Morningstar Magazine - October/November 2016 - 34

Dispatches The structure of closed-end funds, also named investment trusts, allows fund managers to hold cash back in good years and then pay it out to investors in less successful years. This revenue reserve feature means trusts can sustain and even grow dividends in years when the underlying stocks' dividends are cut. The Gold-rated City of London Investment Trust has increased its dividends for 50 consecutive years, according to data compiled by the Association of Investment Companies, or AIC. According to Morningstar data, the fund has managed an average 3% dividend growth rate over the past five years. Morningstar fund analyst David Holder said this fund's success is due to its focus on income as a measure of a company's value, with above-average dividend yield as the primary driver for a stock to enter the portfolio. He thinks shareholders can reasonably expect the annual dividend to rise each year. The trust currently yields 3.9%, and it is trading at a 1.5% premium to net asset value. Another Gold-rated trust, Scottish Mortgage, has increased its dividends for 33 consecutive years, according to the AIC. This fund has increased its dividend an annualized 2.6% the past five years. The fund is managed by the long-term global growth team at Baillie Gifford. The board's aim is to pay an annual dividend that historically has increased each year at a rate higher than the prevailing rate of inflation. This trust is trading at a 1.2% premium. The Gold-rated Murray International has posted 11 consecutive years of dividend growth. The fund has increased its dividend at an annualized 4.7% the past five years and 2.7% over the trailing three-year period. The fund currently yields 5.2%, and it is trading at 3.3% discount. The Silver-rated Bankers and Caledonia Investments and F&C Global Smaller Companies funds have consecutively increased their dividends for 49 years and 46 years, respectively. Karen Kwok is a reporter for Morningstar.co.uk. European Fund Fees Are Decreasing G R E AT E R E U R O P E Denmark Our study of European investment funds finds that the asset-weighted ongoing charge for the full European fund universe was 1% in 2016 through July. That is down from the 1.09% asset-weighted charge we found when conducting our 2013 study, "Expenses in Nordic Investment Funds in a European Context." Across the three broad asset classes-equity, fixed income, and allocation-the asset-weighted ongoing charge for Europe also decreased overall, compared with the findings in the 2013 study. The decline is, among other factors, a result of the increasing penetration of clean share classes-those without commission fees- REACH HIGHER LEARN MORE TO EARN MORE At the College for Financial Planning, we want to help you reach your potential. Our graduates are reporting earnings increases up to 55%, additional clients, and even improved career satisfaction. No matter what stage of your career you're in, we have a program custom designed for your needs. Take the next step toward success today. LEARN MORE at CFFPinfo.com 34 Morningstar October/November 2016 http://Morningstar.co.uk http://www.CFFPinfo.com

Table of Contents for the Digital Edition of Morningstar Magazine - October/November 2016