Brunner Investment Trust : Results for the year ended 30 November 2016

14 February 2017

THE BRUNNER INVESTMENT TRUST PLC

Final Results for the year ended 30 November 2016.

The following comprises extracts from the Company's Annual Financial Report for the year ended 30 November 2016. 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

Performance

This is my first year as Chairman of Brunner and it is pleasing to note that the Net Asset Value (NAV) per ordinary share of the company increased by 20.2% on a total return basis, outperforming the benchmark index of 50% All-Share Index and 50% FTSE World Ex UK Index which generated a total return of 18% over the period.

This outperformance was generated by a combination of good stock selection in overseas markets and a move early in our financial year to increase the weighting of the overseas portfolio.

Earnings per Share

Good dividend growth from our existing portfolio plus the benefit from translating dividends in overseas currencies back into sterling after the large depreciation in sterling, has benefited the company's earnings. As a result the company's earnings per share rose by 16.3% this year, from 14.1p to 16.4p.

Dividends for the Year

It is proposed that a fourth and final dividend of 5.9p per share will be paid on 24 March 2017 to shareholders on the Register of Members at close of business on 24 February 2017, bringing the total payment for 2016 to 15.8p, an increase of 3.3% on last year. Revenue reserves remain strong at 23.3p per share, after the payment of the third quarterly dividend and the proposed final dividend.

The board has not increased dividends this year in line with the very strong earnings growth as it wishes to spread that earnings growth over a number of future years' dividends and also to allow the portfolio manager as much freedom as possible to seek out the companies with the best dividend and earnings opportunities wherever they are based geographically.

However, the board intends 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 the company will have a 45 year record of increasing dividends.

Investment policy and benchmark

For the majority of its history, Brunner has been managed as two separate portfolios, UK equities and overseas equities. Lucy Macdonald, who has managed the overseas portfolio since 2005 became sole manager in June 2016 and the two portfolios were combined to become one global equity portfolio. The investment manager's review starting on page 17 of the annual financial report sets out how the portfolio has been managed to ensure greater consistency since she became sole manager and how the portfolio is focussing on her best global equity ideas.

In the half year report published in July last year I said that the board was considering proposing a revision to the benchmark to incorporate a higher proportion in overseas equities. Our portfolio

manager has been steadily investing an increasing proportion of the portfolio in overseas equities throughout the year. This is to diversify the income stream and to avoid dependence for the dividend on a small number of large UK companies. It allows the manager to take advantage of attractive income opportunities in overseas markets.

The board and manager believe that this will produce a more robust and diversified stream of earnings in the future and the Board is proposing that this is reflected in a change in the current benchmark from 50% FTSE All-Share Index and 50% FTSE World Ex UK Index to 70% FTSE World Ex UK Index and 30% FTSE All-Share Index.

This change to the benchmark is being proposed for shareholder approval as part of a restated Investment Policy at the Annual General Meeting on 21 March and, if approved, will take effect from that date.

Debentures

Even though our net asset value, when calculated on a fair value of debt, takes account of the high cost of the company's existing debentures, the board believes that they are an added complication for a trust which aims to appeal to a broad spectrum of private investors. As the board has noted in previous annual reports, we continue to look at whether there are any viable early redemption options. One of our debentures matures in January 2018 and the directors have decided that they will redeem this for cash at that time and accordingly we have built up the cash reserves to finance this.

The board continues to actively consider whether it would be beneficial to shareholders to repay the 2023 debenture early and monitors carefully how the cost of doing so varies with changes in market yields. There is detail on the debentures in Note 11 on page 67 of the annual financial report and we consider our position further in our Viability Statement on page 13 of the annual financial report.

Buyback of Shares

The discount has traded at an average of 15.5% (with debt at fair value on a cum income basis) during the period and it has been wider than the sector average (7.9%).

The board does not consider this a satisfactory situation and has used its buyback powers when it appeared beneficial to shareholders to do so. There is a difficult balance to be struck here as the consolidation of many retail advisory firms has resulted in their desire for an increased level of liquidity in the shares they recommend to their clients, so a buyback programme that materially reduces the size of the company's market capitalisation is likely to have disappointing long term consequences.

We will be seeking shareholder approval to renew the share buyback facility for the coming year in order to be able to continue to use this mechanism when in the interests of shareholders.

Marketing

The presence of advertising and other media coverage can help make Brunner a 'front of mind' investment choice for those considering their long term investment needs, such as saving for retirement. Accordingly, Brunner operates a targeted and coordinated marketing programme, that aims to raise awareness of its investment remit to potential investors as well as communicating the latest developments to existing shareholders. The board is encouraged by the steady buying we see from retail shareholders and it is encouraging to note that Allianz Global Investors won the 'Best Investor Education' award voted for by private investors of Shares Magazine. A successful marketing strategy stands to benefit all of the company's shareholders. Expenses of running the marketing programme are kept to a reasonable level and are monitored closely by the board to ensure that value for money is being delivered.

Outlook

The US economy is making good progress and there is a slow and steady economic recovery in Europe. Despite the unsettled political outlook the companies we invest in are producing good earnings and dividend growth. Overall the backdrop for equity markets leaves us cautiously optimistic going into 2017, with positive support from earnings and a pro-growth US administration contending with relatively high valuations, higher US interest rates and political uncertainty. Against this background, we believe that your company's balanced portfolio risk profile which has navigated the volatile markets in 2016, will continue to benefit investors.

Annual General Meeting

The Annual General Meeting will be held at Trinity House, Trinity Square, Tower Hill, London EC3N 4DH, on 21 March 2017, and we, the board, look forward to meeting those shareholders who are able to attend.

Carolan Dobson Chairman

14 February 2017

Risk 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 table below, 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 43 of the annual financial report.

Risk Appetite

The directors' approach to risk is to identify where there are risks and to note mitigation actions taken and then to look at the probability of the event and consider the extent to which the resulting residual risk is acceptable, which is defined as the board's risk appetite. As a result of this exercise the risks are rated as 'red' or 'high' when the risk is of concern and sufficient mitigation measures are not possible or not yet in place; 'amber' or 'moderate' when the risk is of concern but sufficient measures are defined and have been or are being implemented; and 'green' or 'acceptable' when the risk is acceptable and no further measures are needed. The nature of the company's business means that a certain amount of risk must be taken for the objectives to be met and it is not surprising that portfolio risk types earn amber ratings.

Principal Risks

A more detailed version of the table below, in the form of a risk matrix, is reviewed and updated by the audit committee at least twice yearly. The principal risks are broadly unchanged from the previous year, although they have been added to by the inclusion of the new category of emerging risks this year.

Principal Risks identified	Controls and mitigation	Risk Appetite*
Portfolio Risk Significant market movements may adversely impact the investments held by the company increasing the risk of loss or challenges to the investment strategy. Reduction of dividends across the market affecting the portfolio yield and the ability to pay in line with dividend policy. Exposure to significant exchange rate volatility could affect the performance of the investment portfolio	The board meets with the portfolio managers and considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines that are monitored and reported on by AllianzGI. The board monitors yields and can modify investment parameters and consider a change to dividend policy. The board receives reports from the manager on the stress testing of the portfolio at least twice each year and contact is made with the chairman and board if necessary between board meetings. Currency movements are monitored closely and are reported to the board.	Amber
Business Risk 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. Risk that there are insufficient liquid funds to pay back debentures on maturity.	The board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and on which the board receives reports at every meeting. The board monitors the implementation and results of the investment process with the investment managers, who attend all board meetings, and reviews data which shows risk factors and how they affect the portfolio. The manager employs the company's gearing tactically within a	Green