The Brunner Investment Trust PLC

Transcription

1 The Brunner Investment Trust PLC INVESTING INVOLVES RISK. THE VALUE OF AN INVESTMENT AND THE INCOME FROM IT MAY FALL AS WELL AS RISE AND INVESTORS MAY NOT GET BACK THE FULL AMOUNT INVESTED.

2 Brunner has a Morningstar Bronze Rating. Morningstar, Inc. All rights reserved. The information given here: (1) is protected by copyright for Morningstar and/or its content providers; (2) may not be reproduced or distributed; and (3) is not guaranteed to be accurate, complete or up-to-date. Neither Morningstar nor its content providers shall be liable for any losses or damage that result from use of this information. A ranking, a rating or an award provides no indicator of future performance and is not constant over time.

3 The Brunner Investment Trust PLC Will your income go as far as you d like? We all want our income to be enough for the life we d like. That means an income that increases over time, keeping up with rising living costs and with the resilience to ride out any difficult economic conditions. The Brunner Investment Trust PLC is a company listed on the London Stock Exchange which aims to provide its shareholders with growth in capital and dividends over the long term. The Trust is not restricted to any one country or sector. Instead, we invest in companies all over the world, seeking out the best opportunities for growth and reliable dividends wherever they may be. Brunner has paid rising dividends to its shareholders for 45 consecutive years, although past performance is no guide to the future. So Brunner could be an attractive proposition for investors planning for retirement, looking to increase their savings or wanting to supplement their income. Investing in the stock market involves risks and share prices can be volatile in the short term. However, investing in several companies can spread this risk. Brunner typically invests in 80 companies at any one time, providing shareholders with a diversified investment portfolio. This brochure details how the portfolio managers make their investment decisions and the significant research resources available to them. It also includes the history of the Trust and explains the important role of the board of directors in safeguarding shareholders interests. Brunner provides a one-stop shop investment solution for investors looking for global growth opportunities and a quarterly dividend that has risen over time. 1

4 The Brunner Investment Trust PLC Investing for the long term since 1927 The Brunner Investment Trust, which aims to provide its shareholders with growth in capital and dividends over the long term, has a long and distinguished history. In the 1870s, Sir John Brunner and Ludwig Mond set up Brunner Mond & Co. to produce chemicals for the cotton industry. The business achieved great success and subsequently merged with three other companies in 1926 to create chemical giant ICI. The following year the Brunner family chose to sell its ICI shares and establish a broad, long-term investment vehicle so in 1927, The Brunner Investment Trust was formed. Jump forward to the present day and the Brunner family retains a connection to the Board and still has a significant share holding. Now, however, Brunner shares are available for everyone to buy and are widely held by a mix of private and institutional investors, attracted by the Trust s global investment remit. management company Allianz Global Investors. This provides shareholders with an efficient, competitive, cost-effective way to gain broad investment exposure through a single investment vehicle. A Brunner Mond advertisement from 1891 Like many long-established investment trusts, Brunner s name reflects its history rather than its investment strategy. It has remained true to its roots which is to take a long-term view on its investments. Brunner is run by an independent board of directors and its portfolio is managed by a specialist investment Today, the Brunner family remains a significant shareholder in the Trust which offers an efficient and well-managed way to gain global investment exposure. 2 Sir John Brunner,

5 with Allianz Global Investors. Brunner has always been managed by Allianz Global Investors (and its predecessors Kleinwort Benson). Today the company manages 480billion 1 in assets for individuals, families and institutions worldwide. In the modern global economy, opportunities for growth and income can be found all over the world. Being able to identify and thoroughly research foreign investments can require levels of time and resources that are beyond many investors. Allianz Global Investors uses specialist in-house researchers around the world to carry out in-depth analysis across economic and industrial sectors. These analysts conduct over 5000 meetings each year with companies that represent potential investments, feeding back their insights to the portfolio managers and their teams. Brunner s investment manager also benefits from a special resource called Grassroots SM Research, offering insight that extends far beyond fundamental analysis (see page 9). Allianz Global Investors is part of the Allianz group, one of the world s foremost financial service providers with more than 85 million customers in over 70 countries 1. Portfolio Manager Lucy Macdonald with members of the Global Equity team Allianz Global Investors around the world Allianz Global Investors employs more than 600 investment professionals in 25 locations worldwide: 1 Global centres of investment expertise Investment and client service offices As at

6 The Brunner Investment Trust PLC As Chairman of the Brunner Investment Trust, I work with my fellow board directors and managers to look after shareholder interests. Carolan Dobson, Chairman I m essentially here because I am a private investor myself and I hope I can reflect that view in the deliberations of the Board. Ian Barlow FCA CTA, Audit Committee Chairman 4

7 Meet the Brunner board Brunner is run by an independent board of directors looking after shareholder interests. The Brunner board possesses a wealth of experience in business, law and investment management. Carolan Dobson (Chairman) Joined the board in December 2013 and has been Chairman since the AGM in March She is also Chairman of Aberdeen Smaller Companies High Income Trust plc, JP Morgan European Smaller Companies Plc and Schroder UK Growth Fund plc. Carolan is a non-executive director of BlackRock Latin American Investment Trust plc, Woodford Patient Capital Trust plc and London CIV (Collective Investment Vehicle). She is a trustee of NEST, and Chair of NEST S Investment Committee. Carolan was previously head of UK equities at Abbey Asset Managers, Head of Investment Trusts at Murray Johnstone and was the portfolio manager of two investment trusts. Ian Barlow FCA CTA (Fellow) (Audit Committee Chairman) Joined the board in November Ian worked full time from 1973 until 2008 at KPMG, latterly as London Office Senior Partner, and prior to that, as Head of Tax and Legal from He is a non-executive director of Smith & Nephew PLC, Foxtons Group PLC, Urban&Civic plc and First Debenture Finance PLC. Ian is a Fellow of the Institute of Chartered Accountants in England and Wales and of the Chartered Institute of Taxation. Peter Maynard Joined the board in October He is a retired solicitor and qualified with Slaughter and May in He is a non-executive director of Edinburgh Dragon Investment Trust plc. He was Group Legal Director at Prudential plc from 1998 to 2009 and Company Secretary from July Prior to that he was with HSBC for 14 years during which time he was variously a director of HSBC Investment Bank, President and Chief Executive Officer of James Capel Inc in New York and finally Deputy Group Legal Adviser. Recently he has been the Head of Group Governance and Regulatory Compliance at Old Mutual plc. He is a former chairman of the GC100 and was a supervisory board member of the London Business School Centre for Corporate Governance. Vivian Bazalgette MA (Senior Independent Director and Remuneration Committee Chairman) Joined the board in January He is Chairman of Fidelity European Values PLC and a non-executive director of Perpetual Income and Growth Investment Trust PLC. He is also an adviser to the pension fund of BAE Systems Plc. He retired as Chief Investment Officer of M & G Investment Management in September 2002 and was formerly a director of Gartmore Investment Management plc. Jim Sharp Joined the board in January He is a Partner in Sirius Equity LLP, which he co-founded in 2008, and he is a non-executive director of James Cropper PLC and feelunique.com. He began his career in financial services with J. Henry Schroder & Co from 1992 to 2002, where he was a director, and has since held senior roles with a number of private equity backed businesses. 5

8 The Brunner Investment Trust PLC 45 consecutive years of dividend growth The prospect of regular dividends may be attractive to investors looking to boost their income, in retirement or before. But they also need dividends to increase over time if they are going to be able to keep up with rising prices. The Brunner board recognises the importance of income to investors. Although income is not guaranteed and could go down as well as up, Brunner has paid increasingly higher dividends to its shareholders year-on-year for the last 45 years from 0.48 pence per share in 1972 to 15.8 pence per share in The Trust is very proud of its status as a dividend hero investment trust as defined by the AIC. Dividends are paid on a regular quarterly basis throughout the year. One of the advantages Brunner possesses in seeking to provide this rising income is how it is able to manage its dividends. Investment trusts have a structural advantage which allows them to allocate up to 15% of their investment income in good years to a revenue reserve. The huge benefit of having these reserves is that trusts can draw on them to help smooth out their own dividends during periods when the companies they invest in may be finding it difficult to keep up their dividend payments. Open-ended funds, on the other hand, are required to pay out all of the income they receive from their underlying investments in the year that it arises so if dividends fall their income payments will have to follow suit. Well-run companies like those that Brunner seeks to invest in are able to increase the prices of their goods and services over time or cut costs in order to preserve or improve their profit margins. This enables them to maintain and increase their dividends in line with or in excess of inflation. Although income is not guaranteed and could go down as well as up, Brunner has paid increasingly higher dividends to its shareholders year-on-year for the last 45 years Dividend per share history (pence) Discrete performance (%) 2 6 One year to Share price Benchmark

9 The Trust s dividend history has attracted the attention of the national press. Business An end in sight to costly debt gives this reliable dividend payer an edge Questor Trust Bargains Borrowings have dragged back Brunner s returns but these are finally falling, says Laura Suter SHAREHOLDERS in companies or funds where much of the earnings derive from overseas are watching to see whether Tuesday s announcement of a snap election will cause prices to slip back further. Sterling fell in June last year, following the Brexit referendum, which had the logical but nonetheless at the time surprising effect of boosting share prices. Profits denominated in dollars, such as those earned by many of the big FTSE 100 firms, became more valuable in sterling terms. Prices rose accordingly. Last year this sterling weakness was a key factor in the excellent results of a number of quoted investment companies. The widely held RIT Capital Partners, for example, delivered net-asset-value growth of 12.1pc. Of that, almost 10pc was attributed to the pound s fall, according to figures from Stifel, the Brunner Buy Large but narrowing discount, more flexible mandate, reducing debts analyst. A sustained recovery of the pound now threatens to claw back some of those of gains. For those investing in global investment trusts, an assessment of exposure to sterling has thus become more of a priority. The constituents of the sector, which includes some of the most popular of all collective investments, vary greatly. At one end is the 274m Independent Investment Trust, which has just 94pc in British companies, to the 5.4bn behemoth Scottish Mortgage, which has just 4pc exposure to the UK. Slightly above average is Brunner, which in recent weeks has been trimming back UK shareholdings. In March, shareholders approved a shift in mandate which would see the 386.7m trust adopt a more global footing. The benchmark for the trust has moved from being a 50:50 split between the UK and the rest of the Brunner investment trust Close: p 800 p world, to being 30pc/70pc. The portfolio is currently nearing its target 30pc exposure. Global investment trusts paring back their UK holdings are following a well trodden path one generally taken in order to secure higher and more diversified income. Dividends paid by UK companies have tended to cluster around a dwindling number of sectors and stocks, adding to risk and jeopardising some trusts commitments to sustained dividend growth. Brunner has increased its dividend every year for the past 45 years, pushing it into a small elite of income Key Numbers Year of launch: month average discount: 16.2pc Current discount: 12.5pc Total assets: 392m Dividend yield (2016): 2.7pc Most recent year s dividend: 15.8p investments. A rise in sterling poses headwinds where such trusts have not maintained sufficient dividend reserve accounts. Iain Scouller said Brunner s dividend is fairly well covered. If there is a bit of strength of sterling I would not expect it to have a negative impact on dividends. Its record of dividend growth should continue. Alongside a change in asset allocation, the fund has also undergone a change in portfolio manager. Lucy MacDonald of Allianz was appointed sole manager of the trust last year. Previously she managed only the overseas assets, but in June she Thursday 20 April 2017 was handed control of the entire portfolio. One change she is bringing about is a reduction in holdings as the fund becomes more concentrated and high-conviction. At the end of January the trust had 76 holdings, but the ultimate aim is to drop this to 60. One shadow hanging over Brunner is its costly debt, which is some of the most expensive among its peer group. Unlike the more commonly held, open-ended funds, investment trusts such as Brunner are allowed to borrow money in order to magnify market exposure if circumstances appear favourable. The strategy can reap rewards but has resulted in problems for certain trusts, one of which is the drag on performance of servicing fixedborrowing costs in periods of low and declining returns. Brunner has almost 50m debt, mostly taken out at fixed rates and at a time when interest rates were far higher. However, 18m of this debt costing an eye-watering 11.1pc runs off at the end of this year. Getting shot of this burden should boost the trust s net asset value and improve its revenues. Unfortunately, another 31m of debt at 9pc interest rate does not expire until 2023, but the board says it is looking at options to repay this early. This year s debt run-off should help to narrow the discount on the trust, which is currently 12.5pc. This has already narrowed considerably from a high of more than 20pc towards the end of last year and is comfortably below its 12-month average of 16pc. Questor says: buy Ticker: BUT TELEGRAPH MEDIA GROUP LIMITED 2017 Reproduced with permission by Media Licensing Co. ( / ). Not to be reproduced without authorisation Past performance is not a reliable indicator of future results. 1 Source: The Brunner Investment Trust PLC Annual Financial Report, to year-end Source: Lipper, percentage growth, mid to mid, total return to The benchmark for the periods shown was 50% FTSE All-Share Index and 50% FTSE World Ex UK Index. On 22 March 2017 the benchmark was changed to 70% FTSE World Ex UK Index and 30% FTSE All-Share Index. Discrete performance figures comply with the Financial Conduct Authority s regulations to enable investors to compare different products from different providers. 7

10 The Brunner Investment Trust PLC Meet the manager Brunner s investments are managed by Lucy Macdonald, Allianz Global Investors Chief Investment Officer of Global Equities, who has 32 years of experience in managing investments. Lucy decides which shares to buy and sell in order to grow the value of the portfolio and to maintain the Trust s rising income. On its appeal to investors, Lucy contends: Brunner s very much a one-stop shop, in that we offer a broad spread of global investments consisting of about 80 stocks. We seek to provide Brunner investors with healthy growth and income and we have successfully done that over many, many years. Lucy outlines the investment approach. We look for stocks with the potential for structural growth, with good cash returns, strong management and balance sheets. We look to buy these stocks at a valuation where these favourable characteristics are not fully priced in. To aid our idea generation, we have access to a global research platform which includes traditional fundamental analysis, supplemented by non-financial market based research. The considerable research resources of Allianz Global Investors are key. We re very fortunate in that we have a vast global research platform explains Lucy. We interact with our global investment analysts and colleagues in offices around the world via a social network we have developed with salesforce.com, which enables a 24 hour global conversation to take place as we review and assess the attractiveness of various investment ideas. We take on board all of their ideas, all of the work undertaken in terms of fundamental analysis, hundreds of company meetings, Our focus is on buying good quality companies at the right time and at the right price the very essence of the Brunner investment strategy model building and research into those companies and their industries in great detail. We have frequent team meetings and regular dialogue with all of the analysts video conferencing with Frankfurt, talking with Hong Kong. We incorporate the strongest ideas and we build the portfolio that way from the bottom up. Lucy makes special mention of a particular resource called Grassroots SM Research*: We think of it as our own intelligence agency. Through Grassroots SM Research, we can access information that s not widely available. Grassroots SM Research has conducted over a quarter of a million interviews with businesses and consumers since 1984 in order to assess investment 8

11 The information provided in this document including any expression of opinion is for information purposes only and is given on the understanding that it is not a recommendation and anyone who acts on it, or changes their opinion thereon, does so entirely at their own risk. The opinions expressed are based on information which we believe to be accurate and reliable, however, these opinions may change without notice. opportunities across different sectors, industries, markets and countries. This additional insight may make a big difference adding conviction to an existing idea or pointing towards something new that we re considering. We re very proud to have been able to contribute to the long and successful track record of the Brunner Investment Trust. The manager is keen to avoid the overall portfolio performance being dependant on individual country, sector or economic trends. Our approach to stock picking is based on detailed analysis, so every investment we put into the portfolio is there for a good reason. We focus on buying stocks that we think are going to make the Trust money, not just manage risk. Around half of the income paid to Brunner s shareholders is generated by dividend-paying UK companies. These often benefit from stronger corporate governance standards than other jurisdictions and traditionally tend to pay higher dividends than overseas businesses. Lucy qualifies that this doesn t make Brunner overly reliant on the UK economy. She points out: Around two thirds of the income generated by the largest 100 FTSE companies comes from abroad, so their ability to pay dividends is linked to the broader global economy, not just the UK. The Trust also has very strong reserves that can provide a solid buffer when faced with difficult economic conditions. One of the real proof statements for the Trust was how it behaved throughout the financial crisis, where the dividend was raised all the way through. The strong reserves are really due to the investment performance compounded over a number of years and I think that when people are considering an investment, past performance and durability are key reasons why they could want to be involved. *Grassroots SM Research Grassroots SM Research is a division within the Allianz Global Investors group of companies that commissions investigative research for asset management professionals. Research data used to generate Grassroots SM Research reports are received from reporters and field force investigators who work as independent, third party research providers, supplying research that is paid for by commissions generated by trades executed on behalf of clients. Opinions as at April

12 The Brunner Investment Trust PLC The benefits of Brunner In summary, we believe Brunner offers a number of potential benefits to investors A one-stop shop Brunner provides a one-stop shop for investors looking for capital growth from a portfolio of global equities as well as a dividend, paid quarterly, that rises over time. Potential for limiting risk Brunner s portfolio typically consists of around 80 stocks, with more than half being from overseas, so buying shares in Brunner will effectively give you a diversified portfolio of global stocks in many different countries, industries and market sectors. This spreads your risk, as you are not reliant on the success of just one or two investments. Independent, experienced board As an investment trust, Brunner is an independent company listed on the London Stock Exchange. The investment manager is accountable to the Trust s autonomous board of directors, safeguarding shareholder interests. 45 consecutive years of dividend growth Brunner has paid increasingly higher dividends to its shareholders year on year for the last 45 years. Furthermore, in periods of falling income such as during the last financial crisis, the Trust can draw on revenue reserves to support its dividend payouts to shareholders. These reserves help smooth dividend payments during short-term periods of difficult economic conditions. Please note that past performance is no guide to future performance and income is not guaranteed and could go down as well as up. 10

13 Long-term conviction As an investment trust, Brunner has a fixed number of shares in circulation at any one time. This frees the managers from the obligation of selling holdings irrespective of their investment convictions in the event of redemptions, as would be the case with an open-ended investment structure. Instead, they are able to implement a measured, long-term investment strategy and to make portfolio decisions purely in terms of achieving investor objectives. Please note that investment trusts are quoted companies listed on the London Stock Exchange. Their share prices are determined by factors including demand, or lack of, which means that the shares may trade below (at a discount to) or above (at a premium to) the underlying net asset value. Cost-effective solution Buying shares in an investment trust can be less costly than purchasing the underlying stocks individually. With ongoing charges of 0.79%, Brunner provides a cost-effective way to access an actively managed portfolio. Please note that the Trust charges 70% of its annual management fee to the capital account and 30% to revenue. This could lead to a higher level of income but capital growth will be constrained as a result. Gearing As an investment trust, Brunner is also able to employ gearing which means borrowing money to buy more investments to seek enhanced returns for its shareholders. This can boost performance when markets go up. However, investors should be aware that losses are magnified when markets fall, which could lead to a substantial loss on the initial investment. Longevity Investment trusts are amongst the oldest forms of investment vehicle. Established in 1927, Brunner has successfully navigated a variety of market conditions throughout its history. Today s investor may find the longevity and experience of The Brunner Investment Trust reassuring. 11

14 30 November 2016 The Brunner Investment Trust PLC How to invest The Brunner Investment Trust PLC is a UK-based investment trust traded on the London Stock Exchange. You can easily invest in the Trust by purchasing shares through a stockbroker or an investment platform. You can also hold shares within an ISA, Junior ISA, SIPP and/or savings scheme. Depending on the type of scheme you choose, you could invest by saving as little as 20 per month. You should note, however, that savings schemes vary in terms of their charges and make sure that you understand what the charges are and that you are happy with them. You will find much more information about The Brunner Investment Trust PLC on our website. As well as the latest performance information including fact sheets and daily share prices, you ll be able to watch a video of our board and managers discussing the Trust s history, read the very latest Stock Exchange announcements and other press cuttings of interest and download the most recent annual report. Pensions freedom Since April 2015, pension savers have had the freedom to choose how they take an income in retirement. The AIC s Freedom in Pensions series of research, articles and videos looks at how investment companies can be used to save for retirement. You must be aware that investing in investment trusts such as Brunner involves risk and the value of your investment and the income from it may fall as well as rise. You should speak to a financial adviser who could guide you in choosing the right type of pension scheme for you. The Brunner Investment Trust PLC Annual Financial Report If you have any queries or would like to join our mailing list for monthly updates, financial reports of fact sheets, our Investor Services team can be reached on: investment-trusts@allianzgi.com 12

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16 The Brunner Investment Trust PLC 199 Bishopsgate London EC2M 3TY T: +44 (0) Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested. Past performance is not a reliable indicator of future returns. You should not make any assumptions on the future on the basis of performance information. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer and/or its affiliated companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. This is a marketing communication issued by Allianz Global Investors GmbH, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht ( Allianz Global Investors GmbH has established a branch in the United Kingdom, Allianz Global Investors GmbH, UK branch, 199 Bishopsgate, London, EC2M 3TY, which is subject to limited regulation by the Financial Conduct Authority ( Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted. The Brunner Investment Trust PLC is incorporated in England and Wales. (Company registration no ). Registered Office: 199 Bishopsgate, London, EC2M 3TY. The Company is a member of the Association of Investment Companies - Category: Global.