The Lindsell Train Investment Trust plc - Annual Financial Report
(the “Company” or “LTIT”)
This announcement contains regulated information
Annual Financial Report for the year ended
Company Summary
The Company
The Company is a
Investment Objective
The objective of the Company is to maximise long-term total returns with a minimum objective to maintain the real purchasing power of Sterling capital.
Investment Manager
Further details concerning the Agreements with the Company’s service providers can be found in Appendix 3.
Performance and Benchmark
The performance and financial highlights are provided on pages 4 and 5 of the Annual Report.
The Company compares its performance and calculates its performance fee relative to its benchmark, the MSCI World Index in Sterling.
Dividend
An unchanged final dividend of £51.50 per Ordinary Share (2023: a final dividend of £51.50 per Ordinary Share) is proposed for the year ended
Annual General Meeting
The notice of the Annual General Meeting, scheduled for Wednesday,
Capital Structure
The Company’s capital structure comprises 200,000 Ordinary Shares of
Business Review
The Directors present their Strategic Report for the Company for the year ended
Further information on how the Directors have discharged their duty under Section 172 of the Companies Act 2006 can be found on pages 21 to 23 of the Annual Report.
The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the date of this Report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
Business Model
The objective of the Company is to maximise long-term total returns with a minimum objective to maintain the real purchasing power of Sterling capital.
The Company’s strategy is to create value for shareholders through achieving its investment objective.
As an externally managed investment company the Company has no executive directors, employees or internal operations. The Company delegates its day-to-day management to third-parties.
The Board is responsible for all aspects of the Company's affairs, including the setting of parameters for and monitoring of the investment strategy as well as the review of investment performance and policy. It also has responsibility for all strategic issues and corporate governance matters.
Reviews of the financial year and commentary on the future outlook are presented in the Chairman’s Statement and the Manager’s Report.
Investment Objective
The objective of the Company is to maximise long-term total returns with a minimum objective to maintain the real purchasing power of Sterling capital.
Investment Policy
The Investment Policy of the Company is to invest
(i) in a wide range of financial assets including equities, unlisted equities, bonds, funds, cash and other financial investments globally with no limitations on the markets and sectors in which investment may be made, although there is likely to be a bias towards equities and Sterling assets, consistent with a Sterling-dominated investment objective. The Directors expect that the flexibility implicit in these powers will assist in the achievement of the investment objective;
(ii) in LTL managed fund products, subject to Board approval, up to 25% of its gross assets; and
(iii) in LTL and to retain a holding, currently 23.9%, in order to benefit from the expected long term growth of the business of the Company’s Manager.
The Company does not envisage any changes to its objective, its investment policy or its management for the foreseeable future. The current composition of the portfolio as at
Diversification
The Company expects to invest in a concentrated portfolio of securities with the number of equity investments averaging fifteen companies. The Company will not make investments for the purpose of exercising control or management and will not invest in the securities of, or lend to, any one company (or other members of its group) more than 15% by value of its gross assets at the time of investment. The Company will not invest more than 15% of gross assets in other closed-ended investment funds.
Gearing
The Directors have discretion to permit borrowings up to 50% of the Net Asset Value. However, the Directors have decided that it is in the Company’s best interests not to use gearing. This is in part a reflection of the size and risk associated with the Company’s unlisted investment in LTL, but also in response to the additional administrative burden required to adhere to the full scope regime of the AIFMD.
Dividends
The Directors’ policy is to pay annual dividends consistent with retaining the maximum permitted earnings in accordance with investment trust regulations, thereby building revenue reserves.
In a year when this policy would imply a reduction in the ordinary dividend the Directors may choose to maintain the dividend by increasing the percentage of revenue paid out or by drawing down on revenue reserves. Revenue reserves are currently more than twice the annual proposed 2024 ordinary dividend.
All dividends have been distributed from revenue or revenue reserves.
Financial Highlights for the Year
Performance Comparisons 2024 2023 Net Asset Value total return per Ordinary Share*^ +2.1% -0.4% Share price total return per Ordinary Share*^ -19.8% -0.7% MSCI World Index total return (Sterling) +22.5% -1.0% UK RPI Inflation (all items) 4.3% 13.5%
* The Net Asset Value and the share price at
^ Alternative Performance Measure (“APM”). See Glossary of Terms and Alternative Performance Measures.
Source: Morningstar and Bloomberg.
Five Year Historical Record
Net revenue Dividends Dividends Net Share available for on Ordinary on Ordinary Asset Value price per Gross Ordinary Shares Shares per Ordinary Ordinary income Shares Cost Rate Share Share To 31 March £’000 £’000 £’000 (£) (£) (£) 2020 12,395 10,598 8,800 44.00 956.65 1,060.00 2021 13,782 12,002 10,000 50.00 1,185.58 1,420.00 2022 14,784 12,729 10,600 53.00 1,113.81 1,105.00 2023 14,135 12,211 10,300 51.50 1,056.95 1,052.50 2024 12,005 10,214 10,300 51.50 1,026.43 801.00
Principal Data
31 March 2024 31 March 2023 % Change Shareholders’ funds (£’000) 205,285 211,390 -2.9% NAV per Ordinary Share £1,026.43 £1,056.95 -2.9% Discount to NAV^ 22.0% 0.4% Share price per Ordinary Share £801.00 £1,052.50 -23.9% Recommended final dividend per Ordinary £51.50 £51.50 – Share Recommended special dividend per Ordinary – – – Share Total dividends recommended for the year £51.50 £51.50 Dividend yield^ 6.4% 4.9% Ongoing Charges^ 0.8% 0.9% Earnings/(loss) per Ordinary Share – basic £20.97 £(3.85) Revenue £51.07 £61.06 Capital £(30.10) £(64.91) NAV total return^† +2.1% -0.4% Share price total return^† -19.8% -0.7% Benchmark (MSCI World Index in Sterling)† +22.5% -1.0%
^ Alternative Performance Measure (see Glossary).
† These are percentage change figures for the year to 31 March.
Please see Glossary of Terms for an explanation of terms used.
Chairman’s Statement
At
The benchmark index proved a tough comparator to beat for the fourth successive year. Both the NAV and share price performances compared unfavorably with the Company’s benchmark index, the MSCI World Index in Sterling, which over the same period had a much better total return of 22.5%.
During the year to
Lindsell Train Limited
For the third time in four calendar years LTL’s core strategies, Global,
These pressures on LTL’s business have resulted in clients withdrawing funds. All LTL’s pooled funds, except for
Whilst the fall in FUM has led to a decline in revenues, it is reassuring to see that the Company’s salary and bonus cap has helped to ensure that overall costs have declined proportionately and operating profit margins remain constant at above 65%. Over the year there have been some important generational changes within the company. A new leadership team is evolving at LTL with the appointment of
The changes outlined above represent part of a long-term plan to ensure that the Company remains true to the investment and business principles first enshrined by Nick and Michael. It is important that clients who have committed their savings to LTL for multi-year periods know that the approach they first accessed remains consistent even if the personnel change. Certainly the Board, as a client and co-investor in LTL, is reassured by the changes made, the progress of succession and the constancy of how LTL invests.
That constancy, together with all the nuances surrounding it, is outlined in Nick’s Manager Review that follows. In it he describes an optimistic and encouraging outlook for the quoted assets which the Company owns. It is self-evident that this optimism also extends to LTL as similar assets underlie all its client portfolios.
The Valuation of Lindsell Train Limited
The valuation methodology was last amended at
As part of its regular valuation, the Board compares LTL’s value with other quoted fund management companies. What stands out is LTL’s profitability that in almost all cases is higher than its peers. Furthermore, LTL retains considerable financial flexibility and optionality with cash resources of £108m in addition to the £7.6m invested in the
The Company’s Dividend
An important consequence of the fall in LTL’s FUM and the contraction of its business is the concomitant decline in LTL’s dividend paying capacity. This is a risk my predecessor consistently warned about in past annual statements. In the year to
In framing its dividend policy, the Company has always assumed that retaining as much net income as allowable within the Company is preferable and more tax efficient for the Company’s shareholders. This principle runs alongside the Board’s desire to see the Company’s dividends grow as returns compound the increasing value of the underlying investments.
In the current year, owing to the decline in the Company’s net revenue after taxation, the Board has decided to pay an unchanged ordinary dividend of £51.50 per share. Like last year, the Company will omit paying a special dividend as LTL earned no performance fees in the year to
To maintain or grow the Company’s dividend in the future is likely to require a combination of factors, notably a material improvement in LTL’s relative performance, a stabilisation in LTL’s FUM and consequent growth in its cash flow together with the continued compounding of the Company’s investments. That will be asking a lot over the next year and the Board will need to see evidence of this materialising before utilising more revenue reserves in order to maintain the Company’s dividend in 2025.
Board Changes
During the year the Board was delighted to welcome
I would like to take this opportunity to thank Julian for his considerable contribution to the Company during his nine years as a director, of which eight were as the Chairman of the Board. He brought an in-depth knowledge of the investment trust sector, together with extensive experience of wider financial markets, wisdom, understanding and sound common sense to all his actions and decisions whilst on the Board. We wish him well in the future.
The Annual General Meeting (“AGM”)
This year the AGM will be held at
Considerations for the Future
There is no doubt that the challenges which the Company and LTL face are considerable but they are not intractable. Throughout this difficult period of performance LTL has kept true to its investment disciplines. It owns a limited number of holdings in great businesses which rarely, if ever change; this allows the underlying companies to do the job of compounding earnings and value over time. It is a differentiated approach that stands out against the crowd and is one that has generated above average return for LTL’s clients for significant periods of time in the past and the Board believes will continue to do so in the future.
Roger Lambert
Chairman
(All ordinary shares unless otherwise stated)
% of Look through Fair value net basis % of Holding Security £’000 assets net assets† 6,378 Lindsell Train Limited 69,002 33.6 33.6 235,000 London Stock Exchange 22,302 10.9 11.1 12,500,000 WS Lindsell Train North American 19,624 9.6 – Equity Fund Acc* 410,000 Nintendo 17,574 8.6 8.6 425,000 Diageo plc 12,433 6.0 6.3 363,000 RELX 12,429 6.0 6.3 222,000 Unilever 8,825 4.3 4.5 149,980 Mondelez International 8,306 4.0 4.4 1,263,393 A.G. Barr 7,353 3.6 3.6 89,000 Heineken 5,688 2.8 2.8 96,800 PayPal 5,131 2.5 2.8 39,099 Laurent Perrier 4,011 1.9 1.9 420,000 Finsbury Growth & Income Trust* 3,612 1.8 – 117,191 Universal Music Group 2,792 1.4 1.4 Indirect Holdings – – 9.6 Total Investments 199,082 97.0 96.9 Cash & Other net current assets 6,203 3.0 3.1 Net Assets 205,285 100.00 100.00
† Look-through basis: Percentages held in each security are adjusted upwards by the amount of securities held by LTL managed funds owned by the Company. A downward adjustment is applied to the fund‘s holdings to take into account the underlying holdings of these funds. It provides shareholders with a measure of stock specific risk by aggregating the direct holdings of the Company with the indirect holdings held within LTL managed funds.
* LTL managed funds.
Leverage^
We detail below the equity exposure of the Funds managed by LTL as at
Net Equity Exposure WS Lindsell Train North American Equity Fund Acc 98.7% Finsbury Growth & Income Trust PLC 101.1%
^ See glossary.
Analysis of Investment Portfolio at
Breakdown by Location of Listing
(look-through basis)^
UK * 66.0%USA 16.1%Japan 8.6%Europe excludingUK 6.2% Rest of World 0% Cash & Other net current assets 3.1% 100.0%
Breakdown by Location of Underlying Company Revenues
(look-through basis)^
USA ** 31.3%Europe excludingUK ** 25.1%UK ** 24.7% Rest of World 12.5%Japan 3.3% Cash & Other net current assets 3.1% 100.0%
Breakdown by Sector
(look-through basis)^
Financials 49.8% Consumer Staples 25.4% Communication Services 11.5% Industrials 7.4% Information Technology 2.3% Consumer Discretionary 0.4% Health Care 0.1% Cash & Other net current assets 3.1% 100.0%
^ Look-through basis: this adjusts the percentages held in each asset class, country or currency by the amount held by LTL managed funds. It provides shareholders with a more accurate measure of country and currency exposure by aggregating the direct holdings of the Company with the indirect holdings held by the LTL funds.
* LTL accounts for 33.6% and is not listed.
** LTL accounts for 14 percentage points of the
Manager’s Report
At the half year I gave a review of the strategic investment case for ten of these direct equity holdings. Rather than repeat those reviews in this report, I instead give an update on developments for each holding over the most recent six-month period, including an account of why we initiated a new position in Universal Music Group. With one exception (Laurent-Perrier) each of the eleven is also a holding in our Global and/or
Over the six months to
The two fallers were Diageo (-3.6%) and Unilever (-2.1%).
Diageo unpleasantly surprised investors including us, in Q4 2023 with news that its Latin American business (c.11% revenues) was suffering an unexpected and marked contraction. Six months later the situation there seems to be stabilising. What has proven a longer-lasting drag on Diageo’s share price is the slowing growth in its biggest geography,
Unilever’s price fall is, we think, a sign of investors’ doubts about the willingness or ability of its board to take actions to unlock the value that most observers, including us, see in its global brands and distribution networks. Notwithstanding the share price weakness, we are encouraged by the air of urgency and competence being displayed by Unilever’s new CEO, CFO and Chairman (all appointed in 2023) and hope that they can deploy the company’s strong balance sheet and cash flows in a way that reignites growth and restores investor confidence, including improving the current lowly rating of its shares.
The two effectively unchanged share prices were Laurent-Perrier and Mondelez.
Laurent-Perrier’s current year revenues are forecast to be barely up year-on-year, for similar reasons to Diageo – in 2023/4 consumers are, at the margin, drinking less highest quality alcoholic beverages. But also like Diageo, it is important to consider that Laurent-Perrier’s revenues this year will be still c.25% higher than those of 2020. The trend towards global consumers drinking lower volumes of alcohol, but instead drinking more premium, high quality products continues and should be beneficial for the owners of iconic premium brands like Laurent-Perrier or
Mondelez has continued to meet or exceed most analysts’ expectations for business and earnings growth (and our own expectation). Last year organic revenues were up over 14%, reported adjusted earnings per share grew at 19% and the dividend was up 10%. More growth is forecast for this year. Perhaps the current 20x earnings might be considered a fair valuation for Mondelez shares and this explains the dull recent share price. To us, however, the reliability of the brands and the growing cash they generate argues for a higher valuation. We would not consider selling an asset of this calibre below 30x!
The shares that made money for their owners in local currency terms over the last six months were Heineken (4.8%), PayPal (14.6%), London Stock Exchange Group (“LSEG”) (15.3%), A.G. Barr (18.5%), RELX (23.4%) and Nintendo (31.6%).
Confidence in Heineken’s earnings power is gradually recovering, as commodity prices subside, but we expect there will need to be an acceleration in beer consumption across the company’s emerging market footprint, particularly in its Asian strongholds, before the shares really rerate.
PayPal shares have recovered from recent lows, but are still ostensibly lowly valued at 12x estimated forward earnings. It is reassuring to see the board responding to that low valuation by retiring shares; buying back
LSEG’s shares have also recovered from their lows of 2022, up nearly 50% since then, but are still a few per cent below the all-time high they hit in 2021, just before the completion of its merger with Refinitiv. That merger has gone well and we hope LSEG’s shares can hit new highs, particularly once the benefits of its recent joint venture with Microsoft become apparent, with product launches due in the second half of 2024.
A.G. Barr’s shares have rallied after a period of torpor; they had gone sideways since 2019. The rally reflects a number of factors. Most important, this well-run soft drinks manufacturer generates steady operating margins and a Return on Capital in the mid-teens – 16% and 18% respectively at the recent interim results. These returns allow the company to generate cash, on top of its existing net cash and debt free balance sheet. That cash has been used to support existing brands, but also to acquire new ones, which can benefit from the company’s manufacturing and distribution capabilities and its marketing nous. The departing CEO,
RELX continues to impress investors with the consistency not only of its growth, but its adherence to a clearly articulated strategy. That strategy is making RELX data services ever more valuable to the global scientific, legal and insurance industries. This is one of the biggest holdings we have at LTL and we believe it can be a big driver of returns for both our Global and
Nintendo’s share price reflects mingled excitement and impatience about the timing of the launch of its next gaming console – probably to be released in early 2025. Sales of the current one, Switch, have exceeded all expectations and its success has allowed Nintendo to sell more copies of its first-party game software (which is where it earns the richest profits) than ever before. As with Apple, there is always a degree of apprehension before the release of a next generation device – can it possibly match or beat the success of its predecessor? All one can say are that the portents are good. Nintendo shares have proven to be a good proxy for the multi-decade increase in popularity of interactive entertainment. As each generation of gamers grows in size and with the promise of technology enhancing the gaming experience even more, Nintendo’s centrality to the industry looks ever more strategically valuable to us. A P/E of 18x for this franchise seems modest.
Universal Music Group’s (“UMG”) share price also rose over the last six months, up 12.7%, while we continued to accumulate a holding. The paragraph that follows provides our summary justification for making this investment. The shares have now moved back toward the upper end of their post-IPO trading range, but that means all the potential alluded to below remains still to come.
UMG stands out for its impressive oligopolistic position (which importantly is effectively global). As the world’s leading record label, built through a generation of consolidation (MCA and Decca, arguably UMG’s predecessors, were founded in 1924 and 1929 respectively), UMG controls roughly a third of the planet’s recorded music (ahead of the other two ‘majors’ Sony on c.23% and Warner on c.16%), curating, producing, and promoting artists. On top of this, as a publisher, UMG holds nearly a quarter of all written songs (just behind Sony’s c.25%, and ahead of Warner’s 12%). Spun out from Vivendi as an independent listed entity in 2021, backed by major strategic shareholders such as Tencent and
This perhaps reflects over-optimism at float. However, estimated FY23 sales and operating profit were c.50% higher than in FY19, taking UMG’s adjusted forward P/E ratio to a mid-20s level. Music is ingrained and integral to the daily life of swathes of humanity, with engagement levels rising as new distribution channels widen access. Monetisation (though not consumption) has eluded the industry at times in the past, but these issues appear well resolved by growing subscription services, with new markets (such as video games or social media) also emerging. As core content owners and market leaders UMG holds a uniquely strong hand. The importance of this dominance is clear, given that globally the top 1% of artists represent 90% of music streams. If management can embrace these tailwinds and execute on analyst expectations for low double-digit growth, this should prove an attractive entry point.
In summary, we believe your portfolio (and by extension other LTL portfolios) comprise a combination of companies remarkable for their strong consumer brands or unique intellectual property. Such companies have generated attractive investment returns for patient owners over many decades and we see no reason to expect coming ones to be any different.
Nick Train
Investment Manager
Director,
Performance and Prospects
The Board continues to support fully the Manager's strategy and firmly believes that it will continue to deliver strong investment returns over the long term.
This is supported by the Company's performance since inception (
The Directors provide an explanation in the Viability Statement as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate.
Key Performance Indicators (“KPIs”)
The Board reviews the performance of the portfolio in detail and is presented with the views of the Manager at each meeting. Information on the Company’s performance is provided in the Chairman’s Statement and the Manager's Report. This performance is assessed against the following KPIs: Net Asset Value Total Return, Share Price Total Return and Dividend per Ordinary Share. The KPIs are unchanged from the prior year.
Net Asset Value Total Return^ and Share Price Total Return^ are compared with the benchmark and provide the key performance indicators for assessing the development and performance of the Company.
31 March 2024 31 March 2023 % Change NAV total return^† +2.1% -0.4% Share price total return^† -19.8% -0.7% Benchmark (MSCI World Index in Sterling)† +22.5% -1.0% Recommended final dividend per Ordinary £51.50 £51.50 – Share Recommended special dividend per Ordinary – – – Share
^ Alternative Performance Measure (see Glossary).
† These are percentage change figures for the year to 31 March.
Please see Glossary of Terms for an explanation of terms used.
Alternative Performance Measures (“APMs”)
The Board believes that each of the APMs, which are typically used within the Investment Trust Sector, provides additional useful information to shareholders in order to assess the Company’s performance between reporting periods and against its peer group. The measures used for the year under review have remained consistent with the prior year.
Discount/premium to NAV^
The Board regularly reviews the level of the discount/premium of the Company’s share price to the net asset value per share and considers ways in which share price performance may be enhanced, including the effectiveness of share buybacks, where appropriate. Any decision to repurchase shares is at the discretion of the Board.
Dividend Yield^
The Directors regard the Company’s dividend yield to be a key indicator of performance. The dividend yield measures the gross income receivable based on the payment of the historic dividend per share expressed as a percentage of the Company’s current share price.
Ongoing Charges^
Ongoing charges represent the costs that shareholders can reasonably expect to pay from one year to the next, under normal circumstances. The Board continues to be conscious of expenses and works hard to maintain a sensible balance between high quality service and the cost of provision.
NAV Total Return^
The Directors regard the Company’s net asset value per share total return as being the overall measure of value delivered to shareholders over the long term. The Board considers the principal comparator to be the MSCI World Index Total Return (Sterling adjusted).
Share Price Total Return^
The Directors also regard the Company’s share price total return to be a key indicator of performance. This reflects share price growth of the Company which the Board recognises is important to investors.
^ Further information on each of the Alternative Performance Measures and the basis of their calculation can be found in the Glossary.
31 March 2024 31 March 2023 Discount to NAV 22.0% 0.4% Dividend yield 6.4% 4.9% Ongoing charges 0.8% 0.9% NAV total return +2.1% -0.4% Share price total return -19.8% -0.7%
Principal Risks, Emerging Risks and Risk Management
The Board is responsible for managing the risks faced by the Company. Through delegation to the Audit Committee, the Board has established procedures to manage risk, to review the Company’s internal control framework and to establish the level and nature of the principal risks the Company is prepared to accept in order to achieve its long-term strategic objective. At least once a year the Audit Committee carries out a robust assessment of the principal and emerging risks. Further information is provided in the Audit Committee Report beginning on page 59 of the Annual Report. These principal risks and the ways they are managed or mitigated are set out below.
The Board’s policy on risk management has not materially changed during the course of the reporting period and up to the year end.
The Company's Approach to Risk Management
Change in inherent risk assessment over the last financial year: No change, Decreased, Increased and New risk included during the year.
Change Principal Risks and Uncertainties Key Mitigations The Board reviews at every Board meeting the investment portfolio, income forecasts and levels of available revenue reserves prepared Corporate Strategy by the Company Secretary. The Board may have to reduce the Sufficient dividends are paid to Company’s dividend. maintain investment trust status. 80% of the Company’s income is The Company has retained revenue represented by dividends from LTL. reserves, which can be used to If LTL’s funds under management supplement dividend payments in the fall the Company’s dividend paying event of a short-term reduction in potential could be negatively net revenue. impacted. In the event of a sustained fall in LTL’s FUM and its dividend paid to the Company, the Company’s dividend would have to be adjusted downwards. The Company’s share price may Regular consideration is given to the differ materially from the NAV per share price premium or discount to share resulting in the shares NAV per share and the Company has trading at either a premium or a authority to buy back shares and hold discount to NAV. in treasury. The Board keeps the investment management arrangements under continual review. In turn, the Manager reports on developments at LTL, including succession and business continuity plans. The Board Investment Strategy and Activity meets with other members of the wider team employed by the Manager. The departure of a key individual at the Manager may affect the Key-man insurance has been secured by Company’s performance. the Company to help mitigate this risk. The Board is also encouraged by the continued development of the investment management team at LTL who are now taking on greater responsibility at a more senior level. The investment strategy adopted by The Board regularly discusses with the Manager, the high degree of the Manager the structure of the concentration of the investment and portfolio, including asset allocation other factors, may lead to a and portfolio concentration. long-term investment return that is materially lower than the Company’s The Board reviews the performance of comparator benchmark index, and a the portfolio against the benchmark possible failure to achieve the at every meeting. Company’s investment objective. The Board receives quarterly ESG updates, which include an update on any climate change related engagement, from the Manager. The Board monitors the Manager on ESG matters to ascertain that the portfolio companies are acting in accordance with the Manager’s ESG approach. The Manager is a signatory to theUK Stewardship Code and actively engages with portfolio companies on ESG matters including climate The adverse impact of climate change change. on the portfolio companies’ operational performance. LTL developed its own methodology to assess the carbon impact of the portfolio. LTL became a signatory of Net Zero Asset Managers (“NZAM”) inDecember 2021 . This reflects LTL's enhanced efforts as a firm to support the goal of net zero greenhouse gas emissions by 2050. Details of the Company’s and Manager’s ESG policies together with the weighted average carbon intensity of the portfolio companies are set out on pages 26 to 31 of the Annual Report. The Board holds quarterly discussions with the Manager at each Board meeting. Consideration is The investment in LTL becomes an given during a strategy meeting to even greater proportion of the the prospects of LTL and subsequent overall value of the Company’s impact on the Company. portfolio. The Board receives monthly compliance reports from the Company Secretary which monitor compliance with the investment restrictions. The Board has appointed reputable service providers who are well experienced in the investment trust sector. Individual Directors are Operational well connected in the investment market and investment company sector Adverse reputational impact of one and thereby keep themselves or more of the Company’s key service appraised of developments in the providers which, by association, sector. The Manager and the Company causes the Company reputational Secretary provide regular news damage. updates on all matters affecting the Company. The Board undertakes an annual review of the level of service provision of the service providers. The Manager and the Company Secretary have in place robust compliance and risk monitoring programmes. Financial The Board receives monthly Fraud (including unauthorised compliance reviews and quarterly payments and cyber fraud) occurs expenses analysis. leading to a loss. An annual statement is obtained by the Audit Committee from all service providers giving representations that there have been no instances of fraud or bribery. The Manager is responsible for undertaking reviews of the creditworthiness of the counterparties that it uses. All business with respect to The Company is exposed to credit portfolio activity is conducted risk. through selected brokers on a delivery versus payment basis thereby minimising exposure to broking counterparties. Further information on financial instruments and risk can be found in note 17 to the Financial Statements. The Directors acknowledge that market risk is inherent in the investment process as the Manager maintains a concentrated portfolio of securities. The Board has imposed guidelines within its investment policy to limit exposure to individual holdings. The Company is exposed to market The Company Secretary reports to the price risk. Board with respect to compliance with investment guidelines on a monthly basis. The Manager provides the Board with regular updates on market movements. No investment is made in derivative instruments and no currency hedging is undertaken. Further information on financial instruments and risk can be found in note 17 to the Financial Statements. The Board monitors regulatory changes with the assistance of the Company Secretary, the Manager and external professional advisers to Accounting, Legal and Regulatory ensure compliance with applicable laws and regulations. The Company and/or the Directors fail(s) to comply with its legal The Board reviews compliance reports requirements in relation toFCA and internal control reports dealing rules/handbook procedures, provided by its service providers, the Listing Rules, the Companies Act as well as the Company’s Financial 2006, relevant accounting standards, Statements and revenue forecasts. the Bribery Act 2010, the Criminal Finances Act 2017, the Association The Company Secretary presents a of Investment Companies (“AIC”) quarterly report on changes in the Statement of Recommended Practice regulatory environment and how and (“SORP”), GDPR, tax regulations or when changes are to be addressed. any other applicable regulations. As a member of the AIC, the Board receives regular technical updates which highlight forthcoming compliance obligations and regulatory issues. The Board monitors the regulatory environment with the assistance of The regulatory environment in which its Company Secretary, Manager and the Company operates changes, external professional advisers to affecting the Company's business ensure that the Board is aware of model. any likely changes in the regulatory environment and will be able to adapt as required. The Board approves the monthly valuation of the Company's Investment. An audit of LTL’s valuation is conducted annually by a leading independent external audit firm.J.P. Morgan Cazenove Ltd undertook an independent review of the Company’s valuation methodology The Company’s valuation of its applied to its unlisted investment investment in LTL is materially in LTL during 2022. The misstated. appropriateness of the valuation methodology was reviewed by theBoard and J.P. Morgan Cazenove Ltd during the year. The Manager and the Company Secretary report to the Board at every meeting. An internal controls report is produced by the Company Secretary on an annual basis covering controls over valuation and release of weekly net asset value per share.
Emerging Risks
The Audit Committee regularly reviews the risk register. Mitigations, the scoring of each risk and any emerging risks are discussed in detail as part of this process to ensure that emerging as well as known risks are identified and, so far as practicable mitigated.
The experience and knowledge of the Directors is useful in these discussions, as are update papers and advice received from the Board's key service providers such as the Manager and the Company Secretary. In addition, the Company is a member of the AIC, which provides regular technical updates as well as drawing members' attention to forthcoming industry and/or regulatory issues and advising on compliance obligations.
Current identified emerging risks are as follows:
Emerging Risks and Uncertainties Key Mitigations The Manager monitors portfolio Emerging Risks construction, performance and liquidity to assess and manage the impact of Geopolitical and macroeconomic increased market volatility on the conflicts, whether they be political, listed portfolio and on the Company’s economic or military, introduce new holding in LTL. risks and exacerbate existing risks. such as: The Manager monitors the impact of the continued war inUkraine and the effect disruptions to supply chains, of sanctions againstRussia ; the operations and markets for investee conflict in theMiddle East and tensions companies both as a direct result of betweenChina and the West. conflict and as result of economic sanctions; The Company’s investment approach means that it owns companies with strong brand prolonged inflation and elevated equity and pricing power making them interest rates, slowing global economic more able to pass on cost increases and growth and the fear or presence of mitigate the effects of inflation on recession; portfolio holdings. increased market volatility and reduced The Board reviews regular internal investor risk appetites; and increased control reports from its key service threat of state sponsored cyberattacks. providers that include cyber defences and other mitigants against unauthorised While presenting investment network access. opportunities, the rapid development of new technologies, such as artificial In view of the number of extraordinary intelligence, may disrupt the markets and unpredictable events in recent and operating models of the companies years, the Board considered that the in which the Company invests, damaging likelihood of the emerging risks their potential investment returns. identified due to geopolitical and macroeconomic conflicts had increased.
The Audit Committee will continue to review newly emerging risks that arise from time to time to ensure that the implications for the Company are properly assessed and mitigating controls introduced where necessary.
Future Developments
The Board’s primary focus is on LTL’s investment approach and performance both as the Company’s Manager and as an investment. The subject is thoroughly discussed at every Board meeting.
In addition, the Company Secretary updates the Board on investor feedback, as well as wider investment company issues.
An outline of performance, investment activity and strategy, and market background during the year, as well as the outlook, is provided in the Chairman's Statement and the Manager's Report.
It is expected that the Company’s strategy will remain unchanged in the coming year.
Long-Term Viability Statement
The Directors have carefully assessed the Company’s financial position and prospects as well as the principal risks facing the Company and have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five financial years.
To make this assessment and in reaching this conclusion, the Audit Committee has considered the Company’s financial position and its ability to liquidate its portfolio and meet its liabilities as they fall due and notes the following:
•
The Company has a liquid investment portfolio of
• Based on historic analysis, excluding the holding in the LTL fund, 95.9% of the current portfolio could be liquidated within 30 business days with 92.4% in five business days. There is no expectation that the nature of the investments held within the portfolio will be materially different in the future.
• With an ongoing charges ratio of 0.83%, the expenses of the Company are predictable and modest in comparison with its assets and there are no capital commitments currently foreseen which would alter that position.
• Revenue expenses of the Company are covered more than five times by investment income.
• The closed-ended nature of the Company means that, unlike an open-ended fund, it does not need to realise investments when shareholders wish to sell their shares.
• The founder directors of LTL, in which the Company holds 23.9%, have given their verbal assurance that they remain committed to LTL for at least seven years on a rolling basis.
• The Company has decided not to use gearing.
• The Company has no employees, only its non-executive Directors. Consequently it does not have any potential redundancy or other employment related liabilities or responsibilities.
The Directors, as well as considering the potential impact of the principal risks and various severe but plausible downside scenarios, have also made the following assumptions in considering the Company’s longer-term viability:
• The Board and the Investment Manager will continue to adopt a long-term view when making investments, and anticipated holding periods will be at least five years.
• Regulation will not increase to a level that makes running the Company uneconomical.
The Board’s long-term view of viability will, of course, be updated each year in the Company’s Annual Report.
Stakeholder Interests and Board Decision Making (Section 172 of the Companies Act 2006)
The following disclosure, which is required by the Companies Act 2006 and the AIC Code, describes how the Directors have had regard to the views of the Company's stakeholders in their decision making.
The benefits of engagement How the Board, the Manager and Stakeholder Group with the Company's the Company Secretary have stakeholders engaged with the Company's stakeholders The Board and the Manager receive shareholder feedback directly from shareholders or from the appointed broker. An analysis of the Company’s shareholder register is provided to the Directors at each Board meeting. Shareholders have access to the Board, directly and via the Company Secretary, throughout the year. These communications help the Board make informed decisions when considering how to promote the success of the Company for the benefit of shareholders over the long term. Key mechanisms of engagement The Board recognises the include: importance of communication with shareholders. • The Annual General Meeting. Clear communication of the • The Board will explain in Investors Company’s strategy and the its announcement of the performance against the results of the Annual General Company’s objective can help Meeting the actions it intends maintain demand for the to take to consult Company’s shares. shareholders in order to understand the reasons behind any significant votes against. Following the consultation, an update will be published no later than six months after the Annual General Meeting and the Annual Report will detail the impact the shareholder feedback has had on any decisions the Board has taken and any actions or resolutions proposed. • The Company’s website which hosts monthly reports and Annual and Half-year Reports. • One-on-one investor meetings as required. • Group meetings with professional investors as required. The Board meets regularly with the Company’s Manager throughout the year both formally at the quarterly Board meetings and informally as needed. The Board and Manager communicate regularly outside these meetings to ensure a collegiate approach. Engagement with the Company’s Furthermore, Michael Lindsell Manager is necessary to is a Director of both the evaluate its performance Company and of the Manager. against the Company’s stated The aim is to maintain a strategy and to understand strong relationship between any risks or opportunities the Board and Manager when this may present. considering the interests of the Company’s stakeholders, The Board monitors the whilst upholding the Company’s Manager’s approach to values. environmental, social and Manager governance (“ESG”) issues. The Manager’s attendance at each Board meeting also Engagement also helps ensure provides the opportunity for that investment management the Manager and Board to costs are closely monitored further reinforce their mutual and remain competitive. understanding of what is expected from both parties. The Chairman’s Statement and Appendix 3 describe the key The Manager’s performance is decisions taken during the evaluated informally on a year relating to LTL. regular basis, with a formal review carried out on an annual basis by the Management Engagement Committee. The Investment Management Agreement is reviewed as part of this process. The Audit Committee review the Manager's internal controls and governance policies on an annual basis. The Board and the Company Secretary engage regularly with other service providers both in one- to-one meetings and via regular written reporting. This regular interaction provides an As an externally managed environment where topics, investment company, the issues and business Company has no employees, development needs can be dealt customers, operations or with efficiently and premises. Therefore, the collegiately. Company's key stakeholders (other than its shareholders) The Board maintains regular are considered to be its contact with the Company’s key service providers. service providers as well as carrying out a review of the The Company contracts with service providers’ business third- parties for other continuity plans and services including: Company additional cyber security Service Providers Secretary and Administrator, provisions. Registrar and Custodian. The Company ensures that the The key service providers’ third-parties to whom the performance is evaluated by services have been outsourced the Management Engagement complete their roles in line Committee on an annual basis, with their service level or more often if appropriate. agreements and are able to The terms and conditions continue to provide these underlying the relationship services, thereby supporting between the service providers the Company in its success are reviewed as part of this and ensuring compliance with process. This approach is its obligations. taken to enhance service levels and strengthen relationships between the Company and its providers to ensure the interests of the Company’s stakeholders are best served by maintaining a high level of service whilst keeping costs proportionate. The Manager invests in a concentrated portfolio of durable business franchises with the intention of holding The Board encourages the these positions for a Company’s Manager to engage considerable time. with companies and in doing so expects ESG issues to be a key The Manager engages with the consideration. management of these companies on a periodic basis and The Board receives an update reports its impressions on on LTL's engagement activities the prospects of the within a dedicated quarterly Portfolio companies companies to the Board. ESG report together with quarterly updates concerning Gaining a deeper the prospects of the portfolio understanding of the companies. portfolio companies and their strategies as well as Details of LTL's approach to incorporating consideration responsible ownership can be of ESG factors into the found on pages 26 to 31 of the investment process assists in Annual Report. understanding and mitigating risks of investments as well as identifying future potential opportunities. The Board ensures compliance The Company Secretary reports Regulators with rules and regulations as to the Board on a monthly relevant to the Company. basis and at each Board meeting.
KEY AREAS OF ENGAGEMENT MAIN DECISIONS AND ACTIONS TAKEN • The Manager meets with shareholders as • Ongoing dialogue with shareholders required and at the Annual General concerning the strategy of the Company, Meeting. performance and the portfolio. • Shareholders are provided with • The impact of market volatility performance updates via the Company's caused by certain geopolitical events website as well as the usual financial in the portfolio. reports and monthly manager reports. • Share price performance and the • The Board continued to monitor share Company's and wider investment trust price movements closely and concluded sector discounts. that it was not in shareholders' best interests to utilise the share buy-back facility. • The Board has in place a refreshment programme which is reviewed annually by the Nomination Committee. During the yearJulian Cazalet retired as the Chairman of theBoard and Management Engagement Committee and was replaced byRoger Lambert . •Cornforth Consulting was appointed by the Board inApril 2023 to assist with the appointment of a new Audit Committee Chairman. This resulted in the appointment ofDavid MacLellan , who joined the Board on30 August 2023 and • Board Composition. will offer himself for election by shareholders at the 2024 Annual General Meeting. • To assist with succession planning and to ensure Board continuityVivien Gould will seek re-election at the forthcoming Annual General Meeting and will retire at the conclusion of Annual General Meeting due to be held inSeptember 2025 . In accordance with the Board's Succession Plan Vivien was previously scheduled to retire at the conclusion of the 2024 Annual General Meeting.
LTIT’s Responsible Investment Policy
The Board believes that consideration of ESG factors is important to shareholders and other stakeholders, and has the potential to protect and enhance investment returns.
In its Responsible Engagement & Investment Policy, the Manager states that its evaluation of ESG factors is an inherent part of the investment process and best practice in this area is encouraged by the Board. These factors include, but are not limited to: “corporate strategy, operating performance, competitive positioning, governance, environmental factors (including climate change), social factors, remuneration, reputation and litigation risks, deployment of capital, regulation and any other risks or issues facing the business”.
The Board has delegated authority to the Manager to vote the shares owned by the Company that are held on its behalf by its Custodian. The Board has instructed that the Manager submits votes for such shares wherever possible and practicable. The Manager is required to refer to the Board on any matters of a contentious nature.
The Manager’s
LTL became a signatory of Net Zero Asset Managers Initiative in
Modern Slavery Act
The Company does not provide goods or services in the normal course of business, and as a financial investment vehicle, does not have customers. Therefore, the Directors do not consider that the Company is required to make a statement under the Modern Slavery Act 2015 in relation to slavery or human trafficking. The Company’s suppliers are typically professional advisers and the Company’s supply chains are considered to be low risk in this regard.
UK Sanctions
The Board has made due diligence enquiries of the service providers that process the Company’s shareholder data to ensure the Company’s compliance with the
Common Reporting Standard ("CRS")
CRS is a global standard for the automatic exchange of information commissioned by the
The Registrar,
Taskforce for Climate Related Financial Disclosures (“TCFD”)
The Company notes the TCFD recommendations on climate related financial disclosures. The Company is an investment company and, as such, it is exempt from the Listing Rules requirement to report against the TCFD framework.
Climate reporting, at both the LTL and LTIT level, will be available from
Global Greenhouse Gas Emissions
The Company is an investment trust, with neither employees nor premises, nor has it any financial or operational control of the assets which it owns. It has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Reports and Directors’ Reports) Regulations 2013 or the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, including those within the Company’s underlying investment portfolio.
The Company consumed less than 40,000 kWh of energy during the year in respect of which the Directors’ Report is prepared and therefore is exempt from the disclosures required under the Streamlined Energy and Carbon Reporting criteria.
The Board is aware of the continued emphasis on ESG matters in recent years. The Manager engages with all the companies in the portfolio to understand their ESG approach and has developed its own methodology to assess the carbon impact of the portfolio.
LTL's Approach to Responsible Ownership
ESG integration
Seeking Sustainability
As a long-term investor, LTL aims to identify companies that can generate long-term sustainable high returns on capital. LTL has historically found that such companies tend to exhibit characteristics associated with good corporate governance and responsible business practices. Indeed, LTL believes that companies which observe such standards, and that are serious in their intention of addressing environmental and social factors, will not only become more durable but will likely prove to be superior investments over time.
To that end LTL’s initial analysis and ongoing company engagement strategy seeks to incorporate all sustainability factors that they believe will affect the company’s ability to deliver long-term value to shareholders. Such factors may include but are not limited to; environmental (including climate change), social and employee matters (including turnover and culture) and governance factors (including remuneration and capital allocation), cyber resilience, responsible data utilisation, respect for human rights, anti-corruption and anti-bribery, and any other risks or issues facing the business and its reputation. This work is catalogued in a proprietary database of risk factors in order to centralise and codify the team’s views, as well as to prioritize LTL’s ongoing research and engagement work and is cross-referenced with the SASB Materiality Map ©.
If, as a result of this assessment, LTL believes that an ESG factor is likely to materially impact a company’s long-term business prospects (either positively or negatively) then this will be reflected in the long-term growth rate that is applied in the investment team’s valuation of that company, which alongside the team’s more qualitative research will influence any final portfolio decisions (for example, whether LTL starts a new position or sell out of an existing holding).
Positive/Negative Screening
As a product of LTL’s investment philosophy, it does not invest in the following industries:
– capital intensive industries (energy, commodities or mining) or any companies involved in the extraction and production of coal, oil or natural gas; and
– industries that LTL judges to be sufficiently detrimental to society that they may be exposed to burdensome regulation or litigation that could impinge on financial returns (e.g. tobacco, gambling or arms manufacturers).
Similarly, LTL’s investment approach has steered
Climate Change
The risks associated with climate change represent the great issue of our era and the transition to a low-carbon economy will affect all businesses, irrespective of their size, sector or geographic location. Therefore, no company’s revenues are immune and the assessment of such risks must be considered within any effective investment approach, particularly one like LTL’s that seeks to protect its clients’ capital for decades to come.
As a relatively small company with a single office location and fewer than 30 employees, LTL’s climate exposure comes predominantly from the investment portfolios that it manages on behalf of its clients. LTL recognises the systemic risk posed by climate change and the potential financial impacts associated with a transition to a low-carbon economy.
To help address this, LTL became a signatory of the Net Zero Asset Managers (NZAM) initiative in
LTL also supports the recommendations of the
1 Committed assets are currently 94% of LTL's total AUM. The assets that were excluded relate to segregated clients that either declined to have their assets included at this time or did not respond by the required deadline. There is scope to increase the level of committed assets over time.
2 Aligned status, as set out by the PAII Net Zero Framework, has prescribed requirements of the portfolio companies, including; 1) Setting short and medium term emission reduction targets, 2) Monitoring emission intensity performance relative to those targets, and 3) Disclosure of scope 1, 2 and 3 emissions. For higher impact sectors, further criteria are required to be categorised as Aligned.
Further, using Morningstar’s carbon metrics calculations, LTL is pleased to note that LTIT’s listed equity holdings have a significantly lower weighted average carbon intensity than its comparable benchmark.
Stewardship
Engagement
Engaging with and monitoring investee companies on matters relating to stewardship has always been an essential element of LTL’s investment strategy. Its long-term approach generally leads it to be supportive of company management. However, where LTL disagrees with a company’s actions, it will try to influence management on specific matters or policies if LTL believe it is in the best interests of its clients. Constructive dialogue has more often than not resulted in satisfactory outcomes, thus limiting the need for escalation. However, where this is not the case, LTL will consider escalating its engagement and stewardship activities.
During the year, on a look-through basis (i.e. including positions held by LTL managed funds owned by the Company), LTL engaged with 27 companies held within the Company’s portfolio on a wide range of environmental, societal and governance related issues, as detailed in the chart below. Moreover, to ensure that the 2030 net zero interim target remains achievable, LTL continues to engage proactively with the management of companies it holds across its portfolios, the aim being to understand each company’s individual goals and, where appropriate, to provide the team’s thoughts on their road maps, with the overall ambition of reaching an absolute reduction in global carbon emissions. Using the data gathered to set the 2030 interim target, LTL has been able to identify which portfolio companies should be prioritised for engagement on their progress. LTL has engaged with management at a number of companies in recent months and will continue to engage with all portfolio companies to understand how they align with LTL’s net zero goals. This includes encouraging them to set science-based targets where possible. This initiative has been led by
Engagement by Topic
Source:
Key Engagement Case Studies:
Company name: Unilever
Sector: Consumer Franchises
Engagement topics: Strategy, Reputation, Environmental claims
Date of engagements:
Engagement format: Calls
Reason for Engagement:
In a call with CFO
In October, LTL followed up with
Further engagement took place in December when the LTL team spoke with Unilever IR regarding the Competition & Markets Authority’s ('CMA') investigation into its green claims. Whilst Unilever was “surprised and disappointed”, it is not against the purpose of the exercise, in that it upholds the need for higher standards against claims which could mislead the consumer. Unilever have been in discussions with the CMA for some time regarding specific claims for a small number of products, and so it was surprised by the announcement of a formal investigation specifically targeting only Unilever. The investigation is focussed on the use of vague and broad language in marketing materials as well as claims about ingredients that might exaggerate how ‘natural’ a product is. As a result, there is unlikely to be a binary outcome. Nonetheless, it is an opportunity for Unilever to refute claims that its new CEO,
Next steps:
The engagement regarding Unilever’s presence in
Company name: Mondelez
Sector: Consumer Franchises
Engagement topic: Human Rights / Modern Slavery
Date of engagement:
May 2023
Engagement format: Call
Reason for Engagement: LTL spoke with the management of Mondelez ahead of its AGM, which included a contentious shareholder proposal relating to the eradication of child labour from the cocoa supply chain. The team has regularly engaged with Mondelez on this issue and so were eager to hear management’s views on the resolution, and also receive an update on the progress the company is making on this specific initiative. Management communicated that whilst it is entirely supportive of the aims and intentions of the shareholder proposal, the company is already working towards these exact goals and believes that the current strategy continues to be the right one to achieve them. It confirmed that significant progress has been made: 74% of the company’s supply chain is now covered by its Cocoa Life programme, up from 28% in 2020. Like Mondelez, LTL recognises that eradicating child labour from the cocoa supply chain is a systemic issue that requires wide-scale collaboration and so LTL voted in line with management, as it believes it is unproductive to expect Mondelez to solve this wider issue on its own.
Next steps: This engagement is ongoing. While LTL accepts that Mondelez cannot solve this wider issue on its own, as the number 2 chocolate brand in the world LTL would like to see the company continuing to set the agenda. LTL would like the percentage of the company’s supply chain covered by the Cocoa Life programme to continue to increase to full coverage, with credible and sustainable ongoing monitoring firmly in place as this is not a ‘set and forget’ issue.
Company name: Nintendo
Sector: Media
Engagement topic: Capital Allocation
Date of engagement:
September 2023
Engagement format: Call
Reason for Engagement: Like many Japanese companies, Nintendo could be accused of maintaining an overly conservative balance sheet. Currently the company has ¥2 trillion of cash to guard against technology change and for future growth investments. As a rule, we are supportive of our companies maintaining net cash balances and, indeed, would be concerned by any significant levels of net debt, however we recognise that Nintendo could manage its balance sheet more efficiently. As such, during Q3 we had the opportunity to share with company management that we would encourage the Board to review its capital allocation and the uses of its retained earnings. If it was decided to return funds to shareholders we expressed our preference for a share buyback at an accretive share price rather than a special dividend.
Next steps: This engagement is ongoing.
Proxy Voting
The primary voting policy of LTL is to protect or enhance the economic value of its investments on behalf of its clients. LTL has appointed Glass Lewis to aid the administration of proxy voting and provide additional support in this area. However, the Manager maintains decision making responsibility based on its detailed knowledge of the investee companies. It is LTL’s policy to exercise all voting rights which have been delegated to LTL by its clients.
Voting record:
Management Shareholder Proposals Total Proposals Proposals With Management 199 7 206 Against Management 2 0 2 Abstain 1 1 2 Totals 202 8 210
Source: Glass Lewis.
Votes against management and abstentions have typically been in the low single-digit range. The main reason for this is that LTL’s long-term approach to investment generally leads it to be supportive of company management and, where required, LTL will try to influence management through its engagement activities. Given LTL often builds up large, long-term stakes in the businesses in which it invests, LTL finds that management is open to (and very often encourage) engagement with LTL. Furthermore, it is LTL’s aim to be invested in ‘exceptional’ companies with strong corporate governance and hence it ought to be rare that LTL finds itself in a position where it is voting against management.
In the majority of cases where LTL has voted against management it has been on matters relating to remuneration. Where LTL does not believe that a company’s compensation policy is aligned with the long-term best interests of the shareholders it will write to management to inform them of LTL’s intention to vote against such policies.
Regulatory Update on ESG
During the year, regulators around the world remained active on defining and classifying ESG investing and curbing greenwashing.
Integrity and Business Ethics
The Company is committed to carrying out business in an honest and fair manner. The Board has adopted a zero tolerance approach to instances of bribery and corruption. Accordingly, it expressly prohibits any Director or associated persons when acting on behalf of the Company from accepting, soliciting, paying, offering or promising to pay or authorise any payment, public or private, in the
The Board applies the same standards to its service providers in their activities for the Company. A copy of the Company’s Anti Bribery and Corruption Policy can be found in the Board and Policies section of the Company's website. The policy is reviewed annually by the Audit Committee.
In response to the implementation of the Criminal Finances Act 2017, the Board adopted a zero-tolerance approach to the criminal facilitation of tax evasion. A copy of the Company’s policy on preventing the facilitation of tax evasion can be found in the Board and Policies section of the Company's website. The policy is reviewed annually by the Audit Committee.
The Company’s culture is driven by its values of integrity, knowledge and frank and courteous conduct. It focusses on achieving returns for shareholders in line with the Company’s Investment Objective. In carrying out its activities, the Company aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues. As an investment company with limited internal resource, the Company has little direct impact on the environment. The Company believes that high standards of ESG make good business sense and have the potential to protect and enhance investment returns. Consequently, the Manager’s investment criteria ensure that ESG and ethical issues are taken into account and best practice is encouraged. The Board's expectations are that its principal service providers have appropriate governance policies in place.
By order of the Board
Chairman
Governance
Statement of Directors’ responsibilities in respect of the Financial Statements
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have prepared the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the
Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing the Financial Statements the Directors are required to:
• select suitable accounting policies and then apply them consistently;
•
state whether applicable
• make judgments and estimates that are reasonable and prudent;
• prepare the Financial Statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business; and
• prepare a directors' report, a strategic report and a directors' remuneration report which comply with the requirements of the Companies Act 2006.
The Directors 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.
They are responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonable to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
The Directors have delegated responsibility to the Administrator for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the
Responsibility Statement of the Directors in respect of the Annual Financial Report
The Directors consider that 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 position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the ‘Board of Directors’ on pages 32 and 33 of the Annual Report confirms that, to the best of their knowledge:
•
the Company Financial Statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the
•
the Strategic Report includes a fair review of the development and performance of information required by the
The Directors also confirm that the Financial Statements, taken as a whole, are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.
Approved by the Board of Directors and signed on its behalf by
Roger Lambert
Chairman
Note to those who wish to access this document by electronic means:
The Annual Report for the year ended
Financial Statements
Income Statement for the year ended
2024 2023 Revenue Capital Total Revenue Capital Total Notes £’000 £’000 £’000 £’000 £’000 £’000 Losses on investments 10 – (6,014) (6,014) – (12,978) (12,978) held at fair value Exchange losses on – (4) (4) – (3) (3) currency balances Income 2 12,005 – 12,005 14,135 – 14,135 Investment management 3 (976) – (976) (1,138) – (1,138) fees Other expenses 4 (715) (1) (716) (690) (1) (691) Net return/(loss) 10,314 (6,019) 4,295 12,307 (12,982) (675) before taxation Taxation 7 (100) – (100) (96) – (96) Return/(loss) after taxation for the 10,214 (6,019) 4,195 12,211 (12,982) (771) financial year Return/(loss) per 9 £51.07 £(30.10) £20.97 £61.06 £(64.91) £(3.85) Ordinary Share
All revenue and capital items in the above statement derive from continuing operations.
The total columns of this statement represent the profit and loss account of the Company. The revenue and capital return columns are supplementary to this and are prepared under the guidance published by the
The Company does not have any other recognised gains or losses. The net return for the year disclosed above represents the Company’s total comprehensive income.
No operations were acquired or discontinued during the year.
The notes form part of these Financial Statements.
Statement of Changes in Equity for the year ended
Share Special Capital Revenue capital reserve reserve reserve Total 2024 2024 2024 2024 2024 £’000 £’000 £’000 £’000 £’000 At 1 April 2023 150 19,850 168,000 23,390 211,390 (Loss)/return for the financial year – – (6,019) 10,214 4,195 Dividends paid for the year ended 31 – – – (10,300) (10,300)March 2023 (see note 8) At 31 March 2024 150 19,850 161,981 23,304 205,285
For the year ended
Share Special Capital Revenue capital reserve reserve reserve Total 2023 2023 2023 2023 2023 £’000 £’000 £’000 £’000 £’000 At 1 April 2022 150 19,850 180,982 21,779 222,761 (Loss)/return for the financial year – – (12,982) 12,211 (771) Dividends paid for the year ended 31 – – – (10,600) (10,600)March 2022 (see note 8) At 31 March 2023 150 19,850 168,000 23,390 211,390
The notes form part of these Financial Statements.
Statement of Financial Position at
2024 2023 Notes £’000 £’000 £’000 £’000 Fixed assets Investments held at fair value through 10 199,082 203,128 profit or loss Current assets Other receivables 11 478 491 Cash at bank 6,028 8,010 6,506 8,501 Creditors: amounts falling due within one year Other payables 12 (303) (239) Net current assets 6,203 8,262 Net assets 205,285 211,390 Called up share capital 13 150 150 Special reserve 14 19,850 19,850 20,000 20,000 Capital reserve 14 161,981 168,000 Revenue reserve 23,304 23,390 Equity Shareholders’ funds 205,285 211,390 Net Asset Value per Ordinary Share 15 £1,026.43 £1,056.95
The Financial Statements were approved by the Board on
Roger Lambert
Chairman
Registered in
The notes form part of these Financial Statements.
Statement of Cash Flows for the year ended
2024 2023 Notes £’000 £’000 Net cash inflow from operating activities 16 10,294 12,243 Investing activities Purchase of investments held at fair value (2,845) (339) Sale of investments held at fair value 873 1 Net cash outflow from investing activities (1,972) (338) Financing activities Equity dividends paid 8 (10,300) (10,600) Net cash outflow from financing activities (10,300) (10,600) (Decrease)/increase in cash and cash equivalents (1,978) 1,305 Cash and cash equivalents at beginning of year* 8,010 6,708 Loss on exchange movements (4) (3) Cash and cash equivalents at end of year* 6,028 8,010
Cash flows from operating activities includes dividend income received (gross) of £11,809,000 (2023: £14,156,000) and deposit interest of £190,000 (2023: £36,000).
* Comprises solely cash held at bank.
The notes form part of these Financial Statements.
Notes to the Financial Statements
1 Accounting policies
A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below:
(a) Basis of accounting
The Financial Statements of the Company have been prepared under the historical cost convention modified to include the revaluation of fixed assets in accordance with
Going concern
The Financial Statements have been prepared on the going concern basis.
The Directors have a reasonable expectation, after considering a schedule of the Company’s current financial resources and liabilities, that the Company has adequate resources to continue in existence for at least 12 months from the approval of the Financial Statements; and that it is appropriate to prepare the Financial Statements on a going concern basis.
The Company does not have a fixed life.
As at
(b) Reporting currency
The Financial Statements are presented in Sterling which is the functional currency of the Company because it is the currency of the primary economic environment in which the Company operates.
(c) Dividends
Under Section 32 of FRS 102, final dividends should not be accrued in the Financial Statements unless they have been approved by shareholders before the balance sheet date.
Dividends payable to shareholders are recognised in the Statement of Changes in Equity when they have been approved by shareholders and have become a liability of the Company. Interim dividends are recognised in the Financial Statements in the period in which they are paid.
(d) Valuation of fixed asset investments
The Company’s investments are classified as held at fair value through profit or loss in accordance with Section 11 and 12 of FRS 102 and are managed and evaluated on a fair value basis in accordance with its investment strategy.
When a purchase or sale is made under a contract, the terms of which require delivery within the time frame of the relevant market, the investments concerned are recognised or derecognised on the trade date.
Listed investments are held through profit or loss and accordingly are valued at fair value, deemed to be bid or last market prices depending on the convention of the exchange on which they are listed. As the Company’s business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends or increases in fair value quoted, investments are held through profit or loss on initial recognition at fair value. 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 Company is provided internally on this basis to the Board.
The unlisted investment in LTL is valued by the Directors at fair value using a valuation methodology adopted by the Board. The formula is monitored by the Board to ensure its ongoing appropriateness. At the most recent update in 2024 the Board sought external advice to verify its approach. Please refer to note 1(j) for further information.
The investment in LTL (representing 23.9% of the Manager) is held as part of the investment portfolio. Accordingly, the shares are accounted for and disclosed in the same way as other investments in the portfolio. The valuation of the investment (see note 17) is calculated at the end of each month on the basis of fair value as determined by the Directors of the Company. The valuation process in effect from
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows:
-- 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.
(e) Income
Dividends are credited to the revenue column of the Income Statement on an ex-dividend basis. Where an ex-dividend date is not available, dividends are recognised when the Company’s right to receive payment is established. The fixed return on a debt security is recognised on a time apportionment basis so as to reflect the effective interest rate on the debt security. Bank and deposit interest is accounted for on an accruals basis.
(f) Expenses
All expenses are accounted for on an accruals basis. Finance costs are accounted for on an accruals basis using the effective interest rate method. Expenses are charged through the revenue column of the Income Statement except as follows:
-- expenses which are incidental to the acquisition or disposal of an investment are charged to the capital column of the Income Statement; -- expenses are charged to the realised capital reserve, via the capital column of the Income Statement, where a connection with the maintenance or enhancement of the value of the investments can be demonstrated; -- the non allocation approach has been taken and charged 100% of the management fees to revenue; and -- performance fees payable to the Manager are charged 100% to capital.
(g) Taxation
Deferred taxation is provided on all differences which have originated but not reversed by the balance sheet date, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in the future against which the deferred tax asset can be recovered.
In line with recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented in the capital column of the Statement of Comprehensive Income is the marginal basis. Under this basis if taxable income is capable of being offset entirely by expenses presented in the revenue column of the Income Statement then no tax relief is transferred to the capital column.
(h) Foreign currency
Transactions denominated in foreign currencies are recorded in the local currency at the actual exchange rates as at the date of the transaction. Assets and liabilities denominated in foreign currencies at the year end are reported at the rate of exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the capital or revenue column of the Income Statement depending on whether the gain or loss is of a capital or revenue nature.
(i) Capital reserve
The following are taken to this reserve:
-- gains or losses on the disposal of investments; -- exchange differences of a capital nature; -- expenses, together with the related taxation effect, allocated to this reserve in accordance with the above policies; and -- investment holding gains or losses, being the increase or decrease in the valuation of investments held at the year end.
Revenue reserve
The revenue reserve reflects all income and expenditure which are recognised in the revenue column of the income statement.
Special reserve
The special reserve arose following Court approval in
In accordance with the Company’s Articles of Association, the capital reserve and special reserve may not be distributed by way of a dividend but may be utilised for the purposes of share buybacks. The Company may only distribute by way of dividend accumulated revenue profits within the revenue reserve.
(j) Significant judgments and estimates
The key significant estimate to report is the valuation of the investment in LTL where material judgments are made. Please refer to notes 1(d) and 17 for details of how this holding is valued.
Other than this, in the course of preparing the Financial Statements, no material judgments have been made in the process of applying the Company’s accounting policies, except those that involve estimations.
2 Income
2024 2023 £’000 £’000 Income from investments Overseas dividends 862 833 UK dividends – Lindsell Train Limited 9,410 11,875 – Other UK dividends 1,543 1,391 11,815 14,099 Other income Deposit Interest 190 36 190 36 Total income comprises: Dividends 11,815 14,099 Interest 190 36 12,005 14,135
3. Management fees
2024 2023 £’000 £’000 Investment management fee 1,099 1,255 Rebate of investment management fee (see below) (123) (117) Total management fee 976 1,138
In accordance with an Investment Management Agreement dated
A performance fee is payable at the rate of 10 per cent of the value of any positive relative performance versus the Benchmark (the MSCI World Index Total Return (Sterling adjusted)), in a financial year. Relative performance is measured by taking the lower of the NAV or Average Market Price, taking into account dividends, at the end of each financial year and comparing the percentage annual change with the total return of the Benchmark. A performance fee will only be paid out if the annual change is both above the Benchmark and is a positive figure. Relative performance will be carried forward in years where the Manager is not eligible for a performance fee based on these two criteria. The Company has twelve month performance periods, ending on 31 March in each year. The performance fee is payable in arrears in respect of each performance period.
The performance fee payable to the Manager for the year to
For the avoidance of double charging management fees, the Manager has agreed to rebate any periodic management fee that it receives from the Company by the amount of fees receivable by it from LTL managed fund products and other fund products where LTL is the Manager. The amounts rebated on the Investment Management fee are shown above, of which £107,585 (2023: £101,725) relates to the Company’s investment in
4 Other expenses
2024 2023 £’000 £’000 Directors’ emoluments 178 151 Company Secretarial and Administration fee 192 195 Auditor’s remuneration*† 55 55 Tax compliance fee 4 6 Safe custody fees 19 18 Printing fees 36 40 Registrars’ fees 32 35 Listing fees 13 14 Legal fees 7 5 Employer’s National Insurance 11 11 Directors’ liability insurance 13 13 Key man insurance 45 47 Director recruitment costs 25 40 Sundry 76 60 VAT irrecoverable 9 – 715 690 Capital charges 1 1 716 691
* Excluding VAT.
† Remuneration for the audit of the Financial Statements of the Company.
5 Directors’ emoluments
These are reflected in the table below:
2024 2023 £’000 £’000 Directors’ fees 178 151
Since
There were no pension contributions paid or payable.
6 Disclosure of interests
As at
LTL is also the Portfolio Manager of Finsbury Growth & Income Trust PLC in which the Company has an investment of 420,000 shares with a fair value of £3,612,000 at a cost of £759,000.
LTL’s appointment as Manager to the Company is subject to termination by either party on twelve months’ notice.
7 Taxation
The tax charge on the loss on ordinary activities for the year was as follows:
2024 2023 Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000 UK corporation tax – – – – – – Overseas tax 114 – 114 102 – 102 Overseas tax recoverable (14) – (14) (6) – (6) Tax charge per accounts 100 – 100 96 – 96
The current taxation charge for the year is different from the standard rate of corporation tax in the
2024 2023 £’000 £’000 Net gains/(loss) on ordinary activities before taxation 4,295 (675) Theoretical tax at UK Corporation tax rate of 25% (2023: 19%) 1,074 (128) Effects of: – UK dividends which are not taxable (2,738) (2,521) – Overseas dividends which are not taxable (215) (158) – Non-taxable loss on investments 1,504 2,466 – Current year excess expenses 375 341 – Overseas tax suffered 114 102 – Overseas tax recoverable (14) (6) Actual current tax charge 100 96
As an
Factors that may affect future tax charges
As at
8 Dividends paid and payable
2023 2022 £’000 £’000 Final dividend for the year ended31 March 2023 of £51.50 per 10,300 10,224 Ordinary share (2022: £51.12 per Ordinary Share)
The total dividend forming the basis of Sections 1158 and 1159 of the Corporation Tax Act 2010 payable in respect of the financial year is set out below:
2024 2023 £’000 £’000 FinaI dividend for the year ended31 March 2024 of £51.50 per 10,300 10,300 Ordinary share (2023: £51.50 per Ordinary Share)
9 Return/(loss) per Ordinary Share
2024 2023 Total return/(loss) per Ordinary share Total return/(loss) £4,195,000 £(771,000) Weighted average number of Ordinary Shares in issue during 200,000 200,000 the year Total return/(loss) per Ordinary share £20.97 £(3.85)
The total return/(loss) per Ordinary share shown above can be further analysed between revenue and capital, as below:
2024 2023 Revenue return per Ordinary Share Revenue return £10,214,000 £12,211,000 Weighted average number of Ordinary Shares in issue 200,000 200,000 during the year Revenue return per Ordinary Share £51.07 £61.06 Capital loss per Ordinary Share Total return £(6,019,000) £(12,982,000) Weighted average number of Ordinary Shares in issue 200,000 200,000 during the year Capital loss per Ordinary Share £(30.10) £(64.91)
10 Investments held at fair value through profit or loss
2024 2023 £’000 £’000 Investments listed on a recognised investment exchange 110,456 100,547 Unlisted investment and Fund 88,626 102,581 Valuation at year end 199,082 203,128 Opening book cost 42,591 42,252 Opening investment holding gains 160,537 173,516 Opening Fair Value 203,128 215,768 Movements in the year: Purchases at cost 2,845 339 Sales – proceeds (877) (1) Losses on investments (6,014) (12,978) Closing Fair Value 199,082 203,128 Closing book cost 45,428 42,591 Closing investment holding gains 153,654 160,537 Closing Fair Value 199,082 203,128 Realised gains on investments 869 1 Decrease in investment holding gains for the year (6,883) (12,979) Losses on investments held at fair value (6,014) (12,978)
The Company received proceeds of £877,000 (2023: £1,000) from investments sold in the year. The book cost of these investments when they were purchased was £7,729 (2023: £400). 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.
Investment transaction costs on purchases and sales of investments during the year to
During the year the investment holding loss attributable to the Company’s holding in LTL amounted to £16,218,000 (2023 loss: £11,690,000). See note 17 for further details.
Significant holdings
Included in the above are the following investments in which the Company has an interest exceeding 10% of the nominal value of the shares of that class in the investee company as at
Investments Country of registration Class of % of or incorporation capital class held Lindsell Train England Ordinary Shares of £100 23.9% Limited*
* As at
See note relating to the 2024 and 2023 results under the tables in Appendix 1.
LTL is a related undertaking of the Company. LTL’s registered office address is 66
LTL has been accounted for as an investment in accordance with the accounting policy in note 1(d).
The Company has arrangements in place with the Manager to avoid double charging of fees and expenses on investments made in other LTL managed funds (see note 3).
11 Other receivables
2024 2023 £’000 £’000 Amounts due from brokers 5 1 VAT recoverable 27 34 Prepayments and accrued income 446 456 478 491
12 Other payables
2024 2023 £’000 £’000 Accruals and deferred income 303 239
13 Share capital
2024 2023 No. of shares No. of shares 000’s £’000 000’s £’000 Allotted and fully paid: Ordinary Shares of 75p each 200 150 200 150
There has been no change in the capital structure during the year to
14 Reserves
Capital reserve
The capital reserve includes investment holding gains of £153,654,000 (2023: £160,537,000).
Revenue reserve
The revenue reserve reflects all income and expenditure which are recognised in the revenue column of the income statement.
Special reserve
The special reserve arose following Court approval in
In accordance with the Company’s Articles of Association the capital reserve and special reserve may not be distributed by way of a dividend but may be utilised for the purposes of share buybacks. The Company may only distribute by way of dividend accumulated revenue profits within the revenue reserve.
The
15 Net Asset Value per share
The Net Asset Value per Ordinary Share and the Net Asset Value at the year end calculated in accordance with the Articles of Association were as follows:
Net Asset Value Net Asset Value per share attributable attributable 2024 2023 2024 2023 £ £ £’000 £’000 1,026.43 1,056.95 205,285 211,390
The movements during the year of the assets attributable to the Ordinary Shares were as follows:
2024 2023 Ordinary Ordinary Shares Shares £’000 £’000 Total Net Assets attributable at beginning of year 211,390 222,761 Total recognised profit/(loss) for the year 4,195 (771) Dividends paid during the year (10,300) (10,600) Total Net Assets attributable at the end of year 205,285 211,390
The Net Asset Value per Ordinary Share is based on net assets of £205,285,000 (2023: £211,390,000) and on 200,000 Ordinary Shares (2023: 200,000), being the number of Ordinary Shares in issue at the year end.
16 Statement of Cash Flows
(a) Reconciliation of operating return to net cash inflow from operating activities
2024 2023 £’000 £’000 Net return/(loss) before finance costs and taxation 4,295 (675) Losses on investments held at fair value 6,014 12,978 Loss on exchange movements 4 3 Decrease/(increase) in other receivables 32 (34) (Increase)/decrease in accrued income (15) 56 Increase in other payables 64 11 Taxation on investment income (100) (96) Net cash inflow from operating activities 10,294 12,243
(b) Analysis of cash flows
At At 1 April Exchange 31 March 2023 Cash Flow Movement 2024 £’000 £’000 £’000 £’000 Cash at bank 8,010 (1,978) (4) 6,028 Total 8,010 (1,978) (4) 6,028 At At 1 April Cash Flow Exchange 31 March Movement 2022 2023 £’000 £’000 £’000 £’000 Cash at bank 6,708 1,305 (3) 8,010 Total 6,708 1,305 (3) 8,010
17 Financial instruments and capital disclosures
Risk management policies and procedures:
The investment objective of the Company is to maximise long-term total returns with a minimum objective to maintain the real purchasing power of Sterling capital. In pursuit of this objective, the Company may be exposed to various forms of risk, as described below.
The Board sets out its principal risks on pages 16 to 20 of the Annual Report and its investment policy including its policy on gearing (bank borrowing), diversification and dividends on page 3 of the Annual Report.
The Board and its Manager consider and review the number of risks inherent with managing the Company’s assets which are detailed below:
Market risk
The Company’s portfolio is exposed to fluctuations in market prices in the regions in which it invests. Market-wide uncertainties which have caused increased volatility include the continued impact of war in
At
Market price risk comprises three elements – foreign currency risk, interest rate risk and other price risk.
Foreign currency risk
Foreign currency exposure as at
US$ Euro JPY Total £’000 £’000 £’000 £’000 Short-term debtors 49 23 210 282 Foreign currency exposure on net monetary items 49 23 210 282 Investments held at fair value through profit or 33,061* 12,492 17,574 63,127 loss that are equities Foreign currency exposure 33,110 12,515 17,784 63,409
* This includes the holding in
Foreign currency exposure as at
US$ Euro JPY Total £’000 £’000 £’000 £’000 Short-term debtors 41 12 216 269 Foreign currency exposure on net monetary items 41 12 216 269 Investments held at fair value through profit or 31,818* 10,634 12,828 55,280 loss that are equities Foreign currency exposure 31,859 10,646 13,044 55,549
* This includes the holding in
Over the year Sterling strengthened against the US Dollar by 2.2% (2023: weakened by 6.2%), strengthened against the Euro by 2.9% (2023: weakened by 4.0%) and strengthened against the Japanese Yen by 16.6% (2023: strengthened by 2.6%).
A 5.0% decline or rise of Sterling against foreign currency denominated (i.e. non Sterling) assets held at the year end would have increased/decreased the Net Asset Value by £3,170,000 or 1.5% of Net Asset Value (2023: £2,777,000 or 1.3% of Net Asset Value).
Interest rate risk
There is no direct exposure to interest rate risk.
Other price risk
Other price risk may affect the value of the quoted investments.
If the fair value of the Company’s investments at the Statement of Financial Position date increased or decreased by 10%, whilst all other variables remained constant, the capital return and net assets attributable to shareholders as at
Liquidity risk
Liquidity risk is not considered significant under normal market conditions in relation to the Company’s investments which are listed on recognised stock exchanges and are, for the most part, readily realisable securities which can be easily sold to meet funding commitments if necessary. The Company’s unlisted investment in LTL is not readily realisable.
As at
Credit risk
Cash at bank and other debtors of the Company at the year end as shown on the Balance Sheet was £6,506,000 (2023: £8,501,000).
Counterparty risk
As cash placed at the Bank is deposited in its capacity as a banker not as a trustee, in line with usual banking practice, such cash is not held in accordance with the Financial Conduct Authority’s client money rules.
Fair values of financial assets and financial liabilities
The tables below set out fair value measurements of financial instruments as at the year end, by the level in the fair value hierarchy into which the fair value measurement is categorised.
Financial assets/liabilities at fair value through profit or loss
At31 March 2024 Level 1 Level 2 Level 3 Total £’000 £’000 £’000 £’000 Investments 110,456 19,624 69,002 199,082 110,456 19,624 69,002 199,082 At31 March 2023 Level 1 Level 2 Level 3 Total £’000 £’000 £’000 £’000 Investments 100,547 17,361 85,220 203,128 100,547 17,361 85,220 203,128
Note: Within the above tables, the entirety of level 1 comprises all the Company’s ordinary equity investments, level 2 represents the investment in
The valuation techniques used by the Company are explained on pages 5 to 7 of the Annual Report.
LTL Valuation Methodology
The current methodology was approved and applied to monthly valuations of the Company from 31
The methodology has a single component based on a percentage of LTL’s funds under management (‘FUM’), with the percentage applied being reviewed monthly and adjusted to reflect the ongoing profitability of LTL. At the end of each month the ratio of LTL’s notional annualised net profits 1 to LTL’s FUM is calculated and, depending on its result, the percentage of FUM is adjusted according to the table below.
_____________________________________________________________________________ |Notional annualised net profits1/FUM (%)|Valuation of LTL – Percentage of FUM| |________________________________________|____________________________________| |0.15 – 0.16 |1.70% | |________________________________________|____________________________________| |0.16 – 0.17 |1.75% | |________________________________________|____________________________________| |0.17 – 0.18 |1.80% | |________________________________________|____________________________________| |0.18 – 0.19 |1.85% | |________________________________________|____________________________________| |0.19 – 0.20 |1.90% | |________________________________________|____________________________________| |0.20 – 0.21 |1.95% | |________________________________________|____________________________________| |0.21 – 0.22 |2.00% | |________________________________________|____________________________________| |0.22 – 0.23 |2.05% | |________________________________________|____________________________________| |0.23 – 0.24 |2.10% | |________________________________________|____________________________________|
1 LTL’s notional net profits are calculated by applying a fee rate (averaged over the last six months) to the most recent end-month FUM to produce annualised fee revenues excluding performance fees. Notional staff costs of 45% of revenues, annualised fixed costs and tax are deducted from revenues to then produce notional annualised net profits.
For instance at 31
st
The valuation of the investment in LTL continues to be reviewed at the end of each month by the Company’s Directors, with the methodology reviewed by the Board at its quarterly meetings.
LTL Valuation per share using differing valuation scenarios
The two tables below show the impact on the LTL valuation if:
(i)
in Table 1 a different % was applied to
(ii)
in Table 2 different Price / Earnings (‘P/E’) ratios were applied to LTL’s
Table 1 – varying the % of FUM
LTL FUM Valuation Valuation as at 31 March 2024 per share (£’000) % of FUM (£’000) (£) 15,180,432 1.00% 151,804 5,694.09 15,180,432 1.25% 189,755 7,117.61 15,180,432 1.50% 227,706 8,541.13 15,180,432 1.75% 265,658 9,964.65 15,180,432 1.90% 288,428 10,818.76 15,180,432 2.00% 303,609 11,388.17 15,180,432 2.25% 341,560 12,811.69 15,180,432 2.50% 379,511 14,235.21 15,180,432 2.75% 417,462 15,658.73
Table 2 – varying the P/E ratio
LTL notional net profits Valuation Valuation as at 31 March 2024 per share (£’000) P/E ratio (£’000) (£) 29,240 7.00 204,682 7,677.48 29,240 8.00 233,922 8,774.27 29,240 9.00 263,162 9,871.05 29,240 9.86 288,428 10,818.76 29,240 10.00 292,402 10,967.84 29,240 11.00 321,643 12,064.62 29,240 12.00 350,883 13,161.40
There were no transfers between levels for financial assets and financial liabilities during the year recorded at fair value as at
Level 3 Financial assets at fair value through profit or loss at 31 March
2024 2023 £’000 £’000 Opening fair value 85,220 96,910 Purchases at cost – – Sales proceeds (846) – Realised gains on investments 846 – Decrease in investment holding gains for the year (16,218) (11,690) Closing fair value 69,002 85,220
Capital management policies and procedures
The Company’s capital management objectives are:
• to ensure that it will be able to continue as a going concern; and
• to maximise long-term total returns with a minimum objective to maintain the real purchasing power of Sterling capital through an appropriate balance of equity capital and debt. The Directors have discretion to permit borrowings up to 50% of the Net Asset Value. However, the Directors have decided it is in the best interests of the Company not to use gearing.
The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on an ongoing basis.
The Company’s objectives, policies and processes for managing capital are unchanged from last year.
The Company is subject to externally imposed capital requirements:
• as a public company, the Company has a minimum share capital of £50,000; and
•
in order to be able to pay dividends out of profits available for distribution, the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by
These requirements are unchanged since last year and the Company has complied with them at all times.
At the next Annual General Meeting the Company intends to renew its authority to repurchase shares at a discount to Net Asset Value.
18 Guarantees, financial commitments and contingent liabilities
There were no financial commitments or contingent liabilities outstanding at the year end (2023: None).
19 Ongoing charges (APM)
2024 2023 £’000 % £’000 % Total operating expenses 1,692 0.8 1,829 0.9
Total operating expenses are included after a management fee waiver of £123,000 (2023: £117,000) (see note 3).
The above total expense ratios are based on the average Shareholders’ Funds of £203,091,000 (2023: £211,310,000) calculated at the end of each month during the year.
It should be noted that administrative expenses borne by the LTL managed funds are excluded from the above.
See Glossary for other cost disclosures.
20 Related party disclosures
LTL acts as Investment Manager of the Company. The amounts paid to the Investment Manager are disclosed in note 3 and further details of the relationship between the Company and the Investment Manager are set out in note 6. Full details of Directors’ interests are set out on page 53 of the Annual Report.
On
21 Subsequent events
There are no significant events that have occurred after the end of the reporting period to the date of this report which require disclosure.
Appendices (unaudited)
DISCLAIMER
The information contained in these Appendices has not been audited by the Auditor and does not form part of the financial statements. The appendices are for information purposes and should not be regarded as any offer or solicitation of an offer to buy or sell shares in the Company.
Appendix 1 Annual Review of
Background
LTL was established in 2000 by
People
LTL’s board of directors consists of the two founders
LTL’s executive staff reduced by three from 28 to 25 the last 12 months, which includes the retirements of
Business
LTL’s strategy is to build excellent long-term performance records for its funds in a way that is consistent with its investment principles and that meet the aims of its clients. Long-term performance is detailed below. Success in achieving satisfactory investment performance should allow the company to expand its FUM in its four key product areas:
To achieve this growth in a manageable way, LTL looks to direct new business flows into LT badged pooled funds and to limit the number of separately managed accounts. The open-ended pooled funds represented 62% of FUM at end of January, down from 65% the year before. The fall resulted from a greater proportion of net outflows emanating from open-ended pooled products.
Additionally, LTL managed 16 separate client relationships, one fewer than a year ago. The largest pooled fund (the
In the year to
All four strategies generated positive absolute returns over the twelve months, however each underperformed relative to their corresponding benchmarks. LTL’s process is simple and remains the same as it always has been, with LTL seeking to find companies that own long-lasting franchises with deep moats and the ability to reinvest returns at relatively high rates of return for extended periods of time. To capture these characteristics LTL portfolios are relatively concentrated with large average position sizes which rarely change. It also means that at any given time there will be a large number of quoted companies that LTL do not own, amongst which there are bound to be some exceptional performers. The unusual feature today is that the performance of some of these companies has reached new extremes, which makes their omission felt more keenly.
However, this current phenomenon has not, and will not change how LTL invests. It remains focused on exploiting the credentials of its highly concentrated, idiosyncratic portfolios.
The relative returns of the LTL funds representing each strategy since their inception are shown below:
To 31 January 2024 Relative Return Inception date Benchmark UK Equity Fund (GBP) +4.2% p.a. July 2006 FTSE All Share Global Equity Fund (GBP) +1.6% p.a. March 2011MSCI World Japanese Equity Fund (Yen) +0.2% p.a. January 2004 TOPIX North American Equity Fund -4.4% p.a. April 2020MSCI North America (GBP)
Returns based on NAV. LF Lindsell Train
The Marketing and Client Services team is in contact with institutional clients both directly and through investment consultants, primarily in the
Financials
In the year to
LTL intends to distribute to shareholders dividends equivalent to 80% of its net profits in respect of each accounting year-end, subject to retaining sufficient working, fixed and regulatory capital to enable it to continue its business in a prudent manner. Total dividends paid in the year to
At
The Future
LTL believes it has plenty of headroom to grow its FUM, with a continued focus on its stable of pooled funds. LTL’s investment approach is applied uniformly across all its products and remains differentiated and appealing to a wide range of clients. A crucial part of that appeal is the ability for LTL to demonstrate investment results that meet clients’ objectives. Over most of LTL’s history this has been achieved, but recently the investment approach has faced several difficult years. Most clients will tolerate short periods of underperformance, especially in a strategy that is so concentrated and committed to its constituent companies. However, it is not surprising, following four years of cumulative underperformance, that the company is seeing some net outflows as clients are attracted to other investment approaches that have exhibited better short-term investment results.
LTL is confident that by remaining committed to its differentiated investment approach that targets companies earning higher returns on capital than average, and with the support of a stable and dedicated team, and a still competitive longer-term performance track record, it can stay positive about its future. But it is fully aware that there are risks ahead which could have a material impact on the value of LTL and its dividend paying potential. These risks include increasing pressure on the active management industry; continued pressures on global equity markets from inflation, higher interest rates and conflict; the growth of ESG designated investment funds; and, the underperformance from LTL’s strategies. Perhaps the greatest risk in relation to LTL’s reputation however remains the withdrawal of either of the founders. They are currently aged 65 and 64, in good health and remain strongly committed to LTL. They are supported by increasingly mature and experienced investment professionals, currently numbering four, all of whom are taking on more responsibility and contributing more to investment decisions as their careers progress with the company. The clearer articulation of the firm’s succession planning and the accelerated transfer of ownership of LTL shares to key individuals should also help mitigate the risk if either founder withdraws.
Data to
Funds Under Management*
FUM by Strategy
Jan 2024 Jan 2023 £m £m UK 6,729 7,690 Global 8,956 10,352 Japan 154 554 North America 37 30 Total 15,876 18,626
Largest Client Accounts
Jan 2024 Jan 2023 % of FUM % of FUM Largest Pooled Fund Asset 29% 30% Largest Segregated Account 11% 10%
* LTL 's year end 2024 and year end 2023 figures above are based on published financial statements. LTL 's year end 2023 figures in L TIT'S Annual Report last year were based on unaudited management accounts. This therefore results in differences when compared with L TIT's Annual Report last year, as last year's Report contained LTL unaudited management account numbers for year ending
Lindsell Train Fund Performance
1 Year 3 Years 5 Years 10 Years Annualised data to31 January 2024 % % % % GBP UK Equity Fund (Accumulation) 1.4 3.4 5.3 7.9 FTSE All Share 1.9 8.4 5.55.5 GBP Global Equity Fund (B share) 6.1 2.1 6.2 12.7MSCI World 13.1 10.8 12.112.0 JPY Japanese Equity Fund (A share) 6.9 1.3 3.7 8.3 TOPIX 32.4 14.9 13.010.1 GBP North American Equity Fund (Accumulation) 10.3 8.5 MSCI North American 15.8 12.3
Source: Morningstar Direct
Note: all figures above show total returns.
Financials*
Jan 2024 Jan 2023 % Profit & Loss £’000 £’000 Change Fee Revenue Investment Management fee 86,146 96,542 -10.8% Performance Fee 0 0 86,146 96,542 -10.8% Bank Interest & Other Income 997 299 87,143 96,841 Staff Remuneration** (25,864) (29,104) -11.1% Fixed Overheads (4,578) (4,622) -1.0% FX Currency Translation (losses)/gains (676) 3,878 Investment Unrealised Gain 2,733 46 Operating Profit 58,758 67,039 -12.4% Taxation (14,162) (12,724) Net Profit 44,596 54,315 -17.9% Dividends (38,967) (48,876) Retained profit 5,629 5,439 Balance Sheet Fixed Assets 51 75 Investments 7,672 6,960 Assets (inc cash at bank and investment in Gilts & 118,354 107,524 Bonds) Liabilities (22,558) (16,879) Net Assets 103,519 97,680 Capital & Reserves Called up Share Capital 267 267 Share Premium*** 57 57 Share Discount*** (494) (416) Treasury Share Reserve† 0 (288) Profit & Loss Account 103,689 98,060 Shareholders' Funds 103,519 97,680
*
LTL 's year end 2024 and year end 2023 figures above are based on published financial statements. LTL 's year end 2023 figures in L TIT'S Annual Report last year were based on unaudited management accounts. This therefore results in differences when compared with L TIT's Annual Report last year, as last year's Report contained LTL unaudited management account numbers for year ending
** Staff costs include permanent staff remuneration, social security, temporary apprentice levy, introduction fees and other staff related costs. No more than 25% of fees (other than those earned from LTIT) can be paid as permanent staff remuneration.
*** The Share Premium and Share Discount account for the difference in the cost and resale of shares that were held in
†
The Treasury Share Reserve accounts for the difference between the cost and current value of the remaining shares held in
Five Year History*
Jan 2024 Jan 2023 Jan 2022 Jan 2021 Jan 2020 Operating Profit Margin 64% 69% 66% 66% 65% Earnings per share (£) 1,673 2,038 2,463 2,340 2,237 Dividends per share (£) 1,462 1,841 1,994 1,817 1,619 Total Staff Cost as % of Fee 30% 30% 32% 30% 31% Revenue Opening FUM (£m) 18,626 21,215 22,802 21,450 16,260 Changes in FUM (£m) (2,751) (2,589) (1,587) 1,352 5,190 – of market movement 657 338 331 1,200 2,781 – of net new fund (3,408) (2,927) (1,918) 152 2,409 (outflows)/inflows Closing FUM (£m) 15,875 18,626 21,215 22,802 21,450 LT Open ended funds as % of total 62% 65% 70% 73% 73%
* LTL’s year end figures above are based on published financial statements. LTL’s year end 2023 figures in LTIT’s Annual Report last year were based on unaudited management accounts. This therefore results in differences when compared with LTIT’s Annual Report last year, as last year’s Report contained LTL unautited management account numbers for year ending
Jan 2024 Jan 2023 Jan 2022 Jan 2021 Jan 2020 Client Relationships – Pooled funds 5 5 5 5 4 – Separate accounts 16 17 18 17 17
Ownership
Jan 2024 Jan 2023 Jan 2022 Michael Lindsell and spouse 9,578 9,650 9,650 Nick Train and spouse 9,578 9,650 9,650 The Lindsell Train Investment Trust plc 6,378 6,450 6,450 Other Directors/employees 1,126 893 778 26,660 26,643 26,528 Treasury Shares 0 17 132 26,660 26,660 26,660
Board of Directors
Michael Lim Director, IT & Company Secretarial
* Appointed as a Director on
** Appointed as a Director on
Employees
Jan 2024 Jan 2023 Investment Team (including three Portfolio Managers) 6 7 Client Servicing and Marketing 7 9 Operations and Administration 10 11 Fixed Term Contractors 2 1 Total Employees 25 28 Non-Executive directors 3 2 Total Headcount 28 30
LTIT Directors’ valuation of LTL
31 Mar 2024 31 Mar 2023 Notional annualised net profits (A)* (£’000) 29,240 35,554 Funds under Management less LTIT holdings (B) (£’000) 15,180,432 18,530,045 Normalised notional net profits as % of FUM A/B = (C) 0.193% 0.192% % of FUM (D) (see table below to view % corresponding to 1.90% 1.90% C) Valuation (E) i.e. B x D (£’000) 288,428 352,071 Number of shares (F)^ 26,660 26,647 Valuation per share in LTL i.e. E / F 10,818.76 13,212.40
* Notional annualised net profits are made up of:
– annualised fee revenue, based on 6-mth average fee rate applied to most recent month-end unaudited AUM
– annualised fee revenue excludes performance fees
– annualised interest income, based on 3-mth average
– notional staff costs of 45% of annualised fee revenue
– annualised operating costs (excluding staff costs), based on 3-mth normalised average
^ The increase in share in issue is due to the sale of shares from LTL's
_____________________________________________________________________________ |Notional annualised net profits*/FUM (%)|Valuation of LTL - Percentage of FUM| |________________________________________|____________________________________| |0.15 to 0.16 |1.70% | |________________________________________|____________________________________| |0.16 to 0.17 |1.75% | |________________________________________|____________________________________| |0.17 to 0.18 |1.80% | |________________________________________|____________________________________| |0.18 to 0.19 |1.85% | |________________________________________|____________________________________| |0.19 to 0.20 |1.90% | |________________________________________|____________________________________| |0.20 to 0.21 |1.95% | |________________________________________|____________________________________| |0.21 to 0.22 |2.00% | |________________________________________|____________________________________| |0.22 to 0.23 |2.05% | |________________________________________|____________________________________| |0.23 to 0.24 |2.10% | |________________________________________|____________________________________|
LTL’s Salary and Bonus Cap
LTL’s salary and bonus expenses are capped at 25% of fees (other than those earned from LTIT as governed by LTL’s Shareholders’ Agreement. Employer national insurance costs are excluded from the restriction. This cap has been in place since the inception of both LTL and LTIT which, alongside LTL’s intent to distribute to shareholders dividends equivalent to 80% of its retained profits in respect of each accounting year (subject to retaining sufficient working and fixed and regulatory capital to enable LTL to continue its business in a prudent manner) ensures LTL shareholders earn a tangible reward from their investment in LTL.
The Board has long recognised that it is important that LTL has the ability to sufficiently reward potential successors, or, if it became necessary to replace the founders, to recruit suitable outside talent. As a consequence, since 2007 the Board has judged it necessary to apply a higher notional salary cost of 45% of revenues in calculating LTL’s net profits when determining the valuation of LTL.
To put this in context, LTL’s total salary and bonus expenses (including employer national insurance payments) have averaged 36% of revenues since 2001. Currently a peer group of quoted fund managers exhibits an average remuneration costs to revenue of 42%, with the salary to revenue of peers with FUM equivalent to LTL is slightly higher at 44%. The Board therefore believes that a notional salary to revenue ratio of 45% makes sufficient allowance for the eventualities described above.
Whilst the 25% salary and bonus cap remain in place for now, both the LTL and LTIT Boards recognise that it may be necessary to review this limit in the future.
Appendix 2
Share Capital
At
Income entitlement
The Company’s revenue earnings are distributed to holders of Ordinary Shares by way of such dividends (if any) as may from time to time be declared by the Directors and approved by the shareholders.
Capital entitlement
On a winding up of the Company, after settling all liabilities of the Company, holders of Ordinary Shares are entitled to a distribution of any surplus assets in proportion to the respective amounts paid up or credited as paid up on their shares.
Voting entitlement
Subject to any rights or restrictions attached to any shares, on a show of hands, every member who is present in person has one vote and every proxy present who has been duly appointed has one vote. However, if the proxy has been duly appointed by more than one member entitled to vote on the resolution, and is instructed by one or more of those members to vote for the resolution and by one or more others to vote against it, or is instructed by one or more of those members to vote in one way and is given discretion as to how to vote by one or more others (and wishes to use that discretion to vote in the other way) he or she has one vote for and one vote against the resolution. Every corporate representative present who has been duly authorised by a corporation has the same voting rights as the corporation. On a poll, every member present in person or by duly appointed proxy or corporate representative has one vote for every share of which they are the holder or in respect of which their appointment as proxy or corporate representative has been made.
A member, proxy or corporate representative entitled to more than one vote need not, if they vote, use all their votes or cast all the votes they use the same way. In the case of joint holders, the vote of the senior who tenders a vote shall be accepted to the exclusion of the votes of the other joint holders, and seniority shall be determined by the order in which the names of the holders stand in the register of members. A member is entitled to appoint another person as his proxy to exercise all or any of their rights to attend and to speak and vote at a meeting of the Company.
The appointment of a proxy shall be deemed also to confer authority to demand or join in demanding a poll. Delivery of an appointment of proxy shall not preclude a member from attending and voting at the meeting or at any adjournment of it. A proxy need not be a member. A member may appoint more than one proxy in relation to a meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by them.
Transfers
There are no restrictions on transfers of Ordinary Shares except: a) dealings by Directors, Persons Discharging Managerial Responsibilities and their connected persons which may constitute insider dealing or are otherwise prohibited by the rules of the
Appendix 3
Agreements with Service Providers
Investment Management Agreement
In accordance with an Investment Management Agreement ('IMA') originally dated
Fees
The Investment Management Fee is payable at the annual rate of 0.60 per cent. of the lower of (a) the Market Capitalisation of the Company and (b) the Net Asset Value of the Company, calculated daily.
The Performance Fee is calculated as 10% of the value of any positive relative performance versus the benchmark in a financial year. Relative performance is measured by taking the lower of the NAV or Average Market Price (defined as the average price over the last month of the performance period), taking into account dividends, at the end of each financial year and comparing the percentage annual change with the total return of the benchmark. A performance fee will only be paid out if the annual change is both above the benchmark and is a positive figure. Relative performance will be carried forward in years where the Manager is not eligible for a performance fee based on these two criteria.
During the year the Directors reviewed the performance of the Manager and consider that the continued engagement of LTL under the existing terms is in the best interests of the Company and shareholders.
In addition to the day to day management of investments, the Manager advises the Board on liquidity and borrowings and liaises with major shareholders. The Manager has a stated policy on stewardship and engagement with investee companies, which the Board has reviewed and endorses, and provides verbal reports to the Board where any concerns or issues have been raised.
Administration, Company Secretarial and Management Services Agreement
Accounting, company secretarial and administrative services are provided by
Details of the fees paid to Frostrow are given in note 4 to the Financial Statements. The services provided by Frostrow since their appointment were also reviewed during the year and the Board considered it to be in the best interests of the Company to continue Frostrow’s appointment under the existing terms.
Other third-party service providers
In addition to the Manager and Administrator, the Company has engaged
Additional Shareholder Information (unaudited)
Glossary of Terms and Alternative Performance Measures (“APM”) (unaudited)
AIC
Alternative Investment Fund Managers Directive (“AIFMD”)
The Alternative Investment Fund Managers Directive (the “Directive”) is a European Union Directive that entered into force on
Alternative Performance Measure (“APM”)
An alternative performance measure is a financial measure of historical or future financial performance, financial position or cash flow that is not prescribed by the relevant accounting standards. The Company’s APMs are the discount and premium, dividend yield, share price and NAV total return and ongoing charges as defined within this Glossary. The Directors believe that these measures enhance the comparability of information between reporting periods and aid investors in understanding the Company’s performance. The measures used for the year under review have remained consistent with the prior year.
Benchmark
With effect from
Prior to
Discount and premium (APM)
If the share price of an investment trust is higher than the Net Asset Value (NAV) per share, the shares are trading at a premium to NAV. In this circumstance the price that an investor pays or receives for a share would be more than the value attributable to it by reference to the underlying assets. The premium is the difference between the share price (based on share prices) and the NAV, expressed as a percentage of the NAV.
A discount occurs when the share price is below the NAV. Investors would therefore be paying less than the value attributable to the shares by reference to the underlying assets.
A premium or discount is generally the consequence of supply and demand for the shares on the stock market.
The discount or premium is calculated by dividing the difference between the share price and the NAV by the NAV.
As at As at 31 March 31 March 2024 2023 £ £ Share Price 801.00 1,052.50 Net Asset Value per Share 1,026.43 1,056.95 Discount to Net Asset Value per Share 22.0% 0.4%
Dividend yield (APM)
A financial ratio that indicates how much a company pays out in dividends each year relative to its share price. Dividend yield is represented as a percentage and can be calculated by dividing the value of dividends paid in a given year per share held by the share price.
The figures disclosed on pages 5, 14 and 15 of the Annual Report have been calculated as shown below:
2024 2023 Total Dividends declared per Ordinary Share (a) £51.50 £51.50 Closing price per Ordinary Share on 31 March (b) £801.00 £1,052.50 Dividend Yield (a) ÷ (b) 6.4% 4.9%
ESG
Environmental, social and governance.
Leverage
The AIFMD leverage definition is slightly different from the Association of Investment Companies’ method of calculating gearing and is defined as follows: any method by which the AIFM increases the exposure of an AIF it manages whether through borrowing of cash or securities, or leverage embedded in derivative positions.
For the purposes of the AIFMD, leverage is any method which increases the Company’s exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company’s exposure and its net asset value.
The MSCI requires the Company to include the following statement in the Annual Report.
MSCI World Index total return in Sterling (the Company's comparator Benchmark)
The MSCI information (relating to the Benchmark) may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any
Net Asset Value (“NAV”) per Ordinary Share
The NAV per Ordinary Share is Shareholders’ funds expressed as an amount per individual share. Equity Shareholders’ funds are the total value of all the Company’s assets, at current market value, having deducted all current and long-term liabilities and any provision for liabilities and charges.
The NAV per Ordinary Share of the Company is announced to the market weekly.
The figures disclosed on pages 5, 14 and 15 of the Annual Report have been calculated as shown below:
2024 2023 ‘000 ‘000 Net Asset Value (a) £205,285 £211,390 Ordinary Shares in issue (b) 200 200 Net Asset Value per Ordinary Share (a) ÷ (b) £1,206.43 £1,056.95
Ongoing charges (APM)
Ongoing charges are expenses of a type that are likely to recur in the foreseeable future, whether charged to capital or revenue, and which relate to the operation of the Company as an investment trust, excluding the costs of acquisition or disposal of investments, financing costs and gains or losses arising on investments. Ongoing charges are based on costs incurred in the year as being the best estimate of future costs and include the annual management charge but not the performance fee. The calculation methodology is set out by the
The figures disclosed on pages 5 and 15 of the Annual Report have been calculated as shown below:
2024 2023 £'000 £'000 Total operating expenses (a) 1,692 1,829 Average Net Asset Value (b) 203,091 211,310 Ongoing Charges excluding synthetic costs (a) ÷ (b) 0.8% 0.9% Ongoing Charges including the charges of the underlying funds 0.9% 0.9% (Ws Lindsell Train North American Fund ) synthetic costs
Revenue return per Share
The revenue return per share is the revenue return profit for the year divided by the weighted average number of ordinary shares in issue during the year.
SASB
The
SASB Materiality Map©
The Materiality Map was developed by the SASB. It ranks issues by industry based on two types of evidence: evidence that investors in the industry are interested in the issue, and evidence that the issue has the ability to impact companies within the industry.
Share price and NAV total return (APM)
These are the returns on the share price and NAV respectively taking into account both the rise and fall of share prices and valuations and the dividends paid to Shareholders.
Any dividends received by a Shareholder are assumed to have been reinvested in either additional shares (for share price total return) or the Company’s assets (for NAV total return).
The share price and NAV total return are calculated as the returns to Shareholders after reinvesting the net dividend in additional shares on the date that the share price goes ex-dividend.
The figures disclosed on pages 5, 14 and 15 of the Annual Report have been calculated at shown below:
Year Ended 31 March 2024 LTIT NAV LTIT Share Price NAV/Share Price at 31 March 2024 a £1,206.43 £801.00 Dividend Adjustment Factor* b 1.02 0.80 Adjusted closing NAV/Share Price c = a x b 1,231.77 642.40 NAV/Share Price at 31 March 2023 d £1,056.95 £1,052.50 Total return ((c/d)-1)) x100 +2.1% -19.8%
* The dividend adjustment factor is calculated on the assumption that the dividends of £51.50 paid by the Company during the year were reinvested into shares or assets of the Company at the cum income NAV per share/share price, as appropriate, at the ex-dividend date.
LTL total return performance
The total return performance for LTL is calculated as the return after receiving but not reinvesting dividends received over the year.
The figure disclosed on page 5 of the Annual Report has been calculated as shown below:
LTL valuation Valuation at 31 March 2023 a £13,212 Valuation at 31 March 2024 b £10,819 Dividends paid during the year c £1,462 Total return {((b-a)+c)/a}x100 -7.0%
TCFD
Treasury Shares
Shares previously issued by a company that have been bought back from Shareholders to be held by the company for potential sale or cancellation at a later date. Such shares are not capable of being voted and carry no rights to dividends.
2024 Accounts
The figures and financial information for 2024
are extracted from the Annual Report and financial statements for the year ended
2023 Accounts
The figures and financial information for 2023 are extracted from the published Annual Report and financial statements for the period ended 31 March 2023 and do not constitute the statutory accounts for that year. The Annual Report and financial statements have been delivered to the Registrar of Companies and included the Report of the Independent Auditor which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
Annual report and financial statements
Copies of the Annual Report and financial statements will be posted to shareholders
in mid
The Company's Annual
Report for the period ended
The Annual General Meeting will be
held on Wednesday,
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 -
For further information please contact
Company Secretary
For and on behalf of
020 3170 8732
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