Monthly Update

RNS Number : 5663V

Lindsell Train Investment Trust PLC

29 May 2008

 



The Lindsell Train Investment Trust PLC

As at 30 Apr 2008

Fund Objective

To maximise long-term total returns subject to the avoidance of loss of absolute value and with a minimum objective to maintain the real purchasing power of Sterling capital, as measured by the annual average yield on the 2.5% Consolidated Loan Stock.

Net Asset Value GBP 161.82  Share Price GBP 153.50  Premium (Discount) (5.1)%  Market Capitalisation GBP 30.7mn Benchmark (2½% Con Ann Avg Yield +4.6%)  +0.4  Source: Bloomberg; NAV-Lindsell Train. Share Price quoted is closing mid price. See Benchmark definition. Performance History (based in GBP) 2002 2003 2004 2005 2006 2007 YTD 2008 Net Asset Value TR% -9.6 +3.1 +23.7 +16.5 +13.7 +16.5 -5.6 Share Price TR% -19.8 -8.7 +20.6 +27.5 +20.1 +8.0 -4.7 Source: LTL and S&P Micropal. Performance years listed Jan - Dec. Launch date 22 Jan 2001. TR=Total Return (with dividends reinvested) Past performance is not a guide to future performance. The price of units and the income from them may go down as well as up. Investors may not get back what they invested. 2007 Performance Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Net Asset Value TR% +2.7 +0.8 +2.0 +2.7 +4.7 -3.2 +2.6 -1.7 +0.6 +3.8 -0.1 +0.6 Share Price TR% -1.4 +4.0 +3.2 +4.7 +2.1 +0.6 -2.5 +5.4 +0.3 +5.4 -9.5 -3.6 Source: LTL and S&P Micropal unless otherwise indicated. Performance years listed Jan - Dec. Launch date 22 Jan 2001. TR=Total Return (with dividends reinvested) 2007 Performance Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Net Asset Value TR% -5.7 +0.4 -1.4 -1.1 Share Price TR% -8.4 +11.9 -4.5 -2.5 Source: LTL and S&P Micropal unless otherwise indicated. Performance years listed Jan - Dec. Launch date 22 Jan 2001. TR=Total Return (with dividends reinvested) *Source: Lindsell Train Ltd . Past performance is not a guide to future performance. The price of units and the income from them may go down as well as up. Investors may not get back what they invested.  Industry Breakdown % of NAV Bonds 14.7 Preference Shares 9.0 Equity - Media 22.0 Equity - Banks & Investment Co. 6.6 Equity - Leisure & Tourism. 3.0 Equity - Food & Beverage 29.1 Equity - Consumer Goods  1.6 Equity - Internet 1.4 Investment Fund 22.2 Cash & Equivalent (9.6) Total 100.0 Source: Lindsell Train Top 10 Holdings % of NAV Nintendo  13.6 Lindsell Train Global Media (Dist) 12.1 Barr AG 9.7 Cadbury Schweppes 9.0 HBOS 9.25% Non Cum Pref 9.0 Diageo 7.4 Lindsell Train Japan (Distr)  6.9 Lindsell Train Ltd  6.9 2½% Consolidated Loan Stock 5.6 US Treasury 2.5% 4.9 Source: Lindsell Train Fund Exposure  Bonds Prefs Equity Funds Cash % of NAV UK % 9.8 9.0 44.0 3.2 (12.9) 53.1 USA % 4.9 - 1.4 - 7.0 13.3 Europe (ex UK) %  - - 4.6 - (2.9) 1.7 Japan % - - 13.6 6.9 (0.7) 19.8 Global % - - - 12.1 - 12.1 Total 14.7 9.1 63.6 22.2 (9.5) 100.0 Source: Lindsell Train

Fund Manager's Comments

It is idle to pretend that the HBOS rights issue is anything but an unpleasant surprise for Lindsell Train Limited. HBOS ordinary shares have been a core holding in LT's UK equity accounts for many years and it has been cause of much chagrin to first watch the share price halve then witness its Board required to raise new capital on such apparently dilutive terms. In hindsight, we have focussed too hard on the Halifax brand- a great UK franchise -and not hard enough on HBOS, which has become an increasingly diverse institution, with a keener appetite for US mortgage debt than we could have conceived. However, so far as the Lindsell Train Investment Trust is concerned, the HBOS rights is pretty much unalloyed good news, certainly relative to where the portfolio was a month ago. This is because LTIT owns no HBOS ordinary, but it does hold a big position in HBOS preference shares. The capital raised represents a material enhancement of the security of those preference dividends, which we already regarded as safe, except in the most dire circumstances. The pref shares have responded accordingly, rallying c28% from the lows of the week after the Bear Stearns bale-out and are now just about unchanged in calendar 2008. With the HBOS ordinary dividend set to be cut in the current financial year, it has been educational to be reminded of the reason that preference shares exist. With a prior claim on distributable earnings, the reliability of the pref dividends in times of economic difficulty is reassuring. We think it possible that the HBOS preference shares will offer a dividend yield rather lower than that on the ordinary, in recognition of that prior claim, during a period when the UK economy may be contracting and collateral values falling. This means further gains for the pref shares, which may be further enhanced by falling interest rates, if that economic prognosis plays out. For our other accounts, the decision whether to support the HBOS cash call will hang on any announcement of change in its corporate strategy - so far unforthcoming. Meanwhile, the unexpected merger between Mars and Wrigley is an important confirmation of the trend to consolidation in the consumer branded goods industry, as companies look to capture scale and efficiency gains and prepare themselves for the multi-year opportunity in Emerging Markets. The valuation attributed to Wrigley is high, but not inconsistent with other recent deals, involving Scottish & Newcastle or Absolut vodka. The truth is that if you want to create a global confectionary or gum brand, you don't have time, nor probably sufficient capital, to start from scratch - because the existing owners already have both brand recognition and distribution. This makes a franchise like Wrigley very valuable - still far more valuable than stock market investors are prepared to acknowledge. Cadbury is valued at about half of the Wrigley takeout, perhaps not coincidentally the same level that Nelson Peltz aspires to for his semi-unfriendly 4.5% stake in the company. Cadbury Schweppes is soon to be no more, as the business splits in two. We do not expect any immediate action, once the demerger is effected, but remain convinced that LTIT holds a unique and undervalued corporate asset - to which we have added. Wrigley was thought to be invulnerable to corporate activity, because the founding family retained material voting rights. The fact that a deal has been done demonstrates the logic of such combinations and the rationality, in the end, of dynastic owners of companies. LTIT holds stock in two similar businesses, Clarins and Heineken. We are content to own each as a participation in their wonderful economics and growth opportunity, but recognise that neither we, nor their family owners can never say never . Nintendo's full year results were amazing, with significantly more software sold than we expected - software being the source of supercharged profitability for the company. Bears argue that the peak of the current hardware cycle is in sight and that this year or next is 'as good as it gets'. We cannot definitively refute these worries, though we think that its recent dull share price is more to do with the strong Yen, than with canny investors pre-empting the top (they evince no such caution with commodity shares, still booming despite their certain cyclicality). However, we still think investors err in measuring Nintendo against previous episodes. The gaming industry is still too young for anyone to be certain that past fluctuations will recur either inevitably, or in the same shape. We note that the DS and Wii systems are each on track to be the biggest selling devices in gaming history, with far wider appeal, to age and gender, than any earlier platform. This is a prime growth industry and Nintendo is at its forefront, with the strongest balance sheet and best business model. A dividend yield on its shares above the average for Japan confirms us in our opinion that there is no reason to sell yet.

Fund Manager Launch Date Denomination Nick Train 22 Jan 2001 GBP Year End Dividend Benchmark 31st Mar Ex Date: June Payment: August The annual average yield on the 2½% Consolidated Loan Stock. The Board Management Fees Registered Address Rhoddy Swire Donald Adamson Dominic Caldecott Michael Lindsell  Michael Mackenzie Standard Fee: 0.65% Performance Fee: 10% of annual increase in the share price, plus dividend, above the gross annual yield of the 2½% Consolidated Loan Stock. Lindsell Train Investment Trust PLC Springfield Lodge, Colchester Road Chelmsford ESSEX  CM2 5PW Registered In England: 4119429 ISIN Secretary Listing GB0031977944 Phoenix Administration Services Limited London Stock Exchange Bloomberg LTI LN

Disclaimer

This factsheet is intended for use by shareholders of the Lindsell Train Investment Trust ('LTIT') and/or persons who are authorised by the UK Financial Services Authority or those who are permitted to receive such information in the UK. Any opinion expressed whether in general or both on the performance of individual securities and in a wider economic context represents Lindsell Train's views at the time of preparation. They are subject to change without notice and should not be construed as investment advice or investment recommendation. Past performance is not a guide to future performance and may not be repeated. The value of investments and income from them can go down as well as up and you may not get back the amount originally invested. Lindsell Train Investment Trust plc is an investment trust company listed on the London Stock Exchange. Investment trusts have the ability to borrow to invest which is commonly referred to as gearing. Companies with higher gearing are subject to higher risks and therefore the investment value may change substantially. The net asset value ('NAV') per share and its performance of an investment trust may not be the same as its market share price per share and performance.

Lindsell Train Limited 2 Queen Anne's Gate Buildings, Dartmouth Street, London SW1H 9BP U.K.  Tel. [phone]  Fax. [phone] [e-mail]  www.lindselltrain.com  Lindsell Train Limited is authorised and regulated by the Financial Services Authority.

 

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