The best of most worlds · 2020. 5. 8. · Vivian Bazalgette MA* Senior Independent Director and...

The Brunner Investment Trust PLC

The best of most worlds

Will your income go as far as you’d like?

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 each year since 1972, 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 Brunner could also be a great way to help your children and grandchildren get ahead in life.

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 around 65 to 70 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.

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.

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

Today, the Brunner family remains a significant shareholder in the Trust which offers an efficient and well-managed way to gain global investment exposure.

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.

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 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.

Sir John Brunner, 1842 - 1919

A Brunner Mond advertisement from 1891


2

Portfolio Manager Lucy Macdonald with members of the Global Equity team

…with Allianz Global Investors.

Brunner has always been managed by Allianz Global Investors (and its predecessors Kleinwort Benson). Today the company manages over €530 billion1 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® 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 countries1.

1 As at 30 September 2018.

Allianz Global Investors employs more than 730 investment professionals in 25 offices worldwide.


3

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 BSc Chartered FCSI*†

ChairmanCarolan Dobson joined the Board in December 2013 and has been Chairman since the AGM in March 2016. She is also Chairman of BlackRock Latin American Investment Trust plc, JP Morgan European Smaller Companies Trust Plc and Baillie Gifford UK Growth Fund plc, and a non-executive director of London CIV and Woodford Patient Capital Trust plc. She 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 ChairmanJoined the board in November 2009. 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 1993-2001. He is a non-executive director of Smith & Nephew PLC, Foxtons Group PLC and Urban&Civic plc. Ian is a Fellow of the Institute of Chartered Accountants in England and Wales and of the Chartered Institute of Taxation.

Vivian Bazalgette MA* Senior Independent Director and Remuneration Committee ChairmanJoined the board in January 2004. 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.

Peter Maynard*Joined the board in October 2010. He is a retired solicitor and qualified with Slaughter and May in 1977. 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 1999. 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. He is a former chairman of the GC100 and was a supervisory board member of the London Business School Centre for Corporate Governance.

Jim Sharp MA*Joined the board in January 2014. 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. He is chairman of In The Style Fashion, Seraphine and Rupert Sanderson Shoes and a non-executive director of James Cropper PLC and feelunique.com.

*Independent of the manager.†Independent on appointment as Chairman.


4

“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

“As Chairman of the Brunner Investment Trust, I work with my fellow board directors and managers to look after shareholder interests.”

Carolan Dobson, Chairman


5

Discrete performance2 (%)

2014 2015 2016 2017 2018

Share price 6.9 3.2 17.1 30.6 -8.2

Benchmark 6.6 2.9 23.5 13.2 -4.7

A dividend hero

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 – from 0.48 pence per share in 1972 to 18.15 pence per share in 2018. 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.

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.

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 since 1972…

Dividend per share history (pence)1

1972

0.48p


6

Past performance is not a reliable indicator of future results.1 The Brunner Investment Trust PLC Annual Financial Report, to year-end 30.12.18. 2 Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return, to 31.12.18. The Benchmark was 50% FTSE All-Share Index and 50% FTSE World Ex UK Index until 21 March 2017, and 70% FTSE World Ex UK Index and 30% FTSE All-Share Index from 22 March 2017. Discrete performance figures comply with the Financial Conduct Authority’s regulations to enable investors to compare different products from different providers.

The Trust’s dividend track record has attracted the attention of the national press.

Thursday 23 August 2018 The Daily Telegraph

Business

This trust has slashed the cost of its debt – and income investors should benefit

A CAPITAL gain of 15pc over 16 months is pretty respectable, especially when the yield adds another 2pc or so – and when next year’s dividend is expected to rise by 10pc.

Brunner, which was recommended in this column in April last year, is the trust in question.

Founded in 1927 to manage the wealth of the eponymous family, whose chemicals firm had merged the previous year with three others to form ICI, the trust now has an unbroken 46-year record of dividend increases.

The reason for its board’s expectation that the dividend for 2018 will be a tenth higher is found in the fund’s borrowings.

Like many investment trusts, Brunner uses “gearing” in an

attempt to boost returns. If you can make more on the

borrowed money than it costs to service the

loan, shareholders will be better off. Doing this is, of course, much easier at times such as the present when borrowing is so cheap. However,

many trusts have remained saddled with debts taken

on when rates were much higher. If they can refinance these loans more cheaply, the portfolio’s net income will rise, other things being equal, and higher dividends

will become possible.This is what is happening at

Brunner. It has already repaid an outstanding “debenture” at a cost of £39m, using existing resources and a newly issued £25m, 30-year “private placement note”. This note will cost 2.84pc a year in interest, compared with the previous 7.7pc cost of the trust’s long-term debt.

The board has estimated that, in the absence of unforeseen circumstances, total dividends for the year to Nov 30 will be 18.15p a share, a 10pc increase

on last year’s 16.5p. That in turn was a 4.4pc rise on 2016’s figure. A payment of 18.15p would represent a yield of 2.7pc for readers who paid 681.25p at the time of our tip.

There are other attractions. Stifel, the broker, said in a recent note that, in addition to tidying up its debt structure, “over the past two and a half years Brunner has been getting its house in order – it has moved to one lead manager [Lucy Macdonald] from two and adopted a more globally focused benchmark”.

The trust now aims for a 70:30 split between global stocks and British ones, compared with 50:50 previously.

The discount of 10.7pc, “wide relative to its global peers”, according to Stifel, should also be enough to interest new buyers.

There is, however, one cloud on the horizon. The trust’s largest shareholder, Aviva, wants to sell its 19pc stake. This is no reflection on Brunner: it is part of a strategic move by the insurer, which has already disposed of shareholdings in other trusts including Witan, Mercantile and BlackRock Income Strategies.

But the presence of such a large intended seller tends to depress the share price and provides a headache for Brunner. “The board now requires

a solution to help Aviva exit its investment without causing too much disruption,” Stifel said.

Brunner is a solid, low-cost vehicle for exposure to global stock markets and investors should not see their long-term returns unduly affected by the Aviva question.Questor says: holdTicker: BUTShare price at close: 718.00

Brunner Close: 781p

2014 2015 2016 2017 2018

p

600

550

500

450

850

800

750

700

650

Market value: £333.5m Year of listing: 1927 Discount: 10.7pc Ave discount over past year: 10.1pc Yield: 2.1pc Most recent year’s dividend: 16.5p Gearing: 8pc Annual charge (Nov 2017): 0.72pc

Key numbers

Brunner

Hold

Expensive debt has been repaid and

management simplified

We’ve already made decent gains on Brunner and now the dividend is expected to receivea 10pc boost

QuestorFollow the MoneyRichard Evans

QuestorTrust BargainsRichard Evans

QuestorIncome PortfolioRichard Evans

QuestorStock PicksRichard Evans

Richard Evans Richard Dyson

QuestorFollow the MoneyRichard Dyson

QuestorTrust BargainsRichard Dyson

QuestorIncome PortfolioRichard Dyson

QuestorStock PicksRichard Dyson

QuestorFollow the Money

QuestorTrust Bargains

QuestorIncome Portfolio

QuestorStock Picks

QuestorInheritance Tax Portfolio



© TELEGRAPH MEDIA GROUP LIMITED 2018 Reproduced with permission by Media Licensing Co. (www.medialicensingco.com / + 44 (0) 20 3773 9320). Not to be reproduced without authorisation.

18.15p

2018


7

“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”

Meet the portfolio manager…

Brunner’s investments are managed by Lucy Macdonald, Allianz Global Investors’ Chief Investment Officer of Global Equities, who has more than 30 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 65 to 70 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, 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.”


8

“We’re very proud to have been able to contribute to the long and successful track record of the Brunner Investment Trust.”

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.

Lucy makes special mention of a particular resource called Grassroots® Research*: “We think of it as our own intelligence agency. Through Grassroots® Research, we can access information that’s not widely available. Grassroots® Research has conducted over a quarter of a million interviews with businesses and consumers since 1984 in order to assess investment 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.”

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.”

Almost 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.”

Opinions as at January 2019.

*Grassroots® ResearchGrassroots® Research is a division of Allianz Global Investors that commissions investigative market research for asset management professionals. Research data used to generate Grassroots® Research reports are received from independent, third party contractors who supply research that, subject to applicable laws and regulations, may be paid for by commissions generated by trades executed on behalf of clients.


9

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 riskBrunner’s portfolio typically consists of around 65 to 70 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 boardAs 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.

Dividend growth year-on-year since 1972Brunner has paid increasingly higher dividends to its shareholders year on year since 1972. Furthermore, in periods of falling income such as during the 2008 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

Long-term convictionAs 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 solutionBuying shares in an investment trust can be less costly than purchasing the underlying stocks individually. With ongoing charges of 0.7%, 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.

GearingAs 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.

LongevityInvestment 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

You will find much more information about The Brunner Investment Trust PLC on our website. This valuable vault of information features the very latest performance, analysis and news on Brunner. You’ll be able to access video and podcast content, as well as a useful guide to platform investing, including links to the most popular online trading platforms. You can also sign up to receive our monthly fact sheets by email, as well as other useful information.

www.brunner.co.uk

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 an investment platform, a stockbroker or a financial adviser.

Many investment platforms allow you to hold shares within an Individual Savings Account (ISA), Junior ISA, Self Invested Personal Pension (SIPP) and/or savings scheme. 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.

Dividend heroAlthough past performance is no guide to the future, Brunner has paid rising dividends to its shareholders each year since 1972. It is one of the Association of Investment Companies’ Dividend Heroes – an elite list of investment trusts that have increased their dividends for 20 years or more. So, Brunner could be an attractive proposition for investors planning for retirement, looking to increase their savings, help their children or grandchildren or simply wanting to supplement their income. Please remember, however, that a ranking, a rating or an award provides no indicator of future performance and is not constant over time.

If you have any queries or would like to join our mailing list for monthly updates, financial reports or fact sheets, our Investor Services team can be reached on:

0800 389 4696 Email: [email protected]


12

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, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www.bafin.de). 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 Finan-cial Conduct Authority (www.fca.org.uk). 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. 226323). Registered Office: 199 Bishopsgate, London, EC2M 3TY. The Company is a member of the Association of Investment Companies - Category: Global.

The Brunner Investment Trust PLC199 BishopsgateLondonEC2M 3TY

0800 389 4696 www.brunner.co.uk

7358

99

The best of most worlds · 2020. 5. 8. · Vivian Bazalgette MA* Senior Independent Director and...

Documents

Transcript of The best of most worlds · 2020. 5. 8. · Vivian Bazalgette MA* Senior Independent Director and...