Annual Report and Financial Statements
For the year ended 31 March 2023
Company Secretary and Registered Office
Frostrow Capital LLP
25 Southampton Buildings
Tel: 020 3008 4910
The Lindsell Train Investment Trust plc
Registered in England, No: 4119429
This report is printed on Revive 100% White Silk a totally recycled paper produced
using 100% recycled waste at a mill that has been awarded the ISO 14001
certicate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
This report has been produced using vegetable based inks.
Strategic Report
Business Review 2
Investment Objective 3
Investment Policy 3
Company Performance 4
Financial Highlights for the Year 5
Chairman’s Statement 5
Portfolio Holdings 9
Analysis of Investment Portfolio 10
Manager’s Report 11
Performance and Prospects 13
Key Performance Indicators 13
Principal Risks 15
Longer-Term Viability Statement 19
Section 172 Disclosure 21
LTIT’s Responsible Investment Policy 24
LTLs Approach to Responsible Ownership 25
Board of Directors 30
Report of the Directors 32
Corporate Governance Statement 36
Directors’ Remuneration Report 46
Directors’ Remuneration Policy 50
Statement of Directors’ Responsibilities 53
Report of the Audit Committee 55
Independent Auditor's Report 61
Financial Statements
Income Statement 68
Statement of Changes in Equity 69
Statement of Financial Position 70
Statement of Cash Flows 71
Notes to the Financial Statements 72
Appendices (unaudited)
Appendix 1 – Annual Review of Lindsell Train Limited 88
Appendix 2 – Share Capital 96
Appendix 3 – Agreements with Service Providers 98
Additional Shareholder Information (unaudited)
Notice of Annual General Meeting 99
Glossary of Terms and Alternative Performance Measures 104
Company Information 107
Company Summary
The Company
The Lindsell Train Investment Trust plc (the “Company” or “LTIT”) is a listed investment company.
Its shares are quoted on the premium segment of the Official List and traded on the main market
of the London Stock Exchange. The Company is a member of the Association of Investment
Companies (“AIC”).
The Company is a UK Alternative Investment Fund (“AIF”) under the European Union Alternative
Investment Fund Managers’ Directive (“AIFMD”). The Board is the Small Registered UK Alternative
Investment Fund Manager (“AIFM”) of the Company.
Investment Objective
The objective of the Company is to maximise long-term total returns with a minimum objective
to maintain the real purchasing power of Sterling capital.
Investment Manager
Lindsell Train Limited (“LTL”) acts as discretionary Investment Manager (the “Manager”) of the
Company’s assets. However, the Board retains ultimate discretion over the holding in LTL and LTL
managed fund products. Decisions on these holdings are based on advice and information
received from the Manager.
Further details concerning the Agreements with the Company’s service providers can be found in
Appendix 3, on page 98.
Performance and Benchmark
The performance and financial highlights are provided on pages 4 and 5.
The Company compares its performance and calculates its performance fee relative to its
benchmark, the MSCI World Index in Sterling.
The Combined Benchmark is a combination of the Old Benchmark (the annual average
redemption yield of the longest dated UK government fixed rate bond, plus a premium of 0.5%
subject to a minimum yield of 4%) until 31 March 2021 and the Current Benchmark (MSCI World
index in Sterling) from 1 April 2021.
A final dividend of £51.50 per Ordinary Share (2022: a final dividend of £51.12 and a special
dividend of £1.88) is proposed for the year ended 31 March 2023. If this dividend is approved by
shareholders at the Annual General Meeting, it will be paid on Tuesday, 12 September 2023 to
shareholders on the register at close of business on Friday, 11 August 2023 (ex-dividend Thursday,
10 August 2023).
Annual General Meeting
The notice of the Annual General Meeting, scheduled for Wednesday, 30 August 2023 at 2.30 p.m.
at the Marlborough Suite, St Ermin’s Hotel, 2 Caxton Street, London, SW1H 0QW, is provided on
pages 99 to 103.
Capital Structure
The Company’s capital structure comprises 200,000 Ordinary Shares of 75 pence each. Details are
given in note 13 to the Financial Statements on page 80.
ATTENTION. If you are in any doubt as to what action to take, you should seek advice from your stockbroker, bank
manager, solicitor, accountant or other financial adviser authorised under the Financial Services and Markets Act
2000 (as amended). If you have sold or otherwise transferred all of your Ordinary Shares in the capital of the
Company you should send this document, together with any other accompanying documents, including the form
of proxy, at once to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale
or transfer, was effected, for onward transmission to the purchaser or transferee.
Business Review
The Directors present their Strategic Report for the Company for the year ended 31 March 2023.
The Report contains: a review of the Company’s strategy, an analysis of its performance during
the financial year, comment on its future outlook and details of the principal risks and challenges
that it faces.
Reviews of the financial year and commentary on the future outlook are presented in the
Chairman’s Statement on pages 5 to 8 and the Managers Report on pages 11 to 12. The
Company’s Investment Objective and Investment Policy are set out on page 3.
The Strategic Report has been prepared to provide shareholders with information to assess how
the Directors have performed their duty to promote the success of the Company.
Further information on how the Directors have discharged their duty under Section 172 of the
Companies Act 2006 can be found on pages 21 to 24.
The Strategic Report contains certain forward-looking statements. These statements are made by
the Directors in good faith based on the information available to them up to the date of this
Report and such statements should be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any such forward-looking
As an externally managed investment company the Company has no executive directors,
employees or internal operations. The Company delegates its day-to-day management to
The Board is responsible for all aspects of the Company's affairs, including the setting of
parameters for and monitoring of the investment strategy as well as the review of investment
performance and policy. It also has responsibility for all strategic issues and corporate governance
Throughout the year under review, the Company continued to operate as an approved
investment company, pursuing its investment objective.
Strategic Report
Investment Objective
The objective of the Company is to maximise long-term total returns with a minimum objective
to maintain the real purchasing power of Sterling capital.
Investment Policy
The Investment Policy of the Company is to invest:
(i) in a wide range of financial assets including equities, unlisted equities, bonds, funds, cash
and other financial investments globally with no limitations on the markets and sectors in
which investment may be made, although there is likely to be a bias towards equities and
Sterling assets, consistent with a Sterling-dominated investment objective. The Directors
expect that the flexibility implicit in these powers will assist in the achievement of the
investment objective;
(ii) in LTL managed fund products, subject to Board approval, up to 25% of its gross assets;
(iii) in LTL and to retain a holding, currently 24.2%, in order to benefit from the growth of the
business of the Company’s Manager.
The Company does not envisage any changes to its objective, its investment policy or its
management for the foreseeable future. The current composition of the portfolio as at 31 March
2023, which may be changed at any time (excluding investments in LTL and LTL managed funds)
at the discretion of the Manager within the confines of the policy stated above, is shown on
pages 9 and 10.
The Company expects to invest in a concentrated portfolio of securities with the number of equity
investments averaging fifteen companies. The Company will not make investments for the
purpose of exercising control or management and will not invest in the securities of, or lend to,
any one company (or other members of its group) more than 15% by value of its gross assets at
the time of investment. The Company will not invest more than 15% of gross assets in other
closed-ended investment funds.
The Directors have discretion to permit borrowings up to 50% of the Net Asset Value. However,
the Directors have decided that it is in the Company’s best interests not to use gearing. This is in
part a reflection of the increasing size and risk associated with the Company’s unlisted investment
in LTL, but also in response to the additional administrative burden required to adhere to the full
scope regime of the AIFMD.
The Directors’ policy is to pay annual dividends consistent with retaining the maximum permitted
earnings in accordance with investment trust regulations, thereby building revenue reserves.
In a year when this policy would imply a reduction in the ordinary dividend the Directors may
choose to maintain the dividend by increasing the percentage of revenue paid out or by drawing
down on revenue reserves. Revenue reserves are currently more than twice the annual proposed
2023 ordinary dividend.
All dividends have been distributed from revenue.
Company Performance
Share price performance and Net Asset Value (“NAV”) compared with the Benchmark for the
year ended 31 March 2023 (based on total return performance with reinvested net dividend)
* Rebased to show the performance per £100 invested.
The closing price is adjusted for the dividends of £53.00 per share which went ex-dividend on 11 August 2022.
Annualised Total Return of the Share Price, NAV and Benchmark
Note: The table is based on monthly raw data.
* The NAV and share price are adjusted for dividends and show annualised total returns.
** The Combined Benchmark is a combination of the Old Benchmark (the annual average redemption yield of the
longest dated UK government fixed rate bond, plus a premium of 0.5% subject to a minimum yield of 4%) until
31 March 2021 and the Current Benchmark (MSCI World index in Sterling) from 1 April 2021.
The Combined Benchmark does not include adjustments relating to the High Water Mark.
*** The Current Benchmark shows the performance of the MSCI World Index in Sterling. It was only adopted as the
Current Benchmark from 1 April 2021.
Source: Bloomberg and LTL.
Strategic Report
Financial Highlights for the Year
* The Net Asset Value and the share price at 31 March 2023 have been adjusted to include the Ordinary dividend
of £51.12 and a special dividend of £1.88 per Share paid on 13 September 2022, with the associated ex-dividend
date of 11 August 2022.
^ Alternative Performance Measure (“APM”). See Glossary of Terms and Alternative Performance Measures
beginning on page 104.
Source: Morningstar and Bloomberg.
Chairman’s Statement
The Company’s net asset value per share (“NAV”) was £1,056.95 on 31 March 2023. Although it fell
from £1,113.81 a year earlier, the payment of the Company’s total annual dividend of £53.00 per
share in September 2022 ensured that the NAV total return was only fractionally down, by 0.4%.
This was a marginally better result than the performance of the Company’s benchmark, the
MSCI World Index in Sterling, which fell in value by 1.0% over the year. The Company’s share price
closely tracked the NAV for most of the year and at 31 March 2023 closed at £1,052.50, a
0.4% discount. After two consecutive years of underperformance compared with the benchmark
index between 31 March 2020 and 31 March 2022 it was pleasing to see comparative returns
The Company’s long-term returns remain satisfactory even with rising inflation over the last two
years and continue to meet the Company’s investment objective as outlined on page 1. The annual
NAV total return since inception was 13.3% and remained well ahead of annual RPI inflation of
3.5%. Over the last five years NAV annual total returns were 11.1% compared with a rise in the RPI
of 5.7%, even though this captures the lower NAV returns and higher inflation of the last two years.
The Manager believes that the best way to mitigate rising inflation is to invest in companies whose
market positions allow them to raise prices or innovate through the application of technology to
grow and to offset cost pressures. We see some evidence of this from the strong corporate
performances reported by the Company’s quoted holdings after lockdowns ended.
In the face of these challenging circumstances there is a reassuring consistency and thus no change
to the Manager’s overall approach to investment. Indeed the quoted portfolio is all but unchanged
from this time last year. It is comprised of ten durable cash generative companies and two pooled
funds, themselves made up of similar companies, generating in aggregate higher returns on
capital than the average quoted company. The Manager believes that by letting these great
quoted businesses compound their returns from year to year rather than changing them in the
hope of anticipating shorter-term market price fluctuations, which incurs execution risk and
dealing expense, performance will generate lasting real returns for shareholders as has been the
case for much of the Company’s existence.
Lindsell Train Limited (‘LTL’)
The Company’s cornerstone holding in LTL, which represented 40.3% of NAV at 31 March 2023,
has held back the Company’s overall performance in recent years even if in the year to 31 March
2023, the LTL valuation total return was marginally positive at 0.2%. From LTLs peak valuation
Performance Comparisons 2023 2022
Net Asset Value total return per Ordinary Share*^ -0.4% -2.3%
Share price total return per Ordinary Share*^ -0.7% -20.0%
MSCI World Index total return (Sterling) -1.0% 15.4%
UK RPI Inflation (all items) 13.5% 8.9%
Strategic Report
on 30 June 2021, LTL’s total return to 31 March 2023 was down by 14.0%. Over the last two years
LTL has been defending its approach to investment in the face of disappointing investment
performance across all its strategies. Relative performance was worst in 2021 and improved for
some strategies in 2022 but cumulatively there is some ground to be made up. In the
circumstances, and exacerbated by other factors unrelated to performance, it is perhaps not
surprising that LTLs FUM has fallen on account of net client withdrawals. FUM for LTL peaked in
June 2021 at £24.6 billion and had fallen to £18.6 billion at 31 March 2023, experiencing over
that time £5.3 billion of net outflows. Lower FUM has resulted in LTLs valuation falling from
£18,730.17 at its peak at 30 June 2021 to £13,212.40 at 31 March 2023, a reduction of 29.5%.
Throughout this period LTL has stuck to its investment approach and, almost without exception,
to the companies it owns in each of its strategies. LTL is encouraged by how well most of its
investee companies have progressed as businesses even if this has not been reflected in market
prices. Provided LTLs companies continue to thrive, market prices should in time recover and
relative performance improve.
LTL has further expanded its profit share scheme to ensure that key individuals are incentivised
to continue to pursue their careers with LTL. From LTLs current financial year 15% of its net profits,
up from 8% last year, will be paid to selected individuals within the scheme. 50% of these profit
share payments have to be invested in LTL shares at the prevailing LTL valuation. The shares are
sourced from LTLs founders, Nick Train and Michael Lindsell, and your Company, with the founders
providing 75% and your Company 25% after LTLs Treasury is exhausted. These profit share
commitments are perpetual provided that the individual remains in LTLs employment. This
transfer of ownership will mean that the Company’s holding in LTL diminishes slowly over time.
The Board believes that by ceding ownership to future successors in this way it builds up an
alignment of interests between employees and shareholders to allow LTL to flourish in the future.
The number of shares the Company holds in LTL has remained static since 31 March 2019 but from
this year will begin to fall, reflecting these sales.
It is intended that these initiatives will accompany a transfer of responsibilities to selected
employees to ensure that LTL thrives beyond the founders active involvement. Any change is likely
to be incremental as both founders remain bound to the business, having recently renewed their
seven year rolling commitment to continue to work at LTL.
The rising profit share payments outlined above should not materially affect the profitability of
LTL, as the payments transfer rewards previously destined to the founders to successors within
the constraints of LTLs salary and bonus cap. If LTL increases the profit share awards in the future
beyond a certain level it may be necessary to give consideration to amending the salary and bonus
cap to accommodate the payments. Any change in the salary and bonus cap will require approval
from the Board of this Company.
The Valuation of Lindsell Train Limited
An important task for the Board is to determine the valuation of its 24.2% minority stake in LTL.
The valuation methodology, which was amended at 31 March 2022 having taken professional
advice, has been applied throughout the year. It is based on a percentage of LTLs FUM, with the
percentage applied adjusted to reflect the ongoing profitability of LTL, and currently values the
LTL stake at £85 million (2022: £97 million). The increase in UK Corporation Tax from April 2023
Chairman’s Statement continued
from 19% to 25% has already impacted the LTL valuation as the Directors accounted for a staged
increase in the tax rate when calculating LTLs valuation from October 2022. The Board continues
to monitor a number of alternative approaches to the valuation of LTL to ensure that the result
of the new methodology makes sense in the context of the future prospects for LTL and also when
it is compared with similar businesses.
As the share transfers resulting from profit share awards increase, so the utility and importance
of LTLs valuation expands from primarily determining a monthly price for LTLs shares to becoming
the price that governs the transfer of value between founders, employees and the Company.
The Board proposes to pay a total dividend for the year to 31 March 2023 of £51.50 per share
which represents a small 0.7% rise in the ordinary dividend from £51.12. No special dividend will
be paid this year as LTL did not earn any performance fees. It represents a 2.8% fall in the total
dividend and means that the Company will retain slightly less than the maximum amount it is
permitted to retain to guarantee continued Investment Trust status.
In framing its dividend policy the Company has always assumed that retaining as much net income
as allowable within the Company is preferable and more tax efficient for our shareholders.
However this principle also runs alongside a desire to see LTLs dividends grow, reflecting the
success of the Company. In three instances in the past (in 2007, 2010 and 2011) following market
volatility, the Board decided either to retain less than the maximum allowed or to draw down on
its revenue reserves to prevent the dividend from falling, which would have resulted if there had
been a strict interpretation of the dividend policy. The Board is minded to do the same in the
future but is aware that, as the LTL dividend now represents 84% of the Company’s total revenues
(a much higher percentage compared with earlier years), depleting revenue reserves to simply
maintain the dividend without some assurance that those reserves would soon be replenished
might not be in the best interests of shareholders. We do not know what 2023 will bring for LTL,
but at current levels of FUM the LTL dividend is likely to fall again in its year ending January 2024.
Board Changes
During the year the Board was delighted to welcome Roger Lambert and Helena Vinnicombe,
who were appointed as Directors in September 2022 following a formal recruitment process.
A resolution proposing their election together with resolutions for those Directors standing for
re-election will be put to Shareholders at the forthcoming Annual General Meeting.
Richard Hughes resigned as the Chairman of the Audit Committee in April 2023 and has also
decided to retire from the Board following the Annual General Meeting. Both decisions were
taken for personal reasons. Richard’s experience as a fund manger and as an observer of
companies and markets over his career made his contribution to the company as the Audit
Committee Chairman particularly valuable, especially in revising the valuation methodology for
LTL and cataloguing and assessing the potential risks facing the Company. The Board is sad to
lose a valued member. We wish him well for the future.
Strategic Report
Following Richard’s resignation Helena Vinnicombe agreed to become the Chairman of the Audit
Committee for an interim period and Cornforth Consulting Ltd (“Cornforth”) was appointed by
the Board in April 2023 to assist with the appointment of a new Audit Committee Chairman.
I have been honoured and privileged to serve as Chairman of the Company since 2015. I have
indicated to the Board that I wish to stand down as part of the normal succession process and it
has been agreed that I will do so at the end of 2023. I am delighted that Roger Lambert has been
chosen by my Board colleagues to succeed me from 1 January 2024.
Change of Auditor
During the year the Board initiated a formal competitive tender process for our external audit
engagement. At the forthcoming Annual General Meeting, the Board will propose that BDO LLP
replace PricewaterhouseCoopers LLP as the Company’s external auditor. Full details of this process
can be found in the Report of the Audit Committee beginning on page 55.
The Annual General Meeting
This year’s Annual General Meeting will be held at 2.30 p.m. on Wednesday, 30 August 2023, at
the Marlborough Suite, St Ermin's Hotel, 2 Caxton Street, London, SW1H 0QW. As well as the
formal proceedings, there will be an opportunity for shareholders to meet the Board and the
Investment Manager, and to receive an update on the Company’s strategy and its key investments.
This year for the first time voting will be conducted via a poll and I encourage all shareholders to
exercise their right to vote. The Board strongly encourages shareholders to register their votes
online in advance. Registering your vote in advance will not restrict shareholders from attending
and voting at the meeting in person should they wish to do so. As investors we demand high
standards of corporate governance from the companies that we own in the Company’s portfolio,
and we urge you, our shareholders, to follow suit and vote on the resolutions that are proposed,
as we the Directors intend to do ourselves.
Considerations for the Future
With interest rates rising as much and as quickly as they have, it is encouraging that markets have
been able to absorb these increases with relative equanimity. Recent troubles in the global
banking sector show that perhaps markets have yet to fully adjust to the effects of this change.
In this environment the Board is much reassured that the Company owns a selection of durable
quoted companies with a history of having thrived through more difficult times in the past. The
holding in LTL, as a unquoted, relatively young company, may represent more risk from this
perspective but, as its business is built on the same durable platform of companies that it owns
for its clients, it is also uniquely aligned with the risks faced by the quoted portfolio.
Let us hope these companies continue to compound the returns we seek. If they do, market prices
should eventually respond, which should be to the benefit of our direct holdings and LTLs
Julian Cazalet
12 June 2023
Chairman’s Statement continued
Portfolio Holdings at 31 March 2023
(All ordinary shares unless otherwise stated)
% of Look through
Fair value net basis % of
Holding Security £’000 assets total assets
6,450 Lindsell Train Limited 85,220 40.32 40.32
235,000 London Stock Exchange 18,490 8.75 8.94
12,500,000 LF Lindsell Train North American* 17,361 8.21 0.00
Equity Fund
420,500 Diageo 15,195 7.19 7.40
410,000 Nintendo 12,828 6.07 6.07
363,000 RELX 9,500 4.49 4.73
222,000 Unilever 9,301 4.40 4.57
149,980 Mondelez International 8,468 4.00 4.45
1,263,393 A.G. Barr 6,367 3.01 3.03
89,000 Heineken 6,618 3.13 3.24
97,400 PayPal 5,988 2.83 3.06
39,000 Laurent Perrier 4,016 1.90 1.90
420,000 Finsbury Growth & Income Trust* 3,776 1.79 0.00
Indirect Holdings 8.26
–––––––––––– –––––––––––– ––––––––––––
Total Investments 203,128 96.09 95.97
Net Current Assets 8,262 3.91 4.03
–––––––––––– –––––––––––– ––––––––––––
Net Assets 211,390 100.00 100.00
–––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– ––––––––––––
Look-through basis: Percentages held in each security are adjusted upwards by the amount of securities held by
LTL managed funds owned by the Company. A downward adjustment is applied to the fund's holdings to take
into account the underlying holdings of these funds. It provides shareholders with a measure of stock specific
risk by aggregating the direct holdings of the Company with the indirect holdings held within LTL managed
* LTL managed funds.
We detail below the equity exposure of the Funds managed by LTL as at 31 March 2023:
Net Equity
LF Lindsell Train North American Equity Fund ACC 97.91%
Finsbury Growth & Income Trust PLC 101.48%
Strategic Report
Analysis of Investment Portfolio at 31 March 2023
Breakdown by Location of Listing
(look-through basis)^
UK* 70%
USA 15%
Japan 6%
Europe excluding UK 5%
Rest of World 0%
Cash & Equivalents 4%
Breakdown by location of underlying company revenues
(look-through basis)^
USA** 28%
Europe excluding UK** 27%
UK** 26%
Rest of World 12%
Japan 3%
Cash & Equivalents 4%
Breakdown by Sector
(look-through basis)^
Financials 54%
Consumer Staples 27%
Communication Services 7%
Industrials 5%
Information Technology 2%
Consumer Discretionary 1%
Cash & Equivalents 4%
^ Look-through basis: this adjusts the percentages held in each asset class, country or currency by the amount
held by LTL managed funds. It provides shareholders with a more accurate measure of country and currency
exposure by aggregating the direct holdings of the Company with the indirect holdings held by the LTL
managed funds.
* LTL accounts for 40.3% and is not listed.
** LTL accounts for 17 percentage points of the Europe figures, 18 percentage points of the UK figures,
5 percentage points of the USA figures and 0 percentage points of the RoW figure.
Manager’s Report
We did not initiate any holdings over the last six months, nor did we dispose of any. In fact, our
only activity was to add to our most recent position, Laurent Perrier. This is now getting on for a
2% holding and we look to build it further, when shares come available, which is infrequently.
We know this lack of activity could be construed as us running out of ideas, or complacency.
I assure you this is not so, and that Michael Lindsell and I remain as committed to and ambitious
for your Company as ever. We both added to our own holdings in the Company over the period.
Instead, the lack of portfolio activity reflects our double conviction. First, that the companies we
own are fine businesses with plenty of growth ahead of them and, therefore, with the potential
to command higher (we hope much higher) share prices in the future. Second, we reiterate our
view that buying and selling shares in the hope of improving investment performance is, on
balance and for most investors, over time, a loser’s game. The costs of such selling and buying are
certain, while the benefits of switching horses in mid-stream are most uncertain, particularly when
you own a stable of thoroughbreds, which we believe is the case for ours.
Nonetheless, we know that for the NAV of your Company to make significant progress, the shares
of our investee companies must also progress. In fact, we want as many as possible to be hitting
regular all-time highs, because that is the best validation of our kind of investment approach.
That investment approach being based on identifying long-term winners and then running those
winners for the genuinely long-term. Candidly, we wish more of our holdings had been hitting
new highs over the last couple of years.
However, in this report let me note: three portfolio holdings hit all-time share price highs in the
first quarter of 2023. We hope this trio goes even better as the year progresses and that they are
soon joined by other important holdings hitting all-time share price highs too.
The three recent winners were Laurent Perrier, Mondelez and RELX, each of which had
encouraging recent trading updates. I hope it doesn’t sound flippant, but we think there is every
ground for expecting these companies to continue to do well. Their respective business franchises
one of the world’s premium champagne brands (and the only publicly-quoted one); the owner
of two beloved global mega-brands, Cadbury and Oreos; and a globally-significant provider of
“must-have data” for scientists, lawyers and risk professionals – remain compelling propositions
for investors, we think. All three have been terrific long-term investments too, in addition to their
2023 gains. Why shouldn’t they carry on being so?
Elsewhere, there are several holdings where the shares have picked up in recent months and are
now within striking distance of all-time highs. Diageo for instance is less than 10% off its peak. A
period of dull price performance since 2021 has coincided with some interesting changes to the
share register. We note three relatively recent buyers of Diageo shares: the Gates Foundation (as
in Bill Gates), Berkshire Hathaway and Diageo itself. We are encouraged to see investors and an
industry participant of this calibre sharing our confidence in the secular growth and inflation
protection offered by Diageo’s brands. And, of course, Diageo’s purchases of its own shares for
cancellation increase the value of each remaining share; great for long-term holders like us.
Bill Gates also took advantage of a recent corporate placing of Heineken shares to acquire a stake
in that company, worth nearly $1.0 billion. This is a nice approbation of the durability and likely
long-term prosperity of this great business, and we hope to see our Heineken shares surpass their
2019 peak soon. They are currently about 10% shy.
Strategic Report
Bill Gates’ old business, Microsoft, recently acquired £1.7 billion-worth of shares in London Stock
Exchange Group (“LSEG”) – as part of a strategic joint venture between the two companies. This
has pushed LSEG shares better, and they are now c10.7% below their 2021 highs (at worst they
traded 35% below those levels). With each passing set of results the wisdom of LSEG’s 2021
purchase of Refinitiv looks more certain. Certainly, it is the reason that Microsoft has partnered
with LSEG. And if the LSEG board’s ambitions are achieved – and that board now has a senior
Microsoft officer as a non-executive - then we have no doubt that old share price peak will be
handsomely superseded.
Another new strategic holding has been built in one of your portfolio companies. Nintendo has
a new, major investor; the Saudi Public Wealth Fund now speaks for 8% of its equity. Today the
shares are 20% below the highs they reached in 2021 (although admittedly somewhat further
below their all-time high of as long ago as 2007). What will make those highs be surpassed? Well
– how about the news that Nintendo’s Mario movie, released in April 2023, has rapidly become
the most successful video-game film spin-off ever and is, after just a week’s release, the second
most successful animated movie released since the onset of Covid-19? To us and, we assume, the
Saudi Public Wealth Fund, that success reinforces our confidence in the longevity of Nintendo’s
wonderful gaming franchises, which have been loved by generation after generation of kids and
their parents. Nintendo shares are valued on a lowly 14x historic earnings and a dividend yield of
nearly 3%, which speaks of a scepticism on the part of investors about the earnings power of the
company. To us that scepticism seems profoundly wrong.
Unilever shares currently stand 16% below their 2019 peak (though 28% above their lows of early
2022) and probably need a resurgence of confidence in Emerging Markets to really get going
again; of course, this will happen one day.
I must acknowledge that for the other two holdings in your portfolio, all-time high share prices
look more distant in the short term. A.G. Barr sits 45% below its 2019 highs and PayPal a
disappointing 75%. Yet both are forecast to grow sales and earnings over the next few years,
each have obviously valuable brands or market positions and both have very strong balance sheets
– so you never know.
In summary, we are pretty pleased with the business performance of the companies in your
portfolio. Excepting the impact of Covid-19, they have exhibited the reliability we hoped for. Their
share prices have been less satisfactory, at least until recently. But we are sure if the businesses
continue to prosper, the shares will follow – to the benefit of your Company.
Nick Train
Investment Manager
Director, Lindsell Train Limited
12 June 2023
Manager’s Report continued
Performance and Prospects
As set out in the Chairman's statement beginning on page 5, considering the opportunities and
challenges faced during the year, relative to the wider market, the Board is satisfied with the
Company’s performance compared with the benchmark and other key performance indicators,
when assessed over the five and ten year periods referred to in the chart on page 4.
The Board continues to fully support the Manager's strategy and firmly believes that it will
continue to deliver strong investment returns over the long-term.
This is supported by the Company's performance since inception (21 January 2001) with a net
asset value per share total return^ of 13.3% compared with a total return from the Company's
combined benchmark index of 4.6% both calculated on an annualised basis.
The Directors provide an explanation in the Viability Statement on pages 19 and 20 as to how
they have assessed the prospects of the Company, over what period they have done so and why
they consider that period to be appropriate.
Key Performance Indicators (“KPIs”)
The Board reviews the performance of the portfolio in detail and is presented with the views of
the Manager at each meeting. Information on the Company’s performance is provided in the
Chairman’s Statement (beginning on page 5) and the Manager's Report (beginning on page 11).
This performance is assessed against the following KPIs: Net Asset Value Total Return, Share Price
Total Return and Dividend per Ordinary Share which are unchanged from last year with the
exception of Dividend per Ordinary Share.
Net Asset Value Total Return^ and Share Price Total Return^ are compared with the benchmark
and provide the key performance indicators for assessing the development and performance of
the Company.
Principal Data
31 March 2023 31 March 2022 % Change
Shareholders’ funds (£’000) 211,390 222,761 -5.1%
NAV per Ordinary Share £1,056.95 £1,113.81 -5.1%
Discount to NAV^ 0.42% 0.79%
Share price per Ordinary Share £1,052.50 £1,105.00 -4.8%
Recommended final dividend per Ordinary Share £51.50 £51.12 +0.7%
Recommended special dividend per Ordinary Share £1.88 -100.0%
Total dividends recommended for the year £51.50 £53.00 -2.8%
Dividend yield^ 4.89% 4.80%
Ongoing Charges^ 0.87% 0.82%
Earnings/(loss) per Ordinary Share – basic £(3.85) £(21.77)
Revenue £61.06 £63.65
Capital £(64.91) £(85.42)
NAV total return^
-0.4% -2.3%
Share price total return^
-0.7% -20.0%
Benchmark (MSCI World Index in Sterling)
-1.0% 15.4%
^ Alternative Performance Measure (see Glossary beginning on page 104).
These are percentage change figures for the year to 31 March.
Please see Glossary of Terms beginning on page 104 for an explanation of terms used.
Strategic Report
Five Year Historical Record
Net revenue Dividends Dividends Net Share
available for on Ordinary on Ordinary asset value price per
Gross Ordinary Shares Shares per Ordinary Ordinary
income Shares Cost Rate Share Share
To 31 March £’000 £’000 £’000 (£) (£) (£)
2019 8,680 7,172 5,900 29.50 895.93 1,475.00
2020 12,395 10,598 8,800 44.00 956.65 1,060.00
2021 13,782 12,002 10,000 50.00 1,185.58 1,420.00
2022 14,784 12,729 10,600 53.00 1,113.81 1,105.00
2023 14,135 12,211 10,300 51.50 1,056.95 1,052.50
Alternative Performance Measures (“APM”)
The Board believes that each of the APMs, which are typically used within the Investment Trust
Sector, provides additional useful information to shareholders in order to assess the Company’s
performance between reporting periods and against its peer group. The measures used for the
year under review have remained consistent with the prior year.
(Discount)/premium to NAV^
The Board regularly reviews the level of the discount/premium of the Company’s share price to
the net asset value per share and considers ways in which share price performance may be
enhanced, including the effectiveness of share buybacks, where appropriate. Any decision to
repurchase shares is at the discretion of the Board.
Dividend Yield^
The Directors regard the Company’s dividend yield to be a key indicator of performance. The
dividend yield measures the gross income receivable based on the payment of the historic
dividend per share expressed as a percentage of the Company’s current share price.
Ongoing Charges^
Ongoing charges represent the costs that shareholders can reasonably expect to pay from one year
to the next, under normal circumstances. The Board continues to be conscious of expenses and
works hard to maintain a sensible balance between high quality service and the cost of provision.
NAV Total Return^
The Directors regard the Company’s net asset value per share total return as being the overall
measure of value delivered to shareholders over the long term. The Board considers the principal
comparator to be the MSCI World Index Total Return (Sterling adjusted).
Share Price Total Return^
The Directors also regard the Company’s share price total return to be a key indicator of
performance. This reflects share price growth of the Company which the Board recognises is
important to investors.
^ Further information on each of the Alternative Performance Measures and the basis of their calculation can be
found in the Glossary beginning on page 104.
Key Performance Indicators (“KPIs”) continued
Principal Risks
The Board is responsible for managing the risks faced by the Company. Through delegation to
the Audit Committee, the Board has established procedures to manage risk, to review the
Company’s internal control framework and to establish the level and nature of the principal risks
the Company is prepared to accept in order to achieve its long-term strategic objective. At least
once a year the Audit Committee carries out a robust assessment of the principal and emerging
risks with the assistance of Frostrow. A risk management process has been established to identify
and assess risks, their likelihood and the possible severity of impact. Further information is
provided in the Audit Committee Report beginning on page 55. These principal risks and the ways
they are managed or mitigated are set out on the following pages.
The Board’s policy on risk management has not materially changed during the course of the
reporting period and up to the year end.
Movement during the year: Unchanged, Reduced, Increased, New risk included during the year
Movement Key Risks and Uncertainties Key Mitigations
Corporate Strategy
The Board may have to reduce the Company’s
84% of the Company’s income is represented by
dividends from LTL. If LTLs funds under
management fall the Company’s dividend
paying potential could be negatively impacted.
The Board reviews at every Board meeting the
investment portfolio, income forecasts and
levels of available revenue reserves prepared by
the Company Secretary at every Board meeting.
Sufficient dividends are paid to maintain
investment trust status.
The Company has retained revenue reserves,
which can be used to supplement dividend
payments in the event of a short-term
reduction in net revenue.
In the event of a sustained fall in LTLs FUM and
its dividend paid to the Company, the
Company’s dividend would have to be adjusted
The Company’s share price total return may
differ materially from the NAV per share total
return resulting in the shares trading at either
a premium or a discount to NAV.
Regular consideration is given to the share price
premium or discount to NAV per share and the
Company has authority to buy back shares and
hold in treasury.
Investment Strategy and Activity
The departure of a key individual at the Manager
may affect the Company’s performance.
The Board keeps the investment management
arrangements under continual review. In turn,
the Manager reports on developments at LTL,
including succession and business continuity
plans. The Board meets with other members of
the wider team employed by the Manager.
Key-man insurance has been secured by the
Company to help mitigate this risk. The Board
is also encouraged by the continued
development of the investment management
team at LTL who are now taking on greater
responsibility at a more senior level.
The investment strategy adopted by the
Manager, including the high degree of
concentration of the investment portfolio, may
lead to an investment return that is materially
lower than the Company’s benchmark index,
and/or a possible failure to achieve the
Company’s investment objective.
The Board regularly discusses with the Manager
the structure of the portfolio, including asset
allocation and portfolio concentration.
The Board reviews the performance of the
portfolio against the benchmark at every meeting.
Principal Risks continued
Strategic Report
Movement Key Risks and Uncertainties Key Mitigations
Fraud (including unauthorised payments and
cyber fraud) occurs leading to a loss.
The Manager and the Company Secretary have
in place robust compliance and risk monitoring
The Board receives monthly compliance reviews
and quarterly expenses analysis.
An annual statement is obtained by the Audit
Committee from all service providers giving
representations that there have been no
instances of fraud or bribery.
Adverse reputational impact of one or more of
the Company’s key service providers which, by
association, causes the Company reputational
The Board has appointed reputable service
providers who are well experienced in the
investment trust sector. Individual Directors are
well connected in the investment market and
investment company sector and thereby keep
themselves appraised of developments in the
sector. The Manager and the Company
Secretary provide regular news updates on all
matters affecting the Company.
The Board undertakes an annual review of the
level of service provision of the service
The investment in LTL becomes an even greater
proportion of the overall value of the
Company’s portfolio.
The Board holds quarterly discussions with the
Manager at each Board meeting. Consideration
is given during a strategy meeting to the
prospects of LTL and subsequent impact on the
The Board receives monthly compliance reports
from the Company Secretary which monitor
compliance with the investment restrictions.
The adverse impact of climate change on the
portfolio companies’ operational performance.
The Board receives quarterly ESG updates, which
include an update on any climate change related
engagement, from the Manager. The Board
monitors the Manager on ESG matters to
ascertain that the portfolio companies are acting
in accordance with the Manager’s ESG approach.
The Manager is a signatory to the UK
Stewardship Code and actively engages with
portfolio companies on ESG matters including
climate change.
LTL developed its own methodology to assess
the carbon impact of the portfolio. LTL became
a signatory of Net Zero Asset Managers
(“NZAM”) in December 2021. This reflects LTL's
enhanced efforts as a firm to support the goal
of net zero greenhouse gas emissions by 2050.
Details of the Company’s and Manager’s ESG
policies together with the weighted average
carbon intensity of the portfolio companies are
set out on pages 25 to 29.
Movement Key Risks and Uncertainties Key Mitigations
Accounting, Legal and Regulatory
The Company and/or the Directors fail(s) to
comply with its legal requirements in relation
to FCA dealing rules/handbook procedures, the
Listing Rules, the Companies Act 2006, relevant
accounting standards, the Bribery Act 2010, the
Criminal Finances Act 2017, the Association of
Investment Companies (“AIC”) Statement of
Recommended Practice (“SORP”), GDPR, tax
regulations or any other applicable regulations.
The Board monitors regulatory changes with
the assistance of the Company Secretary, the
Manager and external professional advisers to
ensure compliance with applicable laws and
The Board reviews compliance reports and
internal control reports provided by its service
providers, as well as the Company’s Financial
Statements and revenue forecasts.
The Company Secretary presents a quarterly
report on changes in the regulatory
environment and how and when changes are
to be addressed
As a member of the AIC, the Board receives
regular technical updates which highlight
forthcoming compliance obligations and
regulatory issues.
The regulatory environment in which the
Company operates changes, affecting the
Company's business model.
The Board monitors the regulatory environment
with the assistance of its Company Secretary,
Manager and external professional advisers to
ensure that the Board is aware of any likely
changes in the regulatory environment and will
be able to adapt as required.
The Company is exposed to market price risk. The Directors acknowledge that market risk is
inherent in the investment process as the
Manager maintains a concentrated portfolio of
securities. The Board has imposed guidelines
within its investment policy to limit exposure to
individual holdings.
The Company Secretary reports to the Board
with respect to compliance with investment
guidelines on a monthly basis. The Manager
provides the Board with regular updates on
market movements. No investment is made in
derivative instruments and no currency hedging
is undertaken.
Further information on financial instruments
and risk can be found in note 17 to the
Financial Statements beginning on page 82.
The Company is exposed to credit risk. The Manager is responsible for undertaking
reviews of the creditworthiness of the
counterparties that it uses.
All business with respect to portfolio activity is
conducted through selected brokers on a
delivery versus payment basis thereby
minimising exposure to broking counterparties.
Further information on financial instruments
and risk can be found in note 17 to the
Financial Statements beginning on page 82.
Emerging Risks
The Audit Committee reviews a risk map regularly during the year. Emerging risks are discussed
in detail as part of this process and also throughout the year to try and ensure that new (as well
as known) risks are identified and, so far as practicable, mitigated. Current identified emerging
risks are as follows:
Movement Key Risks and Uncertainties Key Mitigations
The Company’s valuation of its investment in
LTL is materially misstated.
The Board approves the monthly valuation of
the Company's Investment.
An audit of LTLs valuation is conducted annually
by a leading independent external audit firm.
J.P. Morgan Cazenove Ltd undertook an
independent review of the Company’s
valuation methodology applied to its unlisted
investment in LTL during 2022.
The Manager and the Company Secretary report
to the Board at every meeting. An internal
controls report is produced by the Company
Secretary on an annual basis covering controls
over valuation and release of weekly net asset
value per share.
Movement Key Risks and Uncertainties Key Mitigations
Emerging Risks
Geopolitical and macroeconomic developments
introduce new risks and exacerbate existing
risks. These include:
higher inflation is leading policy makers to
increase interest rates. This in turn may lead
to a reduction in trade, a threat of recession
and higher unemployment;
sanctions damage the prospects of investee
companies with material exposure to
increased market volatility and reduced risk
appetites across a wide variety of asset
increased threat of state sponsored cyber-
attacks; and
geopolitical tension between China and
the West.
The Manager monitors portfolio construction,
performance and liquidity to assess and
manage the impact of increased market
volatility on the listed portfolio and on the
Company’s holding in LTL.
The Manager monitors the current impact of
sanctions and other economic responses to the
war in Ukraine on investee companies.
The Company’s investment approach means
that it owns companies with strong brand
equity and pricing power making them more
able to pass on cost increases and mitigate the
effects of inflation on portfolio holdings.
The Board reviews regular internal control
reports from its key service providers that
include cyber defences and other mitigants
against unauthorised network access.
Strategic Report
Future Developments
The Board’s primary focus is on LTLs investment approach and performance both as the Company’s
Manager and as an investment. The subject is thoroughly discussed at every Board meeting.
In addition, the Company Secretary updates the Board on investor feedback, as well as wider investment
company issues.
An outline of performance, investment activity and strategy, and market background during the
year, as well as the outlook, is provided in the Chairman's Statement beginning on page 5 and
the Manager's Report beginning on page 11.
It is expected that the Company’s strategy will remain unchanged in the coming year.
Longer-Term Viability Statement
The Directors have carefully assessed the Company’s financial position and prospects as well as
the principal risks facing the Company and have formed a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they fall due over the
next five financial years. The Board has chosen a five year horizon in view of the long-term
outlook adopted by the Investment Manager when making investment decisions.
To make this assessment and in reaching this conclusion, the Audit Committee has considered the
Company’s financial position and its ability to liquidate its portfolio and meet its liabilities as they
fall due and notes the following:
The Company has a liquid investment portfolio of UK and internationally listed securities and
funds, and has some short-term cash on deposit. These liquid assets represent 59.7% of net
assets. The other 40.3% is the unlisted investment in LTL, which is not readily realisable.
Based on historic analysis, including the holding in the LTL fund, 56.8% of the current portfolio
could be liquidated within 30 business days with 51.0% in five business days. There is no
expectation that the nature of the investments held within the portfolio will be materially
different in the future.
With an ongoing charges ratio of 0.87%, the expenses of the Company are predictable and
modest in comparison with its assets and there are no capital commitments currently foreseen
which would alter that position.
Revenue expenses of the Company are covered more than five times by investment income.
The closed-ended nature of the Company means that, unlike an open-ended fund, it does not
need to realise investments when shareholders wish to sell their shares.
The founder directors of LTL, in which the Company holds 24.2%, have given their verbal
assurance that they remain committed to LTL for at least seven years on a rolling basis.
The Company has decided not to use gearing.
The Company has no employees, only its non-executive Directors. Consequently it does not
have any potential redundancy or other employment related liabilities or responsibilities.
The Directors, as well as considering the potential impact of the principal risks and various severe
but plausible downside scenarios, have also made the following assumptions in considering the
Company’s longer-term viability:
The Board and the Investment Manager will continue to adopt a long-term view when making
investments, and anticipated holding periods will be at least five years.
Regulation will not increase to a level that makes running the Company uneconomical.
The Board’s long-term view of viability will, of course, be updated each year in the Company’s
Annual Report.
Strategic Report
Longer-Term Viability Statement continued
Who? Why? How?
Investors The benefits of engagement with
the Company’s Stakeholders
The Board recognises the
importance of communication with
Clear communication of the
Company’s strategy and the
performance against the Company’s
objective can help maintain
demand for the Company’s shares.
How the Board, the Manager and the Company
Secretary have engaged with the Company’s
The Board and the Manager receive shareholder
feedback directly from shareholders or from the
appointed broker.
An analysis of the Company’s shareholder register
is provided to the Directors at each Board meeting
Shareholders have access to the Board, directly
and via the Company Secretary, throughout the
year. These communications help the Board make
informed decisions when considering how to
promote the success of the Company for the
benefit of shareholders over the long-term.
Key mechanisms of engagement include:
The Annual General Meeting.
Should any significant votes (greater than
20%) be cast against resolutions proposed at
the Annual General Meeting, the Board will
engage with shareholders. The Board will
explain in its announcement of the results of
the Annual General Meeting the actions it
intends to take to consult shareholders in
order to understand the reasons behind the
significant votes against. Following the
consultation, an update will be published no
later than six months after the Annual General
Meeting and the Annual Report will detail the
impact the shareholder feedback has had on
any decisions the Board has taken and any
actions or resolutions proposed.
The Company’s website which hosts monthly
reports and Annual and Half-year Reports.
One-on-one investor meetings as required.
Section 172 Disclosure
Engaging with the Company’s Stakeholders
The following Section 172 disclosure, which is required by the Companies Act 2006 and the AIC
Code, describes how the Directors have had regard to the views of the Company's stakeholders
in their decision making.
Who? Why? How?
Service Providers
The benefits of engagement with
the Company’s Stakeholders
Engagement with the Company’s
Manager is necessary to evaluate
its performance against the
Company’s stated strategy and to
understand any risks or
opportunities this may present.
The Board monitors the Manager’s
approach to environmental, social
and governance (“ESG”) issues.
Engagement also helps ensure
that investment management
costs are closely monitored and
remain competitive.
The Chairman’s Statement
beginning on page 5 and Appendix
3 beginning on page 98 describe
the key decisions taken during the
year relating to LTL.
The Company contracts with third-
parties for other services including:
Company Secretary and
administration, Registrar and
Custodian. The Company ensures
that the third-parties to whom the
services have been outsourced
complete their roles in line with
expectation thereby supporting the
How the Board, the Manager and the Company
Secretary have engaged with the Company’s
The Board meets regularly with the Company’s
Manager throughout the year both formally at
the quarterly Board meetings and informally as
needed. The Board and Manager communicate
regularly outside these meetings to ensure a
collegiate approach.
Furthermore, Michael Lindsell is a Director of both
the Company and of the Manager. The aim is to
maintain a strong relationship between the Board
and Manager when considering the interests of
the Company’s stakeholders, whilst upholding the
Company’s values.
The Manager’s attendance at each Board meeting
also provides the opportunity for the Manager
and Board to further reinforce their mutual
understanding of what is expected from both
The Manager’s performance is evaluated
informally on a regular basis, with a formal review
carried out on an annual basis by the
Management Engagement Committee. The
Investment Management Agreement is reviewed
as part of this process.
The Audit Committee review the Manager's,
internal controls and governance policies on an
annual basis.
The Board and the Company Secretary engage
regularly with other service providers both in one-
to-one meetings and via regular written
reporting. This regular interaction provides an
environment where topics, issues and business
development needs can be dealt with efficiently
and collegiately.
The Board maintains regular contact with the
Company’s key service providers as well as carrying
out a review of the service providers’ business
continuity plans and additional cyber security
The key service providers’ performance is
evaluated by the Management Engagement
Committee on an annual basis, or more often if
appropriate. The terms and conditions underlying
the relationship between the service providers are
reviewed as part of this process. This approach is
taken to enhance service levels and strengthen
relationships between the Company and its
providers to ensure the interests of the Company’s
stakeholders are best served by maintaining a high
level of service whilst keeping costs proportionate.
Engaging with the Company’s Stakeholders continued
Strategic Report
Who? Why? How?
Portfolio companies
The benefits of engagement with
the Company’s Stakeholders
The Manager invests in a
concentrated portfolio of durable
business franchises with the
intention of holding these
positions for a considerable time.
The Manager engages with the
management of these companies
on a periodic basis and reports its
impressions on the prospects of
the companies to the Board.
Gaining a deeper understanding of
the portfolio companies and their
strategies as well as incorporating
consideration of ESG factors into
the investment process assists in
understanding and mitigating risks
of investments as well as
identifying future potential
The Board ensures compliance
with rules and regulations as
relevant to the Company.
How the Board, the Manager and the Company
Secretary have engaged with the Company’s
The Board encourages the Company’s Manager to
engage with companies and in doing so expects
ESG issues to be a key consideration.
The Board receives an update on LTL's
engagement activities within a dedicated
quarterly ESG report together with quarterly
updates concerning the prospects of the portfolio
Details of LTL's approach to responsible ownership
can be found on pages 25 to 29.
The Company Secretary reports to the Board on a
monthly basis and at each Board meeting.
Ongoing dialogue with shareholders concerning
the strategy of the Company, performance and
the portfolio.
The Manager meets with shareholders as required
and at the Annual General Meeting.
Shareholders are provided with performance
updates via the Company's website as well as the
usual financial reports and monthly reports.
Board Composition. Cornforth was appointed by the Board in April
2022 to assist with the appointment of two new
Directors, resulting in the appointment of Roger
Lambert and Helena Vinnicombe, who joined the
Board on 23 September 2022 and will offer
themselves for election by shareholders at the
2023 Annual General Meeting.
As part of the Board's succession plans, it is
intended that Julian Cazalet will retire as Chairman
of the Board and Management Engagement
Committee at the end of December 2023.
Mr Cazalet will be succeeded as Chairman by
Mr Lambert.
Audit Tender During the year the Audit Committee led a
competitive audit tender process, which resulted
in the recommendation that BDO LLP be
appointed as the Company's new auditor. Further
information concerning the audit tender process
can be found on pages 58, 59 and 60.
Board Composition (continued). Richard Hughes will retire as a Director at the
conclusion of the Company’s Annual General
Meeting. Ms Vinnicombe took over from
Mr Hughes as Chairman of the Audit Committee
with effect from 14 April 2023, on an interim basis.
Cornforth was appointed by the Board in April
2023 to assist with the appointment of a new
Audit Committee Chairman.
LTIT’s Responsible Investment Policy
The Board believes that it is in shareholders’ best interests to consider ESG factors when selecting
and retaining investments and the Manager takes these issues into account.
In its Responsible Engagement & Investment Policy, the Manager states that its evaluation of ESG
factors is an inherent part of the investment process. These factors include, but are not limited
to: “corporate strategy, operating performance, competitive positioning, governance,
environmental factors (including climate change), social factors, remuneration, reputation and
litigation risks, deployment of capital, regulation and any other risks or issues facing the business”.
The Board has delegated authority to the Manager to vote the shares owned by the Company
that are held on its behalf by its Custodian. The Board has instructed that the Manager submits
votes for such shares wherever possible and practicable. The Manager is required to refer to the
Board on any matters of a contentious nature.
The Manager’s Responsible Investment and Engagement Policy has been reviewed and endorsed
by the Board. The Manager is a signatory to the United Nations Principles for Responsible
Investment and a signatory of the 2021 UK Stewardship Code.
LTL became a signatory of Net Zero Asset Managers in December 2021.
UK Sanctions
The Board has made due diligence enquiries of the service providers that process the Company’s
shareholder data to ensure the Company’s compliance with the UK sanctions regime. The relevant
service providers have confirmed that they check the Company’s shareholder data against the UK
sanctions list on a daily basis. At the date of this report, no sanctioned individuals had been
identified on the Company’s shareholder register. The Board notes that stockbrokers and
execution-only platforms also carry out their own due diligence.
Engaging with the Company’s Stakeholders continued
Strategic Report
Taskforce for Climate Related Financial Disclosures (“TCFD”)
The Company notes the TCFD recommendations on climate related financial disclosures. The
Company is an investment company and, as such, it is exempt from the Listing Rules requirement
to report against the TCFD frame work.
Disclosure Concerning Greenhouse Gas Emissions (“GHG”) for the year ended 31 March 2023
The Company is an investment trust, with neither employees nor premises, nor has it any financial
or operational control of the assets which it owns. It has no greenhouse gas emissions to report
from its operations, nor does it have responsibility for any other emissions producing sources
under the Companies Act 2006 (Strategic Reports and Directors’ Reports) Regulations 2013 or the
Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018, including those within the Company’s underlying investment portfolio.
Consequently, the Company consumed less than 40,000 kWh of energy during the year in respect
of which the Directors’ Report is prepared and therefore is exempt from the disclosures required
under the Streamlined Energy and Carbon Reporting criteria.
The Board is aware of the continued emphasis on ESG matters in recent years. The Manager
engages with all the companies in the portfolio to understand their ESG approach and has
developed its own methodology to assess the carbon impact of the portfolio.
LTL’s approach to Responsible Ownership
ESG integration
Seeking Sustainability
As a long-term investor, LTL aims to identify companies that can generate long-term sustainable
high returns on capital. LTL has historically found that such companies tend to exhibit
characteristics associated with good corporate governance and responsible business practices.
Indeed, LTL believes that companies which observe such standards, and that are serious in their
intention of addressing environmental and social factors, will not only become more durable but
will likely prove to be superior investments over time.
To that end LTLs initial analysis and ongoing company engagement strategy seeks to incorporate
all sustainability factors that it believes will affect the Company’s ability to deliver long-term value
to shareholders. Such factors may include but are not limited to: environmental (including climate
change), social and employee matters (including turnover and culture) and governance factors
(including remuneration and capital allocation), cyber resilience, responsible data utilisation,
respect for human rights, anti-corruption and anti-bribery, and any other risks or issues facing the
business and its reputation. This work is catalogued in a proprietary database of risk factors in
order to centralise and codify LTLs investment team’s views, as well as to prioritise its ongoing
research and engagement work and is cross-referenced with the SASB Materiality Map ©.
If, as a result of this assessment, LTL believes that an ESG factor is likely to materially impact a
company’s long-term business prospects (either positively or negatively) then this will be reflected
in the long-term growth rate that is applied in LTLs valuation of that company, which alongside
its more qualitative research will influence any final portfolio decisions (for example, whether LTL
starts a new position or sells out of an existing holding).
LTL’s approach to Responsible Ownership continued
Positive/Negative Screening
As a product of LTLs investment philosophy, it does not invest in the following industries:
capital intensive industries (energy, commodities or mining) or any companies involved in the
extraction and production of coal, oil or natural gas; and
industries that LTL judges to be sufficiently detrimental to society that they may be exposed
to burdensome regulation or litigation that could impinge on financial returns (e.g. tobacco,
gambling or arms manufacturers).
Similarly, LTLs investment approach has steered it to invest in a number of companies that play an
important positive social or environmental role, for example through providing access to
educational information (e.g. RELX) or encouraging environmental progress and best practice (e.g.
Mondelez). LTL believes that such positive benefits for society should be consistent with its aim to
generate competitive long-term returns, thus helping LTL meet its clients’ investment objectives.
Climate Change
The risks associated with climate change represent the great issue of our era and the transition
to a low-carbon economy will affect all businesses, irrespective of their size, sector or geographic
location. Therefore, no company’s revenues are immune and the assessment of such risks must
be considered within any effective investment approach, particularly one like LTLs that seeks to
protect their clients’ capital for decades to come.
As a relatively small company with a single office location and 28 employees, LTLs climate
exposure comes predominantly from the investment portfolios that it manages on behalf of its
clients. LTL recognises the systemic risk posed by climate change and the potential financial
impacts associated with a transition to a low-carbon economy. To address this, LTL became a
signatory of the NZAM initiative in December 2021 and is now committed
to becoming net zero
across all assets under its management by 2050. In line with this ambition, LTL set a 2030 interim
target which has since been approved by The Institutional Investors Group on Climate Change
(“IIGCC”). LTL felt it was most appropriate to set a Portfolio Coverage Target, and has duly
targeted 55% of its asset-weighted committed assets to be considered Aligned
by 2030, as set
out by the Paris Aligned Investment Initiative (“PAII”) Net Zero Investment Framework. This
represents a circa 50% improvement from its baseline of 36% of assets being Aligned as of 2022,
consistent with a fair share of the 50% global reduction in CO
identified as a requirement in the
IPCC special report on global warming of 1.5°C.
Committed assets are currently 94% of LTL's total AUM. The assets that were excluded relate to segregated
clients that either declined to have their assets included at this time or did not respond by the required deadline.
There is scope to increase the level of committed assets over time.
Aligned status, as set out by the PAII Net Zero Framework, has prescribed requirements of the portfolio
companies, including; 1) Setting short and medium term emission reduction targets, 2) Monitoring emission
intensity performance relative to those targets, and 3) Disclosure of scope 1, 2 and 3 emissions. For higher impact
sectors, further criteria are required to be categorised as Aligned. LTL also supports the recommendations of
the Task Force on Climate-Related Financial Disclosures (“TCFD”) and its efforts to encourage companies to
report their climate related disclosures and data in a uniform and consistent way. Further information on LTLs
TCFD related disclosures can be found on LTLs website: within its 2023 TCFD Report.
Strategic Report
Further, using Morningstar’s carbon metrics calculations, LTL is pleased to note that LTIT’s listed
equity holdings have a significantly lower weighted average carbon intensity than its comparable
Weighted Average Carbon Intensity
LTIT Listed Equity Source: Bloomberg and individual Company Annual Reports. Data as at March 2023. Carbon
Intensity is computed for each equity holding as follows: Total Emissions (metric tons of Co2) / Revenue (Mil USD),
and aggregated at the fund level. Data reflects Scope 1 & 2 emissions only. For the sake of clarity, the calculation
does not include the holdings (or look through) of Lindsell Train Limited, Finsbury Growth & Income Trust PLC or
LT North American Fund.
MSCI World Source: Morningstar, data as at March 2023. The Morningstar carbon intensity definition is as follows:
The asset-weighted average of holdings with actual emissions data from the Carbon Disclosure Project or estimated
values from Sustainalytics in a portfolio. A lower score is better. Carbon Intensity is computed for each holding as
follows: Total Emissions (metric tons of Co2) / Revenue (Mil USD), and aggregated at the fund level. Sustainalytics
looks at the latest reported scope 1 (direct emissions from owned or controlled sources) and scope 2 (indirect
emissions from the generation of purchased energy) Greenhouse Gas intensity and emissions for over
10,000 companies. More than 100 different estimation models are used for non-reporting companies.
Engaging with and monitoring investee companies on matters relating to stewardship have
always been an essential element of LTLs investment strategy. Its long-term approach generally
leads it to be supportive of company management. However, where LTL disagrees with a
company’s actions, it will try to influence management on specific matters or policies if LTL believes
it is in the best interests of its clients. Constructive dialogue has more often than not resulted in
satisfactory outcomes, thus limiting the need for escalation. However, where this is not the case,
LTL will consider escalating its engagement and stewardship activities.
During the year, LTL engaged with three companies held within the Company’s portfolio, focussed
on six governance topics (please refer to page 28).
LTL’s approach to Responsible Ownership continued
Engagement (continued)
In addition, Madeline Wright, Deputy Portfolio Manager and Head of Investment ESG at LTL,
completed her process of holding an ESG specific discussion with all of LTLs portfolio companies
(c.70 in total), aimed at establishing a baseline for LTLs ongoing engagement and clarifying its
portfolio companies’ stances on, and approaches to, certain ESG factors, with the objective of
ensuring that all portfolio companies report this essential data going forward. This information
is stored, assessed, and monitored within Sentinel, LTLs proprietary ESG database.
As a public supporter of the TCFD and The IFRS Sustainability Alliance (previously known as the
Sustainability Accounting Standards Board), LTL’s encouraging its portfolio companies to report
in line with these, or similar (if more relevant to their business) frameworks, and also to report
on positive impact goals and progress to net-zero. Furthermore, as signatories of NZAM, LTL is
monitoring carefully the transition to net-zero of each of its businesses and encouraging the
companies to set science-based targets where possible.
Key Engagement Examples:
This engagement in Q2 2022 centred on the recent news of the appointment of activist investor,
Nelson Peltz of Trian Fund Management, to its board as a non-executive director, after his
purchase of 1.5% of Unilever’s shares. As Trian’s objectives are ostensibly in line with that of LTL,
LTL had no objection to the appointment despite being somewhat surprised at the small size of
the investment required to get a seat at the table. LTL did however take the opportunity to urge
the board to resist any proposals that merely boost short-term value. Nils Andersen (non-executive
chairman), confirmed that the board remains committed to their long-term strategy and is
focussed on protecting the strategic value of Unilever’s assets.
In early 2023, LTL engaged with the Chairman of Unilever regarding the announcement of its
choice of new CEO.
LTL has engaged with PayPal on several occasions to share its views regarding compensation best
practice and continues to believe that it could foster greater shareholder alignment through
improved compensation structures. In accordance with LTLs escalation process, it voted against
PayPal’s resolution. LTL wrote to the management of PayPal, outlining the reasons for its vote,
and encouraging them to review their compensation structure.
Proxy Voting
The primary voting policy of L