Final Results
13 June 2023
The Lindsell Train Investment Trust plc
(the “Company” or “LTIT”)
This announcement contains regulated information
Annual Financial Report for the year ended 31 March 2023
Company Summary
The Company
The Lindsell Train Investment Trust plc (the “Company” or “LTIT”) is a listed investment company. Its shares are quoted on the premium segment of the Official List and traded on the main market of the London Stock Exchange. The Company is a member of the Association of Investment Companies (“AIC”).
The Company is a UK Alternative Investment Fund (“AIF”) under the European Union Alternative Investment Fund Managers’ Directive (“AIFMD”). The Board is the Small Registered UK Alternative Investment Fund Manager (“AIFM”) of the Company.
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
Lindsell Train Limited (“LTL”) acts as discretionary Investment Manager (the “Manager”) of the Company’s assets. However, the Board retains ultimate discretion over the holding in LTL and LTL managed fund products. Decisions on these holdings are based on advice and information received from the Manager.
Performance and Benchmark
The Company compares its performance and calculates its performance fee relative to its benchmark, the MSCI World Index in Sterling.
The Combined Benchmark is a combination of the Old Benchmark (the annual average redemption yield of the longest dated UK government fixed rate bond, plus a premium of 0.5% subject to a minimum yield of 4%) until 31 March 2021 and the Current Benchmark (MSCI World index in Sterling) from 1 April 2021.
Dividend
A final dividend of £51.50 per Ordinary Share (2022: a final dividend of £51.12 and a special dividend of £1.88) is proposed for the year ended 31 March 2023. If this dividend is approved by shareholders at the Annual General Meeting, it will be paid on Tuesday, 12 September 2023 to shareholders on the register at close of business on Friday, 11 August 2023 (ex-dividend Thursday, 10 August 2023).
Annual General Meeting
The notice of the Annual General Meeting, scheduled for Wednesday, 30 August 2023 at 2.30 p.m. at the Marlborough Suite, St Ermin’s Hotel, 2 Caxton Street, London, SW1H 0QW c.n be viewed within the Annual Report
Capital Structure
The Company’s capital structure comprises 200,000 Ordinary Shares of 75 pence each. Details are given in note 13 to the Financial Statements.
Strategic Report
Business Review
The Directors present their Strategic Report for the Company for the year ended 31 March 2023. The Report contains: a review of the Company’s strategy, an analysis of its performance during the financial year, comment on its future outlook and details of the principal risks and challenges that it faces.
Reviews of the financial year and commentary on the future outlook are presented in the Chairman’s Statement and the Manager’s Report. The Company’s Investment Objective and Investment Policy are set out above.
The Strategic Report has been prepared to provide shareholders with information to assess how the Directors have performed their duty to promote the success of the Company.
Further information on how the Directors have discharged their duty under Section 172 of the Companies Act 2006 can be found in the Strategic 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.
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.
Throughout the year under review, the Company continued to operate as an approved investment company, pursuing its investment objective.
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 24.2%, in order to benefit from the 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 31 March 2023, which may be changed at any time (excluding investments in LTL and LTL managed funds) at the discretion of the Manager within the confines of the policy stated above.
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 increasing 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 2023 ordinary dividend.
All dividends have been distributed from revenue.
Chairman’s Statement
The Company’s net asset value per share (“NAV”) was £1,056.95 on 31 March 2023. Although it fell from £1,113.81 a year earlier, the payment of the Company’s total annual dividend of £53.00 per share in September 2022 ensured that the NAV total return was only fractionally down, by 0.4%. This was a marginally better result than the performance of the Company’s benchmark, the MSCI World Index in Sterling, which fell in value by 1.0% over the year. The Company’s share price closely tracked the NAV for most of the year and at 31 March 2023 closed at £1,052.50, a 0.4% discount. After two consecutive years of underperformance compared with the benchmark index between 31 March 2020 and 31 March 2022 it was pleasing to see comparative returns improving.
The Company’s long-term returns remain satisfactory even with rising inflation over the last two years and continue to meet the Company’s investment objective as outlined in the front inside cover. The annual NAV total return since inception was 13.3% and remained well ahead of annual RPI inflation of 3.5%. Over the last five years NAV annual total returns were 11.1% compared with a rise in the RPI of 5.7%, even though this captures the lower NAV returns and higher inflation of the last two years. The Manager believes that the best way to mitigate rising inflation is to invest in companies whose market positions allow them to raise prices or innovate through the application of technology to grow and to offset cost pressures. We see some evidence of this from the strong corporate performances reported by the Company’s quoted holdings after lockdowns ended.
In the face of these challenging circumstances there is a reassuring consistency and thus no change to the Manager’s overall approach to investment. Indeed the quoted portfolio is all but unchanged from this time last year. It is comprised of ten durable cash generative companies and two pooled funds, themselves made up of similar companies, generating in aggregate higher returns on capital than the average quoted company. The Manager believes that by letting these great quoted businesses compound their returns from year to year rather than changing them in the hope of anticipating shorter-term market price fluctuations, which incurs execution risk and dealing expense, performance will generate lasting real returns for shareholders as has been the case for much of the Company’s existence.
Lindsell Train Limited (‘LTL’)
The Company’s cornerstone holding in LTL, which represented 40.3% of NAV at 31 March 2023, has held back the Company’s overall performance in recent years even if in the year to 31 March 2023, the LTL valuation total return was marginally positive at 0.2%. From LTL’s peak valuation on 30 June 2021, LTL’s total return to 31 March 2023 was down by 14.0%. Over the last two years LTL has been defending its approach to investment in the face of disappointing investment performance across all its strategies. Relative performance was worst in 2021 and improved for some strategies in 2022 but cumulatively there is some ground to be made up. In the circumstances, and exacerbated by other factors unrelated to performance, it is perhaps not surprising that LTL’s FUM has fallen on account of net client withdrawals. FUM for LTL peaked in June 2021 at £24.6 billion and had fallen to £18.6 billion at 31 March 2023, experiencing over that time £5.3 billion of net outflows. Lower FUM has resulted in LTL’s valuation falling from £18,730.17 at its peak at 30 June 2021 to £13,212.40 at 31 March 2023, a reduction of 29.5%.
Throughout this period LTL has stuck to its investment approach and, almost without exception, to the companies it owns in each of its strategies. LTL is encouraged by how well most of its investee companies have progressed as businesses even if this has not been reflected in market prices. Provided LTL’s companies continue to thrive, market prices should in time recover and relative performance improve.
LTL has further expanded its profit share scheme to ensure that key individuals are incentivised to continue to pursue their careers with LTL. From LTL’s current financial year 15% of its net profits, up from 8% last year, will be paid to selected individuals within the scheme. 50% of these profit share payments have to be invested in LTL shares at the prevailing LTL valuation. The shares are sourced from LTL’s founders, Nick Train and Michael Lindsell, and your Company, with the founders providing 75% and your Company 25% after LTL’s Treasury is exhausted. These profit share commitments are perpetual provided that the individual remains in LTL’s employment. This transfer of ownership will mean that the Company’s holding in LTL diminishes slowly over time. The Board believes that by ceding ownership to future successors in this way it builds up an alignment of interests between employees and shareholders to allow LTL to flourish in the future. The number of shares the Company holds in LTL has remained static since 31 March 2019 but from this year will begin to fall, reflecting these sales.
It is intended that these initiatives will accompany a transfer of responsibilities to selected employees to ensure that LTL thrives beyond the founders active involvement. Any change is likely to be incremental as both founders remain bound to the business, having recently renewed their seven year rolling commitment to continue to work at LTL.
The rising profit share payments outlined above should not materially affect the profitability of LTL, as the payments transfer rewards previously destined to the founders to successors within the constraints of LTL’s salary and bonus cap. If LTL increases the profit share awards in the future beyond a certain level it may be necessary to give consideration to amending the salary and bonus cap to accommodate the payments. Any change in the salary and bonus cap will require approval from the Board of this Company.
The Valuation of Lindsell Train Limited
An important task for the Board is to determine the valuation of its 24.2% minority stake in LTL. The valuation methodology, which was amended at 31 March 2022 having taken professional advice, has been applied throughout the year. It is based on a percentage of LTL’s FUM, with the percentage applied adjusted to reflect the ongoing profitability of LTL, and currently values the LTL stake at £85 million (2022: £97 million). The increase in UK Corporation Tax from April 2023 from 19% to 25% has already impacted the LTL valuation as the Directors accounted for a staged increase in the tax rate when calculating LTL’s valuation from October 2022. The Board continues to monitor a number of alternative approaches to the valuation of LTL to ensure that the result of the new methodology makes sense in the context of the future prospects for LTL and also when it is compared with similar businesses.
As the share transfers resulting from profit share awards increase, so the utility and importance of LTL’s valuation expands from primarily determining a monthly price for LTL’s shares to becoming the price that governs the transfer of value between founders, employees and the Company.
Dividend
The Board proposes to pay a total dividend for the year to 31 March 2023 of £51.50 per share which represents a small 0.7% rise in the ordinary dividend from £51.12. No special dividend will be paid this year as LTL did not earn any performance fees. It represents a 2.8% fall in the total dividend and means that the Company will retain slightly less than the maximum amount it is permitted to retain to guarantee continued Investment Trust status.
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 our shareholders. However this principle also runs alongside a desire to see LTL’s dividends grow, reflecting the success of the Company. In three instances in the past (in 2007, 2010 and 2011) following market volatility, the Board decided either to retain less than the maximum allowed or to draw down on its revenue reserves to prevent the dividend from falling, which would have resulted if there had been a strict interpretation of the dividend policy. The Board is minded to do the same in the future but is aware that, as the LTL dividend now represents 84% of the Company’s total revenues (a much higher percentage compared with earlier years), depleting revenue reserves to simply maintain the dividend without some assurance that those reserves would soon be replenished might not be in the best interests of shareholders. We do not know what 2023 will bring for LTL, but at current levels of FUM the LTL dividend is likely to fall again in its year ending January 2024.
Board Changes
During the year the Board was delighted to welcome Roger Lambert and Helena Vinnicombe, who were appointed as Directors in September 2022 following a formal recruitment process. A resolution proposing their election together with resolutions for those Directors standing for re-election will be put to Shareholders at the forthcoming Annual General Meeting.
Richard Hughes resigned as the Chairman of the Audit Committee in April 2023 and has also decided to retire from the Board following the Annual General Meeting. Both decisions were taken for personal reasons. Richard’s experience as a fund manger and as an observer of companies and markets over his career made his contribution to the company as the Audit Committee Chairman particularly valuable, especially in revising the valuation methodology for LTL and cataloguing and assessing the potential risks facing the Company. The Board is sad to lose a valued member. We wish him well for the future.
Following Richard’s resignation Helena Vinnicombe agreed to become the Chairman of the Audit Committee for an interim period and Cornforth Consulting Ltd (“Cornforth”) was appointed by the Board in April 2023 to assist with the appointment of a new Audit Committee Chairman.
I have been honoured and privileged to serve as Chairman of the Company since 2015. I have indicated to the Board that I wish to stand down as part of the normal succession process and it has been agreed that I will do so at the end of 2023. I am delighted that Roger Lambert has been chosen by my Board colleagues to succeed me from 1 January 2024.
Change of Auditor
During the year the Board initiated a formal competitive tender process for our external audit engagement. At the forthcoming Annual General Meeting, the Board will propose that BDO LLP replace PricewaterhouseCoopers LLP as the Company’s external auditor. Full details of this process can be found in the Report of the Audit Committee.
The Annual General Meeting
This year’s Annual General Meeting will be held at 2.30 p.m. on Wednesday, 30 August 2023, at the Marlborough Suite, St Ermin's Hotel, 2 Caxton Street, London, SW1H 0QW. As well as the formal proceedings, there will be an opportunity for shareholders to meet the Board and the Investment Manager, and to receive an update on the Company’s strategy and its key investments. This year for the first time voting will be conducted via a poll and I encourage all shareholders to exercise their right to vote. The Board strongly encourages shareholders to register their votes online in advance. Registering your vote in advance will not restrict shareholders from attending and voting at the meeting in person should they wish to do so. As investors we demand high standards of corporate governance from the companies that we own in the Company’s portfolio, and we urge you, our shareholders, to follow suit and vote on the resolutions that are proposed, as we the Directors intend to do ourselves.
Considerations for the Future
With interest rates rising as much and as quickly as they have, it is encouraging that markets have been able to absorb these increases with relative equanimity. Recent troubles in the global banking sector show that perhaps markets have yet to fully adjust to the effects of this change.
In this environment the Board is much reassured that the Company owns a selection of durable quoted companies with a history of having thrived through more difficult times in the past. The holding in LTL, as a unquoted, relatively young company, may represent more risk from this perspective but, as its business is built on the same durable platform of companies that it owns for its clients, it is also uniquely aligned with the risks faced by the quoted portfolio.
Let us hope these companies continue to compound the returns we seek. If they do, market prices should eventually respond, which should be to the benefit of our direct holdings and LTL’s business.
Julian Cazalet
Chairman
12 June 2023
Portfolio Holdings at 31 March 2023
(All ordinary shares unless otherwise stated)
| % of | Look through | |||
| Fair value | net | basis % of | ||
| Holding | Security | £’000 | assets | total assets† |
| 6,450 | Lindsell Train Limited | 85,220 | 40.32 | 40.32 |
| 235,000 | London Stock Exchange | 18,490 | 8.75 | 8.94 |
| 12,500,000 | LF Lindsell Train North American* | 17,361 | 8.21 | 0.00 |
| Equity Fund | ||||
| 420,500 | Diageo | 15,195 | 7.19 | 7.40 |
| 410,000 | Nintendo | 12,828 | 6.07 | 6.07 |
| 363,000 | RELX | 9,500 | 4.49 | 4.73 |
| 222,000 | Unilever | 9,301 | 4.40 | 4.57 |
| 149,980 | Mondelez International | 8,468 | 4.01 | 4.45 |
| 1,263,393 | A.G. Barr | 6,367 | 3.01 | 3.03 |
| 89,000 | Heineken | 6,618 | 3.13 | 3.24 |
| 97,400 | PayPal | 5,988 | 2.83 | 3.06 |
| 39,000 | Laurent Perrier | 4,016 | 1.90 | 1.90 |
| 420,000 | Finsbury Growth & Income Trust* | 3,776 | 1.79 | 0.00 |
| Indirect Holdings | – | – | 8.26 | |
| Total Investments | 203,128 | 96.09 | 95.97 | |
| Net Current Assets | 8,262 | 3.91 | 4.03 | |
| Net Assets | 211,390 | 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 31 March 2023:
| Net Equity | |
| Exposure | |
| LF Lindsell Train North American Equity Fund ACC | 97.91% |
| Finsbury Growth & Income Trust PLC | 101.48% |
Analysis of Investment Portfolio at 31 March 2023
Breakdown by Location of Listing
| (look-through basis)^ | |
| UK* | 70% |
| USA | 15% |
| Japan | 6% |
| Europe excluding UK | 5% |
| Rest of World | 0% |
| Cash & Equivalents | 4% |
| 100% |
Breakdown by location of underlying company revenues
| (look-through basis)^ | |
| USA** | 28% |
| Europe excluding UK** | 27% |
| UK** | 26% |
| Rest of World | 12% |
| Japan | 3% |
| Cash & Equivalents | 4% |
| 100% |
Breakdown by Sector
| (look-through basis)^ | |
| Financials | 54% |
| Consumer Staples | 27% |
| Communication Services | 7% |
| Industrials | 5% |
| Information Technology | 2% |
| Consumer Discretionary | 1% |
| Cash & Equivalents | 4% |
| 100% |
^ 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 managed funds.
* LTL accounts for 40.3% and is not listed.
** LTL accounts for 17 percentage points of the Europe figures, 18 percentage points of the UK figures, 5 percentage points of the USA figures and 0 percentage points of the RoW figure.
Manager’s Report
We did not initiate any holdings over the last six months, nor did we dispose of any. In fact, our only activity was to add to our most recent position, Laurent Perrier. This is now getting on for a 2% holding and we look to build it further, when shares come available, which is infrequently.
We know this lack of activity could be construed as us running out of ideas, or complacency. I assure you this is not so, and that Michael Lindsell and I remain as committed to and ambitious for your Company as ever. We both added to our own holdings in the Company over the period.
Instead, the lack of portfolio activity reflects our double conviction. First, that the companies we own are fine businesses with plenty of growth ahead of them and, therefore, with the potential to command higher (we hope much higher) share prices in the future. Second, we reiterate our view that buying and selling shares in the hope of improving investment performance is, on balance and for most investors, over time, a loser’s game. The costs of such selling and buying are certain, while the benefits of switching horses in mid-stream are most uncertain, particularly when you own a stable of thoroughbreds, which we believe is the case for ours.
Nonetheless, we know that for the NAV of your Company to make significant progress, the shares of our investee companies must also progress. In fact, we want as many as possible to be hitting regular all-time highs, because that is the best validation of our kind of investment approach. That investment approach being based on identifying long-term winners and then running those winners for the genuinely long-term. Candidly, we wish more of our holdings had been hitting new highs over the last couple of years.
However, in this report let me note: three portfolio holdings hit all-time share price highs in the first quarter of 2023. We hope this trio goes even better as the year progresses and that they are soon joined by other important holdings hitting all-time share price highs too.
The three recent winners were Laurent Perrier, Mondelez and RELX, each of which had encouraging recent trading updates. I hope it doesn’t sound flippant, but we think there is every ground for expecting these companies to continue to do well. Their respective business franchises – one of the world’s premium champagne brands (and the only publicly-quoted one); the owner of two beloved global mega-brands, Cadbury and Oreos; and a globally-significant provider of “must-have data” for scientists, lawyers and risk professionals – remain compelling propositions for investors, we think. All three have been terrific long-term investments too, in addition to their 2023 gains. Why shouldn’t they carry on being so?
Elsewhere, there are several holdings where the shares have picked up in recent months and are now within striking distance of all-time highs. Diageo for instance is less than 10% off its peak. A period of dull price performance since 2021 has coincided with some interesting changes to the share register. We note three relatively recent buyers of Diageo shares: the Gates Foundation (as in Bill Gates), Berkshire Hathaway and Diageo itself. We are encouraged to see investors and an industry participant of this calibre sharing our confidence in the secular growth and inflation protection offered by Diageo’s brands. And, of course, Diageo’s purchases of its own shares for cancellation increase the value of each remaining share; great for long-term holders like us.
Bill Gates also took advantage of a recent corporate placing of Heineken shares to acquire a stake in that company, worth nearly $1.0 billion. This is a nice approbation of the durability and likely long-term prosperity of this great business, and we hope to see our Heineken shares surpass their 2019 peak soon. They are currently about 10% shy.
Bill Gates’ old business, Microsoft, recently acquired £1.7 billion-worth of shares in London Stock Exchange Group (“LSEG”) – as part of a strategic joint venture between the two companies. This has pushed LSEG shares better, and they are now c10.7% below their 2021 highs (at worst they traded 35% below those levels). With each passing set of results the wisdom of LSEG’s 2021 purchase of Refinitiv looks more certain. Certainly, it is the reason that Microsoft has partnered with LSEG. And if the LSEG board’s ambitions are achieved – and that board now has a senior Microsoft officer as a non-executive - then we have no doubt that old share price peak will be handsomely superseded.
Another new strategic holding has been built in one of your portfolio companies. Nintendo has a new, major investor; the Saudi Public Wealth Fund now speaks for 8% of its equity. Today the shares are 20% below the highs they reached in 2021 (although admittedly somewhat further below their all-time high of as long ago as 2007). What will make those highs be surpassed? Well – how about the news that Nintendo’s Mario movie, released in April 2023, has rapidly become the most successful video-game film spin-off ever and is, after just a week’s release, the second most successful animated movie released since the onset of Covid-19? To us and, we assume, the Saudi Public Wealth Fund, that success reinforces our confidence in the longevity of Nintendo’s wonderful gaming franchises, which have been loved by generation after generation of kids and their parents. Nintendo shares are valued on a lowly 14x historic earnings and a dividend yield of nearly 3%, which speaks of a scepticism on the part of investors about the earnings power of the company. To us that scepticism seems profoundly wrong.
Unilever shares currently stand 16% below their 2019 peak (though 28% above their lows of early 2022) and probably need a resurgence of confidence in Emerging Markets to really get going again; of course, this will happen one day.
I must acknowledge that for the other two holdings in your portfolio, all-time high share prices look more distant in the short term. A.G. Barr sits 45% below its 2019 highs and PayPal a disappointing 75%. Yet both are forecast to grow sales and earnings over the next few years, each have obviously valuable brands or market positions and both have very strong balance sheets – so you never know.
In summary, we are pretty pleased with the business performance of the companies in your portfolio. Excepting the impact of Covid-19, they have exhibited the reliability we hoped for. Their share prices have been less satisfactory, at least until recently. But we are sure if the businesses continue to prosper, the shares will follow – to the benefit of your Company.
Nick Train
Investment Manager
Director,
Lindsell Train Limited
12 June 2023
Performance and Prospects
As set out in the Chairman's statement, considering the opportunities and challenges faced during the year, relative to the wider market, the Board is satisfied with the Company’s performance compared with the benchmark and other key performance indicators, when assessed over the five and ten year periods.
The Board continues to fully support 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 (21 January 2001) with a net asset value per share total return^ of 13.3% compared with a total return from the Company's combined benchmark index of 4.6% both calculated on an annualised basis.
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 which are unchanged from last year with the exception of Dividend per Ordinary Share.
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.
| Principal Data | |||
| 31 March 2023 | 31 March 2022 | % Change | |
| Shareholders’ funds (£’000) | 211,390 | 222,761 | -5.1% |
| NAV per Ordinary Share | £1,056.95 | £1,113.81 | -5.1% |
| Discount to NAV^ | 0.42% | 0.79% | |
| Share price per Ordinary Share | £1,052.50 | £1,105.00 | -4.8% |
| Recommended final dividend per Ordinary Share | £51.50 | £51.12 | +0.7% |
| Recommended special dividend per Ordinary Share | – | £1.88 | -100.0% |
| Total dividends recommended for the year | £51.50 | £53.00 | -2.8% |
| Dividend yield^ | 4.89% | 4.80% | |
| Ongoing Charges^ | 0.87% | 0.82% | |
| Earnings/(loss) per Ordinary Share – basic | £(3.85) | £(21.77) | |
| Revenue | £61.06 | £63.65 | |
| Capital | £(64.91) | £(85.42) | |
| NAV total return^† | -0.4% | -2.3% | |
| Share price total return^† | -0.7% | -20.0% | |
| Benchmark (MSCI World Index in Sterling)† | -1.0% | 15.4% |
^ 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.
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 | (£) | (£) | (£) |
| 2019 | 8,680 | 7,172 | 5,900 | 29.50 | 895.93 | 1,475.00 |
| 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 |
Alternative Performance Measures (“APM”)
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.
Principal Risks
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 with the assistance of Frostrow. A risk management process has been established to identify and assess risks, their likelihood and the possible severity of impact. Further information is provided in the Audit Committee 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.
| Key Risks and Uncertainties | Key Mitigations | |
|---|---|---|
| Corporate Strategy The Board may have to reduce the Company’s dividend. 84% of the Company’s income is represented by dividends from LTL. If LTL’s funds under management fall the Company’s dividend paying potential could be negatively impacted. |
The Board reviews at every Board meeting the investment portfolio, income forecasts and levels of available revenue reserves prepared by the Company Secretary at every Board meeting. Sufficient dividends are paid to maintain investment trust status. The Company has retained revenue reserves, which can be used to supplement dividend payments in the event of a short-term reduction in net revenue. 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. |
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| The Company’s share price total return may differ materially from the NAV per share total return resulting in the shares trading at either a premium or a discount to NAV. | Regular consideration is given to the share price premium or discount to NAV per share and the Company has authority to buy back shares and hold in treasury. | |
| Investment Strategy and Activity The departure of a key individual at the Manager may affect the Company’s performance. |
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 meets with other members of the wider team employed by the Manager. Key-man insurance has been secured by 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. |
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| The investment strategy adopted by the Manager, including the high degree of concentration of the investment portfolio, may lead to an investment return that is materially lower than the Company’s benchmark index, and/or a possible failure to achieve the Company’s investment objective. | The Board regularly discusses with the Manager the structure of the portfolio, including asset allocation and portfolio concentration. The Board reviews the performance of the portfolio against the benchmark at every meeting. |
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| The adverse impact of climate change on the portfolio companies’ operational performance. | 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 the UK Stewardship Code and actively engages with portfolio companies on ESG matters including climate change. LTL developed its own methodology to assess the carbon impact of the portfolio. LTL became a signatory of Net Zero Asset Managers (“NZAM”) in December 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 in the Strategic Report. |
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| The investment in LTL becomes an even greater proportion of the overall value of the Company’s portfolio. | The Board holds quarterly discussions with the Manager at each Board meeting. Consideration is given during a strategy meeting to the prospects of LTL and subsequent impact on the Company. The Board receives monthly compliance reports from the Company Secretary which monitor compliance with the investment restrictions. |
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| Operational Adverse reputational impact of one or more of the Company’s key service providers which, by association, causes the Company reputational damage. |
The Board has appointed reputable service providers who are well experienced in the investment trust sector. Individual Directors are well connected in the investment market and investment company sector and thereby keep themselves appraised of developments in the sector. The Manager and the Company Secretary provide regular news updates on all matters affecting the Company. The Board undertakes an annual review of the level of service provision of the service providers. |
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| Financial Fraud (including unauthorised payments and cyber fraud) occurs leading to a loss. |
The Manager and the Company Secretary have in place robust compliance and risk monitoring programmes. The Board receives monthly compliance reviews and quarterly expenses analysis. 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. |
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| The Company is exposed to credit risk. | The Manager is responsible for undertaking reviews of the creditworthiness of the counterparties that it uses. All business with respect to portfolio activity is conducted 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 beginning. |
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| The Company is exposed to market price risk. | 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 Secretary reports to the 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. |
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| Accounting, Legal and Regulatory The Company and/or the Directors fail(s) to comply with its legal requirements in relation to FCA dealing rules/handbook procedures, the Listing Rules, the Companies Act 2006, relevant accounting standards, the Bribery Act 2010, the Criminal Finances Act 2017, the Association of Investment Companies (“AIC”) Statement of Recommended Practice (“SORP”), GDPR, tax regulations or any other applicable regulations. |
The Board monitors regulatory changes with the assistance of the Company Secretary, the Manager and external professional advisers to ensure compliance with applicable laws and regulations. The Board reviews compliance reports and internal control reports provided by its service providers, as well as the Company’s Financial Statements and revenue forecasts. The Company Secretary presents a quarterly report on changes in the regulatory environment and how and when changes are to be addressed As a member of the AIC, the Board receives regular technical updates which highlight forthcoming compliance obligations and regulatory issues. |
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| The regulatory environment in which the Company operates changes, affecting the Company's business model. | The Board monitors the regulatory environment with the assistance of its Company Secretary, Manager and external professional advisers to ensure that the Board is aware of any likely changes in the regulatory environment and will be able to adapt as required. | |
| The Company’s valuation of its investment in LTL is materially misstated. | 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 applied to its unlisted investment in LTL during 2022. 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 reviews a risk map regularly during the year. Emerging risks are discussed in detail as part of this process and also throughout the year to try and ensure that new (as well as known) risks are identified and, so far as practicable, mitigated. Current identified emerging risks are as follows:
| Key Risks and Uncertainties | Key Mitigations | |
|---|---|---|
| Emerging Risks Geopolitical and macroeconomic developments introduce new risks and exacerbate existing risks. These include: higher inflation is leading policy makers to increase interest rates. This in turn may lead to a reduction in trade, a threat of recession and higher unemployment; sanctions damage the prospects of investee companies with material exposure to Russia; increased market volatility and reduced risk appetites across a wide variety of asset classes; increased threat of state sponsored cyber- attacks; and geopolitical tension between China and the West. |
The Manager monitors portfolio construction, performance and liquidity to assess and manage the impact of increased market volatility on the listed portfolio and on the Company’s holding in LTL. The Manager monitors the current impact of sanctions and other economic responses to the war in Ukraine on investee companies. The Company’s investment approach means that it owns companies with strong brand equity and pricing power making them more able to pass on cost increases and mitigate the effects of inflation on portfolio holdings. The Board reviews regular internal control reports from its key service providers that include cyber defences and other mitigants against unauthorised network access |
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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.
Longer-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. The Board has chosen a five year horizon in view of the long-term outlook adopted by the Investment Manager when making investment decisions.
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 UK and internationally listed securities and funds, and has some short-term cash on deposit. These liquid assets represent 59.7% of net assets. The other 40.3% is the unlisted investment in LTL, which is not readily realisable.
Based on historic analysis, including the holding in the LTL fund, 56.8% of the current portfolio could be liquidated within 30 business days with 51.0% 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 0.87%, 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 24.2%, 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.
Section 172 Disclosure
Engaging with the Company’s Stakeholders
The following Section 172 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.
| STAKEHOLDER GROUP | ||
|---|---|---|
| Who? | Why? | How? |
| Investors | The benefits of engagement with the Company’s Stakeholders | How the Board, the Manager and the Company Secretary have engaged with the Company’s Stakeholders |
| The Board recognises the importance of communication with shareholders. Clear communication of the Company’s strategy and the performance against the Company’s objective can help maintain demand for the Company’s shares. |
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 include: The Annual General Meeting. Should any significant votes (greater than 20%) be cast against resolutions proposed at the Annual General Meeting, the Board will engage with shareholders. The Board will explain in its announcement of the results of the Annual General Meeting the actions it intends to take to consult shareholders in order to understand the reasons behind the 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. |
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| Manager | The benefits of engagement with the Company’s Stakeholders | How the Board, the Manager and the Company Secretary have engaged with the Company’s Stakeholders |
| Engagement with the Company’s Manager is necessary to evaluate its performance against the Company’s stated strategy and to understand any risks or opportunities this may present. The Board monitors the Manager’s approach to environmental, social and governance (“ESG”) issues. Engagement also helps ensure that investment management costs are closely monitored and remain competitive. The Chairman’s Statement beginning and Appendix 3 describe the key decisions taken during the year relating to LTL. |
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. Furthermore, Michael Lindsell is a Director of both the Company and of the Manager. The aim is to maintain a strong relationship between the Board and Manager when considering the interests of the Company’s stakeholders, whilst upholding the Company’s values. The Manager’s attendance at each Board meeting also provides the opportunity for the Manager and Board to further reinforce their mutual understanding of what is expected from both parties. The Manager’s performance is evaluated informally on a 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. |
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| Service Providers | The Company contracts with third-parties for other services including: Company Secretary and administration, Registrar and Custodian. The Company ensures that the third-parties to whom the services have been outsourced complete their roles in line with expectation thereby supporting the Company. | 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 environment where topics, issues and business development needs can be dealt with efficiently and collegiately. The Board maintains regular contact with the Company’s key service providers as well as carrying out a review of the service providers’ business continuity plans and additional cyber security provisions. The key service providers’ performance is evaluated by the Management Engagement Committee on an annual basis, or more often if appropriate. The terms and conditions underlying the relationship between the service providers are reviewed as part of this process. This approach is 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. |
| Portfolio companies | The benefits of engagement with the Company’s Stakeholders | How the Board, the Manager and the Company Secretary have engaged with the Company’s Stakeholders |
| The Manager invests in a concentrated portfolio of durable business franchises with the intention of holding these positions for a considerable time. The Manager engages with the management of these companies on a periodic basis and reports its impressions on the prospects of the companies to the Board. Gaining a deeper understanding of the portfolio companies and their strategies as well as incorporating consideration of ESG factors into the investment process assists in understanding and mitigating risks of investments as well as identifying future potential opportunities. |
The Board encourages the Company’s Manager to engage with companies and in doing so expects ESG issues to be a key consideration. The Board receives an update on LTL's engagement activities within a dedicated quarterly ESG report together with quarterly updates concerning the prospects of the portfolio companies. Details of LTL's approach to responsible ownership can be found in the Strategic Report. |
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| Regulators | The Board ensures compliance with rules and regulations as relevant to the Company. | The Company Secretary reports to the Board on a monthly basis and at each Board meeting. |
| KEY AREAS OF ENGAGEMENT WITH STAKEHOLDERS | HOW THE BOARD HAS ENGAGED WITH THE COMPANY’S STAKEHOLDERS |
|---|---|
| Ongoing dialogue with shareholders concerning the strategy of the Company, performance and the portfolio. | The Manager meets with shareholders as required and at the Annual General Meeting. Shareholders are provided with performance updates via the Company's website as well as the usual financial reports and monthly reports. |
| Board Composition. | Cornforth was appointed by the Board in April 2022 to assist with the appointment of two new Directors, resulting in the appointment of Roger Lambert and Helena Vinnicombe, who joined the Board on 23 September 2022 and will offer themselves for election by shareholders at the 2023 Annual General Meeting. As part of the Board's succession plans, it is intended that Julian Cazalet will retire as Chairman of the Board and Management Engagement Committee at the end of December 2023. Mr Cazalet will be succeeded as Chairman by Mr Lambert. Richard Hughes will retire as a Director at the conclusion of the Company’s Annual General Meeting. Ms Vinnicombe took over from Mr Hughes as Chairman of the Audit Committee with effect from 14 April 2023, on an interim basis. Cornforth was appointed by the Board in April 2023 to assist with the appointment of a new Audit Committee Chairman. |
| Audit Tender | During the year the Audit Committee led a competitive audit tender process, which resulted in the recommendation that BDO LLP be appointed as the Company's new auditor. |
LTIT’s Responsible Investment Policy
The Board believes that it is in shareholders’ best interests to consider ESG factors when selecting and retaining investments and the Manager takes these issues into account.
In its Responsible Engagement & Investment Policy, the Manager states that its evaluation of ESG factors is an inherent part of the investment process. 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 Responsible Investment and Engagement Policy has been reviewed and endorsed by the Board. The Manager is a signatory to the United Nations Principles for Responsible Investment and a signatory of the 2021 UK Stewardship Code.
LTL became a signatory of Net Zero Asset Managers in December 2021.
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 UK sanctions regime. The relevant service providers have confirmed that they check the Company’s shareholder data against the UK sanctions list on a daily basis. At the date of this report, no sanctioned individuals had been identified on the Company’s shareholder register. The Board notes that stockbrokers and execution-only platforms also carry out their own due diligence.
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 frame work.
Disclosure Concerning Greenhouse Gas Emissions (“GHG”) for the year ended 31 March 2023
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.
Consequently, 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 it believes 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 LTL’s investment team’s views, as well as to prioritise its 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 LTL’s valuation of that company, which alongside its more qualitative research will influence any final portfolio decisions (for example, whether LTL starts a new position or sells 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 it to invest in a number of companies that play an important positive social or environmental role, for example through providing access to educational information (e.g. RELX) or encouraging environmental progress and best practice (e.g. Mondelez). LTL believes that such positive benefits for society should be consistent with its aim to generate competitive long-term returns, thus helping LTL meet its clients’ investment objectives.
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 their clients’ capital for decades to come.
As a relatively small company with a single office location and 28 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 address this, LTL became a signatory of the NZAM initiative in December 2021 and is now committed1 to becoming net zero across all assets under its management by 2050. In line with this ambition, LTL set a 2030 interim target which has since been approved by The Institutional Investors Group on Climate Change (“IIGCC”). LTL felt it was most appropriate to set a Portfolio Coverage Target, and has duly targeted 55% of its asset-weighted committed assets to be considered Aligned2 by 2030, as set out by the Paris Aligned Investment Initiative (“PAII”) Net Zero Investment Framework. This represents a circa 50% improvement from its baseline of 36% of assets being Aligned as of 2022, consistent with a fair share of the 50% global reduction in CO2 identified as a requirement in the IPCC special report on global warming of 1.5°C.
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. LTL also supports the recommendations of the Task Force on Climate-Related Financial Disclosures (“TCFD”) and its efforts to encourage companies to report their climate related disclosures and data in a uniform and consistent way. Further information on LTL’s TCFD related disclosures can be found on LTL’s website: www.lindselltrain.com within its 2023 TCFD Report.
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 have 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 believes 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, LTL engaged with three companies held within the Company’s portfolio, focussed on six governance topics.
In addition, Madeline Wright, Deputy Portfolio Manager and Head of Investment ESG at LTL, completed her process of holding an ESG specific discussion with all of LTL’s portfolio companies (c.70 in total), aimed at establishing a baseline for LTL’s ongoing engagement and clarifying its portfolio companies’ stances on, and approaches to, certain ESG factors, with the objective of ensuring that all portfolio companies report this essential data going forward. This information is stored, assessed, and monitored within Sentinel, LTL’s proprietary ESG database.
As a public supporter of the TCFD and The IFRS Sustainability Alliance (previously known as the Sustainability Accounting Standards Board), LTL’s encouraging it’s portfolio companies to report in line with these, or similar (if more relevant to their business) frameworks, and also to report on positive impact goals and progress to net-zero. Furthermore, as signatories of NZAM, LTL is monitoring carefully the transition to net-zero of each of its businesses and encouraging the companies to set science-based targets where possible.
Key Engagement Examples:
Unilever
This engagement in Q2 2022 centred on the recent news of the appointment of activist investor, Nelson Peltz of Trian Fund Management, to its board as a non-executive director, after his purchase of 1.5% of Unilever’s shares. As Trian’s objectives are ostensibly in line with that of LTL, LTL had no objection to the appointment despite being somewhat surprised at the small size of the investment required to get a seat at the table. LTL did however take the opportunity to urge the board to resist any proposals that merely boost short-term value. Nils Andersen (non-executive chairman), confirmed that the board remains committed to their long-term strategy and is focussed on protecting the strategic value of Unilever’s assets.
In early 2023, LTL engaged with the Chairman of Unilever regarding the announcement of its choice of new CEO.
PayPal
LTL has engaged with PayPal on several occasions to share its views regarding compensation best practice and continues to believe that it could foster greater shareholder alignment through improved compensation structures. In accordance with LTL’s escalation process, it voted against PayPal’s resolution. LTL wrote to the management of PayPal, outlining the reasons for its vote, and encouraging them to review their compensation structure.
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 Proposals | Shareholder Proposals |
Total Proposals |
|
| With Management | 199 | 2 | 201 |
| Against Management | 1 | – | 1 |
| Abstain | 1 | 1 | 2 |
| Totals | 201 | 3 | 204 |
Source: Glass Lewis. 1 April 2022 – 31 March 2023.
Votes against management 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 encourages) 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 LTL will write to management to inform them of LTL’s intention to vote against such policies.
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, tax evasion 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 United Kingdom or abroad to secure any improper benefit from themselves or for the Company. As such, policies and procedures are in place to prevent this and can be found on the Company’s website.
The Board applies the same standards to its service providers in their activities for the Company.
The Company’s culture is driven by its values of integrity, knowledge, skill and frank and courteous conduct. It focuses on achieving returns for shareholders in line with the Company’s Investment Objectivee 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
Julian Cazalet
12 June 2023
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 UK and Republic of Ireland”, and applicable law). 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 UK Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the Financial Statements;
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 United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
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 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 UK and Republic of Ireland”, and applicable law (United Kingdom Generally Accepted Accounting Practice), give a true and fair view of the assets, liabilities, financial position and loss of the Company; and
the Strategic Report includes a fair review of the development and performance of information required by the FCA's Disclosure Guidance and Transparency Rules.
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
Julian Cazalet
Chairman
12 June 2023
Note to those who wish to access this document by electronic means:
The Annual Report for the year ended 31 March 2023 has been approved by the Board of The Lindsell Train Investment Trust plc. Copies of the Annual Report are circulated to shareholders and, where possible, to investors through other providers’ products and nominee companies (or written notification is sent when they are published online). It is also made available in electronic format for the convenience of readers. Printed copies are available from the Company’s Registered Office in London.
Financial Statements
Income Statement for the year ended 31 March 2023
| 2023 | 2022 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Losses on investments held at fair value | 10 | – | (12,978) | (12,978) | – | (17,089) | (17,089) |
| Exchange (loss)/gains on currency balances | – | (3) | (3) | – | 6 | 6 | |
| Income | 2 | 14,135 | – | 14,135 | 14,784 | – | 14,784 |
| Investment management fees | 3 | (1,138) | – | (1,138) | (1,309) | – | (1,309) |
| Other expenses | 4 | (690) | (1) | (691) | (668) | (1) | (669) |
| Net return/(loss) before taxation | 12,307 | (12,982) | (675) | 12,807 | (17,084) | (4,277) | |
| Taxation | 7 | (96) | – | (96) | (78) | – | (78) |
| Return/(loss) after taxation for the financial year | 12,211 | (12,982) | (771) | 12,729 | (17,084) | (4,355) | |
| Return/(loss) per Ordinary Share | 9 | £61.06 | £(64.91) | £(3.85) | £63.65 | £(85.42) | £(21.77) |
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 Association of Investment Companies.
The Company does not have any other recognised gains or losses. The net loss 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 31 March 2023
| 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 March 2022 (see note 8) | – | – | – | (10,600) | (10,600) |
| At 31 March 2023 | 150 | 19,850 | 168,000 | 23,390 | 211,390 |
| Share | Special | Capital | Revenue | ||
| capital | reserve | reserve | reserve | Total | |
| 2022 | 2022 | 2022 | 2022 | 2022 | |
| £’000 | £’000 | £’000 | £’000 | £’000 | |
| For the year ended 31 March 2022 | |||||
| At 1 April 2021 | 150 | 19,850 | 198,066 | 19,050 | 237,116 |
| (Loss)/return for the financial year | – | – | (17,084) | 12,729 | (4,355) |
| Dividends paid for the year ended 31 March 2021 (see note 8) | – | – | – | (10,000) | (10,000) |
| At 31 March 2022 | 150 | 19,850 | 180,982 | 21,779 | 222,761 |
The notes form part of these Financial Statements.
Statement of Financial Position at 31 March 2023
| 2023 | 2022 | ||||
| Notes | £’000 | £’000 | £’000 | £’000 | |
| Fixed assets | |||||
| Investments held at fair value through profit or loss | 10 | 203,128 | 215,768 | ||
| Current assets | |||||
| Other receivables | 11 | 491 | 513 | ||
| Cash at bank | 8,010 | 6,708 | |||
| 8,501 | 7,221 | ||||
| Creditors: amounts falling due within one year | |||||
| Other payables | 12 | (239) | (228) | ||
| Net current assets | 8,262 | 6,993 | |||
| Net assets | 211,390 | 222,761 | |||
| Called up share capital | 13 | 150 | 150 | ||
| Special reserve | 14 | 19,850 | 19,850 | ||
| 20,000 | 20,000 | ||||
| Capital reserve | 14 | 168,000 | 180,982 | ||
| Revenue reserve | 23,390 | 21,779 | |||
| Equity Shareholders’ funds | 211,390 | 222,761 | |||
| Net Asset Value per Ordinary Share | 15 | £1,056.95 | £1,113.81 | ||
The Financial Statements were approved by the Board on 12 June 2023 and were signed on its behalf by:
Julian Cazalet
Chairman
The Lindsell Train Investment Trust plc
Registered in England & Wales, No: 4119429
The notes form part of these Financial Statements.
Statement of Cash Flows for the year ended 31 March 2023
| 2023 | Restated 2022† | ||
| Notes | £’000 | £’000 | |
| Net cash inflow from operating activities | 16 | 12,243 | 10,125 |
| Investing activities | |||
| Purchase of investments held at fair value | (339) | (673) | |
| Sale of investments held at fair value | 1 | 1,709 | |
| Net cash (outflow)/inflow from investing activities | (338) | 1,036 | |
| Financing activities | |||
| Equity dividends paid | 8 | (10,600) | (10,000) |
| Net cash outflow from financing activities | (10,600) | (10,000) | |
| Increase in cash and cash equivalents | 1,305 | 1,161 | |
| Cash and cash equivalents at beginning of year* | 6,708 | 5,541 | |
| (Loss)/gains on exchange movements* | (3) | 6 | |
| Cash and cash equivalents at end of year* | 8,010 | 6,708 |
Cash flows from operating activities includes dividend income received (gross) of £14,156,000 (2022:£14,880,000) and deposit interest of £36,000 (2022:£nil).
* Comprises solely cash held at bank.
† Restatement of presentation only. See note 1(k) for further details.
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 United Kingdom Company law, FRS 102 ‘The Financial Reporting Standard applicable in the UK and Ireland’ and with the Statement of Recommended Practice (“SORP”) “Financial Statements of Investment Trust Companies and Venture Capital Trusts”, issued by the Association of Investment Companies in July 2022.
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 31 March 2023, the Company held £117,908,000 (2022: £118,858,000) in listed investments and £102,581,000 (2022: £114,512,000) in an unlisted investment and LTL managed fund. The total operating expenses for the year ended 31 March 2023 were £1,829,000 (2022: £1,978,000). It is estimated that 51.0% of the investment portfolio, (92.3% of the listed portfolio) could be liquidated within five business days based on 20% of the 90 days’ average trading volumes obtained from Bloomberg.
(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.
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, 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.
Lindsell Train fund products are valued daily using prices supplied by the administrator of these funds.
The unlisted investment in Lindsell Train Limited 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 2022 the Board sought external advice to verify its approach. Please refer to note 1(j) for further information.
The investment in LTL (representing 24.2% 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 with effect from 31 March 2023 is based upon a methodology that uses a percentage of LTL’s funds under management, with the percentage applied being reviewed monthly and adjusted to reflect the ongoing profitability of LTL.
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; 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 September 2002 to transfer £19,850,000 from the share premium account. This reserve can be used to finance the redemption and/or purchase of shares in issue.
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.
(k) Statement of Cash Flows (presentation for comparative year restated)
In preparing the Company’s Statement of Cash Flows for the year ended 31 March 2023, the Directors have made the judgement that purchases and sales of investments form part of the Company’s investing activities, on the basis that these activities are intended for the achievement of longer-term shareholder returns, consistent with the Company’s investment objective.
The Company has re-assessed the previous classification of purchases and sales of investments as “operating activities” in the Company’s Statement of Cash Flows and, after careful consideration, the Board decided to change the accounting policy to better reflect the nature of investment activities and classify purchases and sales of investments as “investing activities”. As a result, the presentation of the Statement of Cash Flows for the year ended 31 March 2022 has been restated. This change in accounting policy has no impact on net assets or income in either the current or prior year.
2 Income
| 2023 | 2022 | |
| £’000 | £’000 | |
| Income from investments | ||
| Overseas dividends | 833 | 689 |
| UK dividends | ||
| – Lindsell Train Limited | 11,875 | 12,861 |
| – Other UK dividends | 1,391 | 1,234 |
| 14,099 | 14,784 | |
| Other income | ||
| Deposit Interest | 36 | – |
| 36 | – | |
| Total income comprises: | ||
| Dividends | 14,099 | 14,784 |
| Interest | 36 | – |
| 14,135 | 14,784 |
3 Management fees
| 2023 | 2022 | |
| £’000 | £’000 | |
| Investment management fee | 1,255 | 1,449 |
| Rebate of investment management fee (see below) | (117) | (140) |
| Total management fee | 1,138 | 1,309 |
In accordance with an Investment Management Agreement dated 21 December 2000 (last revised in November 2020) between the Company and LTL, LTL has been providing investment management services to the Company. For its services, LTL receives an annual fee of 0.6%, calculated on the lower of the Adjusted Market Capitalisation and the Adjusted Net Asset Value of the Company, calculated using weekly data and payable in arrears in respect of each calendar month. The amount charged during the year is shown above. £94,893 (2022: £101,681) of the fee for the year was outstanding as at the Balance Sheet date.
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 31 March 2023 was £nil (2022: £nil).
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 £101,725 (2022: £123,593) relates to the Company’s investment in Lindsell Train North American Equity Fund and £15,065 (2022: £16,399) relates to the Company’s investment in the Finsbury Growth & Income Trust PLC.
4 Other expenses
| 2023 | 2022 | |
|---|---|---|
| £’000 | £’000 | |
| Directors’ emoluments | 151 | 118 |
| Company Secretarial and Administration fee | 195 | 211 |
| Auditor’s remuneration*† | 55 | 35 |
| Tax compliance fee | 6 | 5 |
| Safe custody fees | 18 | 19 |
| Printing fees | 40 | 44 |
| Registrars’ fees | 35 | 33 |
| Listing fees | 14 | 10 |
| Legal fees | 5 | 12 |
| Employer’s National Insurance | 11 | 8 |
| Directors’ liability insurance | 13 | 12 |
| Key man insurance | 47 | 24 |
| Consultancy fees** | – | 50 |
| Costs associated with the redesign of the Company’s website | – | 12 |
| Director recruitment costs | 40 | – |
| Sundry | 60 | 41 |
| VAT irrecoverable | – | 34 |
| 690 | 668 | |
| Capital charges | 1 | 1 |
| 691 | 669 |
* Excluding VAT.
† Remuneration for the audit of the Financial Statements of the Company.
** Fees paid to J.P.Morgan Cazenove Ltd in relation to amendments to the Management Agreement and their review of the Company’s valuation methodology applied to its unlisted investment in LTL.
5 Directors’ emoluments
These are reflected in the table below:
| 2023 | 2022 | |
| £’000 | £’000 | |
| Directors’ fees | 151 | 118 |
Since 1 January 2023, the Chairman of the Board, Chairman of the Audit Committee, and other Directors receive set fees at rates of £40,000, £34,000 and £27,000 respectively per annum, and have no entitlement to any performance fees. Directors’ fees amounting to £27,000 (2022: £26,000) have been waived by Michael Lindsell in view of his connection with the Manager.
There were no pension contributions paid or payable.
6 Disclosure of interests
As at 31 March 2023 the Company held 12,500,000 shares in Lindsell Train North American Equity Fund with a fair value of £17,361,000 and a cost of £12,752,000.
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 £3,776,000 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:
| 2023 | 2022 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| UK corporation tax | – | – | – | – | – | – |
| Overseas tax | 102 | – | 102 | 90 | – | 90 |
| Overseas tax recoverable | (6) | – | (6) | (12) | – | (12) |
| Tax charge per accounts | 96 | – | 96 | 78 | – | 78 |
The current taxation charge for the year is different from the standard rate of corporation tax in the UK of 19% (2022: 19%). The differences are explained below:
| 2023 | 2022 | |
| £’000 | £’000 | |
| Net loss on ordinary activities before taxation | (675) | (4,277) |
| Theoretical tax at UK Corporation Tax rate of 19% (2022: 19%) | (128) | (813) |
| Effects of: | ||
| – UK dividends which are not taxable | (2,521) | (2,678) |
| – Overseas dividends which are not taxable | (158) | (131) |
| – Non-taxable loss on investments | 2,466 | 3,246 |
| – Current year excess expenses | 341 | 376 |
| – Overseas tax suffered | 102 | 90 |
| – Overseas tax recoverable | (6) | (12) |
| Actual current tax charge | 96 | 78 |
As an Investment Trust, the Company is not subject to UK taxation on capital gains as long as it maintains exemption under Sections 1158 and 1159 of the Corporation Tax Act 2010. In the opinion of the Directors, the Company has complied with the requirements of Sections 1158 and 1159 of the Corporation Tax Act 2010.
Factors that may affect future tax charges
As at 31 March 2023, the Company had unutilised management expenses of £30,032,000 (2022: £28,241,000). These expenses could only be utilised if the Company were to generate taxable profits in the future. As a result, the Company has not recognised a deferred tax asset of £7,508,000 (2022: £7,060,000) arising from management expenses exceeding taxable income based on the prospective corporation tax rate of 25% (2022: 25%).
8 Dividends paid and payable
| 2022 | 2021 | |
| £’000 | £’000 | |
| Final dividend for the year ended 31 March 2022 of £51.12 per Ordinary share (2021: £47.07 per Ordinary Share) | 10,224 | 9,414 |
| Special dividend paid for the year ended 31 March 2022 of £1.88 per Ordinary share (2021: £2.93 per Ordinary Share) | 376 | 586 |
| 10,600 | 10,000 |
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:
| 2023 | 2022 | |
| £’000 | £’000 | |
| FinaI dividend for the year ended 31 March 2023 of £51.50 per Ordinary share (2022: £51.12 per Ordinary Share) | 10,300 | 10,224 |
| Special dividend paid for the year ended 31 March 2023 of £nil per Ordinary share (2022: £1.88 per Ordinary Share) | – | 376 |
| 10,300 | 10,600 |
9 (Loss)/return per Ordinary Share
| 2023 | 2022 | |
| Total loss per Ordinary share | ||
| Total loss | £(771,000) | £(4,355,000) |
| Weighted average number of Ordinary Shares in issue during the year | 200,000 | 200,000 |
| Total loss per Ordinary share | £(3.85) | £(21.77) |
The total loss per Ordinary share shown above can be further analysed between revenue and capital, as below:
| 2023 | 2022 | |
|---|---|---|
| Revenue return per Ordinary Share | ||
| Revenue return | £12,211,000 | £12,729,000 |
| Weighted average number of Ordinary Shares in issue during the year | 200,000 | 200,000 |
| Revenue return per Ordinary Share | £61.06 | £63.65 |
| Capital loss per Ordinary Share | ||
| Total return | £(12,982,000) | £(17,084,000) |
| Weighted average number of Ordinary Shares in issue during the year | 200,000 | 200,000 |
| Capital loss per Ordinary Share | £(64.91) | £(85.42) |
10 Investments held at fair value through profit or loss
| 2023 | 2022 | |
| £’000 | £’000 | |
| Investments listed on a recognised investment exchange | 100,547 | 101,256 |
| Unlisted investment and Fund | 102,581 | 114,512 |
| Valuation at year end | 203,128 | 215,768 |
| Opening book cost | 42,252 | 43,805 |
| Opening investment holding gains | 173,516 | 190,088 |
| Opening Fair Value | 215,768 | 233,893 |
| Movements in the year: | ||
| Purchases at cost | 339 | 673 |
| Sales – proceeds | (1) | (1,709) |
| Gains/(loss) on investments | (12,978) | (17,089) |
| Closing Fair Value | 203,128 | 215,768 |
| Closing book cost | 42,591 | 42,252 |
| Closing investment holding gains | 160,537 | 173,516 |
| Closing Fair Value | 203,128 | 215,768 |
| Realised gains/(losses) on investments | 1 | (517) |
| Decrease in investment holding gains for the year | (12,979) | (16,572) |
| Losses on investments held at fair value | (12,978) | (17,089) |
The Company received proceeds of £1,000 (2022: £1,709,000) from investments sold in the year. The book cost of these investments when they were purchased was £400 (2022: £2,227,000). 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 31 March 2023 amounted to £85 and £nil respectively (2022: £280 and £673 respectively).
During the year the investment holding loss attributable to the Company’s holding in LTL amounted to £11,690,000 (2022 loss: £17,328,000). 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 31 March 2023.
| Investments | Country of registration or incorporation | Class of capital | % of class held |
| Lindsell Train Limited* | England | Ordinary Shares of £100 | 24.2% |
* As at 31 January 2023, the latest year end for LTL, its unaudited aggregate capital and reserves amounted to £98,449,000, (2022: £90,703,000) and the profit for that year amounted to £55,089,000 (2022: £65,343,000). The total amount of dividends paid during the year was £48,876,000, (2022: £53,134,000) equating to dividends of £1,841 per share (2022: £1,994 per share). The earnings per share were £2,068 (2022: £2,463). The cost of the Company’s investment in LTL was £64,500.
LTL is the only related undertaking of the Company. LTL’s registered office address is 66 Buckingham Gate, London SW1E 6AU.
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 Lindsell Train fund products (see note 3).
11 Other receivables
| 2023 | 2022 | |
| £’000 | £’000 | |
| Amounts due from brokers | 1 | – |
| VAT recoverable | 34 | – |
| Prepayments and accrued income | 456 | 513 |
| 491 | 513 |
12 Other payables
| 2023 | 2022 | |
| £’000 | £’000 | |
| Accruals and deferred income | 239 | 228 |
13 Called up share capital
| 2023 | 2022 | |||
| No. of shares | No. of shares | |||
| 000’s | £’000 | 000’s | £’000 | |
| Alloted, called up 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 31 March 2023.
14 Capital reserve
The capital reserve includes investment holding gains of £160,537,000 (2022: £173,516,000).
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 September 2002 to transfer £19,850,000 from the share premium account. This reserve can be used to finance the redemption and/or purchase of shares in issue.
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 Institute of Chartered Accountants in England and Wales has issued guidance stating that profits arising out of a change in fair value of assets, recognised in accordance with Accounting Standards, may be distributed provided the relevant assets can be readily convertible into cash. Securities listed on a recognised stock exchange are generally regarded as being readily convertible into cash. In accordance with the Company’s Articles of Association the capital reserve and special reserve may not be distributed by way of dividend but may be utilised for the purposes of share buybacks and the Company may only distribute by way of dividend accumulated revenue profits.
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 per share attributable | Net Asset Value attributable | ||
| 2023 | 2022 | 2023 | 2022 |
| £ | £ | £’000 | £’000 |
| 1,056.95 | 1,113.81 | 211,390 | 222,761 |
The movements during the year of the assets attributable to the Ordinary Shares were as follows:
| 2023 Ordinary Shares |
2022 Ordinary Shares |
||
| £’000 | £’000 | ||
| Total Net Assets attributable at beginning of year | 222,761 | 237,116 | |
| Total recognised losses for the year | (771) | (4,355) | |
| Dividends paid during the year | (10,600) ––––––––– |
(10,000) –––––– |
|
| Total Net Assets attributable at the end of year | 211,390 | 222,761 | |
The Net Asset Value per Ordinary Share is based on net assets of £211,390,000 (2022: £222,761,000) and on 200,000 Ordinary Shares (2022: 200,000), being the number of Ordinary Shares in issue at the year end.
16 Statement of Cash Flows
(a) Reconciliation of operating profit to net cash inflow from operating activities
| 2023 | 2022 | |
| £’000 | £’000 | |
| Net loss before finance costs and taxation | (675) | (4,277) |
| Gains on investments held at fair value | 12,978 | 17,089 |
| Loss/(gains) on exchange movements | 3 | (6) |
| Increase in other receivables | (34) | (23) |
| Decrease in accrued income | 56 | 80 |
| Increase/(decrease) in other payables | 11 | (2,651) |
| Taxation on investment income | (96) | (87) |
| Net cash inflow from operating activities | 12,243 | 10,125 |
(b) Analysis of cash flows
| At | At | |||
| 1 April | Exchange | 31 March | ||
| 2022 | Cash Flow | Movement | 2023 | |
| £’000 | £’000 | £’000 | £’000 | |
| Cash at bank | 6,708 | 1,305 | (3) | 8,010 |
| Total | 6,708 | 1,305 | (3) | 8,010 |
| At | At | |||
| 1 April | Exchange | 31 March | ||
| 2021 | Cash Flow | Movement | 2022 | |
| £’000 | £’000 | £’000 | £’000 | |
| Cash at bank | 5,541 | 1,161 | 6 | 6,708 |
| Total | 5,541 | 1,161 | 6 | 6,708 |
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 and its investment policy including its policy on gearing (bank borrowing), diversification and dividends in the Strategic 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 rising interest rates as a response to persistent inflationary pressures, conflict between Ukraine and Russia and heightened tensions between China and the West.
At 31 March 2023, the fair value of the Company’s assets exposed to market price risk was £203,128,000 (2022: £215,768,000). The Company’s exposure to market price fluctuations is reviewed by the Board on a quarterly basis and monitored on a continuous basis by the Manager in pursuance of the investment objective.
Market price risk comprises three elements – foreign currency risk, interest rate risk and other price risk.
Foreign currency risk
Foreign currency exposure as at 31 March 2023
| 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 loss that are equities | *31,818 | 10,634 | 12,828 | 55,280 |
| Foreign currency exposure | 31,859 | 10,646 | 13,044 | 55,549 |
* This includes the holding in LF Lindsell Train North Amercian Equity Fund of £17,361,000.
Foreign currency exposure as at 31 March 2022
| US$ | Euro | JPY | Total | |
| £’000 | £’000 | £’000 | £’000 | |
| Short-term debtors | 40 | 6 | 249 | 295 |
| Foreign currency exposure on net monetary items | 40 | 6 | 249 | 295 |
| Investments held at fair value through profit or loss that are equities | *33,308 | 8,262 | 15,819 | 57,389 |
| Foreign currency exposure | 33,348 | 8,268 | 16,068 | 57,684 |
* This includes the holding in LF Lindsell Train North Amercian Equity Fund of £17,601,000.
Over the year Sterling weakened against the US Dollar by 6.22% (2022: weakened by 4.57%), weakened against the Euro by 3.98% (2022: strengthened by 0.81%) and strengthened against the Japanese Yen by 2.58% (2022: strengthened by 4.82%).
A 5% 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 £2,777,000 or 1.31% of Net Asset Value (2022: £2,884,000 or 1.29% 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 31 March 2023 would have increased or decreased by £20,313,000 or 101.56p per share (2022: £21,577,000 or 107.88p per share).
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 31 March 2023, 51.0% (2022: 49.0%) of the investment portfolio (92.3% of the listed portfolio) could be liquidated within five business days, based on 20% of the 90 days’ average daily trading volumes obtained from Bloomberg. The Company would be able to sell all of its listed holdings within five business days, with the exception of two securities representing 4.9% of NAV.
Credit risk
Cash at bank and other debtors of the Company at the year end as shown on the Balance Sheet was £8,501,000 (2022: £7,221,000).
Counterparty risk
Northern Trust Company (the “Bank”) is the appointed custodian of the Company. It provides securities clearing, safe-keeping, foreign exchange, advance credits and overdrafts, and cash deposit services. The Bank has a credit rating for long-term deposits/debt of Aa2 from Moody’s, AA- from Standard & Poor’s and AA from Fitch Ratings.
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
| Level 1 | Level 2 | Level 3 | Total | |
| At 31 March 2023 | £’000 | £’000 | £’000 | £’000 |
| Investments | 100,547 | 17,361 | 85,220 | 203,128 |
| 100,547 | 17,361 | 85,220 | 203,128 |
| Level 1 | Level 2 | Level 3 | Total | |
| At 31 March 2022 | £’000 | £’000 | £’000 | £’000 |
| Investments | 101,257 | 17,601 | 96,910 | 215,768 |
| 101,257 | 17,601 | 96,910 | 215,768 |
Note: Within the above tables, the entirety of level 1 comprises all the Company’s ordinary equity investments, level 2 represents the investment in LF Lindsell Train North American Equity Fund and level 3 represents the investment in LTL.
LTL Valuation Methodology
During the year ended 31 March 2022, the Board appointed J.P. Morgan Cazenove Ltd to undertake an independent review of the Company’s valuation methodology applied to its unlisted investment in LTL. The current methodology was adopted and applied to monthly valuations from 31 March 2022 onwards.
In adopting the current methodology the Board seeks to capture the changing economics and prospects for LTL’s business. It is designed to be as transparent as possible so that shareholders can themselves calculate how any change to the inputs would affect the resultant valuation.
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 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% |
| 0.24 – 0.25 | 2.15% |
| 0.25 – 0.26 | 2.20% |
| 0.26 – 0.27 | 2.25% |
For instance at 31 March 2023 LTL’s annualised notional net profits were £35.60m and its FUM was £18.53bn. The ratio between the two as a percentage was calculated as 0.1922% resulting in a percentage of FUM of 1.90% and a valuation of LTL of £13,212.40 per share.
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 produce notional annualised net profits.
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 senarios
The two tables below show the impact on the LTL valuation if:
(i) in Table 1 a different % was applied to 31 March 2023 FUM; and
(ii) in Table 2 different Price/Earnings (‘P/E’) ratio were applied to LTL’s March 2023 notional net profits.
Table 1 – varying the % of FUM
| LTL FUM | Valuation | ||
| as at 31 March 2023 | Valuation | per share | |
| (£’000) | % of FUM | (£’000) | (£) |
| 18,530,045 | 0.50% | 92,650 | 3,476.95 |
| 18,530,045 | 0.75% | 138,975 | 5,215.42 |
| 18,530,045 | 1.00% | 185,300 | 6,953.90 |
| 18,530,045 | 1.25% | 231,626 | 8,692.37 |
| 18,530,045 | 1.50% | 277,951 | 10,430.84 |
| 18,530,045 | 1.75% | 324,276 | 12,169.32 |
| 18,530,045 | 1.90% | 352,071 | 13,212.40 |
| 18,530,045 | 2.00% | 370,601 | 13,907.79 |
| 18,530,045 | 2.25% | 416,926 | 15,646.26 |
| 18,530,045 | 2.50% | 463,251 | 17,384.74 |
| 18,530,045 | 2.75% | 509,576 | 19,123.21 |
Table 2 – varying the P/E ratio
| LTL notional | |||
| net profits | Valuation | ||
| as at 31 March 2023 | Valuation | per Share | |
| (£’000) | P/E ratio | (£’000) | (£) |
| 35,554 | 6.00 | 213,327 | 8,005.65 |
| 35,554 | 7.00 | 248,881 | 9,339.92 |
| 35,554 | 8.00 | 284,435 | 10,674.20 |
| 35,554 | 9.00 | 319,990 | 12,008.47 |
| 35,554 | 9.90 | 352,071 | 13,212.40 |
| 35,554 | 10.00 | 355,544 | 13,342.75 |
| 35,554 | 11.00 | 391,099 | 14,677.02 |
| 35,554 | 12.00 | 426,653 | 16,011.30 |
There were no transfers between levels for financial assets and financial liabilities during the year recorded at fair value as at 31 March 2023 and 31 March 2022. A reconciliation of fair value measurements in Level 3 is set out below.
Level 3 Financial assets at fair value through profit or loss at 31 March
| 2023 | 2022 | |
| £’000 | £’000 | |
| Opening fair value | 96,910 | 114,238 |
| Purchases at cost | – | – |
| Sales proceeds | – | – |
| Total losses included in gains on investments in the Income Statement | ||
| – on sold assets | – | – |
| – on assets held at the end of the year | (11,690) | (17,328) |
| Closing fair value | 85,220 | 96,910 |
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 UK company law.
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 (2022: None).
19 Ongoing charges (APM)
| 2023 | 2022 | |||
| £’000 | % | £’000 | % | |
| Total operating expenses | 1,829 | 0.87 | 1,978 | 0.82 |
Total operating expenses are included after a management fee waiver of £117,000 (2022: £140,000) (see note 3).
The above total expense ratios are based on the average Shareholders’ Funds of £211,310,000 (2022: £240,223,000) 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.
20 Related party disclosures
LTL acts as 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 in the Report of the Directors.
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 constitute any form of financial statement. 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 Lindsell Train Limited (‘LTL’) at 31 January 2023
Background
LTL was established in 2000 by Michael Lindsell and Nick Train and was founded on the shared investment philosophy that developed while they worked together during the 1990s. The company’s aim is to foster a work environment in which the investment team can manage capital consistent with this philosophy, which entails managing concentrated portfolios, invested strategically in durable franchises. Essential to success is maintaining a relatively simple business structure encompassing an alignment of interests between on one side LTL’s clients and on the other its founders and employees.
People
LTL’s board of directors consisted of the two founders Michael Lindsell and Nick Train, Michael Lim (the prior COO who remains responsible for IT and is the Company’s Secretary), Joss Saunders (the new COO), Keith Wilson (the Head of Marketing and Client Services), Jane Orr (Director of Marketing) and James Alexandroff and Julian Bartlett (independent non-executive directors). James was a co-founder of a specialist investment boutique, Arisaig Partners, and is a longstanding shareholder in LTIT and Julian is a former partner of Grant Thornton LLP.
In March 2023, after the end of the LTL’s financial year and following a tenure of eight years, James Alexandroff resigned from the board. At the same time, Rory Landman has been appointed an independent non-executive director. Rory served as a non-executive director of LTIT from 2011 to 2020. He has a wide range of investment experience over 35 years, including as Senior Bursar of Trinity College, Cambridge University (where he remains a Fellow), and as a leading manager of emerging markets equities at Thames River Capital and Baring Asset Management. Rory is a qualified Chartered Accountant and has a law degree from Cambridge University. Jane Orr - who joined the company in 2007 and previously headed the Marketing & Client Services team and was appointed to the LTL board in 2010 - has now relinquished all her executive responsibilities but will continue her involvement on the board, being appointed as a non-executive director in March 2023. These changes mean that the LTL board now comprises five executive directors and three non-executive directors, two of whom are independent.
LTL’s employees have increased in number from 25 to 28 over the last 12 months. All staff are based in the UK other than LTL’s North American Marketing and Client Services representative, who works out of the New York area. The increase in employee numbers included an additional recruit in risk oversight who was also a member of LTL’s Risk and Compliance Committee (‘RCC’). The RCC is chaired by Julian Bartlett, one of LTL’s independent non-executive directors. To further enhance its investment risk oversight, LTL is looking to engage an external risk consultancy firm in 2023. In recognition of the importance of investment risk arising from ESG issues, early in 2022 Madeline Wright was appointed Head of Investment ESG, reporting to the ESG Committee chaired by Nick Train. The ESG Committee, established in March 2021, is responsible for defining the Company’s ESG strategy and how this is put into practice, as well as overseeing the identification and mitigation of risks relating to ESG.
LTL’s board recognises that key employees should share in the ownersip of the compnay so as to further alighn their interests with those of LTIT and the founders. This is achieved by acquiring shares from LTL’s major stakeholders either directly or through a dedicated profit share scheme. In the year to 31 January 2023, 8% of the net profits of the company were paid to members of the scheme. This will rise to 15% in the current year. Scheme members are required to invest 50% of the awards into LTL shares.
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 meets 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: UK, Global, Japanese and, more recently, North American equities. LTL aspires to manage multiple billions of pounds in each product area, whilst recognising that there will be a size per product above which their ability to achieve clients’ performance objectives may be compromised. LTL thinks this growth is possible without significantly expanding the investment team, which remained at seven at 31 January 2023.
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. LTL’s open-ended pooled fund products represented 65% of FUM at end of January, down from 70% the year before. The fall resulted from a greater proportion of net outflows emanating from open-ended pooled products. Additionally, LTL managed 17 separate client relationships, one fewer than a year ago. The largest pooled fund (the Lindsell Train Global Equity Fund) represented 30% of total FUM and the largest segregated portfolio accounted for 10%.
In the year to 31 January 2023, LTL’s total FUM fell by 12% from £21.2bn to £18.6bn. This represented net outflows of £2.9bn, broken down by strategy as Global (£1,791m), Japan (£189m) and UK (£949m).
All four strategies generated positive absolute returns over the twelve months and all bar the UK strategy generated relative outperformance against their corresponding benchmarks (with the UK strategy recovering strongly from a difficult start to the year). However there is much catching up to do on account of the disappointing performance in 2021. The relative returns of the LTL funds representing each strategy since their inception are shown below:
| To 31 January 2023 | Relative Return | Inception date | Benchmark |
| UK Equity Fund (GBP) | +4.5% p.a. | July 2006 | FTSE All Share |
| Global Equity Fund (GBP) | +2.4% p.a. | March 2011 | MSCI World |
| Japanese Equity Fund (Yen) | +1.4% p.a. | January 2004 | TOPIX |
| North American Equity Fund (GBP) | -4.0% p.a. | April 2020 | MSCI North America |
Returns based on NAV. LF Lindsell Train UK Equity Fund Acc share class; Lindsell Train Global Equity Fund B share class; Lindsell Train Japanese Equity Fund A Yen share class; LF Lindsell Train North American Equity Fund Acc share class.
The Marketing and Client Services team is in contact with institutional clients both directly and through investment consultants, primarily in the UK, South Africa and the USA. FUM derived from North America now makes up over 14% of total FUM. LTL’s funds are also widely represented on the major UK retail and IFA platforms.
Financials
In the year to 31 January 2023 LTL’s total revenues fell 21%. Annual management fees make up the lion’s share of total revenues, at 99.7%, with interest income the remainder; there were no performance fees earned in the year. LTL’s biggest cost item, direct staff remuneration, is capped at 25% of fees (other than those earned from The Lindsell Train Investment Trust plc), as governed by LTL’s Shareholders’ Agreement. Employer National Insurance costs are excluded from the restriction. Total staff remuneration, including employer national insurance, amounted to 30% of fee revenue, down from 32% last year. Fixed overheads were down from £5.0m to £4.6m. Operating profits were down 17%, registering a margin on sales of 69%.
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 31 January 2023 were £1,841 per share, down from £1,994 per share in the previous year.
At 31 January 2023 LTL’s balance sheet was made up of shareholders’ funds of £98.4m including £91.9m of net current assets.
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 and so it was a welcome return to relative outperformance for three of the four strategies in the past year. 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 three years of cumulative underperformance, that the company is seeing some net outflows as clients are attracted to other investment approaches that may 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 funds with a primary ESG objective; and the underperformance from LTL’s strategies in 2020 and 2021. Perhaps the greatest risk in relation to LTL’s reputation however remains the withdrawal of either of the founders. They are currently aged 64 and 63, in good health and remain strongly committed to LTL. They are supported by increasingly mature and experienced investment professionals, currently numbering five, 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 31 January 2023 unless stated otherwise. The period from 31 January to 31 March 2023 has been reviewed by the Board and there are no significant matters to highlight other than those detailed in this Appendix.
Funds Under Management*
| Jan 2023 | Jan 2022 | |
| FUM by Strategy | £m | £m |
| UK | 7,690 | 8,475 |
| Global | 10,352 | 12,040 |
| Japan | 554 | 702 |
| North America | 30 | 28 |
| Total | 18,626 | 21,245 |
Largest Client Accounts
| Jan 2023 | Jan 2022 | |
| % of FUM | % of FUM | |
| Largest Pooled Fund Asset | 30% | 34% |
| Largest Segregated Account | 10% | 10% |
Lindsell Train Fund Performance
| 1 Year | 3 Years | 5 Years | 10 Years | ||
| Annualised data to 31 January 2023 | % | % | % | % | |
| GBP | UK Equity Fund (Accumulation) | 2.6 | 2.6 | 5.6 | 10.1 |
| FTSE All Share | 5.2 | 5.0 | 4.2 | 6.3 | |
| GBP | Global Equity Fund (B share) | 2.3 | 3.3 | 7.7 | 13.7 |
| MSCI World | 0.9 | 10.1 | 9.6 | 11.9 | |
| JPY | Japanese Equity Fund (A share) | 8.0 | 0.0 | 1.4 | 10.7 |
| TOPIX | 7.0 | 8.0 | 3.9 | 10.1 | |
| GBP | North American Equity Fund (Accumulation) | 0.6 | |||
| MSCI North American | (1.0) | ||||
Source: Morningstar Direct
Note: all figures above show total returns.
* LTL’s year end 2023 figures are based on management accounts, whilst periods ending 31 January 2022 and before are based on published financial statements. This therefore results in differences in prior year numbers i.e. year end 31 January 2022 when comparing with LTIT’s Annual Report last year, as last year’s Report contained LTL management account numbers for year ending 31 January 2022, which in this year’s Annual Report are using numbers based on published Financial Statements.
Financials*
| Jan 2023 | Jan 2022 | % | |
| Profit & Loss | £’000 | £’000 | Change |
| Fee Revenue | |||
| Investment Management fee | 96,599 | 119,971 | -19% |
| Performance Fee | 0 | 2,662 | -100% |
| 96,599 | 122,633 | -21% | |
| Bank Interest & Other Income | 299 | 11 | |
| 96,898 | 122,644 | ||
| Staff Remuneration** | (29,104) | (38,643) | -25% |
| Fixed Overheads | (4,617) | (5,041) | -8% |
| FX Currency Translation Gain | 3,821 | 954 | |
| Investment Unrealised Gain | 46 | 914 | |
| Operating Profit | 67,044 | 80,828 | -17% |
| Taxation | (11,955) | (15,485) | |
| Net Profit | 55,089 | 65,343 | -16% |
| Dividends | (48,876) | (53,134) | |
| Retained profit | 6,213 | 12,209 | |
| Balance Sheet | |||
| Fixed Assets | 75 | 174 | |
| Investments | 6,960 | 6,914 | |
| Current Assets (inc cash at bank) | 106,558 | 93,683 | |
| Liabilities | (15,143) | (10,068) | |
| Net Assets | 98,450 | 90,703 | |
| Capital & Reserves | |||
| Called up Share Capital | 267 | 267 | |
| Share Premium*** | 57 | 57 | |
| Share Discount*** | (416) | 0 | |
| Treasury Share Reserve† | (288) | (2,238) | |
| Profit & Loss Account | 98,830 | 92,617 | |
| Shareholders’ Funds | 98,450 | 90,703 |
* LTL’s year end 2023 figures are based on management accounts, whilst periods ending 31 January 2022 and before are based on published Financial Statements. This therefore results in differences in prior year numbers i.e. year end 31 January 2022 when compared to LTIT’s Annual Report last year, as last year’s report contained LT management account numbers for year ending 31 January 2022, which in this year’s Annual Report are using numbers based on published financial statements.
** 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 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 Treasury.
† The Treasury Share Reserve accounts for the difference between the cost and current value of the remaining shares held in Treasury
Five Year History*
| Jan 2023 | Jan 2022 | Jan 2021 | Jan 2020 | Jan 2019 | |
| Operating Profit Margin | 69% | 66% | 66% | 65% | 66% |
| Earnings per share (£)** | 2,068 | 2,463 | 2,340 | 2,237 | 1,688 |
| Dividends per share (£)** | 1,841 | 1,994 | 1,817 | 1,619 | 1,099 |
| Total Staff Cost as % of Fee Revenue | 30% | 32% | 30% | 31% | 32% |
| Opening FUM (£m) | 21,245 | 22,802 | 21,450 | 16,260 | 13,179 |
| Changes in FUM (£m) | (2,619) | (1,557) | 1,352 | 5,190 | 3,081 |
| – of market movement | 308 | 331 | 1,200 | 2,781 | 808 |
| – of net new fund (outflows)/inflows | (2,927) | (1,888) | 152 | 2,409 | 2,273 |
| Closing FUM (£m) | 18,626 | 21,245 | 22,802 | 21,450 | 16,260 |
| LT Open ended funds as % of total | 65% | 70% | 73% | 73% | 72% |
* LTL’s year end 2023 figures are based on management accounts, whilst periods ending 31 January 2022 and before are based on published financial statements. This therefore results in differences in prior year numbers i.e. year end 31 January 2022 when comparing to LTIT’s annual report last year, as last year’s report contained LT management account numbers for year ending 31 January 2022, which in this year’s annual report are using numbers based on published financial statements.
** On 1 February 2019 LTL undertook a share split with each share sub divided into 10 shares of £10 each. The per share figure is retrospectively changed in y/e January 2019 in the table above based on 26,660 shares for ease of comparison.
| Client Relationships | |||||
| – Pooled funds | 5 | 5 | 5 | 4 | 4 |
| – Segregated accounts | 17 | 18 | 17 | 17 | 17 |
Ownership
| Jan 2023 | Jan 2022 | |
| Michael Lindsell and spouse | 9,650 | 9,650 |
| Nick Train and spouse | 9,650 | 9,650 |
| The Lindsell Train Investment Trust plc | 6,450 | 6,450 |
| Other Directors/employees | 893 | 778 |
| 26,643 | 26,528 | |
| Treasury Shares | 17 | 132 |
| 26,660 | 26,660 |
Board of Directors as at 31st January 2023
| James Alexandroff | Non-Executive |
| Julian Bartlett | Non-Executive |
| Michael Lim | Director, IT & Company Secretarial |
| Michael Lindsell | Chief Executive Officer & Portfolio Manager |
| Jane Orr | Director, Marketing |
| Joss Saunders | Chief Operating Officer |
| Nick Train | Chairman and Portfolio Manager |
| Keith Wilson | Head of Marketing & Client Services |
Employees
| Jan 2023 | Jan 2022 | |
| Investment Team (including three Portfolio Managers) | 7 | 7 |
| Client Servicing and Marketing | 9 | 8 |
| Operations and Administration | 11 | 10 |
| Fixed Term Contractors | 1 | 0 |
| Total Employees | 28 | 25 |
| Non-Executive directors | 2 | 2 |
| Total Headcount | 30 | 27 |
LTIT Director’s valuation of LTL
| 31 Mar 2023 | 31 Mar 2022 | |
| Notional annualised net profits (A)* (£'000) | 35,554 | 42,598 |
| Funds under Management less LTIT holdings (B) (£'000) | 18,530,045 | 20,451,498 |
| Normalised notional net profits as % of FUM A/B = (C) | 0.192% | 0.208% |
| % of FUM (D) (see table below to view % corresponding to (C)) | 1.90% | 1.95% |
| Valuation (E) i.e. B x D (£'000) | 352,071 | 398,804 |
| Number of shares (F)^ | 26,647 | 26,543 |
| Valuation per share in LTL i.e. E / F | £13,212.40 | £15,024.84 |
* 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
From April 2023, the UK corporation tax rate was increased from 19% to 25%. In order to reflect this change within the notional net–profits, a blended rate has been used from the 31 October 2022 valuation onwards, tapering to the 31 March 2023 valuation, as shown in table overleaf.
^ The increase in shares in issue is due to the sale of shares from LTL's Treasury to LTL's employees; these Treasury shares had been purchased in prior years from other LTL employees.
| Notional annualised net profits/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% |
| 0.24 – 0.25 | 2.15% |
| 0.25 – 0.26 | 2.20% |
| 0.26 – 0.27 | 2.25% |
| Month-end valuation | Tax rate applied |
| March 2022 | 19% for 12 months |
| April 2023 | 19% for 12 months |
| May 2023 | 19% for 12 months |
| June 2023 | 19% for 12 months |
| July 2023 | 19% for 12 months |
| August 2023 | 19% for 12 months |
| September 2023 | 19% for 12 months |
| October 2023 | 19% for 5 months; 25% for 7 months |
| November 2023 | 19% for 4 months; 25% for 8 months |
| December 2023 | 19% for 3 months; 25% for 9 months |
| January 2023 | 19% for 2 months; 25% for 10 months |
| February 2023 | 19% for 1 month; 25% for 11 months |
| March 2023 | 25% for 12 months |
LTL’s Salary and Bonus Cap
LTL’s salary and bonus expenses are capped at 25% of fees (other than those earned from The Lindsell Train Investment Trust plc), 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 LTIT 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 LTIT Board has judged it necessary to apply a higher notional salary cost of 45% of revenues in calculating LTL’s net profits1 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%, while the salary to revenue of peers with FUM equivalent to LTL is slightly higher at 44%. The LTIT 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.
Glossary of Terms and Alternative Performance Measures (“APM”) (unaudited)
AIC
Association of Investment Companies.
Alternative Investment Fund Managers Directive (“AIFMD”)
The Alternative Investment Fund Managers Directive (the “Directive”) is a European Union Directive that entered into force on 22 July 2013. The Directive regulates EU fund managers that manage alternative investment funds (this includes investment trusts).
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 1 April 2021 the Company’s comparator benchmark is the MSCI World Index total return in Sterling.
Prior to 1 April 2021 the benchmark was the annual average redemption yield on the longest-dated UK government fixed rate (1.625% 2071) calculated using weekly data, plus a premium of 0.5%, subject to a minimum yield of 4.0%.
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 2023 | 31 March 2022 | |
| £ | £ | |
| Share Price | 1,052.50 | 1,105.00 |
| Net Asset Value per Share | 1,056.95 | 1,113.81 |
| Discount to Net Asset Value per Share | 0.42% | 0.79% |
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.
| 2023 | 2022 | |
| Total Dividends declared per Ordinary Share (a) | £51.50 | £53.00 |
| Closing price per Ordinary Share on 31 March (b) | £1,052.50 | £1,105.00 |
| Dividend Yield (a) ÷ (b) | 4.89% | 4.80% |
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 MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation lost profits) or any other damages. (www.msci.com).
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.
| 2023 | 2022 | |
| ‘000 | ‘000 | |
| Net Asset Value (a) | £211,390 | £222,761 |
| Ordinary Shares in issue (b) | 200 | 200 |
| Net Asset Value per Ordinary Share (a) ÷ (b) | £1,056.95 | £1,113.81 |
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 Association of Investment Companies.
| 2023 | 2022 | |
| £'000 | £'000 | |
| Total operating expenses (a) | 1,829 | 1,978 |
| Average Net Asset Value (b) | 211,310 | 240,223 |
| Ongoing Charges (a) ÷ (b) | 0.87% | 0.82% |
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 Sustainability Accounting Standards Board.
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.
| Year Ended 31 March 2023 | |||
| LTIT NAV | LTIT Share Price | ||
| NAV/Share Price at 31 March 2023 | a | £1,056.95 | £1,052.50 |
| Dividend Adjustment Factor* | b | 1.049 | 1.043 |
| Adjusted closing NAV/Share Price | c = a x b | 1,108.90 | 1,097.40 |
| NAV/Share Price at 31 March 2022 | d | £1,113.81 | £1,105.00 |
| Total return | ((c/d)-1)) x100 | -0.4% | -0.7% |
* The dividend adjustment factor is calculated on the assumption that the dividends of £53 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.
| LTL valuation | ||
| Valuation at 31 March 2022 | a | £15,025 |
| Valuation at 31 March 2023 | b | £13,212 |
| Dividends paid during the year | c | £1,841 |
| Total return | {((b-a)+c)/a}x100 | +0.2% |
TCFD
Task Force on Climate-Related Financial Disclosures.
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.
2023 Accounts
The figures and financial information for 2023 are extracted from the Annual Report and financial statements for the year ended 31 March 2023 and do not constitute the statutory accounts for the year. The Annual Report and financial statements include the Report of the Independent Auditor which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and financial statements have not yet been delivered to the Registrar of Companies.
2022 Accounts
The figures and financial information for 2022 are extracted from the published Annual Report and financial statements for the period ended 31 March 2022 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 June 2023 and will be available on the Company’s website shortly and in hard copy format from the Company Secretary.
The Company's Annual Report for the period ended 31 March 2023 has been submitted to the Financial Conduct Authority and will shortly be available for inspection on the National Storage Mechanism (NSM) via https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The Annual General Meeting will be held on Wednesday, 30 August 2023.
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
Victoria Hale
Company Secretary
For and on behalf of Frostrow Capital LLP
020 3170 8732
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