Final Results

RNS Number : 2380F

Brunner Investment Trust PLC

18 February 2015

 



For immediate release

18 February 2015

THE BRUNNER INVESTMENT TRUST PLC

Final Results for the year ended 30 November 2014

The following comprises extracts from the Company's Annual Financial Report for the year ended 30 November 2014.  The full annual financial report is being made available to be viewed on or downloaded from the company's website at www.brunner.co.uk. Copies will be posted to shareholders shortly.

MANAGEMENT REPORT

Chairman's Statement

The Net Asset Value (NAV) per ordinary share of the company increased by 3.6% closing at 614.9p on 30 November 2014. Although this was a positive absolute return, the benchmark returned 6.5% over the period. The NAV Total Return was 6.0% versus the benchmark figure of 9.6%. This is disappointing after the good outperformance achieved in the two previous years.

Earnings per Share

The company's earnings have fallen by 3.3% this year, from 15.2p to 14.7p, reflecting a number of factors including the impact of translating overseas earnings to sterling.

Dividends for the Year

This is our first year of paying quarterly dividends. It is proposed that a fourth and final dividend of 5.7p per share will be paid on 26 March 2015 to shareholders on the Register of Members at close of business on 6 March 2015, bringing the total payment for 2014 to 15.0p, an increase of 3.4% on last year. This requires a small contribution from revenue reserves (0.3p) but these reserves remain strong at 23.8p per share after the payment of the third quarterly dividend and the proposed final dividend.

The board's intention is to maintain a dividend which grows over time above the inflation rate, subject to performance and to maintaining adequate dividend cover over the longer term.

If the dividend is approved, this will mean we will have a 43 year record of increasing dividends.

Buy Back of Shares

No shares were bought back in the year. We will however be seeking shareholder approval to renew the share buy back facility for the coming year in order to be able to use this tool to reduce discount volatility and to generate modest enhancements to NAV per share in the right market circumstances.

Taking Brunner to a wider audience

We have continued our plans to boost awareness of Brunner and the company's investment objective and strategy amongst both private and professional investors to generate further interest in the company's shares and promote liquidity. The company is included in the list created by The Association of Investment Companies (AIC) of investments a financial adviser can recommend to retail investors under the Retail Distribution Review. Advertising and public relations programmes continue to form a key part of the trust's marketing strategy to make Brunner a 'front of mind' choice for potential investors. We are pleased to note that Brunner is popular with private investors as shares purchased via direct investor platforms almost doubled in 2014 (source: RD:IR).

The company has received positive press comment throughout the year in both national newspapers and personal finance magazines and we have also developed our dedicated website www.brunner. co.uk. The site provides regular updates on the company's performance and views from the fund managers as well as dividend information and regulatory market announcements. We have recently launched a monthly email update which shareholders can subscribe to via the website.

Brunner supports the AIC's 'Freedom in Pensions' campaign which looks at how investment companies can be used to help build a long term pension portfolio. Further details can be found on the home page of our website.

AIFMD

The EU's Alternative Investment Fund Managers Directive came into effect during 2014. Under this legislation the company is designated as an Alternative Investment Fund (AIF) and we appointed an Alternative Investment Fund Manager (AIFM), the existing manager, Allianz Global Investors (AGI). A new AIFM agreement was entered into with AGI, on substantially the same terms as the management agreement already in place. In addition, HSBC Bank plc, the existing custodian of the company's assets, was appointed as Depositary, to provide oversight over the operations carried out for the company and to ensure that appropriate standards are maintained. Some further details of the new arrangements are on pages 31 and 72 of the annual report.

The Board

Our corporate governance statement is posted on the website: www.brunner.co.uk which describes the board review process. We continue to conduct an annual appraisal of the board.

Outlook

While relatively benign, the outlook is not without risks. Geopolitical tensions will be fanned by competitive currency devaluation and the impact of lower oil receipts in some economies.

In the UK, the coming General Election looks to be a close contest and may well create uncertainty over the relationship with the EU. The Fed will need to communicate the path of US monetary policy with some skill to avoid excessive volatility in the bond market, where rate expectations are currently quite complacent. The rebalancing of the Chinese economy away from a reliance on investment and debt is far from complete and could have ramifications for property prices in the region.

In absolute terms the valuation of equity markets are above long run averages which in itself is a good reason for some caution. However, against this environment, we have confidence that our investment managers will continue to find well run companies they believe will bring beneficial returns over the longer term.

Annual General Meeting

The annual general meeting will be held at Trinity House, Trinity Square, Tower Hill, London EC3N 4DH, on 17 March 2015, and we, the board, look forward to meeting those shareholders who are able to attend.

Keith Percy

Chairman

17 February 2015

Risk

The principal risks identified by the board are set out in the table on this page, together with the actions taken to mitigate these risks. A more detailed version of this table, in the form of a risk matrix, together with mitigating actions, is reviewed and updated by the audit committee twice yearly. The principal risks are broadly unchanged from the previous year.

Description	Mitigation
Investment Strategy An inappropriate investment strategy, e.g., asset allocation or the level of gearing, may lead to underperformance against the company's benchmark index and peer group companies, resulting in the company's shares trading on a wider discount.	The board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and on which the board receives reports. Allianz Global Investors GmbH, UK branch (AGI) provides the directors with management information, including performance data and reports and shareholder analyses. The board monitors the implementation and results of the investment process with the investment managers, who attend all board meetings, and reviews data which show risk factors and how they affect the portfolio. The investment managers employ 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.
Market Volatility Market risk arises from uncertainty about the future prices of the company's investments. It represents the potential loss the company might suffer through holding investments in the face of negative market movements.	The board considers asset allocation, stock selection and levels of gearing at every board meeting and has set investment restrictions and guidelines that are monitored and reported on by AGI. The board also monitors currency movement and determines hedging policy as appropriate. At the year end the company had no hedging in place.
Financial and Liquidity Risk	The financial risks to the company and the controls in place to manage these risks are disclosed in detail in note 17 beginning on page 63 of the annual report.

Directors' Responsibility Statement

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable and prudent;

·      state whether applicable UK accounting standards have been followed; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for 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 comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The directors are responsible for ensuring that the Annual Financial Report, taken as a whole, is fair, balanced and understandable.

The directors, at the date of the approval of this Report, each confirm to the best of their knowledge that:

·      the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the company;

·      the Strategic Report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that they face; and

·      the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company's performance, business model and strategy.

For and on behalf of the board

Keith Percy

Chairman

For further information contact:

Melissa Gallagher

Head of Investment Trusts

Allianz Global Investors

Telephone: [phone]

PORTFOLIO ANALYSIS as at 30 November 2014

	% of Invested Funds
United Kingdom	50.01
North America	27.13
Continental Europe	12.81
Pacific Basin	5.39
Japan	2.86
Latin America	1.80
Total	100.0

THIRTY LARGEST EQUITY INVESTMENTS as at 30 November 2014

	Valuation
	30 November	% of
	2014	Invested
	£	Funds	Sector
Royal Dutch Shell 'B' Shares	9,787,043	2.97	Oil & Gas Producers
HSBC	9,609,502	2.92	Banks
Microsoft	7,663,827	2.33	Software & Computer Services
Vodafone	7,617,382	2.31	Mobile Telecommunications
BP	7,137,471	2.17	Oil & Gas Producers
GlaxoSmithKline	6,452,652	1.96	Pharmaceuticals & Biotechnology
Monsanto	6,362,361	1.93	Food Producers
Roche Holdings	6,349,300	1.93	Pharmaceuticals & Biotechnology
AbbVie	6,215,487	1.89	Pharmaceuticals & Biotechnology
Mothercare	5,726,627	1.74	General Retailers
Rio Tinto	4,950,612	1.50	Mining
Estee Lauder 'A' Shares	4,852,062	1.47	Personal Goods
Walgreen	4,602,007	1.40	Food & Drug Retailers
Xchanging	4,466,325	1.36	Support Services
UBM*	4,411,849	1.34	Media
BG Group	4,285,402	1.30	Oil & Gas Producers
Muenchener Rueckver	4,212,296	1.28	Non-Life Insurance
Unilever	4,147,631	1.26	Food Producers
EOG Resources	4,121,938	1.25	Oil & Gas Producers
Better Capital	4,100,000	1.24	Equity Investment
Apple	4,014,101	1.22	Technology & Hardware Equipment
Friends Life (formerly Resolution)	4,007,585	1.22	Life Insurance
Ameriprise Financial	3,998,346	1.21	Financial Services
Tyman	3,969,833	1.21	Construction & Materials
UBS	3,870,836	1.17	Banks
United Health	3,822,335	1.16	Health Care Equipment & Services
Wells Fargo	3,806,528	1.16	Banks
BHP Billiton	3,806,415	1.16	Mining
Visa	3,773,519	1.15	Financial Services
SMC	3,769,248	1.14	Industrial Engineering
	155,910,520	47.35	% of Total Invested Funds

* Includes UBM Rights 13 December 2014 of £1,021,301

INCOME STATEMENT

for the year ended 30 November 2014

			2014
	Revenue		Capital		Total Return
	£		£		£
					(Note C)
Net gains on investments at fair value	-		14,137,065		14,137,065
Net gains on foreign currencies	-		27,279		27,279
Income	9,030,506		-		9,030,506
Investment management fee	(434,377)		(1,013,546)		(1,447,923)
Administration expenses	(595,417)		(6,710)		(602,127)
Net return before finance costs and taxation	8,000,712		13,144,088		21,144,800
Finance costs: interest payable and similar charges	(1,343,188)		(3,081,606)		(4,424,794)
Net return on ordinary activities before taxation	6,657,524		10,062,482		16,720,006
Taxation	(319,765)		-		(319,765)
Net return on ordinary activities attributable to ordinary shareholders	6,337,759		10,062,482		16,400,241
Return per ordinary share
(basic and diluted)                    (Note B)	14.71p		23.35p		38.06p

BALANCE SHEET

as at 30 November 2014

				2014 £
Investments held at fair value through profit or loss				329,280,814
Net current assets				(1,318,754)
Total assets less current liabilities				327,962,060
Creditors - amounts falling due after more than one year				(49,599,030)
Total net assets				278,363,030
Capital and reserves
Called up share capital				10,772,354
Capital redemption reserve				5,227,646
Capital reserve				248,284,533
Revenue reserve				14,078,497
Equity shareholders' funds				278,363,030
Net asset value per ordinary share				646.0p
The net asset value is based on 43,089,418 ordinary shares in issue.

INCOME STATEMENT

for the year ended 30 November 2013

			2013
	Revenue		Capital		Total Return
	£		£		£
					(Note C)
Net gains on investments at fair value	-		45,481,385		45,481,385
Net losses on foreign currencies	-		(18,484)		(18,484)
Income	9,112,784		-		9,112,784
Investment management fee	(412,926)		(963,493)		(1,376,419)
Administration expenses	(488,385)		(9,215)		(497,600)
Net return before finance costs and taxation	8,211,473		44,490,193		52,701,666
Finance costs: interest payable and similar charges	(1,348,838)		(3,094,788)		(4,443,626)
Net return on ordinary activities before taxation	6,862,635		41,395,405		48,258,040
Taxation	(295,705)		-		(295,705)
Net return on ordinary activities attributable to ordinary shareholders	6,566,930		41,395,405		47,962,335
Return per ordinary share
(basic and diluted)                    (Note B)	15.22p		95.94p		111.16p

BALANCE SHEET

as at 30 November 2013

				2013 £
Investments held at fair value through profit or loss				300,320,884
Net current assets				17,775,478
Total assets less current liabilities				318,096,362
Creditors - amounts falling due after more than one year				(49,842,518)
Total net assets				268,253,844
Capital and reserves
Called up share capital				10,772,354
Capital redemption reserve				5,227,646
Capital reserve				238,222,051
Revenue reserve				14,031,793
Equity shareholders' funds				268,253,844
Net asset value per ordinary share				622.6p
The net asset value is based on 43,089,418 ordinary shares in issue.

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 30 November 2014

	Called up Share Capital	Capital Redemption Reserve	Capital Reserve	Revenue Reserve	Total
	£	£	£	£	£
Net assets at 1 December 2012	10,810,729	5,189,271	197,557,672	13,636,402	227,194,074
Revenue return	-	-	-	6,566,930	6,566,930
Shares repurchased during the year	(38,375)	38,375	(731,026)	-	(731,026)
Dividends on ordinary shares	-	-	-	(6,171,539)	(6,171,539)
Capital return	-	-	41,395,405	-	41,395,405
Net assets at 30 November 2013	10,772,354	5,227,646	238,222,051	14,031,793	268,253,844
Net assets at 1 December 2013	10,772,354	5,227,646	238,222,051	14,031,793	268,253,844
Revenue return	-	-	-	6,337,759	6,337,759
Dividends on ordinary shares	-	-	-	(6,291,055)	(6,291,055)
Capital return	-	-	10,062,482	-	10,062,482
Net assets at 30 November 2014	10,772,354	5,227,646	248,284,533	14,078,497	278,363,030

CASH FLOW STATEMENT

For the year ended 30 November 2014

		2014		2014		2013
		£		£		£
Net cash inflow from operating activities				7,563,571		6,955,317
Return on investments and servicing of finance
Interest paid		(4,645,782)				(4,650,919)
Dividends paid on preference stock		(22,500)				(22,500)
Net cash outflow from servicing of financing				(4,668,282)		(4,673,419)
Capital expenditure and financial investment
Purchase of fixed asset investments		(79,721,202)				(92,452,435)
Sale of fixed asset investments		65,235,890				102,158,016
Net cash (outflow) inflow from financial investments				(14,485,312)		9,705,581
Equity dividends paid				(6,291,055)		(6,171,539)
Net cash (outflow) inflow before financing				(17,881,078)		5,815,940
Financing
Repurchase of ordinary shares for cancellation				-		(731,026)
(Decrease) increase in cash				(17,881,078)		5,084,914

Notes

Note A

The financial statements have been prepared under the historical cost basis, except for the measurement at fair value of the investments, and in accordance with applicable accounting standards, the United Kingdom law and United Kingdom Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice - 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (SORP) issued in January 2009 by the Association of Investment Companies.

Note B

The return per ordinary share is based on a weighted average number of shares in issue of 43,089,418 (30 November 2013 - 43,146,811) ordinary shares in issue.

Note C

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 derive from continuing operations. No operations were acquired or discontinued in the year.

A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the company have been reflected in the Income Statement.

Included in the cost of investments are transaction costs and stamp duty on purchases of £232,222 (2013 - £212,118) and transaction costs on sales of £61,222 (2013 - £77,980).

Note D

Valuation - As the company's business is investing in financial assets with a view to profiting from their total return in the form of increases in fair value, financial assets are designated as held at fair value through profit or loss in accordance with FRS 26 'Financial Instruments: Recognition and Measurement'. The company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy, and information about the investments is provided on this basis to the board.

Note E

Dividends on Ordinary Shares

		2014		2013
		£		£
Dividends paid on ordinary shares:
Final - 8.50p paid 26 March 2014 (2013 - 8.30p)		3,662,601		3,586,174
First Interim - 3.00p paid 27 June 2014		1,292,683		-
Second Interim - 3.10p paid 22 September 2014 (2013 - 6.00p)		1,335,771		2,585,365
		6,291,055		6,171,539

Dividends payable at the year end are not recognised as a liability under FRS 21 'Events after Balance Sheet Date' (see Annual Financial Report - Statement of Accounting Policies). Details of these dividends are set out below.

		2014		2013
		£		£
Third interim dividend - 3.20p paid 19 December 2014		1,378,861		-
Final proposed dividend - 5.70p payable 26 March 2015 (2014 - 8.50p)		2,456,096		3,662,601
		3,834,957		3,662,601

Dividends were paid on a quarterly basis for the first time for the year ended 30 November 2014. Three final dividend payments have been declared and a final dividend is proposed to shareholders for approval at the annual general meeting. 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.

Note F

The financial information for the year ended 30 November 2014 has been extracted from the statutory accounts for that year. The auditor's report on those accounts was unqualified and did not contain a statement under either section 498(2) or (3) of the Companies Act 2006. The annual financial report has not yet been delivered to the registrar of companies.

The financial information for the year ended 30 November 2013 has been extracted from the statutory accounts for that year which have been delivered to the registrar of companies. The auditor's report on those accounts was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

The full annual financial report is available to be viewed on or downloaded from the company's website at www.brunner.co.uk .  Neither the contents of the company's website nor the contents of any website accessible from hyperlinks on the company's website (or any other website) is incorporated into, or forms part of this announcement.

 

END

 

 

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