Monthly Update

Lindsell Train Investment Trust PLC 21 December 2005 The Lindsell Train Investment Trust PLC As at 30th November 2005 Fund Objective To maximise long-term total returns subject to the avoidance of loss of absolute value and with a minimum objective to maintain the real purchasing power of Sterling capital, as measured by the annual average yield on the 2.5% Consolidated Loan Stock. Share Price GBP 122.00 Net Asset Value GBP 128.59 Premium (Discount) (5.1%) Market Capitalisation GBP 24.4mn Benchmark (21/2% Con Ann Avg Yield +4.5%) +0.4 Source: Bloomberg; NAV-Lindsell Train. Share Price quoted is closing mid price. See Benchmark definition. Performance History (based in 2000 2001 2002 2003 2004 YTD 2005 GBP) Net Asset Value TR% n/a +3.2 -9.6 +3.1 +23.7 +12.8* Share Price TR% n/a +18.5 -19.8 -8.7 +20.6 +22.4 Source: LTL and S&P Micropal. Performance years listed Jan - Dec. Launch date 22 Jan 2001. TR=Total Return (with dividends reinvested) *Source: Lindsell Train Ltd. Past performance is not a guide to future performance. The price of units and the income from them may go down as well as up. Investors may not get back what they invested. 2004 Performance Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Net Asset Value TR% +1.8 +3.3 +0.3 +2.3 -0.1 +2.1 -2.0 +4.8 +3.8 +1.4 +0.0 +3.7 Share Price TR% -2.3 +6.0 -0.6 +0.6 +2.3 +2.7 +0.5 +0.5 +8.6 +3.0 -1.9 +0.0 Source: LTL and S&P Micropal unless otherwise indicated. Performance years listed Jan - Dec. Launch date 22 Jan 2001. TR=Total Return (with dividends reinvested) *Source: Lindsell Train Ltd. 2005 Performance Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Net Asset Value TR% +1.4 +0.3 +1.7 +0.2 +3.4 +2.9 +0.0 +0.2 +1.0 -1.5 +2.3* - Share Price TR% +8.6 +3.5 -3.4 +1.8 +2.6 +9.3 +0.4 -2.3 +2.4 -3.9 +1.2 - Source: LTL and S&P Micropal unless otherwise indicated. Performance years listed Jan - Dec. Launch date 22 Jan 2001. TR=Total Return (with dividends reinvested) *Source: Lindsell Train Ltd. Past performance is not a guide to future performance. The price of units and the income from them may go down as well as up. Investors may not get back what they invested. Industry Breakdown % of NAV Bonds 22.5 Preference Shares 14.4 Equity - Media 11.4 Equity - Banks & Investment Co. 4.8 Equity - Leisure & Ent. 10.1 Equity - Food & Beverage 26.7 Investment Fund 21.4 Cash & Equivalent (11.3) Total 100.0 Source: Lindsell Train Top 10 Holdings % of NAV HBOS 9.25% Non Cum 11.0 Lindsell Train Global Media (Dist) 10.0 Barr AG 9.8 US Gov Treasury 6.25% 9.1 Cadbury Schweppes 7.8 21/2% Consolidated Loan Stock 7.7 Lindsell Train Japan (Dist) 7.1 Diageo 6.7 Wolverhampton & Dudley Breweries 6.2 UK Treasury 2.5% 5.7 Source: Lindsell Train Fund Exposure Bonds Prefs Equity Funds Cash % of NAV UK % 13.4 14.4 45.3 4.3 (12.7) 64.7 USA % 9.1 - 1.4 - 5.3 15.8 Europe (ex UK) % - - 2.3 - (0.9) 1.4 Japan % - - 4.0 7.1 (3.0) 8.1 Global % - - - 10.0 - 10.0 Total 22.5 14.4 53.0 21.4 (11.3) 100.0 Source: Lindsell Train Fund Manager's Comments The NAV moved ahead in November, up 2.3% to £128.59, a gain for the calendar year to date of 12.8%. From our point of view there were two notable events in November. First, there was a significant gain for our irredeemable gilt holdings. Both rose over 3.0% in the month, taking prices not only to a high for the year, but highs not seen for 40 years or more. The more recent history of the 2.5% Consolidated Loan Stock is that its previous peak price was 56.0p in early 1999, after the deflation scare triggered by the 1998 Emerging Market crisis. Between 1999 and Q1 2005, its price then fluctuated between 45.0p and 55.0p. Finally, in April 2005 the price broke through 55.0p and has risen subsequently to its November high of 59.8p. We are absolutely not chartists, but we are certain that any follower of that black art would describe the recent rally as a 'breakout on the upside, after a prolonged period of consolidation, with significant further gains possible if the resistance at 60.0p is surpassed'. We are optimistic that further gains will indeed be achieved on the irredeemables, but acknowledge that current territory is uncharted for most market participants, including us. Not since the innocent days of the 1960s have Sterling investors been prepared to lend their capital in perpetuity to the British government at yields as low as today's, circa 4.25%. Indeed, as we write, the new 50 year conventional gilt, issued earlier this year, trades at a yield a fraction below 4.0% - an unthinkably scanty return on obligations issued by a Socialist government, at least by the conventional wisdom of the 1970's onwards. The trigger for the November move was the Bank of England's downgrading of its growth and inflation forecasts for the UK economy, accompanied by increasingly plaintive comments from British retailers. This disappointment clearly reduces the threat of accelerating UK inflation in the short term and goes some way in justifying the super-low yields at the long end of the gilt curve. What fascinates us, though, is the potential for a self-feeding bull market in very long-dated securities to develop. This could arise because gilt yields at or below 4.0% present a terrible conundrum for UK pension funds and Life companies - the lower the yields fall, the higher their obligations to their annuitants. These institutions now face an unpalatable choice. Can they rely on UK equities to meet their actuarial liabilities? Or should they lock in today's gilt yields, against the risk that if yields fall further and equities do not perform, they are forced to buy even more gilts in the future, at even more disadvantageous prices? The heavy over-subscription of the latest tranche of the UK 4.25% 2055 gilt suggests that many actuaries believe they have no choice but to keep on buying. We watch the gold price soar and understand the speculative appeal of this metal. But why do investors seem to believe that it is more irrational for long gilts to soar? At least these instruments pay an absolutely secure income, unlike gold, on which there is a negative yield, because of the costs of storage and insurance. And at least those gilt yields exceed the current rate of UK inflation. If the UK economy weakens further in 2006 - not that we would be caught predicting such a thing - we believe gilt prices can go even higher. We will be sellers into sub-4.0% yields. The second feature for us in November was the welcome rally in the Lindsell Train Global Media Fund, which, at 10.0% of NAV, is your company's second largest investment (after the HBOS 9.25% irredeemable pref, which still yields 5.9% net and is therefore a wonderful bargain, if the gilt market does indeed proceed upwards). The Fund price gained 6.3%, to £125.85, a new high both for the year and the life of the strategy. Before breaking out the bunting, we must alert shareholders to the fact that this gain only takes the annual return to plus 3.4% (or up 13.0% in Sterling) and that, since launch, the Fund is compounding at a pedestrian 5.9% per annum. Nonetheless, the gain felt meaningful to us. The fact is the Media sector has been a rotten place for us to try and make money in over the past few years. The FTSE Global Media sector is down over 9.0% in 2005 and off more than 11.5% since we launched in November 2001. Against this backdrop, our return is at least more understandable, perhaps commendable. But the interesting aspect for us was that November was the first month in living memory when every single constituent of our long book went up - indeed 5 of the 17 long positions rose by 9.0% or more. It is natural that we might hope such a decisive move marks a change in the fortunes for the sector, after its long bear market and we do. We certainly believe that there are both valuation and fundamental reasons to believe that Media stocks are cheap. The Fund enables your company to gain exposure to some wonderful properties, such as Pixar's movie library, International Speedway's 11 NASCAR (stock car) racing tracks (with associated TV rights to the US' second most watched sport, after American football), Sage's 4,700,000 small business customers and both the LSE and eBay's liquidity pools. Meanwhile, the Fund's short book is adding value too. Our thesis - that media distribution businesses are being forced into value-destroying capital expenditures, in order to maintain share in the face of proliferating competition - is throwing up profit opportunity. BSkyB has been a successful short for the Fund and we were pleased last month to see the company diversifying into voice telephony, via its acquisition of Easynet, at very considerable expense, in our view. Sky probably doesn't really want to be in this business, but knows that it puts itself at a disadvantage to BT and the cable companies, if it can not match their 'triple play' offerings of video, broadband and voice. Vodafone is another short and, without wishing ill on anyone, it has been rewarding for the Fund to see investors forced to reassess the maturity of Vodafone's business and the increasing intense competition for customers. We hope the Media Fund will be the source of considerably more value for your Company in coming months, not least because this would open the possibility of adding new assets for the strategy, which it needs. Meanwhile, we leave you with this memorable description of NASCAR racing fans, by a Sports Illustrated journalist - 'tattooed, shirtless, sewer-mouthed drunks, and their husbands'. Fund Manager Launch Date Denomination Nick Train 22 Jan 2001 GBP Year End Dividend Benchmark 31st Mar Ex Date: June The annual average yield on the 21/2% Payment: August Consolidated Loan Stock. The Board Management Fees Registered Address Rhoddy Swire Standard Fee: 0.65% Lindsell Train Investment Trust Michael Mackenzie Performance Fee: 10% of annual increase Springfield Lodge, Colchester Road Donald Adamson in the share price, plus dividend, Chelmsford above the gross annual yield of the 2 ESSEX CM2 5PW 1/2% Consolidated Loan Stock. ISIN Secretary Listing GB0031977944 Phoenix Administration Services Limited London Stock Exchange Bloomberg LTI LN Disclaimer This document is intended for use by persons who are authorised by the UK Financial Services Authority ('FSA') and those who are permitted to receive such information in the UK. The information contained in this document does not constitute an offer or invitation to buy or sell any investments. Nothing in this document constitutes investment, legal, tax or other advice. Lindsell Train and/or persons connected with it may have an interest in this investment. The value of any investment in securities or funds and the income generated from them may go down as well as up and are not guaranteed. Past performance cannot be used as a guide or guarantee of future performance. You may not get back the original amount you have invested. Changes in foreign exchange rates may cause the value of your investment to go up or down. Some funds with higher gearing may be subject to higher volatility and the investment value may change substantially. The net asset value (NAV) performance of an investment trust is not the same as its market share price performance. Issued by Lindsell Train Limited Authorised and regulated by the Financial Services Authority 21 Dec 2005 LTL 000-031-7b Lindsell Train Limited 35 Thurloe Street, London SW7 2LQ Tel. +44 20 7225 6400 Fax. +44 20 7225 6499 enquiry@lindselltrain.com www.lindselltrain.com Lindsell Train Limited is authorised and regulated by the Financial Services Authority. This information is provided by RNS The company news service from the London Stock Exchange
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