The Lindsell Train Investment Trust plc - Annual Financial Report

12 June 2024

The Lindsell Train Investment Trust plc

(the “Company” or “LTIT”)

This announcement contains regulated information

Annual Financial Report for the year ended 31 March 2024

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 investments in LTL and in the LTL managed fund products. Decisions on these investments 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.

Performance and Benchmark

The performance and financial highlights are provided on pages 4 and 5 of the Annual Report.

The Company compares its performance and calculates its performance fee relative to its benchmark, the MSCI World Index in Sterling.

Dividend

An unchanged final dividend of £51.50 per Ordinary Share (2023: a final dividend of £51.50 per Ordinary Share) is proposed for the year ended 31 March 2024. If this dividend is approved by shareholders at the Annual General Meeting, it will be paid on Friday, 13 September 2024 to shareholders on the register at close of business on Friday, 9 August 2024 (ex-dividend Thursday, 8 August 2024).

Annual General Meeting

The notice of the Annual General Meeting, scheduled for Wednesday, 4 September 2024 at 2.30 p.m. at the Marlborough Suite, St Ermin’s Hotel, 2 Caxton Street, London, SW1H 0QW, is provided on pages 102 to 106 of the Annual Report.

Capital Structure

The Company’s capital structure comprises 200,000 Ordinary Shares of 75 pence each. Details are given in note 13 to the Financial Statements.

Business Review

The Directors present their Strategic Report for the Company for the year ended 31 March 2024. The Report contains: a review of the Company’s business model and strategy, an analysis of its performance during the financial year and its future developments as well as details of the principal risks and challenges it faces. Its purpose is to inform shareholders and help them 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 23 of the Annual Report.

The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the date of this Report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

Business Model

The objective of the Company is to maximise long-term total returns with a minimum objective to maintain the real purchasing power of Sterling capital.

The Company’s strategy is to create value for shareholders through achieving its investment objective.

As an externally managed investment company the Company has no executive directors, employees or internal operations. The Company delegates its day-to-day management to third-parties.

The Board is responsible for all aspects of the Company's affairs, including the setting of parameters for and monitoring of the investment strategy as well as the review of investment performance and policy. It also has responsibility for all strategic issues and corporate governance matters.

Reviews of the financial year and commentary on the future outlook are presented in the Chairman’s Statement and the Manager’s Report.

Investment Objective

The objective of the Company is to maximise long-term total returns with a minimum objective to maintain the real purchasing power of Sterling capital.

Investment Policy

The Investment Policy of the Company is to invest

(i) in a wide range of financial assets including equities, unlisted equities, bonds, funds, cash and other financial investments globally with no limitations on the markets and sectors in which investment may be made, although there is likely to be a bias towards equities and Sterling assets, consistent with a Sterling-dominated investment objective. The Directors expect that the flexibility implicit in these powers will assist in the achievement of the investment objective;

(ii) in LTL managed fund products, subject to Board approval, up to 25% of its gross assets; and

(iii) in LTL and to retain a holding, currently 23.9%, in order to benefit from the expected long term growth of the business of the Company’s Manager.

The Company does not envisage any changes to its objective, its investment policy or its management for the foreseeable future. The current composition of the portfolio as at 31 March 2024, 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 of the Annual Report.

Diversification

The Company expects to invest in a concentrated portfolio of securities with the number of equity investments averaging fifteen companies. The Company will not make investments for the purpose of exercising control or management and will not invest in the securities of, or lend to, any one company (or other members of its group) more than 15% by value of its gross assets at the time of investment. The Company will not invest more than 15% of gross assets in other closed-ended investment funds.

Gearing

The Directors have discretion to permit borrowings up to 50% of the Net Asset Value. However, the Directors have decided that it is in the Company’s best interests not to use gearing. This is in part a reflection of the size and risk associated with the Company’s unlisted investment in LTL, but also in response to the additional administrative burden required to adhere to the full scope regime of the AIFMD.

Dividends

The Directors’ policy is to pay annual dividends consistent with retaining the maximum permitted earnings in accordance with investment trust regulations, thereby building revenue reserves.

In a year when this policy would imply a reduction in the ordinary dividend the Directors may choose to maintain the dividend by increasing the percentage of revenue paid out or by drawing down on revenue reserves. Revenue reserves are currently more than twice the annual proposed 2024 ordinary dividend.

All dividends have been distributed from revenue or revenue reserves.

Financial Highlights for the Year

* The Net Asset Value and the share price at 31 March 2024 have been adjusted to include the Ordinary dividend of £51.50 paid on 13 September 2023, with the associated ex-dividend date of 8 August 2023.

^ Alternative Performance Measure (“APM”). See Glossary of Terms and Alternative Performance Measures.

Source: Morningstar and Bloomberg.

Five Year Historical Record

Principal Data

^ Alternative Performance Measure (see Glossary).

† These are percentage change figures for the year to 31 March.

Please see Glossary of Terms for an explanation of terms used.

Chairman’s Statement

At 31 March 2024, the Company’s NAV per share was £1,026.43. It was down from £1,056.95 a year earlier but when taking into account the payment of the annual dividend of £51.50 per share in September 2023, the total NAV return was a positive 2.1%. On the other hand the Company’s share price ended the financial year at £801.00, down materially from £1,052.50 on 31 March 2023. Whilst the dividend offset some of this decline, the size of the fall resulted in a share price total return of minus 19.8% over the year. This was the result of the share price discount to the NAV per share widening from 0.4% at 31 March 2023 to 22.0% at 31 March 2024. The sharp widening of the share price discount to NAV was attributable to a combination of factors. These include a lower rate of annualised NAV total returns achieved since 31 March 2020 (6.4% per annum versus 14.4% per annum from 31 March 2001 to 2020), heightened competitive pressures within the fund management industry, outflows from LTL managed funds and a general widening of discounts within the investment trust sector.

The benchmark index proved a tough comparator to beat for the fourth successive year. Both the NAV and share price performances compared unfavorably with the Company’s benchmark index, the MSCI World Index in Sterling, which over the same period had a much better total return of 22.5%.

During the year to 31 March 2024, of the Company’s quoted holdings, only RELX and Nintendo performed better than the benchmark, achieving total returns of 33.6% and 41.1% in Sterling, respectively. Even more significant than the disappointing return from the remaining quoted portfolio holdings was the total return of minus 7.1% generated by the Company’s 23.9% unlisted investment in LTL. With the investment representing 33.6% of NAV at 31 March 2024, it proved to be the biggest detractor from the NAV’s performance over the year and its fall in value also contributed to the Company’s widening share price discount to the NAV.

Lindsell Train Limited

For the third time in four calendar years LTL’s core strategies, Global, UK, Japan and North America, underperformed their comparative benchmark indices. The market’s direction has increasingly been dictated by a narrow range of technology companies. This has played into the hands of passive strategies, which have continued to take market share from all active managers including LTL. Whilst there is no knowing how long this phase can continue, we are reassured that the key business fundamentals of LTL’s portfolios, such as the average underlying return on equity of its companies, remains superior to the benchmark indices against which it is compared. In time these fundamentals should win through, bringing a sustained improvement in absolute and relative performance. Until that happens, it is understandable that, in such a competitive industry, some clients are attracted to today’s better performing strategies.

These pressures on LTL’s business have resulted in clients withdrawing funds. All LTL’s pooled funds, except for North America, its smallest, have shrunk in size and some segregated clients have terminated mandates. FUM outflows over the year to 31 January 2024 amounted to £3.4bn (2023: £2.9bn) with funds under management falling to £15.9bn. LTL now has 21 client relationships (funds and segregated mandates) down from 22 at 31 January 2023. FUM has however fallen more within LTL’s pooled funds that now make up 62% of FUM.

Whilst the fall in FUM has led to a decline in revenues, it is reassuring to see that the Company’s salary and bonus cap has helped to ensure that overall costs have declined proportionately and operating profit margins remain constant at above 65%. Over the year there have been some important generational changes within the company. A new leadership team is evolving at LTL with the appointment of James Bullock, Jessica Cameron and Joss Saunders as LTL directors. Nick Train and Michael Lindsell remain at the heart of the business but there is no doubting the direction of travel. The future lies with a new generation of leaders and their lieutenants. Reflecting these changes, variable remuneration paid to Nick and Michael in the year to 31 January 2024 fell 66% and accounted for 16% of LTL’s total remuneration. Profit share and one-off payments to these new directors and other key staff increased 103% to 40% of the overall remuneration. Half of these payments (virtually all of them after accounting for tax) were mandated to fund the purchase of LTL shares from Nick, Michael and the Company, helping to accelerate the transfer of ownership to potential successors. From LTL’s current financial year at least 17% of its net profits will be paid in this way to seven members of this upcoming generation.

The changes outlined above represent part of a long-term plan to ensure that the Company remains true to the investment and business principles first enshrined by Nick and Michael. It is important that clients who have committed their savings to LTL for multi-year periods know that the approach they first accessed remains consistent even if the personnel change. Certainly the Board, as a client and co-investor in LTL, is reassured by the changes made, the progress of succession and the constancy of how LTL invests.

That constancy, together with all the nuances surrounding it, is outlined in Nick’s Manager Review that follows. In it he describes an optimistic and encouraging outlook for the quoted assets which the Company owns. It is self-evident that this optimism also extends to LTL as similar assets underlie all its client portfolios.

The Valuation of Lindsell Train Limited

The valuation methodology was last amended at 31 March 2022, having taken professional advice, and is unchanged since. It is based on a percentage of LTL’s FUM, with the percentage applied adjusted to reflect the ongoing profitability of LTL. Using this methodology the Company’s holding in LTL was valued at £69m as at 31 March 2024 (2023: £85m). The Board took further professional advice in January 2024 which confirmed that the methodology adopted in 2022 remains valid.

As part of its regular valuation, the Board compares LTL’s value with other quoted fund management companies. What stands out is LTL’s profitability that in almost all cases is higher than its peers. Furthermore, LTL retains considerable financial flexibility and optionality with cash resources of £108m in addition to the £7.6m invested in the LT North American Fund as at 31 January 2024.

The Company’s Dividend

An important consequence of the fall in LTL’s FUM and the contraction of its business is the concomitant decline in LTL’s dividend paying capacity. This is a risk my predecessor consistently warned about in past annual statements. In the year to 31 March 2024 LTL’s dividend accounted for 80% of the Company’s revenues, down slightly from 84% a year earlier. Such a significant dependence on LTL, much more than the 33.6% (2023: 40.3%) which it makes up of the Company’s NAV, means that it has an overwhelming influence on the Company’s dividend paying potential.

In framing its dividend policy, the Company has always assumed that retaining as much net income as allowable within the Company is preferable and more tax efficient for the Company’s shareholders. This principle runs alongside the Board’s desire to see the Company’s dividends grow as returns compound the increasing value of the underlying investments.

In the current year, owing to the decline in the Company’s net revenue after taxation, the Board has decided to pay an unchanged ordinary dividend of £51.50 per share. Like last year, the Company will omit paying a special dividend as LTL earned no performance fees in the year to 31 January 2024. In maintaining the Company’s dividend, it will pay out all of its retained earnings in the year to 31 March 2024 and will utilise £86,000 or just 0.4% of revenue reserves earned in prior years.

To maintain or grow the Company’s dividend in the future is likely to require a combination of factors, notably a material improvement in LTL’s relative performance, a stabilisation in LTL’s FUM and consequent growth in its cash flow together with the continued compounding of the Company’s investments. That will be asking a lot over the next year and the Board will need to see evidence of this materialising before utilising more revenue reserves in order to maintain the Company’s dividend in 2025.

Board Changes

During the year the Board was delighted to welcome David MacLellan who was appointed Chairman of the Audit Committee in August 2023 following a formal recruitment process. A resolution proposing his election together with resolutions for those Directors standing for re-election will be put to Shareholders at the forthcoming Annual General Meeting.

Julian Cazalet resigned as the Chairman of Board in December 2023 as part of the normal succession process.

I would like to take this opportunity to thank Julian for his considerable contribution to the Company during his nine years as a director, of which eight were as the Chairman of the Board. He brought an in-depth knowledge of the investment trust sector, together with extensive experience of wider financial markets, wisdom, understanding and sound common sense to all his actions and decisions whilst on the Board. We wish him well in the future.

The Annual General Meeting (“AGM”)

This year the AGM will be held at 2.30 p.m. on Wednesday, 4 September 2024, 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 who will give an update on the Company’s strategy and its investments. Like last year voting will be conducted via a poll and the Board encourages all shareholders to exercise their right to vote and 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 we own in the Company’s portfolio and we urge all shareholders to follow suit and vote on the resolutions proposed, as we the Directors intend to do ourselves.

Considerations for the Future

There is no doubt that the challenges which the Company and LTL face are considerable but they are not intractable. Throughout this difficult period of performance LTL has kept true to its investment disciplines. It owns a limited number of holdings in great businesses which rarely, if ever change; this allows the underlying companies to do the job of compounding earnings and value over time. It is a differentiated approach that stands out against the crowd and is one that has generated above average return for LTL’s clients for significant periods of time in the past and the Board believes will continue to do so in the future.

Roger Lambert

Chairman

11 June 2024

Portfolio Holdings at 31 March 2024

(All ordinary shares unless otherwise stated)

† Look-through basis: Percentages held in each security are adjusted upwards by the amount of securities held by LTL managed funds owned by the Company. A downward adjustment is applied to the fund‘s holdings to take into account the underlying holdings of these funds. It provides shareholders with a measure of stock specific risk by aggregating the direct holdings of the Company with the indirect holdings held within LTL managed funds.

* LTL managed funds.

Leverage^

We detail below the equity exposure of the Funds managed by LTL as at 31 March 2024:

^ See glossary.

Analysis of Investment Portfolio at 31 March 2024

Breakdown by Location of Listing

(look-through basis)^

Breakdown by Location of Underlying Company Revenues

(look-through basis)^

Breakdown by Sector

(look-through basis)^

^ Look-through basis: this adjusts the percentages held in each asset class, country or currency by the amount held by LTL managed funds. It provides shareholders with a more accurate measure of country and currency exposure by aggregating the direct holdings of the Company with the indirect holdings held by the LTL funds.

* LTL accounts for 33.6% and is not listed.

** LTL accounts for 14 percentage points of the Europe figures, 15 percentage points of the UK figures, 4 percentage points of the USA figures and 0 percentage point of the RoW figure.

Manager’s Report

At the half year I gave a review of the strategic investment case for ten of these direct equity holdings. Rather than repeat those reviews in this report, I instead give an update on developments for each holding over the most recent six-month period, including an account of why we initiated a new position in Universal Music Group. With one exception (Laurent-Perrier) each of the eleven is also a holding in our Global and/or UK strategies. This means their performance is important not just for your portfolio but, more broadly, for the rest of LTL.

Over the six months to 31 March 2024, two of the eleven were down, with the worst faller down c.4%, two were effectively unchanged and the remainder up between c.5 and 30%. Overall, rather encouraging.

The two fallers were Diageo (-3.6%) and Unilever (-2.1%).

Diageo unpleasantly surprised investors including us, in Q4 2023 with news that its Latin American business (c.11% revenues) was suffering an unexpected and marked contraction. Six months later the situation there seems to be stabilising. What has proven a longer-lasting drag on Diageo’s share price is the slowing growth in its biggest geography, the United States. Here consumers have felt the pinch from higher interest rates and, at the margin, traded down their spirits consumption to more “value” brands. This has impinged on Diageo, given its strong growth in the US since Covid-19 had been driven by its higher price and higher profit margin premium brands. Nonetheless, it is important to note here that, at the global level, Diageo’s revenues were c.$15 billion in 2020. This year, a “disappointing” year, we expect they should be over $20 billion. In other words, Diageo has grown notably since 2020 and will continue to grow. Just not in a straight line. We are also sure that this orientation of Diageo’s product portfolio towards premium brands is beneficial for investors over anything but the short term and look to US consumer confidence to rebuild as that economy grows.

Unilever’s price fall is, we think, a sign of investors’ doubts about the willingness or ability of its board to take actions to unlock the value that most observers, including us, see in its global brands and distribution networks. Notwithstanding the share price weakness, we are encouraged by the air of urgency and competence being displayed by Unilever’s new CEO, CFO and Chairman (all appointed in 2023) and hope that they can deploy the company’s strong balance sheet and cash flows in a way that reignites growth and restores investor confidence, including improving the current lowly rating of its shares.

The two effectively unchanged share prices were Laurent-Perrier and Mondelez.

Laurent-Perrier’s current year revenues are forecast to be barely up year-on-year, for similar reasons to Diageo – in 2023/4 consumers are, at the margin, drinking less highest quality alcoholic beverages. But also like Diageo, it is important to consider that Laurent-Perrier’s revenues this year will be still c.25% higher than those of 2020. The trend towards global consumers drinking lower volumes of alcohol, but instead drinking more premium, high quality products continues and should be beneficial for the owners of iconic premium brands like Laurent-Perrier or Johnnie Walker.

Mondelez has continued to meet or exceed most analysts’ expectations for business and earnings growth (and our own expectation). Last year organic revenues were up over 14%, reported adjusted earnings per share grew at 19% and the dividend was up 10%. More growth is forecast for this year. Perhaps the current 20x earnings might be considered a fair valuation for Mondelez shares and this explains the dull recent share price. To us, however, the reliability of the brands and the growing cash they generate argues for a higher valuation. We would not consider selling an asset of this calibre below 30x!

The shares that made money for their owners in local currency terms over the last six months were Heineken (4.8%), PayPal (14.6%), London Stock Exchange Group (“LSEG”) (15.3%), A.G. Barr (18.5%), RELX (23.4%) and Nintendo (31.6%).

Confidence in Heineken’s earnings power is gradually recovering, as commodity prices subside, but we expect there will need to be an acceleration in beer consumption across the company’s emerging market footprint, particularly in its Asian strongholds, before the shares really rerate.

PayPal shares have recovered from recent lows, but are still ostensibly lowly valued at 12x estimated forward earnings. It is reassuring to see the board responding to that low valuation by retiring shares; buying back $5 billion last year and proposing to match that figure in 2024. Those are sizable sums in the context of PayPal’s current c.$67 billion market capitalisation. For us to add to our holding, however, we need to see more evidence of the success of the new products PayPal is bringing to market – tools to streamline e-commerce transactions for vendors and consumers. We continue to monitor PayPal closely.

LSEG’s shares have also recovered from their lows of 2022, up nearly 50% since then, but are still a few per cent below the all-time high they hit in 2021, just before the completion of its merger with Refinitiv. That merger has gone well and we hope LSEG’s shares can hit new highs, particularly once the benefits of its recent joint venture with Microsoft become apparent, with product launches due in the second half of 2024.

A.G. Barr’s shares have rallied after a period of torpor; they had gone sideways since 2019. The rally reflects a number of factors. Most important, this well-run soft drinks manufacturer generates steady operating margins and a Return on Capital in the mid-teens – 16% and 18% respectively at the recent interim results. These returns allow the company to generate cash, on top of its existing net cash and debt free balance sheet. That cash has been used to support existing brands, but also to acquire new ones, which can benefit from the company’s manufacturing and distribution capabilities and its marketing nous. The departing CEO, Roger White, has done an outstanding job for shareholders. If his successor can build on this legacy of growing, profitable brands and a pristine balance sheet, investors can hope the shares will build on their recent gains.

RELX continues to impress investors with the consistency not only of its growth, but its adherence to a clearly articulated strategy. That strategy is making RELX data services ever more valuable to the global scientific, legal and insurance industries. This is one of the biggest holdings we have at LTL and we believe it can be a big driver of returns for both our Global and UK portfolios.

Nintendo’s share price reflects mingled excitement and impatience about the timing of the launch of its next gaming console – probably to be released in early 2025. Sales of the current one, Switch, have exceeded all expectations and its success has allowed Nintendo to sell more copies of its first-party game software (which is where it earns the richest profits) than ever before. As with Apple, there is always a degree of apprehension before the release of a next generation device – can it possibly match or beat the success of its predecessor? All one can say are that the portents are good. Nintendo shares have proven to be a good proxy for the multi-decade increase in popularity of interactive entertainment. As each generation of gamers grows in size and with the promise of technology enhancing the gaming experience even more, Nintendo’s centrality to the industry looks ever more strategically valuable to us. A P/E of 18x for this franchise seems modest.

Universal Music Group’s (“UMG”) share price also rose over the last six months, up 12.7%, while we continued to accumulate a holding. The paragraph that follows provides our summary justification for making this investment. The shares have now moved back toward the upper end of their post-IPO trading range, but that means all the potential alluded to below remains still to come.

UMG stands out for its impressive oligopolistic position (which importantly is effectively global). As the world’s leading record label, built through a generation of consolidation (MCA and Decca, arguably UMG’s predecessors, were founded in 1924 and 1929 respectively), UMG controls roughly a third of the planet’s recorded music (ahead of the other two ‘majors’ Sony on c.23% and Warner on c.16%), curating, producing, and promoting artists. On top of this, as a publisher, UMG holds nearly a quarter of all written songs (just behind Sony’s c.25%, and ahead of Warner’s 12%). Spun out from Vivendi as an independent listed entity in 2021, backed by major strategic shareholders such as Tencent and Bill Ackman/Pershing Square, the shares languished for three years. Despite a torrent of good news (including enhanced distribution agreements) they still trade near their 2021 IPO price.

This perhaps reflects over-optimism at float. However, estimated FY23 sales and operating profit were c.50% higher than in FY19, taking UMG’s adjusted forward P/E ratio to a mid-20s level. Music is ingrained and integral to the daily life of swathes of humanity, with engagement levels rising as new distribution channels widen access. Monetisation (though not consumption) has eluded the industry at times in the past, but these issues appear well resolved by growing subscription services, with new markets (such as video games or social media) also emerging. As core content owners and market leaders UMG holds a uniquely strong hand. The importance of this dominance is clear, given that globally the top 1% of artists represent 90% of music streams. If management can embrace these tailwinds and execute on analyst expectations for low double-digit growth, this should prove an attractive entry point.

In summary, we believe your portfolio (and by extension other LTL portfolios) comprise a combination of companies remarkable for their strong consumer brands or unique intellectual property. Such companies have generated attractive investment returns for patient owners over many decades and we see no reason to expect coming ones to be any different.

Nick Train

Investment Manager
Director,
Lindsell Train Limited
11 June 2024

Performance and Prospects

The Board continues to support fully the Manager's strategy and firmly believes that it will continue to deliver strong investment returns over the long term.

This is supported by the Company's performance since inception (21 January 2001) with a net asset value per share total return^ of 12.7% compared with a total return from the Company's combined benchmark index of 7.1% both calculated on an annualised basis.

The Directors provide an explanation in the Viability Statement as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate.

Key Performance Indicators (“KPIs”)

The Board reviews the performance of the portfolio in detail and is presented with the views of the Manager at each meeting. Information on the Company’s performance is provided in the Chairman’s Statement and the Manager's Report. This performance is assessed against the following KPIs: Net Asset Value Total Return, Share Price Total Return and Dividend per Ordinary Share. The KPIs are unchanged from the prior year.

Net Asset Value Total Return^ and Share Price Total Return^ are compared with the benchmark and provide the key performance indicators for assessing the development and performance of the Company.

^ Alternative Performance Measure (see Glossary).

† These are percentage change figures for the year to 31 March.

Please see Glossary of Terms for an explanation of terms used.

Alternative Performance Measures (“APMs”)

The Board believes that each of the APMs, which are typically used within the Investment Trust Sector, provides additional useful information to shareholders in order to assess the Company’s performance between reporting periods and against its peer group. The measures used for the year under review have remained consistent with the prior year.

Discount/premium to NAV^

The Board regularly reviews the level of the discount/premium of the Company’s share price to the net asset value per share and considers ways in which share price performance may be enhanced, including the effectiveness of share buybacks, where appropriate. Any decision to repurchase shares is at the discretion of the Board.

Dividend Yield^

The Directors regard the Company’s dividend yield to be a key indicator of performance. The dividend yield measures the gross income receivable based on the payment of the historic dividend per share expressed as a percentage of the Company’s current share price.

Ongoing Charges^

Ongoing charges represent the costs that shareholders can reasonably expect to pay from one year to the next, under normal circumstances. The Board continues to be conscious of expenses and works hard to maintain a sensible balance between high quality service and the cost of provision.

NAV Total Return^

The Directors regard the Company’s net asset value per share total return as being the overall measure of value delivered to shareholders over the long term. The Board considers the principal comparator to be the MSCI World Index Total Return (Sterling adjusted).

Share Price Total Return^

The Directors also regard the Company’s share price total return to be a key indicator of performance. This reflects share price growth of the Company which the Board recognises is important to investors.

^ Further information on each of the Alternative Performance Measures and the basis of their calculation can be found in the Glossary.

Principal Risks, Emerging Risks and Risk Management

The Board is responsible for managing the risks faced by the Company. Through delegation to the Audit Committee, the Board has established procedures to manage risk, to review the Company’s internal control framework and to establish the level and nature of the principal risks the Company is prepared to accept in order to achieve its long-term strategic objective. At least once a year the Audit Committee carries out a robust assessment of the principal and emerging risks. Further information is provided in the Audit Committee Report beginning on page 59 of the Annual Report. These principal risks and the ways they are managed or mitigated are set out below.

The Board’s policy on risk management has not materially changed during the course of the reporting period and up to the year end.

The Company's Approach to Risk Management

Change in inherent risk assessment over the last financial year: No change, Decreased, Increased and New risk included during the year.

Emerging Risks

The Audit Committee regularly reviews the risk register. Mitigations, the scoring of each risk and any emerging risks are discussed in detail as part of this process to ensure that emerging as well as known risks are identified and, so far as practicable mitigated.

The experience and knowledge of the Directors is useful in these discussions, as are update papers and advice received from the Board's key service providers such as the Manager and the Company Secretary. In addition, the Company is a member of the AIC, which provides regular technical updates as well as drawing members' attention to forthcoming industry and/or regulatory issues and advising on compliance obligations.

Current identified emerging risks are as follows:

The Audit Committee will continue to review newly emerging risks that arise from time to time to ensure that the implications for the Company are properly assessed and mitigating controls introduced where necessary.

Future Developments

The Board’s primary focus is on LTL’s investment approach and performance both as the Company’s Manager and as an investment. The subject is thoroughly discussed at every Board meeting.

In addition, the Company Secretary updates the Board on investor feedback, as well as wider investment company issues.

An outline of performance, investment activity and strategy, and market background during the year, as well as the outlook, is provided in the Chairman's Statement and the Manager's Report.

It is expected that the Company’s strategy will remain unchanged in the coming year.

Long-Term Viability Statement

The Directors have carefully assessed the Company’s financial position and prospects as well as the principal risks facing the Company and have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five financial years.

To make this assessment and in reaching this conclusion, the Audit Committee has considered the Company’s financial position and its ability to liquidate its portfolio and meet its liabilities as they fall due and notes the following:

• The Company has a liquid investment portfolio of UK and internationally listed securities and funds, and has some short-term cash on deposit. These liquid assets represent 66.4% of net assets. The other 33.6% is the unlisted investment in LTL, which is not readily realisable.

• Based on historic analysis, excluding the holding in the LTL fund, 95.9% of the current portfolio could be liquidated within 30 business days with 92.4% in five business days. There is no expectation that the nature of the investments held within the portfolio will be materially different in the future.

• With an ongoing charges ratio of 0.83%, the expenses of the Company are predictable and modest in comparison with its assets and there are no capital commitments currently foreseen which would alter that position.

• Revenue expenses of the Company are covered more than five times by investment income.

• The closed-ended nature of the Company means that, unlike an open-ended fund, it does not need to realise investments when shareholders wish to sell their shares.

• The founder directors of LTL, in which the Company holds 23.9%, have given their verbal assurance that they remain committed to LTL for at least seven years on a rolling basis.

• The Company has decided not to use gearing.

• The Company has no employees, only its non-executive Directors. Consequently it does not have any potential redundancy or other employment related liabilities or responsibilities.

The Directors, as well as considering the potential impact of the principal risks and various severe but plausible downside scenarios, have also made the following assumptions in considering the Company’s longer-term viability:

• The Board and the Investment Manager will continue to adopt a long-term view when making investments, and anticipated holding periods will be at least five years.

• Regulation will not increase to a level that makes running the Company uneconomical.

The Board’s long-term view of viability will, of course, be updated each year in the Company’s Annual Report.

Stakeholder Interests and Board Decision Making (Section 172 of the Companies Act 2006)

The following disclosure, which is required by the Companies Act 2006 and the AIC Code, describes how the Directors have had regard to the views of the Company's stakeholders in their decision making.

LTIT’s Responsible Investment Policy

The Board believes that consideration of ESG factors is important to shareholders and other stakeholders, and has the potential to protect and enhance investment returns.

In its Responsible Engagement & Investment Policy, the Manager states that its evaluation of ESG factors is an inherent part of the investment process and best practice in this area is encouraged by the Board. These factors include, but are not limited to: “corporate strategy, operating performance, competitive positioning, governance, environmental factors (including climate change), social factors, remuneration, reputation and litigation risks, deployment of capital, regulation and any other risks or issues facing the business”.

The Board has delegated authority to the Manager to vote the shares owned by the Company that are held on its behalf by its Custodian. The Board has instructed that the Manager submits votes for such shares wherever possible and practicable. The Manager is required to refer to the Board on any matters of a contentious nature.

The Manager’s 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 Initiative in December 2021.

Modern Slavery Act

The Company does not provide goods or services in the normal course of business, and as a financial investment vehicle, does not have customers. Therefore, the Directors do not consider that the Company is required to make a statement under the Modern Slavery Act 2015 in relation to slavery or human trafficking. The Company’s suppliers are typically professional advisers and the Company’s supply chains are considered to be low risk in this regard.

UK Sanctions

The Board has made due diligence enquiries of the service providers that process the Company’s shareholder data to ensure the Company’s compliance with the 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.

Common Reporting Standard ("CRS")

CRS is a global standard for the automatic exchange of information commissioned by the Organisation for Economic Cooperation and Development and incorporated into UK law by the International Tax Compliance Regulations 2015. CRS requires the Company to provide certain additional details to HMRC in relation to certain shareholders. The reporting obligation began in 2016 and is an annual requirement.

The Registrar, Link Group, has been engaged to collate such information and file the reports with HMRC on behalf of the Company.

Taskforce for Climate Related Financial Disclosures (“TCFD”)

The Company notes the TCFD recommendations on climate related financial disclosures. The Company is an investment company and, as such, it is exempt from the Listing Rules requirement to report against the TCFD framework.

Climate reporting, at both the LTL and LTIT level, will be available from 30 June 2024 via the LTL website.

Global Greenhouse Gas Emissions

The Company is an investment trust, with neither employees nor premises, nor has it any financial or operational control of the assets which it owns. It has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Reports and Directors’ Reports) Regulations 2013 or the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, including those within the Company’s underlying investment portfolio.

The Company consumed less than 40,000 kWh of energy during the year in respect of which the Directors’ Report is prepared and therefore is exempt from the disclosures required under the Streamlined Energy and Carbon Reporting criteria.

The Board is aware of the continued emphasis on ESG matters in recent years. The Manager engages with all the companies in the portfolio to understand their ESG approach and has developed its own methodology to assess the carbon impact of the portfolio.

LTL's Approach to Responsible Ownership

ESG integration

Seeking Sustainability

As a long-term investor, LTL aims to identify companies that can generate long-term sustainable high returns on capital. LTL has historically found that such companies tend to exhibit characteristics associated with good corporate governance and responsible business practices. Indeed, LTL believes that companies which observe such standards, and that are serious in their intention of addressing environmental and social factors, will not only become more durable but will likely prove to be superior investments over time.

To that end LTL’s initial analysis and ongoing company engagement strategy seeks to incorporate all sustainability factors that they believe will affect the company’s ability to deliver long-term value to shareholders. Such factors may include but are not limited to; environmental (including climate change), social and employee matters (including turnover and culture) and governance factors (including remuneration and capital allocation), cyber resilience, responsible data utilisation, respect for human rights, anti-corruption and anti-bribery, and any other risks or issues facing the business and its reputation. This work is catalogued in a proprietary database of risk factors in order to centralise and codify the team’s views, as well as to prioritize LTL’s ongoing research and engagement work and is cross-referenced with the SASB Materiality Map ©.

If, as a result of this assessment, LTL believes that an ESG factor is likely to materially impact a company’s long-term business prospects (either positively or negatively) then this will be reflected in the long-term growth rate that is applied in the investment team’s valuation of that company, which alongside the team’s more qualitative research will influence any final portfolio decisions (for example, whether LTL starts a new position or sell out of an existing holding).

Positive/Negative Screening

As a product of LTL’s investment philosophy, it does not invest in the following industries:

– capital intensive industries (energy, commodities or mining) or any companies involved in the extraction and production of coal, oil or natural gas; and

– industries that LTL judges to be sufficiently detrimental to society that they may be exposed to burdensome regulation or litigation that could impinge on financial returns (e.g. tobacco, gambling or arms manufacturers).

Similarly, LTL’s investment approach has steered Nick Train and the investment team 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 developing best practice (e.g., Diageo and Mondelez). LTL believes that such positive benefits for society should be consistent with its aim to generate competitive long-term returns, thus helping it meet its clients’ investment objectives.

Climate Change

The risks associated with climate change represent the great issue of our era and the transition to a low-carbon economy will affect all businesses, irrespective of their size, sector or geographic location. Therefore, no company’s revenues are immune and the assessment of such risks must be considered within any effective investment approach, particularly one like LTL’s that seeks to protect its clients’ capital for decades to come.

As a relatively small company with a single office location and fewer than 30 employees, LTL’s climate exposure comes predominantly from the investment portfolios that it manages on behalf of its clients. LTL recognises the systemic risk posed by climate change and the potential financial impacts associated with a transition to a low-carbon economy.

To help address this, LTL became a signatory of the Net Zero Asset Managers (NZAM) initiative in December 2021, which affirms its commitment to support the goal of net zero greenhouse gas emissions by 2050 or sooner. In line with this ambition, LTL published a 2030 interim target in Q4 2022 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 committed1 assets to be considered Aligned2 by 2030, as set out by the PAII Net Zero Investment Framework. This represents a circa 50% improvement from its baseline of 36% of assets being Aligned as of 2022, consistent with a fair share of the 50% global reduction in CO2 identified as a requirement in the Intergovernmental Panel on Climate Change (‘IPCC’) special report on global warming of 1.5°C.

LTL also supports the recommendations of the Task Force on Climate-Related Financial Disclosures (“TCFD”) and its efforts to encourage companies to report their climate related disclosures and data in a uniform and consistent way. Further information on LTL’s TCFD related disclosures can be found in its 2023 TCFD Report, which can be found on LTL’s website: www.lindselltrain.com.

1 Committed assets are currently 94% of LTL's total AUM. The assets that were excluded relate to segregated clients that either declined to have their assets included at this time or did not respond by the required deadline. There is scope to increase the level of committed assets over time.

2 Aligned status, as set out by the PAII Net Zero Framework, has prescribed requirements of the portfolio companies, including; 1) Setting short and medium term emission reduction targets, 2) Monitoring emission intensity performance relative to those targets, and 3) Disclosure of scope 1, 2 and 3 emissions. For higher impact sectors, further criteria are required to be categorised as Aligned.

Further, using Morningstar’s carbon metrics calculations, LTL is pleased to note that LTIT’s listed equity holdings have a significantly lower weighted average carbon intensity than its comparable benchmark.

Stewardship

Engagement

Engaging with and monitoring investee companies on matters relating to stewardship has always been an essential element of LTL’s investment strategy. Its long-term approach generally leads it to be supportive of company management. However, where LTL disagrees with a company’s actions, it will try to influence management on specific matters or policies if LTL believe it is in the best interests of its clients. Constructive dialogue has more often than not resulted in satisfactory outcomes, thus limiting the need for escalation. However, where this is not the case, LTL will consider escalating its engagement and stewardship activities.

During the year, on a look-through basis (i.e. including positions held by LTL managed funds owned by the Company), LTL engaged with 27 companies held within the Company’s portfolio on a wide range of environmental, societal and governance related issues, as detailed in the chart below. Moreover, to ensure that the 2030 net zero interim target remains achievable, LTL continues to engage proactively with the management of companies it holds across its portfolios, the aim being to understand each company’s individual goals and, where appropriate, to provide the team’s thoughts on their road maps, with the overall ambition of reaching an absolute reduction in global carbon emissions. Using the data gathered to set the 2030 interim target, LTL has been able to identify which portfolio companies should be prioritised for engagement on their progress. LTL has engaged with management at a number of companies in recent months and will continue to engage with all portfolio companies to understand how they align with LTL’s net zero goals. This includes encouraging them to set science-based targets where possible. This initiative has been led by Madeline Wright, Deputy Portfolio Manager and Head of Investment ESG. The information gathered from this exercise is stored, assessed, and monitored within Sentinel, LTL’s proprietary ESG database.

Engagement by Topic

Source: Lindsell Train. 1 April 2023 to 31 March 2024. 53 topics raised with 27 companies (on a look through basis).

Key Engagement Case Studies:

Company name: Unilever

Sector: Consumer Franchises

Engagement topics: Strategy, Reputation, Environmental claims

Date of engagements: August 2023, October 2023 and December 2023

Engagement format: Calls

Reason for Engagement: In a call with CFO Graeme Pitkethly, the LTL investment team discussed Unilever’s decision to retain its presence in Russia. It sought justification for this decision and, whilst the team recognises that there is no easy choice, LTL conveyed its expectation that management would keep the situation under active review with the hope of finding the ‘least worst’ outcome.

In October, LTL followed up with Ian Meakins, Designate Chairman. Topics covered included their retained interest in Russia, Nelson Peltz’s presence on the Board, as well as strategic priorities and M&A. On Russia, Ian Meakins agreed that clarity and haste are needed. From a strategic perspective, the focus will be on SKU rationalisation, bolstering existing high-performing brands and targeted geographic expansion, before any more deals are done. Unilever admit that it has overinvested in some emerging markets, in some cases at the expense of some developed markets, and hence a more targeted approach, with due consideration given to the translation of local currency earnings, is required.

Further engagement took place in December when the LTL team spoke with Unilever IR regarding the Competition & Markets Authority’s ('CMA') investigation into its green claims. Whilst Unilever was “surprised and disappointed”, it is not against the purpose of the exercise, in that it upholds the need for higher standards against claims which could mislead the consumer. Unilever have been in discussions with the CMA for some time regarding specific claims for a small number of products, and so it was surprised by the announcement of a formal investigation specifically targeting only Unilever. The investigation is focussed on the use of vague and broad language in marketing materials as well as claims about ingredients that might exaggerate how ‘natural’ a product is. As a result, there is unlikely to be a binary outcome. Nonetheless, it is an opportunity for Unilever to refute claims that its new CEO, Hein Schumacher, is giving up on sustainability and instead focus consumer and investor attention on progress made on its four sustainability priorities (plastic, climate, nature and livelihoods).

Next steps: The engagement regarding Unilever’s presence in Russia and CMA claims is ongoing.

Company name: Mondelez

Sector: Consumer Franchises

Engagement topic: Human Rights / Modern Slavery

Date of engagement: May 2023

Engagement format: Call

Reason for Engagement: LTL spoke with the management of Mondelez ahead of its AGM, which included a contentious shareholder proposal relating to the eradication of child labour from the cocoa supply chain. The team has regularly engaged with Mondelez on this issue and so were eager to hear management’s views on the resolution, and also receive an update on the progress the company is making on this specific initiative. Management communicated that whilst it is entirely supportive of the aims and intentions of the shareholder proposal, the company is already working towards these exact goals and believes that the current strategy continues to be the right one to achieve them. It confirmed that significant progress has been made: 74% of the company’s supply chain is now covered by its Cocoa Life programme, up from 28% in 2020. Like Mondelez, LTL recognises that eradicating child labour from the cocoa supply chain is a systemic issue that requires wide-scale collaboration and so LTL voted in line with management, as it believes it is unproductive to expect Mondelez to solve this wider issue on its own.

Next steps: This engagement is ongoing. While LTL accepts that Mondelez cannot solve this wider issue on its own, as the number 2 chocolate brand in the world LTL would like to see the company continuing to set the agenda. LTL would like the percentage of the company’s supply chain covered by the Cocoa Life programme to continue to increase to full coverage, with credible and sustainable ongoing monitoring firmly in place as this is not a ‘set and forget’ issue.

Company name: Nintendo

Sector: Media

Engagement topic: Capital Allocation

Date of engagement: September 2023

Engagement format: Call

Reason for Engagement: Like many Japanese companies, Nintendo could be accused of maintaining an overly conservative balance sheet. Currently the company has ¥2 trillion of cash to guard against technology change and for future growth investments. As a rule, we are supportive of our companies maintaining net cash balances and, indeed, would be concerned by any significant levels of net debt, however we recognise that Nintendo could manage its balance sheet more efficiently. As such, during Q3 we had the opportunity to share with company management that we would encourage the Board to review its capital allocation and the uses of its retained earnings. If it was decided to return funds to shareholders we expressed our preference for a share buyback at an accretive share price rather than a special dividend.

Next steps: This engagement is ongoing.

Proxy Voting

The primary voting policy of LTL is to protect or enhance the economic value of its investments on behalf of its clients. LTL has appointed Glass Lewis to aid the administration of proxy voting and provide additional support in this area. However, the Manager maintains decision making responsibility based on its detailed knowledge of the investee companies. It is LTL’s policy to exercise all voting rights which have been delegated to LTL by its clients.

Voting record:

Source: Glass Lewis. 1 April 2023 to 31 March 2024.

Votes against management and abstentions have typically been in the low single-digit range. The main reason for this is that LTL’s long-term approach to investment generally leads it to be supportive of company management and, where required, LTL will try to influence management through its engagement activities. Given LTL often builds up large, long-term stakes in the businesses in which it invests, LTL finds that management is open to (and very often encourage) engagement with LTL. Furthermore, it is LTL’s aim to be invested in ‘exceptional’ companies with strong corporate governance and hence it ought to be rare that LTL finds itself in a position where it is voting against management.

In the majority of cases where LTL has voted against management it has been on matters relating to remuneration. Where LTL does not believe that a company’s compensation policy is aligned with the long-term best interests of the shareholders it will write to management to inform them of LTL’s intention to vote against such policies.

Regulatory Update on ESG

During the year, regulators around the world remained active on defining and classifying ESG investing and curbing greenwashing. The UK Financial Conduct Authority (‘FCA’) released its final Policy Statement on Sustainability Disclosure Requirements (‘SDR’) and investment labels on 28 November 2023. The UK SDR, which applies to all FCA-regulated firms, introduces a set of sustainability-related product labels, product and entity-level disclosures, and anti-greenwashing rules for sustainable investing in the UK. While the Investment Manager considers ESG issues to be important when selecting investments, the Company does not have explicit sustainability objectives in its investment policy and the Company will not seek to apply a sustainability label under SDR.

Integrity and Business Ethics

The Company is committed to carrying out business in an honest and fair manner. The Board has adopted a zero tolerance approach to instances of bribery and corruption. Accordingly, it expressly prohibits any Director or associated persons when acting on behalf of the Company from accepting, soliciting, paying, offering or promising to pay or authorise any payment, public or private, in the United Kingdom or abroad to secure any improper benefit from themselves or for the Company.

The Board applies the same standards to its service providers in their activities for the Company. A copy of the Company’s Anti Bribery and Corruption Policy can be found in the Board and Policies section of the Company's website. The policy is reviewed annually by the Audit Committee.

In response to the implementation of the Criminal Finances Act 2017, the Board adopted a zero-tolerance approach to the criminal facilitation of tax evasion. A copy of the Company’s policy on preventing the facilitation of tax evasion can be found in the Board and Policies section of the Company's website. The policy is reviewed annually by the Audit Committee.

The Company’s culture is driven by its values of integrity, knowledge and frank and courteous conduct. It focusses on achieving returns for shareholders in line with the Company’s Investment Objective. In carrying out its activities, the Company aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues. As an investment company with limited internal resource, the Company has little direct impact on the environment. The Company believes that high standards of ESG make good business sense and have the potential to protect and enhance investment returns. Consequently, the Manager’s investment criteria ensure that ESG and ethical issues are taken into account and best practice is encouraged. The Board's expectations are that its principal service providers have appropriate governance policies in place.

By order of the Board

Roger Lambert

Chairman

11 June 2024

Governance

Statement of Directors’ responsibilities in respect of the Financial Statements

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have prepared the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law).

Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the Financial Statements the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• state whether applicable UK Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the Financial Statements;

• make judgments and estimates that are reasonable and prudent;

• prepare the Financial Statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business; and

• prepare a directors' report, a strategic report and a directors' remuneration report which comply with the requirements of the Companies Act 2006.

The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

They are responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonable to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

The Directors have delegated responsibility to the Administrator for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

Responsibility Statement of the Directors in respect of the Annual Financial Report

The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the ‘Board of Directors’ on pages 32 and 33 of the Annual Report confirms that, to the best of their knowledge:

• the Company Financial Statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law (United Kingdom Generally Accepted Accounting Practice), give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

• the Strategic Report includes a fair review of the development and performance of information required by the FCA's Disclosure Guidance and Transparency Rules.

The Directors also confirm that the Financial Statements, taken as a whole, are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

Approved by the Board of Directors and signed on its behalf by

Roger Lambert

Chairman

11 June 2024

Note to those who wish to access this document by electronic means:

The Annual Report for the year ended 31 March 2024 has been approved by the Board of The Lindsell Train Investment Trust plc. Copies of the Annual Report are circulated to shareholders and, where possible, to investors through other providers’ products and nominee companies (or written notification is sent when they are published online). It is also made available in electronic format for the convenience of readers. Printed copies are available from the Company’s Registered Office in London.

Financial Statements

Income Statement for the year ended 31 March 2024

All revenue and capital items in the above statement derive from continuing operations.

The total columns of this statement represent the profit and loss account of the Company. The revenue and capital return columns are supplementary to this and are prepared under the guidance published by the Association of Investment Companies.

The Company does not have any other recognised gains or losses. The net return for the year disclosed above represents the Company’s total comprehensive income.

No operations were acquired or discontinued during the year.

The notes form part of these Financial Statements.

Statement of Changes in Equity for the year ended 31 March 2024

For the year ended 31 March 2023

The notes form part of these Financial Statements.

Statement of Financial Position at 31 March 2024

The Financial Statements were approved by the Board on 11 June 2024 and were signed on its behalf by:

Roger Lambert

Chairman

The Lindsell Train Investment Trust plc
Registered in England & Wales, No: 4119429

The notes form part of these Financial Statements.

Statement of Cash Flows for the year ended 31 March 2024

Cash flows from operating activities includes dividend income received (gross) of £11,809,000 (2023: £14,156,000) and deposit interest of £190,000 (2023: £36,000).

* Comprises solely cash held at bank.

The notes form part of these Financial Statements.

Notes to the Financial Statements

1 Accounting policies

A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below:

(a) Basis of accounting

The Financial Statements of the Company have been prepared under the historical cost convention modified to include the revaluation of fixed assets in accordance with United Kingdom Company law, FRS 102 ‘The Financial Reporting Standard applicable in the UK and Ireland’ and with the Statement of Recommended Practice (“SORP”) “Financial Statements of Investment Trust Companies and Venture Capital Trusts”, issued by the Association of Investment Companies in July 2022.

Going concern

The Financial Statements have been prepared on the going concern basis.

The Directors have a reasonable expectation, after considering a schedule of the Company’s current financial resources and liabilities, that the Company has adequate resources to continue in existence for at least 12 months from the approval of the Financial Statements; and that it is appropriate to prepare the Financial Statements on a going concern basis.

The Company does not have a fixed life.

As at 31 March 2024, the Company held £110,456,000 (2023: £100,547,000) in listed investments and £88,626,000 (2023: £102,581,000) in an unlisted investment and an unlisted fund. The total operating expenses for the year ended 31 March 2024 were £1,692,000 (2023: £1,829,000). It is estimated that 56.6% of the investment portfolio, (92.4% of the portfolio, excluding the holding in LTL), could be liquidated within five business days based on 20% of the 90 days’ average trading volumes obtained from Bloomberg.

(b) Reporting currency

The Financial Statements are presented in Sterling which is the functional currency of the Company because it is the currency of the primary economic environment in which the Company operates.

(c) Dividends

Under Section 32 of FRS 102, final dividends should not be accrued in the Financial Statements unless they have been approved by shareholders before the balance sheet date.

Dividends payable to shareholders are recognised in the Statement of Changes in Equity when they have been approved by shareholders and have become a liability of the Company. Interim dividends are recognised in the Financial Statements in the period in which they are paid.

(d) Valuation of fixed asset investments

The Company’s investments are classified as held at fair value through profit or loss in accordance with Section 11 and 12 of FRS 102 and are managed and evaluated on a fair value basis in accordance with its investment strategy.

When a purchase or sale is made under a contract, the terms of which require delivery within the time frame of the relevant market, the investments concerned are recognised or derecognised on the trade date.

Listed investments are held through profit or loss and accordingly are valued at fair value, deemed to be bid or last market prices depending on the convention of the exchange on which they are listed. As the Company’s business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends or increases in fair value quoted, investments are held through profit or loss on initial recognition at fair value. The Company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy, and information about the Company is provided internally on this basis to the Board.

Lindsell Train fund products are valued daily using prices supplied by the administrator of these funds.

The unlisted investment in LTL is valued by the Directors at fair value using a valuation methodology adopted by the Board. The formula is monitored by the Board to ensure its ongoing appropriateness. At the most recent update in 2024 the Board sought external advice to verify its approach. Please refer to note 1(j) for further information.

The investment in LTL (representing 23.9% of the Manager) is held as part of the investment portfolio. Accordingly, the shares are accounted for and disclosed in the same way as other investments in the portfolio. The valuation of the investment (see note 17) is calculated at the end of each month on the basis of fair value as determined by the Directors of the Company. The valuation process in effect from 31 March 2022 remains unchanged and is based upon a methodology that uses a percentage of LTL’s funds under management, with the percentage applied being reviewed monthly and adjusted to reflect the ongoing profitability of LTL.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows:

• Level 1 – The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.
• Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.
• Level 3 – Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

(e) Income

Dividends are credited to the revenue column of the Income Statement on an ex-dividend basis. Where an ex-dividend date is not available, dividends are recognised when the Company’s right to receive payment is established. The fixed return on a debt security is recognised on a time apportionment basis so as to reflect the effective interest rate on the debt security. Bank and deposit interest is accounted for on an accruals basis.

(f) Expenses

All expenses are accounted for on an accruals basis. Finance costs are accounted for on an accruals basis using the effective interest rate method. Expenses are charged through the revenue column of the Income Statement except as follows:

• expenses which are incidental to the acquisition or disposal of an investment are charged to the capital column of the Income Statement;
• expenses are charged to the realised capital reserve, via the capital column of the Income Statement, where a connection with the maintenance or enhancement of the value of the investments can be demonstrated;
• the non allocation approach has been taken and charged 100% of the management fees to revenue; and
• performance fees payable to the Manager are charged 100% to capital.

(g) Taxation

Deferred taxation is provided on all differences which have originated but not reversed by the balance sheet date, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in the future against which the deferred tax asset can be recovered.

In line with recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented in the capital column of the Statement of Comprehensive Income is the marginal basis. Under this basis if taxable income is capable of being offset entirely by expenses presented in the revenue column of the Income Statement then no tax relief is transferred to the capital column.

(h) Foreign currency

Transactions denominated in foreign currencies are recorded in the local currency at the actual exchange rates as at the date of the transaction. Assets and liabilities denominated in foreign currencies at the year end are reported at the rate of exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the capital or revenue column of the Income Statement depending on whether the gain or loss is of a capital or revenue nature.

(i) Capital reserve

The following are taken to this reserve:

• gains or losses on the disposal of investments;
• exchange differences of a capital nature;
• expenses, together with the related taxation effect, allocated to this reserve in accordance with the above policies; and
• investment holding gains or losses, being the increase or decrease in the valuation of investments held at the year end.

Revenue reserve

The revenue reserve reflects all income and expenditure which are recognised in the revenue column of the income statement.

Special reserve

The special reserve arose following Court approval in September 2002 to transfer £19,850,000 from the share premium account. This reserve can be used to finance the redemption and/or purchase of shares in issue.

In accordance with the Company’s Articles of Association, the capital reserve and special reserve may not be distributed by way of a dividend but may be utilised for the purposes of share buybacks. The Company may only distribute by way of dividend accumulated revenue profits within the revenue reserve.

(j) Significant judgments and estimates

The key significant estimate to report is the valuation of the investment in LTL where material judgments are made. Please refer to notes 1(d) and 17 for details of how this holding is valued.

Other than this, in the course of preparing the Financial Statements, no material judgments have been made in the process of applying the Company’s accounting policies, except those that involve estimations.

2 Income

3. Management fees

In accordance with an Investment Management Agreement dated 21 December 2000 (last revised in November 2020) between the Company and LTL, LTL has been providing investment management services to the Company. For its services, LTL receives an annual fee of 0.6%, calculated on the lower of the Adjusted Market Capitalisation and the Adjusted Net Asset Value of the Company, calculated using weekly data and payable in arrears in respect of each calendar month. The amount charged during the year is shown above. £139,623 (2023: £94,893) of the fee for the year was outstanding as at the Balance Sheet date.

A performance fee is payable at the rate of 10 per cent of the value of any positive relative performance versus the Benchmark (the MSCI World Index Total Return (Sterling adjusted)), in a financial year. Relative performance is measured by taking the lower of the NAV or Average Market Price, taking into account dividends, at the end of each financial year and comparing the percentage annual change with the total return of the Benchmark. A performance fee will only be paid out if the annual change is both above the Benchmark and is a positive figure. Relative performance will be carried forward in years where the Manager is not eligible for a performance fee based on these two criteria. The Company has twelve month performance periods, ending on 31 March in each year. The performance fee is payable in arrears in respect of each performance period.

The performance fee payable to the Manager for the year to 31 March 2024 was £nil (2023: £nil).

For the avoidance of double charging management fees, the Manager has agreed to rebate any periodic management fee that it receives from the Company by the amount of fees receivable by it from LTL managed fund products and other fund products where LTL is the Manager. The amounts rebated on the Investment Management fee are shown above, of which £107,585 (2023: £101,725) relates to the Company’s investment in Lindsell Train North American Equity Fund and £15,656 (2023: £15,065) relates to the Company’s investment in the Finsbury Growth & Income Trust PLC.

4 Other expenses

* Excluding VAT.

† Remuneration for the audit of the Financial Statements of the Company.

5 Directors’ emoluments

These are reflected in the table below:

Since 1 January 2024, the Chairman of the Board, Chairman of the Audit Committee, and other Directors receive set fees at rates of £43,000, £36,000 and £29,000 respectively per annum, and have no entitlement to any performance fees. Directors’ fees amounting to £29,000 (2023: £27,000) have been waived by Michael Lindsell in view of his connection with the Manager.

There were no pension contributions paid or payable.

6 Disclosure of interests

As at 31 March 2024 the Company held 12,500,000 shares in WS Lindsell Train North American Equity Fund with a fair value of £19,624,000 and a cost of £12,912,000.

LTL is also the Portfolio Manager of Finsbury Growth & Income Trust PLC in which the Company has an investment of 420,000 shares with a fair value of £3,612,000 at a cost of £759,000.

LTL’s appointment as Manager to the Company is subject to termination by either party on twelve months’ notice.

7 Taxation

The tax charge on the loss on ordinary activities for the year was as follows:

The current taxation charge for the year is different from the standard rate of corporation tax in the UK of 25% (2023: 19%). The differences are explained below:

As an Investment Trust, the Company is not subject to UK taxation on capital gains as long as it maintains exemption under Sections 1158 and 1159 of the Corporation Tax Act 2010. In the opinion of the Directors, the Company has complied with the requirements of Sections 1158 and 1159 of the Corporation Tax Act 2010.

Factors that may affect future tax charges

As at 31 March 2024, the Company had unutilised management expenses of £31,533,000 (2023: £30,032,000). These expenses could only be utilised if the Company were to generate taxable profits in the future. As a result, the Company has not recognised a deferred tax asset of £7,883,250 (2023: £7,508,000) arising from management expenses exceeding taxable income based on the prospective corporation tax rate of 25% (2023: 19%).

8 Dividends paid and payable

The total dividend forming the basis of Sections 1158 and 1159 of the Corporation Tax Act 2010 payable in respect of the financial year is set out below:

9 Return/(loss) per Ordinary Share

The total return/(loss) per Ordinary share shown above can be further analysed between revenue and capital, as below:

10 Investments held at fair value through profit or loss

The Company received proceeds of £877,000 (2023: £1,000) from investments sold in the year. The book cost of these investments when they were purchased was £7,729 (2023: £400). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

Investment transaction costs on purchases and sales of investments during the year to 31 March 2024 amounted to £805 and £9 respectively (2023: £85 and £nil respectively).

During the year the investment holding loss attributable to the Company’s holding in LTL amounted to £16,218,000 (2023 loss: £11,690,000). See note 17 for further details.

Significant holdings

Included in the above are the following investments in which the Company has an interest exceeding 10% of the nominal value of the shares of that class in the investee company as at 31 March 2024.

* As at 31 January 2024, the latest year end for LTL, its audited aggregate capital and reserves amounted to £103,519,000, (2023: £97,680,000) and the profit for that year amounted to £44,596,000 (2023: £54,315,000). The total amount of dividends paid during the year was £38,967,000 (2023: £48,876,000) equating to dividends of £1,462 per share (2023: £1,841 per share). The earnings per share were £1,673 (2023: £2,038). The cost of the Company’s investment in LTL was £64,500.

See note relating to the 2024 and 2023 results under the tables in Appendix 1.

LTL is a related undertaking of the Company. LTL’s registered office address is 66 Buckingham Gate, London SW1E 6AU.

LTL has been accounted for as an investment in accordance with the accounting policy in note 1(d).

The Company has arrangements in place with the Manager to avoid double charging of fees and expenses on investments made in other LTL managed funds (see note 3).

11 Other receivables

12 Other payables

13 Share capital

There has been no change in the capital structure during the year to 31 March 2024.

14 Reserves

Capital reserve

The capital reserve includes investment holding gains of £153,654,000 (2023: £160,537,000).

Revenue reserve

The revenue reserve reflects all income and expenditure which are recognised in the revenue column of the income statement.

Special reserve

The special reserve arose following Court approval in September 2002 to transfer £19,850,000 from the share premium account. This reserve can be used to finance the redemption and/or purchase of shares in issue.

In accordance with the Company’s Articles of Association the capital reserve and special reserve may not be distributed by way of a dividend but may be utilised for the purposes of share buybacks. The Company may only distribute by way of dividend accumulated revenue profits within the revenue reserve.

The Institute of Chartered Accountants in England and Wales has issued guidance stating that profits arising out of a change in fair value of assets, recognised in accordance with Accounting Standards, may be distributed provided the relevant assets can be readily convertible into cash. Securities listed on a recognised stock exchange are generally regarded as being readily convertible into cash. In accordance with the Company’s Articles of Association the capital reserve and special reserve may not be distributed by way of dividend but may be utilised for the purposes of share buybacks and the Company may only distribute by way of dividend accumulated revenue profits.

15 Net Asset Value per share

The Net Asset Value per Ordinary Share and the Net Asset Value at the year end calculated in accordance with the Articles of Association were as follows:

The movements during the year of the assets attributable to the Ordinary Shares were as follows:

The Net Asset Value per Ordinary Share is based on net assets of £205,285,000 (2023: £211,390,000) and on 200,000 Ordinary Shares (2023: 200,000), being the number of Ordinary Shares in issue at the year end.

16 Statement of Cash Flows

(a) Reconciliation of operating return to net cash inflow from operating activities

(b) Analysis of cash flows

17 Financial instruments and capital disclosures

Risk management policies and procedures:

The investment objective of the Company is to maximise long-term total returns with a minimum objective to maintain the real purchasing power of Sterling capital. In pursuit of this objective, the Company may be exposed to various forms of risk, as described below.

The Board sets out its principal risks on pages 16 to 20 of the Annual Report and its investment policy including its policy on gearing (bank borrowing), diversification and dividends on page 3 of the Annual Report.

The Board and its Manager consider and review the number of risks inherent with managing the Company’s assets which are detailed below:

Market risk

The Company’s portfolio is exposed to fluctuations in market prices in the regions in which it invests. Market-wide uncertainties which have caused increased volatility include the continued impact of war in Ukraine and the effect of sanctions against Russia; tensions between China and the West; the conflict in the Middle East; and the threat of prolonged inflation and elevated interest rates slowing economic growth, and the fear or presence of recession.

At 31 March 2024, the fair value of the Company’s assets exposed to market price risk was £199,082,000 (2023: £203,128,000). The Company’s exposure to market price fluctuations is reviewed by the Board on a quarterly basis and monitored on a continuous basis by the Manager in pursuance of the investment objective.

Market price risk comprises three elements – foreign currency risk, interest rate risk and other price risk.

Foreign currency risk

Foreign currency exposure as at 31 March 2024

* This includes the holding in WS Lindsell Train North American Equity Fund of £19,624,000.

Foreign currency exposure as at 31 March 2023

* This includes the holding in WS Lindsell Train North American Equity Fund of £17,361,000.

Over the year Sterling strengthened against the US Dollar by 2.2% (2023: weakened by 6.2%), strengthened against the Euro by 2.9% (2023: weakened by 4.0%) and strengthened against the Japanese Yen by 16.6% (2023: strengthened by 2.6%).

A 5.0% decline or rise of Sterling against foreign currency denominated (i.e. non Sterling) assets held at the year end would have increased/decreased the Net Asset Value by £3,170,000 or 1.5% of Net Asset Value (2023: £2,777,000 or 1.3% of Net Asset Value).

Interest rate risk

There is no direct exposure to interest rate risk.

Other price risk

Other price risk may affect the value of the quoted investments.

If the fair value of the Company’s investments at the Statement of Financial Position date increased or decreased by 10%, whilst all other variables remained constant, the capital return and net assets attributable to shareholders as at 31 March 2024 would have increased or decreased by £19,908,000 or £99.54 per share (2023: £20,313,000 or 101.56p per share).

Liquidity risk

Liquidity risk is not considered significant under normal market conditions in relation to the Company’s investments which are listed on recognised stock exchanges and are, for the most part, readily realisable securities which can be easily sold to meet funding commitments if necessary. The Company’s unlisted investment in LTL is not readily realisable.

As at 31 March 2024, 56.6% (2023: 51.0%) of the investment portfolio (92.4% of the listed portfolio) could be liquidated within five business days, based on 20% of the 90 days’ average daily trading volumes obtained from Bloomberg. The Company would be able to sell all of its listed holdings within five business days, with the exception of two securities representing 5.5% of NAV.

Credit risk

Cash at bank and other debtors of the Company at the year end as shown on the Balance Sheet was £6,506,000 (2023: £8,501,000).

Counterparty risk

The Northern Trust Company (the “Bank”) is the appointed custodian of the Company. It provides securities clearing, safe-keeping, foreign exchange, advance credits and overdrafts, and cash deposit services. The Bank has a credit rating for long-term deposits/debt of Aa2 from Moody’s, AA- from Standard & Poor’s and AA from Fitch Ratings.

As cash placed at the Bank is deposited in its capacity as a banker not as a trustee, in line with usual banking practice, such cash is not held in accordance with the Financial Conduct Authority’s client money rules.

Fair values of financial assets and financial liabilities

The tables below set out fair value measurements of financial instruments as at the year end, by the level in the fair value hierarchy into which the fair value measurement is categorised.

Financial assets/liabilities at fair value through profit or loss

Note: Within the above tables, the entirety of level 1 comprises all the Company’s ordinary equity investments, level 2 represents the investment in LF Lindsell Train North American Equity Fund and level 3 represents the investment in LTL.

The valuation techniques used by the Company are explained on pages 5 to 7 of the Annual Report.

LTL Valuation Methodology

The current methodology was approved and applied to monthly valuations of the Company from 31 March 2022. J. P. Morgan Cazenove undertook an independent review of the methodology in January 2024, which confirmed that the methodology adopted in 2022 remains valid. The methodology seeks to capture the changing economics and prospects for LTL’s business. It is designed to be as transparent as possible so that shareholders can themselves calculate how any change to the inputs would affect the resultant valuation.

The methodology has a single component based on a percentage of LTL’s funds under management (‘FUM’), with the percentage applied being reviewed monthly and adjusted to reflect the ongoing profitability of LTL. At the end of each month the ratio of LTL’s notional annualised net profits1 to LTL’s FUM is calculated and, depending on its result, the percentage of FUM is adjusted according to the table below.

1 LTL’s notional net profits are calculated by applying a fee rate (averaged over the last six months) to the most recent end-month FUM to produce annualised fee revenues excluding performance fees. Notional staff costs of 45% of revenues, annualised fixed costs and tax are deducted from revenues to then produce notional annualised net profits.

For instance at 31st March 2024 LTL’s annualised notional net profits were £29.4m and its FUM was £15.2bn. The ratio between the two as a percentage was calculated as 0.193% resulting in a percentage of FUM of 1.90% and a valuation of LTL of £10,818.76 per share.

The valuation of the investment in LTL continues to be reviewed at the end of each month by the Company’s Directors, with the methodology reviewed by the Board at its quarterly meetings.

LTL Valuation per share using differing valuation scenarios

The two tables below show the impact on the LTL valuation if:

(i) in Table 1 a different % was applied to 31 March 2024 FUM; and

(ii) in Table 2 different Price / Earnings (‘P/E’) ratios were applied to LTL’s March 2024 notional net profits.

Table 1 – varying the % of FUM

Table 2 – varying the P/E ratio

There were no transfers between levels for financial assets and financial liabilities during the year recorded at fair value as at 31 March 2024 and 31 March 2023. 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

Capital management policies and procedures

The Company’s capital management objectives are:

• to ensure that it will be able to continue as a going concern; and

• to maximise long-term total returns with a minimum objective to maintain the real purchasing power of Sterling capital through an appropriate balance of equity capital and debt. The Directors have discretion to permit borrowings up to 50% of the Net Asset Value. However, the Directors have decided it is in the best interests of the Company not to use gearing.

The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on an ongoing basis.

The Company’s objectives, policies and processes for managing capital are unchanged from last year.

The Company is subject to externally imposed capital requirements:

• as a public company, the Company has a minimum share capital of £50,000; and

• in order to be able to pay dividends out of profits available for distribution, the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by UK company law.

These requirements are unchanged since last year and the Company has complied with them at all times.

At the next Annual General Meeting the Company intends to renew its authority to repurchase shares at a discount to Net Asset Value.

18 Guarantees, financial commitments and contingent liabilities

There were no financial commitments or contingent liabilities outstanding at the year end (2023: None).

19 Ongoing charges (APM)

Total operating expenses are included after a management fee waiver of £123,000 (2023: £117,000) (see note 3).

The above total expense ratios are based on the average Shareholders’ Funds of £203,091,000 (2023: £211,310,000) calculated at the end of each month during the year.

It should be noted that administrative expenses borne by the LTL managed funds are excluded from the above.

See Glossary for other cost disclosures.

20 Related party disclosures

LTL acts as Investment Manager of the Company. The amounts paid to the Investment Manager are disclosed in note 3 and further details of the relationship between the Company and the Investment Manager are set out in note 6. Full details of Directors’ interests are set out on page 53 of the Annual Report.

On 5 June 2024, the Company and LTL entered into an amended and restated Investment Management Agreement, to incorporate changes made, and announced, in June 2021 and June 2022 and additional non-material changes. LTL is considered to be a related party of the Company under the Listing Rules. The amendment and restatement of the Investment Management Agreement amounted to small related party transaction to which certain provisions of Chapter 11 of the Listing Rules do not apply in accordance with LR 11.1.6 R.

21 Subsequent events

There are no significant events that have occurred after the end of the reporting period to the date of this report which require disclosure.

Appendices (unaudited)

DISCLAIMER

The information contained in these Appendices has not been audited by the Auditor and does not form part of the financial statements. The appendices are for information purposes and should not be regarded as any offer or solicitation of an offer to buy or sell shares in the Company.

Appendix 1 Annual Review of Lindsell Train Limited (‘LTL’) at 31 January 2024

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, Michael Lim who was the Chief Operating Officer and is now the Company Secretary, Joss Saunders (Chief Operating Officer), and three non-executive directors,; Rory Landman, Julian Bartlett and Jane Orr, two of which are independent. Rory was appointed to the LTL Board following the retirement of James Alexandroff in March 2023. Rory served as a non-executive director of the Lindsell Train Investment Trust from 2011 to 2020, and Julian is a former partner of Grant Thornton LLP. Jane retired from her executive responsibilities at LTL in March 2023, having previously led the Marketing & Client Services team and was an executive director of the board, appointed in 2010. After 14 years at LTL, Keith Wilson retired from the company and left the Board on 31 January 2024. James Bullock and Jessica Cameron were both appointed to the Board in May 2024.

LTL’s executive staff reduced by three from 28 to 25 the last 12 months, which includes the retirements of Jane Orr and Keith Wilson. All staff are based in the UK other than LTL’s North American Marketing and Client Services representative, who works out of Texas. LTL’s board recognises that key employees should share in the ownership of the company, furthering the alignment of interests between them, LTIT and the founders. This is achieved by acquiring shares from LTL’s major stakeholders either directly or through a dedicated profit 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 FUM in its four key product areas: UK, Global, Japanese, and North American equities. LTL aspires to manage multiple billions of pounds in each product area, whilst recognising that there will be a size per product above which their ability to achieve clients’ performance objectives may be compromised. LTL thinks this growth is possible without significantly expanding the investment team, which numbered six at 31 January 2024.

To achieve this growth in a manageable way, LTL looks to direct new business flows into LT badged pooled funds and to limit the number of separately managed accounts. The open-ended pooled funds represented 62% of FUM at end of January, down from 65% the year before. The fall resulted from a greater proportion of net outflows emanating from open-ended pooled products.

Additionally, LTL managed 16 separate client relationships, one fewer than a year ago. The largest pooled fund (the Lindsell Train Global Equity Fund) represented 29% of total FUM and the largest segregated portfolio accounted for 11%.

In the year to 31 January 2024, LTL’s total FUM fell by 15% from £18.6bn to £15.9bn. This represented net outflows of £3.4bn, broken down by strategy as Global (£1,993m), Japan (£380m) and UK (£1,038m).

All four strategies generated positive absolute returns over the twelve months, however each underperformed relative to their corresponding benchmarks. LTL’s process is simple and remains the same as it always has been, with LTL seeking to find companies that own long-lasting franchises with deep moats and the ability to reinvest returns at relatively high rates of return for extended periods of time. To capture these characteristics LTL portfolios are relatively concentrated with large average position sizes which rarely change. It also means that at any given time there will be a large number of quoted companies that LTL do not own, amongst which there are bound to be some exceptional performers. The unusual feature today is that the performance of some of these companies has reached new extremes, which makes their omission felt more keenly.

However, this current phenomenon has not, and will not change how LTL invests. It remains focused on exploiting the credentials of its highly concentrated, idiosyncratic portfolios.

The relative returns of the LTL funds representing each strategy since their inception are shown below:

Returns based on NAV. LF Lindsell Train UK Equity Fund Acc share class; Lindsell Train Global Equity Fund B share class; Lindsell Train Japanese Equity Fund A Yen share class; LF Lindsell Train North American Equity Fund Acc share class.

The Marketing and Client Services team is in contact with institutional clients both directly and through investment consultants, primarily in the UK, South Africa and the USA. FUM derived from North America makes up over 14% of total FUM. LTL’s funds are also widely represented on the major UK retail and IFA platforms.

Financials

In the year to 31 January 2024 LTL’s total revenues fell 11%. Annual management fees make up the lion’s share of total revenues, at 98.9%, with interest income the remainder; there were no performance fees earned in the year. LTL’s biggest cost item, direct staff remuneration, is capped at 25% of fees (other than those earned from The Lindsell Train Investment Trust plc), as governed by LTL’s Shareholders’ Agreement. Employer National Insurance costs are excluded from the restriction. Total staff remuneration, including employer National Insurance, amounted to 30% of fee revenue, the same as last year. Fixed overheads remained constant at £4.6m. Operating profits were down 12%, registering a margin on sales of 67%. Net profits fell more, by 18% to £44.6m, on account of the rise in the effective tax rate from 19% to 25%.

LTL intends to distribute to shareholders dividends equivalent to 80% of its net profits in respect of each accounting year-end, subject to retaining sufficient working, fixed and regulatory capital to enable it to continue its business in a prudent manner. Total dividends paid in the year to 31 January 2024 were £1,462 per share, down from £1,841 per share in the previous year.

At 31 January 2024 LTL’s balance sheet was made up of shareholders’ funds of £103.5m including £96.2m of net current assets.

The Future

LTL believes it has plenty of headroom to grow its FUM, with a continued focus on its stable of pooled funds. LTL’s investment approach is applied uniformly across all its products and remains differentiated and appealing to a wide range of clients. A crucial part of that appeal is the ability for LTL to demonstrate investment results that meet clients’ objectives. Over most of LTL’s history this has been achieved, but recently the investment approach has faced several difficult years. Most clients will tolerate short periods of underperformance, especially in a strategy that is so concentrated and committed to its constituent companies. However, it is not surprising, following four years of cumulative underperformance, that the company is seeing some net outflows as clients are attracted to other investment approaches that have exhibited better short-term investment results.

LTL is confident that by remaining committed to its differentiated investment approach that targets companies earning higher returns on capital than average, and with the support of a stable and dedicated team, and a still competitive longer-term performance track record, it can stay positive about its future. But it is fully aware that there are risks ahead which could have a material impact on the value of LTL and its dividend paying potential. These risks include increasing pressure on the active management industry; continued pressures on global equity markets from inflation, higher interest rates and conflict; the growth of ESG designated investment funds; and, the underperformance from LTL’s strategies. Perhaps the greatest risk in relation to LTL’s reputation however remains the withdrawal of either of the founders. They are currently aged 65 and 64, in good health and remain strongly committed to LTL. They are supported by increasingly mature and experienced investment professionals, currently numbering four, all of whom are taking on more responsibility and contributing more to investment decisions as their careers progress with the company. The clearer articulation of the firm’s succession planning and the accelerated transfer of ownership of LTL shares to key individuals should also help mitigate the risk if either founder withdraws.

Data to 31 January 2024 unless stated otherwise. The period from 31 January to 31 March 2024 has been reviewed by the Board and there are no significant matters to highlight other than those detailed in this Appendix.

Funds Under Management*

FUM by Strategy

Largest Client Accounts

* LTL 's year end 2024 and year end 2023 figures above are based on published financial statements. LTL 's year end 2023 figures in L TIT'S Annual Report last year were based on unaudited management accounts. This therefore results in differences when compared with L TIT's Annual Report last year, as last year's Report contained LTL unaudited management account numbers for year ending 31 January 2023, which in this year's Annual Report are using numbers based on published Financial Statements.

Lindsell Train Fund Performance

Source: Morningstar Direct

Note: all figures above show total returns.

Financials*