Annual Report, 30 November 2022
The Brunner
Investment Trust PLC
Capital growth and dividends
The Brunner Investment Trust PLC aims
to provide growth in capital value and
dividends for investors over the long term
through investing in a portfolio of global
and UK equities.
The Key Performance Indicators (KPIs)
on page 14 show how effective the
company has been in delivering its
strategy.
‘All-weather’ portfolio
The company provides a balanced
solution for investors looking for a
global and UK portfolio of equities and
a quarterly dividend. The company’s
investment policy is set out in the Strategic
Report on page 9.
Brunner is a member of the Association
of Investment Companies (AIC) and the
company’s shares are recognised by the
AIC as suitable for retail investors. AIC
Category: Global
Independence
Brunner has an independent board
of directors and no employees. Like
many other investment companies, it
outsources investment management
and administration to an investment
management company – Allianz Global
Investors – and other third parties to
provide shareholders with an efficient,
competitive, cost-effective way to gain
wide equity investment exposure through a
single investment vehicle.
Whatever your goals, there’s Brunner…
Like many long-established investment
trusts, Brunner’s name reflects its history
rather than its investment strategy.
Johannes Brunner was born in Canton
Zürich and migrated to Lancashire in
1832. His son, Sir John Brunner, Bart, was
one of the most successful industrialists
of the nineteenth century, and in politics
an influential radical Liberal MP until well
into the twentieth century. In 1873 he
and the scientist Ludwig Mond founded
Brunner, Mond and Co, the largest of the
four companies which came together
to form ICI in 1926. 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.
John Brunner was a passionate
campaigner, including for welfare
reforms and free trade, and used his
wealth for philanthropic purposes.
Jim Sharp, a director of the company,
is connected to the Brunner family
by marriage and continues the link
between board and family. Brunner
family share ownership information is
included on pages 62 and 67.
A family investment from the beginning…
Benchmark
For the year under review the benchmark
against which the portfolio is measured
was a composite of 70% FTSE World Ex UK
Index and 30% FTSE All-Share Index.
Risk and gearing
A statement explaining how the assets
have been invested to spread risk and
how gearing is managed is included under
Investment Policy on page 10.
Sir John BrunnerBrunner, Mond & Co. factory, worker cottages and Co-operative Society
Overview
Contents www.brunner.co.uk
Overview
2 Financial Highlights
4 Chair’s Statement
8 Performance – Review of the Year
Strategic Report
10 Introduction
11 Section 172 Report:
11 Engagement with Key Stakeholders
14 Key Performance Indicators
16 Risk Report
21 Environmental, Social and
Governance Issues
Investment Manager’s Review
24 Investment Manager’s Review
34 Investment Philosophy and Stock
Selection Process
36 Company Engagement Activities
37 Environmental, Social and
Governance performance
38 Top 20 Holdings
43 Case Studies
46 ESG Focus
48 Portfolio Breakdown
53 Distribution of Invested Funds
56 Historical Record
Governance
58 Directors, Manager and Advisers
61 Directors’ Report
63 Corporate Governance Statement
68 Management Engagement
Committee Report
69 Nomination Committee Report
70 Remuneration Committee Report
74 Audit Committee Report
77 Statement of Directors’
Responsibilities in respect of the
financial statements
Financial Statements
80 Independent auditors’ report to the
members of The Brunner Investment
Trust PLC
86 Income Statement
87 Balance Sheet
88 Statement of Changes in Equity
89 Cash Flow Statement
90 Statement of Accounting Policies
92 Notes to the Financial Statements
Investor Information
108 Investor Information (unaudited)
111 Notice of Meeting
115 Glossary
23
2 9
57 79 107
Financial Highlights
Investment Manager’s Review
Governance Financial Statements
Strategic Report
Investor Information
The image of the fountains on the cover
of this report – at the Capitol building
in Washington, D.C. – is inspired by
the Arms of the Brunner family. The
family originated from Switzerland and
’Brunnen’ is German for fountain.
1
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Financial Highlights
For the year ended 30 November 2022
Net assets per ordinary share
1
Debt at Fair Value
2
1,178.7p
2021 1,165.4p
+1.1%
Dividend per ordinary share
3
21.50p
2021 20.15p
+6.7%
Net assets per ordinary share
1
Debt at Par
1,164.4p
2021 1,176.9p
-1.1%
Net asset value total return
Debt at fair value
2
+3.0%
2021
+21.5%
Earnings per ordinary share
22.7p
2021 20.4p
+11.3%
Net asset value total return
Debt at par
2
+0.8%
2021
+21.1%
2
Overview
All figures are UK GAAP unless they are
stated to be Alternative Performance
Measures. (Glossary page 115).
1
All references to NAV in our commentary
and the Strategic Report are to NAV
with debt at fair value since this is the
measure that the board considers best
reflects the value to shareholders.
However, NAV with debt at par value is
reported above and in the Performance
– Review of the Year on page 8.
2
Alternative Performance Measures
(APM). See Glossary on page 115.
3
The dividend per ordinary share includes
the proposed final dividend of 6.05p.
4
The Benchmark Index of 70% FTSE World
Ex UK Index and 30% FTSE All-Share
Index.
5
Share price total return is based on
the movement in share price including
dividends reinvested.
The portfolio’s largest holding and biggest contributor to returns for the year under review was health insurer UnitedHealth Group, headquartered
in Minnetonka, a suburb of Minneapolis–Saint Paul.
Benchmark total return index
4
+1.4%
2021
+21.1%
Share price total return
2 5
-0.8%
2022 1,020.0p
2021 1,050.0p
Consumer price index
+10.7%
2022 126.7
2021 114.5
Discount - average in the year
2
10.3%
2021
11.4%
Revenue reserves per ordinary
share
25.9p
2021
24.7p
3
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Chair’s Statement
Dear Shareholder
Review of the 2022 Financial Year and Performance
2022 was a significant and distressing year in both economic and geopolitical terms. A war, of the
scale we thought we would never see again, raged throughout the year in Ukraine and increasingly
strident statements by China raised questions about the wisdom of extensive cross-border supply
chains. Sanctions on Russia drove European gas prices to levels previously thought impossible.
After years of central banks manipulating interest rates downwards and flooding the monetary
system with excess money, the inevitable consequence of these actions eventually appeared in the
very high inflation rates seen across the world, prompting central banks to raise interest rates sharply.
Stock prices swung wildly throughout the year driven by nervous sentiment on the back of news flow
and data releases. There were wide divergences in returns between sectors and investment styles.
The previous market focus on a few titans of the tech sector that I mentioned last year, in which
we did not participate as our managers believed the valuations to be extreme, has contributed
significantly to equity market price falls.
Against this backdrop, we are pleased to report that the company’s Net Asset Value (NAV) per
ordinary share rose 3.0% on a net dividends reinvested basis with debt at fair value, our key
performance measure. This was ahead of the composite benchmark index (70% FTSE World Ex-UK
and 30% FTSE All Share Index) which rose by 1.4% on a total return basis over the period.
This marks a fourth year of outperformance against the benchmark. In the extremely varied
and volatile conditions of these years we believe this is a continuing testament to the company’s
investment strategy.
Our manager describes the effects of these macroeconomic and geopolitical factors in more detail
in the Investment Management Report starting on page 23.
1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
5000
CPI/RPI and dividend growth
percentage change
0
Britain
joins the
European
Community
1973
Inflation growth of 1,602.7% over the period. RPI 1972-1986. CPI 1987-2021.
Brunner dividend growth of 4,479.2% over the period
Bear
Market
1974
Britain
borrows
money from
the IMF
1976
‘Winter of
Discontent’
1979
Economic
recession
leads to high
unemployment
in the UK
1982
12-month
Miners’
Strike
1984
‘Big Bang’
enhances
London’s status
as a financial
capital
1986
‘Black
Monday’
1987
Gulf War
1991
‘Black
Wednesday’
1992
4
Overview
Environmental, Social and Governance (ESG)
Whilst the strategy of the trust does not aim to meet any specific sustainability criteria, the board
considers that it is in shareholders’ interests to be aware of and consider environmental, social and
governance factors when selecting and retaining investments and believes that active stewardship
is a key task of a responsible asset owner.
In addition to considering investment performance, understanding the manager’s approach to ESG
within the investment process has continued to be a focus for the board over the past year. We take
account of our performance in this area against our objectives using the manager’s internal analysis
and external measures and benchmarks. We believe that well run companies will outperform in the
long term.
We give a full and clear account of ESG considerations within this report (see page 21) and we
also have a page on our website that describes the manager’s ESG process in more detail. Since
the beginning of 2020 we have included quarterly updated ESG measurements on our monthly
factsheet, showing the rating of the Brunner portfolio on ESG risks compared to the rating of the
benchmark, however imperfect that comparison may still be.
We are pleased to see continued efforts by regulators and the industry in general to harmonise
nomenclature and metrics. We hope this represents progress towards more universally accepted
descriptions and reliable measurement for the benefit of all investors.
Earnings per Share
Over the past year most companies have been able to continue paying dividends at or above the
recovery level of 2021 after the constrained 2020 year during the first Covid lockdown. This meant
the portfolio’s earnings grew once more in 2022, with earnings per share for the year rising by 11.3%,
from 20.4p to 22.7p. This has put Brunner in the strong position once again to pay an increased
dividend whilst increasing dividend reserves.
Dividend
The proposed final dividend of 6.05p, if approved by shareholders, will be paid on 4 April 2023
to shareholders on the register on 24 February 2023. In line with board’s dividend policy, which is
outlined on page 14, the total dividend for 2022, including the proposed final dividend, will be
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Beginning
of the end of
the dot-com
boom
2000
9/11
2001
The Second
Gulf War
2003
Financial crisis
2008
Brexit vote
2016
COVID-19
pandemic
2020
Invasion of
Ukraine
2022
Total dividend: from 0.48p to 21.50p over the period
*
Final dividend for approval at the 2023
AGM
*
Dividend per
share in pence
20
15
10
5
25
0
5
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
21.5p. This represents an increase of 6.7% over the 2021 dividend which was 20.15p and means
Brunner has now reached 51 years of consecutive dividend increases, maintaining its place as one
of the AIC’s “Dividend Heroes”.
Revenue reserves will remain strong at 25.9p (2021: 24.7p) after the payment of the proposed final
dividend.
Board Succession
The board is continuing its cycle of recruitment as existing directors retire from the board. We were
pleased to welcome Elizabeth Field to the board with her appointment on 1 December 2022.
Elizabeth was a senior corporate lawyer with extensive experience of advising public and private
companies on a wide range of corporate transactions across a variety of sectors, specifically
including investment trusts. As described in the company’s previous Annual Report, Peter Maynard
is to retire from the board at the Annual General Meeting in 2023. Following Peter’s retirement,
Andrew Hutton will be appointed as Senior Independent Director. Peter has given long service,
invaluable challenge and guidance to the board, staying slightly beyond his planned retirement
date to provide additional continuity on the board through the Covid pandemic. We thank Peter for
his considerable service to the trust and wish him well for the future.
AIFM (“Alternative Investment Fund Manager”)
As we had notified shareholders in 2021, our management contract with Allianz Global
Investors GmbH (‘AllianzGI’) for investment management, accounting, company secretarial and
administrative services as AIFM of the trust is due to transfer to Allianz Global Investors UK Limited
(‘AllianzGI UK’) which is a new FCA authorised and regulated UK entity taking on all activities of
the UK Branch of Allianz Global Investors GmbH. This change is taking place as a result of the UK
leaving the EU and is to take place once the legal set up is arranged to ensure compliance with
the UK regulatory regime. This process is continuing but is expected to be made final in the coming
months. The board is assured that there will be no change to the portfolio management services nor
to the administration services received by the trust. With this change there will be no increase in the
management or administrative expenses of the company. Details of the existing arrangement with
the AIFM are on page 108.
Lead Portfolio Manager Change
In July we announced that Christian Schneider, who is Deputy CIO for AllianzGI’s Global Growth
franchise, would be taking over from Matthew Tillett, who left AllianzGI. Christian, together with
Marcus Morris-Eyton, an experienced investment manager at AllianzGI, had already been working
directly alongside Matthew on the Brunner portfolio and Christian has worked in what is now the
Global Growth team for more than two decades. He is consequently well versed in the strategy
and investment approach. Christian took over as interim Lead Portfolio Manager on Matthew’s
departure for a minimum period of six months and will continue to work with Marcus and with
Simon Gergel, AllianzGI’s CIO UK Equities. All have worked closely on the management of Brunner
for a number of years.
Matthew had worked on the Brunner portfolio for many years, and we wish him all the best in his
future endeavours and thank him for his steadfast and valuable contribution to Brunner.
Julian Bishop subsequently also joined the AllianzGI team managing the company’s portfolio
on 1 November 2022 as a senior portfolio manager. He will become Co-Lead Manager with
Christian Schneider after the Annual General Meeting on 31 March and shareholders will have the
opportunity to meet with him at the AGM. Julian has 25 years investment experience as a global
equity analyst and portfolio manager, most recently as a senior global equity portfolio manager
with Tesco Pension Investment and before that with Sarasin and Partners.
The Brunner Investment Trust will continue to be managed as an all-weather portfolio appropriate
for a multitude of different market conditions with its balanced approach to portfolio construction
and strong focus on valuation.
Marketing
Promoting Brunner to as wide an audience as possible remains a priority and the board supports
the manager in sales and marketing efforts to further that aim. The trust’s balanced nature means
it is a long-term holding that can, in our view, form the cornerstone of an investor’s diversified
6
Overview
portfolio. Attracting more investors, particularly individual investors, generally has the effect of
improving liquidity of the trust’s shares.
The board met with the manager in early 2022 to discuss a refresh of how the trust is described. We
agreed that we should refer to Brunner as an ‘all-weather’ global equity portfolio”:
Brunner – an ‘all-weather’ global equity portfolio
Aiming to grow consistently your investment over time and pay out a regular and rising dividend,
targeting stable long-term stock market returns whatever the economic or market background.
To do this we:
– In
vest in some of the world’s best companies with superior business models delivering strong and
consistent profitability with long-term growth potential
– Manage a diversified p
ortfolio with exposure to most major geographic regions and industries
– Aim f
or growth in both capital and income, with a 51-year track record of continual dividend
growth for shareholders
– Employ the e
xpertise and scale of global asset manager AllianzGI to provide robust investment
processes and oversight
– Pr
ovide all of this in a cost-effective, actively managed fund.
What does this mean in practice?
– Not being skewed too heavily to any one sector or theme
– Longer term view on investments
– True bottom-up stock picking, where stock selection is the predominant driver of risk and return
in the portfolio – looking at what an individual company does and considering how they will
be affected by the macro environment rather than to pick a portfolio that will react well to the
prevailing conditions.
Outlook
2023 continues with some of the most troubling factors currently affecting the world: the ongoing
war in Ukraine which confounds both logic and decency; and the inflation-fuelled cost of living crisis
being felt tangibly by so many closer to home.
However, there are indications of inflation moderating. That may mean interest rate rises may be
nearing their high but there is definitely central bank rhetoric in conflicting directions on the subject.
The more soothing comments from China, as it reopens the economy, is a welcome development.
A more in-depth analysis of that backdrop and the possible outcomes is given in the Investment
Manager’s Review from page 24.
We continue to believe that the best approach for Brunner is to chart a steady path and continue to
be an ‘all-weather’ global equity portfolio for investors, eschewing the biggest bets in the interest of
long-term stability of capital return and provision of a steadily rising dividend to our shareholders.
Annual General Meeting
In 2022 we were happy to be able to welcome many shareholders to a physical Annual General
Meeting after two years constrained by Covid lockdowns. We look forward to welcoming
shareholders again this year to the AGM which is to be held at Trinity House, Trinity Square,
Tower Hill, London, EC3N 4DH, at 12 noon on Friday 31 March 2023. Attending shareholders will
receive a presentation from the investment managers before the formal business takes place
and the meeting will be followed by a light lunch. We would be delighted to meet with all those
shareholders who are able to attend.
Shareholders can send any questions to be answered at the AGM by the board and manager care
of the company secretary at investment-trusts@allianzgi.com or in writing to the registered office
(further details are available on page 60) and we will publish questions and answers on the
website after the meeting. We encourage all shareholders to exercise their votes in advance of the
meeting by completing and returning the form of proxy.
Carolan Dobson
Chair
14 February 2023
7
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Performance – Review of the Year
Review of the Year
Revenue
Year ended 30 November 2022 2021 % change
Income available for ordinary dividend £9,673,972 £8,689,051 +11.3
Earnings per ordinary share 22.7p 20.4p +11.3
Dividends per ordinary share 21.50p 20.15p +6.7
Consumer price index 126.7 114.5 +10.7
Assets
As at 30 November 2022 2021
Capital return
% change
Total return
1
% change
Net asset value per ordinary share with debt at fair value 1,178.7p 1,165.4p +1.1 +3.0
Net asset value per ordinary share with debt at par 1,164.4p 1,176.9p -1.1 +0.8
Share price 1,020.0p 1,050.0p -2.9 -0.8
Total net assets with debt at fair value
2
£503,217,127 £497,525,622 +1.1 -
Total net assets with debt at par £497,096,963 £502,452,284 -1.1 -
Ongoing charges
3
0.63% 0.63% - -
Net Asset Value with Debt at Fair Value
4
Relative to Benchmark
5
Capital return Total return
1
Change in net asset value +1.1% +3.0%
Change in benchmark -1.1% +1.4%
Percentage point performance against benchmark +2.2 +1.6
A Glossary of Alternative Performance Measures (APMs) can be found on page 115.
1
Total return is based on the capital net asset value, including dividends reinvested. (APM).
2
Total net assets with debt at fair value. (APM).
3
The ongoing charges percentage is calculated in accordance with the explanation given on page 115. (APM).
4
The board prefers to measure performance using net asset value with debt at fair value in line with industry practice, as demonstrated in the Chair’s
statement on page 4. (APM).
5
For the period under review the benchmark was 70% FTSE World Ex UK Index and 30% FTSE All-Share Index.
8
Strategic
Report
Strategic
Report
Pharmaceutical research and
development company AbbVie,
headquartered in Chicago,
Illinois, was another notable
contributor to performance.
9
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Information on Revenue and Invested Funds in the year is
summarised on page 61.
Brunner has an independent board of non-executive
directors and no employees or premises of its own. Like
other investment companies, it outsources investment
management, accounting, company secretarial and other
administration services to an investment management
company – Allianz Global Investors GmbH, UK Branch
– and to other parties, including HSBC Bank plc as
depositary and custodian, and Link Group as registrar.
This enables Brunner to provide shareholders with a
competitive, cost-effective way to gain wide investment
exposure through a single investment vehicle.
The company has a main market listing on the London
Stock Exchange. In addition to annual and half-yearly
financial reports, the company announces net asset
values per share daily and provides further information
monthly to the market, in order for investors and market
professionals to compare its performance with its peer
group. The investment manager also issues a monthly
update on investment performance which is posted on the
company’s website and is available by email.
Manager’s Investment Style
The essence of the investment style which we ask the
investment manager to follow is to select the best stocks
in a ‘bottom up’ approach, before any sector or country
consideration. The portfolio is concentrated into 62 stocks
at 30 November 2022 (63 stocks in 2021). Within that
concentration modest gearing - employing the company’s
borrowings to invest - is within guidelines set by the board.
Introduction
Purpose
Our purpose is to provide the company’s shareholders with
growth in capital value and dividends over the long term
through investing in a portfolio of global and UK equities.
The company aims to achieve a return higher than that
of our benchmark, after costs, and to achieve steady
dividend growth in real terms.
Strategy Review
We hold an annual strategy meeting outside the normal
timetable of board meetings. At the most recent meeting
the topics covered included:
– In
vestment strategy and how in fulfilling this AllianzGI
considers and incorporates geographical, sector and
macro views into the Brunner portfolio
– Gearing str
ategy in the portfolio management process
– Marketing str
ategy and the focus for 2023.
Business Model
The Brunner Investment Trust carries on business as an
investment company and follows the investment policy
described below.
By pursuing our investment objective we aim to appeal
to a broad range of investors and to ensure that the
company’s shares are attractive to new investors and
investor groups, particularly individuals with smaller
portfolios held either directly or in self-invested pension
plans for whom we can provide a balanced solution
for equity investment. It is also our objective to provide
good value for shareholders and ensure that the costs of
running the company are reasonable and competitive.
Investment Policy
Investment Objective
The Brunner Investment Trust aims
to provide growth in capital value
and dividends for investors over the
long term through investing in a
portfolio of global and UK equities.
The benchmark against which
performance is measured is 70%
FTSE World Ex UK Index and 30%
FTSE All-Share Index.
Risk Diversification
The company aims to achieve
a spread of investments across
geographies and sectors. The
maximum holding in any single
stock is limited to 10% of gross
assets at the time of investment
and the portfolio will consist of at
least 50 stocks. The company will
not invest more than 15% of its gross
assets in other UK listed investment
companies.
Gearing
The company seeks to enhance
returns over the long term through
appropriate gearing. The board
monitors the gearing, which is
employed within the guidelines
set from time to time by the board.
Gearing in any case will not exceed
20% of net assets at the time of
borrowing.
In the investment policy above, gross assets means the company’s assets before deduction of all debt and other
obligations, net assets means the company’s assets after deduction of all debt and other obligations based on the
fair value of the long-term debt and preference shares.
10
Section 172 Report:
Engagement with Key Stakeholders
Engagement with the company’s stakeholders enables the company to fulfil its strategies and to promote the success
of the company for the benefit of the shareholders as a whole. In the year we were pleased to hold the Annual General
Meeting (AGM) as an in-person event which was well attended and we hope to see and meet with more shareholders
in 2023. Set out below are some examples of the ways in which Brunner has interacted with key stakeholders to
demonstrate how the board and its agents have considered stakeholders in pursuit of the success of the company and
the promotion of that success for the long-term:
Strategic
Report
Stakeholders and how they are
taken into account Activity in the year
Shareholders are identified as
the primary stakeholders as the
investors in the company. The
company’s objective is to provide
growth in capital value and
dividends for investors over the
long term and the company’s
strategy is to provide shareholders
with the desired returns by
diversifying to take into account
risk appetite.
Participation in investor conferences and webinars, together with the pre-
AGM presentation and podcasts on the website informs shareholders of the
investment management activity and performance of the company.
The increasing use of new presentation styles to engage investors such as
audio (podcasts), video and the Turtl platform to distribute information to
shareholders and the wider investment community, including in shorter, more
digestible formats.
Jim Sharp is related to the Brunner family shareholders which provides
further insight for the board into the views of investors to be used for the
advantage of all.
Outcome: The investment team led by Christian Schneider has maintained recognition from shareholders, journalists
and industry commentators. The investment team with three distinctive skill sets (Income, Growth, ESG) has a rising
profile in the investment trust arena.
The company’s rating and liquidity in the company’s shares have continued to be steady over the year as shown in the
KPI reporting on page 15.
The discount, one of the company’s KPIs, stabilised in 2022 and averaged 10.3% in the year, as shown on page 15.
Readers of communications
including shareholders and other
investors, look for information
about the company on the website
and online media coverage.
The user experience on the website has been further developed during
the year.
Outcome: Continual enhancements and improvements to the website including both helpful background and
educational material as well as new and current information providing updates.
The company’s shareholders are its primary stakeholders. Other stakeholders include
service providers and the companies in which it invests. The board’s strategy is facilitated by
the manager reporting interaction on its behalf with a wide range of stakeholders through
meetings, seminars, presentations and publications and through contacts made through
our suppliers and intermediaries.
11
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Stakeholders and how they are
taken into account Activity in the year
Public Relations and media – the
company continues to work with
public relations advisers to ensure
information about the company,
its strategies and performance
can reach a wide audience to
update shareholders and potential
investors through press articles and
online media coverage.
There is an Integrated PR programme and Christian Schneider, the lead
investment manager, provides interviews, presentations and records
podcasts to inform and educate.
We work with a third party, Lansons Communications, and the campaign
work is aligned with AllianzGI’s marketing activity.
Outcome: PR activity (generating exposure in consumer finance titles and the national press) is crucial for the
platform market. Reports to the board show there is a direct correlation between press articles appearing and
spikes of interest and purchases of the company’s shares.
Following feedback that people want bite-sized, shorter presentations, the majority of content for
engagement is in short form, with longer form content accessible for those that want to delve deeper.
Service providers – as well as
the management company, the
board has appointed a depositary,
a custodian and a registrar to
provide specialist services.
The board and these stakeholders
need to be assured of good
governance and controls in the
company.
In addition to regular contact and assurance testing that sound and
effective controls are in place from all of these service providers, there is a
rolling programme of due diligence visits to suppliers of third party services
by the AllianzGI’s investment trust team to ensure that the company is
getting good quality services with robust and fit for purpose internal
controls.
Following a report to the board on a due diligence review of AllianzGI’s
supplier of investment trust administration services, some areas for
improvement were identified.
AllianzGI’s investment trust team and supporting operations also receive
detailed due diligence assessments by direct suppliers, for example, looking
at NAVs and the pricing process and on general controls, by HSBC, the
company’s depositary and custodian. The latest is taking place at the time
of writing, with HSBC assessing the AllianzGI UK Ltd entity as the new AIFM.
Outcome: Assurances from service providers on their internal controls are given formally to the company twice yearly
but day-to-day contact with the investment trust team ensures that issues are quickly identified and acted upon and
that remedial action can take place. There were no significant issues arising during this year.
Improvements were made in client reporting to Brunner following the fund administration due diligence review.
12
Strategic
Report
Stakeholders and how they are
taken into account Activity in the year
Potential new investors are an
important stakeholder group and
getting key information to the
investment market so that investors
both current and prospective
can make informed investment
choices is a significant activity.
Research platforms and
distribution partnerships are
employed to reach a wider
audience of investors.
The marketing team also works on events and campaigns with other
research and marketing companies, including Edison and Kepler.
Additional resources were allocated by the board during the
year for publishing research and event participation.
‘Direct to consumer’, for self-directed investment, is primarily driven by
platforms. Platforms essentially give convenient access to the majority
of the investment universe for investors. The board has encouraged
activity to increase recognition by those operating the platforms
through influencers (including through PR, video recordings with Asset
TV and the company’s digital marketing strategy). ‘Influencing’ activity
involves sponsored content, advertising and client events, targeting
the platforms themselves alongside the key research platforms.
In the year the board reviewed and refreshed its message to
describe the trust as an ‘all-weather’ global equity portfolio,
setting out clearly what Brunner offers its investors.
Outcome: Analysis is in the form of detailed investor group feedback and in considering the metrics of key activity
over the year: in particular the board can see the effectiveness of communicating with investors by monitoring daily
traffic on the website and investment through ‘spikes’ of investment on platforms after publications and events
throughout the year.
As the Chair comments in her Statement beginning on page 4, the board continues to believe that the best
approach for Brunner is to follow a steady path and to be an ‘all-weather’ global equity portfolio for investors,
aiming for long-term stability of capital return and provision of a steadily rising dividend to shareholders.
13
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Debt at
fair value
Debt
at par
Benchmark Percentage point
relative return
Percentage point
relative return
2022 +3.0% +0.8% +1.4% +1.6 -0.6
2021 +21.5% +21.1% +21.1% +0.4 0.0
2020 +6.2% +6.7% +5.3% +0.9 +1.4
Key Performance Indicators
The board uses the following Key Performance Indicators (KPIs) to monitor and evaluate
the performance of the company in executing its strategy.
Performance against the Benchmark Index
Dividends
Net Asset Value Total Return with Debt at Fair Value and Debt at Par
Includes the proposed final dividend.
This is the most important KPI by
which performance is judged.
The principal objective is to achieve
a return higher than that of the
benchmark index over the long
term, after absorbing costs. For
this indicator, we measure the
performance against the benchmark
using NAV with debt at fair value,
in line with industry practice.
We have also disclosed here the
performance against the benchmark
using NAV with debt at par value
for information purposes. Capital
returns are shown on page 8
and in the Chair’s Statement. Three
years of performance data allows
us to compare returns to those pre-
pandemic.
The board aims to pay an increased
dividend each year, taking into
account inflation and the ability
to achieve this subject to general
earnings growth and dividends
received in the portfolio. Dividends
paid in the past ten years are set
out in the Historical Record table
on page 56, and in the graph on
pages 4 and 5, which show
that dividends have risen in every
year since 1972 and have increased
by 6.7% this year.
Source: AllianzGI/Thomson Reuters DataStream. Benchmark: 70% FTSE World
Ex UK Index and 30% FTSE All-Share Index. Alternative Performance Measure
(APM). See Glossary on page 115.
Pence
%
2021
20212020
2022
2022
21.50p
20.15p
Annual dividend
25.0
20.0
15.0
10.0
5.0
0.0
14
Strategic
Report
Share Ownership
Percentage of issued capital held by wealth managers and investment platforms
The marketing programme targets
both professional and retail investors
and aims to create ongoing and
sustained demand for Brunner
shares. A successful marketing
strategy stands to benefit all of
the company’s shareholders by
increasing liquidity. We look at the
growth of share holdings of clients of
wealth managers and of investment
platforms to see the impact of retail
demand for the company’s shares.
1
including Brunner family members
2
including beneficial owners not known
Ongoing Charges
%
Ongoing charges are operating
expenses incurred in the running
of the company, whether charged
to revenue or capital but excluding
financing costs. The ongoing charge
is calculated in accordance with the
AIC’s recommended methodology
(See Glossary on page 115). This
figure does not include costs incurred
from trading activities, as these are
capitalised within the investment
valuation (Note 8 on page 96)
which amount to a further 0.04% of
net assets (2021 - 0.05%). Ongoing
charges are published by the AIC.
2021 2022
0.63%
Discount
The company’s shares currently trade
at a discount to the net asset value
per share. The share price depends
on a number of factors, including
sentiment towards the company
and towards investments in equities
in general. The board monitors the
discount with the aim in normal
markets of being not out of step
with comparable trusts in the sector.
The board gives the manager
authority in certain circumstances to
buyback and either cancel the shares
or hold them in treasury, which would
be likely to result in a temporary
narrowing of the discount.
5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
%
Nov 2020
Nov 2021 Nov 2022
0.63%
2021 2022
Financial
institutions
15.8%
12.6%
Others
2
3.1%
2.6%
Direct
holdings
1
29.5%
29.4%
Investment
platforms
28.0%
31.4%
Wealth
managers
24.1%
23.5%
15
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
As reported to shareholders in the half-yearly report in 2022, the economic backdrop
continues to stress test the business models of all companies.
The board has maintained its close contact with the manager and other third party service providers to understand their
responses to the macroeconomic and geopolitical situation and in particular actions taken to mitigate the effects of
these risks on the company and its business.
Risk Management Policy
The board operates a risk management policy to ensure that the level of risk taken in pursuit of the board’s objectives
and in implementing its strategy are understood. The principal risks identified by the board are set out in the tables on
pages 17 to 19, together with the actions taken to mitigate these risks. The process by which the directors monitor
risk is described in the Audit Committee Report on page 74, and includes a review of a more detailed version of these
tables, in the form of a risk matrix, at least twice yearly.
Risk Appetite
The directors assess the likelihood of occurrence and perceived impact of each risk after mitigating actions and consider
the extent to which the resulting residual risk is acceptable, which is defined as the board’s risk appetite. The results of
this exercise are shown in the heat map below.
Risk Report
IMPACT
LIKELIHOOD
low moderate high very high
rare unlikely moderate likely almost certain
1.1
Market volatility
2.3
Investment
performance
4.0
Emerging
3.3
Accounting /
legal/regulatory
3.4
Corporate
governance
3.7
Reputational
2.1
Investment
strategy
3.1
Organisational
set-up / process
2.2
Shareholder
relations
3.2
Outsourcing /
third party
1.3
Counterparty
2.6
Market
demand
3.6
Financial
crime, fraud
and cyber
3.5
Key persons
2.4
Financial
1.2
Market
liquidity and
pricing
1.4
Currency
2.5
Liquidity and
gearing
The controls and mitigation of
portfolio and business risk will
continue to operate, however,
there remains a risk that the
level of volatility and economic
downturn may be such that the
level of portfolio earnings and
dividends cannot be mitigated by
factors within the board’s control.
Risk is acceptable, no
additional measures needed
Risk is of concern but sufficient
measures are defined and
have been or are being
implemented
Risk is of concern, sufficient
mitigation measures not
possible
16
Strategic
Report
Investment and Portfolio Risks
Principal Risks identified Controls and mitigation
1.1 Market volatility
Significant market movements may adversely
impact the investments held by the company
increasing the risk of loss or challenges to the
investment strategy, reduction of dividends
across the market affecting the portfolio yield
and the ability to pay in line with dividend
policy.
The board meets with the portfolio managers and considers
asset allocation, stock selection and levels of gearing on a
regular basis and has set investment restrictions and guidelines
that are monitored and reported on by AllianzGI. The board
monitors yields and can modify investment parameters and
consider a change to dividend policy.
1.2 Market liquidity and pricing
Failure of investments.
The board receives reports from the manager on the stress
testing of the portfolio at least twice each year and contact is
made with the Chair and board if necessary between board
meetings.
1.3 Counterparty risk
Non-delivery of stock by a counterparty.
The manager operates on a delivery versus payment system,
reducing the risk of counterparty default.
1.4
Curr
ency
Exposure to significant exchange rate volatility
could affect the performance of the investment
portfolio.
Currency movements are monitored closely and are reported
to the board.
Business and Strategic Risks
Principal Risks identified Controls and mitigation
2.1 Investment Strategy
An inappropriate investment strategy e.g., asset
allocation or the level of gearing may lead
to underperformance against the company’s
benchmark index and peer group companies,
resulting in the company’s shares trading on a
wider discount.
The board manages these risks by diversification of
investments through its investment restrictions and guidelines
which are monitored and on which the board receives reports
at every meeting. The board monitors the implementation
and results of the investment process with the investment
managers, who attend all board meetings, and reviews data
which shows risk factors and how they affect the portfolio.
The manager employs the company’s gearing tactically within
a strategic range set by the board. The board also meets
annually specifically to discuss strategy, including investment
strategy.
2.2 Shareholder relations
The investment objectives, or views on decisions
such as gearing, discount management,
dividend policy, of existing shareholders may
not coincide with those of the board leading
investors to sell their shares.
Reports on shareholder sentiment are received from
the manager and brokers and reviewed by the board.
Shareholders are actively encouraged to make their views
known.
2.3 Investment performance
Persistent poor performance against
benchmark or peers leads to decline in
attractiveness of the company to investors.
The investment manager attends all board meetings to discuss
performance with the directors. The board manages these
risks by giving investment guidelines which are monitored at
each meeting. The board reviews the investment performance
of the company against the benchmark and peer group.
17
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
2.4 Financial
Range of risks including incorrect calculation of
NAV, inaccurate revenue forecasts, incorrectly
calculated management fees, issues with title to
investment holdings.
A rolling income forecast (including special dividends), balance
sheet and expenses are reviewed at every board meeting.
Reporting from the custodian covering internal controls in
place over custody of investments and over appointment and
monitoring of sub-custodians is produced and reviewed at
least annually. The board’s investment restrictions are input in
trading systems to impose a pre-trade check.
2.5 Liquidity and gearing
Insufficient income generated by the portfolio
and due to stock market falls, gearing increases
to levels unacceptable to shareholders and the
market which in extreme circumstances results
in a breach of loan covenants.
The board meets with the portfolio managers and considers
asset allocation, stock selection and levels of gearing on
a regular basis. Investment restrictions and guidelines are
monitored and reported on by AllianzGI. Regular compliance
information is prepared on covenant requirements.
2.6 Market demand
The level of discount of the share price to the
NAV moves to unacceptable levels, threatening
confidence in the company’s shares.
The board regularly reviews the level of premium and discount
and existing shares can be bought back by the company when
the board considers this expedient.
Operational Risks
Principal Risks identified Controls and mitigation
3.1 Organisation set up and process
Failure in the operational set up of the
company, through people, processes, systems or
external events could result in financial loss to
the company or its inability to operate.
The manager and the other key service providers report on
business continuity plans and the resilience of their response to
extreme situations. Third party internal controls reports are also
received from these service providers.
3.2 Outsourcing and third party
Risk of inadequate procedures for the
identification, evaluation and management of
risks at outsourced providers including AllianzGI
and its outsourced administration provider,
State Street Bank & Trust Company, HSBC Bank
plc (Depositary and Custodian) and Link Group
(Registrar).
AllianzGI carries out regular monitoring of outsourced
administration functions, which includes compliance visits
and risk reviews where necessary. Results of these reviews
are monitored by the board. And since the pandemic the
board has been obtaining additional assurances on business
resilience and cyber security. Agreed Service Level Agreements
(SLAs) and Key Performance Indicators (KPIs) are in place and
the board receives reports against these.
3.3 Regulatory
Failure to be aware of or comply with legal,
accounting and regulatory requirements which
could result in censure, financial penalty or loss
of investment company status.
The board maintains close relations with its advisers and
makes preparations for mitigation of these risks as and when
they are known or can be anticipated.
3.4 Corporate governance
Weak adherence to best practice in corporate
governance can result in shareholder discontent
and potential reputational damage to the
company.
The board is highly experienced and knowledgeable about
corporate governance best practice and includes directors who
are board members of other UK plcs and other investment
companies. The board takes regular advice on best practice.
18
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Report
3.5 Key person
Departure of the portfolio manager, certain
professional individuals, and/or board
members, may impact the management of the
portfolio, the achievement of the company’s
investment objective and/or disruption to its
operations.
Manager and board succession plans are in place. Cover
is available for core members of the relevant teams of the
manager, and work can be carried out by other team members
should the need arise.
3.6 Financial crime, fraud and cyber security
That the company and the manager’s firm, its
employees, or clients are subject to financial
crime or breach elements of the Bribery Act.
Risk of increased cyber attacks continue
after COVID-19, and the changed working
arrangements that have remained in place.
AllianzGI has anti-fraud, anti-bribery policies and robust
procedures in place. The board is alert to the risks of financial
crime and threat of cyber attacks and reviews how third party
service providers handle these threats. These reports confirm
that all systems are secure and are updated in response to any
new threats as they arise and more frequent assurances have
been sought and received throughout and since the COVID-19
pandemic.
3.7 Reputational
Association with poor governance in portfolio
companies and operational issues in service
providers which can affect the reputation of the
company.
The portfolio management team is in constant interaction
with AllianzGI’s Environmental, Social and Governance
(ESG) and Stewardship function and actively engages with
investee companies on ESG issues and makes investments
incorporating ESG factors in the decision process. Service
providers are monitored and the manager provides oversight.
Emerging Risks
Principal Risks identified Controls and mitigation
4.0 Emerging
Continuing impact of the geopolitical situation,
including the attack on Ukraine by Russian
armed forces and tension between the US and
China; the impact of macroeconomic changes,
including inflation; and the risks of further virus
variants; any of which could cause significant
market falls, threat to income or increase in
gearing.
The board carries out horizon scanning by keeping informed
through its manager and advisers on the political, economic
and legal landscape, and reviews updates received on
regulatory changes that affect the company.
The board maintains close relations with its advisers (auditors,
lawyers and manager) and will make preparations for
mitigation of emerging risks as and when they are known or
can be anticipated.
19
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Going Concern
The directors have considered the company’s investment
objective and capital structure both in general terms and
in the context of the current macroeconomic background.
Having noted that the portfolio, which is constructed by
the portfolio manager on a bottom up basis, consists
mainly of securities which are readily realisable, the
directors have also continued to consider the risks and
consequences of such external factors on the operational
aspects of the company and have concluded that the
company has the ability to continue in operation and meet
its objectives in the foreseeable future. For this reason the
directors continue to adopt the going concern basis in
preparing the financial statements.
The company held some short term debt as a current
liability as at 30 November 2022, in the form of a
Revolving Credit Facility (RCF), which is renewable within
one year. While the company is in a net current liability
position as at 30 November 2022, if an obligation arose
investments could be sold to raise cash.
Viability Statement
Brunner is an investment company and has operated as
an investment vehicle since 1927 with the aim of offering
a return to investors over the long term. The directors
have formally assessed the prospects of the company for
a period of longer than a year. The directors believe that
five years is the suitable outlook period for this review as
there is a realistic prospect that the company will continue
to be viable whilst seeking to achieve its aim to provide
growth in capital value and dividends over the long
term. This reflects the longevity of the company and the
expectation that investors will want to hold on to their
shares for some time. The board also notes that as a high
conviction investor, the portfolio manager has a five year
view on stocks in the portfolio.
The board has assessed the long-term viability of
the company against the principal risks faced by the
company, outlined in the reporting under Risk Policy on
page 16. Many of these matters are subject to ongoing
review and the final assessment, to enable this statement
to be made, has been formally reviewed by the board.
The factors considered at each board meeting are:
– The c
ompany’s investment strategy and the long-term
performance of the company, together with the board’s
view that it can continue to provide attractive returns to
investors;
– As an in
vestment company Brunner is able to put aside
revenue reserves in years of good income to cover a
smooth payment of growing dividends in years when
there are challenges to portfolio revenues;
– The financial p
osition of the company, including the
impact of foreseeable market movements on future
earnings and cash flows. The board monitors the
financial position in detail at each board meeting and
at least twice each year it stress-tests the portfolio
against significant market falls;
– In the current environment the board is reviewing
earnings prospects, gearing and debt covenants on a
continuous basis with the managers; and
– The liquidity of the portfolio, and the company’s ability
to pay dividends and to meet the budgeted expenses,
including interest payments, of running the company.
Based on the results of this assessment, the directors have
a reasonable expectation that the company will be able
to continue in operation and meet its liabilities as they fall
due over the five year period of their review.
The future
As we show in our page on the history of the trust on
the inside cover of this document, the longevity of the
trust and its importance to our investors continues to
be a focus. The future attractiveness of Brunner as an
investment proposition with relevance to a wide variety
of investors is something we debate and evaluate
continuously. We have to consider the investment
environment and wider economic considerations, such
as increasing inflationary pressures, and take soundings
on the prospects for our markets, the returns on assets,
economic growth and numerous other factors. Taking all
this into account the board continues to believe that there
is a place for Brunner in the range of options available to
the investor and that the company remains viable for the
five year period here under review.
The Strategy for the future
The development of the company is dependent on the
success of the company’s investment strategy against the
economic environment and market developments. I give
my view in the Chair’s Statement on page 4 and the
investment manager discusses his view of the outlook for
the company’s portfolio in his review on page 23.
On behalf of the board
Carolan Dobson
Chair
14 February 2023
20
Strategic
Report
Environmental, Social and Governance
Research and Stewardship
Active stewardship is an integral component of our
manager’s investment approach. This can help to unlock
potential in companies, as well as protect companies from
downside risks.
AllianzGI’s approach to ESG analysis
The Brunner Investment Trust’s portfolio managers have
reported to the board how they integrate the analysis
of Environmental, Social and Governance (ESG) issues
into their investment process. This follows AllianzGI’s
proprietary methodology and is designed to enhance
risk management by adding another dimension to
existing investment processes, across all asset classes.
This approach does not require additional exclusions.
The main objective of integrating ESG analysis is to
develop an assessment of the financially material ESG
risks and opportunities within a broader investment case.
AllianzGI’s approach also fosters active engagement with
company management.
The board considers that it is in shareholders’ interests to be aware of and consider
environmental, social and governance factors when selecting and retaining investments.
Details of the company’s policy on ESG are set below.
Environmental, Social and Governance Issues
How it works in practice
The process of integrating ESG analysis involves AllianzGI’s
investment professionals reviewing both ESG scores and
financially material qualitative information for each
holding or company of interest. The investment team
then makes an assessment of the ESG risk or opportunity
that supports the broader investment case. AllianzGI’s
investment professionals have access to both quantitative
ESG scores and qualitative ESG research provided by
MSCI via their Global Collaboration Platform (Investment
Chatter). The MSCI scoring system expresses the level
of ESG risk for a company through a numerical score for
each of the E, S and G pillars on a scale of 0–10, whereby
a score of 0–3 indicates potentially meaningful tail risk. If
a company exhibits an elevated ESG risk profile or no ESG
score, the portfolio management team needs to provide
their risk-reward justification as a written commentary
on the Global Collaboration Platform. The commentary
must be provided prior to the purchase of any new stock.
The portfolio manager is free in their decision to initiate,
continue to hold, or divest any relatively low scoring
company in the portfolio, for as long as the expected
return justifies the risk.
Proxy voting 1 December 2021 to 30 November 2022
In the year there were 70 shareholder meetings for
companies in the portfolio and the manager voted on the
company’s behalf at 69 of these. This represents a total of
1,058 resolutions and the company voted on 96% of these.
Source: AllianzGI.
Company meeting voting record
Number of meetings voted
with management: 23
Number of meetings with
at least one vote Against,
Withhold or Abstain: 46
Vote distribution
Number of votes for: 79%
Number of votes against: 14%
Number of votes abstain: 2%
Number of votes withhold: 1%
Not voted: 1%
Active proxy voting engagement for clients is seen as
a core element of fiduciary responsibilities and the
manager provides total voting coverage. This active,
global approach to the exercise of voting rights is aimed
at improving governance standards across all portfolios
managed by AllianzGI.
21
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
ESG Reporting
The board receives information on ESG scores for the
portfolio and this is published in the company’s monthly
factsheets. This is also included on page 37.
A summary of the many engagements with portfolio
companies on E,S and G matters is set out on page 36.
Brunner’s ESG Policy and web links
A summary of the board’s policy on ESG can be found with
the company’s details on the Association of Investment
Companies’ website, where there is also more information
on ESG for investors:
https://www.theaic.co.uk/esg-and-investment-companies
AllianzGI’s investment professionals generate in-depth
research of companies they own and seek to initiate, and
often closely follow these issuers over long periods of time.
Therefore, they can engage actively with the companies
that need it most. AllianzGI’s Sustainability Research &
Stewardship analysts may further support the process
by providing company, sector and/or thematic research.
All research, risk-reward trade-off commentaries and
engagement notes are documented on AllianzGI’s internal
Global Collaboration Platform. This creates a high degree
of transparency and provides portfolio managers with an
easy way to monitor ESG risk in their portfolios.
Sustainability
The investment manager talks about the importance of
sustainability in the assessment of the quality of portfolio
companies in his Investment Philosophy explanation on
page 34.
Company Engagement
The manager conducts regular meetings with companies
which:
– enriches in
vestment analysis and decision making;
– helps assess c
ompany leadership and culture and build
trust;
– f
acilitates active involvement from portfolio managers
and sector analysts in company engagements;
– pr
ovides an inclusive transparent process and multiple
pressure points from within AllianzGI;
– f
ocuses on material issues in a case-by-case approach;
and
– pr
ovide an organic link to Proxy Voting decisions.
Investment
Research
Proxy
Voting
Company
Engagement
Engagement success is part of delivering investment
performance
More information can be found at:
https://uk.allianzgi.com/en-gb/our-firm/sustainable-investing
22
Strategic
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Our relative underweight to the
Technology sector has been a
significant boost to performance.
Visa, headquartered in the
technology heartland of San
Francisco, has been a positive
contributor.
Investment
Manager’s
Review
23
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Investment Manager’s Review
Market Review
The trust’s past financial year marked another
dramatic twelve months for global equity
markets.
Rising inflation, already evident at the start
of the period, surged rapidly and – even as
the peak appears to have passed in the US
– remains elevated. Investors across asset
classes have become even more beholden to
the Federal Reserve (Fed) which, by way of
response, has raised interest rates at its fastest
pace in forty years. At the same time, Russia’s
invasion of Ukraine prompted a sharp move into
more defensive equities. Geopolitical tensions
with China, itself struggling under continued
zero-Covid rules, only increased the market’s
bearish tendencies.
At a surface level, those investors exposed to
global equity markets in pound sterling have
experienced only a modest leg down. As of
November 30, 2022 the MSCI All Country World
Index (MSCI ACWI) in GBP was a mere 1.3%
lower than where it was a year ago. However,
this masks both a sharp divergence within the
index and the extent of underlying volatility.
At its lowest point in June the MSCI ACWI was
over 13.6% lower, before steadily rebounding.
Similarly, “value” stocks (which are deemed
cheap relative to their earnings) have massively
outperformed their “growth” counterparts
(which are priced for future earnings to
increase). Over the trust’s financial year, their
performance has almost directly mirrored each
other, with the MSCI World Value returning
14.3% while the MSCI World Growth returned
-14.3%. Moreover, this year’s weakening of
sterling relative to the US dollar (c.60% of global
equities by market weight are in the US) has
helped alleviate the pain further.
The primary driver of these market movements
has been inflation, and expectations about
how global central banks will respond. After a
decade of low interest rates, quantitative easing
and minimal price increases, late 2021 saw
costs across energy, commodities and labour all
start to rise. The effect was further amplified by
economies rapidly recovering from the Covid-19
pandemic. Successive months of consumer price
index (CPI) data well above target saw central
banks quickly abandon the position that these
changes were “transitory”, with US CPI peaking
at 9.1% in August.
While the Bank of England (BoE) was the
first to raise rates, the Fed has been the most
aggressive in doing so. In March 2022, US
interest rates stood at 0.25%. By December
2022, they had climbed to 4.5%. The European
Central Bank (ECB) although slower to start,
likewise broke with a decade of easy monetary
policy. Of the major developed economies,
only the Bank of Japan maintained its
accommodative stance.
MSCI World MSCI World Value MSCI World Growth. Rebased to 100. Source: Refinitiv Datastream
Divergent equity market performance
120
110
100
90
80
70
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2022
%
24
Investment
Manager’s
Review
The resulting impact has been widespread. In
a world where money once again has a cost,
companies (and consumers) with high levels
of debt are likely to face significantly higher
refinancing charges. This adds to rising cost
burdens, eroding corporate margins still further
when they may be pressured by consumers’
smaller discretionary incomes. These factors
in and of themselves impact stock valuations,
but are compounded through the discount
rate: put simply, higher rates reduce the value
of companies with significant earnings in the
future, and have less impact on the value of
companies generating strong earnings today.
This latter phenomenon explains a significant
part of the past twelve months’ rotation from
value to growth stocks. It has been amplified
further by Russia’s invasion of Ukraine. The
conflict saw investors turn to some classically
“defensive” sectors such as Health Care and
Utilities, but also likely beneficiaries from the
conflict such as Defence and Energy. These
stocks tended to trade at lower multiples
than the broader market and have benefited
from both the mechanical tailwind of higher
discount rates, as well as stronger underlying
fundamentals.
Indeed, the Energy sector has been this year’s
standout performer, returning over 61%. By
way of contrast, Utilities - the second best-
performing sector – returned a mere 15.4%. At
the other end of the spectrum, Telecom Services
USA Euro Zone UK Japan. Source: Refinitiv Datastream
# Hikes/cuts Implied rate Source: Bloomberg
Cuts expected…
A year of central bank interest rate hikes
Implied policy rate % Interest rate %
Number of hikes / cuts priced in
2.5
2.0
1.5
1.0
0.5
0
5.2
5.0
4.8
4.6
4.4
4.2
Meeting date
5
4
3
2
1
0
-1
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2022
1/2/23 22/3/23 3/5/23 14/6/23
26/7/23 20/9/23 1/11/23 13/12/23 31/1/24
25
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
(a relatively new sector capturing mostly
technology names) has fallen 23.7%. This was
most pronounced in the more speculative end
of the technology market, where investors were
no longer willing to pay a premium for potential
gains and price to earnings multiples collapsed.
Consumer Discretionary stocks also weakened
sharply, as consumers spend a greater share of
their wallet on necessities in the face of a rising
cost of living.
However, at several points over the year, these
trends look to have been reversing. Equity
investors, accustomed to over a decade of
supportive central bank policy, have eagerly
looked through the Fed’s hawkish rhetoric
to a time when interest rates will once again
be cut. Repeatedly, any softer than expected
macro data – whether it be CPI, PMIs, or
unemployment numbers – has been seized
upon by markets as a potential trigger for the
Fed and ECB to change stance. The resulting
rally – particularly in the hardest hit, high
growth areas of the market – has then reversed
as soon as the inflationary trend resumes. Even
after repeated insistence and hiking, markets
still expect rates to stage a relatively swift climb
down.
At the heart of this volatility is the debate as to
whether our current inflationary predicament is
structural or temporary. Without question, some
factors will prove to have been necessarily short
lived. Prior to its invasion of Ukraine, Russia was
responsible for around 10% of global oil supply,
and the main supplier of natural gas to Europe.
Having spiked to over $127 a barrel in March,
similar cost rises are unlikely. Similarly, the
supply chain issues which dogged economies
reopening after the Covid-19 pandemic are
now largely eased. Yet at the same time,
countries around the world are experiencing
higher labour costs thanks to declining
workforces. Energy has also been underinvested
in as a sector for almost a decade, and
delivering a true net zero transition will require
trillions in investment.
Continuing geopolitical tensions present
further inflationary potential. The Ukrainian
invasion highlighted a clear divide between
those countries willing to sanction Russia and
those who were not. While the immediate
consequences were limited to Russia, it has
underscored a sense of global economic
divergence.
Relations between the US and China in
particular have deteriorated, with Chinese
domestic policy adding to the unease. 2022 saw
China’s President Xi consolidate his power at
the National Party Congress in a way not done
since Mao Zedong. Amid increasing domestic
unrest around the pursuit of a continued “zero-
Covid” approach, Chinese authorities cracked
down on Hong Kong and ramped up rhetoric
around Taiwan.
Conversely, US President Biden has used
this year to pass legislation such as the
Chips Act, which will see $280bn invested
in US semiconductor manufacturing over
the next decade, while also banning China
from accessing the necessary technology to
manufacture advanced chips. Over the past
twelve months, the impact has been largely to
the detriment of China’s stock market, with the
MSCI China down 20%, while the US’ S&P 500
is broadly flat at 0.9% as measured in Pounds
Sterling. In a year where markets have become
increasingly emotional and focused on the
short-term, there is potential for a meaningful
divergence between the world’s factory and its
biggest consumer. Deglobalisation of this scale
has the potential to make cost inflation a more
permanent feature of the economic landscape.
Portfolio Review
Over the twelve-month period ending
November 30, 2022, the portfolio returned 1.4%.
The trust’s benchmark also returned 1.4%.
While we always seek to outperform, the
absolute returns generated this fiscal year rank
Brunner second in its global investment trust
peer group. This speaks to not only just how
challenging the market environment has been,
but also the merits of our balanced approach.
While the Brunner investment philosophy
favours high quality companies generating
long-term sustainable growth, this has always
been matched by a sharp focus on valuation.
Discipline in this regard has enabled us to
avoid many of this year’s market torpedoes:
companies whose share prices had surged on
the back of very strong revenue growth, but that
failed to generate cash flow returns. As interest
rates rose, the multiples investors were prepared
to pay for these stocks collapsed, with many
shareholders facing permanent loss of capital.
Not holding the electric vehicle manufacturer
Tesla for example, has been one of the top ten
positive contributors to portfolio performance.
This past year has been a valuable reminder for
market participants that avoiding the downside
is equally as important as capturing the upside.
The sharpest pullbacks of this kind have been
in the Technology sector. In addition to the
mechanical headwinds of monetary policy, the
pandemic saw already fast-growing digital
26
Investment
Manager’s
Review
business models pull forward years of business,
while many traditional industries faced a
forced hiatus. Global economic reopening post
Covid-19 has reversed this dynamic adding
further pressure to share prices.
Thus, not owning Amazon (the online retailer
and provider of cloud services) or Meta (the
parent company of Facebook) has strongly
boosted returns. Amazon now expects full
year revenue growth of just 9%, compared to a
five-year average closer to 30%. The company
also expects adjusted earnings per share
(EPS) to decline 64%. Equally, Meta reported a
4.5% decline in year-on-year revenues thanks
to weaker advertising, at the same time as it
vastly increased spend on the ‘metaverse’, Mark
Zuckerberg’s vision for an online alternative
reality. Adjusted earnings per share (EPS) fell
45% as a result. Meta is now being forced to
lay off 11,000 employees as its core business
struggles to deliver growth, while new projects
have yet to make an impact on the bottom line.
Indeed, within the Brunner portfolio, our relative
underweight to the Technology sector has been
a sizeable boost to performance. Likewise, our
overweight allocation to Health Care stocks
– which have been a relative safe haven this
year – has also contributed positively. On the
other hand, the trust has not benefited from
its underweights in the Consumer Staples and
Energy sectors.
While the trust has two select holdings in the
form of Shell and TotalEnergies, our relatively
small allocation to Energy is longstanding.
Both Shell and TotalEnergies have reported
record profits thanks to the substantial boost
in oil prices. These profits are being reinvested
prudently into less emission intensive activities
such as natural gas and renewables, ensuring
the long-term health of the business. Yet, the
sector as a whole tends to be highly cyclical,
and companies with the long-term quality and
sustainable growth we seek are typically harder
to come by. This may change as the demands of
the energy transition bring greater scrutiny on
the sector.
However, the Brunner portfolio is always
constructed from the bottom-up. As a team,
we look for companies whose financial
fundamentals look like they will best enable the
trust to deliver on its dual objectives of capital
growth and a rising income. This means that
the portfolio managers do not seek to time
the market, or allocate to regions and sectors
on the basis of macroeconomic predictions.
Instead, allocations are a by-product of stock
Contribution to Investment Performance Relative to the Benchmark
Positive contribution
Performance
impact % Negative contribution
Performance
impact %
Overweight
(holding larger than
benchmark weight)
UnitedHealth 1.2 Adidas -1.9
AbbVie 0.9 Partners Group 0.7
Munich Re 0.8 TSMC -0.5
TotalEnergies 0.8 Tyman -0.5
Visa 0.6 Intuit -0.5
Novo Nordisk 0.5 Estée Lauder -0.4
Homeserve 0.5 St James's Place -0.4
Underweight
(zero holding or weight
lower than benchmark
weight)
Amazon 0.7 AstraZeneca -0.6
Meta Platforms 0.6 BP -0.5
Tesla 0.5 Glencore -0.4
27
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
selection, with long-term portfolio performance
similarly driven by the individual returns of each
company.
The portfolio’s biggest contributor to returns
this year was UnitedHealth Group. Shares in
the US-based provider of health insurance
have benefited from investors seeking more
defensive positions. However, the underlying
business has also continued to be strong.
Successive quarters of above-guidance revenue
growth have enabled the company to raise
its full year EPS guidance, thanks in large
part to the strength of its Optum healthcare
services division. Looking forward to next year,
UnitedHealth is as conservative as ever, guiding
for 12% EPS growth – a range it has typically
beaten. While the shares have performed well
this year, they remain on a reasonable long-
term valuation and the position continues to be
a key holding.
Other strong contributors within Health Care
included Abbvie and Novo Nordisk. While
both are pharmaceutical giants, Abbvie
specialises in blockbuster drugs – its most
famous being the anti-inflammatory Humira
which faces a patent cliff in 2023. Shares in
Abbvie have rallied as weakness in Humira has
been lower than expected, while at the same
time the commercial performance of its Skyrizi
psoriasis treatment has also surprised positively.
Given the potential impact of biosimilars on
Humira in 2023, the near-term outlook remains
unclear. However, with its acquisition of Allergan
in 2020, Abbvie has given itself a sizeable
source of recurring revenue to underpin its
future pipeline. Currently trading at around
11x next year’s earnings and with a dividend
yield of over 3.5%, we are comfortable with our
relatively small position.
Novo Nordisk, by contrast, provides long-lasting
treatment for obesity-related illnesses such
as diabetes. Like UnitedHealth, the business
model is less geared to the global economy,
and this has supported its valuation. At the
same time, the reopening of doctors’ practices
has re-enabled Novo to sign on new patients.
This has been particularly beneficial for the
rollout of Novo’s GLP-1 product Wegovy,
for obesity, which helps to regulate insulin
production and glucose release within the body.
After its Q3 results, the company raised full
year sales guidance by 2%, bringing expected
revenue growth and EPS to 25% and 16%,
respectively. Longer-term growth continues to
be underpinned by international markets, which
are seeing a transition from older to newer
products as well as rising demand for diabetes-
adjacent medication.
Outside of Health Care, the portfolio has also
benefited from its position in Visa. Despite the
positive overall contribution, shares in the digital
payments company have proved volatile due
to a range of divergent narratives. On the one
hand, an increase in economic activity post-
pandemic and in particular international
travel, is providing a strong boost to both
topline and margins. Indeed, full year revenues
and net income are expected to grow 22% and
26% respectively, compared to 10% and 16%
last year.
Yet the shares have also struggled in the face of
inflation, with investors fearing softer economic
activity in the medium-term, and potential
disruption from alternative providers. These
appear overdone. Visa’s status as the network
provider for payments, rather than a creditor,
means it captures inflation as a benefit. At the
same time, the company continues to harness
a growing network effect thanks to relatively
small transaction costs, a high user base but
room for further digital payment penetration.
Lastly, we have also benefited from our position
in Homeserve. The company is a UK-listed
provider of domestic maintenance insurance
and related services, with sizeable international
operations. Our original investment case
was predicated on the steady growth in
Homeserve’s core insurance business, as well as
the – for valuation purposes – optional upside
of the online Checkatrade comparison site.
However, in May, the company announced
that it would be sold to Brookfield, a Canadian
private equity company at a premium of c.71%
to its share price.
In recent years, buyouts of quality UK
companies have become a recurring feature of
the investment landscape. The combined effect
of Brexit, turbulent politics and an initially poor
approach to the Covid-19 pandemic has left
the UK market as a whole trading at a discount.
As a result, many high-quality companies, often
with strong growth, trade at far lower valuations
than if they were to be listed in other markets.
In the past five years, we have seen held
companies like UBM, Stock Spirits Group and
Homeserve all taken off the market by either
private equity or peers.
Weakness in the portfolio has been similarly
driven by a combination of macro headwinds
and idiosyncratic stock performance. Some of
the portfolio’s largest detractors are linked to
consumer weakness, although not all of them
fit neatly into the Consumer Discretionary
sector. Similarly, our preference for Financials
stocks which generate returns through fees
28
Investment
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Review
and recurring business, rather than net interest
margins on deposits, has been a sizeable
headwind in a year of rising base rates.
Adidas, the portfolio’s weakest performer
has exemplified this. The sportswear apparel
company has struggled since 2020 with softer
sales in China; partly due to ongoing Covid-19
restrictions, but also due to nationalist boycotts
of Western brands that do not use cotton
sourced from Xinjiang. The latter relates to
allegations of Uighur slave labour. China has
historically been Adidas’ fastest growing and
most profitable geography.
However, the company has also lost market
share in other areas and been accused of
failing to innovate sufficiently quickly. Its largest
competitor, Nike, has performed more strongly
even in China, while smaller Puma brand has
been able to gain footholds elsewhere. Despite
reassurances from management, guidance
has been repeatedly revised down, with the
company now expecting a FY 2022 net profit of
€500m vs. previous guidance of €1.3bn. A public
feud with the musician Kanye West also resulted
in the end of the Yeezy collaboration, whose
outsized impact on profitability had been
underestimated by investors. After reviewing
the investment case at length, we have sold the
position.
The maker of skin care and beauty products,
Estée Lauder has also weakened returns.
Shares were trading at elevated multiples
towards the start of 2022 and we had taken
some profits as a result. However, the continued
impact of China’s zero-Covid approach,
combined with the dollar’s increasing strength
has forced the company to lower its guidance
for 2023. Combined with higher interest rates
and softer consumer expectations given the
rising cost of living, the shares have faced
considerable pressure. Expectations around a
Chinese reopening have provided some support
to the shares of late although a full recovery will
need to see these delivered.
At the other end of the spectrum, our position
in Tyman has derated to an extent not justified
by its fundamentals. An Industrials stock listed
in the UK, the company often trades like a
We added creative content software company Adobe to the portfolio.
29
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
consumer stock. Tyman is an international
leader in door and window seals, as well
as other fixtures and fittings for the housing
market. Shares are now approaching valuations
last seen in the Global Financial Crisis, when
house prices collapsed. However, both the
industry conditions in which Tyman operates,
and the internal fundamental strength of the
business, are materially better today than
they were in 2008. Though we are expecting
softer demand conditions, Tyman is currently
generating robust profits even after an
elevated period in the wake of the pandemic.
The market is overweighting the likely extent
and duration of short-term deterioration, over
and above its longer-term potential.
Within the Financial sector, our two weakest
contributor was Partners Group. Partners is
a diversified private markets asset manager,
generating revenues through fees. The sector as
a whole has benefited from rising demand for
alternative assets in a zero-interest rate world.
With rates rising, bears fear the company will
both see a drop off in demand at the same time
as exit prices for existing investments decline.
However, the company reported net profit
12% above consensus in its 2021 fiscal year
and gave a robust forward outlook for 2022.
While interest rate developments may impact
Partners at the margin, their impact now seems
overly discounted relative to fundamentals. As
a result, we took the opportunity to add to our
position during this period of weakness.
Given the extent of the pullback in Technology
names, stock selection within the sector has
been overwhelmingly positive. However, our
position in the semiconductor manufacturer
TSMC has weakened performance. In addition
to macro concerns around interest rates and
valuations, the high demand and limited supply
which characterised semiconductors during the
pandemic has shown signs of reversal. Having
announced plans to spend over $40bn in CapEx
to build out new factories, the shares reacted
negatively to subsequent news that both Intel
and Apple (two of TSMC’s largest customers)
have revised down orders.
The stock has also been under pressure due to
geopolitical tensions. The company is a supplier
to technology firms in both the US and China,
and as a Taiwanese company, its relationship
with both nations is complex. As part of the
Chips Act, TSMC has pledged to build new
facilities in Arizona but in the event of a Chinese
invasion of Taiwan, these would still take several
years to get online. For now, these concerns
seem overdone. Management has already
started to talk about declining inventories, while
the potential for rivals to produce at TSMC’s
scale or quality has only reduced in recent
years. The shares may continue to prove volatile
in the near term, but look attractive at current
valuations.
Significant Transactions
In times of volatility, it can be tempting to do
too much. Seeing the share price of a company
you hold go down is never pleasant, and selling
can feel like an easy way to stem the loss. At the
same time, when a stock you have admired from
afar goes down, there can be an overwhelming
urge to rush in.
However, price actions are in and of themselves
not an investment case. They are instead a
good prompt to reassess fundamentals. This
year, global equity markets have moved quickly,
extrapolating short-term data points on the basis
of highly emotional situations.
Rather than reacting to these shifts immediately,
we have taken our time to assess both our
holdings and prospective investments from
the bottom up. In each case, we have sought
to determine whether valuations reflect a truly
rational view of the company’s underlying
earnings. For the most part, we have retained
a high degree conviction in the portfolio and as
a result, turnover for the twelve months ending
November 30 has remained low, at 15.1%.
Even so, the extent of the equity market’s
correction has afforded us some valuable
opportunities. Rising interest rates have caused
high growth stocks to derate en masse, with little
differentiation between stocks whose future
earnings are more speculative and those with
little debt and a decade of free cash flow. While
we do not seek to time the market (for example,
hoping to buy ahead of a change in Fed policy),
we can make a judgement as to when a share
price has simply grown cheap.
We have thus initiated positions in several
quality companies with extensive track records
of growth, as well as long-term prospects, at very
reasonable valuations. The continuing discount in
UK names relative to international sector peers,
has also afforded us some valuable entry points.
On the other hand, we have taken advantage
of some recoveries in stocks to exit lower quality
holdings. In a few instances where our conviction
has weakened, the availability of outstanding
companies on historically affordable multiples
has seen us reallocate our positions.
The full list of new holdings and total sales, as
well as some more detailed case studies, are
copied below.
30
Investment
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Adobe is a provider of creative content
software. Since shifting to a Software as a
Service (SaaS) business model, the company
has been able to harness the ever-increasing
consumption of digital content to generate
annual revenue growth of around 20%. As a
technology stock which – until recently – was on
an elevated multiple, the valuation has become
much more reasonable, enabling us to start a
position.
SSP Group is a world leading travel catering
business serving customers predominantly
in airports and train stations. After two very
difficult years in which the company incurred
significant losses, as well as two rights issues,
SSP is now well placed to capitalise on
the recovery in passenger transportation.
Furthermore, ongoing investment during
the downturn should drive growth in market
share. The shares are lowly valued due to
macroeconomic concerns, however we
expect the recovery and growth in revenue
and earnings to occur even against a weaker
economic backdrop.
In July 2022, GSK demerged its consumer
healthcare division to form Haleon. Haleon
is one of the world’s largest consumer health
businesses with products like Sensodyne,
Panadol and Centrum Multivitamins. The
company also boasts a low environmental
footprint, as well as strong pricing power, both
of which are considerable tailwinds in the
current environment. The de-merger should
also help crystallise some of the value in GSK’s
remaining vaccines and oncology businesses
We sold our position in Amadeus at the start
of 2022. The provider of software for the
airline and leisure sectors had rallied strongly
from its pandemic lows thanks to widespread
enthusiasm about the end of the pandemic.
However, our conviction in the company’s
overall competitive positioning and longer-term
growth had started to weaken even before the
onset of Covid-19. Given the more elevated
valuation, we reallocated the position to higher
conviction ideas.
Our initial investment thesis in Fresenius
was predicated on the company’s defensive
exposure to rising health care spend. With a
business model split across dialysis, patient
servicing and hospital management, Fresenius
offers health care exposure without the
traditional “Big Pharma” concern around patent
cycles. However, a series of operational missteps
and declining profitability have weakened our
confidence in management and Fresenius’
growth potential.
In August 2022, we sold our position in Bright
Horizons. The childcare provider has faced
persistent headwinds since the onset of the
pandemic. As workers have embraced the
Purchases Sales
Adobe Amadeus IT Group
Close Bros Fresenius SE
Atalaya Mining Merlin Properties
Align Technology Homeserve
SSP Group Bright Horizons
Haleon National Grid
S&P Global Booking Holdings
SSE Jiangsu Expressway
Atalaya Mining
31
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
hybrid office approach, the nature of childcare
demand has changed. At the same time, Bright
Horizons is facing a structural shortage of
workers as well as greater costs. We agree with
management that longer-term demand for high
quality childcare will remain, but for the near
term there are more compelling opportunities
elsewhere.
Market Outlook
Global equities continue to march to the Fed’s
tune, as they did for most of 2022. Shares have
rallied for two consecutive months, due to softer
inflation numbers and a dovish interpretation
of the central bank’s minutes. Yet against this
optimism, global economic data continue
to deteriorate, as do corporate earnings
expectations. Ongoing developments in China
are also a healthy reminder that large parts
of the world continue to be driven by factors
outside of financial markets.
Markets are now pricing a peak in US interest
rates for June 2023, with a steady reduction
towards 4% by the end of the year. This marks a
downshift from early November, after weaker
than expected US consumer price index prints.
Investors have also seized on less aggressive
comments from Chair Powell. With Covid supply
chain issues now largely resolved, and a further
doubling of the oil price unlikely, equity markets
are hopeful that these inflationary headwinds
are abating.
Yet this optimism does not seem to be shared
by Powell, or other central banks. In general,
the tone has tended towards a slowing of pace,
but a longer overall progression. Inflation and
higher rates therefore, may last longer than
the market currently expects. Even the Bank of
Japan has taken the decision to adjust its yield
curve control policy moderately upwards. At the
same time, economies around the world are
slowing.
Companies, for their part, have done their
best to manage down expectations. Across
the MSCI ACWI, 2023 EPS growth forecasts
have roughly halved according to IBES data.
Weaker demand, higher costs and in some
cases a backlog of inventory that had been
purchased at higher prices, all threaten to erode
corporate profitability. Similarly, optimism about
China’s economic reopening and its potential
GDP boost may be overly optimistic. Within
the Brunner team, we are acutely focused on
how managements are communicating and
responding to these changes.
While highly sentimental markets continue
to misprice stocks on the basis of short-term
data, we also need to be open to any instances
of structural weakness. Within portfolios, the
flurry of recent earnings reports has largely
been positive. Companies like Microchip,
LVMH and Novo Nordisk are reporting resilient
revenues and demonstrating the steady pricing
power that we expect with our quality growth
investment philosophy. Where names like
Agilent and Estée Lauder have reported softer
near-term outlooks, we have been quick to
engage management and test our investment
theses.
After a two-year global pandemic, European
land war and runaway inflation, all of which
were unforeseen, we are hopeful that readers
share our cautious approach to this forecasting
exercise. Instead, we view the above as
considerations shared by the equity market and
to which both the share prices of our holdings
and we as portfolio managers will likely react.
Yet while the market takes this more short-term
view, it is by focusing squarely on long-term
company fundamentals that we will be able to
best serve our clients.
32
Investment
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33
New travel catering purchase
SSP Group is well placed to
capitalise on the recovery in
passenger transportation. We
expect growth in revenue and
earnings to occur even against a
weaker economic backdrop.
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Long-term focus
As investors driven by fundamentals, our focus is on
understanding the long-term. It is only over longer time
periods that the fundamental attributes of businesses and
industries truly reveal themselves, for better or for worse.
We invest in high quality companies with proven profitable
business models that can grow over time. We believe the
stock market is often inefficient in valuing such companies.
Through detailed research and analysis, we seek to
capture these inefficiencies and deliver superior long-term
investment returns.
Balanced, diversified portfolio
Drawing on the full resource of AllianzGI’s global
investment platform, we look across all industries and
geographies to select the most attractive investment
ideas for the trust’s portfolio. We believe in building a
balanced portfolio that is diversified across industries and
geographies, whilst avoiding extreme biases that can
lead to unpredictable and volatile outcomes. In this way
the portfolio can be relied upon to deliver a steady and
consistent capital and income return.
Research intensive, focus on cash flow
AllianzGI’s research platform combines a large global
team of equity and credit portfolio managers and
research analysts, environmental, social and governance
specialists and our own Grassroots* market research
organisation to provide our fund managers with in-
depth analysis of businesses and industries as well as
insights into structural and cyclical trends. Our research
particularly focuses on the analysis of sustainable
company cash flows, which typically provides the truest
measure of corporate performance. (*GrassrootsSM is a
division of AllianzGI)
Stock selection – focus on Quality, Growth and
Valuation
Our stock selection process blends together assessments
of business quality, long-term growth potential and
valuation, resulting in a holistic view of a company, the risk
factors and, ultimately, the drivers of shareholder value.
Quality is about understanding the intrinsic attributes
of a business model. High quality companies are those
with long-term competitive advantages, supported by
shareholder friendly management teams and strong
Investment Philosophy and Stock Selection
Process
Quality: Stable above average returns
– Long term competitive advantage
– Str
ong balance sheets
– High barriers to entry
– Management quality
– Stable/improving ROCE/RoE
– Sound on ESG issues
We seek to identify
this universe through
fundamental
research
Quality
Growth Valuation
Secular growth
– Addressable market growth
– Sustainable gr
owth – technology, brand
– Long term, through-cycle approach
– A
void structural decline
Value, not just “cheap”
– Reverse Discounted Cash Flow
– Enterprise V
alue vs. Cash returns
– Price/Book vs. Return on Equity
– Dividends – an output not input
34
Investment
Manager’s
Review
balance sheets. In financial terms, such companies tend
to be highly profitable, generating substantial surplus
cash flow that can be used to fund further growth or
shareholder returns. These characteristics are often not
immediately obvious from traditional accounting metrics,
which is why we focus so closely on cash flow. Quality can
vary enormously across and within industries. Fortunately,
as global investors with a large investible universe, we
can afford to be highly selective in the companies that we
invest in.
ESG and sustainability considerations also play an
important role in our assessment of business quality.
AllianzGI’s sustainability research team is fully integrated
into the broader investment research platform, allowing
us to develop a deep understanding of these complex
risk factors. Environmental, Social and Governance
(ESG) factors, such as those related to governance or
environmental impact, have the potential to impact
positively or negatively a business model. As long-
term investors, these considerations are critical to our
investment process.
To assess long-term growth potential, it is important
to understand the secular forces that are shaping
the economy and society, such as demographics and
digitalisation. This provides the context in which to assess
broader industry drivers as well as a company’s position
with the industry. Particular emphasis is placed on
differentiating between structural and cyclical growth.
Whilst we will invest in cyclical companies, a much greater
value is placed on the structural element of growth. This
combination of a high quality business model and long-
term growth is powerful driver of shareholder value.
Company valuation seeks to determine whether there
is sufficient upside to warrant investing. We look for
companies where the quality and/or long-term growth
potential is not yet priced in. We want to anticipate rather
than react and are careful not to overpay, for example
by identifying companies with “undiscovered” structural
growth or those where we believe business quality is
improving. We employ a range of valuation tools, such as
free cash flow yield versus expected growth and industry
or market relative valuation.
Sell discipline
Stocks will be sold from the portfolio for one or more of
the following reasons.
– A material change to the in
vestment case, such as a
deterioration in the fundamentals or a rise ESG risks,
undermining the quality and growth potential of the
company.
– A high valuation that can no longer be justified by the
fundamentals.
– Sup
erior alternative investment opportunities, or similar
opportunities with more attractive risk profiles.
Portfolio construction
The portfolio consists of 60-80 holdings that have been
carefully selected on the basis of their own individual
merits, whilst taking into consideration the exposure to
industries, geographies and other risk factors, thereby
ensuring that the overall portfolio remains balanced and
diversified. The size of each individual holding reflects the
level of conviction, the valuation upside potential versus
downside risk factors, and liquidity. At the portfolio level,
the objective is to ensure that stock specific risk – the risk
which results from our stock selection decisions – is the
primary driver of the portfolio’s returns. Residual risks
such as currency, style, geography or macroeconomic
are monitored and managed to ensure that they are not
driving the overall portfolio’s returns. Ultimately, the aim is
to optimise the portfolio to achieve the dual objective of
consistent benchmark outperformance combined with an
attractive and growing income.
The portfolio is segmented into four different groups.
Each has particular characteristics and serves a
specific purpose in the portfolio. The four groups are
explained below, followed by a detailed portfolio
breakdown, providing shareholders with a more complete
understanding of the investment rational behind each
holding.
– High Growth: Rapidly growing companies
demonstrating strong underlying profitability, where
most or all surplus cash flow is reinvested for growth.
The return is expected to come primarily from the long-
term growth in intrinsic value.
– D
efensive Growth: Stable and highly profitable
companies which have demonstrated a long track
record of high returns on capital with a stable
growth profile. The return is expected to come from a
combination of long-term growth in intrinsic value, cash
returns to shareholders and a valuation re-rating.
– Cyclical Growth: Companies delivering high returns on
capital and long-term growth but which also exhibit
more volatile short term results. The return is expected
to come from a combination of long-term growth in
intrinsic value, cash returns to shareholders and a
valuation re-rating, however shorter term returns may
be more variable with the economic cycle.
– Matur
e: Profitable companies that are later in the
industry life cycle where growth rates are typically
lower. The return is expected to come primarily from
shareholder returns and valuation re-rating, with a
lesser contribution from intrinsic value growth.
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The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Company Engagement Activities
Our investment process does not end with purchases of shares. We believe that we have an important duty to engage
with the boards and executive management teams of the companies in the portfolio. This is not purely about holding
management to account, but also about influencing company strategy and promoting effective governance, to help
improve long term performance. In particular, we focus on the sustainability of the business model and factors such as
the environmental impact of the business, social policies and capital management. The table shows the number of our
engagements with businesses last year, and breaks this down into different categories and by sector.
Consumer
Staples
Consumer
Discretionary
Energy
Financials
Health
Industrials
Materials
Technology
Telecoms
Utilities
Business Model
2 2 1 2
1 2
Capital
Management
1 2 1
Audit &
Accounting
1
Corporate
Governance
2 2 3 7 5 1 2 2
Environmental
Risks / Impacts
2 5 4 1 1 1 1 1
Social Risks /
Impacts
1 2 2 2 1 1 1 1
Business Conduct
& Culture
1 1 1
Transparency
& Disclosure
1 1 1 1
Several issues may be covered in each meeting.
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Investment
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AllianzGI does considerable proprietary work in ESG analysis and at the moment also uses research provided by MSCI
to help identify Environmental, Social and Governance factors that can impact the businesses of the companies in the
portfolio. The charts below show that the Brunner portfolio’s ESG ratings compare well against the benchmark’s ESG
ratings over the three year period under review. They show the rating of the Brunner portfolio on Environment, Social and
Governance risks and combined ESG risk measurements compared to the rating of the Benchmark (70% FTSE World Ex
UK Index and 30% FTSE All-Share Index) scored on a scale of 1-10 (where 10 is high) on a quarterly basis over the three
years from 1 July 2019 to 31 December 2022.
Source: MSCI/AllianzGI.
Environmental, Social and Governance
performance
8.0
4.0
Q3 19 Q4 22
8.0
4.0
Q3 19 Q4 22
8.0
4.0
Q3 19 Q4 22
8.0
4.0
Q3 19 Q4 22
Brunner ESG MSCI Environment BM ESG MSCI Environment Brunner ESG MSCI Governance BM ESG MSCI Governance
Brunner ESG MSCI Social BM ESG MSCI Social Brunner ESG MSCI Aggregate BM ESG MSCI Aggregate
Environmental performance v benchmark
Social performance v benchmark
Governance performance v benchmark
ESG performance v benchmark
37
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
UnitedHealth Microsoft
Munich Re
1 2
4
Health Care Providers
North America
25,718,899
4.9%
Non-Life Insurance
Germany
19,434,001
3.7%
Software & Computer Services
North America
24,412,979
4.7%
Top 20 Holdings
Sector
Headquarters
Value of holding
Percentage of portfolio
Visa3
Industrial Support Services
North America
19,593,985
3.7%
UnitedHealth Group is a leading health insurer,
offering a variety of plans and services to group and
individual customers in the US and internationally.
Its UnitedHealthcare health benefits segment
delivers insurance plans, as well as Medicare,
state-funded, and supplemental vision and dental
options. Its Optum health services units provide
wellness and care management programs.
Muenchener Rueckversicherungs-Gesellschaft (known
as MunichRe) is one of the world’s largest reinsurance
and risk management firms, operating in 160 countries.
Reinsurance coverage (insurance for insurers) includes
fire, life, motor, and liability policies at both an
individual and categorized level. The company also
provides direct insurance through Germany-based
ERGO and other subsidiaries.
Microsoft is one of the world’s largest technology
companies. Since Satya Nadella took over as CEO in
2014, the company has moved away from its traditional
on-premise business to focus on its Azure cloud
computing platform. As a result, Microsoft revenue is
now split roughly equally between its three divisions of
personal computing, cloud and productivity.
Visa operates the world’s largest consumer payment
system and boasts nearly 3.6 billion credit and other
payment cards in circulation across more than 200
countries. The company also licenses the Visa name to
member institutions, which issue and market their own
Visa products and participate in the VisaNet payment
system that provides authorization, processing, and
settlement services.
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TotalEnergies8
Oil, Gas & Coal
France
12,512,462
2.4%
Microchip Technology6
Technology Hardware & Equipment
North America
13,451,962
2.6%
Shell5
Oil, Gas & Coal
United Kingdom
14,444,750
2.8%
Pharmaceuticals & Biotechnology
Switzerland
13,021,337
2.5%
Roche Holdings7
TotalEnergies is a multinational energy company based
in France. Under its CEO Patrick Pouyanné, the former
oil and gas company has embarked upon a business
transformation focused on achieving net zero by 2050,
and reducing its broader environmental impact. To do this,
Total is investing heavily into renewables and electricity, as
well as the capacity to offset the emissions of its business
and customers. The company is also expanding its natural
gas capabilities, while reducing its petroleum operations.
Microchip Technology designs, manufactures,
and markets microcontrollers and related mixed-
signal and analog semiconductors. Its chips are
used in the automotive, consumer, industrial, and
telecommunications markets, in products ranging from
electric razors to medical devices. The company stands
to benefit from increased digital penetration of global
hardware.
Shell is a leading globally integrated oil and gas
company. Its operations are split four ways, between
oil, gas, upstream, and chemicals. By reallocating the
proceeds of its legacy activities towards lower carbon
solutions, Shell is a playing a key role in delivering the
energy transition.
Roche operates two segments – pharmaceuticals and
diagnostics – and sells its products in over 190 countries.
Its prescription drugs include cancer therapies, hepatitis
drugs, idiopathic pulmonary fibrosis drugs, macular
degeneration therapies, and Tamiflu, which is used to
prevent and treat influenza (including pandemic strains).
Roche’s diagnostics arm offers clinical lab supplies,
genetic tests, diabetes monitoring supplies, and point-of-
care diagnostics for health care providers.
39
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Taiwan Semiconductor Manufacturing Company (TSMC)
is the first and largest dedicated silicon foundry in the
world, with nine plants in Asia and one in the US. TSMC
makes advanced, ‘leading-edge’ chips for semiconductor
and systems companies who don’t have their own
manufacturing facilities, including AMD, Apple, Broadcom,
NVIDIA, and QUALCOMM.
Novo Nordisk is a pharmaceutical company specialising
in medication for the treatment of diabetes and obesity
related illnesses. The company generates around
80% of revenues from diabetes treatments. Whilst
the roots of the business lie in insulin production, the
company is rapidly expanding its presence in GLP-1
treatments (Glucagon-like peptides), which increase
insulin production and can help suppress appetite.
Novo Nordisk also generates around 15% of its revenues
from its biopharmaceutical division, which specialises in
haemophilia.
Technology Hardware & Equipment
Taiwan
11,876,731
2.3%
Pharmaceutical & Biotechnology
Denmark
11,326,437
2.2%
Electronic & Electrical Equipment
North America
11,843,628
2.3%
Ametek is a global manufacturer of electronic
instruments and electromechanical devices. The
Company manufactures advanced instruments for
process, aerospace, power, and industrial markets and
is a supplier of electrical interconnects, specialty metals,
technical motors and systems, and floor care and
specialty motors.
Schneider Electric is a global producer of electrical
distribution, automation and energy management
products. The company has three business units: Energy
Management, Industrial Automation and Services. Its
products are used in homes, offices, industrial buildings
and infrastructure around the world. Countries around
the world are aiming to reduce their greenhouse
gas emissions, at the same time as digitalising ever
more products and services. As a result, demand for
electrification is structurally rising.
Electronic & Electrical Equipment
France
11,830,830
2.3%
AMETEK
Schneider Electric
10
11
Sector
Headquarters
Value of holding
Percentage of portfolio
Taiwan Semiconductor9
Novo Nordisk12
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Accenture is the world’s largest consulting firm and offers
a portfolio of management consulting, technology, and
business process outsourcing to some of the top companies
and government organizations in the world. Corporate
clients span a broad spectrum of industries - from retail to
communications - and include more than three-quarters of
the Fortune 500. Clients use Accenture’s services to enter
new markets, increase revenue in existing markets, improve
operational performance, and deliver new products to
market.
Industrial Support Services
North America
10,733,310
2.1%
General Industrials
Japan
10,982,090
2.1%
Partners Group is a private equity firm based in
Switzerland with over 94 billion USD in assets under
management. Its asset classes include private equity,
infrastructure, real estate and debt. The firm serves 900
institutional investors and seeks to create value through
active and long-term responsible ownership. The firm
has completed more than 240 private equity investments
in portfolio companies and is one of the most valuable
publicly listed private markets firm in the world.
Investment Banking & Brokerage
Switzerland
11,057,258
2.1%
Personal Care, Drug & Grocery
United Kingdom
10,878,000
2.1%
London listed multinational Unilever is one of the world’s
largest consumer goods companies, selling more than
400 brands such as Dove, Cif and Knorr in over 190
countries. It is particularly well known for its strong
market position in emerging markets such as India,
Nigeria and Indonesia and for its early commitment to
reduce the adverse environmental and social impact of
its business. Recent sales have been boosted by higher
selling prices, necessitated by large increases in the cost
of raw materials. This serves as a reminder that equities
are nominal assets which can benefit from the effects of
higher inflation should their pricing power be sufficient.
Partners Group13
Accenture16
Itochu14
Unilever15
Itochu is a Japanese trading company which owns a
diverse range of businesses around the world. A large
contributor to profit has been its iron ore joint venture
with BHP Billiton in the Pilbara, Australia. The next
largest business is the Japanese convenience store chain
Familymart. The company also owns Kwik Fit, a UK-based
chain of tyre retailers and mechanics. Itochu has a strong
record of value creative growth and management is laser-
focused on generating returns over the cost of capital.
41
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Sector
Headquarters
Value of holding
Percentage of portfolio
Charles Schwab
Yum China Agilent
19
17 18
Total value of top twenty holdings: £274,488,664 Percentage of portfolio: 52.7%
AIA20
AIA is the world’s largest life insurer, covering 18 markets
across the Asia Pacific region. An increasingly affluent
Asian middle class is driving rapid demand for life
insurance, as well as for the company’s other services
in retirement planning and wealth management. Its
geographic spread helps deliver sustainably high growth
with lower volatility than peers. AIA also has strong
governance controls.
Travel & Leisure
North America
10,635,737
2.0%
Life Insurance
Hong Kong
10,131,404
1.9%
Medical Equipment and Services
North America
10,399,529
2.0%
Agilent produces advanced instruments, software
and consumables used by scientists in academia and
the healthcare, food, chemical and environmental
industries. Key platforms relate to liquid and gas
chromatography, mass spectrometry and cell
analysis. The company has enjoyed structural
growth, particularly in emerging markets.
Charles Schwab is the largest discount brokerage in the
US with $6.6 trillion in client assets as at the end of Q3
2022, a number which has grown at a 13% CAGR since
2003. They serve both individual investors managing their
own finances and registered investment advisors. Their
scale means costs as a percentage of client assets are
exceptionally low. This allows them to charge lower fees
than competitors, whilst still making a healthy profit.
Investment Banking & Brokerage
North America
10,203,335
2.0%
Yum China is the largest operator of convenience
restaurants in the country. Its franchises include famous
Western names such as Pizza Hut, KFC and Taco Bell as
well as local brands like Little Sheep and Huang Ji Huang.
Since opening its first restaurant in 1987, Yum has grown to
over 12,000 restaurants in over 1,700 cities across mainland
China. As China’s cities grow, Yum’s restaurants are catering
to an increasingly affluent middle class with less time to
cook. Yum has also been a pioneer in online food delivery.
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Case Studies
Schneider Electric
Sector Electronic & Electrical Equipment
Headquarters France
Value of holding 11,830,830
% of portfolio 2.3%
Schneider Electric is a French company
focused on the digital transformation of energy
management and industrial automation. Its
products, software and services are used in the
construction and retro-fitting of buildings, the
generation, transmission and distribution of
electricity, data centres, infrastructure, IT and
manufacturing. It is a truly global company with
significant businesses in Asia, North America and
Europe.
We believe electrification is a major area of
growth for decades to come. Today only 18% of
global energy needs are met using electricity,
according to IEA figures. This figure will need
to dramatically increase as renewables form
a larger part of the energy mix, displacing the
combustion of fossil fuels in situ. Electric vehicles
are an early case in point. Electrification is key to
all credible net zero pathways.
Schneider’s products have a key role to play
in reducing energy usage and in enabling the
energy transition. The company is consistently
innovative, supported by an R&D budget
equivalent to 5% of sales. The company’s financial
characteristics are also appealing and consistent
with Brunner’s focus on quality; they have solid
margins, consistently good returns on capital and
a progressive dividend policy that returns 50%
of trailing profits to shareholders. Moreover, the
company is an ESG leader itself. Not only do their
products help customers save and avoid millions
of tonnes of carbon emissions and enable the
transition to a more sustainable economy, the
company was one of the first to have its net zero
commitment roadmap validated by the Science
Based Target Initiative.
43
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Visa Inc
Sector Industrial Support Services
Headquarters North America
Value of holding 19,593,985
% of portfolio 3.7%
American company Visa is a leader in digital
payments, facilitating payments between
consumers, merchants, financial institutions and
government entities around the world. They
are an asset light network business that does
not make loans or take credit risk. Instead they
operate the rails on which convenient, reliable
and secure financial transactions can take place.
The power of the Visa network is reflected in
some extraordinary figures. There are 3.6 billion
Visa cards in circulation across 200 countries and
territories. They are issued by 14,900 financial
institutions and accepted at over eighty million
merchant locations. In the year to the end of
June 2021 they processed transactions worth $14
trillion. This ubiquity creates a powerful barrier
to entry. The only equivalent scale business in
Mastercard, their primary competitor.
Visa’s revenues are a very small percentage of
transaction volumes. Transaction volumes tend
to grow every year for two primary reasons.
Firstly, growth in nominal personal consumption
expenditure tends to go up due to a combination
of economic growth and inflation. Secondly,
there is a longstanding shift in most economies
from cash and cheque to card and electronic
payments. This shift is supported by businesses
and governments who dislike the issuing and
handling costs of cash and the associated risks of
crime, whether it be theft, black market activity or
tax avoidance. In addition, the growing share of
e-commerce transactions, by default, requires and
electronic form of payment.
The economics of Visa’s business is outstanding.
The company has margins of approximately
50% and requires negligible capital to grow.
The balance sheet is pristine, meaning all the
company’s prodigious cash flow is returned
to shareholders via a modest dividend and
substantial share buybacks. We expect this
cash flow stream to grow in most years in most
circumstances, reflecting the growth in transaction
volumes described above.
All investments come with risks, of course. With
Visa we think the primary concerns are regulatory
and technological. We note that thus far the
impact of both has been small. New entrants in
payments such as Paypal, Apple Pay, Square etc
etc all rely on ‘tokenised’ credit and debit card
accounts. Regulatory interventions and rulings
have been similarly benign. Overall we think Visa
has one of the most powerful barriers to entry
in global industry and, as such, it remains a core
holding in the Brunner portfolio.
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Haleon PLC
Sector Pharmaceuticals and Biotechnology
Headquarters United Kingdom
Value of holding 5,326,875
% of portfolio 1.0%
Haleon is the one of the world’s leading branded
consumer health companies with a strong
portfolio of brands that includes Sensodyne
toothpaste, Panadol and Advil analgesics,
Centrum vitamins and Nicorette smoking
cessation aids. The company was demerged from
FTSE 100 pharmaceutical company GSK in July
2022. This followed GSK’s consolidation of the
consumer health portfolios of pharmaceutical
peers Novartis and Pfizer last decade. Haleon
now holds number one or two market share
positions in 70% of their markets, including the US,
Germany and China. Many of their brands have
decades long heritage in their markets and are
deeply trusted by consumers. Equally important,
the company has a long record of regulatory
medical expertise.
The company targets 4-6% long term growth in
revenues supported by a combination of volume
growth and modest price inflation. Growth in
2022 was considerably higher than this as cost
pressures were passed through to the consumer,
demonstrating the equity’s usefulness as an
inflation hedge. In addition to ongoing share
gains, long term growth in volumes is supported
by two structural megatrends; demographics and
a shift in the healthcare burden to the individual,
particularly for complaints where self-diagnosis
and treatment is feasible. Recent examples of
pharmaceuticals that have shifted from being
prescription only to being branded products
available ‘over the counter’ include Nexium, for
heartburn, and allergy drug Flonase.
Research and development investment is
equivalent to 3% of sales, in the top quartile
of the industry. Operating margins were an
impressive 22.8% in 2021. The company is highly
cash generative, which will allow the company
to rapidly pay down debt and pay a growing
dividend. In comparison to peers with similar
financial characteristics, the stock was attractively
valued when we initiated the position. This was
partly due to a technical situation, as many GSK
shareholders immediately sold the Haleon stock
that they received in the spin-off. As Haleon
establishes a track record as a standalone public
company we expect this gap to narrow which,
alongside decent growth in profits and substantial
cash returns, should make the investment a solid,
reliable compounder similar to a best-in-class
consumer staple.
45
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
IG Group is a financial trading platform
headquartered in London. Its largest business by
revenue is the provision of over-the-counter (OTC),
leveraged derivatives trading to sophisticated
investors. IG Group specialises in spread bets and
contracts for difference (CFDs), and is the world’s
leading provider by volume. In its 2022 financial
year, the company generated £812 million in
revenues from leveraged derivatives, with a
further £154 million spread across exchange-
traded derivatives and stock trading and
investments.
As investors, we regularly engage with portfolio
companies. Speaking directly with management
and non-executive directors enables us to
address specific issues at a senior level, as well
as advocating for any changes we think would
be beneficial to the company. In both cases,
our duty as stewards of client capital gives us a
responsibility to address strategic and operational
concerns, as well as Environmental, Social and
Governance (ESG) issues. Throughout this process,
we are ably supported by our stewardship team
here at AllianzGI.
In February 2022, we wrote to the board of IG
Group during a consultation on the company’s
capital allocation policy. We believed that IG’s
valuation suffered from volatility of earnings,
and that a lack of clarity on capital allocation
meant that periods of strong cash generation
were not leading to a sustained benefit in
terms of shareholder returns. We provided
detailed feedback as to how cash generation
could be used to fund a core growing dividend,
supplemented by either special dividends or
share buybacks. The latter would increase future
earnings per share, while a growing dividend
would also underline the board’s confidence in IG
Group’s growth prospects.
In its July results, we were pleased to see IG Group
announce a new capital allocation framework
which had adopted the key features that we
had advocated. Management announced a
progressive, well-covered ordinary dividend
equivalent to approximately 50% annual
earnings, as well as returning surplus capital
through share buybacks or special dividends as
appropriate. This included a £150 million buyback
announced on the day, equivalent to 5% of the
company’s market capitalisation.
Whilst it is too soon to judge the long-term
benefits of this new policy, the market reaction
has initially been positive, and we believe the
company’s capital allocation is now much clearer
and better understood. As a result, we considered
the engagement to be a success. Further
meetings with management confirmed that our
input had been taken on board and helped to
shape IG Group’s capital allocation policy. We
believe the net result will be a clear link between
periods of strong trading to shareholder returns
and future earnings growth.
ESG Focus
IG Group
Sector Investment Banking & Brokerage
Headquarters United Kingdom
Value of holding £6,965,750
% of portfolio 1.3%
“During our discussions on establishing a formal capital allocation framework – the
first of its kind at IG – feedback and suggestions from shareholders, such as Allianz
Global Investors, were helpful to the board in formulating a framework that we
believe is optimal for all stakeholders.”
Feedback from IG Group CFO, Charlie Rozes
46
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47
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Portfolio Breakdown
at 30 November 2022
Shell
Unilever
SSE
IG Group
St. James's Place
RELX
Haleon
Close Brothers
Rio Tinto
Ashmore
Paragon Banking
Redrow
Baltic Classifieds
SThree
DCC
GSK
SSP
Helical
Tyman
United Health
Microsoft
Visa
Microchip Technology
AMETEK
Accenture
Yum China Holdings
Agilent Technologies
Charles Schwab
The Cooper Companies
Estée Lauder
Amphenol
Intuitive Surgical
Intuit
AbbVie
CME Group
FleetCor Technologies
Adobe
MarketAxcess
Ecolab
S&P Global
International Flavors &
Fragrances
Align Technology
42.23% 21.95%
North America United Kingdom
48
Investment
Manager’s
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Munich Re
Roche Holdings
TotalEnergies
Schneider Electric
Novo Nordisk
Partners Group
Assa Abloy
LVMH Moet Hennessy Louis
Vuitton
Atlas Copco
Nestle
Adidas
UBS
Jumbo
Iberdrola
Taiwan Semiconductor
AIA
Brambles
Australia & New Zealand
Bank
Itochu
Astellas Pharma
27.11%
5.83%
2.88%
Continental Europe Japan
Pacific Basin
49
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Name Sector Value (£)
% of
Invested
Funds
North America Listed Equity Holdings
United Health
Health Care Providers
25,718,899 4.92
Microsoft
Software & Computer Services
24,412,979 4.67
Visa
Industrial Support Services
19,593,985 3.75
Microchip Technology
Technology Hardware & Equipment
13,451,962 2.57
AMETEK
Electronic & Electrical Equipment
11,843,628 2.27
Accenture
Industrial Support Services
10,733,310 2.05
Yum China Holdings
Travel & Leisure
10,635,737 2.03
Agilent Technologies
Medical Equipment & Services
10,399,529 1.99
Charles Schwab
Investment Banking & Brokerage
10,203,335 1.95
The Cooper Companies
Medical Equipment & Services
9,569,367 1.83
Estée Lauder
Personal Goods
8,711,327 1.67
Amphenol
Technology Hardware & Equipment
8,100,428 1.55
Intuitive Surgical
Medical Equipment & Services
6,472,029 1.24
Intuit
Software & Computer Services
6,160,416 1.18
AbbVie
Pharmaceuticals & Biotechnology
6,079,477 1.16
CME Group
Investment Banking & Brokerage
5,631,236 1.08
FleetCor Technologies
Industrial Support Services
5,601,192 1.07
Adobe
Software & Computer Services
5,358,149 1.02
MarketAxcess
Investment Banking & Brokerage
5,170,316 0.99
Ecolab
Chemicals
4,404,904 0.84
S&P Global
Finance & Credit Services
4,397,016 0.84
International Flavors & Fragrances
Chemicals 4,159,493 0.80
Align Technology
Medical Equipment & Services
3,963,254 0.76
220,771,968 42.23
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Name Sector Value (£)
% of
Invested
Funds
United Kingdom Listed Equity Holdings
Shell
Oil, Gas & Coal
14,444,750 2.76
Unilever
Personal Care, Drug & Grocery
10,878,000 2.08
SSE
Electricity
8,250,347 1.58
IG Group
Investment Banking & Brokerage
6,965,750 1.33
St. James's Place
Investment Banking & Brokerage
6,894,000 1.32
RELX
Media
6,589,200 1.26
Haleon
Pharmaceuticals & Biotechnology
5,326,875 1.02
Close Brothers
Banks
5,254,567 1.01
Rio Tinto
Industrial Metals & Mining
5,304,800 1.01
Ashmore
Investment Banking & Brokerage
4,967,600 0.95
Paragon Banking
Finance & Credit Services
4,930,800 0.94
Redrow
Household Goods & Home Construction
4,802,700 0.92
Baltic Classifieds
Software & Computer Services
4,680,000 0.90
SThree
Industrial Support Services
4,657,500 0.89
DCC Industrial Support Services 4,608,450 0.88
GSK Pharmaceuticals & Biotechnology 4,220,400 0.81
SSP
Travel & Leisure
4,258,000 0.81
Helical
Real Estate Investment & Services
3,978,125 0.76
Tyman
Construction & Materials
3,748,500 0.72
114,760,364 21.95
51
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Name Sector Value (£)
% of
Invested
Funds
Continental Europe Listed Equity Holdings
Munich Re
Non-Life Insurance (Germany)
19,434,001 3.72
Roche Holdings
Pharmaceuticals & Biotechnology (Switzerland)
13,021,337 2.49
TotalEnergies
Oil, Gas & Coal (France)
12,512,462 2.39
Schneider Electric
Electronic & Electrical Equipment (France)
11,830,830 2.26
Novo Nordisk
Pharmaceuticals & Biotechnology (Denmark)
11,326,437 2.17
Partners Group
Investment Banking & Brokerage (Switzerland)
11,057,258 2.12
Assa Abloy
Construction & Materials (Sweden)
9,249,275 1.77
LVMH Moet Hennessy Louis Vuitton
Personal Goods (France)
8,843,454 1.69
Atlas Copco
Industrial Engineering (Sweden)
8,647,571 1.66
Nestle
Food Producers (Switzerland)
8,646,862 1.65
Adidas
Personal Goods (Germany)
7,588,403 1.45
UBS
Investment Banking & Brokerage (Switzerland)
7,590,580 1.45
Jumbo
Leisure Goods (Greece)
6,553,653 1.25
Iberdrola
Electricity (Spain)
5,452,414 1.04
141,754,537 27.11
Pacific Basin Listed Equity Holdings
Taiwan Semiconductor
Technology Hardware & Equipment (Taiwan)
11,876,731 2.27
AIA
Life Insurance (Hong Kong)
10,131,404 1.94
Brambles
General Industrials (Australia)
5,211,353 1.00
Australia & New Zealand Bank
Banks (Australia)
3,247,363 0.62
30,466,851 5.83
Japan Listed Equity Holdings
Itochu
General Industrials
10,982,090 2.10
Astellas Pharma
Pharmaceuticals & Biotechnology
4,093,272 0.78
15,075,362 2.88
Total Invested Funds
£522,829,082 100.00
52
Investment
Manager’s
Review
Distribution of Invested Funds
at 30 November 2022
Breakdown of Equity Portfolio
Sector % Held
Industrials
20.41
Financials
20.25
Health Care
19.18
Technology
14.17
Consumer Discretionary
11.08
Energy
5.15
Consumer Staples
3.73
Basic Materials
2.65
Utilities
2.62
Real Estate
0.76
Total Invested Funds - £522,829,082 (2021 - £533,923,937)
United
Kingdom
%
North
America
%
Other
Countries
%
2022
Total
%
Composite
Benchmark
Sector
Weighting
2021
Total
%
Industrials
Aerospace & Defence - - - - 1.54 -
Construction & Materials 0.72 - 1.77 2.49 1.22 2.39
Electronic & Electrical Equipment - 2.27 2.26 4.53 1.26 4.36
General Industrials - - 3.10 3.10 2.02 2.50
Industrial Engineering - - 1.66 1.66 1.16 1.48
Industrial Support Services 1.77 6.87 - 8.64 3.57 8.53
Industrial Transportation - - - - 1.97 0.58
2.49 9.14 8.79 20.42 12.74 19.84
Financials
Banks 1.01 - 0.62 1.63 7.00 0.59
Finance & Credit Services 0.94 0.84 - 1.78 0.80 0.97
Investment Banking & Brokerage 3.60 4.02 3.57 11.19 3.56 10.77
Life Insurance - - 1.94 1.94 1.47 1.79
Mortgage REITs - - - - 0.02 -
Non-Life Insurance - - 3.72 3.72 1.85 3.65
5.55 4.86 9.85 20.26 14.70 17.77
53
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
United
Kingdom
%
North
America
%
Other
Countries
%
2022
Total
%
Composite
Benchmark
Sector
Weighting
2021
Total
%
Health Care
Health Care Providers - 4.92 - 4.92 1.46 5.09
Medical Equipment & Services - 5.82 - 5.82 2.65 5.58
Pharmaceuticals & Biotechnology 1.83 1.16 5.44 8.43 8.35 9.93
1.83 11.90 5.44 19.17 12.46 20.60
Technology
Software & Computer Services 0.90 6.87 - 7.77 7.83 8.60
Technology Hardware & Equipment - 4.12 2.27 6.39 7.71 6.58
0.90 10.99 2.27 14.16 15.54 15.18
Consumer Discretionary
Automobiles & Parts - - - - 1.83 -
Consumer Services - - - - 0.68 0.78
Household Goods & Home Construction 0.92 - - 0.92 0.50 1.27
Leisure Goods - - 1.25 1.25 0.60 0.99
Media 1.26 - - 1.26 1.69 1.42
Personal Goods - 1.67 3.14 4.81 1.19 6.33
Retailers - - - - 3.92 -
Travel & Leisure 0.81 2.03 - 2.84 2.15 2.30
2.99 3.70 4.39 11.08 12.56 13.09
Energy
Oil, Gas & Coal 2.76 - 2.39 5.15 7.07 3.17
Alternative Energy - - - - 0.14 -
2.76 0.00 2.39 5.15 7.21 3.17
Consumer Staples
Beverages - - - - 2.36 -
Food Producers - - 1.65 1.65 1.53 1.44
Personal Care, Drug & Grocery 2.08 - - 2.08 3.73 1.63
Tobacco - - - - 1.59 -
2.08 0.00 1.65 3.73 9.21 3.07
54
Investment
Manager’s
Review
United
Kingdom
%
North
America
%
Other
Countries
%
2022
Total
%
Composite
Benchmark
Sector
Weighting
2021
Total
%
Basic Materials
Chemicals - 1.64 - 1.64 1.56 2.04
Industrial Materials - - - - 0.12 -
Industrial Metals & Mining 1.01 - - 1.01 3.20 0.86
Precious Metals & Mining - - - - 0.36 -
1.01 1.64 0.00 2.65 5.24 2.90
Utilities
Electricity
1.58 - 1.04 2.62 1.78 1.13
Gas, Water & Multi-Utilities - - - - 1.29 1.74
Waste & Disposal Services - - - - 0.20 -
1.58 0.00 1.04 2.62 3.27 2.87
Real Estate
Real Estate Investment & Services 0.76 - - 0.76 0.52 0.74
Real Estate Investment Trusts - - - - 2.18 0.77
0.76 0.00 0.00 0.76 2.70 1.51
Telecommunications
Telecommunications Equipment - - - - 0.51 -
Telecom Service Providers - - - - 1.98 -
0.00 0.00 0.00 0.00 2.49 0.00
Not classified - - - - 1.88 -
Total 21.95 42.23 35.82 100.00 100.00 100.00
55
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Revenue and Capital 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Total income (£000s)
9,113 9,031 8,735 9,996 11,000 10,968 11,505 9,195 11,487
12,623
Earnings per share
15.22p 14.71p 14.09p 16.40p 18.40p 19.67p 21.66p 15.96p 20.35p
22.66p
Dividend per share
14.50p 15.00p 15.30p 15.80p 16.50p 18.15p 19.98p 20.06p 20.15p
21.50p
Total net assets (£000s)*
268,254 278,363 273,630 318,334 368,014 360,273 403,787 422,099 502,452 497,097
Total net assets (£000s)†
255,769 264,945 262,487 307,707 359,228 361,105 400,207 416,486 497,526 503,217
Net asset value per ordinary share*
622.6p 646.0p 636.2p 742.8p 862.0p 843.9p 945.8p 988.7p 1,176.9p
1,164.4p
Net asset value per ordinary share†
593.6p 614.9p 610.3p 718.0p 841.4p 845.8p 937.4p 975.5p 1,165.4p
1,178.7p
Share price
508.0p 541.0p 540.5p 591.8p 785.0p 745.0p 862.0p 842.0p 1,050.0p
1,020.0p
Year end discount %†
14 12 11 18 7 12 8 14 10
14
* Debt at par. † Debt at fair value.
Geographical Disposition % of Investment Funds* at 30 November
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
United Kingdom 50.5 47.0 42.1 35.0 30.8 26.4 24.7 17.5 20.4 22.0
Europe 13.3 13.6 16.0 20.4 20.8 21.6 23.3 27.9 27.5 27.1
Americas 25.3 30.7 32.5 34.1 37.5 42.7 41.3 43.7 43.1 42.2
Japan 4.0 3.0 3.4 3.7 2.6 2.1 2.6 2.7 2.4 2.9
Pacific Basin 6.9 5.7 6.0 6.8 8.3 7.2 8.1 8.2 6.6 5.8
Other Countries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
* Excludes cash, cash equivalents and other receivables
Historical Record
Net Asset Value Return %
30
25
20
15
10
5
0
-5
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net Asset Value Total Return with Debt at Fair Value and Debt at Par
Brunner debt at par
Brunner debt at fair value
Benchmark
Re-based to 100. Source: AllianzGI/Thomson Reuters DataStream. Benchmark: 70% FTSE World Ex UK Index and 30% FTSE All-
Share Index. Alternative Performance Measure (APM). See Glossary on page 115.
56
Investment
Manager’s
Review
Governance
Munich, Germany is home to
our largest European holding,
Munich Re.
57
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Amanda Aldridge BSc FCA*Carolan Dobson BSc
Chartered FCSI*†
Joined the board in December 2019.
Amanda is a non-executive director
and audit committee chair of Impact
Healthcare REIT plc and also chairs
the audit and risk committee of The
Low Carbon Contracts Company and
The Electricity Settlements Company.
She was formerly a partner at KPMG
LLP and during her career she was
Head of the Retail Sector practice
before becoming Head of Contract
Governance in the Risk-Consulting
Division. Amanda is a Fellow of the
Institute of Chartered Accountants in
England and Wales.
Experience:
Amanda brings senior experience in
accounting practice, with specialisms
including risk, and has non-executive
director and audit committee chair
experience on other public company
boards.
Reasons for the recommendation
for re-election:
Amanda has evident skills
and experience both from her
background as a chartered
accountant and as an audit
committee chair.
Joined the board in December 2013
and has been Chair since the AGM
in March 2016. She is also Chair
of Baillie Gifford UK Growth Fund
plc and BlackRock Latin American
Investment Trust plc. 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.
Experience:
Carolan is an experienced fund
manager and has held key roles in
the investment management industry
and in advisory roles and she chairs
both investment trusts and other
organisations.
Reasons for the recommendation
for re-election:
Carolan’s wise and effective
leadership of the board, notably
demonstrated recently through
her calm steering of the company
through the Covid pandemic and the
inflation crisis and wide knowledge
and experience of the industry.
Elizabeth Field MA*
Joined the board in December 2022.
Elizabeth recently retired as a partner
at Stephenson Harwood. Elizabeth
was a corporate lawyer for 35 years
with extensive experience of advising
public and private companies on a
wide range of corporate transactions
across a variety of sectors, specifically
including investment trusts.
Experience:
Elizabeth is a lawyer and has
experience of providing legal and
corporate governance advice to
investment trusts, asset managers
and investment trust sponsors.
Reasons for the recommendation
for election:
Elizabeth’s legal knowledge and
negotiating skills are valuable to the
board and she has wide knowledge
of the industry.
Directors, Manager and Advisers
*Independent of the manager.
†
Independent on appointment as Chair.
Member of the Audit Committee,
Management Engagement
Committee, Nomination Committee
and Remuneration Committee.
Chair of the Audit Committee,
Member of the Management
Engagement Committee, the
Nomination Committee and the
Remuneration Committee.
Board Chair. Chair of the
Management Engagement
Committee and the Nomination
Committee, Member of the
Remuneration Committee.
58
Governance
Peter Maynard MA*Andrew Hutton MA, CFA*
Joined the board in October 2010. He
is a retired solicitor and qualified with
Slaughter and May in 1977. 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.
Peter was on the board throughout
the year. He is retiring from the board
at the AGM and is not standing for
re-election
Joined the board in April 2020.
He is owner and director of A.J.
Hutton Ltd, an investment advisory
practice established in 2007.
Andrew started his career in 1979
at J.P. Morgan where, over 18 years,
he held investment and business
management positions in London,
New York, Singapore and Australia.
He was subsequently head of
investment management at Coutts
Group and co-CEO of RBS Asset
Management. Andrew has served
as Senior Independent Director
of Baillie Gifford UK Growth Fund
and Chairman of JPMorgan Global
Emerging Markets Income Trust.
Experience:
Andrew is an asset management
professional with senior management
and money management experience.
Reasons for the recommendation
for re-election:
Andrew brings to the board a
deep understanding of portfolio
management.
Jim Sharp MA*
Joined the board in January 2014.
He began his career in corporate
finance with J.Henry Schroder & Co.
Limited from 1992 to 2002 where
he was a director. He is Chairman of
The Cotswold Company and In The
Style and a non-executive director of
James Cropper PLC.
Experience:
Jim has a background in financial
services and in addition to experience
in running businesses and insight into
marketing and promotion he brings
a connection to the largest group of
shareholders.
Reasons for the recommendation
for re-election:
Jim’s broad commercial and
operational experience and
knowledge and understanding
of marketing and promotion are
valuable and his connection to a
key stakeholder helps the board’s
understanding of the requirements of
shareholders.
Chair of the Remuneration
Committee. Member of the
Management Engagement
Committee and the Nomination
Committee.
Senior Independent Director.
Member of the Audit Committee,
the Management Engagement
Committee, the Nomination
Committee and the Remuneration
Committee.
Member of the Audit Committee,
the Management Engagement
Committee, the Nomination
Committee and the Remuneration
Committee.
59
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
The Manager or Alternative Investment Fund
Manager (AIFM)
Allianz Global Investors GmbH (AllianzGI) is an investment
company with limited liability incorporated in Germany
and registered in the UK as a branch with establishment
number BR009058 and with an establishment address of
199 Bishopsgate, London EC2M 3TY. It is authorised by the
Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)
and is subject to limited regulation by the Financial
Conduct Authority (FCA).
In April 2021 the board announced that steps are being
taken by AllianzGI to establish a UK AIFM and this is
expected to take place in 2023.
AllianzGI is an active asset manager operating across
nineteen markets with specialised in-house research
teams around the globe, managing assets for individuals,
families and institutions worldwide.
As at 30 September 2022, AllianzGI had €521 billion of
assets under management worldwide.
Through its predecessors, AllianzGI has a heritage
of investment trust management expertise in the
UK reaching back to the nineteenth century and as
at 31 December 2022 had £2.3 billion assets under
management in a range of investment trusts.
Website: allianzgi.co.uk
Head of Investment Trusts
Stephanie Carbonneil
Email: stephanie.carbonneil@allianzgi.com
Investment Manager
Christian Schneider, Lead manager, representing Allianz
Global Investors GmbH, UK Branch, 199 Bishopsgate,
London EC2M 3TY (the manager).
Company Secretary and Registered Office
Kirsten Salt ACG
199 Bishopsgate, London EC2M 3TY
Telephone: 020 3246 7513
Email: kirsten.salt@allianzgi.com
Registered Number
00226323
Bankers and Custodian
HSBC Bank plc
Depositary
HSBC Securities Services
Solicitors
Dickson Minto W.S.
Independent Auditors
PricewaterhouseCoopers LLP
Registrars
Link Group
(full details on page 109)
Stockbrokers
J.P. Morgan Cazenove
60
Governance
Directors’ Report
The directors present their Report which incorporates
the audited financial statements for the year ended 30
November 2022.
Share Capital
Details of the company’s share capital are set out in Note
11 on page 98. There were no share buybacks during
the year or since the year end.
A resolution to renew the authority to purchase shares
for cancellation or holding in treasury is to be put to
shareholders at the forthcoming annual general meeting
and the full text is set out in the notice of meeting on page
111.
Independent Auditors
A resolution to approve the re-appointment of
PricewaterhouseCoopers LLP as auditors of the company
will be proposed at the annual general meeting, together
with a resolution authorising the directors to determine the
Auditors’ remuneration.
Each of the directors at the date of approval of this report
confirms that:
1. so far as the director is aware, there is no relevant
audit information of which the company’s Auditors are
unaware; and
2.
the dir
ector has taken all the steps that he/she ought to
have taken as a director to make himself/herself aware
of any relevant audit information and to establish that
the company’s auditors are aware of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of section 418 of the
Companies Act 2006.
Related Party Transactions
During the financial year no transactions with related
parties have taken place which would materially affect
the financial position or the performance of the company.
Management Contract and Management Fee
The main expense of the company and therefore the
most significant element of the ongoing charges is the
investment management fee and the board is keen to
ensure this fee remains competitive.
The manager’s performance under the contract and the
contract terms are reviewed annually by the management
engagement committee. The committee’s report is on
page 68.
Under the Alternative Investment Fund Managers
Directive (AIFMD) the company has appointed Allianz
Global Investors GmbH (AllianzGI) as the designated
Alternative Investment Fund Manager (AIFM) for the
company on the terms and subject to the conditions of the
management and administration agreement between
the company and AllianzGI (the management contract).
AllianzGI has been authorised to act as an Alternative
Investment Fund Manager by Bundesanstalt für
Finanzdienstleistungsaufsicht (BaFin) and has completed
the relevant notifications to enable it to conduct its
activities from its UK Branch in accordance with AIFMD
and Financial Conduct Authority requirements.
The management contract provides for a management
fee based on 0.45% per annum of the value of the
company’s assets after the deduction of current liabilities,
short-term loans with an initial duration of less than one
year and the value of the company’s investments in any
other funds managed by the manager. The contract can
be terminated with six months’ notice.
Revenue
The revenue earnings attributable to ordinary
shareholders for the year amounted to £9,673,972 or
22.66p per share (2021 - £8,689,051, 20.35p per share).
The first two quarterly dividends of 5.15p (£2,198,675)
were paid during the company’s financial year to 30
November 2022 and the board declared a third quarterly
dividend of 5.15p (£2,198,675) per ordinary share which
was paid on 12 December 2022. The board recommends
a final dividend for the year ended 30 November 2022
of 6.05p (£2,582,910), payable on 4 April 2023, making a
total distribution for the year of 21.50p per ordinary share.
The next quarterly dividend payment is expected to be
made in July 2023.
Invested Funds
The market value of the Company’s investments at 30
November 2022 was £523m (2021 - £534m). Sales of
investments during the year resulted in net losses based
on historical costs of £3.7m (2021 - gains: £82.4m).
Provisions contained in the Finance Act 2010 exempt
approved investment trusts from corporation tax on their
chargeable gains.
Details of the total return of the company and the split
between revenue and capital returns are shown in the
Income Statement on page 86. The revenue and
capital split is explained in more detail in the Statement
of Accounting Policies on page 90 under ‘Investment
management fee and administrative expenses’ and on
page 93 under ‘Finance costs’.
61
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
The following disclosures are made in accordance with Part 6 of Schedule 7 of the Large and Medium sized Companies
and Groups (Accounts and Reports) Regulations 2008.
Capital Structure
The company’s capital structure is set out in Note 11 on page 98.
Listing Rule 9.8.4R
There are no matters requiring disclosure under this Rule.
Voting Rights in the Company’s Shares
As at 14 February 2023, the company’s capital consisted of:
Share class
Number of
shares issued
Voting rights
per share
Total
voting rights
Ordinary shares of 25p 42,692,727 1 42,692,727
5% Cumulative preference shares of £1 450,000 0 0
Total 43,142,727 42,692,727
These figures remain unchanged as at the date of this report.
Common Reporting Standards (CRS)
CRS is a global standard for the automatic exchange of information commissioned by the Organisation for Economic
Cooperation and Development and incorporated into UK law by the International Tax Compliance Regulations 2015.
CRS requires the company to provide certain additional details to HMRC in relation to UK resident foreign investment
holders. The reporting obligation began in 2016 and will be an annual requirement going forward. The Registrars, Link
Group, have been engaged to collate such information and file the reports with HMRC on behalf of the company.
Interests in the Company’s Share Capital
As at 14 February, the company was aware of the following interests in the company’s share capital greater than 3%:
J Maitland (as trustee 14.17%); Sir Hugo Brunner (beneficial 2.32% – as trustee 11.96)%; TBH Brunner (beneficial 1.67%
– as trustee 4.62%).
J Maitland acts as a co-trustee with TBH Brunner in respect of 1,707,180 ordinary shares (4.00%), which form part of
TBH Brunner’s trustee holding. J Maitland also acts as co-trustee with Sir Hugo Brunner in respect of 4,342,688 ordinary
shares (10.17%) which form part of Sir Hugo Brunner’s trustee holdings.
In addition, the company has notification of the following interest in the voting rights of the ordinary shares: Rathbones
Investment Management Limited (4.98%) and 1607 Capital Partners, LLC (4.98%).
62
The board reports against the AIC Code of Corporate
Governance (AIC Code) 2019. As confirmed by the
Financial Reporting Council, following the AIC Corporate
Governance Guide enables investment company boards
to meet their obligations under the UK Corporate
Governance Code and Listing Rules.
Board Composition
There are six directors on the board. We aim to have two
investment professionals, an accountant, a lawyer and a
director with commercial expertise, one of which preferably
has a connection with the Brunner family, to provide a
balanced board. The optimum number of directors is
therefore five, but the number could fall to four and go as
high as six to cover periods of recruitment, transition and
retirement.
The board has a plan for the retirement of directors to
ensure that an orderly process of recruitment can take
place and that the board’s balance of skills and relevant
experience is maintained. This may mean that directors
might be on the board for longer than nine years to allow
for continuity of experience and a smooth transition.
The biographies of the directors are set out on pages 58
and 59 together with the skills and experience each
director brings to the board for the long-term sustainable
success of the company.
No contracts of significance in which directors are deemed
to have been interested have subsisted during the year
under review. Contracts of employment are not entered
into with the directors, who hold office in accordance with
the company’s Articles.
Board Evaluation
The board and its committees were subject to an internally
facilitated performance appraisal during the course of
the year. This was conducted by means of a detailed
questionnaire and the responses were collated into a
report in which the respondents were anonymous. The
Chair conducted the evaluation and it was found that the
board is effective and that each director continues to be
effective, has the appropriate skills and has demonstrated
commitment and devoted the necessary time to his or
her role. All directors attended all board and relevant
committee meetings during the year. The directors all
provide challenge in board meetings and each offers
useful guidance from their own areas of expertise.
The Senior Independent Director conducted an appraisal
of the Chair following a similar method to the board
evaluation. This exercise confirmed that the Chair
demonstrates effective leadership, makes an excellent
contribution to the company and is assiduous in her
engagements with the company’s stakeholders.
Gender and Ethnic Diversity
At the most recent Nomination Committee meeting,
attended by all of the directors, the forthcoming changes
to the Listing Rules on board diversity and inclusion
on company boards were noted and reflected upon.
The board is very supportive of the improvement of
transparency on the diversity of company boards. It was
noted that the rules apply to accounting periods starting
on or after 1 April 2022 and so numerical disclosures and
targets will be introduced in next year’s annual report. It
was agreed that the recruitment and board refreshment
process would continue with the board’s policy and
the Committee’s terms of reference already in place to
have a diverse board, including the specific inclusion
of candidates and where possible appointees from
diverse ethnic backgrounds. In the recent non-executive
director recruitment exercise candidates were sought
from diverse ethnic backgrounds. The board agreed that
in the report for the year ending 30 November 2023 the
company would show it had identified the Chair, the
Senior Independent Director and the Chair of the Audit
Committee as the senior positions. Currently, three of
the company’s directors are male and three are female.
As the company is an investment trust, all of its activities
are outsourced and it does not have any employees and
therefore it has nothing further to report in respect of
gender representation within the company.
Conflicts of Interest
Under the Companies Act 2006 directors must avoid a
situation where they have, or can have, a direct or indirect
interest that conflicts, or possibly may conflict, with the
company’s interests. The board reports annually on the
company’s procedures for ensuring that its powers of
authorisation of conflicts are operated effectively and that
the procedures have been followed.
Each of the directors has provided a statement of all
conflicts of interest and potential conflicts of interest
relating to the company. These statements have been
considered and approved by the board. The directors have
undertaken to notify the Chair and Company Secretary
of any proposed new appointments and new conflicts or
potential conflicts for consideration, if necessary, by the
board. The board has agreed that only directors who have
no interest in the matter being considered will be able to
participate in taking the relevant decision and that in taking
the decision the directors will act in a way they consider, in
good faith, will be most likely to promote the company’s
success. The board is able to impose limits or conditions
when giving authorisation if it thinks this is appropriate.
The board confirms that its powers of authorisation are
operating effectively and that the agreed procedures have
been followed.
Corporate Governance Statement
Governance
63
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Directors’ Indemnities
Directors’ and Officers’ Liability insurance cover is held by the company. As permitted by the company’s Articles, the
company has granted indemnities to the directors.
Board Committees
Audit Committee
The Audit Committee Report is on page 74.
Nomination Committee
The nomination committee meets as needed – at least once each year – and makes recommendations on board
succession planning and the appointment of new directors and considers the composition and balance of the board. The
committee is chaired by Carolan Dobson, the Chair of the board, and met once in the last year when it considered the
re-election of directors at the annual general meeting and the plans for new recruitment to the board. The members of
the committee met separately under the leadership of the Senior Independent Director to review the tenure of the Chair
and consider the plans for succession. All directors serve on the nomination committee and consider nominations made in
accordance with an agreed procedure.
It is the board’s policy to use external agencies to draw up lists of candidates as part of the recruitment of new directors.
The brief to the recruitment consultant includes the request that the shortlist should include a diverse range of candidates.
The Nomination C
ommittee Report is on page 69.
Management Engagement Committee
The management engagement committee met once in the year to review the Management and Administration
Agreement and the manager’s performance and a report of management fees. It has defined terms of reference and
consists of all the directors. It is chaired by Carolan Dobson, the Chair of the board.
The Management Engagement Committee Report is on page 68.
Remuneration Committee
The remuneration committee met once in the year and consists of all the directors. The committee is chaired by Jim Sharp.
The committee determines the company’s remuneration policy and determines the remuneration of each director within
the terms of that policy. The Directors’ Remuneration Report is on page 70.
The terms of reference for each of the committees may be viewed by shareholders on request and are published on the
company’s website brunner.co.uk in the Information/Legal Documents section.
Board Attendance
Attendance by the directors at formal board and committee meetings during the year was as follows:
Director Board
Board
Strategy
Day
Audit
Committee
Remuneration
Committee
Nomination
Committee
Management
Engagement
Committee
No. of meetings 6 1 2 1 1 1
Carolan Dobson 6 1 2
1
1 1 1
Amanda Aldridge 6 1 2 1 1 1
Elizabeth Field
2
- - - - - -
Andrew Hutton 6 1 2 1 1 1
Peter Maynard 6 1 2 1 1 1
Jim Sharp 6 1 2
1
1 1 1
1
Invited to attend meetings, although not a committee member.
2
Appointed to the board on 1 December 2022.
64
Governance
Internal Control
The directors have overall responsibility for the company’s
system of internal control. Whilst acknowledging their
responsibility for the system of internal control, the directors
are aware that such a system is designed to manage
rather than eliminate the risk of failure to achieve business
objectives and can provide only reasonable but not
absolute assurance against material misstatement or loss.
The board has established an ongoing process for
identifying, evaluating and managing the significant risks
faced by the company. This process has been fully in place
throughout the year under review and up to the date of the
signing of this Annual Report.
The key elements of the process are as follows:
– In addition to the r
eview of the principal risks (see pages
16 to 19), the directors regularly review all the risks
on the Internal Risk Matrix and every six months the
board receives from the manager a formal report which
details any known internal controls failures, including
those that are not directly the responsibility of the
manager.
– A
llianz Global Investors GmbH, UK Branch (AllianzGI),
as the appointed manager, provides investment
management, accounting and company secretarial
services to the company. The manager therefore
maintains the internal controls associated with the day-
to-day operation of the company. These responsibilities
are included in the Management and Administration
Agreement between the company and the manager.
The manager’s systems of internal control are regularly
evaluated by its management and monitored by internal
auditors.
– Ther
e is a regular review by the board of asset
allocation and any risk implications. There are also
regular and comprehensive reviews by the board of
management accounting information, including revenue
and expenditure projections, actual revenue against
projections and performance comparisons.
– A
uthorisation and exposure limits are set and
maintained by the board.
– The b
oard meets with senior representatives of AllianzGI
and also receives an Internal Controls Report from the
manager, together with a report on compliance with the
manager’s anti-bribery policy.
– The audit c
ommittee on behalf of the board reviews the
Internal Controls Reports of other third party service
providers, including those of AllianzGI and all other
providers of administrative and custodian services to
AllianzGI or directly to the company.
Statement of the Depositary’s Responsibilities
in Respect of The Brunner Investment Trust
PLC provided by HSBC Securities Services,
Depositary to the Company.
“The Depositary must ensure that the company is
managed in accordance with the Financial Conduct
Authority’s Investment Funds Sourcebook, (the
Sourcebook), the Alternative Investment Fund Managers
Directive (AIFMD) (together the Regulations) and the
company’s Articles of Association.
The Depositary must in the context of its role act honestly,
fairly, professionally, independently and in the interests of
the company and its investors.
The Depositary is responsible for the safekeeping of the
assets of the company in accordance with the Regulations.
The Depositary must ensure that:
– the company’s cash flows are properly monitored
and that cash of the company is booked into the cash
accounts in accordance with the Regulations;
– the sale, issue, repurchase, redemption and cancellation
of shares are carried out in accordance with the
Regulations;
– the assets under management and the net asset value
per share of the company are calculated in accordance
with the Regulations;
– any consideration relating to transactions in the
company’s assets is remitted to the company within the
usual time limits;
– that the company’s income is applied in accordance
with the Regulations; and
– the instructions of the Alternative Investment Fund
Manager (the AIFM) are carried out (unless they conflict
with the Regulations).
The Depositary also has a duty to take reasonable care to
ensure that the company is managed in accordance with
the Articles of Association in relation to the investment and
borrowing powers applicable to the company.
Report of the Depositary to the Shareholders of The
Brunner Investment Trust PLC (the company) for the
year ended 30 November 2022.
Having carried out such procedures as we consider
necessary to discharge our responsibilities as Depositary
of the company, it is our opinion, based on the information
available to us and the explanations provided, that in all
material respects the company, acting through the AIFM
has been managed in accordance with the rules in the
Sourcebook, the Articles of Association of the company
and as required by the AIFMD.”
HSBC Securities Services
14 December 2022
Further information about the relationship with the
Depositary is on page 108.
65
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
The directors confirm that the audit committee has
reviewed the effectiveness of the system of internal control,
which it has found to be appropriate.
Accountability and Audit
The Statement of Directors’ Responsibilities in respect of
the financial statements is on page 77 and a statement
of going concern is on page 20. The Independent
Auditors’ Report can be found on page 80.
The UK Stewardship Code and Exercise of Voting
Powers
The board has delegated the exercise of voting
powers on its behalf to discharge its responsibilities in
respect of investments, including the exercise of voting
powers on its behalf to the manager, AllianzGI, and receives
regular reports on voting activity. There is more information
on company engagement in the Strategic Report on
page 9, and in the Investment Manager’s Review on
page 23.
TCFD and Greenhouse Gas Emissions
The board continues to look at the carbon footprint of
the portfolio which is reported in the monthly factsheets.
Whereas as an investment company we do not report
following the requirements of the Task Force on Climate-
related Financial Disclosures (TCFD) we take an interest in
how the portfolio compares against available indexed data.
On page 37 we look at various ESG MSCI performance
metrics against those of the benchmark.
The company has an external manager, AllianzGI, part
of Allianz Group, and has no physical assets, operations,
premises or employees of its own. Consequently it has no
greenhouse gas emissions to report. Allianz Group reports
on the greenhouse gas emissions for its own operations.
Modern Slavery Act 2015
The company does not provide goods or services in the
normal course of business, and as a financial investment
vehicle does not have customers. The directors therefore
consider that the company is not required to make a
statement under the Modern Slavery Act 2015 in relation to
slavery or human trafficking.
Bribery Act 2010
The board has a zero tolerance policy in relation to bribery
and corruption and has received assurance through internal
controls reporting from the company’s main third party
service providers that adequate safeguards are in place to
protect against any such potentially illegal behaviour by
employees or agents.
Annual General Meeting Business
Directors’ Re-election and Election
The plans for board succession, including the arrangements
for the retirements of the directors with over nine years’
service, are described on page 69. Peter Maynard has
held office for twelve years and will retire from the board at
the conclusion of the AGM in 2023. His successor, Elizabeth
Field, was appointed on 1 December 2022 and will offer
herself for election at the AGM in 2023. Carolan Dobson,
Amanda Aldridge, Andrew Hutton and Jim Sharp each
retire in accordance with the board policy on the annual
re-election of directors and offer themselves for re-election
at the AGM in 2023. Biographical details of the directors
are on page 58 together with the reasons why the board
supports and recommends their re-election. Directors
serving during the year and their interests in the share
capital of the company as at 30 November 2022 are set out
in the Directors’ Remuneration Report on page 70.
The board’s view is that each director who is retiring and
offering themselves to be re-elected at the AGM continues
to make a valuable and effective contribution and remains
committed in the role. The board has also considered the
number of boards on which each director sits and the other
time commitments for each board member and is satisfied
that each director has the capacity to devote all the time
and attention needed to fulfil their role and duties to the
company.
Allotment of New Shares
A resolution authorising the directors to allot new share
capital for cash was passed at the annual general meeting
of the company on 30 March 2022 under section 551 of the
Companies Act 2006. The current authority will expire on 30
June 2023 and approval is therefore sought for the renewal
of this authority, which will last until the conclusion of the
annual general meeting in 2024 or 30 June 2024 if earlier.
This authority is limited to a maximum number of 14,230,908
ordinary shares, representing approximately one third of
the existing ordinary share capital of the company as at the
date of this report, provided that there is no change in the
issued share capital between the date of this report and the
annual general meeting to be held on 31 March 2023.
Disapplication of Pre-emption Rights
A resolution was passed at the annual general meeting of
the company held on 30 March 2022 under section 570 of
the Companies Act 2006, to authorise the directors to allot
ordinary shares for cash other than pro rata to existing
shareholders. The current authority will expire on 30 June
2023 and approval is therefore sought for the renewal
of this authority, which will last until the conclusion of the
annual general meeting in 2024 or 30 June 2024 if earlier.
This authority is limited to a maximum number of 2,134,636
ordinary shares, representing approximately 5% of the
existing ordinary share capital of the company as at the
date of this report, provided that there is no change in the
issued share capital between the date of this report and the
annual general meeting to be held on 31 March 2023.
Accordingly resolution 12 as set out in the notice of meeting
on page 111 will be proposed as an ordinary resolution
and resolution 13 will be proposed as a special resolution.
The directors do not currently intend to allot shares
under these authorities other than to take advantage
66
Governance
of opportunities in the market as they arise and only if
they believe it would be advantageous to the company’s
existing shareholders to do so. The directors confirm that
no allotments of new shares will be made unless the lowest
market offer price of the ordinary shares is at least equal to
or at a premium to net asset value.
Share Buy Back Programme
As referred to in the Chair’s Statement, the board is
proposing the renewal of the company’s authority under
section 701 of the Companies Act 2006, to purchase
ordinary shares in the market for cancellation. In addition to
renewing its powers to buy back shares for cancellation, the
board will seek shareholder authority to repurchase shares
for holding in treasury for sale and reissue at a later date.
This authority will give the company the ability to reissue
treasury shares quickly and cost-effectively (including
pursuant to the authority under resolution 13, see above)
and provides the company with additional flexibility in the
management of its capital base. Such shares may be resold
for cash but all rights attaching to them, including voting
rights and any right to receive dividends are suspended
whilst they are in the treasury. If the board exercises the
authority conferred by resolution 14, which will be proposed
as a special resolution, the company will have the option of
either holding in treasury or of cancelling any of its shares
purchased pursuant to this authority and will decide at the
time of purchase which option to pursue.
The board believes that such purchases in the market at
appropriate times and prices may be a suitable method of
enhancing shareholder value. The company would make
either a single purchase or a series of purchases, when
market conditions are suitable, with the aim of maximising
the benefits to shareholders and within guidelines set from
time to time by the board. Additionally, the board believes
that the company’s ability to purchase its own shares should
create additional demand for the ordinary shares in the
market and that this should assist shareholders wishing to
sell their ordinary shares.
Where purchases are made at prices below the prevailing
net asset value of the ordinary shares, net asset value
per share for the remaining shareholders is enhanced. It
is therefore intended that purchases will only be made
at prices below net asset value, with the purchases to be
funded from the realised capital profits of the company
(which are currently in excess of £264 million). The rules of
the UK Listing Authority limit the price which may be paid
by the company to 105% of the average middle market
quotation for an ordinary share on the five business days
immediately preceding the date of the relevant purchase.
The minimum price to be paid will be 25p per ordinary share
(being the nominal value).
Under the Financial Conduct Authority’s Listing Rules,
a company is permitted to purchase up to 14.99% of
its equity share capital through market purchases
pursuant to a general authority granted by shareholders
in general meeting.
The curr
ent authority which permits the company to
purchase up to 14.99% of the ordinary shares, expires at
the conclusion of the forthcoming annual general meeting.
The board believes that the company should continue
to have authority to make market purchases of its own
ordinary shares for cancellation or additionally for holding
in treasury. Accordingly, a special resolution to authorise the
company to make market purchases of up to 14.99% of the
company’s issued ordinary share capital will be proposed.
Provided there is no change in the issued share capital
between the date of this report and the annual general
meeting to be held on 31 March 2023 such authority is
equivalent to 6,399,639 ordinary shares.
The authority will last until the annual general meeting of
the company to be held in 2024 or the expiry of 15 months
from the date of the passing of this resolution, whichever
is the earlier. The authority will be subject to renewal by
shareholders at subsequent annual general meetings.
The Brunner Family
Since the establishment of the company in 1927, various
members of the extended Brunner family have held
shares in the company. Jim Sharp, director, is connected by
marriage to the Brunner family.
Following discussions in 2013, agreement was reached with
the Takeover Panel that for the purposes of the City Code
on Takeovers and Mergers (the Code), Sir Hugo Brunner
and Mr TBH Brunner, together with their children (and their
spouses) and related trusts (the Connected Parties) will be
treated as acting in concert for the purposes of the Code.
The Connected Parties currently hold 9,663,408 shares,
representing 22.63% of the ordinary share capital of the
company. If the proposed buy back authority were to be
used in full, the repurchase of ordinary shares could result
in the Connected Parties holding 26.63% of the reduced
ordinary share capital of the company (assuming that
the Connected Parties did not sell any ordinary shares in
connection with the exercise of the buy back authority).
The board and the Annual Report
Following the process reported in the Audit Committee
Report, on page 74, the board is able to state that it
considers that the Annual Report, taken as a whole, is fair,
balanced and understandable.
By order of the board
Kirsten Salt
Company Secretary
14 February 2023
67
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Management Engagement Committee Report
Role of the committee
The Management Engagement Committee reviews
the investment management agreement and monitors
the performance of the Manager for the investment,
secretarial, financial, administration, marketing and
support services that it provides under that agreement.
It also reviews the terms of the agreement including the
level and structure of fees payable, the length of notice
period and best practice provisions generally.
Composition of the committee
All the directors are members of the committee. Its terms
of reference can be found on the website at brunner.co.uk.
Manager evaluation process
The committee met once during the year for the purpose
of the formal evaluation of the manager’s performance.
For the purposes of its ongoing monitoring, the board
receives detailed reports and views from the portfolio
manager on investment policy and strategies, asset
allocation, stock selection, attributions, portfolio
characteristics, gearing and risk. The board also assesses
the manager’s performance against the investment
controls set by the board.
The manager also reported to the board on its succession
plans for the key individuals, including the members of the
portfolio management team.
Performance information is set out on page 8.
AIFM
Details of the current AIFM are on page 108. As the
board announced in April 2021, as a result of the UK
leaving the UK. AllianzGI has formed a UK management
company so that it can continue as a licensed AIFM in
the UK. A temporary permission regime is currently in
place and AllianzGI is in the process of applying for the
licence to operate as an AIFM in the UK. This is expected
to take effect during 2023. There will be no increase in the
management or administrative expenses of the company
with this change.
Manager reappointment
The annual evaluation that took place in December 2022
included a presentation from the portfolio manager and
AllianzGI’s Head of Investment Trusts. This covered
the work done with the board on strategy, including the
reporting of the ESG strategy; the dividend strategy; the
investment strategy in some overseas markets; the sales
and marketing activity, covering the work with investment
platforms and wealth managers; and the relaunch of the
website. The evaluation also considered the manager’s
fee in relation to the peer group. The committee met in a
private session following the presentation and concluded
that in its opinion the continuing appointment of the
manager on the terms agreed was in the interests of
shareholders as a whole and recommended this to the
board.
Note 2 to the Financial Statements on page 92 provides
detailed information in relation to the management fee.
Committee evaluation
The activities of the Management Engagement committee
were considered as part of the board evaluation process
completed in accordance with standard governance
arrangements as summarised on page 63. The
conclusion from the process was that the committee
was operating effectively, with the right balance of
membership and skills.
Carolan Dobson
Management Engagement Committee Chair
14 February 2023
68
Governance
Nomination Committee Report
Role of the committee
The Nomination Committee leads the process for board
appointments and makes nomination recommendations
to the board. The committee reviews and makes
recommendations on board structure, size and
composition, the balance of knowledge, experience, skill
ranges and diversity and considers succession planning
and tenure policy.
Composition of the committee
All directors are members of the committee and its terms
of reference can be found on the website at brunner.co.uk
Activities of the committee
The committee met during the year and considered, in
accordance with its terms of reference the structure, size
and composition of the board and satisfied itself with
regard to succession planning, making recommendations
to the board. The committee reviewed the succession plan,
as mentioned below, and recommended it to the board.
The committee also discussed the results of the board
and committee evaluation exercise, which covered the
structure and size of the board and its composition,
particularly in terms of succession planning, and the
experience and skills of the individual directors and the
topic of board diversity.
One issue considered was the chair of the Remuneration
Committee. Whereas this committee is chaired by a
member of the board not considered by some corporate
governance commentators to be independent due to his
connection to the Brunner family, the board is unanimous
that Jim Sharp brings independence of thought and strong
commercial and operational experience, knowledge and
understanding to the role and facilitates good debate
around the topics in the committee’s remit.
Succession planning
Peter Maynard attained 12 years’ service in 2022 and will
retire from the board at the conclusion of the AGM in 2023
in accordance with the succession plan. The board had
decided to retain all of its directors during 2022 to ensure
continuity through times when face to face meetings
were difficult. During 2022 steps were taken to recruit a
replacement on the board for Peter and Elizabeth Field
was appointed to the Board on 1 December 2022. The
recruitment was managed through Sapphire Partners, an
independent executive search firm. The committee also
considered the succession plan for the Chair.
The members of the committee met separately under
the leadership of the Senior Independent Director to
review the tenure of the Chair and consider the plans for
succession.
Committee evaluation
The activities of the Nomination Committee were
considered as part of the board evaluation process
completed in accordance with standard governance
arrangements as summarised on page 63. The
conclusion from the process was that the committee
was operating effectively, with the right balance of
membership and skills.
Carolan Dobson
Nomination Committee Chair
14 February 2023
69
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Remuneration Committee Report
Composition
All the directors are members of the committee and its terms of reference can be found on the website at brunner.co.uk.
Role
The Remuneration Committee leads the process for fixing directors’ remuneration and makes recommendations to the
board.
Activities
The committee’s activities are set out in the report from the committee which follows.
Directors’ Remuneration Report
This is the Directors’ Remuneration Report for the year. The report is submitted in accordance with Schedule 8 of the
Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended August 2013,
for the year ended 30 November 2022.
An ordinary resolution for the approval of the Directors’ Remuneration Policy Report was first put to a binding
shareholder vote at the annual general meeting in 2014 and was placed before shareholders for approval at the AGM
in 2020. It will next be put to shareholders at the forthcoming AGM in 2023. The Directors’ Remuneration Implementation
Report is to be put to the AGM, annually, as an advisory shareholder vote.
The information provided in this part of the Directors’ Remuneration Report is not subject to audit unless specified below.
The Board
The board of directors is composed solely of non-executive directors. The determination of the directors’ fees is guided by
the remuneration policy (see below) and the recommendations of the remuneration committee which is made up of the
independent directors and is chaired by Jim Sharp.
Directors’ Interests (Audited)
The directors are required to hold 4,000 shares in the company under the company’s Articles. Pursuant to Article 19 of the
EU Market Abuse Regulations the directors’ interests in the share capital of the company are shown in the table below.
Ordinary shares of 25p
2022
Beneficial
2022
Non-beneficial
2021
Beneficial
2021
Non-beneficial
Carolan Dobson 4,750 - 4,750 -
Amanda Aldridge 4,000 - 4,000 -
Elizabeth Field* 4,000 - - -
Andrew Hutton 6,000 - 6,000 -
Peter Maynard 4,000 - 4,000 -
Jim Sharp 117,218 651,956 117,043 651,956
* Appointed 1 December 2022
I am pleased to present my report as Chair of the Remuneration Committee.
70
Governance
Directors retire and offer themselves for re-election annually. No director has a service contract with the company. The
company’s policy is for the directors to be remunerated in the form of fees, payable quarterly in arrears. In accordance
with the AIC Code of Corporate Governance, there are no long term incentive schemes and fees are not related to the
individual director’s performance, nor to the performance of the board as a whole. No exit payments are made when a
director leaves the board.
Directors’ Remuneration Policy
The board’s policy, subject to the overall limit in the Articles, is to determine the level of directors’ fees having regard to
the level of fees payable to non-executive directors in the investment trust industry generally, the rate of inflation, the
increasing requirements in the nature of the role that individual directors fulfil, and the time committed to the company’s
affairs. These requirements are particularly relevant to the Chair and the Chair of the Audit Committee. The board
believes that levels of remuneration should be sufficient to attract and retain non-executive directors with the relevant
experience and skills to oversee the company. The company’s Articles limit the aggregate fees payable to the board of
directors to a total of £250,000 per annum.
The company’s Articles also provide that additional discretionary payments can be made for services which in the
opinion of the directors are outside the scope of the ordinary duties of a director. Directors are entitled to be reimbursed
for any reasonable expenses properly incurred by them in connection with the performance of their duties and
attendance at meetings. Directors are not eligible for bonuses, pension benefits, share options or other incentives or
benefits. There are no agreements between the company and its directors concerning compensation for loss of office.
This Directors’ Remuneration Policy is the same in all material respects as that currently followed by the board and
summarised in the last Directors’ Remuneration Report and approved by shareholders at the annual general meeting
held on 30 March 2022.
The company has no employees and consequently has no policy on the remuneration of employees.
The board will consider, where raised, shareholders’ views on directors’ remuneration.
Implementation Report
The policy is to review directors’ fee rates from time to time, but reviews will not necessarily result in a change to the
rates. In the year under review the directors were paid at a rate of £26,500 per annum and the Chair at a rate of £42,000
per annum, with an additional £6,000 for the Chair of the Audit Committee, and an additional £2,000 for the Senior
Independent Director. The current fees have been effective since 1 December 2021.
The fees were reviewed during the year and the committee compared industry reports and other independent data. It
was noted that fees had fallen against the market. With further board recruitment planned it was agreed that it was
important to make relatively modest increases to remain competitive. It was determined that the following fees would
apply with effect from 1 December 2022: Chair £44,500, directors £28,100, with an additional £6,400 to the Chair of the
Audit Committee, and an additional £2,100 for the Senior Independent Director.
Directors’ Emoluments (Audited)
The directors received directors’ fees and no other remuneration or additional discretionary payments during the year
and therefore the directors’ emoluments during the year and in the previous year are as follows:
2022 2021
Base
salary
£
Taxable
expenses
£
** Total
£
Base
salary
£
Taxable
expenses
£
** Total
£
Carolan Dobson 42,000 931 42,931 39,000 226 39,226
Amanda Aldridge 32,500 - 32,500 32,000 - 32,000
Ian Barlow* - - - 330 - 330
Andrew Hutton 26,500 - 26,500 26,000 - 26,000
Peter Maynard 28,500 - 28,500 28,000 - 28,000
Jim Sharp 26,500 - 26,500 26,000 - 26,000
Total 156,000 931 156,931 151,330 226 151,556
* Retired from the board 8 December 2020.
** Taxable travel and subsistence expenses incurred in attending Board and Committee meetings, gross pre-tax amounts
Elizabeth Field appointed to the Board 1 December 2022.
71
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
2022
£
% change
from
2021 to
2022
2021
£
% change
from
2020 to
2021
2020
£
Base Salary
Board Chair 42,000 7.7 39,000 0.0 39,000
Audit Chair 32,500 1.6 32,000 0.0 32,000
Senior Independent Director 28,500 1.8 28,000 0.0 28,000
Independent Director 26,500 1.9 26,000 0.0 26,000
Expenses
Carolan Dobson 931 311.9 226 -94.3 3,935
Any increase in pay was effective from 1 December in any given year.
The requirements to disclose this information came into force for financial years on or after 10 June 2019 and the
comparison will be expanded in future annual reports until such time as it covers a five year period.
Analysis of Pay against Distributions
A table showing actual expenditure by the company on remuneration and distributions to shareholders for the year and
the prior year is below:
Expenditure by the company on remuneration and distributions to the shareholders
2022
£
2021
£
Remuneration paid to all directors 156,000 151,330
Distributions paid during the financial year 8,986,818 8,589,776
This disclosure is a statutory requirement. The directors, however, do not consider that the comparison of directors’
remuneration with distributions to shareholders is a meaningful measure of the company’s overall performance.
72
Governance
Performance Graph
The performance graph below measures the company’s share price and net asset value performance on a total return
basis against the benchmark index: 70% FTSE World Ex UK Index and 30% FTSE All-Share Index. An explanation of the
company’s performance is given in the Chair’s Statement and the Investment Manager’s Review.
The Brunner Investment Trust PLC
30 November 2012 – 30 November 2022
Share Price 219%
NAV debt at fair value 209%
Benchmark 179%
Jim Sharp
Remuneration Committee Chair
14 February 2023
Source: AllianzGI/Thomson Reuters DataStream
400
300
200
100
Nov 12 Nov 13 Nov 14 Nov 15 Nov 16 Nov 17 Nov 18 Nov 19 Nov 20 Nov 21 Nov 22
%
73
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Audit Committee Report
As chair of the audit committee I am delighted to present the committee’s
report for the year ended 30 November 2022.
Composition
Andrew Hutton and Peter Maynard served on the
committee throughout the year. The Chair of the board
and Jim Sharp are invited to attend audit committee
meetings, as are representatives of the manager. I was
delighted to welcome Elizabeth Field to the committee on
her appointment to the board on 1 December 2022.
As you will see from my biography on page 58, I am
a Chartered Accountant and until 2017, I was an audit
and advisory partner, at KPMG, London. I also chair the
audit committee of another listed company. During the
year the board reviewed the composition of the audit
committee and it considers that, collectively, its members
have sufficient recent and relevant financial experience to
discharge their responsibilities fully.
Role
The principal role of the committee is to assist the board in
relation to the reporting of financial information, review of
financial controls and management of risk. The committee
has defined terms of reference and duties and the terms
of reference are published on the company’s website,
brunner.co.uk. These include:
– r
esponsibility for the review of the Annual Report and
the half-yearly Financial Report;
– c
onsideration of the nature and scope, independence
and effectiveness of the external audit and of the
Auditors’ findings and recommendations; and
– r
eview of the terms of appointment of the auditors,
including their remuneration and the provision of any
non-audit services by them.
Activities
The committee meets twice each year. These meetings are
attended by the auditors and also by representatives of
the manager, including both risk and compliance officers.
At the scheduled meetings in respect of the year ended 30
November 2022 the committee reviewed the company’s
accounting policies and confirmed their appropriateness,
and reviewed in detail the annual and half-yearly
financial reports and in each case recommended them for
adoption by the board. At the meeting for the half year
the auditors presented the audit plan for the year ending
30 November 2022. In the meeting relating to the year
end the committee considered the auditors’ report on the
annual financial statements.
At each meeting the committee received a report on the
operation of controls relating to the company and the
proper conduct of its business in accordance with the
regulatory environment in which both the company and
the manager operate. The committee has also received
reports from the company’s service providers on their
continuing response to cyber security risks and related
business continuity updates.
Risk
Although the board has ultimate responsibility for the
management of risk, the audit committee assists by
monitoring the formal reports from the manager and
third-party service providers on internal controls.
The committee reviewed its approach to the risk
management process and concluded that existing
processes were adequate to ensure that its assessment of
risk is robust and of sufficient frequency, namely carried
out at each committee meeting and twice annually by the
board as follows:
– A matrix of risks is reviewed at each of its meetings.
We consider whether new risks should be added
or previously identified risks removed, assess their
likelihood of occurring and potential scale, review
the mitigating actions and assess the residual risk
against what we regard as acceptable – ‘risk appetite’.
Economic volatility, rising inflation and the increase
in international conflict and tensions have all been
considered by the board in this review.
– Assurance over mitigating actions in relation to these
risks is provided in a series of reports from all the third
party service providers.
– Resulting from the work of the audit committee, certain
key risks are identified for disclosure and discussion in
our annual report. We have also assessed residual risks
after controls and mitigating actions have been applied,
and evaluated whether our risk appetite has been
satisfied. The principal risks are in relation to Portfolio,
Business and Operational matters. The risks identified,
74
Governance
together with mitigating actions, and the results of the
risk appetite assessment are set out in the Strategic
Report on page 9.
Viability Statement
Based on this review of risk the committee reviewed a
paper that supported the board’s conclusion, set out on
page 20 in the Strategic Report, of their reasonable
expectation that the company is viable in the longer term,
assessed as the next five years.
The audit, its effectiveness and the terms of
appointment of the auditor
The committee reviewed the terms of appointment of
the auditor, monitored the audit process, assessed the
auditors’ independence and objectivity as well as the
effectiveness of the audit process. It was noted that there
were no non-audit services provided by the firm, and that
none are planned in the financial year to 30 November
2022.
Following the audit of these accounts, Gillian Alexander
will be rotating off the audit after a five year term
as partner. Her successor, Iain Kirkpatrick, has been
introduced to the committee and the committee is
satisfied that he has the appropriate experience to take
on the role.
As part of the review of the auditor, the members of the
committee and those representatives of the manager
involved in the audit process reviewed and considered a
number of areas including:
– the r
eputation and standing of the audit firm;
– the audit pr
ocesses, evidence of partner oversight and
external information such as annual reports from the
Auditors’ regulator;
– the skills, e
xperience and specialist knowledge of the
audit team, particularly relating to investment trusts;
– audit c
ommunication including details of planning,
information on relevant accounting and regulatory
developments, and recommendations on corporate
reporting;
– the r
easonableness of audit fees; and
– the Financial R
eporting Council’s Audit Quality Report
on PricewaterhouseCoopers LLP for 2021/22.
The committee considered the representations made by
the auditor and sought comments from representatives
of the manager on the provision of services by the auditor
and the effectiveness of the external audit for the year
ended 30 November 2022.
It is the practice of the committee to meet with the auditor
without management present at least once each year.
Based on all of the above, the audit committee considers
that the performance of the auditor is satisfactory and has
recommended to the board that a resolution proposing
the re-appointment of the auditor is put to shareholders at
the annual general meeting.
Financial Report and Significant Issues
The significant issues identified for the review of the
financial statements this year, that is, those identified
as presenting the greatest risks, were the valuation and
existence of the investments in the portfolio; and the
accuracy, occurrence and completeness of dividend
income. These and other matters, identified as posing
lesser risk, were considered and discussed with the
manager and the auditor as part of the year end process.
Valuation and existence of the investments in the
portfolio
Investments are valued using stock exchange prices
provided by third party financial data vendors. Unlisted
investments are recognised on a fair value basis as set
out in the Statement of Accounting Policies on page 90
and are reviewed by the manager’s valuation committee
before being approved by the company and being made
available to the auditor.
The manager confirms to us the existence and ownership
of portfolio investments. The manager receives
information from the custodian which is reconciled with
the portfolio list.
Accuracy, occurrence and completeness of dividend
income
Income reports and forecasts are reviewed in detail with
the manager at each meeting of the board, including yield
information. Changes to the forecast for each portfolio
stock from meeting to meeting are also scrutinised.
The committee confirms that these reports and checks
have provided the directors with reasonable assurances
on the risks identified.
In addition we reviewed the manner in which expenses
are allocated between capital and income and concluded
that the ratio of 70:30 remains appropriate since it fairly
reflects our investment policy and split of prospective
capital and income returns.
We also confirmed, as stated in the Statement of
Accounting Policies on page 90, that there are no
judgements, estimates, and assumptions about the
carrying amounts of assets and liabilities that are not
readily apparent from other sources.
The committee observed the audit materiality and error
reporting thresholds in the audit plan and confirmed that
they were satisfied with these. As in previous years, the
auditor set the materiality threshold as 1% of net asset
value to align closely with comparable companies, but
continues to report to the committee on matters below
that level on qualitative grounds. In practice there were no
unadjusted errors reported in the audit.
The audit committee and the whole board reviewed
the entire annual report and noted all of the supporting
information received. It then considered whether the
annual report satisfactorily reflected a true picture of the
75
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
company and its activities and performance in the year,
with a clear link between the relevant sections of the
report and concluded that it did so. The directors were
then able to confirm that the annual report, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
company’s performance, business model and strategy.
Internal audit
The audit committee’s view continues to be that the
company does not require an internal audit function of
its own as it delegates its day-to-day operations to third
parties from whom it receives internal control reports.
Reports from third party auditors on the internal controls
maintained on behalf of the company by AllianzGI and
by all other providers of administrative and custodian
services to AllianzGI or directly to the company were
reviewed during the year. No issues of concern relating to
the company were raised in the reports.
Whistleblowing
As the company has no employees it does not have a
formal policy concerning the raising, in confidence, of any
concerns about improprieties for appropriate independent
investigation. The audit committee has, however, received
and noted the manager’s policy on this matter. However,
any matters concerning the company should be raised
with the Chair or Senior Independent Director.
Amanda Aldridge
Audit Committee Chair
14 February 2023
76
Governance
Statement of Directors’ Responsibilities
in respect of the financial statements
The directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have prepared the financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”,
and applicable law).
Under company law directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for
that period. In preparing these financial statements, the
directors are required to:
– select suitable ac
counting policies and then apply them
consistently;
– state whether applic
able United Kingdom Accounting
Standards, comprising FRS 102 have been followed,
subject to any material departures disclosed and
explained in the financial statements;
– make judgements and ac
counting estimates that are
reasonable and prudent; and
– pr
epare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
The directors are responsible for safeguarding the assets
of the company and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
The directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain
the company’s transactions and disclose with reasonable
accuracy at any time the financial position of the company
and enable them to ensure that the financial statements
and the Directors’ Remuneration Report comply with the
Companies Act 2006.
The directors are responsible for the maintenance
and integrity of the company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
Each of the directors, whose names and functions are
listed in Directors, Manager and Advisers on page 58,
confirm that, to the best of their knowledge:
– the c
ompany financial statements, which have
been prepared in accordance with United Kingdom
Accounting Standards, comprising FRS 102, give a true
and fair view of the assets, liabilities, financial position
and profit of the company; and
– the Str
ategic Report includes a fair review of the
development and performance of the business and the
position of the company, together with a description of
the principal risks and uncertainties that it faces.
In the case of each director in office at the date the
directors’ report is approved:
– so f
ar as the director is aware, there is no relevant
audit information of which the company’s auditors are
unaware; and
– the
y have taken all the steps that they ought to have
taken as a director in order to make themselves aware
of any relevant audit information and to establish that
the company’s auditors are aware of that information.
This responsibility statement was approved by the
board of directors on 14 February 2023 and signed on its
behalf by:
Carolan Dobson
Chair
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The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
78
Governance
Financial
Statements
Oil and gas company Shell, our
largest UK holding, is engaged
in wind projects in the North Sea.
The company has more than
4.3 gigawatts of offshore wind
capacity in operation or under
construction worldwide, and
another 16.7 GW of potential
projects.
79
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Report on the audit of the financial statements
Opinion
In our opinion, The Brunner Investment Trust PLC’s
financial statements:
– give a true and fair view of the state of the company’s
affairs as at 30 November 2022 and of its profit and
cash flows for the year then ended;
– have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, including FRS
102 “The Financial Reporting Standard applicable in
the UK and Republic of Ireland”, and applicable law);
and
– have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements, included within
the Annual Report, which comprise: Balance Sheet as at
30 November 2022; the Income Statement, Cash Flow
Statement and Statement of Changes in Equity for the
year then ended; the Statement of Accounting Policies;
and the notes to the financial statements.
Our opinion is consistent with our reporting to the Audit
Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities for the audit of
the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the company in accordance
with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which includes
the FRC’s Ethical Standard, as applicable to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare
that non-audit services prohibited by the FRC’s Ethical
Standard were not provided.
We have provided no non-audit services to the company
in the period under audit.
Our audit approach
Overview
Audit scope
– The c
ompany is a standalone Investment Trust
Company and engages Allianz Global Investors
GmBHUK Branch (the ‘‘Manager’’) to manage its assets.
– W
e conducted our audit of the financial statements
using information from State Street Bank & Trust
Company (the “Administrator”) to whom the Manager
has, with the consent of the directors, delegated the
provision of certain administrative functions.
– W
e tailored the scope of our audit taking into account
the types of investments within the Company, the
involvement of the third parties referred to above, the
accounting processes and controls, and the industry in
which the Company operates.
– W
e obtained an understanding of the control
environment in place at both the Manager and
the Administrator and adopted a fully substantive
testing approach using reports obtained from the
Administrator.
Key audit matters
– Valuation and existence of investments
– Accuracy, occurrence and completeness of Income from
investments
Materiality
– Over
all materiality: £4,970,970 (2021: £5,024,523)
based on 1% of Net Assets.
– Per
formance materiality: £3,728,228 (2021: £3,768,392).
The scope of our audit
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the
audit of the financial statements of the current period
and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by
the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on
the results of our procedures thereon, were addressed in
the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Independent auditors’ report to the members of
The Brunner Investment Trust PLC
80
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Valuation and existence of investments
Refer to page 74 (Audit Committee Report), page 90
(Statement of Accounting Policies) and page 92 (Notes
to the Financial Statements). The investment portfolio at
the year-end comprised listed equity investments valued
at £522.8m.
We tested the valuation of the listed equity investments by
agreeing the prices used in the valuation to independent
third party sources. No misstatements were identified by
our testing which required reporting to those charged with
governance.
We focused on the valuation and existence of investments
because investments represent the principal element of
the net asset value as disclosed on the Balance Sheet in
the financial statements.
We tested the existence of the investment portfolio
by agreeing investment holdings to an independent
custodian confirmation. No misstatements were identified
by our testing which required reporting to those charged
with governance.
Accuracy, occurrence and completeness of Income from
investments
Refer to page 74 (Audit Committee Report), page 90
(Statement of Accounting Policies) and page 92 (Notes
to the Financial Statements).
We assessed the accounting policy for dividend income
recognition for compliance with accounting standards
and the AIC SORP and performed testing to check that
income had been accounted for in accordance with this
stated accounting policy. We found that the accounting
policies implemented were in accordance with accounting
standards and the AIC SORP, and that income has been
accounted for in accordance with the stated accounting
policy.
We focused on the accuracy, occurrence and
completeness of dividend income recognition as
incomplete or inaccurate income could have a material
impact on the Company’s net asset value and dividend
cover.
We tested the accuracy of dividend receipts by agreeing
the dividend rates from investments to independent
market data. No misstatements were identified which
required reporting to those charged with governance.
We also focused on the accounting policy for income
recognition and its presentation in the Income Statement
as set out in the requirements of The Association of
Investment Companies Statement of Recommended
Practice (the “AIC SORP”) as incorrect application could
indicate a misstatement in income recognition.
To test for completeness, we tested that all dividends
declared in the market by investment holdings had
been recorded. No misstatements were identified which
required reporting to those charged with governance.
We tested occurrence by testing that all dividends
recorded in the year had been declared in the market
by investment holdings. Our testing did not identify any
misstatements which required reporting to those charged
with governance.
We also tested the allocation and presentation of
dividend income between the revenue and capital
return columns of the Income Statement in line with the
requirements set out in the AIC SORP by determining
reasons behind dividend distributions. Our procedures did
not identify any misstatements which required reporting to
those charged with governance.
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Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the company, the accounting processes and controls,
and the industry in which it operates.
The impact of climate risk on our audit
In planning our audit, we made enquiries of the Directors and Investment Manager to understand the extent of the
potential impact of climate change on the Company’s financial statements.
The Directors and Investment Manager stated they are cognisant of the long-term risk to performance from inadequate
attention to Environmental, Social, and Governance (‘ESG’) issues, and in particular the impact of Climate Change. This
is explained on page 66 of the Directors’ Report. The Company’s investment portfolio is made up of level 1 quoted
securities which are valued at fair value based on market prices. We found this to be consistent with our understanding
of the Company’s investment activities.
We also considered the consistency of the climate change disclosures included in the Directors’ Report and Investment
Manager’s Review with the financial statements and our knowledge from our audit.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in
evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall company materiality £4,970,970 (2021: £5,024,523).
How we determined it 1% of Net Assets
Rationale for benchmark applied Entity is focused on net assets as a key indicator.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in
determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions
and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2021: 75%) of overall
materiality, amounting to £3,728,228 (2021: £3,768,392) for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of
our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£248,549 (2021: £251,226) as well as misstatements below that amount that, in our view, warranted reporting for
qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of
accounting included:
– e
valuating the Directors’ updated risk assessment and considering whether it addressed relevant threats to the
Company;
– e
valuating the Directors’ assessment of potential operational impacts, considering their consistency with other
available information and our understanding of the business and assessed the potential impact on the financial
statements;
– r
eviewing the Directors’ assessment of the Company’s financial position in the context of its ability to meet future
expected operating expenses and debt repayments, their assessment of liquidity as well as their review of the
operational resilience of the Company and oversight of key third-party service providers; and
– assessing the implic
ation of significant reductions in NAV as a result of market performance on the ongoing ability of
the Company to operate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a
period of at least twelve months from when the financial statements are authorised for issue.
82
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the
company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency
or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement
of the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report
and Directors’ Report for the year ended 30 November 2022 is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we
did not identify any material misstatements in the Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report, which is included within the Remuneration Committee
Report, to be audited has been properly prepared in accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and
that part of the corporate governance statement relating to the company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review. Our additional responsibilities with respect to the corporate
governance statement as other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the financial statements and our knowledge obtained
during the audit, and we have nothing material to add or draw attention to in relation to:
– The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
– The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being managed or mitigated;
– The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their identification of any material uncertainties to the company’s
ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
– The directors’ explanation as to their assessment of the company’s prospects, the period this assessment covers and why
the period is appropriate; and
– The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue
83
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the company was substantially less in scope
than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and
considering whether the statement is consistent with the financial statements and our knowledge and understanding of
the company and its environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements
of the corporate governance statement is materially consistent with the financial statements and our knowledge
obtained during the audit:
– The dir
ectors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable,
and provides the information necessary for the members to assess the company’s position, performance, business
model and strategy;
– The section of the Annual R
eport that describes the review of effectiveness of risk management and internal control
systems; and
– The section of the Annual R
eport describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the
company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code
specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation
of the financial statements in accordance with the applicable framework and for being satisfied that they give a true
and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance
with laws and regulations related to breaches of section 1158 of the Corporation Tax Act 2010, and we considered the
extent to which non-compliance might have a material effect on the financial statements. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override
of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase
revenue (investment income and capital gains) or to increase the net asset value of the Company. Audit procedures
performed by the engagement team included:
– Discussions with the manager and the audit c
ommittee, including consideration of known or suspected instances of
non-compliance with laws and regulation and fraud;
– R
eviewing relevant meeting minutes, including those of the Audit Committee;
– E
valuation of the controls implemented by the Company and the Administrator designed to prevent and detect
irregularities;
– Assessment of the C
ompany’s compliance with the requirements of section 1158 of the Corporation Tax Act 2010,
84
including recalculation of numerical aspects of the eligibility conditions;
– Identifying and testing journal entries, in particular year end journal entries posted by the administrator during the
preparation of the financial statements and any journals with unusual account combinations; and
– Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances
of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the
financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing
complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In
other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is
selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions,
accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not obtained all the inf
ormation and explanations we require for our audit; or
– adequate ac
counting records have not been kept by the company, or returns adequate for our audit have not been
received from branches not visited by us; or
– c
ertain disclosures of directors’ remuneration specified by law are not made; or
– the financial statements and the p
art of the Directors’ Remuneration Report, which is included within the
Remuneration Committee Report, to be audited are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the directors on 19 December 2018 to
audit the financial statements for the year ended 30 November 2018 and subsequent financial periods. The period of
total uninterrupted engagement is 5 years, covering the years ended 30 November 2018 to 30 November 2022.
Gillian Alexander (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
14 February 2023
85
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Income Statement
for the year ended 30 November 2022
Notes
2022
Revenue
£
2022
Capital
£
2022
Total Return
£
2021
Revenue
£
2021
Capital
£
2021
Total Return
£
(Losses) gains on investments held at fair value
through profit or loss
8 - (3,737,462) (3,737,462) - 82,406,614 82,406,614
Losses on foreign currencies - (50,522) (50,522) - (24,280) (24,280)
Income 1 12,622,989 - 12,622,989 11,487,165 - 11,487,165
Investment management fee 2 (688,660) (1,606,874) (2,295,534) (666,745) (1,555,738) (2,222,483)
Administration expenses 3 (789,354) (1,975) (791,329) (723,214) (1,624) (724,838)
Profit (loss) before finance costs and taxation 11,144,975 (5,396,833) 5,748,142 10,097,206 80,824,972 90,922,178
Finance costs: interest payable and similar charges 4 (303,980) (654,611) (958,591) (269,638) (571,335) (840,973)
Profit (loss) on ordinary activities before taxation 10,840,995 (6,051,444) 4,789,551 9,827,568 80,253,637 90,081,205
Taxation 5 (1,167,023) - (1,167,023) (1,138,517) - (1,138,517)
Profit (loss) after taxation attributable to ordinary
shareholders
9,673,972 (6,051,444) 3,622,528 8,689,051 80,253,637 88,942,688
Earnings per ordinary share (basic and diluted) 7 22.66p (14.17p) 8.49p 20.35p 187.98p 208.33p
Dividends to be distributed in respect of the financial year ended 30 November 2022 total 21.50p (2021 - 20.15p),
amounting to £9,178,935 (2021 - £8,602,584). Details are set out in Note 6 on page 95.
The total return column of this statement is the profit and loss account of the company.
The supplementary revenue return and capital return columns are both prepared under the guidance published by the
Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or
discontinued in the year.
Profit after taxation attributable to ordinary shareholders disclosed above represents the company’s total
comprehensive income.
The Statement of Accounting Policies on pages 90 and 91 the notes on pages 92 to 106 form an integral part of
these Financial Statements.
86
Notes
2022
£
2022
£
2021
£
Fixed assets
Investments held at fair value through profit or loss 8 522,829,082 533,923,937
Current assets
Other receivables 9 2,747,156 2,255,211
Cash and cash equivalents 9 7,918,710 3,694,667
10,665,866 5,949,878
Current liabilities
Other payables 9 (11,306,871) (12,339,748)
Net current liabilities (641,005) (6,389,870)
Total assets less current liabilities 522,188,077 527,534,067
Creditors: amounts falling due after more than one year 10 (25,091,114) (25,081,783)
Total net assets 497,096,963 502,452,284
Capital and reserves
Called up share capital 11 10,673,181 10,673,181
Capital redemption reserve 12 5,326,819 5,326,819
Capital reserve 12 465,250,733 471,302,177
Revenue reserve 12 15,846,230 15,150,107
Total shareholders' funds 13 497,096,963 502,452,284
Net asset value per ordinary share 13 1,164.4p 1,176.9p
The financial statements of The Brunner Investment Trust PLC, company number 00226323, were approved and
authorised for issue by the Board of Directors on 14 February 2023 and signed on its behalf by:
Carolan Dobson
Chair
Balance Sheet
at 30 November 2022
The Statement of Accounting Policies on pages 90 and 91 the notes on pages 92 to 106 form an integral part of
these Financial Statements.
87
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Statement of Changes in Equity
for the year ended 30 November 2022
Notes
Called up
Share
Capital
£
Capital
Redemption
Reserve
£
Capital
Reserve
£
Revenue
Reserve
£
Total
£
Net assets as at 1 December 2020 10,673,181 5,326,819 391,048,540 15,050,832 422,099,372
Revenue profit - - - 8,689,051 8,689,051
Dividends on ordinary shares 6 - - - (8,589,776) (8,589,776)
Capital profit - - 80,253,637 - 80,253,637
Net assets as at 30 November 2021 10,673,181 5,326,819 471,302,177 15,150,107 502,452,284
Net assets as at 1 December 2021 10,673,181 5,326,819 471,302,177 15,150,107 502,452,284
Revenue profit - - - 9,673,972 9,673,972
Dividends on ordinary shares 6 - - - (8,986,818) (8,986,818)
Unclaimed dividends - - - 8,969 8,969
Capital loss - - (6,051,444) - (6,051,444)
Net assets as at 30 November 2022 10,673,181 5,326,819 465,250,733 15,846,230 497,096,963
The Statement of Accounting Policies on pages 90 and 91 the notes on pages 92 to 106 form an integral part of
these Financial Statements.
88
Notes
2022
£
2021
£
Operating activities
Profit before finance costs and taxation* 5,748,142 90,922,178
Add (Less): Losses (gains) on investments held at fair value through profit or loss 3,737,462 (82,406,614)
Less: Overseas tax suffered (1,167,023) (1,138,517)
Add: Losses on foreign currency 50,522 24,280
Purchase of fixed asset investments held at fair value through profit or loss (79,629,586) (70,571,279)
Sales of fixed asset investments held at fair value through profit or loss 85,530,947 64,919,529
Increase in other receivables (72,588) (276,366)
(Decrease) increase in other payables (93,914) 201,037
Net cash inflow from operating activities 14,103,962 1,674,248
Financing activities
Interest paid and similar charges (829,048) (804,243)
Proceeds from Revolving Credit Facility - 2,500,000
Dividend paid on cumulative preference stock (22,500) (22,531)
Dividends paid on ordinary shares 6 (8,986,818) (8,589,776)
Unclaimed dividends over 12 years 8,969 -
Net cash outflow from financing activities (9,829,397) (6,916,550)
Increase (decrease) in cash and cash equivalents 4,274,565 (5,242,302)
Cash and cash equivalents at the start of the year 3,694,667 8,961,249
Effect of foreign exchange rates (50,522) (24,280)
Cash and cash equivalents at the end of the year 7,918,710 3,694,667
Comprising:
Cash at bank 7,918,710 3,694,667
* Cash inflow from dividends was £11,034,636 (2021 - £10,096,758) and cash inflow from interest was £12,814 (2021 -
£nil).
Cash Flow Statement
for the year ended 30 November 2022
The Statement of Accounting Policies on pages 90 and 91 the notes on pages 92 to 106 form an integral part of
these Financial Statements.
89
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Statement of Accounting Policies
for the year ended 30 November 2022
The company is incorporated in the United Kingdom
under the Companies Act. The company is a public
company limited by shares and is registered in England
and Wales. The address of the company’s registered
office is shown on page 60. The principal activity
of the company and the nature of its operations are
set out in the strategic report on page 9. The
company conducts its business so as to qualify as
an investment trust company within the meaning of
sub-section 1158 of the Corporation Tax Act 2010.
The principal accounting policies are summarised
below. They have all been applied consistently
throughout the year and to the preceding year.
1
Basis of pr
eparation – The financial statements have
been prepared under the historical cost convention,
except for the revaluation of financial instruments held
at fair value through profit or loss and in accordance
with applicable United Kingdom law and UK
Accounting Standards (UK GAAP), including Financial
Reporting Standard 102 – the Financial Reporting
Standard applicable in the United Kingdom and
Republic of Ireland (FRS 102), the requirements of the
Companies Act 2006 and in line with the Statement
of Recommended Practice “Financial Statements
of Investment Trust Companies and Venture Capital
Trusts” issued by the Association of Investment
Companies (AIC SORP) in July 2022.
In order to better reflect the activities of an investment
trust company, and in accordance with guidance
issued by the AIC, supplementary information which
analyses the Income Statement between items of
revenue and capital nature has been presented
alongside the Income Statement. In accordance with
the company’s Articles of Association, net capital
returns may not be distributed by way of dividend.
The directors believe that it is appropriate to continue
to adopt the going concern basis in preparing the
financial statements as the assets of the company
consist mainly of securities, which are readily realisable
and significantly exceed liabilities. Accordingly, the
directors believe that the company has adequate
financial resources, to continue in operational
existence for the foreseeable future. The company’s
business, the principal risks and uncertainties it faces,
together with the factors likely to affect its future
development, performance and position are set out in
the Strategic Report on page 9.
2 Income – Dividends received on equity shares are
accounted for on an ex-dividend basis. Foreign
dividends are grossed up at the appropriate rate of
withholding tax.
Special dividends are recognised on an ex-dividend
basis and treated as a capital or revenue item
depending on the facts and circumstances of each
dividend. The board reviews special dividends and
their treatment at each meeting.
Where the company has elected to receive its
dividends in the form of additional shares rather
than in cash, the equivalent of the cash dividend is
recognised as income. Any excess in the value of the
shares received over the amount of the cash dividend
is recognised in capital reserves.
Deposit interest receivable is accounted for on an
accruals basis.
Commissions in respect of underwriting are recognised
when the underwritten issue closes and are generally
recognised within the Income Statement as revenue.
Where, however, the company is required to take up
a proportion of the shares underwritten, the same
proportion of the shares underwritten is recognised as
capital, with the balance recognised as revenue.
3 Investment management fee and administrative
expenses – The investment management fee is
calculated on the basis set out in Note 2 to the
financial statements and is charged to capital and
revenue in the ratio 70:30 to reflect the company’s
investment policy and prospective capital and income
growth. Other administrative expenses are charged in
full to revenue, except custodian handling charges on
investment transactions which are charged to capital.
All expenses are on an accruals basis.
4 Investments – As the company’s business is investing
in financial assets with a view to profiting from their
total return in the form of increases in fair value,
financial assets are held at fair value through profit
or loss in accordance with FRS 102 Section 11: ‘Basic
Financial Instruments’ and Section 12: ‘Other Financial
Instruments’. The company manages and evaluates
the performance of these investments on a fair value
basis in accordance with its investment strategy, and
information about investments is provided on this basis
to the board.
Investments held at fair value through profit or loss
are initially recognised at fair value. After initial
recognition, these continue to be measured at fair
value, which for quoted investments is either the
bid price or the last traded price depending on the
convention of the exchange on which they are listed.
Gains or losses on investments are recognised in the
capital column of the Income Statement. Purchases
and sales of financial assets are recognised on
the trade date, being the date which the company
commits to purchase or sell assets.
90
Unlisted investments are valued by the Directors
based upon the latest dealing prices, stockbrokers’
valuations, net asset values, earnings and other
known accounting information in accordance with the
principles set out by the International Private Equity
and Venture Capital Valuation Guidelines issued in
December 2022.
After initial recognition unquoted stocks are valued by
the board on an annual basis.
5
Financ
e costs – In accordance with the FRS 102
Section 11: ‘Basic Financial Instruments’ and Section
12 ‘Other Financial Instruments’, long term borrowings
are stated at the amortised cost being the amount of
net proceeds on issue plus accrued finance costs to
date. Finance costs are calculated over the term of the
debt on the effective interest rate basis.
Finance costs net of amortised premiums are charged
to capital and revenue in the ratio 70:30 to reflect
the board’s investment policy and prospective split of
capital and revenue returns.
Dividends payable on the 5% cumulative preference
stock are classified as an interest expense and are
charged in full to revenue.
6 Taxation – Where expenses are allocated between
capital and revenue, any tax relief obtained in respect
of those expenses is allocated between capital and
revenue on the marginal method and the company’s
effective rate of corporation tax for the accounting
period. Deferred taxation is recognised in respect of
all timing differences that have originated but not
reversed at the balance sheet date, where transactions
or events that result in an obligation to pay more tax
or a right to pay less tax in the future have occurred.
Timing differences are differences between the
company’s taxable profits and its results as stated in
the financial statements.
A deferred tax asset is recognised when it is more likely
than not that the asset will be recoverable. Deferred
tax is measured on a non-discounted basis at the rate
of corporation tax that is expected to apply when the
timing differences are expected to reverse.
7
Shar
es repurchased for cancellation and for holding
in treasury – Share capital is reduced by the nominal
value of the shares repurchased, and the capital
redemption reserve is correspondingly increased in
accordance with Section 733 Companies Act 2006.
The full cost of the repurchase is charged to the capital
reserve within Gains (Losses) on Sales of Investments.
For shares repurchased for holding in treasury, the full
cost is charged to the capital reserve.
8 Shares sold (reissued) from treasury – Proceeds
received from the sale of shares held in treasury are
treated as realised profits in accordance with Section
731 of the Companies Act 2006. Proceeds equivalent
to the original cost, calculated by applying a weighted
average price, are credited to the capital reserve;
proceeds in excess of the original cost are credited to
the share premium account.
9 Dividends – In accordance with FRS 102 Section 32:
‘Events After the End of the Reporting Period’, the final
dividend proposed on ordinary shares is recognised
as a liability when approved by shareholders. Interim
dividends are recognised only when paid. Dividends
are paid from the revenue reserve.
10
F
oreign currency – In accordance with FRS 102 Section
30: ‘Foreign Currency Translation’, the company is
required to nominate a functional currency, being
the currency in which the company predominately
operates. The functional and reporting currency is
pounds sterling, reflecting the primary economic
environment in which both the company and its’
shareholders predominantly operate and in which
its’ expenses are generally paid. Transactions in
foreign currencies are translated into pounds sterling
at the rates of exchange ruling on the date of the
transaction. Foreign currency monetary assets and
liabilities are translated into pounds sterling at the
rates of exchange ruling at the balance sheet date.
Profits and losses thereon are recognised in the capital
column of the income statement and taken to the
capital reserve.
11 Significant judgements, estimates and assumptions
– In the application of the company’s accounting
policies, which are described above, the directors
are required to make judgements, estimates, and
assumptions about the carrying amounts of assets
and liabilities that are not readily apparent from other
sources. The investment portfolio currently consists
of listed investments and therefore no significant
estimates have been made in valuing these securities
There are no significant judgements, estimates, and
assumptions.
Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
affects both current and future periods.
91
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Notes to the Financial Statements
for the year ended 30 November 2022
1. Income
2022
£
2021
£
Income from Investments*
Equity income from UK investments
†
4,791,041 3,958,066
Equity income from overseas investments
††
7,819,134 7,529,099
12,610,175 11,487,165
Other Income
Deposit interest 12,814 -
12,814 -
Total income 12,622,989 11,487,165
* All dividend income is derived from listed investments.
†
Includes special dividends of £45,600 (2021 - £660,395).
††
Includes special dividends of £474,916 (2021 - £450,985).
2. Investment Management Fee
2022
Revenue
£
2022
Capital
£
2022
Total
£
2021
Revenue
£
2021
Capital
£
2021
Total
£
Investment management fee 688,660 1,606,874 2,295,534 666,745 1,555,738 2,222,483
Under the terms of the Management and Administration Agreement the company’s manager is Allianz Global Investors
GmbH, UK Branch (AllianzGI). The agreement was restated in July 2014, with the appointment of AllianzGI as the
Alternative Investment Fund Manager. The terms of the agreement were unchanged: it provides for a management fee
based on 0.45% per annum of the value of the assets after deduction of current liabilities, short-term loans under one
year and other funds managed by AllianzGI, calculated monthly. The fee is charged in the ratio 70:30 between capital
and revenue as set out in the Statement of Accounting Policies.
The provision of investment management services, company administrative and secretarial services by AllianzGI under
the Management and Administration Agreement may be terminated by either the company or AllianzGI on not less than
six months’ notice.
92
3. Administration Expenses
2022
£
2021
£
Auditors’ remuneration
for audit services 38,500 35,000
VAT on Auditors’ remuneration 7,700 7,000
46,200 42,000
Other administration expenses
Directors' fees 156,000 151,330
Depositary fees 52,623 50,623
Custody fees 48,541 54,350
Registrars' fees 70,258 69,252
Association of Investment Companies' fees 21,188 21,185
Marketing costs 265,946 236,516
Printing and postage 37,849 31,841
Directors' and officers' liability insurance 11,805 8,163
Professional and advisory fees 65,692 10,800
Other 67,889 86,608
VAT recovered (54,637) (39,454)
789,354 723,214
(i) The above expenses include value added tax where applicable.
(ii) Directors’ fees are set out in the Directors’ Remuneration Report on page 70.
(iii) Custodian handling charges of £1,975 were charged to capital (2021 - £1,624).
4. Finance Costs: Interest Payable and Similar Charges
2022
Revenue
£
2022
Capital
£
2022
Total
£
2021
Revenue
£
2021
Capital
£
2021
Total
£
On Fixed Rate Interest Loan* - - - 928 2,165 3,093
On 5% Cumulative Preference Stock repayable
after more than five years
22,500 - 22,500 22,531 - 22,531
On 2.84% Fixed Rate Notes 2048 repayable after
more than five years
215,800 503,532 719,332 215,720 503,346 719,066
On Revolving Credit Facility 64,748 151,079 215,827 28,210 65,824 94,034
On Sterling overdraft 932 - 932 2,249 - 2,249
303,980 654,611 958,591 269,638 571,335 840,973
* The Fixed Rate Interest Loan was repaid on 2 July 2018. Fintrust was placed into liquidation on 25 November 2019 and
formally dissolved on 30 June 2021. The company paid its share of any additional expenses borne out of the liquidation
process.
93
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
5. Taxation
2022
Revenue
£
2022
Capital
£
2022
Total
£
2021
Revenue
£
2021
Capital
£
2021
Total
£
Overseas taxation 1,167,023 - 1,167,023 1,138,517 - 1,138,517
Total tax 1,167,023 - 1,167,023 1,138,517 - 1,138,517
Reconciliation of tax charge
Profit before taxation 10,840,995 (6,051,444) 4,789,551 9,827,568 80,253,637 90,081,205
Tax on profit (loss) at 19.00% (2021 - 19.00%) 2,059,789 (1,149,774) 910,015 1,867,238 15,248,191 17,115,429
Effects of
Non taxable income (2,395,493) - (2,395,493) (2,182,594) - (2,182,594)
Non taxable capital losses (gains) - 719,717 719,717 - (15,652,644) (15,652,644)
Disallowable expenses 4,275 375 4,650 4,281 309 4,590
Overseas tax suffered 1,167,023 - 1,167,023 1,138,517 - 1,138,517
Excess of allowable expenses over taxable income 331,429 429,682 761,111 311,075 404,144 715,219
Total tax 1,167,023 - 1,167,023 1,138,517 - 1,138,517
The company’s taxable income is exceeded by its tax allowable expenses, which include both the revenue and capital
elements of the management fee and finance costs.
As at 30 November 2022, the company had accumulated surplus expenses of £105.4 million (2021 - £101.4 million) and
eligible unrelieved foreign tax of nil (2021 - nil).
The company has not recognised a deferred tax asset of £26.4 million (2021 - £19.3 million) in respect of these expenses,
based on a prospective corporation tax rate of 25% (2021 - 19%) because there is no reasonable prospect of recovery.
The increase in the standard rate of corporation tax was substantively enacted on 24 May 2021 and is effective from 1
April 2023.
94
6. Dividends on Ordinary Shares
2022
£
2021
£
Dividends paid on ordinary shares
Third interim dividend - 4.70p paid 10 December 2021 (2020 - 4.67p) 2,006,558 1,993,750
Final dividend - 6.05p paid 1 April 2022 (2021 - 6.05p) 2,582,910 2,582,910
First interim dividend - 5.15p paid 21 July 2022 (2021 - 4.70p) 2,198,675 2,006,558
Second interim dividend - 5.15p paid 15 September 2022 (2021 - 4.70p) 2,198,675 2,006,558
8,986,818 8,589,776
Dividends payable at the year end are not recognised as a liability under FRS 102 Section 32 ‘Events After the End of the
Reporting Period’ (see page 90 - Statement of Accounting Policies). Details of these dividends are set out below.
2022
£
2021
£
Third interim dividend - 5.15p paid 12 December 2022 (2021 - 4.70p) 2,198,675 2,006,558
Final proposed dividend - 6.05p payable 4 April 2023 (2022 - 6.05p) 2,582,910 2,582,910
4,781,585 4,589,468
The proposed final dividend accrued is based on the number of shares in issue at the year end. However, the dividend
payable will be based on the numbers of shares in issue on the record date and will reflect any changes in the share
capital between the year end and the record date.
All dividends disclosed in the tables above have been paid or are payable from the revenue reserves.
7. Earnings per Ordinary Share
2022
Revenue
£
2022
Capital
£
2022
Total
£
2021
Revenue
£
2021
Capital
£
2021
Total
£
Profit (loss) after taxation attributable to ordinary
shareholders
9,673,972 (6,051,444) 3,622,528 8,689,051 80,253,637 88,942,688
Earnings per ordinary share (basic and diluted) 22.66p (14.17p) 8.49p 20.35p 187.98p 208.33p
The earnings per ordinary share is based on a weighted number of shares 42,692,727 (2021 - 42,692,727) ordinary
shares in issue.
95
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
8. Investments Held at Fair Value Through Profit or Loss
2022
£
2021
£
Opening book cost 300,448,489 269,261,065
Opening investments holding gains 233,475,448 175,854,472
Opening market value 533,923,937 445,115,537
Additions at cost 78,592,911 70,844,971
Disposals proceeds received (85,950,304) (64,443,185)
(Losses) gains on investments (3,737,462) 82,406,614
Market value of investments held at 30 November 522,829,082 533,923,937
Closing book cost 321,784,618 300,448,489
Closing investment holding gains 201,044,464 233,475,448
Closing market value 522,829,082 533,923,937
(Losses) gains on investments
(Losses) gains on investment (3,737,462) 82,406,614
(Losses) gains on investments (3,737,462) 82,406,614
The company received £85,950,304 (2021 - £64,443,185) from investments sold in the year. The book cost of these
investments when they were purchased was £57,256,782 (2021 - £39,653,208).
These investments have been revalued over time and until they were sold any unrealised gains/losses were included in
the fair value of the investments.
Transaction costs and stamp duty on purchases amounted to £187,149 (2021 - £199,265) and transaction costs on sales
amounted to £18,885 (2021 - £16,862).
96
9. Other Receivables and Other Payables
2022
£
2021
£
Other receivables
Sales for future settlement 973,513 554,156
Accrued income 1,732,319 1,625,783
Prepayments 41,324 75,272
2,747,156 2,255,211
Cash and cash equivalents
Current account 7,918,710 3,694,667
7,918,710 3,694,667
Other payables: amounts falling due within one year
Purchases for future settlement - 1,036,675
Other payables 877,710 971,624
Interest on borrowings (see below) 313,934 313,934
Revolving Credit Facility 10(i) 10,115,227 10,017,515
11,306,871 12,339,748
The carrying amount of other receivables, cash and cash equivalents and other payables: amounts falling due within one
year, each approximate their fair value.
2022
£
2021
£
Interest on outstanding borrowings consists of:
5% Cumulative preference stock 11,311 11,311
2.84% Fixed Rate Note 2048 302,623 302,623
313,934 313,934
(i) On 27 June 2022 the company entered into a revolving credit facility agreement of £10m (replacing an existing
facility of £10m). The full amount of £10m is currently drawn down. The rate of interest for the revolving credit facility
is set each month and is made up of a fixed margin plus SONIA rate. Under this agreement £10m was rolled over on
27 December 2022, with a maturity date of 27 June 2023. The repayment date of the revolving facility is the last day
of its interest period and the termination date is 27 June 2025.
The c
ompany pays a commitment fee of 0.30% p.a. on any undrawn amounts.
97
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
10. Creditors: Amounts falling due after more than one year
2022
£
2021
£
5% Cumulative preference stock (i) 450,000 450,000
2.84% Fixed Rate Note 2048 (ii) 24,641,114 24,631,783
25,091,114 25,081,783
(i) The 5% Cumulative Preference Stock is recognised as a creditor due after more than one year under the provisions
of FRS102 Section 11: ’Basic Financial Instruments’ and Section 12: ’Other Financial Instruments’. The right of the
preference stockholders to receive payments is not calculated by reference to the company’s profits and, in the event
of a return of capital are limited to a specific amount, being £450,000. Dividends on the preference stock are payable
on 30 June and 31 December each year.
(ii)
The Fixed R
ate Notes of £25,000,000 is stated at £24,641,114 (2021 - £24,631,783) being the net proceeds of
£24,601,800 plus accrued finance costs of £39,314 (2021 - £29,983).
The Note is repayable on 28 June 2048 and carries interest at 2.84% per annum on the principal amount. Interest is
payable in June and December each year. The effective interest rate of the loan inclusive of the issue costs is 2.94%.
11. Called up Share Capital
2022
£
2021
£
Allotted and fully paid
42,692,727 ordinary shares of 25p each (2021 - 42,692,727) 10,673,181 10,673,181
The directors are authorised by an ordinary resolution passed on 30 March 2022 to allot relevant securities, in accordance
with section 551 of the Companies Act 2006, up to a maximum of 14,230,908 ordinary shares of 25p each. This authority
expires on 30 June 2023 and accordingly a renewed authority will be sought at the annual general meeting on 31 March
2023.
During the year nil (2021 - nil) ordinary shares were repurchased by the company. The aggregate purchase price of these
shares, amounting to £nil (2021 - £nil) was charged to the capital reserve, within gains on sales of investments (see Note
12).
98
12. Reserves
Capital Reserve
Capital
Redemption
Reserve
£
Gains (losses)
on sales of
Investments
£
Investment
Holding
Gains (losses)
£
Revenue
Reserve
£
Balance at 1 December 2021 5,326,819 238,019,190 233,282,987 15,150,107
Gains on realisation of investments - 88,372,933 - -
Transfer on disposal of investments - (59,679,411) 59,679,411 -
Movement in investment holding losses - - (92,110,395) -
Losses on foreign currency - - (50,522) -
Investment management fee - (1,606,874) - -
Finance costs of borrowings - (654,611) - -
Other capital expenses - (1,975) - -
Dividends appropriated in the year - - - (8,986,818)
Profit retained for the year - - - 9,673,972
Unclaimed dividends - - - 8,969
Balance at 30 November 2022 5,326,819 264,449,252 200,801,481 15,846,230
The Companies Act 2006 sections 830(2), 832, and 833, detail the distribution requirements for an Investment Company.
In line with that legislation, under the terms of the company’s Articles of Association, the capital reserves are distributable
only by way of redemption or purchase of the company’s own shares, for so long as the company carries on business as
an Investment Company. Net capital returns may not be distributed by way of a dividend.
The Institute of Chartered Accountants in England and Wales (ICAEW) and the Institute of Chartered Accountants in
Scotland (ICAS) in its technical guidance TECH 02/17BL, state that investment holding gains arising out of a change in
fair value of assets may be recognised as gains on sales of investments, provided they can be readily converted into cash.
Securities listed on a stock exchange are generally regarded as being readily convertible into cash and hence investment
holding gains in respect of such securities have been regarded as realised.
Distributions via dividends can only be made from the revenue reserve, and this reserve is entirely and exclusively
distributable by way of dividends (as defined by ICAEW and ICAS technical guidance TECH 02/17BL) at the date of
the balance sheet. This distributable reserve balance is at a point in time, and does not reflect what may be able to be
distributed at a later date, as this can be affected by several factors.
All paid and payable dividends for the year are charged to the revenue reserve (2021 - same). In accordance with the
company’s Articles of Association, net capital returns may not be distributed by way of a dividend.
99
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
13. Net Asset Value Total Return
The net asset value total return for the year is the percentage movement from the capital net asset value as at 30
November 2021 to the net asset value, on a total return basis as at 30 November 2022. The net asset value total return
with debt at fair value is 3.0% (2021: 21.5%) and the net asset value total return with debt at par is 0.8% (2021: 21.1%).
The net asset value per ordinary share is based on 42,692,727 ordinary shares in issue at the year end (2021 - 42,692,727).
The method of calculation of the net asset value with debt at fair value is described in Note 15(c) on page 104.
The net asset value per ordinary share was as follows:
Debt at
fair value
Debt
at par
Debt at
fair value
Debt
at par
2022 2022 2021 2021
Net asset value per ordinary share attributable 1,178.70p 1,164.40p 1,165.40p 1,176.90p
Effect of dividends reinvested on the respective ex-dividend dates 21.50p 21.50p 20.15p 20.15p
Net asset value total return 1,200.20p 1,185.90p 1,185.55p 1,197.05p
Net asset value attributable £503,217,127 £497,096,963 £497,525,622 £502,452,284
14. Contingent Liabilities, Capital Commitments and Guarantees
At 30 November 2022 there were no contingent liabilities (2021 - £nil).
15. Financial Risk Management policies and procedures
The company invests in equities and other investments in accordance with its investment objective as stated in the
Strategic Report on page 10. In pursuing its investment objective, the company is exposed to certain inherent risks that
could result in either a reduction in the company’s net assets or a reduction in the profits available for distribution by way
of dividends.
The main risks arising from the company’s financial instruments are: market risk (comprising market price risk, market
yield risk, foreign currency risk and interest rate risk), liquidity risk and credit risk. The directors’ approach to the
management of these risks, are set out below. The directors determine the objectives and agree policies for managing
each of these risks, as set out below. The manager, in close cooperation with the directors, implements the company’s risk
management policies. These policies have remained substantially unchanged during the current and preceding year.
(a) Market Risk
The manager assesses the exposure to market risk when making each investment decision, and monitors the risk on the
investment portfolio on an ongoing basis. Market risk comprises of market price risk (price and yield), foreign currency
risk and interest rate risk.
(i) Market Price Risk
Market price risk arises mainly from the uncertainty about future prices of financial instruments held. It represents the
potential loss the company might suffer through holding market positions in the face of price movements. An analysis of
the company’s portfolio begins on page 48.
Market Price Risk Sensitivity
The value of the company’s listed equities which were exposed to market price risk as at 30 November 2022 and 2021
was as follows:
2022
£
2021
£
Listed equity investments held at fair value through profit or loss 522,829,082 533,923,937
The following illustrates the sensitivity of the return after taxation for the year and the net assets to an increase or
decrease of 30% (2021 - 30%) in the fair values of the company’s quoted equities. This level of change is considered to
be reasonably possible based on observation of market conditions in recent years. The sensitivity analysis on the profit
after taxation and net assets is based on the impact of a 30% increase or decrease in the value of the company’s listed
investments at each closing balance sheet date and the consequent impact on the investment management fees for the
year, with all other variables held constant.
100
2022
30% Increase
in fair value
£
2022
30% Decrease
in fair value
£
2021
30% Increase
in fair value
£
2021
30% Decrease
in fair value
£
Revenue earnings
Investment management fee (211,746) 211,746 (216,239) 216,239
Capital earnings
(Losses) gains on investments at fair value 156,848,725 (156,848,725) 160,177,181 (160,177,181)
Investment management fee (494,073) 494,073 (504,558) 504,558
Change in net earnings and net assets 156,142,906 (156,142,906) 159,456,384 (159,456,384)
Management of Market Price Risk
The directors meet regularly to review the asset allocation of the portfolio recommended by the manager, in order
to minimise the risk associated with particular countries or industry sectors. Dedicated fund managers have the
responsibility for monitoring the existing portfolio selection in accordance with the company’s investment objectives and
seek to ensure that individual stocks meet an acceptable risk reward profile.
(ii) Market Yield Risk
Market yield risk arises from the uncertainty about the company’s ability to maintain its income objectives due to a
systematic decline in corporate dividend levels.
Management of Market Yield Risk
The directors regularly review the current and projected yield of the investment portfolio, and discuss with the manager
the extent to which it will enable the company to meet its investment income objective. The board has also committed to
using the strong revenue reserve if required.
(iii) Foreign Currency Risk
Foreign currency risk is the risk of the movement in the values of overseas financial instruments as a result of fluctuations
in exchange rates.
Management of Foreign Currency Risk
Transactions in foreign currencies are translated into sterling at the rates of exchange ruling on the date of the
transaction. Foreign currency assets and liabilities are translated into sterling at the rates of exchange ruling at the
balance sheet date. The company does not currently hedge against foreign currency exposure.
The table below summarises in sterling terms the foreign currency risk exposure:
2022
Investments
£
2022
Other net assets
(liabilities)
£
2022
Total Currency
Exposure
£
2021
Investments
£
2021
Other net assets
(liabilities)
£
2021
Total Currency
Exposure
£
Pounds Sterling 114,760,363 (29,215,772) 85,544,591 108,890,020 (33,455,140) 75,434,880
Australian Dollar 8,458,716 97,171 8,555,887 7,248,144 84,474 7,332,618
Danish Krone 11,326,437 35,822 11,362,259 12,909,812 16,522 12,926,334
Euro 72,215,216 319,906 72,535,122 79,479,916 (853,801) 78,626,115
Hong Kong Dollar 10,131,404 1,226,423 11,357,827 12,650,353 - 12,650,353
Japanese Yen 15,075,362 201,974 15,277,336 13,010,488 167,900 13,178,388
Swedish Krona 17,896,846 7,800 17,904,646 14,491,287 - 14,491,287
Swiss Franc 40,316,036 494,052 40,810,088 39,924,301 487,828 40,412,129
Taiwan Dollar - 913,699 913,699 - 936,480 936,480
US Dollar 232,648,702 186,806 232,835,508 245,319,616 1,144,084 246,463,700
Total 522,829,082 (25,732,119) 497,096,963 533,923,937 (31,471,653) 502,452,284
The following table details the company’s sensitivity to a 20% increase and decrease in sterling against the relevant
foreign currencies and the resultant impact that any such increase or decrease would have on net return and net assets.
The sensitivity analysis includes only outstanding foreign currency denominated items and adjusts their translation at the
year end for a 20% change in foreign currency rates.
101
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
2022
20% Decrease
in sterling
against
foreign
currencies
£
2022
20% Increase
in sterling
against
foreign
currencies
£
2021
20% Decrease
in sterling
against
foreign
currencies
£
2021
20% Increase
in sterling
against
foreign
currencies
£
Australian Dollar 2,138,972 (1,425,981) 1,833,155 (1,222,103)
Danish Krone 2,840,565 (1,893,710) 3,231,584 (2,154,389)
Euro 18,133,781 (12,089,187) 19,656,529 (13,104,353)
Hong Kong Dollar 2,839,457 (1,892,971) 3,162,588 (2,108,392)
Japanese Yen 3,819,334 (2,546,223) 3,294,597 (2,196,398)
Swedish Krona 4,476,162 (2,984,108) 3,622,822 (2,415,215)
Swiss Franc 10,202,522 (6,801,681) 10,103,032 (6,735,355)
Taiwan Dollar 228,425 (152,283) 234,120 (156,080)
US Dollar 58,208,877 (38,805,918) 61,615,925 (41,077,283)
Total 102,888,095 (68,592,062) 106,754,352 (71,169,568)
(iv) Interest Rate Risk
Interest rate risk is the risk of movements in the value of financial instruments as a result of fluctuations in interest rates.
Interest Rate Exposure
The table below summarises in sterling terms the financial assets and financial liabilities whose values are directly
affected by changes in interest rates.
2022
Fixed
rate
interest
£
2022
Floating
rate
interest
£
2022
Nil
Interest
£
2022
Total
£
2021
Fixed
rate
interest
£
2021
Floating
rate
interest
£
2021
Nil
Interest
£
2021
Total
£
Financial assets
- 7,918,710 522,829,082 530,747,792 - 3,694,667 533,923,937 537,618,604
Financial Liabilities
(25,091,114) - - (25,091,114) (25,081,783) - - (25,081,783)
Net financial (liabilities) assets
(25,091,114) 7,918,710 522,829,082 505,656,678 (25,081,783) 3,694,667 533,923,937 512,536,821
Short term receivables and
payables
- - -
(8,559,715) - - - (10,084,537)
Net (liabilities) assets per balance
sheet
(25,091,114) 7,918,710 522,829,082 497,096,963 (25,081,783) 3,694,667 533,923,937 502,452,284
As at 30 November 2022, the interest rates received on cash balances, or paid on bank overdrafts respectively, is
approximate to 1.50% and 4.00% per annum (2021: 0.00% and 1.10% per annum).
The fixed rate interest bearing liabilities bear the following coupon and effective rates as at 30 November 2021 and 30
November 2022.
2022
Maturity
date
Amount
borrowed
£
Coupon
rate
Effective
rate since
inception*
5% Cumulative Preference Stock n/a 450,000 5.00% n/a
2.84% Fixed Rate Note 2048 28/06/2048 25,000,000 2.84% 2.94%
2021
Maturity
date
Amount
borrowed
£
Coupon
rate
Effective
rate since
inception*
5% Cumulative Preference Stock n/a 450,000 5.00% n/a
2.84% Fixed Rate Note 2048 28/06/2048 25,000,000 2.84% 2.94%
102
* The effective rates are calculated in accordance with FRS 102 Section 12: ‘Other Financial Instruments’ as detailed in
the Statement of Accounting Policies on page 90.
The weighted average effective rate of the company’s fixed interest bearing liabilities (excluding the 5% cumulative
preference stock) is 2.94% (2021 - 2.94%) and the weighted average period to maturity of these liabilities is 25.5 years
(2021 - 26.5 years).
The above year end amounts are reasonably representative of the exposure to interest rates during the year, as the level
of exposure does not change materially. The company’s profit after tax and net assets, is not significantly affected by
changes in interest rates.
Management of Interest Rate Risk
The company invests mainly in equities, the values of which are not directly affected by changes in prevailing market
interest rates.
The company finances its operations through a mixture of share capital, retained earnings and long term borrowings
which are subject to fixed rates. Movement in interest rates will not materially affect the finance costs of the company.
The company is considered to have low direct exposure to interest rate risk.
(b) Liquidity Risk
Liquidity risk relates to the capacity to meet liabilities as they fall due and is dependent on the liquidity of the underlying
assets.
Maturity of Financial Liabilities
The table below presents the future cash flows payable by the company in respect of its financial liabilities.
Cash flows in respect of the principal and interest on the 2.84% Fixed Rate Note 2048 reflect the maturity dates set out in
Note 10 on page 98. Cash flows in respect of the 5% cumulative preference stock, which has no fixed repayment date,
assume maturity of 20 years from the balance sheet date. Cash flows have not been discounted.
2022
Three
months
or less
£
Between
three months
and one year
£
Between
one and
five years
£
More than
five years
£
Total
£
Other payables
Finance costs of borrowing 366,250 366,250 - - 732,500
Revolving Credit Facility 197,214 10,000,000 - - 10,197,214
Other payables 877,710 - - - 877,710
Creditors: amounts falling due after more than one year
Maturity of borrowings - - - 25,450,000 25,450,000
Finance costs of borrowing - - 2,930,000 15,247,500 18,177,500
1,441,174 10,366,250 2,930,000 40,697,500 55,434,924
2021
Three
months
or less
£
Between
three months
and one year
£
Between
one and
five years
£
More than
five years
£
Total
£
Other payables
Finance costs of borrowing 366,250 366,250 - - 732,500
Revolving Credit Facility 82,217 10,000,000 - - 10,082,217
Other payables 2,008,299 - - - 2,008,299
Creditors: amounts falling due after more than one year
Maturity of borrowings - - - 25,450,000 25,450,000
Finance costs of borrowing - - 2,930,000 15,957,500 18,887,500
2,456,766 10,366,250 2,930,000 41,407,500 57,160,516
Other creditors include trade creditors only, no accrued finance costs included.
103
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Management of Liquidity Risk
Liquidity risk is not considered to be significant as the company’s assets mainly comprise realisable securities, which can
be sold to meet funding requirements. Short-term flexibility can be achieved through the use of overdraft facilities, where
necessary. The company has an undrawn committed borrowing facility of £5 million (2021 - £5 million).
(c) Credit Risk
Credit risk is the risk of default by a counterparty in discharging its obligations under transactions that could result in
the company suffering a loss. There were no impaired assets as of 30 November 2022 (30 November 2021 - nil). The
counterparties which the company engages with are regulated entities and are of high credit quality.
Management of Credit Risk
Outstanding settlements are subject to credit risk. Credit risk is mitigated by the company through its decision to transact
with counterparties of high credit quality. The company only buys and sells investments through brokers which are
approved counterparties, thus minimising the risk of default during settlement. The credit rating of brokers are reviewed
quarterly by the manager.
The company is also exposed to credit risk through the use of banks for its cash position. Bankruptcy or insolvency of banks
may cause the company’s rights with respect to cash held by banks to be delayed or limited. The company’s cash balance
is held by HSBC Bank plc, rated A1 by Moody’s rating agency. The directors believe the counterparties the company has
chosen to transact with are of high credit quality, therefore the company has minimal exposure to credit risk.
In summary, the exposure to credit risk at 30 November 2022 and 2021 was as follows:
2022
£
2021
£
Other Receivables:
Outstanding settlements 973,513 554,156
Accrued income 1,732,319 1,625,783
Prepayments 41,324 75,272
2,747,156 2,255,211
Cash and cash equivalents 7,918,710 3,694,667
10,665,866 5,949,878
Fair Values of Financial Assets and Financial Liabilities
Investments are designated as held at fair value through profit or loss in accordance with FRS 102 sections 11 and 12.
FRS 102 sets out three fair value levels.
Level 1 - The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the
measurement date.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable (i.e., developed using market data)
for the asset or liability, either directly or indirectly.
Level 3 - Inputs are unobservable (i.e., for which market data is unavailable) for the asset or liability.
With the exception of those financial liabilities measured at amortised cost, all other financial assets and financial
liabilities are either carried at their fair value or the balance sheet amount is a reasonable approximation of their fair
value.
As at 30 November 2022 the financial assets at fair value through profit and loss of £522,829,082 (2021 - £533,923,937)
are categorised as follows:
2022
£
2021
£
Level 1 522,829,082 533,923,937
Level 2 - -
Level 3 - -
522,829,082 533,923,937
There were no transfers between levels for financial assets and financial liabilities during the year recorded at fair value
as at 30 November 2022 and 30 November 2021.
The financial liabilities measured at amortised cost have the following fair values:*
104
2022
Book Value
£
2022
Fair Value
£
2021
Book Value
£
2021
Fair Value
£
Preference Stock 450,000 423,450 450,000 945,945
Fixed Rate Note 24,641,114 18,547,500 24,631,783 29,062,500
25,091,114 18,970,950 25,081,783 30,008,445
The net asset value per ordinary share, with the debt at fair value is calculated as follows:
2022
£
2021
£
Net assets per balance sheet 497,096,963 502,452,284
Add: financial liabilities at book value 25,091,114 25,081,783
Less: financial liabilities at fair value * (18,970,950) (30,008,445)
Net assets (debt at fair value) 503,217,127 497,525,622
Net asset value per ordinary share (debt at fair value) 1,178.7p 1,165.4p
* The fair value has been derived from the closing market value as at 30 November 2022 and 30 November 2021.
The fair value of the long term debt is calculated with reference to the nearest relevant gilt based on repayment date.
A margin is added to the yield of the relevant reference gilt to calculate the fair value. This margin is derived from the
excess of UK corporate bond yields over gilt yields.
The net asset value per ordinary share is based on 42,692,727 ordinary shares in issue at 30 November 2022 (2021 -
42,692,727).
16. Capital Management Policies and Procedures
The company’s objective is to provide growth in capital value and dividends over the long term through investing in a
portfolio of UK and international securities.
The company’s capital at 30 November comprises:
2022
£
2021
£
Debt
Revolving Credit Facility 10,115,227 10,017,515
Creditors: amounts falling due after more than one year 25,091,114 25,081,783
35,206,341 35,099,298
Equity
Called up share capital 10,673,181 10,673,181
Share premium account and other reserves 486,423,782 491,779,103
497,096,963 502,452,284
Total Capital 532,303,304 537,551,582
Debt as a percentage of total capital
6.6%
6.5%
The board, with the assistance of the manager, monitors and reviews the broad structure of the company’s capital on
an ongoing basis. The level of gearing is monitored, taking into account the manager’s view on the market and the
future prospects of the company’s performance. Capital management also involves reviewing the difference between
the net asset value per share and the share price (i.e. the level of share price discount or premium) to assess the need to
repurchase shares for cancellation.
105
Financial
Statements
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
The company is subject to several externally imposed capital requirements. The company has an overdraft facility of
£5m (2021 - £5m) available, hence any amounts drawn under this facility should not exceed £5m, and as a public
company the minimum share capital is £50,000. The company’s objective, policies and processes for managing capital
are unchanged from the preceding accounting period, and the company has complied with them. The terms of the debt
instruments have various covenants which prescribe that moneys borrowed should not exceed 33% of the adjusted net
asset value. These are measured in accordance with the policies used in the annual financial statements. The company
has complied with these.
17. Transactions with the Investment Manager and related parties
The amounts paid to the investment manager together with details of the investment management contract are
disclosed in note 2 on page 92. The existence of an independent board of directors demonstrates that the company
is free to pursue its own financial and operating policies and therefore, under FRS102 Section 33: ‘Related Party
Disclosures’, the investment manager is not considered to be a related party.
The company’s related parties are its directors. Fees paid to the company’s board are disclosed in the Directors’
Remuneration Report on page 70.
There are no other identifiable related parties at the year end, and as of 14 February 2023.
18. Post Balance Sheet Events
There are no significant events after the end of the reporting period requiring disclosure.
106
Investor
Information
Investor
Information
Switzerland is home to more
of our European holdings than
any other country, including
investment bank UBS in Zurich.
107
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
AIFM and Depositary
Allianz Global Investors GmbH (AllianzGI) is designated the Alternative Investment Fund Manager (AIFM).
AllianzGI is authorised to act as an AIFM and to conduct its activities from its UK Branch by Bundesanstalt für
Finanzdienstleistungsaufsicht (BaFin), in accordance with AIFMD and Financial Conduct Authority requirements. The
management fee and the notice period are unchanged in the restated Management and Administration Agreement
(details in Note 2 on page 92).
The company appointed HSBC Bank PLC as its depositary and custodian in accordance with AIFMD under an
agreement between the company, AllianzGI and HSBC. Depositary fees are charged in addition to custody fees and are
calculated on the basis of net assets.
Leverage and Risk Policies under AIFMD
Details of leverage and risk policies required under AIFMD are published on the website brunner.co.uk under Literature/
Trust Documents/Disclosures to Investors under AIFMD. These policies represent no change to the board’s policies in
existence prior to AIFMD and are in place to ensure that these limits would not be breached under any foreseeable
circumstances.
Remuneration Disclosure of the AIFM
Employee remuneration of Allianz Global Investors GmbH for the financial year ending 31 December 2021 (all values in
Euro).
Number of employees: 1,668
All employees Risk Taker
Board
Member
Other
Risk Taker
Employees
with Control
Function
Employees with
Comparable
Compensation
Fixed remuneration 155,709,850 6,149,684 853,418 1,430,671 220,480 3,645,115
Variable remuneration 103,775,068 10,383,891 746,730 1,949,415 155,462 7,532,283
Total remuneration 259,484,918 16,533,575 1,600,148 3,380,086 375,942 11,177,398
Remuneration Policy of the AIFM
The compensation structure at AllianzGI is set up to avoid any kind of excessive risk-taking. Variable compensation
awards are delivered via deferral programmes to ensure they are linked to sustainable performance. In addition,
any compensation decisions have to be reviewed and approved by the AIFM’s Functional, Regional and Global
Compensation Committees on both an aggregate and individual basis, to further ensure effective risk mitigation.
Key Investor Information Document (KID)
The Key Investor Information (KID) is a standardised pan-European document that contains product, risk, charges and
other information. It is a regulatory requirement that you are provided with a KID before you invest, and you will be
required to declare that you have seen the latest KID when you make your investment.
The Brunner Investment Trust KID is available under Information/Documents at brunner.co.uk. However, your chosen
platform provider or stockbroker should provide you with a copy before accepting your investment instructions.
Please note that existing investors do not need to review the KID unless planning to add to an investment. The KID’s
standardised format is intended to allow potential investors to compare funds easily, on a like-for-like basis. However,
there are wider investment industry concerns that disclosures mandated for inclusion may prove to be unhelpful for
investors. Investors should be aware that the performance and risk numbers in the KID are based on the last five years’
experience and note that past experience is not always a guide to the future. Transaction costs quoted in the KID are
based on the difference between the market price of the investment at the time the order is made and the actual price
paid/received when the deal was completed. The transaction costs quoted on page 96 are the costs associated with
the buying and selling of the underlying investments, such as dealing fees and stamp duty. Both are calculated as a
percentage of the net asset value.
Investor Information (unaudited)
108
Investor
Information
Financial Calendar
Year end 30 November.
Full year results announced and Annual Report posted to
shareholders in February.
Annual General Meeting held in March/April.
Half year results announced and half-yearly Financial
Report posted to shareholders in July.
Ordinary Dividends
It is anticipated that dividends will be paid as follows:
1st quarterly June/July
2nd quarterly September
3rd quarterly December
Final March/April
Preference Dividends
Payable half-yearly 30 June and 31 December.
Benchmark
For the year under review the benchmark was 70% FTSE
World Ex UK Index / 30% FTSE All-Share Index. For further
information, the FTSE 100 Index was 7,573.05 at 30
November 2022, compared to 7,059.45 at 30 November
2021, an increase of 7.3%.
Market and Portfolio Information
The company’s ordinary shares are listed on the London
Stock Exchange. The market price range, gross yield and
net asset value are shown daily in the Financial Times
and The Daily Telegraph under the headings ‘Investment
Companies’ and ‘Investment Trusts’, respectively. The net
asset value of the ordinary shares is calculated daily and
published on the London Stock Exchange Regulatory
News Service. The geographical spread of investments
and ten largest holdings are published monthly on the
London Stock Exchange Regulatory News Service. They
are also available from the manager’s Investors Helpline
on 0800 389 4696 or via the company’s website: brunner.
co.uk.
Website
Further information about The Brunner Investment Trust
PLC, including monthly factsheets, daily share price and
performance, is available on the company’s website:
brunner.co.uk.
How to Invest
Information is available from AllianzGI either via Investor
Services on 0800 389 4696 or on the company’s website:
brunner.co.uk.
A list of providers can be found on the company’s website:
brunner.co.uk/about-us/how-to-invest.
Dividend
The board is recommending a final dividend of 6.05p
to be payable on 4 April 2023 to shareholders on the
Register of Members at the close of business on 24
February 2023, making a total distribution of 21.5p per
share for the year ended 30 November 2022, an increase
of 6.7% over last year’s distribution. The ex-dividend date is
23 February 2023.
A Dividend Reinvestment Plan (DRIP) is available for this
dividend and the relevant Election Date is 10 March 2023.
Cash dividends will be sent by cheque to first-named
shareholders at their registered address. Dividends may
be paid directly into shareholders’ bank accounts. Details
of how this may be arranged can be obtained from Link
Group. Dividends mandated in this way are paid via
Bankers’ Automated Clearing Services (BACS).
Registrars
Link Group, 10th Floor, Central Square, 29 Wellington
Street, Leeds LS1 4DL. Telephone: 0371 664 0300. Lines
are open 9.00 a.m. to 5.30 p.m. (UK time) Monday to
Friday.
Email: shareholderenquiries@linkgroup.co.uk.
Website: https://www.linkgroup.eu/.
Shareholder Enquiries
In the event of queries regarding their holdings of shares,
lost certificates, dividend payments, registered details,
etc., shareholders should contact the registrars on 0371
664 0300. Lines are open 9.00 a.m. to 5.30 p.m. (UK time)
Monday to Friday. Calls to the helpline number from
outside the UK are charged at applicable international
rates. Different charges may apply to calls made from
mobile telephones and calls may be recorded and
monitored randomly for security and training purposes.
Changes of name and address must be notified to the
registrars in writing. Any general enquiries about the
company should be directed to the Company Secretary,
The Brunner Investment Trust PLC, 199 Bishopsgate,
London EC2M 3TY. Telephone: 020 3246 7513.
Dividend Reinvestment Plan for Ordinary
Shareholders (DRIP)
The registrars offer a DRIP which gives ordinary
shareholders the opportunity to use their cash dividend
to buy further shares in the company under a low-
cost dealing arrangement. Terms and Conditions and
an application form are enclosed with each dividend
payment. For more information please email shares@
linkgroup.co.uk or call 0371 664 0381.
109
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Share Dealing Services
Link Group operate an online and telephone dealing
facility for UK resident shareholders with share certificates.
Stamp duty and commission may be payable on
transactions.
For further information on these services please contact:
linksharedeal.com for online dealing or 0371 664 0445
for telephone dealing. Lines are open 8.00 a.m. to 4.30
p.m. (UK time) Monday to Friday. Calls to the helpline
number from outside the UK are charged at applicable
international rates. Different charges may apply to calls
made from mobile telephones and calls may be recorded
and monitored randomly for security and training
purposes.
Share Portal
Link Group offer shareholders a free online service
called Share Portal, enabling shareholders to access a
comprehensive range of shareholder related information.
Through Share Portal, shareholders can: view their current
and historical shareholding details; obtain an indicative
share price and valuation; amend address details; view
details of dividend payments; and apply for dividends to
be paid directly to a bank or change existing bank details.
Shareholders can access these services at
signalshares.com. Shareholders will need to register
for a Share Portal Account by completing an on-screen
registration form. An email address is required.
International Payment Services
Link Group operate an international payment service
for shareholders, whereby they can elect either for their
dividend to be paid by foreign currency draft or they can
request an international bank mandate. This service is only
available for dividend payments of £10 or more and a
small administration fee per dividend payment applies.
For further information on this service please contact:
0371 664 0385. Lines are open between 9.00am and
5.30pm (UK time), Monday to Friday or email IPS@
linkgroup.co.uk.
Shareholder Proxy Voting
There are two new ways that shareholders can vote this
year. Shareholders may submit their proxy electronically
using the Share Portal service at www.signalshares.com.
Or via the registrars’ new LinkVote+ shareholder App.
Further details on voting via the LinkVote+ App, online
through the registrars’ Share Portal, or by post using the
personalised proxy card provided, are contained within
the Notice of Meeting Notes on page 112.
CREST Proxy Voting
Shares held in uncertificated form (i.e., in CREST) may
be voted through the CREST Proxy Voting Service in
accordance with the procedures set out in the CREST
manual. Voting via the Proxymity platform is also
available to institutional shareholders. Further details
are contained within the Notice of Meeting Notes on
page 113.
Association of Investment Companies (AIC)
The company is a member of the AIC, the trade body of
the investment trust industry, which provides a range of
literature including fact sheets and a monthly statistical
service. Copies of these publications can be obtained from
the AIC, 9th Floor, 24 Chiswell Street, London EC1Y 4YY, or
at theaic.co.uk.
AIC Category: Global.
Warning to Shareholders
We are aware that some shareholders may have received unsolicited telephone calls or correspondence concerning
investment matters. These are typically from overseas based organisations who target UK shareholders offering
to sell them, what often turn out to be, worthless or high risk shares in US or UK investments or encourage them to
dispose of UK shares. They can be extremely persistent and persuasive. Shareholders are therefore advised to be
very wary of any unsolicited advice or offers.
Please note that it is most unlikely that either the company or the company’s Registrar, Link Group, would make
unsolicited telephone calls to shareholders. Any such calls would only ever relate to official documentation already
circulated to shareholders and never in respect of investment ‘advice’.
If you are in any doubt about the veracity of an unsolicited telephone call, please call the Company Secretary on
+44 (0)800 389 4696 or the Registrar on +44 (0) 371 664 0300.
110
Investor
Information
Notice is hereby given that the ninety-sixth annual general
meeting of The Brunner Investment Trust PLC will be held
at Trinity House, Trinity Square, Tower Hill, London EC3N
4DH on Friday 31 March 2023 at 12 noon to transact the
following business:
Ordinary Business
1. To receive and adopt the Directors’ Report and the
Financial Statements for the year ended 30 November
2022 with the Auditors’ Report thereon.
2. To declare a final dividend of 6.05p per ordinary share.
3. To re-elect Carolan Dobson as a director.
4. To re-elect Amanda Aldridge as a director.
5. To re-elect Andrew Hutton as a director.
6. To re-elect Jim Sharp as a director.
7. To elect Elizabeth Field as a director.
8. To approve the Directors’ Remuneration Policy.
9. To approve the Directors’ Remuneration
Implementation Report.
10. To re-appoint PricewaterhouseCoopers LLP as the
Auditor of the company.
11. To authorise the directors to determine the
remuneration of the Auditor.
Special Business
To consider and, if thought fit, pass the following
resolutions of which resolution 12 will be proposed as
an ordinary resolution and resolutions 13 and 14 will be
proposed as special resolutions:
12.
That the dir
ectors be and are hereby generally and
unconditionally authorised pursuant to section
551 of the Companies Act 2006 to allot relevant
securities (within the meaning of section 551 of that
Act) provided that this power shall be limited to the
allotment of relevant securities up to an aggregate
nominal amount of £3,557,727 (14,230,908 ordinary
shares) and shall expire at the conclusion of the next
annual general meeting of the company held after
the meeting at which this resolution is passed or 30
June 2024 if earlier, save that the directors may before
such expiry make an offer or agreement which would
or might require relevant securities to be allotted
after such expiry and the directors may allot relevant
securities in pursuance of such offer or agreement as if
the power conferred hereby had not expired.
13. That the directors be and are hereby empowered,
pursuant to section 570 of the Companies Act 2006,
to allot equity securities (as defined in section 560
of that Act) pursuant to the authority conferred by
resolution 12 above or by way of a sale of treasury
shares as if section 561 of that Act did not apply to
any such allotment, provided that this power shall
be limited to the allotment of equity securities for
cash of an aggregate maximum nominal amount of
£533,659 (2,134,636 ordinary shares) and shall expire
at the conclusion of the next annual general meeting
of the company held after the meeting at which this
resolution is passed or 30 June 2024, if earlier, save
that the directors may before such expiry make an
offer or agreement which would or might require
equity securities to be allotted after such expiry and
the directors may allot equity securities in pursuance of
such offer or agreement as if the power conferred had
not expired.
14.
That the c
ompany be and is hereby generally and
unconditionally authorised in accordance with section
701 of the Companies Act 2006 (the Act) to make
market purchases (within the meaning of section
693(4) of the Act) of ordinary shares of 25p each in
the capital of the company (ordinary shares) either
for retention as treasury shares or for cancellation,
provided that:
(i) the maximum number of ordinary shares hereby
authorised to be purchased shall be 6,399,639;
(ii)
the minimum pric
e which may be paid for an ordinary
share is 25p;
(iii) the maximum price which may be paid for an ordinary
share is an amount equal to 105% of the average of
the middle market quotations for an ordinary share
taken from the London Stock Exchange Official List for
the 5 business days immediately preceding the day on
which the ordinary share is purchased or such other
amount as may be specified by the London Stock
Exchange from time to time;
(iv)
the authority her
eby conferred shall expire at the
conclusion of the annual general meeting of the
company in 2024 or 30 June 2024 if earlier, unless such
authority is renewed prior to such time; and
(v) the company may make a contract to purchase
ordinary shares under the authority hereby conferred
prior to the expiry of such authority which will or may
be executed wholly or partly after the expiration of
such authority and may make a purchase of ordinary
shares pursuant to any such contract.
By order of the board
Kirsten Salt
Company Secretary
14 February 2023
199 Bishopsgate, London EC2M 3TY
Notice of Meeting
111
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Notes:
The following notes explain your general rights as a
shareholder and your right to attend and vote at this
Meeting or to appoint someone else to vote on your
behalf.
1.
T
o be entitled to attend and vote at the Meeting (and
for the purpose of the determination by the Company
of the number of votes they may cast), shareholders
must be registered in the Register of Members of
the Company at close of trading on Wednesday 29
March 2023 (the record date). Changes to the Register
of Members after the relevant deadline shall be
disregarded in determining the rights of any person to
attend and vote at the Meeting.
2. Shareholders are entitled to appoint another person
as a proxy to exercise all or part of their rights to
attend and to speak and vote on their behalf at the
Meeting. A shareholder may appoint more than one
proxy in relation to the Meeting provided that each
proxy is appointed to exercise the rights attached to a
different ordinary share or ordinary shares held by that
shareholder. A proxy need not be a shareholder of the
Company.
3.
A p
ersonalised form of proxy which may be used to
make such appointment and give proxy instructions
accompanies this Notice. If you do not have a form of
proxy and believe that you should have one, or if you
require additional forms, please contact the registrar
of the Company whose contact details are provided in
note 6 below.
4. In the case of joint holders, where more than one of
the joint holders purports to appoint a proxy, only the
appointment submitted by the most senior holder will
be accepted. Seniority is determined by the order in
which the names of the joint holders appear in the
Company’s Register of Members in respect of the joint
holding (the first named being the most senior).
5.
A vote withheld is not a vote in law
, which means that
the vote will not be counted in the calculation of votes
for or against the resolution. If no voting indication is
given, your proxy will vote or abstain from voting at his
or her discretion. Your proxy will vote (or abstain from
voting) as he or she thinks fit in relation to any other
matter which is put before the Meeting.
6. To be valid, any form of proxy or other instrument
appointing a proxy, must be returned by no later than
12 noon on Wednesday 29 March 2023 through any
one of the following methods:
i) by post, courier or (during normal business hours
only) hand to the Company’s registrar at:
Link Group
PXS1
Central Square
29 Wellington Street
Leeds
LS1 4DL
ii) electronically through the website of the
Company’s registrar at www.signalshares.com
(see note 8 below).
iii) via LinkVote+ (see note 9 below).
iv) via Proxymity (see note 10 below).
v) in the case of shares held through CREST, via the
CREST system (see notes below).
7.
If you r
eturn more than one proxy appointment,
either by paper or electronic communication, the
appointment received last by the Registrar before
the latest time for the receipt of proxies will take
precedence. You are advised to read the terms and
conditions of use carefully. Electronic communication
facilities are open to all shareholders and those who
use them will not be disadvantaged.
8. To submit your proxy instructions electronically through
the company’s registrar, please complete the online
form of proxy by logging on to www.signalshares.
com. If you have not previously registered for the share
portal you will need your investor code (IVC) which
is detailed on your share certificate or is available by
calling our Registrar, Link Group on 0371 664 0300 or,
if calling from overseas, on +44 (0) 371 664 0300. Calls
are charged at the standard geographic rate and will
vary by provider. Calls outside the United Kingdom
will be charged at the applicable international rate.
The Registrar is open between 09:00 - 17:30, Monday
to Friday excluding public holidays in England and
Wales.
9.
Link Gr
oup, the company’s registrar, has launched a
shareholder app: LinkVote+. It’s free to download and
use and gives shareholders the ability to access their
shareholding record at any time and allows users to
submit a proxy appointment quickly and easily online
rather than through the post. The app is available to
download on both the Apple App Store and Google
Play. QR codes to facilitate this are shown below. Your
vote must be lodged by 12 noon on Wednesday 29
March 2023 in order to be considered valid or, if the
meeting is adjourned, by the time which is 48 hours
before the time of the adjourned meeting.
Apple App Stor
e GooglePlay
112
Investor
Information
10. If you are an institutional investor, you may be able
to appoint a proxy electronically via the Proxymity
platform, a process which has been agreed by the
Company and approved by the Registrar. For further
information regarding Proxymity, please go to www.
proxymity.io. Your proxy must be lodged by 12 noon on
Wednesday 29 March 2023 in order to be considered
valid or, if the meeting is adjourned, by the time which
is 48 hours before the time of the adjourned meeting.
Before you can appoint a proxy via this process you
will need to have agreed to Proxymity’s associated
terms and conditions. It is important that you read
these carefully as you will be bound by them and they
will govern the electronic appointment of your proxy.
An electronic proxy appointment via the Proxymity
platform may be revoked completely by sending an
authenticated message via the platform instructing
the removal of your proxy vote.
11.
The r
eturn of a completed form of proxy, electronic
voting online or via the app or any CREST Proxy
Instruction (as described in note 13 below) will not
prevent a shareholder from attending the Meeting
and voting in person if he/she wishes to do so.
12 CREST members who wish to appoint a proxy
or proxies through the CREST electronic proxy
appointment service may do so for the Meeting
(and any adjournment of the Meeting) by using the
procedures described in the CREST Manual (available
from www.euroclear.com). CREST Personal Members
or other CREST sponsored members, and those CREST
members who have appointed a service provider(s),
should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate
action on their behalf.
13. In order for a proxy appointment or instruction made
by means of CREST to be valid, the appropriate
CREST message (a ‘CREST Proxy Instruction’) must be
properly authenticated in accordance with Euroclear
UK & International Limited’s specifications and must
contain the information required for such instructions,
as described in the CREST Manual. The message must
be transmitted so as to be received by the issuer’s
agent (ID RA10) by 12 noon on Wednesday 29 March
2023. For this purpose, the time of receipt will be taken
to mean the time (as determined by the timestamp
applied to the message by the CREST application
host) from which the issuer’s agent is able to retrieve
the message by enquiry to CREST in the manner
prescribed by CREST. After this time, any change of
instructions to proxies appointed through CREST
should be communicated to the appointee through
other means.
14. CREST members and, where applicable, their CREST
sponsors or voting service providers should note
that Euroclear UK & International Limited does not
make available special procedures in CREST for
any particular message. Normal system timings and
limitations will, therefore, apply in relation to the input
of CREST Proxy Instructions. It is the responsibility of
the CREST member concerned to take (or, if the CREST
member is a CREST personal member, or sponsored
member, or has appointed a voting service provider(s),
to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary
to ensure that a message is transmitted by means
of the CREST system by any particular time. In this
connection, CREST members and, where applicable,
their CREST sponsors or voting system providers are
referred, in particular, to those sections of the CREST
Manual concerning practical limitations of the CREST
system and timings. The Company may treat as invalid
a CREST Proxy Instruction in the circumstances set out
in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
15. Unless otherwise indicated on the Form of Proxy,
CREST voting or any other electronic voting channel
instruction, the proxy will vote as they think fit or, at
their discretion, withhold from voting.
16. Corporate representatives are entitled to attend
and vote on behalf of the corporate member in
accordance with section 323 of the Companies Act
2006. Pursuant to the Companies (Shareholders’
Rights) Regulations 2009 (SI 2009/1632), multiple
corporate representatives appointed by the same
corporate member can vote in different ways provided
they are voting in respect of different shares.
17. As at 14 February, (being the latest practicable
business day prior to the publication of this Notice),
the total number of shares in the company in respect
of which members are entitled to exercise voting
rights was 42,692,727 ordinary shares, of 25p each.
Each ordinary share carries the right to one vote and
therefore the total number of voting rights in the
company on 14 February 2023 is 42,692,727. The 5%
cumulative preference shares do not ordinarily have
any voting rights.
18. The right to appoint a proxy does not apply to persons
whose shares are held on their behalf by another
person and who have been nominated to receive
communications from the company in accordance with
section 146 of the Companies Act 2006 (nominated
persons). Nominated persons may have a right under
an agreement with the registered shareholder who
holds the shares on their behalf to be appointed
(or to have someone else appointed) as a proxy.
Alternatively, if nominated persons do not have such
a right, or do not wish to exercise it, they may have
a right under such an agreement to give instructions
to the person holding the shares as to the exercise of
voting rights. Nominated persons should contact the
registered member by whom they were nominated in
respect of these arrangements.
19. Members have a right under section 319A of the
Companies Act 2006 to require the company to
113
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
answer any question raised by a member at the AGM,
which relates to the business being dealt with at the
meeting, although no answer need be given: (a) if
to do so would interfere unduly with the preparation
of the meeting or involve disclosure of confidential
information; (b) if the answer has already been given
on the company’s website; or (c) it is undesirable in the
best interests of the company or the good order of the
meeting.
20. Members satisfying the thresholds in section 527 of
the Companies Act 2006 can require the company, at
its expense, to publish a statement on the company
website setting out any matter which relates to the
audit of the company’s financial statements that are to
be laid before the meeting. Any such statement must
also be sent to the company’s auditor no later than the
time it is made available on the website and must be
included in the business of the meeting.
21. Any shareholder attending the Meeting has the right
to ask questions. The Company must cause to be
answered any such question relating to the business
being dealt with at the Meeting but no such answer
need be given if: (a) to do so would interfere unduly
with the preparation for the Meeting or involve the
disclosure of confidential information; (b) the answer
has already been given on a website in the form of
an answer to a question; or (c) it is undesirable in the
interests of the Company or the good order of the
Meeting that the question be answered.
22. Further information regarding the meeting which the
company is required by section 311A of the Companies
Act 2006 to publish on a website in advance of the
meeting (including this notice), can be accessed at
brunner.co.uk.
23. Contracts of services are not entered into with the
directors, who hold office in accordance with the
Articles.
114
Investor
Information
UK GAAP performance measures
Net Asset Value is the value of total assets less all liabilities. The Net Asset Value, or NAV, per ordinary share is calculated
by dividing this amount by the total number of ordinary shares in issue. The debt in the company used in the calculation
is measured at par value, that is, the net proceeds on issue plus accrued finance costs to date. As at 30 November 2022,
the NAV with debt at par value was £497,096,963 (2021 - £502,452,284) and the NAV per share was 1,164.4p (2021 -
1,176.9p).
Earnings per ordinary share is the profit after taxation, divided by the weighted average number of shares in issue for
the period. For the year ended 30 November 2022 earnings per ordinary share was 22.66p (2021 - 20.35p), calculated
by taking the profit after tax of £9,673,972 (2021 - £8,689,051), divided by the weighted average shares in issue of
42,692,727 (2021 - 42,692,727).
Alternative Performance Measures (APMs)
Net Asset Value, debt at market value is the value of total assets less all liabilities, with the company’s debt measured
at the market value at the time of calculation. The Net Asset Value, or NAV, per ordinary share with debt at market value
is calculated by dividing this amount by the total number of ordinary shares in issue (see page 100). As at 30 November
2022, the NAV with debt at market value was £503,217,127 (2021 - £497,525,622) and the NAV per share with debt at
market value was 1,178.7p (2021 - 1,165.4p). (Further details can be found in Note 15(c) on page 104).
Net Asset Value per ordinary share, total return represents the theoretical return on NAV per ordinary share, assuming
that dividends paid to shareholders were reinvested at the NAV per ordinary share at the close of business on the day
the shares were quoted ex dividend (see Note 13 on page 100).
Share Price Total Return the theoretical return to a shareholder, on a closing market price basis, assuming that all
dividends received were reinvested, without transaction costs, into the ordinary shares of the company at the close of
business on the day the shares were quoted ex dividend (see page 3). The share price as at 30 November 2022 was
1,020.0p, a decrease of 30.0p from the price of 1,050.0p as at 30 November 2021. The reduction in share price of 30.0p
plus the dividends declared for the year of 21.5p are divided by the opening share price of 1,050.0p to arrive at the share
price total return for the year ended 30 November 2022 of -0.8% (2021 - 27.1%).
Benchmark Total Return is the return on the benchmark, on a closing market price basis, assuming that all dividends
received were reinvested into the shares of the underlying companies at the time their shares were quoted ex dividend
(see page 3).
Discount or Premium is the amount by which the stock market price per ordinary share is lower (discount) or higher
(premium) than the Net Asset Value, or NAV, with either debt at par or debt at market value, per ordinary share. The
discount/premium is normally expressed as a percentage of the NAV per ordinary share (see page 2).
Glossary
115
The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022
Ongoing Charges are operating expenses incurred in the running of the company, whether charged to revenue or
capital, but excluding financing costs. These are expressed as a percentage of the average net asset value during the
year and this is calculated in accordance with guidance issued by the Association of Investment Companies (see page
15).
2022
£
2021
£
Management fee 2,295,534 2,222,483
Administration expenses 789,354 723,214
Less: non-recurring expenses* (22,491) -
Total expenses (A) 3,062,397 2,945,697
Average net asset value with debt at market value (B) 482,686,739 469,448,313
Ongoing charge (A/B) 0.63% 0.63%
* Taiwan tax advisors fees
The ongoing charge differs from the ongoing charge in the Company’s KID, which is calculated in accordance with the
PRIIPs regulations and includes finance costs.
Yield represents dividends declared in the past year as a percentage of share price.
2022 2021
Dividends declared for the year 21.5p 20.15p
Share price at year end 1,020.0p 1050.0p
Annual dividend as a percentage of share price 2.1% 1.9%
Gearing is the amount of debt as a percentage of the net assets (see Note 16 on page 105).
Revenue Reserve per ordinary share of 25.9p (2021 - 24.7p) is the revenue reserve per the balance sheet of £15,846,230
(2021 - £15,150,107) less the third dividend and final proposed dividend in respect of the year (Note 6) of £4,781,585
(2021 - £4,589,468), payable after the year end, divided by the total number of ordinary shares in issue of 42,692,727
(2021 - 42,692,727).
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The Brunner Investment Trust PLC
199 Bishopsgate
London
EC2M 3TY
+44 (0)203 246 7000
www.brunner.co.uk