Monthly Update May 2004
Lindsell Train Investment Trust PLC
18 June 2004
The Lindsell Train Investment Trust PLC
As at 31 May 2004
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 90.50
Net Asset Value GBP 102.31
Premium (Discount) (11.5%)
Market Capitalisation GBP 18.1mn
Benchmark (21/2% Con Ann Avg Yield +5.0%) % +0.4
Source: Bloomberg; NAV-Lindsell Train
Performance History (based in GBP) 2004 YTD 2003 2002 2001 2000
Net Asset Value % +7.9 +1.6 -9.6 +3.2 n/a
Share Price % +5.8 -10.0 -19.5 +18.5 n/a
Source: Bloomberg. Based in GBP. Share Price quoted is closing mid price.
Performance years listed Jan - Dec. Launch date 22 Jan 2001.
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.
2003 Performance Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03
Net Asset Value % -3.8 +1.9 -0.6 +1.1 + 3.4 -0.9 +2.0 +1.7 -2.7 -0.5 -0.7 +0.9
Share Price % 0.0 +0.5 0.0 0.0 0.0 -4.2 -1.1 +2.2 -4.3 +2.3 -11.0 +6.2
2004 Performance Jan 04 Feb 04 Mar 04 Apr 04 May 04 Jun 04 Jul 04 Aug 04 Sep 04 Oct 04 Nov 04 Dec 04
Net Asset Value % +1.9 +3.3 +1.8 +0.8 0.0
Share Price % -2.3 +6.0 -0.6 +0.6 +2.3
Source: Bloomberg. Based in GBP. Performance years listed Jan - Dec.
Launch date 22 Jan 2001.
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 26.8
Preference Shares 14.2
Equity - Media 9.1
Equity - Banks & Investment Co. 4.0
Equity - Leisure & Ent. 9.3
Equity - Food & Beverage 27.2
Investment Fund 24.3
Cash & Equivalent (14.9)
Total 100.0
Source: Lindsell Train
Top 10 Holdings % of NAV
US Gov Treasury 6.25 12.4
Lindsell Train Global Media (Dist) 10.8
Lindsell Train Japan (Dist) 9.7
HBOS 9.25% Non Cum 9.6
Barr AG 9.4
21/2% Consolidated Loan Stock 8.3
Glenmorangie A&B 8.1
Cadbury Schweppes 6.7
UK Treasury 2.5% 6.1
Wolverhampton & Dudley Breweries 5.1
Source: Lindsell Train
Fund Exposure Bonds Prefs Equity Funds Cash % of NAV
UK % 14.4 14.2 43.2 3.8 (14.4) 61.2
USA % 12.4 - 2.3 10.8 2.5 28.0
Europe (ex UK) % - - - - - -
Japan % - - 4.2 9.7 (3.1) 10.8
Total 26.8 14.2 49.7 24.3 (14.9) 100.0
Source: Lindsell Train
*FTSE Future Notional Value (2.0)%
Fund Manager's Comments
The NAV closed the month fractionally lower, at £102.31. This means the NAV is up 8.0% year-to-date, outpacing all
major equity and bond markets, many of which, including the UK and US stock markets, are little changed since
January. Our gains have come from the equity and Fund investments, while the fixed interest assets have delivered a
flat performance, with modest total returns from some of our gilts and preference shares offset by modest local
currency losses, little more than 1.0% after accounting for interest earned, on the US government bonds.
Looking ahead, for the bonds first, we expect long term interest rates to stabilise as 2004 progresses, allowing the
Trust to earn a positive return of at least the income on its fixed-coupon investments from hereon. This judgement is
based on the fact that long-term inflation expectations, as measured by the gap between the redemption yields on the
longest dated conventional and index-linked bonds in both the UK and the US, are already over 3.0%. This expected
rate of inflation is roughly double the prevailing rate of inflation in the UK and US. If actual inflation continues
to undershoot expected inflation, the real return offered by the interest paid by conventional bonds will remain just
that, in other words a positive, ahead of inflation return. Such a real return ought to be attractive to risk-averse
investors, we think. Bears of bonds today and there are plenty, are taking a threefold bet. First that inflation is
heading towards 3.0% pa and more. Second, that the monetary authorities will take no action to prevent such an
acceleration. Finally, that capital market investors themselves will tolerate a sustained period of erosion of the
purchasing power of fixed interest securities, without exercising their traditional role as 'bond market vigilantes'.
The truth is, inflation pressures remain muted in the UK, the Bank of England is taking pre-emptive measures already
and, without the faintest shadow of doubt, bond investors are not complacent about inflation.
We do not to argue that bonds will do better than equities for the rest of this year, nor necessarily in any future
years. We simply note that decent real returns are available on government bonds, a lower risk asset class. In the
meantime, we are thrilled by the performance of some of our equity holdings and gratified that the investment themes
that drive our Funds appear well set.
Notable performers in recent weeks include Glenmorangie and Nintendo. Glenmorangie 'A' shares rose by 10.0% in May
and the 'Bs' by 6.5%. The gains accompanied very satisfactory Final Results from the company and an 8.0% dividend
increase. We continue to believe that Glenmorangie stock is significantly undervalued, relative to the potential of
the business. The global market for Scottish whisky is c£2.00 billion per annum and grew 4.0% last year. This growth,
already not trivial, is driven by new consumers in emerging markets and the demographics of the West, where older
drinkers turn away from beer towards the less gaseous charms of spirits. Meanwhile, the single malt category
represents just 6.0% of the total scotch market, but is growing at double the rate, 8.0% last year. This gain in
share for single malts reflects the increasingly sophisticated palates of drinkers, who are recognising that single
malts are more characterful and rewarding than blends. Glenmorangie, the brand, is already the largest single malt in
Scotland, is running neck and neck with Glenfiddich in the UK, with a 20.0% share of the market each and is the third
largest in the world, behind Glenlivet and Glenfiddich. Glenmorangie volumes were up 15.0% last year, in turn double
the rate for the category, with notable success in the USA and Asia. In 1960 the distillery at Tain sold just 6 cases
of Glenmorangie, the rest of its production destined for blends. This year case sales will approach 300,000, but the
opportunity for this company is only just beginning. Meanwhile, if Glenmorangie PLC was sold on the same terms that
The Macallan changed hands at in the 1990s, the last substantive transaction for a the single malt, its enterprise value
would nearly triple. We do not have any expectation whatsoever that such a change of ownership is likely, but it is a
comfort to recognise the strategic value that underpins this growth investment.
Nintendo rose 8.0% last month, with a promised doubling of its dividend being both a trigger for the gain (Nintendo
shares would offer a yield higher than an energy utility on the forecast), but also representing a powerful instance
of how change in Japanese corporate culture can create value for investors. Nintendo is an important individual
holding in the Trust, but is also held in each of the Lindsell Train Funds, in meaningful size. The news from the
company is trebly helpful, then, particularly in its endorsement of the Japan Fund strategy. Mike is in Japan as this
note is written, visiting Nintendo amongst others and will report fully in our next monthly note.
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
21/2% Consolidated Loan Stock.
The Board Management Fees Registered Address
Rhoddy Swire
Michael Lindsell Standard Fee: 0.65%
Donald Adamson Performance Fee: 10%
Michael Mackenzie of annual increase in
the share price, plus
dividend, above the gross annual
yield of the 21/2% Consolidated
Loan Stock.
Lindsell Train Investment Trust
77A High Street
Brentwood
ESSEX CM14 4RR
ISIN Bloomberg
GB0031977944 LTI LN
Disclaimer
This document is intended for use by persons who are authorised by the UK Financial Services Authority ('FSA') and
those who are permitted to receive such information in the UK. The information contained in this document does not
constitute an offer or invitation to buy or sell any investments. Nothing in this document constitutes investment,
legal, tax or other advice. Lindsell Train and/or persons connected with it may have an interest in this investment.
The value of any investment in securities or funds and the income generated from them may go down as well as up and
are not guaranteed. Past performance cannot be used as a guide or guarantee of future performance. You may not get
back the original amount you have invested. Changes in foreign exchange rates may cause the value of your investment
to go up or down. Some funds with higher gearing may be subject to higher volatility and the investment value may
change substantially. The net asset value (NAV) performance of an investment trust is not the same as its market
share price performance.
Issued by Lindsell Train Limited
Authorised and regulated by the Financial Services Authority
17 Jun 2004 LTL 000-017-5b
Lindsell Train Limited
35 Thurloe Street, London SW7 2LQ
Tel. +44 20 7225 6400 Fax. +44 20 7225 6499
info@lindselltrain.com http://www.lindselltrain.com/
Lindsell Train Limited is authorised and regulated by the Financial Services Authority.
END
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