Annual Report, 30 November 2023
A GLOBAL EQUITY INVESTMENT TRUST
The Brunner
Investment Trust PLC
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Capital growth and dividends
The Brunner Investment Trust PLC (‘Brunner’)
aims to provide growth in capital value and
dividends for investors over the long term
through investing in a portfolio of global
and UK equities.
The Key Performance Indicators (KPIs) on
page 14 show how effective the company
has been in delivering its strategy.
‘All-weather’ portfolio
The company provides a balanced
solution for investors looking for a global
and UK portfolio of equities and a quarterly
dividend. The company’s investment
policy is set out in the Strategic Report on
page 9.
Independence
Brunner has an independent board
of directors and no employees. Like
many other investment companies, it
outsources investment management
and administration to an investment
management company – Allianz Global
Investors – and other third parties to provide
shareholders with an efficient, competitive,
cost-effective way to gain wide equity
investment exposure through a single
investment vehicle.
The Brunner Investment Trust PLC
Like many long-established investment
trusts, Brunner’s name reflects its history
rather than its investment strategy.
Johannes Brunner was born in Canton
Zürich and migrated to Lancashire in
1832. His son, Sir John Brunner, Bart, was
one of the most successful industrialists
of the nineteenth century, and in politics
an influential radical Liberal MP until well
into the twentieth century. In 1873 he
and the scientist Ludwig Mond founded
Brunner, Mond and Co, the largest of the
four companies which came together
to form ICI in 1926. The following year
the Brunner family chose to sell its ICI
shares and establish a broad, long-term
investment vehicle – so in 1927, The
Brunner Investment Trust was formed.
John Brunner was a passionate
campaigner, including for welfare reforms
and free trade, and used his wealth for
philanthropic purposes. Jim Sharp, a
director of the company, is connected to the
Brunner family by marriage and continues
the link between board and family. Brunner
family share ownership information is
included on pages 64 and 71.
A family investment from the beginning…
Benchmark
For the year under review the benchmark
against which the portfolio is measured was
a composite of 70% FTSE World Ex UK Index
and 30% FTSE All-Share Index.
Association of Investment Companies
Brunner is a member of the Association
of Investment Companies (AIC) and the
company’s shares are recognised by the
AIC as suitable for retail investors. AIC
Category: Global.
Risk and gearing
A statement explaining how the assets
have been invested to spread risk and
how gearing is managed is included under
Investment Policy on page 10.
Sir John BrunnerBrunner, Mond & Co. factory, worker cottages and Co-operative Society
A GLOBAL EQUITY INVESTMENT TRUST
Contents
Overview
2 Financial Highlights
5 Chair’s Statement
8 Performance – Review of the Year
Strategic Report
10 Introduction
11 Section 172 Report
14 Key Performance Indicators
16 Risk Report
21 Environmental, Social and Governance Issues
Investment Manager’s Review
24 Portfolio Managers’ Report
36 Five years of benchmark outperformance
38 Investment Philosophy and Stock Selection Process
40 Company Engagement Activities
41 Environmental, Social and Governance performance
42 Top 20 Holdings
47 Case Studies
50 Portfolio Breakdown
55 Distribution of Invested Funds
58 Historical Record
Governance
60 Directors, Manager and Advisers
63 Directors’ Report
65 Corporate Governance Statement
72 Management Engagement Committee Report
73 Nomination Committee Report
74 Remuneration Committee Report
78 Audit Committee Report
81 Statement of Directors’ Responsibilities in respect
of the financial statements
Financial Statements
84 Independent auditors’ report to the members
of The Brunner Investment Trust PLC
90 Income Statement
91 Balance Sheet
92 Statement of Changes in Equity
93 Cash Flow Statement
94 Statement of Accounting Policies
96 Notes to the Financial Statements
Investor Information
112 Investor Information (unaudited)
115 Notice of Meeting
119 Glossary
The photograph of fountains in Barcelona on the cover of this report is inspired by the
Arms of the Brunner family. The family originated from Switzerland and ’Brunnen’ is
German for fountain.
WWW.BRUNNER.CO.UK
2
9
23
59
83
111
1
Financial Highlights
For the year ended 30 November 2023
Seattle, Washington, USA, is home
to Microsoft, the portfolio’s largest
holding at year end.
2
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
OVERVIEW
Discount - average in the year
2
11.5%
2022
10.3%
Earnings per ordinary share
26.4p
2022 22.7p
+16.3%
Dividend per ordinary share
3
22.7p
2022 21.5p
+5.6%
Net assets per ordinary share
1
Debt at fair value
2
1,258.6p
2022 1,178.7p
+6.8%
Share price total return
2 5
+6.6%
2023 1,065.0p
2022 1,020.0p
Net assets per ordinary share
1
Debt at Par
1,237.2p
2022 1,164.4p
+6.3%
Consumer price index
+3.9%
2023 131.7
2022 126.7
Benchmark total return index
4
+5.5%
2022
+1.4%
Net asset value total return
Debt at fair value
2
+8.7%
2022
+3.0%
Net asset value total return
Debt at par
2
+8.2%
2022
+0.8%
Revenue reserves per ordinary
share for the year
29.6p
2022
25.9p
All figures are UK GAAP unless they are stated to be Alternative Performance Measures. (Glossary page 119).
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 119.
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.
3
OVERVIEW
0.48p
1972
22.70p
4,629.2%
1,587.7%
2023*
of continual
dividend growth
yrs
52
1973
Britain joins
the European
Community
1973
Yom Kippur
war
197
4
Bear Market
1976
Britain borrows
money from
the IMF
1979
‘Winter of
Discontent’
1982
Economic
recession
leads to high
unemployment
in the UK
1984
12-month
Miners’ Strike
1986
‘Big Bang’
enhances
London’s status
as a financial
capital
1987
‘Black
Monday’
200
0
Beginning of
the end of the
dot-com boom
2001
9/11
2003
The Second
Gulf War
2008
Financial crisis
2016
Brexit vote
2020
COVID-19
pandemic
2022
Invasion of
Ukraine
Inflation growth of 1,587.7% over the period. RPI 1972-1986. CPI 1987-2023.
Brunner dividend growth of 4,629.2% over the period
Total dividend: from 0.48p to 22.70p over the period * Final dividend for approval at the 2024 AGM
4
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Chair’s Statement
Dear Shareholder,
Review of the 2023 Financial
Year and Performance
2023 was another year of difficult and
volatile stock markets in uncertain
economic conditions. The sheer pace
and reach of how news now travels
round the world, coupled with the
amount of short-term trading done in
markets by maths models, may mean
that this is how most years will look in
the future.
Global equities climbed out of a dip
through December 2022 and January
2023, but over February and early-
March gave back most gains. It was a
repeating picture over the remainder of
the year as gains from March to August
were largely given back up to a point
in October which was barely above the
start of the year. From that point though
markets rallied to finish the calendar
year strongly ahead. Our financial year
reporting period is from 1 December
2022 to 30 November 2023 and
therefore captures only a proportion of
the gains from the 2023 year-end rally,
but the strong December will be in our
2024 fiscal year.
Globally inflation continued to be more
persistent than expected, subduing
only towards the end of the year. This
allowed central banks to make more
optimistic statements about future cuts
in interest rates, spurring the year end
stock market rally.
In geopolitical terms we are
approaching the second anniversary
of the war in Ukraine and are in the
middle of another war in the Middle
East; neither conflict has a clear end in
sight. Our thoughts remain firmly with all
those affected by conflicts and political
instability around the world, as well
as those affected by the many natural
disasters seen in 2023.
In environmental terms, global
temperatures broke new records and
COP-28 saw nations further galvanise
behind the movement away from fossil
fuels, though how that is achieved
remains unclear.
The development and scale of
implementation of Artificial Intelligence
dominated headlines through the year.
The mega-capitalisation companies
– dubbed ‘The Magnificent Seven’
(Alphabet, Amazon, Apple, Meta,
Microsoft, Nvidia, and Tesla) were
significant beneficiaries of this. AI offers
both opportunity and concern from the
perspective of humanity. Whilst that
debate is not one to have here, from an
investment perspective it will be crucial
to understand if regulation will be
imposed and if it will ultimately help or
hinder those firms at the cutting edge.
Against this volatile backdrop, Brunner
once again beat its benchmark over the
year to 30 November 2023. Brunner’s
Net Asset Value (NAV) per ordinary
share total return (calculated on a net
dividends reinvested basis with debt at
fair value) was +8.7%, versus +5.5% for
the composite benchmark (70% FTSE
World Ex. UK / 30% FTSE All-Share).
This marks the 5th consecutive year
of outperformance of the benchmark
by the trust. As we are only relatively
Against this volatile backdrop, Brunner once again
beat its benchmark over the year to 30 November
2023… This marks the 5th consecutive year of
outperformance of the benchmark by the trust.
5
OVERVIEW
small holders of the noted stocks
that led markets forward, the board
is particularly happy to report this
consistent progress to shareholders.
The four largest contributors to
performance were Microsoft, Jumbo SA
(a Greek listed retailer), Novo Nordisk
and Munich Re, demonstrating the
variety of companies and sectors the
manager selects to meet the company’s
performance and risk objectives.
Brunner should be viewed as an ‘all
weather global equity portfolio’.
Over time we aim to demonstrate the
substance of this claim, providing solid
outperformance through a variety of
market and macroeconomic conditions.
The portfolio is constructed with a
focus on high quality companies that
are expected to perform well over the
long term. The managers do not look to
build a portfolio that will perform on a
particular economic condition or trigger
– rather they remain aware of these
external factors and review how they
might impact the individual companies
within the portfolio. You can read more
about the portfolio managers’ analysis
of what happened to the portfolio
during the period on pages 23 to
58. The portfolio managers also
observe that stock market returns bear
little resemblance to economic factors or
drivers over time. “Over time” is of course
the important factor there as markets
can be over-sensitive to news flow and
economic data. “Over time” perfectly
describes a key tenet of our investment
philosophy though – thinking about
performance over longer time periods,
not trying to time or profit from short-
term market movements.
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.
Active stewardship is a key task of any
responsible asset owner.
Understanding the manager’s approach
to ESG and how it has been integrated
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 both the manager’s
internal analysis and external measures
and benchmarks.
We give a full and clear account of
ESG considerations within this report
(see page 21). We also have a
page on our website that describes
the manager’s ESG processes 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 and combined
ESG risk measurements 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 measurement, the latest just at
the end of 2023 coming from the FCA.
We see this as a further step forward
towards more universal 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 previous levels
and there has been a contribution
from special dividends. This meant the
portfolio’s generation of income and
earnings grew once more through 2023,
with earnings per share for the year
rising by 16.3%, from 22.7p to 26.4p.
This has put Brunner in the strong
position once again to be able to cover
our increased dividend payment to
shareholders and still put a sizeable
amount into revenue reserves for a
future ‘rainy day’.
Dividend
The proposed final dividend of 6.05p,
if approved by shareholders, will be
paid on 4 April 2024 to shareholders
on the register on 1 March 2024.
In line with board’s dividend policy,
which is outlined on page 14, the
total dividend for 2023, including the
proposed final dividend, will be 22.7p.
This represents an increase of 5.6%
over the 2022 dividend of 21.5p and
means Brunner has now reached 52
years of consecutive dividend increases,
cementing its place near the top of the
AIC’s “Dividend Heroes” list.
Revenue reserves will remain strong
at 29.6p after the payment of the
proposed final dividend.
Brunner should be viewed as an ‘all weather
global equity portfolio’. Over time we aim
to demonstrate the substance of this claim,
providing solid outperformance through a variety
of market and macroeconomic conditions.
6
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Board Succession
As noted in the previous report,
Elizabeth Field joined the board at
the start of the financial year on 1
December 2022. In addition, Andrew
Hutton was appointed as Senior
Independent Director at the Annual
General Meeting in 2023, succeeding
Peter Maynard who stepped down.
Portfolio Management Team
At the Annual General Meeting at
the end of March 2023, Julian Bishop
became Co-lead Portfolio Manager
alongside Christian Schneider. Christian
who was Deputy CIO for AllianzGI’s
Global Growth franchise has since been
promoted to the CIO role, leading that
team. Simon Gergel, AllianzGI’s CIO UK
Equities, continues his involvement with
the portfolio, having worked closely
on the management of Brunner for
many years.
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 and Discount
Promoting Brunner to as wide an
audience as possible remains a priority
and the board supports the manager’s
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 portfolio. Attracting
more investors, particularly individual
investors, generally has the effect of
improving liquidity of the trust’s shares.
As noted in previous reporting, in 2022
we agreed that we should refer to
Brunner as “An all-weather global equity
portfolio”. We would like to think that
Brunner has been “doing what it says
on the tin”. It is something of an obvious
‘line’ given the prevailing economic and
fiscal conditions. Anyone can claim to
be ‘all-weather’: we believe we have
been living and breathing it for a long
time; the consistent results achieved are
the proof.
Despite the strong performance noted,
Brunner traded at a larger than average
discount through most of the period.
Some of this is sector-wide – investment
trusts in general have had a difficult
year as investors shied away in the
prevailing macro environment. The AIC’s
statistics for 2023 show the impact on
average discounts. Although not within
the reporting period, as I write at the
beginning of 2024 it has been pleasing
to see the investment trust sector rally
from 2023 lows.
We have seen the discount of Brunner
relative to its peers begin to narrow
which we believe is a reflection of
the portfolio’s out-performance and
the effectiveness of our marketing
campaign. As a board, we are
disappointed that a trust that has
delivered 5 consecutive years of
outperformance over one of the most
volatile periods in stock market history,
trades at a discount and continue
our strenuous efforts in marketing,
sales and investor relations to gain
greater investor knowledge. We
have been heartened by the steady
increase in ownership from private
investors achieved.
Outlook
2024 will likely be another significant
year in terms of ‘headline’ events with
64 countries plus the European Union
holding elections. Associated ‘news’
is likely to be rampant. Along with
two major conflicts, the geopolitical
landscape remains dangerous.
Markets have been acutely concerned
with inflation and second-guessing
central bank’s rate rhetoric. Inflation
appears to be more under control but
events in the Middle East have the
potential to disrupt that.
Not all economies are built equally,
and we have already seen divergence
in economic performance. As you will
read in the Portfolio Manager’s Review
on pages 24 to 39, the portfolio
managers are largely agnostic to where
a stock happens to be listed. A large
proportion of world class businesses
derive their revenues from a diverse
range of locations around the globe,
often unconnected with where their
stock is listed. The managers also argue
in their report that the ‘macro’ factors,
which undoubtedly move markets
(possibly dramatically) in the short
term, ultimately have limited impact on
the long-term outcomes for individual
businesses and thus for stock market
returns over the long term.
As ever this scenario provides a good
hunting ground for stock pickers who
can look past the immediate noise and
focus on the long-term opportunities
available from individual businesses,
crafting a balanced portfolio of
such opportunities.
Annual General Meeting
At our 2023 Annual General Meeting in
March, it was a pleasure to introduce
our now co-lead manager Julian
Bishop to the audience. The event
was well attended by shareholders,
with an interesting range of questions
and discussion. We look forward to
welcoming shareholders once 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 Monday 25 March 2024. Attending
shareholders will receive a presentation
from the portfolio managers before the
formal business takes place. 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
113) 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
13 February 2024
7
OVERVIEW
Performance – Review of the Year
Review of the Year
Revenue
Year ended 30 November 2023 2022 % change
Income available for ordinary dividend £11,251,047 £9,673,972 +16.3
Earnings per ordinary share 26.4p 22.7p +16.3
Dividends per ordinary share 22.7p 21.5p +5.6
Consumer price index 131.7 126.7 +3.9
Assets
As at 30 November 2023 2022
Capital return
% change
Total return
1
% change
Net asset value per ordinary share with debt at fair value 1,258.6p 1,178.7p +6.8 +8.7
Net asset value per ordinary share with debt at par 1,237.2p 1,164.4p +6.3 +8.2
Share price 1,065.0p 1,020.0p +4.4 +6.6
Total net assets with debt at fair value
2
£537,307,615 £503,217,127 +6.8 -
Total net assets with debt at par £528,209,759 £497,096,963 +6.3 -
Ongoing charges
3
0.64% 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 +6.8% +8.7%
Change in benchmark +2.7% +5.5%
Percentage point performance against benchmark +4.1 +3.2
A Glossary of Alternative Performance Measures (APMs) can be found on page 119.
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 119. (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 5. (APM).
5
For the financial year under review the benchmark was 70% FTSE World Ex UK Index and 30% FTSE All-Share Index.
8
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Pharmaceutical and
biotechnology specialist
Novo Nordisk was a top
contributor to performance.
The company is headquartered
in Copenhagen, Denmark.
Strategic
Report
10 Introduction
11 Section 172 Report
14 Key Performance Indicators
16 Risk Report
21 Environmental, Social and
Governance Issues
9
of investors and to ensure that the
company’s shares are attractive to
new investors and investor groups,
particularly individuals with smaller
portfolios held either directly or in self-
invested pension plans for whom we can
provide a balanced solution for equity
investment. It is also our objective to
provide good value for shareholders
and ensure that the costs of running
the company are reasonable and
competitive. Information on Revenue
and Invested Funds in the year is
summarised on page 63.
Brunner has an independent board
of non-executive directors and no
employees or premises of its own.
Like other investment companies, it
outsources investment management,
accounting, company secretarial and
other administration services to an
investment management company –
Allianz Global Investors UK Ltd – and
to other parties, including HSBC Bank
plc as depositary and custodian, and
Link Group as registrar. This enables
Brunner to provide shareholders with a
competitive, cost-effective way to gain
wide investment exposure through a
single investment vehicle.
The company has a main market
listing on the London Stock Exchange.
In addition to annual and half-yearly
financial reports, the company
announces net asset values per share
daily and provides further information
monthly to the market, in order for
investors and market professionals to
compare its performance with its peer
group. The investment manager also
issues a monthly update on investment
performance which is posted on the
company’s website and is available
by email.
Manager’s Investment Style
The essence of the investment style
which we ask the investment manager
to follow is to select the best stocks in
a ‘bottom up’ approach, before any
sector or country consideration. The
portfolio is concentrated into 60 stocks
at 30 November 2023 (62 stocks in
2022). Within that concentration modest
gearing - employing the company’s
borrowings to invest - is within guidelines
set by the board.
Introduction
Purpose
Our purpose is to provide the company’s
shareholders with growth in capital
value and dividends over the long term
through investing in a portfolio of global
and UK equities. The company aims to
achieve a return higher than that of our
benchmark, after costs, and to achieve
steady dividend growth in real terms.
Strategy Review
We hold an annual strategy meeting
outside the normal timetable of board
meetings. At the most recent meeting
the topics covered included:
– Investment strategy and balancing
the Brunner portfolio
– Threats and opportunities for
investment trusts
– Marketing strategy and the focus
for 2024.
Business Model
The Brunner Investment Trust PLC carries
on business as an investment company
and follows the investment policy
described below.
By pursuing our investment objective
we aim to appeal to a broad range
Investment Policy
Investment Objective
The Brunner Investment Trust PLC aims
to provide growth in capital value and
dividends for investors over the long
term through investing in a portfolio of
global and UK equities.
The benchmark against which
performance is measured is 70% FTSE
World Ex UK Index and 30% FTSE
All-Share Index.
Risk Diversification
The company aims to achieve
a spread of investments across
geographies and sectors. The
maximum holding in any single stock
is limited to 10% of gross assets at the
time of investment and the portfolio
will consist of at least 50 stocks. The
company will not invest more than 15%
of its gross assets in other UK listed
investment companies.
Gearing
The company seeks to enhance
returns over the long term through
appropriate gearing. The board
monitors the gearing, which is
employed within the guidelines
set from time to time by the board.
Gearing in any case will not exceed
20% of net assets at the time
of borrowing.
In the investment policy above, gross assets means the company’s assets before deduction of all debt and other
obligations, net assets means the company’s assets after deduction of all debt and other obligations based on the fair
value of the long-term debt and preference shares.
10
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Section 172 Report
Engagement with Key Stakeholders
Engagement with the company’s stakeholders enables the company to fulfil its strategies and to promote the success of the
company for the benefit of the shareholders as a whole. In the year we were pleased to hold the Annual General Meeting (AGM)
as an in-person event which was well attended and we hope to see and meet with more shareholders in 2024. 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
the primary stakeholders as the
investors in the company. The
company’s objective is to provide
growth in capital value and
dividends for investors over the long
term and the company’s strategy
is to provide shareholders with the
desired returns by diversifying to
take into account risk appetite.
Participation in investor conferences and webinars, together with videos and
podcasts on the website informs shareholders of the investment management
activity and performance of the company.
The increasing use of new presentation styles to engage investors such as audio
(podcasts), video and the Turtl platform to distribute information to shareholders
and the wider investment community, including in shorter, more digestible formats.
Jim Sharp is related to the Brunner family shareholders which provides further
insight for the board into the views of investors to be used for the advantage of all.
Outcome: The investment team with co-leads Julian Bishop and Christian Schneider has extended its recognition with
shareholders, journalists and industry commentators. The investment team has multiple skill sets (including Income, Growth,
Global and UK) has an increasing profile in the investment trust arena.
Both the company’s market rating (reflected in the discount) and the liquidity of 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 2023 and averaged 11.5% in the year, as shown on page 15.
Readers of communications
including shareholders and other
investors, look for information about
the company on the website and
online media coverage.
The user experience on the website has been further developed during the year.
The manager has worked with other publications, such as Citywire, to provide
more information about the trust online.
Outcome: Continual enhancements and improvements to the website including both helpful background and educational
material as well as new and current information providing updates for shareholders and other investors.
The company’s shareholders are its primary stakeholders. Other stakeholders include service
providers and the companies in which it invests. The board’s strategy is facilitated by the
manager reporting interaction on its behalf with a wide range of stakeholders through
meetings, seminars, presentations and publications and through contacts made through our
suppliers and intermediaries.
11
STRATEGIC REPORT
Stakeholders and how they are
taken into account Activity in the year
Public Relations and media – the
company continues to work with
public relations advisers to ensure
information about the company,
its strategies and performance can
reach a wide audience to update
shareholders and potential investors
through press articles and online
media coverage.
There is an Integrated PR programme and both Julian Bishop and Christian
Schneider, the co-lead investment managers, provide interviews, presentations
and record podcasts to inform and educate.
We work with a third party, Lansons Communications, and the campaign work is
aligned with AllianzGI’s marketing activity.
Outcome: PR activity (generating exposure in consumer finance titles and the national press) is crucial for the platform
market. Reports to the board show there is a direct correlation between press articles appearing and spikes of interest and
purchases of the company’s shares.
Following feedback that people want bite-sized, shorter presentations, the majority of content for engagement is in short
form, with longer form content accessible for those that want to delve deeper.
Service providers – as well as the
management company, the board
has appointed a depositary, a
custodian and a registrar to provide
specialist services.
The board and these stakeholders
need to be assured of good
governance and controls in the
company.
In addition to regular contact and assurance testing that sound and effective
controls are in place from all of these service providers, there is a rolling
programme of due diligence visits to suppliers of third party services by the
AllianzGI’s investment trust team to ensure that the company is getting good
quality services with robust and fit for purpose internal controls.
A due diligence review of AllianzGI’s supplier of investment trust fund
administration services followed issues that had arisen during the year, some areas
for improvement were identified and remediation was agreed.
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 took place in January 2024, with HSBC’s now annual
assessment of the AllianzGI UK Ltd entity as the new AIFM, and no issues
were raised.
Outcome: Assurances from direct 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. A NAV pricing issue arose during the year from an external provider of fund administration
services. The manager responded with a due diligence exercise, resulting in enhanced controls and procedures.
Improvements continued to be made in client reporting to Brunner following the fund administration due diligence.
12
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Stakeholders and how they are
taken into account Activity in the year
Potential new investors are an
important stakeholder group and
getting key information to the
investment market so that investors
both current and prospective can
make informed investment choices
is a significant activity.
Research platforms and distribution
partnerships are employed to reach
a wider audience of investors.
The marketing team also works on events and campaigns with other research and
marketing companies, including Edison and Kepler.
Additional resources were allocated by the board during the year for publishing
research and event participation.
‘Direct to consumer’, for self-directed investment, is primarily driven by platforms.
Platforms essentially give convenient access to the majority of the investment
universe for investors. The board has encouraged activity to increase recognition
by those operating the platforms through influencers (including through PR,
video recordings with Asset TV and the company’s digital marketing strategy).
‘Influencing’ activity involves sponsored content, advertising and client events,
targeting the platforms themselves alongside the key research platforms.
In the year the board described 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.
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
STRATEGIC REPORT
Debt at
fair value
Debt
at par
Benchmark Percentage point
relative return
Percentage point
relative return
2023 +8.7% +8.2% +5.5% +3.2 +2.7
2022 +3.0% +0.8% +1.4% +1.6 -0.6
2021 +21.5% +21.1% +21.1% +0.4 0.0
Key Performance Indicators
The board uses the following Key Performance Indicators (KPIs) to monitor and evaluate
the performance of the company in executing its strategy.
Performance against the Benchmark Index
Dividends
Net Asset Value Total Return with Debt at Fair Value and Debt at Par
Includes the proposed final dividend.
This is the most important KPI by
which performance is judged.
The principal objective is to achieve
a return higher than that of the
benchmark index over the long
term, after absorbing costs. For
this indicator, we measure the
performance against the benchmark
using NAV with debt at fair value,
in line with industry practice.
We have also disclosed here the
performance against the benchmark
using NAV with debt at par value for
information purposes. Capital returns
are shown on page 8 and in the
Chair’s Statement.
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
58, and in the graphic on page
4, which show that dividends have
risen in every year since 1972 and
have increased by 5.6% this year.
%
2022
20222021 2023
2023
22.7p
21.5p
Annual dividend
25.0
20.0
15.0
10.0
5.0
0.0
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 119.
14
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Share Ownership
Percentage of issued capital held by wealth managers and investment platforms
The marketing programme targets
both professional and retail investors
and aims to create ongoing and
sustained demand for Brunner shares.
A successful marketing strategy
stands to benefit all of the company’s
shareholders by increasing liquidity.
We look at the growth of share
holdings of clients of wealth managers
and of investment platforms to see
the impact of retail demand for the
company’s shares.
1
including Brunner family members
2
including beneficial owners not known
Ongoing Charges
Ongoing charges are operating
expenses incurred in the running
of the company, whether charged
to revenue or capital but excluding
financing costs. The ongoing charge
is calculated in accordance with the
AIC’s recommended methodology
(See Glossary on page 119). This
figure does not include costs incurred
from trading activities, as these are
capitalised within the investment
valuation (Note 8 on page 100)
which amount to a further 0.05% of
net assets (2022 - 0.04%). Ongoing
charges are published by the AIC.
2022 2023
0.64%
Discount
The company’s shares currently trade
at a discount to the net asset value
per share. The share price depends
on a number of factors, including
sentiment towards the company
and towards investments in equities
in general. The board monitors the
discount with the aim in normal
markets of being not out of step
with comparable trusts in the sector.
The board gives the manager
authority in certain circumstances to
buyback and either cancel the shares
or hold them in treasury, which would
be likely to result in a temporary
narrowing of the discount.
5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
%
Nov 2020
Nov 2021 Nov 2022 Nov 2023
0.63%
2022 2023
Financial
institutions
9.8%
12.6%
Others
2
2.0%
3.1%
Direct
holdings
1
29.1%29.4%
Investment
platforms
36.4%
31.4%
Wealth
managers
22.8%
23.5%
15
STRATEGIC REPORT
As reported to shareholders in the half-yearly report in 2023, 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. The likelihood of both ‘Market volatility’ and ‘Emerging’ risks have been moved from
‘likely’ to ‘almost certain’ from this time last year.
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 78, and includes a review of a more detailed version of these tables, in the form of a risk
matrix, at least twice yearly.
Risk Report
IMPACT
LIKELIHOOD
low moderate high very high
rare unlikely moderate likely almost certain
2.3
Investment
performance
3.3
Accounting /
legal/regulatory
3.4
Corporate
governance
3.7
Reputational
2.1
Investment
strategy
3.1
Organisational
set-up / process
2.2
Shareholder
relations
3.2
Outsourcing /
third party
1.3
Counterparty
2.6
Market
demand
3.6
Financial
Crime/Fraud,
Cyber and AI
3.5
Key persons
2.4
Financial
1.2
Market
liquidity and
pricing
1.4
Currency
2.5
Liquidity and
gearing
Risk is acceptable, no
additional measures needed
Risk is of concern but
sufficient measures are
defined and have been or are
being implemented
Risk is of concern, sufficient
mitigation measures
not possible
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 on page 16.
1.1
Market volatility
4.0
Emerging
The controls and mitigation of
portfolio and business risk will
continue to operate, however,
there remains a risk that the
level of volatility and economic
downturn may be such that the
level of portfolio earnings and
dividends cannot be mitigated by
factors within the board’s control.
16
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Investment and Portfolio Risks
Principal Risks identified Controls and mitigation
1.1 Market volatility
Significant market movements may adversely
impact the investments held by the company
increasing the risk of loss or challenges to the
investment strategy, reduction of dividends
across the market affecting the portfolio
yield and the ability to pay in line with
dividend policy.
Macroeconomic factors could also cause
significant market falls, unexpected volatility,
threat to income or increase in gearing.
The board meets with the portfolio managers and considers asset
allocation, stock selection and levels of gearing on a regular
basis and has set investment restrictions and guidelines that are
monitored and reported on by AllianzGI. The board monitors yields
and can modify investment parameters and consider a change to
dividend policy.
Macroeconomic factors and their causes may mean mitigation may
not be possible for significant market movements caused by factors
outside the board’s control.
1.2 Market liquidity and pricing
Failure of investments.
The board receives reports from the manager on the stress testing of
the portfolio at least twice each year and contact is made with the
Chair and board if necessary between board meetings.
1.3 Counterparty risk
Non-delivery of stock by a counterparty.
The manager operates on a delivery versus payment system,
reducing the risk of counterparty default.
1.4 Currency
Exposure to significant exchange rate
volatility could affect the performance of the
investment portfolio.
Currency movements are monitored closely and are reported to
the board.
Business and Strategic Risks
Principal Risks identified Controls and mitigation
2.1 Investment Strategy
An inappropriate investment strategy e.g., asset
allocation or the level of gearing may lead
to underperformance against the company’s
benchmark index and peer group companies,
resulting in the company’s shares trading on a
wider discount.
The board manages these risks by diversification of investments
through its investment restrictions and guidelines which are monitored
and on which the board receives reports at every meeting. The board
monitors the implementation and results of the investment process
with the investment managers, who attend all board meetings,
and reviews data which shows risk factors and how they affect
the portfolio.
The manager employs the company’s gearing tactically within a
strategic range set by the board. The board also meets annually
specifically to discuss strategy, including investment strategy.
2.2 Shareholder relations
The investment objectives, or views on decisions
such as gearing, discount management, dividend
policy, of existing shareholders may not coincide
with those of the board leading investors to sell
their shares.
Reports on shareholder sentiment are received from the manager
and brokers and reviewed by the board. Shareholders are actively
encouraged to make their views known.
17
STRATEGIC REPORT
2.3 Investment performance
Persistent poor performance against benchmark
or peers leads to decline in attractiveness of the
company to investors.
The investment manager attends all board meetings to discuss
performance with the directors. The board manages these risks by
giving investment guidelines which are monitored at each meeting.
The board reviews the investment performance of the company
against the benchmark and peer group.
2.4 Financial
Range of risks including incorrect calculation of
NAV, inaccurate revenue forecasts, incorrectly
calculated management fees, issues with title to
investment holdings.
A rolling income forecast (including special dividends), balance sheet
and expenses are reviewed at every board meeting. Reporting from
the custodian covering internal controls in place over custody of
investments and over appointment and monitoring of sub-custodians
is produced and reviewed at least annually. The board’s investment
restrictions are input in trading systems to impose a pre-trade check.
2.5 Liquidity and gearing
Insufficient income generated by the portfolio
and due to stock market falls, gearing increases
to levels unacceptable to shareholders and the
market which in extreme circumstances results in
a breach of loan covenants.
The board meets with the portfolio managers and considers asset
allocation, stock selection and levels of gearing on a regular basis.
Investment restrictions and guidelines are monitored and reported
on by AllianzGI. Regular compliance information is prepared on
covenant requirements.
2.6 Market demand
The level of discount of the share price to the
NAV moves to unacceptable levels, threatening
confidence in the company’s shares.
The board regularly reviews the level of premium and discount and
existing shares can be bought back by the company when the board
considers this expedient.
Operational Risks
Principal Risks identified Controls and mitigation
3.1 Organisation set up and process
Failure in the operational set up of the company,
through people, processes, systems or external
events could result in financial loss to the
company or its inability to operate.
The manager and the other key service providers report on business
continuity plans and the resilience of their response to extreme
situations. Third party internal controls reports are also received from
these service providers.
3.2 Outsourcing and third party
Risk of inadequate procedures for the
identification, evaluation and management of
risks at outsourced providers including AllianzGI
and its outsourced administration provider,
State Street Bank & Trust Company, HSBC
Bank plc (Depositary and Custodian) and Link
Group (Registrar).
AllianzGI carries out regular monitoring of outsourced administration
functions, which includes compliance visits and risk reviews where
necessary. Results of these reviews are monitored by the board.
And since the pandemic the board has been obtaining additional
assurances on business resilience and cyber security. Agreed Service
Level Agreements (SLAs) and Key Performance Indicators (KPIs) are in
place and the board receives reports against these.
3.3 Regulatory
Failure to be aware of or comply with legal,
accounting and regulatory requirements which
could result in censure, financial penalty or loss of
investment company status.
The board maintains close relations with its advisers and makes
preparations for mitigation of these risks as and when they are known
or can be anticipated.
3.4 Corporate governance
Weak adherence to best practice in corporate
governance can result in shareholder discontent
and potential reputational damage to
the company.
The board is highly experienced and knowledgeable about corporate
governance best practice and includes directors who are board
members of other UK plcs and other investment companies. The
board takes regular advice on best practice.
18
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
3.5 Key person
Departure of the portfolio manager, certain
professional individuals, and/or board members,
may impact the management of the portfolio,
the achievement of the company’s investment
objective and/or disruption to its operations.
Manager and board succession plans are in place. Cover is available
for core members of the relevant teams of the manager, and work
can be carried out by other team members should the need arise.
3.6 Financial crime, fraud, cyber security and AI
That the company and the manager’s firm, its
employees, or clients are subject to financial
crime or breach elements of the Bribery Act. Risk
of increased cyber attacks. Risk from traditional
and generative Artificial Intelligence (AI) in
respect of malicious AI, its rapid growth and the
lack of regulation.
AllianzGI has anti-fraud, anti-bribery policies and robust procedures
in place. The board is alert to the risks of financial crime and threat of
cyber attacks and reviews how third party service providers handle
these threats. These reports confirm that all systems are secure and
are updated in response to any new threats as they arise.
The board asks for and receives assurance from key suppliers on
information security and AI developments and threats.
3.7 Reputational
Association with poor governance in portfolio
companies and operational issues in service
providers which can affect the reputation of
the company.
The portfolio management team is in constant interaction with
AllianzGI’s Environmental, Social and Governance (ESG) and
Stewardship function and actively engages with investee companies
on ESG issues and makes investments incorporating ESG factors
in the decision process. Service providers are monitored and the
manager provides oversight.
Emerging Risks
Principal Risks identified Controls and mitigation
4.0 Emerging
Geopolitical uncertainties including the Israel
- Gaza war, the supply chain issues in the Red
Sea, the ongoing invasion of Ukraine by Russian
armed forces and tension between the US and
China, any of which could cause significant
market falls, threat to income or increase
in gearing.
Impact of AI on the investment portfolio.
The board carries out horizon scanning by keeping informed through
its manager and advisers on the political, economic and legal
landscape, and reviews updates received on regulatory changes that
affect the company.
The board has asked the manager to report on its own careful
consideration of AI developments and threats within its own
organisation and in its oversight of investments.
The board maintains close relations with its advisers (auditors, lawyers
and manager) and will make preparations for mitigation of emerging
risks as and when they are known or can be anticipated.
19
STRATEGIC REPORT
Going Concern
The directors have considered the company’s investment
objective and capital structure both in general terms and in the
context of the current macroeconomic background. Having
noted that the portfolio, which is constructed by the portfolio
manager on a bottom up basis, consists mainly of securities
which are readily realisable, the directors have also continued
to consider the risks and consequences of such external
factors on the operational aspects of the company and have
concluded that the company has the ability to continue in
operation and meet its objectives in the foreseeable future. For
this reason the directors continue to adopt the going concern
basis in preparing the financial statements.
The company held some short term debt as a current liability
as at 30 November 2023, in the form of a Revolving Credit
Facility (RCF), which is renewable within one year. While
the company is in a net current liability position as at 30
November 2023, if an obligation arose investments could be
sold to raise cash.
Viability Statement
Brunner is an investment company and has operated as an
investment vehicle since 1927 with the aim of offering a return
to investors over the long term. The directors have formally
assessed the prospects of the company for a period of longer
than a year. The directors believe that five years is the suitable
outlook period for this review as there is a realistic prospect
that the company will continue to be viable whilst seeking
to achieve its aim to provide growth in capital value and
dividends over the long term. This reflects the longevity of the
company and the expectation that investors will want to hold
on to their shares for some time. The board also notes that as
a high conviction investor, the portfolio manager has a five
year view on stocks in the portfolio.
The board has assessed the long-term viability of the company
against the principal risks faced by the company, outlined in
the reporting under Risk Management Policy on page 16.
Many of these matters are subject to ongoing review and the
final assessment, to enable this statement to be made, has
been formally reviewed by the board.
The factors considered at each board meeting are:
– The company’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 investment 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 position of the company, including the impact
of foreseeable market movements on future earnings and
cash flows. The board monitors the financial position in
detail at each board meeting and at least twice each year it
stress-tests the portfolio against significant market falls;
– In the current environment the board is reviewing earnings
prospects, gearing and debt covenants on a continuous
basis with the managers; and
– The liquidity of the portfolio, and the company’s ability
to pay dividends and to meet the budgeted expenses,
including interest payments, of running the company.
Based on the results of this assessment, the directors have
a reasonable expectation that the company will be able to
continue in operation and meet its liabilities as they fall due
over the five year period of their review.
The future
As we show in our page on the history of the trust on the
inside cover of this document, the longevity of the trust and
its importance to our investors continues to be a focus. The
future attractiveness of Brunner as an investment proposition
with relevance to a wide variety of investors is something we
debate and evaluate continuously. We have to consider the
investment environment and wider economic considerations,
such as increasing inflationary pressures, and take soundings
on the prospects for our markets, the returns on assets,
economic growth and numerous other factors. Taking all
this into account the board continues to believe that there is
a place for Brunner in the range of options available to the
investor and that the company remains viable for the five year
period here under review.
The Strategy for the future
The development of the company is dependent on the success
of the company’s investment strategy against the economic
environment and market developments. I give my view in the
Chair’s Statement on page 5 and the portfolio managers
discuss their view of the outlook for the company’s portfolio in
their review on page 33.
On behalf of the board
Carolan Dobson
Chair
13 February 2024
20
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Environmental, Social and Governance Research
and Stewardship
Active stewardship is an integral component of our investment
manager’s investment approach. This can help to unlock
potential in companies, as well as protect companies from
downside risks.
AllianzGI’s approach to ESG analysis
Brunner’s portfolio managers follow AllianzGI’s proprietary
ESG methodology which is designed to enhance risk
management by adding another dimension to existing
investment processes across all asset classes. The main
objective of integrating ESG analysis is to develop
an assessment of the financially material ESG risks
and opportunities within a broader investment case.
AllianzGI’s approach also fosters active engagement with
company management.
The board considers that it is in shareholders’ interests to be aware of and consider
environmental, social and governance factors when selecting and retaining investments.
Details of the company’s policy on ESG are set below.
Environmental, Social and Governance Issues
How it works in practice
The process of integrating ESG analysis involves AllianzGI’s
investment professionals reviewing both ESG scores and
financially material qualitative information for each holding
or company of interest. The investment team then makes an
assessment of the ESG risk or opportunity that supports the
broader investment case. AllianzGI’s investment professionals
have access to both quantitative tools and qualitative ESG
research. The investment manager has explained to us how
AllianzGI uses the MSCI scoring system which expresses the
level of ESG risk for a company through a numerical score
for each of the E, S and G pillars on a scale of 0–10, whereby
a score of 0–3 indicates potentially meaningful tail risk. If
a company exhibits an elevated ESG risk profile or no ESG
score, the portfolio management team needs to provide their
risk-reward justification as a written commentary to their
colleagues on the AllianzGI tool: the Global Collaboration
Platform. The commentary must be provided prior to the
purchase of any new stock.
Proxy voting 1 December 2022 to 30 November 2023
In the year there were 63 shareholder meetings for
companies in the portfolio and the manager voted on the
company’s behalf at 61 of these. This represents a total of
1,125 resolutions and the company voted on 91% of these.
Source: AllianzGI.
Company meeting voting record
Number of meetings voted
with management: 17
Number of meetings with
at least one vote Against,
Withhold or Abstain: 44
Vote distribution
Number of votes for: 78%
Number of votes against: 12%
Number of votes abstain: 1%
Number of votes withhold: <1%
Not voted: 7%
Active proxy voting engagement for clients is seen as a
core element of fiduciary responsibilities and the manager
provides total voting coverage. This active, global approach
to the exercise of voting rights is aimed at improving
governance standards.
21
STRATEGIC REPORT
ESG Reporting
The board receives information on ESG scores for the portfolio
and this is published in the company’s monthly factsheets. This
is also included on page 41.
A summary of the many engagements with portfolio
companies on E,S and G matters is set out on page 40.
Brunner’s ESG Policy and web links
A summary of the board’s policy on ESG can be found with
the company’s details on the Association of Investment
Companies’ website, where there is also more information on
ESG for investors:
https://www.theaic.co.uk/esg-and-investment-companies
AllianzGI’s investment professionals generate in-depth
research of companies they own or believe to be of interest
and often closely follow these issuers over long periods of
time. Therefore, they can engage actively with the companies
that need it most. AllianzGI’s Sustainability Research &
Stewardship analysts further support the process by providing
company, sector and/or thematic research. All ESG research
and engagement notes are documented on AllianzGI’s
internal Global Collaboration Platform. This creates a high
degree of transparency and provides portfolio managers with
an easy way to monitor ESG risk in their portfolios.
Sustainability
The portfolio managers talk about the importance of
sustainability in the assessment of the quality of portfolio
companies in their Investment Philosophy explanation on
page 38.
Company Engagement
The investment manager conducts regular meetings with
companies which:
– enriches investment analysis and decision making;
– helps assess company leadership and culture and
build trust;
– facilitates active involvement from portfolio managers and
sector analysts in company engagements;
– focuses on material issues in a case-by-case approach; and
– provides 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
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Greek retailer Jumbo SA,
headquartered in Moschato,
Athens, was one of the top four
largest contributors
to performance.
Investment
Manager’s
Review
24 Portfolio Managers’ Report
38 Investment Philosophy and Stock
Selection Process
40 Company Engagement Activities
41 Environmental, Social and
Governance performance
42 Top 20 Holdings
47 Case Studies
50 Portfolio Breakdown
55 Distribution of Invested Funds
58 Historical Record
23
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Portfolio Managers’ Report
The Brunner Investment Trust PLC
was formed when the Brunner family
sold its interest in Brunner Mond &
Co, the largest of the four companies
which came together to form Imperial
Chemical Industries (ICI) in 1927.
Brunner Mond & Co itself was founded
in 1873 and was best known for the
efficient manufacture of soda ash, or
sodium carbonate. This commodity,
which has been manufactured since
the time of the ancient Egyptians
over 5,000 years ago, is an important
industrial ingredient used in a wide
range of applications, from the
production of glass to detergents and
lithium-ion batteries.
Today, it is mostly produced using the
Solvay process in which salt (sodium
chloride) is reacted with limestone
(calcium carbonate) and coking coal in
the presence of ammonia. Indeed, the
reason Brunner Mond & Co was located
in Northwich, Cheshire was due to the
abundance of salt in the region.
Salt is one of those virtually invisible
commodities that is rarely given a
second thought. Despite being a hugely
important chemical feedstock, its
contribution to GDP and to stock market
value is negligible. Similarly, many other
commodities such as sand (without
which there would be no concrete or
semiconductors) and iron ore (without
which there would be no cars, no
machines, no large buildings) are hugely
important in the physical world but, due
to their relative abundance, are not in
themselves particularly valuable. Ed
Conway makes this point in his book
‘Material World’ in which he expounds
upon the role commodities like sand,
salt, iron ore, oil and lithium play in the
modern economy. Similarly, academic
Vaclav Smil calls steel (modified iron),
ammonia (made from natural gas,
used primarily as fertiliser), cement
(the other feedstock of concrete) and
plastic (largely derived from oil) the ‘four
material pillars of modern civilisation’.
Without these products society literally
couldn’t function. Yet their direct
contribution to global GDP and stock
market value is negligible.
From the standpoint of the investor,
the interesting but counter intuitive
conclusion is that just because
something is important doesn’t mean it
is valuable. This statement also works in
reverse. It is extraordinary, for example,
that the second most valuable company
in Europe, Louis Vuitton Moet Hennessey
(LVMH), derives the majority of its profit
from the sale of something as frivolous
as handbags.
This paradox is manifest throughout
the stock market. For example, many
stock market commentators obsess
over trends in GDP, inflation and other
macro-economic indicators. We find
these datapoints interesting, but we
believe they are less crucial than many
think. Many long-term studies show the
correlation between GDP performance
and stock market performance is
non-existent, or even negative. Given
that GDP represents the ultimate pool
from which firms can derive profits,
this is counter intuitive, but in our
view it reflects the reality that strong
profitability and therefore stock market
value regularly accrues in relatively
obscure niches which make a relatively
immaterial direct contribution to GDP.
There are numerous examples that
can be used to demonstrate this. At the
highest level, the US now accounts for
70% of the world stock market value
despite the US only accounting for
25% of world GDP. Simplistically this is
because, in aggregate, US firms have
grown faster and with higher returns
on invested capital (returns above the
cost of capital are the definition of value
creation) than those elsewhere in the
world. In the US just two firms – Apple
and Microsoft – now account for 14% of
stock market value yet their collective
revenues in the US account for just 1%
of GDP. Would Microsoft be worth less
if inflation was slightly higher or GDP
slightly lower? At the margin, perhaps,
but Microsoft’s worth generally stems
from attributes unrelated to general
economic activity.
In a similar vein, it is instructive to note
that Volkswagen’s sales, and therefore
direct GDP contribution, are actually
higher than that of Microsoft, yet
Microsoft’s $2.8 trillion market value is
more than forty times that of VW, which
has a market cap of just $65bn despite
its enormous sales base. Microsoft is
hugely profitable, growing and well
governed. By contrast, Volkswagen
operates in perfectly competitive,
mature market and its voting stock is
controlled by the Porsche-Piech family
and the Lower State of Saxony, for both
of whom considerations beyond profit
Christian SchneiderJulian Bishop
24
may dominate. Despite its size and
importance, particularly to the GDP
of Germany, the company, much like
salt, has rarely created value despite its
ability to create well engineered cars.
Many of Brunner’s holdings, such as
Microsoft, operate in profitable niches.
We pay particular attention to the
competitive environment and market
structure as these tend to be key
determinants of a company’s ability
to generate high returns. Businesses
with unique assets or abilities are of
particular interest. It is businesses such
as these that can reinvest their cashflows
at attractive rates of return, creating
value for shareholders along the way.
During the year, we were saddened by
the death of Charlie Munger. Charlie
Munger was Warren Buffett’s business
partner at Berkshire Hathaway and his
investment philosophy has had a huge
influence on the Brunner investment
team. Many prognostications about
investment are a matter of opinion,
but some are underpinned by sound
mathematical logic. Here he expounds
upon the importance of returns. It’s
simple but key to understanding the
importance of quality when investing:
‘Over the long term, it’s hard for a stock
to earn a much better return than the
business which underlies it earns. If the
business earns 6% on capital over 40
years and you hold it for that 40 years,
you’re not going to make much different
than a 6% return – even if you originally
buy it at a huge discount. Conversely, if a
business earns 18% on capital over 20 or
30 years, even if you pay an expensive
looking price, you’ll end up with a
fine result. So the trick is getting into
better businesses’.
Return on capital is the key metric
here, and one we use as a base
for determining the quality of a
business. Put simply, if a business can
borrow money at 6% and invest it at
a sustainable 18% return, that is the
definition of value creation - imagine
borrowing money from the bank
at 6% and being able to put it into
another account at 18%. If the business
can then take the 18% it earns on its
investment and reinvest that at 18%
again and so on, that is when the power
of compounding really starts to work
its magic.
Albert Einstein reputedly called
compound interest the eighth wonder
of the world. We can demonstrate
its power using two hypothetical
businesses: Business A and Business B.
Business A earns just 6% on its invested
capital and reinvests all the cash it
generates back into the business. After
10 years profits will have grown from
an assumed 100 at the start to 169 by
the end.
Business B has a return on capital of
25% and also reinvests all the cash it
generates back into the business. We
assume that at the start of the period
they also generate profits of 100. By the
end of the same ten-year period profits
will have grown to 745. After twenty
years Business B’s profits will have
grown to over 6,900, while Business
A’s profits will have just passed 300.
Truncating this growth by insisting on
premature dividends would be unwise.
One of the reasons we don’t exclusively
target high dividends is that our strong
preference is for businesses that can
reinvest at high returns on capital for an
extended period of time, creating value
as demonstrated.
Virtually all of the world’s great
equities have been Business Bs. It is
these businesses that generate most
equity performance over time. A study
by Hendrik Bessembinder, a finance
Earnings comparison
Source: AllianzGI.
Business A (6% return on equity) Business B (25% return on equity)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year7 Year 8 Year 9 Year 10
800
700
600
500
400
300
200
100
0
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INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
professor at Arizona State University,
found that half of all wealth generation
by US stocks between 1926 and 2019
came from fewer than 100 stocks: a
tiny fraction of the overall universe. It
is the combination of high returns and
growth that helps explain why a small
subset of extraordinary businesses has
been able to deliver incredible stock
market performance and why that
small subset of businesses has come
to dominate stock market value in a
way that does not necessarily correlate
with their real-world importance. Value
accrues in niches. Most businesses, like
salt and cars, are prone to competition
that keeps profitability in check. Brunner
is proud to have owned many of the
great businesses of our time, those that
have delivered exceptional results for
shareholders. Companies like Microsoft
and United Health in the US, LVMH,
Novo Nordisk and ASML in Europe and
TSMC in Asia have all married high
returns with growth, to outstanding
effect. Our investment approach
continues to hunt for these rare entities,
whilst always remaining mindful of
valuation and never veering into
speculative territory. We believe this is a
timeless way of running money and one
that will continue to pay literal dividends
over the long term.
Market Review
Measured in Sterling, global equity
markets rose about 7% over the twelve
months to Brunner’s year end at the end
of November 2023. In dollar terms, the
return was almost twice that, with US,
Japanese and European markets all
delivering strong results in local currency
that were partially lost once translated
back into pounds. Sterling has continued
to strengthen after the lows associated
with the Truss/Kwarteng ‘mini budget’ of
autumn 2022, creating a headwind for
the value of overseas assets. Over the
longer term, however, weaker Sterling
has been clearly beneficial for the UK
investor with global exposure.
Looking beneath the surface, there
was a huge divergence in performance
between differing types of equities. In
aggregate, growth stocks roared ahead
whilst value stocks retreated. This was
a perfect inversion of what we saw in
2022, which was itself a perfect inversion
of what was seen in 2021. This inversion
was mirrored at the sector level. After
a torrid 2022, technology stocks were
very strong once more, whereas the
lowly rated financials and energy names
that fared so well in 2022 resumed their
longstanding underperformance.
In the US, the narrowness of the market
has been particularly notable. Famously,
the performance of the ‘magnificent
7’ (Amazon, Apple, Google parent
Alphabet, Facebook parent Meta,
Microsoft, Nvidia and Tesla) accounted
for the majority of the S&P500’s
performance. It only takes one Microsoft
to perform well, with its near $3 trillion
market cap, more than the entire FTSE
100, to mask mediocre performance
amongst dozens of other smaller
companies. Probabilistically, this made
it a hard market to outperform. We are
pleased with our strong performance in
this context.
The resumption of tech outperformance
is associated with three factors. Firstly,
the correction of 2022 bought valuations
down from exuberant to palatable
levels. Secondly, interest rates stabilised.
Higher interest rates lower the present
value of more distant predicted future
profits, on which growth stocks tend
to be disproportionately dependent.
Thirdly, and perhaps most importantly,
was the emergence of a new growth
narrative, centred on artificial
intelligence (AI).
Investor Jim Grant once said: ‘to suppose
that the value of a common stock is
determined purely by a corporation’s
earnings discounted by the relevant
interest rates and adjusted for the
marginal tax rate is to forget that
people have burned witches, gone to
war on a whim, risen to the defence
of Joseph Stalin and believed Orson
Welles when he told them over the radio
that the Martians had landed. That’s
always been the case. And it always
will be the case. Every investment
price, every market valuation, is just a
number from today multiplied by a story
about tomorrow’.
This somewhat hyperbolic comment
is refreshingly honest. Every business
school, every financial analysis course,
parrots as fact that a company or stock
is worth the present value of its future
cash flow. Whilst the theory behind
the discounted cash flow model is
hard to quibble with (why else would
stock have value, aside from the cash
it can ultimately generate?) the way
it is taught neglects to mention the
reality that no one knows, with any
precision, what those future cash flows
will be. That is particularly true for the
intellectual property rich, physical asset
light businesses that dominate today’s
markets. All valuation work is a forward-
looking assessment of a company’s
profitability and that is inherently
uncertain. As physicist Carlos Rovelli
said: ‘we can’t be sure about anything’.
This statement related to the spirit of
ongoing scientific enquiry and was
intended to remind us that the concept
of a ‘scientific fact’ is an oxymoron. This
is even more so in equity investment,
where uncertainty and educated
guesswork is implicit in every piece of
valuation work undertaken.
Hence a narrative, a story, can be a
powerful driver of short-term investment
performance. Indeed, most financial
bubbles have been driven by an initially
plausible premise. In the longer run, of
course, operational results need to justify
heightened expectations, but at present
the technology sector is basking in the
rays of possibility.
Excitement relating to artificial
intelligence began in earnest in
November 2022 when OpenAI launched
an early demo of ChatGPT, a natural
language processing tool that provides
linguistically fluent and logically
sophisticated answers to prompts and
questions. This was followed in May
2023 by an exceptional set of financial
results from Nvidia, the semiconductor
company which dominates the market
for the graphic processing units
(GPUs) used in artificial intelligence
applications. Rarely have sales and
profit forecasts for a large company
been so heavily underestimated.
Over the course of the financial year
shares in Nvidia rose 176% as earnings
26
Contribution to Investment Performance Relative to the Benchmark
Top ten positive
contribution
Performance
impact %
Top ten negative
contribution
Performance
impact %
Overweight
(holding larger than
benchmark weight)
Microsoft 1.0 Charles Schwab -0.7
Jumbo 0.9 St James's Place -0.6
Novo Nordisk 0.9 Estee Lauder -0.6
Munich Re 0.8 Agilent Technologies -0.6
Partners Group 0.6 Roche Holdings -0.5
Adobe 0.5 AIA -0.4
Baltic Classifieds 0.4
Schneider Electric 0.4
Itochu 0.4
Arthur J. Gallagher & Co. 0.3
Underweight
(zero holding or weight lower
than benchmark weight)
Nvidia -0.9
Meta -0.6
Apple -0.5
Amazon -0.5
expectations for the company in 2024
rose from $4.36 per share to over $12.
Categorically, Nvidia is in the realms of
the great, a Business B that combines
high returns with growth. Only time will
tell if the company’s barriers to entry are
sufficient to maintain their profitability.
General interest in artificial intelligence
is very high indeed and we have no
doubt that its eventual impact will prove
enormous. Nevertheless, judging the
winners and losers at this early stage
is difficult. If history is any guide, a few
fortunes will be made but many will
be lost. We remain happy with our
participation in this nascent theme
via our holdings in Microsoft, Adobe,
Accenture and TSMC, amongst others.
Microsoft partially owns OpenAI and
hosts many processing intensive AI
models in its Azure cloud computing
division. The company is developing
a useful ‘Copilot’ for users of its widely
used Office product suite. A small
incremental fee charged for each
of their 300m+ subscribers could be
incredibly lucrative. Adobe is using AI to
make its suite of software products used
by creative professionals more inventive
and easier to use. Accenture will win
business deploying AI applications on
behalf of its corporate clients. TSMC
are a semiconductor ‘foundry’ that has
near 100% share manufacturing the
most sophisticated GPUs on behalf of
Nvidia et al. In each instance we believe
we are appropriately agnostic as to
the precise winners in the AI space and
that they should flourish no matter how
the technology evolves. All are also
extraordinary quality businesses which
are reasonably valued and generate
plentiful free cash flow; quintessential
Brunner holdings.
Events in the financial sector were
dramatic as the industry adjusted to
rapid increases in interest rates from
very low levels. Problems first emerged
in March at Silicon Valley Bank (SVB),
an American regional bank based in
California serving corporate clients in
the technology industry. During the
pandemic, these clients raised vast
amounts of cash from venture capital
firms keen to invest in the digital
economy, which they then deposited at
SVB for future use. When VC funding
dried up in early 2022, many of these
tech clients began burning through
their cash balances, as unprofitable
technology start-ups are wont to
do. In an error of judgement, SVB
management had invested many of
these deposits in relatively long dated
bonds in order to boost income. These
bonds fell in value due to rising interest
rates. Selling them to meet the deposit
outflows crystallised significant losses,
eating into the bank’s equity cushion.
A poorly communicated effort to
raise additional equity to cover these
losses caused a full blown, digitally
enabled bank run with devastating
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INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
consequences. This crisis of confidence
then spread across the US regional
banking sector, with several other banks
failing before confidence was restored.
In Europe, Credit Suisse was rescued
by UBS in a deal brokered by the
Swiss government after another crisis
of confidence.
These events were a timely reminder of
the inherent fragility of the fractional
banking system. Put simply, not all
depositors can have their deposits
back at once, as they have been lent
to others. Banks rely on trust and loss
of trust can be fatal. In most markets,
regulators reinforce trust by insuring
deposits (up to £85,000 in the UK). In
the instance of SVB, most deposits
belonged to businesses not individuals
and most balances were therefore
way beyond the insured level. It was
perfectly rational, therefore, for venture
capital firms to insist that their investee
companies withdrew their funds from
SVB the moment rumours of their
problems began. In the old days,
depositors had to queue outside the
branch as they did in the movie ‘It’s a
Wonderful Life’. These days withdrawals
can take place at the click of a button,
lowering the associated friction to
negligible levels.
At Brunner, we believe we are
appropriately cautious when it comes to
our small investments in banks. We are
mindful that banks’ balance sheets are
generally in better shape than they have
been for many decades, which should
make them safer and allow for very
generous levels of cash returns going
forwards. However, they are rarely value
creative in the way we described earlier.
A bank loan is a bank loan is a bank
loan. Borrowers do not pay a premium
for a mortgage from Lloyds over a
mortgage from Nationwide for example.
Opportunities to eke out a competitive
advantage tend to be meagre and, as
the SVB case shows, the risks are higher
than they are for most businesses.
We have positions in banks where
we believe we are adequately
compensated for the corresponding
dangers and in all cases we look for
banks we believe operate at the very
lower end of the relative risk spectrum.
Our largest bank holding is DNB,
the leading Norwegian bank, which
operates within one of the strictest
regulatory frameworks in the world.
Capital levels (as measured by the
amount of equity set aside to deal with
losses) are higher than virtually any
other major bank in existence. Another
small holding, UK based Close Brothers,
intentionally has longer dated deposits
than loans (for example, it may borrow
money from depositors for two years
and lend it to borrowers for one year)
essentially eliminating the possibility
of a run entirely. We are not naïve
about banks and feel that our cautious
approach has been vindicated by recent
events in the US and elsewhere.
After a couple of years dominated by
the impact of the COVID pandemic,
news flow in the healthcare sector
focused on the success of a new
class of anti-obesity drugs. The most
prominent variant is called Wegovy
and is manufactured by Novo
Nordisk, a Brunner holding. Wegovy
is administered via a weekly injection
and clinical trials show that it leads to
a 15% reduction in body weight after
one year. This is a massive impact
which has numerous health benefits.
A subsequent trial found that those
taking Wegovy had a 20% reduction
in ‘material adverse cardiovascular
events’ (i.e., heart attacks and strokes).
A further litany of benefits is suspected.
For example, in addition to the feeling
of fullness and the reduction in appetite
Wegovy induces, reduced cravings for
alcohol have been reported, leading to
a trial for alcohol use disorder.
At present, demand for Wegovy far
outstrips Novo Nordisk’s manufacturing
capacity. Consensus expectations
are for annual sales to peak later this
decade close to $20bn, implying very
widespread usage and making it one
of the best-selling drugs of all time.
The anticipated success of the drug at
reducing health problems en masse led
to a notable fall in the shares of many
healthcare companies that treat the
problems Wegovy et al may prevent.
Companies which make devices to treat
heart problems or sleep apnea (heavily
associated with obesity) sank, as did
shares in food companies like Mondelez
(Oreos, Cadburys) and McDonalds.
Calorific intake in the US is way above
global averages and we would not
be surprised to see food consumption
there gradually fall, with the feeling of
satiety induced by weight loss drugs
contributing to that decline.
In the first half of the year, oil and gas
prices fell from the peaks seen after
the invasion of Ukraine but stabilised
thereafter. Demand has rebounded and
supply remains in check from a sector
newly focused on capital discipline,
partially at the behest of investors tired
of profligate expenditure with scant
regard to returns and partially at the
behest of the ESG movement. Ironically,
the reverse was seen in the renewables
space, with returns for offshore wind
projects, particularly, suffering from a
toxic combination of cost overruns and
higher financing rates.
As we noted earlier, just because
something is important or growing does
not make it profitable. We are hopeful
that the sector will be restructured in
a way to ensure the economic returns
are sufficient to attract the massive
amounts of investment the sector
needs in order for society to meet its net
zero aspirations. The ‘electrification of
everything’ remains a capital-intensive
must if the planet is to avoid the worst
impacts of climate change.
It will be intriguing to watch this energy
transition take place. It remains our
belief that this will be frustratingly
slow, multi-decade process, necessarily
involving the mobilisation of trillions
of dollars and vast amounts of
physical, material assets. We suspect
the industrial economy of the
developed world will benefit from this
unprecedented investment, in stark
contrast to the deindustrialisation of the
past fifty years as manufacturing etc has
been offshored to China and elsewhere.
China finally reopened at the start of
the year after lifting some of the most
draconian COVID lockdowns imposed
anywhere. Compared to other countries,
the subsequent economic rebound has
been lacklustre. Indeed, China appears
to be struggling with both deflation
28
and a moribund real estate sector.
Real estate construction accounts
for a worryingly high percentage of
Chinese GDP, far higher than Ireland
at the height of the property bubble
that preceded the financial crisis, for
example. Deflating a property bubble
and weaning the economy off an
unhealthy reliance on construction is
not something many other economies
have been able to achieve without
serious pain. Time will tell if the Chinese
authorities, with the tools available to
a centrally planned economy, will fare
any better.
In the West money supply is now falling
year over year and the full impact of
interest rate increases are starting to be
felt. These contractionary policies are
necessary to reduce inflation back to
acceptable levels. Until that is achieved,
central bank policy is likely to remain
hawkish and real economic growth is
likely to be poor. Towards the end of the
year, concrete evidence of moderating
inflation started to emerge. Markets
reacted positively in anticipation of
central banks cutting rates and, they
hope, unleashing growth closer to
potential. On a cautionary note, we
highlight that equities can and have
benefitted from inflation in certain
instances, and that lower inflation isn’t
all good news. Looking into 2024, it is
highly unlikely Nestle and many other
businesses will be able to raise prices as
much as they did in 2023, for example.
Markets are dynamic, constantly
responding to visions of the future.
The prices of securities are essentially
the collision of two views. Every time
someone buys a share, someone sells.
The equilibrium price is a compromise
between two contradicting opinions.
We deeply believe that an approach
that prioritises a consideration of how
cash flows will develop over the long
term is markedly superior to the broader
market’s obsession with the short term.
We often boast that Brunner has raised
its dividend every year for over 50 years.
However, this pales in comparison with
some of the most storied equities. For
example, Colgate Palmolive, maker of
the eponymous toothpaste, has paid
a dividend every year since Queen
Victoria was on the throne. In the great
scheme of things, what happens next
quarter or next year rarely matters yet
it is commentary on this that dominates
the newswires of the City and Wall
Street. We try our hardest to shut out this
irrelevant cacophony and focus on what
really matters for long term investment
outcomes: company specific returns on
invested capital, competition, barriers to
entry, free cash flow, structural growth,
the abilities of management, long
term relevance, all considered within a
prudent valuation framework.
Portfolio Review
In the financial year to the end of
November 2023, Brunner provided a
NAV total return of 8.7%, comfortably
ahead of the benchmark (30% FTSE
All Share/70% FTSE World ex UK).
This marks our fifth consecutive year
of outperformance. We are delighted
with this outcome given the dramatic
changes in market leadership over
this period.
Netherlands-based semiconductor specialist ASML was a new addition to the portfolio.
PHOTO © ASML
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INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Technology giant
Microsoft ended the year
as not just the portfolio’s
largest holding but also
the top contributor to
performance.
PHOTO © MICROSOFT CORPORATION30
Attribution analysis shows that
our underweight positions in Basic
Materials, Consumer Staples and Real
Estate contributed positively to relative
performance. This was partially offset
by our overweight in Health Care and
Financials. Our modest underweight
in technology also detracted from
performance. At a geographical level
our underweights in Japan and US were
unhelpful, partially compensated for
by our underweight in the UK which
underperformed after a strong 2022.
As a reminder, we are stock pickers
who do not allocate by region or
sector. However, it can be illuminating
to evaluate the composition of
performance in this way. In aggregate,
we note that whilst our sector and
regional weightings were of positive
consequence this year, they only
account for a small portion of our
outperformance. The vast majority of
outperformance was attributable to
individual stock selection; a pleasing
outcome which is consistent with our
‘all weather’ investment objectives.
In short, we aim to outperform by
carefully selecting the most promising
individual stocks, rather than by
making bets (the choice of word here
is deliberate) on a smaller number of
macro-driven outcomes.
Looking at individual stocks, the largest
contributor to performance came from
Microsoft, the trust’s largest holding
and one we added to early in the year.
Results here continue to impress, with
the company most recently reporting
growth in earnings per share of 27%
on revenue growth of 13%. Excitement
around AI also led to a sharp re-rating in
the shares. Whilst we are always vigilant
about valuation, we are reluctant to
sell what we consider a core holding,
although we did reduce our position
size towards the end of the year. We
note that the company has a net cash
balance sheet and good free cash flow,
allowing the company to pay one of
the only decent dividends amongst
mega cap tech companies, in addition
to buybacks. We also note that the
accounts are very clean, particularly in
comparison to other tech companies,
with relatively little dilution from stock-
based compensation – a common and
under-analysed accounting abuse
amongst many of their software peers.
The second largest contributor to
performance was from an altogether
smaller, more obscure stock. Jumbo
SA is a Greek listed retailer which
operates across Greece, Cyprus and
Eastern Europe. Their stores are similar
to a small IKEA in layout but focus on
family-orientated categories such as
toys, stationery and seasonal items, all
sold at very keen prices. Recent sales
growth and margins have been very
strong leading to upward earnings
revisions. The company has a large cash
pile on its balance sheet, is enormously
cash generative and traded at an
exceptionally low starting multiple.
During our financial year, it has paid
€3.3 in dividends on a starting €13 share
price – a 24% cash return in just twelve
months, in addition to a 90% increase in
the share price.
Intercontinental Hotels Group was another new addition to the portfolio.
PHOTO © IHG HOTELS & RESORTS
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INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Other positive contributors include Novo
Nordisk, the Danish pharmaceutical
company with mastery of two important
therapeutic areas: diabetes and obesity.
As mentioned above, the success of
Wegovy made headlines this year.
Although the company is currently
struggling to manufacture enough of
this complex biological molecule to
keep pace with demand, their sales still
grew 39% in dollars in the most recently
reported period.
Other names worth noting include
Munich Re, the German reinsurer, which
is enjoying a period of unusually strong
pricing power. This pattern of improved
pricing also helped AJ Gallagher, an
insurance broker, into the trust’s top
ten. Elsewhere in the financial sector,
Partners Group, a Swiss private markets
investment manager, demonstrated
that it can continue to see healthy
inflows despite higher interest rates.
Schneider Electric is seeing strong
demand for electrical components and
systems as the world embarks upon the
journey to net zero. Baltic Classifieds
Group cemented its status as the
leading web portal for property and
autos in Lithuania, Latvia and Estonia,
with similar dominance to firms like
Rightmove and Autotrader in the UK.
On the other side of the ledger, not
holding Nvidia was the largest single
negative detractor from relative
performance. Not holding other large
tech index stalwarts such as Meta,
Apple and Amazon also hurt. This
was in stark contrast to 2022, when
our decision to avoid these names
based on valuation and deteriorating
fundamentals positively contributed to
our relative performance. As noted in
the review, these stocks drove much of
the year’s gain in US markets. They are
all outstanding companies with bright
futures, even though future growth
is likely to slow. We regularly debate
their suitability for Brunner. For the time
being we are content with our existing
technology holdings which tend to be,
with the obvious exception of Microsoft,
further down the size spectrum and, we
believe, offer better value.
Of the names we actively hold, Charles
Schwab was the most damaging.
Charles Schwab is the largest US
investment and savings platform,
roughly analogous to Hargreaves
Lansdown or AJ Bell in the UK. Unlike
those UK proxies, however, Schwab
makes most of its money from interest
income rather than fees charged for
trading etc. Much higher short term
interest rates have caused clients to
reallocate the cash balances in their
savings accounts to higher yielding
money market funds. Under normal
conditions, the interest Schwab makes
on those residual cash balances is a
major contributor to profit so near-
term estimates have fallen. We have
added to the stock on weakness; in the
long term we believe the company’s
competitive position to be outstanding.
St James‘s Place also performed
poorly. The company found itself in the
crosshairs of a sector-wide regulatory
review of the wealth management
industry which necessitated an overhaul
of their charging structure. We sold
the position shortly after year end.
We generally avoid companies prone
to regulatory interference and are
not convinced that the company’s
competitive advantages are as robust as
originally believed.
US beauty company Estee Lauder
also had a tough year. The company
had become reliant on the skincare
category in Greater China, particularly
super-premium brands such as La Mer,
where a simple 100ml pot of moisturiser
retails for over £400 in the UK. The
company has run into problems with
excess inventory in the country where,
as noted, the economic rebound has
been muted. It is difficult to get a good
grasp of how long this situation will
last and what the eventual growth rate
will look like, but we find the ongoing
strength of their brands reassuring. We
are careful to reconsider our investment
cases where the thesis has not evolved
as anticipated, but thus far we are in the
camp that this is a temporary problem
that should be resolved in due course.
Significant Transactions
We are constantly reappraising the
businesses we invest in. On occasion,
we conclude there is an alternative
that provides a better balance of
quality, value and growth than an
existing position. In other instances,
the original investment case doesn’t
evolve as anticipated. Whilst we always
buy with the intention of holding
for a lengthy period, changes are
sometimes necessary.
During the period, volatility in equity
markets provided us with valuable
opportunities to acquire some
outstanding new businesses at what we
believe are attractive prices. All of these
new stocks reflect Brunner’s balanced
approach to quality, growth and value.
In our Half-Yearly report we provided
details of the new stocks we added to
the portfolio at the six month stage. All
of them reflected Brunner’s balanced
approach to quality, growth and value.
They were:
– AJ Gallagher, a US listed
insurance broker
– Diageo, the world’s leading premium
spirits company with brands like
Johnnie Walker and Tanqueray
– Admiral, the UK’s leading UK
motor insurer
– DNB, the largest bank in Norway
– Rentokil, the residential and
commercial pest control business
– Intercontinental Hotels Group, one
of the world’s largest hotel franchise
and management companies, whose
stable of brands include Holiday
Inn Express, Intercontinental and
Six Senses.
These purchases meant we said
goodbye to several familiar holdings.
Sales included:
– Adidas, with whom readers will
be familiar
– Ecolab, which makes cleaning
products for commercial usage
– International Flavours and
Fragrances, a US listed specialist
ingredients company
– Astellas, a Japanese
pharma company
– Ashmore, a UK specialist
asset manager
– SSP, who operate restaurants in
stations and airports
– Intuitive Surgical, a maker of robotic
surgical equipment
32
Please see the Half-Yearly report for
further details of these transactions.
Since the halfway point we have added
three more holdings. They are:
– ASML, the Netherlands based maker
of semiconductor capital equipment
– Thermo Fisher Scientific, which
makes a wide range of equipment for
laboratories around the world
– AENA, an infrastructure company
which owns Spanish airports.
Please see the ‘Case Studies’ section for
further details of each.
During the second half of the year,
we sold three holdings to fund these
purchases. They were:
– Paragon Banking Group PLC
– Agilent Technologies
– Yum China
The sale of Paragon, a UK buy to
let lender, reflected our collective
preference for Close Brothers and DNB
within the traditional banking space. The
sale of Agilent reflected our preference
for Thermo Fisher.
Yum China operates fast food
restaurants such as KFC and Pizza Hut.
Audit, accounting and legal standards
in China can be less transparent than
in the developed world, which means
we require a higher risk premium/lower
valuation before committing capital
to the direct market. Combined with
a deteriorating economic outlook,
we believed the valuation of Yum!
China no longer provided sufficient
margin for error. We also believe that
Intercontinental Hotels Group, which the
trust purchased in the first half of the
year, is a comparable but higher quality
business model.
Suffice to say we believe the collective
impact of all these trades has been a
net improvement in the overall profile
of the portfolio. Whilst Brunner has
a long-term approach and relatively
low turnover, there is still competition
for capital. We see little merit in
stubbornly clinging on to investments
where the thesis has not developed as
hoped, where valuations have reached
unjustifiable levels, or where we see a
better alternative.
The full list of purchases and sales made
during the financial year is shown below.
Market Outlook
Commentary on financial markets
inevitably turns to the dramatic, the
extreme and the novel. We are as guilty
of this as anyone. In the market review
we discussed banking crises and the AI
frenzy. As newspaper editors know, there
is no interest in the mundane.
In reality, most of the businesses held
in the Brunner portfolio go about their
work and evolve gradually. Recessions
inevitably come and go. Interest rates
change. In the vast majority of instances,
however, our investments continue
to generate cash which is sensibly
reinvested in value creative activities
or returned to us as dividends and
buybacks. We expect profits to grow at
most of our holdings in most years. Over
the long term, it is the combination of
growth and cash remittances that drives
equity returns.
Those returns take time to achieve. As
the adage goes, it’s time in the market,
not timing the market, that allows one to
grow wealth. As the wise know, get rich
quick schemes are invariably flawed or
fraudulent. Patience is key yet is at odds
with the frenetic pace that dominates
market activity and the financial press.
New holdings Complete sales
Admiral Adidas
AENA Agilent Technologies
AJ Gallagher Ashmore Group
ASML Astellas Pharma
Diageo Ecolab
Intercontinental Hotels International Flavors and Fragrances
Rentokil Intuitive Surgical
Thermo Fisher Scientific Paragon Banking
SSP
Yum China
UBS
33
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
We are therefore strong advocates of
slowing down, reading, considering,
thinking. As AA Milne said: ‘Rivers know
this: there is no hurry. We shall get there
some day’.
If you are truly trying to ascertain
or approximate the intrinsic value
of a company, the short term is of
mathematically little relevance. A good
equity should provide cash flows for
generations to come. Occurrences today
can and do give important clues to the
future, but a lot of news is simply noise
and should be disregarded.
Good equity analysis focuses on the
probable outlook for profits far into
the future whilst acknowledging that
is a fundamentally imprecise exercise.
We know we can’t be sure of anything.
Nevertheless, over-analysing the short
term, making incredibly precise forecasts
about this quarter’s or next year’s
profitability, loses sight of what actually
matters. This brings to mind the tale of
the man who’s found searching for his
keys under the streetlight. When asked
if that’s where he lost them he replies no,
he lost them in the park, but this is where
the light is.
Towards the end of the financial year,
evidence of moderating inflation on
both sides of the Atlantic started to
mount, catalysing a dramatic and broad
stock market rally. We suspect, as do
large swathes of the market, that this
should mean interest rates have peaked
and that central banks would soon be
able to adopt a more accommodative
policy. Both the UK and US are likely
to have elections in 2024. Many polls
suggest that Sir Keir Starmer and
Donald Trump are most likely to be our
new leaders. Markets have concluded
Starmer is sufficiently centrist not to be
of concern to asset values, whilst Trump
will presumably be as stimulative as he
was when last in office. Both will have
their power checked by other branches
of the executive function. Modern liberal
democracies are designed to prevent
any one individual from wielding too
much influence.
Frankly, we are not sure what any of this
means for markets. Changes to interest
rates or our political leaders are unlikely
to determine whether companies
such as Microsoft or Diageo prosper
or flounder. We are more focused on
long-term trends which we believe come
with more visibility. We know that society
will inevitably age, that the population
of India and Africa will continue to
grow, that Japan’s will shrink. It seems
probable the world will need more
semiconductors, that people will travel
more, that we will electrify our energy
system to reduce carbon emissions. As
we consistently aim to highlight, we
prioritise thinking about the long term
and we encourage our shareholders
to share that vision. If you’re in the for
the long haul, economic cycles are an
inevitable part of life, not a reason to
panic. We deliberately select businesses
that we expect to continue to flourish,
whatever the weather.
We added laboratory equipment manufacturer Thermo Fisher Scientific to the portfolio in the second half of the year.
PHOTO © THERMO FISHER SCIENTIFIC
34
AENA, the Spanish
airports-owning
infrastructure specialist,
was another new purchase.
PHOTO © AENA
35
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Analysing performance over a longer
time period allows us to understand the
investment decisions that have ultimately
had the most impact. Given our long
term investment horizon, this is more
illuminating and relevant than looking at
attribution over shorter timeframes.
Over the five years to the end of
November 2023, the equity held
within the Brunner Investment Trust
returned 67% vs 54% for the benchmark;
13% outperformance.
We regularly remind shareholders that
Brunner is run on a bottom up basis.
We select investments in individual
companies and do not allocate by
region or sector. Nevertheless, as a
result of our stock specific work, certain
regional and sector biases can emerge.
Over the past five years, we have been
underweight the UK market. Given the
poor performance of the UK this has
been the correct aggregate decision.
We note that the performance of the UK
market has been better over the past
three years thanks particularly to strong
relative performance in 2022. The board
regularly considers whether the ongoing
inclusion of the UK in our benchmark is
appropriate and they have concluded
that the UK market, with its low multiples,
strong corporate governance and high
dividend yields, acts a useful diversifier.
Asides from the UK underweight, our
country weights made no meaningful
impact on performance over the past
five years.
At the sector level, we have generally
struggled to find ideas of interest in the
telecoms and energy sectors. These
are two notoriously low quality sectors
which are typically capital intensive,
levered and produce undifferentiated
products subject to intense competition.
We have also been underweight the
consumer staples sector. Here there
are some good companies with strong
brands but growth has proven to be
elusive. Given the valuations, this has
led to poor investment outcomes.
Being underweight these sectors
has contributed meaningfully to
relative performance.
Conversely, our modest underweight
to technology stocks over the period
detracted slightly from performance.
Technology stocks have performed
exceptionally over the past five years.
Many of the best performing tech
companies pay no dividend, which
means that funds with an income
mandate have struggled to keep up.
We have been slightly hampered in
this regard.
Microsoft has been the single most
important contributor to performance
over the period, contributing over
4% of the total. This is now the trust’s
largest holding and has performed
exceptionally well under CEO Satya
Nadella. Taiwan Semiconductor, which
manufactures the world’s most complex
chips for Apple, Nvidia, etc, has also
been a great success for us. Accenture,
the leading technology implementation
firm, too. Within the tech sector these
successes have been offset by our
premature decision to sell Apple in
2019 and the absence of Nvidia (which
makes graphics processing units used in
computing applications) and Alphabet
(parent of Google) from the portfolio.
Novo Nordisk, the Danish
pharmaceutical maker of weight
loss drug Wegovy, contributed 3%
to performance. UnitedHealth also
performed well. Other strong performers
are varied. They include Munich Re
(reinsurance), Schneider Electric
(industrial components), Jumbo (a Greek
retailer), Itochu (a Japanese trading
company) and Totalenergies (which we
bought at very depressed levels).
Beyond the tech names we don’t own,
a few companies stand out as being
harmful to relative performance. Adidas
was a particularly poor investment,
plagued with problems beyond their
control and of their own making
during our ownership. Other detractors
include Senior (engineering), Fresenius
(diabetes management), St James’s
Place (UK wealth management,
ironically), Bright Horizons (US pre school
learning), Informa (UK publishing)
and Marketaxess (bond trading
platform). Whilst there is no apparent
pattern to these we hope to learn from
each mistake.
Understanding performance over a
longer time period shows that just a few
investment decisions drive most of the
outcome. This is not unique to Brunner. In
the managers’ report we cite the work of
economic analyst Henrik Bessembinder,
which highlights how a relatively small
number of companies drive the majority
of stock market performance over time.
Warren Buffett readily concedes that just
a handful of investments have driven
the bulk of outperformance at Berkshire
Hathaway. ‘Our satisfactory results have
been the product of about a dozen
truly good decisions – that would be
about one every five years’, he said in his
2022 letter.
The most important thing is to have a
philosophy and process that maximises
the chances of finding the long term
winners. Some of our best decisions
were allowing our holdings in Microsoft,
Novo Nordisk etc to grow. One of
our worst decisions was to sell Apple
too soon. As disclaimers often state,
past performance isn’t a guide to the
future, but there are persistent patterns
in stock market history that show
that momentum matters. In physics,
momentum is a product of velocity and
mass. In stock markets, long term returns
have been dominated by a small cohort
of large, exceptional companies that
have continuously defied expectations.
The investor who has studied the
composition of returns understands this,
and its implications, one of which is to
temper the urge to sell something simply
because it has gone up and vice versa.
Often it is best to let the weeds wither
and let the flowers bloom.
Five years of benchmark outperformance
36
Five year portfolio performance attribution
1 December 2018 to 30 November 2023
Brunner portfolio
+66.6%
Percentage point performance
against the benchmark
+12.6
Benchmark (70% FTSE World Ex
UK / 30% FTSE All-Share)
+54.0%
Portfolio holdings
Top ten contributors
Performance
impact (%) Top ten detractors
Performance
impact (%)
Microsoft 4.1 Apple -4.0
Novo Nordisk 3.0 Adidas -3.1
Munich Re 2.3 Nvidia -1.9
Taiwan Semiconductor 2.3 Senior -1.4
United Health 1.9 Fresenius -1.2
Schneider Electric 1.9 Alphabet -1.1
Accenture 1.7 St James's Place -1.1
Jumbo 1.6 Bright Horizons -1.1
Itochu 1.6 Informa -1.0
TotalEnergies 1.5 Marketaxess -1.0
ICB industry sectors
Top three contributors
Brunner
relative weight
Sector absolute
performance
Contribution
to performance
Health Care 18.7% 24.5% 4.93%
Industrials 20.2% 16.9% 3.77%
Utilities 3.3% 80.2% 2.15%
Top three detractors
Brunner
relative weight
Sector absolute
performance
Contribution
to performance
Consumer Discretionary 12.3% -14.6% -3.04%
Basic Materials 3.7% -59.4% -2.69%
Technology 14.1% -7.3% -0.73%
Source: AllianzGI. Capital returns.
37
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Long-term focus
Our focus is on understanding how a business evolves and
creates value over the long term. It is only over longer periods
that the fundamental attributes of a businesses or industry
reveal themselves. It is also over longer periods that the
power of compounding takes place. A small cohort of high
return, growth businesses are able to deliver exceptional
outcomes for shareholders over time. Patience is a prerequisite
for participation.
Factually, most equities are long duration assets, whose
present value is derived from cash flows expected well into the
future. We therefore believe it is sensible to align our analytical
timeframe with that reality. Our attention is skewed to factors
such as returns on invested capital, sustainable competitive
advantages, barriers to entry, long term growth rates, capital
allocation policies and leverage. Ultimately, considerations
such as these will determine the quantity, trajectory and
riskiness of the cash flows that the trust will receive from its
holdings. We believe the stock market remains excessively
focused on the short term. Through detailed research and
analysis focused on what truly matters, we seek to deliver
superior investment returns.
A balanced, diversified portfolio
Drawing on the full resource of AllianzGI’s global platform, we
look across all industries and geographies to select the most
attractive investment ideas for the trust’s portfolio. We believe
in building a balanced portfolio that is diversified across a
wide range of idiosyncratic opportunities and risks. In this
way the portfolio can be relied upon to deliver a steady and
consistent capital and income return.
Research intensive, focus on cash flow
AllianzGI’s research platform combines a large global
team of equity and credit portfolio managers and analysts,
environmental, social and governance specialists and our
own Grassroots* market research organisation. Collectively,
these provide Brunner’s fund managers with thoughtful, high
quality analysis of a wide range of businesses and industries,
augmented by insights into structural and cyclical trends. Our
research emphasises the analysis of sustainable company
cash flows, which we believe provides the truest measure
of corporate performance. (*GrassrootsSM is a division
of AllianzGI)
Investment Philosophy and
Stock Selection Process
Quality: Stable above average returns
– Long term competitive advantage
– Strong balance sheets
– High barriers to entry
– Management quality
– Stable/improving ROCE/RoE
– Sound on ESG issues
We seek to identify
this universe through
fundamental
research
Quality
Growth Valuation
Secular growth
– Addressable market growth
– Sustainable growth – technology, brand
– Long term, through-cycle approach
– Avoid structural decline
Value, not just “cheap”
– Reverse Discounted Cash Flow
– Enterprise Value vs. Cash returns
– Price/Book vs. Return on Equity
– Dividends – an output not input
38
Stock selection – focus on Quality, Growth and
Valuation
Our stock selection process blends assessments of business
quality, long-term growth potential and valuation, resulting in
a holistic view of a company, the risk factors and, ultimately,
the drivers of shareholder value.
Quality is about understanding the intrinsic attributes of
a business model. High quality companies are those with
high returns on invested capital supported by long-term
competitive advantages, shareholder friendly management
teams, sound ESG and strong balance sheets.
Such companies tend to be highly profitable, generating
substantial cash flow that can be used to fund further, value-
creative growth or returned to shareholders as dividends or
buybacks. Business quality can vary enormously across and
within industries. Fortunately, as global investors with a large
investible universe, we can afford to be highly selective.
To assess long-term growth potential, it is important to
understand the secular forces that are shaping the economy
and society, such as demographics, electrification and
digitalisation. This provides the context in which to assess
broader industry drivers as well as a company’s position within
the industry. Particular emphasis is placed on differentiating
between structural and cyclical growth. Whilst we will invest
in cyclical companies, a much greater value is placed on the
structural element. The combination of a high-quality business
model and long-term growth is a particularly powerful driver
of shareholder value. Most of the world’s truly great equities
have enjoyed these twin attributes.
Company valuation seeks to determine whether there is
sufficient upside to warrant investing. We look for companies
where the quality and/or long-term growth potential is not
fully appreciated. We want to anticipate rather than react
and are careful not to overpay, for example by identifying
companies with structural growth masked by a cyclical
downturn or those where we believe business quality is
improving. We employ a wide range of valuation tools,
such as reverse DCFs (which allow us to determine currently
discounted assumptions), free cash flow yields and relative
multiples. At all times we are intellectually honest, recognising
that the valuation of unknown future cash flows is inherently
uncertain. We prefer to be directionally correct, rather than
precisely wrong.
ESG considerations straddle these three factors. Good
governance influences quality, for example. Environmental
factors will present opportunities for growth and threats to
terminal value. AllianzGI’s sustainability research team is fully
integrated into the broader investment research platform,
allowing us to develop a deep understanding of these risks
and opportunities. As long-term investors, these considerations
are critical to our investment process.
Our ultimate goal is to provide a balanced portfolio, which
optimises for aggregate quality, growth and value.
Selling stocks
Despite taking a long-term approach, we are still active
managers. In general, there are three situations where stocks
will be sold from the portfolio:
– Where there has been a material change to the investment
case. Whilst we work hard to minimise mistakes, we
recognise that we can make errors of judgement. Businesses
can evolve in an adverse direction, despite our best efforts
to avoid investments in those that do.
– Where the valuation has reached uncomfortably high levels
and imply expectations that clearly exceed what we believe
to be reasonable.
– Where a sale is required to raise cash for a superior
investment opportunity elsewhere.
Portfolio construction
The portfolio consists of a minimum of 50 holdings that
are selected on their individual merits whilst taking
into consideration the exposure to individual industries,
geographies, themes, factors and other idiosyncratic risk
factors, ensuring that the overall portfolio remains well
balanced and diversified.
The size of each individual holding reflects the level of
conviction. Typically, this reflects our balanced judgement
regarding the quality, growth and value of each investment,
with additional considerations related to the likely range of
outcomes (a proxy for risk) and liquidity.
At the portfolio level, the objective is to ensure that stock
specific risk – the risk which results from our stock selection
decisions – is the primary driver of the portfolio’s returns.
Residual risks such as currency, style, geography or
macroeconomic are monitored and managed to ensure that
they are not driving the overall portfolio’s returns. Ultimately,
the aim is to optimise the portfolio to achieve the dual
objective of consistent benchmark outperformance combined
with an attractive and growing income.
39
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
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.
Communication
Services
Consumer
Discretionary
Consumer
Staples
Energy
Financials
Health
Industrials
Materials
Technology
Utilities
Total
Strategy or
Business Model
8
Audit & Accounting
2
Corporate
Governance
19
Environmental
Risks or Impacts
18
Financial
Performance
1
Operational
Performance
1
Risk Management
3
Social Risks
or Impacts
13
Transparency
and Disclosure
6
Several issues may be covered in each meeting.
40
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 2023.
Source: MSCI/AllianzGI.
Environmental, Social and Governance
performance
8.0
4.0
Q1 17 Q4 23 Q1 17 Q4 23
8.0
4.0
8.0
4.0
Q1 17 Q4 23 Q1 17 Q4 23
8.0
4.0
Brunner ESG MSCI Environment BM ESG MSCI Environment Brunner ESG MSCI Governance BM ESG MSCI Governance
Brunner ESG MSCI Social BM ESG MSCI Social Brunner ESG MSCI Aggregate BM ESG MSCI Aggregate
Environmental performance v benchmark
Social performance v benchmark
Governance performance v benchmark
ESG performance v benchmark
41
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Top 20 Holdings
Visa operates the world’s largest consumer payment system.
The company’s extraordinary network consists of 4.3 billion
cards in circulation, issued by 14,500 banks and other financial
institutions which can be used at over 130 million merchant
locations across 200 countries. In the twelve months to the end
of September 2023 Visa processed 276 billion transactions
worth over $15 trillion dollars.
Sector: Software & Computer Services
Headquarters: North America
Value of holding: £37,146,255
Percentage of portfolio: 6.7%
Sector: Industrial Support Services
Headquarters: North America
Value of holding: £21,878,979
Percentage of portfolio: 4.0%
Sector: Health Care Providers
Headquarters: North America
Value of holding: £24,464,485
Percentage of portfolio: 4.4%
Sector: Technology Hardware & Equipment
Headquarters: North America
Value of holding: £15,995,821
Percentage of portfolio: 2.9%
UnitedHealth Group is a leading health insurer, offering
a variety of plans and services to employers, government
programmes such as Medicare (US), and individuals in the US
and internationally. The business operates two complementary
businesses - UnitedHealthcare, which manages health
benefits, and Optum which delivers cost-efficient care aided by
technology and data. Together, the company plays a key role
managing costs throughout the health care system.
Microchip Technology designs, manufactures and markets
analog semiconductors, microcontrollers and other relatively
basic, low cost chips used across a wide variety of industrial,
consumer and computing end markets. The company’s
products play a key role in a variety of megatrends including
the ‘internet of things’, the electrification of transportation,
data centres, renewable energy and autonomous driving.
UnitedHealth
Microchip Technology
Microsoft
Visa
1
3
2
4
Microsoft is one of the world’s largest technology companies
with a unique position in enterprise software. 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. Its Office software has over
400 million users and its Windows desktop operating system
continues to dominate. The company is an early leader in
artificial intelligence applications.
42
Shell is a leading global, integrated energy company. Its
operations span the production and marketing of oil and gas,
liquefied natural gas (LNG), chemical products and renewable
energy production. By reallocating the proceeds of its legacy
activities towards lower carbon solutions, Shell plays a key
role in the energy transition. Its LNG plays an important role in
reducing reliance on Russian gas and replacing the polluting
coal still used to generate electricity in some countries.
Partners Group is a leading private markets firm based in
Switzerland, and one of the most valuable publicly listed
alternative asset managers in the world. The company
provides tailored solutions to around 800 institutional clients
seeking investment expertise in private equity, infrastructure,
real estate and credit. Partners Group has grown assets under
management at more than 16% a year since 2006, and today
manages over $142 billion.
Sector: Oil, Gas & Coal
Headquarters: United Kingdom
Value of holding: £15,130,484
Percentage of portfolio: 2.7%
Sector: Investment Banking & Brokerage
Headquarters: Switzerland
Value of holding: £14,200,035
Percentage of portfolio: 2.6%
Sector: Electronic & Electrical Equipment
Headquarters: France
Value of holding: £14,306,587
Percentage of portfolio: 2.6%
Sector: Medical Equipment & Services
Headquarters: North America
Value of holding: £14,166,513
Percentage of portfolio: 2.6%
Schneider Electric offers electrical distribution, industrial
automation and energy management products and services
which are used in homes, offices, industrial buildings and
infrastructure worldwide. The electrification of the global
economy is a necessity if we are to replace fossil fuels with
renewables and we therefore expect electricity usage to grow
dramatically over the coming decades.
Thermo Fisher Scientific is the world leader in serving the
science industry, with annual revenue over $40 billion. With
a mission to enable customers ‘to make the world healthier,
cleaner and safer’, they provide a wide range of products and
services that enable life sciences research. These range from
relatively basic laboratory supplies to electron microscopes,
CRISPR gene editing machines, clinical research services and
the production of complex pharmaceutical ingredients.
Schneider Electric
Thermo Fisher Scientific
Shell
Partners Group
8
5 6
7
43
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Charles Schwab is the largest discount brokerage in the US,
serving both individual investors and registered investment
advisors. Charles Schwab’s vast size and extensive use of
scalable technology results in low costs per customer, allowing
it to offer lower fees than most competitors whilst still making
a healthy profit. 35 million customers trust Schwab with $8.5
trillion of assets, and assets have grown at a rate of 11% a year
since 2003.
Taiwan Semiconductor Manufacturing Company (TSMC) is
the world’s leading semiconductor ‘foundry’ with an exclusive
focus on manufacturing products for companies like Apple,
Nvidia and Qualcomm, including a virtual monopoly making
the most complex, ‘leading edge’ semiconductors. In 2022,
the company manufactured over 12,000 different products
for over 500 customers. These products serve a broad set of
diverse end markets, from smartphones to automotive.
Sector: Investment Banking & Brokerage
Headquarters: North America
Value of holding: £ 13,891,300
Percentage of portfolio: 2.5%
Sector: Technology Hardware & Equipment
Headquarters: Taiwan
Value of holding: £13,059,369
Percentage of portfolio: 2.4%
Sector: Non-Life Insurance
Headquarters: North America
Value of holding: £13,204,751
Percentage of portfolio: 2.4%
Sector: Oil, Gas & Coal
Headquarters: France
Value of holding: £12,876,533
Percentage of portfolio: 2.3%
Founded in 1927, Gallagher is today one of the world’s leading
insurance brokerage, risk management, and HR & benefits
consulting companies. Gallagher has a particular strength in
advising medium-sized clients, where competitors typically
lack Gallagher’s scale, industry expertise, and data and
analytics capabilities. Organic growth combined with frequent
acquisitions of smaller competitors has resulted in average
revenue growth of 11% a year for the past 20 years.
TotalEnergies is a multinational energy company based
in France. The company has embarked upon a business
transformation focused on achieving net zero by 2050 and
reducing its broader environmental impact. To do this, Total
is investing heavily in renewables and electricity whilst driving
growth in LNG, the transition fuel which complements the
natural intermittency of renewable sources of electricity and
replaces more polluting coal generated power.
Arthur J. Gallagher & Co.
TotalEnergies
Charles Schwab
Taiwan Semiconductor
9
11
10
12
44
Muenchener Rueckversicherungs Gesellschaft (Munich Re) is
one of the world’s leading insurance companies, with clients
in more than 160 countries. It is the world’s largest provider
of reinsurance coverage (insurance for insurers), working with
clients to manage and share the risk of losses from major
events like natural catastrophes or cyber breaches. Munich Re
also provides insurance directly to companies and consumers
through its Germany-based ERGO subsidiary.
Intercontinental Hotels Group (IHG) is one of the world’s
largest hotel companies with 6,200 hotels open and a further
1,900 in the pipeline. The business model is asset light; it
takes a franchise or management fee from hotel owners who
licence its brands, which include Holiday Inn, Intercontinental
and Six Senses. Low capital requirements mean it generates
tremendous amounts of cash which can be returned to
shareholders via dividends and buybacks.
Sector: Non-Life Insurance
Headquarters: Germany
Value of holding: £12,500,544
Percentage of portfolio: 2.3%
Sector: Travel & Leisure
Headquarters: United Kingdom
Value of holding: £12,026,666
Percentage of portfolio: 2.2%
Sector: Electronic & Electrical Equipment
Headquarters: North America
Value of holding: £12,138,291
Percentage of portfolio: 2.2%
Sector: General Industrials
Headquarters: Japan
Value of holding: £11,411,833
Percentage of portfolio: 2.1%
Ametek is a global manufacturer of electronic instruments
and electromechanical devices serving a diverse range of
niche markets and applications. Broad end market exposure
reduces dependence of any single market, technology or
customer and the focus on niches allows the company to
differentiate via technology and innovation. Many of their
businesses are aligned with secular growth trends including
health care, energy, aerospace and industrial automation.
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.
AMETEK
Itochu
Munich Re
Intercontinental Hotels
16
1413
15
45
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Total value of top twenty holdings: £301,990,239 Percentage of portfolio: 54.6%
Netherlands based ASML makes amongst the most advanced
semiconductor manufacturing equipment on the planet. The
pinnacle of their business is their unique capability in extreme
ultra violet (EUV) lithography machines. These enable a critical
step in the production of the most complex computer chips
such as those used in the Apple iPhone or made by Nvidia for
artificial intelligence applications. The company enjoys very
high barriers to entry and a robust growth outlook.
DNB is Norway’s leading bank with high market share
and profitability in a rational, consolidated and prudently
regulated market. Norway is a stable, wealthy jurisdiction
where banks are required to have high levels of capital,
protecting them against adverse developments. DNB ranks
as one of the world’s safest banks with a credit rating of AAA
(MSCI) and exceptional performance in the EU’s most recent
stress tests. The company pays a very generous dividend.
Sector: Technology Hardware & Equipment
Headquarters: Netherlands
Value of holding: £11,295,883
Percentage of portfolio: 2.0%
Sector: Banks
Headquarters: Norway
Value of holding: £10,710,122
Percentage of portfolio: 1.9%
Sector: Industrial Support Services
Headquarters: North America
Value of holding: £11,186,407
Percentage of portfolio: 2.0%
Sector: Industrial Engineering
Headquarters: Sweden
Value of holding: £10,399,381
Percentage of portfolio: 1.9%
Accenture is a leading global professional services company
that helps customers accelerate growth. Over 740,000
employees serve more than 9,000 diverse corporate clients
worldwide, including three quarters of the Fortune Global 500.
Alongside strategy and consulting, Accenture has particular
strength in technology where they deliver a comprehensive
suite of services and solutions to a broad range of providers
including Microsoft, Amazon Web Services, Adobe and IBM.
Atlas Copco is a decentralised Swedish industrial
conglomerate serving a wide variety of end markets around
the world. It has strong market positions in compressed
air solutions (used in industrial processes ranging from the
production of food to wastewater treatment and LNG),
vacuums (used in the production of semiconductors, for
example), industrial power tools, assembly technologies and
portable power.
Accenture
Atlas Copco
ASML
DNB Bank
17
19
18
20
46
Case Studies
ASML
Sector: Technology Hardware & Equipment
Headquarters: Netherlands
Value of holding: £11,295,883
Percentage of portfolio: 2.0%
Netherlands based ASML are a world
class growth company. Originally part of
conglomerate Philips, they make some
of the most advanced semiconductor
manufacturing equipment on the
planet, enabling Moore’s Law (the
observation that the number of
transistors on a circuit doubles every two
years) to march forward.
The pinnacle of their business is their
unique capability in extreme ultra-violet
(EUV) lithography machines. The largest,
most complex semiconductors comprise
circuits feature billions of transistors.
Simplistically, the pattern of the circuit is
made by projecting light onto chemicals
deposited on a silicon wafer (hence the
term lithography, or ‘stone writing’).
The science and physics of producing
these chips is almost beyond
comprehension. The A17 chip used
by Apple it its latest iPhones has 19
billion transistors. The ‘line width’ of
the circuit pattern is 3 nanometres (a
millionth of a millimetre) across. This is
how far a human toenail grows in three
seconds. A human hair, for comparison,
is a relatively rotund 80,000-100,000
nanometres wide.
Because 3 nm is some way short of
the wavelength of light, it has become
impossible to use anything on the
normal spectrum to project the pattern
of the circuit onto the silicon. EUV has a
far lower wavelength, overcoming this
problem. Generating EUV light, alone, is
an exercise of extraordinary complexity.
In his book Chip War, Chris Miller
summarises the process as follows: the
‘best approach is to shoot a tiny ball
of tin a thirty millionth of a meter wide
through a vacuum at 200 mph then
striking it twice with a laser - the first
pulse to warm it up, the second to blast
it into a plasma with a temperature of
around half a million degrees i.e. many
times hotter than the surface of the
sun. This process is repeated 50,000
times per second to produce EUV in the
quantities required’.
This is but one example of the
extraordinary technology within an
ASML EUV machine. Another is the
mirrors required to project the light onto
the silicon wafer. Each mirror has over
100 layers of materials that are carefully
selected to maximise the reflection of
EUV light. To avoid distortions, flatness
is crucial. The mirrors are polished to
less than one atom’s thickness. For
perspective, if the mirrors were the size
of Germany, the tallest ‘mountain’ would
be just 1mm high.
The latest ASML lithography machines
weigh 200 tonnes and cost hundreds
of millions dollars. A recent downturn in
the semiconductor market has allowed
us to buy the stock for what we believe
is a very fair price. The economics of
the business is outstanding and the
balance sheet is pristine. Unusually for
a cutting-edge tech company, they
pay a reasonable dividend. Over the
long term, we expect sales to grow
substantially, reflecting the world’s
insatiable appetite for computing power.
47
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
AENA
Sector: Industrial Transportation
Headquarters: Spain
Value of holding: £10,308,783
Percentage of portfolio: 1.9%
AENA stands for ‘Aeropuertos Espanoles
y Navegacion Aerea’, or ‘Spanish
Airports and Air Navigation’. Unusually
for Brunner, AENA is a state-controlled
company; something we generally
prefer to avoid. However, we believe
the merits of the investment case were
so compelling we decided to make an
exception on this occasion.
AENA owns 46 airports across the
Spanish mainland and Islands;
every commercial airport in Spain,
to all intents and purposes. Freehold
ownership is actually unusual for
an infrastructure company; most
infrastructure companies operate under
a time-limited concession model, which
brings uncertainty, so AENA’s model is
an attractive rarity.
To prevent abuse of the company’s de
facto monopolist position on air travel
in Spain, the profit they are permitted
to make on the aeronautical side of
the business (for example, the fees
they charge to airlines) is determined
and capped by a regulatory formula
based on the value of their assets. This
profitability is not particularly attractive
in itself but provides a reliable income
stream under most circumstances.
The more interesting part of the business
is its commercial side, which accounts
for roughly 60% of profit and is entirely
unregulated, meaning profitability is
uncapped. AENA acts as a landlord,
renting out space to duty free retailers,
restaurants, car hire firms etc at its
airports. This is particularly valuable
real estate, serving a captive audience
of free-spending travellers who tend to
have above average income.
Over time we assume a decent growth
rate, driven by growth in passenger
numbers, higher spend per passenger at
the airport’s shops and restaurants and
higher rental take-rates. The company
already generates lots of cash, most
of which it returns to shareholders.
We expect a generous and growing
dividend in the years to come.
Some recent economic history and
geography is relevant to the investment
case. Spain invested a great deal in
infrastructure prior to the financial crisis,
meaning Spain generally has plentiful,
modern airport capacity, negating
the need for major expenditure in the
near future. Additionally, the Spanish
economy is heavily reliant on tourism,
providing a supportive environment for
air travel. Finally, domestic air travel is
a material part of the passenger mix,
largely composed of travel between
the mainland and the Balearic and
Canary Islands.
Overall, we believe AENA will prove
to be a fine investment. The stock
combines quality (high incremental
returns on the commercial side, powerful
barriers to entry, strong balance sheet),
good value (a high dividend yield and
unchallenging multiple) and reasonable
growth underpinned by several drivers;
a quintessential Brunner holding.
48
Thermo Fisher Scientific
Sector: Medical Equipment & Services
Headquarters: North America
Value of holding: £14,166,513
Percentage of portfolio: 2.6%
US based Thermo Fisher is the world’s
largest pure-play life science firm, selling
instruments, services, tools, and related
consumables to customers involved
in scientific research. Their customer
base includes the pharmaceutical
and biotech industries, hospitals and
clinical diagnostic labs, universities,
research institutions and government
agencies. Their products are also used
in environmental, industrial, research
and development, quality and process
control settings.
The company operates in markets
with strong secular tailwinds, including
the impact of an aging population in
the developed world which is driving
increased healthcare demand, and
ongoing scientific advances in life
sciences research and techniques,
such as developments around mRNA
vaccine technology. Together, these
secular tailwinds are expected to result
in a life science market which grows
approximately 5% a year.
Thermo Fisher is well positioned to
outgrow the overall market, supported
by an R&D function that includes 7,300
R&D scientists and engineers and
costs $1.5 billion annually, as well as
close commercial relationships and
engagement with end customers.
Management expect long-term organic
growth of 7-9%.
This organic growth will be
supplemented by acquisitions. Since the
merger of Thermo Electron and Fisher
Scientific in 2006, Thermo Fisher has
followed a strategy of consolidating a
highly fragmented and inefficient life
science industry, making approximately
100 acquisitions for a total consideration
of $100 billion. Acquired businesses
typically grow faster as part of the
Thermo Fisher organisation, and profit
margins typically increase as well.
This acquisition strategy has delivered
significant value for shareholders:
Thermo Fisher has delivered 17%
average annual growth in earnings per
share over the past decade (2012-22).
Despite nearly two decades executing
this acquisition strategy, the market
remains highly fragmented, with the
largest three players representing only
around one-third of the market. Thermo
Fisher expects to continue deploying the
majority of its cash flow on M&A.
Thermo Fisher and many of its peers
were beneficiaries of the global ramp
up in infection testing and vaccine
research and development that
occurred during the Covid-19 pandemic.
Organic revenue growth rates of 25%
in 2020 and 17% in 2021 were far
above sustainable levels. As the world
normalised following the pandemic
these relatively high-margin revenue
streams fell away. Consequently,
analysts expect organic revenue to have
declined 5% in 2023 and to deliver no
growth in 2024. We took advantage
of other investors selling in response to
these short-term headwinds to acquire
a position in this leading global life
science franchise at what we believe to
be a very reasonable price.
49
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Portfolio Breakdown
at 30 November 2023
44.29%
North America
£553,377,318
50
25.09%
United Kingdom
26.15%
2.41%
2.06%
Continental Europe
Japan
Pacific Basin
51
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Name Sector Value (£)
% of
Invested
Funds
North America Listed Equity Holdings
Microsoft
Software & Computer Services
37,146,255 6.71
United Health
Health Care Providers
24,464,485 4.42
Visa
Industrial Support Services
21,878,979 3.95
Microchip Technology
Technology Hardware & Equipment
15,995,821 2.89
Thermo Fisher Scientific
Medical Equipment & Services
14,166,513 2.56
Charles Schwab
Investment Banking & Brokerage
13,891,300 2.51
Arthur J. Gallagher & Co.
Non-Life Insurance
13,204,751 2.39
Taiwan Semiconductor
Technology Hardware & Equipment
13,059,369 2.36
AMETEK
Electronic & Electrical Equipment
12,138,291 2.19
Accenture
Industrial Support Services
11,186,407 2.02
Amphenol
Technology Hardware & Equipment
10,301,630 1.86
The Cooper Companies
Medical Equipment & Services
8,380,430 1.51
Intuit
Software & Computer Services
8,125,349 1.47
S&P Global
Finance & Credit Services
7,150,245 1.29
Adobe
Software & Computer Services
7,144,034 1.29
CME Group
Investment Banking & Brokerage
6,554,512 1.18
FleetCore Technologies
Industrial Support Services
6,460,258 1.17
MarketAxcess
Investment Banking & Brokerage
4,362,544 0.79
AbbVie
Pharmaceuticals & Biotechnology
3,571,858 0.65
Align Technology
Medical Equipment & Services
3,206,116 0.58
Estée Lauder
Personal Goods
2,741,687 0.50
245,130,834 44.29
52
Name Sector Value (£)
% of
Invested
Funds
United Kingdom Listed Equity Holdings
Shell
Oil, Gas & Coal
15,130,484 2.73
Intercontinental Hotels
Travel & Leisure
12,026,666 2.17
Admiral Group
Non-Life Insurance
9,990,000 1.81
Unilever
Personal Care, Drug & Grocery
9,893,625 1.79
SSE
Electricity
8,834,656 1.60
RELX
Media
8,661,150 1.57
Baltic Classifieds
Software & Computer Services
7,003,750 1.27
Redrow
Household Goods & Home Construction
6,936,472 1.25
SThree
Industrial Support Services
6,544,800 1.18
Haleon
Pharmaceuticals & Biotechnology
6,187,500 1.12
IG Group
Investment Banking & Brokerage
5,809,750 1.05
DCC
Industrial Support Services
5,609,100 1.01
Rentokil Initial
Industrial Support Services
5,286,352 0.96
Close Brothers
Banks
5,147,191 0.93
Rio Tinto
Industrial Metals & Mining
5,129,050 0.93
St. James's Place Investment Banking & Brokerage 5,117,603 0.92
Tyman Construction & Materials 4,895,675 0.88
GSK
Pharmaceuticals & Biotechnology
4,258,200 0.77
Diageo
Beverages
3,868,200 0.70
Helical
Real Estate Investment & Services
2,517,500 0.45
138,847,724 25.09
53
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Name Sector Value (£)
% of
Invested
Funds
Continental Europe Listed Equity Holdings
Schneider Electric
Electronic & Electrical Equipment (France)
14,306,587 2.59
Partners Group
Investment Banking & Brokerage (Switzerland)
14,200,035 2.57
TotalEnergies
Oil, Gas & Coal (France)
12,876,533 2.33
Munich Re
Non-Life Insurance (Germany)
12,500,544 2.26
ASML Holding
Technology Hardware & Equipment (Netherlands)
11,295,883 2.04
DNB Bank
Banks (Norway)
10,710,122 1.94
Atlas Copco
Industrial Engineering (Sweden)
10,399,381 1.88
AENA
Industrial Transportation (Spain)
10,308,783 1.86
Assa
Abloy
Construction & Materials (Sweden)
9,946,073 1.80
Roche Holdings
Pharmaceuticals & Biotechnology (Switzerland)
9,094,563 1.64
Nestle
Food Producers (Switzerland)
7,881,187 1.42
Novo Nordisk
Pharmaceuticals & Biotechnology (Denmark)
5,790,389 1.05
Iberdrola
Electricity (Spain)
5,717,646 1.03
LVMH Moet Hennessy Louis Vuitton
Personal Goods (France)
4,857,880 0.88
Jumbo
Leisure Goods (Greece)
4,771,495 0.86
144,657,101 26.15
Pacific Basin Listed Equity Holdings
Brambles
General Industrials (Australia)
5,339,904 0.96
AIA
Life Insurance (Hong Kong)
5,009,435 0.91
Australia & New Zealand Bank
Banks (Australia)
2,980,487 0.54
13,329,826 2.41
Japan Listed Equity Holdings
Itochu
General Industrials
11,411,833 2.06
11,411,833 2.06
Total Invested Funds
553,377,318 100.00
54
Distribution of Invested Funds
at 30 November 2023
Breakdown of Equity Portfolio
Sector % Held
Industrials
24.51
Financials
21.09
Technology
19.89
Health Care
14.30
Consumer Discretionary
7.23
Energy
5.06
Consumer Staples
3.91
Utilities
2.63
Basic Materials
0.93
Real Estate
0.45
Total Invested Funds - £
553,377,318 (2022 - £522,829,082)
United
Kingdom
%
North
America
%
Other
Countries
%
2023
Total
%
Composite
Benchmark
Sector
Weighting
2022
Total
%
Industrials
Aerospace & Defence - - - - 1.91 -
Construction & Materials 0.88 - 1.80 2.68 0.97 2.49
Electronic & Electrical Equipment - 2.19 2.59 4.78 1.30 4.53
General Industrials - - 3.02 3.02 1.99 3.10
Industrial Engineering - - 1.88 1.88 1.09 1.66
Industrial Support Services 3.15 7.14 - 10.29 1.79 8.64
Industrial Transportation - - 1.86 1.86 3.48 -
4.03 9.33 11.15 24.51 12.53 20.42
Financials
Banks 0.93 - 2.48 3.41 6.81 1.63
Finance & Credit Services - 1.29 - 1.29 0.97 1.78
Investment Banking & Brokerage 1.97 4.48 2.57 9.02 3.52 11.19
Life Insurance - - 0.91 0.91 1.34 1.94
Mortgage REITs - - - - 0.01 -
Non-Life Insurance 1.81 2.39 2.26 6.46 1.88 3.72
4.71 8.16 8.22 21.09 14.53 20.26
55
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
United
Kingdom
%
North
America
%
Other
Countries
%
2023
Total
%
Composite
Benchmark
Sector
Weighting
2022
Total
%
Technology
Software & Computer Services 1.27 9.47 - 10.74 10.05 7.77
Technology Hardware & Equipment - 7.11 2.04 9.15 9.06 6.39
1.27 16.58 2.04 19.89 19.11 14.16
Health Care
Health Care Providers - 4.42 - 4.42 1.22 4.92
Medical Equipment & Services - 4.65 - 4.65 2.37 5.82
Pharmaceuticals & Biotechnology 1.89 0.65 2.69 5.23 7.70 8.43
1.89 9.72 2.69 14.30 11.29 19.17
Consumer Discretionary
Automobiles & Parts - - - - 1.97 -
Consumer Services - - - - 0.83 -
Household Goods & Home Construction 1.25 - - 1.25 0.60 0.92
Leisure Goods - - 0.86 0.86 0.52 1.25
Media 1.57 - - 1.57 1.95 1.26
Personal Goods - 0.50 0.88 1.38 1.07 4.81
Retailers - - - - 4.18 -
Travel & Leisure 2.17 - - 2.17 2.21 2.84
4.99 0.50 1.74 7.23 13.33 11.08
Energy
Oil, Gas & Coal 2.73 - 2.33 5.06 6.46 5.15
Alternative Energy - - - - 0.08 -
2.73 - 2.33 5.06 6.54 5.15
Consumer Staples
Beverages 0.70 - - 0.70 1.95 -
Food Producers - - 1.42 1.42 1.35 1.65
Personal Care, Drug & Grocery 1.79 - - 1.79 3.55 2.08
Tobacco - - - - 1.29 -
2.49 - 1.42 3.91 8.14 3.73
56
United
Kingdom
%
North
America
%
Other
Countries
%
2023
Total
%
Composite
Benchmark
Sector
Weighting
2022
Total
%
Utilities
Electricity
1.60 - 1.03 2.63 1.59 2.62
Gas, Water & Multi-Utilities - - - - 1.34 -
Waste & Disposal Services - - - - 0.18 -
1.60 - 1.03 2.63 3.11 2.62
Basic Materials
Chemicals - - - - 1.37 1.64
Industrial Materials - - - - 0.11 -
Industrial Metals & Mining 0.93 - - 0.93 2.76 1.01
Precious Metals & Mining - - - - 0.32 -
0.93 - - 0.93 4.56 2.65
Real Estate
Real Estate Investment & Services 0.45 - - 0.45 0.47 0.76
Real Estate Investment Trusts - - - - 2.01 -
0.45 - - 0.45 2.48 0.76
Telecommunications
Telecommunications Equipment - - - - 0.82 -
Telecom Service Providers - - - - 1.69 -
- - - - 2.51 -
Not classified - - - - 1.87 -
Total 25.09 44.29 30.62 100.00 100.0 100.00
57
INVESTMENT MANAGER’S REVIEW
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Historical Record
Net Asset Value Total Return with Debt at Fair Value and Debt at Par
Brunner debt at par
Brunner debt at fair value
Benchmark
Re-based to 100. Source: AllianzGI/Thomson Reuters DataStream. Benchmark: 70% FTSE World Ex UK Index and 30% FTSE All-Share Index.
Alternative Performance Measure (APM). See Glossary on page 119.
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Revenue
Total income (£000s)
9,031 8,735 9,996 11,000 10,968 11,505 9,195 11,487 12,623
14,426
Earnings per share
14.71p 14.09p 16.40p 18.40p 19.67p 21.66p 15.96p 20.35p 22.66p
26.35p
Dividend per share
15.00p 15.30p 15.80p 16.50p 18.15p 19.98p 20.06p 20.15p 21.50p
22.70p
Capital
Total net assets (£ms)
1
278.4 273.6 318.3 368.0 360.3 403.8 422.1 502.4 497.1 528.2
Total net assets (£ms)
2
264.9 262.5 307.7 359.2 361.1 400.2 416.5 497.5 503.2 537.3
Net asset value per ordinary share
1
646.0p 636.2p 742.8p 862.0p 843.9p 945.8p 988.7p 1,176.9p 1,164.4p
1,237.2p
Net asset value per ordinary share
2
614.9p 610.3p 718.0p 841.4p 845.8p 937.4p 975.5p 1,165.4p 1,178.7p
1,258.6p
Share price
541.0p 540.5p 591.8p 785.0p 745.0p 862.0p 842.0p 1,050.0p 1,020.0p
1,065.0p
Year end discount %
2
12 11 18 7 12 8 14 10 14
15
Geographical Disposition
% of Investment Funds at year end
3
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
United Kingdom 47.0 42.1 35.0 30.8 26.4 24.7 17.5 20.4 22.0 25.1
Europe 13.6 16.0 20.4 20.8 21.6 23.3 27.9 27.5 27.1 26.1
Americas 30.7 32.5 34.1 37.5 42.7 41.3 43.7 43.1 42.2 44.3
Japan 3.0 3.4 3.7 2.6 2.1 2.6 2.7 2.4 2.9 2.1
Pacific Basin 5.7 6.0 6.8 8.3 7.2 8.1 8.2 6.6 5.8 2.4
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
1
Debt at par.
2
Debt at fair value.
3
Excludes cash at bank and in hand and other receivables.
Net Asset Value Return %
30
25
20
15
10
5
0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
58
Schneider Electric was
another notable contributor
to performance. The electrical
distribution, automation and
energy management company is
headquartered in Paris, France.
Governance
60 Directors, Manager and Advisers
63 Directors’ Report
65 Corporate Governance Statement
72 Management Engagement
Committee Report
73 Nomination Committee Report
74 Remuneration Committee Report
78 Audit Committee Report
81 Statement of Directors’
Responsibilities in respect of
the financial statements
59
Amanda Aldridge BSc FCA*Carolan Dobson BSc
Chartered FCSI*†
Joined the board in December 2019.
Amanda is a non-executive director
and audit committee chair of Impact
Healthcare REIT plc and Staffline
Group PLC. She also chairs the audit
and risk committee of The Low Carbon
Contracts Company and is a director of
The Electricity Settlements Company.
She was formerly a partner at KPMG
LLP and during her career she was Head
of the Retail Sector practice before
becoming Head of Contract Governance
in the Risk-Consulting Division. Amanda
is a Fellow of the Institute of Chartered
Accountants in England and Wales.
Experience:
Amanda brings senior experience in
accounting practice, with specialisms
including risk, and has non-executive
director and audit committee
chair experience on other public
company boards.
Reasons for the recommendation
for re-election:
Amanda has evident skills and
experience both from her background
as a chartered accountant and as an
audit committee chair.
Joined the board in December 2013 and
has been Chair since the AGM in March
2016. She is also Chair of Baillie Gifford
UK Growth Fund plc and BlackRock
Latin American Investment Trust plc
and a director of Aberdeen Standard
Fund Managers Limited, M&G Securities
Limited and Investment Trustee and
Adviser Limited. Carolan was previously
head of UK equities at Abbey Asset
Managers, Head of Investment Trusts at
Murray Johnstone and was the portfolio
manager of two investment trusts.
Experience:
Carolan is an experienced fund
manager and has held key roles
in the investment management
industry and in advisory roles and
she chairs both investment trusts and
other organisations.
Reasons for the recommendation
for re-election:
Carolan’s wise and effective leadership
of the board and wide knowledge and
experience of the industry.
Elizabeth Field MA*
Joined the board in December 2022.
Elizabeth recently retired as a partner
at Stephenson Harwood. Elizabeth
was a corporate lawyer for 35 years
with extensive experience of advising
public and private companies on a wide
range of corporate transactions across
a variety of sectors, specifically including
investment trusts.
Experience:
Elizabeth is a lawyer and has experience
of providing legal and corporate
governance advice to investment
trusts, asset managers and investment
trust sponsors.
Reasons for the recommendation
for re-election:
Elizabeth’s legal knowledge and
negotiating skills are valuable to the
board and she has wide knowledge of
the industry.
Directors, Manager and Advisers
* Independent of the manager.
†
Independent on appointment as Chair.
Member of the Audit Committee,
Management Engagement
Committee, Nomination Committee
and Remuneration Committee.
Chair of the Audit Committee, Member
of the Management Engagement
Committee, the Nomination
Committee and the Remuneration
Committee.
Board Chair. Chair of the Management
Engagement Committee and the
Nomination Committee, Member of
the Remuneration Committee.
60
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Andrew Hutton MA, CFA*
Joined the board in April 2020. He is
owner and director of A.J.Hutton Ltd, an
investment advisory practice established
in 2007. Andrew started his career in
1979 at J.P. Morgan where, over 18
years, he held investment and business
management positions in London,
New York, Singapore and Australia. He
was subsequently head of investment
management at Coutts Group and co-
CEO of RBS Asset Management. Andrew
has served as Senior Independent
Director of Baillie Gifford UK Growth
Fund and Chairman of JPMorgan
Global Emerging Markets Income Trust.
Experience:
Andrew is an asset management
professional with senior management
and money management experience.
Reasons for the recommendation
for re-election:
Andrew brings to the board a
deep understanding of portfolio
management.
Jim Sharp MA*
Joined the board in January 2014. He
began his career in corporate finance
with J.Henry Schroder & Co. Limited from
1992 to 2002 where he was a director.
He is Chair of The Cotswold Company
and is a non-executive director of James
Cropper PLC.
Experience:
Jim has a background in financial
services and in addition to experience
in running businesses and insight into
marketing and promotion he brings
a connection to the largest group
of shareholders.
Reasons for the recommendation
for re-election:
Jim’s broad commercial and operational
experience and knowledge and
understanding of marketing and
promotion are valuable and his
connection to a key stakeholder helps
the board’s understanding of the
requirements of shareholders.
Member of the Management
Engagement Committee and the
Nomination Committee.
Senior Independent Director, Chair
of the Remuneration Committee,
Member of the Audit Committee,
the Management Engagement
Committee, and the Nomination
Committee.
61
GOVERNANCE
The Manager or Alternative Investment Fund
Manager (AIFM)
Allianz Global Investors UK Limited (AllianzGI UK) is
incorporated in the UK and its registered office is at 199
Bishopsgate, London EC2M 3TY. It is authorised by the
Financial Conduct Authority (FCA).
Allianz Global Investors GmbH (AllianzGI) is an active asset
manager operating across nineteen markets with specialised
in-house research teams around the globe, managing assets
for individuals, families and institutions worldwide.
As at 30 September 2023, AllianzGI had €516 billion of assets
under management worldwide.
Through its predecessors, AllianzGI has a heritage of
investment trust management expertise in the UK reaching
back to the nineteenth century and as at 31 December 2023
had £2.8 billion assets under management in a range of
investment trusts.
Website: allianzgi.co.uk
Head of Investment Trusts
Stephanie Carbonneil
Email: stephanie.carbonneil@allianzgi.com
Investment Manager
Julian Bishop and Christian Schneider, Co-Lead managers,
representing Allianz Global Investors UK Limited, 199
Bishopsgate, London EC2M 3TY (the manager).
Company Secretary and Registered Office
Kirsten Salt ACG
199 Bishopsgate, London EC2M 3TY
Telephone: 020 3246 7513
Email: kirsten.salt@allianzgi.com
Registered Number
00226323
Bankers and Custodian
HSBC Bank plc
Depositary
HSBC Securities Services
Solicitors
Dickson Minto W.S.
Independent Auditors
PricewaterhouseCoopers LLP
Registrars
Link Group
(full details on page 113)
Stockbrokers
J.P. Morgan Cazenove
62
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Directors’ Report
The directors present their Report which incorporates
the audited financial statements for the year ended 30
November 2023.
Share Capital
Details of the company’s share capital are set out in Note 11
on page 102. 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 115.
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 72.
During the year, the Company changed its Alternative
Investment Fund Manager (‘AIFM’) from Allianz Global
Investors GmbH, UK Branch (‘AllianzGI GmbH’) to Allianz
Global Investors UK Limited (‘AllianzGI UK’). AllianzGI UK is
an affiliate of, and has the same ultimate parent company
as, AllianzGI GmbH. There was no change to the portfolio
management or fee arrangements. Under the Alternative
Investment Fund Managers Directive (AIFMD) the company
appointed AllianzGI UK 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 UK (the management contract).
AllianzGI UK is authorised and regulated by the Financial
Conduct Authority with its registered office at 199 Bishopsgate,
London EC2M 3TY.
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 £11,251,047 or 26.35p per share (2022 -
£9,673,972, 22.66p per share).
The first two quarterly dividends of 5.55p (£2,369,446) were
paid during the company’s financial year to 30 November
2023 and the board declared a third quarterly dividend of
5.55p (£2,369,446) per ordinary share which was paid on 12
December 2023. The board recommends a final dividend for
the year ended 30 November 2023 of 6.05p (£2,582,910),
payable on 4 April 2024, making a total distribution for the
year of 22.70p per ordinary share. The next quarterly dividend
payment is expected to be made in July 2024.
Invested Funds
The market value of the Company’s investments at 30
November 2023 was £553m (2022 - £523m). Sales of
investments during the year resulted in net gains of £32.2m
(2022 - losses: £3.7m). 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 90. The revenue and capital split is
explained in more detail in the Statement of Accounting
Policies on page 94 under ‘Investment management
fee and administrative expenses’ and on page 97 under
‘Finance costs’.
63
GOVERNANCE
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 102.
Listing Rule 9.8.4R
There are no matters requiring disclosure under this Rule.
Voting Rights in the Company’s Shares
As at 12 February 2024, 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 12 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 0.36% – as
trustee 6.00%).
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 4,341,288 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%).
Internal Control
The directors have overall responsibility for the company’s system of internal control. Whilst acknowledging their responsibility
for the system of internal control, the directors are aware that such a system is designed to manage rather than eliminate the
risk of failure to achieve business objectives and can provide only reasonable but not absolute assurance against material
misstatement or loss.
The board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the
company. This process has been fully in place throughout the year under review and up to the date of the signing of this
Annual Report.
The key elements of the process are as follows:
– In addition to the review of the principal risks (see pages 16 to 19), the directors regularly review all the risks on the
Internal Risk Matrix and every six months the board receives from the manager a formal report which details any known
internal controls failures, including those that are not directly the responsibility of the manager.
– Allianz Global Investors UK Limited (AllianzGI UK), as the appointed manager, provides investment management, accounting
and company secretarial services to the company. The manager therefore maintains the internal controls associated with the
day-to-day operation of the company. These responsibilities are included in the Management and Administration Agreement
64
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
The board reports against the AIC Code of Corporate Governance (AIC Code) 2019. As confirmed by the Financial Reporting
Council, following the AIC Corporate Governance Guide enables investment company boards to meet their obligations under the
UK Corporate Governance Code and Listing Rules.
Board Composition
There are five directors on the board. We aim to have two investment professionals, an accountant, a lawyer and a director
with commercial expertise, one of which preferably has a connection with the Brunner family, to provide a balanced board.
The optimum number of directors is therefore five, but the number could fall to four and go as high as six to cover periods of
recruitment, transition and retirement.
The board has a plan for the retirement of directors to ensure that an orderly process of recruitment can take place and that the
board’s balance of skills and relevant experience is maintained. This may mean that directors might be on the board for longer
than nine years to allow for continuity of experience and a smooth transition.
The biographies of the directors are set out on pages 60 and 61 together with the skills and experience each director brings
to the board for the long-term sustainable success of the company.
No contracts of significance in which directors are deemed to have been interested have subsisted during the year under review.
Contracts of employment are not entered into with the directors, who hold office in accordance with the company’s Articles
of Association.
Board Evaluation
The board and its committees were subject to an internally facilitated performance appraisal during the course of the year. This
was conducted by means of a detailed questionnaire and the responses were collated into a report in which the respondents
were anonymous. The Chair conducted the evaluation and it was found that the board is effective and that each director
continues to be effective, has the appropriate skills and has demonstrated commitment and devoted the necessary time to his or
her role. All directors attended all board and relevant committee meetings during the year. The directors all provide challenge in
board meetings and each offers useful guidance from their own areas of expertise.
The Senior Independent Director conducted an appraisal of the Chair following a similar method to the board evaluation. This
exercise confirmed that the Chair demonstrates effective leadership, makes an excellent contribution to the company and is
assiduous in her engagements with the company’s stakeholders.
Gender and Ethnic Diversity
The board is supportive of the FCA’s recently updated Listing Rules (LR 9.8.6R(9)) to encourage greater diversity on listed
company boards and has implemented the FCA’s disclosure requirements. The board recognises the importance of having a
range of skilled, experienced individuals with the right knowledge represented on the board. The board will continue to ensure
that all appointments are made on the basis of merit against the specification prepared for each appointment.
The board has chosen to align its diversity reporting reference date with the company’s financial year end and proposes to
maintain this alignment for future reporting periods. The company has met one of the targets on board diversity as at its chosen
reference date, 30 November 2023 as at least 40% of the individuals on its board of directors are women. The board did not at
the reference date and does not at the date of this report have any directors from a minority ethnic background. Further details
on the company’s appointment process can be found under Board Composition, above, and Succession on page 73. As
required under LR 9.8.6R(10), further detail in respect of the targets outlined above as at 30 November 2023 is disclosed in the
tables below.
As an externally managed investment company, the company has no executive directors, employees or internal operations.
Therefore columns relating to executive management have been removed from the tables below. The roles of chief executive
and chief financial officer are not applicable to the company, however, the company considers the roles of the Senior
Independent Director and Chair of the Audit Committee to be senior board positions and the following disclosure is made on
this basis.
Corporate Governance Statement
65
GOVERNANCE
As at 30 November 2023:
Number of
Board members
Percentage
of the Board
Number of
Senior Positions
on the Board
(CEO, CFO, SID
and chair)*
Men 2 40% 1
Women 3 60% 1
Other - - -
Not specified/prefer not to say - - -
Number of
Board members
Percentage
of the Board
Number of
Senior Positions
on the Board
(CEO, CFO, SID
and chair)*
White British or other White (including minority-white groups) 5 100% 2
Mixed/Multiple Ethnic Groups - - -
Asian/Asian British - - -
Black/African/Caribbean/Black British - - -
Other ethnic group, including Arab - - -
Not specified/prefer not to say - - -
Since the reference date and the date that the Annual Report was approved no further changes have occurred.
As at 13 February 2024:
Number of
Board members
Percentage
of the Board
Number of
Senior Positions
on the Board
(CEO, CFO, SID
and chair)*
Men 2 40% 1
Women 3 60% 1
Other - - -
Not specified/prefer not to say - - -
Number of
Board members
Percentage
of the Board
Number of
Senior Positions
on the Board
(CEO, CFO, SID
and chair)*
White British or other White (including minority-white groups) 5 100% 2
Mixed/Multiple Ethnic Groups - - -
Asian/Asian British - - -
Black/African/Caribbean/Black British - - -
Other ethnic group, including Arab - - -
Not specified/prefer not to say - - -
* The company only has two of the senior roles specified by the Listing Rules, that is the position of chair and SID. One of these roles is occupied
by a man and one by a woman. However, the company considers that the chair of the audit committee, nomination committee and remunera-
tion committee is a senior position. Of these three senior roles, two are performed by a woman and one by a man.
Conflicts of Interest
Under the Companies Act 2006 directors must avoid a situation where they have, or can have, a direct or indirect interest that
conflicts, or possibly may conflict, with the company’s interests. The board reports annually on the company’s procedures for
ensuring that its powers of authorisation of conflicts are operated effectively and that the procedures have been followed.
66
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Each of the directors has provided a statement of all conflicts
of interest and potential conflicts of interest relating to the
company. These statements have been considered and
approved by the board. The directors have undertaken to
notify the Chair and Company Secretary of any proposed
new appointments and new conflicts or potential conflicts
for consideration, if necessary, by the board. The board has
agreed that only directors who have no interest in the matter
being considered will be able to participate in taking the
relevant decision and that in taking the decision the directors
will act in a way they consider, in good faith, will be most
likely to promote the company’s success. The board is able
to impose limits or conditions when giving authorisation if
it thinks this is appropriate. For example, a director with a
potential conflict might be asked to step out of the meeting
room, or will be permitted to remain in the room but not
participate in the discussion or take part in a vote on a course
of action.
The board confirms that its powers of authorisation are
operating effectively and that the agreed procedures have
been followed.
Directors’ Indemnities
Directors’ and Officers’ Liability insurance cover is held by the
company and was in place for the whole of the financial year.
As permitted by the company’s Articles of Association, the
company has granted indemnities to the directors.
Board Committees
Audit Committee
The Audit Committee Report is on page 78.
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 Committee Report is on page 73.
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 72.
Remuneration Committee
The remuneration committee met once in the year and
consists of all the directors. The committee is chaired by
Andrew Hutton. 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 74.
The terms of reference for each of the committees may be
viewed by shareholders on request and are published on the
company’s website brunner.co.uk in the Information/Legal
Documents section.
Board Attendance
Attendance by the directors at formal board and committee meetings during the year was as follows:
Director Board
Board
Strategy
Day
Audit
Committee
Remuneration
Committee
Nomination
Committee
Management
Engagement
Committee
No. of meetings 6 1 2 1 1 1
Carolan Dobson 6 1 2
1
1 1 1
Amanda Aldridge 6 1 2 1 1 1
Elizabeth Field 6 1 2 1 1 1
Andrew Hutton 6 1 2 1 1 1
Peter Maynard
2
2 1 1 1 1 1
Jim Sharp 6 1 2
1
1
1
1 1
1
Invited to attend meetings, although not a committee member.
2
Retired from the board on 31 March 2023.
67
GOVERNANCE
between the company and the manager. The manager’s
systems of internal control are regularly evaluated by its
management and monitored by internal auditors.
– There is a regular review by the board of asset allocation
and any risk implications. There are also regular and
comprehensive reviews by the board of management
accounting information, including revenue and expenditure
projections, actual revenue against projections and
performance comparisons.
– Authorisation and exposure limits are set and maintained by
the board.
– The board meets with senior representatives of AllianzGI
and also receives an Internal Controls Report from the
manager, together with a report on compliance with the
manager’s anti-bribery policy.
– The audit committee on behalf of the board reviews the
Internal Controls Reports of other third party service
providers, including those of AllianzGI and all other
providers of administrative and custodian services to
AllianzGI or directly to the company.
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 81 and a statement of
going concern is on page 20. The Independent Auditors’
Report can be found on page 84.
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 starting on page 9,
and in the Investment Manager’s Review on page 40.
TCFD
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 41 we
look at various ESG MSCI performance metrics against those
of the benchmark.
In accordance with the requirements of the TCFD, AllianzGI
UK as AIFM is preparing a product level report for the
company. It is expected that the TCFD report for the
company will be available in June 2024 on the company’s
website www.brunner.co.uk.
Greenhouse Gas Emissions
As an investment company, the Company’s own direct
environmental impact is minimal. The Company has no
greenhouse gas emissions to report from its operations, not
does it have responsibility for any other emissions producing
sources under the Companies Act 2006 (Strategic Report
and Directors’ Reports) Regulations 2013. For the same
reasons, the Company considers itself to be a low energy user
under the Streamlined Energy & Carbon Reporting (“SECR”)
regulations and therefore is not required to disclose energy
and carbon information.
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
The plans for board succession, including the arrangements
for the retirements of the directors with over nine years’ service,
are described on page 73. Carolan Dobson, Amanda
Aldridge, Elizabeth Field, 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 2024. Biographical details of the directors are on page
60 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 2023 are set out in the Directors’ Remuneration
Report on page 74.
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.
Adoption of new Articles of Association
Resolution 11, which will be proposed as a special resolution,
seeks shareholder approval to adopt new Articles of
Association (the “New Articles”) in order to update the
Company’s current Articles of Association (the “Existing
68
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Articles”). The proposed amendments being introduced in the
New Articles primarily relate to changes in law and regulation,
developments in market practice and other developments
since the Existing Articles were adopted.
The following principal amendments will be made to the
Company’s Existing Articles through the adoption of the
New Articles if Resolution 11 is approved by shareholders at
the AGM:
i. removing references to the Companies Act 1985 which is
no longer in force;
ii. clarifying that the model articles contained in The
Companies (Model Articles) Regulations 2008 (SI 2008
No. 3229) do not apply to the Company;
iii. clarifying and expanding upon the Board’s ability to
issue, and take steps to deal with, shares that are held in
uncertificated form (i.e. in the CREST system), in particular
in circumstances where the Company is entitled to
enforce a lien over, or sell, transfer or forfeit, any of such
shares in accordance with the Articles;
iv. clarifying that the Company is permitted to purchase its
own shares and to reduce its share capital, any capital
redemption reserve and any share premium account in
any manner permitted by, and in accordance with, the
Companies Act 2006;
v. removing the requirement to place advertisements in
national newspapers in an attempt to trace shareholders
in order to reflect modern best practice;
vi. removing the requirement to return the net proceeds of
sale of shares belonging to untraced shareholders and
any associated unclaimed dividends;
vii. including provisions which enable the Company to hold
shareholder meetings across two (or more) physical
locations in the event that all shareholders cannot be
accommodated in a single physical location on the day
of a meeting;
viii. removing references to routine business at an annual
general meeting;
ix. inserting provisions which enable the Company
to postpone a shareholder meeting in
certain circumstances;
x. inserting provisions which enable the Board or the
chair of a shareholder meeting to adjourn the meeting
without the consent of the meeting where any physical or
electronic facilities being used to host the meeting have
Statement of the Depositary’s Responsibilities
in Respect of The Brunner Investment Trust
PLC provided by HSBC Securities Services,
Depositary to the Company.
“The Depositary must ensure that the company is managed
in accordance with the Financial Conduct Authority’s
Investment Funds Sourcebook, (the Sourcebook), the
Alternative Investment Fund Managers Directive (AIFMD)
(together the Regulations) and the company’s Articles of
Association.
The Depositary must in the context of its role act honestly,
fairly, professionally, independently and in the interests of
the company and its investors.
The Depositary is responsible for the safekeeping of the
assets of the company in accordance with the Regulations.
The Depositary must ensure that:
– the company’s cash flows are properly monitored
and that cash of the company is booked into the cash
accounts in accordance with the Regulations;
– the sale, issue, repurchase, redemption and cancellation
of shares are carried out in accordance with
the Regulations;
– the assets under management and the net asset value
per share of the company are calculated in accordance
with the Regulations;
– any consideration relating to transactions in the
company’s assets is remitted to the company within the
usual time limits;
– that the company’s income is applied in accordance with
the Regulations; and
– the instructions of the Alternative Investment Fund
Manager (the AIFM) are carried out (unless they conflict
with the Regulations).
The Depositary also has a duty to take reasonable care to
ensure that the company is managed in accordance with
the Articles of Association in relation to the investment and
borrowing powers applicable to the company.
Report of the Depositary to the Shareholders of The
Brunner Investment Trust PLC (the company) for the year
ended 30 November 2023.
Having carried out such procedures as we consider
necessary to discharge our responsibilities as Depositary
of the company, it is our opinion, based on the information
available to us and the explanations provided, that in all
material respects the company, acting through the AIFM
has been managed in accordance with the rules in the
Sourcebook, the Articles of Association of the company and
as required by the AIFMD.”
HSBC Securities Services
14 December 2023
Further information about the relationship with the
Depositary is on page 112.
69
GOVERNANCE
become compromised or no longer enable the meeting
to be conducted as intended;
xi. inserting provisions which enable the Board or the
chair of a shareholder meeting to direct that any
person wishing to attend any shareholder meeting
(including any virtual meeting) should submit to and
comply with such searches or other security, access or
safety arrangements or restrictions as the Directors or
the chair of the meeting shall consider appropriate
in the circumstances, including any arrangement
or requirement to ensure the identification of those
accessing or participating in the meeting and the orderly
conduct of the meeting;
xii. removing the existing provisions relating to the retirement
of Directors by rotation and inserting provisions which
require all Directors to retire at each AGM (and, if they
wish, to offer themselves for re-election) in line with the
recommended corporate governance regime in the
UK, and provisions dealing with the potential situation
whereby no Directors are re-elected at an AGM;
xiii. expanding the provisions in the Existing Articles which
allow the Board to immediately remove a Director
from office;
xiv. increasing the cap on the aggregate of all fees which
may be paid to Directors to £300,000 per annum. The
proposed increase will provide headroom for the future.
Both the Existing Articles and the New Articles allow for
a higher amount to be approved from time to time by
ordinary resolution of the Company;
xv. amending the provision in the Existing Articles regarding
the minimum shareholding requirement of a Director so
that a Director will be required to acquire and retain (for
so long as he/she remains a Director) a minimum holding
of shares having an aggregate nominal amount of
£500 (rather than £1,000 as required under the Existing
Articles), such minimum holding to be acquired within
one year (rather than two months) from his/her date of
appointment as a Director, to reflect the increase in the
market price of the Company’s shares in recent years;
xvi. expanding the provisions in the Existing Articles
which enable the Directors to use electronic, digital
and audio communications to convene and conduct
board meetings, board committee meetings and other
board business;
xvii. amending the provisions in the Articles which restrict
the total amount of borrowings that the Company may
have outstanding at any time so that the Company’s
borrowings are restricted to an amount equal to the
total net assets of the Company as shown by the latest
audited balance sheet of the Company prepared for the
purposes of the Companies Acts. This amendment does
not affect the Board’s policy on gearing which forms part
of the Company’s investment policy; and
xviii. modernising the provisions relating to the payment
methods for dividends, including inserting provisions
which enable the Company to pay dividends by any
approved funds transfer system (in addition to traditional
bank transfers) and which enable the Company to
specify which payment method(s) will be used by the
Company in respect of any dividend.
Other proposed amendments which are of a minor,
technical, typographical or clarifying nature, or which seek
to remove duplicate provisions in the Articles, have not been
summarised above.
The summary above is intended only to highlight the principal
amendments which are likely to be of interest to shareholders.
It is not intended to be comprehensive and cannot be relied
upon to identify amendments or issues which may be of
interest to all shareholders. The summary is not a substitute
for reviewing the full terms of the New Articles which will
be available for inspection at the offices of Allianz Global
Investors UK Ltd, 199 Bishopsgate, London EC2M 3TY between
the hours of 9.00am and 5.00pm (Saturdays, Sundays and
public holidays excepted), and on the Company’s website,
www.brunner.co.uk, from the date of the AGM Notice until the
close of the AGM, and will also be available for inspection at
the venue of the AGM from 15 minutes before and during the
AGM. The New Articles will also be available for inspection on
the National Storage Mechanism located at https://data.fca.
org.uk/#/nsm/nationalstoragemechanism, from the date of
the AGM Notice.
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 31 March 2023 under section 551 of the
Companies Act 2006. The current authority will expire on 24
June 2024 and approval is therefore sought for the renewal of
this authority, which will last until the conclusion of the annual
general meeting in 2025 or 24 June 2025 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 25 March 2024.
Disapplication of Pre-emption Rights
A resolution was passed at the annual general meeting of
the company held on 31 March 2023 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 24 June
2024 and approval is therefore sought for the renewal of this
authority, which will last until the conclusion of the annual
general meeting in 2025 or 24 June 2025 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 25 March 2024.
70
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Accordingly resolution 12 as set out in the notice of meeting
on page 115 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 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
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 £297 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 25 March 2024 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 9,709,522 shares, representing 22.74%
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
26.75% 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 78, 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
13 February 2024
71
GOVERNANCE
Management Engagement Committee Report
Role of the committee
The Management Engagement Committee reviews the
investment management agreement and monitors the
performance of the Manager for the investment, secretarial,
financial, administration, marketing and support services
that it provides under that agreement. It also reviews the
terms of the agreement including the level and structure of
fees payable, the length of notice period and best practice
provisions generally.
Composition of the committee
All the directors are members of the committee. Its terms of
reference can be found on the website at brunner.co.uk.
Manager evaluation process
The committee met once during the year for the purpose of
the formal evaluation of the manager’s performance.
For the purposes of its ongoing monitoring, the board receives
detailed reports and views from the portfolio manager on
investment policy and strategies, asset allocation, stock
selection, attributions, portfolio characteristics, gearing and
risk. The board also assesses the manager’s performance
against the investment controls set by the board.
The manager also reported to the board on its succession
plans for the key individuals, including the members of the
portfolio management team.
Performance information is set out on page 8.
AIFM
Details of the current AIFM are on page 112. The Board
announced that with effect from 30 May 2023, the Company
changed its Alternative Investment Fund Manager (‘AIFM’)
from Allianz Global Investors GmbH, UK Branch (‘AllianzGI
GmbH’) to Allianz Global Investors UK Limited (‘AllianzGI
UK’). AllianzGI UK is an affiliate of, and has the same ultimate
parent company as, AllianzGI GmbH. There has been no
change to the portfolio management or fee arrangements.
AllianzGI UK is authorised and regulated by the Financial
Conduct Authority with its registered office at 199 Bishopsgate,
London EC2M 3TY.
Manager reappointment
The annual evaluation that took place in November 2023
included a presentation from the portfolio managers and
AllianzGI’s Head of Investment Trusts. This covered the work
done with the board on the provision of investment and
support services, including the promotion and distribution
of the trust, succession planning and the ambitions for 2024;
the reporting of the ESG strategy; the dividend strategy; the
investment strategy in some overseas markets; the sales
and marketing activity, covering the work with investment
platforms and wealth managers; and the relaunch of the
website. The evaluation also considered the manager’s fee
in relation to the peer group. The committee met in a private
session following the presentation and concluded that in its
opinion the continuing appointment of the manager on the
terms agreed was in the interests of shareholders as a whole
and recommended this to the board.
Note 2 to the Financial Statements on page 96 provides
detailed information in relation to the management fee.
Committee evaluation
The activities of the Management Engagement committee
were considered as part of the board evaluation process
completed in accordance with standard governance
arrangements as summarised on page 65. The conclusion
from the process was that the committee was operating
effectively, with the right balance of membership and skills.
Carolan Dobson
Management Engagement Committee Chair
13 February 2024
72
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Nomination Committee Report
Role of the committee
The Nomination Committee leads the process for board
appointments and makes nomination recommendations
to the board. The committee reviews and makes
recommendations on board structure, size and composition,
the balance of knowledge, experience, skill ranges and
diversity and considers succession planning and tenure policy.
Composition of the committee
All directors are members of the committee and its terms of
reference can be found on the website at brunner.co.uk
Activities of the committee
The committee met during the year and considered, in
accordance with its terms of reference the structure, size and
composition of the board and satisfied itself with regard to
succession planning, making recommendations to the board.
The committee reviewed the succession plan, as mentioned
below, and recommended it to the board.
The committee also discussed the results of the board and
committee evaluation exercise, which covered the structure
and size of the board and its composition, particularly in
terms of succession planning, and the experience and skills of
the individual directors and the topic of board diversity and
inclusion A table is shown on page 66 showing the current
board composition.
Succession
Succession planning is considered regularly by the committee
and the board was pleased that Elizabeth Field joined the
Board on 1 December 2022.
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.
Notwithstanding her length of service on the board, the
directors are unanimously agreed that Caroline Dobson
continues to be a highly effective Chair with strong leadership
of the board. Taking this into account and as the board has a
majority of independent directors It was agreed that Caroline
Dobson’s tenure as the Chair of the board should continue for
a further two years.
Committee evaluation
The activities of the Nomination Committee were considered
as part of the board evaluation process completed in
accordance with standard governance arrangements as
summarised on page 65. The conclusion from the process
was that the committee was operating effectively, with the
right balance of membership and skills.
Carolan Dobson
Nomination Committee Chair
13 February 2024
73
GOVERNANCE
Remuneration Committee Report
Composition
All the directors are members of the committee and its terms of reference can be found on the website at brunner.co.uk.
Role
The Remuneration Committee leads the process for fixing directors’ remuneration and makes recommendations to the board.
Activities
The committee’s activities are set out in the report from the committee which follows.
Directors’ Remuneration Report
This is the Directors’ Remuneration Report for the year. The report is submitted in accordance with Schedule 8 of the Large and
Medium sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended August 2013, for the year ended
30 November 2023.
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 AGMs in 2020 and 2023. It will
next be put to shareholders at the AGM in 2026. 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 Andrew Hutton.
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
2023
Beneficial
2023
Non-beneficial
2022
Beneficial
2022
Non-beneficial
Carolan Dobson 4,750 - 4,750 -
Amanda Aldridge 4,000 - 4,000 -
Elizabeth Field
1
4,000 - -
2
-
Andrew Hutton 6,000 - 6,000 -
Peter Maynard
3
4,000 - 4,000 -
Jim Sharp
4
124,799 651,956 117,218 651,956
1
Appointed 1 December 2022.
2
The prior year table is restated as 4,000 shares were acquired after the end of the 2022 financial year.
3
Retired 31 March 2023.
4
A further 4,911 beneficial shares were acquired after the end of the financial year.
I am pleased to present my first report as Chair of the Remuneration Committee.
74
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
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 currently 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 31 March 2023.
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 £28,100 per annum and the Chair at a rate of £44,500 per annum, with
an additional £6,400 for the Chair of the Audit Committee, and an additional £2,100 for the Senior Independent Director. The
current fees have been effective since 1 December 2022.
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 2023: Chair £47,000, directors £29,200, with an additional unchanged £6,400 to the Chair of the Audit Committee,
and an additional unchanged £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:
2023 2022
Base
salary
£
Taxable
expenses
£
Total***
£
Base
salary
£
Taxable
expenses
£
Total***
£
Carolan Dobson 44,500 6,386 50,886 42,000 931 42,931
Amanda Aldridge 34,500 - 34,500 32,500 - 32,500
Elizabeth Field* 28,100 - 28,100 - - -
Andrew Hutton 29,500 - 29,500 26,500 - 26,500
Peter Maynard** 10,066 - 10,066 28,500 - 28,500
Jim Sharp 28,100 - 28,100 26,500 - 26,500
Total 174,766 6,386 181,152 156,000 931 156,931
* Appointed to the board 1 December 2022
** Retired from the board 31 March 2023.
*** Taxable travel and subsistence expenses incurred in attending Board and Committee meetings, gross pre-tax amounts
75
GOVERNANCE
2023
£
% change
from
2022 to
2023
2022
£
% change
from
2021 to
2022
2021
£
Base Salary
Board Chair 44,500 6.0 42,000 7.7 39,000
Audit Chair 34,500 6.2 32,500 1.6 32,000
Senior Independent Director 30,200 5.3 28,500 1.8 28,000
Independent Director 28,100 6.0 26,500 1.9 26,000
Expenses
Carolan Dobson 6,386 585.9 931 311.9 226
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
2023
£
2022
£
Remuneration paid to all directors 174,766 156,000
Distributions paid during the financial year 9,520,477 8,986,818
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.
76
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
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 2013 – 30 November 2023
Share Price 169%
NAV debt at fair value 166%
Benchmark 142%
Andrew Hutton
Remuneration Committee Chair
13 February 2024
Source: AllianzGI/Thomson Reuters DataStream
280
260
240
220
200
180
160
140
120
100
Nov 13 Nov 14 Nov 15 Nov 16 Nov 17 Nov 18 Nov 19 Nov 20 Nov 21 Nov 22 Nov 23
%
77
GOVERNANCE
Audit Committee Report
As chair of the audit committee I am delighted to present the committee’s
report for the year ended 30 November 2023.
Composition
Andrew Hutton and Elizabeth Field served on the committee
throughout the year, and Peter Maynard was a member of
the committee until his retirement at the AGM in March. The
Chair of the board and Jim Sharp are invited to attend audit
committee meetings, as are representatives of the manager.
As you will see from my biography on page 60, I am a
Chartered Accountant and until 2017, I was an audit and
advisory partner, at KPMG, London. I also chair the audit
committee of two other listed companies. During the year
the board reviewed the composition of the audit committee
and it considers that, collectively, its members have sufficient
recent and relevant financial experience to discharge their
responsibilities fully.
Role
The principal role of the committee is to assist the board in
relation to the reporting of financial information, review of
financial controls and management of risk. The committee
has defined terms of reference and duties and the terms of
reference are published on the company’s website, brunner.
co.uk. These include:
– responsibility for the review of the Annual Report and the
half-yearly Financial Report;
– consideration of the nature and scope, independence and
effectiveness of the external audit and of the Auditors’
findings and recommendations; and
– review of the terms of appointment of the auditors, including
their remuneration and the provision of any non-audit
services by them.
Activities
The committee meets twice each year. These meetings are
attended by the auditors and also by representatives of the
manager, including both risk and compliance officers. It is the
practice of the committee to meet with the auditor without
management present at least once each year.
At the scheduled meetings in respect of the year ended 30
November 2023 the committee reviewed the company’s
accounting policies and confirmed their appropriateness, and
reviewed in detail the annual and half-yearly financial reports
and in each case recommended them for adoption by the
board. At the meeting for the half year the auditors presented
the audit plan for the year ending 30 November 2023. In the
meeting relating to the year end the committee considered the
auditors’ report on the annual financial statements.
At each meeting the committee received a report on the
operation of controls relating to the company and the proper
conduct of its business in accordance with the regulatory
environment in which both the company and the manager
operate. The committee has also received reports from the
company’s service providers on their continuing response to
cyber security risks and related business continuity updates.
Risk
Although the board has ultimate responsibility for the
management of risk, the audit committee assists by monitoring
the formal reports from the manager and third-party service
providers on risk and internal controls.
During the year the committee reviewed the risk management
framework and concluded that existing processes were
adequate to ensure that its assessment of risk is robust and
of sufficient frequency, namely carried out at each committee
meeting and twice annually by the board as follows:
– A matrix of risks is reviewed at each audit committee
meeting. We consider whether new risks should be added or
previously identified risks removed, assess their likelihood of
occurring and potential scale, review the mitigating actions
and assess the residual risk against what we regard as
acceptable – ‘risk appetite’. Economic volatility, including a
sustained period of high inflation and high interest rates and
the further increase in international conflict and tensions
have all been considered by the board in this review and
discussed by the board.
– Assurance over mitigating actions in relation to these risks
is provided in a series of reports from all the third party
service providers.
– Resulting from the work of the audit committee, the principal
risks and uncertainties are identified for disclosure and
discussion in our annual report. The committee also assesses
residual risks after controls and mitigating actions have
been applied, and evaluates whether these fall within our
risk appetite. The risks identified, together with mitigating
actions, and the results of the risk appetite assessment are
set out in the Strategic Report on page 9.
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THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Viability Statement
Taking into account this review of risk the committee reviewed
a paper that supported the board’s conclusion, set out
on page 20 in the Strategic Report, of their reasonable
expectation that the company is viable in the longer term,
assessed as the next five years.
The audit, its effectiveness and the terms of
appointment of the auditor
The committee reviewed the terms of appointment of the
auditor, monitored the audit process, assessed the auditors’
independence and objectivity as well as the effectiveness of
the audit process. It was noted that there were no non-audit
services provided by the firm, and that none are planned in the
financial year to 30 November 2024.
During the year we thanked Gillian Alexander for her five
years of leading the company’s audit and welcomed the new
audit lead, Iain Kirkpatrick. This is PricewaterhouseCooper’s
sixth year as our auditor and under current FRC guidance,
the next audit tender will be required in respect of the year
ending 30 November 2028. Until then, we will continue
to monitor the auditor’s performance and make any
appropriate recommendations.
As part of our review of the performance of the auditor, the
members of the committee and those representatives of
the manager involved in the audit process reviewed and
considered a number of areas including:
– the reputation and standing of the audit firm including
annual reports from the auditor’s regulator;
– the skills, experience and specialist knowledge of the audit
team, particularly relating to investment trusts;
– audit communication including details of planning,
information on relevant accounting and regulatory
developments, and recommendations on
corporate reporting;
– the audit processes, evidence of oversight by the audit
lead; and
– the reasonableness of audit fees;
The committee sought comments from representatives of
the manager on the provision of services by the auditor and
the effectiveness of the external audit for the year ended 30
November 2023 and considered whether the audit team as a
whole demonstrated an appropriate level of challenge to the
Board and the manager in fulfilling their role.
Based on all of the above, the committee concluded that
we have no concerns with the performance of the and has
recommended to the board that a resolution proposing the
re-appointment of the auditor is put to shareholders at the
annual general meeting.
Financial Report and Significant Issues
The significant issues identified for the review of the financial
statements this year, that is, those identified as presenting
the greatest risks, were the valuation and existence of the
investments in the portfolio; and the accuracy, occurrence
and completeness of dividend income. These and other
matters, identified as posing lesser risk, were considered and
discussed with the manager and the auditor as part of the
year end process.
Valuation and existence of the investments in the portfolio
Listed investments are valued using stock exchange prices
provided by third party financial data vendors. Unlisted
investments are recognised on a fair value basis and are
reviewed by the manager’s valuation committee before
being approved by the company and being made available
to the auditor. We discussed the work done by the auditor on
valuation of investments and received assurance that there
were no concerns regarding valuation of the investments.
The manager confirms to us the existence and ownership of
portfolio investments. The manager receives information from
the custodian which is reconciled with the portfolio list. The
auditor conducts an independent verification exercise which
was satisfactorily concluded.
Based on this the committee concluded that the valuation and
existence of the investments in the portfolio is appropriately
recorded in the annual report and accounts,
Accuracy, occurrence and completeness of dividend income
During the year, income reports and forecasts are reviewed
in detail with the manager at each meeting of the board,
including yield information. Changes to the forecast for each
portfolio stock from meeting to meeting are also scrutinised.
The auditor conducts an independent analysis of the expected
income stream from the investment portfolio for the year.
We discussed the outcome of this analysis and were satisfied
based on this and the dividend income was appropriately
recorded in the annual report and accounts.
In addition we noted the manner in which expenses are
allocated between capital and income and concluded that
the ratio of 70:30 remains appropriate since it fairly reflects our
investment policy and split of prospective capital and income
returns. This area was subject to a detailed review last year.
We also confirmed, as stated in the Statement of Accounting
Policies on page 94, that there are no judgements,
estimates, and assumptions about the carrying amounts
of assets and liabilities that are not readily apparent from
other sources.
The committee considered the audit materiality and error
reporting thresholds in the audit plan and confirmed that
they were satisfied with these. As in previous years, the
auditor set the materiality threshold as 1% of net asset value
to align closely with comparable companies, but continues
to report to the committee on matters below that level on
qualitative grounds.
The audit committee and the whole board reviewed the entire
annual report and noted all of the supporting information
received. It then considered whether the annual report
satisfactorily reflected a true picture of the company and
79
GOVERNANCE
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 control and internal audit
During the year, in July 2023, it was brought to the audit
committee’s attention that an issue had arisen with the capital
NAV calculated by AllianzGI’s third party service provider
and reported to the market in the daily NAV announcements.
It was noted that this did not impact the cum-income NAV
announced throughout the period concerned, nor did it
affect the half-year financial statements which were being
considered at that time. Since then, the manager, AllianzGI,
has reported to the board on the due diligence performed
with State Street the corrective actions taken and the plans
now in place to prevent recurrence. Service enhancements
that resulted from this included lower tolerance thresholds
for additional reporting of daily NAV movements, quicker
responses to requests for information, a new escalation
protocol and service industry benchmarking. The manager
has confirmed that it believes that the service is now expected
to stabilise as these remediations take effect. The audit
committee will continue to monitor this progress closely.
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 other key 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
13 February 2024
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THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Statement of Directors’ Responsibilities
in respect of the financial statements
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 102
“The Financial Reporting Standard applicable in the UK and
Republic of Ireland”, and applicable law).
Under company law directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the company and of the profit
or loss of the company for that period. In preparing these
financial statements, the directors are required to:
– select suitable accounting policies and then apply
them consistently;
– state whether applicable United Kingdom Accounting
Standards, comprising FRS 102 have been followed, subject
to any material departures disclosed and explained in the
financial statements;
– make judgements and accounting estimates that are
reasonable and prudent; and
– prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy
at any time the financial position of the company and enable
them to ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity
of the company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmations
Each of the directors, whose names and functions are listed
in Directors, Manager and Advisers on pages 60 to 62,
confirm that, to the best of their knowledge:
– the company financial statements, which have been
prepared in accordance with United Kingdom Accounting
Standards, comprising FRS 102, give a true and fair view
of the assets, liabilities, financial position and profit of the
company; and
– the Strategic Report includes a fair review of the
development and performance of the business and the
position of the company, together with a description of the
principal risks and uncertainties that it faces.
In the case of each director in office at the date the directors’
report is approved:
– so far as the director is aware, there is no relevant
audit information of which the company’s auditors are
unaware; and
– they have taken all the steps that they ought to have
taken as a director in order to make themselves aware of
any relevant audit information and to establish that the
company’s auditors are aware of that information.
This responsibility statement was approved by the
board of directors on 13 February 2024 and signed on its
behalf by:
Carolan Dobson
Chair
81
GOVERNANCE
82
Financial
Statements
84 Independent auditors’ report
to the members of The Brunner
Investment Trust PLC
90 Income Statement
91 Balance Sheet
92 Statement of Changes in Equity
93 Cash Flow Statement
94 Statement of Accounting Policies
96 Notes to the Financial Statements
83
Laboratory equipment
manufacturer Thermo Fisher
Scientific, a new purchase,
is headquartered in Boston,
Massachusetts, USA.
Report on the audit of the financial
statements
Opinion
In our opinion, The Brunner Investment Trust PLC’s
financial statements:
– give a true and fair view of the state of the company’s affairs
as at 30 November 2023 and of its profit and cash flows for
the year then ended;
– have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, including FRS 102 “The
Financial Reporting Standard applicable in the UK and
Republic of Ireland”, and applicable law); and
– have been prepared in accordance with the requirements of
the Companies Act 2006.
We have audited the financial statements, included within
the Annual Report, which comprise: the Balance Sheet as at
30 November 2023; the Income Statement, the Cash Flow
Statement and the Statement of Changes in Equity for the
year then ended; the Statement of Accounting Policies; and
the notes to the financial statements.
Our opinion is consistent with our reporting to the
Audit Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described
in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the company in accordance
with the ethical requirements that are relevant to our audit of
the financial statements in the UK, which includes the FRC’s
Ethical Standard, as applicable to listed public interest entities,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
To the best of our knowledge and belief, we declare that non-
audit services prohibited by the FRC’s Ethical Standard were
not provided.
We have provided no non-audit services to the company in the
period under audit.
Our audit approach
Overview
Audit scope
– The company is a standalone Investment Trust Company
and engages Allianz Global Investors UK Limited (the
‘‘Manager’’) to manage its assets.
– We conducted our audit of the financial statements using
information from State Street Bank & Trust Company
(the “Administrator”) to whom the Manager has, with the
consent of the directors, delegated the provision of certain
administrative functions.
– We tailored the scope of our audit taking into account the
types of investments within the Company, the involvement
of the third parties referred to above, the accounting
processes and controls, and the industry in which the
Company operates.
– We obtained an understanding of the control environment
in place at both the Manager and the Administrator
and adopted a fully substantive testing approach using
information obtained from the Administrator.
Key audit matters
– Valuation and existence of investments
– Accuracy, occurrence and completeness of Income
from investments
Materiality
– Overall materiality: £5,282,098 (2022: £4,970,970) based on
1% of net asset value.
– Performance materiality: £3,961,574 (2022: £3,728,228).
The scope of our audit
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the financial statements of the current period and include
the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters,
and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on
these matters.
This is not a complete list of all risks identified by our audit.
Independent auditors’ report to the members of
The Brunner Investment Trust PLC
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THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
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 78 (Audit Committee Report), page 94
(Statement of Accounting Policies) and page 96 (Notes
to the Financial Statements). The investment portfolio at
the year-end comprised listed equity investments valued
at £553.3m.
We focused on the valuation and existence of investments
because investments represent the principal element of the
net asset value as disclosed on the Balance Sheet in the
financial statements.
We tested the valuation of the listed equity investments by
agreeing the prices used in the valuation to independent third
party sources. No misstatements were identified by our testing
which required reporting to those charged with governance.
We tested the existence of the investment portfolio by
agreeing investment holdings to an independent custodian
confirmation. No misstatements were identified by our testing
which required reporting to those charged with governance.
Accuracy, occurrence and completeness of Income from
investments
Refer to page 78 (Audit Committee Report), page 94
(Statement of Accounting Policies) and page 96 (Notes to
the Financial Statements).
We focused on the accuracy, completeness and occurrence
of dividend income recognition as incomplete or inaccurate
income could have a material impact on the Company’s net
asset value and dividend cover.
We also focused on the accounting policy for investment
income recognition and its presentation in the Income
Statement for compliance with the requirements of
The Association of Investment Companies Statement
of Recommended Practice (the “AIC SORP”) as
incorrect application could indicate a misstatement in
income recognition.
We assessed the accounting policy for investment income
recognition for compliance with accounting standards and the
AIC SORP and performed testing to check that income had
been accounted for in accordance with this stated accounting
policy. We found that the accounting policies implemented
were in accordance with accounting standards and the AIC
SORP, and that income has been accounted for in accordance
with the stated accounting policy.
We tested the accuracy of dividend receipts by agreeing the
dividend rates from investments to independent market data.
No misstatements were identified which required reporting to
those charged with governance.
To test for completeness, we tested that all dividends declared
in the market by investment holdings had been recorded. No
misstatements were identified which required reporting to
those charged with governance.
We tested occurrence by testing that all dividends recorded
in the year had been declared in the market by investment
holdings. Our testing did not identify any misstatements which
required reporting to those charged with governance.
We also tested the allocation and presentation of dividend
income between the revenue and capital return columns
of the Income Statement in line with the requirements
set out in the AIC SORP by determining reasons behind
dividend distributions. Our procedures did not identify any
misstatements which required reporting to those charged
with governance.
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 Manager to understand the extent of the potential impact of
climate change on the Company’s financial statements.
85
FINANCIAL STATEMENTS
In conducting our audit, we made enquiries of the Directors and Manager to understand the extent of the potential impact
of the climate change risk on the Company’s financial statements. Both concluded that the impact on the measurement and
disclosures within the financial statements is not material because 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 Strategic Report, Investment Manager’s
Review and Directors’ Report 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
£5,282,098 (2022: £4,970,970).
How we determined it
1% of net asset value
Rationale for benchmark applied
We have applied this benchmark, which is a generally
accepted auditing practice for investment trust audits.
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% (2022: 75%) of overall materiality, amounting to £3,961,574
(2022: £3,728,228) 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 £264,105
(2022: £248,549) 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:
– evaluating the Directors’ updated risk assessment and considering whether it addressed relevant threats to the Company;
– evaluating 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;
– reviewing 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 implication of significant reductions in net asset value 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.
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.
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THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
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 2023
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 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.
87
FINANCIAL STATEMENTS
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 directors’ 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 Report that describes the review
of effectiveness of risk management and internal control
systems; and
– The section of the Annual Report 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 in respect of the financial statements, 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 the ongoing qualification as
an Investment Trust under the Corporation Tax Act 2010, and
we considered the extent to which non-compliance might
have a material effect on the financial statements. We also
considered those laws and regulations that have a direct
impact on the financial statements such as the Companies
Act 2006. 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
of inappropriate journal entries to increase income or to
overstate the value of investments and increase the net asset
value of the Company. Audit procedures performed by the
engagement team included:
– discussions with the Directors, the Manager and the
Administrator, including consideration of known or
suspected instances of non-compliance with laws and
regulation and fraud;
– reviewing relevant meeting minutes, including those of the
Audit Committee;
– evaluation of the controls implemented by the Manager
and the Administrator designed to prevent and
detect irregularities;
– assessment of the Company’s compliance with the
requirements of section 1158 of the Corporation Tax Act
2010, 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
– 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.
88
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
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 information and explanations
we require for our audit; or
– adequate accounting 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
– certain disclosures of directors’ remuneration specified by
law are not made; or
– the financial statements and the part 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 6 years, covering the
years ended 30 November 2018 to 30 November 2023.
Iain Kirkpatrick (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
13 February 2024
89
FINANCIAL STATEMENTS
Income Statement
for the year ended 30 November 2023
Notes
2023
Revenue
£
2023
Capital
£
2023
Total Return
£
2022
Revenue
£
2022
Capital
£
2022
Total Return
£
Gains (losses) on investments held at fair value
through profit or loss
8 - 32,247,788 32,247,788 - (3,737,462) (3,737,462)
Losses on foreign currencies - (294,696) (294,696) - (50,522) (50,522)
Income 1 14,426,006 - 14,426,006 12,622,989 - 12,622,989
Investment management fee 2 (716,931) (1,672,839) (2,389,770) (688,660) (1,606,874) (2,295,534)
Administration expenses 3 (855,035) (1,887) (856,922) (789,354) (1,975) (791,329)
Profit (loss) before finance costs and taxation 12,854,040 30,278,366 43,132,406 11,144,975 (5,396,833) 5,748,142
Finance costs: interest payable and similar charges 4 (407,927) (898,583) (1,306,510) (303,980) (654,611) (958,591)
Profit (loss) on ordinary activities before taxation 12,446,113 29,379,783 41,825,896 10,840,995 (6,051,444) 4,789,551
Taxation 5 (1,195,066) - (1,195,066) (1,167,023) - (1,167,023)
Profit (loss) after taxation attributable to ordinary
shareholders
11,251,047 29,379,783 40,630,830 9,673,972 (6,051,444) 3,622,528
Earnings per ordinary share (basic and diluted) 7 26.35p 68.82p 95.17p 22.66p (14.17p) 8.49p
Dividends to be distributed in respect of the financial year ended 30 November 2023 total 22.70p (2022 - 21.50p), amounting to
£9,691,248 (2022 - £9,178,935). Details are set out in Note 6 on page 99.
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 94 and 95 and the notes on pages 96 to 110 form an integral part of
these Financial Statements.
90
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Notes
2023
£
2023
£
2022
£
Fixed assets
Investments held at fair value through profit or loss 8 553,377,318 522,829,082
Current assets
Other receivables 9 1,661,906 2,747,156
Cash at bank and in hand 9 9,864,904 7,918,710
11,526,810 10,665,866
Current liabilities
Other payables 9 (11,593,648) (11,306,871)
Net current liabilities (66,838) (641,005)
Total assets less current liabilities 553,310,480 522,188,077
Creditors: amounts falling due after more than one year 10 (25,100,721) (25,091,114)
Total net assets 528,209,759 497,096,963
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 12 494,630,516 465,250,733
Revenue reserve 12 17,579,243 15,846,230
Total shareholders' funds 13 528,209,759 497,096,963
Net asset value per ordinary share 13 1,237.2p 1,164.4p
The financial statements of The Brunner Investment Trust PLC, company number 00226323, as set out in pages 90 to 110,
were approved and authorised for issue by the Board of Directors on 13 February 2024 and signed on its behalf by:
Carolan Dobson
Chair
Balance Sheet
at 30 November 2023
The Statement of Accounting Policies on pages 94 and 95 and the notes on pages 96 to 110 form an integral part of
these Financial Statements.
91
FINANCIAL STATEMENTS
Statement of Changes in Equity
for the year ended 30 November 2023
Notes
Called up
Share
Capital
£
Capital
Redemption
Reserve
£
Capital
Reserve
£
Revenue
Reserve
£
Total
£
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
Net assets as at 1 December 2022 10,673,181 5,326,819 465,250,733 15,846,230 497,096,963
Revenue profit - - - 11,251,047 11,251,047
Dividends on ordinary shares 6 - - - (9,520,477) (9,520,477)
Unclaimed dividends - - - 2,443 2,443
Capital profit - - 29,379,783 - 29,379,783
Net assets as at 30 November 2023 10,673,181 5,326,819 494,630,516 17,579,243 528,209,759
The Statement of Accounting Policies on pages 94 and 95 and the notes on pages 96 to 110 form an integral part of
these Financial Statements.
92
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Notes
2023
£
2022
£
Operating activities
Profit before finance costs and taxation* 43,132,406 5,748,142
(Less) add: (gains) losses on investments held at fair value through profit or loss (32,247,788) 3,737,462
Less: overseas tax suffered (1,195,066) (1,167,023)
Add: losses on foreign currency 294,696 50,522
Purchase of fixed asset investments held at fair value through profit or loss (115,960,271) (79,629,586)
Sales of fixed asset investments held at fair value through profit or loss 118,633,336 85,530,947
Decrease (increase) in other receivables 111,737 (72,588)
Increase (decrease) in other payables 142,596 (93,914)
Net cash inflow from operating activities 12,911,646 14,103,962
Financing activities
Interest paid and similar charges (1,130,222) (829,048)
Dividend paid on cumulative preference stock (22,500) (22,500)
Dividends paid on ordinary shares 6 (9,520,477) (8,986,818)
Unclaimed dividends over 12 years 2,443 8,969
Net cash outflow from financing activities (10,670,756) (9,829,397)
Increase in cash and cash equivalents 2,240,890 4,274,565
Cash and cash equivalents 7,918,710 3,694,667
Effect of foreign exchange rates (294,696) (50,522)
Cash and cash equivalents at the end of the year 9,864,904 7,918,710
Comprising:
Cash at bank 9,864,904 7,918,710
* Cash inflow from dividends was £12,717,117 (2022 - £11,034,636) and cash inflow from interest was £196,203 (2022 - £12,814).
Cash Flow Statement
for the year ended 30 November 2023
The Statement of Accounting Policies on pages 94 and 95 and the notes on pages 96 to 110 form an integral part of
these Financial Statements.
93
FINANCIAL STATEMENTS
Statement of Accounting Policies
for the year ended 30 November 2023
The company is incorporated in the United Kingdom
under the Companies Act. The company is a public
company limited by shares and is registered in England
and Wales. The address of the company’s registered
office is shown on page 62. The principal activity of
the company and the nature of its operations are set
out in the strategic report on page 9. The company
conducts its business so as to qualify as an investment
trust company within the meaning of sub-section 1158 of
the Corporation Tax Act 2010. The principal accounting
policies are summarised below. They have all been applied
consistently throughout the year and to the preceding year.
1 Basis of preparation – The financial statements have
been prepared under the historical cost convention,
except for the revaluation of financial instruments held
at fair value through profit or loss and in accordance
with applicable United Kingdom law and UK Accounting
Standards (UK GAAP), including Financial Reporting
Standard 102 - the Financial Reporting Standard
applicable in the United Kingdom and Republic of Ireland
(FRS 102), the requirements of the Companies Act 2006
and in line with the Statement of Recommended Practice
“Financial Statements of Investment Trust Companies
and Venture Capital Trusts” issued by the Association of
Investment Companies (AIC SORP) in July 2022.
In order to better reflect the activities of an investment
trust company, and in accordance with guidance issued
by the AIC, supplementary information which analyses
the Income Statement between items of revenue and
capital nature has been presented alongside the
Income Statement.
The directors believe that it is appropriate to continue to
adopt the going concern basis in preparing the financial
statements as the assets of the company consist mainly
of securities, which are readily realisable and significantly
exceed liabilities. Accordingly, the directors believe that the
company has adequate financial resources, to continue
in operational existence for the foreseeable future. The
company’s business, the principal risks and uncertainties
it faces, together with the factors likely to affect its future
development, performance and position are set out in the
Strategic Report on page 9.
2 Income – Dividends received on equity shares are
accounted for on an ex-dividend basis. Foreign dividends
are grossed up at the appropriate rate of withholding tax.
Special dividends are recognised on an ex-dividend basis
and treated as a capital or revenue item depending
on the facts and circumstances of each dividend. The
board reviews special dividends and their treatment at
each meeting.
Where the company has elected to receive its dividends
in the form of additional shares rather than in cash,
the equivalent of the cash dividend is recognised as
income. Any excess in the value of the shares received
over the amount of the cash dividend is recognised in
capital reserves.
Deposit interest receivable is accounted for on an
accruals basis.
3 Investment management fee and administrative
expenses – The investment management fee is calculated
on the basis set out in Note 2 to the financial statements
and is charged to capital and revenue in the ratio 70:30 to
reflect the company’s investment policy and prospective
capital and income growth. Other administrative expenses
are charged in full to revenue, except custodian handling
charges on investment transactions which are charged to
capital. All expenses are on an accruals basis.
4 Investments – As the company’s business is investing in
financial assets with a view to profiting from their total
return in the form of increases in fair value, financial assets
are held at fair value through profit or loss in accordance
with FRS 102 Section 11: ‘Basic Financial Instruments’ and
Section 12: ‘Other Financial Instruments’. The company
manages and evaluates the performance of these
investments on a fair value basis in accordance with its
investment strategy, and information about investments is
provided on this basis to the board.
Investments held at fair value through profit or loss are
initially recognised at fair value. After initial recognition,
these continue to be measured at fair value, which for
quoted investments is either the bid price or the last traded
price depending on the convention of the exchange on
which they are listed. Gains or losses on investments are
recognised in the capital column of the Income Statement.
Purchases and sales of financial assets are recognised
on the trade date, being the date which the company
commits to purchase or sell assets.
5 Finance costs – In accordance with the FRS 102 Section
11: ‘Basic Financial Instruments’ and Section 12 ‘Other
Financial Instruments’, long term borrowings are stated
at the amortised cost being the amount of net proceeds
on issue plus accrued finance costs to date. Finance costs
are calculated over the term of the debt on the effective
interest rate basis.
94
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Finance costs net of amortised premiums are charged to
capital and revenue in the ratio 70:30 to reflect the board’s
investment policy and prospective split of capital and
revenue returns.
Dividends payable on the 5% cumulative preference stock
are classified as an interest expense and are charged in
full to revenue.
6 Taxation – Where expenses are allocated between capital
and revenue, any tax relief obtained in respect of those
expenses is allocated between capital and revenue on
the marginal method and the company’s effective rate
of corporation tax for the accounting period. Deferred
taxation is recognised in respect of all timing differences
that have originated but not reversed at the balance
sheet date, where transactions or events that result in an
obligation to pay more tax or a right to pay less tax in the
future have occurred. Timing differences are differences
between the company’s taxable profits and its results as
stated in the financial statements.
A deferred tax asset is recognised when it is more likely
than not that the asset will be recoverable. Deferred tax
is measured on a non-discounted basis at the rate of
corporation tax that is expected to apply when the timing
differences are expected to reverse.
7 Shares repurchased for cancellation and for holding in
treasury – Share capital is reduced by the nominal value
of the shares repurchased, and the capital redemption
reserve is correspondingly increased in accordance with
Section 733 Companies Act 2006. The full cost of the
repurchase is charged to the capital reserve within Gains
(Losses) on Sales of Investments.
For shares repurchased for holding in treasury, the full cost
is charged to the capital reserve
8 Shares sold (reissued) from treasury – Proceeds received
from the sale of shares held in treasury are treated as
realised profits in accordance with Section 731 of the
Companies Act 2006. Proceeds equivalent to the original
cost, calculated by applying a weighted average price, are
credited to the capital reserve; proceeds in excess of the
original cost are credited to the share premium account.
9 Dividends – In accordance with FRS 102 Section 32:
‘Events After the End of the Reporting Period’, the final
dividend proposed on ordinary shares is recognised as a
liability when approved by shareholders. Interim dividends
are recognised only when paid. Dividends are paid from
the revenue reserve.
10 Foreign currency – In accordance with FRS 102 Section
30: ‘Foreign Currency Translation’, the company is required
to nominate a functional currency, being the currency
in which the company predominately operates. The
functional and reporting currency is pounds sterling,
reflecting the primary economic environment in which
both the company and its’ shareholders predominantly
operate and in which its’ expenses are generally paid.
Transactions in foreign currencies are translated into
pounds sterling at the rates of exchange ruling on the date
of the transaction. Foreign currency monetary assets and
liabilities are translated into pounds sterling at the rates
of exchange ruling at the balance sheet date. Profits and
losses thereon are recognised in the capital column of the
income statement and taken to the capital reserve.
11 Significantjudgements,estimatesandassumptions–
In the application of the company’s accounting policies,
which are described above, the directors are required to
make judgements, estimates, and assumptions about
the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The investment
portfolio currently consists of listed investments and
therefore no significant estimates have been made in
valuing these securities.
There are no significant judgements, estimates,
and assumptions.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
if the revision affects only that period, or in the period of
the revision and future periods if the revision affects both
current and future periods.
95
FINANCIAL STATEMENTS
Notes to the Financial Statements
for the year ended 30 November 2023
1. Income
2023
£
2022
£
Income from Investments*
Equity income from UK investments
†
5,229,024 4,791,041
Equity income from overseas investments
††
9,000,779 7,819,134
14,229,803 12,610,175
Other Income
Deposit interest 196,203 12,814
196,203 12,814
Total income 14,426,006 12,622,989
* All dividend income is derived from listed investments.
†
Includes special dividends of £101,750 (2022 - £45,600).
††
Includes special dividends of £1,326,776 (2022 - £474,916).
2. Investment Management Fee
2023
Revenue
£
2023
Capital
£
2023
Total
£
2022
Revenue
£
2022
Capital
£
2022
Total
£
Investment management fee 716,931 1,672,839 2,389,770 688,660 1,606,874 2,295,534
Under the terms of the Management and Administration Agreement the company’s manager is Allianz Global Investors UK Ltd.
The agreement was restated in July 2014, with the appointment of AllianzGI as the Alternative Investment Fund Manager. On 30
May 2023 the Agreement was novated from Allianz Global Investors GmbH to Allianz Global Investors UK Limited (AllianzGI UK).
In both cases 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 Allianz
Global Investors GmbH, 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 UK under the
Management and Administration Agreement may be terminated by either the company or AllianzGI UK on not less than six
months’ notice.
96
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
3. Administration Expenses
2023
£
2022
£
Auditors’ remuneration
for audit services 44,275 38,500
VAT on Auditors’ remuneration 8,855 7,700
53,130 46,200
Other administration expenses
Directors' fees
1
174,766 156,000
Depositary fees 55,724 52,623
Custody fees 41,777 48,541
Registrars' fees 67,087 70,258
Association of Investment Companies' fees 21,455 21,188
Marketing costs 351,843 265,946
Printing and postage 39,539 37,849
Directors' and officers' liability insurance 18,188 11,805
Professional and advisory fees 8,145 65,692
Other 88,854 67,889
VAT recovered (65,473) (54,637)
855,035 789,354
1
Directors’ fees are set out in the Directors’ Remuneration Report on page 74.
The above expenses include value added tax where applicable.
Custodian handling charges of £1,887 were charged to capital (2022 - £1,975).
4. Finance Costs: Interest Payable and Similar Charges
2023
Revenue
£
2023
Capital
£
2023
Total
£
2022
Revenue
£
2022
Capital
£
2022
Total
£
On 5% Cumulative Preference Stock repayable
after more than five years
22,500 - 22,500 22,500 - 22,500
On 2.84% Fixed Rate Notes 2048 repayable after
more than five years
215,882 503,725 719,607 215,800 503,532 719,332
On Revolving Credit Facility 169,225 394,858 564,083 64,748 151,079 215,827
On Sterling overdraft 320 - 320 932 - 932
407,927 898,583 1,306,510 303,980 654,611 958,591
97
FINANCIAL STATEMENTS
5. Taxation
2023
Revenue
£
2023
Capital
£
2023
Total
£
2022
Revenue
£
2022
Capital
£
2022
Total
£
Overseas taxation 1,195,066 - 1,195,066 1,167,023 - 1,167,023
Total tax 1,195,066 - 1,195,066 1,167,023 - 1,167,023
Reconciliation of tax charge
Profit before taxation 12,446,113 29,379,783 41,825,896 10,840,995 (6,051,444) 4,789,551
Tax on profit (loss) at 23.01% (2022 - 19.00%) 2,863,851 6,760,288 9,624,139 2,059,789 (1,149,774) 910,015
Effects of
Non taxable income (3,257,278) - (3,257,278) (2,395,493) - (2,395,493)
Non taxable capital gains - (7,352,713) (7,352,713) - 719,717 719,717
Disallowable expenses 5,177 434 5,611 4,275 375 4,650
Overseas tax suffered 1,195,066 - 1,195,066 1,167,023 - 1,167,023
Excess of allowable expenses over taxable income 388,250 591,991 980,241 331,429 429,682 761,111
Total tax 1,195,066 - 1,195,066 1,167,023 - 1,167,023
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 2023, the company had accumulated surplus expenses of £109.7 million (2022 - £105.4 million) and eligible
unrelieved foreign tax of £nil (2022 - £nil).
The company has not recognised a deferred tax asset of £27.4 million (2022 - £26.4 million) in respect of these expenses, based
on a prospective corporation tax rate of 25% (2022 - 25%) 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 was effective from 1
April 2023.
98
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
6. Dividends on Ordinary Shares
2023
£
2022
£
Dividends paid on ordinary shares
Third interim dividend - 5.15p paid 12 December 2022 (2021 - 4.70p) 2,198,675 2,006,558
Final dividend - 6.05p paid 4 April 2023 (2022 - 6.05p) 2,582,910 2,582,910
First interim dividend - 5.55p paid 25 July 2023 (2022 - 5.15p) 2,369,446 2,198,675
Second interim dividend - 5.55p paid 15 September 2023 (2022 - 5.15p) 2,369,446 2,198,675
9,520,477 8,986,818
Dividends payable at the year end are not recognised as a liability (see page 94 - Statement of Accounting Policies). Details of
these dividends are set out below.
2023
£
2022
£
Third interim dividend - 5.55p paid 12 December 2023 (2022 - 5.15p) 2,369,446 2,198,675
Final proposed dividend - 6.05p payable 4 April 2024 (2023 - 6.05p) 2,582,910 2,582,910
4,952,356 4,781,585
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
2023
Revenue
£
2023
Capital
£
2023
Total
£
2022
Revenue
£
2022
Capital
£
2022
Total
£
Profit (loss) after taxation attributable to ordinary
shareholders
11,251,047 29,379,783 40,630,830 9,673,972 (6,051,444) 3,622,528
Earnings per ordinary share 26.35p 68.82p 95.17p 22.66p (14.17p) 8.49p
The earnings per ordinary share is based on a weighted number of shares 42,692,727 (2022 - 42,692,727) ordinary shares
in issue.
99
FINANCIAL STATEMENTS
8. Investments Held at Fair Value Through Profit or Loss
2023
£
2022
£
Opening book cost 321,784,618 300,448,489
Opening investments holding gains 201,044,464 233,475,448
Opening market value 522,829,082 533,923,937
Additions at cost 115,960,271 78,592,911
Disposals proceeds received (117,659,823) (85,950,304)
Gains (losses) on investments 32,247,788 (3,737,462)
Market value of investments held at 30 November 553,377,318 522,829,082
Closing book cost 355,552,866 321,784,618
Closing investment holding gains 197,824,452 201,044,464
Closing market value 553,377,318 522,829,082
Gains (losses) on investments
Gains (losses) on investments 32,247,788 (3,737,462)
Gains (losses) on investments 32,247,788 (3,737,462)
The company received £117,659,823 (2022 - £85,950,304) from investments sold in the year. The book cost of these investments
when they were purchased was £82,192,022 (2022 - £57,256,781).
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 £231,783 (2022 - £187,149) and transaction costs on sales
amounted to £38,689 (2022 - £18,885).
100
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
9. Other Receivables, Cash at Bank and in Hand and Other Payables
2023
£
2022
£
Other receivables
Sales for future settlement - 973,513
Accrued income 1,612,128 1,732,319
Prepayments 49,778 41,324
1,661,906 2,747,156
Cash at bank and in hand
Current account 9,864,904 7,918,710
9,864,904 7,918,710
Other payables: amounts falling due within one year
Other payables 1,020,306 877,710
Interest on borrowings (see below) 313,934 313,934
Revolving Credit Facility (i) 10,259,408 10,115,227
11,593,648 11,306,871
The carrying amount of other receivables, cash at bank and in hand and other payables: amounts falling due within one year,
each approximate their fair value.
2023
£
2022
£
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 2023, with a maturity
date of 27 June 2024. The repayment date of the revolving facility is the last day of its interest period and the termination date is
27 June 2025.
The company pays a commitment fee of 0.30% p.a. on any undrawn amounts.
101
FINANCIAL STATEMENTS
10. Creditors: Amounts Falling Due After More Than One Year
2023
£
2022
£
5% Cumulative preference stock (i) 450,000 450,000
2.84% Fixed Rate Note 2048 (ii) 24,650,721 24,641,114
25,100,721 25,091,114
(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 £24,650,721 (2022 - £24,641,114) being the net proceeds of £24,601,800
(2022 - £24,601,800) plus accrued finance costs of £48,921 (2022 - £39,314).
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
2023
£
2022
£
Allotted and fully paid
42,692,727 ordinary shares of 25p each (2022 - 42,692,727) 10,673,181 10,673,181
The directors are authorised by an ordinary resolution passed on 31 March 2023 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 2024 and accordingly a renewed authority will be sought at the annual general meeting on 25 March 2024.
During the year nil (2022 - nil) ordinary shares were repurchased by the company. The aggregate purchase price of these shares,
amounting to £nil (2022 - £nil) was charged to the capital reserve, within gains on sales of investments (see Note 12).
102
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
12. Reserves
Capital Reserve
Capital
Redemption
Reserve
£
Gains (losses)
on sales of
Investments
£
Investment
Holding
Gains (losses)
£
Revenue
Reserve
£
Balance at 1 December 2022 5,326,819 264,449,252 200,801,481 15,846,230
Gains on realisation of investments - 85,948,037 - -
Transfer on disposal of investments - (50,480,237) 50,480,237 -
Movement in investment holding losses - - (53,700,249) -
Losses on foreign currency - - (294,696) -
Investment management fee - (1,672,839) - -
Finance costs of borrowings - (898,583) - -
Other capital expenses - (1,887) - -
Dividends appropriated in the year - - - (9,520,477)
Profit retained for the year - - - 11,251,047
Unclaimed dividends - - - 2,443
Balance at 30 November 2023 5,326,819 297,343,743 197,286,773 17,579,243
All paid or payable dividends for the year are payable from the revenue reserve (2022 - same).
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
2022 to the net asset value, on a total return basis as at 30 November 2023. The net asset value total return with debt at fair
value is 8.7% (2022 - 3.0%) and the net asset value total return with debt at par is 8.2% (2022 - 0.8%).
The net asset value per ordinary share is based on 42,692,727 ordinary shares in issue at the year end (2022 - 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 108.
The net asset value per ordinary share was as follows:
Debt at
fair value
2023
Debt
at par
2023
Debt at
fair value
2022
Debt
at par
2022
Net asset value per ordinary share attributable 1,258.6p 1,237.2p 1,178.7p 1,164.4p
Effect of dividends reinvested on the respective ex-dividend dates 22.7p 22.7p 21.5p 21.5p
Net asset value total return 1,281.3p 1,259.9p 1,200.2p 1,185.9p
Net asset value attributable £537,307,615 £528,209,759 £503,217,127 £497,096,963
103
FINANCIAL STATEMENTS
14. Contingent Liabilities, Capital Commitments and Guarantees
At 30 November 2023 there were no contingent liabilities, capital commitments or guarantees (2022 - £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 50.
Market Price Risk Sensitivity
The value of the company’s listed equities which were exposed to market price risk as at 30 November 2023 and 2022 was
as follows:
2023
£
2022
£
Listed equity investments held at fair value through profit or loss 553,377,318 522,829,082
The following illustrates the sensitivity of the return after taxation for the year and the net assets to an increase or decrease of
30% (2022 - 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.
2023
30% Increase
in fair value
£
2023
30% Decrease
in fair value
£
2022
30% Increase
in fair value
£
2022
30% Decrease
in fair value
£
Revenue earnings
Investment management fee (224,118) 224,118 (211,746) 211,746
Capital earnings
Gains (losses) on investments at fair value 166,013,195 (166,013,195) 156,848,725 (156,848,725)
Investment management fee (522,942) 522,942 (494,073) 494,073
Change in net earnings and net assets 165,266,135 (165,266,135) 156,142,906 (156,142,906)
104
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
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:
2023
Investments
£
2023
Other net assets
(liabilities)
£
2023
Total Currency
Exposure
£
2022
Investments
£
2022
Other net assets
(liabilities)
£
2022
Total Currency
Exposure
£
Pounds Sterling 138,847,724 (27,578,843) 111,268,881 114,760,363 (29,215,772) 85,544,591
Australian Dollar 8,320,391 114,964 8,435,355 8,458,716 97,171 8,555,887
Danish Krone 5,790,389 37,735 5,828,124 11,326,437 35,822 11,362,259
Euro 76,635,351 272,067 76,907,418 72,215,216 319,906 72,535,122
Hong Kong Dollar 5,009,435 - 5,009,435 10,131,404 1,226,423 11,357,827
Japanese Yen 11,411,833 143,345 11,555,178 15,075,362 201,974 15,277,336
Norwegian Krona 10,710,122 - 10,710,122 - - -
Swedish Krona 20,345,454 7,479 20,352,933 17,896,846 7,800 17,904,646
Swiss Franc 31,175,786 588,358 31,764,144 40,316,036 494,052 40,810,088
Taiwan Dollar - 871,056 871,056 - 913,699 913,699
US Dollar 245,130,833 376,280 245,507,113 232,648,702 186,806 232,835,508
Total 553,377,318 (25,167,559) 528,209,759 522,829,082 (25,732,119) 497,096,963
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.
105
FINANCIAL STATEMENTS
2023
20% Decrease in
sterling against
foreign currencies
£
2023
20% Increase in
sterling against
foreign currencies
£
2022
20% Decrease in
sterling against
foreign currencies
£
2022
20% Increase in
sterling against
foreign currencies
£
Australian Dollar 2,108,839 (1,405,893) 2,138,972 (1,425,981)
Danish Krone 1,457,031 (971,354) 2,840,565 (1,893,710)
Euro 19,226,855 (12,817,903) 18,133,781 (12,089,187)
Hong Kong Dollar 1,252,359 (834,906) 2,839,457 (1,892,971)
Japanese Yen 2,888,795 (1,925,863) 3,819,334 (2,546,223)
Norwegian Krona 2,677,531 (1,785,020) - -
Swedish Krona 5,088,233 (3,392,156) 4,476,162 (2,984,108)
Swiss Franc 7,941,036 (5,294,024) 10,202,522 (6,801,681)
Taiwan Dollar 217,764 (145,176) 228,425 (152,283)
US Dollar 61,376,778 (40,917,852) 58,208,877 (38,805,918)
Total 104,235,221 (69,490,147) 102,888,095 (68,592,062)
(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.
2023
Fixed
rate
interest
£
2023
Floating
rate
interest
£
2023
Nil
Interest
£
2023
Total
£
2022
Fixed
rate
interest
£
2022
Floating
rate
interest
£
2022
Nil
Interest
£
2022
Total
£
Financial assets
- 9,864,904 553,377,318 563,242,222 - 7,918,710 522,829,082 530,747,792
Financial Liabilities
(25,100,721) - - (25,100,721) (25,091,114) - - (25,091,114)
Net financial (liabilities) assets
(25,100,721) 9,864,904 553,377,318 538,141,501 (25,091,114) 7,918,710 522,829,082 505,656,678
Short term receivables and payables - - -
(9,931,742) - - - (8,559,715)
Net (liabilities) assets per balance
sheet
(25,100,721) 9,864,904 553,377,318 528,209,759 (25,091,114) 7,918,710 522,829,082 497,096,963
As at 30 November 2023, the interest rates received on cash balances, or paid on bank overdrafts respectively, is approximate to
2.75% and 6.25% per annum (2022: 1.50% and 4.00% per annum).
The fixed rate interest bearing liabilities bear the following coupon and effective rates as at 30 November 2022 and 30
November 2023.
2023
Maturity
date
Amount
borrowed
£
Coupon
rate
Effective
rate since
inception*
5% Cumulative Preference Stock n/a 450,000 5.00% n/a
2.84% Fixed Rate Note 2048 28/06/2048 25,000,000 2.84% 2.94%
2022
Maturity
date
Amount
borrowed
£
Coupon
rate
Effective
rate since
inception*
5% Cumulative Preference Stock n/a 450,000 5.00% n/a
2.84% Fixed Rate Note 2048 28/06/2048 25,000,000 2.84% 2.94%
* 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 94.
106
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
The weighted average effective rate of the company’s fixed interest bearing liabilities (excluding the 5% cumulative preference
stock) is 2.94% (2022 - 2.94%) and the weighted average period to maturity of these liabilities is 24.5 years (2022 - 25.5 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 102. 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.
2023
Three
months
or less
£
Between
three months
and one year
£
Between
one and
five years
£
More than
five years
£
Total
£
Other payables
Finance costs of borrowing 366,250 366,250 - - 732,500
Revolving Credit Facility 320,516 10,000,000 - - 10,320,516
Other payables 1,020,306 - - - 1,020,306
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 14,537,500 17,467,500
1,707,072 10,366,250 2,930,000 39,987,500 54,990,822
2022
Three
months
or less
£
Between
three months
and one year
£
Between
one and
five years
£
More than
five years
£
Total
£
Other payables
Finance costs of borrowing 366,250 366,250 - - 732,500
Revolving Credit Facility 197,214 10,000,000 - - 10,197,214
Other payables 877,710 - - - 877,710
Creditors: amounts falling due after more than one year
Maturity of borrowings - - - 25,450,000 25,450,000
Finance costs of borrowing - - 2,930,000 15,247,500 18,177,500
1,441,174 10,366,250 2,930,000 40,697,500 55,434,924
Other creditors include trade creditors only, no accrued finance costs included.
107
FINANCIAL STATEMENTS
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 (2022 - £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 2023 (30 November 2022 - 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 2023 and 2022 was as follows:
2023
£
2022
£
Other Receivables:
Outstanding settlements - 973,513
Accrued income 1,612,128 1,732,319
Prepayments 49,778 41,324
1,661,906 2,747,156
Cash at bank and in hand 9,864,904 7,918,710
11,526,810 10,665,866
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 2023 the financial assets at fair value through profit and loss of £553,377,318 (2022 - £522,829,082) are
categorised as follows:
2023
£
2022
£
Level 1 553,377,318 522,829,082
Level 2 - -
Level 3 - -
553,377,318 522,829,082
108
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
There were no transfers between levels for financial assets and financial liabilities during the year recorded at fair value as at 30
November 2023 and 30 November 2022.
The financial liabilities measured at amortised cost have the following fair values:*
2023
Book Value
£
2023
Fair Value
£
2022
Book Value
£
2022
Fair Value
£
Preference Stock 450,000 377,865 450,000 423,450
Fixed Rate Note 24,650,721 15,625,000 24,641,114 18,547,500
25,100,721 16,002,865 25,091,114 18,970,950
The net asset value per ordinary share, with the debt at fair value is calculated as follows:
2023
£
2022
£
Net assets per balance sheet 528,209,759 497,096,963
Add: financial liabilities at book value 25,100,721 25,091,114
Less: financial liabilities at fair value* (16,002,865) (18,970,950)
Net assets (debt at fair value) 537,307,615 503,217,127
Net asset value per ordinary share (debt at fair value) 1,258.6p 1,178.7p
* The fair value has been derived from the closing market value as at 30 November 2023 and 30 November 2022.
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 2023 (2022 - 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:
2023
£
2022
£
Debt
Revolving Credit Facility 10,259,408 10,115,227
Creditors: amounts falling due after more than one year 25,100,721 25,091,114
35,360,129 35,206,341
Equity
Called up share capital 10,673,181 10,673,181
Share premium account and other reserves 517,536,578 486,423,782
528,209,759 497,096,963
Total Capital 563,569,888 532,303,304
Debt as a percentage of total capital 6.3% 6.6%
109
FINANCIAL STATEMENTS
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.
The company is subject to several externally imposed capital requirements. The company has an overdraft facility of £5m
(2022 - £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 financial year, 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 96. 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 74.
There are no other identifiable related parties at the year end, and as of 13 February 2024.
18. Post Balance Sheet Events
There were no significant events after the end of the financial year to 13 February 2024 that required disclosure.
110
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
Investor
Information
112 Investor Information (unaudited)
115 Notice of Meeting
119 Glossary
Reinsurance and risk
management firm Munich Re,
another significant contributor
to performance, was founded in
Munich, Germany, in 1880.
111
AIFM and Depositary
Allianz Global Investors UK Limited (AllianzGI UK) is designated the Alternative Investment Fund Manager (AIFM). AllianzGI UK is
authorised to act as an AIFM and to conduct its activities by the Financial Conduct Authority (FCA) in accordance with AIFMD and
FCA requirements. The management fee and the notice period are unchanged in the restated management and administration
agreement (details in Note 2 on page 96).
The company appointed HSBC Bank PLC as its depositary and custodian in accordance with AIFMD under an agreement
between the company, AllianzGI UK and HSBC. Depositary fees are charged in addition to custody fees and are calculated on
the basis of net assets.
Leverage and Risk Policies under AIFMD
Details of leverage and risk policies required under AIFMD are published on the website brunner.co.uk under Literature/Trust
Documents/Disclosures to Investors under AIFMD. These policies represent no change to the board’s policies in existence prior to
AIFMD and are in place to ensure that these limits would not be breached under any foreseeable circumstances.
Remuneration Disclosure of the AIFM
Employee remuneration of Allianz Global Investors GmbH for the financial year ending 31 December 2022 (all values in Euro).
During the year, as reported above and in Note 2 on page 96, Allianz Global Investors UK Limited (AllianzGI UK) was appointed
as AIFM in place of Allianz Global Investors GmbH. Going forward, the Remuneration Disclosure for AllianzGI UK will be disclosed.
Number of employees: 1,710
All employees Risk Taker
Board
Member
Other
Risk Taker
Employees with
Control Function
Employees with
Comparable
Compensation
Fixed remuneration 174,302,493 7,269,792 985,960 2,207,677 390,480 3,685,675
Variable remuneration 121,033,472 16,763,831 1,483,410 4,459,440 377,612 10,443,368
Total remuneration 295,335,965 24,033,623 2,469,370 6,667,117 768,092 14,129,043
Remuneration Policy of the AIFM
The compensation structure at Allianz Global Investors GmbH 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
100 are the costs associated with the buying and selling of the underlying investments, such as dealing fees and stamp duty.
Both are calculated as a percentage of the net asset value.
Investor Information (unaudited)
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
112
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 7,576.59 at 30 November
2023, compared to 7,573.05 at 30 November 2022, a very
small increase of 0.05%.
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 UK 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 2024 to shareholders on the Register of
Members at the close of business on 1 March 2024, making
a total distribution of 22.7p per share for the year ended
30 November 2023, an increase of 5.6% over last year’s
distribution. The ex-dividend date is 29 February 2024.
A Dividend Reinvestment Plan (DRIP) is available for this
dividend and the relevant Election Date is 15 March 2024.
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, 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.
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.
INVESTOR INFORMATION
113
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
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 116.
CREST Proxy Voting
Shares held in uncertificated form (i.e., in CREST) may be
voted through the CREST Proxy Voting Service in accordance
with the procedures set out in the CREST manual. Voting
via the Proxymity platform is also available to institutional
shareholders. Further details are contained within the Notice
of Meeting Notes on page 116.
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.
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
114
Notice is hereby given that the ninety-seventh annual general
meeting of The Brunner Investment Trust PLC will be held
at Trinity House, Trinity Square, Tower Hill, London EC3N
4DH on Monday 25 March 2024 at 12 noon to transact the
following business:
Ordinary Business
1. To receive and adopt the Directors’ Report and the
Financial Statements for the year ended 30 November 2023
with the Auditors’ Report thereon.
2. To declare a final dividend of 6.05p per ordinary share.
3. To re-elect Carolan Dobson as a director.
4. To re-elect Amanda Aldridge as a director.
5. To re-elect Elizabeth Field as a director.
6. To re-elect Andrew Hutton as a director.
7. To re-elect Jim Sharp as a director.
8 To approve the Directors’ Remuneration
Implementation Report.
9. To re-appoint PricewaterhouseCoopers LLP as the Auditor
of the company.
10. To authorise the directors to determine the remuneration
of the Auditor.
Special Business
To consider and, if thought fit, pass the following resolutions
of which resolution 12 will be proposed as an ordinary
resolution and resolutions 11, 13 and 14 will be proposed as
special resolutions:
11. That the New Articles of Association produced to the
meeting and signed by the chair of the meeting for the
purposes of identification be approved and adopted as the
Articles of Association of the Company in substitution for, and
to the exclusion of, the existing Articles of Association with
effect from the conclusion of the meeting.
12. That the directors be and are hereby generally and
unconditionally authorised pursuant to section 551 of the
Companies Act 2006 to allot relevant securities (within the
meaning of section 551 of that Act) provided that this power
shall be limited to the allotment of relevant securities up to
an aggregate nominal amount of £3,557,727 (14,230,908
ordinary shares) and shall expire at the conclusion of the
next annual general meeting of the company held after the
meeting at which this resolution is passed or 30 June 2025 if
earlier, save that the directors may before such expiry make
an offer or agreement which would or might require relevant
securities to be allotted after such expiry and the directors
may allot relevant securities in pursuance of such offer or
agreement as if the power conferred hereby had not expired.
13. That the directors be and are hereby empowered, pursuant
to section 570 of the Companies Act 2006, to allot equity
securities (as defined in section 560 of that Act) pursuant to the
authority conferred by resolution 12 above or by way of a sale
of treasury shares as if section 561 of that Act did not apply to
any such allotment, provided that this power shall be limited
to the allotment of equity securities for cash of an aggregate
maximum nominal amount of £533,659 (2,134,636 ordinary
shares) and shall expire at the conclusion of the next annual
general meeting of the company held after the meeting at
which this resolution is passed or 30 June 2025, if earlier, save
that the directors may before such expiry make an offer or
agreement which would or might require equity securities to
be allotted after such expiry and the directors may allot equity
securities in pursuance of such offer or agreement as if the
power conferred had not expired.
14. That the company be and is hereby generally and
unconditionally authorised in accordance with section
701 of the Companies Act 2006 (the Act) to make market
purchases (within the meaning of section 693(4) of the Act)
of ordinary shares of 25p each in the capital of the company
(ordinary shares) either for retention as treasury shares or for
cancellation, provided that:
(i) the maximum number of ordinary shares hereby
authorised to be purchased shall be 6,399,639;
(ii) the minimum price which may be paid for an ordinary
share is 25p;
(iii) the maximum price which may be paid for an ordinary
share is an amount equal to 105% of the average of the
middle market quotations for an ordinary share taken from
the London Stock Exchange Official List for the 5 business days
immediately preceding the day on which the ordinary share is
purchased or such other amount as may be specified by the
London Stock Exchange from time to time;
(iv) the authority hereby conferred shall expire at the
conclusion of the annual general meeting of the company
in 2025 or 30 June 2025 if earlier, unless such authority is
renewed prior to such time; and
(v) the company may make a contract to purchase ordinary
shares under the authority hereby conferred prior to the expiry
of such authority which will or may be executed wholly or
partly after the expiration of such authority and may make a
purchase of ordinary shares pursuant to any such contract.
By order of the board
Kirsten Salt
Company Secretary
13 February 2024
199 Bishopsgate, London EC2M 3TY
Notice of Meeting
INVESTOR INFORMATION
115
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 Thursday 21 March 2024 (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 Thursday 21 March 2024 through any one of the
following methods:
i) by post, courier or (during normal business hours only)
hand to the Company’s registrar at:
Link Group
PXS1
Central Square
29 Wellington Street
Leeds
LS1 4DL
ii) electronically through the website of the Company’s
registrar at www.signalshares.com
(see note 8 below).
iii) via LinkVote+ (see note 9 below).
iv) via Proxymity (see note 10 below).
v) in the case of shares held through CREST, via the
CREST system (see notes below).
7. If you 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 Thursday 21
March 2024 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 GooglePlay
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 Thursday 21 March 2024 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
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
116
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 Thursday 21 March
2024. 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 13 February 2024, (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 13 February 2024 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 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.
INVESTOR INFORMATION
117
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. The full terms of the proposed amendments to the
Company’s Articles of Association are available at the
offices of Allianz Global Investors UK Ltd, 199 Bishopsgate,
London EC2M 3TY between the hours of 9.00am and 5.00pm
(Saturdays, Sundays and public holidays excepted) and on
the Company’s website, www.brunner.co.uk, from the date
of the AGM Notice until the close of the AGM, and will also
be available for inspection at the venue of the AGM from
15 minutes before and during the AGM. The New Articles
will also be available for inspection on the National Storage
Mechanism located at https://data.fca.org.uk/#/nsm/
nationalstoragemechanism, from the date of the AGM Notice.
23. 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.
24. Contracts of services are not entered into with the directors,
who hold office in accordance with the Articles.
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
118
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 2023, the NAV with debt at
par value was £528,209,759 (2022 - £497,096,963) and the NAV per share was 1,237.2p (2022 - 1,164.4p).
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 2023 earnings per ordinary share was 26.35p (2022 - 22.66p), calculated by taking the profit
after tax of £11,251,047 (2022 - £9,673,972), divided by the weighted average shares in issue of 42,692,727 (2022 - 42,692,727).
Alternative Performance Measures (APMs)
Net Asset Value, debt at fair value is the value of total assets less all liabilities, with the company’s debt measured at the fair
value at the time of calculation. The Net Asset Value, or NAV, per ordinary share with debt at fair value is calculated by dividing
this amount by the total number of ordinary shares in issue (see page 103). As at 30 November 2023, the NAV with debt at fair
value was £537,307,615 (2022 - £503,217,127) and the NAV per share with debt at fair value was 1,258.6p (2022 - 1,178.7p).
(Further details can be found in Note 15(c) on page 108).
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 103).
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 2023 was 1,065.0p, an increase of
45.0p from the price of 1,020.0p as at 30 November 2022. The increase in share price of 45.0p plus the dividends declared for
the year of 22.7p are divided by the opening share price of 1,020.0p to arrive at the share price total return for the year ended 30
November 2023 of +6.6% (2022 - -0.8%).
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).
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).
2023
£
2022
£
Management fee 2,389,770 2,295,534
Administration expenses 855,035 789,354
Less: non-recurring expenses* - (22,491)
Total expenses (A) 3,244,805 3,062,397
Average net asset value with debt at market value (B) 507,451,778 482,686,739
Ongoing charge (A/B) 0.64% 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.
Glossary
INVESTOR INFORMATION
119
2023 2022
Dividends declared for the year 22.7p 21.5p
Share price at year end 1,065.0p 1,020.0p
Annual dividend as a percentage of share price 2.1% 2.1%
Gearing is the amount of debt as a percentage of the net assets (see Note 16 on page 109).
Revenue Reserve per ordinary share of 29.6p (2022 - 25.9p) is the revenue reserve per the balance sheet of £17,579,243 (2022 -
£15,846,230) less the third dividend and final proposed dividend in respect of the year (Note 6) of £4,952,356 (2022 - £4,781,585),
payable after the year end, divided by the total number of ordinary shares in issue of 42,692,727 (2022 - 42,692,727).
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
120
OVERVIEW
6
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023
1
The Brunner Investment Trust PLC
199 Bishopsgate
London
EC2M 3TY
+44 (0)203 246 7000
www.brunner.co.uk
THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023