The board of the Brunner Investment Trust has reduced the level of debt and cut the interest rates on the remaining borrowings to help sustain its dividend.
In the full year results statement of the £385m trust released this morning (February 15) the board stated it had come into 2018 with two historic loans at high interest rates.
One of these loans has been repaid in full using the cash reserves of the trust, while the other has been refinanced at a lower interest rate.
The cumulative effect of this is that the aggregate interest rate paid on the debt held by the trust has fallen from 9 per cent to 3 per cent.
Lucy Macdonald, manager of the Brunner Investment Trust, said this would help sustain the dividend of the trust in the years ahead.
Her investment philosophy has changed in recent years, as she believes the impact of technological change will mean that many traditional income stocks will perform poorly, while technology companies that disrupt the business models of more traditional businesses will thrive.
This had led her to invest more in technology companies, some of which pay little in the way of dividends but maintain the dividend, which has risen for each of the past 47 years. The trust yields 2.4 per cent.
It has returned 71 per cent over the past three years, compared with 75 per cent for the average trust in the AIC Global sector in the same time period.
Investment trust fund managers frequently borrow and invest the money alongside the capital they receive from shareholders.
If the investments are profitable, then the trust pays the interest, and the shareholders in the trust keep any surplus. By reducing the level of interest paid, more cash is left for shareholders.
david.thorpe@ft.com
