TIDMLTI
RNS Number : 0004Q
Lindsell Train Investment Trust PLC
15 June 2020
THE LINDSELL TRAIN INVESTMENT TRUST PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEARED 31 MARCH 2020
A copy of the Company's Annual Report for the year ended 31
March 2020 will shortly be available to view and download from the
dedicated page on Lindsell Train's website www.lindselltrain.com.
Neither the contents of this website nor the contents of any
website accessible from hyperlinks on this website (or any other
website) is incorporated into or forms part of this
announcement.
Printed copies of the Annual Report will be sent to shareholders
shortly. Additional copies may be obtained from the Corporate
Secretary - Maitland Administration Services Limited, Hamilton
Centre, Rodney Way, Chelmsford, Essex, CM1 3BY
The Annual General Meeting of the company will be held on
Thursday 3 September 2020 at 2.30pm.
A final dividend of GBP41.39 per Ordinary Share (2019: GBP27.87)
and a special dividend of GBP2.61 per Ordinary Share (2019:
GBP1.63) is proposed for the year ended 31 March 2020. If these
dividends are approved by Shareholders, they will be paid on 8
September 2020 to Shareholders on the register at close of business
on 14 August 2020 (ex-dividend 13 August 2020).
The following text is copied from the Annual Report and
Accounts.
Company Summary
The Company
The Lindsell Train Investment Trust plc (the "Company") is an
investment trust and its shares are listed 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.
Management
The Company has appointed Lindsell Train Limited ("LTL") as its
Investment Manager. Accounting, company secretarial and
administrative services are provided by Maitland Administration
Services Limited as appointed by the Board. Further details of the
terms of these appointments are provided on page 78.
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. The Investment Policy is described on
page 10.
Performance and Benchmark
The performance highlights are provided on page 3.
The performance benchmark is the annual average running yield on
the longest-dated UK government fixed rate bond (currently UK
Treasury 1.625% 2071), calculated using weekly data, plus a premium
of 0.5%, subject to a minimum yield of 4.0% ("the Benchmark").
Dividend
A final dividend of GBP41.39 per Ordinary Share (2019: GBP27.87)
and a special dividend of GBP2.61 per Ordinary Share (2019:
GBP1.63) is proposed for the year ended 31 March 2020. If these
dividends are approved by Shareholders, they will be paid on 8
September 2020 to Shareholders on the register at close of business
on 14 August 2020 (ex-dividend 13 August 2020).
Annual General Meeting
A notice of the Annual General Meeting, scheduled for 3
September 2020 at 3rd Floor, 66 Buckingham Gate, Westminster,
London SW1E 6AU, is provided on pages 79 to 82. This year the
meeting will be closed to Shareholders and will be attended by
Directors only. Shareholders are strongly encouraged to vote by
proxy and to appoint the Chairman as their proxy.
Capital Structure
The Company's capital structure comprises 200,000 Ordinary
Shares of 75 pence each. Details are given in note 14 to the
Financial Statements on page 61.
THIS DOCUMENT IS IMPORTANT and, if you are a holder of Ordinary
Shares, requires your immediate attention. If you are in doubt as
to what action to take, you should seek advice from your own
independent personal financial advisor. If you have sold or
otherwise transferred all of your Ordinary Shares in the capital of
the Company you should send this document, and the Form of Proxy
which accompanies it, immediately to the purchaser or transferee or
to the stockbroker, bank or other agent through whom the sale or
transfer was effected.
Strategic Report
The Directors present their Strategic Report for the Company for
the year ended 31 March 2020. 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 on pages 3 to 5
and the Investment Manager's Report on pages 8 and 9. The Company's
Investment Objective and Investment Policy are set out on page
10.
Performance
Share price performance compared to the Net Asset Value and the
Benchmark for the year ended 31 March 2020 (based on total
performance with reinvested net dividend)
http://www.rns-pdf.londonstockexchange.com/rns/0004Q_1-2020-6-15.pdf
* Figures are rebased to show the performance per GBP100
invested.
Share price performance compared to the Net Asset Value and the
Benchmark for ten years to 31 March 2020
http://www.rns-pdf.londonstockexchange.com/rns/0004Q_1-2020-6-15.pdf
Note: The chart is based on monthly raw data. When a performance
fee is paid, the Benchmark is adjusted up to the high watermark
("HWM") at that point. This only occurs annually, if at all, on 31
March.
* The NAV and share price are unadjusted for dividends.
** The Benchmark is adjusted for inclusion of the HWM. Please
note that the inclusion of the HWM means that, at the financial
year end, if a performance fee has been paid, the Benchmark is
adjusted to the same level as the NAV or the share price whichever
is lower. If the Benchmark performs better than the NAV and/or the
share price, or a performance fee has not been paid, no adjustment
is made.
Source: Bloomberg and LTL
Highlights for the Year
Performance comparisons Change
Middle market price per Ordinary Share* (26.5%)
Net Asset Value per Ordinary Share* 9.8%
Benchmark 4.0%
MSCI World Index (Sterling) (5.8%)
UK RPI Inflation (all items) 2.6%
---------------------------------------- -------
* Calculated on a total return basis. The Net Asset Value and
the share price at 31 March 2020 have been adjusted to include a
dividend of GBP27.87 per Ordinary Share and a special dividend of
GBP1.63 per Ordinary Share paid on 9 September 2019.
The annual average running yield on the longest-dated UK
government fixed rate bond (currently UK Treasury 1.625% 2071),
calculated using weekly data, plus a premium of 0.5%, subject to a
minimum yield of 4.0%.
Source: Datastream, Lindsell Train Limited, Morningstar and
Bloomberg
Chairman's Statement
After a number of years of successive advances in the Company's
net asset value ('NAV') and share price, the year to 31 March 2020
proved to be one of dramatic highs and lows. Over the year the NAV
total return was 9.8%, exceeding the benchmark return of 4% and
also comparing favourably to the fall in world markets (as measured
by the MSCI World Index in Sterling) of 5.8%. However, these
relatively benign results disguised extreme volatility in the share
price. The shares began the year at GBP1,475, a 65% premium to NAV,
rose to a premium of 100% (reaching GBP2,000 per share), only to
fall in recent months on the back of the market rout to a low in
mid-March, when they hit an 18% discount to NAV. Finally, having
recovered somewhat from these lows, the share price ended the year
at 31 March 2020 down 26.5%, at GBP1,060, an 11% premium to NAV.
This degree of volatility in the premium/discount is unusual for an
Investment Trust but in part explainable by the large unlisted
holding in Lindsell Train Limited whose business itself is largely
dependent on the performance of markets, which were themselves
extremely volatile.
Long-term investors can take comfort from the steady rise in the
NAV but new shareholders, particularly those who bought at times in
2019, will be smarting from an abrupt loss of value from the fall
in the share price. In light of this, and to reinforce the
alignment of interest with shareholders instilled since the
Company's inception, the Manager has chosen not to take the
performance fee of GBP448,679 it was due. However, the high
watermark set at 31 March 2019 will not be adjusted upwards, which
will allow the Manager to earn the fee in future periods, provided
appropriate returns are achieved.
My predecessor as Chairman and I have, over the last six years,
cautioned investors (via the Company's Annual and Interim Reports)
to think carefully before buying shares in the Company when they
are trading at a premium to NAV. The Directors themselves have
certainly desisted but this year the brief move from a premium to a
discount at last gave us the opportunity to buy shares, something
we have all wanted to do since joining the Board. All directors now
own shares in the Company, cementing our alignment of interest with
shareholders.
Turbulent markets present a challenge in valuing any unlisted
company and the Board focuses with great care on its valuation of
Lindsell Train Limited, not least because it remains the most
significant investment in the Company's portfolio at 46.8% (45.9%
at 31 March 2019) of NAV. At the end of March 2020 the Board
decided to apply an adjustment to the inputs used to calculate
LTL's valuation. The aim was to ensure that the valuation captured
the full effect of the decline in LTL's funds under management
('FUM') as markets fell, and to reflect the sharp fall in the
values of listed fund managers. The Board has used two
methodologies to value the company, weighted equally. One values
LTL at 1.5% of its FUM and this input remains unchanged. The other
element uses an estimate of LTL's historical annual notional
earnings. The earnings based valuation took time to capture the
effects of declining FUM as it was based on three month rolling
data. From 31 March 2020 valuation and into the future, the Board
has decided to calculate LTL's notional earnings with reference to
LTL's most recent end month FUM (see page 75). In the month of
March this resulted in a 17.2% decline in the earnings calculation
and a 13.4% decline in LTL's overall valuation.
I am glad to report that despite the turbulence in markets
impacting its FUM, LTL made good progress in a difficult year for
the industry in general. Its valuation increased by 8.7% despite
the adjustment mentioned above. Add to that the dividends paid and
its total return for the year to 31 March 2020 was 21.4%. This made
LTL once again the largest contributor to the Company's returns
over the year. It proved to be a year of two distinct halves for
LTL's FUM, which rose to a peak of GBP22.7bn in August only to
plateau and then decline in the first quarter of 2020 due to both
market moves and net outflows. LTL's FUM at 31 March 2020 was
GBP18.2bn, almost the same level as at 31 March 2019, having
recorded net inflows of GBP759m over the year. Throughout all the
turbulence LTL's investment performance has remained impressive.
Provided this continues it bodes well for the future even against a
difficult background for the active management industry. The
ongoing progress in LTL's FUM sourced from the USA is also
encouraging; they increased again this year and show every sign of
building further in the future.
A detailed resumé of LTL's financials and fund performance can
be found in Appendix 1 on page 69. Reflecting LTL's record year for
revenues and profits, its dividend was up 47.3% and its
contribution to the Company's revenues was even higher this year at
84%. It is this contribution more than any other that has led the
48% increase in the Company's profits. The increase in the
Company's proposed total dividend per share from GBP29.50 to
GBP44.00 remains in keeping with the Company's policy to retain the
highest percentage of earnings that Investment Trust regulations
allow. The payment is made up of an ordinary dividend of GBP41.39
and a special dividend of GBP2.61 in respect of the proportion of
LTL's income attributable to performance fees, which remain
unpredictable.
Whilst it is pleasing to declare the rise in the dividend I
should caution you that the flow of LTL profits to LTL dividends
and then onto the Company's revenues and its dividends is
predominantly formulaic. In other words if LTL's profits were to
fall due to falling FUM so would the LTL dividend. As this is such
a large percentage of the Company's revenues, a falling LTL
dividend, were it to occur, would most probably lead to a reduction
in the Company's dividend at some point in the future. It is also
likely that dividends from our other investee companies, although a
smaller part of our revenues, will fall this year as a result of
the business disruption arising from the coronavirus lockdowns
worldwide.
The listed portfolio remained almost exactly the same as it was
last year, with just some small additions to the Company's most
recently introduced holding of Laurent-Perrier. As the year
progressed different companies vied for the position as the largest
listed holding, with both Nintendo and Diageo bearing that accolade
at times; but by the end of the year it was passed to the London
Stock Exchange, at 9.4% of NAV, as a result of it generating a
total return of 55% over the year. Shareholders have been rewarded
with a staggering 29.7% annualised return from the company over the
last ten years, a testament to a wonderful core business and a
series of value creating acquisitions.
It is likely that the coronavirus pandemic and its subsequent
effect on economies worldwide will dictate the prospects for all
the investments owned by the Company over most of the next year.
Without any historical template on which to base forecasts, trying
to predict what will happen is futile. However, what we can say is
that our listed investments are well established businesses and
over their history have the experience of operating in many
different conditions, often in more challenging circumstances than
today. The Board remains confident that the companies in which we
are invested are well-placed to survive, with the ability to
prosper once the crisis is behind us.
LTL is a relatively young business (albeit now almost 20 years'
old) without the heritage of most of the companies in the quoted
portfolio. There is still a reliance on its two founders, but
significant steps have been taken to address succession, with James
Bullock and Madeline Wright taking on more responsibility for
portfolio management and investment decisions. From a purely
financial perspective we hope it is of some reassurance for the
Company's shareholders that LTL's biggest cost, salaries, would
automatically fall if revenues declined, due to LTL's salary and
bonus cap. Therefore when revenues fall profit margins hold up, as
fixed costs are only c.5% of revenues. It is also a reassurance
that LTL is so well capitalised, with substantial net cash on its
balance sheet as is evident from the details in Appendix 1.
I am sorry to report that Rory Landman has signalled his wish to
step down from the Board after nine years as a director and will
therefore not be standing for re-election at the Annual General
Meeting in September. Rory has given the Company invaluable service
and we will miss his incisive contribution and particularly his
forensic attention to detail. I will personally greatly miss his
support.
The coronavirus pandemic and the associated requirement for
social distancing has made it impractical to conduct the Company's
Annual General Meeting in the traditional way. This year the
meeting will be held at LTL's offices at 2.30 pm on 3 September
2020 but shareholders are requested not to attend in person and
instead only Directors will be present. Shareholders are strongly
encouraged to vote by proxy, appointing the Chairman as your proxy.
LTL will arrange an interactive, internet enabled presentation on
the Company and its prospects at 3.00 pm on the same day. All
shareholders are encouraged to log in and attend. We would ask you
register in advance by completing the enclosed form or emailing
kirsty.banks@lindselltrain.com.
Julian Cazalet
Chairman
15 June 2020
Portfolio Holdings at 31 March 2020
(All ordinary shares unless otherwise stated)
Look-through
Fair value % of basis % of
Holding Security GBP'000 net assets net assets
--------- --------------------------------------- ---------- ----------- ------------
6,450 Lindsell Train Limited 89,479 46.77 46.77
246,500 London Stock Exchange 17,925 9.37 9.57
41,000 Nintendo 12,711 6.64 6.90
420,500 Diageo 10,870 5.68 5.85
222,000 Unilever 9,037 4.72 4.89
101,000 PayPal 7,795 4.07 4.08
161,552 Mondelez International 6,523 3.41 3.57
363,000 RELX 6,285 3.29 3.46
1,263,393 A.G. Barr 6,064 3.17 3.19
89,000 Heineken 5,493 2.87 2.95
3,288,767 Lindsell Train Japanese Equity Fund - B 5,031 2.63 2.38
420,000 Finsbury Growth & Income Trust 3,159 1.65 0.64
28,093 Laurent-Perrier 1,854 0.97 0.97
74,050 eBay 1,795 0.94 0.94
300,000 Pearson 1,657 0.87 0.89
--------- --------------------------------------- ---------- ----------- ------------
Total investments 185,678 97.05 97.05
Net current assets 5,652 2.95 2.95
--------- --------------------------------------- ---------- ----------- ------------
Net Assets 191,330 100.00 100.00
--------- --------------------------------------- ---------- ----------- ------------
Look-through basis: This adjusts the percentages held in each
security upwards by the amount held by LTL managed funds and
adjusts the fund's holdings downwards to account for the overlap.
It provides Shareholders with a measure of stock specific risk by
amalgamating the direct holdings of the Company with the indirect
holdings held within the LTL funds.
Leverage
We detail below the equity exposure of these funds managed by
LTL as at 31 March 2020:
Equity
Exposure
------------------------------------ --------
Fund
Lindsell Train Japanese Equity Fund 96.90%
Finsbury Growth & Income Trust 101.05%
Analysis of Investment Portfolio at 31 March 2020
Breakdown by location of listing
(look-through basis)^
Japan 9%
Europe 4%
UK* 75%
USA 9%
Emerging 0%
Cash and Equivalents 3%
--------------------- ----
100%
--------------------- ----
Breakdown by location of underlying company revenues
(look-through basis)^
Japan 4%
Europe** 27%
UK** 36%
USA** 20%
Emerging 10%
Cash and Equivalents 3%
----------------------------------------------------- ----
100%
----------------------------------------------------- ----
Breakdown by sector
(look-through basis)^
Consumer Staples 23%
Communication Services 8%
Industrials 3%
Financials* 57%
Healthcare 1%
Information Technology 4%
Consumer Discretionary 1%
Cash and Equivalents 3%
----------------------------------------------------- ----
100%
----------------------------------------------------- ----
* LTL accounts for 47% and is not listed.
** LTL accounts for 25 percentage points of the UK figure, 17
percentage points of the Europe figure and 5 percentage points of
the US figure.
^ Look-through basis: This adjusts the percentages held in each
asset class, country or currency by the amount held by LTL managed
funds. It provides Shareholders with a more accurate measure of
country and currency exposure by aggregating the direct holdings of
the Company with the indirect holdings held by the LTL funds.
Investment Manager's Report year ended 31 March 2020
I suppose I must write about the pandemic. My heart sinks. In
part because this is such a distressing topic. It has affected us
all in such a personal, intimate way that I feel it almost
inappropriate to discuss it dispassionately, from the perspective
of an investor. But to the best of our ability we must keep our
investment objectivity and try to find a response that best
protects the value of the capital entrusted to us.
So, let me report that we have neither initiated any new
holding, nor disposed of any existing holding as a result of the
crisis. This is the case not just for your Company, but across all
of Lindsell Train Limited's strategies. This does not mean we have
been completely inactive. Where we held cash, or welcomed new
subscriptions, we have responded to price falls by adding to
holdings. And of course, when we have seen outflows from our
open-ended accounts we have been sellers.
But the absence of new buys or sells is significant. There are
two reasons for it. First, in all humility - We Do Not Know. We are
not epidemiologists and therefore have no insight into the duration
or severity of the epidemic. Of course there are enormous
ramifications for investment assets depending on the duration and
severity. But there seems little justification to place what would
be, for us, speculative bets on outcomes where we have no special
insight. Sometimes doing nothing is rational.
The second reason for us doing nothing is that we hope Lindsell
Train's investment principles and process mean we were already
owning the right sort of company for a crisis. We have always
placed a high value on the durability, predictability and plain
"survivability" of the companies we invest in. That preference has
meant that, to date, our portfolios have avoided the worst of the
value loss in stock markets. We know that every company we hold is
being challenged today and may face future challenges we have not
yet considered. Nonetheless, your portfolio, built around companies
of the "survivability" of Diageo, Heineken, London Stock Exchange,
Nintendo, Mondelez, PayPal, RELX and Unilever, seems resilient to
us.
On the question of the resilience of these companies - we are
often asked what worries us most today. Our answer is that our
biggest worry remains the same question we had on the 1st January
2020 and, indeed, the 1st January 2019. Namely - Is technology
change the friend or the enemy of the companies we have chosen to
invest in? What does seem clear about this crisis is the way it has
accelerated both the decline of some industries and business models
(high street retail most obviously) and accelerated the adoption of
digital tools and services. Being on the right side of this change
has never felt more important. To that point we sincerely hope that
the multi-year investment that Pearson has made in building its
digital learning products and services begins to pay off over the
next few academic years. That possibility is the reason we have
retained our holding.
Despite my warning above, I am going to stray into the dangerous
territory of prediction. We were grateful to JP Morgan for its
recent piece of research which pointed out that the age of the
average European is 43 years old. Meanwhile, the age of the average
inhabitant of Latin America is 31, of India 26 years 8 months and
of Africa, 19 years and 7 months. There have been precious few
positive surprises about this wretched virus. But tentatively,
perhaps a positive surprise for the world will be that the relative
youth of the majority of the world's population means that the
virus' mortal effects will be less severe in the Emerging Markets
than elsewhere. This may be an unexpected plus for companies that
serve young consumers in these regions.
In conclusion we sincerely hope all the world's young people
will enjoy one hell of a party after their deliverance from this
ordeal. Investors should go long booze, chocolate and party
frocks.
We hope to join them at these festivities, along with all our
shareholders.
Nick Train
Investment Manager
Lindsell Train Limited
15 June 2020
Company Profile
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:
-- 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 may be bias towards
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 absolute returns
that the investment objective requires;
-- in Lindsell Train managed fund products, subject to Board
approval, up to 25% of its gross assets; and
-- in LTL and to retain a holding, currently 24.23%, in order to
benefit from the growth of the business of the Company's Investment
Manager.
The Company does not envisage changing its objective, its
investment policy, or its management for the foreseeable future.
The current composition of the portfolio as at 31 March 2020, which
may be changed at any time (excluding investments in LTL and LTL
managed funds) at the discretion of the Investment Manager within
the confines of the policy stated above, is shown on pages 6 and
7.
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 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 Alternative Investment Fund Managers Directive
("AIFMD").
Dividends
The Directors' policy is to pay annual dividends consistent with
retaining the maximum permitted earnings in accordance with
investment trust regulations.
Key Performance Indicators
Net Asset Value and Share Price Total Return are measured
against the Benchmark and provide the key performance indicators
for assessing the development and performance of the Company.
Principal Data
31 March 2020 31 March 2019 % change
-------------------------------------- ------------- ------------- --------
Shareholders' funds (GBP'000) 191,330 179,185 6.8
NAV per Ordinary Share GBP956.65 GBP895.93 6.8
Premium to NAV 10.80% 64.63%
Closing mid-market price per Ordinary
Share GBP1,060.00 GBP1,475.00 (28.1)
Recommended final dividend per
Ordinary Share GBP41.39 GBP27.87 48.5
Recommended special dividend per
Ordinary Share GBP2.61 GBP1.63 60.1
Dividend yield* 4.15% 2.00%
Ongoing Charges* 0.83% 0.88%
Earnings per Ordinary Share -
basic GBP90.23 GBP170.65 (47.1)
Revenue GBP52.99 GBP35.86 47.8
Capital GBP37.24 GBP134.79 (72.4)
NAV total return 9.8% 23.2%
Share price total return (26.5)% 45.7%
Benchmark** 4.0% 4.0%
-------------------------------------- ------------- ------------- --------
* These are Alternative Performance Measures.
** See Company Summary on inside front cover.
These are percentage change figures for the year to 31 March
Please see Glossary on pages 84 and 85 for an explanation of
terms used.
Five Year Historical Record
Net revenue Dividends Dividends Basic net Mid-market
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 GBP'000 GBP'000 GBP'000 (GBP) (GBP) (GBP)
------------ ------- ----------- ----------- ----------- ------------ ----------
2016 3,358 2,320 1,780 8.90 443.13 570
2017 4,887 3,900 3,160 15.80 588.21 809.98
2018 6,505 5,283 4,360 21.80 747.08 1,030
2019 8,680 7,172 5,900 29.50 895.93 1,475
2020 12,395 10,598 8,800 44.00 956.65 1,060
------------ ------- ----------- ----------- ----------- ------------ ----------
Ongoing Charges
The ongoing charges (excluding the performance fee) for the year
ended 31 March 2020 amounted to GBP1,722,000 (2019: GBP1,459,000)
equivalent to 0.83% (2019: 0.88%), based on average undiluted net
assets of GBP207,946,000 (2019: GBP166,566,000).
There was no performance fee charged for the year to 31 March
2020 as LTL did not take the performance fee due other than
GBP3,000 in respect of an adjustment for the prior year. The charge
for the performance fee for the year to 31 March 2019 amounted to
GBP2,433,000, equivalent to 1.5% of average assets of
GBP166,566,000, based on an increase in NAV of 23.2%.
Principal Risks
The Directors confirm that they have carried out a robust
assessment of the principal identified risks facing the Company,
including those that would threaten its objective, future
performance, solvency or liquidity. The Board considers at each
Board meeting the key risks and its Investment Manager also closely
monitors them. In the event that any factor poses a potential
material risk to the Company, the Board will consider what action
(if any) should be taken.
The key risks affecting the Company are described below. Further
detail on financial risks and how these are managed are discussed
in note 17 to the Financial Statements on pages 62 to 68.
Market risk: Equity price risk is the largest component of
market risk. The other lesser components of market risk are foreign
exchange risk and interest rate risk, which are discussed in note
17 to the Financial Statements on pages 62 and 63. Market risk is
monitored by the Board on a quarterly basis and on a continuous
basis by the Investment Manager.
Investment performance: The Company is an investment trust and
to generate returns for Shareholders it may invest in a range of
different companies and sectors. Investors should be aware of
certain factors which apply to the Company:
-- The investment approach of the Company involves investing in
a concentrated portfolio of securities (averaging around fifteen
companies). When compared to most other investment trusts the
number of investments is relatively few.
-- The Company retains a holding in LTL, currently 24.23%, and
has benefited over the years from the growth of the Company's
Investment Manager. The holding in LTL now represents 46.8% of the
Company's NAV; there is no guarantee that this growth will continue
at the same pace or at all.
-- The Investment Manager will invest in securities on the
Company's behalf that it believes to be attractively valued. There
is no guarantee that the perceived value of the underlying
investments will be crystallised in any expected timeframe or at
all.
-- The Company's portfolio is constructed in a manner that does
not seek to mirror any stock market index. Consequently there will
be periods where performance will be quite unlike that of any index
or the Benchmark and there is no guarantee that this divergence
will be to the Company's advantage.
-- Market liquidity in the shares of investment trusts is
frequently inferior to the market liquidity of shares issued by
larger companies traded on the London Stock Exchange. The Company's
Ordinary Shares are traded on the London Stock Exchange Main Market
but it is possible that there may not always be a liquid market in
them and investors may have difficulty in selling.
The Board meets formally with the Investment Manager on a
quarterly basis when the investment performance, the performance of
the Company's holding in LTL and portfolio transactions are
discussed and reviewed. The Company is dependent on the services of
the Investment Manager for the implementation of its investment
policy.
Loss of key personnel: The Board considers that the roles
undertaken by Nick Train and Michael Lindsell are central to the
performance of the Company and the loss of either would be likely
to have an adverse effect on both the Company and its major
investment in LTL. It is intended that key-man insurance will be
secured by the Company to help mitigate this risk. The Board is
also encouraged by the continued development of investment
management staff at LTL who are now taking on greater
responsibility at a more senior level.
Protection of assets: The Company's assets are protected by the
use of an independent custodian, Northern Trust Company. The Board
monitors the custodian to ensure assets remain protected. In
addition, the Investment Manager and Administrator are both asked
to demonstrate their internal controls including for the
safeguarding of assets.
Economic Conditions: Changes in economic conditions, including,
for example, interest rates, rates of inflation, industry
conditions, competition, political events and trends and tax
legislation, can substantially and adversely or favourably affect
the Company's prospects and the value of the Company's portfolio.
The Board has reviewed the risks arising from the impact of the
Covid-19 pandemic. The pandemic has affected, and will continue to
affect, the value of the portfolio companies and has created
uncertainty around levels of future revenue from dividends. The
investment objective and policy has not changed. The Company's
service providers have implemented business continuity plans to
ensure their services remain as unaffected as possible and, as
such, the Board does not expect there to be changes in the level of
service provided.
Regulatory risk: The Company must abide by section 1158 of the
Corporation Tax Act 2010 to maintain its investment trust status.
The Board monitors and also seeks assurance from the Administrator
that investment trust status is being maintained. The Board also
reviews a schedule of regulatory risk items at quarterly meetings
in order to monitor and take action to address any regulatory
changes.
Political risk: Changes in the political landscape could
substantially affect the Company's prospects and the value of its
portfolio companies. There are risks associated with the departure
of the UK from the European Union ("EU") and the nature of future
trading relationships remains unclear. Potential changes to the
UK's policies and regulatory landscape following the UK's departure
from the EU could also impact the Company in the future. The Board
continues to monitor developments to assess any potential
consequences for the Company.
Climate change risk: The Board and Investment Manager consider
how climate change could affect the Company's portfolio companies
and shareholder returns.
The coronavirus pandemic: The Board notes that the pandemic is
impacting economies and financial markets worldwide. It has already
reduced the value of the Company's investments, could do so further
and will likely also impact on the Company's revenues in the
forthcoming year and beyond into the future.
Viability Statement
The Board reviews the performance and progress of the Company in
depth at each quarterly Board meeting over historic periods and
uses these assessments, regular investment performance updates from
the Investment Manager and a continuing programme of monitoring
risk to assess the future viability of the Company. The Directors
consider that a period of three years is the most appropriate time
horizon to consider the Company's viability and, after careful
analysis, the Directors believe that the Company is viable over a
three year period, taking into account the potential impact of the
potential risks and uncertainties it faces, including the impact of
the Covid-19 pandemic as detailed in the Chairman's Statement,
Investment Manager's Report and Principal Risk sections of this
Report. The following facts support the Directors' view.
-- The Company has a liquid investment portfolio in relation to
investments in UK and internationally listed securities and has
some short-term cash on deposit. These liquid assets represent 53%
of net assets, the other 47% is the unlisted investment in LTL,
which is not readily realisable.
-- The founder directors of LTL, in which the Company holds
24.23%, have given their verbal assurance that they remain
committed to the business for the foreseeable future.
-- The Company has decided not to use gearing.
-- Revenue expenses of the Company are covered five times by investment income.
In order to maintain viability, the Company has a robust risk
control framework for the identification and mitigation of risk
which is reviewed regularly by the Board. The Directors also seek
reassurance from service providers that their operations are well
managed and they are taking appropriate action to monitor and
mitigate risk. The Directors have a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their
assessment.
Companies Act Section 172 Statement
The Directors are conscious of their duties to promote the
success of the Company for the benefit of its shareholders, whilst
considering the interests of its wider stakeholders, as per section
172 of the Companies Act 2006. The matters set out in section
172(1) (a) to (f) are:
(a) the likely consequences of any decision in the long term;
(b) the interests of the company's employees;
(c) the need to foster the company's business relationships with
suppliers, customers and others;
(d) the impact of the company's operations on the community and the environment;
(e) the desirability of the company maintaining a reputation for
high standards of business conduct; and
(f) the need to act fairly between members of the company.
The Board acknowledges that engagement with key stakeholders
assists the Board in meeting these obligations and has identified
its key stakeholders below. The following outlines the Board's
engagement with stakeholders, the impact on decision making where
appropriate, and cross refers to relevant detail provided elsewhere
in the Report.
Shareholders - The Board recognises the importance of
communication with shareholders. A presentation is made by the
Investment Managers on the performance and prospects of the Company
at the Annual General Meeting. However this year, owing to the
coronavirus pandemic, the Annual General Meeting on 3rd September
2020 is to be closed to shareholders and only Directors will
attend. Shareholders are strongly encouraged to vote by proxy,
appointing the Chairman as their proxy. The Investment Manager will
arrange an interactive internet enabled presentation following the
AGM at 3.00 pm which will provide shareholders with the opportunity
to engage with and put questions to the Board and the Investment
Manager (see further detail on page 30). In addition, 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.
Further detail on how the Company engages with shareholders is
provided on page 30.
Investment Manager - The Board recognises the critical role of
the Investment Manager in the Company's success. The Investment
Manager is invited to attend Board and Audit Committee meetings,
where open and transparent discussions are encouraged, as is an
appropriate level of challenge. The Board and Investment Manager
communicate regularly outside of these meetings to ensure a
collegiate approach. Furthermore, Michael Lindsell is a Director of
both the Company and of the Investment Manager. The aim is to
maintain a strong relationship between the Board and Investment
Manager when considering the interests of the Company's
stakeholders, whilst upholding the Company's values. The Investment
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 as referred to on
page 30.
Portfolio companies - The Investment Manager invests in a
concentrated portfolio of durable business franchises with the
intention of holding these positions for a considerable time. The
Investment 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.
Service providers - The Company looks to build long term
partnerships and collaborate with its key service providers by
communicating regularly with, and providing feedback to, each of
the providers. 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 as referred to on page 30.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.
Regulators - The Board ensures compliance with rules and
regulations as relevant to the Company. A review of the Company's
compliance is carried out on an annual basis.
Key decisions during the year, which have required the Directors
to consider applicable section 172 factors, are as follows:
-- The Investment Manager did not take a performance fee for the
year to 31 March 2020, in response to a negative share price total
return of 26.5% over the year, as detailed on page 55. The Board
believes this enhances value for shareholders and promotes the long
standing alignment of interests between shareholders and the
Investment Manager. This decision was made in relation to the
financial year ending 31 March 2020 only and, therefore, a
performance fee may be taken in future years.
-- In response to volatility in the market, the Board took the
decision to apply an adjustment to the inputs in the valuation
formula used to calculate the value of the Company's most
significant investment in its portfolio, LTL. Further details of
this are set out on pages 4 and 75. The aim of this was to ensure
that the valuation captured the full effect of the decline in LTL's
funds under management ('FUM') as markets fell in early 2020, and
to reflect the sharp fall in the values of quoted fund managers,
due to the impact of the coronavirus pandemic. The Board believes
this adjustment increases the accuracy of the calculation of the
unlisted investment, increasing the transparency of the Company to
its shareholders and enabling them to make informed investment
decisions. Determining the valuation of LTL is a key judgement
undertaken by the Board. The methodology used to calculate the LTL
Valuation is regularly monitored and formally reviewed by the Board
on an annual basis.
Purpose, Values and Culture
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 Objective, as set out on the inside front cover.
As the Company has no employees, its culture is represented by
the values, conduct and performance of the Board, the Investment
Manager and its key service providers.
Employees, Social, Human Rights and Environmental Matters
The principal activity of the Company is to invest in line with
the Investment Policy set out on page 10. The Company has no
employees and accordingly it has no direct social, human rights or
environmental impact from its operations. It does not hold
sufficiently large proportions of portfolio companies to be able to
influence their social or environmental footprints.
As an investment vehicle the Company does not provide goods or
services in the normal course of business, and does not have
customers but does engage service providers. Due diligence is
carried out on key service providers prior to their engagement.
Accordingly, the Directors consider that the Company is not
required to make any slavery or human trafficking statement under
the Modern Slavery Act 2015.
Company's Directors and Employees
The number of Directors and employees at the financial year end
was 6 (2019: 6).
2020 2019
Male Female Male Female
-------------------------- ---- ------ ---- ------
Directors (Non-Executive) 5 1 5 1
-------------------------- ---- ------ ---- ------
There were no Executive Directors or employees during the
year.
Board Diversity
When considering new appointments, the Board reviews the skills
of the Directors and seeks to add persons with complementary skills
or who possess skills and experience which fill any gaps in the
Board's knowledge or experience. The Company is committed to
ensuring that any vacancies arising are filled by the most
qualified candidates. The Board acknowledges the benefits of
greater diversity, and remains committed to ensuring that the
Company's Directors bring a wide range of skills, knowledge,
experience, backgrounds and perspectives to the Board. As such, the
Board is minded to increase the diversity of its Board and in
particular the proportion of female directors.
The following key objectives for the appointment process for new
Directors have been established:
-- all Board appointments will be made on merit, in the context
of the skills, knowledge and experience that are needed for the
Board to be effective;
-- candidates selected must have sufficient time to devote to
their duties as a Director of the Company; and
-- long lists of potential non-executive directors should
include diverse candidates of appropriate merit.
Approval Statement
The Strategic Report of the Company, comprising pages 2 to 17 of
this Report, has been approved by the Board.
For and on behalf of the Board
Julian Cazalet
Chairman
15 June 2020
Governance
Directors
Julian Cazalet (*^) , Chairman, is a director of Deltex Medical
Group plc and trustee of a number of charitable trusts. Previously
he was a Managing Director - Corporate Finance at J.P. Morgan
Cazenove until his retirement in December 2007. During his
corporate finance career he advised many investment trusts in
addition to his work with industrial and commercial companies. A
qualified Chartered Accountant, he has an M.A. in economics from
Cambridge University.
Nicholas Allan (*^) is a non-executive director of Walled City
Hotels Pte Limited (India), Kangra Valley Garden Hotels Pte Limited
(India), Indian Room with a View Pte Limited (Singapore), Asian
Resort Developments Limited (Mauritius) and Pixton Woodlands
Limited (UK). He has significant experience of investment
management, namely at Boyer Allan Investment Management and
Kleinwort Benson. He was joint founder of Boyer Allan Investment
Management and joint fund manager of the Boyer Allan Pacific Fund
Inc. He was a director of Boyer Allan Investment Services Limited
from 1998 to 2016 and a director of Dresdner Kleinwort Securities
Limited from 1992 to 1998.
Vivien Gould (*^) , Audit Committee Chairman, is a non-executive
director of Baring Emerging Europe PLC, Schroder AsiaPacific Fund
plc and National Philanthropic Trust UK. She has worked in the
financial services sector since 1981. She was a founder director of
River & Mercantile Investment Management Limited (1985) and
served as a senior executive and Deputy Managing Director with the
Group until 1994. She then worked as an independent consultant and
served on the boards of a number of investment management
companies, listed investment trusts, other financial companies and
charitable trusts.
Richard Hughes (*^) is a non-executive director of Middlefield
Canadian Income PCC. He also serves as a non-executive director of
Edentree Asset Management Limited, chairs its Investment Committee
and is a member of its Risk and Audit Committee. He has significant
experience with closed-end funds, namely M&G's Investment Trust
business of which he was a director. He managed a number of funds,
including M&G Smaller Companies Fund, M&G Recovery Fund and
M&G Charifund. He was a director of M&G Group plc and
Managing Director of M&G Investment Management Limited. He was
a director of M&G Limited and M&G Group plc from 1994 to
2000, and a director of M&G Recovery Trust plc from 1992 to
1998.
Rory Landman (*^) is the Senior Bursar of Trinity College,
Cambridge, and was previously a senior director and the head of
global emerging market equities at Baring Asset Management. He was
a founding partner of the Nevsky emerging market equities team at
Thames River Capital. A qualified Chartered Accountant, he has an
M.A. in Law from Cambridge University.
Michael Lindsell joined the investment department of Lazard
Brothers in 1982 after obtaining a BSc (Hons) degree in zoology
from Bristol University. In 1985 he moved to Scimitar Asset
Management in Hong Kong where he ran Pacific and Japanese mandates
before specialising in Japan. In 1989 he moved to Warburg Asset
Management where he was a director and head of Mercury Asset
Management's Japanese fund management division. In 1992 he joined
GT Management's Tokyo office where he held the post of chief
investment officer with responsibility for GT's Japanese funds, and
global funds sourced out of Japan. He returned to the UK in 1997
and following the acquisition of GT by INVESCO in 1998, he was
appointed head of the combined global product team. He left INVESCO
to set up LTL in 1999.
All Directors are non-executive.
(*) Independent
(^) Audit Committee member
Management Engagement Committee member
M Lindsell was appointed on 13 July 2006. R Landman was
appointed on 20 July 2011 and will retire on 3 September 2020. J
Cazalet and V Gould were both appointed on 29 January 2015. N Allan
and R Hughes were both appointed on 18 September 2018.
Investment Manager
LTL acts as as discretionary Investment Manager of the Company's
assets. However, the Board retains ultimate discretion over the
holding in LTL and LT managed fund products. Decisions on these
holdings are based on advice and information received from the
Investment Manager.
Administrator and Company Secretary
Maitland Administration Services Limited is the Administrator
and Company Secretary
Report of the Directors
The Directors present their report together with the audited
financial statements of the Company for the year ended 31 March
2020.
Status
The Company is registered in England & Wales under number
04119429. It is an investment company as defined in Section 833 of
the Companies Act 2006.
The Company has been confirmed by HM Revenue & Customs as
having approved investment trust status under the Investment Trusts
(Approved Company) (Tax) Regulations 2011, subject to it continuing
to comply with the Regulations. The Directors conduct the affairs
of the Company with a view to maintaining this approved investment
trust status in order to preserve the Company's exemption from UK
capital gains tax.
The Board has been approved by the Financial Conduct Authority
to be a Small Registered UK Alternative Investment Manager
('AIFM').
The Alternative Investment Fund Managers' Directive ('AIFMD')
requires certain disclosures to be made in respect of any
remuneration policy for the AIFM, leverage, risk disclosures and
pre-investment disclosures. The Board is the AIFM, and receives no
remuneration in this regard. The Company does not use gearing,
makes sufficient risk disclosure within the Report, and there have
been no material changes to investment policy or objectives.
Therefore, it is considered that separate disclosures are not
required.
The Company is a member of the Association of Investment
Companies ('AIC').
Investment Policy and Objective
Details of the Company's investment policy and objective of the
Company are set out above.
Results and Dividend
The revenue return for the financial year ended 31 March 2020
after taxation amounted to GBP10,598,000 (2019: GBP7,172,000). A
final dividend of GBP41.39 per Ordinary Share (2019: GBP27.87) and
a special dividend of GBP2.61 per Ordinary Share (2019: GBP1.63) is
proposed for the year ended 31 March 2020. If these dividends are
approved by Shareholders at the forthcoming Annual General Meeting
they will be paid on 8 September 2020 to Shareholders on the
register at close of business on 14 August 2020 (ex-dividend 13
August 2020).
Use of Financial Instruments
The Company's use of financial instruments is disclosed in note
17 to the Financial Statements.
Share Capital
Full details of the Company's Ordinary Share capital are
provided in Note 14 of the Financial Statements.
Supplier Agreements
Details of the Company's supplier agreements can be found in
Appendix 3.
Substantial Shareholdings
As at the dates below the Company had received notifications
(DTR 5.1.2R) and/or become aware of the following shareholdings
representing 3% or greater of the Ordinary Share capital of the
Company:
No. of Shares
at No. of Shares
31 March at % of issued
2020 22 May 2020 capital
---------------------------------------- ------------- ------------- -----------
Hargreaves Lansdown Asset Management 34,829 34,165 17.08
Interactive Investor 17,102 17,258 8.63
Mr N Train 12,280 12,280 6.14
Mr M Lindsell (including non-beneficial
interests) 10,945 10,945 5.38
A J Bell Group 10,025 9,726 4.86
Finsbury Growth & Income Trust
plc 10,000 10,000 5.00
Rathbone Investment Management
Limited 9,402 9,431 4.72
Brewin Dolphin 7,373 7,312 3.66
---------------------------------------- ------------- ------------- -----------
Directors
Details of the Directors of the Company who served during the
year are set out on page 18. Particulars of their remuneration are
given on pages 34 to 39. Rory Landman will be retiring at the
Company's forthcoming Annual General Meeting having served on the
Board for nine years. All of the other Directors as at the date of
this Report will stand for re-election.
Powers of the Directors
The powers of the Directors are contained in the Company's
Articles of Association, which are publicly available at Companies
House. Subject to the provisions of the Companies Acts and the
Company's Articles, the Directors may exercise all powers within
their scope to manage the business of the Company and may delegate
any of those powers to a Director, Committee or Agent.
The Directors may exercise the Company's authority to borrow, to
pay fees, expenses and additional remuneration or salary for
special duties undertaken by any Director, and vote the shares of
portfolio companies.
Directors' Interests
The interests of the Directors, and connected persons, in the
Ordinary Shares of the Company are shown in the Directors'
Remuneration Report on page 38.
Directors' Indemnification and Insurance
Articles 165 and 166 of the Company's Articles of Association
provide that, insofar as permitted by law, every Director shall be
indemnified by the Company against all costs, charges, expenses,
losses or liabilities incurred in the execution and discharge of
the Directors' duties, powers or office. The Company has arranged
appropriate insurance cover in respect of legal action against its
Directors. This cover was in place during the year and also to the
date of signing this report.
Given the importance of the investment in LTL, the Company
intends to take out a new policy to insure the lives of the
founders and key managers, Michael Lindsell and Nick Train, for
GBP10m each. Currently there is a policy in place to insure Michael
Lindsell for a premium of GBP19,337 and we anticipate there will be
one in place shortly to insure Nick Train. In the unfortunate event
of a claim being made the proceeds would partly offset the likely
fall in the value of the investment in LTL.
Disclosure of Interests
Save as disclosed below and in note 6 to the Financial
Statements, no Director was a party to, or had an interest in, any
contract or arrangement with the Company.
Michael Lindsell is a director of the Investment Manager, LTL,
and the beneficial holder of 36.33% of the issued share capital of
that company. He is actively involved in the management of the
Lindsell Train Japanese Equity Fund in which he invests, and in
which the Company also invests. Details of the Company's investment
in this fund can be found on page 6 of the Annual Report.
All of the Directors are non-executive and no Director had a
contract of service with the Company at any time during the
year.
Corporate Governance
The Corporate Governance Statement, which forms part of this
Report of the Directors, is set out on pages 26 to 30.
Employment, Social, Human Rights and Environmental
Statements
The Strategic Report on pages 2 to 17 includes statements on
social, economic, human rights and environmental issues.
Disclosure Concerning Greenhouse Gas Emissions
The Company itself has no greenhouse gas emissions to report on
from its activities.
Streamlined Energy and Carbon Reporting
The Company is categorised as a lower energy user under the HMRC
Environmental Reporting Guidelines March 2019 and is therefore not
required to make the detailed disclosures of energy and carbon
information set out within the guidelines. The Company's energy and
carbon information is therefore not disclosed in this Report.
Stakeholder Engagement
While the Company has no employees, suppliers or customers, the
Directors give regular consideration to the need to foster the
Company's business relationships with its stakeholders, in
particular with shareholders and service providers. The effect of
this consideration upon the principal decisions taken by the
Company during the financial year is set out in further detail in
the Strategic Report on pages 14 and 15.
Annual General Meeting
The Annual General Meeting of the Company will be held on 3
September 2020 at 2.30 pm. In accordance with the AIC Code, the
Notice of Meeting is circulated more than twenty working days
before the meeting. The Meeting will be held at 3rd Floor, 66
Buckingham Gate, Westminster, London SW1E 6AU.
The coronavirus pandemic and the associated requirement for
social distancing has made it impractical to conduct the Company's
Annual General Meeting in the traditional way. This year the
meeting will be closed to shareholders and will be attended by
Directors only. Shareholders are encouraged to vote by proxy and to
appoint the Chairman as their proxy.
The Directors recommend that Shareholders vote in favour of all
Resolutions being put to the Annual General Meeting, as they
themselves intend to do in respect of their own holdings
representing 5.6% of total voting rights.
Special business at the Annual General Meeting
Directors' Remuneration Policy
Resolution 11 is proposed as an Ordinary Resolution to receive
and adopt the Directors' Remuneration Policy.
Share buyback authority
Resolution 12 is proposed as a Special Resolution and would, if
passed, renew the authority to permit the Company to buy back
through the stock market up to a maximum of 29,980 Ordinary Shares
of 75p each (equivalent to 14.99% of the Ordinary Shares in issue
at the date of this report). Purchases will only be made through
the market for cash at prices below the prevailing NAV per Ordinary
Share, thereby resulting in an increased NAV per Ordinary
Share.
Shares bought back may be held in treasury and are then eligible
for subsequent resale or cancellation. No voting rights or
entitlement to distribution (either dividend or on a winding up)
applies to shares held in treasury.
Authority to sell treasury shares
Resolution 13 authorises the Directors to sell back into the
market shares held in treasury. Treasury shares would not be resold
at a price below that at which they had been bought back nor below
NAV.
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; and
-- 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.
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.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements and the Directors' Remuneration Report
comply with the Companies Act 2006.
The Directors have delegated responsibility to the
Administrators for the maintenance and integrity of the corporate
and financial information included on the Company's page on the LTL
website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Independent Auditors
Following a formal tender process, led by the Company's Audit
Committee, the Board appointed PricewaterhouseCoopers LLP as the
Company's Auditors in January 2018. PricewaterhouseCoopers LLP has
expressed its willingness to continue to act as the Company's
independent auditors ("the Auditors"). A resolution to appoint
PricewaterhouseCoopers LLP as the Auditors to the Company and to
authorise the Directors to determine the Auditors' remuneration
will be proposed at the forthcoming Annual General Meeting.
Audit information
Each of the persons who were Directors at the date of approval
of this Annual Report confirm, in accordance with the provisions of
Section 418 of the Companies Act 2006, that:
-- so far as each is aware there is no relevant audit
information (as defined in the Companies Act 2006) of which the
Auditors are unaware; and
-- each has taken all the steps that he ought to have taken as a
Director to make himself aware of any relevant audit information
and to establish that the Auditors are aware of that
information.
Going Concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position,
are described in the Chairman's Statement and in the Investment
Manager's Report. The Company has adequate financial resources
including readily realisable equity securities and cash and the
value of its assets is greater than its liabilities. Additionally,
after reviewing the Company's budget including the current
financial resources and projected expenses for the next 12 months
and its medium-term plans, the Directors believe that the Company's
resources are adequate for continuing in business for the
foreseeable future. Notwithstanding the challenges arising from the
impact of Covid-19, the Investment Manager and its other service
providers continue to operate, administer and calculate the net
asset value of the Company in accordance with relevant accounting
standards. At the time of writing, investment markets are
experiencing high levels of daily volatility and it is likely that
this volatility will continue for the foreseeable future.
Accordingly, having assessed the principal risks and the other
matters set out in the Viability Statement, the Directors believe
that the Company is well placed to manage its business risks
successfully and it is thus appropriate to prepare the Annual
Report and Financial Statements on a going concern basis. The
Investment Manager will continue to monitor fund liquidity and
market volatility to ensure the Company is managed in the best
interests of shareholders and to ensure that it remains a going
concern. Where appropriate the Administrator will value assets on a
"fair value" basis in accordance with the Regulations. The Company
does not have a fixed life.
The Directors consider that the Annual Report and Financial
Statements taken as a whole is fair, balanced and understandable
and it provides the information necessary for Shareholders to
assess the Company's position, performance, business model and
strategy.
Directors' Confirmation Statement
The Directors, as the persons responsible within the Company,
hereby confirm to the best of their knowledge:
a) that the Financial Statements within the Annual Report of
which this statement forms part have been prepared in accordance
with applicable UK Accounting Standards and give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company; and
b) the Strategic Report includes a fair review of the
development and performance of the business and position of the
Company, together with the principal risks and uncertainties which
the Company faces.
By order of the Board
Maitland Administration Services Limited
Secretary
15 June 2020
Corporate Governance Statement
The Corporate Governance Statement forms part of the Report of
the Directors.
The Board has considered the principles and recommendations of
the AIC Code of Corporate Governance 2019 ("AIC Code"), addresses
all the principles set out in the UK Corporate Governance Code ("UK
Code"), as well as setting out additional principles and
recommendations on issues that are of specific relevance to the
Company.
The Board considers that reporting in line with the principal
recommendations of the AIC Code will provide better information to
Shareholders. The Financial Reporting Council has confirmed that
AIC member companies who report against the AIC Code will be
meeting their obligations in relation to the UK Code.
The Board confirms that it complies with the recommendations of
the AIC Code and the relevant provisions of the UK Corporate
Governance Code, except as set out below.
UK Corporate
Governance Code Additional Information
---------------------------------------------------------- ------------------------------------------
The Board considers these provisions
* the role of the chief executive; are not relevant to the Company,
as it is an externally managed investment
company. All of the Company's day-to-day
* executive directors' remuneration; and management and administrative functions
are outsourced to third parties.
As a result, the Company has no executive
* the need for an internal audit function. directors, employees or internal
operations. The Company has therefore
not reported further in respect of
these provisions.
---------------------------------------------------------- ------------------------------------------
AIC Code Additional Information
---------------------------------------------------------- ------------------------------------------
The Board does not consider it necessary
* the appointment of a senior independent director to appoint a senior independent director.
The Chairman's performance is considered
annually at the Nomination Committee.
---------------------------------------------------------- ------------------------------------------
The Board does not consider this
* the Board should establish a Remuneration Committee provision relevant as the Company
has no employees and there are no
executive Directors. Non-executive
Directors' remuneration is determined
by the Board in line with the Directors'
Remuneration Policy.
---------------------------------------------------------- ------------------------------------------
Board Structure
The Board recognises that its prime purpose is to direct the
business so as to maximise Shareholder value within a framework of
proper controls. The Board at the date of this Report currently
comprises six members, five of whom are male and one who is female.
All directors are non-executive and five are independent of the
Investment Manager.
The Directors normally meet as a Board on a quarterly basis. The
Board lays down guidelines within which the Investment Manager
implements investment policy and has a schedule of matters reserved
exclusively for resolution by the Directors. All Board members have
access to the advice and services of the Company Secretary, the
removal or replacement of whom is a matter for the Board as a
whole. The Directors are also able to take independent professional
advice at the Company's expense.
The Investment Manager, Company Secretary and Administrator all
operate in a supportive and cooperative manner and representatives
of each attend Board meetings.
The number of meetings of the Board and Committees for the year
under review is given below, together with individual Director's
attendance at those meetings:
Board Management
(regular Audit Engagement Nomination
meetings) Committee Committee Committee
------------------------- --------- --------- ---------- ----------
Total number of meetings 4 2 1 1
Julian Cazalet 4 2 1 1
Nicholas Allan 4 2 1 0
Vivien Gould 4 2 1 1
Richard Hughes 4 2 1 1
Rory Landman** 4 2 1 1
Michael Lindsell 4 2* - -
------------------------- --------- --------- ---------- ----------
* Present as an attendee and not a member of Committee.
** Rory Landman will be retiring at the forthcoming Annual
General Meeting, having served on the Board for nine years.
Board Performance Evaluation
The Board evaluates the performance of the Board, Committees,
individual Directors and third party service providers using a
structured questionnaire and without recourse to an external
facilitator. The Board is satisfied from the results of these that
the Board, its Committees and its third party providers function
effectively, both collectively and individually, and contain an
appropriate balance of skills and experience for the effective
management of the Company.
Board Responsibilities
It is the responsibility of the independent members of the
Board, led by the Chairman, to ensure the effectiveness of the
Investment Manager and other third party service providers. The
Board receives accurate, timely and clear information to assist it
in its decision making, and no one Director has unfettered powers
of decision.
Matters Reserved for the Board
The Board is responsible for setting the Company's investment
objectives, strategy and benchmark. It also decides on the
appointment and replacement of key suppliers including the
Investment Manager, the Auditors (subject to Shareholder approval),
Registrar, Custodian, Company Secretary, Administrator and Tax
Services Supplier.
The Board determines what items will be put to Shareholders at
general meetings, approves financial results and any
communications/announcements relating to the Company. Within the
authority granted by Shareholders the Board approves allotments and
buy-backs of Ordinary Shares and increases/reductions of Ordinary
Shares in issue and in treasury.
The Board monitors key risks and ensures that there is a
structure of internal controls in place to mitigate the likelihood
of risks materialising. These are explained in greater detail
below. Authority has been delegated to the Investment Manager to
take decisions on the purchase and sale of individual investments.
However, the Board retains discretion in relation to the investment
in LTL and LTL managed funds. The Board has also delegated
authority to the Committees listed on pages 29 and 30 and has
established Terms of Reference which are available on the Company's
page on LTL's website and from the Registered Office of the
Company.
A schedule of matters reserved for the Board is also available
on the Company's page on LTL's website and from the Registered
Office of the Company.
Internal Control
The Board confirms that there is an ongoing process for
identifying, evaluating and managing those risks which are
significant for the Company (particularly operational risks) and
that this process reflects the guidance provided by the FRC. This
process has been in place for the year ended 31 March 2020 and up
to the date of the Annual Report and Financial Statements, and is
regularly reviewed by the Board. The review covers all material
financial, operational and compliance controls and risk management
systems.
The Board has ultimate responsibility for the system of internal
control and for reviewing its effectiveness. The key elements of
the system are the appointment of an independent custodian with
responsibility for safeguarding the Company's assets and clearly
defined responsibilities between the Board, the Custodian and the
Investment Manager, all of whom have detailed operating procedures
in place. The controls operated by the Board include the
authorisation of the investment strategy and regular reviews of the
investment performance and financial results. The system is
designed to manage rather than eliminate the risk of being unable
to meet business objectives and can provide reasonable but not
absolute assurance against material misstatement or loss. The Board
reviews the operation and effectiveness of the Company's internal
controls regularly through identification and assessment of key
risks and there is an annual review of how these are managed.
The Board has delegated the management of the investment
portfolio to the Investment Manager, LTL, other than maintaining
ultimate discretion over the holdings in LTL and LTL managed funds.
LTL and the Board regularly discuss the investments in LTL and LTL
funds. The day-to-day administration and the Company Secretarial
requirements are contractually delegated to Maitland Administration
Services Limited, and the custodial services including the
safeguarding of assets to Northern Trust Company (see note 17).
These contracts have been entered into after full consideration by
the Board of the services undertaken and are reviewed annually. The
Investment Manager, Administrator and Custodian all maintain their
own systems of internal and financial controls.
The Investment Manager has established a framework to provide
reasonable assurance on the effectiveness of internal controls
operated on behalf of its clients. The Investment Manager's
compliance officer assesses and reports to the Board on that
effectiveness and on the various business risks that may be
encountered by the Investment Manager.
The Company Secretary and Administrator also has established
internal controls and have procedures in place to monitor them.
The Audit Committee reviews, at least annually, a detailed
analysis of the activities and potential risks to which the Company
might be exposed and the key controls in place to minimise
risk.
The Board is satisfied that its approach to managing internal
control and risk conforms to the recommendations of the FRC's
Guidance on Risk Management, Internal Control and Related Financial
and Business Reporting (September 2014).
The Board notes that the coronavirus pandemic has affected the
operations of all its service providers but is satisfied that all
have been able to adjust their business practices to accommodate
the disruption and to continue to provide a satisfactory service to
the Company.
As the Company's investment management, administration and
custodial activities are carried out by third party service
providers, the Board does not consider it necessary to have an
internal audit function or whistleblowing procedures. The Audit
Committee reviews annually the whistleblowing procedures of the
Investment Manager and the Administrator.
Nomination Committee
The Board has established a Nomination Committee which will meet
annually, or more often, if necessary. The Company's Nomination
Committee during the year comprised Julian Cazalet (Chairman), Rory
Landman, Vivien Gould, Nicholas Allan and Richard Hughes.
The Directors have many years' experience within the industry
between them and a broad knowledge of individuals who would have
the necessary skills to promote and develop the Company.
Accordingly the Nomination Committee has not considered it
necessary to engage the services of third party search
consultants.
The Board's policy on diversity, including gender, is described
in more detail on page 16.
The Board's policy on tenure is that Directors' appointments are
reviewed through the regular board performance evaluations. There
is no requirement for Directors to stand down after a fixed period
of time as the Company values experience over a number of
investment cycles.
Remuneration Committee
The Company has no executive Directors and the Board as a whole
fulfils the function of a Remuneration Committee.
Audit Committee
The Company's Audit Committee during the year comprised Vivien
Gould (Chairman), Julian Cazalet, Rory Landman, Nicholas Allan and
Richard Hughes. Although Mr Cazalet is Chairman of the Board, the
Board considers it desirable that he continues as a member of the
Committee. The Audit Committee has set out a formal Report on pages
31 to 33 of the Annual Report.
Management Engagement Committee
The Company's Management Engagement Committee during the year
comprised Julian Cazalet (Chairman), Rory Landman, Vivien Gould,
Nicholas Allan and Richard Hughes.
The Committee reviews LTL's performance against comparator
indices and market peers and considers whether terms of the
contract, fees and other remuneration payable to LTL remain
appropriate on at least an annual basis.
The Committee also considers the performance, terms, fees and
other remuneration payable to the Administrator, the Custodian,
Northern Trust Company and the Registrar, Link Asset Services.
Shareholder Relations
The Company, through the Investment Manager (in accordance with
its stated policy on stewardship), has regular contact with its
institutional Shareholders. The Board supports the principle that
the Annual General Meeting should be used to communicate with
private investors but recognises that this year the coronavirus
pandemic and the associated requirement for social distancing has
made it impractical to conduct the Company's Annual General Meeting
in the traditional way. The meeting will be held at LTL's offices
but shareholders are requested not to attend in person and instead
only Directors will be present. Shareholders are strongly
encouraged to vote by proxy, appointing the Chairman as their
proxy.
LTL will arrange an interactive internet enabled presentation on
the Company and its prospects at 3.00 pm on 3 September 2020. All
shareholders are encouraged to log in and attend. We would ask you
to register in advance by completing the enclosed form or emailing
kirsty.banks@lindselltrain.com.
The Board has elected to provide shareholders with a printed
summary of proxy voting to shareholders that request it. The
results of voting will be placed on the Company's page on the LTL
website as soon as practicable after the Annual General
Meeting.
Shareholders may contact the Board through either the Investment
Manager or the office of the Company Secretary, contact details for
whom are given on page 83.
Report of the Audit Committee
This report to Shareholders for the year ended 31 March 2020 has
been prepared in accordance with guidance issued by the Financial
Reporting Council and the UK Corporate Governance Code issued by it
in September 2014.
Composition of the Committee
The Audit Committee during the year comprised five Directors all
of whom are members of the Board. All of the members of the
Committee are independent and considered to have sufficient recent
and relevant experience to enable the Committee to function
effectively. Julian Cazalet, Rory Landman and Richard Hughes have
current experience in relation to accounting and financial matters.
The Company Secretary is Secretary to the Committee.
Role of the Committee
The principal activities undertaken by the Audit Committee
are:
-- to monitor and review the effectiveness of all aspects of the
Company's financial reporting;
-- to satisfy itself as to the integrity of the full year and
half year reports to Shareholders;
-- to advise the Board that such reports are fair, balanced and
understandable and comply with applicable laws and regulations;
-- to monitor the effectiveness of internal controls operated by
third party service providers appointed by the Board to undertake
the day-to-day activities and administration of the Company's
business;
-- to consider significant issues (if any) which are identified
by the Auditors and to determine such action (if any) as needs to
be recommended to the Board in connection therewith;
-- to meet, at least annually, with the Auditors and review the
audit plan proposed by them; including areas of risk they will look
particularly at, their level of materiality and the fee proposed by
them for the statutory audit work;
-- to make recommendations to the Board on the appointment,
reappointment, replacement or removal of the Auditors;
-- to consider all proposals and fees for non-audit work, which
may include tenders from independent third parties as well as
proposals from the Auditors to undertake such work, the fees for
such work and their suitability to undertake the work involved;
-- to monitor and satisfy itself as to the independence,
objectivity, resources and qualifications of the Auditors at least
annually;
-- to consider, at least annually, whether or not the Company
should have an internal audit function.
Meetings
The Audit Committee normally meets twice each year. Meetings are
held to consider the full year and half year results. Before each
year end, the Board review the Auditors' proposed plans, scope of
work and costs for the ensuing full year audit. Representatives of
the Investment Manager and the Administrator attend meetings to
provide input and respond to questions. The Committee also holds
meetings with the Auditors without any of the Company's third party
service providers present at which any aspect of the Auditors' work
may be discussed.
The Audit Committee operates under written Terms of Reference,
copies of which are available on the Company's page on LTL's
website and from the Registered Office of the Company.
Internal Controls
The Committee is responsible for ensuring that suitable controls
are in place to prevent and detect fraud, error and misstatement of
financial information. As the Company outsources all of its
functions to third parties, neither the Committee nor the Company
has any internal control structure in place but instead requires
its third party service providers to report on their internal
controls. These reports are received at least annually, including
reports which have been independently verified by the relevant
service provider's independent auditors.
Audit process
The Committee reviews at least annually whether the Company
should have an internal audit function. It has recommended to the
Board that, given the size, structure and nature of the Company's
activities, and that all operations are carried out by third party
service providers, an internal audit function is not appropriate.
The Board has endorsed the recommendation of the Committee.
PricewaterhouseCoopers LLP are the Auditors and were appointed
in March 2018. The Committee is not aware of any contractual or
other restrictions which would impinge on the Committee's ability
to select independent auditors.
The Partner responsible for the audit affairs of the Company has
been in position for three audit cycles and is subject to change at
least every five years.
The Committee satisfies itself as to the independence of the
Auditors, and in particular takes into account any non-audit work
undertaken by the Auditors. When considering whether to appoint the
Auditors to undertake non-audit work the Committee takes into
account any potential impairment of independence or impartiality,
knowledge of the Company and their proposed fee. The Committee may
also put non-audit work out to tender.
Tax Compliance
The Company has engaged ACA Compliance Group to assist with the
Company's tax compliance matters. In particular, the preparation
and submission of the Company's corporation tax computation and tax
return.
Significant issues in relation to Financial Statements
When planning the statutory audit, the Committee identified the
following areas of particular significance which might require
particular audit emphasis:
-- ownership of investments and assets included in the portfolio;
-- valuation of positions in the portfolio, especially any which
are illiquid or unlisted; and
-- accuracy and completeness of the recognition of revenue.
Ownership of investments
The Administrator has highlighted no issues and confirmed that
all additions, disposals and corporate actions were agreed to
contract notes or other supporting documentation. In addition, a
list of holdings was checked against an independent statement
provided by the Company's custodian.
Valuation of investments
The Audit Committee considered the valuation methodology of the
unlisted investment in LTL that represented 47% of net assets at
the financial year end. From the 31 March 2020 valuation and into
the future the Board decided to amend one of the inputs by
estimating LTL's annual notional earnings with reference to LTL's
most recent month end funds under management ('FUM') (see page 75).
This more readily captures the change in earnings brought about by
changes in FUM.
The other 53% of the Company's net assets are quoted investments
and cash. The valuation of these investments is a material matter
in the production of the Financial Statements.
The Audit Committee noted that the coronavirus pandemic has had
a malign impact on economies and stock markets worldwide and that
the valuations of all its investments, both listed and unlisted,
have been impacted. The Audit Committee reviewed the procedures in
place for ensuring the accuracy of the values and is content that
these procedures remain robust.
The results of the valuation of all investments were discussed
with the Auditors. No material issues were identified.
Revenue
Dividend income is reviewed by the Administrator to ensure it is
appropriately accounted for and allocated correctly to revenue or
capital. The Audit Committee has also reviewed the Auditors'
approach to revenue recognition prior to the commencement of the
audit. The results of the audit in this area were discussed with
the Auditor and there were no significant issues arising.
Independence and effectiveness of the Auditors
The Committee is satisfied with the independence, objectivity
and impartiality of the Auditors. In order to fulfil the
Committee's responsibility regarding the independence of the
Auditors, we reviewed the Auditors arrangements concerning any
conflicts of interest, the extent of any non-audit services, and
the statement by the Auditors that they remain independent within
the meaning of the regulations and their professional standards. No
non-audit services were provided by the Auditors.
The Committee is also satisfied that the audit process was
effective. In order to consider the effectiveness of the audit
process, we reviewed the Auditors' fulfilment of the agreed audit
plan, the report arising from the audit and feedback from those
involved in the audit process.
Reappointment of the Independent Auditors
The Committee is satisfied that the independence, objectivity
and impartiality of the Auditors has not been compromised.
Accordingly a resolution to reappoint Pricewaterhouse Coopers LLP
as the Auditors will be proposed at the forthcoming Annual General
Meeting.
The Committee has decided not to put the Company's audit work
out to tender as it has been satisfied with the services it has
been provided with and the audit fees paid are in line with
expectations.
Vivien Gould
Chairman - Audit Committee
15 June 2020
Directors' Remuneration Report
This Remuneration Report has been prepared in accordance with
Schedule 8 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (as amended). It describes
the Company's Directors' Remuneration Policy ("Policy"), and how
the Policy was implemented for the year to 31 March 2020.
The Board does not consider it necessary or appropriate to
establish a separate Remuneration Committee as the Company has no
employees, the Board is small, and there are no executive
Directors. Non-executive Directors' remuneration is determined by
the Board in line with the Directors' Remuneration Policy
(below).
Remuneration Policy
This Directors' Remuneration Policy ("Policy") sets out details
of the Company's policy on the remuneration of Directors of the
Company.
The Policy is subject to a triennial binding vote. However, the
Board has resolved that, for good governance purposes, the Policy
vote will be put to Shareholders every year. Accordingly, a
resolution to approve the Policy will be put to Shareholders at the
2020 Annual General Meeting. The Policy, subject to the vote, is
set out in full below and is currently in force.
The Company has only non-executive directors and no employees.
The Directors of the Company are entitled to such rates of annual
fees as the Board at its discretion determines, subject to
aggregate annual fees not exceeding GBP220,000 under the Company's
Articles of Association ("Articles"). No change to this ceiling is
currently envisaged. Each Director abstains from voting on the
specific remuneration to be paid to them.
In addition to fees, Directors are entitled to reimbursement of
reasonable expenses incurred by them in the performance of their
duties. In line with the majority of investment trusts, no
component of any Director's remuneration is subject to performance
factors. There are no provisions in Directors' Letters of
Appointment for recovery or withholding of fees or expenses. Annual
fees are pro-rated where a change takes place during a financial
year.
The Board reviews annually the remuneration paid by other
similar investment trusts and considers research from third
parties. The Board considers it important to pay sufficient
compensation in order to promote the long-term success of the
Company. The following table of remuneration components was
approved with effect from 1 January 2020.
Table of Directors' Remuneration Components
Annual
Component Rate (GBP) Purpose and operation
----------------- ----------- ----------------------------------------------
Basic Annual Fee: 24,000 In recognition of the time and commitment
Each Director required by Directors of public companies.
The basic fee is reviewed against those
paid for peer companies to ensure that
it reflects fair and adequate compensation
for the role.
----------------- ----------- ----------------------------------------------
Additional Fee: 11,000 For the additional time, commitment
Chairman of the and responsibility required on the
Board Company's business issues; and providing
leadership as Chairman of the Board.
----------------- ----------- ----------------------------------------------
Additional Fee: 4,000 For the greater time required on the
Audit Committee financial and reporting affairs of
Chairman the Company.
----------------- ----------- ----------------------------------------------
Additional Fee: Variable In the event that the Company undertakes
Each Director a complex or large project, such additional
fee as will fairly compensate for the
additional time and commitment required
by a Director.
----------------- ----------- ----------------------------------------------
Expenses: Variable Reimbursement of expenses properly
Each Director incurred by Directors in attending
meetings and/or otherwise in the performance
of their duties to the Company.
----------------- ----------- ----------------------------------------------
Notes:
(1.) The Board only exercises its discretion to fix fees after
an analysis of fees paid to directors of other companies of a
similar size to that of the Company.
(2.) As the Company has no employees, there are no differences
in policy between the remuneration of Directors and the
remuneration of employees.
(3.) None of the Directors are entitled to receive any
remuneration which is performance-related.
The table below shows the rate of annual fees payable to the
Chairman, who is the highest paid Director, and all other
non-executive Directors as at 31 March 2020 and as at 31 March
2019:
Fees 2020 (GBP) 2019 (GBP)
---------------------------- ---------- ----------
Chairman 35,000 32,000
Chairman of Audit Committee 28,000 26,000
Board Member 24,000 22,000
---------------------------- ---------- ----------
Recruitment Remuneration Principles
(1.) The remuneration package for any new Chairman or
non-executive Director will be the same as the prevailing rates
determined on the bases set out above. The fees and entitlement to
reclaim reasonable expenses will be set out in Directors' Letters
of Appointment.
(2.) The Board will not pay any introductory fee or incentive to
any person to encourage them to become a Director. However, it may
engage the services of search & selection specialists in
connection with the process of appointing new non-executive
Directors.
(3.) The Company does not intend appointing any non-executive
Directors in the foreseeable future.
(4.) The aggregate maximum fees currently payable to all
Directors is GBP220,000 per annum.
Service Contracts
None of the Directors has a service contract with the Company.
Non-executive Directors are engaged under Letters of
Appointment.
Loss of Office
Directors' Letters of Appointment expressly prohibit any
entitlement to payment or compensation on loss of office.
Scenarios
All remuneration of the Chairman and non-executives Directors'
is fixed at annual rates and there are no performance related
scenarios where remuneration will vary. It is accordingly not
considered appropriate to provide different remuneration scenarios
for each Director.
Statement of consideration of conditions elsewhere in the
Company
The Company has no employees, nor does it have any subsidiaries
or associated companies which have employees, and accordingly a
process of consulting with employees on the setting of the
Company's Remuneration Policy is not applicable.
Other Items
None of the Directors has any entitlement to pensions or pension
related benefits, medical or life insurance schemes, share options,
long-term incentive plans or any form of performance related
payments. No Director is entitled to any other monetary payment or
any assets of the Company except in their capacity (where
applicable) as Shareholders of the Company.
Directors' and Officers' liability insurance cover is maintained
by the Company, at the Company's expense, on behalf of all
Directors.
The Company has also provided indemnities to the Directors in
respect of costs or other liabilities which they may incur in
connection with any claims relating to their performance or the
performance of the Company whilst they are Directors.
The Directors' interests in contractual arrangements with the
Company are as shown in the Annual Report on Remuneration below. No
Director had any interest in any contracts with the Company during
the year to 31 March 2020 or subsequently other than as stated in
the Report of the Directors.
Annual Report on Remuneration
A Resolution to adopt this Annual Report on Remuneration will be
put to the forthcoming Annual General Meeting. The vote is advisory
only and not binding on the Company, but does give Shareholders a
chance to inform the Board of their views on Directors'
remuneration. The Board has proposed no significant changes to the
way the remuneration policy will be implemented in the next
financial year.
The rates of fees paid to Directors were reviewed during the
year,using external benchmarking, and were increased. The
directors' fees (effective from 1 January 2020) are equivalent to
the following annual rates: Julian Cazalet (Chairman of the Board)
GBP35,000; Vivien Gould (Chairman of the Audit Committee)
GBP28,000; and other directors GBP24,000 each with the exception of
Michael Lindsell who, because of his connection with the Investment
Manager, waived his entitlement to fees.
Directors' emoluments
The single total figure of remuneration for each Director for
the year to 31 March 2020 is detailed below together with the prior
year comparative.
Single Total Figure Table (audited information)
Name of Director Fees paid/Total (GBP)*
Year to 31 March: 2020 2019
-------------------- ----------- -----------
Julian Cazalet 32,750 32,000
Nicholas Allan 22,500 11,700
Vivien Gould 27,000 26,000
Richard Hughes 22,500 11,700
Rory Landman 22,500 22,000
Michael Lindsell - -
Michael Mackenzie** - 8,500
-------------------- ----------- -----------
TOTALS 127,250 111,900
-------------------- ----------- -----------
* There were no taxable benefits.
** Michael Mackenzie resigned on 29 August 2018.
None of the Directors are entitled to pensions or pension
related benefits, medical or life insurance, share options,
long-term incentive plans, and any form of performance related pay.
Also, no Director has any right to any payment by way of monetary
equivalent to an entitlement or to any assets of the Company except
in their capacity as Shareholders.
As the Company does not have a Chief Executive Officer or any
executive Directors, there are no percentage increases to disclose
in respect of their Single Total Figure.
Sums paid to Third Parties (audited information) - There were no
sums paid to third parties during the year ended 31 March 2020
(2019: nil).
Directors' & Officers' insurance is maintained by the
Company, at the Company's expense, on behalf of all Directors, in
accordance with Article 173 of the Company's Articles of
Association.
Taxable benefits - None of the Directors received any taxable
benefits other than fees.
Expenses - Under the Articles of Association, Directors are
entitled to reimbursement of reasonable expenses incurred by them
in connection with attendance at Board and General Meetings, the
performance of their duties, and any additional work or duties they
undertake at the Company's request.
Pensions related benefits - Although Article 109 of the
Company's Articles of Association permits the Company to provide
pensions and/or similar benefits for Directors and employees of the
Company, no schemes or arrangements have been established and no
Director is entitled to any pension or similar benefits.
Loss of office
Directors do not have service contracts with the Company but are
engaged under Letters of Appointment. These expressly exclude any
entitlement to compensation upon leaving office for whatever
reason.
Statement of Directors' shareholding and share interests
(audited information)
Neither the Articles nor the Directors' Letters of Appointment
require any Director to own shares in the Company. The interests of
the Directors and their connected persons in the equity securities
of the Company at 31 March 2020 and 31 March 2019 are shown in the
table below:
Ordinary Shares Ordinary Shares
of 75p of 75p
31 March 2020 31 March 2019
----------------------------- --------------- ---------------
J Cazalet 25 -
N Allan 50 -
V Gould 25 -
R Hughes 25 -
R Landman 100 100
M Lindsell 7,345 7,155
M Lindsell (non-beneficial)* 3,600 3,600
----------------------------- --------------- ---------------
* Mr Lindsell's non-beneficial shares relate to him acting as a
trustee of a family trust.
No changes in the above interests occurred between 31 March 2020
and the date of this Report. None of the Directors has been
granted, or exercised, any options or rights to subscribe for
Ordinary Shares of the Company.
Share Price Total Return
The chart below illustrates the total Shareholder return for a
holding in the Company's shares as compared to the Benchmark
between the relevant dates. The Board has adopted this as the
measure for both the Company's performance and that of the
Investment Manager for the year.
Share price performance compared to the Net Asset Value and
Benchmark for ten years to 31 March 2020 (based on total return
performance with net dividends reinvested)
http://www.rns-pdf.londonstockexchange.com/rns/0004Q_2-2020-6-15.pdf
Note: The chart is rebased to 100 from March 2010, includes
dividends and is plotted yearly so this smooths out the high
watermark's effect on the Benchmark.
* Figures are rebased to show the performance per GBP100
invested.
** The Benchmark is adjusted for inclusion of the HWM. Please
note that the inclusion of the HWM means that, at the financial
year end, if a performance fee has been paid, the Benchmark is
adjusted to the same level as the NAV or the share price whichever
is lower. If the Benchmark performs better than the NAV and/or the
share price, or a performance fee has not been paid, no adjustment
is made.
Source: Bloomberg and LTL
Relative Importance of Spend on Pay
The table below shows the amount of the Company's income spent
on Directors' remuneration in comparison with investment management
and performance fees paid and dividends paid to Shareholders.
Year to Year to
31 March 31 March Increase
2020 2019 (decrease)
GBP GBP %
-------------------------------------- ---------- ---------- ------------
Directors' remuneration 127,250 111,900 13.7%
Investment management fees and other
expenses 1,722,000 1,459,000 18.0%
Performance fees (charged to capital) 3,000 2,433,000 (99.9%)
Dividends to Shareholders (final
and special) 8,800,000 5,900,000 49.2%
-------------------------------------- ---------- ---------- ------------
Voting at Annual General Meeting
A binding Ordinary Resolution approving the Directors'
Remuneration Policy and a non-binding Ordinary Resolution adopting
the Annual Report on Directors' Remuneration for the year ended 31
March 2019 were approved by Shareholders at the Annual General
Meeting held on 4 September 2019. The votes cast by proxy were as
follows:
Remuneration Policy
For - % of votes cast 96.44%
Against - % of votes cast 3.56%
At Chairman's discretion - % of votes cast 0.00%
Total votes cast 55,671
Number of votes withheld 10
Annual Report on Directors' Remuneration
For - % of votes cast 96.43%
Against - % of votes cast 0.01%
At Chairman's discretion - % of votes cast 3.56%
Total votes cast 55,679
Number of votes withheld 0
Statement by the Chairman of the Board
The Directors confirm that the Directors' Remuneration Policy
and the Annual Report on Directors' Remuneration set out above
provide a fair and reasonable summary for the financial year ended
31 March 2020 of:
a) the major decisions on Directors' remuneration;
b) any changes relating to Directors' remuneration made during the year; and
c) the context in which those changes occurred and the decisions which have been taken.
By order of the Board
Julian Cazalet
Chairman
15 June 2020
Independent auditors' report to the members of The Lindsell
Train Investment Trust plc
Report on the audit of the Financial Statements
Opinion
In our opinion, The Lindsell Train Investment Trust plc's
Financial Statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 March 2020 and of its return and cash flows for
the year then ended;
-- have been properly prepared 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);
and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the Financial Statements, included within the
Annual Report and Financial Statements (the "Annual Report"), which
comprise: the Statement of Financial Position as at 31 March 2020;
the Income Statement, Cash Flow Statement, the Statement of Changes
in Equity for the year then ended; and the notes to the Financial
Statements, which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting to the Audit
Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities under ISAs (UK) are further described in the
Auditors' responsibilities for the audit of the Financial
Statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the
Financial Statements in the UK, which includes the FRC's Ethical
Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC's Ethical Standard were
not provided to the Company.
We have provided no non-audit services to the Company in the
period from 1 April 2019 to 31 March 2020.
Our audit approach
Overview
Materiality
* Overall materiality: GBP1.91m (2019: GBP1.79m), based
on 1% of Net Asset Value.
----------- ------------------------------------------------------------------
Audit scope
* The Company is a standalone Investment Trust Company
and engages Lindsell Train Limited (the "Manager") to
manage its assets.
* We conducted our audit of the Financial Statements
with the assistance of Maitland Administration
Services Limited (the "Administrator") to whom the
Directors have delegated the provision of certain
administrative functions.
* We tailored the scope of our audit taking into
account the types of investments within the Company,
the involvement of the third parties referred to
above, the accounting processes and controls, and the
industry in which the Company operates.
* We obtained an understanding of the control
environment in place at the Administrator and adopted
a fully substantive testing approach using reports
obtained from the Administrator.
----------- ------------------------------------------------------------------
Key audit
matters * Valuation and existence of unlisted investments.
* Valuation and existence of listed investment.
* Income from investments.
* Consideration of impacts of COVID-19.
----------- ------------------------------------------------------------------
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the Financial
Statements.
Capability of the audit in detecting irregularities, including
fraud
Based on our understanding of the Company and industry, we
identified that the principal risks of non-compliance with laws and
regulations related to the ongoing qualification as an Investment
Trust under the Corporation Tax Act 2010 (see Note 8 of the Annual
Report), and we considered the extent to which non-compliance might
have a material effect on the Financial Statements. We also
considered those laws and regulations that have a direct impact on
the preparation of the Financial Statements such as the Companies
Act 2006. We evaluated management's incentives and opportunities
for fraudulent manipulation of the Financial Statements (including
the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal
entries to increase revenue (investment income and capital gains)
or to increase net asset value, and management bias in accounting
estimates. Audit procedures performed by the engagement team
included:
-- Discussions with the Audit Committee, the Manager and the
Administrator, including consideration of known or suspected
instances of non-compliance with the laws and regulation and
fraud;
-- Reviewing relevant Board meeting minutes, including those of the Audit Committee;
-- Assessment of the Company's compliance with the requirements
of s1158 of the Corporation Tax Act 2010, including recalculation
of numerical aspects of the eligibility conditions;
-- Challenging assumptions and judgements made by management in
their significant accounting estimates, in particular in relation
to the valuation of the unlisted investment (see related key audit
matter below);
-- Identifying and testing journal entries posted throughout the
year and in particular manual year end journal entries posted
during the preparation of the Financial Statements. This included,
but was not limited, to testing journals with unusual account
combinations, inappropriate users or reviewers and journals posted
at unusual times; and
-- Designing audit procedures to incorporate unpredictability
around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
Financial Statements, the less likely we would become aware of it.
Also, the risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through
collusion.
Key audit matters
Key audit matters are those matters that, in the auditors'
professional judgement, were of most significance in the audit of
the Financial Statements of the current period and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of
our audit of the Financial Statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters. This is not a complete list of all risks identified
by our audit.
Key audit matter How our audit addressed the key audit
matter
-------------------------------- -------------------------------------------------------------
Valuation and existence We understood and evaluated the valuation
of unlisted investments methodology applied, by reference to
Refer to page 32 (Audit the International Private Equity and
Committee Report), page Venture Capital Valuation guidelines
52 (Accounting Policies) (IPEV), and tested the techniques used
and page 59 (notes). by the Directors in determining the
The investment portfolio fair value of the unlisted investment.
at 31 March 2020 included Reading the Board meeting minutes where
one unlisted investment. the valuation of the unlisted investment
We focused on the valuation was discussed and agreed and attended
and existence of the relevant Audit Committee meetings where
unlisted investment the valuation of the unlisted investment
as this investment represented was discussed.
a material balance in We assessed the impact of COVID-19 on
the Financial Statements the valuation of the unlisted investment.
(GBP89.5 million) and This together with our knowledge of
the valuation requires the investee entity, FRS 102 and the
significant judgements AIC SORP, enabled us to discuss with
and estimates to be and challenge the Directors as to the
made by the Directors appropriateness of the methodology and
such that changes to key inputs used in the valuation.
the methodology or key Supported by our internal valuation
inputs can result in experts, we tested the appropriateness
a material change to of the key assumptions, including discount
the valuation of the rate and earnings multiples being used.
unlisted investment. We found that the valuation of the unlisted
investment was consistent with the accounting
policies and that the assumptions used
to derive the valuation within the Financial
Statements were appropriate based on
the investee's circumstances.
We tested the existence of the unlisted
investment by agreeing the holding to
independently obtained third party confirmations
as at 31 March 2020. No differences
were identified.
-------------------------------- -------------------------------------------------------------
Valuation and existence We tested the valuation of all the listed
of listed investments investments by agreeing the prices used
Refer to page 32 (Audit in the valuation to independent third
Committee Report), page party sources. No significant exceptions
52 (Accounting Policies) were identified by our testing.
and page 59 (notes). We agreed the existence of investments
The investment portfolio to independent third party sources by
at 31 March 2020 comprised agreeing the holdings of investments
listed equity investments to an independently obtained third party
of GBP96.2 million. confirmations as at 31 March 2020. No
We focused on the valuation differences were identified.
and existence of investments
because investments
represent the principal
element of the net asset
value as disclosed in
the Statement of Financial
Position in the Financial
Statements.
-------------------------------- -------------------------------------------------------------
Income from investments We assessed the accounting policy for
Refer to page 32 (Audit income recognition for compliance with
Committee Report), page accounting standards and the AIC SORP
53 (Accounting Policies) and performed testing to check that
and page 54 (notes). income had been accounted for in accordance
ISAs (UK) presume there with this stated accounting policy.
is a risk of fraud in We found that the accounting policies
income recognition. implemented were in accordance with
We considered this risk accounting standards and the AIC SORP,
to specifically relate and that income has been accounted for
to the risk of overstating in accordance with the stated accounting
investment gains and policy.
the misclassification We understood and assessed the design
of dividend income as and implementation of key controls surrounding
capital rather than income recognition.
revenue due to the pressure The gains/losses on investments held
management may feel at fair value comprise realised and
to achieve capital growth unrealised gains/losses. For unrealised
in line with the objective gains and losses, we sample tested the
of the Company. valuation of the portfolio at the year-end
We focused on the valuation (see above), together with testing the
of investments with reconciliation of opening and closing
respect to gains on investments. For realised gains/losses,
investments and the we tested a sample of disposal proceeds
accuracy and completeness by agreeing the proceeds to bank statements
of dividend income recognition and we re-performed the calculation
and its presentation of a sample of realised gains/losses.
in the Income Statement In addition, we tested dividend receipts
as set out in the requirements by agreeing the dividend rates from
of The Association of investments to independent third party
Investment Companies sources. No significant exceptions were
Statement of Recommended identified by our testing which required
Practice (the 'AIC SORP'). reporting to those charged with governance.
To test for completeness, we tested
that the appropriate dividends had been
received in the year by reference to
independent data of dividends declared
for a sample of investment holdings
in the portfolio. Our testing did not
identify any unrecorded dividends.
We tested the allocation and presentation
of dividend income between the revenue
and capital return columns of the Income
Statement in line with the requirements
set out in the AIC SORP. We did not
find any material special dividends
that were not treated in accordance
with the AIC SORP.
-------------------------------- -------------------------------------------------------------
Consideration of impacts We evaluated the Directors' assessment
of COVID-19 of the impact of the COVID-19 pandemic
Refer to the Chairman's on the Company by:
Statement (page 5), * Evaluating the Company's updated risk assessment and
Principal Risks and considering whether it addresses the relevant threats
Uncertainties (page presented by COVID- 19.
13), the Viability Statement
(page 13), the Going
Concern Statement (page * Evaluating management's assessment of operational
24), which disclose impacts, considering their consistency with other
the impact of the COVID-19 available information and our understanding of the
pandemic. business and assessing the potential impact on the
From a small number Financial Statements.
of cases of an unknown
virus in 2019, the COVID-19
viral infection has * Te sting the impact of COVID-19 on the valuation of
become a global pandemic. investments, including the post year movement in
It has caused disruption share price and net asset value.
to supply chains and
travel, slowed global
growth and caused volatility We obtained and evaluated the Directors'
in global markets and going concern assessment which reflects
in exchange rates during conditions up to the point of approval
the first quarter of of the Annual Report.
2020 and to date. * We obtained evidence to support the key assumptions
The coronavirus impacted and forecasts driving the Directors' going concern
global capital markets assessment. This included reviewing the Directors
significantly in March assessment of the Company's financial position and
2020. The Company's forecasts, their assessment of liquidity as well as
net assets were GBP191.3 their review of the operational resilience of the
million as at 31 March Company and oversight of key third party service
2020. providers.
The Directors have prepared
the Financial Statements
of the Company on a We assessed the disclosures presented
going concern basis, in the Annual Report in relation to
and believe this assumption COVID-19 by:
remains appropriate. * Reading the other information, including the
This conclusion is based Principal Risks and Viability Statement set out in
on the assessment that, the Strategic Report, and assessing its consistency
notwithstanding the with the Financial Statements and the evidence we
significant market fall obtained in our audit.
and the related uncertainties,
they are satisfied that
the Company has adequate Our conclusions relating to other information
resources to continue are set out in the 'Reporting on other
in operational existence information' section of our report.
for the foreseeable Our conclusions relating to going concern
future and that the are set out in the 'Conclusions relating
Company and its key to going concern' section below.
third party service
providers have in place
appropriate business
continuity plans and
will be able to maintain
service levels through
the coronavirus pandemic.
-------------------------------- -------------------------------------------------------------
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the Financial
Statements as a whole, taking into account the structure of the
Company, the accounting processes and controls, and the industry in
which it operates.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the Financial Statements as a whole.
Based on our professional judgement, we determined materiality
for the Financial Statements as a whole as follows:
Overall materiality GBP1.91m (2019: GBP1.79m).
----------------------- -----------------------------------------------------
How we determined
it 1% of Net Asset Value.
----------------------- -----------------------------------------------------
Rationale for benchmark We have applied this benchmark, a generally
applied accepted auditing practise for investment
trust audits, in the absence of indicators
that an alternative benchmark would be appropriate
and because we believe this provides an appropriate
and consistent year on year basis for our
audit.
----------------------- -----------------------------------------------------
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above GBP95,000 (2019:
GBP90,000) as well as misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation Outcome
------------------------------- ----------------------------------------------
We are required to report We have nothing material to add or to
if we have anything draw attention to. However, because not
material to add or draw all future events or conditions can be
attention to in respect predicted, this statement is not a guarantee
of the Directors' statement as to the Company's ability to continue
in the Financial Statements as a going concern.
about whether the Directors
considered it appropriate
to adopt the going concern
basis of accounting
in preparing the Financial
Statements and the Directors'
identification of any
material uncertainties
to the Company's ability
to continue as a going
concern over a period
of at least twelve months
from the date of approval
of the Financial Statements.
------------------------------- ----------------------------------------------
We are required to report We have nothing to report.
if the Directors' statement
relating to Going Concern
in accordance with Listing
Rule 9.8.6R(3) is materially
inconsistent with our
knowledge obtained in
the audit.
------------------------------- ----------------------------------------------
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the Financial Statements and our auditors'
report thereon. The Directors are responsible for the other
information. Our opinion on the Financial Statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the Financial Statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the Financial Statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we
identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the Financial
Statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic Report, Report of the Directors
and Corporate Governance Statement, we also considered whether the
disclosures required by the UK Companies Act 2006 have been
included.
Based on the responsibilities described above and our work
undertaken in the course of the audit, the Companies Act 2006
(CA06), ISAs (UK) and the Listing Rules of the Financial Conduct
Authority (FCA) require us also to report certain opinions and
matters as described below (required by ISAs (UK) unless otherwise
stated).
Strategic Report and Report of the Directors
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Strategic Report and Report
of the Directors for the year ended 31 March 2020 is consistent
with the Financial Statements and has been prepared in accordance
with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Company and
its environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and
Report of the Directors. (CA06)
Corporate Governance Statement
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Corporate Governance
Statement (on pages 26 to 30) about internal controls and risk
management systems in relation to financial reporting processes in
compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance
and Transparency Rules sourcebook of the FCA ("DTR") is consistent
with the Financial Statements and has been prepared in accordance
with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Company and
its environment obtained in the course of the audit, we did not
identify any material misstatements in this information. (CA06)
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Corporate Governance
Statement (on pages 26 to 30) with respect to the Company's
corporate governance code and practices and about its
administrative, management and supervisory bodies and their
committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the DTR.
(CA06)
We have nothing to report arising from our responsibility to
report if a corporate governance statement has not been prepared by
the Company. (CA06)
The Directors' assessment of the prospects of the Company and of
the principal risks that would threaten the solvency or liquidity
of the Company
We have nothing material to add or draw attention to
regarding:
-- The Directors' confirmation on page 12 of the Annual Report
that they have carried out a robust assessment of the principal
risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity.
-- The disclosures in the Annual Report that describe those
risks and explain how they are being managed or mitigated.
-- The Directors' explanation on page 24 of the Annual Report 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, and their statement as to whether they have a
reasonable expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the
Directors' statement that they have carried out a robust assessment
of the principal risks facing the company and statement in relation
to the longer-term viability of the Company. Our review was
substantially less in scope than an audit and only consisted of
making inquiries and considering the Directors' process supporting
their statements; checking that the statements are in alignment
with the relevant provisions of the UK Corporate Governance Code
(the "Code"); and considering whether the statements are consistent
with the knowledge and understanding of the Company and its
environment obtained in the course of the audit. (Listing
Rules)
Other Code Provisions
We have responsibility to report when:
-- The statement given by the Directors, on page 25, that they
consider the Annual Report taken as a whole to be fair, balanced
and understandable, and provides the information necessary for the
members to assess the Company's position and performance, business
model and strategy is materially inconsistent with our knowledge of
the Company obtained in the course of performing our audit.
-- The section of the Annual Report on page 30 describing the
work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
-- The Directors' statement relating to the Company's compliance
with the Code does not properly disclose a departure from a
relevant provision of the Code specified, under the Listing Rules,
for review by the auditors.
-- We have nothing to report in relation to these matters.
Directors' Remuneration
-- In our opinion, the part of the Directors' Remuneration
Report to be audited has been properly prepared in accordance with
the Companies Act 2006. (CA06)
Responsibilities for the Financial Statements and the audit
Responsibilities of the Directors for the Financial
Statements
As explained more fully in the Statement of Directors'
responsibilities in respect of the Financial Statements, the
Directors are responsible for the preparation of the Financial
Statements in accordance with the applicable framework and for
being satisfied that they give a true and fair view. The Directors
are also 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.
In preparing the Financial Statements, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditors' responsibilities for the audit of the Financial
Statements
Our objectives are to obtain reasonable assurance about whether
the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors' report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these Financial
Statements.
A further description of our responsibilities for the audit of
the Financial Statements is located on the FRC's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors' report.
Use of this report
This report, including the opinions, has been prepared for and
only for the Company's members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- we have not received all the information and explanations we require for our audit; or
-- adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- certain disclosures of Directors' remuneration specified by law are not made; or
-- the Financial Statements and the part of the Directors'
Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this
responsibility.
Appointment
Following the recommendation of the Audit Committee, we were
appointed by the Directors on 1 March 2018 to audit the Financial
Statements for the year ended 31 March 2018 and subsequent
financial periods. The period of total uninterrupted engagement is
3 years, covering the years ended 31 March 2018 to 31 March
2020.
Christopher Meyrick (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
15 June 2020
Financial Statements
Income Statement for the year ended 31 March 2020
2020 2019
---------------------------- ------------------------------
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----- -------- -------- -------- -------- --------- ---------
Gains on investments
held at fair value
through profit or loss 11 - 7,457 7,457 - 29,414 29,414
Exchange (losses)/gains
on currency - (6) (6) - (24) (24)
Income 2 12,395 - 12,395 8,680 - 8,680
Investment management
fees 3 (1,298) (3) (1,301) (995) (2,433) (3,428)
Other expenses 4 (424) (1) (425) (464) - (464)
-------------------------- ----- -------- -------- -------- -------- --------- ---------
Net return before finance
costs and tax 10,673 7,447 18,120 7,221 26,957 34,178
-------------------------- ----- -------- -------- -------- -------- --------- ---------
Interest payable and
similar charges 7 - - - - - -
-------------------------- ----- -------- -------- -------- -------- --------- ---------
Return before tax 10,673 7,447 18,120 7,221 26,957 34,178
Tax 8 (75) - (75) (49) - (49)
-------------------------- ----- -------- -------- -------- -------- --------- ---------
Return after tax for
the financial year 10,598 7,447 18,045 7,172 26,957 34,129
-------------------------- ----- -------- -------- -------- -------- --------- ---------
Return per Ordinary
Share 10 GBP52.99 GBP37.24 GBP90.23 GBP35.86 GBP134.79 GBP170.65
All revenue and capital items in the above statement derive from
continuing operations.
The total columns of this statement represent the profit and
loss accounts 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 gains for the year disclosed above represent the Company's
total comprehensive income.
No operations were acquired or discontinued during the year.
The notes on pages 52 to 68 form part of these Financial
Statements.
Statement of Changes in Equity for the year ended 31 March
2020
Share Special Capital Revenue
capital reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- --------
For the year ended 31 March
2020
At 1 April 2019 150 19,850 148,035 11,150 179,185
Return after tax for the
financial year - - 7,447 10,598 18,045
Dividends paid (see note
9) - - - (5,900) (5,900)
---------------------------- -------- -------- -------- -------- --------
At 31 March 2020 150 19,850 155,482 15,848 191,330
---------------------------- -------- -------- -------- -------- --------
Share Special Capital Revenue
capital reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- --------
For the year ended 31 March
2019
At 1 April 2018 150 19,850 121,078 8,338 149,416
Return after tax for the
financial year - - 26,957 7,172 34,129
Dividends paid (see note
9) - - - (4,360) (4,360)
---------------------------- -------- -------- -------- -------- --------
At 31 March 2019 150 19,850 148,035 11,150 179,185
---------------------------- -------- -------- -------- -------- --------
The notes on pages 52 to 68 form part of these Financial
Statements.
Statement of Financial Position at 31 March 2020
2020 2019
------------------ ------------------
Notes GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----- ------- --------- ------- ---------
Fixed assets
Investments held at fair
value
through profit or loss 11 185,678 177,693
Current assets
Other receivables 12 415 293
Cash at bank and in hand 5,390 3,782
--------------------------------- ----- ------- --------- ------- ---------
5,805 4,075
Creditors: amounts falling
due within one year
Other payables 13 (153) (2,583)
--------------------------------- ----- ------- --------- ------- ---------
Net current assets/(liabilities) 5,652 1,492
--------------------------------- ----- ------- --------- ------- ---------
Net assets 191,330 179,185
--------------------------------- ----- ------- --------- ------- ---------
Capital and reserves
Called up share capital 14 150 150
Special reserve 15 19,850 19,850
--------------------------------- ----- ------- --------- ------- ---------
20,000 20,000
Capital reserve 15 155,482 148,034
Revenue reserve 15,848 11,151
--------------------------------- ----- ------- --------- ------- ---------
Total Shareholders' funds 191,330 179,185
--------------------------------- ----- ------- --------- ------- ---------
Net Asset Value per Ordinary
Share 16 GBP956.65 GBP895.93
The Financial Statements on pages 48 to 68 were approved by the
Board on 15 June 2020 and were signed on its behalf by:
Julian Cazalet
Chairman
The Lindsell Train Investment Trust plc
Registered in England & Wales, No: 4119429
The notes on pages 52 to 68 form part of these Financial
Statements.
Cash Flow Statement for the year ended 31 March 2020
2020 2019
Notes GBP'000 GBP'000
------------------------------------------- ----- -------- --------
Operating Activities
Net return before finance costs and
tax 18,120 34,178
Gains on investments held at fair
value (7,457) (29,414)
Losses on exchange movements 6 24
(Increase)/decrease in other receivables (33) 24
Increase in accrued income (88) (57)
Decrease in other payables (2,430) (377)
Purchase of investments held at fair
value (581) (4,414)
Sale of investments held at fair value 53 5,088
------------------------------------------- ----- -------- --------
Net cash inflow from operating activities
before interest and taxation 7,590 5,052
Interest paid - -
Taxation on investment income (76) (49)
------------------------------------------- ----- -------- --------
Net cash inflow from operating activities 7,514 5,003
Financing activities
Equity dividends paid 9 (5,900) (4,360)
------------------------------------------- ----- -------- --------
Net cash outflow from financing activities (5,900) (4,360)
Increase in cash and cash equivalents 1,614 643
Cash and cash equivalents at beginning
of year 3,782 3,163
Losses on exchange movements (6) (24)
------------------------------------------- ----- -------- --------
Cash and cash equivalents at end of
year 5,390 3,782
------------------------------------------- ----- -------- --------
The notes on pages 52 to 68 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
(issued November 2014 and updated in February 2018 with
consequential amendments).
After considering a schedule of the Company's current financial
resources and liabilities for the next twelve months, and as a
majority of the net assets of the Company are securities which are
traded on recognised stock exchanges, the Directors have determined
that its resources are adequate for continuing in business for the
foreseeable future and that it is appropriate to prepare the
Financial Statements on a going concern basis. The Company does not
have a fixed life.
(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 only 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. In 2018 and 2020 the Board sought external
advice to verify its approach. Please refer to note 1(j) for
further information.
The investment in LTL (representing 24.23% of the Investment
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 is based upon a methodology that takes into
account, inter alia, the value of the funds under LTL's management
and an estimate of its annual earnings.
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 (ie developed using market data) for
the asset or liability, either directly or indirectly.
-- Level 3 - Inputs are unobservable (ie 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 Investment 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 respectively.
(i) Capital reserve
The following are taken to this reserve:
- Gains and 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 being the increase and 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 GBP19,850,000 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
buyback. 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) Registered address and nature of business
The Company is an investment company defined in Section 833 of
the Companies Act 2006. Its registered office address is provided
on page 83.
2 Income
2020 2019
GBP'000 GBP'000
------------------------- -------- --------
Income from investments
Overseas dividends 650 434
UK dividends
- Lindsell Train Limited 10,442 7,099
- Other UK dividends 1,303 1,147
------------------------- -------- --------
12,395 8,680
------------------------- -------- --------
Total income comprises:
Dividends 12,395 8,680
------------------------- -------- --------
12,395 8,680
------------------------- -------- --------
3 Investment Management fees
2020 2019
GBP'000 GBP'000
------------------------------------------------ -------- --------
Investment management fee 1,351 1,066
Investment Manager's performance fee - charged
to capital 3 2,433
Rebate of investment management fee (see below) (53) (71)
------------------------------------------------ -------- --------
Total management fee 1,301 3,428
------------------------------------------------ -------- --------
In accordance with an Investment Management Agreement dated 21
December 2000 (last revised in March 2016) between the Company and
LTL, LTL has been providing investment management services to the
Company. For their services, LTL receive an annual fee of 0.6%
(reduced from 0.65% from 1 July 2019), 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, and GBP102,862 (2019: GBP93,180) 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
amount by which the growth in the lower of (i) the Adjusted Market
Capitalisation per Ordinary Share of the Company and (ii) the
Adjusted Net Asset Value per Ordinary Share of the Company in each
performance period exceeds the annual average running yield on the
longest-dated UK government fixed rate bond, currently Treasury
1.625% 2071, calculated using weekly data, plus a premium of 0.5%
over the period, subject to a minimum yield of 4%, and to a high
watermark. 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 for the year to the 31 March 2020 was
GBP3,000 (2018 GBP2,433,000). This payment represents an adjustment
in respect of the fee to the 31 March 2019. The performance fee
accrued for the year to 31 March 2020 was GBP448,679 but was not
taken by LTL on account of the Company's 26.5% negative share price
total return over the year.
For the avoidance of double charging management fees, the
Investment Manager has agreed to rebate any periodic management fee
that it receives from the Company by the amount of fees receivable
by it from Lindsell Train fund products and other fund products
where LTL is the Investment Manager in respect of the Company's
investments in those funds. The amounts rebated on the Investment
Management fee are shown above, of which GBP35,176 (2019:
GBP33,725) relates to the Company's investment in the Lindsell
Train Japanese Equity Fund, GBP0 (2019: GBP22,395) relates to the
Company's investment in the Lindsell Train Global LLC and GBP18,050
(2019: GBP14,975) relates to the Company's investment in the
Finsbury Growth & Income Trust PLC.
4 Other expenses
2020 2019
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Directors' emoluments (see note 5) 127 112
Administration fee 80 80
AIFM monitoring fee 20 11
Auditors' remuneration for:
- audit of the Financial Statements of the Company* 25 25
Tax Compliance fee 3 3
Safe custody fees 19 19
Printing fees 11 16
Registrars' fees 42 27
Listing fees 16 15
Legal fees 15 3
Employer's National Insurance 9 7
Directors' liability insurance 7 7
Key man insurance 22 21
Sundry 28 82
VAT irrecoverable - 36
---------------------------------------------------- -------- --------
424 464
Capital charges 1 -
---------------------------------------------------- -------- --------
425 464
---------------------------------------------------- -------- --------
* Excluding VAT
In accordance with an administration agreement dated 1 July 2019
between the Company and Maitland Administration Services Limited
("Maitland"), Maitland has been appointed to provide administration
and company secretarial services to the Company for which Maitland
receives an annual fee of GBP80,000. Maitland also receives an
annual fee of GBP20,000 for AIFM monitoring.
5 Directors' emoluments
There were no Director's emoluments assigned to a consultancy
during the financial year. These are reflected in the table
below:
2020 2019
GBP'000 GBP'000
---------------- -------- --------
Directors' fees 127 112
---------------- -------- --------
Since 1 January 2020, the Chairman of the Board, Chairman of the
Audit Committee, and other Directors receive set fees at rates of
GBP35,000, GBP28,000 and GBP24,000 respectively per annum, and have
no entitlement to any performance fees. Directors' fees amounting
to GBP22,500 (2019: GBP22,000) have been waived by Mr Michael
Lindsell in view of his connection with the Investment Manager.
There were no pension contributions paid or payable.
6 Disclosure of interests
As at 31 March 2020 the Company had investments in the following
Lindsell Train managed funds: 3,288,767 shares in Lindsell Train
Japanese Equity Fund at a cost of GBP1,382,594; 420,000 shares in
Finsbury Growth & Income Trust PLC at a cost of GBP758,721.
LTL is also the Investment Manager of Finsbury Growth &
Income Trust PLC in which the Company has an investment (see page
6).
LTL's appointment as Investment Manager to the Company is
subject to termination by either party on twelve months'
notice.
7 Interest payable and similar charges
2020 2019
GBP'000 GBP'000
--------------------------------- -------- --------
On foreign currency cash balances - -
--------------------------------- -------- --------
- -
--------------------------------- -------- --------
8 Taxation
The tax charge on the profit on ordinary activities for the year
was as follows:
2020 2019
---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- -------- -------- -------- --------
UK corporation tax - - - - - -
Overseas tax 82 - 82 54 - 54
Overseas tax recoverable (7) - (7) (5) - (5)
------------------------- -------- -------- -------- -------- -------- --------
Tax charge per accounts 75 - 75 49 - 49
------------------------- -------- -------- -------- -------- -------- --------
The current taxation charge for the year is the same as the
standard rate of corporation tax in the UK of 19% (2019: 19%). The
differences are explained below:
2020 2019
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Net return before tax 18,120 34,178
-------------------------------------------------- -------- --------
Theoretical tax at UK corporation tax rate of 19%
(2019: 19%) 3,443 6,494
Effects of:
- UK dividends which are not taxable (2,232) (1,567)
- Overseas dividends which are not taxable (124) (82)
- Capital gains not subject to corporation tax (1,416) (5,584)
- Current year excess expenses 327 277
- Unutilised capital expenses 1 462
- Overseas tax suffered 82 54
- Overseas tax recoverable (6) (5)
-------------------------------------------------- -------- --------
Total tax charge 75 49
-------------------------------------------------- -------- --------
As an investment trust the Company, whilst it obtains exemption
under Sections 1158/1159 Corporation Tax Act 2010, is not subject
to UK taxation on capital gains. In the opinion of the Directors,
the Company has complied with the requirements of Section 1159
Corporation Tax Act 2010.
Factors that may affect future tax charges
The Company has not recognised a deferred tax asset of
GBP4,165,000 (2019: GBP3,838,000) arising from management expenses
exceeding taxable income. These expenses could only be utilised if
the Company were to generate taxable profits in the future.
9 Dividends paid and payable
2019 2018
GBP'000 GBP'000
------------------------------------------------- -------- --------
Final dividend paid for the year ended 31 March
2019 of GBP27.87
per Ordinary Share (2018: GBP21.29 per Ordinary
Share) 5,574 4,258
Special dividend paid for the year ended 31
March 2019 of GBP1.63
per Ordinary Share (2018: GBP0.51 per Ordinary
Share) 326 102
------------------------------------------------- -------- --------
Total Dividends 5,900 4,360
------------------------------------------------- -------- --------
The total dividend payable in respect of the financial year is
set out below. This complies with the requirements of Section 1158
Corporation Tax Act 2010.
2020 2019
GBP'000 GBP'000
------------------------------------------------- -------- --------
FinaI dividend payable for the year ended 31
March 2020 of GBP41.39
per Ordinary Share (2019: GBP27.87 per Ordinary
Share) 8,278 5,574
Special dividend payable for the year ended
31 March 2020 of GBP2.61
per Ordinary Share (2019: GBP1.63 per Ordinary
Share) 522 326
------------------------------------------------- -------- --------
Total Dividends 8,800 5,900
------------------------------------------------- -------- --------
10 Total return per Ordinary Share
2020 2019
------------------------------------------- ------------- -------------
Total return per Ordinary Share
Total return GBP18,045,000 GBP34,129,000
Weighted average number of Ordinary Shares
in issue during the year 200,000 200,000
------------------------------------------- ------------- -------------
Total return per Ordinary Share GBP90.23 GBP170.65
------------------------------------------- ------------- -------------
The total return per Ordinary Share shown above can be further
analysed between revenue and capital, as below:
2020 2019
---------------------------------------------- ------------- -------------
Revenue return per Ordinary Share
Revenue return GBP10,598,000 GBP7,172,000
Weighted average number of Ordinary Shares in
issue during the year 200,000 200,000
Revenue return per Ordinary Share
Capital return per Ordinary Share GBP52.99 GBP35.86
---------------------------------------------- ------------- -------------
Capital return GBP7,447,000 GBP26,957,000
Weighted average number of Ordinary Shares in
issue during the year 200,000 200,000
---------------------------------------------- ------------- -------------
Capital return per Ordinary Share GBP37.24 GBP134.79
---------------------------------------------- ------------- -------------
11 Investments held at fair value through profit or loss
2020 2019
GBP'000 GBP'000
---------------------------------------------- -------- --------
Investments listed on a recognised investment
exchange 96,200 95,333
Unlisted investment 89,478 82,360
---------------------------------------------- -------- --------
Valuation at year end 185,678 177,693
---------------------------------------------- -------- --------
Opening book cost 33,418 31,095
Opening investment holding gains/(losses) 144,275 117,855
---------------------------------------------- -------- --------
Opening Fair Value 177,693 148,950
Analysis of transactions made during the year
Purchases at cost 581 4,414
Sales proceeds received (53) (5,085)
Gains/(losses) on investments 7,457 29,414
Closing fair value 185,678 177,693
---------------------------------------------- -------- --------
Closing book cost 33,997 33,418
Closing investment holding gains/(losses) 151,681 144,275
---------------------------------------------- -------- --------
Closing Fair Value 185,678 177,693
---------------------------------------------- -------- --------
The company received proceeds of GBP53,000 (2019: GBP5,085,000)
from investments sold in the year. The book cost of these
investments when they were purchased was GBP2,000 (2019:
GBP2,091,000). 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 2020 amounted to GBP232 and
GBP3 respectively (2019: GBP7,064 and GBP2 respectively).
During the year the investment holding gain attributable to the
Company's holding in LTL amounted to GBP7,162,144 (2019:
GBP20,014,000).
The disclosure of gains on investments has been amended to
comply with the requirements of the AIC Statement of Recommended
Practice Financial Statements of Investment Trust Companies and
Venture Capital Trusts' (updated in October 2019).
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
2020.
Country of registration % of class
Investments or incorporation Class of capital held
--------------- ------------------------ ----------------- ----------
Lindsell Train Ordinary Shares
Limited* England of GBP100 24.23%
--------------- ------------------------ ----------------- ----------
* As at 31 January 2020, the latest year end for LTL, the
audited aggregate capital and reserves amounted to GBP66,735,000,
(2019: GBP50,251,000) and the profit for that year ended amounted
to GBP59,646,000 (2019: GBP45,000,000). The total amount of
dividends paid during the year was GBP43,162,540, equating to
dividends of GBP1,619 per share. The earnings per share were
GBP2,237. The cost of the investment in LTL was GBP64,500.
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 Investment
Manager to avoid double charging of fees and expenses on
investments made in other Lindsell Train fund products (see note
3).
12 Other receivables
2020 2019
GBP'000 GBP'000
------------------------------- -------- --------
VAT recoverable 31 -
Prepayments and accrued income 384 293
------------------------------- -------- --------
415 293
------------------------------- -------- --------
13 Other payables
2020 2019
GBP'000 GBP'000
----------------------------- -------- --------
Accruals and deferred income 153 2,583
----------------------------- -------- --------
153 2,583
----------------------------- -------- --------
14 Called up share capital
2020 2019
No. of No. of
shares shares
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------- ------- -------- -------
Authorised:
Ordinary Shares of 75p each 200 150 200 150
------------------------------------ -------- ------- -------- -------
Allotted, 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 2020.
15 Capital reserve
The capital reserve includes investment holding gains of
GBP151,681,000 (2019: GBP144,275,000).
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 GBP19,850,000 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.
16 Net Asset Value per Ordinary 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 of the Company were as follows:
Net Asset Value per share attributable Net Asset Value attributable
---------------------------------------- ------------------------------
2020 2019 2020 2019
GBP GBP GBP'000 GBP'000
956.65 895.93 191,330 179,185
------------------- ------------------- -------------- --------------
The movements during the year of the assets attributable to each
Ordinary Share are disclosed in the Statement of Changes in Equity
on page 49.
The Net Asset Value per Ordinary Share is based on net assets of
GBP191,330,000 (2019: GBP179,185,000) and on 200,000 Ordinary
Shares (2019: 200,000), being the number of Ordinary Shares in
issue at the year end.
17 Financial instruments and capital disclosures
Risk management policies and procedures
The investment objective of the Company is to maximise long-term
total returns with a minimum objective to maintain the real
purchasing power of Sterling capital. In pursuit of this objective,
the Company may be exposed to various forms of risk, as described
below.
The Board sets out its principal risks on pages 12 and 13 and
its investment policy including its policy on gearing (bank
borrowing), diversification and dividends on page 10.
The Board and its Investment Manager consider and review the
number of risks inherent with managing the Company's assets which
are detailed below.
Market risk
The fair values or future cash flows of the Company's financial
instruments may fluctuate due to changes in market risk. Market
risk encompasses mainly equity price risk but also foreign exchange
risk and interest rate risk which are discussed below.
At 31 March 2020, the fair value of the Company's assets exposed
to market price risk was GBP185,678,000 (2019: GBP177,694,000). 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 2020 would have
increased or decreased by GBP18,568,000 or 92.84p per share (2019:
GBP17,769,000 or 88.85p per share).
Market risk is reviewed by the Board on a quarterly basis and
monitored on a continuous basis by the Investment Manager.
The coronavirus pandemic is impacting economies and financial
markets worldwide. It has already reduced the value of the
Company's investments, could do so further and may also impact on
the Company's revenues in the forthcoming year and beyond.
Foreign currency exposure as at 31 March 2020
Sterling US$ Euro JPY Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- -------- --------
Short-term debtors 204 32 8 171 415
Cash at bank 5,390 - - - 5,390
Short-term creditors (153) - - - (153)
--------------------------- -------- -------- -------- -------- --------
Foreign currency exposure
on net
monetary items 5,441 32 8 171 5,652
Investments held at fair
value through
profit or loss that are
equities 144,476 16,113 7,347 17,742 185,678
--------------------------- -------- -------- -------- -------- --------
Total net foreign currency
exposure 149,917 16,145 7,355 17,913 191,330
--------------------------- -------- -------- -------- -------- --------
Foreign currency exposure as at 31 March 2019
Sterling US$ Euro JPY Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- -------- --------
Short-term debtors 125 27 7 132 291
Cash at bank 3,783 - - - 3,783
Short-term creditors (2,583) - - - (2,583)
--------------------------------- -------- -------- -------- -------- --------
Foreign currency exposure
on net
monetary items 1,325 27 7 132 1,491
Investments held at fair value
through
profit or loss that are equities 139,100 16,353 8,519 13,722 177,694
--------------------------------- -------- -------- -------- -------- --------
Total net foreign currency
exposure 140,425 16,380 8,526 13,854 179,185
--------------------------------- -------- -------- -------- -------- --------
Over the year against all of the Company's principal investing
currencies, Sterling weakened against the US Dollar by 4.84% (2019:
weakened by 7.15%), weakened against the Euro by 2.62% (2019:
strengthened by 1.92%) and weakened against the Japanese Yen by
7.19% (2019: weakened by 3.25%).
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 GBP2,071,000 or
1.08% of Net Asset Value (2019: GBP1,938,000 or 1.08% of Net Asset
Value). The impact on the profit and loss account is difficult to
estimate, since the profit and loss is the net result of all the
transactions in the portfolio throughout the year.
Interest rate risk
There is no material exposure to interest rate risk.
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 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 of March 2020, 46% (2019: 47%) of the investment portfolio
(92% of the listed portfolio) could be liquidated within five
business days , based on 20% of 90 days' average daily trading
volume 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 3.5% of NAV.
Credit risk
Cash at bank and other debtors of the Company at the year end as
shown on the Balance Sheet was GBP5,805,000 (2019:
GBP4,075,000).
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 and AA- from Standard & Poor's.
As cash placed at the Bank is deposited in its capacity as a
banker not 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 Level Level
1 2 3 Total
At 31 March 2020 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- -------- --------
Investments 96,199 - 89,479 185,678
----------------- -------- -------- -------- --------
96,199 - 89,479 185,678
----------------- -------- -------- -------- --------
Level Level Level
1 2 3 Total
At 31 March 2019 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- -------- --------
Investments 95,333 - 82,360 177,693
----------------- -------- -------- -------- --------
95,333 - 82,360 177,693
----------------- -------- -------- -------- --------
Note: Within the above tables, the entirety of level 1 comprises
all the Company's ordinary equity investments, and level 3
represents the investment in LTL, including the one share in LTL
against which an option had been granted.
The valuation techniques used by the Company are explained in
the accounting policies note on pages 65 to 67.
LTL valuation methodology
LTL's shares are valued at the end of each month by LTIT's
directors using a methodology first adopted by the Board in October
2007, after taking professional advice and further reviewed by
professional advisers in 2018. The Board reviews the LTL valuation
at its quarterly Board meetings. In 2018, the valuation methodology
was independently assessed and it was decided no change of approach
was required. It uses a simple average of two different
components:
-- 1.5% of LTL's most recent funds under management ("FUM"); and
-- LTL's net earnings (adjusted for a notional increase in staff
costs to 45% of revenues excluding performance fees) calculated on
a three month rolling basis, one month in arrears and annualised,
divided by the annual average running yield on the longest dated UK
government fixed rate bond (currently UK Treasury 1.625% 2071),
calculated using weekly data, plus a premium of 0.5%, subject to a
minimum yield of 4%, plus an equity risk premium of 4.5%.
The calculation was amended from 31 March 2020 and into the
future by estimating LTL's annual notional earnings with reference
to LTL's most recent end month FUM. The change was made by the
Board after consultation with professional advisors.
The calculation of the LTL valuation as at 31 March 2020 using
this methodology is provided in full on page 75 (unaudited).
The valuation matrix below shows the sensitivity of the
valuation of each LTL share, which as at 31 March 2020 was
GBP13,873 per share, to changes to key assumptions in the LTL
valuation methodology. The horizontal axis shows the impact when
the percentage of LTL's FUM (currently 1.5%) is changed. The
vertical axis shows the impact when the discount rate (currently
8.5%) is changed.
LTL Valuation Matrix at 31 March 2020
LTL valuation per share using differing valuation
assumptions
Funds under Management Multiple
-------------- -----------------------------------------------------
Discount rate 0.50% 1.00% 1.50% 2.00% 2.50%
-------------- --------- --------- --------- --------- ---------
7.0% GBP12,319 GBP14,032 GBP15,744 GBP17,457 GBP19,170
7.5% GBP11,612 GBP13,325 GBP15,037 GBP16,750 GBP18,462
8.0% GBP10,993 GBP12,706 GBP14,419 GBP16,131 GBP17,844
8.5% GBP10,448 GBP12,160 GBP13,873 GBP15,585 GBP17,298
9.0% GBP9,962 GBP11,675 GBP13,387 GBP15,100 GBP16,813
9.5% GBP9,528 GBP11,241 GBP12,953 GBP14,666 GBP16,378
10.0% GBP9,137 GBP10,850 GBP12,562 GBP14,275 GBP15,988
10.50% GBP8,784 GBP10,496 GBP12,209 GBP13,921 GBP15,634
11.00% GBP8,462 GBP10,175 GBP11,887 GBP13,600 GBP15,313
11.50% GBP8,169 GBP9,881 GBP11,594 GBP13,307 GBP15,019
12.00% GBP7,900 GBP9,612 GBP11,325 GBP13,038 GBP14,750
Another valuation matrix shows the sensitivity of the per share
valuation of LTL to changes in the weighting of the two components
of the LTL valuation calculation. It shows both the resultant
valuation as a percentage of FUM and in terms of the earnings yield
at different weightings.
LTL valuation using different weightings of the two components
of the LTL valuation calculation at 31 March 2020
Valuation based on FUM
Valuation based % of
on earnings 100% 75% 50% 25% 0% FUM
--------------- --------- --------- --------- --------- --------- ----
0% GBP10,275 1.5%
25% GBP12,074 1.8%
50% GBP13,873 2.0%
75% GBP15,671 2.3%
100% GBP17,470 2.6%
Earnings Yield 14.5% 12.3% 10.7% 9.5% 8.5%
LTL valuation using different weightings of the two components
of the LTL valuation calculation at 31 March 2019
Valuation based on FUM
Valuation based % of
on earnings 100% 75% 50% 25% 0% FUM
--------------- --------- --------- --------- --------- --------- ----
0% GBP10,364 1.5%
25% GBP11,563 1.7%
50% GBP12,762 1.8%
75% GBP13,961 2.0%
100% GBP15,160 2.2%
Earnings Yield 12.4% 11.1% 10.1% 9.2% 8.5%
The following scenarios show the sensitivity of the Company's
NAV to changes in the valuation of LTL arising from a change of 10%
or 20% in LTL's FUM.
31 March 2020** 31 March 2019*
LTL LTIT LTL LTIT
Valuation NAV Valuation NAV
GBP'000 GBP'000 GBP'000 GBP'000
89,479 191,330 82,317 179,186
---------- -------- ---------- --------
LTL LTIT LTL LTIT
Change in Change in Change in Change in
valuation NAV valuation NAV
(estimated) (estimated) (estimated) (estimated)
-------------------- ------------ ------------ ------------ ------------
10% change in LTL's
FUM +/-10.6% +/-5.0% +/-4.1% +/-1.9%
-------------------- ------------ ------------ ------------ ------------
20% change in LTL's
FUM +/-21.3% +/-9.9% +/-8.1% +/-3.7%
-------------------- ------------ ------------ ------------ ------------
* The estimates assume that the LTL valuation was based on the
same methodology used to calculate the 31 March 2019 valuation.
** The estimates assume that the LTL valuation is based on the
same methodology used to calculate the 31 March 2020 valuation.
Note:
Both estimates assume that the issued share capital of the
Company remains 200,000 shares and the shareholding in LTL remains
unchanged.
There were no transfers between levels for financial assets and
financial liabilities during the year recorded at fair value as at
31 March 2020 and 31 March 2019. 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
2020 2019
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Opening fair value 82,360 62,346
Purchases at cost - -
Sales proceeds (43) -
Total gains or losses included in gains on investments
in the Income Statement
- on sold assets 43 -
- on assets held at the end of the year 7,119 20,014
------------------------------------------------------- -------- --------
Closing fair value 89,479 82,360
------------------------------------------------------- -------- --------
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 Investment 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 GBP50,000; 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.
The Company intends to renew its authority to repurchase shares
at a discount to Net Asset Value in order to enhance value for
Shareholders at the next Annual General Meeting.
18 Guarantees, financial commitments and contingent
liabilities
There were no financial commitments or contingent liabilities
outstanding at the year end (2019: None)
19 Ongoing charges
2020 2019
------------- -------------
GBP'000 % GBP'000 %
------------------------- ------- ---- ------- ----
Total operating expenses 1,722 0.83 1,459 0.88
Total operating expenses include GBP49,000 (2019: GBP71,000) in
respect of a management fee waiver (see note 3). They exclude the
Manager's performance fee of GBP3,000, an adjustment in respect of
the year to 31 March 2019, charged to capital in 2020 (2019:
GBP2,433,000).
The above total expense ratios are based on the average
Shareholders' funds of GBP207,946,000 (2019: GBP166,566,000)
calculated at the end of each month during the year.
It should be noted that administrative expenses borne by the
Lindsell Train funds are excluded from the above.
20 Related Party transactions
Lindsell Train Limited acts as the Investment Manager of the
Company. LTL is considered a related party as it has a Director in
common with the Company, as well as the Company owning a
significant share of LTL. 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 and note 11. Disclosure of the Directors' interests
in the Ordinary Shares of the Company and fees and expenses payable
to the Directors are set out in the Directors' Remuneration Report
on pages 34 to 39.
Appendices
DISCLAIMER
The information contained in these Appendices has not been
audited by the Auditors 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
2020
The Manager of The Lindsell Train Investment Trust
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 consists of the two founders Michael
Lindsell and Nick Train, the Chief Operating Officer Michael Lim,
the Head of Marketing and Client Services Keith Wilson, the
Director of Marketing Jane Orr, and James Alexandroff, the only
non-executive director. James was a co-founder of a specialist
investment boutique, Arisaig Partners, and is a longstanding
shareholder in The Lindsell Train Investment Trust. LTL's executive
staff number 20, an increase from 17 a year ago with the
recruitment of extra resource in investment, compliance and
marketing. All staff are based in the UK aside from our North
American Marketing and Client Services representative, who works
out of Boston.
LTL's board recognises that key employees should share in the
ownership of the company whilst furthering the alignment of
interests between them, LTIT and the founders. This is achieved by
acquiring shares from LTL's major stakeholders and through a
recently introduced dedicated profits share scheme.
Business
LTL's strategy is to build excellent long-term performance
records for its funds in a way that is consistent with its
investment principles and that meet the aims of its clients. Long
term performance is detailed below.
Success in achieving satisfactory investment performance should
allow the company to expand its funds under management ('FUM') in
its three product areas: UK, Global and Japanese equities. LTL
aspires to manage multiple billions of pounds in each product
whilst recognising that there will be a size per product above
which its ability to achieve clients' performance objectives may be
compromised. LTL thinks this growth is possible without
significantly expanding the investment staff, which stood at six at
31 January 2020.
To achieve this growth in a manageable way LTL looks to direct
new business flows into LT badged pooled funds and to limit the
number of separately managed accounts. The open-ended pooled funds
represented 73% of FUM at end of January, up from 72% the year
before. Additionally, LTL managed 17 separate client relationships,
unchanged from a year ago. The largest pooled fund (now the
Lindsell Train Global Equity Fund) represented 38% of total FUM and
the largest segregated portfolio accounted for 9%.
In the year to 31 January 2020 LTL's total FUM grew 32% from
GBP16.3bn to GBP21.5bn, of which GBP2.4bn represented net new
inflows, broken down by strategy as Global (net inflow of
GBP2,360m), Japan (net inflow of GBP241m) and UK (a net outflow of
GBP192m). Performance was satisfactory in all strategies over the
12 months. LTL's long-term annualised excess returns are shown in
the table below.
To 31.1.2020 Excess Return Inception date Benchmark
-------------------- ------------- -------------- --------------
UK Equity Fund (GBP) +6.1% p.a. July 2006 FTSE All Share
-------------------- ------------- -------------- --------------
Global Equity Fund
(GBP) +5.6% p.a. March 2011 MSCI World
-------------------- ------------- -------------- --------------
Japanese Equity Fund
(Yen) +3.2% p.a. January 2004 TOPIX
-------------------- ------------- -------------- --------------
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.
The Marketing and Client Services team is in contact with
institutional clients both directly and through investment
consultants, primarily in the UK and the USA. Currently only 5.4%
of LTL's FUM derive from North American based clients and LTL
believes there is still significant opportunity to grow its
institutional client base in that region. LTL's funds are also
widely represented on the major UK retail and IFA platforms to the
extent that investors through these platforms make up nearly 44% of
LTL's FUM.
Financials
In the year to 31 January 2020 LTL's total revenues grew 32%.
Annual management fees made up the lion's share, at 96%, with less
predictable performance fees the rest. LTL's biggest cost item,
direct staff remuneration, is capped at 25% of fees (other than
those earned from The Lindsell Train Investment Trust), 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 31% of total
revenues, down from 32% last year. Fixed overheads were up from
GBP2.3m to GBP3.3m owing primarily to the rising costs associated
with increased contributions to the Financial Services Compensation
Scheme. Operating profits were up 33%, registering a margin on
sales of 66%.
LTL intends to distribute to shareholders dividends equivalent
to 80% of its retained profits in respect of each accounting
year-end, subject to retaining sufficient working and fixed or
regulatory capital to enable it to continue its business in a
prudent manner. Total dividends paid in the year to 31 January 2020
were GBP1,619 per share, up from an adjusted GBP1,099* per share in
2019.
At the end of January 2020 LTL's balance sheet was made up of
shareholders' funds of GBP66.7m backed by GBP66.7m of net current
assets including GBP67.6m of cash.
* LTL's shares were split 1:10 during the year resulting in
shares in issue increasing from 2,666 to 26,660.The per share
figure for 2019 has been retrospectively changed based on 26,660
shares for ease of comparison.
The Future
Having seen net outflows in the latter half of its financial
year - as a result of both client-specific and market-related
factors - LTL believes it has plenty of headroom to grow its FUM,
with a continued focus on its stable of pooled funds. Most growth
is currently evident in the Lindsell Train Global Equity LLC,
targeted at qualifying US investors. It has grown to GBP309m at the
31 March, up from GBP146m a year earlier. In April 2020 we
established a new strategy and fund, the LF Lindsell Train North
American Fund. It is run consistent with LTL's distinct investment
approach and was launched with a view to underpinning succession in
the company. It is managed with complete autonomy by James Bullock
assisted by Madeline Wright, with the support of the rest of the
investment team. Given that the US is a critical market for our
Global Equity strategy (with over 40% of our Global Universe
represented by US companies), any broadening or deepening of our
knowledge should additionally benefit the Global portfolios. The
fund has been seeded from LT related sources, including The
Lindsell Train Investment Trust. However, we do not plan to promote
the fund for the time being or to market it to external investors
until it has built up a meaningful track record.
With the support of a stable and dedicated team and a strong
performance track record, LTL remains 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; weakness in world equity markets (which we
have just experienced, reflecting uncertainty about the coronavirus
impact in the longer term); and the possibility of a sustained bout
of underperformance from LTL's strategies. Perhaps the greatest
risk in relation to LTL's performance however remains the demise of
either of the founders. They are currently aged 61 and 60, in good
health and remain strongly committed to LTL. Furthermore, as
described above, it is encouraging to see the team that they have
built around them maturing and taking on more responsibility.
All data is based to 31 January 2020 unless stated otherwise.
The period from 31 January to 31 March 2020 has been reviewed by
the Board and there are no significant matters to highlight other
than those detailed in this Report.
Funds Under Management
Jan 2020 Jan 2019
FUM by Strategy GBPm GBPm
---------------- -------- --------
UK 9,486 8,311
Global 11,160 7,465
Japan 804 484
---------------- -------- --------
Total 21,450 16,260
---------------- -------- --------
Largest Client Accounts
Jan 2020 Jan 2019
% of FUM % of FUM
--------------------------- ---------- ----------
Largest Pooled Fund Asset 38% 35%
Largest Segregated Account 9% 9%
--------------------------- ---------- ----------
Lindsell Train Fund Performance
Annualised data to 31 January 1 Year 3 Years 5 Years 10 Years
2020 % % % %
------------------------------------ ------ ------- ------- --------
GBP UK Equity Fund (Accumulation) 18.0 12.6 10.9 15.3
FTSE All-Share (total return) 10.7 5.8 6.3 8.2
----------------------------------- ------ ------- ------- --------
GBP Global Equity Fund (B share) 15.7 18.5 18.4 -
MSCI World (total return) 17.5 9.7 11.9 -
----------------------------------- ------ ------- ------- --------
Japanese Equity Fund (A
JPY share) 11.8 12.6 12.4 11.8
TOPIX (total return) 10.2 5.8 5.8 8.8
----------------------------------- ------ ------- ------- --------
Source: Morningstar Direct
Financials
Jan 2020 Jan 2019 %
GBP'000 GBP'000 Change
------------------------------------ -------- -------- -------
Profit & Loss
Fee Revenue:
Investment Management fee 107,143 76,317 40%
Performance Fee 4,717 8,187 (42%)
Bank Interest 415 212
------------------------------------ -------- -------- -------
112,275 84,716
Staff Remuneration* (35,232) (27,467) 28%
Fixed Overheads (3,321) (2,281) 46%
FX Currency Translation (Loss)/Gain (67) 597
------------------------------------ -------- -------- -------
Operating Profit 73,655 55,566 33%
Taxation (14,009) (10,565)
------------------------------------ -------- -------- -------
Net Profit 59,646 45,000 33%
Dividends (43,162) (29,299)
------------------------------------ -------- -------- -------
Retained profit 16,484 15,701
------------------------------------ -------- -------- -------
Capital & Reserves
Called up Share Capital 267 267
Profit & Loss Account 66,468 49,984
------------------------------------ -------- -------- -------
Shareholders' Funds 66,735 50,251
------------------------------------ -------- -------- -------
Balance Sheet
Fixed Assets 61 43
Current Assets (inc cash at bank) 81,130 61,036
Liabilities (14,456) (10,828)
------------------------------------ -------- -------- -------
Net Assets 66,735 50,251
------------------------------------ -------- -------- -------
* No more than 25% of fees (other than LTIT fees) can be paid as
staff remuneration. Employer national insurance costs are excluded
from this limit.
Five Year History
Jan 2020 Jan 2019 Jan 2018 Jan 2017 Jan 2016
--------------------------- -------- -------- -------- -------- --------
Operating Profit Margin 66% 66% 62% 68% 63%
Earnings per share (GBP)* 2,237 1,688 1,149 813 607
Dividends per share (GBP)* 1,619 1,099 784 545 352
Total staff costs as
% of Revenue 31% 32% 34% 30% 34%
Opening FUM (GBPm) 16,260 13,179 8,975 6,189 5,022
Changes in FUM (GBPm) 5,190 3,081 4,204 2,786 1,167
- of market movement 2,781 808 2,074 1,179 312
- of net new fund inflows 2,409 2,273 2,130 1,607 855
Closing FUM (GBPm) 21,450 16,260 13,179 8,975 6,189
Open ended funds as %
of total 73% 72% 67% 61% 53%
Client Relationships
Pooled funds 4 4 4 4 4
Separate accounts 17 17 15 16 16
--------------------------- -------- -------- -------- -------- --------
Ownership *
Jan 2020 Jan 2019
---------------------------------------- -------- --------
Michael Lindsell & spouse 9,650 9,670
Nick Train & spouse 9,650 9,670
The Lindsell Train Investment Trust plc 6,450 6,460
Other Directors/employees 910 860
---------------------------------------- -------- --------
Total shares 26,660 26,660
---------------------------------------- -------- --------
Board of Directors
Nick Train Chairman and Portfolio Manager
Chief Executive & Portfolio
Michael Lindsell Manager
Michael Lim Chief Operating Officer
Head of Client Servicing &
Keith Wilson Marketing
Jane Orr Director of Marketing
James Alexandroff Non-Executive
Employees
Jan 2020 Jan 2019
-------------------------------------------- -------- --------
Investment Team (inc. 3 Portfolio Managers) 6 5
Client Servicing & Marketing 6 5
Operations & Administration 8 7
Non-Executive director 1 1
-------------------------------------------- -------- --------
Total number of employees 21 18
-------------------------------------------- -------- --------
* On 1 February 2019 LTL undertook a share split with each share
subdivided into 10 shares of GBP10 each. The per share figures are
retrospectively changed from January 2016 to January 2019 based on
26,660 shares for ease of comparison.
LTIT Directors' Valuation of LTL (unaudited)
Mar 2020 Mar 2019
GBP'000 GBP'000
----------------------------------------------- ---------- ----------
Funds under Management excluding LTIT holdings 18,232,082 18,421,064
----------------------------------------------- ---------- ----------
Valuation of LTL based on 1.5% of FUM (A) 273,481 276,315
----------------------------------------------- ---------- ----------
Revenue ex performance fee 97,542** 82,229*
Notional staff costs (45%) (43,894) (37,003)
Interest income 221** 224*
Operating costs (5,076)** (2,507)*
Notional tax (9,271) (8,589)
----------------------------------------------- ---------- ----------
Notional post tax earnings 39,522 34,354
----------------------------------------------- ---------- ----------
Benchmark*** 4.0% 4.0%
Equity risk premium 4.5% 4.5%
Total yield + premium (discount rate) 8.5% 8.5%
----------------------------------------------- ---------- ----------
Valuation of LTL based on earnings (B) 464,961 404,168
----------------------------------------------- ---------- ----------
Valuation of LTL (A+B)/2 (C) 369,221 340,242
----------------------------------------------- ---------- ----------
Number of shares in Issue (D)**** 26,615 26,660
----------------------------------------------- ---------- ----------
Valuation per share in LTL (C/D) GBP13,873 GBP12,762
----------------------------------------------- ---------- ----------
* Revenue, interest income and operating costs based on previous
three month's data one month in arrears and annualised.
** Revenues based on 31 March LTL FUM mutiplied by LTL's average
fee rate for the year to 31 January 2020 and interest income and
operating costs based on February 2020 data annualised.
*** As described in the Company summary on the inside front
cover.
**** The reduction in shares in issue is on account of a share
buyback by LTL. In March 2020 LTL repurchased 45 shares from an
employee shareholder.
LTL's valuation is based on a formula first developed at the
inception of the company, amended by an independent professional
advisor in 2007 and further reviewed by professional external
advisors in 2018.
At its core are two methodologies widely used in the industry -
a value based on a percentage of LTL's FUM and one on its earnings.
The LTIT Board view these methods of valuation to have equal
validity and thus equally weight their contribution to the overall
calculation.
In calculating the valuation based on LTL's FUM the LTIT Board
currently value LTL at 1.5% of FUM. LTL monitors merger and
acquisition transactions in the fund management industry and of the
147 transactions since 2009 the median transaction value has been
1.7% of FUM. Transactions from the beginning of 2018 averaged 2.4%
and from 2019 1.8%. This confirms a recent downward trend reflected
also in the ongoing value of Global quoted fund managers (ex.
Alternative Asset Managers) where average values stood at 1.4% of
FUM at 31 March 2020.
In calculating the earnings based valuation performance fees are
excluded owing to their unpredictability.
For valuations up until 29th February 2020, LTL's notional post
tax earnings were calculated with reference to LTL's earnings based
on the prior three months data, one month in arrears and
annualised. From 31 March 2020 and for all valuations in the future
the Board decided to calculate notional earnings with reference to
LTL's most recent end month FUM. This more readily captures the
full effect on the earnings of the company from the change in FUM
in any month. The change was made by the Board after consultation
with professional external advisors.
Salary and bonus expenses at LTL are restricted by a salary and
bonus cap* (see below). Currently the founders of LTL earn rewards
for their endeavours from salaries and bonuses together with
dividends from their shareholdings. The LTIT Board believe that if
it became necessary to replace the founders with individuals with a
lesser ownership interest in the company, it may be necessary to
increase the salary and bonus cap to compensate them sufficiently.
LTL's actual salary and bonus costs have averaged 37% of revenues
since 2001 but the LTIT Board judge it necessary to instead apply a
notional salary cost at 45% of revenues in calculating earnings.
Currently a quoted peer group of fund managers exhibit an average
salary cost to revenue ratio of 37% but the salary to revenue ratio
of peers with FUM equivalent to LTL are higher at 41%. The LTIT
Board believe a notional salary to revenue ratio of 45% makes
sufficient allowance for the eventuality described above.
Notional post-tax earnings are discounted by a discount rate
made up of two parts: the Company's benchmark - the annual average
yield on the longest dated UK Government bond yield, which is a
proxy for the risk free rate, with a minimum of 4%, plus an equity
risk premium of 4.5%. As the current average annual yield on the
longest dated UK Government bond is at c.0.4%, well below the
minimum, you could argue that there is an implicit additional risk
premium of 3.6%. This part of the calculation will fluctuate but
only when long-term interest rates rise above 4%. The 4.5% equity
risk premium could change at the LTIT Board's discretion if there
was more (or less) certainty that the company could continue beyond
the active participation of the founders. While there remains doubt
the LTIT Board believe it is prudent to use a higher premium
(4.5%). The warranted discount rate amounting to 8.5% is the sum of
the risk premium and the benchmark.
The formula is calculated monthly referencing the end month FUM
of LTL for both components of the calculation.
* No more than 25% of fees (other than LTIT fees) can be paid as
staff remuneration. Employer national insurance costs are excluded
from this limit.
Appendix 2
Share Capital
At 31 March 2020 and 31 March 2019, and up to the date of this
report, the Company had an authorised and issued share capital
comprising 200,000 Ordinary Shares of 75p nominal value each. At 31
March 2020 the Ordinary Share price was GBP1,060.00 (31 March 2019:
GBP1,475.00).
Income entitlement
The Company's revenue earnings are distributed to holders of
Ordinary Shares by way of such dividends (if any) as may from time
to time be declared by the Directors and approved by the
Shareholders.
Capital entitlement
On a winding up of the Company, after settling all liabilities
of the Company, holders of Ordinary Shares are entitled to a
distribution of any surplus assets in proportion to the respective
amounts paid up or credited as paid up on their shares.
Voting entitlement
Holders of Ordinary Shares are normally entitled to one vote on
a show of hands, but this year shareholders are requested not to
attend the Annual General Meeting in person and instead only
Directors will be present. Shareholders are strongly encouraged to
vote by proxy, appointing the Chairman as their proxy. Notices of
Meetings and Proxy Forms set out the deadlines for the valid
exercise of voting rights and, other than with regard to Directors
not being permitted to vote on matters upon which they have an
interest, there are no other restrictions on the voting rights of
Ordinary Shareholders.
Transfers
There are no restrictions on transfers of Ordinary Shares
except: a) dealings by Directors, Persons Discharging Managerial
Responsibilities and their connected persons which may constitute
insider dealing or are otherwise prohibited by the rules of the
UKLA; b) transfers to more than four joint holders; c) transfers to
US persons other than as specifically permitted by the Directors;
d) if, in the Directors' opinion, the assets of the Company might
become "plan assets" for the purposes of US ERISA 1974; and e)
transfers which in the opinion of the Directors would cause
material legal, regulatory, financial or tax disadvantage to the
Company.
Appendix 3
Agreements with Service Providers
Investment Management Agreement
The Investment Manager, LTL, is engaged under the terms of a
contract dated 13 August 2014, details of which are given in note 6
to the Financial Statements, terminable on twelve months' notice by
either party. Since 1 April 2016, the Investment Management Fee has
been calculated by reference to the lower of the Adjusted Market
Capitalisation or the Adjusted NAV of the Company. During the year
the Directors reviewed the performance of the Investment Manager
and consider that the continued engagement of LTL under the
existing terms is in the best interests of the Company and
Shareholders. Michael Lindsell did not participate in the review as
he is an employee and shareholder of the Investment Manager.
In addition to the day to day management of investments, the
Investment Manager advises the Board on liquidity and borrowings
and liaises with major Shareholders. The Investment Manager has a
stated policy on stewardship and engagement with investee
companies, which the Board has reviewed and endorses, and provides
verbal reports to the Board where any concerns or issues have been
raised.
The Administrator and Secretarial Agreement
Accounting, company secretarial and administrative services are
provided by Maitland Administration Services Limited ("Maitland")
pursuant to an agreement dated 1 July 2019. The agreement is
terminable by either party on not less than three months' notice.
Details of the fees paid to Maitland are given in note 4 to the
Financial Statements. The services provided by Maitland were also
reviewed during the year and the Board considered it to be in the
best interests of the Company to continue Maitland's appointment
under the existing terms.
Other third party service providers
In addition to the Investment Manager and Administrator the
Company has engaged Link Asset Services to maintain the share
register of the Company and Northern Trust Company, London Office
as the Company's custodian. The agreements for these services were
entered into after careful consideration of their terms and their
cost-effectiveness for the Company.
Shareholder Information
This year the Annual General Meeting will be closed to
shareholders and will be attended by Directors only. Shareholders
are strongly encouraged to vote by proxy and to appoint the
Chairman as their proxy.
Notice of Annual General Meeting
Notice is hereby given that the eighteenth Annual General
Meeting of The Lindsell Train Investment Trust plc will be held at
the 3rd Floor, 66 Buckingham Gate, Westminster, London SW1E 6AU on
3 September 2020 at 2.30 pm for the following purposes:
Ordinary business
1. To receive the Financial Statements and Reports of the
Directors and the Auditors for the year ended 31 March 2020;
2. To approve the Directors' Remuneration Report for the year ended 31 March 2020;
3. To approve the payment of a final dividend for the year ended
31 March 2020 of GBP41.39 per Ordinary Share;
4. To approve the payment of a special dividend for the year
ended 31 March 2020 of GBP2.61 per Ordinary Share;
5. To re-elect Mr Julian Cazalet as a Director of the Company;
6. To re-elect Mr Nicholas Allan as a Director of the Company;
7. To re-elect Ms Vivien Gould as a Director of the Company;
8. To re-elect Mr Richard Hughes as a Director of the Company;
9. To re-elect Mr Michael Lindsell as a Director of the Company;
10. To appoint PricewaterhouseCoopers LLP as Auditors to the
Company and authorise the Directors to determine their
remuneration.
Special Business
To consider and, if thought fit, pass resolution 11 as an
Ordinary Resolution:
11. To receive and adopt the Directors' Remuneration Policy.
To consider and, if thought fit, pass resolutions 12 and 13 as
Special Resolutions:
12. THAT the Company be and is hereby generally and
unconditionally authorised in accordance with Section 701 of the
Companies Act 2006 (the "Act") to make market purchases (within the
meaning of Section 693(4) of the Act) of Ordinary Shares of 75p
each ("Ordinary Shares") in the capital of the Company provided
that:
a. the maximum number of Ordinary Shares hereby authorised to be purchased shall be 29,980;
b. the minimum price which may be paid for an Ordinary Share shall be 75p;
c. the maximum price (excluding expenses) which may be paid for
an Ordinary Share shall be the higher of (a) 5% above the average
of the mid-market values for the Ordinary Shares in the Stock
Exchange Daily Official List for the five business days immediately
preceding the date of the purchase and (b) the higher of the last
independent trade and highest independent bid;
d. any purchase of Ordinary Shares will be made in the market
for cash at prices below the then prevailing Net Asset Value per
Ordinary Share;
e. any Ordinary Shares so purchased shall be cancelled unless
the Directors otherwise determine that they shall be held in
treasury and treated as treasury shares; and
f. unless renewed, such authority hereby conferred shall expire
at the end of the next following Annual General Meeting of the
Company to be held after the passing of this resolution or, if
earlier, the date fifteen months from the passing of the
resolution, save that the Company may, prior to such expiry, enter
into contract(s) to purchase shares which will or may be completed
or executed wholly or partly after such expiry.
13. THAT the Directors be and are hereby generally and
unconditionally authorised in accordance with Section 573 of the
Companies Act 2006 ("Act") to sell and/or transfer Ordinary Shares
held by the Company in treasury for cash as if Section 561 of the
Act did not apply to such sale or transfer, provided that the
authority hereby granted shall expire at the earlier of the
conclusion of the next following Annual General Meeting of the
Company or the date fifteen months after the passing of this
resolution, save that the Directors may before such expiry enter
into offer(s) or agreement(s) which may or shall require Ordinary
Shares held in treasury to be sold or transferred after such expiry
and the Directors shall be entitled to sell or transfer Ordinary
Shares pursuant to such offer(s) or agreement(s) as if the
authority hereby granted had not so expired.
By order of the Board
Maitland Administration Services Limited
Secretary
15 June 2020
Notes
(i) This Annual Report and Financial Statements is sent to
holders of Ordinary Shares. The coronavirus pandemic and the
associated requirement for social distancing has made it
impractical to conduct the Company's Annual General Meeting in the
traditional way. This year the meeting will be closed to
shareholders and will be attended by Directors only. Shareholders
are strongly encouraged to vote by proxy, and to appoint the
Chairman as their proxy.
(ii) You can vote either:
-- by returning a completed proxy form to the Company's registrar; or
-- by logging on to www.signalshares.com and following the instructions; or
-- in the case of CREST members, by utilising the CREST
electronic proxy appointment service in accordance with the
procedures set out below.
In order for a proxy appointment to be valid a form of proxy
must be completed. In each case the form of proxy must be received
by Link Asset Services at 34 Beckenham Road, Beckenham, Kent, BR3
4ZF by 2.30 pm on 1 September 2020.
If you need help with voting online, or require another paper
proxy form, please contact our Registrar, Link Asset Services, on
0871 664 0391 if calling from the UK, or +44 (0) 371 664 0391 if
calling from outside of the UK, or email Link at
enquiries@linkgroup.co.uk
To be valid the form of proxy and any power of attorney or other
authority (if any) under which it is signed (or a notarially
certified copy of that power of attorney or authority) must be sent
to the Company's registrar - Link Asset Services, PXS1, 34
Beckenham Road, Beckenham, Kent BR3 4ZF - so as to arrive no later
than 2.30 pm on 1 September 2020.
(iii) CREST members who wish to appoint a proxy by utilising the
CREST electronic proxy appointment service may do so for the
meeting and any adjournment(s) thereof by utilising the procedures
described in the CREST Manual. CREST personal members or other
CREST sponsored members, and those CREST members who have appointed
a voting service provider(s), should refer to their CREST sponsor
or voting service provider(s), who will be able to take the
appropriate action on their behalf.
(iv) In order for a proxy appointment made by means of CREST to
be valid, the appropriate CREST message (a "CREST Proxy
Instruction") must be properly authenticated in accordance with
Euroclear UK & Ireland Limited's ("EUI") specifications and
must contain the information required for such instructions, as
described in the CREST Manual. The message must be transmitted so
as to be received by the issuer's agent Link Asset Services (ID:
RA10) by 2.30 pm on 1 September 2020. In this respect the time of
receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Applications Host)
from which the issuer's agent is able to retrieve the message in
the manner prescribed by CREST.
(v) CREST members and, where applicable, their CREST sponsors or
voting service providers should note that EUI does not make
available special procedures in CREST for any particular messages.
Normal system timings and limitations will therefore apply in
relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take such action as
shall be necessary to ensure that a message is transmitted by means
of the CREST system by the particular time the CREST member
requires.
(vi) The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
(vii) A person who is not a member of the Company and receives
this notice of meeting as a person nominated by a member to enjoy
information rights under Section 146 of the Companies Act 2006
("Act") does not have a right to appoint proxies. However, if a
nominated person has an agreement with the member who nominated
them, the nominated person may have a right to be appointed as a
proxy or a right to instruct the member as to the exercise of
voting rights at the AGM.
(viii) Shareholders entered on the Register of Members of the
Company at the close of business on 1 September 2020, or the close
of business on the day two days prior to the time of an adjourned
meeting, shall be entitled to vote. Any changes to the Register of
Members after such dates shall be disregarded in determining the
rights of any Shareholders to vote.
(ix) As at 10 June 2020, the latest practicable date prior to
the publication of this notice, the Company's issued share capital
comprised 200,000 Ordinary Shares of 75p each, of which none are
held in treasury. Each Ordinary Share carries a right to one vote
at general meetings of the Company and accordingly the total number
of voting rights in the Company as at 2020 is 200,000.
(x) Information regarding the AGM, including the information
required by Section 311A of the Act, can be found on the Company's
web-pages by following the appropriate links at
www.lindselltrain.com.
(xi) No Director has a service agreement with the Company.
Directors' letters of appointment will be available for inspection
at the AGM venue from 15 minutes before the time for the meeting
until the conclusion of the meeting.
(xii) Member(s) have a right in accordance with Section 338 of
the Act to require the Company to give to members of the Company
entitled to receive the above notice of meeting, notice of any
resolution which they may properly move at the meeting. Under
Section 338A of the Act member(s) may request the Company to
include in the business to be dealt with at the meeting any matter,
other than a proposed resolution, which may be properly included in
that business.
(xiii) Members may require the Company, under Section 527 of the
Act, to publish on a website a statement setting out any matter
relating to the audit of the Company's Financial Statements being
laid before the meeting, including the Auditors' report and the
conduct of the audit at the Company's expense. Where the Company is
required to place such a statement on a website it must forward the
statement to the Auditors not later than the time it makes the
statement available on that website, and include the statement in
the business to be dealt with at the meeting.
Company Information
Directors
Julian Cazalet (Chairman)
Nicholas Allan
Vivien Gould
Richard Hughes
Rory Landman
Michael Lindsell
Investment Manager
Lindsell Train Limited
3rd Floor
66 Buckingham Gate
London
SW1E 6AU
Tel: 020 7808 1210
(Authorised and Regulated by the
Financial Conduct Authority)
Company Secretary, Administrator and Registered Office
Maitland Administration Services Limited
Hamilton Centre
Rodney Way
Chelmsford
Essex
CM1 3BY
Tel: 01245 398950
www.maitlandgroup.com
email: cosec@maitlandgroup.co.uk
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0871 664 0300
Calls cost 12p per minute plus
network extras (from outside the
UK: +44 371 664 0300)
Solicitor
Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH
Independent Auditors
PricewaterhouseCoopers LLP
Atria One, 144 Morrison Street
Edinburgh
EH3 8EX
Broker
J.P. Morgan Cazenove Ltd
25 Bank Street
Canary Wharf
London
E14 5JP
Custodian
Northern Trust Company
50 Bank Street
Canary Wharf
London
E14 5NT
Shareholder relations
The Company's share price for Ordinary Shares is listed daily in
the Financial Times. For further information visit:
www.lindselltrain.com and follow the links.
Individual Savings Account ("ISA")
The Company's shares are eligible to be held in an ISA account
subject to HM Revenue & Customs' limits.
Registered in England, No: 4119429
Glossary
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 APMs are the dividend yield and ongoing charges as
defined below.
Discount and premium
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 mid-market 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.
Dividend yield
A financial ratio that indicates how much a company pays out in
dividends each year relative to its share price. Dividend yield is
represented as a percentage and can be calculated by dividing the
value of dividends paid in a given year per share held by the share
price.
The figures disclosed on page 11 have been calculated as shown
below:
2020 2019
-------------------------------------------- ----------- -----------
Total Dividends paid per ordinary share (a) GBP44.00 GBP29.50
Closing mid-market price per Ordinary Share
on 31 March (b) GBP1,060.00 GBP1,475.00
-------------------------------------------- ----------- -----------
Dividend Yield (a) ÷ (b) 4.15% 2.00%
-------------------------------------------- ----------- -----------
Middle market price
The middle (or mid) market price is the price between the best
offered price and the best bid price. It can simply be defined as
the average of the current bid and offer prices being quoted.
Net asset value (NAV) per Ordinary Share
The NAV 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 of the Company is published weekly.
The figures disclosed on page 11 have been calculated as shown
below:
2020 2019
'000 '000
---------------------------------------------- ---------- ----------
Net Asset Value (a) GBP191,330 GBP179,185
Ordinary Shares in issue (b) 200 200
---------------------------------------------- ---------- ----------
Net asset value per Ordinary Share (a) ÷
(b) GBP956.65 GBP895.93
---------------------------------------------- ---------- ----------
Ongoing charges
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.
The figures disclosed on page 11 have been calculated as shown
below:
2020 2019
GBP'000 GBP'000
------------------------------- -------- --------
Total operating expenses (a) 1,722 1,459
Average Net Asset Value (b) 207,946 166,566
------------------------------- -------- --------
Ongoing Charges (a) ÷ (b) 0.83% 0.88%
------------------------------- -------- --------
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.
Share price and NAV total return
This is the return on the share price and NAV 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 is calculated as the return
to shareholders after reinvesting the net dividend in additional
shares on the date that the share price goes ex-dividend.
The figures disclosed on page 11 have been calculated at shown
below:
Year Ending 31 March
2020
----------------------
LTIT NAV LTIT Price
---------------------------- -------------- --------- -----------
NAV/Price at 31 March 2020 a GBP956.65 GBP1,060.00
Dividend Adjustment Factor* b 1.0279 1.0227
Adjusted closing NAV/Price c = a x b GBP983.34 GBP1,084.06
NAV/Price 31 at March 2019 d GBP895.93 GBP1,475.00
---------------------------- -------------- --------- -----------
Total return [(c/d)-1]*100 9.8% -26.5%
---------------------------- -------------- --------- -----------
* The dividend adjustment factor is calculated on the assumption
that the dividends of GBP29.50 paid by the Company during the year
were reinvested into shares or assets of the Company at the cum
income NAV per share/share price, as appropriate, at the
ex-dividend date.
LTL total return performance
The total return performance for LTL is calculated as the return
after receiving but not reinvesting dividends received over the
year.
The figure disclosed on page 4 has been calculated as shown
below:
LTL valuation
------------------------------- ------------------ -------------
Valuation at 31 March 2019 a GBP12,762.27
Valuation at 31 March 2020 b GBP13,872.68
Dividends paid during the year c GBP1,619
------------------------------- ------------------ -------------
Total return {[(b-a)+c]/a}*100 21.4%
------------------------------- ------------------ -------------
END
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFFFDIESSEFM
(END) Dow Jones Newswires
June 15, 2020 09:25 ET (13:25 GMT)
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