with Games Workshop fanatics to analysing the Indian deodorant market. We ve monitored cricket bat prices for our work on Sports Direct and visited scores of their stores across Europe. We have recruited mystery shoppers for Morrisons, and tracked every house sale on hundreds of buildings sites to understand more about Barratt Developments. More recently, we have catalogued thousands of Easyjet and Ryanair flights, by departure airport, arrival airport, departure times and costs, to get a true understanding of the budget airline battleground. Fees Team We have a fee structure which aligns Phoenix s interests with those of investors. We charge no management fees. The only fees relate to performance, and we only earn that fee when we exceed the return of the FTSE All Share. The performance fee is one-third of that out-performance. Investors are protected from subsequent underperformance by a clawback mechanism. Phoenix only does well when investors do well. This is how it should be. We believe our fees are fair, transparent, and attractive for investors. Put simply, if we don t perform well, then we don t get paid. Aurora is governed by a Board of non-executive Directors with substantial investment management experience. The core investment team at Phoenix have been together for over 16 years. The broader team have over 80 years combined investment experience. Gary Channon Gary Channon is the Chief Investment Officer and has been since founding Phoenix in Prior to that he was Co-Head of Equity and Equity Derivatives Trading at Nomura International. Before joining Nomura he worked at Nikko and Goldman Sachs. Tristan Chapple Tristan is a Director at Phoenix, joining the firm in 2001 as a Business Manager. In 2004 he became a research analyst and in 2010 he became a partner of Phoenix. He is also a Director of the Aurora Investment Trust.

7 Disclaimer THIS DOCUMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS. INVESTORS SHOULD READ THE PROSPECTUS PUBLISHED BY AURORA INVESTMENT TRUST PLC (THE COMPANY ) IN CONNECTION WITH THE ADMISSION OF NEW SHARES OF THE COMPANY ( THE NEW SHARES ) TO THE OFFICIAL LIST OF THE UK LISTING AUTHORITY AND TO TRADING ON THE MAIN MARKET OF THE LONDON STOCK EXCHANGE. INVESTORS SHOULD NOT SUBSCRIBE FOR ANY SHARES REFERRED TO IN THIS DOCUMENT EXCEPT ON THE BASIS OF THE INFORMATION CONTAINED IN THE PROSPECTUS. Copies of the prospectus are available from the Aurora website:. This document is issued by Phoenix Asset Management Partners Limited in the United Kingdom only. Phoenix Asset Management Partners Limited is authorised and regulated in the UK by the Financial Conduct Authority. This document is not for distribution in or into any member state of the European Economic Area (other than the United Kingdom), the United States, Canada, Australia, the Republic of South Africa, Japan, or to any resident thereof, or in or into any other jurisdiction where local laws or regulations may result in a risk of civil, regulatory or criminal exposure or prosecution if this document is sent or made available to a person in that jurisdiction. The distribution of this document may be restricted by law and persons into whose possession it comes are required to inform themselves of and comply with any such restrictions. This document does not constitute or form part of, and should not be construed as constituting or forming part of, any offer to sell or issue, any invitation to make any investment in, or any solicitation of any offer to purchase or subscribe for, any securities or other investments, nor shall any part of this document constitute a recommendation regarding any securities or other investments. Application for shares may only be made in due course on the basis of a prospectus relating to the Company which may in some respects differ from the information herein. This document sets out certain features of the Company and does not purport to provide a complete description of the Company or its shares. It is for information only and may not be relied upon for any purpose, and no representation or warranty is given as to its accuracy or completeness. Views and opinions, whilst given in good faith, are subject to change without notice. Information relating to the Phoenix UK Fund (the Representative Fund ) is provided for information purposes only and does not constitute a recommendation, a solicitation, an offer, an advice, or an invitation to purchase or sell and should in no case be interpreted as such. This document has been prepared for general information purposes only and is intended to provide a summary of the subject matter covered. It does not purport to be comprehensive or to give advice. The views expressed are the views of the writer at the time of issue and may change over time. The information contained within this document has been obtained from sources believed to be reliable and accurate at the time of issue. Phoenix Asset Management Partners Limited does not accept any liability for any loss arising whether directly or indirectly from any use of this document. Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell. Reference to the names of any company is merely to explain the investment strategy or to provide information on the holdings in any fund and should not be construed as investment advice or a recommendation to invest in any of those companies. Past performance of the Representative Fund is not a reliable indicator of future results of the Representative Fund or the Company. The value of investments and any income from them may go down as well as up. Investors may get back less than the original amount invested. There is no guarantee that the Company will achieve its investment objective and investment results may vary substantially over time. Shares in an investment trust are traded on a stock market and the share price will fluctuate in accordance with supply and demand and may not reflect the underlying net asset value of the shares. Other risk factors such as political and economic conditions should also be considered. Where a fund holds a limited number of investments and one or more of those investments declines or is otherwise adversely affected, it may have a more pronounced effect on the fund s value than if a larger number of investments were held.