THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## The Brunner ## Investment Trust PLC ### A GLOBAL EQUITY INVESTMENT TRUST ### Annual Report, 30 November 2023 ## The Brunner Investment Trust PLC ### A GLOBAL EQUITY INVESTMENT TRUST | Capital growth and dividends | ‘All-weather’ portfolio | Independence | | --- | --- | --- | | The Brunner Investment Trust PLC (‘Brunner’) | The company provides a balanced | Brunner has an independent board | | aims to provide growth in capital value and | solution for investors looking for a global | of directors and no employees. Like | | dividends for investors over the long term | and UK portfolio of equities and a quarterly | many other investment companies, it | | through investing in a portfolio of global | dividend. The company’s investment | outsources investment management | | and UK equities. | policy is set out in the Strategic Report on | and administration to an investment | | | page 9. | management company – Allianz Global | The Key Performance Indicators (KPIs) on Investors – and other third parties to provide page 14 show how effective the company shareholders with an efficient, competitive, has been in delivering its strategy. cost-effective way to gain wide equity investment exposure through a single investment vehicle. | Risk and gearing | Benchmark | Association of Investment Companies | | --- | --- | --- | | A statement explaining how the assets | For the year under review the benchmark | Brunner is a member of the Association | | have been invested to spread risk and | against which the portfolio is measured was | of Investment Companies (AIC) and the | | how gearing is managed is included under | a composite of 70% FTSE World Ex UK Index | company’s shares are recognised by the | | Investment Policy on page 10. | and 30% FTSE All-Share Index. | AIC as suitable for retail investors. AIC | Category: Global. ## A family investment from the beginning… | Like many long-established investment | into the twentieth century. In 1873 he | John Brunner was a passionate | | --- | --- | --- | | trusts, Brunner’s name reflects its history | and the scientist Ludwig Mond founded | campaigner, including for welfare reforms | | rather than its investment strategy. | Brunner, Mond and Co, the largest of the | and free trade, and used his wealth for | | Johannes Brunner was born in Canton | four companies which came together | philanthropic purposes. Jim Sharp, a | | Zürich and migrated to Lancashire in | to form ICI in 1926. The following year | director of the company, is connected to the | | 1832. His son, Sir John Brunner, Bart, was | the Brunner family chose to sell its ICI | Brunner family by marriage and continues | | one of the most successful industrialists | shares and establish a broad, long-term | the link between board and family. Brunner | | of the nineteenth century, and in politics | investment vehicle – so in 1927, The | family share ownership information is | | an influential radical Liberal MP until well | Brunner Investment Trust was formed. | included on pages 64 and 71. | Sir John BrunnerBrunner, Mond & Co. factory, worker cottages and Co-operative Society ### WWW.BRUNNER.CO.UK ## Contents Overview 2 Financial Highlights ## 2 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 ## 9 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 23 47 Case Studies 50 Portfolio Breakdown 55 Distribution of Invested Funds 58 Historical Record Governance 60 Directors, Manager and Advisers 63 Directors’ Report ## 59 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 ## 83 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 ## 111 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. 1 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## 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 OVERVIEW OVERVIEW 4 | Net asset value total return | | Net asset value total return | | Benchmark total return index | | --- | --- | --- | --- | --- | | | 2 | | 2 | | | Debt at fair value | | Debt at par | | | ## +8.7% +8.2% +5.5% ### 2022 2022 2022 ## +3.0% +0.8% +1.4% 1 1 2 5 Net assets per ordinary share Net assets per ordinary share Share price total return 2 Debt at fair value Debt at Par ## 1,258.6p 1,237.2p +6.6% ### 2022 1,178.7p 2022 1,164.4p 2023 1,065.0p ## +6.8% +6.3% 2022 1,020.0p 3 Earnings per ordinary share Dividend per ordinary share Revenue reserves per ordinary share for the year ## 26.4p 22.7p 29.6p ### 2022 22.7p 2022 21.5p 2022 ## +16.3% +5.6% 25.9p 2 Consumer price index Discount - average in the year ## 11.5% +3.9% ### 2022 2023 131.7 ### 2022 126.7 ## 10.3% 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 | | 2 | | 3 | | | --- | --- | --- | --- | --- | | the Year on page 8. | Alternative Performance Measures (APM). See Glossary on page 119. | | The dividend per ordinary share includes | | | | | 4 | | 5 | | the proposed final dividend of 6.05p. | | The Benchmark Index of 70% FTSE World Ex UK Index and 30% FTSE All-Share Index. | | Share price total | return is based on the movement in share price including dividends reinvested. 3 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 | 1973 | 1973 | 197 | 4 | 1976 | 1979 | 1982 | 1984 | 1986 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Britain joins | Yom Kippur | Bear Market | | Britain borrows | ‘Winter of | Economic | 12-month | ‘Big Bang’ | | the European | war | | | money from | Discontent’ | recession | Miners’ Strike | enhances | | Community | | | | the IMF | | leads to high | | London’s status | | | | | | | | unemployment | | as a financial | | | | | | | | in the UK | | capital | ### 2023* ## yrs ## 22.70p ## 52 ## 4,629.2% ## of continual ## dividend growth ## 1,587.7% ### 1972 ## 0.48p 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 | 1987 | 200 | 0 | 2001 | 2003 | 2008 | 2016 | 2020 | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | ‘Black | Beginning of | | 9/11 | The Second | Financial crisis | Brexit vote | COVID-19 | Invasion of | | Monday’ | the end of the | | | Gulf War | | | pandemic | Ukraine | dot-com boom 4 OVERVIEW ## Chair’s Statement Dear Shareholder, the gains from the 2023 year-end rally, The development and scale of but the strong December will be in our implementation of Artificial Intelligence Review of the 2023 Financial 2024 fiscal year. dominated headlines through the year. Year and Performance The mega-capitalisation companies Globally inflation continued to be more 2023 was another year of difficult and – dubbed ‘The Magnificent Seven’ persistent than expected, subduing volatile stock markets in uncertain (Alphabet, Amazon, Apple, Meta, only towards the end of the year. This economic conditions. The sheer pace Microsoft, Nvidia, and Tesla) were allowed central banks to make more and reach of how news now travels significant beneficiaries of this. AI offers optimistic statements about future cuts round the world, coupled with the both opportunity and concern from the in interest rates, spurring the year end amount of short-term trading done in perspective of humanity. Whilst that stock market rally. markets by maths models, may mean debate is not one to have here, from an that this is how most years will look in In geopolitical terms we are investment perspective it will be crucial the future. approaching the second anniversary to understand if regulation will be of the war in Ukraine and are in the imposed and if it will ultimately help or Global equities climbed out of a dip middle of another war in the Middle hinder those firms at the cutting edge. through December 2022 and January East; neither conflict has a clear end in 2023, but over February and early- Against this volatile backdrop, Brunner sight. Our thoughts remain firmly with all March gave back most gains. It was a once again beat its benchmark over the those affected by conflicts and political repeating picture over the remainder of year to 30 November 2023. Brunner’s instability around the world, as well the year as gains from March to August Net Asset Value (NAV) per ordinary as those affected by the many natural were largely given back up to a point share total return (calculated on a net disasters seen in 2023. | in October which was barely above the | | dividends reinvested basis with debt at | | --- | --- | --- | | start of the year. From that point though | In environmental terms, global | fair value) was +8.7%, versus +5.5% for | | markets rallied to finish the calendar | temperatures broke new records and | the composite benchmark (70% FTSE | | year strongly ahead. Our financial year | COP-28 saw nations further galvanise | World Ex. UK / 30% FTSE All-Share). | | reporting period is from 1 December | behind the movement away from fossil | This marks the 5th consecutive year | | 2022 to 30 November 2023 and | fuels, though how that is achieved | of outperformance of the benchmark | | therefore captures only a proportion of | remains unclear. | 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## 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. | small holders of the noted stocks | not trying to time or profit from short- | the end of 2023 coming from the FCA. | | --- | --- | --- | | that led markets forward, the board | term market movements. | We see this as a further step forward | | is particularly happy to report this | | towards more universal descriptions and | | consistent progress to shareholders. | Environmental, Social and | reliable measurement for the benefit of | | | Governance (ESG) | all investors. | The four largest contributors to Whilst the strategy of the trust does not performance were Microsoft, Jumbo SA Earnings per Share aim to meet any specific sustainability (a Greek listed retailer), Novo Nordisk criteria, the board considers that Over the past year most companies and Munich Re, demonstrating the it is in shareholders’ interests to be have been able to continue paying variety of companies and sectors the aware of and consider environmental, dividends at or above previous levels manager selects to meet the company’s social and governance factors when and there has been a contribution performance and risk objectives. selecting and retaining investments. from special dividends. This meant the Brunner should be viewed as an ‘all portfolio’s generation of income and Active stewardship is a key task of any weather global equity portfolio’. earnings grew once more through 2023, responsible asset owner. Over time we aim to demonstrate the with earnings per share for the year Understanding the manager’s approach substance of this claim, providing solid rising by 16.3%, from 22.7p to 26.4p. to ESG and how it has been integrated outperformance through a variety of This has put Brunner in the strong within the investment process has market and macroeconomic conditions. position once again to be able to cover continued to be a focus for the board our increased dividend payment to The portfolio is constructed with a over the past year. We take account of shareholders and still put a sizeable focus on high quality companies that our performance in this area against amount into revenue reserves for a are expected to perform well over the our objectives using both the manager’s future ‘rainy day’. long term. The managers do not look to internal analysis and external measures build a portfolio that will perform on a and benchmarks. Dividend particular economic condition or trigger We give a full and clear account of The proposed final dividend of 6.05p, – rather they remain aware of these ESG considerations within this report if approved by shareholders, will be external factors and review how they (see page 21). We also have a paid on 4 April 2024 to shareholders might impact the individual companies page on our website that describes on the register on 1 March 2024. within the portfolio. You can read more the manager’s ESG processes in more In line with board’s dividend policy, about the portfolio managers’ analysis detail. Since the beginning of 2020 we which is outlined on page 14, the of what happened to the portfolio have included quarterly updated ESG total dividend for 2023, including the during the period on pages 23 to measurements on our monthly factsheet, proposed final dividend, will be 22.7p. 58. The portfolio managers also showing the rating of the Brunner This represents an increase of 5.6% observe that stock market returns bear portfolio on ESG risks and combined over the 2022 dividend of 21.5p and little resemblance to economic factors or ESG risk measurements compared to means Brunner has now reached 52 drivers over time. “Over time” is of course the rating of the benchmark, however years of consecutive dividend increases, the important factor there as markets imperfect that comparison may still be. cementing its place near the top of the can be over-sensitive to news flow and AIC’s “Dividend Heroes” list. | economic data. “Over time” perfectly | We are pleased to see continued | | | --- | --- | --- | | describes a key tenet of our investment | efforts by regulators and the industry | Revenue reserves will remain strong | | philosophy though – thinking about | in general to harmonise nomenclature | at 29.6p after the payment of the | | performance over longer time periods, | and measurement, the latest just at | proposed final dividend. | 6 OVERVIEW Board Succession Despite the strong performance noted, often unconnected with where their Brunner traded at a larger than average stock is listed. The managers also argue As noted in the previous report, discount through most of the period. in their report that the ‘macro’ factors, Elizabeth Field joined the board at Some of this is sector-wide – investment which undoubtedly move markets the start of the financial year on 1 trusts in general have had a difficult (possibly dramatically) in the short December 2022. In addition, Andrew year as investors shied away in the term, ultimately have limited impact on Hutton was appointed as Senior prevailing macro environment. The AIC’s the long-term outcomes for individual Independent Director at the Annual statistics for 2023 show the impact on businesses and thus for stock market General Meeting in 2023, succeeding average discounts. Although not within returns over the long term. Peter Maynard who stepped down. the reporting period, as I write at the As ever this scenario provides a good beginning of 2024 it has been pleasing Portfolio Management Team hunting ground for stock pickers who to see the investment trust sector rally At the Annual General Meeting at can look past the immediate noise and from 2023 lows. | the end of March 2023, Julian Bishop | | focus on the long-term opportunities | | --- | --- | --- | | became Co-lead Portfolio Manager | We have seen the discount of Brunner | available from individual businesses, | | alongside Christian Schneider. Christian | relative to its peers begin to narrow | crafting a balanced portfolio of | | who was Deputy CIO for AllianzGI’s | which we believe is a reflection of | such opportunities. | | Global Growth franchise has since been | the portfolio’s out-performance and | | | promoted to the CIO role, leading that | the effectiveness of our marketing | Annual General Meeting | | team. Simon Gergel, AllianzGI’s CIO UK | campaign. As a board, we are | | At our 2023 Annual General Meeting in Equities, continues his involvement with disappointed that a trust that has March, it was a pleasure to introduce the portfolio, having worked closely delivered 5 consecutive years of our now co-lead manager Julian on the management of Brunner for outperformance over one of the most Bishop to the audience. The event many years. volatile periods in stock market history, was well attended by shareholders, trades at a discount and continue with an interesting range of questions The Brunner Investment Trust will our strenuous efforts in marketing, and discussion. We look forward to continue to be managed as an all- sales and investor relations to gain welcoming shareholders once again weather portfolio appropriate for a greater investor knowledge. We this year to the AGM which is to be held multitude of different market conditions have been heartened by the steady at Trinity House, Trinity Square, Tower with its balanced approach to increase in ownership from private Hill, London, EC3N 4DH, at 12 noon portfolio construction and strong focus investors achieved. on Monday 25 March 2024. Attending on valuation. shareholders will receive a presentation Outlook from the portfolio managers before the Marketing and Discount 2024 will likely be another significant formal business takes place. We would Promoting Brunner to as wide an year in terms of ‘headline’ events with be delighted to meet with all those audience as possible remains a priority 64 countries plus the European Union shareholders who are able to attend. and the board supports the manager’s holding elections. Associated ‘news’ marketing efforts to further that aim. Shareholders can send any questions to is likely to be rampant. Along with The trust’s balanced nature means be answered at the AGM by the board two major conflicts, the geopolitical it is a long-term holding that can, in and manager care of the company landscape remains dangerous. | our view, form the cornerstone of an | | secretary at investment-trusts@allianzgi. | | --- | --- | --- | | investor’s diversified portfolio. Attracting | Markets have been acutely concerned | com or in writing to the registered office | | more investors, particularly individual | with inflation and second-guessing | (further details are available on page | | investors, generally has the effect of | central bank’s rate rhetoric. Inflation | 113) and we will publish questions | | improving liquidity of the trust’s shares. | appears to be more under control but | and answers on the website after the | | | events in the Middle East have the | meeting. We encourage all shareholders | As noted in previous reporting, in 2022 potential to disrupt that. to exercise their votes in advance of the we agreed that we should refer to meeting by completing and returning Brunner as “An all-weather global equity Not all economies are built equally, the form of proxy. portfolio”. We would like to think that and we have already seen divergence Brunner has been “doing what it says in economic performance. As you will on the tin”. It is something of an obvious read in the Portfolio Manager’s Review Carolan Dobson ‘line’ given the prevailing economic and on pages 24 to 39, the portfolio Chair fiscal conditions. Anyone can claim to managers are largely agnostic to where 13 February 2024 be ‘all-weather’: we believe we have a stock happens to be listed. A large been living and breathing it for a long proportion of world class businesses time; the consistent results achieved are derive their revenues from a diverse the proof. range of locations around the globe, 7 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 # 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 ## Strategic ## Report ### 10 Introduction ### 11 Section 172 Report ### 14 Key Performance Indicators ### 16 Risk Report ### 21 Environmental, Social and ### Governance Issues Pharmaceutical and biotechnology specialist Novo Nordisk was a top contributor to performance. The company is headquartered in Copenhagen, Denmark. 9 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Introduction Purpose of investors and to ensure that the The company has a main market company’s shares are attractive to listing on the London Stock Exchange. Our purpose is to provide the company’s new investors and investor groups, In addition to annual and half-yearly shareholders with growth in capital particularly individuals with smaller financial reports, the company value and dividends over the long term portfolios held either directly or in self- announces net asset values per share through investing in a portfolio of global invested pension plans for whom we can daily and provides further information and UK equities. The company aims to provide a balanced solution for equity monthly to the market, in order for achieve a return higher than that of our investment. It is also our objective to investors and market professionals to benchmark, after costs, and to achieve provide good value for shareholders compare its performance with its peer steady dividend growth in real terms. and ensure that the costs of running group. The investment manager also the company are reasonable and issues a monthly update on investment Strategy Review competitive. Information on Revenue performance which is posted on the We hold an annual strategy meeting and Invested Funds in the year is company’s website and is available outside the normal timetable of board summarised on page 63. by email. meetings. At the most recent meeting the topics covered included: Brunner has an independent board Manager’s Investment Style of non-executive directors and no – Investment strategy and balancing The essence of the investment style employees or premises of its own. the Brunner portfolio which we ask the investment manager Like other investment companies, it – Threats and opportunities for to follow is to select the best stocks in outsources investment management, investment trusts a ‘bottom up’ approach, before any accounting, company secretarial and – Marketing strategy and the focus sector or country consideration. The other administration services to an for 2024. portfolio is concentrated into 60 stocks investment management company – at 30 November 2023 (62 stocks in Allianz Global Investors UK Ltd – and Business Model 2022). Within that concentration modest to other parties, including HSBC Bank The Brunner Investment Trust PLC carries gearing - employing the company’s plc as depositary and custodian, and on business as an investment company borrowings to invest - is within guidelines Link Group as registrar. This enables and follows the investment policy set by the board. Brunner to provide shareholders with a described below. competitive, cost-effective way to gain By pursuing our investment objective wide investment exposure through a we aim to appeal to a broad range single investment vehicle. ### Investment Policy | Investment Objective | Risk Diversification | Gearing | | --- | --- | --- | | The Brunner Investment Trust PLC aims | The company aims to achieve | The company seeks to enhance | | to provide growth in capital value and | a spread of investments across | returns over the long term through | | dividends for investors over the long | geographies and sectors. The | appropriate gearing. The board | | term through investing in a portfolio of | maximum holding in any single stock | monitors the gearing, which is | | global and UK equities. | is limited to 10% of gross assets at the | employed within the guidelines | | | time of investment and the portfolio | set from time to time by the board. | The benchmark against which will consist of at least 50 stocks. The Gearing in any case will not exceed performance is measured is 70% FTSE company will not invest more than 15% 20% of net assets at the time World Ex UK Index and 30% FTSE of its gross assets in other UK listed of borrowing. All-Share Index. investment companies. In the investment policy above, gross assets means the company’s assets before deduction of all debt and other obligations, net assets means the company’s assets after deduction of all debt and other obligations based on the fair value of the long-term debt and preference shares. 10 STRATEGIC REPORT ### Section 172 Report ## Engagement with Key Stakeholders ### The company’s shareholders are its primary stakeholders. Other stakeholders include service ### providers and the companies in which it invests. The board’s strategy is facilitated by the ### manager reporting interaction on its behalf with a wide range of stakeholders through ### meetings, seminars, presentations and publications and through contacts made through our ### suppliers and intermediaries. Engagement with the company’s stakeholders enables the company to fulfil its strategies and to promote the success of the company for the benefit of the shareholders as a whole. In the year we were pleased to hold the Annual General Meeting (AGM) as an in-person event which was well attended and we hope to see and meet with more shareholders in 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 Participation in investor conferences and webinars, together with videos and the primary stakeholders as the podcasts on the website informs shareholders of the investment management investors in the company. The activity and performance of the company. company’s objective is to provide The increasing use of new presentation styles to engage investors such as audio growth in capital value and (podcasts), video and the Turtl platform to distribute information to shareholders dividends for investors over the long and the wider investment community, including in shorter, more digestible formats. term and the company’s strategy is to provide shareholders with the Jim Sharp is related to the Brunner family shareholders which provides further desired returns by diversifying to insight for the board into the views of investors to be used for the advantage of all. take into account risk appetite. 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 The user experience on the website has been further developed during the year. including shareholders and other The manager has worked with other publications, such as Citywire, to provide investors, look for information about more information about the trust online. the company on the website and online media coverage. Outcome: Continual enhancements and improvements to the website including both helpful background and educational material as well as new and current information providing updates for shareholders and other investors. 11 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 Stakeholders and how they are taken into account Activity in the year Public Relations and media – the There is an Integrated PR programme and both Julian Bishop and Christian company continues to work with Schneider, the co-lead investment managers, provide interviews, presentations public relations advisers to ensure and record podcasts to inform and educate. information about the company, We work with a third party, Lansons Communications, and the campaign work is its strategies and performance can aligned with AllianzGI’s marketing activity. reach a wide audience to update shareholders and potential investors through press articles and online media coverage. Outcome: PR activity (generating exposure in consumer finance titles and the national press) is crucial for the platform market. Reports to the board show there is a direct correlation between press articles appearing and spikes of interest and purchases of the company’s shares. Following feedback that people want bite-sized, shorter presentations, the majority of content for engagement is in short form, with longer form content accessible for those that want to delve deeper. Service providers – as well as the In addition to regular contact and assurance testing that sound and effective management company, the board controls are in place from all of these service providers, there is a rolling has appointed a depositary, a programme of due diligence visits to suppliers of third party services by the custodian and a registrar to provide AllianzGI’s investment trust team to ensure that the company is getting good specialist services. quality services with robust and fit for purpose internal controls. The board and these stakeholders A due diligence review of AllianzGI’s supplier of investment trust fund need to be assured of good administration services followed issues that had arisen during the year, some areas governance and controls in the for improvement were identified and remediation was agreed. company. 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 STRATEGIC REPORT Stakeholders and how they are taken into account Activity in the year Potential new investors are an The marketing team also works on events and campaigns with other research and important stakeholder group and marketing companies, including Edison and Kepler. getting key information to the Additional resources were allocated by the board during the year for publishing investment market so that investors research and event participation. both current and prospective can make informed investment choices ‘Direct to consumer’, for self-directed investment, is primarily driven by platforms. is a significant activity. Platforms essentially give convenient access to the majority of the investment universe for investors. The board has encouraged activity to increase recognition Research platforms and distribution by those operating the platforms through influencers (including through PR, partnerships are employed to reach video recordings with Asset TV and the company’s digital marketing strategy). a wider audience of investors. ‘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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Key Performance Indicators ### The board uses the following Key Performance Indicators (KPIs) to monitor and evaluate ### the performance of the company in executing its strategy. ### Performance against the Benchmark Index Net Asset Value Total Return with Debt at Fair Value and Debt at Par Debt at Debt Benchmark Percentage point Percentage point fair value at par relative return 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 25.0 This is the most important KPI by which performance is judged. 20.0 The principal objective is to achieve a return higher than that of the | 15.0 | benchmark index over the long | | --- | --- | | % | term, after absorbing costs. For | | 10.0 | this indicator, we measure the | performance against the benchmark using NAV with debt at fair value, 5.0 in line with industry practice. We have also disclosed here the 0.0 performance against the benchmark 20222021 2023 using NAV with debt at par value for Source: AllianzGI/Thomson Reuters DataStream. Benchmark: 70% FTSE World information purposes. Capital returns Ex UK Index and 30% FTSE All-Share Index. Alternative Performance Measure are shown on page 8 and in the (APM). See Glossary on page 119. Chair’s Statement. ### Dividends Annual dividend The board aims to pay an increased 22.7p 21.5p 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 2023 Includes the proposed final dividend. 14 STRATEGIC REPORT ### Share Ownership Percentage of issued capital held by wealth managers and investment platforms 2022 2023 The marketing programme targets both professional and retail investors 36.4% and aims to create ongoing and 31.4% 29.1%29.4% sustained demand for Brunner shares. A successful marketing strategy 23.5% 22.8% stands to benefit all of the company’s shareholders by increasing liquidity. 12.6% 9.8% We look at the growth of share holdings of clients of wealth managers 3.1% 2.0% and of investment platforms to see the impact of retail demand for the 2 | Investment | Direct | | Wealth | Financial | Others | | | --- | --- | --- | --- | --- | --- | --- | | | | 1 | | | | company’s shares. | | platforms | holdings | | managers | institutions | | | 1 including Brunner family members 2 including beneficial owners not known ### Discount 5.0 The company’s shares currently trade at a discount to the net asset value 0.0 per share. The share price depends on a number of factors, including -5.0 sentiment towards the company and towards investments in equities % -10.0 in general. The board monitors the discount with the aim in normal -15.0 markets of being not out of step with comparable trusts in the sector. -20.0 The board gives the manager authority in certain circumstances to -25.0 buyback and either cancel the shares Nov 2020 Nov 2021 Nov 2022 Nov 2023 or hold them in treasury, which would be likely to result in a temporary narrowing of the discount. ### 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 0.63% 0.64% 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 2022 2023 charges are published by the AIC. 15 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Risk 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. The controls and mitigation of IMPACT portfolio and business risk will 1.1 continue to operate, however, there remains a risk that the Market volatility level of volatility and economic downturn may be such that the level of portfolio earnings and 4.0 3.3 dividends cannot be mitigated by 3.4 Accounting / factors within the board’s control. Emerging legal/regulatory Corporate governance 2.1 Investment strategy 3.1 Organisational set-up / process 2.2 3.2 1.3 Shareholder 2.6 relations Outsourcing / Counterparty third party Market Risk is acceptable, no demand | | 2.3 | | 3.6 | additional measures needed | | --- | --- | --- | --- | --- | | Investment | | Financial | | Risk is of concern but | | performance | | Crime/Fraud, | | | 3.5 | | | Cyber and AI | sufficient measures are | | --- | --- | --- | --- | | Key persons | | | defined and have been or are | | | 2.4 | | being implemented | 1.2 2.5 Financial Risk is of concern, sufficient Market liquidity and mitigation measures Liquidity and pricing gearing not possible 3.7 low moderate high very high 1.4 Reputational Currency rare unlikely moderate likely almost certain LIKELIHOOD 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. 16 STRATEGIC REPORT Investment and Portfolio Risks Principal Risks identified Controls and mitigation 1.1 Market volatility The board meets with the portfolio managers and considers asset Significant market movements may adversely allocation, stock selection and levels of gearing on a regular impact the investments held by the company basis and has set investment restrictions and guidelines that are increasing the risk of loss or challenges to the monitored and reported on by AllianzGI. The board monitors yields investment strategy, reduction of dividends and can modify investment parameters and consider a change to across the market affecting the portfolio dividend policy. yield and the ability to pay in line with Macroeconomic factors and their causes may mean mitigation may dividend policy. not be possible for significant market movements caused by factors Macroeconomic factors could also cause outside the board’s control. significant market falls, unexpected volatility, threat to income or increase in gearing. 1.2 Market liquidity and pricing The board receives reports from the manager on the stress testing of Failure of investments. the portfolio at least twice each year and contact is made with the Chair and board if necessary between board meetings. | 1.3 Counterparty risk | | The manager operates on a delivery versus payment system, | | --- | --- | --- | | | Non-delivery of stock by a counterparty. | reducing the risk of counterparty default. | | 1.4 Currency | | Currency movements are monitored closely and are reported to | | | Exposure to significant exchange rate | the board. | volatility could affect the performance of the investment portfolio. Business and Strategic Risks Principal Risks identified Controls and mitigation 2.1 Investment Strategy The board manages these risks by diversification of investments An inappropriate investment strategy e.g., asset through its investment restrictions and guidelines which are monitored allocation or the level of gearing may lead and on which the board receives reports at every meeting. The board to underperformance against the company’s monitors the implementation and results of the investment process benchmark index and peer group companies, with the investment managers, who attend all board meetings, resulting in the company’s shares trading on a and reviews data which shows risk factors and how they affect wider discount. the portfolio. The manager employs the company’s gearing tactically within a strategic range set by the board. The board also meets annually specifically to discuss strategy, including investment strategy. 2.2 Shareholder relations Reports on shareholder sentiment are received from the manager The investment objectives, or views on decisions and brokers and reviewed by the board. Shareholders are actively such as gearing, discount management, dividend encouraged to make their views known. policy, of existing shareholders may not coincide with those of the board leading investors to sell their shares. 17 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 2.3 Investment performance The investment manager attends all board meetings to discuss Persistent poor performance against benchmark performance with the directors. The board manages these risks by or peers leads to decline in attractiveness of the giving investment guidelines which are monitored at each meeting. company to investors. The board reviews the investment performance of the company against the benchmark and peer group. 2.4 Financial A rolling income forecast (including special dividends), balance sheet Range of risks including incorrect calculation of and expenses are reviewed at every board meeting. Reporting from NAV, inaccurate revenue forecasts, incorrectly the custodian covering internal controls in place over custody of calculated management fees, issues with title to investments and over appointment and monitoring of sub-custodians investment holdings. is produced and reviewed at least annually. The board’s investment restrictions are input in trading systems to impose a pre-trade check. 2.5 Liquidity and gearing The board meets with the portfolio managers and considers asset Insufficient income generated by the portfolio allocation, stock selection and levels of gearing on a regular basis. and due to stock market falls, gearing increases Investment restrictions and guidelines are monitored and reported to levels unacceptable to shareholders and the on by AllianzGI. Regular compliance information is prepared on market which in extreme circumstances results in covenant requirements. a breach of loan covenants. 2.6 Market demand The board regularly reviews the level of premium and discount and The level of discount of the share price to the existing shares can be bought back by the company when the board NAV moves to unacceptable levels, threatening considers this expedient. confidence in the company’s shares. Operational Risks Principal Risks identified Controls and mitigation 3.1 Organisation set up and process The manager and the other key service providers report on business Failure in the operational set up of the company, continuity plans and the resilience of their response to extreme through people, processes, systems or external situations. Third party internal controls reports are also received from events could result in financial loss to the these service providers. company or its inability to operate. 3.2 Outsourcing and third party AllianzGI carries out regular monitoring of outsourced administration Risk of inadequate procedures for the functions, which includes compliance visits and risk reviews where identification, evaluation and management of necessary. Results of these reviews are monitored by the board. risks at outsourced providers including AllianzGI And since the pandemic the board has been obtaining additional and its outsourced administration provider, assurances on business resilience and cyber security. Agreed Service State Street Bank & Trust Company, HSBC Level Agreements (SLAs) and Key Performance Indicators (KPIs) are in Bank plc (Depositary and Custodian) and Link place and the board receives reports against these. Group (Registrar). 3.3 Regulatory The board maintains close relations with its advisers and makes Failure to be aware of or comply with legal, preparations for mitigation of these risks as and when they are known accounting and regulatory requirements which or can be anticipated. could result in censure, financial penalty or loss of investment company status. 3.4 Corporate governance The board is highly experienced and knowledgeable about corporate Weak adherence to best practice in corporate governance best practice and includes directors who are board governance can result in shareholder discontent members of other UK plcs and other investment companies. The and potential reputational damage to board takes regular advice on best practice. the company. 18 STRATEGIC REPORT 3.5 Key person Manager and board succession plans are in place. Cover is available Departure of the portfolio manager, certain for core members of the relevant teams of the manager, and work professional individuals, and/or board members, can be carried out by other team members should the need arise. may impact the management of the portfolio, the achievement of the company’s investment objective and/or disruption to its operations. 3.6 Financial crime, fraud, cyber security and AI AllianzGI has anti-fraud, anti-bribery policies and robust procedures That the company and the manager’s firm, its in place. The board is alert to the risks of financial crime and threat of employees, or clients are subject to financial cyber attacks and reviews how third party service providers handle crime or breach elements of the Bribery Act. Risk these threats. These reports confirm that all systems are secure and of increased cyber attacks. Risk from traditional are updated in response to any new threats as they arise. and generative Artificial Intelligence (AI) in The board asks for and receives assurance from key suppliers on respect of malicious AI, its rapid growth and the information security and AI developments and threats. lack of regulation. 3.7 Reputational The portfolio management team is in constant interaction with Association with poor governance in portfolio AllianzGI’s Environmental, Social and Governance (ESG) and companies and operational issues in service Stewardship function and actively engages with investee companies providers which can affect the reputation of on ESG issues and makes investments incorporating ESG factors the company. in the decision process. Service providers are monitored and the manager provides oversight. Emerging Risks Principal Risks identified Controls and mitigation 4.0 Emerging The board carries out horizon scanning by keeping informed through Geopolitical uncertainties including the Israel its manager and advisers on the political, economic and legal - Gaza war, the supply chain issues in the Red landscape, and reviews updates received on regulatory changes that Sea, the ongoing invasion of Ukraine by Russian affect the company. armed forces and tension between the US and The board has asked the manager to report on its own careful China, any of which could cause significant consideration of AI developments and threats within its own market falls, threat to income or increase organisation and in its oversight of investments. in gearing. The board maintains close relations with its advisers (auditors, lawyers Impact of AI on the investment portfolio. and manager) and will make preparations for mitigation of emerging risks as and when they are known or can be anticipated. 19 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 Going Concern – In the current environment the board is reviewing earnings prospects, gearing and debt covenants on a continuous The directors have considered the company’s investment basis with the managers; and objective and capital structure both in general terms and in the – The liquidity of the portfolio, and the company’s ability context of the current macroeconomic background. Having to pay dividends and to meet the budgeted expenses, noted that the portfolio, which is constructed by the portfolio including interest payments, of running the company. manager on a bottom up basis, consists mainly of securities which are readily realisable, the directors have also continued Based on the results of this assessment, the directors have to consider the risks and consequences of such external a reasonable expectation that the company will be able to factors on the operational aspects of the company and have continue in operation and meet its liabilities as they fall due concluded that the company has the ability to continue in over the five year period of their review. operation and meet its objectives in the foreseeable future. For this reason the directors continue to adopt the going concern The future basis in preparing the financial statements. As we show in our page on the history of the trust on the The company held some short term debt as a current liability inside cover of this document, the longevity of the trust and as at 30 November 2023, in the form of a Revolving Credit its importance to our investors continues to be a focus. The Facility (RCF), which is renewable within one year. While future attractiveness of Brunner as an investment proposition the company is in a net current liability position as at 30 with relevance to a wide variety of investors is something we November 2023, if an obligation arose investments could be debate and evaluate continuously. We have to consider the sold to raise cash. investment environment and wider economic considerations, such as increasing inflationary pressures, and take soundings Viability Statement on the prospects for our markets, the returns on assets, economic growth and numerous other factors. Taking all Brunner is an investment company and has operated as an this into account the board continues to believe that there is investment vehicle since 1927 with the aim of offering a return a place for Brunner in the range of options available to the to investors over the long term. The directors have formally investor and that the company remains viable for the five year assessed the prospects of the company for a period of longer period here under review. 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 The Strategy for the future to achieve its aim to provide growth in capital value and The development of the company is dependent on the success dividends over the long term. This reflects the longevity of the of the company’s investment strategy against the economic company and the expectation that investors will want to hold environment and market developments. I give my view in the on to their shares for some time. The board also notes that as Chair’s Statement on page 5 and the portfolio managers a high conviction investor, the portfolio manager has a five discuss their view of the outlook for the company’s portfolio in year view on stocks in the portfolio. their review on page 33. The board has assessed the long-term viability of the company On behalf of the board 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 | Carolan Dobson | | --- | --- | | final assessment, to enable this statement to be made, has | Chair | | been formally reviewed by the board. | 13 February 2024 | 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; 20 STRATEGIC REPORT ## Environmental, Social and Governance Issues ### The board considers that it is in shareholders’ interests to be aware of and consider ### environmental, social and governance factors when selecting and retaining investments. ### Details of the company’s policy on ESG are set below. Environmental, Social and Governance Research How it works in practice and Stewardship The process of integrating ESG analysis involves AllianzGI’s Active stewardship is an integral component of our investment investment professionals reviewing both ESG scores and manager’s investment approach. This can help to unlock financially material qualitative information for each holding potential in companies, as well as protect companies from or company of interest. The investment team then makes an downside risks. assessment of the ESG risk or opportunity that supports the broader investment case. AllianzGI’s investment professionals AllianzGI’s approach to ESG analysis have access to both quantitative tools and qualitative ESG research. The investment manager has explained to us how Brunner’s portfolio managers follow AllianzGI’s proprietary AllianzGI uses the MSCI scoring system which expresses the ESG methodology which is designed to enhance risk level of ESG risk for a company through a numerical score management by adding another dimension to existing for each of the E, S and G pillars on a scale of 0–10, whereby investment processes across all asset classes. The main a score of 0–3 indicates potentially meaningful tail risk. If objective of integrating ESG analysis is to develop a company exhibits an elevated ESG risk profile or no ESG an assessment of the financially material ESG risks score, the portfolio management team needs to provide their and opportunities within a broader investment case. risk-reward justification as a written commentary to their AllianzGI’s approach also fosters active engagement with colleagues on the AllianzGI tool: the Global Collaboration company management. Platform. The commentary must be provided prior to the purchase of any new stock. ### Proxy voting 1 December 2022 to 30 November 2023 Active proxy voting engagement for clients is seen as a In the year there were 63 shareholder meetings for core element of fiduciary responsibilities and the manager companies in the portfolio and the manager voted on the provides total voting coverage. This active, global approach company’s behalf at 61 of these. This represents a total of to the exercise of voting rights is aimed at improving 1,125 resolutions and the company voted on 91% of these. governance standards. Source: AllianzGI. Company meeting voting record Vote distribution Number of meetings voted Number of votes for: 78% with management: 17 Number of votes against: 12% Number of meetings with Number of votes abstain: 1% at least one vote Against, Withhold or Abstain: 44 Number of votes withhold: <1% Not voted: 7% 21 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 AllianzGI’s investment professionals generate in-depth ESG Reporting research of companies they own or believe to be of interest The board receives information on ESG scores for the portfolio and often closely follow these issuers over long periods of and this is published in the company’s monthly factsheets. This time. Therefore, they can engage actively with the companies is also included on page 41. that need it most. AllianzGI’s Sustainability Research & A summary of the many engagements with portfolio Stewardship analysts further support the process by providing companies on E,S and G matters is set out on page 40. 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 Brunner’s ESG Policy and web links degree of transparency and provides portfolio managers with A summary of the board’s policy on ESG can be found with an easy way to monitor ESG risk in their portfolios. the company’s details on the Association of Investment Companies’ website, where there is also more information on Sustainability ESG for investors: The portfolio managers talk about the importance of https://www.theaic.co.uk/esg-and-investment-companies 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 ## 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 Greek retailer Jumbo SA, headquartered in Moschato, Athens, was one of the top four largest contributors to performance. 23 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Portfolio Managers’ Report Christian SchneiderJulian Bishop The Brunner Investment Trust PLC ‘Material World’ in which he expounds profitability and therefore stock market was formed when the Brunner family upon the role commodities like sand, value regularly accrues in relatively sold its interest in Brunner Mond & salt, iron ore, oil and lithium play in the obscure niches which make a relatively Co, the largest of the four companies modern economy. Similarly, academic immaterial direct contribution to GDP. which came together to form Imperial Vaclav Smil calls steel (modified iron), There are numerous examples that Chemical Industries (ICI) in 1927. ammonia (made from natural gas, can be used to demonstrate this. At the Brunner Mond & Co itself was founded used primarily as fertiliser), cement highest level, the US now accounts for in 1873 and was best known for the (the other feedstock of concrete) and 70% of the world stock market value efficient manufacture of soda ash, or plastic (largely derived from oil) the ‘four despite the US only accounting for sodium carbonate. This commodity, material pillars of modern civilisation’. 25% of world GDP. Simplistically this is which has been manufactured since Without these products society literally because, in aggregate, US firms have the time of the ancient Egyptians couldn’t function. Yet their direct grown faster and with higher returns over 5,000 years ago, is an important contribution to global GDP and stock on invested capital (returns above the industrial ingredient used in a wide market value is negligible. cost of capital are the definition of value range of applications, from the From the standpoint of the investor, creation) than those elsewhere in the production of glass to detergents and the interesting but counter intuitive world. In the US just two firms – Apple lithium-ion batteries. | | conclusion is that just because | and Microsoft – now account for 14% of | | --- | --- | --- | | Today, it is mostly produced using the | something is important doesn’t mean it | stock market value yet their collective | | Solvay process in which salt (sodium | is valuable. This statement also works in | revenues in the US account for just 1% | | chloride) is reacted with limestone | reverse. It is extraordinary, for example, | of GDP. Would Microsoft be worth less | | (calcium carbonate) and coking coal in | that the second most valuable company | if inflation was slightly higher or GDP | | the presence of ammonia. Indeed, the | in Europe, Louis Vuitton Moet Hennessey | slightly lower? At the margin, perhaps, | | reason Brunner Mond & Co was located | (LVMH), derives the majority of its profit | but Microsoft’s worth generally stems | | in Northwich, Cheshire was due to the | from the sale of something as frivolous | from attributes unrelated to general | | abundance of salt in the region. | as handbags. | economic activity. | | Salt is one of those virtually invisible | This paradox is manifest throughout | In a similar vein, it is instructive to note | | commodities that is rarely given a | the stock market. For example, many | that Volkswagen’s sales, and therefore | | second thought. Despite being a hugely | stock market commentators obsess | direct GDP contribution, are actually | | important chemical feedstock, its | over trends in GDP, inflation and other | higher than that of Microsoft, yet | | contribution to GDP and to stock market | macro-economic indicators. We find | Microsoft’s $2.8 trillion market value is | | value is negligible. Similarly, many other | these datapoints interesting, but we | more than forty times that of VW, which | | commodities such as sand (without | believe they are less crucial than many | has a market cap of just $65bn despite | | which there would be no concrete or | think. Many long-term studies show the | its enormous sales base. Microsoft is | | semiconductors) and iron ore (without | correlation between GDP performance | hugely profitable, growing and well | | which there would be no cars, no | and stock market performance is | governed. By contrast, Volkswagen | | machines, no large buildings) are hugely | non-existent, or even negative. Given | operates in perfectly competitive, | | important in the physical world but, due | that GDP represents the ultimate pool | mature market and its voting stock is | | to their relative abundance, are not in | from which firms can derive profits, | controlled by the Porsche-Piech family | | themselves particularly valuable. Ed | this is counter intuitive, but in our | and the Lower State of Saxony, for both | | Conway makes this point in his book | view it reflects the reality that strong | of whom considerations beyond profit | 24 INVESTMENT MANAGER’S REVIEW | may dominate. Despite its size and | ‘Over the long term, it’s hard for a stock | its power using two hypothetical | | --- | --- | --- | | importance, particularly to the GDP | to earn a much better return than the | businesses: Business A and Business B. | | of Germany, the company, much like | business which underlies it earns. If the | Business A earns just 6% on its invested | | salt, has rarely created value despite its | business earns 6% on capital over 40 | capital and reinvests all the cash it | | ability to create well engineered cars. | years and you hold it for that 40 years, | generates back into the business. After | | | you’re not going to make much different | 10 years profits will have grown from | Many of Brunner’s holdings, such as than a 6% return – even if you originally an assumed 100 at the start to 169 by Microsoft, operate in profitable niches. buy it at a huge discount. Conversely, if a the end. We pay particular attention to the business earns 18% on capital over 20 or Business B has a return on capital of competitive environment and market 30 years, even if you pay an expensive 25% and also reinvests all the cash it structure as these tend to be key looking price, you’ll end up with a generates back into the business. We determinants of a company’s ability fine result. So the trick is getting into assume that at the start of the period to generate high returns. Businesses better businesses’. they also generate profits of 100. By the with unique assets or abilities are of Return on capital is the key metric end of the same ten-year period profits particular interest. It is businesses such here, and one we use as a base will have grown to 745. After twenty as these that can reinvest their cashflows for determining the quality of a years Business B’s profits will have at attractive rates of return, creating business. Put simply, if a business can grown to over 6,900, while Business value for shareholders along the way. | | borrow money at 6% and invest it at | A’s profits will have just passed 300. | | --- | --- | --- | | During the year, we were saddened by | a sustainable 18% return, that is the | Truncating this growth by insisting on | | the death of Charlie Munger. Charlie | definition of value creation - imagine | premature dividends would be unwise. | | Munger was Warren Buffett’s business | borrowing money from the bank | One of the reasons we don’t exclusively | | | at 6% and being able to put it into | target high dividends is that our strong | partner at Berkshire Hathaway and his another account at 18%. If the business preference is for businesses that can investment philosophy has had a huge can then take the 18% it earns on its reinvest at high returns on capital for an influence on the Brunner investment investment and reinvest that at 18% extended period of time, creating value team. Many prognostications about again and so on, that is when the power as demonstrated. investment are a matter of opinion, of compounding really starts to work but some are underpinned by sound Virtually all of the world’s great its magic. mathematical logic. Here he expounds equities have been Business Bs. It is upon the importance of returns. It’s Albert Einstein reputedly called these businesses that generate most simple but key to understanding the compound interest the eighth wonder equity performance over time. A study importance of quality when investing: of the world. We can demonstrate by Hendrik Bessembinder, a finance Earnings comparison 800 700 600 500 400 300 200 100 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year7 Year 8 Year 9 Year 10 Business A (6% return on equity) Business B (25% return on equity) Source: AllianzGI. 25 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 | professor at Arizona State University, | a perfect inversion of what we saw in | This somewhat hyperbolic comment | | --- | --- | --- | | found that half of all wealth generation | 2022, which was itself a perfect inversion | is refreshingly honest. Every business | | by US stocks between 1926 and 2019 | of what was seen in 2021. This inversion | school, every financial analysis course, | | came from fewer than 100 stocks: a | was mirrored at the sector level. After | parrots as fact that a company or stock | | tiny fraction of the overall universe. It | a torrid 2022, technology stocks were | is worth the present value of its future | | is the combination of high returns and | very strong once more, whereas the | cash flow. Whilst the theory behind | | growth that helps explain why a small | lowly rated financials and energy names | the discounted cash flow model is | | subset of extraordinary businesses has | | hard to quibble with (why else would | that fared so well in 2022 resumed their been able to deliver incredible stock stock have value, aside from the cash longstanding underperformance. market performance and why that it can ultimately generate?) the way In the US, the narrowness of the market small subset of businesses has come it is taught neglects to mention the has been particularly notable. Famously, to dominate stock market value in a reality that no one knows, with any the performance of the ‘magnificent way that does not necessarily correlate precision, what those future cash flows 7’ (Amazon, Apple, Google parent will be. That is particularly true for the with their real-world importance. Value Alphabet, Facebook parent Meta, intellectual property rich, physical asset accrues in niches. Most businesses, like Microsoft, Nvidia and Tesla) accounted light businesses that dominate today’s salt and cars, are prone to competition | that keeps profitability in check. Brunner | for the majority of the S&P500’s | markets. All valuation work is a forward- | | --- | --- | --- | | is proud to have owned many of the | performance. It only takes one Microsoft | looking assessment of a company’s | | great businesses of our time, those that | to perform well, with its near $3 trillion | profitability and that is inherently | | have delivered exceptional results for | market cap, more than the entire FTSE | uncertain. As physicist Carlos Rovelli | | shareholders. Companies like Microsoft | 100, to mask mediocre performance | said: ‘we can’t be sure about anything’. | | and United Health in the US, LVMH, | amongst dozens of other smaller | This statement related to the spirit of | | Novo Nordisk and ASML in Europe and | companies. Probabilistically, this made | ongoing scientific enquiry and was | | TSMC in Asia have all married high | it a hard market to outperform. We are | intended to remind us that the concept | | returns with growth, to outstanding | pleased with our strong performance in | of a ‘scientific fact’ is an oxymoron. This | | effect. Our investment approach | this context. | is even more so in equity investment, | | continues to hunt for these rare entities, | | where uncertainty and educated | The resumption of tech outperformance whilst always remaining mindful of guesswork is implicit in every piece of is associated with three factors. Firstly, valuation and never veering into valuation work undertaken. the correction of 2022 bought valuations speculative territory. We believe this is a Hence a narrative, a story, can be a down from exuberant to palatable timeless way of running money and one powerful driver of short-term investment levels. Secondly, interest rates stabilised. that will continue to pay literal dividends performance. Indeed, most financial Higher interest rates lower the present over the long term. bubbles have been driven by an initially value of more distant predicted future plausible premise. In the longer run, of profits, on which growth stocks tend Market Review course, operational results need to justify to be disproportionately dependent. Measured in Sterling, global equity heightened expectations, but at present Thirdly, and perhaps most importantly, markets rose about 7% over the twelve the technology sector is basking in the was the emergence of a new growth months to Brunner’s year end at the end rays of possibility. narrative, centred on artificial of November 2023. In dollar terms, the intelligence (AI). Excitement relating to artificial return was almost twice that, with US, intelligence began in earnest in Japanese and European markets all Investor Jim Grant once said: ‘to suppose November 2022 when OpenAI launched delivering strong results in local currency that the value of a common stock is an early demo of ChatGPT, a natural that were partially lost once translated determined purely by a corporation’s language processing tool that provides back into pounds. Sterling has continued earnings discounted by the relevant linguistically fluent and logically to strengthen after the lows associated interest rates and adjusted for the sophisticated answers to prompts and with the Truss/Kwarteng ‘mini budget’ of marginal tax rate is to forget that questions. This was followed in May autumn 2022, creating a headwind for people have burned witches, gone to 2023 by an exceptional set of financial the value of overseas assets. Over the war on a whim, risen to the defence results from Nvidia, the semiconductor longer term, however, weaker Sterling of Joseph Stalin and believed Orson company which dominates the market has been clearly beneficial for the UK Welles when he told them over the radio for the graphic processing units investor with global exposure. | | that the Martians had landed. That’s | (GPUs) used in artificial intelligence | | --- | --- | --- | | Looking beneath the surface, there | always been the case. And it always | applications. Rarely have sales and | | was a huge divergence in performance | will be the case. Every investment | profit forecasts for a large company | | between differing types of equities. In | price, every market valuation, is just a | been so heavily underestimated. | | aggregate, growth stocks roared ahead | number from today multiplied by a story | Over the course of the financial year | | whilst value stocks retreated. This was | about tomorrow’. | shares in Nvidia rose 176% as earnings | 26 INVESTMENT MANAGER’S REVIEW | expectations for the company in 2024 | incremental fee charged for each | in March at Silicon Valley Bank (SVB), | | --- | --- | --- | | rose from $4.36 per share to over $12. | of their 300m+ subscribers could be | an American regional bank based in | | Categorically, Nvidia is in the realms of | incredibly lucrative. Adobe is using AI to | California serving corporate clients in | | the great, a Business B that combines | make its suite of software products used | the technology industry. During the | | high returns with growth. Only time will | by creative professionals more inventive | pandemic, these clients raised vast | | tell if the company’s barriers to entry are | and easier to use. Accenture will win | amounts of cash from venture capital | | sufficient to maintain their profitability. | business deploying AI applications on | firms keen to invest in the digital | | | behalf of its corporate clients. TSMC | economy, which they then deposited at | General interest in artificial intelligence are a semiconductor ‘foundry’ that has SVB for future use. When VC funding is very high indeed and we have no dried up in early 2022, many of these near 100% share manufacturing the doubt that its eventual impact will prove tech clients began burning through most sophisticated GPUs on behalf of enormous. Nevertheless, judging the their cash balances, as unprofitable Nvidia et al. In each instance we believe winners and losers at this early stage technology start-ups are wont to we are appropriately agnostic as to is difficult. If history is any guide, a few do. In an error of judgement, SVB the precise winners in the AI space and fortunes will be made but many will management had invested many of that they should flourish no matter how be lost. We remain happy with our these deposits in relatively long dated the technology evolves. All are also participation in this nascent theme bonds in order to boost income. These extraordinary quality businesses which via our holdings in Microsoft, Adobe, bonds fell in value due to rising interest are reasonably valued and generate Accenture and TSMC, amongst others. rates. Selling them to meet the deposit plentiful free cash flow; quintessential Microsoft partially owns OpenAI and outflows crystallised significant losses, Brunner holdings. hosts many processing intensive AI eating into the bank’s equity cushion. models in its Azure cloud computing Events in the financial sector were A poorly communicated effort to division. The company is developing dramatic as the industry adjusted to raise additional equity to cover these a useful ‘Copilot’ for users of its widely rapid increases in interest rates from losses caused a full blown, digitally used Office product suite. A small very low levels. Problems first emerged enabled bank run with devastating Contribution to Investment Performance Relative to the Benchmark | | Top ten positive | Performance | | Top ten negative | Performance | | | --- | --- | --- | --- | --- | --- | --- | | | contribution | | impact % | contribution | | impact % | | Overweight | Microsoft 1.0 Charles Schwab -0.7 | | | | | | | (holding larger than | Jumbo 0.9 St James's Place -0.6 | | | | | | benchmark weight) 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 Nvidia -0.9 (zero holding or weight lower Meta -0.6 than benchmark weight) Apple -0.5 Amazon -0.5 27 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 consequences. This crisis of confidence Our largest bank holding is DNB, shares in food companies like Mondelez then spread across the US regional the leading Norwegian bank, which (Oreos, Cadburys) and McDonalds. banking sector, with several other banks operates within one of the strictest Calorific intake in the US is way above failing before confidence was restored. regulatory frameworks in the world. global averages and we would not In Europe, Credit Suisse was rescued Capital levels (as measured by the be surprised to see food consumption by UBS in a deal brokered by the amount of equity set aside to deal with there gradually fall, with the feeling of Swiss government after another crisis losses) are higher than virtually any satiety induced by weight loss drugs of confidence. other major bank in existence. Another contributing to that decline. small holding, UK based Close Brothers, These events were a timely reminder of In the first half of the year, oil and gas intentionally has longer dated deposits the inherent fragility of the fractional prices fell from the peaks seen after than loans (for example, it may borrow banking system. Put simply, not all the invasion of Ukraine but stabilised money from depositors for two years depositors can have their deposits thereafter. Demand has rebounded and and lend it to borrowers for one year) back at once, as they have been lent supply remains in check from a sector essentially eliminating the possibility to others. Banks rely on trust and loss newly focused on capital discipline, of a run entirely. We are not naïve of trust can be fatal. In most markets, partially at the behest of investors tired about banks and feel that our cautious regulators reinforce trust by insuring of profligate expenditure with scant approach has been vindicated by recent deposits (up to £85,000 in the UK). In regard to returns and partially at the events in the US and elsewhere. the instance of SVB, most deposits behest of the ESG movement. Ironically, belonged to businesses not individuals After a couple of years dominated by the reverse was seen in the renewables and most balances were therefore the impact of the COVID pandemic, space, with returns for offshore wind way beyond the insured level. It was news flow in the healthcare sector projects, particularly, suffering from a perfectly rational, therefore, for venture focused on the success of a new toxic combination of cost overruns and capital firms to insist that their investee class of anti-obesity drugs. The most higher financing rates. companies withdrew their funds from prominent variant is called Wegovy As we noted earlier, just because SVB the moment rumours of their and is manufactured by Novo something is important or growing does problems began. In the old days, Nordisk, a Brunner holding. Wegovy not make it profitable. We are hopeful depositors had to queue outside the is administered via a weekly injection that the sector will be restructured in branch as they did in the movie ‘It’s a and clinical trials show that it leads to a way to ensure the economic returns Wonderful Life’. These days withdrawals a 15% reduction in body weight after are sufficient to attract the massive can take place at the click of a button, one year. This is a massive impact amounts of investment the sector lowering the associated friction to which has numerous health benefits. needs in order for society to meet its net negligible levels. A subsequent trial found that those zero aspirations. The ‘electrification of taking Wegovy had a 20% reduction At Brunner, we believe we are everything’ remains a capital-intensive in ‘material adverse cardiovascular appropriately cautious when it comes to must if the planet is to avoid the worst events’ (i.e., heart attacks and strokes). our small investments in banks. We are impacts of climate change. A further litany of benefits is suspected. mindful that banks’ balance sheets are For example, in addition to the feeling It will be intriguing to watch this energy generally in better shape than they have been for many decades, which should of fullness and the reduction in appetite transition take place. It remains our make them safer and allow for very Wegovy induces, reduced cravings for belief that this will be frustratingly generous levels of cash returns going alcohol have been reported, leading to slow, multi-decade process, necessarily forwards. However, they are rarely value a trial for alcohol use disorder. involving the mobilisation of trillions creative in the way we described earlier. of dollars and vast amounts of At present, demand for Wegovy far A bank loan is a bank loan is a bank physical, material assets. We suspect outstrips Novo Nordisk’s manufacturing loan. Borrowers do not pay a premium the industrial economy of the capacity. Consensus expectations for a mortgage from Lloyds over a developed world will benefit from this are for annual sales to peak later this mortgage from Nationwide for example. unprecedented investment, in stark decade close to $20bn, implying very Opportunities to eke out a competitive contrast to the deindustrialisation of the widespread usage and making it one advantage tend to be meagre and, as past fifty years as manufacturing etc has of the best-selling drugs of all time. the SVB case shows, the risks are higher been offshored to China and elsewhere. The anticipated success of the drug at than they are for most businesses. reducing health problems en masse led China finally reopened at the start of We have positions in banks where to a notable fall in the shares of many the year after lifting some of the most we believe we are adequately healthcare companies that treat the draconian COVID lockdowns imposed compensated for the corresponding problems Wegovy et al may prevent. anywhere. Compared to other countries, dangers and in all cases we look for Companies which make devices to treat the subsequent economic rebound has banks we believe operate at the very heart problems or sleep apnea (heavily been lacklustre. Indeed, China appears lower end of the relative risk spectrum. associated with obesity) sank, as did to be struggling with both deflation 28 INVESTMENT MANAGER’S REVIEW | and a moribund real estate sector. | central banks cutting rates and, they | the eponymous toothpaste, has paid | | --- | --- | --- | | Real estate construction accounts | hope, unleashing growth closer to | a dividend every year since Queen | | for a worryingly high percentage of | potential. On a cautionary note, we | Victoria was on the throne. In the great | | Chinese GDP, far higher than Ireland | highlight that equities can and have | scheme of things, what happens next | | at the height of the property bubble | benefitted from inflation in certain | quarter or next year rarely matters yet | | that preceded the financial crisis, for | instances, and that lower inflation isn’t | it is commentary on this that dominates | | example. Deflating a property bubble | all good news. Looking into 2024, it is | the newswires of the City and Wall | | | highly unlikely Nestle and many other | Street. We try our hardest to shut out this | and weaning the economy off an businesses will be able to raise prices as irrelevant cacophony and focus on what unhealthy reliance on construction is much as they did in 2023, for example. really matters for long term investment not something many other economies outcomes: company specific returns on have been able to achieve without Markets are dynamic, constantly invested capital, competition, barriers to serious pain. Time will tell if the Chinese responding to visions of the future. entry, free cash flow, structural growth, authorities, with the tools available to The prices of securities are essentially the abilities of management, long a centrally planned economy, will fare the collision of two views. Every time term relevance, all considered within a any better. someone buys a share, someone sells. prudent valuation framework. The equilibrium price is a compromise In the West money supply is now falling between two contradicting opinions. year over year and the full impact of Portfolio Review We deeply believe that an approach interest rate increases are starting to be In the financial year to the end of that prioritises a consideration of how felt. These contractionary policies are November 2023, Brunner provided a cash flows will develop over the long necessary to reduce inflation back to NAV total return of 8.7%, comfortably term is markedly superior to the broader acceptable levels. Until that is achieved, ahead of the benchmark (30% FTSE market’s obsession with the short term. | central bank policy is likely to remain | | All Share/70% FTSE World ex UK). | | --- | --- | --- | | hawkish and real economic growth is | We often boast that Brunner has raised | This marks our fifth consecutive year | | likely to be poor. Towards the end of the | its dividend every year for over 50 years. | of outperformance. We are delighted | | year, concrete evidence of moderating | However, this pales in comparison with | with this outcome given the dramatic | | inflation started to emerge. Markets | some of the most storied equities. For | changes in market leadership over | | reacted positively in anticipation of | example, Colgate Palmolive, maker of | this period. | Netherlands-based semiconductor specialist ASML was a new addition to the portfolio. PHOTO © ASML 29 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 INVESTMENT MANAGER’S REVIEW Attribution analysis shows that In short, we aim to outperform by comparison to other tech companies, our underweight positions in Basic carefully selecting the most promising with relatively little dilution from stock- Materials, Consumer Staples and Real individual stocks, rather than by based compensation – a common and Estate contributed positively to relative making bets (the choice of word here under-analysed accounting abuse performance. This was partially offset is deliberate) on a smaller number of amongst many of their software peers. by our overweight in Health Care and macro-driven outcomes. The second largest contributor to Financials. Our modest underweight Looking at individual stocks, the largest performance was from an altogether in technology also detracted from contributor to performance came from smaller, more obscure stock. Jumbo performance. At a geographical level Microsoft, the trust’s largest holding SA is a Greek listed retailer which our underweights in Japan and US were and one we added to early in the year. operates across Greece, Cyprus and unhelpful, partially compensated for Results here continue to impress, with Eastern Europe. Their stores are similar by our underweight in the UK which the company most recently reporting to a small IKEA in layout but focus on underperformed after a strong 2022. | | growth in earnings per share of 27% | family-orientated categories such as | | --- | --- | --- | | As a reminder, we are stock pickers | on revenue growth of 13%. Excitement | toys, stationery and seasonal items, all | | who do not allocate by region or | around AI also led to a sharp re-rating in | sold at very keen prices. Recent sales | | sector. However, it can be illuminating | the shares. Whilst we are always vigilant | growth and margins have been very | | to evaluate the composition of | about valuation, we are reluctant to | strong leading to upward earnings | | performance in this way. In aggregate, | sell what we consider a core holding, | revisions. The company has a large cash | | we note that whilst our sector and | although we did reduce our position | pile on its balance sheet, is enormously | | regional weightings were of positive | size towards the end of the year. We | cash generative and traded at an | | consequence this year, they only | note that the company has a net cash | exceptionally low starting multiple. | | account for a small portion of our | balance sheet and good free cash flow, | During our financial year, it has paid | | outperformance. The vast majority of | allowing the company to pay one of | €3.3 in dividends on a starting €13 share | | outperformance was attributable to | the only decent dividends amongst | price – a 24% cash return in just twelve | | individual stock selection; a pleasing | mega cap tech companies, in addition | months, in addition to a 90% increase in | | outcome which is consistent with our | to buybacks. We also note that the | the share price. | | ‘all weather’ investment objectives. | accounts are very clean, particularly in | | Intercontinental Hotels Group was another new addition to the portfolio. PHOTO © IHG HOTELS & RESORTS 31 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 Other positive contributors include Novo Charles Schwab is the largest US that provides a better balance of Nordisk, the Danish pharmaceutical investment and savings platform, quality, value and growth than an company with mastery of two important roughly analogous to Hargreaves existing position. In other instances, therapeutic areas: diabetes and obesity. Lansdown or AJ Bell in the UK. Unlike the original investment case doesn’t As mentioned above, the success of those UK proxies, however, Schwab evolve as anticipated. Whilst we always Wegovy made headlines this year. makes most of its money from interest buy with the intention of holding Although the company is currently income rather than fees charged for for a lengthy period, changes are struggling to manufacture enough of trading etc. Much higher short term sometimes necessary. this complex biological molecule to interest rates have caused clients to During the period, volatility in equity keep pace with demand, their sales still reallocate the cash balances in their markets provided us with valuable grew 39% in dollars in the most recently savings accounts to higher yielding opportunities to acquire some reported period. money market funds. Under normal outstanding new businesses at what we conditions, the interest Schwab makes Other names worth noting include believe are attractive prices. All of these on those residual cash balances is a Munich Re, the German reinsurer, which new stocks reflect Brunner’s balanced major contributor to profit so near- is enjoying a period of unusually strong approach to quality, growth and value. term estimates have fallen. We have pricing power. This pattern of improved added to the stock on weakness; in the In our Half-Yearly report we provided pricing also helped AJ Gallagher, an long term we believe the company’s details of the new stocks we added to insurance broker, into the trust’s top competitive position to be outstanding. the portfolio at the six month stage. All ten. Elsewhere in the financial sector, of them reflected Brunner’s balanced Partners Group, a Swiss private markets St James‘s Place also performed approach to quality, growth and value. investment manager, demonstrated poorly. The company found itself in the They were: that it can continue to see healthy crosshairs of a sector-wide regulatory inflows despite higher interest rates. review of the wealth management – AJ Gallagher, a US listed Schneider Electric is seeing strong industry which necessitated an overhaul insurance broker demand for electrical components and of their charging structure. We sold – Diageo, the world’s leading premium systems as the world embarks upon the the position shortly after year end. spirits company with brands like journey to net zero. Baltic Classifieds We generally avoid companies prone Johnnie Walker and Tanqueray Group cemented its status as the to regulatory interference and are – Admiral, the UK’s leading UK leading web portal for property and not convinced that the company’s motor insurer autos in Lithuania, Latvia and Estonia, competitive advantages are as robust as – DNB, the largest bank in Norway with similar dominance to firms like originally believed. – Rentokil, the residential and Rightmove and Autotrader in the UK. commercial pest control business US beauty company Estee Lauder – Intercontinental Hotels Group, one On the other side of the ledger, not also had a tough year. The company of the world’s largest hotel franchise holding Nvidia was the largest single had become reliant on the skincare and management companies, whose negative detractor from relative category in Greater China, particularly stable of brands include Holiday performance. Not holding other large super-premium brands such as La Mer, Inn Express, Intercontinental and tech index stalwarts such as Meta, where a simple 100ml pot of moisturiser Six Senses. Apple and Amazon also hurt. This retails for over £400 in the UK. The was in stark contrast to 2022, when These purchases meant we said company has run into problems with our decision to avoid these names goodbye to several familiar holdings. excess inventory in the country where, based on valuation and deteriorating Sales included: as noted, the economic rebound has fundamentals positively contributed to been muted. It is difficult to get a good – Adidas, with whom readers will our relative performance. As noted in grasp of how long this situation will be familiar the review, these stocks drove much of last and what the eventual growth rate – Ecolab, which makes cleaning the year’s gain in US markets. They are will look like, but we find the ongoing products for commercial usage all outstanding companies with bright strength of their brands reassuring. We – International Flavours and futures, even though future growth are careful to reconsider our investment Fragrances, a US listed specialist is likely to slow. We regularly debate cases where the thesis has not evolved ingredients company their suitability for Brunner. For the time as anticipated, but thus far we are in the – Astellas, a Japanese being we are content with our existing camp that this is a temporary problem pharma company technology holdings which tend to be, that should be resolved in due course. – Ashmore, a UK specialist with the obvious exception of Microsoft, asset manager further down the size spectrum and, we Significant Transactions – SSP, who operate restaurants in believe, offer better value. We are constantly reappraising the stations and airports Of the names we actively hold, Charles businesses we invest in. On occasion, – Intuitive Surgical, a maker of robotic Schwab was the most damaging. we conclude there is an alternative surgical equipment 32 INVESTMENT MANAGER’S REVIEW Please see the Half-Yearly report for Yum China operates fast food Market Outlook further details of these transactions. restaurants such as KFC and Pizza Hut. Commentary on financial markets Audit, accounting and legal standards inevitably turns to the dramatic, the Since the halfway point we have added in China can be less transparent than extreme and the novel. We are as guilty three more holdings. They are: in the developed world, which means of this as anyone. In the market review we require a higher risk premium/lower – ASML, the Netherlands based maker we discussed banking crises and the AI valuation before committing capital of semiconductor capital equipment frenzy. As newspaper editors know, there to the direct market. Combined with is no interest in the mundane. – Thermo Fisher Scientific, which a deteriorating economic outlook, makes a wide range of equipment for In reality, most of the businesses held we believed the valuation of Yum! laboratories around the world in the Brunner portfolio go about their China no longer provided sufficient – AENA, an infrastructure company work and evolve gradually. Recessions margin for error. We also believe that which owns Spanish airports. inevitably come and go. Interest rates Intercontinental Hotels Group, which the change. In the vast majority of instances, trust purchased in the first half of the Please see the ‘Case Studies’ section for however, our investments continue year, is a comparable but higher quality further details of each. to generate cash which is sensibly business model. reinvested in value creative activities During the second half of the year, Suffice to say we believe the collective or returned to us as dividends and we sold three holdings to fund these impact of all these trades has been a buybacks. We expect profits to grow at purchases. They were: net improvement in the overall profile most of our holdings in most years. Over of the portfolio. Whilst Brunner has – Paragon Banking Group PLC the long term, it is the combination of a long-term approach and relatively – Agilent Technologies growth and cash remittances that drives low turnover, there is still competition – Yum China equity returns. for capital. We see little merit in Those returns take time to achieve. As The sale of Paragon, a UK buy to stubbornly clinging on to investments the adage goes, it’s time in the market, let lender, reflected our collective where the thesis has not developed as not timing the market, that allows one to preference for Close Brothers and DNB hoped, where valuations have reached grow wealth. As the wise know, get rich unjustifiable levels, or where we see a within the traditional banking space. The quick schemes are invariably flawed or better alternative. sale of Agilent reflected our preference fraudulent. Patience is key yet is at odds for Thermo Fisher. The full list of purchases and sales made with the frenetic pace that dominates during the financial year is shown below. 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 We are therefore strong advocates of he lost them in the park, but this is where rates or our political leaders are unlikely slowing down, reading, considering, the light is. to determine whether companies thinking. As AA Milne said: ‘Rivers know such as Microsoft or Diageo prosper Towards the end of the financial year, this: there is no hurry. We shall get there or flounder. We are more focused on evidence of moderating inflation on some day’. long-term trends which we believe come both sides of the Atlantic started to with more visibility. We know that society If you are truly trying to ascertain mount, catalysing a dramatic and broad will inevitably age, that the population or approximate the intrinsic value stock market rally. We suspect, as do of India and Africa will continue to of a company, the short term is of large swathes of the market, that this grow, that Japan’s will shrink. It seems mathematically little relevance. A good should mean interest rates have peaked probable the world will need more equity should provide cash flows for and that central banks would soon be semiconductors, that people will travel generations to come. Occurrences today able to adopt a more accommodative more, that we will electrify our energy can and do give important clues to the policy. Both the UK and US are likely system to reduce carbon emissions. As future, but a lot of news is simply noise to have elections in 2024. Many polls we consistently aim to highlight, we and should be disregarded. suggest that Sir Keir Starmer and prioritise thinking about the long term Donald Trump are most likely to be our Good equity analysis focuses on the and we encourage our shareholders new leaders. Markets have concluded probable outlook for profits far into to share that vision. If you’re in the for Starmer is sufficiently centrist not to be the future whilst acknowledging that the long haul, economic cycles are an of concern to asset values, whilst Trump is a fundamentally imprecise exercise. inevitable part of life, not a reason to will presumably be as stimulative as he We know we can’t be sure of anything. panic. We deliberately select businesses was when last in office. Both will have Nevertheless, over-analysing the short that we expect to continue to flourish, their power checked by other branches term, making incredibly precise forecasts whatever the weather. of the executive function. Modern liberal about this quarter’s or next year’s democracies are designed to prevent profitability, loses sight of what actually any one individual from wielding too matters. This brings to mind the tale of much influence. the man who’s found searching for his keys under the streetlight. When asked Frankly, we are not sure what any of this if that’s where he lost them he replies no, means for markets. Changes to interest We added laboratory equipment manufacturer Thermo Fisher Scientific to the portfolio in the second half of the year. 34 PHOTO © THERMO FISHER SCIENTIFIC AENA, the Spanish airports-owning infrastructure specialist, was another new purchase. PHOTO © AENA 35 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Five years of benchmark outperformance Analysing performance over a longer Being underweight these sectors include Senior (engineering), Fresenius time period allows us to understand the has contributed meaningfully to (diabetes management), St James’s investment decisions that have ultimately relative performance. Place (UK wealth management, had the most impact. Given our long ironically), Bright Horizons (US pre school Conversely, our modest underweight term investment horizon, this is more learning), Informa (UK publishing) to technology stocks over the period illuminating and relevant than looking at and Marketaxess (bond trading detracted slightly from performance. attribution over shorter timeframes. platform). Whilst there is no apparent Technology stocks have performed pattern to these we hope to learn from Over the five years to the end of exceptionally over the past five years. each mistake. | November 2023, the equity held | Many of the best performing tech | | | --- | --- | --- | | within the Brunner Investment Trust | companies pay no dividend, which | Understanding performance over a | | returned 67% vs 54% for the benchmark; | means that funds with an income | longer time period shows that just a few | | 13% outperformance. | mandate have struggled to keep up. | investment decisions drive most of the | | | We have been slightly hampered in | outcome. This is not unique to Brunner. In | We regularly remind shareholders that this regard. the managers’ report we cite the work of Brunner is run on a bottom up basis. economic analyst Henrik Bessembinder, We select investments in individual Microsoft has been the single most which highlights how a relatively small companies and do not allocate by important contributor to performance number of companies drive the majority region or sector. Nevertheless, as a over the period, contributing over of stock market performance over time. result of our stock specific work, certain 4% of the total. This is now the trust’s Warren Buffett readily concedes that just regional and sector biases can emerge. largest holding and has performed a handful of investments have driven exceptionally well under CEO Satya Over the past five years, we have been the bulk of outperformance at Berkshire Nadella. Taiwan Semiconductor, which Hathaway. ‘Our satisfactory results have underweight the UK market. Given the manufactures the world’s most complex been the product of about a dozen poor performance of the UK this has chips for Apple, Nvidia, etc, has also truly good decisions – that would be been the correct aggregate decision. been a great success for us. Accenture, about one every five years’, he said in his We note that the performance of the UK the leading technology implementation 2022 letter. market has been better over the past firm, too. Within the tech sector these three years thanks particularly to strong The most important thing is to have a successes have been offset by our relative performance in 2022. The board philosophy and process that maximises premature decision to sell Apple in regularly considers whether the ongoing the chances of finding the long term 2019 and the absence of Nvidia (which inclusion of the UK in our benchmark is winners. Some of our best decisions makes graphics processing units used in appropriate and they have concluded were allowing our holdings in Microsoft, computing applications) and Alphabet that the UK market, with its low multiples, Novo Nordisk etc to grow. One of (parent of Google) from the portfolio. | strong corporate governance and high | | our worst decisions was to sell Apple | | --- | --- | --- | | dividend yields, acts a useful diversifier. | Novo Nordisk, the Danish | too soon. As disclaimers often state, | | Asides from the UK underweight, our | pharmaceutical maker of weight | past performance isn’t a guide to the | | country weights made no meaningful | loss drug Wegovy, contributed 3% | future, but there are persistent patterns | | impact on performance over the past | to performance. UnitedHealth also | in stock market history that show | | five years. | performed well. Other strong performers | that momentum matters. In physics, | | | are varied. They include Munich Re | momentum is a product of velocity and | At the sector level, we have generally (reinsurance), Schneider Electric mass. In stock markets, long term returns struggled to find ideas of interest in the (industrial components), Jumbo (a Greek have been dominated by a small cohort telecoms and energy sectors. These retailer), Itochu (a Japanese trading of large, exceptional companies that are two notoriously low quality sectors company) and Totalenergies (which we have continuously defied expectations. which are typically capital intensive, bought at very depressed levels). The investor who has studied the levered and produce undifferentiated composition of returns understands this, products subject to intense competition. Beyond the tech names we don’t own, and its implications, one of which is to We have also been underweight the a few companies stand out as being temper the urge to sell something simply consumer staples sector. Here there harmful to relative performance. Adidas because it has gone up and vice versa. are some good companies with strong was a particularly poor investment, Often it is best to let the weeds wither brands but growth has proven to be plagued with problems beyond their and let the flowers bloom. elusive. Given the valuations, this has control and of their own making led to poor investment outcomes. during our ownership. Other detractors 36 INVESTMENT MANAGER'S REVIEW ## Five year portfolio performance attribution 1 December 2018 to 30 November 2023 Brunner portfolio +66.6% Benchmark (70% FTSE World Ex UK / 30% FTSE All-Share) +54.0% Percentage point performance against the benchmark +12.6 ### 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Investment Philosophy and ## Stock Selection Process Long-term focus A balanced, diversified portfolio Our focus is on understanding how a business evolves and Drawing on the full resource of AllianzGI’s global platform, we creates value over the long term. It is only over longer periods look across all industries and geographies to select the most that the fundamental attributes of a businesses or industry attractive investment ideas for the trust’s portfolio. We believe reveal themselves. It is also over longer periods that the in building a balanced portfolio that is diversified across a power of compounding takes place. A small cohort of high wide range of idiosyncratic opportunities and risks. In this return, growth businesses are able to deliver exceptional way the portfolio can be relied upon to deliver a steady and outcomes for shareholders over time. Patience is a prerequisite consistent capital and income return. for participation. Research intensive, focus on cash flow Factually, most equities are long duration assets, whose AllianzGI’s research platform combines a large global present value is derived from cash flows expected well into the team of equity and credit portfolio managers and analysts, future. We therefore believe it is sensible to align our analytical environmental, social and governance specialists and our timeframe with that reality. Our attention is skewed to factors own Grassroots* market research organisation. Collectively, such as returns on invested capital, sustainable competitive these provide Brunner’s fund managers with thoughtful, high advantages, barriers to entry, long term growth rates, capital quality analysis of a wide range of businesses and industries, allocation policies and leverage. Ultimately, considerations augmented by insights into structural and cyclical trends. Our such as these will determine the quantity, trajectory and research emphasises the analysis of sustainable company riskiness of the cash flows that the trust will receive from its cash flows, which we believe provides the truest measure holdings. We believe the stock market remains excessively of corporate performance. (*GrassrootsSM is a division focused on the short term. Through detailed research and of AllianzGI) analysis focused on what truly matters, we seek to deliver superior investment returns. Quality: Stable above average returns We seek to identify – Long term competitive advantage this universe through – Strong balance sheets fundamental Quality – High barriers to entry research – Management quality – Stable/improving ROCE/RoE – Sound on ESG issues Growth Valuation Value, not just “cheap” Secular growth – Reverse Discounted Cash Flow – Addressable market growth – Enterprise Value vs. Cash returns – Sustainable growth – technology, brand – Price/Book vs. Return on Equity – Long term, through-cycle approach – Dividends – an output not input – Avoid structural decline 38 INVESTMENT MANAGER’S REVIEW Stock selection – focus on Quality, Growth and Selling stocks Valuation Despite taking a long-term approach, we are still active Our stock selection process blends assessments of business managers. In general, there are three situations where stocks quality, long-term growth potential and valuation, resulting in will be sold from the portfolio: a holistic view of a company, the risk factors and, ultimately, – Where there has been a material change to the investment the drivers of shareholder value. case. Whilst we work hard to minimise mistakes, we Quality is about understanding the intrinsic attributes of recognise that we can make errors of judgement. Businesses a business model. High quality companies are those with can evolve in an adverse direction, despite our best efforts high returns on invested capital supported by long-term to avoid investments in those that do. competitive advantages, shareholder friendly management – Where the valuation has reached uncomfortably high levels teams, sound ESG and strong balance sheets. and imply expectations that clearly exceed what we believe to be reasonable. Such companies tend to be highly profitable, generating – Where a sale is required to raise cash for a superior substantial cash flow that can be used to fund further, value- investment opportunity elsewhere. creative growth or returned to shareholders as dividends or buybacks. Business quality can vary enormously across and Portfolio construction within industries. Fortunately, as global investors with a large The portfolio consists of a minimum of 50 holdings that investible universe, we can afford to be highly selective. are selected on their individual merits whilst taking To assess long-term growth potential, it is important to into consideration the exposure to individual industries, understand the secular forces that are shaping the economy geographies, themes, factors and other idiosyncratic risk and society, such as demographics, electrification and factors, ensuring that the overall portfolio remains well digitalisation. This provides the context in which to assess balanced and diversified. broader industry drivers as well as a company’s position within The size of each individual holding reflects the level of the industry. Particular emphasis is placed on differentiating conviction. Typically, this reflects our balanced judgement between structural and cyclical growth. Whilst we will invest regarding the quality, growth and value of each investment, in cyclical companies, a much greater value is placed on the with additional considerations related to the likely range of structural element. The combination of a high-quality business outcomes (a proxy for risk) and liquidity. model and long-term growth is a particularly powerful driver of shareholder value. Most of the world’s truly great equities At the portfolio level, the objective is to ensure that stock have enjoyed these twin attributes. specific risk – the risk which results from our stock selection decisions – is the primary driver of the portfolio’s returns. Company valuation seeks to determine whether there is Residual risks such as currency, style, geography or sufficient upside to warrant investing. We look for companies macroeconomic are monitored and managed to ensure that where the quality and/or long-term growth potential is not they are not driving the overall portfolio’s returns. Ultimately, fully appreciated. We want to anticipate rather than react the aim is to optimise the portfolio to achieve the dual and are careful not to overpay, for example by identifying objective of consistent benchmark outperformance combined companies with structural growth masked by a cyclical with an attractive and growing income. 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. 39 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 8 Business Model Audit & Accounting 2 Corporate 19 Governance Environmental 18 Risks or Impacts Financial 1 Performance Operational 1 Performance Risk Management 3 Social Risks 13 or Impacts Transparency 6 and Disclosure Several issues may be covered in each meeting. 40 INVESTMENT MANAGER’S REVIEW ## Environmental, Social and Governance ## performance AllianzGI does considerable proprietary work in ESG analysis and at the moment also uses research provided by MSCI to help identify Environmental, Social and Governance factors that can impact the businesses of the companies in the portfolio. The charts below show that the Brunner portfolio’s ESG ratings compare well against the benchmark’s ESG ratings over the three year period under review. They show the rating of the Brunner portfolio on Environment, Social and Governance risks and combined ESG risk measurements compared to the rating of the Benchmark (70% FTSE World Ex UK Index and 30% FTSE All-Share Index) scored on a scale of 1-10 (where 10 is high) on a quarterly basis over the three years from 1 July 2019 to 31 December 2023. Environmental performance v benchmark Governance performance v benchmark 8.0 8.0 4.0 4.0 Q1 17 Q4 23 Q1 17 Q4 23 Brunner ESG MSCI Environment BM ESG MSCI Environment Brunner ESG MSCI Governance BM ESG MSCI Governance Social performance v benchmark ESG performance v benchmark 8.0 8.0 4.0 4.0 Q1 17 Q4 23 Q1 17 Q4 23 Brunner ESG MSCI Social BM ESG MSCI Social Brunner ESG MSCI Aggregate BM ESG MSCI Aggregate Source: MSCI/AllianzGI. 41 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Top 20 Holdings ## 1 2 ## Microsoft UnitedHealth Sector: Software & Computer Services Sector: Health Care Providers Headquarters: North America Headquarters: North America Value of holding: £37,146,255 Value of holding: £24,464,485 Percentage of portfolio: 6.7% Percentage of portfolio: 4.4% Microsoft is one of the world’s largest technology companies UnitedHealth Group is a leading health insurer, offering with a unique position in enterprise software. Since Satya a variety of plans and services to employers, government Nadella took over as CEO in 2014, the company has moved programmes such as Medicare (US), and individuals in the US away from its traditional ‘on-premise’ business to focus on its and internationally. The business operates two complementary Azure cloud computing platform. Its Office software has over businesses - UnitedHealthcare, which manages health 400 million users and its Windows desktop operating system benefits, and Optum which delivers cost-efficient care aided by continues to dominate. The company is an early leader in technology and data. Together, the company plays a key role artificial intelligence applications. managing costs throughout the health care system. ## 3 4 ## Visa Microchip Technology | | Sector: Industrial Support Services | | Sector: Technology Hardware & Equipment | | --- | --- | --- | --- | | | Headquarters: North America | | Headquarters: North America | | | Value of holding: £21,878,979 | | Value of holding: £15,995,821 | | | Percentage of portfolio: 4.0% | | Percentage of portfolio: 2.9% | | Visa operates the world’s largest consumer payment system. | | Microchip Technology designs, manufactures and markets | | | The company’s extraordinary network consists of 4.3 billion | | analog semiconductors, microcontrollers and other relatively | | | cards in circulation, issued by 14,500 banks and other financial | | basic, low cost chips used across a wide variety of industrial, | | consumer and computing end markets. The company’s institutions which can be used at over 130 million merchant products play a key role in a variety of megatrends including locations across 200 countries. In the twelve months to the end the ‘internet of things’, the electrification of transportation, of September 2023 Visa processed 276 billion transactions data centres, renewable energy and autonomous driving. worth over $15 trillion dollars. 42 INVESTMENT MANAGER’S REVIEW ## 5 6 ## Shell Schneider Electric Sector: Oil, Gas & Coal Sector: Electronic & Electrical Equipment Headquarters: United Kingdom Headquarters: France Value of holding: £15,130,484 Value of holding: £14,306,587 Percentage of portfolio: 2.7% Percentage of portfolio: 2.6% Shell is a leading global, integrated energy company. Its Schneider Electric offers electrical distribution, industrial operations span the production and marketing of oil and gas, automation and energy management products and services liquefied natural gas (LNG), chemical products and renewable which are used in homes, offices, industrial buildings and energy production. By reallocating the proceeds of its legacy infrastructure worldwide. The electrification of the global activities towards lower carbon solutions, Shell plays a key economy is a necessity if we are to replace fossil fuels with role in the energy transition. Its LNG plays an important role in renewables and we therefore expect electricity usage to grow reducing reliance on Russian gas and replacing the polluting dramatically over the coming decades. coal still used to generate electricity in some countries. ## 7 8 ## Partners Group Thermo Fisher Scientific Sector: Investment Banking & Brokerage Sector: Medical Equipment & Services Headquarters: Switzerland Headquarters: North America Value of holding: £14,200,035 Value of holding: £14,166,513 Percentage of portfolio: 2.6% Percentage of portfolio: 2.6% Partners Group is a leading private markets firm based in Thermo Fisher Scientific is the world leader in serving the Switzerland, and one of the most valuable publicly listed science industry, with annual revenue over $40 billion. With alternative asset managers in the world. The company a mission to enable customers ‘to make the world healthier, provides tailored solutions to around 800 institutional clients cleaner and safer’, they provide a wide range of products and seeking investment expertise in private equity, infrastructure, services that enable life sciences research. These range from real estate and credit. Partners Group has grown assets under relatively basic laboratory supplies to electron microscopes, management at more than 16% a year since 2006, and today CRISPR gene editing machines, clinical research services and manages over $142 billion. the production of complex pharmaceutical ingredients. 43 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ![img-0.jpeg](img-0.jpeg) ## Charles Schwab **Sector:** Investment Banking & Brokerage **Headquarters:** North America **Value of holding:** £ 13,891,300 **Percentage of portfolio:** 2.5% 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. ![img-1.jpeg](img-1.jpeg) ## Arthur J. Gallagher & Co. **Sector:** Non-Life Insurance **Headquarters:** North America **Value of holding:** £13,204,751 **Percentage of portfolio:** 2.4% 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. ![img-2.jpeg](img-2.jpeg) ## Taiwan Semiconductor **Sector:** Technology Hardware & Equipment **Headquarters:** Taiwan **Value of holding:** £13,059,369 **Percentage of portfolio:** 2.4% 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. ![img-3.jpeg](img-3.jpeg) ## TotalEnergies **Sector:** Oil, Gas & Coal **Headquarters:** France **Value of holding:** £12,876,533 **Percentage of portfolio:** 2.3% 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. 44 INVESTMENT MANAGER'S REVIEW ![img-4.jpeg](img-4.jpeg) # Munich Re Sector: Non-Life Insurance Headquarters: Germany Value of holding: £12,500,544 Percentage of portfolio: 2.3% 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. ![img-5.jpeg](img-5.jpeg) # AMETEK Sector: Electronic & Electrical Equipment Headquarters: North America Value of holding: £12,138,291 Percentage of portfolio: 2.2% 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. ![img-6.jpeg](img-6.jpeg) # Intercontinental Hotels Sector: Travel & Leisure Headquarters: United Kingdom Value of holding: £12,026,666 Percentage of portfolio: 2.2% 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. ![img-7.jpeg](img-7.jpeg) # Itochu Sector: General Industrials Headquarters: Japan Value of holding: £11,411,833 Percentage of portfolio: 2.1% Itochu is a Japanese trading company which owns a diverse range of businesses around the world. A large contributor to profit has been its iron ore joint venture with BHP Billiton in the Pilbara, Australia. The next largest business is the Japanese convenience store chain Familymart. The company also owns Kwik Fit, a UK-based chain of tyre retailers and mechanics. Itochu has a strong record of value creative growth and management is laser-focused on generating returns over the cost of capital. 45 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ![img-8.jpeg](img-8.jpeg) ## ASML **Sector:** Technology Hardware & Equipment **Headquarters:** Netherlands **Value of holding:** £11,295,883 **Percentage of portfolio:** 2.0% 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. ![img-9.jpeg](img-9.jpeg) ## DNB Bank **Sector:** Banks **Headquarters:** Norway **Value of holding:** £10,710,122 **Percentage of portfolio:** 1.9% 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. ![img-10.jpeg](img-10.jpeg) ## Accenture **Sector:** Industrial Support Services **Headquarters:** North America **Value of holding:** £11,186,407 **Percentage of portfolio:** 2.0% 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. ![img-11.jpeg](img-11.jpeg) ## Atlas Copco **Sector:** Industrial Engineering **Headquarters:** Sweden **Value of holding:** £10,399,381 **Percentage of portfolio:** 1.9% 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. Total value of top twenty holdings: **£301,990,239** Percentage of portfolio: **54.6%** 46 INVESTMENT MANAGER’S REVIEW ## 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 | how far a human toenail grows in three | This is but one example of the | | --- | --- | --- | | class growth company. Originally part of | seconds. A human hair, for comparison, | extraordinary technology within an | | conglomerate Philips, they make some | is a relatively rotund 80,000-100,000 | ASML EUV machine. Another is the | | of the most advanced semiconductor | nanometres wide. | mirrors required to project the light onto | | manufacturing equipment on the | | the silicon wafer. Each mirror has over | Because 3 nm is some way short of planet, enabling Moore’s Law (the 100 layers of materials that are carefully the wavelength of light, it has become observation that the number of selected to maximise the reflection of impossible to use anything on the transistors on a circuit doubles every two EUV light. To avoid distortions, flatness normal spectrum to project the pattern years) to march forward. is crucial. The mirrors are polished to of the circuit onto the silicon. EUV has a less than one atom’s thickness. For The pinnacle of their business is their far lower wavelength, overcoming this perspective, if the mirrors were the size unique capability in extreme ultra-violet problem. Generating EUV light, alone, is of Germany, the tallest ‘mountain’ would (EUV) lithography machines. The largest, an exercise of extraordinary complexity. be just 1mm high. | most complex semiconductors comprise | In his book Chip War, Chris Miller | | | --- | --- | --- | | circuits feature billions of transistors. | summarises the process as follows: the | The latest ASML lithography machines | | Simplistically, the pattern of the circuit is | ‘best approach is to shoot a tiny ball | weigh 200 tonnes and cost hundreds | | made by projecting light onto chemicals | of tin a thirty millionth of a meter wide | of millions dollars. A recent downturn in | | deposited on a silicon wafer (hence the | through a vacuum at 200 mph then | the semiconductor market has allowed | | term lithography, or ‘stone writing’). | striking it twice with a laser - the first | us to buy the stock for what we believe | | | pulse to warm it up, the second to blast | is a very fair price. The economics of | The science and physics of producing it into a plasma with a temperature of the business is outstanding and the these chips is almost beyond around half a million degrees i.e. many balance sheet is pristine. Unusually for comprehension. The A17 chip used times hotter than the surface of the a cutting-edge tech company, they by Apple it its latest iPhones has 19 sun. This process is repeated 50,000 pay a reasonable dividend. Over the billion transistors. The ‘line width’ of times per second to produce EUV in the long term, we expect sales to grow the circuit pattern is 3 nanometres (a quantities required’. substantially, reflecting the world’s millionth of a millimetre) across. This is insatiable appetite for computing power. 47 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 based on the value of their assets. This Some recent economic history and y Navegacion Aerea’, or ‘Spanish profitability is not particularly attractive geography is relevant to the investment Airports and Air Navigation’. Unusually in itself but provides a reliable income case. Spain invested a great deal in for Brunner, AENA is a state-controlled stream under most circumstances. infrastructure prior to the financial crisis, company; something we generally meaning Spain generally has plentiful, The more interesting part of the business prefer to avoid. However, we believe modern airport capacity, negating is its commercial side, which accounts the merits of the investment case were the need for major expenditure in the for roughly 60% of profit and is entirely so compelling we decided to make an near future. Additionally, the Spanish unregulated, meaning profitability is exception on this occasion. economy is heavily reliant on tourism, uncapped. AENA acts as a landlord, providing a supportive environment for AENA owns 46 airports across the renting out space to duty free retailers, air travel. Finally, domestic air travel is Spanish mainland and Islands; restaurants, car hire firms etc at its a material part of the passenger mix, every commercial airport in Spain, airports. This is particularly valuable largely composed of travel between to all intents and purposes. Freehold real estate, serving a captive audience the mainland and the Balearic and ownership is actually unusual for of free-spending travellers who tend to Canary Islands. an infrastructure company; most have above average income. infrastructure companies operate under Overall, we believe AENA will prove Over time we assume a decent growth a time-limited concession model, which to be a fine investment. The stock rate, driven by growth in passenger brings uncertainty, so AENA’s model is combines quality (high incremental numbers, higher spend per passenger at an attractive rarity. returns on the commercial side, powerful the airport’s shops and restaurants and barriers to entry, strong balance sheet), To prevent abuse of the company’s de higher rental take-rates. The company good value (a high dividend yield and facto monopolist position on air travel already generates lots of cash, most unchallenging multiple) and reasonable in Spain, the profit they are permitted of which it returns to shareholders. growth underpinned by several drivers; to make on the aeronautical side of We expect a generous and growing a quintessential Brunner holding. the business (for example, the fees dividend in the years to come. they charge to airlines) is determined and capped by a regulatory formula 48 INVESTMENT MANAGER’S REVIEW ## 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 | Thermo Fisher is well positioned to | Despite nearly two decades executing | | --- | --- | --- | | largest pure-play life science firm, selling | outgrow the overall market, supported | this acquisition strategy, the market | | instruments, services, tools, and related | by an R&D function that includes 7,300 | remains highly fragmented, with the | | consumables to customers involved | R&D scientists and engineers and | largest three players representing only | | in scientific research. Their customer | costs $1.5 billion annually, as well as | around one-third of the market. Thermo | | base includes the pharmaceutical | close commercial relationships and | Fisher expects to continue deploying the | | and biotech industries, hospitals and | engagement with end customers. | majority of its cash flow on M&A. | | clinical diagnostic labs, universities, | Management expect long-term organic | | Thermo Fisher and many of its peers research institutions and government growth of 7-9%. were beneficiaries of the global ramp agencies. Their products are also used This organic growth will be up in infection testing and vaccine in environmental, industrial, research supplemented by acquisitions. Since the research and development that and development, quality and process merger of Thermo Electron and Fisher occurred during the Covid-19 pandemic. control settings. | | Scientific in 2006, Thermo Fisher has | Organic revenue growth rates of 25% | | --- | --- | --- | | The company operates in markets | followed a strategy of consolidating a | in 2020 and 17% in 2021 were far | | with strong secular tailwinds, including | highly fragmented and inefficient life | above sustainable levels. As the world | | the impact of an aging population in | science industry, making approximately | normalised following the pandemic | | the developed world which is driving | 100 acquisitions for a total consideration | these relatively high-margin revenue | | increased healthcare demand, and | of $100 billion. Acquired businesses | streams fell away. Consequently, | | ongoing scientific advances in life | typically grow faster as part of the | analysts expect organic revenue to have | | sciences research and techniques, | Thermo Fisher organisation, and profit | declined 5% in 2023 and to deliver no | | such as developments around mRNA | margins typically increase as well. | growth in 2024. We took advantage | | vaccine technology. Together, these | This acquisition strategy has delivered | of other investors selling in response to | | secular tailwinds are expected to result | significant value for shareholders: | these short-term headwinds to acquire | | in a life science market which grows | Thermo Fisher has delivered 17% | a position in this leading global life | | approximately 5% a year. | average annual growth in earnings per | science franchise at what we believe to | | | share over the past decade (2012-22). | be a very reasonable price. | 49 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Portfolio Breakdown at 30 November 2023 ## North America ## 44.29% ## £553,377,318 50 INVESTMENT MANAGER’S REVIEW ## United Kingdom ## 25.09% ## Continental Europe ## Japan ## 26.15% ## 2.06% ## Pacific Basin ## 2.41% 51 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 % of Invested Name Sector Value (£) 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 INVESTMENT MANAGER’S REVIEW % of Invested Name Sector Value (£) 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 % of Invested Name Sector Value (£) 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 INVESTMENT MANAGER’S REVIEW ## 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) | | Composite | United | | North | | | Other | | 2023 | | Benchmark | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Kingdom | | America | | Countries | | | Total | | | Sector | Total | | | | % | | % | | | % | | % | Weighting | | | % | 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 Composite | United | | North | | | Other | | 2023 | | Benchmark | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Kingdom | | America | | Countries | | | Total | | | Sector | Total | | | | % | | % | | | % | | % | Weighting | | | % | 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 INVESTMENT MANAGER’S REVIEW Composite | United | | North | | | Other | | 2023 | | Benchmark | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Kingdom | | America | | Countries | | | Total | | | Sector | Total | | | | % | | % | | | % | | % | Weighting | | | % | 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 # Historical Record | | 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 Total Return with Debt at Fair Value and Debt at Par ![img-12.jpeg](img-12.jpeg) Re-based to 100. Source: AllianzGI/Thomson Reuters DataStream. Benchmark: 70% FTSE World Ex UK Index and 30% FTSE All-Share Index. Alternative Performance Measure (APM). See Glossary on page 119. 58 ## 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 Schneider Electric was another notable contributor to performance. The electrical distribution, automation and energy management company is headquartered in Paris, France. 59 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Directors, Manager and Advisers Amanda Aldridge BSc FCA*Carolan Dobson BSc Elizabeth Field MA* Chartered FCSI*† Chair of the Audit Committee, Member Member of the Audit Committee, of the Management Engagement Management Engagement Board Chair. Chair of the Management Committee, the Nomination Committee, Nomination Committee Engagement Committee and the Committee and the Remuneration and Remuneration Committee. Nomination Committee, Member of Committee. the Remuneration Committee. | Joined the board in December 2013 and | Joined the board in December 2019. | Joined the board in December 2022. | | --- | --- | --- | | has been Chair since the AGM in March | Amanda is a non-executive director | Elizabeth recently retired as a partner | | 2016. She is also Chair of Baillie Gifford | and audit committee chair of Impact | at Stephenson Harwood. Elizabeth | | UK Growth Fund plc and BlackRock | Healthcare REIT plc and Staffline | was a corporate lawyer for 35 years | | Latin American Investment Trust plc | Group PLC. She also chairs the audit | with extensive experience of advising | | and a director of Aberdeen Standard | and risk committee of The Low Carbon | public and private companies on a wide | | Fund Managers Limited, M&G Securities | Contracts Company and is a director of | range of corporate transactions across | | Limited and Investment Trustee and | The Electricity Settlements Company. | a variety of sectors, specifically including | | Adviser Limited. Carolan was previously | She was formerly a partner at KPMG | investment trusts. | | head of UK equities at Abbey Asset | LLP and during her career she was Head | | Experience: Managers, Head of Investment Trusts at of the Retail Sector practice before Elizabeth is a lawyer and has experience Murray Johnstone and was the portfolio becoming Head of Contract Governance of providing legal and corporate manager of two investment trusts. in the Risk-Consulting Division. Amanda governance advice to investment is a Fellow of the Institute of Chartered Experience: trusts, asset managers and investment Accountants in England and Wales. Carolan is an experienced fund trust sponsors. manager and has held key roles Experience: Reasons for the recommendation in the investment management Amanda brings senior experience in for re-election: industry and in advisory roles and accounting practice, with specialisms Elizabeth’s legal knowledge and she chairs both investment trusts and including risk, and has non-executive negotiating skills are valuable to the other organisations. director and audit committee board and she has wide knowledge of chair experience on other public Reasons for the recommendation the industry. company boards. for re-election: Carolan’s wise and effective leadership Reasons for the recommendation of the board and wide knowledge and for re-election: experience of the industry. Amanda has evident skills and experience both from her background as a chartered accountant and as an audit committee chair. * Independent of the manager. † Independent on appointment as Chair. 60 GOVERNANCE Andrew Hutton MA, CFA* Jim Sharp MA* Senior Independent Director, Chair Member of the Management of the Remuneration Committee, Engagement Committee and the Member of the Audit Committee, Nomination Committee. the Management Engagement Committee, and the Nomination Committee. | Joined the board in April 2020. He is | Joined the board in January 2014. He | | --- | --- | | owner and director of A.J.Hutton Ltd, an | began his career in corporate finance | | investment advisory practice established | with J.Henry Schroder & Co. Limited from | | in 2007. Andrew started his career in | 1992 to 2002 where he was a director. | | 1979 at J.P. Morgan where, over 18 | He is Chair of The Cotswold Company | | years, he held investment and business | and is a non-executive director of James | | management positions in London, | Cropper PLC. | New York, Singapore and Australia. He Experience: was subsequently head of investment Jim has a background in financial management at Coutts Group and co- services and in addition to experience CEO of RBS Asset Management. Andrew in running businesses and insight into has served as Senior Independent marketing and promotion he brings Director of Baillie Gifford UK Growth a connection to the largest group Fund and Chairman of JPMorgan of shareholders. Global Emerging Markets Income Trust. Reasons for the recommendation Experience: for re-election: Andrew is an asset management Jim’s broad commercial and operational professional with senior management experience and knowledge and and money management experience. understanding of marketing and Reasons for the recommendation promotion are valuable and his for re-election: connection to a key stakeholder helps Andrew brings to the board a the board’s understanding of the deep understanding of portfolio requirements of shareholders. management. 61 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 | The Manager or Alternative Investment Fund | Company Secretary and Registered Office | | --- | --- | | Manager (AIFM) | Kirsten Salt ACG | | Allianz Global Investors UK Limited (AllianzGI UK) is | 199 Bishopsgate, London EC2M 3TY | | incorporated in the UK and its registered office is at 199 | Telephone: 020 3246 7513 | | Bishopsgate, London EC2M 3TY. It is authorised by the | Email: kirsten.salt@allianzgi.com | Financial Conduct Authority (FCA). Registered Number Allianz Global Investors GmbH (AllianzGI) is an active asset 00226323 manager operating across nineteen markets with specialised in-house research teams around the globe, managing assets Bankers and Custodian for individuals, families and institutions worldwide. HSBC Bank plc As at 30 September 2023, AllianzGI had €516 billion of assets under management worldwide. Depositary Through its predecessors, AllianzGI has a heritage of HSBC Securities Services investment trust management expertise in the UK reaching back to the nineteenth century and as at 31 December 2023 Solicitors had £2.8 billion assets under management in a range of Dickson Minto W.S. investment trusts. Website: allianzgi.co.uk Independent Auditors PricewaterhouseCoopers LLP Head of Investment Trusts Registrars Stephanie Carbonneil Email: stephanie.carbonneil@allianzgi.com Link Group (full details on page 113) Investment Manager Stockbrokers Julian Bishop and Christian Schneider, Co-Lead managers, representing Allianz Global Investors UK Limited, 199 J.P. Morgan Cazenove Bishopsgate, London EC2M 3TY (the manager). 62 GOVERNANCE # 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 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 GOVERNANCE ## Corporate Governance Statement 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. 65 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 As at 30 November 2023: Number of Senior Positions Number of on the Board Board members Percentage (CEO, CFO, SID of the Board and chair)* Men 2 40% 1 Women 3 60% 1 Other - - - Not specified/prefer not to say - - - Number of Senior Positions Number of on the Board Board members Percentage (CEO, CFO, SID of the Board 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 Senior Positions Number of on the Board Board members Percentage (CEO, CFO, SID of the Board and chair)* Men 2 40% 1 Women 3 60% 1 Other - - - Not specified/prefer not to say - - - Number of Senior Positions Number of on the Board Board members Percentage (CEO, CFO, SID of the Board 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 GOVERNANCE Each of the directors has provided a statement of all conflicts The committee is chaired by Carolan Dobson, the Chair of the of interest and potential conflicts of interest relating to the board, and met once in the last year when it considered the company. These statements have been considered and re-election of directors at the annual general meeting and the approved by the board. The directors have undertaken to plans for new recruitment to the board. The members of the notify the Chair and Company Secretary of any proposed committee met separately under the leadership of the Senior new appointments and new conflicts or potential conflicts Independent Director to review the tenure of the Chair and for consideration, if necessary, by the board. The board has consider the plans for succession. All directors serve on the agreed that only directors who have no interest in the matter nomination committee and consider nominations made in being considered will be able to participate in taking the accordance with an agreed procedure. relevant decision and that in taking the decision the directors It is the board’s policy to use external agencies to draw up lists will act in a way they consider, in good faith, will be most of candidates as part of the recruitment of new directors. likely to promote the company’s success. The board is able The brief to the recruitment consultant includes the request to impose limits or conditions when giving authorisation if that the shortlist should include a diverse range of candidates. it thinks this is appropriate. For example, a director with a potential conflict might be asked to step out of the meeting The Nomination Committee Report is on page 73. room, or will be permitted to remain in the room but not Management Engagement Committee participate in the discussion or take part in a vote on a course The management engagement committee met once in of action. the year to review the Management and Administration The board confirms that its powers of authorisation are Agreement and the manager’s performance and a report operating effectively and that the agreed procedures have of management fees. It has defined terms of reference and been followed. consists of all the directors. It is chaired by Carolan Dobson, the Chair of the board. Directors’ Indemnities The Management Engagement Committee Report is on Directors’ and Officers’ Liability insurance cover is held by the page 72. company and was in place for the whole of the financial year. Remuneration Committee As permitted by the company’s Articles of Association, the The remuneration committee met once in the year and company has granted indemnities to the directors. consists of all the directors. The committee is chaired by Andrew Hutton. The committee determines the company’s Board Committees remuneration policy and determines the remuneration of Audit Committee each director within the terms of that policy. The Directors’ The Audit Committee Report is on page 78. Remuneration Report is on page 74. Nomination Committee The terms of reference for each of the committees may be The nomination committee meets as needed – at least viewed by shareholders on request and are published on the once each year – and makes recommendations on board company’s website brunner.co.uk in the Information/Legal succession planning and the appointment of new directors Documents section. and considers the composition and balance of the board. Board Attendance Attendance by the directors at formal board and committee meetings during the year was as follows: Board Management Strategy Audit Remuneration Nomination Engagement Director Board Day Committee Committee Committee Committee No. of meetings 6 1 2 1 1 1 1 Carolan Dobson 6 1 2 1 1 1 Amanda Aldridge 6 1 2 1 1 1 Elizabeth Field 6 1 2 1 1 1 Andrew Hutton 6 1 2 1 1 1 2 | Peter Maynard | 2 1 1 1 1 1 | | | | | --- | --- | --- | --- | --- | | | | 1 | 1 | | | Jim Sharp 6 1 2 | | | 1 | 1 1 | 1 Invited to attend meetings, although not a committee member. 2 Retired from the board on 31 March 2023. 67 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 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 GOVERNANCE Articles”). The proposed amendments being introduced in the any manner permitted by, and in accordance with, the New Articles primarily relate to changes in law and regulation, Companies Act 2006; developments in market practice and other developments v. removing the requirement to place advertisements in since the Existing Articles were adopted. national newspapers in an attempt to trace shareholders in order to reflect modern best practice; The following principal amendments will be made to the vi. removing the requirement to return the net proceeds of Company’s Existing Articles through the adoption of the sale of shares belonging to untraced shareholders and New Articles if Resolution 11 is approved by shareholders at any associated unclaimed dividends; the AGM: vii. including provisions which enable the Company to hold i. removing references to the Companies Act 1985 which is shareholder meetings across two (or more) physical no longer in force; locations in the event that all shareholders cannot be ii. clarifying that the model articles contained in The accommodated in a single physical location on the day Companies (Model Articles) Regulations 2008 (SI 2008 of a meeting; No. 3229) do not apply to the Company; viii. removing references to routine business at an annual iii. clarifying and expanding upon the Board’s ability to general meeting; issue, and take steps to deal with, shares that are held in ix. inserting provisions which enable the Company uncertificated form (i.e. in the CREST system), in particular to postpone a shareholder meeting in in circumstances where the Company is entitled to certain circumstances; enforce a lien over, or sell, transfer or forfeit, any of such x. inserting provisions which enable the Board or the shares in accordance with the Articles; chair of a shareholder meeting to adjourn the meeting iv. clarifying that the Company is permitted to purchase its without the consent of the meeting where any physical or own shares and to reduce its share capital, any capital electronic facilities being used to host the meeting have redemption reserve and any share premium account in Statement of the Depositary’s Responsibilities – that the company’s income is applied in accordance with the Regulations; and in Respect of The Brunner Investment Trust PLC provided by HSBC Securities Services, – the instructions of the Alternative Investment Fund Depositary to the Company. Manager (the AIFM) are carried out (unless they conflict with the Regulations). “The Depositary must ensure that the company is managed The Depositary also has a duty to take reasonable care to in accordance with the Financial Conduct Authority’s ensure that the company is managed in accordance with Investment Funds Sourcebook, (the Sourcebook), the the Articles of Association in relation to the investment and Alternative Investment Fund Managers Directive (AIFMD) borrowing powers applicable to the company. (together the Regulations) and the company’s Articles of Association. Report of the Depositary to the Shareholders of The The Depositary must in the context of its role act honestly, Brunner Investment Trust PLC (the company) for the year fairly, professionally, independently and in the interests of ended 30 November 2023. the company and its investors. Having carried out such procedures as we consider The Depositary is responsible for the safekeeping of the necessary to discharge our responsibilities as Depositary assets of the company in accordance with the Regulations. of the company, it is our opinion, based on the information available to us and the explanations provided, that in all The Depositary must ensure that: material respects the company, acting through the AIFM – the company’s cash flows are properly monitored has been managed in accordance with the rules in the and that cash of the company is booked into the cash Sourcebook, the Articles of Association of the company and accounts in accordance with the Regulations; as required by the AIFMD.” – the sale, issue, repurchase, redemption and cancellation HSBC Securities Services of shares are carried out in accordance with 14 December 2023 the Regulations; – the assets under management and the net asset value Further information about the relationship with the per share of the company are calculated in accordance Depositary is on page 112. with the Regulations; – any consideration relating to transactions in the company’s assets is remitted to the company within the usual time limits; 69 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 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 GOVERNANCE 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* *Company Secretary 13 February 2024* 71 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Management Engagement Committee Report Role of the committee Manager reappointment The Management Engagement Committee reviews the The annual evaluation that took place in November 2023 investment management agreement and monitors the included a presentation from the portfolio managers and performance of the Manager for the investment, secretarial, AllianzGI’s Head of Investment Trusts. This covered the work financial, administration, marketing and support services done with the board on the provision of investment and that it provides under that agreement. It also reviews the support services, including the promotion and distribution terms of the agreement including the level and structure of of the trust, succession planning and the ambitions for 2024; fees payable, the length of notice period and best practice the reporting of the ESG strategy; the dividend strategy; the provisions generally. investment strategy in some overseas markets; the sales and marketing activity, covering the work with investment Composition of the committee platforms and wealth managers; and the relaunch of the website. The evaluation also considered the manager’s fee All the directors are members of the committee. Its terms of in relation to the peer group. The committee met in a private reference can be found on the website at brunner.co.uk. session following the presentation and concluded that in its opinion the continuing appointment of the manager on the Manager evaluation process terms agreed was in the interests of shareholders as a whole The committee met once during the year for the purpose of and recommended this to the board. the formal evaluation of the manager’s performance. Note 2 to the Financial Statements on page 96 provides For the purposes of its ongoing monitoring, the board receives detailed information in relation to the management fee. detailed reports and views from the portfolio manager on investment policy and strategies, asset allocation, stock Committee evaluation selection, attributions, portfolio characteristics, gearing and The activities of the Management Engagement committee risk. The board also assesses the manager’s performance were considered as part of the board evaluation process against the investment controls set by the board. completed in accordance with standard governance The manager also reported to the board on its succession arrangements as summarised on page 65. The conclusion plans for the key individuals, including the members of the from the process was that the committee was operating portfolio management team. effectively, with the right balance of membership and skills. Performance information is set out on page 8. Carolan Dobson AIFM Management Engagement Committee Chair Details of the current AIFM are on page 112. The Board 13 February 2024 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. 72 GOVERNANCE ## Nomination Committee Report Role of the committee Succession The Nomination Committee leads the process for board Succession planning is considered regularly by the committee appointments and makes nomination recommendations and the board was pleased that Elizabeth Field joined the to the board. The committee reviews and makes Board on 1 December 2022. recommendations on board structure, size and composition, The members of the committee met separately under the the balance of knowledge, experience, skill ranges and leadership of the Senior Independent Director to review the diversity and considers succession planning and tenure policy. tenure of the Chair and consider the plans for succession. Notwithstanding her length of service on the board, the Composition of the committee directors are unanimously agreed that Caroline Dobson All directors are members of the committee and its terms of continues to be a highly effective Chair with strong leadership reference can be found on the website at brunner.co.uk of the board. Taking this into account and as the board has a majority of independent directors It was agreed that Caroline Activities of the committee Dobson’s tenure as the Chair of the board should continue for The committee met during the year and considered, in a further two years. accordance with its terms of reference the structure, size and composition of the board and satisfied itself with regard to Committee evaluation succession planning, making recommendations to the board. The activities of the Nomination Committee were considered The committee reviewed the succession plan, as mentioned as part of the board evaluation process completed in below, and recommended it to the board. accordance with standard governance arrangements as summarised on page 65. The conclusion from the process The committee also discussed the results of the board and was that the committee was operating effectively, with the committee evaluation exercise, which covered the structure right balance of membership and skills. 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 Carolan Dobson inclusion A table is shown on page 66 showing the current Nomination Committee Chair board composition. 13 February 2024 73 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 # Remuneration Committee Report ![img-13.jpeg](img-13.jpeg) I am pleased to present my first report as Chair of the Remuneration Committee. ## Composition All the directors are members of the committee and its terms of reference can be found on the website at brunner.co.uk. ## Role The Remuneration Committee leads the process for fixing directors' remuneration and makes recommendations to the board. ## Activities The committee's activities are set out in the report from the committee which follows. ## Directors' Remuneration Report This is the Directors' Remuneration Report for the year. The report is submitted in accordance with Schedule 8 of the Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended August 2013, for the year ended 30 November 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. 74 GOVERNANCE Directors retire and offer themselves for re-election annually. No director has a service contract with the company. The company's policy is for the directors to be remunerated in the form of fees, payable quarterly in arrears. In accordance with the AIC Code of Corporate Governance, there are no long term incentive schemes and fees are not related to the individual director's performance, nor to the performance of the board as a whole. No exit payments are made when a director leaves the board. ### Directors' Remuneration Policy The board's policy, subject to the overall limit in the Articles, is to determine the level of directors' fees having regard to the level of fees payable to non-executive directors in the investment trust industry generally, the rate of inflation, the increasing requirements in the nature of the role that individual directors fulfil, and the time committed to the company's affairs. These requirements are particularly relevant to the Chair and the Chair of the Audit Committee. The board believes that levels of remuneration should be sufficient to attract and retain non-executive directors with the relevant experience and skills to oversee the company. The company's Articles 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 | | | % change | | | | % change | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | from | | | | from | | | | 2023 | | 2022 to | | 2022 | | 2021 to | | 2021 | | | | £ | | 2023 | | £ | | 2022 | | £ | 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 GOVERNANCE ## Performance Graph The performance graph below measures the company's share price and net asset value performance on a total return basis against the benchmark index: 70% FTSE World Ex UK Index and 30% FTSE All-Share Index. An explanation of the company's performance is given in the Chair's Statement and the Investment Manager's Review. ### The Brunner Investment Trust PLC 30 November 2013 – 30 November 2023 ![img-14.jpeg](img-14.jpeg) Source: AllianzGI/Thomson Reuters DataStream Andrew Hutton Remuneration Committee Chair 13 February 2024 77 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## 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 board. At the meeting for the half year the auditors presented the audit plan for the year ending 30 November 2023. In the Andrew Hutton and Elizabeth Field served on the committee meeting relating to the year end the committee considered the throughout the year, and Peter Maynard was a member of auditors’ report on the annual financial statements. the committee until his retirement at the AGM in March. The Chair of the board and Jim Sharp are invited to attend audit At each meeting the committee received a report on the committee meetings, as are representatives of the manager. operation of controls relating to the company and the proper conduct of its business in accordance with the regulatory As you will see from my biography on page 60, I am a environment in which both the company and the manager Chartered Accountant and until 2017, I was an audit and operate. The committee has also received reports from the advisory partner, at KPMG, London. I also chair the audit company’s service providers on their continuing response to committee of two other listed companies. During the year cyber security risks and related business continuity updates. 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 Risk responsibilities fully. Although the board has ultimate responsibility for the management of risk, the audit committee assists by monitoring Role the formal reports from the manager and third-party service providers on risk and internal controls. The principal role of the committee is to assist the board in relation to the reporting of financial information, review of During the year the committee reviewed the risk management financial controls and management of risk. The committee framework and concluded that existing processes were has defined terms of reference and duties and the terms of adequate to ensure that its assessment of risk is robust and reference are published on the company’s website, brunner. of sufficient frequency, namely carried out at each committee co.uk. These include: meeting and twice annually by the board as follows: – responsibility for the review of the Annual Report and the – A matrix of risks is reviewed at each audit committee half-yearly Financial Report; meeting. We consider whether new risks should be added or – consideration of the nature and scope, independence and previously identified risks removed, assess their likelihood of effectiveness of the external audit and of the Auditors’ occurring and potential scale, review the mitigating actions findings and recommendations; and and assess the residual risk against what we regard as – review of the terms of appointment of the auditors, including acceptable – ‘risk appetite’. Economic volatility, including a their remuneration and the provision of any non-audit sustained period of high inflation and high interest rates and services by them. the further increase in international conflict and tensions have all been considered by the board in this review and Activities discussed by the board. The committee meets twice each year. These meetings are – Assurance over mitigating actions in relation to these risks attended by the auditors and also by representatives of the is provided in a series of reports from all the third party manager, including both risk and compliance officers. It is the service providers. practice of the committee to meet with the auditor without – Resulting from the work of the audit committee, the principal management present at least once each year. risks and uncertainties are identified for disclosure and discussion in our annual report. The committee also assesses At the scheduled meetings in respect of the year ended 30 residual risks after controls and mitigating actions have November 2023 the committee reviewed the company’s been applied, and evaluates whether these fall within our accounting policies and confirmed their appropriateness, and risk appetite. The risks identified, together with mitigating reviewed in detail the annual and half-yearly financial reports actions, and the results of the risk appetite assessment are and in each case recommended them for adoption by the set out in the Strategic Report on page 9. 78 GOVERNANCE Viability Statement investments in the portfolio; and the accuracy, occurrence and completeness of dividend income. These and other Taking into account this review of risk the committee reviewed matters, identified as posing lesser risk, were considered and a paper that supported the board’s conclusion, set out discussed with the manager and the auditor as part of the on page 20 in the Strategic Report, of their reasonable year end process. expectation that the company is viable in the longer term, assessed as the next five years. Valuation and existence of the investments in the portfolio Listed investments are valued using stock exchange prices The audit, its effectiveness and the terms of provided by third party financial data vendors. Unlisted appointment of the auditor investments are recognised on a fair value basis and are The committee reviewed the terms of appointment of the reviewed by the manager’s valuation committee before auditor, monitored the audit process, assessed the auditors’ being approved by the company and being made available independence and objectivity as well as the effectiveness of to the auditor. We discussed the work done by the auditor on the audit process. It was noted that there were no non-audit valuation of investments and received assurance that there services provided by the firm, and that none are planned in the were no concerns regarding valuation of the investments. financial year to 30 November 2024. The manager confirms to us the existence and ownership of During the year we thanked Gillian Alexander for her five portfolio investments. The manager receives information from years of leading the company’s audit and welcomed the new the custodian which is reconciled with the portfolio list. The audit lead, Iain Kirkpatrick. This is PricewaterhouseCooper’s auditor conducts an independent verification exercise which sixth year as our auditor and under current FRC guidance, was satisfactorily concluded. the next audit tender will be required in respect of the year Based on this the committee concluded that the valuation and ending 30 November 2028. Until then, we will continue existence of the investments in the portfolio is appropriately to monitor the auditor’s performance and make any recorded in the annual report and accounts, appropriate recommendations. Accuracy, occurrence and completeness of dividend income As part of our review of the performance of the auditor, the During the year, income reports and forecasts are reviewed members of the committee and those representatives of in detail with the manager at each meeting of the board, the manager involved in the audit process reviewed and including yield information. Changes to the forecast for each considered a number of areas including: portfolio stock from meeting to meeting are also scrutinised. – the reputation and standing of the audit firm including The auditor conducts an independent analysis of the expected annual reports from the auditor’s regulator; income stream from the investment portfolio for the year. – the skills, experience and specialist knowledge of the audit We discussed the outcome of this analysis and were satisfied team, particularly relating to investment trusts; based on this and the dividend income was appropriately – audit communication including details of planning, recorded in the annual report and accounts. information on relevant accounting and regulatory developments, and recommendations on In addition we noted the manner in which expenses are corporate reporting; allocated between capital and income and concluded that – the audit processes, evidence of oversight by the audit the ratio of 70:30 remains appropriate since it fairly reflects our lead; and investment policy and split of prospective capital and income – the reasonableness of audit fees; returns. This area was subject to a detailed review last year. The committee sought comments from representatives of We also confirmed, as stated in the Statement of Accounting the manager on the provision of services by the auditor and Policies on page 94, that there are no judgements, the effectiveness of the external audit for the year ended 30 estimates, and assumptions about the carrying amounts November 2023 and considered whether the audit team as a of assets and liabilities that are not readily apparent from whole demonstrated an appropriate level of challenge to the other sources. Board and the manager in fulfilling their role. The committee considered the audit materiality and error Based on all of the above, the committee concluded that reporting thresholds in the audit plan and confirmed that we have no concerns with the performance of the and has they were satisfied with these. As in previous years, the recommended to the board that a resolution proposing the auditor set the materiality threshold as 1% of net asset value re-appointment of the auditor is put to shareholders at the to align closely with comparable companies, but continues annual general meeting. to report to the committee on matters below that level on qualitative grounds. Financial Report and Significant Issues The audit committee and the whole board reviewed the entire The significant issues identified for the review of the financial annual report and noted all of the supporting information statements this year, that is, those identified as presenting received. It then considered whether the annual report the greatest risks, were the valuation and existence of the satisfactorily reflected a true picture of the company and 79 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 its activities and performance in the year, with a clear link The audit committee’s view continues to be that the company between the relevant sections of the report and concluded does not require an internal audit function of its own as it that it did so. The directors were then able to confirm that delegates its day-to-day operations to third parties from the annual report, taken as a whole, is fair, balanced and whom it receives internal control reports. Reports from third understandable and provides the information necessary for party auditors on the internal controls maintained on behalf shareholders to assess the company’s performance, business of the company by AllianzGI and by other key providers of model and strategy. administrative and custodian services to AllianzGI or directly to the company were reviewed during the year. No issues of Internal control and internal audit concern relating to the company were raised in the reports. During the year, in July 2023, it was brought to the audit committee’s attention that an issue had arisen with the capital Whistleblowing NAV calculated by AllianzGI’s third party service provider As the company has no employees it does not have a and reported to the market in the daily NAV announcements. formal policy concerning the raising, in confidence, of any It was noted that this did not impact the cum-income NAV concerns about improprieties for appropriate independent announced throughout the period concerned, nor did it investigation. The audit committee has, however, received affect the half-year financial statements which were being and noted the manager’s policy on this matter. However, any considered at that time. Since then, the manager, AllianzGI, matters concerning the company should be raised with the has reported to the board on the due diligence performed Chair or Senior Independent Director. with State Street the corrective actions taken and the plans now in place to prevent recurrence. Service enhancements Amanda Aldridge that resulted from this included lower tolerance thresholds Audit Committee Chair for additional reporting of daily NAV movements, quicker 13 February 2024 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. 80 GOVERNANCE ## Statement of Directors’ Responsibilities ## in respect of the financial statements The directors are responsible for preparing the Annual Report Directors’ confirmations and the financial statements in accordance with applicable Each of the directors, whose names and functions are listed law and regulation. in Directors, Manager and Advisers on pages 60 to 62, confirm that, to the best of their knowledge: Company law requires the directors to prepare financial statements for each financial year. Under that law the directors – the company financial statements, which have been have prepared the financial statements in accordance with prepared in accordance with United Kingdom Accounting United Kingdom Generally Accepted Accounting Practice Standards, comprising FRS 102, give a true and fair view (United Kingdom Accounting Standards, comprising FRS 102 of the assets, liabilities, financial position and profit of the “The Financial Reporting Standard applicable in the UK and company; and Republic of Ireland”, and applicable law). – the Strategic Report includes a fair review of the development and performance of the business and the Under company law directors must not approve the financial position of the company, together with a description of the statements unless they are satisfied that they give a true and principal risks and uncertainties that it faces. 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 In the case of each director in office at the date the directors’ financial statements, the directors are required to: report is approved: – select suitable accounting policies and then apply – so far as the director is aware, there is no relevant them consistently; audit information of which the company’s auditors are – state whether applicable United Kingdom Accounting unaware; and Standards, comprising FRS 102 have been followed, subject – they have taken all the steps that they ought to have to any material departures disclosed and explained in the taken as a director in order to make themselves aware of financial statements; any relevant audit information and to establish that the – make judgements and accounting estimates that are company’s auditors are aware of that information. reasonable and prudent; and This responsibility statement was approved by the – prepare the financial statements on the going concern basis board of directors on 13 February 2024 and signed on its unless it is inappropriate to presume that the company will behalf by: continue in business. The directors are responsible for safeguarding the assets of the company and hence for taking reasonable steps for the Carolan Dobson prevention and detection of fraud and other irregularities. Chair 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. 81 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 Laboratory equipment manufacturer Thermo Fisher Scientific, a new purchase, is headquartered in Boston, Massachusetts, USA. 83 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Independent auditors’ report to the members of ## The Brunner Investment Trust PLC ### Report on the audit of the financial Our audit approach ### statements Overview Audit scope Opinion – The company is a standalone Investment Trust Company In our opinion, The Brunner Investment Trust PLC’s and engages Allianz Global Investors UK Limited (the financial statements: ‘‘Manager’’) to manage its assets. – give a true and fair view of the state of the company’s affairs – We conducted our audit of the financial statements using as at 30 November 2023 and of its profit and cash flows for information from State Street Bank & Trust Company the year then ended; (the “Administrator”) to whom the Manager has, with the – have been properly prepared in accordance with United consent of the directors, delegated the provision of certain Kingdom Generally Accepted Accounting Practice (United administrative functions. Kingdom Accounting Standards, including FRS 102 “The – We tailored the scope of our audit taking into account the Financial Reporting Standard applicable in the UK and types of investments within the Company, the involvement Republic of Ireland”, and applicable law); and of the third parties referred to above, the accounting – have been prepared in accordance with the requirements of processes and controls, and the industry in which the the Companies Act 2006. Company operates. – We obtained an understanding of the control environment We have audited the financial statements, included within in place at both the Manager and the Administrator the Annual Report, which comprise: the Balance Sheet as at and adopted a fully substantive testing approach using 30 November 2023; the Income Statement, the Cash Flow information obtained from the Administrator. Statement and the Statement of Changes in Equity for the year then ended; the Statement of Accounting Policies; and Key audit matters the notes to the financial statements. – Valuation and existence of investments – Accuracy, occurrence and completeness of Income Our opinion is consistent with our reporting to the from investments Audit Committee. Materiality Basis for opinion – Overall materiality: £5,282,098 (2022: £4,970,970) based on We conducted our audit in accordance with International 1% of net asset value. Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. – Performance materiality: £3,961,574 (2022: £3,728,228). Our responsibilities under ISAs (UK) are further described The scope of our audit in the Auditors’ responsibilities for the audit of the financial As part of designing our audit, we determined materiality statements section of our report. We believe that the audit and assessed the risks of material misstatement in the evidence we have obtained is sufficient and appropriate to financial statements. provide a basis for our opinion. Key audit matters Independence Key audit matters are those matters that, in the auditors’ We remained independent of the company in accordance professional judgement, were of most significance in the audit with the ethical requirements that are relevant to our audit of of the financial statements of the current period and include the financial statements in the UK, which includes the FRC’s the most significant assessed risks of material misstatement Ethical Standard, as applicable to listed public interest entities, (whether or not due to fraud) identified by the auditors, and we have fulfilled our other ethical responsibilities in including those which had the greatest effect on: the overall accordance with these requirements. audit strategy; the allocation of resources in the audit; and To the best of our knowledge and belief, we declare that non- directing the efforts of the engagement team. These matters, audit services prohibited by the FRC’s Ethical Standard were and any comments we make on the results of our procedures not provided. thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion We have provided no non-audit services to the company in the thereon, and we do not provide a separate opinion on period under audit. these matters. This is not a complete list of all risks identified by our audit. 84 FINANCIAL STATEMENTS 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 We tested the valuation of the listed equity investments by (Statement of Accounting Policies) and page 96 (Notes agreeing the prices used in the valuation to independent third to the Financial Statements). The investment portfolio at party sources. No misstatements were identified by our testing the year-end comprised listed equity investments valued which required reporting to those charged with governance. at £553.3m. We tested the existence of the investment portfolio by We focused on the valuation and existence of investments agreeing investment holdings to an independent custodian because investments represent the principal element of the confirmation. No misstatements were identified by our testing net asset value as disclosed on the Balance Sheet in the which required reporting to those charged with governance. financial statements. Accuracy, occurrence and completeness of Income from investments Refer to page 78 (Audit Committee Report), page 94 We assessed the accounting policy for investment income (Statement of Accounting Policies) and page 96 (Notes to recognition for compliance with accounting standards and the the Financial Statements). AIC SORP and performed testing to check that income had been accounted for in accordance with this stated accounting We focused on the accuracy, completeness and occurrence policy. We found that the accounting policies implemented of dividend income recognition as incomplete or inaccurate were in accordance with accounting standards and the AIC income could have a material impact on the Company’s net SORP, and that income has been accounted for in accordance asset value and dividend cover. with the stated accounting policy. We also focused on the accounting policy for investment We tested the accuracy of dividend receipts by agreeing the income recognition and its presentation in the Income dividend rates from investments to independent market data. Statement for compliance with the requirements of No misstatements were identified which required reporting to The Association of Investment Companies Statement those charged with governance. of Recommended Practice (the “AIC SORP”) as incorrect application could indicate a misstatement in To test for completeness, we tested that all dividends declared income recognition. 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 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. 86 FINANCIAL STATEMENTS Our responsibilities and the responsibilities of the directors with statement as other information are described in the Reporting respect to going concern are described in the relevant sections on other information section of this report. of this report. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Reporting on other information corporate governance statement is materially consistent with The other information comprises all of the information in the the financial statements and our knowledge obtained during Annual Report other than the financial statements and our the audit, and we have nothing material to add or draw auditors’ report thereon. The directors are responsible for the attention to in relation to: other information. Our opinion on the financial statements – The directors’ confirmation that they have carried out a does not cover the other information and, accordingly, we do robust assessment of the emerging and principal risks; not express an audit opinion or, except to the extent otherwise – The disclosures in the Annual Report that describe those explicitly stated in this report, any form of assurance thereon. principal risks, what procedures are in place to identify In connection with our audit of the financial statements, our emerging risks and an explanation of how these are being responsibility is to read the other information and, in doing managed or mitigated; so, consider whether the other information is materially – The directors’ statement in the financial statements about inconsistent with the financial statements or our knowledge whether they considered it appropriate to adopt the obtained in the audit, or otherwise appears to be materially going concern basis of accounting in preparing them, and misstated. If we identify an apparent material inconsistency or their identification of any material uncertainties to the material misstatement, we are required to perform procedures company’s ability to continue to do so over a period of to conclude whether there is a material misstatement of the at least twelve months from the date of approval of the financial statements or a material misstatement of the other financial statements; information. If, based on the work we have performed, we – The directors’ explanation as to their assessment of the conclude that there is a material misstatement of this other company’s prospects, the period this assessment covers and information, we are required to report that fact. We have why the period is appropriate; and nothing to report based on these responsibilities. – The directors’ statement as to whether they have a reasonable expectation that the company will be able to With respect to the Strategic report and Directors’ Report, we continue in operation and meet its liabilities as they fall also considered whether the disclosures required by the UK due over the period of its assessment, including any related Companies Act 2006 have been included. disclosures drawing attention to any necessary qualifications Based on our work undertaken in the course of the audit, the or assumptions. Companies Act 2006 requires us also to report certain opinions Our review of the directors’ statement regarding the longer- and matters as described below. term viability of the company was substantially less in scope Strategic report and Directors’ Report than an audit and only consisted of making inquiries and In our opinion, based on the work undertaken in the course considering the directors’ process supporting their statement; of the audit, the information given in the Strategic report checking that the statement is in alignment with the relevant and Directors’ Report for the year ended 30 November 2023 provisions of the UK Corporate Governance Code; and is consistent with the financial statements and has been considering whether the statement is consistent with the prepared in accordance with applicable legal requirements. financial statements and our knowledge and understanding of the company and its environment obtained in the course of In light of the knowledge and understanding of the company the audit. 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 87 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 In addition, based on the work undertaken as part of our the economic decisions of users taken on the basis of these audit, we have concluded that each of the following elements financial statements. of the corporate governance statement is materially consistent Irregularities, including fraud, are instances of non-compliance with the financial statements and our knowledge obtained with laws and regulations. We design procedures in line during the audit: with our responsibilities, outlined above, to detect material – The directors’ statement that they consider the misstatements in respect of irregularities, including fraud. Annual Report, taken as a whole, is fair, balanced and The extent to which our procedures are capable of detecting understandable, and provides the information necessary irregularities, including fraud, is detailed below. for the members to assess the company’s position, Based on our understanding of the company and industry, performance, business model and strategy; we identified that the principal risks of non-compliance with – The section of the Annual Report that describes the review laws and regulations related to the ongoing qualification as of effectiveness of risk management and internal control an Investment Trust under the Corporation Tax Act 2010, and systems; and we considered the extent to which non-compliance might – The section of the Annual Report describing the work of the have a material effect on the financial statements. We also Audit Committee. considered those laws and regulations that have a direct We have nothing to report in respect of our responsibility to impact on the financial statements such as the Companies report when the directors’ statement relating to the company’s Act 2006. We evaluated management’s incentives and compliance with the Code does not properly disclose a opportunities for fraudulent manipulation of the financial departure from a relevant provision of the Code specified statements (including the risk of override of controls), and under the Listing Rules for review by the auditors. determined that the principal risks were related to posting of inappropriate journal entries to increase income or to Responsibilities for the financial statements and overstate the value of investments and increase the net asset the audit value of the Company. Audit procedures performed by the engagement team included: Responsibilities of the directors for the financial statements – discussions with the Directors, the Manager and the As explained more fully in the Statement of Directors’ Administrator, including consideration of known or Responsibilities in respect of the financial statements, the suspected instances of non-compliance with laws and directors are responsible for the preparation of the financial regulation and fraud; statements in accordance with the applicable framework – reviewing relevant meeting minutes, including those of the and for being satisfied that they give a true and fair view. The Audit Committee; directors are also responsible for such internal control as they – evaluation of the controls implemented by the Manager determine is necessary to enable the preparation of financial and the Administrator designed to prevent and statements that are free from material misstatement, whether detect irregularities; due to fraud or error. – assessment of the Company’s compliance with the requirements of section 1158 of the Corporation Tax Act In preparing the financial statements, the directors are 2010, including recalculation of numerical aspects of the responsible for assessing the company’s ability to continue eligibility conditions; as a going concern, disclosing, as applicable, matters – identifying and testing journal entries, in particular year related to going concern and using the going concern basis end journal entries posted by the administrator during the of accounting unless the directors either intend to liquidate preparation of the financial statements; and the company or to cease operations, or have no realistic – designing audit procedures to incorporate unpredictability alternative but to do so. around the nature, timing or extent of our testing. Auditors’ responsibilities for the audit of the financial There are inherent limitations in the audit procedures statements described above. We are less likely to become aware of Our objectives are to obtain reasonable assurance about instances of non-compliance with laws and regulations that whether the financial statements as a whole are free from are not closely related to events and transactions reflected material misstatement, whether due to fraud or error, in the financial statements. Also, the risk of not detecting a and to issue an auditors’ report that includes our opinion. material misstatement due to fraud is higher than the risk of Reasonable assurance is a high level of assurance, but is not detecting one resulting from error, as fraud may involve not a guarantee that an audit conducted in accordance deliberate concealment by, for example, forgery or intentional with ISAs (UK) will always detect a material misstatement misrepresentations, or through collusion. 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 88 FINANCIAL STATEMENTS Our audit testing might include testing complete populations ### Other required reporting of certain transactions and balances, possibly using data Companies Act 2006 exception reporting auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing Under the Companies Act 2006 we are required to report to complete populations. We will often seek to target particular you if, in our opinion: items for testing based on their size or risk characteristics. In – we have not obtained all the information and explanations other cases, we will use audit sampling to enable us to draw we require for our audit; or a conclusion about the population from which the sample – adequate accounting records have not been kept by the is selected. company, or returns adequate for our audit have not been A further description of our responsibilities for the audit of the received from branches not visited by us; or financial statements is located on the FRC’s website at: www. – certain disclosures of directors’ remuneration specified by frc.org.uk/auditorsresponsibilities. This description forms part law are not made; or of our auditors’ report. – the financial statements and the part of the Directors’ Remuneration Report, which is included within the Use of this report Remuneration Committee Report, to be audited are not in This report, including the opinions, has been prepared for and agreement with the accounting records and returns. 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 We have no exceptions to report arising from other purpose. We do not, in giving these opinions, accept or this responsibility. assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it Appointment may come save where expressly agreed by our prior consent Following the recommendation of the Audit Committee, in writing. 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Income Statement for the year ended 30 November 2023 | | | 2023 | | 2023 | | | 2023 | | | 2022 | | 2022 | | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Revenue | | | Capital | | Total Return | | | Revenue | | | Capital | | Total Return | | | | Notes | | | £ | | £ | | | £ | | | £ | | £ | | | £ | Gains (losses) on investments held at fair value 8 - 32,247,788 32,247,788 - (3,737,462) (3,737,462) through profit or loss 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 11,251,047 29,379,783 40,630,830 9,673,972 (6,051,444) 3,622,528 shareholders 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 FINANCIAL STATEMENTS # Balance Sheet at 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 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 # 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 FINANCIAL STATEMENTS # Cash Flow Statement for the year ended 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). 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## Statement of Accounting Policies for the year ended 30 November 2023 The company is incorporated in the United Kingdom board reviews special dividends and their treatment at under the Companies Act. The company is a public each meeting. company limited by shares and is registered in England Where the company has elected to receive its dividends and Wales. The address of the company’s registered in the form of additional shares rather than in cash, office is shown on page 62. The principal activity of the equivalent of the cash dividend is recognised as the company and the nature of its operations are set income. Any excess in the value of the shares received out in the strategic report on page 9. The company over the amount of the cash dividend is recognised in conducts its business so as to qualify as an investment capital reserves. trust company within the meaning of sub-section 1158 of Deposit interest receivable is accounted for on an the Corporation Tax Act 2010. The principal accounting accruals basis. policies are summarised below. They have all been applied consistently throughout the year and to the preceding year. 3 Investment management fee and administrative expenses – The investment management fee is calculated 1 Basis of preparation – The financial statements have on the basis set out in Note 2 to the financial statements been prepared under the historical cost convention, and is charged to capital and revenue in the ratio 70:30 to except for the revaluation of financial instruments held reflect the company’s investment policy and prospective at fair value through profit or loss and in accordance capital and income growth. Other administrative expenses with applicable United Kingdom law and UK Accounting are charged in full to revenue, except custodian handling Standards (UK GAAP), including Financial Reporting charges on investment transactions which are charged to Standard 102 - the Financial Reporting Standard capital. All expenses are on an accruals basis. applicable in the United Kingdom and Republic of Ireland (FRS 102), the requirements of the Companies Act 2006 4 Investments – As the company’s business is investing in and in line with the Statement of Recommended Practice financial assets with a view to profiting from their total “Financial Statements of Investment Trust Companies return in the form of increases in fair value, financial assets and Venture Capital Trusts” issued by the Association of are held at fair value through profit or loss in accordance Investment Companies (AIC SORP) in July 2022. with FRS 102 Section 11: ‘Basic Financial Instruments’ and In order to better reflect the activities of an investment Section 12: ‘Other Financial Instruments’. The company trust company, and in accordance with guidance issued manages and evaluates the performance of these by the AIC, supplementary information which analyses investments on a fair value basis in accordance with its the Income Statement between items of revenue and investment strategy, and information about investments is capital nature has been presented alongside the provided on this basis to the board. Income Statement. Investments held at fair value through profit or loss are The directors believe that it is appropriate to continue to initially recognised at fair value. After initial recognition, adopt the going concern basis in preparing the financial these continue to be measured at fair value, which for statements as the assets of the company consist mainly quoted investments is either the bid price or the last traded of securities, which are readily realisable and significantly price depending on the convention of the exchange on exceed liabilities. Accordingly, the directors believe that the which they are listed. Gains or losses on investments are company has adequate financial resources, to continue recognised in the capital column of the Income Statement. in operational existence for the foreseeable future. The Purchases and sales of financial assets are recognised company’s business, the principal risks and uncertainties on the trade date, being the date which the company it faces, together with the factors likely to affect its future commits to purchase or sell assets. development, performance and position are set out in the 5 Finance costs – In accordance with the FRS 102 Section Strategic Report on page 9. 11: ‘Basic Financial Instruments’ and Section 12 ‘Other 2 Income – Dividends received on equity shares are Financial Instruments’, long term borrowings are stated accounted for on an ex-dividend basis. Foreign dividends at the amortised cost being the amount of net proceeds are grossed up at the appropriate rate of withholding tax. on issue plus accrued finance costs to date. Finance costs are calculated over the term of the debt on the effective Special dividends are recognised on an ex-dividend basis interest rate basis. and treated as a capital or revenue item depending on the facts and circumstances of each dividend. The 94 FINANCIAL STATEMENTS Finance costs net of amortised premiums are charged to operate and in which its’ expenses are generally paid. capital and revenue in the ratio 70:30 to reflect the board’s Transactions in foreign currencies are translated into investment policy and prospective split of capital and pounds sterling at the rates of exchange ruling on the date revenue returns. of the transaction. Foreign currency monetary assets and liabilities are translated into pounds sterling at the rates Dividends payable on the 5% cumulative preference stock of exchange ruling at the balance sheet date. Profits and are classified as an interest expense and are charged in losses thereon are recognised in the capital column of the full to revenue. income statement and taken to the capital reserve. 6 Taxation – Where expenses are allocated between capital 11 Significantjudgements,estimatesandassumptions– and revenue, any tax relief obtained in respect of those In the application of the company’s accounting policies, expenses is allocated between capital and revenue on which are described above, the directors are required to the marginal method and the company’s effective rate make judgements, estimates, and assumptions about of corporation tax for the accounting period. Deferred the carrying amounts of assets and liabilities that are taxation is recognised in respect of all timing differences not readily apparent from other sources. The investment that have originated but not reversed at the balance portfolio currently consists of listed investments and sheet date, where transactions or events that result in an therefore no significant estimates have been made in obligation to pay more tax or a right to pay less tax in the valuing these securities. future have occurred. Timing differences are differences between the company’s taxable profits and its results as There are no significant judgements, estimates, stated in the financial statements. and assumptions. A deferred tax asset is recognised when it is more likely Estimates and underlying assumptions are reviewed on than not that the asset will be recoverable. Deferred tax an ongoing basis. Revisions to accounting estimates are is measured on a non-discounted basis at the rate of recognised in the period in which the estimate is revised corporation tax that is expected to apply when the timing if the revision affects only that period, or in the period of differences are expected to reverse. the revision and future periods if the revision affects both current and future periods. 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 95 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## 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 | | 2023 | | 2023 | | | 2022 | | 2022 | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | | Capital | | Total | | Revenue | | | Capital | | 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 FINANCIAL STATEMENTS 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 1 Directors' fees 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 | | 2023 | | 2023 | | | 2022 | | 2022 | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | | Capital | | Total | | Revenue | | | Capital | | Total | | | | | £ | | £ | | £ | | | £ | | £ | | £ | On 5% Cumulative Preference Stock repayable 22,500 - 22,500 22,500 - 22,500 after more than five years On 2.84% Fixed Rate Notes 2048 repayable after 215,882 503,725 719,607 215,800 503,532 719,332 more than five years 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 5. Taxation | | 2023 | | 2023 | | 2023 | | | 2022 | | 2022 | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | | Capital | | Total | | Revenue | | | Capital | | 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 FINANCIAL STATEMENTS 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 | | 2023 | | 2023 | | | 2022 | | 2022 | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue | | | Capital | | Total | | Revenue | | | Capital | | Total | | | | | £ | | £ | | £ | | | £ | | £ | | £ | Profit (loss) after taxation attributable to ordinary 11,251,047 29,379,783 40,630,830 9,673,972 (6,051,444) 3,622,528 shareholders 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## 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 FINANCIAL STATEMENTS 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 ## 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 FINANCIAL STATEMENTS 12. Reserves Capital Reserve Capital Gains (losses) Investment Redemption on sales of Holding Revenue Reserve Investments Gains (losses) 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 | Debt | Debt at | Debt | | --- | --- | --- | --- | | fair value | at par | fair value | at par | | 2023 | 2023 | 2022 | 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 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 | | | 2023 | | | 2022 | | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 30% Increase | | | 30% Decrease | | | 30% Increase | | | 30% Decrease | | | | in fair value | | | in fair value | | | in fair value | | | in fair value | | | | | | £ | | | £ | | | £ | | | £ | Revenue earnings Investment management fee (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 FINANCIAL STATEMENTS 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 | | | | 2023 | | | | 2023 | | | 2022 | | | | 2022 | | | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Other net assets | | | | Total Currency | | | | | | | Other net assets | | | | Total Currency | | | | | Investments | | | | (liabilities) | | | | Exposure | | | Investments | | | | (liabilities) | | | | 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 | | 2023 | | | 2023 | | | 2022 | | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 20% Decrease in | | | 20% Increase in | | | 20% Decrease in | | | 20% Increase in | | | | sterling against | | | sterling against | | | sterling against | | | sterling against | | | | foreign currencies | | | foreign currencies | | | foreign currencies | | | 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 | | | 2023 | | 2023 | | | 2023 | | 2022 | | | 2022 | | 2022 | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Fixed | | Floating | | | | | | | | Fixed | | Floating | | | | | | | | | | rate | | | rate | | | Nil | | | | rate | | | rate | | | Nil | | | | | | interest | | interest | | | Interest | | | Total | | interest | | interest | | | Interest | | 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 (25,100,721) 9,864,904 553,377,318 528,209,759 (25,091,114) 7,918,710 522,829,082 497,096,963 sheet 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. | | | | Amount | | | | Effective | | --- | --- | --- | --- | --- | --- | --- | --- | | | Maturity | | borrowed | | Coupon | | rate since | | 2023 | | date | | £ | | rate | inception* | 5% Cumulative Preference Stock n/a 450,000 5.00% n/a 2.84% Fixed Rate Note 2048 28/06/2048 25,000,000 2.84% 2.94% | | | | Amount | | | | Effective | | --- | --- | --- | --- | --- | --- | --- | --- | | | Maturity | | borrowed | | Coupon | | rate since | | 2022 | | date | | £ | | rate | inception* | 5% Cumulative Preference Stock n/a 450,000 5.00% n/a 2.84% Fixed Rate Note 2048 28/06/2048 25,000,000 2.84% 2.94% * 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 FINANCIAL STATEMENTS 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. | | Three | | | Between | | Between | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | months | | three months | | | one and | | More than | | | | | | or less | | and one year | | | five years | | five years | | Total | | | 2023 | | £ | | | £ | | £ | | £ | | £ | 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 | | Three | | | Between | | Between | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | months | | three months | | | one and | | More than | | | | | | or less | | and one year | | | five years | | five years | | Total | | | 2022 | | £ | | | £ | | £ | | £ | | £ | Other payables Finance costs of borrowing 366,250 366,250 - - 732,500 Revolving Credit Facility 197,214 10,000,000 - - 10,197,214 Other payables 877,710 - - - 877,710 Creditors: amounts falling due after more than one year Maturity of borrowings - - - 25,450,000 25,450,000 Finance costs of borrowing - - 2,930,000 15,247,500 18,177,500 1,441,174 10,366,250 2,930,000 40,697,500 55,434,924 Other creditors include trade creditors only, no accrued finance costs included. 107 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 # **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 FINANCIAL STATEMENTS 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 | | | 2023 | | | 2022 | | | 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Book Value | | | Fair Value | | | Book Value | | | 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 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 ## 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 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 # Investor Information (unaudited) ## 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. 112 INVESTOR INFORMATION ## Financial Calendar Year end 30 November. Full year results announced and Annual Report posted to shareholders in February. Annual General Meeting held in March/April. Half year results announced and half-yearly Financial Report posted to shareholders in July. ## Ordinary Dividends It is anticipated that dividends will be paid as follows: | 1st quarterly | June/July | | --- | --- | | 2nd quarterly | September | | 3rd quarterly | December | | Final | March/April | ## Preference Dividends Payable half-yearly 30 June and 31 December. ## Benchmark For the year under review the benchmark was 70% FTSE World Ex UK Index / 30% FTSE All-Share Index. For further information, the FTSE 100 Index was 7,576.59 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, last 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. 113 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 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. 114 INVESTOR INFORMATION # Notice of Meeting 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 115 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 # **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 PX51 Central Square 29 Wellington Street Leeds LS1 4DL ii) electronically through the website of the Company's registrar at www.signalshares.com (see note 8 below). iii) via LinkVote+ (see note 9 below). iv) via Proximity (see note 10 below). v) in the case of shares held through CREST, via the CREST system (see notes below). 7. If you return more than one proxy appointment, either by paper or electronic communication, the appointment received last by the Registrar before the latest time for the receipt of proxies will take precedence. You are advised to read the terms and conditions of use carefully. Electronic communication facilities are open to all shareholders and those who use them will not be disadvantaged. 8. To submit your proxy instructions electronically through the company's registrar, please complete the online form of proxy by logging on to www.signalshares.com. If you have not previously registered for the share portal you will need your investor code (IVC) which is detailed on your share certificate or is available by calling our Registrar, Link Group on 0371 664 0300 or, if calling from overseas, on +44 (0) 371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The Registrar is open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales. 9. Link Group, the company's registrar, has launched a shareholder app: LinkVote+. It's free to download and use and gives shareholders the ability to access their shareholding record at any time and allows users to submit a proxy appointment quickly and easily online rather than through the post. The app is available to download on both the Apple App Store and Google Play. QR codes to facilitate this are shown below. Your vote must be lodged by 12 noon on 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 ![img-15.jpeg](img-15.jpeg) GooglePlay ![img-16.jpeg](img-16.jpeg) 10. If you are an institutional investor, you may be able to appoint a proxy electronically via the Proximity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proximity, please go to www.proximity.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 116 INVESTOR INFORMATION 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. 117 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 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. 118 INVESTOR INFORMATION # Glossary ## UK GAAP performance measures **Net Asset Value** is the value of total assets less all liabilities. The Net Asset Value, or NAV, per ordinary share is calculated by dividing this amount by the total number of ordinary shares in issue. The debt in the company used in the calculation is measured at par value, that is, the net proceeds on issue plus accrued finance costs to date. As at 30 November 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. 119 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 | | 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). 120 OVERVIEW 6 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 THE BRUNNER INVESTMENT TRUST PLC ANNUAL REPORT 30 NOVEMBER 2023 The Brunner Investment Trust PLC 199 Bishopsgate London EC2M 3TY +44 (0)203 246 7000 www.brunner.co.uk 1