## The Brunner ## Investment Trust PLC ## Annual Report, 30 November 2022 ## Whatever your goals, there’s Brunner… | Capital growth and dividends | ‘All-weather’ portfolio | Independence | | --- | --- | --- | | The Brunner Investment Trust PLC aims | The company provides a balanced | Brunner has an independent board | | to provide growth in capital value and | solution for investors looking for a | of directors and no employees. Like | | dividends for investors over the long term | global and UK portfolio of equities and | many other investment companies, it | | through investing in a portfolio of global | a quarterly dividend. The company’s | outsources investment management | | and UK equities. | investment policy is set out in the Strategic | and administration to an investment | | | Report on page 9. | management company – Allianz Global | The Key Performance Indicators (KPIs) Investors – and other third parties to on page 14 show how effective the Brunner is a member of the Association provide shareholders with an efficient, company has been in delivering its of Investment Companies (AIC) and the competitive, cost-effective way to gain strategy. company’s shares are recognised by the wide equity investment exposure through a AIC as suitable for retail investors. AIC single investment vehicle. Category: Global | Benchmark | Risk and gearing | | --- | --- | | For the year under review the benchmark | A statement explaining how the assets | | against which the portfolio is measured | have been invested to spread risk and | | was a composite of 70% FTSE World Ex UK | how gearing is managed is included under | | Index and 30% FTSE All-Share Index. | Investment Policy on page 10. | ## A family investment from the beginning… | Like many long-established investment | into the twentieth century. In 1873 he | John Brunner was a passionate | | --- | --- | --- | | trusts, Brunner’s name reflects its history | and the scientist Ludwig Mond founded | campaigner, including for welfare | | rather than its investment strategy. | Brunner, Mond and Co, the largest of the | reforms and free trade, and used his | | Johannes Brunner was born in Canton | four companies which came together | wealth for philanthropic purposes. | | Zürich and migrated to Lancashire in | to form ICI in 1926. The following year | Jim Sharp, a director of the company, | | 1832. His son, Sir John Brunner, Bart, was | the Brunner family chose to sell its ICI | is connected to the Brunner family | | one of the most successful industrialists | shares and establish a broad, long-term | by marriage and continues the link | | of the nineteenth century, and in politics | investment vehicle – so in 1927, The | between board and family. Brunner | | an influential radical Liberal MP until well | Brunner Investment Trust was formed. | family share ownership information is | included on pages 62 and 67. Sir John BrunnerBrunner, Mond & Co. factory, worker cottages and Co-operative Society Overview ## Contents www.brunner.co.uk ## 2 9 Financial Highlights ## 23 Investment Manager’s Review Strategic Report ## 57 79 107 Governance Financial Statements Investor Information | Overview | Investment Manager’s Review | | Financial Statements | | | --- | --- | --- | --- | --- | | 2 Financial Highlights | 24 Investment Manager’s Review | | 80 Independent auditors’ report to the | | | 4 Chair’s Statement | 34 Investment Philosophy and Stock | | | members of The Brunner Investment | | 8 Performance – Review of the Year | | Selection Process | | Trust PLC | | | 36 Company Engagement Activities | | 86 Income Statement | | | | 37 Environmental, Social and | | 87 Balance Sheet | | Strategic Report Governance performance 88 Statement of Changes in Equity 10 Introduction 38 Top 20 Holdings 89 Cash Flow Statement 11 Section 172 Report: 43 Case Studies 90 Statement of Accounting Policies 11 Engagement with Key Stakeholders 46 ESG Focus 92 Notes to the Financial Statements 14 Key Performance Indicators 48 Portfolio Breakdown 16 Risk Report 53 Distribution of Invested Funds Investor Information 21 Environmental, Social and 56 Historical Record Governance Issues 108 Investor Information (unaudited) 111 Notice of Meeting Governance 115 Glossary 58 Directors, Manager and Advisers 61 Directors’ Report 63 Corporate Governance Statement 68 Management Engagement Committee Report The image of the fountains on the cover 69 Nomination Committee Report of this report – at the Capitol building 70 Remuneration Committee Report in Washington, D.C. – is inspired by 74 Audit Committee Report the Arms of the Brunner family. The 77 Statement of Directors’ family originated from Switzerland and Responsibilities in respect of the ’Brunnen’ is German for fountain. financial statements 1 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 ## Financial Highlights For the year ended 30 November 2022 1 1 Net assets per ordinary share Net assets per ordinary share Earnings per ordinary share 2 | Debt at Fair Value | Debt at Par | | | --- | --- | --- | | 1,178.7p | 1,164.4p | 22.7p | | 2021 1,165.4p | 2021 1,176.9p | 2021 20.4p | | +1.1% | -1.1% | +11.3% | 3 | Dividend per ordinary share | Net asset value total return | | Net asset value total return | | | --- | --- | --- | --- | --- | | | | 2 | | 2 | | | Debt at fair value | | Debt at par | | | 21.50p | +3.0% | | +0.8% | | | 2021 20.15p | 2021 | | 2021 | | | +6.7% | +21.5% | | +21.1% | | 2 Overview 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. Revenue reserves per ordinary share 25.9p 2021 24.7p Share price total return²⁵ -0.8% 2022 1,020.0p 2021 1,050.0p Discount - average in the year² 10.3% 2021 11.4% Benchmark total return index⁴ +1.4% 2021 +21.1% Consumer price index +10.7% 2022 126.7 2021 114.5 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. ![img-0.jpeg](img-0.jpeg) 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. | | | | | Economic | ‘Big Bang’ | | | --- | --- | --- | --- | --- | --- | --- | | | Britain | Britain | | recession | enhances | | | 5000 | joins the | borrows | | leads to high | London’s status | | | | European | money from | ‘Winter of | unemployment | as a financial | | | | Community | the IMF | Discontent’ | in the UK | capital | Gulf War | | | 1973 | 1976 | 1979 | 1982 | 1986 | 1991 | 12-month | Bear | Miners’ | ‘Black | | ‘Black | | --- | --- | --- | --- | --- | | Market | Strike | Monday’ | Wednesday’ | | | 1974 | 1984 | 1987 | | 1992 | percentage change CPI/RPI and dividend growth 0 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 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 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 | Beginning | | | | | | | | | | Invasion of | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | of the end of | | | | | | | | COVID-19 | | | Ukraine | 25 | | the dot-com | | The Second | | | | | | pandemic | | | 2022 | | | | boom | Gulf War | | Financial crisis | | Brexit vote | | | 2020 | | | | | | 2000 | | 2003 | | 2008 | | 2016 | | | | | | 20 9/11 2001 15 10 share in pence 5 Dividend per 0 * 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 * Total dividend: from 0.48p to 21.50p over the period Final dividend for approval at the 2023 AGM 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 Pharmaceutical research and development company AbbVie, headquartered in Chicago, ## Report Illinois, was another notable contributor to performance. 9 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 ## Introduction Purpose Information on Revenue and Invested Funds in the year is summarised on page 61. Our purpose is to provide the company’s shareholders with growth in capital value and dividends over the long term Brunner has an independent board of non-executive through investing in a portfolio of global and UK equities. directors and no employees or premises of its own. Like The company aims to achieve a return higher than that other investment companies, it outsources investment of our benchmark, after costs, and to achieve steady management, accounting, company secretarial and other dividend growth in real terms. administration services to an investment management company – Allianz Global Investors GmbH, UK Branch Strategy Review – and to other parties, including HSBC Bank plc as We hold an annual strategy meeting outside the normal depositary and custodian, and Link Group as registrar. timetable of board meetings. At the most recent meeting This enables Brunner to provide shareholders with a the topics covered included: competitive, cost-effective way to gain wide investment exposure through a single investment vehicle. – In vestment strategy and how in fulfilling this AllianzGI considers and incorporates geographical, sector and The company has a main market listing on the London | macro views into the Brunner portfolio | | | Stock Exchange. In addition to annual and half-yearly | | --- | --- | --- | --- | | – Gearing str | ategy in the portfolio management process | | financial reports, the company announces net asset | | – Marketing str | | ategy and the focus for 2023. | values per share daily and provides further information | monthly to the market, in order for investors and market Business Model professionals to compare its performance with its peer group. The investment manager also issues a monthly The Brunner Investment Trust carries on business as an update on investment performance which is posted on the investment company and follows the investment policy company’s website and is available by email. described below. By pursuing our investment objective we aim to appeal Manager’s Investment Style to a broad range of investors and to ensure that the The essence of the investment style which we ask the company’s shares are attractive to new investors and investment manager to follow is to select the best stocks investor groups, particularly individuals with smaller in a ‘bottom up’ approach, before any sector or country portfolios held either directly or in self-invested pension consideration. The portfolio is concentrated into 62 stocks plans for whom we can provide a balanced solution at 30 November 2022 (63 stocks in 2021). Within that for equity investment. It is also our objective to provide concentration modest gearing - employing the company’s good value for shareholders and ensure that the costs of borrowings to invest - is within guidelines set by the board. running the company are reasonable and competitive. ### Investment Policy | Investment Objective | Risk Diversification | Gearing | | --- | --- | --- | | The Brunner Investment Trust aims | The company aims to achieve | The company seeks to enhance | | to provide growth in capital value | a spread of investments across | returns over the long term through | | and dividends for investors over the | geographies and sectors. The | appropriate gearing. The board | | long term through investing in a | maximum holding in any single | monitors the gearing, which is | | portfolio of global and UK equities. | stock is limited to 10% of gross | employed within the guidelines | | | assets at the time of investment | set from time to time by the board. | The benchmark against which and the portfolio will consist of at Gearing in any case will not exceed performance is measured is 70% least 50 stocks. The company will 20% of net assets at the time of FTSE World Ex UK Index and 30% not invest more than 15% of its gross borrowing. FTSE All-Share Index. assets in other UK listed investment companies. 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 Strategic Report ### Section 172 Report: ## Engagement with Key Stakeholders ### 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. 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: Stakeholders and how they are taken into account Activity in the year Shareholders are identified as Participation in investor conferences and webinars, together with the pre- the primary stakeholders as the AGM presentation and podcasts on the website informs shareholders of the investors in the company. The investment management activity and performance of the company. company’s objective is to provide The increasing use of new presentation styles to engage investors such as growth in capital value and audio (podcasts), video and the Turtl platform to distribute information to dividends for investors over the shareholders and the wider investment community, including in shorter, more long term and the company’s digestible formats. strategy is to provide shareholders with the desired returns by Jim Sharp is related to the Brunner family shareholders which provides diversifying to take into account further insight for the board into the views of investors to be used for the risk appetite. 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 The user experience on the website has been further developed during including shareholders and other the year. investors, look for information about the company on the website and online media coverage. Outcome: Continual enhancements and improvements to the website including both helpful background and educational material as well as new and current information providing updates. 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 There is an Integrated PR programme and Christian Schneider, the lead company continues to work with investment manager, provides interviews, presentations and records public relations advisers to ensure podcasts to inform and educate. information about the company, We work with a third party, Lansons Communications, and the campaign its strategies and performance work is aligned with AllianzGI’s marketing activity. can reach a wide audience to update shareholders and potential investors through press articles and online media coverage. 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 In addition to regular contact and assurance testing that sound and the management company, the effective controls are in place from all of these service providers, there is a board has appointed a depositary, rolling programme of due diligence visits to suppliers of third party services a custodian and a registrar to by the AllianzGI’s investment trust team to ensure that the company is provide specialist services. getting good quality services with robust and fit for purpose internal The board and these stakeholders controls. need to be assured of good Following a report to the board on a due diligence review of AllianzGI’s governance and controls in the supplier of investment trust administration services, some areas for company. 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 The marketing team also works on events and campaigns with other important stakeholder group and research and marketing companies, including Edison and Kepler. getting key information to the Additional resources were allocated by the board during the investment market so that investors year for publishing research and event participation. both current and prospective ‘Direct to consumer’, for self-directed investment, is primarily driven by can make informed investment platforms. Platforms essentially give convenient access to the majority choices is a significant activity. of the investment universe for investors. The board has encouraged Research platforms and activity to increase recognition by those operating the platforms distribution partnerships are through influencers (including through PR, video recordings with Asset employed to reach a wider TV and the company’s digital marketing strategy). ‘Influencing’ activity audience of investors. 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 ## 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 Net Asset Value Total Return with Debt at Fair Value and Debt at Par | | 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 | ![img-1.jpeg](img-1.jpeg) 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. 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. ### Dividends Annual dividend ![img-2.jpeg](img-2.jpeg) Includes the proposed final dividend. 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. 14 Strategic Report ## Share Ownership Percentage of issued capital held by wealth managers and investment platforms ![img-3.jpeg](img-3.jpeg) 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 ## Discount ![img-4.jpeg](img-4.jpeg) 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. ## Ongoing Charges ![img-5.jpeg](img-5.jpeg) 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. 15 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 ## Risk Report ### 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. | IMPACT | | | The controls and mitigation of | | --- | --- | --- | --- | | | | 1.1 | portfolio and business risk will | | | Market volatility | | continue to operate, however, | there remains a risk that the level of volatility and economic 4.0 downturn may be such that the 3.3 level of portfolio earnings and 3.4 Accounting / Emerging dividends cannot be mitigated by legal/regulatory Corporate factors within the board’s control. governance 2.1 Investment strategy 3.1 Organisational set-up / process 2.2 3.2 1.3 Shareholder 2.6 relations Outsourcing / Counterparty third party Market Risk is acceptable, no demand | | | | | 2.3 | | 3.6 | additional measures needed | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Investment | | Financial | | Risk is of concern but sufficient | | | 3.5 | | performance | | crime, fraud | | | | | | | | | and cyber | | measures are defined and | | Key persons | | | | | | | have been or are being | | | | 2.4 | | | | | implemented | 1.2 2.5 Financial Risk is of concern, sufficient Market liquidity and mitigation measures not Liquidity and pricing gearing possible 3.7 low moderate high very high 1.4 Reputational Currency rare unlikely moderate likely almost certain LIKELIHOOD 16 Strategic Report Investment and Portfolio Risks Principal Risks identified Controls and mitigation 1.1 Market volatility The board meets with the portfolio managers and considers Significant market movements may adversely asset allocation, stock selection and levels of gearing on a impact the investments held by the company regular basis and has set investment restrictions and guidelines increasing the risk of loss or challenges to the that are monitored and reported on by AllianzGI. The board investment strategy, reduction of dividends monitors yields and can modify investment parameters and across the market affecting the portfolio yield consider a change to dividend policy. and the ability to pay in line with dividend policy. 1.2 Market liquidity and pricing The board receives reports from the manager on the stress Failure of investments. 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 | | | The manager operates on a delivery versus payment system, | | --- | --- | --- | --- | | | Non-delivery of stock by a counterparty. | | reducing the risk of counterparty default. | | 1.4 | Curr | ency | Currency movements are monitored closely and are reported | | | Exposure to significant exchange rate volatility | | to the board. | could affect the performance of the investment portfolio. Business and Strategic Risks Principal Risks identified Controls and mitigation 2.1 Investment Strategy The board manages these risks by diversification of An inappropriate investment strategy e.g., asset investments through its investment restrictions and guidelines allocation or the level of gearing may lead which are monitored and on which the board receives reports to underperformance against the company’s at every meeting. The board monitors the implementation benchmark index and peer group companies, and results of the investment process with the investment resulting in the company’s shares trading on a managers, who attend all board meetings, and reviews data wider discount. 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 Reports on shareholder sentiment are received from The investment objectives, or views on decisions the manager and brokers and reviewed by the board. such as gearing, discount management, Shareholders are actively encouraged to make their views dividend policy, of existing shareholders may known. not coincide with those of the board leading investors to sell their shares. 2.3 Investment performance The investment manager attends all board meetings to discuss Persistent poor performance against performance with the directors. The board manages these benchmark or peers leads to decline in risks by giving investment guidelines which are monitored at attractiveness of the company to investors. 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 A rolling income forecast (including special dividends), balance Range of risks including incorrect calculation of sheet and expenses are reviewed at every board meeting. NAV, inaccurate revenue forecasts, incorrectly Reporting from the custodian covering internal controls in calculated management fees, issues with title to place over custody of investments and over appointment and investment holdings. 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 The board meets with the portfolio managers and considers Insufficient income generated by the portfolio asset allocation, stock selection and levels of gearing on and due to stock market falls, gearing increases a regular basis. Investment restrictions and guidelines are to levels unacceptable to shareholders and the monitored and reported on by AllianzGI. Regular compliance market which in extreme circumstances results information is prepared on covenant requirements. in a breach of loan covenants. 2.6 Market demand The board regularly reviews the level of premium and discount The level of discount of the share price to the and existing shares can be bought back by the company when NAV moves to unacceptable levels, threatening the board considers this expedient. confidence in the company’s shares. Operational Risks Principal Risks identified Controls and mitigation 3.1 Organisation set up and process The manager and the other key service providers report on Failure in the operational set up of the business continuity plans and the resilience of their response to company, through people, processes, systems or extreme situations. Third party internal controls reports are also external events could result in financial loss to received from these service providers. the company or its inability to operate. | 3.2 Outsourcing and third party | | AllianzGI carries out regular monitoring of outsourced | | --- | --- | --- | | | Risk of inadequate procedures for the | administration functions, which includes compliance visits | | | identification, evaluation and management of | and risk reviews where necessary. Results of these reviews | | | risks at outsourced providers including AllianzGI | are monitored by the board. And since the pandemic the | | | and its outsourced administration provider, | board has been obtaining additional assurances on business | | | State Street Bank & Trust Company, HSBC Bank | resilience and cyber security. Agreed Service Level Agreements | | | plc (Depositary and Custodian) and Link Group | (SLAs) and Key Performance Indicators (KPIs) are in place and | | | (Registrar). | the board receives reports against these. | | 3.3 Regulatory | | The board maintains close relations with its advisers and | | | Failure to be aware of or comply with legal, | makes preparations for mitigation of these risks as and when | | | accounting and regulatory requirements which | they are known or can be anticipated. | could result in censure, financial penalty or loss of investment company status. 3.4 Corporate governance The board is highly experienced and knowledgeable about Weak adherence to best practice in corporate corporate governance best practice and includes directors who governance can result in shareholder discontent are board members of other UK plcs and other investment and potential reputational damage to the companies. The board takes regular advice on best practice. company. 18 Strategic Report | 3.5 Key person | | Manager and board succession plans are in place. Cover | | --- | --- | --- | | | Departure of the portfolio manager, certain | is available for core members of the relevant teams of the | | | professional individuals, and/or board | manager, and work can be carried out by other team members | | | members, may impact the management of the | should the need arise. | portfolio, the achievement of the company’s investment objective and/or disruption to its operations. 3.6 Financial crime, fraud and cyber security AllianzGI has anti-fraud, anti-bribery policies and robust That the company and the manager’s firm, its procedures in place. The board is alert to the risks of financial employees, or clients are subject to financial crime and threat of cyber attacks and reviews how third party crime or breach elements of the Bribery Act. service providers handle these threats. These reports confirm Risk of increased cyber attacks continue that all systems are secure and are updated in response to any after COVID-19, and the changed working new threats as they arise and more frequent assurances have arrangements that have remained in place. been sought and received throughout and since the COVID-19 pandemic. 3.7 Reputational The portfolio management team is in constant interaction Association with poor governance in portfolio with AllianzGI’s Environmental, Social and Governance companies and operational issues in service (ESG) and Stewardship function and actively engages with providers which can affect the reputation of the investee companies on ESG issues and makes investments company. 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 The board carries out horizon scanning by keeping informed Continuing impact of the geopolitical situation, through its manager and advisers on the political, economic including the attack on Ukraine by Russian and legal landscape, and reviews updates received on armed forces and tension between the US and regulatory changes that affect the company. China; the impact of macroeconomic changes, The board maintains close relations with its advisers (auditors, including inflation; and the risks of further virus lawyers and manager) and will make preparations for variants; any of which could cause significant mitigation of emerging risks as and when they are known or market falls, threat to income or increase in can be anticipated. gearing. 19 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 Going Concern – In the current environment the board is reviewing earnings prospects, gearing and debt covenants on a The directors have considered the company’s investment continuous basis with the managers; and objective and capital structure both in general terms and – The liquidity of the portfolio, and the company’s ability in the context of the current macroeconomic background. to pay dividends and to meet the budgeted expenses, Having noted that the portfolio, which is constructed by including interest payments, of running the company. the portfolio manager on a bottom up basis, consists mainly of securities which are readily realisable, the Based on the results of this assessment, the directors have directors have also continued to consider the risks and a reasonable expectation that the company will be able consequences of such external factors on the operational to continue in operation and meet its liabilities as they fall aspects of the company and have concluded that the due over the five year period of their review. company has the ability to continue in operation and meet its objectives in the foreseeable future. For this reason the The future directors continue to adopt the going concern basis in As we show in our page on the history of the trust on preparing the financial statements. the inside cover of this document, the longevity of the The company held some short term debt as a current trust and its importance to our investors continues to liability as at 30 November 2022, in the form of a be a focus. The future attractiveness of Brunner as an Revolving Credit Facility (RCF), which is renewable within investment proposition with relevance to a wide variety one year. While the company is in a net current liability of investors is something we debate and evaluate position as at 30 November 2022, if an obligation arose continuously. We have to consider the investment investments could be sold to raise cash. environment and wider economic considerations, such as increasing inflationary pressures, and take soundings Viability Statement on the prospects for our markets, the returns on assets, economic growth and numerous other factors. Taking all Brunner is an investment company and has operated as this into account the board continues to believe that there an investment vehicle since 1927 with the aim of offering is a place for Brunner in the range of options available to a return to investors over the long term. The directors the investor and that the company remains viable for the have formally assessed the prospects of the company for five year period here under review. 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 The Strategy for the future to be viable whilst seeking to achieve its aim to provide The development of the company is dependent on the growth in capital value and dividends over the long success of the company’s investment strategy against the term. This reflects the longevity of the company and the economic environment and market developments. I give expectation that investors will want to hold on to their my view in the Chair’s Statement on page 4 and the shares for some time. The board also notes that as a high investment manager discusses his view of the outlook for conviction investor, the portfolio manager has a five year the company’s portfolio in his review on page 23. view on stocks in the portfolio. The board has assessed the long-term viability of On behalf of the board the company against the principal risks faced by the company, outlined in the reporting under Risk Policy on Carolan Dobson page 16. Many of these matters are subject to ongoing Chair review and the final assessment, to enable this statement 14 February 2023 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; 20 Strategic Report ## Environmental, Social and Governance Issues ### 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 How it works in practice Research and Stewardship The process of integrating ESG analysis involves AllianzGI’s Active stewardship is an integral component of our investment professionals reviewing both ESG scores and manager’s investment approach. This can help to unlock financially material qualitative information for each potential in companies, as well as protect companies from holding or company of interest. The investment team downside risks. 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 AllianzGI’s approach to ESG analysis ESG scores and qualitative ESG research provided by The Brunner Investment Trust’s portfolio managers have MSCI via their Global Collaboration Platform (Investment reported to the board how they integrate the analysis Chatter). The MSCI scoring system expresses the level of Environmental, Social and Governance (ESG) issues of ESG risk for a company through a numerical score for into their investment process. This follows AllianzGI’s each of the E, S and G pillars on a scale of 0–10, whereby proprietary methodology and is designed to enhance a score of 0–3 indicates potentially meaningful tail risk. If risk management by adding another dimension to a company exhibits an elevated ESG risk profile or no ESG existing investment processes, across all asset classes. score, the portfolio management team needs to provide This approach does not require additional exclusions. their risk-reward justification as a written commentary The main objective of integrating ESG analysis is to on the Global Collaboration Platform. The commentary develop an assessment of the financially material ESG must be provided prior to the purchase of any new stock. risks and opportunities within a broader investment case. The portfolio manager is free in their decision to initiate, AllianzGI’s approach also fosters active engagement with continue to hold, or divest any relatively low scoring company management. company in the portfolio, for as long as the expected return justifies the risk. ### Proxy voting 1 December 2021 to 30 November 2022 Active proxy voting engagement for clients is seen as In the year there were 70 shareholder meetings for a core element of fiduciary responsibilities and the companies in the portfolio and the manager voted on the manager provides total voting coverage. This active, company’s behalf at 69 of these. This represents a total of global approach to the exercise of voting rights is aimed 1,058 resolutions and the company voted on 96% of these. at improving governance standards across all portfolios Source: AllianzGI. managed by AllianzGI. Company meeting voting record Vote distribution Number of meetings voted Number of votes for: 79% with management: 23 Number of votes against: 14% Number of meetings with Number of votes abstain: 2% at least one vote Against, Withhold or Abstain: 46 Number of votes withhold: 1% Not voted: 1% 21 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 AllianzGI’s investment professionals generate in-depth ESG Reporting research of companies they own and seek to initiate, and The board receives information on ESG scores for the often closely follow these issuers over long periods of time. portfolio and this is published in the company’s monthly Therefore, they can engage actively with the companies factsheets. This is also included on page 37. that need it most. AllianzGI’s Sustainability Research & Stewardship analysts may further support the process A summary of the many engagements with portfolio by providing company, sector and/or thematic research. companies on E,S and G matters is set out on page 36. All research, risk-reward trade-off commentaries and engagement notes are documented on AllianzGI’s internal Brunner’s ESG Policy and web links Global Collaboration Platform. This creates a high degree A summary of the board’s policy on ESG can be found with of transparency and provides portfolio managers with an the company’s details on the Association of Investment easy way to monitor ESG risk in their portfolios. Companies’ website, where there is also more information on ESG for investors: Sustainability https://www.theaic.co.uk/esg-and-investment-companies 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 Report ## Investment Our relative underweight to the Technology sector has been a ## Manager’s significant boost to performance. Visa, headquartered in the technology heartland of San Francisco, has been a positive contributor. ## Review 23 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 ## Investment Manager’s Review Market Review increase). Over the trust’s financial year, their performance has almost directly mirrored each The trust’s past financial year marked another other, with the MSCI World Value returning dramatic twelve months for global equity 14.3% while the MSCI World Growth returned markets. -14.3%. Moreover, this year’s weakening of | Rising inflation, already evident at the start | sterling relative to the US dollar (c.60% of global | | --- | --- | | of the period, surged rapidly and – even as | equities by market weight are in the US) has | | the peak appears to have passed in the US | helped alleviate the pain further. | – remains elevated. Investors across asset The primary driver of these market movements classes have become even more beholden to has been inflation, and expectations about the Federal Reserve (Fed) which, by way of how global central banks will respond. After a response, has raised interest rates at its fastest decade of low interest rates, quantitative easing pace in forty years. At the same time, Russia’s and minimal price increases, late 2021 saw invasion of Ukraine prompted a sharp move into costs across energy, commodities and labour all more defensive equities. Geopolitical tensions start to rise. The effect was further amplified by with China, itself struggling under continued economies rapidly recovering from the Covid-19 zero-Covid rules, only increased the market’s pandemic. Successive months of consumer price bearish tendencies. index (CPI) data well above target saw central | At a surface level, those investors exposed to | banks quickly abandon the position that these | | --- | --- | | global equity markets in pound sterling have | changes were “transitory”, with US CPI peaking | | experienced only a modest leg down. As of | at 9.1% in August. | November 30, 2022 the MSCI All Country World While the Bank of England (BoE) was the Index (MSCI ACWI) in GBP was a mere 1.3% first to raise rates, the Fed has been the most lower than where it was a year ago. However, aggressive in doing so. In March 2022, US this masks both a sharp divergence within the interest rates stood at 0.25%. By December index and the extent of underlying volatility. 2022, they had climbed to 4.5%. The European | At its lowest point in June the MSCI ACWI was | Central Bank (ECB) although slower to start, | | --- | --- | | over 13.6% lower, before steadily rebounding. | likewise broke with a decade of easy monetary | | Similarly, “value” stocks (which are deemed | policy. Of the major developed economies, | | cheap relative to their earnings) have massively | only the Bank of Japan maintained its | | outperformed their “growth” counterparts | accommodative stance. | (which are priced for future earnings to Divergent equity market performance 120 110 100 % 90 80 70 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2022 MSCI World MSCI World Value MSCI World Growth. Rebased to 100. Source: Refinitiv Datastream 24 Investment Manager’s Review A year of central bank interest rate hikes 5 4 3 2 1 0 -1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2022 USA Euro Zone UK Japan. Source: Refinitiv Datastream The resulting impact has been widespread. In value to growth stocks. It has been amplified a world where money once again has a cost, further by Russia’s invasion of Ukraine. The companies (and consumers) with high levels conflict saw investors turn to some classically of debt are likely to face significantly higher “defensive” sectors such as Health Care and refinancing charges. This adds to rising cost Utilities, but also likely beneficiaries from the burdens, eroding corporate margins still further conflict such as Defence and Energy. These when they may be pressured by consumers’ stocks tended to trade at lower multiples smaller discretionary incomes. These factors than the broader market and have benefited in and of themselves impact stock valuations, from both the mechanical tailwind of higher but are compounded through the discount discount rates, as well as stronger underlying rate: put simply, higher rates reduce the value fundamentals. of companies with significant earnings in the Indeed, the Energy sector has been this year’s future, and have less impact on the value of standout performer, returning over 61%. By companies generating strong earnings today. way of contrast, Utilities - the second best- This latter phenomenon explains a significant performing sector – returned a mere 15.4%. At part of the past twelve months’ rotation from the other end of the spectrum, Telecom Services Cuts expected… 5.2 2.5 5.0 2.0 4.8 1.5 4.6 1.0 Implied policy rate % Interest rate % 4.4 0.5 Number of hikes / cuts priced in 4.2 0 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 Meeting date # Hikes/cuts Implied rate Source: Bloomberg 25 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 | (a relatively new sector capturing mostly | the National Party Congress in a way not done | | --- | --- | | technology names) has fallen 23.7%. This was | since Mao Zedong. Amid increasing domestic | | most pronounced in the more speculative end | unrest around the pursuit of a continued “zero- | | of the technology market, where investors were | Covid” approach, Chinese authorities cracked | | no longer willing to pay a premium for potential | down on Hong Kong and ramped up rhetoric | | gains and price to earnings multiples collapsed. | around Taiwan. | Consumer Discretionary stocks also weakened Conversely, US President Biden has used sharply, as consumers spend a greater share of this year to pass legislation such as the their wallet on necessities in the face of a rising Chips Act, which will see $280bn invested cost of living. in US semiconductor manufacturing over | However, at several points over the year, these | the next decade, while also banning China | | --- | --- | | trends look to have been reversing. Equity | from accessing the necessary technology to | | investors, accustomed to over a decade of | manufacture advanced chips. Over the past | | supportive central bank policy, have eagerly | twelve months, the impact has been largely to | | looked through the Fed’s hawkish rhetoric | the detriment of China’s stock market, with the | | to a time when interest rates will once again | MSCI China down 20%, while the US’ S&P 500 | | be cut. Repeatedly, any softer than expected | is broadly flat at 0.9% as measured in Pounds | | macro data – whether it be CPI, PMIs, or | Sterling. In a year where markets have become | | unemployment numbers – has been seized | increasingly emotional and focused on the | | upon by markets as a potential trigger for the | short-term, there is potential for a meaningful | | Fed and ECB to change stance. The resulting | divergence between the world’s factory and its | | rally – particularly in the hardest hit, high | biggest consumer. Deglobalisation of this scale | | growth areas of the market – has then reversed | has the potential to make cost inflation a more | | as soon as the inflationary trend resumes. Even | permanent feature of the economic landscape. | after repeated insistence and hiking, markets still expect rates to stage a relatively swift climb Portfolio Review down. Over the twelve-month period ending November 30, 2022, the portfolio returned 1.4%. At the heart of this volatility is the debate as to The trust’s benchmark also returned 1.4%. whether our current inflationary predicament is structural or temporary. Without question, some While we always seek to outperform, the factors will prove to have been necessarily short absolute returns generated this fiscal year rank lived. Prior to its invasion of Ukraine, Russia was Brunner second in its global investment trust responsible for around 10% of global oil supply, peer group. This speaks to not only just how and the main supplier of natural gas to Europe. challenging the market environment has been, Having spiked to over $127 a barrel in March, but also the merits of our balanced approach. similar cost rises are unlikely. Similarly, the While the Brunner investment philosophy supply chain issues which dogged economies favours high quality companies generating reopening after the Covid-19 pandemic are long-term sustainable growth, this has always now largely eased. Yet at the same time, been matched by a sharp focus on valuation. countries around the world are experiencing higher labour costs thanks to declining Discipline in this regard has enabled us to workforces. Energy has also been underinvested avoid many of this year’s market torpedoes: in as a sector for almost a decade, and companies whose share prices had surged on delivering a true net zero transition will require the back of very strong revenue growth, but that trillions in investment. failed to generate cash flow returns. As interest rates rose, the multiples investors were prepared Continuing geopolitical tensions present to pay for these stocks collapsed, with many further inflationary potential. The Ukrainian shareholders facing permanent loss of capital. invasion highlighted a clear divide between Not holding the electric vehicle manufacturer those countries willing to sanction Russia and Tesla for example, has been one of the top ten those who were not. While the immediate positive contributors to portfolio performance. consequences were limited to Russia, it has This past year has been a valuable reminder for underscored a sense of global economic market participants that avoiding the downside divergence. is equally as important as capturing the upside. Relations between the US and China in The sharpest pullbacks of this kind have been particular have deteriorated, with Chinese in the Technology sector. In addition to the domestic policy adding to the unease. 2022 saw mechanical headwinds of monetary policy, the China’s President Xi consolidate his power at pandemic saw already fast-growing digital 26 Investment Manager’s Review business models pull forward years of business, other hand, the trust has not benefited from while many traditional industries faced a its underweights in the Consumer Staples and forced hiatus. Global economic reopening post Energy sectors. Covid-19 has reversed this dynamic adding While the trust has two select holdings in the further pressure to share prices. form of Shell and TotalEnergies, our relatively | Thus, not owning Amazon (the online retailer | small allocation to Energy is longstanding. | | --- | --- | | and provider of cloud services) or Meta (the | Both Shell and TotalEnergies have reported | | parent company of Facebook) has strongly | record profits thanks to the substantial boost | | boosted returns. Amazon now expects full | in oil prices. These profits are being reinvested | | year revenue growth of just 9%, compared to a | prudently into less emission intensive activities | | five-year average closer to 30%. The company | such as natural gas and renewables, ensuring | | also expects adjusted earnings per share | the long-term health of the business. Yet, the | | (EPS) to decline 64%. Equally, Meta reported a | sector as a whole tends to be highly cyclical, | | 4.5% decline in year-on-year revenues thanks | and companies with the long-term quality and | | to weaker advertising, at the same time as it | sustainable growth we seek are typically harder | | vastly increased spend on the ‘metaverse’, Mark | to come by. This may change as the demands of | | Zuckerberg’s vision for an online alternative | the energy transition bring greater scrutiny on | | reality. Adjusted earnings per share (EPS) fell | the sector. | 45% as a result. Meta is now being forced to However, the Brunner portfolio is always lay off 11,000 employees as its core business constructed from the bottom-up. As a team, struggles to deliver growth, while new projects we look for companies whose financial have yet to make an impact on the bottom line. fundamentals look like they will best enable the Indeed, within the Brunner portfolio, our relative trust to deliver on its dual objectives of capital underweight to the Technology sector has been growth and a rising income. This means that a sizeable boost to performance. Likewise, our the portfolio managers do not seek to time overweight allocation to Health Care stocks the market, or allocate to regions and sectors – which have been a relative safe haven this on the basis of macroeconomic predictions. year – has also contributed positively. On the Instead, allocations are a by-product of stock Contribution to Investment Performance Relative to the Benchmark | | | Performance | | Performance | | | --- | --- | --- | --- | --- | --- | | | Positive contribution | | impact % Negative contribution | | impact % | | Overweight | UnitedHealth 1.2 Adidas -1.9 | | | | | (holding larger than AbbVie 0.9 Partners Group 0.7 benchmark weight) 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 Amazon 0.7 AstraZeneca -0.6 (zero holding or weight Meta Platforms 0.6 BP -0.5 lower than benchmark weight) 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 Outside of Health Care, the portfolio has also similarly driven by the individual returns of each benefited from its position in Visa. Despite the company. positive overall contribution, shares in the digital payments company have proved volatile due The portfolio’s biggest contributor to returns to a range of divergent narratives. On the one this year was UnitedHealth Group. Shares in hand, an increase in economic activity post- the US-based provider of health insurance pandemic and in particular international have benefited from investors seeking more travel, is providing a strong boost to both defensive positions. However, the underlying topline and margins. Indeed, full year revenues business has also continued to be strong. and net income are expected to grow 22% and Successive quarters of above-guidance revenue 26% respectively, compared to 10% and 16% growth have enabled the company to raise last year. its full year EPS guidance, thanks in large | part to the strength of its Optum healthcare | Yet the shares have also struggled in the face of | | --- | --- | | services division. Looking forward to next year, | inflation, with investors fearing softer economic | | UnitedHealth is as conservative as ever, guiding | activity in the medium-term, and potential | | for 12% EPS growth – a range it has typically | disruption from alternative providers. These | | beaten. While the shares have performed well | appear overdone. Visa’s status as the network | | this year, they remain on a reasonable long- | provider for payments, rather than a creditor, | | term valuation and the position continues to be | means it captures inflation as a benefit. At the | | a key holding. | same time, the company continues to harness | a growing network effect thanks to relatively Other strong contributors within Health Care small transaction costs, a high user base but included Abbvie and Novo Nordisk. While room for further digital payment penetration. both are pharmaceutical giants, Abbvie | specialises in blockbuster drugs – its most | Lastly, we have also benefited from our position | | --- | --- | | famous being the anti-inflammatory Humira | in Homeserve. The company is a UK-listed | | which faces a patent cliff in 2023. Shares in | provider of domestic maintenance insurance | | Abbvie have rallied as weakness in Humira has | and related services, with sizeable international | | been lower than expected, while at the same | operations. Our original investment case | | time the commercial performance of its Skyrizi | was predicated on the steady growth in | psoriasis treatment has also surprised positively. Homeserve’s core insurance business, as well as Given the potential impact of biosimilars on the – for valuation purposes – optional upside Humira in 2023, the near-term outlook remains of the online Checkatrade comparison site. unclear. However, with its acquisition of Allergan However, in May, the company announced in 2020, Abbvie has given itself a sizeable that it would be sold to Brookfield, a Canadian source of recurring revenue to underpin its private equity company at a premium of c.71% future pipeline. Currently trading at around to its share price. 11x next year’s earnings and with a dividend yield of over 3.5%, we are comfortable with our In recent years, buyouts of quality UK relatively small position. companies have become a recurring feature of the investment landscape. The combined effect Novo Nordisk, by contrast, provides long-lasting of Brexit, turbulent politics and an initially poor treatment for obesity-related illnesses such approach to the Covid-19 pandemic has left as diabetes. Like UnitedHealth, the business the UK market as a whole trading at a discount. model is less geared to the global economy, As a result, many high-quality companies, often and this has supported its valuation. At the with strong growth, trade at far lower valuations same time, the reopening of doctors’ practices than if they were to be listed in other markets. has re-enabled Novo to sign on new patients. In the past five years, we have seen held This has been particularly beneficial for the companies like UBM, Stock Spirits Group and rollout of Novo’s GLP-1 product Wegovy, Homeserve all taken off the market by either for obesity, which helps to regulate insulin private equity or peers. production and glucose release within the body. | After its Q3 results, the company raised full | Weakness in the portfolio has been similarly | | --- | --- | | year sales guidance by 2%, bringing expected | driven by a combination of macro headwinds | | revenue growth and EPS to 25% and 16%, | and idiosyncratic stock performance. Some of | | respectively. Longer-term growth continues to | the portfolio’s largest detractors are linked to | | be underpinned by international markets, which | consumer weakness, although not all of them | | are seeing a transition from older to newer | fit neatly into the Consumer Discretionary | | products as well as rising demand for diabetes- | sector. Similarly, our preference for Financials | | adjacent medication. | stocks which generate returns through fees | 28 Investment Manager’s Review and recurring business, rather than net interest in the end of the Yeezy collaboration, whose margins on deposits, has been a sizeable outsized impact on profitability had been headwind in a year of rising base rates. underestimated by investors. After reviewing the investment case at length, we have sold the Adidas, the portfolio’s weakest performer position. has exemplified this. The sportswear apparel | company has struggled since 2020 with softer | The maker of skin care and beauty products, | | --- | --- | | sales in China; partly due to ongoing Covid-19 | Estée Lauder has also weakened returns. | | restrictions, but also due to nationalist boycotts | Shares were trading at elevated multiples | | of Western brands that do not use cotton | towards the start of 2022 and we had taken | | sourced from Xinjiang. The latter relates to | some profits as a result. However, the continued | | allegations of Uighur slave labour. China has | impact of China’s zero-Covid approach, | | historically been Adidas’ fastest growing and | combined with the dollar’s increasing strength | | most profitable geography. | has forced the company to lower its guidance | for 2023. Combined with higher interest rates However, the company has also lost market and softer consumer expectations given the share in other areas and been accused of rising cost of living, the shares have faced failing to innovate sufficiently quickly. Its largest considerable pressure. Expectations around a competitor, Nike, has performed more strongly Chinese reopening have provided some support even in China, while smaller Puma brand has to the shares of late although a full recovery will been able to gain footholds elsewhere. Despite need to see these delivered. reassurances from management, guidance has been repeatedly revised down, with the At the other end of the spectrum, our position company now expecting a FY 2022 net profit of in Tyman has derated to an extent not justified €500m vs. previous guidance of €1.3bn. A public by its fundamentals. An Industrials stock listed feud with the musician Kanye West also resulted 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 the potential for rivals to produce at TSMC’s leader in door and window seals, as well scale or quality has only reduced in recent as other fixtures and fittings for the housing years. The shares may continue to prove volatile market. Shares are now approaching valuations in the near term, but look attractive at current last seen in the Global Financial Crisis, when valuations. house prices collapsed. However, both the industry conditions in which Tyman operates, Significant Transactions and the internal fundamental strength of the In times of volatility, it can be tempting to do business, are materially better today than too much. Seeing the share price of a company they were in 2008. Though we are expecting you hold go down is never pleasant, and selling softer demand conditions, Tyman is currently can feel like an easy way to stem the loss. At the generating robust profits even after an same time, when a stock you have admired from elevated period in the wake of the pandemic. afar goes down, there can be an overwhelming The market is overweighting the likely extent urge to rush in. and duration of short-term deterioration, over and above its longer-term potential. However, price actions are in and of themselves not an investment case. They are instead a Within the Financial sector, our two weakest good prompt to reassess fundamentals. This contributor was Partners Group. Partners is year, global equity markets have moved quickly, a diversified private markets asset manager, extrapolating short-term data points on the basis generating revenues through fees. The sector as of highly emotional situations. a whole has benefited from rising demand for alternative assets in a zero-interest rate world. Rather than reacting to these shifts immediately, | With rates rising, bears fear the company will | we have taken our time to assess both our | | --- | --- | | both see a drop off in demand at the same time | holdings and prospective investments from | | as exit prices for existing investments decline. | the bottom up. In each case, we have sought | | However, the company reported net profit | to determine whether valuations reflect a truly | | 12% above consensus in its 2021 fiscal year | rational view of the company’s underlying | | and gave a robust forward outlook for 2022. | earnings. For the most part, we have retained | | While interest rate developments may impact | a high degree conviction in the portfolio and as | | Partners at the margin, their impact now seems | a result, turnover for the twelve months ending | | overly discounted relative to fundamentals. As | November 30 has remained low, at 15.1%. | a result, we took the opportunity to add to our Even so, the extent of the equity market’s position during this period of weakness. correction has afforded us some valuable Given the extent of the pullback in Technology opportunities. Rising interest rates have caused names, stock selection within the sector has high growth stocks to derate en masse, with little been overwhelmingly positive. However, our differentiation between stocks whose future position in the semiconductor manufacturer earnings are more speculative and those with TSMC has weakened performance. In addition little debt and a decade of free cash flow. While to macro concerns around interest rates and we do not seek to time the market (for example, valuations, the high demand and limited supply hoping to buy ahead of a change in Fed policy), which characterised semiconductors during the we can make a judgement as to when a share pandemic has shown signs of reversal. Having price has simply grown cheap. announced plans to spend over $40bn in CapEx We have thus initiated positions in several to build out new factories, the shares reacted quality companies with extensive track records negatively to subsequent news that both Intel of growth, as well as long-term prospects, at very and Apple (two of TSMC’s largest customers) reasonable valuations. The continuing discount in have revised down orders. UK names relative to international sector peers, The stock has also been under pressure due to has also afforded us some valuable entry points. geopolitical tensions. The company is a supplier On the other hand, we have taken advantage to technology firms in both the US and China, of some recoveries in stocks to exit lower quality and as a Taiwanese company, its relationship holdings. In a few instances where our conviction with both nations is complex. As part of the has weakened, the availability of outstanding Chips Act, TSMC has pledged to build new companies on historically affordable multiples facilities in Arizona but in the event of a Chinese has seen us reallocate our positions. invasion of Taiwan, these would still take several The full list of new holdings and total sales, as years to get online. For now, these concerns well as some more detailed case studies, are seem overdone. Management has already copied below. started to talk about declining inventories, while 30 Investment Manager’s Review Adobe is a provider of creative content of which are considerable tailwinds in the software. Since shifting to a Software as a current environment. The de-merger should Service (SaaS) business model, the company also help crystallise some of the value in GSK’s has been able to harness the ever-increasing remaining vaccines and oncology businesses consumption of digital content to generate We sold our position in Amadeus at the start annual revenue growth of around 20%. As a of 2022. The provider of software for the technology stock which – until recently – was on airline and leisure sectors had rallied strongly an elevated multiple, the valuation has become from its pandemic lows thanks to widespread much more reasonable, enabling us to start a enthusiasm about the end of the pandemic. position. However, our conviction in the company’s | SSP Group is a world leading travel catering | overall competitive positioning and longer-term | | --- | --- | | business serving customers predominantly | growth had started to weaken even before the | | in airports and train stations. After two very | onset of Covid-19. Given the more elevated | | difficult years in which the company incurred | valuation, we reallocated the position to higher | | significant losses, as well as two rights issues, | conviction ideas. | SSP is now well placed to capitalise on Our initial investment thesis in Fresenius the recovery in passenger transportation. was predicated on the company’s defensive Furthermore, ongoing investment during exposure to rising health care spend. With a the downturn should drive growth in market business model split across dialysis, patient share. The shares are lowly valued due to servicing and hospital management, Fresenius macroeconomic concerns, however we offers health care exposure without the expect the recovery and growth in revenue traditional “Big Pharma” concern around patent and earnings to occur even against a weaker cycles. However, a series of operational missteps economic backdrop. and declining profitability have weakened our In July 2022, GSK demerged its consumer confidence in management and Fresenius’ healthcare division to form Haleon. Haleon growth potential. is one of the world’s largest consumer health In August 2022, we sold our position in Bright businesses with products like Sensodyne, Horizons. The childcare provider has faced Panadol and Centrum Multivitamins. The persistent headwinds since the onset of the company also boasts a low environmental pandemic. As workers have embraced the footprint, as well as strong pricing power, both 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 While highly sentimental markets continue demand has changed. At the same time, Bright to misprice stocks on the basis of short-term Horizons is facing a structural shortage of data, we also need to be open to any instances workers as well as greater costs. We agree with of structural weakness. Within portfolios, the management that longer-term demand for high flurry of recent earnings reports has largely quality childcare will remain, but for the near been positive. Companies like Microchip, term there are more compelling opportunities LVMH and Novo Nordisk are reporting resilient elsewhere. revenues and demonstrating the steady pricing power that we expect with our quality growth Market Outlook investment philosophy. Where names like Agilent and Estée Lauder have reported softer Global equities continue to march to the Fed’s near-term outlooks, we have been quick to tune, as they did for most of 2022. Shares have engage management and test our investment rallied for two consecutive months, due to softer theses. inflation numbers and a dovish interpretation of the central bank’s minutes. Yet against this After a two-year global pandemic, European optimism, global economic data continue land war and runaway inflation, all of which to deteriorate, as do corporate earnings were unforeseen, we are hopeful that readers expectations. Ongoing developments in China share our cautious approach to this forecasting are also a healthy reminder that large parts exercise. Instead, we view the above as of the world continue to be driven by factors considerations shared by the equity market and outside of financial markets. to which both the share prices of our holdings and we as portfolio managers will likely react. Markets are now pricing a peak in US interest Yet while the market takes this more short-term rates for June 2023, with a steady reduction view, it is by focusing squarely on long-term towards 4% by the end of the year. This marks a company fundamentals that we will be able to downshift from early November, after weaker best serve our clients. 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. 32 Investment Manager’s Review 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. 33 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 ## Investment Philosophy and Stock Selection ## Process Long-term focus Research intensive, focus on cash flow As investors driven by fundamentals, our focus is on AllianzGI’s research platform combines a large global understanding the long-term. It is only over longer time team of equity and credit portfolio managers and periods that the fundamental attributes of businesses and research analysts, environmental, social and governance industries truly reveal themselves, for better or for worse. specialists and our own Grassroots* market research We invest in high quality companies with proven profitable organisation to provide our fund managers with in- business models that can grow over time. We believe the depth analysis of businesses and industries as well as stock market is often inefficient in valuing such companies. insights into structural and cyclical trends. Our research Through detailed research and analysis, we seek to particularly focuses on the analysis of sustainable capture these inefficiencies and deliver superior long-term company cash flows, which typically provides the truest investment returns. measure of corporate performance. (*GrassrootsSM is a division of AllianzGI) Balanced, diversified portfolio Drawing on the full resource of AllianzGI’s global Stock selection – focus on Quality, Growth and investment platform, we look across all industries and Valuation geographies to select the most attractive investment Our stock selection process blends together assessments ideas for the trust’s portfolio. We believe in building a of business quality, long-term growth potential and balanced portfolio that is diversified across industries and valuation, resulting in a holistic view of a company, the risk geographies, whilst avoiding extreme biases that can factors and, ultimately, the drivers of shareholder value. lead to unpredictable and volatile outcomes. In this way the portfolio can be relied upon to deliver a steady and Quality is about understanding the intrinsic attributes consistent capital and income return. of a business model. High quality companies are those with long-term competitive advantages, supported by shareholder friendly management teams and strong Quality: Stable above average returns We seek to identify – Long term competitive advantage this universe through – Str ong balance sheets fundamental – High barriers to entry Quality research – Management quality – Stable/improving ROCE/RoE – Sound on ESG issues Growth Valuation Value, not just “cheap” Secular growth – Reverse Discounted Cash Flow – Addressable market growth – Enterprise V alue vs. Cash returns – Sustainable gr owth – technology, brand – Price/Book vs. Return on Equity – Long term, through-cycle approach – Dividends – an output not input – A void structural decline 34 Investment Manager’s Review balance sheets. In financial terms, such companies tend Portfolio construction to be highly profitable, generating substantial surplus The portfolio consists of 60-80 holdings that have been cash flow that can be used to fund further growth or carefully selected on the basis of their own individual shareholder returns. These characteristics are often not merits, whilst taking into consideration the exposure to immediately obvious from traditional accounting metrics, industries, geographies and other risk factors, thereby which is why we focus so closely on cash flow. Quality can ensuring that the overall portfolio remains balanced and vary enormously across and within industries. Fortunately, diversified. The size of each individual holding reflects the as global investors with a large investible universe, we level of conviction, the valuation upside potential versus can afford to be highly selective in the companies that we downside risk factors, and liquidity. At the portfolio level, invest in. the objective is to ensure that stock specific risk – the risk which results from our stock selection decisions – is the ESG and sustainability considerations also play an primary driver of the portfolio’s returns. Residual risks important role in our assessment of business quality. such as currency, style, geography or macroeconomic AllianzGI’s sustainability research team is fully integrated are monitored and managed to ensure that they are not into the broader investment research platform, allowing driving the overall portfolio’s returns. Ultimately, the aim is us to develop a deep understanding of these complex to optimise the portfolio to achieve the dual objective of risk factors. Environmental, Social and Governance consistent benchmark outperformance combined with an (ESG) factors, such as those related to governance or attractive and growing income. environmental impact, have the potential to impact positively or negatively a business model. As long- The portfolio is segmented into four different groups. term investors, these considerations are critical to our Each has particular characteristics and serves a investment process. specific purpose in the portfolio. The four groups are explained below, followed by a detailed portfolio To assess long-term growth potential, it is important breakdown, providing shareholders with a more complete to understand the secular forces that are shaping understanding of the investment rational behind each the economy and society, such as demographics and holding. digitalisation. This provides the context in which to assess broader industry drivers as well as a company’s position – High Growth: Rapidly growing companies with the industry. Particular emphasis is placed on demonstrating strong underlying profitability, where differentiating between structural and cyclical growth. most or all surplus cash flow is reinvested for growth. Whilst we will invest in cyclical companies, a much greater The return is expected to come primarily from the long- value is placed on the structural element of growth. This term growth in intrinsic value. combination of a high quality business model and long- term growth is powerful driver of shareholder value. – D efensive Growth: Stable and highly profitable companies which have demonstrated a long track Company valuation seeks to determine whether there record of high returns on capital with a stable is sufficient upside to warrant investing. We look for growth profile. The return is expected to come from a companies where the quality and/or long-term growth combination of long-term growth in intrinsic value, cash potential is not yet priced in. We want to anticipate rather returns to shareholders and a valuation re-rating. than react and are careful not to overpay, for example by identifying companies with “undiscovered” structural – Cyclical Growth: Companies delivering high returns on growth or those where we believe business quality is capital and long-term growth but which also exhibit improving. We employ a range of valuation tools, such as more volatile short term results. The return is expected free cash flow yield versus expected growth and industry to come from a combination of long-term growth in or market relative valuation. intrinsic value, cash returns to shareholders and a valuation re-rating, however shorter term returns may be more variable with the economic cycle. Sell discipline Stocks will be sold from the portfolio for one or more of – Matur e: Profitable companies that are later in the the following reasons. industry life cycle where growth rates are typically lower. The return is expected to come primarily from – A material change to the in vestment case, such as a shareholder returns and valuation re-rating, with a deterioration in the fundamentals or a rise ESG risks, lesser contribution from intrinsic value growth. 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. 35 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 1 2 1 Management Audit & 1 Accounting Corporate 2 2 3 7 5 1 2 2 Governance Environmental 2 5 4 1 1 1 1 1 Risks / Impacts Social Risks / 1 2 2 2 1 1 1 1 Impacts Business Conduct 1 1 1 & Culture Transparency 1 1 1 1 & Disclosure Several issues may be covered in each meeting. 36 Investment Manager’s Review ## Environmental, Social and Governance ## performance 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. Environmental performance v benchmark Governance performance v benchmark 8.0 8.0 4.0 4.0 Q3 19 Q4 22 Q3 19 Q4 22 Brunner ESG MSCI Environment BM ESG MSCI Environment Brunner ESG MSCI Governance BM ESG MSCI Governance Social performance v benchmark ESG performance v benchmark 8.0 8.0 4.0 4.0 Q3 19 Q4 22 Q3 19 Q4 22 Brunner ESG MSCI Social BM ESG MSCI Social Brunner ESG MSCI Aggregate BM ESG MSCI Aggregate Source: MSCI/AllianzGI. 37 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 # Top 20 Holdings ![img-6.jpeg](img-6.jpeg) ## 1 UnitedHealth Health Care Providers North America 25,718,899 4.9% 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. ![img-7.jpeg](img-7.jpeg) ## 3 Visa Industrial Support Services North America 19,593,985 3.7% 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. ![img-8.jpeg](img-8.jpeg) ## 2 Microsoft Software & Computer Services North America 24,412,979 4.7% 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. ![img-9.jpeg](img-9.jpeg) ## 4 Munich Re Non-Life Insurance Germany 19,434,001 3.7% 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. 38 Sector Headquarters Value of holding Percentage of portfolio Investment Manager’s Review | | Shell5 | | | Microchip Technology6 | | | --- | --- | --- | --- | --- | --- | | | | Oil, Gas & Coal | | | Technology Hardware & Equipment | | | | United Kingdom | | | North America | | | | 14,444,750 | | | 13,451,962 | | | | 2.8% | | | 2.6% | | Shell is a leading globally integrated oil and gas | | | Microchip Technology designs, manufactures, | | | | company. Its operations are split four ways, between | | | and markets microcontrollers and related mixed- | | | | oil, gas, upstream, and chemicals. By reallocating the | | | signal and analog semiconductors. Its chips are | | | | proceeds of its legacy activities towards lower carbon | | | used in the automotive, consumer, industrial, and | | | | solutions, Shell is a playing a key role in delivering the | | | telecommunications markets, in products ranging from | | | | energy transition. | | | electric razors to medical devices. The company stands | | | to benefit from increased digital penetration of global hardware. ## Roche Holdings7 TotalEnergies8 Pharmaceuticals & Biotechnology Oil, Gas & Coal Switzerland France 13,021,337 12,512,462 2.5% 2.4% Roche operates two segments – pharmaceuticals and TotalEnergies is a multinational energy company based diagnostics – and sells its products in over 190 countries. in France. Under its CEO Patrick Pouyanné, the former Its prescription drugs include cancer therapies, hepatitis oil and gas company has embarked upon a business drugs, idiopathic pulmonary fibrosis drugs, macular transformation focused on achieving net zero by 2050, degeneration therapies, and Tamiflu, which is used to and reducing its broader environmental impact. To do this, prevent and treat influenza (including pandemic strains). Total is investing heavily into renewables and electricity, as Roche’s diagnostics arm offers clinical lab supplies, well as the capacity to offset the emissions of its business genetic tests, diabetes monitoring supplies, and point-of- and customers. The company is also expanding its natural care diagnostics for health care providers. gas capabilities, while reducing its petroleum operations. 39 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 | | Taiwan Semiconductor9 | | 10 | AMETEK | | | --- | --- | --- | --- | --- | --- | | | | Technology Hardware & Equipment | | | Electronic & Electrical Equipment | | | | Taiwan | | | North America | | | | 11,876,731 | | | 11,843,628 | | | | 2.3% | | | 2.3% | | Taiwan Semiconductor Manufacturing Company (TSMC) | | | Ametek is a global manufacturer of electronic | | | | is the first and largest dedicated silicon foundry in the | | | instruments and electromechanical devices. The | | | | world, with nine plants in Asia and one in the US. TSMC | | | Company manufactures advanced instruments for | | | | makes advanced, ‘leading-edge’ chips for semiconductor | | | process, aerospace, power, and industrial markets and | | | | and systems companies who don’t have their own | | | is a supplier of electrical interconnects, specialty metals, | | | | manufacturing facilities, including AMD, Apple, Broadcom, | | | technical motors and systems, and floor care and | | | | NVIDIA, and QUALCOMM. | | | specialty motors. | | | ## 11 Schneider Electric Novo Nordisk12 Electronic & Electrical Equipment Pharmaceutical & Biotechnology France Denmark 11,830,830 11,326,437 2.3% 2.2% Schneider Electric is a global producer of electrical Novo Nordisk is a pharmaceutical company specialising distribution, automation and energy management in medication for the treatment of diabetes and obesity products. The company has three business units: Energy related illnesses. The company generates around Management, Industrial Automation and Services. Its 80% of revenues from diabetes treatments. Whilst products are used in homes, offices, industrial buildings the roots of the business lie in insulin production, the and infrastructure around the world. Countries around company is rapidly expanding its presence in GLP-1 the world are aiming to reduce their greenhouse treatments (Glucagon-like peptides), which increase gas emissions, at the same time as digitalising ever insulin production and can help suppress appetite. more products and services. As a result, demand for Novo Nordisk also generates around 15% of its revenues electrification is structurally rising. from its biopharmaceutical division, which specialises in haemophilia. 40 Sector Headquarters Value of holding Percentage of portfolio Investment Manager's Review ![img-10.jpeg](img-10.jpeg) ## 13 Partners Group © Investment Banking & Brokerage Switzerland € 11,057,258 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. ![img-11.jpeg](img-11.jpeg) ## 15 Unilever © 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. ![img-12.jpeg](img-12.jpeg) ## 14 Itochu © General Industrials Japan € 10,982,090 2.1% 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. ![img-13.jpeg](img-13.jpeg) ## 16 Accenture © Industrial Support Services North America € 10,733,310 2.1% 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. 41 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 | 17 18 | Yum China Agilent | | | | | --- | --- | --- | --- | --- | | | | Travel & Leisure | | Medical Equipment and Services | | | | North America | | North America | | | | 10,635,737 | | 10,399,529 | | | | 2.0% | | 2.0% | | Yum China is the largest operator of convenience | | | Agilent produces advanced instruments, software | | | restaurants in the country. Its franchises include famous | | | and consumables used by scientists in academia and | | | Western names such as Pizza Hut, KFC and Taco Bell as | | | the healthcare, food, chemical and environmental | | | well as local brands like Little Sheep and Huang Ji Huang. | | | industries. Key platforms relate to liquid and gas | | | Since opening its first restaurant in 1987, Yum has grown to | | | chromatography, mass spectrometry and cell | | | over 12,000 restaurants in over 1,700 cities across mainland | | | analysis. The company has enjoyed structural | | | China. As China’s cities grow, Yum’s restaurants are catering | | | growth, particularly in emerging markets. | | to an increasingly affluent middle class with less time to cook. Yum has also been a pioneer in online food delivery. ## 19 Charles Schwab AIA20 Investment Banking & Brokerage Life Insurance North America Hong Kong 10,203,335 10,131,404 2.0% 1.9% Charles Schwab is the largest discount brokerage in the AIA is the world’s largest life insurer, covering 18 markets US with $6.6 trillion in client assets as at the end of Q3 across the Asia Pacific region. An increasingly affluent 2022, a number which has grown at a 13% CAGR since Asian middle class is driving rapid demand for life 2003. They serve both individual investors managing their insurance, as well as for the company’s other services own finances and registered investment advisors. Their in retirement planning and wealth management. Its scale means costs as a percentage of client assets are geographic spread helps deliver sustainably high growth exceptionally low. This allows them to charge lower fees with lower volatility than peers. AIA also has strong than competitors, whilst still making a healthy profit. governance controls. Total value of top twenty holdings: £274,488,664 Percentage of portfolio: 52.7% 42 Sector Headquarters Value of holding Percentage of portfolio Investment Manager’s Review ## 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 Schneider’s products have a key role to play focused on the digital transformation of energy in reducing energy usage and in enabling the management and industrial automation. Its energy transition. The company is consistently products, software and services are used in the innovative, supported by an R&D budget construction and retro-fitting of buildings, the equivalent to 5% of sales. The company’s financial generation, transmission and distribution of characteristics are also appealing and consistent electricity, data centres, infrastructure, IT and with Brunner’s focus on quality; they have solid manufacturing. It is a truly global company with margins, consistently good returns on capital and significant businesses in Asia, North America and a progressive dividend policy that returns 50% Europe. of trailing profits to shareholders. Moreover, the company is an ESG leader itself. Not only do their We believe electrification is a major area of products help customers save and avoid millions growth for decades to come. Today only 18% of of tonnes of carbon emissions and enable the global energy needs are met using electricity, transition to a more sustainable economy, the according to IEA figures. This figure will need company was one of the first to have its net zero to dramatically increase as renewables form commitment roadmap validated by the Science a larger part of the energy mix, displacing the Based Target Initiative. combustion of fossil fuels in situ. Electric vehicles are an early case in point. Electrification is key to all credible net zero pathways. 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 and governments who dislike the issuing and payments, facilitating payments between handling costs of cash and the associated risks of consumers, merchants, financial institutions and crime, whether it be theft, black market activity or government entities around the world. They tax avoidance. In addition, the growing share of are an asset light network business that does e-commerce transactions, by default, requires and not make loans or take credit risk. Instead they electronic form of payment. operate the rails on which convenient, reliable The economics of Visa’s business is outstanding. and secure financial transactions can take place. The company has margins of approximately The power of the Visa network is reflected in 50% and requires negligible capital to grow. some extraordinary figures. There are 3.6 billion The balance sheet is pristine, meaning all the Visa cards in circulation across 200 countries and company’s prodigious cash flow is returned territories. They are issued by 14,900 financial to shareholders via a modest dividend and institutions and accepted at over eighty million substantial share buybacks. We expect this merchant locations. In the year to the end of cash flow stream to grow in most years in most June 2021 they processed transactions worth $14 circumstances, reflecting the growth in transaction trillion. This ubiquity creates a powerful barrier volumes described above. to entry. The only equivalent scale business in Mastercard, their primary competitor. All investments come with risks, of course. With Visa we think the primary concerns are regulatory Visa’s revenues are a very small percentage of and technological. We note that thus far the transaction volumes. Transaction volumes tend impact of both has been small. New entrants in to grow every year for two primary reasons. payments such as Paypal, Apple Pay, Square etc Firstly, growth in nominal personal consumption etc all rely on ‘tokenised’ credit and debit card expenditure tends to go up due to a combination accounts. Regulatory interventions and rulings of economic growth and inflation. Secondly, have been similarly benign. Overall we think Visa there is a longstanding shift in most economies has one of the most powerful barriers to entry from cash and cheque to card and electronic in global industry and, as such, it remains a core payments. This shift is supported by businesses holding in the Brunner portfolio. 44 Investment Manager’s Review ## 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 | a shift in the healthcare burden to the individual, | | --- | --- | | consumer health companies with a strong | particularly for complaints where self-diagnosis | | portfolio of brands that includes Sensodyne | and treatment is feasible. Recent examples of | | toothpaste, Panadol and Advil analgesics, | pharmaceuticals that have shifted from being | | Centrum vitamins and Nicorette smoking | prescription only to being branded products | | cessation aids. The company was demerged from | available ‘over the counter’ include Nexium, for | | FTSE 100 pharmaceutical company GSK in July | heartburn, and allergy drug Flonase. | 2022. This followed GSK’s consolidation of the Research and development investment is consumer health portfolios of pharmaceutical equivalent to 3% of sales, in the top quartile peers Novartis and Pfizer last decade. Haleon of the industry. Operating margins were an now holds number one or two market share impressive 22.8% in 2021. The company is highly positions in 70% of their markets, including the US, cash generative, which will allow the company Germany and China. Many of their brands have to rapidly pay down debt and pay a growing decades long heritage in their markets and are dividend. In comparison to peers with similar deeply trusted by consumers. Equally important, financial characteristics, the stock was attractively the company has a long record of regulatory valued when we initiated the position. This was medical expertise. partly due to a technical situation, as many GSK The company targets 4-6% long term growth in shareholders immediately sold the Haleon stock revenues supported by a combination of volume that they received in the spin-off. As Haleon growth and modest price inflation. Growth in establishes a track record as a standalone public 2022 was considerably higher than this as cost company we expect this gap to narrow which, pressures were passed through to the consumer, alongside decent growth in profits and substantial demonstrating the equity’s usefulness as an cash returns, should make the investment a solid, inflation hedge. In addition to ongoing share reliable compounder similar to a best-in-class gains, long term growth in volumes is supported consumer staple. by two structural megatrends; demographics and 45 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 ## ESG Focus ## IG Group Sector Investment Banking & Brokerage Headquarters United Kingdom Value of holding £6,965,750 % of portfolio 1.3% IG Group is a financial trading platform detailed feedback as to how cash generation headquartered in London. Its largest business by could be used to fund a core growing dividend, revenue is the provision of over-the-counter (OTC), supplemented by either special dividends or leveraged derivatives trading to sophisticated share buybacks. The latter would increase future investors. IG Group specialises in spread bets and earnings per share, while a growing dividend contracts for difference (CFDs), and is the world’s would also underline the board’s confidence in IG leading provider by volume. In its 2022 financial Group’s growth prospects. year, the company generated £812 million in In its July results, we were pleased to see IG Group revenues from leveraged derivatives, with a announce a new capital allocation framework further £154 million spread across exchange- which had adopted the key features that we traded derivatives and stock trading and had advocated. Management announced a investments. progressive, well-covered ordinary dividend | As investors, we regularly engage with portfolio | equivalent to approximately 50% annual | | --- | --- | | companies. Speaking directly with management | earnings, as well as returning surplus capital | | and non-executive directors enables us to | through share buybacks or special dividends as | | address specific issues at a senior level, as well | appropriate. This included a £150 million buyback | | as advocating for any changes we think would | announced on the day, equivalent to 5% of the | | be beneficial to the company. In both cases, | company’s market capitalisation. | our duty as stewards of client capital gives us a Whilst it is too soon to judge the long-term responsibility to address strategic and operational benefits of this new policy, the market reaction concerns, as well as Environmental, Social and has initially been positive, and we believe the Governance (ESG) issues. Throughout this process, company’s capital allocation is now much clearer we are ably supported by our stewardship team and better understood. As a result, we considered here at AllianzGI. the engagement to be a success. Further In February 2022, we wrote to the board of IG meetings with management confirmed that our Group during a consultation on the company’s input had been taken on board and helped to capital allocation policy. We believed that IG’s shape IG Group’s capital allocation policy. We valuation suffered from volatility of earnings, believe the net result will be a clear link between and that a lack of clarity on capital allocation periods of strong trading to shareholder returns meant that periods of strong cash generation and future earnings growth. were not leading to a sustained benefit in terms of shareholder returns. We provided “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 Investment Manager’s Review 47 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 ## Portfolio Breakdown at 30 November 2022 North America United Kingdom ## 42.23% 21.95% United Health Shell Microsoft Unilever Visa SSE Microchip Technology IG Group AMETEK St. James's Place Accenture RELX Yum China Holdings Haleon Agilent Technologies Close Brothers Charles Schwab Rio Tinto The Cooper Companies Ashmore Estée Lauder Paragon Banking Amphenol Redrow Intuitive Surgical Baltic Classifieds Intuit SThree AbbVie DCC CME Group GSK FleetCor Technologies SSP Adobe Helical MarketAxcess Tyman Ecolab S&P Global International Flavors & Fragrances Align Technology 48 Investment Manager’s Review Continental Europe Japan | 27.11% | 2.88% | | --- | --- | | Munich Re | Itochu | | Roche Holdings | Astellas Pharma | TotalEnergies Schneider Electric Novo Nordisk Partners Group Assa Abloy LVMH Moet Hennessy Louis Vuitton Pacific Basin Atlas Copco ## 5.83% Nestle Adidas Taiwan Semiconductor UBS AIA Jumbo Brambles Iberdrola Australia & New Zealand Bank 49 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 % of Invested Name Sector Value (£) 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 50 Investment Manager’s Review % of Invested Name Sector Value (£) 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 % of Invested Name Sector Value (£) 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) Composite | United | | North | | | Other | | 2022 | | Benchmark | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Kingdom | | America | | Countries | | | Total | | | Sector | Total | | | | % | | % | | | % | | % | Weighting | | | % | 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 Composite | United | | North | | | Other | | 2022 | | Benchmark | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Kingdom | | America | | Countries | | | Total | | | Sector | Total | | | | % | | % | | | % | | % | Weighting | | | % | 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 Composite | United | | North | | | Other | | 2022 | | Benchmark | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Kingdom | | America | | Countries | | | Total | | | Sector | Total | | | | % | | % | | | % | | % | Weighting | | | % | 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 # Historical Record | 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 ## Net Asset Value Total Return with Debt at Fair Value and Debt at Par ![img-14.jpeg](img-14.jpeg) 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 ## Directors, Manager and Advisers Amanda Aldridge BSc FCA*Carolan Dobson BSc Elizabeth Field MA* Chartered FCSI*† Chair of the Audit Committee, Member of the Audit Committee, Member of the Management Management Engagement Board Chair. Chair of the Engagement Committee, the Committee, Nomination Committee Management Engagement Nomination Committee and the and Remuneration Committee. Committee and the Nomination Remuneration Committee. Committee, Member of the Remuneration Committee. | Joined the board in December 2013 | Joined the board in December 2019. | Joined the board in December 2022. | | --- | --- | --- | | and has been Chair since the AGM | Amanda is a non-executive director | Elizabeth recently retired as a partner | | in March 2016. She is also Chair | and audit committee chair of Impact | at Stephenson Harwood. Elizabeth | | of Baillie Gifford UK Growth Fund | Healthcare REIT plc and also chairs | was a corporate lawyer for 35 years | | plc and BlackRock Latin American | the audit and risk committee of The | with extensive experience of advising | | Investment Trust plc. Carolan was | Low Carbon Contracts Company and | public and private companies on a | | previously head of UK equities | The Electricity Settlements Company. | wide range of corporate transactions | | at Abbey Asset Managers, Head | She was formerly a partner at KPMG | across a variety of sectors, specifically | | of Investment Trusts at Murray | LLP and during her career she was | including investment trusts. | | Johnstone and was the portfolio | Head of the Retail Sector practice | | | manager of two investment trusts. | before becoming Head of Contract | Experience: | | | Governance in the Risk-Consulting | Elizabeth is a lawyer and has | | Experience: | Division. Amanda is a Fellow of the | experience of providing legal and | | Carolan is an experienced fund | Institute of Chartered Accountants in | corporate governance advice to | | manager and has held key roles in | England and Wales. | investment trusts, asset managers | | the investment management industry | | and investment trust sponsors. | | and in advisory roles and she chairs | Experience: | | | both investment trusts and other | Amanda brings senior experience in | Reasons for the recommendation | | organisations. | accounting practice, with specialisms | for election: | | | including risk, and has non-executive | Elizabeth’s legal knowledge and | | Reasons for the recommendation | director and audit committee chair | negotiating skills are valuable to the | | for re-election: | experience on other public company | board and she has wide knowledge | | Carolan’s wise and effective | boards. | of the industry. | leadership of the board, notably demonstrated recently through Reasons for the recommendation her calm steering of the company for re-election: through the Covid pandemic and the Amanda has evident skills inflation crisis and wide knowledge and experience both from her and experience of the industry. background as a chartered accountant and as an audit committee chair. *Independent of the manager. † Independent on appointment as Chair. 58 Governance Peter Maynard MA*Andrew Hutton MA, CFA* Jim Sharp MA* Member of the Audit Committee, Senior Independent Director. Chair of the Remuneration the Management Engagement Member of the Audit Committee, Committee. Member of the Committee, the Nomination the Management Engagement Management Engagement Committee and the Remuneration Committee, the Nomination Committee and the Nomination Committee. Committee and the Remuneration Committee. Committee. | Joined the board in April 2020. | Joined the board in October 2010. He | Joined the board in January 2014. | | --- | --- | --- | | He is owner and director of A.J. | is a retired solicitor and qualified with | He began his career in corporate | | Hutton Ltd, an investment advisory | Slaughter and May in 1977. He was | finance with J.Henry Schroder & Co. | | practice established in 2007. | Group Legal Director at Prudential | Limited from 1992 to 2002 where | | Andrew started his career in 1979 | plc from 1998 to 2009 and Company | he was a director. He is Chairman of | | at J.P. Morgan where, over 18 years, | Secretary from July 1999. Prior to that | The Cotswold Company and In The | | he held investment and business | he was with HSBC for 14 years during | Style and a non-executive director of | | management positions in London, | which time he was variously a director | James Cropper PLC. | | New York, Singapore and Australia. | of HSBC Investment Bank, President | | | He was subsequently head of | and Chief Executive Officer of James | Experience: | | investment management at Coutts | Capel Inc in New York and finally | Jim has a background in financial | | Group and co-CEO of RBS Asset | Deputy Group Legal Adviser. He is a | services and in addition to experience | | Management. Andrew has served | former chairman of the GC100 and | in running businesses and insight into | | as Senior Independent Director | was a supervisory board member of | marketing and promotion he brings | | of Baillie Gifford UK Growth Fund | the London Business School Centre | a connection to the largest group of | | and Chairman of JPMorgan Global | for Corporate Governance. | shareholders. | Emerging Markets Income Trust. Peter was on the board throughout Reasons for the recommendation the year. He is retiring from the board Experience: for re-election: at the AGM and is not standing for Andrew is an asset management Jim’s broad commercial and re-election professional with senior management operational experience and and money management experience. knowledge and understanding of marketing and promotion are Reasons for the recommendation valuable and his connection to a for re-election: key stakeholder helps the board’s Andrew brings to the board a understanding of the requirements of deep understanding of portfolio shareholders. management. 59 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 | The Manager or Alternative Investment Fund | Company Secretary and Registered Office | | --- | --- | | Manager (AIFM) | Kirsten Salt ACG | | Allianz Global Investors GmbH (AllianzGI) is an investment | 199 Bishopsgate, London EC2M 3TY | | company with limited liability incorporated in Germany | Telephone: 020 3246 7513 | | and registered in the UK as a branch with establishment | Email: kirsten.salt@allianzgi.com | number BR009058 and with an establishment address of 199 Bishopsgate, London EC2M 3TY. It is authorised by the Registered Number Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) 00226323 and is subject to limited regulation by the Financial Conduct Authority (FCA). Bankers and Custodian In April 2021 the board announced that steps are being HSBC Bank plc taken by AllianzGI to establish a UK AIFM and this is expected to take place in 2023. Depositary HSBC Securities Services AllianzGI is an active asset manager operating across nineteen markets with specialised in-house research Solicitors teams around the globe, managing assets for individuals, families and institutions worldwide. Dickson Minto W.S. As at 30 September 2022, AllianzGI had €521 billion of Independent Auditors assets under management worldwide. PricewaterhouseCoopers LLP Through its predecessors, AllianzGI has a heritage of investment trust management expertise in the Registrars UK reaching back to the nineteenth century and as Link Group at 31 December 2022 had £2.3 billion assets under (full details on page 109) management in a range of investment trusts. Website: allianzgi.co.uk Stockbrokers J.P. Morgan Cazenove 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). 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 director 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 Governance ## Corporate Governance Statement The board reports against the AIC Code of Corporate Gender and Ethnic Diversity Governance (AIC Code) 2019. As confirmed by the At the most recent Nomination Committee meeting, Financial Reporting Council, following the AIC Corporate attended by all of the directors, the forthcoming changes Governance Guide enables investment company boards to the Listing Rules on board diversity and inclusion to meet their obligations under the UK Corporate on company boards were noted and reflected upon. Governance Code and Listing Rules. The board is very supportive of the improvement of transparency on the diversity of company boards. It was Board Composition noted that the rules apply to accounting periods starting There are six directors on the board. We aim to have two on or after 1 April 2022 and so numerical disclosures and investment professionals, an accountant, a lawyer and a targets will be introduced in next year’s annual report. It director with commercial expertise, one of which preferably was agreed that the recruitment and board refreshment has a connection with the Brunner family, to provide a process would continue with the board’s policy and balanced board. The optimum number of directors is the Committee’s terms of reference already in place to therefore five, but the number could fall to four and go as have a diverse board, including the specific inclusion high as six to cover periods of recruitment, transition and of candidates and where possible appointees from retirement. diverse ethnic backgrounds. In the recent non-executive director recruitment exercise candidates were sought The board has a plan for the retirement of directors to from diverse ethnic backgrounds. The board agreed that ensure that an orderly process of recruitment can take in the report for the year ending 30 November 2023 the place and that the board’s balance of skills and relevant company would show it had identified the Chair, the experience is maintained. This may mean that directors Senior Independent Director and the Chair of the Audit might be on the board for longer than nine years to allow Committee as the senior positions. Currently, three of for continuity of experience and a smooth transition. the company’s directors are male and three are female. The biographies of the directors are set out on pages 58 As the company is an investment trust, all of its activities and 59 together with the skills and experience each are outsourced and it does not have any employees and director brings to the board for the long-term sustainable therefore it has nothing further to report in respect of success of the company. gender representation within the company. No contracts of significance in which directors are deemed Conflicts of Interest to have been interested have subsisted during the year Under the Companies Act 2006 directors must avoid a under review. Contracts of employment are not entered situation where they have, or can have, a direct or indirect into with the directors, who hold office in accordance with interest that conflicts, or possibly may conflict, with the the company’s Articles. company’s interests. The board reports annually on the company’s procedures for ensuring that its powers of Board Evaluation authorisation of conflicts are operated effectively and that The board and its committees were subject to an internally the procedures have been followed. facilitated performance appraisal during the course of the year. This was conducted by means of a detailed Each of the directors has provided a statement of all questionnaire and the responses were collated into a conflicts of interest and potential conflicts of interest report in which the respondents were anonymous. The relating to the company. These statements have been Chair conducted the evaluation and it was found that the considered and approved by the board. The directors have board is effective and that each director continues to be undertaken to notify the Chair and Company Secretary effective, has the appropriate skills and has demonstrated of any proposed new appointments and new conflicts or commitment and devoted the necessary time to his or potential conflicts for consideration, if necessary, by the her role. All directors attended all board and relevant board. The board has agreed that only directors who have committee meetings during the year. The directors all no interest in the matter being considered will be able to provide challenge in board meetings and each offers participate in taking the relevant decision and that in taking useful guidance from their own areas of expertise. the decision the directors will act in a way they consider, in good faith, will be most likely to promote the company’s The Senior Independent Director conducted an appraisal success. The board is able to impose limits or conditions of the Chair following a similar method to the board when giving authorisation if it thinks this is appropriate. evaluation. This exercise confirmed that the Chair demonstrates effective leadership, makes an excellent The board confirms that its powers of authorisation are contribution to the company and is assiduous in her operating effectively and that the agreed procedures have engagements with the company’s stakeholders. been followed. 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: Board Management Strategy Audit Remuneration Nomination Engagement Director Board Day Committee Committee Committee Committee No. of meetings 6 1 2 1 1 1 1 Carolan Dobson 6 1 2 1 1 1 Amanda Aldridge 6 1 2 1 1 1 2 Elizabeth Field - - - - - - Andrew Hutton 6 1 2 1 1 1 Peter Maynard 6 1 2 1 1 1 1 Jim Sharp 6 1 2 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 services to the company. The manager therefore maintains the internal controls associated with the day- The directors have overall responsibility for the company’s to-day operation of the company. These responsibilities system of internal control. Whilst acknowledging their are included in the Management and Administration responsibility for the system of internal control, the directors Agreement between the company and the manager. are aware that such a system is designed to manage The manager’s systems of internal control are regularly rather than eliminate the risk of failure to achieve business evaluated by its management and monitored by internal objectives and can provide only reasonable but not auditors. absolute assurance against material misstatement or loss. – Ther e is a regular review by the board of asset The board has established an ongoing process for allocation and any risk implications. There are also identifying, evaluating and managing the significant risks regular and comprehensive reviews by the board of faced by the company. This process has been fully in place management accounting information, including revenue throughout the year under review and up to the date of the and expenditure projections, actual revenue against signing of this Annual Report. projections and performance comparisons. – A uthorisation and exposure limits are set and The key elements of the process are as follows: maintained by the board. – In addition to the r eview of the principal risks (see pages – The b oard meets with senior representatives of AllianzGI 16 to 19), the directors regularly review all the risks and also receives an Internal Controls Report from the on the Internal Risk Matrix and every six months the manager, together with a report on compliance with the board receives from the manager a formal report which manager’s anti-bribery policy. details any known internal controls failures, including – The audit c ommittee on behalf of the board reviews the those that are not directly the responsibility of the Internal Controls Reports of other third party service manager. providers, including those of AllianzGI and all other – A llianz Global Investors GmbH, UK Branch (AllianzGI), providers of administrative and custodian services to as the appointed manager, provides investment AllianzGI or directly to the company. management, accounting and company secretarial Statement of the Depositary’s Responsibilities company’s assets is remitted to the company within the usual time limits; in Respect of The Brunner Investment Trust – that the company’s income is applied in accordance PLC provided by HSBC Securities Services, with the Regulations; and Depositary to the Company. – the instructions of the Alternative Investment Fund “The Depositary must ensure that the company is Manager (the AIFM) are carried out (unless they conflict managed in accordance with the Financial Conduct with the Regulations). Authority’s Investment Funds Sourcebook, (the The Depositary also has a duty to take reasonable care to Sourcebook), the Alternative Investment Fund Managers ensure that the company is managed in accordance with Directive (AIFMD) (together the Regulations) and the the Articles of Association in relation to the investment and company’s Articles of Association. borrowing powers applicable to the company. The Depositary must in the context of its role act honestly, fairly, professionally, independently and in the interests of Report of the Depositary to the Shareholders of The the company and its investors. Brunner Investment Trust PLC (the company) for the The Depositary is responsible for the safekeeping of the year ended 30 November 2022. assets of the company in accordance with the Regulations. Having carried out such procedures as we consider The Depositary must ensure that: necessary to discharge our responsibilities as Depositary – the company’s cash flows are properly monitored of the company, it is our opinion, based on the information and that cash of the company is booked into the cash available to us and the explanations provided, that in all accounts in accordance with the Regulations; material respects the company, acting through the AIFM has been managed in accordance with the rules in the – the sale, issue, repurchase, redemption and cancellation Sourcebook, the Articles of Association of the company of shares are carried out in accordance with the and as required by the AIFMD.” Regulations; – the assets under management and the net asset value HSBC Securities Services per share of the company are calculated in accordance 14 December 2022 with the Regulations; Further information about the relationship with the – any consideration relating to transactions in 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 current 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 Manager reappointment The Management Engagement Committee reviews The annual evaluation that took place in December 2022 the investment management agreement and monitors included a presentation from the portfolio manager and the performance of the Manager for the investment, AllianzGI’s Head of Investment Trusts. This covered secretarial, financial, administration, marketing and the work done with the board on strategy, including the support services that it provides under that agreement. reporting of the ESG strategy; the dividend strategy; the It also reviews the terms of the agreement including the investment strategy in some overseas markets; the sales level and structure of fees payable, the length of notice and marketing activity, covering the work with investment period and best practice provisions generally. platforms and wealth managers; and the relaunch of the website. The evaluation also considered the manager’s Composition of the committee fee in relation to the peer group. The committee met in a private session following the presentation and concluded All the directors are members of the committee. Its terms that in its opinion the continuing appointment of the of reference can be found on the website at brunner.co.uk. manager on the terms agreed was in the interests of shareholders as a whole and recommended this to the Manager evaluation process board. The committee met once during the year for the purpose of the formal evaluation of the manager’s performance. Note 2 to the Financial Statements on page 92 provides detailed information in relation to the management fee. For the purposes of its ongoing monitoring, the board receives detailed reports and views from the portfolio Committee evaluation manager on investment policy and strategies, asset The activities of the Management Engagement committee allocation, stock selection, attributions, portfolio were considered as part of the board evaluation process characteristics, gearing and risk. The board also assesses completed in accordance with standard governance the manager’s performance against the investment arrangements as summarised on page 63. The controls set by the board. conclusion from the process was that the committee The manager also reported to the board on its succession was operating effectively, with the right balance of plans for the key individuals, including the members of the membership and skills. portfolio management team. Carolan Dobson Performance information is set out on page 8. Management Engagement Committee Chair 14 February 2023 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. 68 Governance ## Nomination Committee Report Role of the committee Succession planning The Nomination Committee leads the process for board Peter Maynard attained 12 years’ service in 2022 and will appointments and makes nomination recommendations retire from the board at the conclusion of the AGM in 2023 to the board. The committee reviews and makes in accordance with the succession plan. The board had recommendations on board structure, size and decided to retain all of its directors during 2022 to ensure composition, the balance of knowledge, experience, skill continuity through times when face to face meetings ranges and diversity and considers succession planning were difficult. During 2022 steps were taken to recruit a and tenure policy. replacement on the board for Peter and Elizabeth Field was appointed to the Board on 1 December 2022. The Composition of the committee recruitment was managed through Sapphire Partners, an independent executive search firm. The committee also All directors are members of the committee and its terms considered the succession plan for the Chair. of reference can be found on the website at brunner.co.uk The members of the committee met separately under Activities of the committee the leadership of the Senior Independent Director to The committee met during the year and considered, in review the tenure of the Chair and consider the plans for accordance with its terms of reference the structure, size succession. and composition of the board and satisfied itself with regard to succession planning, making recommendations Committee evaluation to the board. The committee reviewed the succession plan, The activities of the Nomination Committee were as mentioned below, and recommended it to the board. considered as part of the board evaluation process completed in accordance with standard governance The committee also discussed the results of the board arrangements as summarised on page 63. The and committee evaluation exercise, which covered the conclusion from the process was that the committee structure and size of the board and its composition, was operating effectively, with the right balance of particularly in terms of succession planning, and the membership and skills. experience and skills of the individual directors and the topic of board diversity. Carolan Dobson One issue considered was the chair of the Remuneration Nomination Committee Chair Committee. Whereas this committee is chaired by a 14 February 2023 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. 69 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 # Remuneration Committee Report ![img-15.jpeg](img-15.jpeg) I am pleased to present my report as Chair of the Remuneration Committee. ## 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 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: | | Base salary £ | Taxable expenses** £ | 2022 Total £ | Base salary £ | Taxable expenses** £ | 2021 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 Moynard | 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 | | % change | | | | % change | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | from | | | | from | | | | 2022 | 2021 to | | 2021 | | 2020 to | | 2020 | | | | £ | 2022 | | £ | | 2021 | | £ | 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 400 Share Price 219% 300 NAV debt at fair value 209% Benchmark 179% % 200 100 Nov 12 Nov 13 Nov 14 Nov 15 Nov 16 Nov 17 Nov 18 Nov 19 Nov 20 Nov 21 Nov 22 Source: AllianzGI/Thomson Reuters DataStream Jim Sharp Remuneration Committee Chair 14 February 2023 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 the auditors presented the audit plan for the year ending 30 November 2022. In the meeting relating to the year Andrew Hutton and Peter Maynard served on the end the committee considered the auditors’ report on the committee throughout the year. The Chair of the board annual financial statements. and Jim Sharp are invited to attend audit committee meetings, as are representatives of the manager. I was At each meeting the committee received a report on the delighted to welcome Elizabeth Field to the committee on operation of controls relating to the company and the her appointment to the board on 1 December 2022. proper conduct of its business in accordance with the regulatory environment in which both the company and As you will see from my biography on page 58, I am the manager operate. The committee has also received a Chartered Accountant and until 2017, I was an audit reports from the company’s service providers on their and advisory partner, at KPMG, London. I also chair the continuing response to cyber security risks and related audit committee of another listed company. During the business continuity updates. 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 Risk discharge their responsibilities fully. Although the board has ultimate responsibility for the management of risk, the audit committee assists by Role monitoring the formal reports from the manager and third-party service providers on internal controls. The principal role of the committee is to assist the board in relation to the reporting of financial information, review of The committee reviewed its approach to the risk financial controls and management of risk. The committee management process and concluded that existing has defined terms of reference and duties and the terms processes were adequate to ensure that its assessment of of reference are published on the company’s website, risk is robust and of sufficient frequency, namely carried brunner.co.uk. These include: out at each committee meeting and twice annually by the board as follows: – r esponsibility for the review of the Annual Report and the half-yearly Financial Report; – A matrix of risks is reviewed at each of its meetings. – c onsideration of the nature and scope, independence We consider whether new risks should be added and effectiveness of the external audit and of the or previously identified risks removed, assess their Auditors’ findings and recommendations; and likelihood of occurring and potential scale, review – r eview of the terms of appointment of the auditors, the mitigating actions and assess the residual risk including their remuneration and the provision of any against what we regard as acceptable – ‘risk appetite’. non-audit services by them. Economic volatility, rising inflation and the increase in international conflict and tensions have all been Activities considered by the board in this review. The committee meets twice each year. These meetings are – Assurance over mitigating actions in relation to these attended by the auditors and also by representatives of risks is provided in a series of reports from all the third the manager, including both risk and compliance officers. party service providers. – Resulting from the work of the audit committee, certain At the scheduled meetings in respect of the year ended 30 key risks are identified for disclosure and discussion in November 2022 the committee reviewed the company’s our annual report. We have also assessed residual risks accounting policies and confirmed their appropriateness, after controls and mitigating actions have been applied, and reviewed in detail the annual and half-yearly and evaluated whether our risk appetite has been financial reports and in each case recommended them for satisfied. The principal risks are in relation to Portfolio, adoption by the board. At the meeting for the half year Business and Operational matters. The risks identified, 74 Governance together with mitigating actions, and the results of the Financial Report and Significant Issues risk appetite assessment are set out in the Strategic The significant issues identified for the review of the Report on page 9. financial statements this year, that is, those identified as presenting the greatest risks, were the valuation and Viability Statement existence of the investments in the portfolio; and the Based on this review of risk the committee reviewed a accuracy, occurrence and completeness of dividend paper that supported the board’s conclusion, set out on income. These and other matters, identified as posing page 20 in the Strategic Report, of their reasonable lesser risk, were considered and discussed with the expectation that the company is viable in the longer term, manager and the auditor as part of the year end process. assessed as the next five years. Valuation and existence of the investments in the portfolio The audit, its effectiveness and the terms of Investments are valued using stock exchange prices appointment of the auditor provided by third party financial data vendors. Unlisted The committee reviewed the terms of appointment of investments are recognised on a fair value basis as set the auditor, monitored the audit process, assessed the out in the Statement of Accounting Policies on page 90 auditors’ independence and objectivity as well as the and are reviewed by the manager’s valuation committee effectiveness of the audit process. It was noted that there before being approved by the company and being made were no non-audit services provided by the firm, and that available to the auditor. none are planned in the financial year to 30 November The manager confirms to us the existence and ownership 2022. of portfolio investments. The manager receives Following the audit of these accounts, Gillian Alexander information from the custodian which is reconciled with will be rotating off the audit after a five year term the portfolio list. as partner. Her successor, Iain Kirkpatrick, has been Accuracy, occurrence and completeness of dividend introduced to the committee and the committee is income satisfied that he has the appropriate experience to take Income reports and forecasts are reviewed in detail with on the role. the manager at each meeting of the board, including yield As part of the review of the auditor, the members of the information. Changes to the forecast for each portfolio committee and those representatives of the manager stock from meeting to meeting are also scrutinised. involved in the audit process reviewed and considered a The committee confirms that these reports and checks number of areas including: have provided the directors with reasonable assurances – the r eputation and standing of the audit firm; on the risks identified. – the audit pr ocesses, evidence of partner oversight and In addition we reviewed the manner in which expenses external information such as annual reports from the are allocated between capital and income and concluded Auditors’ regulator; that the ratio of 70:30 remains appropriate since it fairly – the skills, e xperience and specialist knowledge of the reflects our investment policy and split of prospective audit team, particularly relating to investment trusts; capital and income returns. | – audit c | | ommunication including details of planning, | | | | --- | --- | --- | --- | --- | | information on relevant accounting and regulatory | | | | We also confirmed, as stated in the Statement of | | developments, and recommendations on corporate | | | | Accounting Policies on page 90, that there are no | | reporting; | | | | judgements, estimates, and assumptions about the | | – the r | easonableness of audit fees; and | | | carrying amounts of assets and liabilities that are not | | – the Financial R | | | eporting Council’s Audit Quality Report | readily apparent from other sources. | on PricewaterhouseCoopers LLP for 2021/22. The committee observed the audit materiality and error The committee considered the representations made by reporting thresholds in the audit plan and confirmed that the auditor and sought comments from representatives they were satisfied with these. As in previous years, the of the manager on the provision of services by the auditor auditor set the materiality threshold as 1% of net asset and the effectiveness of the external audit for the year value to align closely with comparable companies, but ended 30 November 2022. continues to report to the committee on matters below that level on qualitative grounds. In practice there were no It is the practice of the committee to meet with the auditor unadjusted errors reported in the audit. without management present at least once each year. The audit committee and the whole board reviewed Based on all of the above, the audit committee considers the entire annual report and noted all of the supporting that the performance of the auditor is satisfactory and has information received. It then considered whether the recommended to the board that a resolution proposing annual report satisfactorily reflected a true picture of the the re-appointment of the auditor is put to shareholders at the annual general meeting. 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 Directors’ confirmations Report and the financial statements in accordance with Each of the directors, whose names and functions are applicable law and regulation. listed in Directors, Manager and Advisers on page 58, confirm that, to the best of their knowledge: Company law requires the directors to prepare financial statements for each financial year. Under that law the – the c ompany financial statements, which have directors have prepared the financial statements in been prepared in accordance with United Kingdom accordance with United Kingdom Generally Accepted Accounting Standards, comprising FRS 102, give a true Accounting Practice (United Kingdom Accounting and fair view of the assets, liabilities, financial position Standards, comprising FRS 102 “The Financial Reporting and profit of the company; and Standard applicable in the UK and Republic of Ireland”, – the Str ategic Report includes a fair review of the and applicable law). development and performance of the business and the position of the company, together with a description of Under company law directors must not approve the the principal risks and uncertainties that it faces. financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the In the case of each director in office at the date the company and of the profit or loss of the company for directors’ report is approved: that period. In preparing these financial statements, the directors are required to: – so f ar as the director is aware, there is no relevant audit information of which the company’s auditors are – select suitable ac counting policies and then apply them unaware; and consistently; – the y have taken all the steps that they ought to have – state whether applic able United Kingdom Accounting taken as a director in order to make themselves aware Standards, comprising FRS 102 have been followed, of any relevant audit information and to establish that subject to any material departures disclosed and the company’s auditors are aware of that information. explained in the financial statements; | – make judgements and ac | | counting estimates that are | This responsibility statement was approved by the | | --- | --- | --- | --- | | reasonable and prudent; and | | | board of directors on 14 February 2023 and signed on its | | – pr | epare the financial statements on the going concern | | behalf by: | basis unless it is inappropriate to presume that the company will continue in business. Carolan Dobson Chair 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. 77 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 78 Governance ## Financial Oil and gas company Shell, our largest UK holding, is engaged ## Statements 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 ## Independent auditors’ report to the members of ## The Brunner Investment Trust PLC Report on the audit of the financial statements Our audit approach Opinion Overview In our opinion, The Brunner Investment Trust PLC’s Audit scope financial statements: – The c ompany is a standalone Investment Trust – give a true and fair view of the state of the company’s Company and engages Allianz Global Investors affairs as at 30 November 2022 and of its profit and GmBHUK Branch (the ‘‘Manager’’) to manage its assets. cash flows for the year then ended; – W e conducted our audit of the financial statements – have been properly prepared in accordance with United using information from State Street Bank & Trust Kingdom Generally Accepted Accounting Practice Company (the “Administrator”) to whom the Manager (United Kingdom Accounting Standards, including FRS has, with the consent of the directors, delegated the 102 “The Financial Reporting Standard applicable in provision of certain administrative functions. the UK and Republic of Ireland”, and applicable law); – W e tailored the scope of our audit taking into account and the types of investments within the Company, the – have been prepared in accordance with the involvement of the third parties referred to above, the requirements of the Companies Act 2006. accounting processes and controls, and the industry in | We have audited the financial statements, included within | which the Company operates. | | --- | --- | | the Annual Report, which comprise: Balance Sheet as at | – W e obtained an understanding of the control | | 30 November 2022; the Income Statement, Cash Flow | environment in place at both the Manager and | | Statement and Statement of Changes in Equity for the | the Administrator and adopted a fully substantive | | year then ended; the Statement of Accounting Policies; | testing approach using reports obtained from the | | and the notes to the financial statements. | Administrator. | | Our opinion is consistent with our reporting to the Audit | Key audit matters | | Committee. | – Valuation and existence of investments | – Accuracy, occurrence and completeness of Income from investments Basis for opinion We conducted our audit in accordance with International Materiality Standards on Auditing (UK) (“ISAs (UK)”) and applicable – Over all materiality: £4,970,970 (2021: £5,024,523) law. Our responsibilities under ISAs (UK) are further based on 1% of Net Assets. described in the Auditors’ responsibilities for the audit of – Per formance materiality: £3,728,228 (2021: £3,768,392). the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and The scope of our audit appropriate to provide a basis for our opinion. As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the Independence financial statements. We remained independent of the company in accordance with the ethical requirements that are relevant to our Key audit matters audit of the financial statements in the UK, which includes Key audit matters are those matters that, in the auditors’ the FRC’s Ethical Standard, as applicable to listed public professional judgement, were of most significance in the interest entities, and we have fulfilled our other ethical audit of the financial statements of the current period responsibilities in accordance with these requirements. and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by To the best of our knowledge and belief, we declare the auditors, including those which had the greatest effect that non-audit services prohibited by the FRC’s Ethical on: the overall audit strategy; the allocation of resources Standard were not provided. in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on We have provided no non-audit services to the company the results of our procedures thereon, were addressed in in the period under audit. 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. 80 Financial Statements 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 We tested the valuation of the listed equity investments by (Statement of Accounting Policies) and page 92 (Notes agreeing the prices used in the valuation to independent to the Financial Statements). The investment portfolio at third party sources. No misstatements were identified by the year-end comprised listed equity investments valued our testing which required reporting to those charged with at £522.8m. governance. We focused on the valuation and existence of investments We tested the existence of the investment portfolio because investments represent the principal element of by agreeing investment holdings to an independent the net asset value as disclosed on the Balance Sheet in custodian confirmation. No misstatements were identified the financial statements. 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 We assessed the accounting policy for dividend income (Statement of Accounting Policies) and page 92 (Notes recognition for compliance with accounting standards to the Financial Statements). 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 We tested the accuracy of dividend receipts by agreeing completeness of dividend income recognition as the dividend rates from investments to independent incomplete or inaccurate income could have a material market data. No misstatements were identified which impact on the Company’s net asset value and dividend required reporting to those charged with governance. cover. We also focused on the accounting policy for income To test for completeness, we tested that all dividends recognition and its presentation in the Income Statement declared in the market by investment holdings had as set out in the requirements of The Association of been recorded. No misstatements were identified which Investment Companies Statement of Recommended required reporting to those charged with governance. Practice (the “AIC SORP”) as incorrect application could indicate a misstatement in income recognition. 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. 81 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 Financial Statements 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 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 Financial Statements 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 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 ## Income Statement for the year ended 30 November 2022 | | | 2022 | | 2022 | | 2022 | | | 2021 | | 2021 | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Revenue | | | Capital | Total Return | | | Revenue | | | Capital | Total Return | | | | Notes | | | £ | | £ | | £ | | | £ | | £ | | £ | (Losses) gains on investments held at fair value 8 - (3,737,462) (3,737,462) - 82,406,614 82,406,614 through profit or loss 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 9,673,972 (6,051,444) 3,622,528 8,689,051 80,253,637 88,942,688 shareholders 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 Financial^{}[] Statements # Balance Sheet at 30 November 2022 | | 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 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 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 Financial^{}[] Statements # Cash Flow Statement for the year ended 30 November 2022 | | 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). 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 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 basis and treated as a capital or revenue item under the Companies Act. The company is a public depending on the facts and circumstances of each company limited by shares and is registered in England dividend. The board reviews special dividends and and Wales. The address of the company’s registered their treatment at each meeting. office is shown on page 60. The principal activity Where the company has elected to receive its of the company and the nature of its operations are dividends in the form of additional shares rather set out in the strategic report on page 9. The than in cash, the equivalent of the cash dividend is company conducts its business so as to qualify as recognised as income. Any excess in the value of the an investment trust company within the meaning of shares received over the amount of the cash dividend sub-section 1158 of the Corporation Tax Act 2010. is recognised in capital reserves. The principal accounting policies are summarised Deposit interest receivable is accounted for on an below. They have all been applied consistently accruals basis. throughout the year and to the preceding year. Commissions in respect of underwriting are recognised 1 Basis of pr eparation – The financial statements have when the underwritten issue closes and are generally been prepared under the historical cost convention, recognised within the Income Statement as revenue. except for the revaluation of financial instruments held Where, however, the company is required to take up at fair value through profit or loss and in accordance a proportion of the shares underwritten, the same with applicable United Kingdom law and UK proportion of the shares underwritten is recognised as Accounting Standards (UK GAAP), including Financial capital, with the balance recognised as revenue. Reporting Standard 102 – the Financial Reporting Standard applicable in the United Kingdom and 3 Investment management fee and administrative Republic of Ireland (FRS 102), the requirements of the expenses – The investment management fee is Companies Act 2006 and in line with the Statement calculated on the basis set out in Note 2 to the of Recommended Practice “Financial Statements financial statements and is charged to capital and of Investment Trust Companies and Venture Capital revenue in the ratio 70:30 to reflect the company’s Trusts” issued by the Association of Investment investment policy and prospective capital and income Companies (AIC SORP) in July 2022. growth. Other administrative expenses are charged in full to revenue, except custodian handling charges on In order to better reflect the activities of an investment investment transactions which are charged to capital. trust company, and in accordance with guidance All expenses are on an accruals basis. issued by the AIC, supplementary information which analyses the Income Statement between items of 4 Investments – As the company’s business is investing revenue and capital nature has been presented in financial assets with a view to profiting from their alongside the Income Statement. In accordance with total return in the form of increases in fair value, the company’s Articles of Association, net capital financial assets are held at fair value through profit returns may not be distributed by way of dividend. or loss in accordance with FRS 102 Section 11: ‘Basic The directors believe that it is appropriate to continue Financial Instruments’ and Section 12: ‘Other Financial to adopt the going concern basis in preparing the Instruments’. The company manages and evaluates financial statements as the assets of the company the performance of these investments on a fair value consist mainly of securities, which are readily realisable basis in accordance with its investment strategy, and and significantly exceed liabilities. Accordingly, the information about investments is provided on this basis directors believe that the company has adequate to the board. financial resources, to continue in operational Investments held at fair value through profit or loss existence for the foreseeable future. The company’s are initially recognised at fair value. After initial business, the principal risks and uncertainties it faces, recognition, these continue to be measured at fair together with the factors likely to affect its future value, which for quoted investments is either the development, performance and position are set out in bid price or the last traded price depending on the the Strategic Report on page 9. convention of the exchange on which they are listed. Gains or losses on investments are recognised in the 2 Income – Dividends received on equity shares are capital column of the Income Statement. Purchases accounted for on an ex-dividend basis. Foreign and sales of financial assets are recognised on dividends are grossed up at the appropriate rate of the trade date, being the date which the company withholding tax. commits to purchase or sell assets. Special dividends are recognised on an ex-dividend 90 Financial Statements Unlisted investments are valued by the Directors average price, are credited to the capital reserve; based upon the latest dealing prices, stockbrokers’ proceeds in excess of the original cost are credited to valuations, net asset values, earnings and other the share premium account. known accounting information in accordance with the 9 Dividends – In accordance with FRS 102 Section 32: principles set out by the International Private Equity ‘Events After the End of the Reporting Period’, the final and Venture Capital Valuation Guidelines issued in dividend proposed on ordinary shares is recognised December 2022. as a liability when approved by shareholders. Interim After initial recognition unquoted stocks are valued by dividends are recognised only when paid. Dividends the board on an annual basis. are paid from the revenue reserve. 5 Financ e costs – In accordance with the FRS 102 10 F oreign currency – In accordance with FRS 102 Section Section 11: ‘Basic Financial Instruments’ and Section 30: ‘Foreign Currency Translation’, the company is 12 ‘Other Financial Instruments’, long term borrowings required to nominate a functional currency, being are stated at the amortised cost being the amount of the currency in which the company predominately net proceeds on issue plus accrued finance costs to operates. The functional and reporting currency is date. Finance costs are calculated over the term of the pounds sterling, reflecting the primary economic debt on the effective interest rate basis. environment in which both the company and its’ Finance costs net of amortised premiums are charged shareholders predominantly operate and in which to capital and revenue in the ratio 70:30 to reflect its’ expenses are generally paid. Transactions in the board’s investment policy and prospective split of foreign currencies are translated into pounds sterling capital and revenue returns. at the rates of exchange ruling on the date of the transaction. Foreign currency monetary assets and Dividends payable on the 5% cumulative preference liabilities are translated into pounds sterling at the stock are classified as an interest expense and are rates of exchange ruling at the balance sheet date. charged in full to revenue. Profits and losses thereon are recognised in the capital 6 Taxation – Where expenses are allocated between column of the income statement and taken to the capital and revenue, any tax relief obtained in respect capital reserve. of those expenses is allocated between capital and 11 Significant judgements, estimates and assumptions revenue on the marginal method and the company’s – In the application of the company’s accounting effective rate of corporation tax for the accounting policies, which are described above, the directors period. Deferred taxation is recognised in respect of are required to make judgements, estimates, and all timing differences that have originated but not assumptions about the carrying amounts of assets reversed at the balance sheet date, where transactions and liabilities that are not readily apparent from other or events that result in an obligation to pay more tax sources. The investment portfolio currently consists or a right to pay less tax in the future have occurred. of listed investments and therefore no significant Timing differences are differences between the estimates have been made in valuing these securities company’s taxable profits and its results as stated in the financial statements. There are no significant judgements, estimates, and assumptions. A deferred tax asset is recognised when it is more likely than not that the asset will be recoverable. Deferred Estimates and underlying assumptions are reviewed tax is measured on a non-discounted basis at the rate on an ongoing basis. Revisions to accounting estimates of corporation tax that is expected to apply when the are recognised in the period in which the estimate is timing differences are expected to reverse. revised if the revision affects only that period, or in the period of the revision and future periods if the revision 7 Shar es repurchased for cancellation and for holding affects both current and future periods. 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 91 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 | | 2022 | | 2022 | | | 2021 | | 2021 | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | | Capital | | Total | | Revenue | | | Capital | | 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 Financial Statements 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 | | 2022 | | 2022 | | | 2021 | | 2021 | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | | Capital | | Total | | Revenue | | | Capital | | Total | | | | | £ | | £ | | £ | | | £ | | £ | | £ | On Fixed Rate Interest Loan* - - - 928 2,165 3,093 On 5% Cumulative Preference Stock repayable 22,500 - 22,500 22,531 - 22,531 after more than five years On 2.84% Fixed Rate Notes 2048 repayable after 215,800 503,532 719,332 215,720 503,346 719,066 more than five years 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 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 5. Taxation | | 2022 | | 2022 | | 2022 | | | 2021 | | 2021 | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | | Capital | | Total | | Revenue | | | Capital | | 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 Financial Statements 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 | | 2022 | | 2022 | | | 2021 | | 2021 | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | | Capital | | Total | | Revenue | | | Capital | | Total | | | | | £ | | £ | | £ | | | £ | | £ | | £ | Profit (loss) after taxation attributable to ordinary 9,673,972 (6,051,444) 3,622,528 8,689,051 80,253,637 88,942,688 shareholders 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 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 Financial Statements 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 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 Rate 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 Financial^{}[] Statements ## 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 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 2022 | Debt at par 2022 | Debt at fair value 2021 | Debt at par 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 Financial Statements | | 2022 | | | 2022 | | | 2021 | | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 30% Increase | | | 30% Decrease | | | 30% Increase | | | 30% Decrease | | | | in fair value | | | in fair value | | | in fair value | | | 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 | | | 2022 | | | | 2022 | | | 2021 | | | 2021 | | | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Other net assets | | | | Total Currency | | | | | | Other net assets | | | | Total Currency | | | | | Investments | | | (liabilities) | | | | Exposure | | | Investments | | | (liabilities) | | | | 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 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 | | | 2022 | | | | 2022 | | | | 2021 | | | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 20% Decrease | | | | 20% Increase | | | | 20% Decrease | | | | 20% Increase | | | | | | in sterling | | | | in sterling | | | | in sterling | | | | in sterling | | | | | | against | | | against | | | | against | | | | against | | | | | | foreign | | | | foreign | | | | foreign | | | | foreign | | | | currencies | | | | currencies | | | | currencies | | | | 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 | | | 2022 | | 2022 | | 2022 | | 2021 | | | 2021 | | | 2021 | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Fixed | | Floating | | | | | | | Fixed | | Floating | | | | | | | | | | | rate | | | rate | | | Nil | | | rate | | | rate | | | | Nil | | | | | | interest | | interest | | | Interest | | Total | | interest | | interest | | | Interest | | | 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 - - - (8,559,715) - - - (10,084,537) payables Net (liabilities) assets per balance (25,091,114) 7,918,710 522,829,082 497,096,963 (25,081,783) 3,694,667 533,923,937 502,452,284 sheet 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. | | | | Amount | | | | Effective | | --- | --- | --- | --- | --- | --- | --- | --- | | | Maturity | | borrowed | | Coupon | | rate since | | 2022 | | date | | £ | | rate | 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% | | | | Amount | | | | Effective | | --- | --- | --- | --- | --- | --- | --- | --- | | | Maturity | | borrowed | | Coupon | | rate since | | 2021 | | date | | £ | | rate | 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 Financial Statements * 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. | | Three | | | Between | | Between | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | months | | three months | | | one and | | More than | | | | | | or less | | and one year | | | five years | | five years | | Total | | | 2022 | | £ | | | £ | | £ | | £ | | £ | 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 | | Three | | | Between | | Between | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | months | | three months | | | one and | | More than | | | | | | or less | | and one year | | | five years | | five years | | Total | | | 2021 | | £ | | | £ | | £ | | £ | | £ | 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 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 Financial Statements | | 2022 | | | 2022 | | | 2021 | | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Book Value | | | Fair Value | | | Book Value | | | 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 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 Switzerland is home to more of our European holdings than any other country, including ## Information investment bank UBS in Zurich. 107 The Brunner Investment Trust PLC Annual Report for the year ended 30 November 2022 # Investor Information (unaudited) ## AIFM and Depository 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 depository and custodian in accordance with AIFMD under an agreement between the company, AllianzGI and HSBC. Depository 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. 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 Proximity 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 of Meeting Notice is hereby given that the ninety-sixth annual general be limited to the allotment of equity securities for meeting of The Brunner Investment Trust PLC will be held cash of an aggregate maximum nominal amount of at Trinity House, Trinity Square, Tower Hill, London EC3N £533,659 (2,134,636 ordinary shares) and shall expire 4DH on Friday 31 March 2023 at 12 noon to transact the at the conclusion of the next annual general meeting following business: of the company held after the meeting at which this resolution is passed or 30 June 2024, if earlier, save Ordinary Business that the directors may before such expiry make an offer or agreement which would or might require 1. To receive and adopt the Directors’ Report and the equity securities to be allotted after such expiry and Financial Statements for the year ended 30 November the directors may allot equity securities in pursuance of 2022 with the Auditors’ Report thereon. such offer or agreement as if the power conferred had 2. To declare a final dividend of 6.05p per ordinary share. not expired. 3. To re-elect Carolan Dobson as a director. 4. To re-elect Amanda Aldridge as a director. 14. That the c ompany be and is hereby generally and 5. To re-elect Andrew Hutton as a director. unconditionally authorised in accordance with section 6. To re-elect Jim Sharp as a director. 701 of the Companies Act 2006 (the Act) to make 7. To elect Elizabeth Field as a director. market purchases (within the meaning of section 8. To approve the Directors’ Remuneration Policy. 693(4) of the Act) of ordinary shares of 25p each in 9. To approve the Directors’ Remuneration the capital of the company (ordinary shares) either Implementation Report. for retention as treasury shares or for cancellation, 10. To re-appoint PricewaterhouseCoopers LLP as the provided that: Auditor of the company. | 11. To authorise the directors to determine the | | (i) the maximum number of ordinary shares hereby | | | | --- | --- | --- | --- | --- | | | remuneration of the Auditor. | | authorised to be purchased shall be 6,399,639; | | | | | (ii) | the minimum pric | e which may be paid for an ordinary | Special Business share is 25p; To consider and, if thought fit, pass the following (iii) the maximum price which may be paid for an ordinary resolutions of which resolution 12 will be proposed as share is an amount equal to 105% of the average of an ordinary resolution and resolutions 13 and 14 will be the middle market quotations for an ordinary share proposed as special resolutions: taken from the London Stock Exchange Official List for 12. That the dir ectors be and are hereby generally and the 5 business days immediately preceding the day on unconditionally authorised pursuant to section which the ordinary share is purchased or such other 551 of the Companies Act 2006 to allot relevant amount as may be specified by the London Stock securities (within the meaning of section 551 of that Exchange from time to time; Act) provided that this power shall be limited to the (iv) the authority her eby conferred shall expire at the allotment of relevant securities up to an aggregate conclusion of the annual general meeting of the nominal amount of £3,557,727 (14,230,908 ordinary company in 2024 or 30 June 2024 if earlier, unless such shares) and shall expire at the conclusion of the next authority is renewed prior to such time; and annual general meeting of the company held after the meeting at which this resolution is passed or 30 (v) the company may make a contract to purchase June 2024 if earlier, save that the directors may before ordinary shares under the authority hereby conferred such expiry make an offer or agreement which would prior to the expiry of such authority which will or may or might require relevant securities to be allotted be executed wholly or partly after the expiration of after such expiry and the directors may allot relevant such authority and may make a purchase of ordinary securities in pursuance of such offer or agreement as if shares pursuant to any such contract. the power conferred hereby had not expired. 13. That the directors be and are hereby empowered, By order of the board pursuant to section 570 of the Companies Act 2006, Kirsten Salt to allot equity securities (as defined in section 560 Company Secretary of that Act) pursuant to the authority conferred by 14 February 2023 resolution 12 above or by way of a sale of treasury 199 Bishopsgate, London EC2M 3TY shares as if section 561 of that Act did not apply to any such allotment, provided that this power shall 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. To 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 personalised 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 Proximity (see note 10 below). v) in the case of shares held through CREST, via the CREST system (see notes below). 7. If you return 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 Group, 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 Store ![img-16.jpeg](img-16.jpeg) GooglePlay ![img-17.jpeg](img-17.jpeg) 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 return 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 # Glossary ## 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). 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). 116 The Brunner Investment Trust PLC 199 Bishopsgate London EC2M 3TY +44 (0)203 246 7000 www.brunner.co.uk