Monthly Briefing June 2002
Lindsell Train Investment Trust PLC
10 July 2002
The Lindsell Train Investment Trust PLC
As at 30th June 2002
Fund Objective
To maximise long-term total returns subject to the avoidance of loss of absolute
value and with a minimum objective to maintain the real purchasing power of
Sterling capital, as measured by the annual average yield on the 2.5%
Consolidated Loan Stock.
Share Price GBP 103.50
Net Asset Value GBP 98.69
Discount (Premium) (4.2%)
Market Capitalisation GBP 20.7mn
June Fund Performance - NAV -3.6%
- Price -8.0%
Source: Bloomberg
NAV - LT & Bloomberg
Performance
(based in GBP) Jun May Apr 1 Year Since Launch
NAV -3.6 -0.4 -0.8 -2.9 -0.7
Share Price -8.0 -2.6 -4.9 -15.9 +3.5
2.5% Consol Loan Stock +5.1
Annual Average Yield
Source: Bloomberg.
Based in GBP.
Top 10 Holdings
% NAV
US Gov Treasury 6.25% 13.3
Lindsell Train Japan (Dist) 12.4
Lindsell Train Global Media (Dist) 12.1
US Gov Treasury IL 3.875% 7.8
HBOS 6.125% Non Cum 6.9
Cadbury Schweppes 5.9
21/2% Consolidated Loan Stock 5.7
Barr (AG) 5.1
UK Treasury 2.5% 4.9
Nintendo Co 4.6
Industry Breakdown
% NAV
Bonds 34.7
Preference Shares 10.9
Media 9.7
Banks & Investment Co. 6.9
Leisure & Tourism 8.9
Food & Beverage 16.4
Investment Fund 24.5
Cash & Equivalent (12.0)
Total 100.0
Geographical Breakdown
% NAV
Bonds 34.7
UK* 13.6
US 21.1
Preference Shares 10.9
Equities 42.0
UK 29.8
US 5.2
Japan 4.6
Europe 2.4
Funds 24.5
LT Japan 12.4
LT Global Media 12.1
Cash & Equivalent (12.0)
Total 100.0
* Including the Daily Mail 2.5% 2004 Convertible Bonds (3% of NAV)
Currency Exposure
% NAV
USD 50.9
JPY 0.2
EUR 2.4
GBP 46.5
Total 100.0
Fund Manager's Comments
The NAV has spent the first five months of 2002 fluctuating between £103 and
£105. In June, though, it fell 4.2% to £98.67. Although this seems a
creditable performance as compared to world markets that fell 10.2%, it was
somewhat disappointing to us for two reasons. Firstly our bonds did not rise in
price as much as we might have hoped and secondly most of the loss in value from
the month was attributable to the depreciation of the dollar versus sterling.
Our enthusiasm for bonds is based on a belief in the continued absence of
inflation in the major world economies. The relative outperformance of our
holding of the 27 year US inflation linked bond versus our 28 year conventional
(4% so far this year) indicates that if investors require the certainly of real
income they are prepared to sacrifice current yield to achieve it, which is
another way of saying they fear inflation. At the beginning of the year when
the US economy was showing less ambiguous signs of recovery and the stockmarket
was rising it was understandable that some investors, harking back to
experiences in previous cycles, might fear inflation. Now, with stockmarkets
plummeting and deepening scepticism about the sustainability of economic
activity it is surprising to us that bonds have only managed a rally to the
prices at which they began the year. Maybe investors have an altogether more
fundamental fear that in the face of sluggish or declining economies central
bankers will pursue irresponsible monetary policies to force growth by whatever
means. Time will tell, but so far we have the evidence on our side: reported
inflation is less than expected with almost every successive release on both
sides of the Atlantic.
The strength of sterling is more of a frustration than anything else, as without
it we would have done a far better job of protecting the NAV. Its rise has lead
to quotational loss on 51% of the portfolio denominated in US dollars. Our
judgement on the relative values of the currencies is that Sterling is somewhat
overvalued versus the US dollar. The US is a more open and competitive economy
with the inefficient government sector representing a smaller part of the whole,
a combination which helps to limit the rise in price of many comparable goods
and services and average wages. Today many of these 'comparables' are cheaper
in the USA than in the UK which would tend to favour the US currency if
geography was not an issue. However a more potent short-term influence on
currencies is capital flows and in the last few months these have clearly
demanded better prices (a lower US dollar) in recognition of the declining
confidence in the quality and scale of returns of US dollar assets. This can
change. Some of the longer-term problems that observers attribute to US dollar
weakness are ones that are mirrored here but for whatever reason are not subject
to the same extent of investor scrutiny today. What is worth remembering is
that when capital flows act to change the value of Sterling the flows tend to be
a greater proportion relative to GNP than in the USA, making for far more
volatile exchange rate movements.
The fall in the NAV has acted to increase our gearing marginally as have two
minor additional purchases of Nintendo and Reuters as prices fell during the
month. The gearing is now just over 12% and though we are prepared to accept
that this will rise if the gross assets continue to move down, we would only
want to add materially to positions if the assets we bought generated income
sufficient to fund any extra borrowing.
Fund Manager Launch Date Denominated Currency
Nick Train 22 January 2001 GBP
Year End Dividend Benchmark
31st March Ex-date: June The annual average yield on
Payment: August the 21/2% Consolidated Loan Stock.
Sedol No Bloomberg
3001710 LTI LN
The Board Management Fees Registered Address
Rhoddy Swire Standard Fee: 0.65% p.a. Lindsell Train Investment Trust
Michael Mackenzie Performance Fee: 77A High Street
Donald Adamson 10% of annual increase in Brentwood
Michael Lindsell the share price, plus ESSEX DM14 4RR
dividend, above
the gross annual yield of
the 21/2% Consolidated
Loan Stock.
Disclaimer
The contents in this document is solely for information purposes only. The
information contained herein does not constitute an offer or invitation to buy
or subscribe any securities or funds in any jurisdiction in which such
distribution is not authorised. Nothing in this document constitutes investment,
legal, tax or other advice and cannot be relied upon in making any investment
decision. Applications to invest in some of the funds must only be made on the
basis of offer documents which may only be available for private circulation.
The information contained in this document is published in good faith and
neither Lindsell Train Limited nor any other person so connected assumes any
responsibility for the accuracy or completeness of such information as provided.
No representation is made or assurance given that any statements made, views,
projections or forecasts are correct or that objectives will be achieved.
Lindsell Train and/or persons connected with it may have an interest in the
Fund. The value of investments and the income from them may go down as well as
up and are not guaranteed. Past performance is no guarantee of future
performance. You may not get back the amount you invested. Foreign exchange
rates may cause the value of investments to go up or down. Investments may be
subject to higher volatility in certain funds and the investment value may fall
suddenly and substantially.
Lindsell Train Limited
35 Thurloe Street, London SW7 2LQ
Tel. +44 20 7225 6400 Fax. +44 20 7225 6499
info@lindselltrain.com www.lindselltrain.com
Lindsell Train Limited is regulated by the FSA.
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