A N N U A L R E P O R T
2020
The Law Debenture Corporation p.l.c.
A T A G L A N C E
A differentiated investment proposition
A PROUD HISTORY
132 years
of value creation for shareholders
STRENGTH AND DIVERSITY OF INCOME
34.0%
LONG-TERM DIVIDEND GROWTH
of total 2020 dividend funded by our Independent Professional Services business
42 years
of increasing or maintaining dividends to shareholders (116.5% increase in
dividend over the last ten years)
CONSISTENT LONG-TERM OUTPERFORMANCE OF OUR BENCHMARK
87.3%
outperformance of our benchmark, the FTSE Actuaries All-Share Index,
over ten years
Key statistics
for the year ended 31 December 2020
666.2p
NAV per share
(2019: 702.2p)
787.2m1
Net Asset Value
(2019: 830.1m)
18.3%2
9.5%
Growth in fair valuation
Independent Professional
of IPS (2019: 21.0%)
Services business growth in
earnings per share (2019: 8.5%)
-9.8%
3.6%
5.8%
6.2%
Benchmark total return
NAV total return for the year
Proposed increase in 2020
Increase in share price
for the year
(2019: 19.2%)
(with debt at par)
(2019: 19.4%)
dividend per share
in 2020 (2019: 20.4%)
(2019: 37.6%)
1 Please refer to page 37 for calculation of net asset value.
2 Increase in annual valuation of Independent Professional Services business, excluding change in surplus net assets.
lawdebenture.com
Law Debenture is an investment trust and a leading provider of independent
professional services, listed on the London Stock Exchange. From its origins in
1889, it has diversified to become a Group with a unique range of activities in
the financial and professional services sectors. The Group has two distinct areas
of business:
Investment
Portfolio
c. 83% of NAV
Independent Professional
Services (IPS) business
c. 17% of NAV
Managed by James Henderson and Laura Foll
of Janus Henderson
OBJECTIVE: LONG-TERM CAPITAL
GROWTH IN REAL TERMS AND STEADILY
INCREASING INCOME
– Focused on long-term returns
– Low ongoing charges ratio at 0.55%1
compared to industry average of 1.02%2
– Contrarian investment style:
– Out of favour equities standing at
valuation discounts to their long-term
historical average
– High quality companies with strong
competitive advantage at attractive valuations
– Selective, bottom-up approach
– Diversified portfolio by sector
(predominant UK weighting)
PENSIONS
The longest
established and
largest UK
provider of
independent
pension trustees
CORPORATE
TRUST
A leading
independent
corporate
trustee across
international
capital markets
CORPORATE
SERVICES
Range of
outsourced
solutions to
corporates
internationally
INTERNATIONAL PRESENCE:
United Kingdom, New York, Ireland, Hong Kong,
Delaware, and Channel Islands
All divisions have further potential for growth
through the overall market growth for these
services and market share gains, alongside better
leveraging technology, strong relationships and
a high quality brand
Significant, consistent income contribution from IPS gives greater flexibility in stock selection
1 Calculated based on data held by Law Debenture for the year ended 31 December 2020.
2 Source: Association of Investment Companies (AIC) industry average (excluding 3i) as at 31 December 2020.
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A T A G L A N C E
Contents
A T A G L A N C E
C O R P O R A T E G O V E R N A N C E
Financial summary and performance
3
The Board
S T R A T E G I C R E P O R T
Chairman’s statement
Q&A with Denis Jackson, CEO
4-5
6-7
Q&A with James Henderson and Laura Foll,
Executive Leadership team
Directors’ report
Corporate governance report
Covid-19 response
Audit and Risk Committee report
investment managers
8-9
Annual remuneration report
50-51
52
53-55
56-60
61-62
63-65
67-82
Chief Executive Officer’s review
Investment managers’ review
Fifteen largest holdings
Classification of investments
Investment portfolio valuation
Changes in geographical distribution
Company overview
Calculation of net asset value
(NAV) per share
Long-term performance record
Risk Management
Viability statement
Section 172(1) statement
10-16
18-23
24-25
26
28-31
31
32-36
37
38
39-45
46
47-49
F I N A N C I A L S T A T E M E N T S
Independent auditor’s report
84-90
Group income statement
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statements of cash flows
Notes to the accounts
92
92
93
94-95
96
97-126
C O R P O R A T E I N F O R M A T I O N
Alternative performance measures
128-129
Company advisers and information
Financial calendar
Subsidiary company details
130
131
131
Notice of annual general meeting (AGM)
132-133
Summary of proposed amendments
to the Articles of Association
134-137
Explanatory notes to the notice of AGM
138-139
Shareholder notes
AGM online user guide
140-141
142
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Change
(5.2)%
(5.1)%
(45.4)%
+9.5%
N/M
(29.7)%
N/M
+5.8%
+6.2%
31 December 2020
£000
31 December 2019
£000
830,139
Pence
702.17
22.18
8.54
(0.04)
30.68
79.27
26.00
650.00
%
0.48
5†
(7.4)
787,219
Pence
666.15
12.12
9.35
0.09
21.56
(19.06)
27.50
690.00
%
0.55
9
3.6
1 year
%
3.6
2.0
(9.8)
12.9
3 years
%
5 years
%
10 years
%
15.6
13.2
(2.7)
24.3
6.4
59.1
53.0
28.5
67.3
13
147.8
134.7
71.9
174.8
29.4
Financial summary
Net assets1
Net Asset Value (NAV) per share at fair value1*
Revenue return per share
Investment portfolio
Independent professional services
Group charges
Group revenue return per share
Capital (loss)/return per share
Dividends per share
Share price
Ongoing charges3*
Gearing3
Premium/(Discount)*
Performance
NAV total return2* (with debt at par)
NAV total return2* (with debt at fair value)
FTSE Actuaries All-Share Index Total Return4
Share price total return4*
Change in Retail Price Index4
0.9
* Items marked “*” are considered to be alternative performance measures and are described in more detail on page 128.
† The 2019 gearing has been restated to reflect the revised approach to the calculation. Please see page 128 for more information.
1 Please refer to page 37 for calculation of net asset value.
2 NAV is calculated in accordance with the AIC methodology, based on performance data held by Law Debenture including fair value of the IPS business and long-term borrowings. NAV is
shown with debt measured at par and with debt measured at fair value.
3 Source: AIC. Ongoing charges are based on the costs of the investment trust and include the Janus Henderson Investors’ management fee of 0.30% of NAV of the investment trust. There is
no performance related element to the fee. Gearing is described in the strategic report on page 34 and in our alternative performance measures on page 128.
4 Source: Refinitiv Datastream.
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S T R A T E G I C R E P O R T
Chairman’s statement
suspend or cut their dividends in order to protect their businesses
over the long-term. The stable income provided by our IPS business
means that we are not as dependent as many on the payouts from
our underlying investments, illustrating the trust’s relative resilience
in a downturn. The IPS business has funded over a third of our
dividends to shareholders over the past eleven years. It continues
to demonstrate a good performance at a time of significant
market instability.
Furthermore, as with all investment trusts, we have the ability to
hold back a portion of our income received each year. These revenue
reserves help us to maintain or continue increasing our dividends
in times of economic distress. At the start of 2020, we had one of
the strongest reserves positions within the UK Equity Income sector
with a Group retained earnings of £62.5m2.
Understandably, having regular, reliable income is now more
important than ever for many of our shareholders. We listened
to feedback from our investors and in July, transitioned to a
quarterly dividend cycle, providing greater regularity around
dividend payments.
Subject to your approval, we propose paying a final dividend of
8 pence per ordinary share. The dividend will be paid on 15 April
2021 to holders on the register on the record date of 12 March 2021.
This will provide shareholders with a total dividend of 27.5 pence per
share for 2020 and represents a dividend yield of 3.8% based on our
share price of 723p pence on 24 February 2021.
As we have done this year, we will continue to listen and respond to
feedback, to deliver value for our shareholders.
Our investment portfolio
Our experienced investment management team, led by James
Henderson and Laura Foll, has left us well-positioned for future
longer-term growth. The investment managers’ review on pages 18
to 22 contains a more detailed explanation from James and Laura on
the portfolio’s performance.
Through these difficult times, your Board continues to support
the investment managers’ strategy of investing in high-quality
companies at attractive valuations, which offer good total return
opportunities. With markets in their current state, the advantages
of Law Debenture’s structure have been evident. The cash that we
generate from our IPS business has allowed James and Laura to avoid
potential value traps, as other income funds may be forced into a
narrower selection of stocks to maintain their own dividend yield.
IPS business
Within the IPS business, our diverse revenue streams have shown
resilience in these difficult macroeconomic conditions.
During the period, we continued to deliver growth. Over the course
of 2020, IPS grew its revenues by 8.5% while earnings per share grew
by 9.5% compared to 2019. This is built on two previous years of good
performance and, over the last three years, revenues have grown by
27.1% and earnings per share by 29.7% in total.
In what has been a challenging year, Law Debenture has shown good
resilience and I am delighted to introduce our 2020 annual report.
Performance
2020 was a very difficult year. The impact of Covid-19 on our lives
has been substantial and has led to significant economic volatility.
Although the recent approval and rollout of new vaccines usher in
hope, it is difficult to assess how long this period of instability will last.
However, the strength and capabilities of your Company have been
evident in these volatile times. During the period, our active investment
managers have demonstrated the value in their stock-picking strategy.
Despite the current backdrop, Law Debenture saw a share price total
return of 12.9% in 2020, outperforming the FTSE Actuaries All-Share
Index by 22.7%, which declined by 9.8%. Over the same period, your
Company’s net asset value (with debt at par) grew 3.6%1 .
We are proud of this achievement and our ability to deliver on our
aim of producing long-term capital growth and steadily increasing
income for our shareholders.
The Board remains strongly focused on longer-term performance. Over
the three-year period to 31 December 2020, the NAV per share (with
debt at par) total return was up 15.6%, which compares favourably with
the 2.7% total return of the FTSE All-Share Index and, over ten years,
your Company saw a NAV per share total return of 147.8%, outstripping
the 71.9% total return for the FTSE All-Share Index.
We are continuing to closely monitor and actively manage the
impact of Covid-19 on our portfolio and clients. We are also taking
the necessary precautions to protect both our employees and the
communities in which we operate.
Dividend
Law Debenture has a proud history of maintaining or increasing its
dividend payments for 42 years.
The Covid-19 crisis has highlighted the unique benefits that Law
Debenture’s structure offers. The severe turbulence across global
markets in 2020 caused a large proportion of listed companies to
1 NAV is calculated in accordance with the AIC methodology, based on performance data held by Law Debenture including fair value of the IPS business and long-term borrowings. NAV is shown
with debt measured at par and with debt measured at fair value.
2 Investec Securities analysis from 30 March 2020, based on Group Revenue Return, including professional services fees. Calculated on an annualised basis on dividend payments in respect of
accounting years between 1 January 2011 and 31 December 2020. Group retained earnings were £62.5m as at 1 January 2020.
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Chairman’s statement continued
We maintained operational continuity throughout the Covid-19
pandemic and did not furlough any employees, implement any pay
cuts or make any redundancies related to Covid-19.
In December, we were pleased to announce the acquisition
of a company secretarial business line (CSS) from Konexo
UK, a division of Eversheds Sutherland (International) LLP, for
£20 million. The acquisition was an important step forward
in supporting Law Debenture’s strategy. The expansion of our
existing company secretarial offering will enable us to grow in an
attractive core business and meet increasing customer needs in a
specialised market.
The Board believes that the IPS business continues to have
good prospects for further organic growth and we remain alert
to opportunities presented by acquisitions which meet Law
Debenture’s strict financial and strategic criteria.
Environmental, Social and Governance (ESG)
considerations
Robust governance, transparency and accountability are embedded
in our corporate values. Within our IPS business, utilities’ consumption
and business travel are critical aspects of our environmental and
carbon footprint. In 2020, we were pleased to move into a new ‘green’
office and adopt paperless ways of working and we look forward to
increasing our focus on ESG in 2021. The Board will be conducting a
full internal review on ESG and we plan to monitor our emissions and
evaluate carbon reduction targets, step up employee engagement and
ensure individual voices continue to be heard. Many of our IPS activities
constitute governance services and we strive to maximise the potential
of all our colleagues and partners.
This year there were several new appointments within our senior
leadership, as covered later in this report. I am proud that we have
strong female representation across our management team. We are
working to ensure that ethnic diversity is appropriately represented
within our organisation, but we acknowledge that there is more work
to do. We are committed to progressing this further in 2021.
Our investment managers have an ESG policy of discussing
any material issues directly with their investee companies and
monitoring for improvement. They are not afraid to exit positions
where management fail to deliver expected improvements. In
addition, James and Laura are always looking for companies that are
actively seeking to address ESG issues. Holdings exposed to the need
to decarbonise the global economy have performed extremely well
during the year, including Ceres Power and ITM Power. ESG issues
are considered both directly by James and Laura, and also by the
experienced responsible investing team at Janus Henderson. While
they do have quantitative metrics on ESG available for the portfolio,
they are not at present explicitly screening companies out on ESG
ratings as the data quality is sometimes unreliable. This will be kept
under review.
The Board
I would like to thank our CEO, Denis Jackson, for his tireless efforts
during 2020, particularly in relation to the acquisition of the CSS
business and delivering another set of strong results for your
Company. The Board worked closely with our CEO to restructure
our Executive Leadership team. We were delighted to appoint Trish
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Houston as our new COO and welcomed her as an Executive Director
on the Board on 2 September. She is a chartered accountant with
almost two decades of experience in financial services. Her in-depth
sector knowledge will be invaluable as we continue to make progress
against our stated growth strategy.
Katie Thorpe stood down as CFO in October and was succeeded
by Hester Scotton, who joined Law Debenture in 2019 as Head of
Internal Controls and Group Money Laundering Reporting Officer.
The management transition has gone well, with both Hester and
Trish playing integral roles in our acquisition of CSS from Konexo UK.
I look forward to working with them both as we look to continue our
growth trajectory.
The Executive Leadership team was further strengthened with the
promotion of Kelly Stobbs to General Counsel.
After nine years on the Board, Robert Laing will be stepping down
as non-executive director and Chairman of the Remuneration
Committee. We would like to thank him for his significant contribution
to the Company over the years and wish him all the best in the future.
Report and accounts
Every year we reflect on the format and disclosure of the report
and accounts, striving to improve how we communicate with
shareholders. For 2020 you will notice we have presented additional
disclosure within our risk management section and simplified
our presentation of the remuneration report. We cannot ignore
the impact of Covid-19 and have set out in full within the Strategic
Report how we have responded to the pandemic to protect our
key stakeholders. We will continue to listen to shareholders and
analysts, reflecting on the areas they find important and evolving our
reporting to make sure we have the appropriate level of transparency.
We continue to develop an integrated ESG narrative and see this as
the start of a journey and will be looking to continue to evolve our
reporting into 2021 and beyond.
Looking forward
The Board is confident in the expertise of our investment managers
and their strategy of investing in high-quality companies with strong
competitive characteristics. Where the current valuation does not
reflect the long-term prospects, these companies should continue
to deliver attractive returns to shareholders.
The prospects of the IPS businesses remain positive due to their
strong market positions and good reputation, supported by
strong governance and regulatory drivers in the markets in which
they operate.
Overall, the Board is confident that your Company is positioned
to perform well in the long-term and our unique structure is well
placed to serve shareholders searching for a reliable and growing
income stream.
In closing, we are grateful to our people for their tremendous work
and efforts in delivering a good set of results in 2020 and for their
ongoing dedication to our business.
Robert Hingley
Chairman
25 February 2021
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Q&A with Denis Jackson, Chief Executive Officer
1. How should shareholders be feeling
about Law Debenture’s results in 2020?
Despite the Covid-19 crisis, our business preserved shareholders’
capital, increased our dividend, and increased the earnings of our
operating business. Not many businesses can say that about their
performance in 2020. We performed well during the crisis but it
is critical now that we use our position of strength to continue to
build long-term capital growth and steadily increasing income.
2. What were the highlights for you?
Without question it was the way that all of our staff, unselfishly,
and without any prompting from me, brought out the very best of
our collective experience to solve the rapidly evolving needs of our
clients. I am proud of the kindness that our staff showed to one
another and the calm, measured and thoroughly professional way
in which they applied themselves. We are lucky to have them. We
will continue to invest in them and in their well-being.
3. Where do you feel the Company could
potentially have done better?
We need to ensure that investors and potential new investors
understand us. This includes who we are, what we do and how
we do it. We have a very loyal investor base who have supported
us through all parts of the economic cycle. As our Group evolves,
we must take them with us and attract a new generation of
buyers of our stock.
4. What, if any, learnings came from
Covid-19 for the business?
I think that as much as we try to forecast, budget and plan, we
can never predict what is just around the corner. During my
career, I have experienced a stock market crash, the demolishing
of the Berlin Wall, 9/11, the global financial crisis and now a global
pandemic. With a strong balance sheet, a diverse set of revenue
streams and a reputation for excellence, Law Debenture will
always attract discerning clients. Law Debenture has once again
shown resilience in a crisis; continued investment in a great
technology team and a good disaster recovery plan have certainly
proved their worth.
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Q&A with Denis Jackson, Chief Executive Officer continued
5. Have there been any changes to your
strategy/priorities for the IPS business
going forward?
8. What do you see as the main challenges
to sustainably grow all three divisions of
the IPS business?
We have a strong brand built on trust and product excellence.
We must ensure that we have the right people in place to both
We need to maintain these pillars while adding ‘ease of use’ as a
grow our business and deliver an excellent service to our clients.
9. Given the macroeconomic backdrop,
what medium-term growth are you
targeting for the IPS business and how
might the multiple develop over time in
different scenarios?
In our annual report two years ago we stated that following a
period of no growth between 2011 and 2017, mid to high single
digit growth would be a sensible target and would represent
significant progress. In the past three years, our IPS EPS has
increased by 9.2%, 8.5% and 9.5% respectively. We are proud of
this and believe that compound mid to high single digit growth
continues to be an appropriate goal for our business. If we
continue to execute well, compound our growth at mid to high
single digits, and better educate analysts and investors about our
business, we are confident we will achieve our goals of long-term
capital growth and steadily increasing income.
third. When the Board interviewed me for the role just over three
years ago, we agreed that we should look to radically reposition
the role of technology in our business. Specifically the need to
embed efficient technology into the way that all of our businesses
interact with our clients. We have made progress from a low base
but we still have much to do. It is critical that we quicken the pace
of change.
6. How is the integration of the company
secretarial business from Eversheds
Sutherland (International) LLP
progressing?
The transaction completed on the last working day in January
2021. It is still early days, but we are off to a fast start. During
our initial conversation with Eversheds last year, we stated that
on completion of the acquisition we wanted to have the same
excellent people, in the same offices, serving the same clients
on similar terms. On Monday, 1 February 2021, all of our new staff
were able to log on to their new machines, access the correct
data and continue serving their clients. From a client continuity
perspective we are in great shape. Successfully embedding a new
business requires a significant amount of work, but this is well
under way.
7. Should we expect more acquisitions in
the short or longer term?
As we have previously stated, we are open to growth through
acquisitions. This very much remains the case.
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Q&A with James Henderson and Laura Foll
investment managers
1. The pandemic has caused disruption
for all companies this year. How has this
impacted your investment approach?
James: Trends that were in place before the pandemic, such
as the growth of online shopping and the decline in physical
retailing, have been accelerated. We have always focused on
companies that provide an excellent product or service to the
consumer. Those companies have in their culture an ability to
adapt to the situations in which they find themselves; in that
sense the pandemic has not changed our approach.
2. What steps did you take in response to
the outbreak of the pandemic?
Laura: During Spring of 2020 when the first ‘lockdown’ happened
the most material response from us was to be net investors,
as we saw a wide range of opportunities across both new and
existing holdings. February and March were the largest months
for net investment and, by the end of March, we had invested an
additional £36.8m in equities. This was then slowly unwound over
the course of the year as valuations began to recover.
3. How do you think the long-term
economic consequences of Covid-19
will affect the portfolio and the type of
stocks you choose?
James: The long-term economic consequences will not be fully
known for several years. The high level of indebtedness that the
state has incurred could hold back long-term economic growth
prospects in the UK. If interest rates rise substantially in coming
years the cost of servicing that debt will act as a real drag on
economic activity.
However, the portfolio is not a proxy for the UK economy but
rather a collection of individual companies that we believe will
prosper even if there is an economic headwind.
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Q&A with James Henderson and Laura Foll
investment managers continued
4. ESG is a topic that is of increasing
importance for investors, how does this
tie in with your investment process?
Laura: ESG is a growing focus across the fund management
industry. You would be hard placed to find a fund manager
that does not say ESG is an increasingly important part of the
investment process and we are no exception. I think where we
some that continued operating without much impact, and some
that were severely affected, but the overall blend meant that the
net asset value was able to finish the year approximately flat.
The key lesson for me in terms of appropriate capital structure is
to fully appreciate the importance of a strong balance sheet in
the face of ‘unknown unknowns’. This was a lesson many of our
management teams had already learnt during the financial crisis,
and therefore we went into this downturn with comparatively
potentially differ is that we see ESG, particularly environmental
strong balance sheets.
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issues such as the need to reduce global emissions, as an
opportunity as well as a risk. The portfolio performance in 2020
demonstrates this – two of the top five performers were in
alternative energy.
5. What will be the long-term implications
from the Brexit deal on UK equities?
James: It is a big relief that there has been a deal on Brexit. This
means goods will not be subject to punishing tariffs. Overseas
9. What is the outlook for UK dividends
in 2021 and beyond?
Laura: We expect UK dividends to recover in 2021 relative to
2020 levels, but not to reach 2019 levels. This is because some
income payers in the UK, including the integrated energy
companies, permanently rebased their dividends last year due
to a combination of the oil price fall and the need to gradually
reposition their portfolios towards renewable energy. Looking
investors had been very worried about a no deal Brexit. Over
further ahead, I think what we will see in the UK is a more
the next year, they could increase their exposure to UK equities
balanced market for UK equity income. Previously, UK dividends
and this could be good for valuations. Longer term, however, it is
were heavily dominated by a few large income payers for
example, Royal Dutch Shell and BP, as well as large banks such as
HSBC. I think companies that had previously had, in hindsight, too
high payouts will take the opportunity to rebase their dividends
to a level from which they can grow. This may mean the yield of
the UK index being lower than historically, but there will still be
an attractive income opportunity in the UK. There should also be
scope for dividend growth from that newly rebased level.
10. What trends do you expect to see in 2021
and how will these play a role in your
approach to investing?
James: The desire for an environmentally sustainable economy
has become even more important to governments and
individuals. Therefore companies that are dealing with the issue
of decarbonisation will rise to prominence if they can provide
answers to the issue. Companies involved in this area are well
represented in the portfolio.
unclear what the implications might be.
6. Where do you currently see the most
attractive investment opportunities?
Laura: We are finding most opportunities in the UK. The UK has
materially underperformed other global equity markets over the
last five years and 2020 was no exception. This has led to a clear
valuation discount between UK companies and overseas peers.
Towards the end of 2020 there was a notable pick-up in takeover
activity as private equity and overseas companies sought to
exploit that valuation gap. We would not be surprised if we see
further corporate activity in 2021.
7. What do you think are the key lessons
to be learnt from the crisis?
James: Equity investment always carries risk of the unexpected
occurring. However human ingenuity will overcome the
problems. This has occurred over the last year with the
pandemic’s arrival and fast tracking of vaccines to control it.
8. Has your approach to risk in the portfolio
and what comprises an appropriate
capital structure changed as a result
of the crisis?
Laura: I think what this year demonstrated, more than ever, was
the need for diversity in the portfolio and the role of diversity in
mitigating risk. We had some businesses that thrived last year,
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S T R A T E G I C R E P O R T
Chief Executive Officer’s review
The Board at Law Debenture is focused on delivering for
stakeholders over the longer-term and we are proud to have
delivered a 117% increase in dividend over the last ten years with
42 years of increasing or maintaining dividends to shareholders.
This is all supported by the diversified nature of IPS revenues,
which funded around 35% of dividends for the trust over the
preceding 10 years.
At the AGM on 7 April 2020 when talking to the potential impact
of lockdown on the IPS business we stated that “we would get a
bloody nose, but overall the diversified mix of revenue streams
would serve us well”. Almost one year on, that still feels like an
appropriate assessment. IPS business net revenues for the full year
were up 8.5% at £34.5m (2019: £31.8m) and earnings per share up
by 9.5% to 9.35p (2019: 8.54p). At the start of 2019 we committed
to shareholders that we would seek to grow our IPS business by
mid to high single digits. Given everything that 2020 threw at
us, we are proud to have been able to deliver growth within this
targeted range.
Our unique proposition as an investment trust is that the IPS
business allows James and Laura increased flexibility in portfolio
construction. This was highlighted in 2020. The combination of
our strong reserves position and the resilience of the IPS revenues
allowed our investment managers to maintain or increase
exposures to great companies whose dividends are challenged in
the short-term. Moreover, the strength of our diversified income
Introduction
2020 was a year of significant turbulence
and uncertainty, which saw companies
around the world being forced to adapt
quickly and nimbly to a continually
changing environment. For the UK, the
macroeconomic uncertainty caused by
Covid-19, combined with an ongoing lack
of clarity on its future relationship with
the EU, our largest export market, saw the
fastest contraction in economic activity of
modern times.
However, our generally robust performance
through the year reflects well on our
ability to withstand major operational and
market challenges. It is with great pride
that I can say I now feel more optimistic
than ever about the longer-term growth
trajectory of Law Debenture, the strength
of our business model and quality of our
investment managers, James Henderson
and Laura Foll of Janus Henderson
streams allowed us to invest into some
emerging companies with excellent long-
term growth prospects who will not be
paying dividends for many years.
We have also invested in our central
leadership team and functions to provide
greater support to the IPS business. As
part of this, I have built our Executive
Leadership team. I am delighted to
welcome Trish Houston as COO. During
the year, Hester Scotton was promoted to
CFO and Kelly Stobbs was promoted to
General Counsel.
Taking each business in turn:
At the core of
Law Debenture’s
financial objectives
are two keys aims;
the first is to
achieve long-term
capital growth,
the second is to steadily
Corporate trust
increase income for
our shareholders.
Law Debenture was founded 132 years
ago to be a bond trustee. Our role as
a bond trustee is to act, as a conduit,
between the issuer of a bond and the
bondholders themselves. Typical duties
Investors. As a UK Equity Income Trust, this Company works to
ensure shareholders can depend on us for regular, reliable income.
We aim to gradually increase income, by increasing dividend
payments in excess of inflation over time. 2020 was a year which
showcased how the unique combination of our equity portfolio
and leading global professional services business can drive value
for us include being a point of contact between the issuer and
its bondholders and receiving certain financial, security and
covenant information from the issuer, for which we are usually
paid an inflation-linked annual fee throughout the lifetime of
the bond. We started 2020 with approximately £5m of annual
revenues contractually secured.
for our stakeholders.
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Our leading independent professional services business is built on three excellent foundations:
our pensions, corporate trust and corporate services businesses.
DIVISION
Pensions
Corporate trust
Corporate services
Total
Net revenue
2018
£000
Net revenue
2019
£000
Net revenue
2020
£000
Growth
2019/2020
%
9,488
8,362
11,734
29,584
10,598
9,024
12,167
31,789
11,479
10,788
12,226
34,493
8.3%
19.5%
0.5%
8.5%
We also earn revenue from ‘post issuance work’, such as
went into ‘lockdown’. While we have seen some bankruptcies,
documentation changes, which can arise over the life of the
policymakers have provided a number of support mechanisms
bond. The revenue and risk profile can change substantially
that have enabled businesses to stay afloat in some form or
when a bond issuer becomes stressed or a bond issue itself goes
another. Unsurprisingly, this has led to a plethora of covenant
into default. In these circumstances, the trustee may be required
waivers and restructuring type work. The longer-term position
to perform a material amount of extra work in order to optimise
for many challenged companies and sectors remains unclear as
returns for all bondholders. Such default scenarios may involve
the global economy works its way through this crisis.
the business incurring costs and can take many years to play out.
That said, given a favourable result, this may lead to incremental
revenues for the business. We do not wish any operating
Highlights
We took on a significant number of new appointments in
difficulties on any of the issuers in our portfolio. Nonetheless, the
2020. We are proud to have been appointed by many of the
countercyclicality of post issuance work with the economic cycle
UK’s leading companies including BP, Legal & General, British
has been demonstrated time and again throughout our history.
Telecom and Vodafone for various roles.
Our corporate trust team are considered and careful in taking
Eliot Solarz, Head of Corporate Trust, continues to invest in his
on new business. This disciplined approach has produced
team and build on our reputation for technical knowledge,
consistent profits for over a century. Our shareholders should
speed and innovation. We will always play to our strengths and
understand that short-term swings in our revenue (and in turn
are able to compete highly effectively against global banks for
our profit) may result from adopting a prudent approach to
more complex products.
provisioning, as specific long-term default situations work their
way through to a conclusion.
Market dynamics
Following the challenging operating environment in 2019,
remarkably the onset of Covid-19 and the actions of policy
makers provided a favourable operating environment for this
business.
The growth of our escrow offering in 2020 was particularly
pleasing. Many of our investors who have purchased a home
may be familiar with the concept of an escrow. In the case
of a house purchase often a solicitor receives execution
documentation from the various parties involved (e.g. buyer/
seller/bank/title company etc.) and the associated monies.
Having satisfied themselves that all is in order, the solicitor then
distributes the proceeds and documentation accordingly to the
Primary market activity recovered well in 2020 and we were
various parties. Eliot’s team does not perform escrows for house
able to capture our fair share of roles on new bond issues. Our
purchases, but the principles that underpin his team’s work in
main market, Europe, had a particularly challenging 2019 with
this area are in essence the same.
investment banking revenues down 14%, but recovered well in
2020 with debt issuance revenues up 21%.
The demand for rapid responses to Covid-19 exposed many
procurement processes as being cumbersome and overly
Post issuance work increased materially as many businesses
engineered. Happily, our escrow offering, was able to move fast
around the world saw their revenues severely challenged,
and respond to rapidly evolving demand. Particularly pleasing
or in some cases even evaporate completely, as economies
was the role that we played on several PPE related escrows,
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Chief Executive Officer’s review continued
as various NHS trusts looked to urgently source supply from
have no crystal ball when looking at 2021. That said, we have a
around the world. In addition, we upped our profile on escrows
broad suite of products, deep and long standing relationships
related to M&A, pensions, litigation and commercial real estate
with clients, law firms and financial institutions, which give us
transactions. Our escrow balances ended the year over five
confidence that we should continue to build on the gains made
times higher than at the start of 2020.
in our corporate trust business over the past three years.
In 1910, we were trustee to the Kansai Railway in Japan and
we continue to support long dated infrastructure financing.
In 2020, we were appointed as the security trustee to the IFC
backed Almaty Ring Road in Kazakhstan.
We continue to build on our expertise to support financings
in renewable energy, as demonstrated by the case study on
Falck Renewables. In addition, as the year ended, we signed as
Security Agent for the IFC/ADB backed Nur Novi solar power
project in Uzbekistan.
As we mentioned in last year’s review, social housing is an
important and growing part of our book of business. We are
thrilled to have been appointed as bond and security trustee
on the £2.5 billion note programme launched by London and
Quadrant during the year.
Falck Renewables SpA – first Italian
equity-linked green bond
Our experience and knowledge in green finance was
further enhanced in 2020. We were mandated as
bond trustee on Falck Renewables SpA’s offering of
€200 million 0% senior unsecured equity-linked green
Pensions
Our pensions business completed its fourth successive year
of positive growth with revenues up by 8.3% for the year. We
continue to invest heavily in this business.
Initially founded over 50 years ago as a pension trustee
business, this remains very much at the core of our offering.
More recently, we have expanded our governance offerings
under our Pegasus brand to provide a much broader range of
services from pensions secretarial through to fully outsourced
pensions scheme management. We remain the largest and
longest established independent professional pension trustee
business in the UK.
Market dynamics
In the short-term, the stresses placed on the world economy
by Covid-19 have further highlighted the need for best in class
pensions governance. At precisely the same time that scheme
assets and liabilities were experiencing extreme volatility,
sponsoring employer covenants came under significant strain
as operating conditions for many businesses were severely
disrupted. With the need to rapidly move the administrative
monthly payment of pensions to a robust and secure remote
bonds. Falck Renewables is a renewable energy company
operating environment, the necessity for top quality scheme
who design, build and manage plants that generate clean
oversight was evident. That said, following a burst of activity
energy. They plan to use the bond proceeds to finance
in March and April in particular, the move to virtual meetings
and/or refinance, in whole or in part, new or existing
renewable energy assets with expected substantial
environmental impact (Eligible Green Assets) in line
with the 2018 Green Bond Principles published by the
International Capital Markets Association and the May
2020 Green Loan Principles published by the Loan
Market Association.
This was the first Italian green convertible
bond and highlights our involvement in
new and innovative products.
Outlook for our corporate trust business
As we have mentioned above, certain aspects of our corporate
trust business are strongly countercyclical. Recent history
tells us that, as the world economy recovered from the global
financial crisis, our post issuance workload should remain at
elevated levels for some time to come.
Levels of primary market activity are very difficult to predict. The
see-saw of the past two years is clear evidence of this, and we
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resulted in shorter meetings which reduced our time based
charges. We expect that this will reverse somewhat as
Government remote working requirements begin to fade away.
Over the medium-term, the Pensions Regulator’s drive towards
a smaller number of better governed defined benefit schemes
continues to build momentum and plays to our strengths.
Consolidation provides an opportunity for smaller schemes to
enhance their governance. A larger asset base may well give a
scheme the financial resources to employ a professional trustee.
Put simply, we act for under 5% of the 5,500 defined benefit
schemes in the UK so there is plenty of room to grow our market
share in what we believe is a growing market.
While the negative effects of Covid-19 will hopefully only be
temporary, the Pensions Regulator backed the expansion
of stewardship definitions and the advancement of ESG
investment agendas are looking increasingly permanent. Best
in class standards are rapidly evolving. There is significant
opportunity for us to help our clients stay ahead of the game as
the investing world addresses the impact on the environment
and on society in general.
Chief Executive Officer’s review continued
Highlights
2020 was the year that our outsourced pensions executive
service, Pegasus, came of age. Pegasus continued to see strong
revenue growth in 2020 and we are confident that Pegasus
will continue to increase our share of total pensions revenue.
We have widely received positive feedback from our quickly
growing client base. What has been particularly pleasing is
our ability to execute relatively small appointments well, and
nurture these into much broader relationships. Chief financial
officers use tough operating conditions to focus capital
allocation on activities that differentiate their specific company’s
offering while simultaneously outsourcing essential but non-
core functions, such as Pensions Administration, where our
Pegasus business can provide support to oversee such changes.
Our Pegasus business has also fared well in the ‘temporary staff’
market where, for example, opportunities to provide maternity
cover have added further strings to our bow. Our sole trustee
solution continues to build momentum and resonates well
with buyers looking for a ‘one stop shop’ approach to their
governance needs.
On the trustee side we did much to enhance our reputation
for innovation – see the adjacent case study on Premier
Foods by way of example. Through transactions such as these
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Landmark pensions agreement
between Premier Foods plc and Premier
Foods Pension Scheme – significantly
improving the Group’s pension
funding situation
This transformational agreement is testament to our
Pensions clients ‘getting things done with LawDeb’, our
expertise in restructuring and commitment to thinking
holistically and collaboratively, involving all stakeholders.
Shares in the branded foods maker, which makes
Mr. Kipling cakes, jumped 17% on the announcement.
A segregated merger of all the Group’s pension schemes,
placing all the UK defined benefit schemes under one Trust
was a strategy that LawDeb’s Managing Director of Pensions
and Chair of the Premier Foods Pensions Scheme, Michael
Chatterton, was instrumental in taking to and working
up with the company in the belief that this new pensions
agreement represents a more secure future for the Group’s
pension scheme members.
we increasingly catch the eye of the discerning corporate
The Board and pension trustees expect this will provide
buyer, not just the pensions team. We also executed well
greater funding certainty for Premier Foods’ pension
and added to our expertise in longevity swaps, buy-ins and
schemes’ members by leveraging the strength and scale
buy-outs, such as the work we did for Baker Hughes (UK) and
of the successful RHM pension scheme investment
the British Bankers’ Association. Increasingly too, we have
much to offer clients as they navigate the tricky pensions
waters that lap against M&A activity, such as the work we
have been appointed to undertake for Cobham. Finally, and
without wishing ill on any firm, our experience of dealing with
distressed and restructuring type situations, in both the public
strategy. The net present value (NPV) of the pension deficit
contributions could reduce from the current £300m-£320m
by approximately 45% to £175m-£185m. The merger also
provides an opportunity to improve the security available to
all the schemes involved.
and private markets, continues to grow significantly.
Duncan Leggett, Chief Financial Officer of Premier Foods,
Outlook for our pensions business
A broad and stable set of foundations underpins the long-
term growth potential of our pensions business. An aging
population, a growing middle class, a relatively recent
auto-enrolment regime and strong moves by regulators to
commented, “This is an innovative and ground-breaking
initiative to address pension funding that is delivering huge
value for the members and for the company.
Law Debenture has been instrumental in
working with the company to develop this
professionalise the governance of schemes creates a sound
strategy and help bring it to conclusion.”
platform on which to build. Our team is well placed to enable
us to solve our clients’ problems. Our reputation has been hard
won over five decades. We will continue to invest in our people
and nurture the next generation of problem solvers in this
growing market.
I would like to thank Michael Chatterton, Head of Pensions,
and Mark Ashworth, Chairman of Pensions, for encouraging
Corporate services
Overall the diversification within the IPS revenue streams served
us well in 2020, but our corporate services businesses were
adversely affected by the pandemic. This revenue stream
their team to continuously produce advantageous outcomes
consists of three components: our company secretarial and
for our clients.
accounting offering, the Safecall whistleblowing business and
our service of process business. Year on year revenues of £12.2m
were broadly flat.
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Chief Executive Officer’s review continued
Market dynamics
Company secretarial and accounting
The growing market for company secretarial offerings is
underpinned by three main factors. Firstly, ever increasing
reporting demands on businesses from governments and
regulatory authorities. Secondly, increased desire by corporations
to focus their efforts on their particular unique value proposition
and outsource critical but non-differentiating aspects of their
business. Thirdly, the increasing speed of corporate lifecycles and
a lowest cost proposition based around call centre staff following
scripts, our offering is based on highly trained employees who
follow a clearly defined process. Issues raised by employees were
at record levels as they used our service to flag concerns around
working conditions in particular.
Highlights
Whistleblowing
We have received much unsolicited praise for our work during
ever-changing market dynamics hand an advantage to those
the year. Boards, General Counsels, Heads of Human Resource
organisations that can access new markets quickly and simply.
Management, Heads of Risk and Compliance and employers
Expertise combined with ease of use will remain at the core of our
have seen real value in the quality and timeliness of our work.
ability to effectively compete in this market.
Highlights
Company secretarial and accounting
We have been in this business in a modest way for well over
twenty years and we understand it well. Our existing business,
led by Mark Filer, grew soundly off a small base in 2020.
Particularly noteworthy were roles on residential mortgage
backed securitisations (RMBS), that we were appointed to for
LendInvest, an increasingly disruptive property lending company
in the UK. We further deepened our relationship with Atom
However, the period from March until June 2020 was dominated
by a ‘no new projects’ mentality as potential buyers adjusted to
the uncertainties caused by Covid-19. Sales picked up as the year
progressed and we ended with roughly the same number and
same annual contract values of new wins as the prior year. We
ended the year with revenues up approximately 11.3%.
High quality clients that we were thrilled to onboard during
the year included Brompton Cycles, Channel 4 (see the case
study below), Co-op Food, Morgan Sindall and Wolseley
(renamed Ferguson).
Bank, a fast growing UK challenger bank, where we acted on
After 22 years at the helm Graham Long, who founded this
their new RMBS issue. We were delighted to take on a significant
business along with his late father Alan, will step back from the
piece of work with one of the largest pension schemes in the UK,
day-to-day running of this business during 2021. Safecall has
the Universities Superannuation Scheme, to help them service
been an amazing success story as Graham has taken this from
an equity release funding platform. We also took on our largest
just an idea to a market leading whistleblowing business that
ever company secretarial appointment to date on the back of a
helps employees from well over 500 companies all over the
complex restructuring of a significant real estate portfolio.
world. As we look to accelerate our growth and adapt the use of
On 29 January, 2021 we completed the acquisition of the company
secretarial business of Konexo UK, a division of Eversheds
Sutherland (International) LLP. This significantly expands our
footprint in this exciting market.
technology to support this business, Graham felt that the next
chapters should be written with the help of a fresh perspective.
At this time, our search for a new Managing Director has just
started and Graham will remain fully engaged to ensure a smooth
transition. Our thanks to Graham, but not farewell just yet, as he
We believe that we can increase our market share in this growing
will continue to be Non-Executive Chairman of the Safecall Board.
market, and we are confident that there are significant avenues
for us to explore across our c.450 new clients with respect to
other Law Debenture offerings. The acquired business is headed
by Andy Casey. We have very much enjoyed welcoming our new
colleagues to Law Debenture and look forward to working closely
with them in the future.
Market dynamics
Whistleblowing
Regulatory frameworks continue to be established. The UK
parliament had its first reading of The Office of the Whistleblower
Bill in 2020 and in 2021 the European Whistleblowing Directive
Forbes.com name checks Safecall:
“UK Broadcaster Channel 4 Promote
Whistleblowing Facility”
In July Forbes published news of Safecall’s client, Channel 4,
increasing its marketing of its whistleblowing service to
allow easier access for production crews to call attention
to incidents of racism, inappropriate or illegal behaviour,
malpractice, bribery, fraud and flippancy around the new
(the Directive) comes into force. The Directive requires that all
Covid-19 guidelines.
European companies with over 50 employees and €10million
in turnover have a whistleblowing solution in place. ISO37002
for Whistleblowing Management Systems is expected to be
established in 2021. Despite the fact that this is a relatively new
market, private equity investors have been quick to see its growth
potential and have been consistently buying up operators and
consolidating businesses. While many competitors have followed
Channel 4 has been a Safecall client since 2015 and we
are proud to work with them, as we do with
organisations of all sizes, across various industry
sectors globally, to ensure the successful
implementation of our whistleblowing service.
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We are proud to have delivered a 117% increase in dividend payments over the last
ten years with 42 years of increasing or maintaining dividends to shareholders.
Service of process
Our service of process business, headed up by Anne Hills, is the
highest volume transactional business with the least recurring
These changes bring an increased scale to our operations and
enhance our controls and security.
contractual revenues of all the IPS businesses. It is highly
We are increasingly agile users of third party software applications
correlated to the global economic cycle. Contractions in the
to support our various businesses. We have also invested
global economy mean that fewer commercial transactions are
significantly in customising platforms to both simplify and
completed, which in turn reduces the demand for a service
process agent to complete documentation. In 2020, we
experienced our toughest year since the global financial crisis.
improve our clients’ user experience.
This past year saw the launch of a number of initiatives for
our Safecall business. Potential clients can now purchase our
Our history over many economic cycles in this area gives us
Safecall whistleblowing services online. In addition, we have a
confidence that as the world economy recovers, so too will our
suite of e-learning modules that clients can roll out to all staff
revenues. Our referral network has been nurtured over many
that covers everything from the basics through to training for
decades and is global. In the meantime, we continue to invest
managers in how to appropriately handle whistleblowing cases.
in enhancing our use of technology to create a seamless user
We rapidly shifted classroom based training to online to meet
experience for our clients in this high volume business.
client demand, hosting 15 such events in the second half of 2020.
Outlook for our corporate services business
We believe that the governance services businesses that combine
to make up our corporate services offering all operate in markets
that have sound long-term growth prospects. They are, after all,
elements that make up the “G” in ESG. However, 2020 reminds us
that even the most robust long-term businesses are not immune
from unexpected short-term challenges. We have held our nerve
and increased our investment in these business at a time when
many competitors could simply not afford to do so, with the aim
of ensuring we can meet the needs of our customers simply and
to the highest of standards.
Technology
These gains are hard earned, but we must quicken our pace of
change. As we start 2021, we are determined to further enhance
our operational efficiency and resilience, and to creatively evolve
our products and services. We expanded our IT team in 2020 and
will do so again in 2021. Increasingly, we are using technology to
interface with our clients and our future success will depend on
our ability to satisfy their rapidly accelerating demands.
Property
2020 was certainly an interesting year for the lease on our Head
Office to expire. After plenty of searching we settled on a new
lease for premises at 100 Bishopsgate, EC2N 4AG. Despite the
challenges of 2020, this move was successfully completed
If ‘Covid’ was the word of the year for 2020 then ‘Zoom’ must
during the year.
be a close second. If we could have received a pound for each
The new building has excellent transport links as it is situated
time we said “you’re on mute”, we would have all done rather
across the street from Liverpool Street station. Importantly, the
well. Surely one of the largest gains that the global economy will
building has been designed to limit its impact on the environment,
benefit from, as we emerge from the Covid-19 crisis, is the crash
as shown on the diagram on page 17.
course in technology that we all received as we transitioned
to fully remote working in March 2020. It was the digital era’s
equivalent of a rapid mass literacy program.
An unintended consequence of the eleven months since
lockdown last March has been a most thorough test of our
remote working environment. It is clear we are able to work from
I am delighted to report that our own technology platform was
home. Some staff felt that there were productivity gains when
up to the challenge. Having joined us in December 2018 our Chief
the need arose to avoid distractions and spend an extended
Technology Officer (CTO), David Williams, was front and centre
period to complete a complex piece of client work. However,
in ensuring that, after 131 years of being on site, our business was
it is also clear that to work optimally we must retain a modern
able to seamlessly transition to a virtual existence. Under David’s
fit for purpose office environment. We are collectively more
leadership, our growing technology team has transitioned much
efficient and creative. We benefit from collaboration and we have
of our outdated hosted infrastructure to cloud-based services.
more fun.
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Chief Executive Officer’s review continued
Prospects
Although it is impossible to predict when global economies and
our everyday lives will return to normal post the turmoil that
Covid-19 has brought, I remain optimistic in our longer-term
outlook. Your Company is resilient and prospects remain bright
with a strong and dedicated team.
We closed the year in a solid position, despite the economic
turmoil. Your Company continued to execute against its stated
strategy of growing the IPS business. We acquired the company
secretarial business of Konexo UK, taking an important step
forward to cement our position in a growing and attractive
sector. This strengthens our IPS business and its longer-term
earnings outlook. We look forward to continuing to grow
and develop the IPS business and build greater market share
by seeking to further capitalise on the significant market
opportunities available through both organic investment and
disciplined acquisitions, where appropriate.
Over the last three years we have shown an IPS compound
annual growth rate (CAGR) of 8.3% and 9.1% respectively for
revenue and earnings per share. There have been ups and
downs by individual area but this correlates well with our mid to
high single digit medium-term growth ambition.
It is in challenging times like these when good judgement
and extensive knowledge is critical to a successful investment
strategy and I am grateful that Law Debenture has been able to
benefit from both James’s and Laura’s expertise and experience.
I am confident that their focus on selecting strong business
models and attractive valuation opportunities, coupled with a
deep understanding of companies and industries, will enable
them to continue to position the equity portfolio for future
longer-term growth and outperformance.
On behalf of the Board, I would like to thank our shareholders for
their continued support and confidence in our abilities during a
particularly tumultuous time. At Law Debenture, we greatly value
our culture and close partnership with clients. I would also like to
express my deepest thanks to our employees; their commitment
has shone through. I look forward to keeping you updated on the
Group’s future operational and strategic achievements.
Denis Jackson
Chief Executive Officer
25 February 2021
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In 2021, when Government guidance encourages a return to the
workplace, we plan to allow employees to work up to two days
per week from home with their manager’s approval. This allows
our staff to retain flexibility and keep the gains of periodic remote
working, while ensuring that for the majority of our time we are in
a communal environment where we are most effective.
Given our change in work patterns, our shift of much of our IT
infrastructure to cloud-based services, and the huge digitalisation
initiative, we were able to reduce our physical footprint by
approximately one third.
Like a house move, an office move provides a wonderful
opportunity to throw things away. In common with many
professional services firms we had paper everywhere. It was a
huge one-off project but we were able to digitalise many decades
worth of materials. This makes retrieval easier, reduces demand
for physical storage space and reduces our costs.
As part of this process, we uncovered many items which
showcased our rich history. These included a glorious 999 year
lease on a property complete with wax seal signed six weeks
before the Battle of Waterloo. Sadly the lease was not ours, rather
it belonged to a client.
Having moved in during early December, we look forward to
welcoming our staff and our clients to our new space as 2021
unfolds.
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www.100bishopsgate.com/sustainability
SOLAR ENERGY
Photovoltaic panels and
solar hot water panels are
roof mounted to generate
renewable electricity and
heat energy respectively
OCCUPANCY SENSORS
Efficient light fittings, zoning
and automated controls
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HEALTH &
WELLBEING
The building has been
designed to be adaptable
for future climate change
to ensure thermal comfort
for occupants
WATER
Estimated 35,000m3
of water saved p.a.
WASTE
Greater than 90% of
waste to be diverted
from landfill
MANAGEMENT
The project is targeting
exemplary performance
under the Considerate
Constructors Scheme with
a minimum score of 40
MATERIALS
Targeting
100% of
materials
responsibly
sourced
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ENERGY
23.7% improvement over Part
L 2013 predicted more than
600 tonnes CO2 saved p.a
(compared to Part L 2013)
TRANSPORT
900 cycle storage spaces and
lockers, additional showers
and changing facilities
POLLUTION
SUDS strategy to ensure the
development has a neutral impact
on surface water runoff through
provision of attenuation tanks
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362m2 green wall with a diverse flowering
period to encourage invertebrates such as
bees and butterflies. Provides nesting
opportunities for various birds including
swifts and sparrows
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Investment managers’ review
as Microsoft, had on average performed well and were trading on
high valuations versus history, while we were finding a number of
attractive valuation opportunities in the UK.
Our investment strategy
We take a bottom-up approach, spending a great deal of time with
the management teams of our portfolio companies, conducting
detailed analysis of the strengths, weaknesses and growth
prospects of those companies into which we invest your money.
Were there to be a common theme amongst the diverse portfolio,
it would be that the majority of companies held are market leaders
in the product or service they are providing. This market leadership
could be in the UK or on a global scale; it could be a small niche
market such as UK paving stones (Marshalls) or a large global
market such as oncology drugs (Bristol-Myers Squibb). What we
are looking for is companies with excellent products or services
and with experienced management teams that can help navigate
different market environments.
We are patient with our positions and invest for the long-term. We
build up positions gradually. Having taken the decision to invest in
a stock, we typically begin by investing around 30bps of overall net
asset value, and then add to this over time, depending upon the
risk profile of an individual stock.
Our long list of stocks allows us to moderate our position size
where we perceive the investment case is higher risk than may be
the case elsewhere in the portfolio. This means that we take a risk-
The equity portfolio
In a wholly unpredictable year, diversity within the investment
portfolio was particularly important. This portfolio benefitted from
its aim to be a ‘one stop shop’ for investors, by holding equities
in a deliberately diverse collection of well-managed, market
leading companies. While the majority of
the portfolio (82%) was invested in the UK at
year end, much of underlying revenues from
the portfolio were derived from overseas. In
addition to geographic diversity, the long list of
holdings, 137 at year end, alongside the broad
range of end market operations, meant that
the portfolio held enough beneficiaries from
the current environment to show growth of
3.6% in absolute terms during the year, while
the FTSE All-Share benchmark fell 9.8%. We
will go on to discuss the largest contributors to
performance in greater detail, but the need to
decarbonise the global economy and the shift
of much of consumer spending to online were
common themes among the best performers.
By the calendar year end we were roughly
neutral net investors within the portfolio.
However, during the course of the year we
invested heavily in the Spring and, by the end
of March, had invested £36.8m (net). This net
investment was then gradually reduced as
valuations rose, particularly in the final month
We increased
our leverage and
repositioned our
holdings over the
course of the year
to take advantage of
comparatively low
valuations within the
UK market, particularly
for domestic stocks.
based approach to our position sizing,
while ensuring that, if we get something
right, the sizing is sufficient to influence
the portfolio performance as a whole.
Our patience keeps our portfolio turnover
low, reducing the drag of dealing costs
on returns to our investors. That patience
has rewarded our shareholders; over 10
years, the portfolio has outperformed the
benchmark index by 69% (valuing debt
at par).
ESG considerations in
our investment strategy
Responsible investing, incorporating
ESG, has always been an integral
feature of our process as we are long-
term investors. Therefore any material
ESG issues are also material to the
investment case. These issues are of
growing prominence to both investors
and companies and whilst they have
of the year. Geographically, sales were concentrated in North
always been an implicit part of the investment process, we are
America, where on a net basis we sold £30.5m during the year,
now explicitly both monitoring internally and discussing with
while purchases were concentrated in the UK, where on a net basis
company management teams any particular issues of concern. We
we purchased £24.8m. This geographic difference was not driven
have decided not to explicitly exclude any sectors, partly because
by a macroeconomic view. The US stocks sold during the year, such
the data quality on the more difficult to measure environmental
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Investment managers’ review continued
NAV total return (with debt at par)1
NAV total return (with debt at fair value)1
FTSE Actuaries All-Share Index total return2
1 year
%
3.6
2.0
(9.8)
3 years
%
15.6
13.2
(2.7)
5 years
%
59.1
53.0
28.5
10 years
%
147.8
134.7
71.9
1 NAV is calculated in accordance with AIC methodology, based on performance data held by Law Debenture including fair value of IPS business. NAV total return with debt at par excludes
the fair value of long-term borrowings, where NAV total return with debt at fair value includes the fair value adjustment.
2 Source: Refinitiv Datastream, all references to ‘FTSE All-Share’ and ‘benchmark’ in this review refer to the FTSE Actuaries All-Share Index total return.
and social area is not robust, and partly because, in our view, it is
change in consumer behaviour will remain long-term issues for the
better to engage with companies to encourage better practices
economy. In this economic environment we need to be invested in
rather than to sell the shares. In addition to monitoring the risks
companies that have a credible way forward to deal with a testing
associated with ESG issues, we also aim to invest in companies
economic backdrop.
that are seeking positively to address these challenges, such as
the need to decarbonise the economy. One such area is hydrogen
fuel cells, and portfolio performance this year has benefitted from
UK market backdrop
exposure to this area.
Overview of 2020
Prior to 2020, the UK equity market had underperformed
other developed equity markets in the period following the EU
referendum vote in 2016. 2020 was no exception, meaning that
over a five-year period the UK equity market has underperformed
The lessons the authorities learnt in the financial crisis of 2008/9
Continental Europe by 38% and the US by 90%.
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proved invaluable in dealing with the crisis brought about by
Covid-19. Co-ordinated quantitative easing and fiscal stimulus
saved the global economy from the extreme fall-out that might
have happened as businesses were forced to close their doors as
‘lockdown’ was imposed. The authorities’ actions stabilised markets
and Law Debenture’s asset value was virtually unchanged on
the year. The economy and its outlook, however, were impacted
dramatically and we saw a rapid acceleration of existing structural
trends. For instance the move in retailing from physical stores to
online was already happening but it received an extraordinary
boost. The desire for decarbonisation of the economy was well in
motion but again the progression has been rapidly advanced by
the desire to rebuild a more sustainable environment after the
pandemic. These trends have had a massive effect on equity prices,
with the best performing areas of the portfolio being in companies
that are working towards the goal of decarbonisation, and the
worst being the property companies that own retail space, along
with aerospace companies.
Economic backdrop
The UK economy contracted violently in March as the virus
THE UK HAS UNDERPERFORMED OTHER GLOBAL EQUITY
MARKETS
250
210
190
170
150
130
110
90
70
D ec 2 0 2 0
M ar 2 0 2 0
S e p 2 0 2 0
Ju n 2 0 2 0
D ec 2 016
D ec 2 018
D ec 2 019
D ec 2 015
M ar 2 016
M ar 2 018
M ar 2 019
S e p 2 016
S e p 2 018
S e p 2 019
D ec 2 017
M ar 2 017
S e p 2 017
Ju n 2 016
Ju n 2 018
Ju n 2 019
Ju n 2 017
UK
US
Europe ex UK
Japan
Source: Refinitiv Eikon. £, total return, rebased to 100 as at 31st December 2015. Indices
used – FTSE All-Share, S&P 500, MSCI Europe ex UK, Nikkei 225.
The reasons for this underperformance include the uncertain
took hold and ‘lockdown’ was enforced. The gradual easing of
future trading relationship with the EU and the sector composition
restrictions saw a rapid recovery in economic activity that was
of the UK market, with comparatively more in underperforming
further aided by the prospect of a limited free trade deal with the
sectors such as energy, and comparatively less in outperforming
European Union. However, by the year end the re-imposition of
sectors such as technology. During 2020 there was also a larger
‘lockdown’ meant the pick-up in activity lost momentum. During
contraction in UK GDP following the pandemic than in other major
this period there has been an extraordinary shift to private saving
economies. With the UK economy forecast to grow strongly in
and the state increasing its borrowing. This can be done as interest
2021 (5.3% on consensus numbers), and a free trade agreement
rates remain very low. However, a great deal of production has
on goods reached with the EU, these overhangs on the UK equity
been lost, some capital spend programmes have been deferred
market could be lifting at a time when UK companies are trading
and unemployment has risen. The economy has materially shrunk;
at a stark valuation discount to their global peers. The above graph
UK GDP on consensus is estimated to have contracted 11.3% in
shows the discount of the UK market relative to the US and Europe
2020. Some economic activity will recover relatively quickly.
on cyclically adjusted price/earnings. The UK also trades at a
However, higher government debt and the losers from structural
discount using other valuation methods such as price/book.
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Investment managers’ review continued
CYCLICALLY ADJUSTED P/E ACROSS REGIONS
historical revenue reserve, allowed the Board to confidently grow
50
45
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35
30
25
20
15
10
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0
the dividend 5.8% year on year.
From a capital perspective, the below-benchmark portfolio yield at
the start of 2020 insulated the portfolio from being overly exposed
to among the worst performers last year. The best illustration
of this is the comparative performance of the FTSE 350 High
Yield index and the FTSE 350 Low Yield index last year, where it
can be seen that on average higher yielding stocks substantially
underperformed.
While 2020 was a challenging year for UK dividends, in the
latter half of the year there were reasons for optimism on the UK
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dividend outlook. Many companies held in the portfolio which had
suspended dividends in the first half of the year, chose to resume
UK
US
Europe ex UK
Source: Refinitiv Eikon as at 7 December 2020. Indices used: UK – FTSE All-Share, US – FTSE
North America, Europe ex UK – FTSE Europe ex UK.
Income backdrop
In prior years, we have emphasised the unique advantage of
paying and in some cases catch up on missed payments. In the
banking sector, while dividends remained forcibly suspended
by the regulator, there were clear indications from management
teams that when restrictions were lifted they would seek to
resume dividends. Following updated guidance from the regulator,
we expect modest dividends to resume.
Law Debenture’s structure, with the income generated by the
In 2021, we expect investment income from the portfolio to rise,
IPS business allowing greater flexibility to invest in lower or zero
but not to reach 2019 levels. Some companies held, including Royal
dividend yield stocks within the investment portfolio. This allows
Dutch Shell and BP, have permanently rebased their dividends lower
us to focus on capital generation, while knowing that historically
as they seek to transition their portfolios gradually away from fossil
approximately a third of the Trust’s income has been provided by
fuels towards renewable energy. Other companies (such as those
the IPS business. In a year when investment income fell 38% to
exposed to the aerospace industry) continue to have limitations
£18.1m (2019: £29.2m) as a result of the pandemic (approximately
on their trading as a result of the pandemic and therefore will not
in line with the fall seen in the wider UK market), this greater
return to paying dividends until 2022 at the earliest.
flexibility provided by the growing income from the IPS business
helped the Trust from both an income and a capital perspective.
From a shareholder perspective, the share of Group income
generated by the IPS business this year grew to 43.4%1. Therefore
the fall in investment income was partially offset by growing
income from the IPS business. This, combined with the large
COMPARATIVE PERFORMANCE OF THE FTSE 350 HIGH YIELD
INDEX AND THE FTSE 350 LOW YIELD INDEX
105
100
95
90
85
80
75
70
65
60
D ec 2 019
Ja n 2 0 2 0
Fe b 2 0 2 0
M ar 2 0 2 0
A pr 2 0 2 0
M ay 2 0 2 0
Ju n 2 0 2 0
Jul 2 0 2 0
A u g 2 0 2 0
S e p 2 0 2 0
O ct 2 0 2 0
N ov 2 0 2 0
D ec 2 0 2 0
FTSE 350 High Yield
FTSE 350 LowYield
Source: Refinitiv Eikon. £, total return, rebased to 100 as at 31 December 2019.
1 Calculated on IPS contribution to total earnings per share for year end 31 December 2020.
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Top five contributors
The following five stocks produced the largest absolute
contribution for 2020:
Stock
Ceres Power
ITM Power
Herald Investment Trust
Rio Tinto
Royal Mail
Share price
total return (%)
Contribution
(£m)
403.8
626.1
51.7
21.5
49.2
33.5
13.3
6.0
3.6
3.4
Source: Share price total returns from Bloomberg, all in £.
Portfolio attribution
There were broadly two themes to the best performers during
the year; companies exposed to the need to decarbonise the
global economy, and companies exposed to the shift of much of
consumer spending online.
Ceres Power, which designs hydrogen fuel cells, and ITM Power,
which produces electrolysers that can be used to generate ‘green
Investment managers’ review continued
hydrogen’ from renewable energy, were both among the best
performers. In both cases the technology has existed for some
loan losses (HSBC). GlaxoSmithKline in the table above is the
exception to this, with earnings expectations remaining largely
time, but one of the catalysts for the shares performing well was
unchanged during the year as a result of its defensive end
they both received external validation from strong commercial
markets (vaccines, pharmaceuticals and consumer healthcare).
partnerships; Ceres agreed a manufacturing licence agreement
The underperformance could be due to lower earnings growth
with Bosch, and later in the year Doosan in South Korea, while
than pharmaceutical peers as they continue to invest heavily in
ITM Power formed a partnership with industrial gas producer
research and development in order to improve their pipeline. We
Linde. These commercial partnerships came at a time when many
continue to view this as a long-term opportunity and it remains a
developed economies are increasingly willing to make substantial
top ten holding.
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investments in ‘green technology’ in order to meet future
environmental targets.
Both Herald Investment Trust and Royal Mail benefited from the
accelerated move ‘online’ in 2020. Herald invests predominantly
in technology shares, which performed exceptionally well
last year as businesses shifted to working remotely and were
increasingly reliant on cloud computing, and consumer spending
moved increasingly online. Royal Mail had for many years seen a
gradual decline in letters and an increase in parcel delivery; this
trend was accelerated last year, allowing them to progress with
their reconfiguration of the delivery network and reallocation of
costs towards parcels.
Top five detractors
Portfolio activity
What we have been buying
The most material decision during the year was to be net investors
during the peak of the market weakness in Spring. March was
the most active month for net investment, where we invested an
additional £14.8m in the portfolio.
The investment process aims to identify market leading, well-
managed businesses and invest at the point of which they are out
of favour. There was an abundance of these opportunities during
the Spring. We invested broadly, adding to both existing positions
such as Aviva, and establishing new positions such as Anglo
American and Marks & Spencer. While there was deliberately no
commonality in these additions in terms of geography or end-
The following five stocks produced the largest negative
impact on the portfolio valuation for 2020:
market exposure, we focused purchases on companies that would
benefit from a global economic recovery following the pandemic.
Stock
Royal Dutch Shell
Hammerson
GlaxoSmithKline
BP
HSBC
Share price
total return (%)
Contribution
(£m)
(43.8)
(82.4)
(20.6)
(46.0)
(36.0)
(12.3)
(9.2)
(7.3)
(6.9)
(5.7)
Source: Share price total returns from Bloomberg, all in £.
The worst performing stocks during the year were broadly
those exposed to a fall in economic activity, whether via the
fall in the oil price as transportation fuel demand fell markedly
(Royal Dutch Shell, BP in the table above) or those exposed
to further declines in already low interest rates and uncertain
This modest shift in the portfolio towards sectors that are more
cyclical can be seen in the sector composition at year end, with
a higher weighting in, for example, materials and oil and gas
than the previous year. It is also evident in the top five purchases
detailed below, which are spread between financials, materials
and oil and gas.
What we have been selling
Sales during the year were predominantly for either valuation
reasons or driven by corporate activity. For example Microsoft,
which had for a number of years been the largest overseas holding
in the portfolio, performed well following the pandemic and in our
view there were better valuation opportunities elsewhere. Ceres
Power was reduced following strong performance, partially in
order to fund other investments in the alternative energy sector
such as AFC Energy.
In our view the long-term positives of the UK market have been forgotten with the
political uncertainty in recent years, but continue to represent a valuation opportunity for
long-term investors. We therefore remain happy with approximately 80% of the portfolio
invested in the UK as at the end of December.
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Investment managers’ review continued
The position in insurer RSA was sold following a takeover offer
from overseas peers. Towards the end of the year there was a
Outlook
notable pick-up in takeover activity in the UK, with another of the
portfolio’s holdings (Elementis) also receiving a takeover approach.
This is a theme that we expect to continue in the current year
Structural changes that are happening in the economy throw up
opportunities, as well as severe challenges for companies. The
speed of the change has accelerated as a result of Covid-19, but
while there continues to be a valuation gap between UK and other
reflects the longer-term trend that intellectual capital has been
developed equity markets.
Five largest purchases
The largest five purchases during the year are detailed
below:
Stock
M&G
Barclays
Anglo American
Aviva
BP
Five largest sales
Total purchased
(£m)
7.4
7.1
6.9
6.7
6.3
replacing physical assets as the driving force for corporate success.
The shelf life of intellectual capital can be short. This is the reason
behind the need for an active rather than a passive approach to
portfolio management. We will retain a broad and relatively long
list of stocks. We are always on the lookout for stocks that are
reasonably valued and have characteristics that cannot be found in
the UK. The focus, though, will be predominantly in the UK as this
is where value can be found. The companies will be serving a wide
range of end markets. Diversity is important in order to achieve a
reasonable level of consistency in returns.
The companies held are adapting to the challenging economic
backdrop. The key is to have excellent products and services that
remain relevant to the customer. This usually means an emphasis
on research and productive capital expenditure. Therefore the
portfolio is about the individual companies, and it is not a proxy
for the economy. The overall valuation of the stocks held remains
undemanding using history as a guide. Therefore, the intention
is to retain a reasonable level of gearing so that the portfolio
is fully exposed to the opportunities that can be found in the
The largest five sales during the year are detailed below:
equity market.
Stock
Ceres Power
AstraZeneca
Flutter Entertainment
Microsoft
RSA Insurance
James Henderson and Laura Foll
Investment managers
25 February 2021
Total sold
(£m)
21.4
13.3
12.0
10.9
10.7
Investment managers ESG case study: Severn Trent
The investment managers held a call in 2020 with the new Chair of water company Severn Trent covering a broad range of ESG
issues, including board composition and succession planning, human capital, health and safety, customer service and climate
change. Severn Trent is using a 30-year time horizon to model detailed climate and weather predictions. The company saw
increased water consumption during the warm weather in 2020, while the shift to working from home has also seen a change
in consumption patterns. As a result, the company is building more resilience into their systems.
Severn Trent has strong leadership across the senior executive team and was well prepared to respond to the
challenges presented by Covid-19. The UK Government is seeking advice from the CEO on how to manage a
company in a socially distanced environment. While the water sector has faced significant controversies over the
industry’s track record for customer service and environmental management, we regard Severn Trent as an
industry leader on ESG issues.
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Portfolio by sector and value
Portfolio by sector
2020
Portfolio by sector
2019
Oil and gas 11.6%
Basic materials 9.3%
Industrials 22.0%
Consumer goods 6.2%
Health care 5.2%
Consumer services 8.9%
Telecommunications 1.9%
Utilities 4.8%
Financials 28.5%
Technology 1.6%
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Oil and gas 9.7%
Basic materials 6.4%
Industrials 23.2%
Consumer goods 5.2%
Health care 8.9%
Consumer services 10.2%
Telecommunications 1.1%
Utilities 4.0%
Financials 28.9%
Technology 2.4%
Geographical distribution
Geographical distribution
of portfolio by value
2020
of portfolio by value
2019
United Kingdom 82.1%
North America 5.4%
Europe 10.1%
Japan 1.1%
Other Pacific 0.9%
Other 0.4%
United Kingdom 80.7%
North America 8.3%
Europe 7.8%
Japan 1.1%
Other Pacific 0.9%
Other 1.2%
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Fifteen largest holdings: investment rationale
as at 31 December 2020
Rank
2020 Company
1
Ceres Power
% of
portfolio
Approx
Market Cap.
Valuation
2019
£000
Purchases
£000
Sales
£000
Appreciation/
(Depreciation)
£000
Valuation
2020
£000
2.99
£2.7bn
12,052
—
(21,368)
33,513
24,197
Ceres Power operates as a fuel cell technology and engineering business. The technology is fuel flexible and is licensed to partners
including Bosch, Weichi, Minra and Doosan. Therefore, strong revenue growth is expected in coming years. The desire to push towards
lowering carbon emissions drives the need for fuel cell technology to be adopted. Their fuel cell is being used to power buses in China as
well as data centres in the UK. The adoption of this new technology is rapidly spreading.
2
GlaxoSmithKline
2.77
£70.2bn
29,792
—
—
(7,314)
22,478
GlaxoSmithKline is one of the world’s largest pharmaceutical, vaccine and consumer healthcare companies. GSK currently trades at
a discount to the global pharmaceutical sector. Whilst they have world leading consumer healthcare and vaccines businesses, the
pharmaceutical division has lagged behind others, for example in innovative oncology drugs. With a new CEO in place, along with a new
Head of Pharmaceuticals and a new Head of Research, they are re-investing in research and development and focusing on innovative
products. Given the long development time within pharmaceuticals it will take years for this change to become fully evident but we are
seeing early stages of an improved drug pipeline.
3
Rio Tinto
2.53
£77.2bn
16,884
—
—
3,628
20,512
Rio Tinto is one of the world’s largest mining companies with a particular focus on iron ore, aluminium and copper. Their mines are well
positioned on the cost curve, often at the lowest cost quartile globally, meaning that they can continue to be highly cash generative
despite volatile commodity prices. This cash generation combined with a strong balance sheet has resulted in an attractive ordinary
dividend payment, combined with some special dividends in recent years. Dividends have continued to be paid in 2020 despite a
volatile demand backdrop for commodities.
Following the Juukan Gorge site destruction, Janus Henderson extensively engaged with the Rio Tinto board and management team.
We continue to be of the view that Rio has high levels of corporate governance relative to mining peers and took appropriate action
following the disaster to replace management and improve standards.
4
Herald Investment Trust
2.16
£1.4bn
12,580
—
(1,073)
5,998
17,505
Herald is a global technology focused investment trust managed by Katie Potts, who launched the Trust in 1994. Its technology focus
brings worthwhile diversity to the portfolio and it has been an excellent performer over time.
5
Royal Dutch Shell
1.94
£52.2bn
27,994
—
—
(12,251)
15,743
Royal Dutch Shell is a vertically integrated oil and gas company. Following a fall in the oil price in 2020, the Board took the decision to
rebase the dividend by two thirds and further reduce capital and operating expenditure. At the rebased level the dividend is covered
by free cash flow at the current oil price and is in a position to grow if the oil price recovers. Shell are perceived to be among the leaders
within integrated oil and gas companies in the transition to renewable energy. We expect further detail on their renewable energy
strategy early in 2021.
6
BP
1.79
£60.8bn
15,091
6,285
—
(6,852)
14,524
BP is a vertically integrated oil and gas company. Under a new CEO, BP have announced ambitious plans to reach net zero carbon
emissions by 2050 and gradually transition away from fossil fuels towards renewable energy. The cash generation from their oil and gas
business should enable this transition to take place, while also continuing to fund cash returns to shareholders via dividends (and likely
share buybacks in the future).
7
Prudential Corp
1.55
£37.1bn
13,506
—
—
(925)
12,581
Prudential Corp is a leading provider of insurance products in Asia, with additional operations in the US. In 2019 Prudential spun off
its M&G division, which constituted its UK business. This brings a clearer focus to the company and enhances its growth prospects. The
savings market in Asia is immature and has strong growth drivers. In our view the franchise value of their Asian business is not fully
reflected in the current share price. The business will simplify further as they plan to list a portion of their US business on the market in
early 2021.
8
National Grid
1.5
£30.1bn
13,307
—
—
(1,118)
12,189
National Grid are a regulated utility company with operations in both the UK and the US. The need to reduce global carbon emissions
is likely to increase demands on electricity networks and this could lead to faster regulated asset growth in future driven by the need to
increase grid capacity. The position brings defensive qualities and continues to pay an attractive dividend yield.
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Fifteen largest holdings: investment rationale continued
as at 31 December 2020
Rank
2020 Company
% of
portfolio
Approx
Market Cap.
Valuation
2019
£000
Purchases
£000
9
Morgan Advanced Materials
1.47
£0.9bn
11,095
974
Sales
£000
—
Appreciation/
(Depreciation)
£000
Valuation
2020
£000
(95)
11,974
Morgan Advanced Materials is a specialist materials producer for a wide variety of end markets including transportation, healthcare,
industrials and semiconductors. Under a relatively new management team they have simplified the business via divestments,
strengthened the balance sheet and invested in new product development. Industrial end markets in 2020 were challenging. However,
management have responded to end market weakness by permanently reducing costs such as closing manufacturing facilities. In our
view, when sales recover the margins generated will be higher than prior to the pandemic.
S
T
R
A
T
E
G
I
C
R
E
P
O
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T
10
HSBC
1.46
£83.1bn
15,606
1,955
—
(5,680)
11,881
HSBC are a global bank with a substantial presence in Hong Kong and mainland China. Their geographic focus brings worthwhile
diversity to the portfolio. As a result of Covid-19 they have suspended their dividend following guidance from the regulator, and the level
of future loan impairments is difficult to forecast. However, the shares are trading at a material discount to book value which, in our view,
suggests a degree of uncertainty is already reflected in the share price. The new management team also have a ‘self-help’ opportunity to
scale back their relatively lower returning US and European businesses in order to improve the overall group returns.
11
ITM Power
1.41
£3.0bn
2,295
1,160
(5,285)
13,318
11,488
ITM Power designs and manufactures integrated systems for energy storage and clean fuel production. It is a world leader in electrolysis,
allowing ‘green hydrogen’ to be produced using electricity from renewable energy and water. Their products should allow ITM Power to
capture growth from increased hydrogen usage. A large new plant will be commissioned this year to satisfy growing demand with their
project partner, Linde.
12
Severn Trent
1.41
£5.6bn
12,575
—
—
(1,135)
11,440
Severn Trent is a UK water utility. It is one of the best quality water companies in the UK on metrics such as preventing leakages as it has
a well invested network. The position brings defensiveness to the overall portfolio and the dividend yield remains attractive.
13
Accsys Technologies
1.37
£0.3bn
8,218
—
—
2,913
11,131
Accsys Technologies focuses on the sustainable transformation of wood through acetylation (creating a natural sealant to protect
against erosion). It is scaling up production with a new plant, which will be commissioned in 2021, to satisfy the strong demand for
their products.
14
Aviva
1.36
£13.6bn
5,380
6,665
—
(1,037)
11,008
Aviva is a diversified insurer that writes life and non-life insurance. Under a new chief executive, they are focusing the business on
geographies where they have strong market positions and are divesting assets in more peripheral geographies. The shares trade with
a conglomerate discount relative to insurance peers and a more focused group would, in our view, merit a higher valuation. The shares
continue to pay an attractive dividend yield to shareholders.
15
Anglo American*
1.34
£37.6bn
—
6,838
—
4,072
10,910
Anglo American is a diversified mining company with exposure to commodities including copper, iron ore, diamonds and platinum. It
is well positioned to benefit from the need to decarbonise the global economy. For example, it is significantly exposed to copper where
demand is likely to grow driven by its use in electric vehicles and renewable energy. Anglo American are also among the leaders within
the mining sector on environmental targets, aiming to be carbon neutral in their own operations by 2040.
*Anglo American was first purchased on 12 March 2020.
2525
S T R A T E G I C R E P O R T
Classification of investments
based on market values as at 31 December 2020
North
America
%
Europe
%
Rest of the
world
%
Oil and gas
Alternative energy
Oil and gas producers
Oil equipment services and distribution
Basic materials
Chemicals
Forestry and paper
Mining
Industrials
Aerospace and defence
Construction and materials
Electronic and electrical equipment
General industrials
Industrial engineering
Industrial transportation
Support services
Consumer goods
Automobiles and parts
Food and drug retailers
Food producers
Household goods and home construction
Personal goods
Tobacco
Health care
Health care equipment and services
Pharmaceuticals and biotechnology
Consumer services
General retailers
Media
Travel and leisure
Financials
Banks
Equity investment instruments
Financial services
Life insurance/assurance
Nonlife insurance
Real estate investment trusts
Real estate investments and services
Technology
Software and computer services
Technology hardware and equipment
Telecommunications
Fixed line telecommunications
Mobile telecommunications
Utilities
Electricity
Gas, water and multiutilities
TOTAL 2020
TOTAL 2019
26
lawdebenture.com
U.K.
%
1.36
4.32
4.60
10.28
1.78
1.01
5.17
7.96
4.18
4.49
2.88
1.30
2.58
1.37
2.40
—
0.68
0.38
1.06
—
—
—
—
—
—
—
—
1.94
—
—
19.20
1.94
—
0.74
—
1.49
0.54
0.58
3.35
0.87
2.77
3.64
3.23
2.34
1.39
6.96
5.51
3.83
5.76
4.09
2.38
2.98
0.91
25.46
—
—
—
0.49
0.52
1.01
1.02
3.08
4.10
81.96
80.75
0.84
—
—
—
—
—
0.84
—
0.70
0.70
—
—
—
—
—
—
—
—
—
—
—
—
—
0.89
0.89
—
—
—
—
—
—
5.43
8.30
—
0.26
—
0.26
1.33
—
—
1.33
—
—
—
0.36
—
—
0.55
0.91
0.23
—
0.43
—
0.21
—
0.87
—
0.84
0.84
—
0.34
1.57
1.91
0.84
—
0.41
—
0.47
—
—
1.72
0.43
0.24
0.67
0.11
0.82
0.93
0.70
—
0.70
10.14
7.83
Total
2020
%
1.36
5.26
4.98
11.60
3.11
1.01
5.17
9.29
4.18
4.49
2.88
1.66
4.52
1.37
2.95
Total
2020
£000
Total
2019
%
Total
2019
£000
11,079
42,711
40,479
94,269
25,311
8,168
42,010
75,489
33,928
36,432
23,434
13,448
36,706
11,104
23,916
7.46
61,340
—
2.21
9.67
2.16
1.02
3.24
6.42
4.13
6.34
1.53
2.94
4.87
1.11
2.29
—
18,114
79,454
17,732
8,419
26,656
52,807
33,971
52,140
12,525
24,158
39,990
9,089
18,778
22.05
178,968
23.21
190,651
2.22
0.74
0.43
1.49
0.75
0.58
6.21
0.87
4.31
5.18
3.23
2.68
2.96
8.87
6.35
4.70
6.17
4.09
2.85
3.43
0.91
18,032
6,016
3,507
12,116
6,132
4,739
50,542
7,097
34,950
42,047
26,228
21,740
24,084
72,052
51,586
38,213
50,102
33,207
23,204
27,809
7,400
1.82
0.31
0.43
1.70
—
0.98
5.24
1.05
7.79
8.84
1.88
3.30
4.97
10.15
6.18
4.13
3.40
1.69
3.97
5.64
3.93
14,910
2,534
3,499
13,952
—
8,079
42,974
8,608
64,098
72,706
15,462
27,105
40,946
83,513
50,890
33,916
28,048
13,916
32,633
46,442
32,315
28.50
231,521
28.94
238,160
0.43
1.13
1.56
0.60
1.34
1.94
1.72
3.08
4.80
3,502
9,184
12,686
4,852
10,887
15,739
13,959
25,025
38,984
812,297
—
1.66
0.78
2.44
—
1.13
1.13
0.70
3.26
3.96
13,676
6,450
20,126
—
9,325
9,325
5,825
26,775
32,600
100.00
662,593
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1.15
—
—
—
—
—
1.15
—
—
—
—
—
—
—
—
0.87
—
—
—
0.45
—
1.32
—
—
—
—
—
—
—
—
—
2.47
3.12
100.00
—
The above table excludes bank balances and short-term deposits
Photo credit: Charles Hosea
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
27
S T R A T E G I C R E P O R T
Investment portfolio valuation
based on market values as at 31 December 2020
Holding name
Ceres Power
GlaxoSmithKline
Rio Tinto
Herald Investment Trust
Royal Dutch Shell
BP
Prudential Corp
National Grid
Morgan Advanced Materials
HSBC
ITM Power
Severn Trent
Accsys Technologies
Aviva
Anglo American
RELX
BHP
DS Smith
Royal Mail
Direct Line Insurance
Land Securities
Dunelm
Hipgnosis Songs Fund
M&G
Rolls Royce
Hill & Smith
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
NatWest
Hiscox
BAE Systems
Standard Chartered
IP Group
Urban Logistics REIT
AFC Energy
Standard Life Aberdeen
Mondi
Caterpillar
Johnson Service Group
Cummins
Lloyds Banking Group
Senior
Croda
Balfour Beatty
St Modwen Properties
28
lawdebenture.com
UK
UK
UK
UK
UK
UK
UK
UK
UK
USA
UK
USA
UK
UK
UK
UK
UK
Location
Sector
Industry
£000
Oil equipment services and distribution
24,197
Pharmaceuticals and biotechnology
Basic Materials
Mining
Oil and gas
Health Care
Financials
Oil and gas
Oil and gas
Financials
Utilities
Industrials
Financials
Oil and gas
Utilities
Industrials
Financials
Equity investment instruments
Oil and gas producers
Oil and gas producers
Life insurance/assurance
Gas, water and multiutilities
Electronic and electrical equipment
Banks
Gas, water and multiutilities
Construction and materials
Life insurance/assurance
Oil equipment services and distribution
11,488
Basic Materials
Mining
Consumer Services
Media
Basic Materials
Mining
Industrials
Industrials
Financials
Financials
General industrials
Industrial transportation
Nonlife insurance
Real estate investment trusts
Consumer Services
General retailers
Financials
Financials
Industrials
Industrials
Equity investment instruments
Financial services
Aerospace and defence
Industrial engineering
Financials
Financials
Industrials
Financials
Financials
Financials
Oil and gas
Financials
Banks
Nonlife insurance
Aerospace and defence
Banks
Financial services
Real estate investment trusts
Alternative Energy
Financial services
Basic Materials
Forestry and paper
Industrials
Industrials
Industrials
Financials
Industrials
Industrial engineering
Support services
Industrial engineering
Banks
Aerospace and defence
Basic Materials
Chemicals
Industrials
Financials
Construction and materials
Real estate investments and services
7,400
22,478
20,512
17,505
15,743
14,524
12,581
12,189
11,974
11,881
11,440
11,131
11,008
10,910
10,755
10,588
10,548
10,466
10,368
10,254
10,068
10,035
9,898
9,401
9,372
9,297
9,213
8,991
8,798
8,784
8,765
8,730
8,580
8,457
8,168
7,982
7,953
7,801
7,652
7,576
7,561
7,469
%
2.99
2.77
2.53
2.16
1.94
1.79
1.55
1.50
1.47
1.46
1.41
1.41
1.37
1.36
1.34
1.32
1.30
1.30
1.29
1.28
1.26
1.24
1.24
1.22
1.16
1.15
1.14
1.13
1 . 1 1
1.08
1.08
1.08
1.07
1.06
1.04
1.01
0.98
0.98
0.96
0.94
0.93
0.93
0.92
0.91
Toyota Motor Corporation
Japan
Consumer Goods
Automobiles and parts
Investment portfolio valuation continued
based on market values as at 31 December 2020
Holding name
Barclays
Applied Materials
Smith & Nephew
Location
Sector
UK
USA
UK
Financials
Technology
Health Care
Industry
Banks
Technology hardware and equipment
Health care equipment and services
Scottish Oriental Smaller Cos
Pacific
Financials
Equity investment instruments
Marks & Spencer
UK
Consumer Services
General retailers
Irish Continental Group
Ireland
Consumer Services
Travel and leisure
USA
Consumer Goods
Automobiles and parts
Consumer Goods
Household goods and home construction
6,815
Financials
Financial services
Basic Materials
Chemicals
Industrials
Construction and materials
Germany
Basic Materials
Chemicals
UK
UK
UK
UK
Ireland
Ireland
USA
Financials
Life insurance/assurance
Consumer Goods
Food and Drug Retailers
Industrials
Electronic and electrical equipment
Consumer Services
Media
Consumer Services
Travel and leisure
Utilities
Electricity
Health Care
Pharmaceuticals and biotechnology
International Consolidated Airlines UK
Consumer Services
Travel and leisure
Canada
Oil and gas
Oil and gas producers
Industrials
Electronic and electrical equipment
Consumer Goods
Household goods and home construction
5,301
General Motors
Watkin Jones
Provident Financial
Elementis
Marshalls
Linde
Chesnara
Tesco
Spectris
Euromoney
Ryanair
EQTEC
Bristol-Myers Squibb
Gibson Energy
TT Electronics
Taylor Wimpey
Hammerson
IMI
Ibstock
Halfords
British American Tobacco
SigmaRoc
Meggitt
Boku
SSE
Studio Retail Group
Unilever
Vodafone
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Financials
Industrials
Industrials
Real estate investment trusts
Industrial engineering
Construction and materials
Consumer Services
General retailers
Consumer Goods
Tobacco
Industrials
Industrials
Industrials
Utilities
Construction and materials
Aerospace and defence
Support services
Electricity
Consumer Services
General retailers
Consumer Goods
Personal goods
Telecommunications
Mobile telecommunications
Koninklijke DSM
Netherlands
Basic Materials
Chemicals
Oxford Sciences Innovation
UKULM
Financials
Financial services
Weir Group
BT Group
UK
UK
Industrials
Industrial engineering
Telecommunications
Fixed Line Telecommunications
Muenchener Rueckver
Germany
Financials
Nonlife insurance
SIMEC Atlantis Energy
International Personal Finance
UK
UK
Utilities
Financials
Electricity
Financial services
BAWAG
Austria
Financials
Banks
Grit Real Estate Income Group
Other
Financials
Real estate investment trusts
£000
7,261
7,253
7,097
7,077
6,951
6,949
6,849
6,780
6,732
6,728
6,627
6,115
6,016
5,988
5,891
5,807
5,667
5,666
5,493
5,491
5,472
5,201
5,097
4,951
4,806
4,739
4,729
4,665
4,571
4,499
4,402
4,392
4,233
4,193
4,077
3,979
3,968
3,845
3,794
3,790
3,670
3,624
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
%
0.89
0.89
0.87
0.87
0.86
0.86
0.84
0.84
0.83
0.83
0.83
0.82
0.75
0.74
0.74
0.73
0.71
0.70
0.70
0.68
0.68
0.67
0.65
0.64
0.63
0.61
0.59
0.58
0.58
0.57
0.56
0.55
0.54
0.54
0.52
0.52
0.50
0.49
0.49
0.47
0.47
0.47
0.45
0.45
29
S T R A T E G I C R E P O R T
Investment portfolio valuation continued
based on market values as at 31 December 2020
Holding name
Location
Sector
Industry
Foresight Solar Fund
Telecom Italia RSP
UK
Italy
Financials
Equity investment instruments
Telecommunications
Mobile telecommunications
Nestle
Switzerland
Consumer Goods
Food producers
Phoenix Group Holdings
UK
Financials
Life insurance/assurance
Prosus
Babcock
Indus Gas
UniCredit
Redde Northgate
Cellnex Telecom
Carnival
Roche
Schlumberger
Allied Minds
SIG Combibloc
Vivendi
Marstons
Worldline
Amundi
Ilika
Mirriad Advertising
Novo Nordisk
Augean
Total
ASML
Faurecia
Nexi
Morses Club
CNH Industrial
Moncler
Ricardo
Velocys
Grifols
Kier
Centrica
Netherlands
Technology
Software and computer services
UK
UK
Italy
UK
Spain
UK
Industrials
Oil and gas
Financials
Industrials
Aerospace and defence
Oil and gas producers
Banks
Support services
Telecommunications
Mobile telecommunications
Consumer Services
Travel and leisure
Switzerland
Health Care
Pharmaceuticals and biotechnology
USA
UK
Oil and gas
Financials
Financial services
Oil equipment services and distribution
3,048
Switzerland
Industrials
General industrials
France
Consumer Services
Media
UK
France
France
UK
UK
Consumer Services
Travel and leisure
Industrials
Financials
Oil and gas
Support services
Financial services
Alternative Energy
Consumer Services
Media
Denmark
Health Care
Pharmaceuticals and biotechnology
UK
Industrials
Support services
France
Oil and gas
Oil and gas producers
Netherlands
Technology
Technology hardware and equipment
France
Consumer Goods
Automobiles and parts
Italy
UK
UK
Italy
UK
UK
Industrials
Financials
Industrials
Support services
Financial services
Industrial engineering
Consumer Goods
Personal goods
Industrials
Oil and gas
Support services
Oil equipment services and distribution
Spain
Health Care
Pharmaceuticals and biotechnology
UK
UK
Industrials
Utilities
Construction and materials
Gas, water and multiutilities
Koninklijke KPN
Netherlands
Telecommunications
Fixed Line Telecommunications
Brockhaus Capital Management
Germany
Financials
Financial services
Premier Oil
Renold
Logistics Development Group
Tullow Oil
LDIC Investments
Carclo
Providence Resources
UK
UK
UK
UK
UK
UK
UK
Oil and gas
Industrials
Industrials
Oil and gas
Other
Oil and gas producers
Industrial engineering
Industrial transportation
Oil and gas producers
Other
Basic Materials
Chemicals
Oil and gas
Oil and gas producers
30
lawdebenture.com
£000
3,570
3,559
3,507
3,503
3,502
3,488
3,346
3,122
3,105
3,095
3,076
3,064
3,006
2,900
2,765
2,759
2,612
2,579
2,499
2,328
2,294
2,137
2,124
1,931
1,886
1,828
1,795
1,742
1,740
1,710
1,679
1,447
1,425
1,396
884
743
736
734
639
591
213
198
156
%
0.44
0.44
0.43
0.43
0.43
0.43
0.41
0.38
0.38
0.38
0.38
0.38
0.38
0.37
0.36
0.34
0.34
0.32
0.32
0.31
0.29
0.28
0.26
0.26
0.24
0.23
0.23
0.22
0.21
0.21
0.21
0.21
0.18
0.18
0.17
0 . 1 1
0.09
0.09
0.09
0.08
0.07
0.03
0.02
0.02
Investment portfolio valuation continued
based on market values as at 31 December 2020
Holding name
DistributionNOW
Better Capital (2012)
Location
Sector
Industry
USA
UK
Oil and gas
Financials
Oil equipment services and distribution
Equity investment instruments
Permanent TSB
Ireland
Financials
Banks
£000
66
25
3
%
0.01
0
0
812,297
100.00
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
Changes in geographical distribution
Valuation
31 December
2019
£000
664,021
68,182
64,409
8,693
7,237
9,774
822,316
Purchases
£000
129,219
3,513
39,921
—
—
1,178
173,831
United Kingdom
North America
Europe
Japan
Other Pacific
Other
* Please refer to note 2 on page 102.
Costs of
acquisition
£000
Sales
proceeds
£000
Appreciation/
(depreciation)*
£000
Valuation
31 December
2020
£000
(98,200)
(28,706)
665,800
(534)
(2)
(52)
—
—
—
(33,771)
(33,574)
—
—
(1,363)
(588)
(166,908)
6,234
11,639
604
(160)
(5,965)
(16,354)
44,156
82,343
9,297
7,077
3,624
%
82.1
5.4
10.1
1.1
0.9
0.4
812,297
100.0
31
S T R A T E G I C R E P O R T
Company overview
Who we are
From its origins in 1889, Law Debenture has diversified to become a Group with a unique range of activities in the financial and
professional services sectors. Law Debenture is an investment trust with two distinct lines of business: an investment portfolio and a
leading provider of independent professional services.
Law Debenture shares are intended for private investors in the UK (retail investors), professionally advised private clients and institutional
investors. When choosing an investment trust, shareholders typically accept the risk of exposure to equities but hope that the pooled
nature of an investment trust portfolio will give some protection from the volatility in share price movements that can sometimes affect
individual equities.
Our objective
Our objective for the investment trust is to achieve long-term capital growth in real terms and steadily increasing income. The aim is
to achieve a higher rate of total return than the FTSE Actuaries All-Share Index through investing in a diversified portfolio of stocks and
ownership of the IPS business.
Our business model
Our business model is designed to position the Company to the best advantage in the investment trust sector.
Investment Portfolio
(c. 83% of NAV)
Independent Professional Services
(c. 17% of NAV)
The Company’s portfolio will typically contain between 70 and 150
Operating through wholly owned subsidiary companies, all
listed investments. The portfolio is diversified in order to spread
of which are listed at note 14 to the accounts, we provide
investment risk with no obligation to hold shares in any particular
pension trustee executives, outsourced pension services,
type of company, industry or geographical location. The IPS
corporate trust services and corporate services to companies,
business does not form part of the investment portfolio.
agencies, organisations and individuals throughout the world.
Whilst performance is measured against local and UK indices, the
composition of these indices does not influence the construction
of the portfolio. As a consequence, it is expected that the
The services are provided through offices in the UK, Dublin,
New York, Delaware, Hong Kong, the Channel Islands and the
Cayman Islands.
Company’s investment portfolio and performance will deviate from
Group employees are employed by L.D.C. Trust Management
the comparator indices.
Limited and Safecall Limited (in the UK) or a locally incorporated
entity (in the overseas jurisdictions). As part of their duties, a
number of the employees provide services to the investment
trust and their time is charged to the trust, forming a part of the
ongoing charges.
More details about the performance of the IPS business in
2020 are given in the Chief Executive Officer’s review on pages
10 to 16.
Our unique structure allows our investment managers to focus on capital
generation, while knowing that historically approximately one-third of
the Trust’s income has been provided by the IPS business.
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Total Shareholder Return
Investment Portfolio
Independent Professional Services
•
Invests in a diverse equity portfolio
• T rusted, professional,
• Earns capital returns and dividends
• Low ongoing charges
independent, third party
• Generates re-occuring fees
• Cost base kept under control
•
Profits give a dividend stream
which increases the ability for
the Group to pay dividends
to shareholders
• Tax efficient
Our strategy – implementation
We aim to deliver the investment trust’s objective by skilled
implementation of the investment strategy, complemented
by maintaining and operating our IPS business profitably and
safely, while keeping it distinct from the portfolio. The operational
independence of the IPS business means that it can act flexibly
and commercially. It provides a regular flow of dividend income
to the Company. This helps the Board to smooth out equity
dividend peaks and troughs, means that the investment manager
does not have to be constrained by choosing stocks just for
United Kingdom
North America
Europe
Japan
Other Pacific
Other
Minimum
%
Maximum
%
55
0
0
0
0
0
100
20
10
10
10
10
yield and is an important element in delivering the objective of
Liquidity and long-term borrowings are managed with the aim
steadily increasing income for shareholders. In turn, some of the
of improving returns to shareholders. The policy on gearing is to
tax relief at the investment trust level arising from our debenture
adopt a level of gearing that balances risk with the objective of
interest and excess costs, which would otherwise be unutilised,
increasing the return to shareholders, in pursuit of its investment
can be transferred to the IPS business, thus reducing the overall
objective. More information on gearing can be found on
tax liability of the Group.
The way in which we implemented the investment strategy
during 2020 is described in more detail in the CEO’s review on
pages 12 to 16 and the investment managers’ review on pages
18 to 22.
Performance against KPIs is set out at pages 3 to 31, which contain
comprehensive tables, charts and data to explain performance
both over the year under review and over the long-term.
Our strategy – guidelines
There are some guidelines, set by the Board, on maximum or
minimum stakes in particular regions and all stakes are monitored
page 34. Investments may be held in, inter alia, equity shares,
collective investment products including open ended investment
companies (OEICs), fixed interest securities, interests in limited
liability partnerships, cash and liquid assets. Derivatives may
be used but only with the prior authorisation of the Board. It is
permissible to hedge against currency movements on both the
capital and income account, and to lend stocks up to 30% of the
NAV, subject again to prior authorisation of the Board. Trading
in suspended shares and short positions are not permitted. No
more than 15% of gross assets will be invested in other UK listed
investment trusts. During 2020, the Board took the decision to
remove the cap on UK investments given our AIC classification
in the UK Equities Sector. However, the Company’s investment
activities are subject to the following limitations and restrictions:
in detail by the Board at every scheduled Board meeting in order
•
No investment may be made which raises the aggregate value
to ensure that sufficient diversification is maintained.
of the largest 20 holdings, excluding investments in collective
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Company overview continued
investment vehicles that give exposure to the Japan, Asia/
administration. Law Debenture’s latest published level of ongoing
Pacific or emerging market regions, to more than 40% of the
charges shown on page 3 is one of the lowest in the marketplace.
Company’s portfolio, including gilts and cash.
No performance fees are paid to the investment manager.
•
The value of a new acquisition in any one company may not
exceed 5% of total portfolio value (including cash) at the time
the investment is made. Further additions shall not cause a
single holding to exceed 5%, and Board approval must be
sought to retain a holding, should its value increase above the
5% limit (that approval to be sought at the next Board meeting).
•
The Company applies a ceiling on effective gearing of 50%.
While effective gearing will be employed in a typical range
of 10% net cash to 20% gearing, the Board retains the ability
to reduce equity exposure so that net cash is above 10% if
deemed appropriate.
•
The Company may not make investments in respect of which
there is unlimited liability.
Fee structure and ongoing charges
Our portfolio of investments is managed under delegation by
James Henderson and Laura Foll of Janus Henderson Investors
(Janus Henderson) under a contract terminable by either side
on six months’ notice. On a fully discretionary basis, Janus
Henderson is responsible for implementing the Company’s
investment strategy and fees are charged at 0.30% of the value
Capital structure – simple and mainstream
Law Debenture’s capital structure is transparent. We have only
one class of share – ordinary shares – and each share has the same
rights as every other share.
The Company conducts its affairs so that its ordinary shares are
capable of being recommended by independent financial advisors
to retail investors in accordance with relevant FCA rules.
Our ordinary shares are, we consider, mainstream investment
products because they are shares in an investment trust. The
Company intends to continue conducting its affairs for the
foreseeable future so that the ordinary shares can continue to be
categorised as a mainstream investment.
Transparency
In order to assist shareholders to understand the nature of the
underlying investments they are buying into when investing in Law
Debenture shares, we publish our entire portfolio monthly – with
additional monthly updates on the composition of the top ten
holdings in the portfolio. During the course of 2020, we also began
publishing a daily NAV.
of the net assets of the Group (excluding
the net assets of IPS), calculated on the
basis adopted in the audited financial
statements. This means that the Company
continues to maintain one of the
most competitive fee structures in the
investment trust sector. This, combined
with the strong performance of Janus
Henderson over the years as our investment
manager, has led the Board to conclude
that the continuing appointment of Janus
Henderson as the Company’s investment
manager remains in the best interests of
shareholders. Equity investment needs to
be considered over the longer term and
Janus Henderson has delivered positive
returns over many years.
The agreement with Janus Henderson
does not cover custody which is the
responsibility of the depositary (see section
on regulatory compliance in the Directors’
Law Debenture’s
latest published level
of ongoing charges
is one of the lowest
in the marketplace at
0.55%. No performance
fees are paid to the
Gearing
Investment trusts have the benefit of being
able to ‘gear’ their portfolios according to
market conditions. This means that they
can raise debt (either short or long-term)
to generate funds for further investment.
These funds can be used to increase the
size of the portfolio, or assets from within
the portfolio can be sold to reduce debt
and even be ‘negatively geared’. This means
selling assets to hold cash so that less than
100% of the Company’s assets are invested
in equities. At 31 December 2020, our
gearing was 9% (2019: 5% restated†).
investment manager.
There has been no change in the
Company’s gearing policy, with effective
gearing typically employed in a range of
10% net cash to 20% gearing.
report, page 53). Nor does it cover the preparation of data
associated with investment performance, or record keeping, both
of which are maintained by the Company.
Borrowings
Investment trusts are required to publish their ongoing charges.
The Company has two debentures (long dated sterling
This is the cost of operating the trust and includes the investment
denominated financing) details of which are at page 120. The
management fee, depositary and custody fees, investment
weighted average interest payable on the Company’s structural
performance data, accounting, company secretary and back office
borrowings is 4.589% (2019: 4.589%).
† Please refer to gearing/(net cash) note on page 128.
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Company overview continued
Breakdown of employees by sex
NAV total return with debt at Fair Value
We report that at the 2020 year end:
•
•
two Directors of the Company were female (2019: two);
50% of the senior managers of the Group were female (2019:
31%) (senior manager being any individual with responsibility
for planning, directing or controlling an activity of one of
the subsidiary companies or a key central business function,
excluding the CEO and the COO); and
•
50% (2019: 50%) of the Group employees were female.
Future trends and factors
1 year
3.6%
3 years
15.6%
5 years
59.1%
10 years
147.8%
Premium/(discount)
Year end
High for year
Low for year
31 December 2020
31 December 2019
3.6%
6.6%
(19.0)%
(7.4)%
(4.8)%
(11.6)%
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Law Debenture will continue to strive to deliver its business
objectives for both the investment trust and the IPS business.
Ongoing expenses ratio
The Chairman’s statement, the investment managers’
review and the CEO’s review (all of which form part of this
strategic report) respectively set out the Company’s views on
future developments.
Brexit
During the course of 2020, the UK went through the transition
period and came to a trade deal for good with the EU. The Board
continues to believe that the UK’s decision to leave the EU does
not present a threat to the Group’s business model, the viability
statement, or its ability to continue producing accounts on a going
concern basis.
Performance and related data
Pages 3, 13 and 18 to 22, which contain performance and related
data, form a part of this strategic report.
Key performance indicators (KPIs) and
alternative performance measures
Year ended 31 December 2020
Year ended 31 December 2019
0.55%
0.48%
Alternative Performance Measures as defined under ESMA
guidelines have been adopted and these are described in detail on
page 128.
Share price and NAV
Investment trusts can trade at a discount (where the share price
is lower than the combined value (NAV) of the underlying assets),
or at a premium (where the share price trades at a higher level
than the underlying NAV). Investment trust investors need to
understand these concepts as well as examine the underlying
portfolio and the way in which it is managed, to decide whether or
not an investment trust share represents “good value”.
Law Debenture’s responsibilities
as an institutional shareholder
The Company recognises that in delivering its objective to produce
long-term capital growth and a steadily increasing income, it must
The KPIs used to measure the progress and performance of the
ensure that its investment strategy is delivered with due emphasis
Group are:
•
•
•
NAV total return per share (combining the capital and income
returns of the Group) and how this compares, over various time
intervals, with relevant indices;
the discount/premium in share price to NAV; and
on the need to ensure that investee companies are acting in
accordance with accepted standards of corporate governance. The
Company has therefore adopted the following policy.
Law Debenture will normally support incumbent management
and vote in favour of resolutions proposed by the boards of
companies in which it has a shareholding, but will vote against
the cost of running the portfolio as a percentage of its value.
management or withhold a vote where appropriate.
Since the objective of the investment trust is measurable solely in
financial terms, the Board does not consider that it is appropriate
to adopt non-financial KPIs. The financial measures adopted as
KPIs are part of our financial reporting obligations.
The Board determines the Company’s investment strategy but
does not issue express instructions to the investment manager on
transactions in particular shares. Where Law Debenture believes
that incumbent management is failing in its duties, Law Debenture
(or on its behalf, the Company’s investment manager) may attempt
to enter into dialogue with the company concerned in an attempt
to alter the management’s position.
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Company overview continued
Where this is not possible, or where incumbent management
number is reached by taking the return, including profit attribution
declines to alter its behaviour, Law Debenture will consider voting
on ordinary activities before interest and taxation of £12.2m from
against resolutions proposed by the management. Further, if it
note 7 on page 105 and adding back the depreciation charge for
is deemed necessary or desirable, the Company would consider
property plant and equipment of £1.2m and the amortisation of
acting collectively with other institutional investors to try and
intangible assets of £59,000 shown in note 3 on page 103.
achieve a particular goal.
The calculation of the IPS valuation and methodology used
Janus Henderson, on Law Debenture’s behalf, monitors companies
to derive it are included in the annual report at note 14. In
in which Law Debenture is invested, and from time to time may
determining a calculated basis for the fair valuation of the IPS
discuss matters of corporate responsibility with such companies.
business, the Board has taken appropriate external professional
The Janus Henderson corporate governance unit will notify Law
advice. The multiple applied in valuing the IPS business is based
Debenture’s investment managers, who in turn may notify Law
on comparable companies sourced from market data, with
Debenture, should matters arise that might lead the Company
appropriate adjustments to reflect the difference between the
to consider intervening, abstaining or voting against a particular
comparable companies and IPS business in respect of size,
proposal. During the year, the Company abstained or voted
liquidity, margin and growth. A range of multiples is then provided
against one or more resolutions at 30 shareholder meetings of
by the professional valuation firm, from which the Board selects
investee companies.
The Company will not hold shares in companies whose ethical
and environmental practices are in its view likely to damage the
performance of the business to the detriment of its shareholders.
The Company does not believe that conflicts arise between
its duties as an institutional shareholder and the IPS work
undertaken by the IPS business. The investment manager has
complete discretion as to portfolio decisions and as a matter of
policy, has no access to ‘non-public’ knowledge about any of the
activities of the IPS business.
Janus Henderson remains a signatory to the 2012 UK Stewardship
Code and intends to sign up to the 2020 UK Stewardship Code.
As the Company’s investment manager, Janus Henderson makes
the day-to-day investment decisions and is therefore best placed
an appropriate multiple to apply. The multiple selected for the
current year is 9.4x, which represents a discount of almost 30% on
the mean multiple across the comparable businesses, to reflect the
relative size of the IPS business and the fact that it is unlisted.
The comparable companies used, and their recent performance,
is presented in the table below:
Company
Law Deb IPS
Intertrust N.V.
Sanne Group plc
Revenue
LTM 1
(£m)
LTM EV/
EBITDA
31 Dec
2020
Revenue
CAGR
2016-2020
EBITDA
margin
LTM
35
518
170
9.4x
11.2x
7%
44%
12%
33%
19.6x
28%
29%
to engage with portfolio companies and discharge stewardship
SEI Investments Company
1,286
15.1x
3%
28%
obligations. The Board is of the view that becoming a signatory to
the Stewardship Code would unnecessarily duplicate the work of
the investment manager and therefore continues to rely on Janus
Henderson in this regard.
Valuation of our IPS business
Accounting standards require us to consolidate the income, costs
1 LTM refers to the trailing 12 months ‘results’ which are publicly available.
Source: Capital IQ.
Valuation guidelines require that the fair value of the IPS business
be established on a stand-alone basis. Therefore, the valuation
does not reflect the value of Group tax relief applied from the
investment trust to the IPS business, which reduced the tax charge
by £1,549,000 (2019: £1,120,000). It is hoped that our initiatives to
and taxation of our IPS business into the Group income statement
inject growth into the IPS business will result in a corresponding
on page 92. The assets and liabilities of the business are also
increase in valuation over time. As stated above, management is
consolidated into the Group column of the statement of financial
aiming to achieve mid to high single digit growth in 2020. The
position on page 93. A segmental analysis is provided in note 7
valuation of the business has increased by £44.9m/49.6% since the
(page 105) to these accounts which shows a detailed breakdown
first valuation of the business as at 31 December 2015.
of the split between the investment portfolio, IPS business and
Group charges.
In order to assist investors, the Company restated its historical
NAV in 2015 to include the fair value of the IPS business for the last
Consolidating the value of the IPS business in this way failed
ten years. This information is provided in the annual report within
to recognise the value created for the shareholder by the IPS
the 10-year record on page 38.
business. To address this, from December 2015, the NAV we
have published for the Group has included a fair value for the
standalone IPS business.
Long-term borrowing
The current fair value of the IPS business is calculated based upon
historical earnings before interest, taxation, depreciation and
amortisation (EBITDA) for 2020, with an appropriate multiple
applied. The EBITDA for the IPS business for 2020 was £13.3m. This
The fair value of long-term borrowings held by the Group is
disclosed in note 21 to the accounts. The methodology of fair
valuing all long-term borrowings is to benchmark the Group debt
against A rated UK corporate bond yields.
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Calculation of net asset value (NAV) per share
Calculation of NAV per share
The table below shows how the NAV at fair value is calculated. The value of assets already included within the NAV per the Group statement
of financial position that relate to the IPS business are removed (£23.5m) and substituted with the calculation of the fair value and surplus net
assets of the business (£136m). An adjustment of £52.2m is then made to show the Group’s debt at fair value, rather than the book cost that
is included in the NAV per the Group statement of financial position. This calculation shows a NAV fair value for the Group as at 31 December
2020 of £787.2m or 666.15 pence per share:
Net asset value (NAV) per Group statement of financial position
Fair valuation of IPS: EBITDA at a multiple of 9.4x (2019: 9.2x)
Surplus net assets
Fair value of IPS business
Removal of assets already included in NAV per financial statements
Fair value uplift for IPS business
Debt fair value adjustment
NAV at fair value
31 December 2020
31 December 2019
£000 Pence per share
£000 Pence per share
726,994
125,349
10,605
135,954
(23,547)
112,407
(52,182)
787,219
615.19
106.07
8.97
115.05
(19.93)
95.12
(44.16)
666.15
775,272
105,938
16,367
122,305
(30,445)
91,860
(36,992)
830,139
655.76
89.61
13.84
103.45
(25.75)
77.70
(31.29)
702.17
Photo credit: Harry Evans
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Long-term performance record
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Net assets (£m)1
412.6
390.9
451.9
569.1
574.2
557.3
662.3
748.3
669.4
775.3
727.0
Revenue return (pence)
13.26
15.52
15.14
Capital return (pence)
58.22
(19.07)
50.24
16.27
97.18
16.95
18.10
15.96
21.66
21.26
30.68
21.56
3.87
(17.47)
89.30
67.10
(71.85)
79.27
(19.06)
Total (pence)
71.48
(3.55)
65.38
113.45
20.82
0.63
105.26
88.76
(50.59)
109.95
2.50
Revenue return (pence)
Investment trust
Independent professional
services
7.07
6.19
8.27
7.25
8.47
6.67
9.31
10.08
6.96
6.87
11.01
7.09
10.88
7.68
11.61
9.93*
13.23
7.87
22.18
8.54
Group charges2
—
—
—
—
—
—
(2.60)
0.12
0.16
(0.04)
13.26
15.52
15.14
16.27
16.95
18.10
18.56
21.54
21.10
30.72
13.26
15.52
15.14
16.27
16.95
18.10
15.96
21.66
21.26
30.68
12.12
9.35
0.09
21.56
21.56
Dividends (pence)
12.70
13.50
14.25
15.00
15.70
16.20
16.70
17.30
18.90
26.00
27.50
Share price (pence)1
356.6
333.5
425.0
529.0
530.0
498.0
530.0
629.0
540.0
650.0
690.0
(Discount)/premium (%)1
NAV at fair value (pence)1
(10.5)
398.5
(13.4)
385.1
0.1
(2.4)
(2.3)
(5.1)
(11.4)
(6.0)
424.7
541.8
542.3
524.5
598.5
669.5
(12.1)
614.1
(7.4)
3.6
702.2
666.2
Market capitalisation (£m)1
418.6
393.8
501.9
625.0
627.1
589.3
627.2
744.5
639.3
769.8
817.3
1 At 31 December calculated in accordance with AIC methodology, based on performance data held by Law Debenture including fair value of IPS business and long-term borrowings.
2 For details see note 7 to the accounts.
*This includes 2.72 pence per share of exceptional items including the sale of an unlisted investment, excluding which, normalised earnings per share were 7.21 pence per share.
Note: The 10 year record has been restated (2010-2014) to reflect the fair value of the IPS business and the long-term borrowings.
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Risk management
Principal risks and internal controls
– overview
2021. This will further enhance the governance and oversight
of the management of the principal risks (detailed below). An
update on this refresh will be made in next year’s annual report.
The Group’s risk management and internal control framework
is embedded in our operations and subject to continuous
enhancements. Board-level oversight is provided by our Audit and
Presentation of Group risks
Risk Committee. Our Executive Risk Committee has responsibility
The key risks for Law Debenture are referred to as principal risks;
for the oversight of the management of operational risk within
they broadly relate to market, credit, liquidity and operational
the Group. The framework enables the Board to identify, evaluate
risks and are split into three categories:
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and manage principal risks to support our delivery of long-term
priorities. The Board recognises that there are certain risks which
are inherent in our business structure, such as market risk with
respect to its investment portfolio and the controls to mitigate
against such risks are paramount to the delivery of our objectives.
On an annual basis, the Audit and Risk Committee consider the
risks to the Group and the adequacy of the controls in place to
appropriately manage those risks. Consideration is also given to
emerging risks to ensure that the risk management framework
is updated to protect the business. Where there is insufficient
information on the potential risk, ongoing monitoring is put
in place.
During 2020, the General Counsel oversaw the roll out of a policy
review for key Group-wide risks and procedures. This included an
updated approach to the management of incident reporting up
to the Executive Risk Committee level and to the Audit and Risk
Committee, if necessary. This was supported by an enhanced all
1. Group Risks.
2. Investment Portfolio Risks.
3. IPS Risks.
The principal risks for the Group are presented below together
with their corresponding controls and mitigating actions. In
line with FRC guidance issued in October 2020, Law Debenture
have identified where Covid-19 has materially impacted or has
the potential to materially impact existing risks and has acted
accordingly. This is outlined in the Covid-19 section on page 61.
Governance
staff risk and compliance training programme to build on the
The Group’s risk management and internal control framework is
existing learning and development programmes. In November
managed through its governance structure shown in the diagram
2020, the Chairman of the Audit and Risk Committee and the
below. The IPS business risks are managed through business
Executive Risk Committee both agreed a plan to refresh the
unit risk committees and management meetings. The outputs
Group’s risk management and internal audit framework during
of these are fed through to the Executive Risk Committee.
Executive Risk Committee
SOP
Pensions
(including
Pegasus)
Corporate
Trust
Corporate
services
Safecall
Central
Functions
– Business Unit Risk Committees (where appropriate)
– Business Unit Management Meetings
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Risk management continued
The key focus of the Executive Risk Committee is:
•
•
•
•
The review of high or out of appetite risks.
Internal controls and mitigating actions.
Emerging risks.
Escalations from Business Unit Risk Committees or Business Unit Management Meetings.
Executive Risk Committee
Section
IPS Business Risks
Group Risks
Investment Portfolio Risks
– High risk and out of appetite
IPS risks
– High risk and out of appetite
business risks
– Outstanding/ongoing mitigating
Agenda
actions/controls
– Testing schedule/results
– Emerging risks
– Incidents/breaches
– Escalations from business unit
risk committees (e.g. Pensions)
Attendees
– Business Heads
– Chief Financial Officer
– Chief Operating Officer
– Chief Technology Officer
– General Counsel
– Heads of Overseas Offices
– Head of Internal Audit
– MLRO
– High risk and out of appetite
– High risk and out of appetite
group risks
portfolio risks
– Outstanding/ongoing mitigating
– Outstanding/ongoing mitigating
actions/controls
actions/controls
– Testing schedule/results
– Testing schedule/results
– Emerging risks
– Incidents/breaches
– Third party suppliers
– Emerging risks
– Incidents/breaches
– Chief Financial Officer
– Chief Operating Officer
– Chief Financial Officer
– Chief Technology Officer
– Chief Operating Officer
– General Counsel
– General Counsel
– Heads of Overseas Offices
– Head of Internal Audit
– Head of Internal Audit
– MLRO
Terms of Reference
The Executive Risk Committee escalates risk events to the Audit
The governance framework is continually under review to ensure
and Risk Committee, as appropriate. The General Counsel also
that it is fit for purpose with annual reviews of the terms of
speaks directly to the Chair of the Audit and Risk Committee on
reference and oversight across the Group by the Chairs of the
any matters arising as required.
Audit and Risk Committee and the Executive Risk Committee.
LDC plc Board
Audit and Risk Committee
Executive Risk Committee
Business Unit Risk Committees/Business Unit Management Meetings
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Risk management continued
Group risk summary and internal controls
PRINCIPAL GROUP RISKS
MITIGATING ACTIVITIES
1. Financial Reporting
The risk of inaccurate publication
To mitigate these risks, the management and production of all financial reporting is
of financial statements, annual
overseen by appropriately skilled and trained colleagues within the Group’s Finance team,
reports, NAV, factsheets and other
with review from the CFO.
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The valuation is calculated based on the reconciled data using a specialist third party for
the pricing and the NAV is reported to the London Stock Exchange and Morningstar daily.
Investment Data is reconciled to third party data held by the Custodian/Depositary and
Janus Henderson as the investment manager.
To mitigate these risks, the Board has various measures in place:
•
The investment limits and restrictions it has placed on the investment portfolio only
permit investments in primarily equities and fixed interest securities quoted on major
financial markets. Excess cash is held in money market funds with immediate access.
There are also daily dealing limits in place for Janus Henderson and liquidity within the
investment portfolio (and the Group as a whole) is closely monitored by the Finance
team.
•
•
•
A refreshed liquidity policy has been reviewed by the CFO and a liquidity stress test is
included in the Group Board papers on a quarterly basis. This furthers the Finance team’s
and CFO’s monitoring of the Group’s liquidity position.
The Group is not permitted to retain more than 15% of its income from shares and
securities each year. This is actively monitored by the Finance team and is also a key
consideration as part of the discussions on the final annual dividend and interim
dividends.
The Company has a stated objective to provide shareholders with a steadily increasing
flow of income and this is considered when making any dividend decision. Distribution
is reviewed by the Board quarterly.
market data that can adversely
impact financial results, investor
decisions, reputation or which
may lead to regulatory fines
or sanctions.
2. Liquidity and Dividend
The risk that the Group cannot meet
its cash and collateral obligations
at a reasonable cost. This is for both
expected and unexpected cash
flows, without adversely affecting
daily operations or financial
conditions. Liquidity risk can arise
from cash flow mismatches, market
constraints from the inability to
convert assets to cash, the inability
to raise cash in the markets or
contingent liquidity events. It
could also arise from the operating
business of the IPS if, for example, its
debtor position were to materially
deteriorate or where, in extremis, the
Group is required to use its capital to
mitigate a material post issue event
within IPS where we could be paid
years after the event.
Liquidity issues could result in the
Group being required to sell stock
that Janus Henderson has invested
in at a sub-optimal time/price, not
be able to maintain or increase the
dividend (a publicly stated aim) or
require additional borrowing.
3. Foreign Currency
The risk arising from movements
Cash positions are monitored daily by the Finance team. Where appropriate, funds are
in currency rates applicable to the
converted to our reporting currency.
investment portfolio’s investment
in equities and the net assets of
the Group’s overseas subsidiaries
denominated in currencies other
than sterling.
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Risk management continued
PRINCIPAL GROUP RISKS
MITIGATING ACTIVITIES
4. Interest Rates
The risk arising from movements in
To mitigate interest rate risks, the Board reviews the mix of fixed and floating rate
interest rates on borrowing, deposits
exposures and ensures that gearing levels are appropriate to the current and anticipated
and short-term investments.
market environment. Cash positions are monitored daily by the finance team. Where
possible, funds are moved into liquid funds with higher returns.
5. Legal and Regulatory
The risk that the Group’s business
To mitigate these risks, the following controls are in place:
will be negatively affected if we
do not comply with the various
laws and regulations the Group is
required to, or if we are not able to
anticipate and keep pace with rapid
changes in laws or regulations, or
if laws or regulations decrease the
need for our services or increase
our costs.
•
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6. Third Party Suppliers
A schedule of all Group legal, regulatory, compliance and reporting obligations
to ensure all reporting and other requirements across the Group are tracked and
complied with.
A GDPR review is also underway following the growth of the IPS business and
changes to ways of working.
A review of regulatory permissions across the Group is ongoing.
Horizon scanning for any changes in legislation and regulations is also
being progressed.
Law Debenture relies on third
To mitigate these risks, all third-party suppliers are subject to robust due diligence,
parties to perform key functions of
review and sign off from the Executive Risk Committee.
its business operations enabling its
provision of services to clients. The
Board recognises that such third
parties may act in ways that could
harm our business either through
failure to deliver services or negative
public opinion.
7. Financial Crime and Fraud
Across all jurisdictions the Group's
To mitigate these risks, the following controls are in place:
activities are subject to various
financial crime laws and regulations,
including sanctions and export
control, anti-bribery, anti-corruption,
anti-money-laundering and counter-
terrorist financing. Changes to
these laws could have a material
•
•
Enhanced incident reporting procedures for the Group with timelines for notifications
and clear reporting lines.
Appropriate whistleblowing procedures and a clearly defined reporting structure
with colleagues having the option to raise any concerns with their line manager, the
General Counsel and HR Manager or if those avenues are not appropriate, to the
Chairman of the Audit and Risk Committee, who is the employee representative of
adverse impact on our operations or
the Board.
financial results.
•
There are robust policies in place covering fraud prevention, anti-bribery and
corruption which are supported by employee training.
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Risk management continued
Investment portfolio risk summary and internal controls
INVESTMENT PORTFOLIO RISKS MITIGATING ACTIVITIES
1. Investment Performance
and Market Risk
The risk of the investment portfolio
Even though this is an accepted risk given the nature of the investment portfolio, the
failing to deliver and/or failing
Board is responsible for ensuring that there are adequate controls to help manage the
to consider and react to market
inherent risk. As such, the Board has put in place various controls, details of which can
conditions to deliver the publicly
be found on page 33 of the strategic report on Our Strategy – implementation.
stated strategic objectives to:
Furthermore, the NAV is published daily and subject to review by the CFO, which
•
•
•
Achieve long-term capital growth.
enables ongoing monitoring of the investment portfolio’s performance.
Deliver a steadily increasing income.
The Board further notes that the IPS business also provides an additional layer of
Achieve a rate of return greater than
the FTSE Actuaries All-Share Index.
diversification for the portfolio, meaning that the investment portfolio and the Group as
a whole are less exposed to any potential dividend cuts from the equity holdings.
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Investment performance and market
risk is the largest risk which the
investment portfolio is exposed to,
however, this is an accepted risk
and one which the Board actively
takes as it believes long-term equity
investment is an attractive proposition.
2. Gearing
This risk could arise where the
To mitigate this risk, all borrowings require the prior approval of the Board and gearing
Company has borrowed money for
levels are kept under close review by the Board. The Board applies a ceiling on effective
investment purposes. If the value
gearing of 50%. While effective gearing will be employed in a typical range of 10% net
of portfolio investments falls, any
cash to 20% gearing, the Board retains the ability to reduce equity exposure so that net
borrowings will magnify the extent
cash is above 10% if deemed appropriate. Gearing is reviewed and reported on to the
of this loss.
AIC monthly by the Finance team.
3. Credit Risk (Securities
Lending)
Securities lending within the
To mitigate this risk, the Board has limited the amount of stock lending within the
investment portfolio could lead to
investment portfolio to up to 30% of NAV only. In addition, the Board is indemnified
the risk of loss if any of our borrowers’
by HSBC as the sub-custodian under the securities lending arrangements. HSBC are
default on their obligations to
the business.
obliged to indemnify the arrangements such that the security collateral value shall
always be greater than the value of securities on loan and a minimum margin is applied
onto the security collateral: 102.5% for government bonds and 105% for equities.
4. Legal and Regulatory
This could arise from a failure to
All legal, regulatory, compliance and reporting obligations across the Group, including
comply with legal and regulatory
that of the investment portfolio, are tracked and complied with. Horizon scanning
requirements and filings resulting in
for any changes in legislation and regulations is also being progressed. An annual
fines, suspension of listing or a loss
“Key Information Document” (KID) is compiled and published by the business as are
of investment trust status. Changes
European PRIIP and MIFID templates (EPT/EMT). There is also oversight and monitoring
to legislation could have a negative
from the Depositary.
impact on Law Debenture’s ability to
meet its objectives. e.g. Government
intervention on publicly listed firms’
dividend policy.
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Risk management continued
INVESTMENT PORTFOLIO RISKS MITIGATING ACTIVITIES
5. Technology, Systems and
Internal Controls
The risk of loss resulting from
To mitigate these risks, Janus Henderson are subject to an annual ISAE3402 audit and AAF
inadequate or failed technology,
review to ensure there are no material deficiencies. The Executive Risk Committee also
information and manual processes and
receive a monthly operational report with respect to Janus Henderson’s risks and controls.
systems of Janus Henderson, including
business continuity/disaster recovery
incidents and wider control issues such
as fraud or conflicts of interest.
IPS business risk summary and internal controls
IPS BUSINESS RISKS
MITIGATING ACTIVITIES
1. Financial
This is the risk that the IPS business
To mitigate these risks, monthly management information is provided to the CEO and
is not able to scale up and deliver
Business Heads to monitor and assess business performance. Through 2020 there
on its growth plans to generate
has been significant investment in people and technology to support the long-term
anticipated revenue growth,
growth of the business and these needs continue to be regularly assessed.
profitability, cost savings and react
to any changes in market conditions.
2. People
This is key as the IPS business is based
To mitigate our key people risks, a new COO and Human Resources Manager
on successfully attracting and retaining
have been recruited and are developing plans for continued and better employee
talented employees representing
engagement and wellbeing. With this, the Board recognises that there is an
diverse backgrounds, experiences and
opportunity to further develop and enhance its strategic plans to support employees
skill sets. The loss of key colleagues, no
in a collaborative culture.
succession planning or failure to ensure
effective transfer of knowledge and
smooth transition could damage or
result in the loss of client relationships
and could result in such colleagues
competing against the business.
3. Technology and Systems
Maintaining the brand and reputation, as well as a diverse and inclusive work environment
that enables all our employees to thrive, is important to our ability to recruit and retain
employees.
The risk of cyberattacks and security
To mitigate such risks, the office move is allowing for enhanced technology resources
vulnerabilities is ever present, and
and capability through investment and increased use of cloud services allowing
failures here could lead to reduced
sustainable, scalable technology growth in 2021 and beyond. Incident reporting
revenue, increased costs, liability
procedures are in place.
claims, or harm to our reputation or
competitive position.
4. Legal and Regulatory
The IPS business will be negatively
The General Counsel helps safeguard the IPS business and ensures that it complies
affected if it is not able to anticipate
with changes in law or regulations.
and keep pace with rapid changes
in laws or regulations, or if laws or
regulations decrease the need for the
services provided or increase costs.
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Risk management continued
IPS BUSINESS RISKS
MITIGATING ACTIVITIES
5. Credit
This is the risk of loss to our receivables
Credit risk is actively monitored by the Finance team; the mitigations in place ensure
should any of IPS’ clients or other
that debtors across the business are monitored and moreover, the credit status of
counterparties default on their
clients is considered as part of the client onboarding process.
payment obligations either through
no payment or late payment for
services we have delivered or the risk of
exposure or centration to one client or
business sector.
6. Strategic
This is the risk that the current business
To mitigate this risk, there has been significant investment in people and technology
model becomes obsolete due to a lack
to support the IPS business strategy and this will continue to be monitored along with
of technical or commercial innovation,
the introduction of the Group’s 3-year strategic plan which forms part of the Group’s
market disruption, product obsolesce
or regulatory or legislative change.
longer term viability statement. There are also regular IPS board meetings where
the strategy of the business is discussed with the Business Heads and the Executive
Leadership team.
Looking forward: our risk agenda 2021
The focus for 2021 and beyond will be to further enhance the internal controls and mitigating actions in place to reduce risk and to test
the procedures added in 2020 to further strengthen their effectiveness. A number of initiatives have been planned for 2021; the below
lists some examples.
Risk Management and Internal Audit plans
As noted above, a plan to refresh the risk management and internal audit framework has been agreed by the Chairman of the
Audit and Risk Committee and the Executive Risk Committee and will begin in earnest in 2021. This will support the management
of the principal risks (and other business specific risks) highlighted above and will enhance the governance and oversight of
their management.
AML/KYC
A review of the AML/KYC framework is due to be undertaken in 2021. This will focus specifically on the management of the principal
risks (and other business specific risks) noted earlier and to enhance the governance and oversight of their management. This also
includes the review of the Sixth Money Laundering Directive which came into force in December 2020. As such an important area for
the Group, the Board is keen that this is something that is continually under review and enhanced where possible. As a result of the
leadership changes in 2020, we will look to appoint a new Group MLRO in 2021.
Third Party Supplier Due Diligence
An enhanced third-party risk/due diligence policy will be put in place with the aim of documenting third party risk and supplier due
diligence requirements. This will include third party fraud prevention, anti-bribery and corruption and will enhance the due diligence
process and sign-off the Executive Risk Committee already undertakes.
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Viability statement
Viability statement
Our business operations
The UK Corporate Governance Code (the Code) requires the
Board to issue a ‘viability statement’ declaring whether the
Directors believe the Company can operate and meet its
liabilities, taking into account its current position and principal
risks. The overriding aim of the Code is to ensure that the
Board focuses on the longer term and is actively involved in
the oversight of the risk management framework and internal
control environment.
The Board is required to assess the Company’s viability over
a period greater than twelve months. Our stated financial
objective is to deliver long-term capital growth in real terms
and to steadily increase income to our shareholders. As
such, the Board considers that the Company is a long-term
investment vehicle and, for the purposes of this statement, has
decided that three years is an appropriate period over which to
consider its viability and we have aligned our business planning
process and remuneration at a senior level accordingly.
In assessing the viability of the Company over the review
period, the Board has considered a number of key factors,
including:
•
•
•
•
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The Company retains ownership of all assets held by the
Custodian under the terms of formal agreements with the
Custodian and Depositary.
The Group’s cash is all held with banks approved by the Board.
The Group’s cash balance, including money market funds, at
31 December 2020 totalled £41.8m (2019: £71.2m).
There is long-term borrowing in place comprising of two
debentures; 6.125% debenture maturing in 2034 and a 3.77%
debenture maturing in 2045. These are subject to formal
agreements, including financial covenants which the Company
complied with in full during the year.
During January 2021, the Company put in place a £50m
unsecured overdraft facility with HSBC.
The Board reviews the Trust performance including revenue
forecasts, along with other key metrics such as gearing at each
Board meeting and receives regular financial reporting.
In addition to this, the Board carried out a robust assessment of
our principal and emerging risks and uncertainties which could
threaten the Company’s business model, as detailed on pages
32 to 34 of the annual report, along with the controls in place to
Our business model and strategy
mitigate these risks.
•
The Board seeks to ensure that the Company delivers
long-term performance. The closed ended nature of
the investment trust means that the Company does not
face liquidity issues when shareholders wish to sell their
shares, avoiding any untimely requirements to sell down
the portfolio.
•
As an investment trust, we benefit from the unique structure
of a predominantly UK-based equity portfolio with a
diversified revenue stream arising from the IPS business. As
shown both historically and during the recent economic crisis
brought about by Covid-19, the IPS revenue streams provide
protection to the long-term viability of the Company.
•
•
The majority of the portfolio is investments in UK listed
securities which are traded on major stock exchanges.
The Company has an ongoing charge of 0.55%, which is lower
than other comparable trusts within our Sector.
During 2020 there has been significant global economic
volatility bought about by the Covid-19 global pandemic, which
has impacted the UK Equity Investment Trust Sector, as many
listed companies took steps to suspend or cut their dividend
payments. A detailed overview of the response by the Board
and Company to Covid-19 can be found on page 63. In light of
the current conditions, the Board has considered the Company’s
current financial position and the potential impact of its principal
risks and uncertainties, and has a reasonable expectation that
the Company will be able to continue in operation and meet its
liabilities as they fall due for a period of three years from the date
of this annual report.
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Section 172(1) statement
Section 172(1) statement
Shareholders
The Board is responsible for the overall
Engagement with our institutional and
strategy and overseeing the management
retail shareholders is an ongoing process.
of the Group, setting investment strategy
The Board actively communicates with its
and ensuring that the Company is acting
shareholders as detailed in the Directors’
in accordance with its legal and regulatory
report on page 54. In addition, meetings
The Covid-19 pandemic
The Covid-19 pandemic has had
a significant impact on all of our
stakeholders since it emerged towards
the end of the previous financial year.
obligations. Throughout the global
are held with shareholders throughout
This impact and how we have responded
pandemic, the Board has been flexible
the year, which are attended by Executive
to protect our business and manage the
and continued to meet as normal, hosting
Directors along with representatives from
expectations of our five key categories
meetings virtually. During the course of
the investment manager. During 2020,
of stakeholders is set out in full on pages
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2020, the Board met seventeen times.
in-person meetings with investors were
In discharging its responsibilities, the
Board takes into account the Group’s
purpose, value and culture and acts
in good faith to promote the success
of the Company and to maintain high
standards of business conduct. The Board
is responsible for overseeing stakeholder
engagement and ensuring that we fulfil
our obligations to all key stakeholders
impacted by the business. We believe
that this is pivotal to our ability to drive
value creation over the longer-term. Those
impacted by the Company’s activities
largely replaced with virtual meetings due
to the spread of Covid-19 and resultant
intermittent lock-downs across the UK.
Key topics of discussion during the year
included prospects and valuation of
the IPS business, performance against
benchmark, prospects for the UK economy
and the investment style and stock
selection. We listened to our shareholders
and introduced the publication of a daily
NAV, along with a full portfolio listing on
the website every month and moved to a
quarterly dividend.
can be grouped into the following five
In February 2021, the Board obtained
main categories: shareholders, clients,
shareholders’ approval to amend the
employees, principal service providers, the
Company’s Articles of Association to
community and the environment.
permit virtual general meetings, including
annual general meetings. The Board does
not at this time intend to hold virtual only
meetings in the future or on an ongoing
basis. The Board hopes that this will
provide comfort to our shareholders that,
where circumstances arise which make
it difficult to attend in person, they will
still be able to attend, vote and speak
at meetings.
When making decisions the Board
considers the interests of shareholders
as a whole and the need to act fairly as
between members of the Company.
61 and 62.
KEY:
Shareholders
Clients
Employees
Service providers
Community and
the environment
Clients
Ensuring that we provide an excellent
service to our clients is crucial to the
delivery of the Board’s strategy for the IPS
business. This year, we have continued to
focus on acting as a trusted advisor to our
clients across each of our offerings and
have sought to introduce innovative ways
to better meet the needs of our clients,
through the channels we offer our services.
In light of the Covid-19 pandemic, we
have sought new digital ways to engage
with our clients, such as virtual client
events and increased our presence on
social media.
The Board also receives presentations from
each IPS Business Head on a rolling basis
throughout the year, including details of
client relationship management initiatives
and proposed new service offerings to
expand the client base. With the rise
of remote working, the Board was also
particularly concerned to have oversight of
the Group’s approach to managing cyber
security and engaged directly with the
Chief Technology Officer to understand
the controls in place.
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Section 172(1) statement continued
Stakeholders
Shareholders
Clients
Employees
Ke y Priorities
Deliver against our stated objective to provide long-term capital growth in real terms
and a steadily increasing income.
Seek to provide an excellent service to all our clients.
To provide an inclusive and diverse place to work which promotes engagement in
the delivery of our long-term strategy.
Service providers
To provide a clear framework and open communication channel between us and
our key service providers to facilitate the best possible investment outcomes for
our shareholders.
Ensure that prompt and accurate payments are made for goods and services across
all service providers.
Community and the environment
To act responsibly as an institutional shareholder and to minimise the impact of the
Company’s operations on the community and the environment.
Community and
environment
We disclose our carbon emissions
consumption as part of the Directors’
report on page 54. Those emissions relate
solely to the maintenance of our various
offices around the world. The Group
supports certain charities from time to
time, particularly where employees have
personally organised events, or take part in
sponsored activities, that benefit charities
related to them or their families. During
the course of 2020, the Group has given
employees the opportunity to donate the
monetary value of any unused holiday
to a charity of their choice. The Group is
unaware of any human rights issues that
might arise from its activities, mindful
though of the need to act responsibly as
an institutional shareholder (as described
on page 35).
Employees
Service providers
In 2019, the Board appointed Mark
The Company has regard for all service
Bridgeman as its designated Non-
providers. The investment manager has
Executive Director to gather the views
been identified as the principal service
of Law Debenture’s workforce. He
provider with which the Board engages
commissioned an employee engagement
on an on-going basis. The investment
survey across the entire employee base,
manager provides an update on
the results of which have been considered
management and performance of the
by the Board and appropriate action
portfolio at scheduled Board meetings.
During the pandemic, the increased use
of online communication and out of office
working for the investment manager
and other key service providers have, to
date, also proved to be robust. Aware of
the cashflow challenges that many of our
suppliers may have been facing, the Group
sought to ensure we met our obligations
on a timely basis.
plans have been put in place to address
concerns, where required. Employees are
also invited to attend and ask questions at
an all staff “townhall” presentation from
the Executives and investment manager
following the result of the half year and
annual results. Towards the end of the
year, the Company moved head office
to provide employees with a modern,
comfortable working environment
that complies with all relevant safety
regulations. Employee wellbeing is
ensured through delivery of a range of
benefits designed to promote good health
including health insurance and access to
medical reviews. Independent confidential
helpline facilities are provided to enable
employees to deal with issues of concern
to them, whether work or domestic. As
a result of these measures, and senior
management’s open style, staff turnover is
generally low.
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Section 172(1) statement
Key strategic decisions impacting stakeholders in 2020
During the year, as the Board made decisions to deliver against our strategy, whilst considering the different interests of our stakeholder
groups and the impact of key decisions upon them. The following provides an overview of some of the key decisions taken and how
integral our stakeholders are in the Board’s decision-making process.
1) Providing Certainty over the Final Dividend
At a time when many companies were cancelling or postponing payment of their dividends, the Board ensured that the Company
paid the final dividend for 2019 as approved by the shareholders. Aware that many of our shareholders are dependent on income
arising from their investments, the Board delivered on our commitment to move to a quarterly dividend and also provided an early
indication that the recommendation would be to at least maintain the dividend at the level of 2019, thus providing some certainty
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for our investors during turbulent times.
2) Upholding our Investment Strategy
The pandemic placed a strain on global equities valuations and many companies’ balance sheets. The Board took the decision to
utilise the strength of the Company’s balance sheet, to fund dividends out of reserves if necessary, and allowed our investment
managers to remain committed to pursue longer term value rather than immediate income receipts. Throughout the year, the
Board has been instrumental in supporting the investment managers’ position, as a key service provider, to be a net investor in a
depressed market, taking the decision to allow the investment managers to increase leverage, with a view to maximising the return
for our shareholders.
During 2019, the portfolio was realigned to the AIC UK Equities sector and during the course of 2020, the Board took the decision to
remove the previous cap on UK investments, giving our investment managers increased flexibility in their selection of holdings.
3) Investing in the Executive Leadership Team
With the IPS business showing sustained growth over the last three years, the Board recognised that it was time to invest in
expanding the Executive Leadership team, to provide greater support to our employees as they seek to provide an excellent service
to our clients. Having had an Executive Leadership team compromising of the CEO and the CFO, the Board took the decision to
appoint a COO and a General Counsel to ensure that there was sufficient bandwidth within the team to continue to drive growth
within the IPS business, which is beneficial to providing a secure source of income for our shareholders.
4) Continued Investment in Delivering Long-Term IPS Revenue Growth
Throughout the course of 2020, the Board has supported the Executive Leadership team in continuing investment to ensure that
the growth in IPS revenue was sustainable. There has been ongoing investment into our digital offering with the launch of an
ecommerce platform for our Safecall whistleblowing business, amongst other things. The Group has also continued to invest in our
people, where supported by revenue growth or a strong business case, incremental hires have been made and we have invested in a
training programme for all our staff.
5) Diversification and Strengthening of Revenue Streams
At the end of 2020, we announced the strategic acquisition of the Konexo UK company secretarial business. Having scrutinized the
proposed acquisition, the Board believes that this deal significantly strengthens both the corporate services revenue stream, adds to
diversification of revenues across the Group and delivers growth in earnings per share for our shareholders.
6) Implementing a New Risk Management Framework
The long-term success of every business is dependent on the appropriate management of risk. During the course of the year, the
Board oversaw the implementation of a new risk management framework, of which further details can be found on pages 39 to 45
of this report, and hired a new Head of Internal Audit to modernise the assurance programme across the Group. This provides a
clear framework of risk management for our employees and service providers to work within and strengthens our ability to provide
sustainable growth for our shareholders.
KEY
Shareholders
Clients
Employees
Service providers
Community and the environment
Law Debenture Corporate Services Limited
Company Secretary
25 February 2021
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C O R P O R A T E G O V E R N A N C E
The Board
Robert Hingley
Chairman of the Board, Independent
Denis Jackson
Chief Executive Officer
Trish Houston
Chief Operating Officer
Non-Executive Director
N R
Appointed to the Board on 1 October 2017
and appointed Chairman in April 2018.
A corporate financier with over 30 years’
experience, Robert was a partner at
Ondra LLP until October 2017. From 2010
until 2015, he was a managing director
and later senior advisor, at Lazard. He
was previously director-general of The
Takeover Panel from 2007 on secondment
from Lexicon Partners, where he was
vice chairman. Prior to joining Lexicon
Partners in 2005, he was co-head of the
Global Financial Institutions Group and
head of German investment banking at
Citigroup Global Capital Markets, which
acquired the investment banking business
of Schroders in 2000. He joined Schroders
in 1985 after having qualified as a solicitor
with Clifford Chance in 1984.
Robert is currently the chairman of
Phoenix Spree Deutschland Limited
and of Euroclear UK and Ireland Limited
and chairman of Governors at North
London Collegiate School. He is also a
Appointed to the Board on 1 January
Appointed to the Board on 2 September
2018.
2020.
Denis joined Law Debenture in July 2017
Trish brings almost twenty years of
as Chief Commercial Officer. He was
experience in leadership roles in the
previously at Capita plc as director of
financial services industry. Most recently,
new business enterprise, having been
she was a member of the senior
a director at Throgmorton UK Limited
management team at JDX Consulting
(which Capita acquired). Prior to that,
Limited, where she had executive
he was regional general manager for
responsibility for HR, IT and facilities and
Europe and the United States at Tibra
oversaw the merger of three businesses.
Trading Europe Limited, a FCA regulated
Previously, Trish was a partner at
proprietary trading company, which he
Ruffer LLP where she held several roles
joined from Citigroup (formerly Salomon
including global head of HR and global
Brothers). He spent almost 20 years there
head of Risk. She was also a member
in a variety of roles including in Treasury
of the investment management team
(both in New York and London), as head
in the UK, Australia and Switzerland at
of the finance desk in Hong Kong, head
PricewaterhouseCoopers LLP.
of fixed income prime brokerage in New
York and ultimately, head of EMEA prime
brokerage sales.
Key skills and experience contributed to
the Company include operational growth,
risk management, strategy and human
Key skills and experience contributed to
resource management.
the Company include strategy, commerce,
corporate finance and governance and
operational and transactional leadership
non-executive director of Marathon Asset
in regional organisations.
Management, a member of the Takeover
Panel and a trustee of Park Theatre.
Key skills and experience contributed to
the Company include strategy, corporate
finance, corporate governance and
mergers and acquisitions.
Key
R Remuneration Committee
N Nomination Committee
A Audit and Risk Committee
Committee Chairman
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The Board continued
Robert Laing
Senior Independent Director
Mark Bridgeman
Independent Non-Executive
Tim Bond
Independent Non-Executive
Claire Finn
Independent Non-Executive
R A N
Director
A R N
Director
A R N
Director
A R N
Appointed to the Board on
Appointed to the Board on
Appointed to the Board on
Appointed to the Board on
2 April 2012.
15 March 2013.
14 April 2015.
2 September 2019.
Robert qualified as a solicitor
Mark’s background is in fund
Tim is currently a partner of
Claire’s most recent executive
in England in 1977 and in
management. He spent 19
Odey Asset Management
experience was at Blackrock,
Scotland in 1985 and worked
years with Schroders plc as an
LLP having joined in 2010 as
where she spent almost 13 years,
for Slaughter and May from
analyst and then fund manager,
its head of macroeconomic
becoming managing director
1975 to 1985, when he joined
rising to become head of global
strategy and currently manages
and head of UK DC, Unit Linked
Maclay Murray & Spens LLP.
sector research. Previous roles
Odey’s Odyssey Fund. Before
and Platforms, responsible for
He is currently a non-executive
at Schroders included head
joining Odey, Tim spent 12
strategy, innovation and growth.
director of The Independent
of Pan European research,
years at Barclays Capital as
Previous roles at Blackrock
Investment Trust plc and
head of global sector research
managing director and head
included director/managing
a non-executive advisor to
and emerging markets fund
of global asset allocation. Tim
director, head of strategic
Rossie House Investment
manager. He was also non-
was editor and principal author
alliances, director of sales and
Management LLP.
executive director of JP Morgan
of Barclays Capital’s Equity Gilt
relationship management,
Key skills and experience
contributed to the Company
include corporate trust, law and
corporate governance.
Brazil Investment Trust plc until
Study and chief advisor to the
and vice president of product
November 2020. During his
bank’s RADAR Fund. Prior to
development. She previously
career, he enjoyed successful
Barclays, Tim worked at Moore
held roles in product
long-term secondments in
Capital and spent 10 years as a
management at Henderson
Australia and the United
strategist and trader for Tokai
Global Investors (2001 – 2005)
States. Mark left Schroders
Bank Europe, a proprietary
and relationship management
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in 2009 to manage a rural
trading boutique.
Key skills and experience
contributed to the Company
include fund management and
investment, strategy, corporate
finance, ESG matters and
distribution to investors.
estate and farming business
in Northumberland and is also
on the board of two charities.
Mark is currently a director of
Country Land and Business
Association Limited, Howick
Trustees Limited and Otter
Arable Limited.
Key skills and experience
contributed to the Company
include fund management
and investment, strategy and
corporate finance.
at Bank of Tokyo-Mitsubishi,
London (1999 – 2001). Claire
is currently a non-executive
director of Artemis Fund
Managers Limited, Sparrows
Capital Limited and St. Joseph’s
Catholic Primary School.
Key skills and experience
contributed to the Company
include fund product
development, distribution
to retail and institutional
investors, strategic innovation
and growth in the UK asset
management, pensions and
insurance industries and
corporate governance.
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Executive Leadership team
Denis Jackson Chief Executive Officer
Appointed to the Board on 1 January 2018.
Denis Jackson’s key strengths are in commerce, corporate finance and strategy with significant
experience in operational and transactional leadership in regional organisations. He continues
to lead the effective implementation of strategy across the Group and has been instrumental in
increasing the profits of the IPS business, enhancing shareholder value and increasing income.
He also successfully led the Group’s operations during the Covid-19 pandemic and in the
acquisition of Konexo UK’s company secretarial business.
Trish Houston Chief Operating Officer
Appointed to the Board on 2 September 2020.
Trish Houston brings almost twenty years of experience of leadership roles in financial services.
Her key strengths are in operational growth, risk management, strategy and human resource
management. Trish has already been core to the improvement of the business’ operations
having spearheaded the implementation of the new HR System for the Group, taken lead on the
relocation of Law Debenture’s London Head Office to 100 Bishopsgate and been responsible for
the operational aspects of the recent acquisition of Konexo UK’s company secretarial business.
Hester Scotton Chief Financial Officer
Hester Scotton qualified at Ernst & Young LLP and has over ten years of experience in a variety of
finance and internal audit roles at organisations such as Marks & Spencer PLC, Bupa and Legal
and General. Since joining Law Debenture, Hester has been instrumental in the modernisation
of the finance function and provided significant support in the acquisition of the company
secretarial business from Konexo UK.
Kelly Stobbs General Counsel
Kelly Stobbs brings more than ten years’ legal experience in private practice as an M&A lawyer
at Herbert Smith Freehills LLP, in-house as a corporate and finance senior executive at HSBC at a
Group level and latterly as a legal and tax director at Deloitte LLP. As part of her responsibilities
as General Counsel, Kelly heads up risk and compliance and the Group company secretarial
function. Kelly led on the legal aspects of the recent acquisition of Konexo UK’s company
secretarial business and has implemented a risk, controls and governance refresh across
the Group.
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Directors’ report
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The Directors present their annual report and the audited financial statements for the year ended 31 December 2020. The Company operates
as an investment trust in accordance with sections 1158-1159 of the Corporation Tax Act 2010 as amended (s1158-1159) and has been approved
as such by HM Revenue & Customs. In the opinion of the Directors, the Company has conducted its affairs so as to enable it to continue to
be an approved investment trust under s1158-1159. The Company, which is not a close company, is registered as an investment company as
defined in section 833 of the Companies Act 2006 and operates as such. The Directors consider that the Group operates as a going concern.
The corporate governance report forms a part of the Directors’ report.
Essential contracts
any new conflicts are to be declared is also considered at each
Board meeting. Each Director has declared all matters that might
In the view of the Board, the only contract that is essential to the
give rise to a potential conflict of interest and these have been
business of the Group is the investment management agreement
considered and (where necessary) approved by the Board.
with Janus Henderson, details of which are set out in the strategic
report.
Financial instruments
The Company’s financial instruments, financial risk management
objectives and policies arising from its financial instruments and
its exposure to risk are disclosed in note 20 to the accounts.
Regulatory compliance
The Company is subject to continuing obligations applicable to
premium listed companies, overseen by the FCA.
Information required to be disclosed in accordance with Listing
Rule 9.8.4 is included as referenced below:
Revenue, dividends and reserves
The Group revenue return attributable to shareholders for the
year ended 31 December 2020 was 21.63p per share. The Directors
Rule
9.8.4 (1)
9.8.4 (7)
Detail
Where
Interest capitalised
Note 6, page 104
Allotment of equity securities Note 18, page 101
recommend a final dividend of 8.00p per share, which, together
9.8.4 (2-6) (8-14) Not applicable
N/A
with the interim dividend of 6.50p paid in each of July and
October 2020 and January 2021, will produce a total of 27.5p per
share (2019: 26.0p). The final dividend will be paid on 15 April 2021
to holders on the register on the record date as at 12 March 2021.
After deduction of the interim and final dividends of £32,572,000
(2019: £30,788,000), consolidated revenue reserves decreased by
Under the Alternative Investment Fund Managers Directive (AIFMD)
the Company is required to appoint an “Alternative Investment Fund
Manager” (AIFM), which must be appropriately regulated by the
FCA. The Company has elected to be its own AIFM.
£12,358,000 (2019: increase of £4,854,000).
The AIFM is required to provide portfolio management, risk
Directors
The Directors at the date of this report are listed on pages 50 and
51. All Directors held office throughout the year other than Trish
Houston, who was appointed on 2 September 2020 and Katie
Thorpe, who resigned from the Board on 11 September 2020.
All Directors are required to stand for re-election every year (or
election at the next AGM following appointment). The list of
candidates, which the Board supports, is set out in the notice of
annual general meeting. The particular skills and experience that
each Director contributes to the long-term sustainable success of
the Company and the Group may be found on pages 50 and 51.
As mentioned in the Chairman’s statement, Robert Laing will not
be standing for re-election as a Director of the Company at the
upcoming AGM.
Directors’ conflicts of interests
management, administration, accounting and company secretarial
services to the Company. All of these functions, barring portfolio
management which continues to be delegated to Janus Henderson,
are undertaken by the Company. The Company has appointed
NatWest Trustee and Depositary Services Limited, as depositary
under Article 36 of the AIFMD. A fee is payable for this service, being
0.0225% per annum of the calculated monthly NAV. As part of its
duties, the depositary is responsible for custody of the Company’s
portfolio assets, and has appointed HSBC Bank plc (which has been
the Company’s custodian for many years) as sub-custodian.
AIFMs are obliged to publish certain information for investors and
prospective investors and that information may be found either in this
annual report or on the Company’s website at www.lawdebenture.
com/investment-trust/corporate-governance/the-aifmd.
The AIFMD requires us to report on ‘leverage’. This is slightly different
from gearing, leverage being any method of borrowing that
increases the Company’s exposure, including the borrowing of cash
and the use of derivatives. It is expressed as a ratio between the
Company’s exposure and its NAV and must be calculated on a ‘gross’
The Directors have a statutory duty to avoid conflicts of interest.
and a ‘commitment’ method. Under the gross method, exposure
The Board has in place appropriate procedures to deal with
represents the sum of the Company’s positions after the deduction
conflicts and potential conflicts, including an annual review, and
of sterling cash balances, without taking into account any hedging
can confirm those procedures are operating effectively. Whether
and netting arrangements. Under the commitment method,
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Directors’ report continued
exposure is calculated without the deduction of sterling cash
issued share capital. Share information as required by section 992
balances and after certain hedging and netting positions are offset
of the Companies Act 2006 appears at pages 33 and 114.
against each other. At 31 December 2020, the maximum amount of
leverage under the gross and commitment methods was 1.50 and
actual amounts were 1.06 and 1.15 respectively.
Shareholder relations
ESG considerations
The Company encourages communication between management
and shareholders on matters of mutual interest. All shareholders,
with the exception of employees, on the register are sent a copy
The Group gives ongoing consideration to ESG factors in both the
of the annual report and the Company also provides this service
management of the investment portfolio and the IPS business.
to shareholders in nominee companies where the nominee
This is reflected in the Chairman’s statement on pages 4 and 5, the
has made appropriate arrangements. Shareholders wishing
CEO’s review pages 10 to 16 and the investment managers’ review
to receive reports and other communications electronically
pages 18 to 22.
In addition to this, we also consider our greenhouse gas emissions.
The Group’s carbon emissions arise from its consumption of energy
in maintaining its offices. Using conversion factors published by
the UK Department for Business, Energy and Industrial Strategy,
emissions for the year to 31 December 2020 were 179.65 tonnes of
CO2e (2019: 228.63 tonnes of CO2e). This equates to 0.0059 tonnes
of CO2e per £000 of IPS revenue (2019: 0.0062 tonnes of CO2e).
None of the entities within the Group (subsidiaries or parent
company) meet the streamlined energy and carbon reporting
(SECR) regulations at an individual level.
Repurchase of shares
At the 2020 AGM the Directors were given power to buy back
17,753,225 ordinary shares or if less the number of shares equal
to 14.99% of the Company’s issued share capital at that date.
During the year, the Company did not repurchase any of its
shares for cancellation. This authority will expire at the 2021 AGM.
The Company intends to seek shareholder approval to renew its
powers to repurchase shares for cancellation up to 14.99% of the
Company’s issued share capital if circumstances are appropriate,
at the 2021 AGM.
Donations
The Company made no political or charitable donations during
the year (2019: £nil) to organisations.
may do so by writing to the Company. In addition to periodic
regulatory reports published via the London Stock Exchange, the
Company publishes a monthly factsheet on its website about the
investment portfolio performance, the quality of which has been
recently enhanced.
Investment managers – interests held
Laura Foll held 6,750 shares in the Company as at 31 December
2020 (2019: 1,750). James Henderson did not have a beneficial
interest as at 31 December 2020 (2019: nil), although persons
connected to him had an interest of 134,000 shares (2019:
100,000 shares). In addition, a charity with which James
Henderson has non-beneficial connections owns 117,000 shares
(2019: 100,000 shares).
The Company holds no shares in the Janus Henderson Group
or their products. It has been notified that funds managed by
members of the Janus Henderson Group held 262,519 shares in
the Company as at 31 December 2020 (2019: 154,026 shares).
Employee participation/issue of shares
Employees are informed of the financial aspects of the Group’s
performance through periodic management meetings. Mindful
of the Company’s paperless initiative, copies of the annual
report are made available to employees on request and are
available on the Company’s website. The Company operates a
SAYE scheme in which all UK full-time employees are eligible to
participate after completing a minimum service requirement.
Share capital and significant shareholdings
Options outstanding under the SAYE scheme as at 31 December
2020 were:
The Company’s share capital is made up of ordinary shares with a
nominal value of 5p each. The voting rights of the shares on a poll are
one vote for every share held. There are no restrictions on the transfer
Date of grant
of the Company’s ordinary shares or voting rights and no shares
which carry specific rights with regard to the control of the Company.
There are no other classes of share capital and none of the Company’s
issued shares are held in treasury. As at 31 December 2020, there were
19 August 2015
23 August 2016
15 August 2017
118,454,562 ordinary shares in issue with 118,454,562 voting rights. Note
15 August 2018
18 includes details of share capital changes in the year.
As at 25 February 2021, there were no shareholders that had
notified the Company of a beneficial interest in 3% or more of the
14 August 2019
26 August 2020
Number
of option
holders
2
7
12
22
16
23
Shares
under
option
2,926
9,981
18,153
Exercise
price
512.50p
495.75p
594.75p
44,905
606.00p
27,761
592.00p
56,759
539.00p
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Directors’ report continued
Directors’ responsibilities
responsible for ensuring that the annual report and accounts,
taken as a whole are fair, balanced and understandable and
The Directors are responsible for preparing the annual report
provides the information necessary for shareholders to assess the
and the financial statements in accordance with international
Company’s performance, business model and strategy.
accounting standards in conformity with the requirements of the
Companies Act 2006 and other applicable laws and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the financial statements in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006. 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 Group and of the profit or loss for the Group for
that period. The Directors are also required to prepare financial
statements in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as
it applies in the European Union.
In preparing these financial statements, the Directors are
required to:
•
•
•
select suitable accounting policies and then apply
them consistently;
make judgements and accounting estimates that are
reasonable and prudent;
state whether they have been prepared in accordance
with international accounting standards in conformity
with the requirements of the Companies Act 2006,
subject to any material departures disclosed and
explained in the financial statements;
•
state whether they have been prepared in accordance
with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union, subject to any
Website publication
The Directors are responsible for ensuring the annual report
and the financial statements are made available on a website.
Financial statements are published on the Group’s website in
accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements, which
may vary from legislation in other jurisdictions. The maintenance
and integrity of the Group’s website is the responsibility of the
Directors. The Directors’ responsibility also extends to the ongoing
integrity of the financial statements contained therein.
Directors’ responsibility statement
pursuant to DTR4
The Directors confirm to the best of their knowledge that:
•
the financial statements have been prepared in accordance
with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Group;
and
•
the annual report includes a fair review of the development
and performance of the business and the financial position of
the Group, together with a description of the principal risks and
uncertainties that they face.
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Auditors
material departures disclosed and explained in the
In the case of each Director in office at the date the Directors’
financial statements;
report is approved:
•
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group will continue in business; and
•
prepare a Directors’ report, a strategic report and
•
•
so far as the Director is aware, there is no relevant audit
information of which the Group and Company’s auditors are
unaware; and
they have taken all the steps that they ought to have taken
Directors’ remuneration report which comply with the
as a Director in order to make themselves aware of any
requirements of the Companies Act 2006.
relevant audit information and to establish that the Group and
The Directors are responsible for keeping adequate accounting
Company’s auditors are aware of that information.
records that are sufficient to show and explain the Group’s
A resolution to re-appoint BDO LLP as auditors to the Company
transactions and disclose with reasonable accuracy at any time
will be proposed at the upcoming annual general meeting.
the financial position of the Group and enable them to ensure
that the financial statements comply with the Companies Act
2006 and, as regards the financial statements, article 4 of the
IAS Regulation.
By order of the Board
They are also responsible for safeguarding the assets of the
Group and hence for taking reasonable steps for the prevention
Law Debenture Corporate Services Limited
Company Secretary
and detection of fraud and other irregularities. The Directors are
25 February 2021
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Corporate governance report
Corporate governance
Procedures are in place to enable independent professional
advice to be taken by individual Directors at the Company’s
The Directors are required to report on how the Company has
expense. Appropriate insurance cover is in place in respect of legal
applied the main and supporting principles in the UK Corporate
action against the Directors.
Governance Code (the Code), and to confirm that it has complied
with the Code’s provisions or, where this has not been the case,
to provide an explanation. This report relates to the Code as
published in July 2018, a copy of which may be obtained by visiting
www.frc.org.uk. The FRC has recognised that the Board structure
of investment companies such as Law Debenture, might affect the
relevance of some of the provisions of the Code. The Company has
therefore considered the provisions of the Code that are applicable
to it as a FTSE 250 listed investment company. This corporate
governance statement forms part of the Directors’ report and should
be read in conjunction with the strategic report on pages 4 to 49.
The Board has concluded that, as demonstrated by the disclosures
made throughout the Directors’ report, the Company has complied
with all of the requirements applicable to it under the Code.
The Board – role, modus operandi
and appraisal
The names and biographies of the Directors at the date of this
report are on pages 50 and 51 of the annual report. Trish Houston
was appointed as an Executive Director on 2 September 2020 and
Katie Thorpe stepped down as CFO on 11 September 2020.
The Board is responsible for the overall strategy and management
of the Group, setting investment strategy and ensuring that the
The Board meets regularly throughout the year. The attendance
records of the Directors (both at meetings of the Board and, where
they are a member, meetings of Board Committees) are set out in
the table below. There was also a strategy meeting in September
2020, attended by all of the Directors, the Company’s corporate
broker and certain senior executives.
Board Remuneration Audit and Risk Nomination
Number of
meetings in
the year
Meetings
attended by:
D. Jackson
T. Houston*
R. Hingley
R. Laing
M. Bridgeman
T. Bond
C. Finn
17
17
8
16
16
16
14
16
6
—
—
6
6
5
5
6
8
—
—
—
8
8
8
8
5
—
—
5
5
5
4
5
* Trish Houston was appointed on 2 September 2020 and was present at all Board
meetings on or after that date.
Company is operating in compliance with statutory and legal
Whilst not members of the Committees, Denis Jackson and
obligations. There is a formal schedule of matters specifically
Trish Houston attend meetings at the invitation of the relevant
reserved for Board decision, published on the Company’s website
Committee. Similarly Robert Hingley’s attendance at Audit and
(https://www.lawdebenture.com/investment-trust/shareholder-
Risk Committee meetings is by invitation only.
information/corporate-governance). Matters connected with
strategy and management, structure and capital, financial
reporting and control, the investment trust portfolio, contracts,
shareholder communication, Board membership and other
appointments, remuneration and corporate governance are
reserved for the Board.
During the second half of the year, the Directors participated in
an external Board evaluation process, conducted by independent,
external consultant, Value Alpha. Value Alpha provides no other
services to the Company. Each Director was interviewed on
a one-to-one, confidential basis, as were a number of senior
stakeholders from the business. A cycle of quarterly Board and
In discharging its responsibilities, the Board takes account of the
Committee meetings was observed. The evaluation focused on
Group’s purpose, value and culture, aiming to promote enhanced
Board composition, including Directors’ skills, experience and
value for shareholders in both capital and income terms. The
behaviours, Board processes and decision-making mechanisms.
Board sets a cultural tone that encourages openness, diversity and
The findings of the evaluation were presented to and discussed
attention to the needs and views of shareholders and those who
with the Board in late November 2020.
transact with us through our IPS business.
The evaluation concluded that the Board is performing strongly
The Chairman takes personal responsibility for leadership of
and represents a healthy platform for the next stage of the
the Board and ensures that Directors receive accurate, timely
Board’s and Company’s evolution. Behaviours are appropriate,
and clear information. He reviews channels for the provision of
commitment is high and Board meetings are effective.
information with the company secretary at least annually.
The following actionable recommendations were made:
The Board operates as a collective decision-making forum.
Individual Directors are required to scrutinise reports produced
by the Executive Leadership team and are encouraged to debate
issues in an open and constructive manner. If one or more Directors
cannot support a consensus decision, a vote will be taken and the
•
•
increase investment by the Company in Director development;
robust succession planning should be put in place for both
the Executive and Non-Executive Directors, with the aim
of ensuring an appropriate mix of skills in the medium and
views of a dissenting Director recorded in the minutes.
longer-term;
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•
•
•
consider potential ways to enhance Board engagement with
dates of appointment and have remained independent, having no
investors;
previous connection with the Company or any of its subsidiaries.
Board reports and management information should be
Denis Jackson and Trish Houston, as Executive Directors, are not
streamlined to reflect the changing nature of the business; and
independent.
work should be undertaken to clarify and embed the vision,
Robert Laing will remain the SID until the date of his retirement
values, culture and behaviours required to shape the business
and is available to shareholders who have concerns that cannot
as it grows.
be addressed through the Chairman, CEO or COO.
Actions against each of these recommendations is currently
underway. The Board will continue to conduct an externally
facilitated performance evaluation every three years and internal
evaluations in the intervening years.
Based on the outcome of the evaluation and on the basis that they
continued to make valuable contributions and exercise judgement
and express opinions in an independent manner, the Nomination
Committee has recommended the re-election and election of
Directors, as set out in the Notice of AGM on pages 132 and 133.
Directors’ remuneration
Details of the Directors’ remuneration appear in the remuneration
report on pages 67 to 82.
Board Committees
The Board has established Nomination, Audit and Risk and
Remuneration Committees, to each of which it has delegated
All Directors are submitted for annual re-election, subject to
certain responsibilities. Each Committee has terms of reference,
continued satisfactory performance, which is assessed as previously
which are reviewed annually and published on the Company’s
described. As mentioned in the Chairman’s statement, Robert
website (www.lawdebenture.com/investment-trust/corporate-
Laing will not be standing for re-election at the upcoming AGM.
governance). Membership of the Committees is reviewed annually.
There is no maximum number of terms that a Director may serve,
other than the Chairman whose tenure is explained on page 58.
The Company has established a diversity policy, described in the
Nomination Committee’s report.
The Board – independence
Taking account of the position of the Company as an investment
trust, the Board is deliberately kept small and it believes this is in
the best interests of shareholders. The Board is satisfied that its
composition and size is sufficient to ensure that the requirements
of the business can be met.
The membership of the Board and its Committees are fully
compliant with Code stipulations.
At least half of the Board, excluding the Chairman, must be
independent Non-Executive Directors (NEDs). The Board can
The Board does not operate a management engagement
Committee; the duties of such a Committee are undertaken
confirm that as at the date of this report, excluding the Chairman,
directly by the Board.
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four of the six other Directors are independent NEDs. In assessing
Directors’ independence, the Board takes into account their
tenure on the Board, whether or not a Director is independent of
management and any material business or other relationship that
could affect or interfere with the exercise of objective judgement
by the Director, or his/her ability to act in the best interests of the
Group. As well as being satisfied that each Director dedicates
sufficient time to Law Debenture, the Board is satisfied that none
of the Directors are ‘overboarded’ (having five or more listed
company roles). The contribution made by each Director to the
Company’s and Group’s long-term success, is described on pages
50 and 51 of the annual report.
The Chairman, Robert Hingley, was independent at appointment
and continued to be independent throughout the period, in the
view of the Board, having no current or previous connections with
the Company or any of its subsidiaries.
The Board is satisfied that Robert Hingley’s other commitments
do not interfere with the discharge of his responsibilities to
Law Debenture, and that he makes sufficient time available to
discharge his duties as Chairman.
A summary of each Committee is set out below.
Nomination Committee
Members
R. Hingley (Chairman)
T. Bond
M. Bridgeman
C. Finn
R. Laing
Role
To keep under review the structure, size and composition of the
Board and its Committees, to make recommendations to the
Board about adjustments that are deemed necessary and to
ensure effective succession planning in accordance with legal and
corporate governance requirements.
Key duties
•
identification and nomination of suitable candidates to fill
Similarly, the Board is satisfied that Robert Laing, Mark Bridgeman,
Tim Bond and Claire Finn were independent at their respective
vacancies, with particular regard for the need to develop a
diverse pipeline of Board members and senior executives, for
Board approval;
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Corporate governance report continued
•
•
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succession planning (in particular of the Chairman and CEO);
making recommendations for the election and re-election
of Directors; and
ensuring that the Board and its Committees are constituted
to comply so far as practicable with the Code.
The Nomination Committee ensures that the Board has in
place arrangements for orderly and transparent appointments
to the Board. There are job descriptions in place for NEDs’
roles, and the Board has written terms and conditions for such
appointments, which will be made available for inspection
upon request to the Company Secretary, until the conclusion
of the 2021 AGM. Particular care is taken to ensure that NEDs
have sufficient time to commit to the duties expected of
them and as necessary, diversity issues are considered. No
new NED is appointed without first being interviewed by each
existing NED and comfort is obtained in relation to their other
commitments to ensure they have sufficient time to devote to
the role.
All new Directors undergo an induction process, involving
presentations by the CEO, COO, CFO, General Counsel, each
of the Business Heads and meetings with the investment
manager.
For the appointment of Trish Houston, the Committee
identified potential candidates through a rigorous selection
process against an agreed set of criteria.
The Committee is also responsible for considering the policy
on the tenure of the Chairman of the Board. Robert Hingley
was appointed to the Board in October 2017 and, in line with
the policy on tenure and the recommendations of the Code, he
will stand down after nine years although this period may be
extended for a limited time to facilitate an effective handover.
Accountability and audit, fair balanced
and understandable reporting and
going concern
The statement of Directors’ responsibilities in relation to the
financial statements appears on page 55. The independent
auditors’ report appears on pages 84 to 90. The Directors confirm
that the Group and Company are a going concern as evidenced by
the financial statements, which demonstrate a healthy position,
taking into account all known and future anticipated liabilities,
and the Group’s ability to meet those liabilities. The performance
metrics of the Group remain strong. The trust has outperformed
its benchmark by 87.3% over the last ten years and the IPS
business has shown positive growth following the introduction
of a new management team. There are no material uncertainties
that call into question the Company’s ability to continue to be a
going concern for at least 12 months from the date of approval
of the financial statements. The Directors therefore consider it
appropriate to adopt a going concern basis in preparing the
financial statements.
The Audit and Risk Committee has concluded and the Board
concurs, that the financial statements present a fair, balanced
and understandable assessment of the financial position and
prospects of the Company and the Group. The financial statements
are reviewed by the Audit and Risk Committee, approved by the
Board and signed by the Chairman and CEO. In the opinion of
the Board, the annual report, taken as a whole is fair, balanced
and understandable and provides the necessary information for
shareholders to assess the Company’s and Group’s position and
performance, business model and strategy.
Internal controls
The framework of internal controls ensures that the Company
The Board diversity policy states that, while the Board remains
has sound risk management systems to enable it to operate
small, it will endeavour to meet the requirements of the
within the desired risk appetite. The following paragraphs provide
Davies review in 2021. At the date of this report the Company
a description of the main features of the internal control and
is compliant with the recommendations under the Hampton-
Alexander review.
The Committee’s approach to performance evaluation and the
gender balance of those in senior management is set out at
pages 56 and 57, respectively.
Audit and Risk and Remuneration
Committees
Following best practice guidelines published by the Financial
Reporting Council (FRC), the Audit and Risk and Remuneration
Committee reports are published as separate sections of the
annual report and can be found at pages 63 to 65 and 67 to 82,
respectively.
risk management systems in relation to the financial reporting
process, which fulfil the obligations of the FRC Guidance on Risk
Management, Internal Control and Related Financial and Business
Reporting and the FCA’s Disclosure Guidance and Transparency
Rules. This section should be read in conjunction with the
strategic report, which sets out how the Directors manage or
mitigate the principal risks relating to the Company and Group’s
business model.
The Board monitors the effectiveness of internal controls on
a continuous basis to ensure that internal control and risk
mitigation is incorporated into the day to day management
of the organisation, both directly through main Board general
reviews and by the more specific work carried out by the Audit
and Risk Committee. The annual internal audit programme and
system of compliance checks have both been developed using
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a risk-based methodology and an evaluation of the existing
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systematic reporting to the Board of matters relating
process controls. Other mechanisms in place to monitor risk
to litigation, insurance, pensions, taxation, accounting,
include:
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Board review of the Group’s matrix of key risks and controls
counterparty risk and cash management as well as legal,
compliance and company secretarial issues;
managed by the General Counsel, reporting to an Executive
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review of internal audit reports by the appropriate
Risk Committee;
professional services company, Board and the Audit and Risk
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an internal audit function, which involves business
Committee;
departments and business wide processes (including overseas
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review of the internal controls of those services, such as
offices) being subject to audit on a regular basis;
investment management, which have been delegated to
testing by the General Counsel of the FCA regulated business
systems and controls;
third parties. This review was conducted during the initial
contractual negotiations and on a regular basis, including
annual discussions with the senior management and
testing by the General Counsel of the Company’s compliance
compliance staff of Janus Henderson;
with its AIFMD obligations;
•
monitoring by the Board of the investment management
review of reports by the depositary and the sub-custodian;
process, including the establishment and maintenance of
periodic reports to the Board by the General Counsel about
legal and regulatory changes, and the steps that the Board
must take to comply; and
investment guidelines, receiving a report from the investment
manager on a quarterly basis, the review of all transactions
with the investment manager and regular reconciliations of
the records of the Group with those of the depositary and
review of the reports produced by the external auditors on
sub-custodian; and
•
•
•
•
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their annual audit work.
The Board considers that the above measures constitute
•
receipt of frequent and detailed reports about the
performance of the IPS business, including the overseas
continuing application of the FRC risk guidance and form an
subsidiaries.
important management tool in the monitoring and control of
the Group’s operational risks.
An important element of the overall controls remains a
continuous review of the quality and effectiveness of internal
financial controls of the Group. During the year, the Board
requires that the Group maintains proper accounting records,
so that it can rely on the financial information it receives to
make appropriate business decisions and also that the Group’s
The systems of internal financial control are designed to provide
reasonable assurance against material misstatement or loss.
By means of the procedures set out above, the Directors have
established a robust process for identifying, evaluating and
monitoring the effectiveness of the internal control systems for
the period. This process has been in place throughout 2020 and
will be reviewed by the Board on a regular basis.
assets are safeguarded. This includes having data that allows the
Arrangements are in place by which staff of the Group may, in
Board to consider country and currency exposure and potential
confidence, raise concerns under the Public Interest Disclosure
impairment of assets (both financial and non-financial).
Act 1998 about possible improprieties in matters of financial
In November 2020 the Chairman of the Audit and Risk
Committee and the Executive Risk Committee agreed a plan
to refresh the Group’s risk management and internal audit
framework. This will enhance the governance and oversight
of the management of the Company’s principal risks. A risk
and controls consultant was added during the year. A risk and
compliance learning programme was rolled out to all staff on
key topics and policies, including whistleblowing, anti-bribery
and corruption and financial crime. A new management and
incident reporting framework was also introduced.
Key elements of the systems of internal control continue to be:
reporting or other matters. Whistleblowing capability has been
enhanced as part of the changes made to the whistleblowing
policy, with several senior colleagues undergoing specialist
investigative training to manage reports as they come in. Any
concerns which are raised will be subject to proportionate
investigation, with appropriate follow up action as per the policy.
There is a clearly defined reporting structure with colleagues
having the option to raise any concerns with their line manager,
the General Counsel and HR Manager or if those avenues are not
appropriate, to the Chairman of the Audit and Risk Committee,
who is the employee representative of the Board.
•
•
regular qualitative self-assessment of the effectiveness of the
individual controls maintained in the overall internal financial
control framework;
Information about share capital
The information that the Company is required to disclose about its
share capital can be found in the Directors’ report (significant holders)
preparation by management of a comprehensive and detailed
and AGM notice (total voting rights).
budget, involving annual Board approval and comparison at
Board level of actual results with budgets and forecasts at
every meeting;
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Annual general meeting (AGM)
Details of the 2021 AGM are set out at pages 132 and 133.
The Board recognises the value of the AGM as an opportunity to
communicate with shareholders and encourage their participation.
Separate resolutions are put to the AGM on each substantially
separate issue. The number of votes lodged for and against
each resolution and the number of votes withheld is published
immediately after the AGM to the London Stock Exchange and on
the Company’s website. In line with governance recommendations,
if 20% or more of the votes cast are against any Board resolution, the
Company would announce what action it intended to take to consult
shareholders’ views and provide a summary of the outcome. The
Board confirms that none of the resolutions put to shareholders at the
AGM in 2020 received votes against above 20% of the votes cast. The
notice of the AGM and related papers are sent to shareholders at least
20 business days before the meeting. Where requested by nominee
holders, annual reports and related documentation are circulated to
beneficial owners and the Company is happy for beneficial owners
to attend the AGM and (where appropriate arrangements have been
made with the nominee) to vote their shares in person.
On 11 February 2021, at an Extraordinary General Meeting,
amendments to the Company’s Articles of Association allowing
shareholders to attend, speak and vote electronically at the 2021
AGM and subsequent AGMs and general meetings, were approved.
Accordingly, this year’s AGM will be held electronically to provide
shareholders with the opportunity to participate by virtual means,
given the ongoing Covid-19 related restrictions at the time of the
approval of the Notice of AGM.
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Covid-19 Response
Our response to Covid-19: governance in action
During the global pandemic, there have been three main bodies responsible for managing and monitoring the impact of Covid-19 on
the business, that have worked together to protect the interests of our key stakeholders.
Response teams
The Board
The Board has overseen the business’ Covid-19 response and it has
worked with the Executive Leadership team to consider multiple
scenarios associated with the pandemic, reviewed and considered
potential response options and set expectations for the Group’s
approach with consideration for each of the key stakeholders. The
Board has asked the Executive Leadership team to keep them
updated on the performance of both the investment portfolio
and the IPS business, along with reviewing the implementation
During the initial phase of ‘lockdown’, the Board met on a
fortnightly basis to monitor the key performance indicators such
as the performance of the portfolio and to provide guidance to
the Executive Leadership team and the investment managers on
the response to Covid-19. This enabled the investment managers
to continue to pursue their strategy and take advantage of market
conditions, being net investors in the depressed market. During
this time our gearing peaked at 19%. The Executive Leadership
team also sought to ensure that all suppliers received timely
payments to minimise impact on their cashflows.
of the government’s guidelines to manage the pandemic. During
the extended UK ‘lockdown’ in the Spring, after the World Health
Our people
Organization declared the virus a pandemic, the Board had
additional meetings by phone or online at least fortnightly to
monitor the Group’s ongoing response.
Executive Leadership team
As the Executive Leadership team was responsible for the
day-to-day operation of the business, they have overseen the
business’ Covid-19 response under the guidance of, and as
directed by, the Board. From reviewing the impact on revenue to
ensuring the smooth transition to remote working, the Executive
The safety and well-being of our people is of the utmost
importance to the Board and the Executive Leadership team.
We have sought to engage our staff to ensure that their needs
were met. We ensured that there were regular communications
both through ‘all staff’ calls, team meetings and email
communications. We have made our offices available to those
who have been unable to work from home, which has been
adjusted to comply with the Government’s health and safety
guidelines relating to Covid-19.
Leadership team continues to take operational decisions in line
To assess whether we were meeting the needs of our staff,
with the Board’s strategic approach, ensuring that the Board can
a staff survey was commissioned, for which the results were
remain focused on the long-term strategic issues and decisions
overwhelmingly positive. The successful transition to remote
associated with the pandemic. During the height of the pandemic
working and the nature of the IPS business has meant that there
as the Group transitioned into new ways of working, the Executive
has been no requirement for the Group to furlough workers
Leadership team worked closely with the IPS Business Heads.
or to make any demands on Government schemes to support
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Executive Risk Committee
The Executive Risk Committee has representation from finance,
operations, IT and legal, risk and compliance and has been
responsible for providing oversight of the actions required to
minimise the impact of the pandemic on business operations. It
has worked with the Executive Leadership team to highlight any
key risks emerging and ensured that appropriate measures have
been implemented to safeguard the well-being of our people.
During the height of the pandemic, the Executive Risk Committee
met weekly.
Operations
On 23 March 2020, the Group transitioned to full remote
working. Having monitored the situation closely the Group’s
Chief Technology Officer, with support from the Executive Risk
Committee, took steps to ensure that the business would be ready
to make such a transition. This, coupled with the investment in
modernising our IT infrastructure over the preceding eighteen
months, meant that there was a limited but manageable impact
on business operations.
business operations.
Balance sheet resilience
The Board and the Executive Leadership team have actively
monitored the cash position across the Group throughout the
year, mindful of our commitment to pay quarterly dividends to
shareholders. As of year-end, the Group held cash of £41.8m. In
addition to this, the Company has secured an overdraft facility of
£50m to protect against any significant fall of cash inflows. This
has been declared as a post balance sheet event.
Revenue
In the early stages of the Covid-19 crisis, the potential impact of
the crisis led to the reforecast of income for 2020, which has been
monitored throughout the year. As reflected in our CEO’s review
on pages 10 to 16, the IPS business has proved resilient, with
revenues growing 8.5% during 2020.
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As with many equity based portfolios, the overall portfolio
March 2020, the Company remained well within the requirements
dividend income declined. Despite the backdrop of companies
of the covenants and this remains the case, with no future looking
cutting, postponing and cancelling dividends, the Board sought
concerns identified through the forecast undertaken.
to provide certainty to our shareholders by not only paying the
declared 2019 dividend but also confirming our intention to at
least maintain the 2020 dividend at the 2019 level, utilising some
of our reserves if required.
Structured finance covenant checks
The Company is required to monitor the debenture covenants on
Actions taken
A snapshot of how the Board sought to comply with its duty
under section 172 of the Companies Act 2006 during the year
while navigating the macro environmental impact of Covid-19 and
the expected long-term effects of those decisions is set out below
a monthly basis. During the height of the turbulence within the
in a case study.
equity markets, this was monitored daily by the CFO and reported
up to the Board. Despite the sharp drop in asset prices during
Other ways in which the Board adhered to its duties under section
172 of the Companies Act 2006 are provided on page 47.
Covid-19 case study
The effects of Covid-19 on the operations of the Group are unprecedented, having resulted in the Board and the Executive
Leadership team expediting new ways of operating and servicing clients. Remaining cognisant of its duty under section 172 of the
Companies Act 2006, the following is a summary of actions taken since the start of the pandemic and the long-term solutions that
have been implemented, ensuring the safety of our staff, business continuity, service excellence and ultimately, income growth.
First response
to Covid-19 working
Remote working
Safety and flexible working
•
Daily monitoring of the
•
Daily and weekly
•
100 Wood Street office adjusted and
virus and UK Government’s
communications provided
consistently deep cleaned to comply with
response.
by the Executive Leadership
government guidelines on maintaining a
•
Daily all staff e-mail
communications were
circulated with updates on the
virus, Government guidance
and the business’ response
with regular invitations
for employee queries
and concerns.
•
Testing of the resilience of
the IT infrastructure and
team. Once stability was
achieved, updates were
provided periodically,
including remarks from Non-
Executive directors during
virtual staff presentations.
•
Regular reminders sent to
staff on available channels
to voice mental health and
welfare concerns.
preparation for business-wide
•
Covid-19 staff survey issued
remote working.
•
Frequent management
meetings around Covid-19 and
regular reports to the Board
to gauge employees’ views
on management’s response
to the pandemic and any
other concerns.
on the impact to the portfolio,
•
Results of the staff survey
staff and the IPS business.
were positive and were shared
with the Board and with staff.
Actions were taken to address
any concerns raised.
Covid-secure environment for those returning
to the office.
The Company offered to cover the costs of
Covid-19 testing kits for employees.
Guidelines circulated to staff on precautions
to be adopted where opting to work in
the office.
Office re-opened to staff who voluntarily
chose to work in the office.
Flexible working policy devised and released
on a trial basis for possible long-term
implementation.
•
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•
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100 Bishopsgate office fitted to accommodate
social distancing and other required safety
measures to permanently ensure the safety of
all staff, clients, advisors, suppliers and visitors.
•
Implementation of paperless initiative
across the Group where possible, reducing
our carbon footprint and surfaces to aid in
combating the spread of Covid-19.
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•
Reviewing and reporting to the Board on significant financial
reporting issues (if any) and judgements which those
statements contain.
Providing review and challenge where necessary over key areas
of judgement, including the assumptions or qualifications in
support of the going concern statement and the Company’s
ongoing viability and risks thereto.
Internal controls and risk management
•
Reviewing the adequacy and effectiveness of the risk
management and internal controls framework.
•
Advising the Board on the Company’s overall risk appetite,
tolerance and strategy, and the principal and emerging risks
the Company is willing to take in order to achieve its long-term
strategy and objectives.
•
Reviewing the inherent and emerging risks in the business and
the system of internal controls necessary to monitor such risks.
Where requested by the Board, provide them with assurance of
the robustness of the management of principal risks.
•
Reviewing regular reports from the General Counsel and
Executive Risk Committee (which is responsible for day-to-day
management of the operational risk within the Group), and
other applicable persons on risk and internal control matters
and the adequacy and effectiveness of the control functions.
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Annual statement by the Chairman
of the Audit and Risk Committee
I am pleased to present the Company’s Audit and Risk Committee
report for the year ending 31 December 2020.
The Committee was comprised at the year-end of Robert Laing,
Tim Bond, Claire Finn and me. Robert Hingley, whilst not a
member of the Committee, is invited to attend.
During the year the Committee approved the new terms of
reference to reflect more clearly that the Committee also
considers risk-related matters as part of its role.
Role and duties
The main function of the Audit and Risk Committee is to assist
the Board in the management of the Company’s financial
reporting structure, internal controls and risk management,
external and internal audit and compliance functions. Our key
duties are as follows:
Financial reporting
•
Monitoring the integrity of the financial statements including
the annual and half-yearly reports, preliminary announcements
and any other formal statements or announcements relating to
the Company’s financial performance.
External audit
•
Making recommendations to the Board on the appointment or
reappointment of the external auditors.
•
•
Monitoring the quality, independence and objectivity of
the external auditors, their performance and agreeing
their remuneration.
Developing and implementing policy on the engagement (or
not) of the external auditor for non-audit services.
Internal audit
•
Monitoring the effectiveness of the Head of Internal Audit’s
work and overseeing the implementation of any corrective
actions.
•
Approving the internal audit programme in the context of the
Company’s overall risk management system and ensuring it is
aligned to the key risks of the business. I have agreed a refresh
of the risk and internal audit plan for next year to enhance risk
management and internal controls across the Company and
the Group.
•
•
Ensuring internal audit has sufficient access to perform its
function effectively and in accordance with relevant standards.
Reviewing reports from the Head of Internal Audit and
considering any major findings from their work and monitoring
management’s responsiveness to Internal Audit’s findings
and recommendations.
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Compliance
•
Reviewing regular reports on compliance matters and keeping
•
Review of reports about reconciliations, procedures in place to
prevent fraud and anti-bribery and corruption and anti-money
under review the adequacy and effectiveness of the Company’s
laundering.
and the wider Group’s compliance reporting and obligations.
•
Reviewing regular reports from the Money Laundering
Reporting Officer and the adequacy and effectiveness of the
Company’s and the wider Group’s anti-money laundering
systems and controls.
•
Reviewing the Company’s and wider Group’s procedures,
systems and controls for ethical behaviour and the prevention
of fraud, bribery and modern slavery and to receive reports on
non-compliance (if any) and overseeing the implementation of
any corrective actions.
Shortly after the year end, the Committee met with the external
auditors to discuss the 2020 financial statements and the
outcome of that discussion is set out below.
Risk management, internal control
and internal audit
The approach to risk management adopted by the Group is
set out in the Principal Risks and Internal Controls section
on page 39. The Board as a whole is responsible for the
•
Reviewing the arrangements in place for Group staff,
effectiveness of internal control mechanisms, but it is informed
contractors and external parties in confidence to raise
by more specific work carried out by the Audit and Risk
concerns about possible improprieties in matters of financial
Committee, which includes the initiation and oversight of
reporting or other matters insofar as they may affect the
any investigations that may be necessary to address control
Group (whistleblowing). The Committee ensures that
weaknesses or breaches, as identified.
these arrangements allow proportionate and independent
investigation of such matters and appropriate follow-up action.
As part of my duties as Committee Chairman, I met with the audit
partner and also with the Chief Financial Officer, General Counsel
and Company Secretary to discuss matters of significance.
In particular, the Committee reviews the adequacy and
effectiveness of the Group’s risk management systems and
processes. The General Counsel reports through the Executive
Risk Committee, but in line with good practice in this area, the
Committee’s Terms of Reference give her the right to report
directly to me on any specific matter of concern. The General
The Committee considers that I have recent and relevant financial
Counsel also provides quarterly reporting on risk matters to
experience due to my extensive experience as a fund manager
the Committee.
and from my executive management experience. Similarly, Tim
Bond satisfies the requirement as an active fund manager. The
Committee as a whole has competence relevant to the sector in
which the Company operates.
Principal activities of the Committee
The internal auditor, who reports to me as Chairman of the Audit
and Risk Committee, presents their annual audit programme to
the Committee for approval each year and attends Committee
meetings, presenting all of their reports including management’s
actions in response to the findings and recommendations. The
internal auditor has the right, should they wish, to meet separately
with the Audit and Risk Committee to raise any matters of
During the year, the Committee’s business included:
concern that may arise (although they did not need to do so
•
Consideration of the annual report and financial statements
and of the half yearly report and statements including
consideration of the final and interim dividends.
•
Consideration of the principal risks and controls and
general oversight of the Group’s internal control systems
and procedures including in the context of reports by the
Depositary, the Company’s obligations as an AIFM and
the heads of business and functions with respect to the
IPS business.
•
Meetings with the external auditor to discuss the 2019
financial statements and, in the fourth quarter, to plan
the 2020 audit. These meetings included discussions on
fees, auditor independence, key risks and developments in
accounting standards.
•
•
Review and approval of the internal audit programme.
Consideration of all internal audit reports.
during the year under report).
The Committee is satisfied that the quality, experience and
expertise of the internal auditor is appropriate for the business.
Wilfred White retired in September 2020 and was replaced by
Jocelyn Williamson.
Engagement with the FRC
During the second half of the year, we received a letter from the
Financial Reporting Council Corporate Reporting Review team
as part of its ongoing monitoring of UK corporate reporting. This
letter informed us that it had carried out a review of our 2019
Annual Report and Financial Statements, and that at this stage,
the review had not raised any further questions or queries which
required a substantive response. A small number of disclosure
points were also noted as part of the review which require minor
amendment and as a result, we have enhanced the relevant
disclosures in our 2020 Annual Report and Financial Statements.
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Audit and Risk Committee report continued
The Financial Reporting Council (FRC) requested that it be
No new significant issues arose during the course of the audit. As
made clear the inherent limitations of the review; in particular
reported in previous years, an area of consideration is that relating
it noted in its letter that its review provides no assurance that
to bad debt provisions.
the 2019 Annual Report and Financial Statements are correct in
all material respects and that the FRC’s role is not to verify the
information provided but to consider compliance with reporting
requirements. The FRC also noted its review did not benefit from
Management makes an estimate of a number of bad debt
provisions for non-collection of fees and costs as part of the risk
management and control framework.
detailed knowledge of the Group’s business or an understanding
Other issues that arose included: the risk that portfolio
of the underlying transactions entered into.
External auditors – assessing effectiveness
One of the most important functions of the Committee is to
monitor the independence and objectivity of the auditors, their
performance and effectiveness. The Committee achieves this
by an annual formal meeting with the audit partner to plan
that year’s audit. Part of that process requires the auditor to
give the Committee written assessment of how the audit team
identifies and manages the threats to its independence, along
investments may not be beneficially owned or correctly valued;
and that revenue is appropriately recognised. The Committee has
received assurance on these matters from management.
The Committee is satisfied that the judgements made by
management are reasonable and that appropriate disclosures
have been included in the accounts. Taken in its entirety, the
Committee was able to conclude that the financial statements
themselves and the annual report as a whole are fair, balanced
and understandable and provide the necessary information for
shareholders to assess the Company and Group’s position and
performance, business model and strategy. That conclusion was
with the description of the safeguards that it has in place to avoid
reported to the Board.
Mark Bridgeman
Chairman, Audit and Risk Committee
25 February 2021
such threats. This vital part of the audit process also enables
the Committee to examine in detail the scope of the audit,
ensuring that the auditor’s objectives meet the Committee’s own
expectations, along with key audit and accounting matters to be
considered that year.
At the conclusion of each audit, the Committee receives a
presentation from the audit partner on the principal findings.
This provides the opportunity for robust challenge, particularly
in areas where management judgement has been required. The
Committee will also give the auditors an opportunity, without the
Executive Leadership team present, to comment on the quality
and standard of the executive’s performance generally and during
the audit. Similarly, the Committee will seek the views of the
Executive Leadership team on the effectiveness and performance
of the audit team. There were no matters of concern raised during
the period under review.
Non-audit services
Non-audit services provided by the auditor are reviewed by the
Committee to ensure that independence is maintained. Non-
audit fees are shown at note 3 to the accounts. The Committee’s
policy is that non-audit work should be limited to those matters
where the external auditor is most appropriately placed to carry
out the work, unless there is a conflict of interest. Consequently,
fees for non-audit services have historically been low and in the
year under review were £9,000 (2019: £13,600).
Significant financial issues relating
to the 2020 accounts
The Code requires us to describe any significant issues considered
in relation to the financial statements and how those issues
were addressed.
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Annual remuneration report
Part 1 Remuneration Committee Chairman’s annual statement
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As a result, 2020 was another encouraging year for our IPS
business with revenue growth of 8.5%, an increase in profit before
tax of 6.6% and an increase in earnings per share of 9.5%. This
builds on the momentum of last year and is a positive reflection of
the efforts of all our staff and the success of our new management
team. Please refer to the Chairman’s statement on pages 4 and
5 for further overview of the financial and operational highlights
for 2020.
Towards the end of the year, we were pleased to announce
the acquisition of the company secretarial services business of
Konexo UK, a division of Eversheds Sutherland (International) LLP.
We completed this acquisition in January and the successful
integration of this business should generate approximately £2m
of additional profit for the IPS business in 2021.
Management changes
In May 2020, our CFO, Katie Thorpe, announced her intention
to leave Law Debenture in October 2020. Following this
announcement, the Board oversaw the restructuring of the
Executive Leadership team and, on 2 September 2020, Trish
Houston joined Law Debenture as COO, and was appointed as an
Executive Director at the same time.
As part of the restructuring, the Executive Leadership team was
expanded to include Hester Scotton, who was promoted to CFO
in October 2020, and Kelly Stobbs, who was appointed as General
Counsel on 2 June 2020.
Performance outcomes for 2020
Annual bonus outcomes for 2020
As indicated in last year’s report, the maximum annual bonus
opportunity for directors was set at 100% of salary for 2020 and
the performance measures were based 50% on financial targets
with the remainder based on non-financial measures aligned to
the strategic priorities of both the IPS business and the Company
as a whole. The financial target was based on the percentage
growth in IPS Profit before Tax (PBT) ranging on a straight line
basis from 3% at threshold to 8% as a stretch target. This target
has been set to reflect the impact that Covid-19 has had on
market conditions. Management delivered well against this target
achieving growth in IPS PBT of 6.6%.
Dear Shareholder
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ending 31 December 2020.
This year we have continued to work on enhancing the report to
improve transparency and clarity for all stakeholders and maintain
alignment with governance best practice.
Financial and operational highlights
2020 has been a challenging year for both our staff and our
clients, with many having first-hand experience of the impact
of Covid-19. As an organisation, we have been in the fortunate
As mentioned previously the Company did not draw upon any of
position that we have not had to draw upon any of the
the Government Support Schemes or place any staff on furlough
Government Support Schemes, nor have we had to place any of
during the year and furthermore, has generated a share price total
our staff on furlough. The Board is very grateful for all the hard
return of 12.9% and a growth in NAV of 3.6% over the same period.
work that the Executive Leadership team have put in to minimise
In view of the positive outcome for the IPS business in what has
the effects of the pandemic and to ensure that, despite the
been a difficult year and the progress that has been made in
constraints imposed by working from home and social distancing,
achieving various strategic objectives, including the recruitment
all our staff were able to continue to focus on delivering on our
of new senior management, continuing the process of overhauling
objectives of producing long-term capital growth and steadily
the IT systems completely, the move to the new head office, as
increasing income for our shareholders.
well as their support in numerous meetings with shareholders,
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Annual remuneration report continued
we have decided to award a bonus of 85% to the CEO and 85%,
pro-rated, to the COO. The Committee determined that the
Wider workforce considerations and fairness
The Committee has carefully considered remuneration
annual bonus outcomes for 2020, based on the application of the
arrangements across the Group. The Committee receives
performance conditions, were in line with the overall performance
information on wider workforce remuneration of our staff, ensuring
of the business and have not applied their discretion in assessing
they have a good understanding of the structure and application of
the Executive Directors’ remuneration.
the reward policies throughout the Group.
Implementation of the policy in 2021
Salary and benefits
The Committee has reviewed the performance of the Executive
Directors during 2020. The Remuneration Committee will normally
limit Executive Director salary increases to the level of increase for
the wider workforce. With inflation, measured by CPI, in the UK at
0.8%, pay increases across the organisation will only be awarded
to those employees whose roles and responsibility have materially
changed, during the course of 2020, or on an exceptional merit
basis. To align with this, the Committee is proposing not to award
a pay increase for the CEO and the COO. Their salaries will remain
at £325,000 and £230,000 respectively. The Executive Directors’
pension contributions will continue to be aligned with the
workforce at 12% of salary or cash equivalent.
Bonus
The maximum bonus opportunity will remain unchanged at 100%
of salary for 2021, with 50% of performance measures based on IPS
financial targets and with the remainder based on non-financial
measures aligned to the current strategic priorities of both the IPS
business and the Company as a whole. Further details are provided
on page 75 of this report. The specific targets will be published
together with the bonus outcome in the Annual Report on
Remuneration for 2021. The deferral requirement for the Executive
Directors is that half of any bonus earned above £100,000 will be
deferred in shares for three years.
In line with the provisions of the 2018 UK Corporate Governance
Code, various methods of communication (including presentations,
email correspondence and availability for digital meetings) have
been utilised by the Board and Executive Leadership team to raise
employee awareness of the role and engagement with the Board
more broadly. Work continues to look at the use and frequency of
employee engagement surveys to ensure that our people have a
forum to share their views. As part of this, we undertook a number
of surveys to measure our response to Covid-19 with management
receiving positive feedback from staff.
Conclusions
I will be stepping down as Non-Executive Director for Law
Debenture, having served nine years on the Board. I will be handing
over the role of Chair of the Remuneration Committe to Claire Finn
from 7 April 2021. I hope that you have found my letter useful and the
accompanying report informative and clear. Shareholders voted to
approve the new Remuneration Policy at the AGM in April 2020 and
we are not proposing any additional changes to the Remuneration
Policy. We hope shareholders will be able to give their support to
the resolution approving the Company’s remuneration report at the
AGM in April 2021. I am grateful for the engagement and support
provided by our shareholders and I will be available at the AGM to
answer any questions in relation to this Remuneration Report.
The Executive Directors will each receive LTIP awards of 100%
of salary in 2021 which will vest based on 3-year IPS EPS targets
Robert Laing
Chairman, Remuneration Committee
ranging from 4% p.a. growth at threshold (at which 25% of the
25 February 2021
award vests) to 10% p.a. at stretch. The calculation of the base EPS
targets for the LTIP will be adjusted to reflect the increase in profit
expected from acquisition of the company secretarial business
of Konexo UK referred to above. Given the internal business plan,
analyst forecasts, the historically flat performance of the IPS
business, and economic uncertainty, the Board believes that to
sustain the proposed stretch level of earnings growth for three
years would be exceptional. Any shares vesting must be held for
a further two years. Further details are provided on page 72 of
this report.
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REMUNERATION COMMITTEE MEMBERSHIP AND ACTIVITIES DURING 2020
Members
The members of the Committee who served during the year were:
R. Laing (Chairman)
R. Hingley
T. Bond
M. Bridgeman
C. Finn
Details of Committee meetings and attendance can be found on page 56.
Key activities of the Committee during the year included:
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determining 2020 annual bonus outcomes and payments;
preparing the 2020 Directors’ Remuneration Report;
determining salary adjustments for the Executive Directors and senior managers;
setting performance objectives, annual bonus measures and targets for 2021;
reviewing the operation of the annual bonus;
benchmarking pay for the Executive Directors and senior managers;
determining executive pay for 2020, including performance conditions for the LTIP awards in 2021;
reviewing the workforce engagement mechanism;
review of Remuneration Committee Terms of Reference; and
reviewing Gender Pay Gap reporting.
Support provided to the Committee
PricewaterhouseCoopers LLP (PwC) was appointed by the Remuneration Committee on 14 February 2019 as independent
adviser following a formal selection process. PwC is a founding member of the Remuneration Consultants Group and
voluntarily operates under its Code of Conduct in its dealings with the Committee. PwC’s fees charged for the provision of
independent advice to the Committee during the year were £48,000. Other than in relation to advice on remuneration, PwC
provides support to the Company in relation to valuation of the IPS business and tax advice. The Committee is satisfied that
PwC does not have connections with the Group that may impair their objectivity and independence.
During the year, the Committee also took advice from the CEO, whose attendance at Committee meetings was by invitation
from the Chair, to advise on specific questions raised by the Committee and on matters relating to the performance and
remuneration of the senior management team. No Director was present for any discussions that related directly to their
own remuneration.
Key responsibilities of the Committee
The Committee’s terms of reference are published on the Company’s website (www.lawdebenture.com/investment-trust/
corporate-governance). The key responsibilities of the Remuneration Committee are to:
•
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•
•
•
•
•
determine the Remuneration Policy for Executive Directors and senior managers (including the Company Secretary) in
compliance with legal and governance requirements and in the context of pay and conditions across the workforce, engaging
with shareholders thereon;
determine the individual remuneration packages for Executive Directors and senior managers;
approve the remuneration package of the Chairman;
consider the design of, determine targets for and review outcomes for the annual bonus plan;
determine the design of, quantum and performance conditions for long-term incentive plans;
review workforce remuneration and related policies across the Company as a whole;
review pension arrangements, service contracts and termination payments for Executive Directors; and
approve the Directors’ Remuneration Report, ensuring compliance with legal and governance requirements.
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Part 2: Annual remuneration report
Remuneration Policy table including 2020 outcomes and 2021 implementation*
SALARY AND BENEFITS
Purpose
To provide an appropriate level of salary and competitive benefits package to attract and retain
individuals of the required calibre to successfully deliver the business strategy.
Operation and Opportunity
Salary
Benefits
individual skills, experience and performance;
all employee share plans, sickness pay, private
Executive Directors are entitled to receive
those benefits available to all Law Debenture
employees generally, such as participation in
medical insurance, life assurance cover, disability
income plan, season ticket and parental leave.
Benefits are not pensionable.
Other benefits may be introduced from time
to time to ensure the benefits package is
competitive and reflects the circumstances of
the individual Director, for example relocation
allowances.
The Remuneration Committee may award non-
pensionable cash payments in lieu of one or more
of these benefits.
Salary levels will relate to:
the nature of the role;
•
•
•
•
•
performance of the business and the external
economic conditions;
appropriate market data; and
pay and conditions elsewhere in the Company.
There is no maximum salary under the policy.
The Committee will consider salary increases
for the senior management team and these
will normally be in line with those of the wider
workforce. Increases may be made above this
level in certain circumstances, including but not
limited to:
•
•
•
an increase in scale, scope or responsibility of
the role;
to ensure salaries remain market competitive;
and
where individuals have been recruited or
promoted with salaries below the targeted
policy level initially and have become more
established in their role.
Performance Framework
None
Outcomes for 2020
Denis Jackson’s annual salary was £325k. He
Trish Houston’s annual salary was £230k, pro-
also opted to participate in the Company health
rated since her appointment on 2 September
care plan.
2020.
Implementation in 2021
Denis Jackson’s salary and benefits are
Trish Houston’s salary and benefits are
unchanged in 2021.
unchanged in 2021.
PENSION
Purpose
To provide funding for retirement at market competitive levels.
Operation and Opportunity
Executive Directors may receive pension contributions to a personal pension scheme and/or cash
allowances in lieu of contributions.
Executive Directors (including current incumbents and new Directors) receive a contribution of 12% of
salary in line with the contribution for the wider workforce.
Performance Framework
None
Outcomes for 2020
Denis Jackson received the cash allowance in lieu
Trish Houston received the cash allowance in lieu
of contributions equivalent of 12% of salary.
of contributions equivalent of 12% of salary.
Implementation in 2021
Denis Jackson’s pension contributions are
Trish Houston’s pension contributions are
unchanged in 2021.
unchanged in 2021.
* Katie Thorpe resigned as an Executive Director on 11 September 2020 and her remuneration in relation to 2020 is disclosed on page 77 of this report.
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ANNUAL BONUS
Purpose
To incentivise and reward the achievement of annual business objectives to enable successful
implementation of the Group strategy, and to align the interests of Executive Directors with
shareholders and support retention.
Operation and Opportunity
Performance measures, targets and weightings
Maximum individual annual bonus opportunity is
are set at the start of the year.
100% of base salary.
At the end of the year, the Committee determines
The total aggregate annual bonus payment
the extent to which the targets have been
for Executive Directors is capped at 25% of the
achieved and the resulting proportion of the
general bonus pool for employees.
maximum individual opportunity payable to
Executive Directors.
20% of the maximum will be payable for
threshold performance and 50% of the
Half of any bonus earned above £100,000 will
maximum will be payable for on-target
be deferred in shares for three years. Dividend
performance, with full payment for stretch
equivalents may accrue on deferred bonus
performance. Payment increases on a straight-
awards and be paid on those shares which vest.
The Plan contains malus and clawback provisions
(see below for details).
line basis between threshold, target and stretch.
Performance Framework
Performance measures, targets and weightings are determined each year to reflect key business
priorities and are measured over a period of one financial year.
A minimum of 50% of the bonus is based on financial measures. The remainder is based on non-
financial measures aligned to the strategic priorities of the business and may also contain individual
performance objectives.
Outcomes for 2020
Denis Jackson is recommended to receive a 85%
Trish Houston is recommended to receive a
bonus. The basis for the award is explained on
85% bonus, pro-rated. The basis for the award is
page 75.
explained on page 75.
Implementation in 2021
The maximum individual annual bonus
The maximum individual annual bonus
opportunity continues to be 100% of base salary.
opportunity continues to be 100% of base salary.
LTIP
Purpose
To drive sustained long-term performance that supports the creation of shareholder value, and to
encourage and facilitate substantial long-term share ownership.
Operation and Opportunity
An award of conditional shares or nil cost-options
Dividend equivalents may accrue on shares held
may be granted annually.
Awards vest after three years, subject to
performance and continued employment.
Following vesting, an additional two-year holding
under the Plan and be paid on those shares
which vest. These will be delivered in shares in
line with the Investment Association Guidelines.
Maximum award of 100% of salary. 25% of the
period will apply (net of tax), such that shares are
award will vest for threshold performance, with
not released until five years from grant.
full vesting for stretch performance.
Award levels and performance conditions are
Vesting increases on a straightline basis between
reviewed in advance of each grant to ensure they
threshold and stretch.
remain appropriate.
Performance Framework
At least half of the award will be based on financial measures, normally profit-based measures linked
to the IPS business. The Committee has discretion to adjust the formulaic vesting outcome to reflect
underlying Company performance.
Any adjustments or discretion applied by the Committee will be fully explained in the following year’s
Remuneration Report.
Outcomes for 2020
Denis Jackson was awarded an LTIP of up to 100%,
Trish Houston was not eligible for an LTIP award
subject to meeting the performance conditions.
in 2020.
Implementation in 2021
Denis Jackson will be awarded an LTIP of up
Trish Houston will be awarded an LTIP of up
to 100%, subject to meeting the performance
to 100%, subject to meeting the performance
conditions.
conditions.
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Remuneration Policy table including 2020 outcomes and 2021 implementation continued
SHAREHOLDING REQUIREMENTS
Purpose
To provide alignment between the interests of the Executive Directors and our other shareholders.
Operation and Opportunity
The Executive Directors are required to build and maintain a minimum shareholding of two times
base salary. Executive Directors are required to retain 50% of the post-tax number of vested shares
from the Company incentive plans until the minimum shareholding requirement is met and
maintained.
On cessation of employment, Executive Directors are required to retain their minimum shareholding
requirement immediately prior to departure for two years. Where their actual shareholding at
departure is below the minimum shareholding requirement, the Executive Director’s actual
shareholding is required to be retained on the same terms and for the same periods.
In addition, the Company is using an Employee Benefit Trust or nominee accounts in which to hold
shares to enable the post cessation requirements to be operated.
Performance Framework
None.
Outcomes for 2020
Denis Jackson currently holds 43,855 shares
Trish Houston currently holds 1,564 shares on her
through his own account, deferred bonus, SAYE
own account.
and the SIP.
Implementation in 2021
No changes to the policy.
No changes to the policy.
Remuneration principles
In preparation for the review of our Directors’ remuneration
Executive remuneration. From this, we have drawn a unifying set
policy, the Committee reviewed the reward frameworks for
of remuneration principles that apply equally to Executives, and to
the wider workforce, alongside our more specific debates on
employees at all levels of our workforce hierarchy.
REMUNERATION PRINCIPLES
Alignment
Our remuneration programmes will align with Law Debenture’s strategic priorities, long-term success
and shareholders’ experience.
Competitiveness
Total remuneration will be competitive but not extravagant for the role taking into account sector,
complexity of responsibility and geography. When setting senior executive pay, we will consider both
external pay relativity and wider workforce remuneration and conditions.
Pay for performance
There should be no reward for failure, but the Executives should be rewarded for the performance of
the IPS business, which is central to Law Debenture’s business model and unique identity.
Discretion
The Committee has discretion to adjust the formulaic bonus and the LTIP outcomes to reflect
underlying Company performance. Any adjustments or discretion applied by the Committee will be
fully explained in the following year’s Directors’ Remuneration Report.
Consideration of shareholder views
of Executive remuneration remains appropriate and commits to
undertake a shareholder consultation in advance of any material
The Remuneration Committee is committed to shareholder
changes to the Remuneration Policy.
dialogue and engages with shareholders as appropriate to address
any remuneration issues that arise in relation to the Executive
Directors. Any feedback provided is taken into account when
Minor amendments
developing Executive remuneration arrangements, in addition
The Committee may make minor amendments to the policy set
to guidelines of investor bodies and shareholder views. The
out above (for regulatory, exchange control, tax or administrative
Committee continues to monitor trends and developments in
purposes or to take account of a change in legislation) without
corporate governance and market practice to ensure the structure
obtaining shareholder approval for that amendment.
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Consideration of employment conditions
In determining the remuneration arrangements for Executive
Directors, the Committee considers pay and conditions of
other employees across the IPS business and aims to ensure
a consistent approach. To facilitate this, the Committee
receives information on wider workforce remuneration,
ensuring they have a good understanding of the structure
and application of the reward policies throughout the
Group. Mark Bridgeman has been appointed as the Non-
Executive Director with responsibility for engaging with
the workforce. Since making that appointment, various
methods of communication (including presentations,
email correspondence and availability for meetings) have
been utilised to raise employee awareness of the role and
engagement with the Board more broadly. The Company has
introduced a quarterly survey to assess employee satisfaction.
Differences in remuneration policy
for Executive Directors compared with
other employees
The Company’s approach to annual salary reviews is consistent
across the Group, with consideration given to the level of
experience, responsibility, individual performance and salary
levels in comparable companies. In terms of variable incentives,
all employees are eligible to participate in an annual bonus
scheme with business area-specific metrics and individual
performance taken into account where appropriate. The
maximum bonus opportunity of 100% of salary is consistent
across all staff.
Senior managers may be eligible to participate in the LTIP with
annual awards up to 100% of salary. Performance conditions
are consistent for all participants, while award sizes vary by
level. Specific cash incentives are also in place to motivate,
reward and retain staff below Board level. When determining
incentive outcomes, the Remuneration Committee may
take account of the Executive Directors’ contribution to the
investment trust strategy and performance, as well as the
performance of the IPS business. For all other employees,
performance is primarily based on the IPS business. All UK
employees are eligible to participate in the Company’s SAYE
and SIP schemes on the same terms.
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Illustration of total remuneration
opportunity
£000
1,200
1,000
800
600
400
200
0
£000
1,200
1,000
800
600
400
200
0
Denis Jackson (CEO)
£371
100%
£696
23%
23%
53%
£1,021
32%
32%
36%
Minimum
On-Target
Maximum
Trish Houston (COO)
£265
100%
£495
23%
23%
54%
£725
32%
32%
37%
Minimum
On-Target
Maximum
£1,184
14%
27%
27%
31%
Maximum
with 50%
share price
appreciation
£840
14%
27%
27%
32%
Maximum
with 50%
share price
appreciation
Fixed
Annual Bonus
LTIP
Share price appreciation
ELEMENT
Total fixed pay
ASSUMPTIONS
Base salary:
CEO £325,000,
COO £230,000.
Pension:
12% of salary or cash equivalent.
Benefits:
As disclosed in single figure table
on page 77.
Annual bonus
Minimum: No payout.
LTIP
Share price growth
On-target: 50% of maximum
(50% of salary).
Maximum: 100% of maximum
(100% of salary).
Minimum: No vesting.
On-target: 50% of maximum
(50% of salary).
Maximum: 100% of maximum
(100% of salary).
Impact of 50% share price
appreciation on maximum
remuneration over three years.
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Performance measures selection for the annual bonus
Performance Measures used under the annual bonus are selected annually to reflect the Group’s main short and long-term objectives and
reflect both financial and non-financial priorities. For Executive Directors, performance measures in incentives will focus predominantly on
the profitability of the IPS business which is central to Law Debenture’s business model and unique identity and is the area of the business
fully within management’s control. The performance targets are set to be stretching but achievable, taking into account a range of internal
and external reference points and having regard to the particular strategic priorities and economic environment.
Executive Directors’ strategic objectives are linked to the delivery of Law Debenture’s strategic priorities. By their nature, some objectives
require a more subjective assessment than others and this is done by the Committee following the input from the wider Board and other
Board Committees as appropriate.
STRATEGIC OBJECTIVES
Description
Weighting
IPS financial
performance
The Remuneration Committee reviews a number of key financial metrics when assessing
50%
the Executive Directors’ delivery against financial performance targets. The metric
used for 2020 was profit before tax. The Executive Directors’ awards are based on the
performance against agreed thresholds, which can be found in the table below.
Market standing
Engagement with investors, potential investors, market analysts and the media is
20%
considered to be beneficial to our shareholders as it raises awareness of the unique
investment proposition which is offered by Law Debenture. The Remuneration
Committee believe that the efforts made by the Executive Directors to further enhance
the reputation of the Group should be rewarded.
Operational resilience,
business strategy and
leadership
The success of the IPS business is dependent on the effective leadership and
30%
implementation of the right strategy to ensure our people can provide excellent service
to our clients regardless of the external challenges the business may face. This includes a
robust business continuity plan supported by the right technology, a well embeded risk
management framework and high calibre people. The Remuneration Committee recognise
the importance of this and reflect this in the award made to our Executive Directors.
MEASURE
For 2020 the maximum bonus opportunity for the Executive Directors was 100% of salary. Performance conditions were based 50% on
financial metrics and 50% on strategic metrics. Details of the specific measures, weightings, targets and outcome achieved are set out below:
Measure
IPS financial performance - PBT
Market standing
Operational resilience, business strategy and leadership
Total
Weighting
Threshold
(0% of max.)
Target
(50% of max.)
Maximum
(100% of max.)
50%
20%
30%
100%
3%
4%
8%
Further details set out below
Further details set out below
Actual
6.6%
Long Term Incentive Plan
The first award under the new LTIP was granted to the CEO in 2020 at a level of 100% of salary. An award of 100% was also made to Katie
Thorpe, CFO, but this lapsed after her resignation from the Company. The award will vest after three years based on IPS EPS performance, and
any vested shares (net of tax) will be subject to a further two-year holding period. The performance targets are as follows:
3-year CAGR (p.a.)
Below threshold
Threshold
Stretch
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% vesting
IPS EPS 3-year CAGR (p.a.)
0%
25%
100%
Less than 4%
4%
10%
Annual remuneration report continued
For 2021 it is proposed that, both the Executive Directors will be granted LTIPs at the level of 100% of salary, with the same performance
conditions. The 2021 LTIP will have the base year performance adjusted to reflect the additional EPS arising from the acquisition of the
company secretarial services business.
2020 PERFORMANCE AND PAY OUTCOMES
Financial performance
The IPS business delivered PBT growth of 6.5%.
In light of the economic impact of Covid-19, the Remuneration Committee applied PBT growth targets of 3%-8%, resulting in an
award of 39% in relation to financial performance.
Non-financial performance
The Remuneration Committee gave careful consideration to the delivery of non-financial targets during 2020. In challenging
conditions, the Executive Directors oversaw:
• a successful office move to significantly enhanced premises;
• recruitment of new, high-calibre senior staff and the reshape of the Executive Leadership team;
• acquisition of the company secretarial services business from Eversheds Sutherland (International) LLP;
•
the response to the Covid-19 pandemic by ensuring we had a robust business continuity plan in place to allow us
to continue to service the needs of our clients;
• effectively moved immediately to home working with the introduction of national ‘lockdown’ in March 2020;
•
improved market standing through positive media coverage, meetings with brokers and potential investors; and
• the implementation of a new risk management framework as detailed on pages 39 to 45 of the annual report.
As a result of this, the Executive Directors were awarded 46% in relation to non-financial targets.
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Total remuneration 2020
Denis Jackson
Chief Executive Officer
Salary and benefits 50%
Retirement benefits 6%
Annual bonus 44%
Performance Shares 0%*
Trish Houston
Chief Operating Officer
Salary and benefits 51%
Retirement benefits 6%
Annual bonus 43%
Performance Shares 0%*
* No Long-Term incentives or scheme interests vested in 2020 for either the CEO or COO.
Share ownership
Shareholding is a key means by which the interests of Executive Directors are aligned with those of shareholders. As at
31 December 2020 neither Director had holdings in Law Debenture which exceeded our shareholding policy requirement of two
times salary.
Denis Jackson1
Denis Jackson
Chief Executive Officer
Chief Executive Officer
£271k
Trish Houston
Trish Houston
Chief Operating Officer
Chief Operating Officer
£10k
Actual
Total Policy Requirement
Current holdings: 43,855 shares2
Two times salary, 94,203 shares
Total share value3 of £650k
Current holdings: 1,564 shares
Two times salary, 66,667 shares
Total share value3 of £460k
1 D. Jackson has 117,400 shares vesting in 1-4 years time subject to a service condition but not a performance condition.
2 Includes shares held in the deferred bonus scheme.
3 Calculated based on a close price of 690p as at 31 December 2020.
The value of the shareholdings disclosed have been calculated using the close price at the time of acquisition of the shares. For
these purposes, shares held in the deferred bonus scheme, the SIP and SAYE as at 31 December 2020 have been included as there
are no performance conditions to be met. The LTIP awards have not been factored in.
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How do we safeguard against payments for failure?
SAFEGUARDING REQUIREMENTS
Performance based pay
A significant portion of remuneration varies with performance – where performance targets are not
achieved, lower or no payments will be made under the plans.
Discretion
The Committee will operate all incentive plans
•
adjustment of awards in certain
according to the rules and discretions contained
circumstances, e.g. changes in capital
therein to ensure that the implementation of
structure, demerger, special dividend,
the Remuneration Policy is fair, both to the
distribution or any other corporate event
individual Director and to the shareholders. The
which may affect the current or future value
discretions cover aspects such as:
of an award;
• selection of participants;
•
adjustment of performance conditions in
•
•
•
•
•
•
timing of grant and vesting of awards;
size of awards (subject to the Policy limits);
choice of measures, weightings and targets;
determining level of payout or vesting based
exceptional circumstances provided the new
targets are fair and reasonable and neither
materially more or less challenging than the
original targets; and
•
application of malus and/or clawback.
on an assessment of performance;
Any such use of discretion will be fully disclosed
settlement of awards in cash or shares;
treatment of awards on termination of
employment and change of control;
in the subsequent annual report and may, as
appropriate, be the subject of consultation with
the Company’s shareholders.
Malus and Clawback
Malus is the adjustment of deferred annual
The circumstances in which malus and clawback
bonus awards or unvested LTIP awards, because
could apply are as follows:
of the occurrence of one or more circumstances.
The adjustment may result in the value being
reduced to nil.
Clawback is the recovery of cash payments
made under the annual bonus, deferred annual
bonus award or vested LTIP awards as a result
of the occurrence of one or more circumstances
listed. Clawback may apply to all or part of a
participant’s payment or award and may be
effected, among other means, by requiring the
transfer of shares, payment of cash or reduction
of awards or bonuses.
•
•
•
•
•
gross misconduct;
misstatement of the financial results;
error in reporting or calculation;
serious reputational damage; or
corporate failure.
Malus applies to deferred annual bonus awards
and unvested LTIP awards up to the date
of vesting.
Clawback applies to cash annual bonus
payments and vested LTIP awards for up to two
years from payment or vesting.
Annual bonus payments and LTIP awards are
subject to malus and clawback for up to two
years from payment of the bonus or vesting
of shares.
Payments for loss of office
There were no payments to former Directors for loss of office.
Payments to past Directors
There were no payments to past directors during the year.
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Single total figure of remuneration (audited)
Denis Jackson
Trish Houston1
Katie Thorpe2
Year ended
Salary
£000
Benefits
£000
Bonus
£000
LTIP
£000
Pension
£000
2020
2019
2020
2019
2020
2019
325
315
77
N/A
180
225
4
4
—
N/A
3
3
275
287
65
N/A
—
205
—
—
—
—
—
—
39
38
9
N/A
22
25
Total
£000
643
644
151
N/A
205
458
Total
Fixed
£000
368
357
86
N/A
205
253
Total
Variable
£000
275
287
65
N/A
—
205
1 Trish Houston joined the Board as COO on 2 September 2020..
2 Katie Thorpe resigned from the Board on 11 September 2020 and left the Company in October 2020.
Executive Directors’ shareholdings (audited)
The table below shows the interests of the Executive Directors and connected persons in shares (owned outright or vested) as at
31 December 2020. There have been no changes in Directors’ interests in the period between 31 December 2020 and 25 February 2021.
Outstanding scheme interests
Shares owned
outright
Unvested
shares not
subject to
performance3
Unvested
options
not subject to
performance4
Unvested
options
subject to
performance5
Vested but
unexercised
share options
Total scheme
interests
Shareholding
guideline
(% of salary)
Current
shareholding
(% of salary)6
Guideline
met
Denis Jackson
Trish Houston1
Katie Thorpe2
2,948
1,564
1,767
35,342
5,565
70,210
—
18,257
—
2,475
—
—
—
—
—
114,065
1,564
22,499
200%
200%
N/A
18.1%
4.7%
N/A
No
No
N/A
1 Trish Houston joined the Board as an Executive Director with effect from 2 September 2020.
2 Katie Thorpe resigned from the Board as an Executive Director with effect from 11 September 2020.
3 Includes deferred bonus awards granted under the Deferred Share Plan.
4 Includes options awarded under Save As You Earn Share Save Plan.
5 Includes options awarded under the LTIP.
6 Based on a share price on 31 December 2020 of 690p. Shares owned outright have been included.
Executive Directors’ interests in shares and option plans (audited)
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Interests
held at
1 January
2020
Granted
in the
year
Date of
grant
Market
price at
grant
Vested
in the
year
Lapsed /
forfeited
in the
year
Exercised
in the
year
Market
price at
date of
exercise
Interests
held at
31 December
2020
Vesting /
first
exercise
date
Exercise
price*
Denis Jackson
Scheme
DSP1
DSP2
DSP3
LTIP4
SAYE5
3,079
196†
02.03.18 572.00p
16,662
1,020†
11.03.19 582.00p
— 17,333†
13.03.20 587.19p
— 70,210 07.04.20 462.90p
—
5,565
26.08.20 539.00p
—
—
—
—
—
—
—
—
—
—
— 572.00p
— 582.00p
—
587.19p
— 462.90p
— 539.00p
n/a
n/a
n/a
n/a
n/a
3,275 01.03.21
17,682
11.03.22
17,333
13.03.23
70,210 07.04.23
5,565 26.08.25
114,065
Total
19,741
94,324
1 Deferred Share Plan 2018 (share grant price is based on market close on the date of the grant).
2 Deferred Share Plan 2019 (share grant price is based on market close on the date of the grant).
3 Deferred Share Plan 2020 (share grant price is based on market close on the date of the grant).
4 Long Term Incentive Plan 2020 (price at grant is calculated based on a 5 day average close price up to and including the day before the date of grant). Details of performance conditions
and targets can be found on page 74.
5 Save As You Earn Save Plan 2020 (share grant price is based on market close on the date of the grant).
* Exercise price is based on market price at grant.
† Includes dividend reinvestment.
Trish Houston does not currently hold options or shares in any of the Company’s employee share schemes.
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Percentage change in Director remuneration
The table below shows the percentage change in Director remuneration, comprising salary, taxable benefits and annual bonus, and
comparable data for the average of all UK employees within the Company.
Denis Jackson (CEO)
Trish Houston (COO)1
Katie Thorpe (CFO)2
Robert Hingley (NED)
Robert Laing (NED)
Mark Bridgeman (NED)
Tim Bond (NED)
Claire Finn (NED)
All other Employees (excluding directors)3
1 Trish Houston was appointed to the Board on 2 September 2020
Salary
2020
Taxable benefits
2020
Annual bonus
2020
3%
N/A
6%
3%
3%
3%
3%
3%
3%
3%
N/A
6%
0%
0%
0%
0%
0%
3%
-4%
N/A
N/A
0%
0%
0%
0%
0%
11%
2 Katie Thorpe resigned from the Board on 11 September 2020 and left Law Debenture in October 2020
3 For the purposes of this table, all other employees excluding Directors have been taken to mean employees of LDC Trust Management Limited.
Relative importance of spend on pay
The chart below shows the Company’s actual expenditure on shareholder distributions (including dividends and share buybacks) and total
employee pay expenditure for the financial years ended 31 December 2018, 31 December 2019 and 31 December 2020.
Total employee pay expenditure1
Total distributed to shareholders2
2018
£000
13,964
22,339
2019
£000
14,709
30,778
2020
£000
16,156
32,572
% change
9.8%
5.8%
1 Total remuneration includes bonuses, employers’ NI and pension costs and is the figure reported at note 3 of the accounts less remuneration of Non-Executive Directors.
2 Amounts distributed to shareholders are the totals of the final and interim dividends in respect of that year. There were no other distributions.
The dividend payment structure was changed during 2020 to include three interim and one final dividend to be paid to shareholders as
explained in the Chairman’s statement on pages 4 and 5. The average number of employees has increased from 133 in 2019 to 165 in 2020,
which has led to an increase in employee pay expenditure. The increase also includes a discretionary increase in individuals’ remuneration.
Distribution to shareholders has been subject to an increase for the current year as explained in the Chairman’s statement on pages 4
and 5.
Historical remuneration and TSR chart
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Incumbent
C. Banszky C. Banszky C. Banszky C. Banszky C. Banszky
CEO single figure of total
remuneration (£000)
602.7
636.9
636.9
690.7
677.5
Annual bonus and deferred bonus
awarded (against maximum %)
75.0% 70.0%
72.1% 62.0% 100.0%
M. Adams1 T. Fullwood2
C. Banszky M. Adams
180.5
757.8
142.2
344.1
65.1% 100.0%
0.0%
0.0%
D. Jackson3 D. Jackson3 D. Jackson3
611.2
643.4
643.0
100.0% 90.9%
85.0%
1 C. Banszky stepped down as CEO on 31 August and was succeeded by M. Adams on the same date following his appointment to the Board on 4 August.
2 T. Fullwood was appointed interim Chief Executive Officer from 22 October for a fixed term until retirement at 1 January 2018.
3 D. Jackson was appointed as CEO on 1 January 2018.
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Total Shareholder Return (TSR) chart and historical remuneration
The graph below compares the value of £1,000 invested in Law Debenture’s shares, including reinvested dividends, with the FTSE All-Share
Total Return Index over the last ten years. This index was selected because it is the index adopted as Law Debenture’s benchmark.
£3,000
£2,800
£2,600
£2,400
£2,200
£2,000
£1,800
£1,600
£1,400
£1,200
£1,000
£800
£600
Notes
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Law Debenture share price total return, assuming
the investment of £1,000 on 31 December 2010 and the
reinvestment of all dividends (excluding dealing expenses)
FTSE All-Share Index Total Return assuming notional
investment of £1,000 into the index on 31 December 2010 and
the reinvestment of all income (excluding dealing expenses)
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1 The graph shows the total shareholder return of a nominal holding of £1,000 of Law Debenture’s shares measured against the total shareholder return of a nominal holding of £1,000
invested in the FTSE All-Share Index over a 10 year period.
2 Dividends have been reinvested.
3 FTSE All-Share Index is chosen as the comparator in this table because that is the index against which, historically, the Company has reported the performance of the investment
trust portfolio.
External appointments
It is the Board’s policy to allow the Executive Directors to take up one non-executive position on the board of another company, subject
to the prior approval of the Board. Any fee earned in relation to outside appointments is retained by the Executive Director. During 2020,
there were no external appointments held by the Executive Directors.
Recruitment policy
When determining the remuneration arrangements of a new appointment to the Board, the Committee will seek to apply the following
principles:
•
•
although we operate in a competitive market for talent, we are mindful to pay no more than is necessary to attract and retain high-
quality talent; and
the Committee will appoint new Executive Directors with a package that is in line with the remuneration policy in place at the time. In
particular, the maximum level of variable remuneration will be in line with the limits set out in the policy table on pages 72 and 73.
Service contracts
Executive Directors’ service contracts may be terminated by not less than six months’ notice given in writing by either party to the
contract, with no contractual provisions for compensation payable on early termination of contract. The Directors are subject to annual
re-election at the AGM. Executive Directors’ service contracts are available for inspection at the Company’s registered office, subject to
Covid-19 restrictions.
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Termination Policy
Executive Directors will be entitled to receive salary and benefits during the notice period, which may be paid ‘in lieu’ of all or part of any
period of notice. Payments may be made as either a lump sum or in equal monthly instalments until the end of the notice period at the
discretion of the Company and Executive Directors will be expected to mitigate their loss.
The Committee will seek to ensure that there are no unjustified payments for failure. There are no entitlements to payments of any sort
in the event that for cause an Executive Director’s employment is summarily terminated. In the event that an Executive Director is given
notice of termination of employment within twelve months of any change in control of the Company, he/she will be given not less than
twelve month’s written notice and the same arrangements for receiving salary and benefits during this period will apply as described
above.
The Committee may authorise payments for statutory entitlements in the event of termination, reasonable settlement of potential legal
claims, and payment of reasonable reimbursement of professional fees in connection with such agreements.
PLAN
GOOD LEAVERS1
ALL OTHER LEAVERS
CHANGE OF CONTROL
•
•
•
•
Annual bonus
•
Typically paid at the same time
as continuing employees, to the
extent that the performance
conditions are achieved with
pro-rating for the proportion of
the financial year served, unless
the Committee determines
otherwise.
•
Deferred bonus awards will
continue until the normal vesting
date or may vest earlier at the
discretion of the Committee.
LTIP
•
Unvested LTIP awards will
typically vest on the normal
vesting date, to the extent that
the performance conditions are
achieved with pro-rating for the
proportion of the financial year
served, unless the Committee
determines otherwise.
•
Vested awards will remain
subject to any holding period.
No bonus payable.
•
Normally paid immediately on
Unvested deferred bonus
awards lapse.
the effective date of change
of control, subject to the
achievement of the performance
conditions and pro-rated for
the proportion of the year
served to the date of change of
control, unless the Committee
determines otherwise.
•
Deferred bonus awards vest
immediately in full on the
effective date of change of
control.
Unvested awards lapse.
•
Unvested LTIP awards will
Vested awards will remain
subject to any holding period.
typically vest immediately in
full on the effective date of
change of control, subject to the
achievement of the performance
conditions and pro-rated for
the proportion of the year
served to the date of change of
control, unless the Committee
determines otherwise.
•
The holding period applicable to
any awards will end at the time of
change in control.
•
Alternatively, awards may be
exchanged for new equivalent
awards in the acquiring company.
1 The Committee has discretion to determine that an Executive Director is a good leaver. It is the Committee’s intention to only use this discretion in circumstances where there is an appropriate
business case which will be explained in full to shareholders. A good leaver is typically defined as an employee who ceases to hold employment by reason of: death, injury, ill-health or disability;
retirement with the agreement of the Group; redundancy; the participant’s employing Company being transferred to an entity which is not a Group member; transfer of undertaking; or any
other reason at the Committee’s discretion.
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Policy for Chairman and Non-Executive Directors
The Non-Executive Directors, including the Chairman, do not have service contracts and are appointed for an indefinite term. Non-Executive
Directors will not be entitled to compensation on termination of their directorship, no matter what the reason for termination. The Directors
are subject to annual re-election at the AGM. Non-Executive Directors’ letters of appointment are available to view at the Company’s
registered office.
Non-Executive Directors do not receive benefits from the Company and they are not eligible to join the Company’s pension scheme
or participate in any bonus or share incentive plans. Where specific cash or share arrangements are delivered to the Chairman or Non-
Executive Directors, these will not include share options or any other performance related elements. Any reasonable expenses that they
incur in the furtherance of their duties are reimbursed by the Company (including any tax liability thereon).
PURPOSE AND LINK TO STRATEGY
OPERATION
FEE LEVELS
To attract and retain Non-Executive
The Chairman is paid a single annual all-
Fee increases are typically expected to be
Directors of the required calibre by
inclusive fee for all Board responsibilities.
in line with wider employee rises.
offering market competitive fees.
Non-Executive Directors receive a basic annual
Board fee. Additional fees may be payable
In exceptional circumstances (including,
but not limited to, material misalignment
for additional Board responsibilities such as
with the market or a change in the
Chairmanship or Membership of a Committee,
complexity, responsibility or time
or the role of Senior Independent Director.
commitment required to fulfil the role) the
The Chairman’s fee is determined by the
Committee, and fees to Non-Executive Directors
are determined by the Board. Fees are reviewed
Board may make appropriate adjustments
to fee levels to ensure they remain market
competitive and fair to the Director.
periodically, considering time commitment,
The maximum annual aggregate fee for
scope and responsibilities, and appropriate
all Non-Executive Directors will be within
market data.
the limit set out in the Company’s Articles
Expenses incurred in the performance of
non-executive duties for the Company may be
reimbursed or paid for directly by the Company,
including any tax due thereon.
of Association.
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Non-Executive Directors’ shareholdings (audited)
The table below shows the interests of the Non-Executive Directors and connected persons in shares (owned outright or vested) as at
31 December 2020. There have been no changes in Directors’ interests in the period between 31 December 2020 and 25 February 2021.
Robert Hingley
Robert Laing
Mark Bridgeman1
Tim Bond
Claire Finn
1 Interests of connected persons in addition to Mark Bridgeman's beneficial holding – 25,620.
Shares owned outright
4,870
12,300
4,513
—
—
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Single total figure of remuneration for Non-Executive Directors (audited)
The table below sets out the single figure for the total remuneration received by each Non-Executive Director for the year ended
31 December 2020 and the prior period:
Non-Executive Directors
Robert Hingley
Robert Laing
Mark Bridgeman
Tim Bond
Claire Finn
Salary/fees
Total
£87,550
£85,000
50,985
£54,153
56,650
£51,940
£45,320
£44,000
£46,237
£13,750
£87,550
£85,000
50,985
£54,153
56,650
£51,940
£45,320
£44,000
£46,237
£13,750
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019*
*Claire Finn’s remuneration for 2020 includes an extra payment which relates to 2019.
Non-Executive Director fees
For 2021, the fees for the Chairman and Non-Executive Directors have been maintained in line with the wider workforce:
Fee
Chairman fee
Non-Executive Director base fee
Additional fee for Chairman of Audit Committee
Additional fee for Chairman of Remuneration Committee
Additional fee for oversight of workforce engagement
Fees effective
1 January 2021
Fees effective
1 January 2020
% change
£87,550
£45,320
£5,665
£5,665
£5,665
£87,550
£45,320
£5,665
£5,665
£5,665
0.0
0.0
0.0
0.0
0.0
Statement of shareholder voting at the Company’s AGM
The table below sets out the results of the most recent shareholder votes on the Policy Report and the Annual Report on Remuneration at
the AGM on 7 April 2020.
Policy Report
2019 Annual Report on Remuneration
Percentage of votes cast
Number of votes cast
For
97.65%
97.64%
Against
2.35%
2.36%
For
30,240,887
30,389,436
Against
728,373
733,673
Withheld1
250,424
96,865
1 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution.
For and on behalf of the Remuneration Committee.
Robert Laing
Chairman of the Remuneration Committee
25 February 2021
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•
•
F I N A N C I A L S T A T E M E N T S
Independent auditor’s report
to the Members of The Law Debenture Corporation P.l.c.
Opinion on the financial statements
In our opinion:
•
the financial statements give a true and fair view of the
state of the Group’s and of the Parent Company’s affairs as
at 31 December 2020 and of the Group’s profit for the year
then ended;
Independence
Following the recommendation of the audit committee, we
were appointed at the Annual General Meeting on 7 April 2020
to audit the financial statements in the UK for the ended 31
December 2020. The period of total uninterrupted engagement
including retenders and reappointments is 13 years, covering
the years ending 31 December 2008 to 31 December 2020. We
remain independent of the Company in accordance with the
the Group financial statements have been properly prepared
ethical requirements that are relevant to our audit of the financial
in accordance with international accounting standards in
statements in the UK, including the FRC’s Ethical Standard as
conformity with the requirements of the Companies Act 2006;
applied to listed public interest entities, and we have fulfilled
the Group financial statements have been properly prepared
in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union;
•
the Parent Company financial statements have been properly
prepared in accordance with international accounting
our other ethical responsibilities in accordance with these
requirements. The non-audit services prohibited by that standard
were not provided to the Group or the Parent Company.
We have provided services other than audit to the Group as set out
below. This includes a description of any relationships between the
company, its subsidiaries and Directors and the firm.
standards in conformity with the requirements of the
•
BDO provided the Group with a limited assurance opinion on
Companies Act 2006 and as applied in accordance with the
the CASS report that was issued to the FCA. The work involved
provisions of the Companies Act 2006; and
as part of the CASS procedures is closely related to the work
•
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and,
performed in the audit and the threats to auditor independence
are insignificant.
as regards the Group financial statements, Article 4 of the
•
BDO also provided agreed upon procedures relating to
IAS Regulation.
We have audited the financial statements of The Law Debenture
Corporation p.l.c. (the ‘Parent Company’ or ‘Company’) and
its subsidiaries (the ‘Group’) for the year ended 31 December
2020 which comprise the group income statement, the group
statement of comprehensive income, the group and company
reporting on the Company’s statement of capital and reserves.
The work involved is closely related to the work performed in
the audit and the threats to auditor independence are clearly
insignificant. This work is a requirement of the Guaranteed
Secured Bond in accordance with Clause 27 of the Trust Deed
dated 12 October 1999.
statement of financial position, the group and company
We do not consider there to be any other threats that may be
statement of changes in equity, the group and company
considered to bear on our objectivity and independence. Our
statements of cash flows and notes to the financial statements,
overall assessment is that the safeguards described here are
including a summary of significant accounting policies. The
appropriate and effective.
financial reporting framework that has been applied in their
preparation is the law and international accounting standards in
conformity with the requirements of the Companies Act 2006
and, as regards the Parent Company financial statements, as
applied in accordance with the provisions of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion. Our audit opinion is consistent with the additional report
to the audit committee.
Conclusions relating to principal risks,
going concern and viability statement
In auditing the financial statements, we have concluded that
the Directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate. Our
evaluation of the Directors’ assessment of the Group and the
Parent Company’s ability to continue to adopt the going concern
basis of accounting included:
•
•
Obtaining management’s assessment of the Going Concern
Status & Long Term Viability of the Group
Reviewing the appropriateness of the forecasted cash flow
calculated at group level by performing a sensitivity analysis
on the expected receipt of cash from revenue streams and
future expenditure and the cash outflow arising from dividend
payments to shareholders
•
Challenging management’s assumptions and judgements
made with regards to stress-tested forecast revenue figures,
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cash to be received from revenue, the cost of fixed expenditures,
the payment of dividends to shareholders on a quarterly basis
An overview of the scope of our audit
and cash flows relating to the acquisition of a new company
Our Group audit was scoped by obtaining an understanding of
secretarial unit by comparing to the accuracy of past forecasts
the Group and its environment, including the Group’s system of
Enquiring with management about the level of insurance
coverage across the group
internal control, and assessing the risks of material misstatement
in the financial statements. We also addressed the risk of
management override of internal controls, including assessing
Calculating financial ratios to ascertain the financial health of
whether there was evidence of bias by the Directors that may have
the group
represented a risk of material misstatement.
We obtained the debenture and loan agreements to identify the
All seven significant components (The Law Debenture Corporation
covenants and assessed the likelihood of the covenants being
p.l.c., The Law Debenture Trust Corporation p.l.c., The Law
breached based on management forecasts and our sensitivity
Debenture Pension Trust Corporation p.l.c., Law Debenture
•
•
•
analysis
•
Performing calculations assessing the net asset position of the
group to understand the reliance on loans and debentures
Corporate Service Ltd, L.D.C. Trust Management Ltd, The Law
Debenture Intermediary Corporation p.l.c. and Law Debenture
Trustees Ltd) are based in the UK and the group audit team have
responsibility for the audit of all significant components included
Based on the work we have performed, we have not identified
in the consolidated financial statements.
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
entity’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
In relation to the Parent Company’s reporting on how it has
applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’
statement in the financial statements about whether the Directors
considered it appropriate to adopt the going concern basis of
accounting.
Component materiality across the group ranged from £900
to £5.475m. For components where full scope audits were not
undertaken, the group audit team undertook audit procedures
on material balances with a performance materiality of 75% of
materiality in all cases.
Our audit approach was developed by obtaining an understanding
of the group’s activities and the overall control environment. Based
on this understanding we assessed those aspects of the group’s
transactions and balances which were most likely to give rise to a
material misstatement.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
Our involvement with component auditors
In respect of non-significant components, we instructed other BDO
this report.
Overview
Coverage
100.0% (2019: 100.0%) of the investment
portfolio.
member firms to carry out desktop reviews and undertake specific
audit procedures on balances where we identified a significant risk.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
93.6% (2019: 95.1%) of the Group Revenue.
fraud) that we identified, including those which had the greatest
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effect on: the overall audit strategy, the allocation of resources in
the audit, and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit
Valuation & Ownership of
matters
Investments – investment
portfolio
Revenue Recognition –
Independent Professional
Services
Revenue Recognition –
investment portfolio
2020
2019
Ç
Ç
Ç
Ç
Ç
Ç
Materiality
£7.30m (2019: £8.22m) based on 1% of Group net
assets (2019: 1% of Group Total Investments)
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Key Audit Matter
Valuation and
Ownership of
Investments –
The investment portfolio at the year-
We responded to this matter by testing the valuation and ownership
end comprised of predominantly
of 100% of the quoted investments.
How the matter was addressed in the audit
listed equity investments at fair value
We utilised our BDO DIVA (Dividend-Investment-Valuation Analyser)
tool to recalculate the valuation of the listed investments portfolio
using the holdings per the third party HSBC report and independent
bid prices.
We obtained the third party year-end custodian holdings report from
HSBC and checked that for all listed investments the number of
shares owned agreed to the year-end investments summary provided
in the draft financial statements. A sample of additions and disposals
have been corroborated to third party confirmations and we have
recalculated the realised gains on disposals based on the brought
forward book cost.
We reviewed the latest available independent assurance report
addressing the relevant controls in place at the custodian to assess
whether any of the exceptions identified had an impact on our
audit approach.
For the unrealised gains/losses on investments held at fair value, we
tested the valuation of the portfolio at the year-end, together with
testing the reconciliation of opening and closing investments. We did
this by taking the portfolio holdings at and the opening and closing
positions and corroborating the bid prices to independent sources,
obtaining comfort over the unrealised movements recognised
between these two points.
For the unlisted investment (£4.1m at 31 December 2020) we
considered whether, in our professional judgement, the valuation
methodology was the most appropriate in the circumstances under
the IPEV guidelines.
As part of our detailed testing for the unlisted investment, we:
•
•
•
re-performed the calculation of the valuation
verified key inputs to the valuation to independent information
challenged significant judgements made such as the NAV
per share
Key observations:
Based on our procedures performed, we did not identify any
exceptions with regards to valuation or ownership of investments.
investment portfolio
through profit or loss.
(notes 1 and 14 to the
financial statements)
We consider the valuation and
ownership of investments to be one
of the most significant audit areas
as investments represent the most
significant balance in the financial
statements and underpin the
principal activity of the entity
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Key Audit Matter
How the matter was addressed in the audit
Revenue Recognition
We consider that the timing of
In respect of fee income from the provision of professional services, our
– Independent
invoicing of fees resulting in amounts
audit strategy differed per revenue stream.
Professional Services
being accrued and deferred at the
(notes 1 and 7 to the
financial statements
year-end based on management’s
estimates as a significant risk and key
audit matter.
For annuals fees, annual trustee fees, company secretarial fees and daily
rates fees we agreed a sample of recorded revenue to a contractual
agreement, invoice and receipt of cash. We also obtained a breakdown
of accrued and deferred income and selected a sample, which we
Revenue consists of fees receivable
recalculated, based on the aforementioned supporting documentation
from the provision of professional
to check that the appropriate proportion of income had been
services including, but not limited to,
recognised in the year.
annual trustee services, transaction
fees, service of process fees, company
secretarial fees, special fees, daily
rates, single payments, new fee
structure and European Medium
Term Note revenue.
For the annual fees revenue stream
we consider that the risk lies with
billing and invoicing throughout the
For the testing of the transaction and special fees, we agreed the fee to
sales invoice and receipt of cash. For these revenue streams, we tested
whether the sampled client was on the annual fees schedule meaning
that they had an equal opportunity to be chosen in our samples as part
of our annual fee, annual trustee fees and company secretarial fees
contract testing.
For service of process fees we agreed a sample of recorded revenue to
appointment letter, invoice and receipt of cash.
year for all clients in this revenue
Single payments, New Fee Structure and European Medium Term
stream.
Note revenue generated was tested through a sample of transactions
being agreed to client agreements or recent correspondence where a
countersigned agreement was not available, sales invoices and bank
receipts; in addition to a revenue recalculation being performed.
We obtained evidence to confirm that performance obligations have
been satisfied across all streams.
We reviewed invoices either side of the year-end to verify that the
revenue has been accounted for in the correct period.
We have also reviewed a sample of credit notes raised post year-end to
ascertain whether any related to revenue recorded in the financial year.
Key observations:
Based on procedures performed, we did not identify any exceptions
with regards to the income and revenue recognition policy in
relation to the provision of professional services.
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Revenue Recognition
– investment portfolio
We consider that the existence of
dividend income recorded by the
For the income recognised in the investment portfolio, we utilised our
BDO DIVA (Dividend-Investment-Valuation Analyser) tool to recalculate
(notes 1 and 7 to the
investment portfolio is a significant
the dividend income received.
financial statements
risk and a Key Audit Matter.
We sourced further independent data to corroborate an expectation
For the investment portfolio the
of income due based on the investments held and dividend
revenue comprises dividends and
announcements made.
interest receivable on the portfolio
of investments held. Dividend
income is one of the key drivers of
dividend returns to investors and is
often a key factor in demonstrating
the performance of the portfolio.
Judgement is also required in the
allocation of income to revenue
or capital.
We performed a dividend yield to test, using a threshold of 5%, to
identify whether any capital dividends had incorrectly been recorded
as revenue income.
Key observations:
Based on our procedures performed, we did not identify any
exceptions with regards to the income in relation to the provision
of the investment portfolio.
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Our application of materiality
We apply the concept of materiality both in planning
extent of testing needed. Importantly, misstatements below
and performing our audit, and in evaluating the effect of
these levels will not necessarily be evaluated as immaterial as
misstatements. We consider materiality to be the magnitude by
we also take account of the nature of identified misstatements,
which misstatements, including omissions, could influence the
and the particular circumstances of their occurrence, when
economic decisions of reasonable users that are taken on the
evaluating their effect on the financial statements as a whole.
basis of the financial statements.
Based on our professional judgement, we determined
In order to reduce to an appropriately low level the probability
materiality for the financial statements as a whole and
that any misstatements exceed materiality, we use a lower
performance materiality as follows:
materiality level, performance materiality, to determine the
Materiality
Group financial statements
Parent Company financial statements
2020
£m
7.30
2019
£m
8.22
2020
£m
5.48
2019
£m
7.81
Basis for determining
1% Group Net Assets
1% Group Total
75% Group Materiality
95% Group Materiality
materiality
Rationale for the
benchmark applied
Investments
Group Net Assets to
Total Investments
This to ensure the
This to ensure the
account for the debt
threshold to effectively
audit team identify
audit team identify
held by the group.
test the value of
errors in the parent
errors in the parent
investments and the
entity that may present
entity that may present
range of reasonable
an aggregate risk of
an aggregate risk of
alternative valuations.
material misstatement
material misstatement
to the group financial
to the group financial
statements.
statements.
Performance materiality
5.48
6.17
4.11
5.86
Basis for determining
75% based on the
75% based on the
75% based on the
75% based on the
performance materiality
expected total value
expected total value
expected total value
expected total value
of known and likely
of known and likely
of known and likely
of known and likely
misstatements.
misstatements.
misstatements.
misstatements.
Change to Group Materiality Approach
The benchmark for group materiality was changed this year to
Five of the significant components had a materiality calculated
based on 7.0% of their adjusted profit before tax with L.D.C. Trust
account for the debt within the group. This is appropriate as the Law
Management Ltd based on 1% of expenditure and the parent
Debenture group is a mixture of a large Independent Professional
company capped at 75% of Group materiality. We used adjusted
Services (“IPS”) business and an investment portfolio. The use of the
profit before tax to exclude the impact of group intercompany
investment value alone is not appropriate given the IPS business.
recharges.
Specific materiality
We also determined that for items impacting the revenue return, a
Reporting threshold
We agreed with the Audit Committee that we would report
misstatement of less than materiality for the financial statements
to them all individual audit differences in excess of £65,000.
as a whole could influence the economic decisions of users.
A specific materiality level was therefore set at £1.290m (2019:
£1.884m), based on 5% of group income before tax (2019: 5% of
group income before tax). We further applied a performance
(2019: £164,000). We also agreed to report differences below this
threshold that, in our view, warranted reporting on qualitative
grounds by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are
materiality level of 75% of specific materiality to ensure that the risk
taken on the basis of the financial statements.
of errors exceeding specific materiality was appropriately mitigated.
Component materiality
Full scope audits of the seven significant components were
Other information
The directors are responsible for the other information. The
performed at a materiality level calculated based on a level
other information comprises the information included in
appropriate to the relative scale of the business concerned.
the annual report other than the financial statements and
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Independent auditor’s report continued
our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except
Other Companies Act 2006 reporting
to the extent otherwise explicitly stated in our report, we do
Based on the responsibilities described below and our work
not express any form of assurance conclusion thereon. Our
performed during the course of the audit, we are required by
responsibility is to read the other information and, in doing
the Companies Act 2006 and ISAs (UK) to report on certain
so, consider whether the other information is materially
opinions and matters as described below.
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is
a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement
in relation to going concern, longer-term viability and that
part of the Corporate Governance Statement relating to the
parent company’s compliance with the provisions of the UK
Corporate Governance Statement specified for our review.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements or our knowledge obtained
during the audit.
Going concern
•
The Directors’ statement with regard to
and longer-
the appropriateness of adopting the going
term viability
concern basis of accounting and any
material uncertainties identified set out on
page 55; and
•
The Directors’ explanation as to its
assessment of the entity’s prospects, the
period this assessment covers and why this
period is appropriate set out on page 53.
Other Code
•
Directors’ statement on fair, balanced
provisions
and understandable reporting set out on
page 58;
•
Board’s confirmation that it has carried out
a robust assessment of the emerging and
principal risks set out on page 46;
•
The section of the annual report that
describes the review of effectiveness of risk
management and internal control systems
set out on page 64; and
•
The section describing the work of the audit
committee set out on pages 63 and 64.
Strategic
report and
Directors’
report
In our opinion, based on the work undertaken
in the course of the audit:
•
the information given in the Strategic report
and the Directors’ report for the financial
year for which the financial statements are
prepared is consistent with the financial
statements; and
•
the Strategic report and the Directors’ report
have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and
understanding of the Group and Parent
Company and its environment obtained in
the course of the audit, we have not identified
material misstatements in the strategic report
or the Directors’ report.
Directors’
In our opinion, the part of the Directors’
remuneration
remuneration report to be audited has been
properly prepared in accordance with the
Companies Act 2006.
Matters on
which we
We have nothing to report in respect of the
following matters in relation to which the
are required
Companies Act 2006 requires us to report to
to report by
you if, in our opinion:
exception
•
adequate accounting records have not been
kept by the Parent Company, or returns
adequate for our audit have not been
received from branches not visited by us; or
•
the Parent Company financial statements
and the part of the Directors’ remuneration
report to be audited are not in agreement
with the accounting records and returns; or
•
certain disclosures of Directors’
remuneration specified by law are not made;
or
•
we have not received all the information and
explanations we require for our audit.
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Responsibilities of Directors
As explained more fully in the Directors’ responsibilities, the
Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate
the Group or the Parent Company or to cease operations, or have
no realistic alternative but to do so.
and regulation, review of board meeting minutes and review of
legal correspondence.
We focused on laws and regulations that could give rise to a
material misstatement in the company financial statements. Our
tests included, but were not limited to:
•
•
•
•
•
agreement of the financial statement disclosures to
underlying supporting documentation;
enquiries of management;
Testing of journal postings made during the year to identify
potential management override of controls
review of minutes of board meetings throughout the period;
and
Obtaining an understanding of the control environment in
monitoring compliance with laws and regulations
Auditor’s responsibilities for the audit of
the financial statements
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising
that the risk of not detecting a material misstatement due
Our objectives are to obtain reasonable assurance about whether
to fraud is higher than the risk of not detecting one resulting
the financial statements as a whole are free from material
from error, as fraud may involve deliberate concealment by, for
misstatement, whether due to fraud or error, and to issue an
example, forgery, misrepresentations or through collusion. There
auditor’s report that includes our opinion. Reasonable assurance
are inherent limitations in the audit procedures performed and
is a high level of assurance, but is not a guarantee that an audit
the further removed non-compliance with laws and regulations
conducted in accordance with ISAs (UK) will always detect a
is from the events and transactions reflected in the financial
material misstatement when it exists. Misstatements can arise
statements, the less likely we are to become aware of it.
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
We gained an understanding of the legal and regulatory
framework applicable to the group and the two industries
in which the group operates, and considered the risk of acts
by the company which were contrary to applicable laws and
regulations, including fraud. These included but were not limited
to compliance with Companies Act 2006, the FCA listing and
DTR rules, the principles of the UK Corporate Governance Code,
industry practice represented by the AIC SORP and international
accounting standards. We also considered the company’s
qualification as an Investment Trust under UK tax legislation.
We considered compliance with this framework through
discussions with the Audit Committee and performed audit
procedures on these areas as considered necessary. Our
procedures involved enquiries with Management, review of the
reporting to the directors with respect to compliance with laws
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A further description of our responsibilities is available on
the Financial Reporting Council’s website at: www.frc.org.
uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Parent Company’s members those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone
other than the Parent Company and the Parent Company’s
members as a body, for our audit work, for this report, or for
the opinions we have formed.
Vanessa-Jayne Bradley (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
United Kingdom
25 February 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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Group income statement
as at 31 December 2020
UK dividends
UK special dividends
Overseas dividends
Overseas special dividends
Interest income
Independent professional services fees
Other income
Total income
Net (loss)/gain on investments held at fair
value through profit or loss
Total income and capital gains/(losses)
Cost of sales
Administrative expenses
Provision for onerous contracts
Operating profit/(loss)
Finance costs
Interest payable
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year
Return per ordinary share (pence)
Diluted return per ordinary share (pence)
Revenue
£000
14,794
458
2,685
—
17,937
89
38,898
219
57,143
Capital
£000
2020
Total*
£000
Revenue
£000
Capital
£000
—
—
—
—
—
—
—
—
—
14,794
23,458
458
2,685
—
2,364
3,294
85
17,937
29,201
89
706
38,898
36,815
219
20
57,143
66,742
—
—
—
—
—
—
—
—
—
2019
Total*
£000
23,458
2,364
3,294
85
29,201
706
36,815
20
66,742
—
(16,354)
(16,354)
—
100,023
100,023
57,143
(16,354)
40,789
66,742
100,023
166,765
(4,405)
—
(4,405)
(5,026)
—
(5,026)
(24,879)
(2,216)
(27,095)
(22,835)
(2,379)
(25,214)
118
—
118
113
—
113
27,977
(18,570)
9,407
38,994
97,644
136,638
(1,320)
(3,958)
(5,278)
26,657
(22,528)
(1,178)
—
25,479
(22,528)
21.56
21.56
(19.06)
(19.06)
4,129
(1,178)
2,951
2.50
2.50
(1,319)
37,675
(1,420)
36,255
30.68
30.67
(3,958)
93,686
—
(5,277)
131,361
(1,420)
93,686
129,941
79.27
79.27
109.95
109.94
Notes
6
2
3
4
6
7
8
7
7
7
Statement of comprehensive income
as at 31 December 2020
GROUP
Profit for the year
Revenue
£000
Capital
£000
2020
Total
£000
Revenue
£000
Capital
£000
2019
Total
£000
25,479
(22,528)
2,951
36,255
93,686
129,941
Items that will or may be reclassified to profit or loss:
Foreign exchange on translation of foreign operations
—
Items that will not be reclassified to profit or loss:
Pension actuarial losses
Taxation on pension
Other comprehensive loss for the year
(6,500)
1,235
(5,265)
105
—
—
105
Total comprehensive (loss)/income for the year
20,214
(22,423)
105
—
(214)
(214)
(6,500)
1,235
(5,160)
(2,209)
(800)
152
(648)
—
—
(214)
(800)
152
(862)
35,607
93,472
129,079
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Statement of financial position
as at 31 December 2020
Assets
Non-current assets
Goodwill
Property, plant and equipment
Right-of-use asset
Other intangible assets
Investments held at fair value through profit or loss
Investments in subsidiary undertakings
Retirement benefit asset
Deferred tax asset
Total non-current assets
Current assets
Trade and other receivables
Other accrued income and prepaid expenses
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Amounts owed to subsidiary undertakings
Trade and other payables
Lease liability
Corporation tax payable
Deferred tax liability
Other taxation including social security
Deferred income
Total current liabilities
Non-current liabilities and deferred income
Long-term borrowings
Deferred income
Lease liability
Retirement benefit liability
Provision for onerous contracts
Total non-current liabilities
Total net assets
Equity
Called up share capital
Share premium
Own shares
Capital redemption
Translation reserve
Capital reserves
Retained earnings
Total equity
Notes
11
12
23
13
14
14
24
8
15
16
17
23
8
8
21
23
4
18
18
2020
£000
1,914
1,088
5,413
619
GROUP
2019
£000
COMPANY
2020
£000
2019
£000
1,930
64
1,057
104
—
—
—
16
—
—
—
16
812,297
822,316
812,083
822,102
—
—
771
—
61,283
61,283
2,700
—
—
—
—
—
822,102
828,171
873,382
883,401
16,129
6,529
7,213
6,438
4,084
1,990
542
2,155
41,762
71,236
32,098
46,128
64,420
84,887
38,172
48,825
886,522
913,058
911,554
932,226
—
—
61,698
53,990
27,405
13,010
13,075
1,420
—
238
—
860
4,367
730
710
83
540
5,625
—
—
—
793
16
—
20
—
534
16
32,870
20,698
75,582
55,980
114,201
114,157
74,569
74,551
4,011
5,606
2,840
—
2,463
125
135
350
—
118
—
—
—
—
—
—
126,658
117,088
74,694
74,686
726,994
775,272
761,278
801,560
5,923
9,277
(1,461)
8
5,921
9,147
(1,332)
8
2,002
1,897
5,923
9,277
—
8
—
5,921
9,147
—
8
—
19
674,591
697,119
733,189
755,717
36,654
62,512
12,881
30,767
726,994
775,272
761,278
801,560
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E
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Total equity pence per share
615.19
655.76
As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own income statement, however its gain for
the year was £5,658,000 (2019: gain £122,817,000). Approved and authorised for issue by the Board on 25 February 2021 and signed on its
behalf by:
R. Hingley, Chairman
Registered number 30397.
| D. Jackson, Chief Executive Officer
93
F I N A N C I A L S T A T E M E N T S
Statement of changes in equity
as at 31 December 2020
GROUP
Called
up share
capital
£000
Share
premium
£000
Own
shares
£000
Capital
redemption
£000
Translation
reserve
£000
Capital
reserves
£000
Retained
earnings
£000
Total
£000
Balance at 1 January 2020
5,921
9,147
(1,332)
8
1,897
697,119
62,512
775,272
Net gain for the period
Foreign exchange
Actuarial gain on pension
scheme (net of tax)
Total comprehensive loss
for the period
Issue of shares
Movement in own shares
Dividend relating to 2019
Dividend relating to 2020
Statute barred dividends
Total equity at
31 December 2020
GROUP
Balance at 1 January
2019
Net gain for the period
Foreign exchange
Actuarial gain on pension
scheme (net of tax)
Total comprehensive income
for the period
Issue of shares
Movement in own shares
Dividend relating to 2018
Dividend relating to 2019
Statute barred dividends
Total equity at
31 December 2019
—
—
—
—
2
—
—
—
—
—
—
—
—
130
—
—
—
—
—
—
—
—
—
(129)
—
—
—
—
—
—
—
—
—
—
—
—
(22,528)
25,479
2,951
105
—
—
105
—
—
—
(5,265)
(5,265)
105
(22,528)
20,214
(2,209)
—
—
—
—
—
—
—
—
—
—
—
—
132
(129)
(22,976)
(22,976)
(23,096)
(23,096)
—
—
5,923
9,277
(1,461)
8
2,002
674,591
36,654
726,994
Called up
share capital
£000
Share
premium
£000
Own
shares
£000
Capital
redemption
£000
Translation
reserve
£000
Capital
reserves
£000
Retained
earnings
£000
Total
£000
5,919
8,904
(966)
—
—
—
—
2
—
—
—
—
—
—
—
—
243
—
—
—
—
—
—
—
—
—
(366)
—
—
—
5,921
9,147
(1,332)
8
—
—
—
—
—
—
—
—
—
8
2,111
—
(214)
—
603,433
49,955
669,364
93,686
36,255
129,941
—
—
—
(214)
(648)
(648)
(214)
93,686
35,607
129,079
—
—
—
—
—
—
—
—
—
—
—
—
245
(366)
(15,272)
(15,272)
(7,813)
(7,813)
35
35
1,897
697,119
62,512
775,272
Capital reserves comprises realised and unrealised gains on investments held at fair value through profit or loss (see note 19).
94
lawdebenture.com
Statement of changes in equity continued
as at 31 December 2020
COMPANY
Balance at 1 January 2 020
Total comprehensive gain
for the period
Issue of shares
Dividend relating to 2019
Dividend relating to 2020
Statute barred dividends
Total equity at
31 December 2020
COMPANY
Balance at 1 January 2019
Total comprehensive gain
for the period
Issue of shares
Dividend relating to 2018
Dividend relating to 2019
Statute barred dividends
Total equity at
31 December 2019
Share
capital
£000
5,921
Share
premium
£000
9,147
—
2
—
—
—
—
130
—
—
—
5,923
9,277
Share
capital
£000
5,919
Share
premium
£000
8,904
—
2
—
—
—
—
243
—
—
—
5,921
9,147
Own
shares
£000
Capital
redemption
£000
Translation
reserve
£000
Capital
reserves
£000
Retained
earnings
£000
Total
£000
—
—
—
—
—
—
—
8
—
—
—
—
—
8
—
755,717
30,767
801,560
—
—
—
—
—
(22,528)
28,186
5,658
132
—
—
—
—
—
(22,976)
(22,976)
(23,096)
(23,096)
—
—
—
733,189
12,881
761,278
Own
shares
£000
Capital
redemption
£000
Translation
reserve
£000
Capital
reserves
£000
Retained
earnings
£000
Total
£000
—
—
—
—
—
—
—
8
—
—
—
—
—
8
—
—
—
—
—
—
—
662,031
24,686
701,548
93,686
29,131
122,817
—
—
—
—
—
245
(15,272)
(15,272)
(7,813)
(7,813)
35
35
755,717
30,767
801,560
Capital reserves comprises realised and unrealised gains on investments held at fair value through profit or loss (see note 19).
95
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F I N A N C I A L S T A T E M E N T S
Statements of cash flows
for the year ended 31 December 2020
Operating activities
Operating profit before interest payable and taxation
Losses/(gains) on investments
Non-cash dividends
Foreign exchange losses/(gains)
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Interest on lease liability
Amortisation of intangible assets
Loss on sale of fixed assets
Decrease/(increase) in receivables
(Decrease)/increase in payables
Transfer from capital reserves
Normal pension contributions in excess of cost
Cash generated from operating activities
Taxation
Operating cash flow
Investing activities
Acquisition of property, plant and equipment
Expenditure on intangible assets
Purchase of investments
Sale of investments
Acquisition of subsidiary undertakings
Cash flow from investing activities
Financing activities
Intercompany funding
Interest paid
Dividends paid
Payment of lease liability
Proceeds of increase in share capital
Purchase of own shares
Net cash flow from financing activities
2020
£000
GROUP
2019
£000
COMPANY
2020
£000
2019
£000
9,406
136,638
18,570
(97,644)
—
19
37
1,179
49
59
(15)
(9,007)
14,926
(1,341)
(960)
—
20
55
1,101
99
104
—
(958)
1,298
(1,680)
(1,000)
10,843
18,570
(10,000)
—
—
—
—
—
—
128,207
(97,644)
—
—
—
—
—
—
—
(3,377)
11,922
(1,341)
—
(626)
60
(1,680)
—
32,922
38,033
26,617
28,317
(1,103)
31,819
(663)
—
—
37,370
26,617
28,317
(1,079)
(574)
(21)
(23)
—
—
—
(16)
(173,831)
(163,106)
(173,831)
(163,106)
166,908
102,888
166,908
102,888
—
—
—
(50)
(8,576)
(60,262)
(6,923)
(60,284)
—
—
17,708
6,150
(5,278)
(5,277)
(5,206)
(5,390)
(46,071)
(23,050)
(46,071)
(23,050)
(1,163)
132
(129)
(1,177)
245
(366)
—
132
—
—
245
—
(52,509)
(29,625)
(33,437)
(22,045)
Net (decrease)/increase in cash and cash equivalents
(29,266)
(52,517)
(13,743)
(54,012)
Cash and cash equivalents at beginning of period
Foreign exchange (losses)/gains on cash and cash equivalents
Cash and cash equivalents at end of period
71,236
(208)
41,762
124,148
46,128
100,321
(395)
(287)
(181)
71,236
32,098
46,128
96
lawdebenture.com
Notes to the accounts
for the year end 31 December 2020
1. Summary of significant accounting policies
General information
The Law Debenture Corporation p.l.c. is a public company incorporated in the United Kingdom. The address of the registered office
is given on page 130. The Group’s operations and its principal activities are as an investment trust and the provider of independent
professional services.
Basis of preparation
The financial statements of The Law Debenture Corporation p.l.c. and the Group have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Where presentational guidance set out in the Statement of Recommended Practice Financial Statements of Investment Trust Companies
and Venture Capital Trusts issued November 2014 and updated in October 2019 (SORP) is consistent with the requirements of IFRS, the
Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
The Directors have considered the guidance of the UK Financial Reporting Council and events relating to the spread of Covid-19 and have
treated this as an in year event with due consideration given in preparing these financial statements.
Going concern
The financial statements have been prepared on a going concern basis and under the historical cost basis of accounting, modified to
include the revaluation of investment at fair value.
The assets of the Company consist of securities that are readily realisable and, accordingly, the Directors believe that the Company has
adequate resources to continue in operational existence for at least 12 months from the date of approval of the financial statements.
The Directors have also considered the impact of Covid-19, including cash flow forecasting, balances sheet review at entity level, a review of
covenant compliance including the headroom above the covenants and an assessment of the liquidity of the portfolio. A detailed overview
of these considerations can be found in the section on our response to Covid-19, page 61. They have concluded that the Group is able to
meet its financial obligations, including the repayment of the debenture interest, as they fall due for a period of at least 12 months from
the date of approval of the financial statements. Having assessed these factors and the principal risks, the Directors are not aware of any
material uncertainties that cast significant doubt on the Group’s ability to continue as a going concern.
The Directors have also considered the wider operational consequences and ramifications of the Covid-19 pandemic. As explained in the
Chief Executive Officer’s report our business infrastructure has proved resilient in protecting the safety of our employees and maintaining
our high levels of client service as the vast majority of Group staff work from home. We continue to review our approach in line with latest
developments and government guidance.
Critical accounting estimates and judgements
The preparation of the financial statements requires the exercise of judgement both in application of accounting policies which are set out
below and in the selection of assumptions used in the calculation of estimates. These estimates and judgements are reviewed on an ongoing
basis and are continually evaluated based on historical experience and other factors. However, actual results may differ from these estimates.
The most significantly affected component of the financial statements and associated critical judgements is as follows:
Defined benefit scheme
The calculation of the defined benefit scheme assets and obligations is sensitive to the assumptions used. The assumptions used are given
in note 24 to the financial statements.
The sensitivity to changes in assumptions and conditions which are significant to the calculation of the asset have been considered
and the following is an illustration of the potential impact.
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Discount rate +0.1%
Inflation assumptions +0.1%
Life expectancy at 65 +1 year
RPI/CPI gap 0.1% increase in wedge between RPI and CPI at all durations (2019: 1.0% instead of 0.8%)
Increase/(decrease)
in defined benefit obligations
at 31 December
2020
£ million
at 31 December
2019
£ million
(1.2)
1.0
2.9
(0.3)
(1.1)
0.9
2.0
(0.6)
97
Notes to the accounts continued
for the year end 31 December 2020
1. Summary of significant accounting policies continued
Basis of consolidation
The consolidated financial statements incorporate the financial statements of The Law Debenture Corporation p.l.c. and entities controlled
by the Company (its subsidiaries) made up to the end of the financial period. The Company controls an investment if all three of the
following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to
use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change
in any of these elements of control.
The assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess
consideration over the fair values of the identifiable net assets acquired is recognised as goodwill.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. The financial
statements of subsidiaries are adjusted, where necessary, to ensure the accounting policies used are consistent with those adopted by
the Group.
Presentation of income statement and statement of comprehensive income
In order to better reflect the activities of an investment trust company and in accordance with the SORP, supplementary information
which analyses the income statement and statement of comprehensive income between items of a revenue and capital nature has been
presented. Additionally, the net revenue is the measure the Directors believe appropriate in assessing the Group’s compliance with certain
requirements set out in Sections 1158-1159 of the Corporation Tax Act 2010.
The allocation of investment trust finance costs and investment management fees between the revenue and the capital columns in the
income statement reflects the expected split of future returns between income and capital. The proportional split is:
• Revenue 25% (2019: 25%)
•
Capital 75% (2019: 75%)
Segment reporting
Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by
the Directors in deciding how to allocate resources and in assessing performance. The Group comprises two operating segments; the
investment portfolio and independent professional services business. This is consistent with internal reporting.
Foreign currencies
Transactions recorded in foreign currencies are translated into sterling at the exchange rate ruling on the date of the transaction.
Assets and liabilities denominated in foreign currencies at the reporting date are translated into sterling at the exchange rate ruling at that
date. Gains and losses on translation are included in profit or loss for the period, however exchange gains or losses on investments held at
fair value through profit or loss are included as part of their fair value gain or loss.
The assets and liabilities of overseas subsidiaries are translated at exchange rates prevailing on the reporting date. Income and expenses of
overseas subsidiaries are translated at the average exchange rates for the period. Exchange differences arising from the translation of net
investment in foreign subsidiaries are recognised in the statement of comprehensive income and transferred to the Group’s translation reserve.
Property, plant and equipment and right-of-use assets
All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the item. Depreciation is calculated using the straight-line method to allocate the cost over the assets’
estimated useful lives.
Right-of-use assets are measured at cost less accumulated depreciation. The carrying amount is adjusted for any re-measurement of the
lease liability.
Leasehold improvements
over the remaining lease period
Office furniture and equipment
3-10 years
Right-of-use asset
over the remaining lease period
98
lawdebenture.com
Notes to the accounts continued
for the year end 31 December 2020
1. Summary of significant accounting policies continued
Intangible assets
Computer software
Computer software is capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are
amortised over their estimated useful lives of between three and five years.
IT project costs
IT project costs have been capitalised that relate to the development of new internal software scheduled to be launched in 2021. It will be
depreciated on the commencement of its use, over the useful economic life of three years.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable
assets and liabilities of a subsidiary at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured
at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any
impairment would be recognised in profit or loss and is not subsequently reversed.
Impairment of assets
An impairment loss is recognised for the amount by which an asset’s carrying amount exceeds its recoverable amount. Assets are reviewed on a
regular basis and tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Financial instruments
Investments
Listed and unlisted investments, which comprise the investment trust portfolio, have been designated as investments held at fair value
through profit or loss. Purchases and sales of listed and unlisted investments are recognised on the date on which the Group commits to
purchase or sell the investment. Investments are initially recognised at fair value and transaction costs are expensed as incurred. Gains and
losses arising from listed and unlisted investments, as assets at fair value through profit or loss, are included in the income statement in
the period in which they arise. The Group has not taken the option to irrevocably designate any equity securities as fair value through other
comprehensive income. Transaction costs are expensed immediately.
The fair value of listed investments is based on quoted market prices at the reporting date. The quoted market price used is the bid price.
The fair value of unlisted investments is determined by the Directors with reference to the International Private Equity and Venture Capital
Valuation (IPEV) guidelines (December 2018).
Gains and losses on investments and direct transaction costs are analysed within the income statement as capital. All other costs of the
investment trust are treated as revenue items.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated
irrecoverable amounts and expected credit losses.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held with banks and other short-term highly liquid investments with original
maturities of three months or less, subject to insignificant changes in fair value.
Borrowings
Borrowings are recognised initially at fair value, which is generally the proceeds net of transaction costs incurred. The difference between
the proceeds net of transaction costs and the redemption value is recognised in the income statement over the term of the borrowings
using the effective interest rate method, so as to generate a constant rate of return on the amount outstanding.
Share capital
Ordinary shares are classified as equity. The ordinary shares of the Company which have been purchased by the Employee Share
Ownership Trust (ESOT) to provide share based payments to employees are valued at cost and deducted from equity.
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Notes to the accounts continued
for the year end 31 December 2020
1. Summary of significant accounting policies continued
Financial instruments continued
Taxation
Current tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it
excludes items of income or expense which are either never taxable or deductible or are taxable or deductible in other periods. The
Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the year end date.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements.
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it
is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the
Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each year end date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to recover the asset.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is expected to be settled or the
asset is expected to be realised based on tax rates that have been enacted or substantively enacted at the year end date.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to do so and presented as a net number on
the face of the balance sheet.
Investment in subsidiaries
Investments in subsidiaries are carried at cost.
Revenue recognition
Dividend income
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.
Stock lending
Stock lending revenue is accounted for on an accruals basis and shown in the revenue return based on amounts to which the
Company is entitled. The fees relating to the third party arranging the transaction are accounted for in Cost of Sales.
Interest income
Interest income is accrued on a time basis using the effective interest rate applicable.
IPS income
The Group has disaggregated the IPS revenue into various categories below which depict the nature, amount, timing, and uncertainty
of revenue and cash flows.
During the course of the year there has been no changes to the Group’s application of IFRS 15. We continue to recognise revenue in
line with the discharge of our performance obligations and we apply this consistently across the Group.
Corporate Services
Corporate Services provide governance services and includes Corporate Services, Service of Process and Safecall. In Service of Process,
the performance obligation is fulfilled at the point in time we are appointed as process agent for the client, who is the contract
counter party. In Corporate Services and Safecall the performance obligation is the provision of contracted services.
The transaction price can include any combination of one-off acceptance fees, regular annual payments, and special fees for extra
work. Transactions are billed as a single payment at point of engagement or as on-going annual fees. Revenue is recognised over the
period of time it is taken to fulfil the contracted performance obligation.
For annual contracts such as the provision of company secretarial work, or a whistleblowing hotline, the substance of these
performance obligations is to “stand ready” to serve the customer and is satisfied over time with revenue recognised straight-line over
the time lapsed. If the contract is an acceptance fee, the revenue is recognised in-month as that is the obligation and performance
is at that point in time. If the contract is for training, revenue is recognised in the month the training took place as the obligation is
fulfilled at that training event.
100
lawdebenture.com
Notes to the accounts continued
for the year end 31 December 2020
1. Summary of significant accounting policies continued
Revenue recognition continued
Corporate Trust
Contract terms are dealt with either in trust deeds or appointment letters. Revenue is recognised over the period of service where
amounts which are not recognised in the financial period are deferred. The majority of Group deferred revenue relates to Corporate
Trust business. Amounts are mostly billed and paid on an annual or quarterly basis. The Corporate Trust business is not adversely
affected by economic stress factors because in a downturn clients seek to restructure their debt arrangements.
The transaction price can include any combination of one-off acceptance fees, regular annual payments, and special fees for extra
work, and are recognised over the annual term or when the performance obligation is met.
The performance obligations are services provided in the creation of the trust or the structure and the obligations set out in the trust
deed or service agreement over the period for which the trust or structure will be in place.
Pensions
Pension trusts provide professional trustee and governance services to clients, typically on a fixed annual fee basis or a time cost basis.
The transaction price may be determined either by time billed or as an annual fixed fee.
The performance obligation is provision of the time of the Pensions professionals and the transfer of the services is at that point of time.
Revenue is recognised in the accounting period in which the time has been recorded with amounts mostly billed and paid on a
quarterly basis. This means that revenue accrued at year end is invoiced in January the following year.
The cashflow associated with Pensions are largely unimpacted by economic factors because if a client becomes distressed they still
deliver on their pensions governance requirements. There has been very limited history of bad debt write-off in the Pensions business.
Employee benefits
Pension costs
The Group operates a defined benefit pension plan, which was closed to future accrual on 31 December 2016. The cost of providing
benefits under the plan is determined using the projected unit credit method, with independent actuarial calculations being
carried out at each year end date. Actuarial gains and losses are recognised in full in the period in which they occur through other
comprehensive income.
The asset recognised in the statement of financial position in respect of the defined benefit plan is the present value of the defined
benefit obligation at the year end date less the fair value of the plan assets.
In addition the Group operates defined contribution plans, where the cost recognised is the contributions paid in respect of the year.
Profit share schemes
The Group recognises provisions in respect of its profit share schemes when contractually obliged or when there is a past practice that
has created a constructive obligation.
Share based plans
The Group issues equity-settled share-based payments to certain employees. whereby the shares are deferred for a three-year period.
Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of
the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of
shares that will eventually vest and adjusted for the effects of non-market-based vesting conditions.
The Group also awards share options to executives. In 2020 the Group introduced a long-term performance incentive plan (LTIP) to
executives in addition to annual bonus following the completion of a required service period and is dependent on the achievement
of corporate performance and individual targets. Options are normally exercisable between 3 to 5 years from the date of grant for nil
consideration. Full details of this plan can be found in the Directors’ remuneration report.
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E
M
E
N
T
S
101
Notes to the accounts continued
for the year end 31 December 2020
1. Summary of significant accounting policies continued
Reserves
A description of each of the reserves follows:
Share premium
This reserve represents the difference between the issue price of shares and the nominal value of shares at the date of issue,
net of related issue costs.
Capital redemption
This reserve was created on the cancellation and repayment of the Company’s share capital.
Own shares
This represents the cost of shares purchased by the ESOT.
Capital reserves
The following are dealt with through this reserve:
• gains and losses on realisation of investments; and
• changes in fair value investments which are readily convertible to cash.
Retained earnings
Net revenue profits and losses of the Company and its subsidiaries and the fair value costs of share based payments which are revenue
in nature are dealt with in this reserve.
Translation reserve
This reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and in
prior years gains or losses on hedging instruments relating to the effective portion of the hedge related to the net investment in foreign
subsidiaries.
Leases
Operating leases under right-of-use model
From 1 January 2019 IFRS 16 replaced IAS 17; and the right-of-use model replaces the risks and rewards of ownership model. Under this
standard leases previously classified as operating leases are recognised on the balance sheet, and the impact to the income statement
is a change to both the expense character (rent expenses replaced with depreciation and interest expense) and recognition pattern
(acceleration of lease expense relative to the recognition pattern for operating leases today).
Further detail on leases is provided in note 23 of the accounts.
Dividend distribution
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when paid. In the
case of final dividends, this is when approved by the shareholders.
2. Net capital gain/(loss) on investments
Realised gains based on historical cost
Amounts recognised as unrealised in previous years
Realised gains based on carrying value at previous year end date
Unrealised (loss)/gain on investments
Transfers to revenue
102
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2020
£000
2019
£000
62,233
39,043
(51,586)
(22,242)
10,647
(27,001)
(16,354)
—
16,801
83,365
100,166
(143)
(16,354)
100,023
Notes to the accounts continued
for the year end 31 December 2020
3. Administrative expenses
Administrative expenses include:
Salaries and Directors’ fees
Social security costs
Other pension costs
Investment management fee*
Depreciation – property, plant and equipment
Depreciation – right-of-use asset
Amortisation – intangible assets
Interest on lease liability
Foreign exchange
Auditors’ remuneration
Other property costs
IT infrastructure
Business development
Professional fees
Other expenses
Administrative expenses
2020
£000
13,762
1,622
1,093
16,477
447
37
1,179
59
49
(35)
289
511
791
83
950
2019
£000
12,731
1,457
878
15,066
512
55
1,101
104
99
54
265
542
463
129
676
4,042
24,879
3,769
22,835
* 25% of the management fee is charged to revenue, and 75% to capital reserves, to better reflect the expected split of future returns between income and capital. Further details are given
in note 1 on page 98.
During the year, the Group employed an average of 152 staff (2019: 133). All staff are engaged in the provision of independent professional
services. The Company has no employees.
Details of the terms of the investment management agreement are provided on page 34 of the strategic report.
Administrative expenses charged to capital are transaction costs and foreign exchange differences on the purchase of investments held at
fair value through profit or loss.
A more detailed analysis of the auditors’ remuneration on a worldwide basis is provided below:
Audit services
– fees payable to the Company’s auditors for the audit of its financial statements*
– audit related regulatory
2020
£000
275
14
289
2019
£000
251
14
265
* Including the Company £48,000 (2019: £45,500).
A description of the work of the Audit and Risk Committee is set out in the Audit and Risk Committee report on pages 63 to 65
and includes an explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided by
the auditors.
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103
Notes to the accounts continued
for the year end 31 December 2020
4. Provision for onerous contracts
GROUP
At 1 January
(Release) made in the year
Foreign exchange
At 31 December
2020
£000
118
(118)
—
—
2019
£000
236
(113)
(5)
118
In December 2016 the Group completed the disposal of substantially all of its US corporate trust business for a consideration of $1. The
disposal was the completion of the first part of a strategy to exit the US corporate trust business, so as to release $50m of capital required
by the business. At the time of disposal the contracts remaining were assessed and deemed to generate insufficient income to cover
the costs of running and financing the remainder of the business up to the eventual date of its closure. A provision for onerous costs of
£3,106,000 representing the expected net future costs up to the date of disposal or completion of the remaining contracts was included
in the year ended 31 December 2016. The business was closed during 2020 and the remaining provision of £118,000 was released (2019:
release of £113,000). No provision was required at 31 December 2020.
5. Remuneration of Directors (key management personnel)
The remuneration of the Directors, who are the key management personnel of the Group, comprises the following:
Short-term benefits including fees in respect of Directors
Deferred share bonus scheme
Details for each individual Director are shown in the remuneration report on pages 77 and 82.
6. Interest
Interest Income
Interest on pension scheme (net)
Interest on bank deposits
Returns on money market funds
Interest Payable
Interest on long-term debt – revenue
Interest on long-term debt – capital
2020
£
2019
£
1,285,600
1,351,170
—
—
1,285,600
1,351,170
2020
£000
—
1
88
89
1,320
3,958
5,278
2019
£000
100
1
605
706
1,319
3,958
5,277
Interest (net)
(5,189)
(4,571)
104
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Notes to the accounts continued
for the year end 31 December 2020
7. Segment analysis
Investment portfolio
Independent
professional services
Group charges
Total
31 December
2020
£000
31 December
2019
£000
31 December
2020
£000
31 December
2019
£000
31 December
2020
£000
31 December
2019
£000
31 December
2020
£000
31 December
2019
£000
Revenue
Segment income
17,937
29,201
38,898
36,815
Other income
Cost of sales
213
—
17
—
6
3
(4,405)
(5,026)
Administration costs
(2,570)
(2,186)
(22,301)
(20,536)
Release of onerous contracts
Interest payable (net) (note 6)
Return, including profit on
—
15,580
(1,260)
—
27,032
(822)
ordinary activities before taxation
14,320
26,210
Taxation
—
—
Return, including profit
—
12,198
29
12,227
(1,178)
—
11,256
209
11,465
(1,370)
attributable to shareholders
14,320
26,210
11,049
10,095
—
—
—
(8)
118
110
—
110
—
110
—
—
—
(113)
113
—
—
—
(50)
56,835
66,016
219
20
(4,405)
(5,026)
(24,879)
(22,835)
118
113
27,888
38,288
(1,231)
(613)
26,657
(1,178)
37,675
(1,420)
(50)
25,479
36,255
Revenue return per
ordinary share (pence)
Assets
Liabilities
12.12
22.18
9.35
850,255
870,944
36,246
(146,992)
(126,399)
(12,536)
Total net assets
703,263
744,545
23,710
8.54
42,021
(11,226)
30,795
0.09
(0.04)
21.56
30.68
21
—
21
50
(118)
(68)
886,522
913,015
(159,528)
(137,743)
726,994
775,272
For the purposes of reporting segmental performance, the table above presents a split of the revenue column between the investment
portfolio, the IPS business and Group charges. Group dividends are paid from the investment portfolio segment of revenue reserves.
Geographic location of revenue: 90% of revenue is based in the UK. Geographic location is based on the jurisdiction in which the
contracting legal entity is based.
Major customers: Due to the diverse nature of the IPS revenue streams, there is no single customer or concentration of customers that
represents more than 2% of gross revenue streams.
Capital element: The capital element of the income statement is wholly gains and losses relating to investments held at fair value through
profit and loss (2020 loss of £16,354,000; 2019 gain of £100,023,000), administrative expenses (2020: £2,216,000; 2019: £2,379,000) and
interest payable (2020: £3,958,000; 2019: £3,958,000) which corresponds to amounts classified as capital in nature in accordance with the
SORP are shown in the capital column of the income statement on page 92.
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Details regarding the segments are included on page 1 – Group summary and in note 1 – Segment reporting on page 98.
The total of the capital element and the table above is loss of £8,208,000 (2019: gain of £119,896,000).
105
Notes to the accounts continued
for the year end 31 December 2020
7. Segment analysis continued
Investment portfolio
Independent professional services
31 December
2020
£000
31 December
2019
£000
31 December
2020
£000
31 December
2019
£000
31 December
2020
£000
Total
31 December
2019
£000
Other information
Capital expenditure
Depreciation/amortisation
Depreciation – right-of-use asset
—
—
—
—
—
—
1,652
96
1,179
44
159
1,101
Group charges before taxation during the year comprised the following:
Closure of the US trust business:
Release for onerous contracts (see note 4)
8. Taxation
Taxation based on revenue for the year comprises:
UK Corporation tax at 19.0% (2019: 19.0%)
Foreign tax charge
Total current tax charge
Deferred tax charge
Charge for the year
Taxation
The charge for the year can be reconciled to the profit per the income statement as follows:
Profits before taxation
Tax on ordinary activities at standard rate 19.0% (2019: 19.0%)
Effects of:
Permanent tax adjustments
Higher rates of tax on foreign income
Non-taxable capital (gains)
Tax credit on dividend income
Limit on Group relief for UK interest expense
Prior year under/(over) provision in respect of current tax
Deferred tax on movement in provision for onerous contracts
Total
1,652
96
1,179
2020
£000
118
118
2020
£000
404
338
742
436
1,178
2020
£000
4,129
785
(79)
128
6,405
(5,926)
133
(56)
(212)
1,178
44
159
1,101
2019
£000
113
113
2019
£000
855
327
1,182
238
1,420
2019
£000
131,361
24,885
25
150
(18,959)
(4,848)
217
—
(50)
1,420
The Group expects that a substantial portion of its future income will continue to be in the form of dividend receipts and capital gains and
losses, which constitute non-assessable income. On this basis, the Group tax charge is expected to remain significantly different to the
standard UK rate of 19.0%.
106
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Notes to the accounts continued
for the year end 31 December 2020
8. Taxation continued
Deferred Tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and
prior reporting period.
GROUP
Deferred tax assets/(liabilities)
At 31 December 2018
(Charge) to income
Credit to other comprehensive income
Foreign exchange
At 31 December 2019
(Charge) to income
Credit to other comprehensive income
Other
At 31 December 2020
Accelerated tax
depreciation
£000
Retirement
benefit
obligations
£000
486
(48)
—
(8)
430
(246)
—
55
239
(475)
(190)
152
—
(513)
(190)
1,235
—
532
Total
£000
11
(238)
152
(8)
(83)
(436)
1,235
55
771
In accordance with the applicable accounting policy, deferred tax is calculated at the tax rates that are expected to apply to the reversal.
Foreign taxes reflect the current rate, whilst UK taxes are at the enacted rate of 19.0%. A deferred tax asset has not been recognised in
respect of foreign losses of £1,281,501 (2019: £1,245,981) as their usability cannot be predicted with reasonable certainty.
9. Dividends on ordinary shares
Dividends on ordinary shares comprise the following:
2020 Interims† 19.50p (2019: 6.60p)
2019 Final 12.90p (2018: 12.90p)
Statute barred dividends*
Total for year
† 2020 interim dividends were paid in July 2020, October 2020 and January 2021.
* Relates to dividends unclaimed over 12 years old.
2020
£000
2019
£000
23,096
22,976
—
7,813
15,272
(35)
46,072
23,050
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Proposed final dividend for the year ended 31 December 2020
The proposed final dividend is subject to approval by shareholders at the annual general meeting and has not been included as a liability
in these financial statements.
Set out below is the total dividend payable in respect of the financial year, which is the basis on which the requirements of Sections 1158-
1159 of the Corporation Tax Act 2010 are considered.
2020 Interims† 19.50p (2019: 6.60p)
2020 Final 8.0p (2019: 19.40p)
† 2020 interim dividends were paid in July 2020, October 2020 and January 2021.
2020
£000
23,096
9,476
32,572
2019
£000
7,813
22,975
30,788
On this basis, The Law Debenture Corporation p.l.c. satisfies the requirements of Sections 1158-1159 of the Corporation Tax Act 2010, as an
approved investment trust company.
107
Notes to the accounts continued
for the year end 31 December 2020
10. Net asset value/return per share
NAV per share is calculated based on 118,173,664 (2019: 118,224,400) shares, being the total number of shares in issue of 118,454,562 (2019:
118,429,010), less 267,752 (2019: 204,610) shares, acquired by the ESOT in the open market. The net asset value of £787,219,000 (2019:
£830,139,000) comprises the NAV per the balance sheet of £726,994,000 (2019: £775,272,000) plus the fair value adjustment to for the IPS
business of £112,407,000, (2019: £91,860,000) less the fair value adjustment for the debt of £52,204,000, (2019: £36,993,000).
Revenue return per share is based on profits attributable of £25,479,000 (2019: £36,255,000).
Capital loss per share is based on capital losses for the year of £22,528,000 (2019: gains £93,686,000).
Total return per share is based on gain for the year of £2,951,000 (2019: gain £129,941,000).
The calculations of returns per share are based on 118,171,875 (2019: 118,181,082) shares, being the weighted average number of shares
in issue during the year after adjusting for shares owned by the ESOT. In 2020, total revenue and capital diluted returns per share were
calculated using 118,192,860 shares (2019: 118,190,993 shares), being the diluted weighted average number of shares in issue assuming
exercise of options at less than fair value. There were no (2019: 47,380) antidilutive shares.
11. Goodwill
GROUP
Cost
At 1 January
Foreign exchange
At 31 December
Provision for impairment
At 1 January
Foreign exchange
At 31 December
Net book value at 31 December
2020
£000
2,359
(30)
2,329
428
(13)
415
1,914
2019
£000
2,397
(38)
2,359
445
(16)
429
1,930
The goodwill is identifiable with separate operating companies (Safecall Limited: £1,419,000; and Delaware Corporate Services Inc.:
£495,000). At 31 December 2020 the goodwill in relation to the operating companies was reviewed. The review assessed whether the
carrying value of goodwill was supported by the net present value of future cash flows based on management forecasts for 2021.
The review for Safecall was assessed using annual growth for five years of 5% with no terminal growth, which is based on current
expectations and a discount rate of 9% (2019: 9%). Sensitivity analysis was also completed using annual growth of 2% and a discount rate
of 10% and on neither basis was the goodwill considered to be impaired.
The review of Delaware Corporate Services Inc. was assessed using annual growth for five years of 5% with no terminal growth, which is
based on current expectations and a discount rate of 9% (2019: 9%). Sensitivity analysis was also completed using annual growth of 2%
and a discount rate of 10% and on neither basis was the goodwill considered to be impaired.
108
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Notes to the accounts continued
for the year end 31 December 2020
12. Property, plant and equipment
Office
improvements
£000
Furniture and
equipment
£000
2020
Total
£000
2,748
1,079
(2,372)
(7)
1,448
2,684
37
Office
improvements
£000
Furniture and
equipment
£000
2019
Total
£000
899
17
—
(3)
913
888
15
—
(3)
900
1,836
2,735
4
—
(5)
21
—
(8)
1,835
2,748
1,747
2,635
40
—
(3)
55
—
(6)
1,784
2,684
1,835
1,079
(1,576)
(4)
1,334
1,784
20
913
—
(796)
(3)
114
900
17
(813)
(2)
102
(1,544)
(2,357)
(2)
258
(4)
360
GROUP
Cost
At 1 January
Additions at cost
Disposals at cost
Foreign exchange
At 31 December
Accumulated depreciation
At 1 January
Charge
Disposals at cost
Foreign exchange
At 31 December
NET BOOK VALUE
Net book value at 31 December
12
1,076
1,088
13
51
64
The Company holds no property, plant and equipment.
13. Other intangible assets
Computer
Software
£000
IT project
Costs
£000
2020
Intangible
Total
£000
Computer
Software
£000
IT project
Costs
£000
2019
Intangible
Total
£000
GROUP
Cost
At 1 January
Additions at cost
Disposals at cost
Foreign exchange
At 31 December
Accumulated depreciation
At 1 January
Charge
Disposals at cost
Foreign exchange
At 31 December
NET BOOK VALUE
1,814
6
(660)
—
1,160
1,710
59
(661)
—
1,108
—
567
—
—
567
—
—
—
—
—
1,814
573
(660)
—
1,727
1,710
59
(661)
—
1,108
1,792
23
—
(1)
1,814
1,606
104
—
—
1,710
Net book value at 31 December
52
567
619
104
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A
T
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M
E
N
T
S
—
—
—
—
—
—
—
—
—
—
—
1,792
23
—
(1)
1,814
1,606
104
—
—
1,710
104
109
Notes to the accounts continued
for the year end 31 December 2020
14. Investments
Investments held at fair value through profit or loss
GROUP
Opening cost at 1 January
Gains at 1 January
Opening fair value at 1 January
Purchases at cost
Cost of acquisition
Sales – proceeds
– realised gains on sales
Gains/(losses) in the income statement
Closing fair value at 31 December
Closing cost at 31 December
Gains
Closing fair value at 31 December
Fair value through profit or loss
COMPANY
Opening cost at 1 January
Gains at 1 January
Opening fair value at 1 January
Purchases at cost
Cost of acquisition
Sales – proceeds
– realised gains on sales
Gains/(losses) in the income statement
Closing fair value at 31 December
Closing cost at 31 December
Gains
Closing fair value at 31 December
Listed
£000
629,845
188,402
818,247
173,831
(588)
(166,908)
62,233
(78,809)
808,006
698,413
109,593
808,006
Listed
£000
634,943
183,304
818,247
173,831
(588)
(166,908)
62,233
(78,809)
808,006
703,511
104,495
808,006
Unlisted
£000
3,547
522
4,069
—
—
—
—
222
4,291
3,547
744
4,291
Unlisted
£000
3,333
522
3,855
—
—
—
—
222
4,077
3,333
744
4,077
2020
Total
£000
633,392
188,924
822,316
173,831
(588)
Listed
£000
531,245
127,264
658,509
163,106
(661)
(166,908)
(102,888)
62,233
(78,587)
812,297
701,960
110,337
812,297
2020
Total
£000
638,276
183,826
822,102
173,831
(588)
39,043
61,138
818,247
629,845
188,402
818,247
Listed
£000
536,343
122,166
658,509
163,106
(661)
(166,908)
(102,888)
62,233
(78,587)
812,083
706,844
105,239
812,083
39,043
61,138
818,247
634,943
183,304
818,247
Unlisted
£000
3,547
537
4,084
—
—
—
—
(15)
4,069
3,547
522
4,069
Unlisted
£000
3,333
537
3,870
—
—
—
—
(15)
3,855
3,333
522
3,855
2019
Total
£000
534,792
127,801
662,593
163,106
(661)
(102,888)
39,043
61,123
822,316
633,392
188,924
822,316
2019
Total
£000
539,676
122,703
662,379
163,106
(661)
(102,888)
39,043
61,123
822,102
638,276
183,826
822,102
Listed investments are all traded on active markets and as defined by IFRS 13 are Level 1 financial instruments. As such they are valued at
unadjusted quoted bid prices. Unlisted investments are Level 3 financial instruments. They are valued by the Directors using unobservable
inputs including the underlying net assets of the investments. There were no transfers in or out of Level 3 during the year.
Investments in subsidiary undertakings – Company
Cost
At 1 January
Additions in year
At 31 December
110
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2020
£000
2019
£000
61,283
—
61,283
61,233
50
61,283
Notes to the accounts continued
for the year end 31 December 2020
14. Investments continued
Investments in subsidiaries are measured at cost less impairment. The financial statements consolidate the results and financial position
of the Group, including all subsidiary undertakings, which are listed in this note under section “subsidiaries and related undertakings”.
The cost of subsidiary undertakings includes capital contributions and as a consequence is not comparable to the fair value of the IPS
business.
Fair valuation of the IPS
The fair value of the IPS business relates to all of the wholly owned subsidiaries of the Company, with the exception of Law Debenture
Finance p.l.c. The Directors have chosen to provide a fair valuation of the IPS business, which is not included within the financial
statements, to assist the users of the annual report. The fair valuation is used in preparing performance data for the Group. The fair value
is determined using unobservable inputs (including the Group’s own data), which represent Level 3 inputs. The Directors’ estimate of fair
value uses the guidelines and methodologies on valuation published by the International Private Equity and Venture Capital Association.
The fair valuation of IPS is based upon the historic earnings before interest, taxation, depreciation and amortisation (EBITDA), an
appropriate multiple and the surplus net assets of the business at their underlying fair value. The multiple applied in valuing IPS is from
comparable companies sourced from market data, with appropriate adjustments to reflect the difference between the comparable
companies and IPS in respect of growth, margin, size and liquidity.
Fair valuation of IPS
EBITDA at a multiple of 9.4 (2019: 9.2)
Surplus net assets
2020
£000
125,349
10,605
135,954
2019
£000
105,938
16,367
122,305
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
An increase or decrease of 1 in the multiple would give rise to a £13.3m change in the fair valuation of the IPS. The adjustment to NAV to
reflect the IPS fair value is an increase of 95.12p per share (2019: 77.70p).
Subsidiaries and related undertakings
The following is a list of all of the subsidiaries within the Law Debenture Group. Each of them is 100% owned within the Group and has been
consolidated in the Group accounts. Subsidiaries held directly by the Company are in bold. Unless indicated, all subsidiaries are incorporated
and have their registered office in the United Kingdom at 8th Floor, 100 Bishopsgate, London EC2N 4AG. The addresses of overseas registered
companies appear at page 131. All shares issued by Group subsidiaries are ordinary shares. The Company and the Group do not have any
significant holdings in any qualifying undertakings other than the subsidiary undertakings listed below.
L.D. Pension Plan Trustee Limited
L.D.C. Trust Management Limited
Safecall Limited
Safecall Training Limited
Law Debenture Investment Management Limited
The Whistleblowing Company Limited
Law Debenture (Independent Professional Services) Limited
The Sole Trustee plc
Beagle Nominees Limited
The Law Debenture Corporation (Deutschland) Limited
The Law Debenture Trust Corporation p.l.c.
L.D.C. Latvia Limited
The Law Debenture Pension Trust Corporation p.l.c.
Law Debenture Trustee for Charities
Pegasus Pensions plc
Law Debenture (No. 1 Scheme) Trust Corporation
Law Debenture Corporate Services Limited
Law Debenture (No. 2 Scheme) Trust Corporation
Law Debenture Trustees Limited
Law Debenture (No. 3 Scheme) Pension Trust Corporation
The Law Debenture Intermediary Corporation p.l.c.
The Law Debenture (No. 5) Trust Corporation
Law Debenture Overseas No. 1 Limited
The Law Debenture (1996) Pension Trust Corporation
Law Debenture Finance p.l.c.
The Law Debenture (Airborne) Pension Trust Corporation
Law Debenture Securitisation Services Limited
The Law Debenture (BAA) Pension Trust Corporation
LDPTC Nominees Limited
The Law Debenture (BIS Management) Pension Trust Corporation
Law Debenture Governance Services Limited
The Law Debenture (BIS Retirement) Pension Trust Corporation
111
Notes to the accounts continued
for the year end 31 December 2020
14. Investments continued
The Law Debenture (Freemans) Trust Corporation
The Law Debenture (GS) Pension Trust Corporation
The Law Debenture (Intel Old Plan) Pension Trust Corporation
The Law Debenture (SAPP) Pension Trust Corporation
The Law Debenture (JLPF) Pension Trust Corporation
The Law Debenture (JLPP) Pension Trust Corporation
The Law Debenture (JGRP) Pension Trust Corporation
The Law Debenture (JGSPS) Pension Trust Corporation
The Law Debenture (JIC) Pension Trust Corporation
LDC DR Trustee Limited
LDC DR Nominees Limited
L.D.C. (SPV No.1) Limited
LD (Holdco) Limited
LD (Bidco) Limited
The Law Debenture Corporation (HK) Limited
(incorporated/registered office in Hong Kong)
Law Debenture Trust (Asia) Limited
(incorporated/registered office in Hong Kong)
Law Debenture China Limited
The Law Debenture (KBPP) Pension Trust Corporation
(incorporated/registered office in Hong Kong)
The Law Debenture (KGPP) Pension Trust Corporation
Law Debenture Services (HK) Limited
The Law Debenture (LBS) Pension Trust Corporation
The Law Debenture (Swiss Re GB) Trust Corporation
Law Debenture (Ocean) Trust Corporation
Law Debenture (Odyssey) Trust Corporation
(incorporated/registered office in Hong Kong)
The Law Debenture Trust Corporation (Channel Islands) Limited
(incorporated/registered office in Jersey)
The Law Debenture Trust Corporation (Cayman) Limited
(incorporated/registered office in the Cayman Islands)
The Law Debenture (SRL) Pension Trust Corporation
The Law Debenture (Stena Line EPS) Pension Trust Corporation
The Law Debenture (Tootal) Trust Corporation
Law Debenture (GWR) Pension Trust Corporation
Law Debenture Corporate Services Inc.
(incorporated/registered office in the USA)
Law Debenture Holdings Inc.
(incorporated/registered office in the USA)
The Law Debenture (JGDBS) Pension Trust Corporation
Delaware Corporate Services Inc.
(incorporated/registered office in the USA)
Law Debenture (Ireland) Limited
(incorporated/registered office in the Republic of Ireland)
Law Debenture Ireland (Trustees) Limited
(incorporated/registered office in the Republic of Ireland)
Law Debenture Holdings (Ireland) Limited
(incorporated/registered office in the Republic of Ireland)
LDI (OCS) Limited
(incorporated/registered office in the Republic of Ireland)
Registered Shareholder Services No.1 Limited
(incorporated/registered office in the Republic of Ireland)
Registered Shareholder Services No.2 Limited
(incorporated/registered office in the Republic of Ireland)
Registered Shareholder Services No.3 Limited
(incorporated/registered office in the Republic of Ireland)
BHP SVC PTY Limited
(incorporated/registered office in Australia)
ICI Pensions Trustee Limited
Morgan Crucible Pension Trustees Limited
AstraZeneca Pensions Trustee Limited
Law Debenture MC Senior Pension Trust Corporation
ICI Specialty Chemicals Pensions Trustee Limited
RTL Shareholder SVC Limited
Billiton SVC Limited
DLC SVC Limited
LDC (NCS) Limited
Terrier Services Limited
L.D.C. Securitisation Director No. 1 Limited
L.D.C. Securitisation Director No. 2 Limited
L.D.C. Securitisation Director No. 3 Limited
L.D.C. Securitisation Director No. 4 Limited
L.D.C. Corporate Director No. 1 Limited
L.D.C. Corporate Director No. 2 Limited
L.D.C. Corporate Director No. 3 Limited
L.D.C. Corporate Director No. 4 Limited
L.D.C. Corporate Director No. 5 Limited
CD Corporate Director No. 1 Limited
CD Corporate Director No. 2 Limited
LDC Nominee Director No. 1 Limited
LDC Nominee Director No. 2 Limited
LDC Nominee Secretary Limited
112
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Notes to the accounts continued
for the year end 31 December 2020
14. Investments continued
Unlisted investments
The Group holds an immaterial amount (approximately 0.5% of the portfolio) in unlisted investments.
Investment trust
The majority of the investment portfolio is invested in listed investments. A small minority of investments are unlisted comprising a small
fund investment and a number of other immaterial unquoted investments.
Quarterly valuations for the small fund investment are received. The Investment Valuation Committee updates the valuation of this
immaterial investment on a six monthly basis. The minutes of the meeting are shared with the auditors on a bi-annual basis.
Other unquoted investment holdings are reviewed on a bi-annual basis to market value and agreed by the Committee members at the
same Investment Valuation Committee meeting.
Independent professional services
As part of the services offered by the Independent Professional Services business, the Group acts as the registered holder of an immaterial
amount of unlisted shares in structured finance companies which are held on trust for discretionary charitable purposes. The Group has
no beneficial interest in those shares or the results of the companies whose shares are held.
The holdings are reviewed on a bi-annual basis at the Investment Valuation Committee meeting but are not revalued as there is no market
rate and the Group has no beneficial or economic interest in those shares.
15. Trade and other receivables
The carrying value represents trade and other receivables which are not impaired. The Directors consider that the carrying value
approximates to the fair value.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for
trade receivables. To measure expected credit losses trade receivables are grouped based on similar risk characteristics and ageing.
The expected loss rates are based on the Group’s historical credit losses experienced over the two year period prior to the period
end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the
Group’s customers.
Contract assets and contract liabilities are included within “other accrued income and prepaid expenses” and “deferred income”
respectively on the face of the statement of financial position. They arise from the Group’s IPS business which enters into contracts that
can take more than one year to complete.
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
Brought forward
Amounts included in contract liabilities that were recognised as
revenue during the period
Contract
assets
2020
£000
3,454
—
Contract
assets
2019
£000
2,664
—
Settlement of contract assets brought forward
(3,454)
(2,664)
Invoices issued in advance of performance and not recognised as
—
—
revenue during the period
Contract
liabilities
2020
£000
9,480
(6,746)
—
6,674
Contract
liabilities
2019
£000
9,653
(6,417)
—
6,244
Amounts included in contract assets that were recognised as revenue
3,902
3,454
—
—
during the period
At 31 December
3,902
3,454
9,408
9,480
113
Notes to the accounts continued
for the year end 31 December 2020
16. Cash and cash equivalents
These comprise cash held at bank by the Group, short-term bank deposits with an original maturity of three months or less and money
market funds with immediate access. The carrying value of these assets approximates to their fair value.
17. Trade and other payables
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period
taken for trade purchases is 30 days.
The Directors consider that the carrying value of trade and other payables approximates to their fair value, due to their age.
18. Called up share capital
Allotted, issued and fully paid share capital - Group and Company
Value
As at 1 January
Issued in year
As at 31 December
Shares
As at 1 January
Issued in year
As at 31 December
2020
£000
5,921
2
5,923
2019
£000
5,919
2
5,921
Number
Number
118,429,010
118,381,667
25,552
47,343
118,454,562
118,429,010
During the year to 31 December 2020, 25,552 shares (2019: 47,343 shares) were allotted under the SAYE scheme for a total consideration of
£131,163 (2019: £244,937) which includes a premium of £129,885 (2019: £242,570).
During the year, 56,759 options were granted under the Company’s SAYE scheme. At 31 December 2020, options under the SAYE scheme
exercisable from 2020 to 2026 at prices ranging from 495.75p to 606.00p per share were outstanding in respect of 160,485 ordinary
shares (2019: 135,578 ordinary shares). During 2020, 6,300 options lapsed or were cancelled (2019: 25,061) and 25,552 (2019: 47,343)
were exercised.
Further details of options outstanding are given in the Directors’ report on page 41.
Own shares held - Group
Value
Own shares held - cost
2020
£000
2019
£000
1,461
1,332
The own shares held represent the cost of 267,752 (2019: 204,610) ordinary shares of 5p each in the Company, acquired by the ESOT in
the open market. The shares have been acquired to meet the requirements of the Deferred Share Plan. The voting rights relating to the
shares have been waived while the relevant shares remain in trust, in accordance with the Plan rules. The market value of the shares at
31 December 2020 was £1,847,489 (2019: £1,329,965).
114
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Notes to the accounts continued
for the year end 31 December 2020
19. Capital reserves
GROUP
At 1 January
Transfer on disposal of investments
Net gains on investments
Cost of acquisition
Foreign exchange
Transfers to revenue
At 31 December
COMPANY
At 1 January
Transfer on disposal of investments
Net gains on investments
Cost of acquisition
Foreign exchange
Transfers to revenue
At 31 December
20. Financial instruments
Unrealised
appreciation
£000
Realised
reserves
£000
2020
Total
£000
Unrealised
appreciation
£000
Realised
reserves
£000
2019
Total
£000
181,411
515,708
697,119
121,273
482,160
603,433
(51,586)
(27,001)
(588)
(287)
—
101,949
51,586
10,647
—
—
(5,299)
572,642
Unrealised
appreciation
£000
Realised
reserves
£000
(51,586)
(27,001)
(588)
(287)
—
51,586
10,647
—
—
—
(22,242)
(16,354)
83,365
22,242
16,801
—
—
(5,495)
181,411
515,708
Unrealised
appreciation
£000
Realised
reserves
£000
—
100,166
(661)
(181)
(5,638)
697,119
2019
Total
£000
—
(22,242)
(16,354)
83,365
22,242
16,801
—
—
—
100,166
(661)
(181)
(5,495)
(5,637)
(588)
(287)
(5,299)
674,591
2020
Total
£000
(588)
(287)
(661)
(181)
(143)
(661)
(181)
(142)
174,692
581,025
755,717
114,554
547,477
662,031
(5,299)
(5,299)
95,230
637,959
733,189
174,693
581,025
755,718
The Group’s investment objective is to achieve long-term capital growth through investing in a diverse portfolio of investments. In pursuit
of this objective, the Group has the power to deploy the following financial instruments:
• Quoted equities, unlisted equities and fixed interest securities
• Cash and short-term investments and deposits
• Debentures, term loans and bank overdrafts to allow the Group to raise finance
• Derivative transactions to manage any of the risks arising from the use of the above instruments
• Derivative transactions to hedge the net investment in overseas subsidiaries
It remains the Group’s policy that no trading in derivatives is undertaken. Information in respect of the investment portfolio is included on
pages 18 to 31.
Capital management
The Company is not allowed to retain more than 15% of its income from shares and securities each year and has a policy to increase
dividends. However revenue profits are calculated after all expenses. Distributions will not be made if they inhibit the investment
strategy. This policy on dividends is expected to continue going forwards. The investment strategy of the Company is disclosed on page
32 and includes a ceiling on effective gearing of 50%, with a typical range of 10% net cash to 20% gearing. At 31 December 2020 gearing
was 9% (2019: 5% restated). Gearing is calculated in line with net gearing guidelines from the AIC.
Capital is represented by the Group’s net assets.
115
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Notes to the accounts continued
for the year end 31 December 2020
20. Financial instruments continued
The Group and Company held the following categories of financial assets and liabilities at 31 December 2020:
GROUP
Assets
Financial assets held at fair value through profit or loss:
Equity investments
Financial assets held at amortised cost
Trade and other receivables
Cash and cash equivalents
Total financial assets
Liabilities
Financial liabilities measured at amortised cost
Trade and other payables
Long-term borrowings
Lease liability
Total financial liabilities
COMPANY
Assets
Financial assets held at fair value through profit or loss:
Equity investments
Financial assets held at amortised cost
Trade and other receivables
Cash and cash equivalents
Total financial assets
Liabilities
Financial liabilities measured at amortised cost
Amounts owed to subsidiary undertakings
Trade and other payables
Long-term borrowings
Total financial liabilities
116
lawdebenture.com
2020
£000
2019
£000
812,297
822,316
16,129
41,762
57,891
7,213
71,236
78,449
870,188
900,765
27,405
114,201
5,606
147,212
13,010
114,157
1,080
128,247
2020
£000
2019
£000
812,083
822,102
4,084
32,098
36,182
542
46,128
46,670
848,265
868,772
61,698
13,075
74,569
149,342
53,990
1,420
74,551
129,961
Notes to the accounts continued
for the year end 31 December 2020
20. Financial instruments continued
The principal risks facing the Group in respect of its financial instruments remain unchanged from 2019 and are:
Market risk
Price risk, arising from uncertainty in the future value of financial instruments. The Board maintains strategy guidelines whereby risk is
spread over a range of investments, the number of holdings normally being between 70 and 150. In addition, the stock selections and
transactions are actively monitored throughout the year by the investment manager, who reports to the Board on a regular basis to
review past performance and develop future strategy. The investment portfolio is exposed to market price fluctuation: if the valuation at
31 December 2020 fell or rose by 10%, the impact on the Group’s total profit or loss for the year would have been £81.2m (2019: £82.2m).
Corresponding 10% changes in the valuation of the investment portfolio on the Company’s total profit or loss for the year would have
been £81.2m (2019: £82.2m).
Foreign currency risk, arising from movements in currency rates applicable to the Group’s investment in equities and fixed interest
securities and the net assets of the Group’s overseas subsidiaries denominated in currencies other than sterling. The Group’s financial
assets denominated in currencies other than sterling were:
GROUP
US Dollar
Canadian Dollar
Euro
Danish Krone
Swedish Krona
Swiss Franc
Hong Kong Dollar
Japanese Yen
Investments
£m
Net monetary
assets
£m
Total currency
exposure
£m
Investments
£m
Net monetary
assets
£m
Total currency
exposure
£m
2020
2019
40.1
5.5
65.2
2.3
—
9.5
—
9.3
131.9
11.7
—
0.4
—
—
—
1.0
—
13.1
51.8
5.5
65.6
2.3
—
9.5
1.0
9.3
145.0
70.7
7.2
49.6
2.9
1.0
11.0
—
8.7
151.1
5.0
—
0.7
—
—
—
0.4
—
6.1
75.7
7.2
50.3
2.9
1.0
11.0
0.4
8.7
157.2
The Group US dollar net monetary assets is that held by the US operations of £1.4m (2019: £3.1m) together with £10.3m (2019: £1.2m) held by
non-US operations.
COMPANY
US Dollar
Canadian Dollar
Euro
Danish Krone
Swedish Krona
Swiss Franc
Japanese Yen
Investments
£m
Net monetary
assets
£m
Total currency
exposure
£m
Investments
£m
Net monetary
(liabilities)
£m
Total currency
exposure
£m
2020
2019
40.1
5.5
65.2
2.3
—
9.5
9.3
131.9
9.9
—
—
—
—
—
—
50.0
5.5
65.2
2.3
—
9.5
9.3
9.9
141.8
70.7
7.2
49.6
2.9
1.0
11.0
8.7
151.1
0.1
—
—
—
—
—
—
0.1
70.8
7.2
49.6
2.9
1.0
11.0
8.7
151.2
117
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T
S
Notes to the accounts continued
for the year end 31 December 2020
20. Financial instruments continued
The holding in Scottish Oriental Smaller Companies Trust is denominated in sterling but has underlying assets in foreign currencies
equivalent to £7.1m (2019: £7.2m which included £23.0m in Baillie Gifford Pacific and Stewart Investors Asia Pacific OEICs which were sold
in 2019). Investments made in the UK and overseas have underlying assets and income streams in foreign currencies which cannot easily
be determined and have not been included in the sensitivity analysis. If the value of all other currencies at 31 December 2020 rose or fell
by 10% against sterling, the impact on the Group’s total profit or loss for the year would have been £15.5m and £12.5m respectively (2019:
£17.6m and £14.2m). Corresponding 10% changes in currency values on the Company’s total profit or loss for the year would have been the
same. The calculations are based on the investment portfolio at the respective year end dates and are not representative of the year as a
whole.
Interest rate risk, arising from movements in interest rates on borrowing, deposits and short-term investments. The Board reviews the mix
of fixed and floating rate exposures and ensures that gearing levels are appropriate to the current and anticipated market environment.
The Group’s interest rate profile was:
Floating rate assets
Sterling
HK Dollars
US Dollars
£m
28.2
£m
1.0
£m
11.7
Floating rate assets
Sterling
£m
65.1
HK Dollars
£m
US Dollars
£m
0.4
5.0
GROUP
Euro
£m
0.4
GROUP
Euro
£m
0.7
2020
COMPANY
Sterling
US Dollars
£m
22.0
£m
9.9
2019
Sterling
£m
46.0
COMPANY
US Dollars
£m
0.1
The Group holds cash and cash equivalents on short-term bank deposits and money market funds. Interest rates tend to vary with bank
base rates. The investment portfolio is not directly exposed to interest rate risk.
Fixed rate liabilities
2020
Sterling
£m
114.2
GROUP
2019
Sterling
£m
114.2
2020
Sterling
£m
74.5
COMPANY
2019
Sterling
£m
74.6
Weighted average fixed rate for the year
4.589%
4.589%
3.770%
3.770%
If interest rates during the year were 1.0% higher the impact on the Group’s total profit or loss for the year would have been £458,000
credit (2019: £791,000 credit). It is assumed that interest rates are unlikely to fall below the current level.
The Company holds cash and cash equivalents on short-term bank deposits and money market funds, it also has short-term borrowings.
Amounts owed to subsidiary undertakings include £40m at a fixed rate. Interest rates on cash and cash equivalents and amounts due
to subsidiary undertakings at floating rates tend to vary with bank base rates. A 1.0% increase in interest rates would have affected
the Company’s profit or loss for the year by £317,000 credit (2019: £593,000 credit). The calculations are based on the balances at the
respective year end dates and are not representative of the year as a whole.
Liquidity risk
Is the risk arising from any difficulty in realising assets or raising funds to meet commitments associated with any of the above financial
instruments. To minimise this risk, the Board’s strategy largely limits investments to equities and fixed interest securities quoted in major
financial markets. In addition, cash balances are maintained commensurate with likely future settlements. The maturity of the Group’s
existing borrowings is set out in note 21. The interest on borrowings is paid bi-annually on March and September for the 2045 secured
senior notes and April and October for the 2034 secured bonds.
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Notes to the accounts continued
for the year end 31 December 2020
20. Financial instruments continued
Credit risk
Is the risk arising from the failure of another party to perform according to the terms of their contract. The Group minimises credit
risk through policies which restrict deposits to highly rated financial institutions and restrict the maximum exposure to any individual
financial institution. The Group’s maximum exposure to credit risk arising from financial assets is £57.9m (2019: £78.4m). The Company’s
maximum exposure to credit risk arising from financial assets is £36.2m (2019: 46.7m).
Stock lending
Stock lending agreements are transactions in which the Group lends securities for a fee and receives cash as collateral. The Group
continues to recognise the securities in their entirety in the statement of financial position because it retains substantially all of the risks
and rewards of ownership. Because as part of the lending arrangement the Group sells the contractual rights to the cash flows of the
securities, it does not have the ability to use the transferred assets during the term of the arrangement.
Stock lending transactions are carried out with a number of approved counterparties. Details of the value of securities on loan at the year
end can be found in note 28. In summary, the Group only transacts with counterparties that it considers to be credit worthy.
Trade and other receivables
Trade and other receivables not impaired but past due by the following:
F
I
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A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
Between 31 and 60 days
Between 61 and 90 days
More than 91 days
Total
IFRS 9 credit loss rates
2020
£000
1,550
1,044
4,804
7,398
GROUP
2019
£000
1,225
219
2,330
3,774
COMPANY
2019
£000
2020
£000
—
—
—
—
—
—
—
—
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for
trade receivables and contract assets. To measure expected credit losses trade receivables are grouped based on similar risk characteristics
including business area and business geography and ageing.
The expected loss rates are based on the Company’s historical credit losses experienced over a three-year period prior to the year end. The
historical loss rates are adjusted for current and forward-looking information on macroeconomic factors affecting the Company’s customers.
The Group has identified gross domestic product (GDP) and unemployment trends act as key economic indicators which may impact our
customers’ future ability to pay debt. At 31 December 2020 the provision in relation to IFRS 9 resulting from credit loss rates is £790,000.
The below table display the gross carrying amount against the expected credit loss provision on Group trade receivables. Excluded from
the table below are specific provisions of £2,416,000 which relate to balances 91+ days overdue.
The total specific and credit loss provision at 31 December 2020 is £3,206,000 (2019: £2,907,000).
31 December 2020
Expected loss rate
Gross carrying amount (£000)
Loss provision (£000)
31 December 2019
Expected loss rate
Gross carrying amount (£000)
Loss provision (£000)
Current
£000
4.04%
1,781
(72)
2.54%
1,733
(44)
1-30 days
31-60 days
61-90 days
overdue
£000
overdue
£000
overdue
£000
6.23%
1,638
(102)
4.16%
1,129
(47)
4.43%
1,557
(96)
5.85%
991
(58)
8.01%
724
(58)
0%
181
—
91+ days
overdue
£000
6.66%
6,938
(462)
3.27%
3,637
(119)
Total
£000
6.25%
12,638
(790)
3.49%
7,670
(268)
119
Notes to the accounts continued
for the year end 31 December 2020
20. Financial instruments continued
Trade and other payables
Due in less than one month
Due in more than one month and less than three months
2020
£000
27,139
266
27,405
GROUP
2019
£000
12,686
324
13,010
2020
£000
13,075
—
13,075
COMPANY
2019
£000
1,420
—
1,420
Fair value
The Directors are of the opinion that the fair value of financial assets and liabilities of the Group are not materially different to their
carrying values, with the exception of the long-term borrowings (see note 21). The Group’s basis of fair value calculation on these long-term
borrowings uses quoted prices (unadjusted) in active markets for identical liabilities that the entity can access at the measurement date.
The Group does not make adjustments to quoted prices, only under specific circumstances, for example when a quoted price does not
represent the fair value (i.e. when a significant event takes place between the measurement date and market closing date).
Derecognition – financial assets
The Group enters into stock lending transactions whereby it transfers assets recognised on its statement of financial position, but retains
either all or substantially all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are
not derecognised.
21. Long-term borrowings
Long-term borrowings are repayable as follows:
In more than five years
Secured
6.125% guaranteed secured bonds 2034
3.77% secured senior notes 2045
2020
£000
GROUP
2019
£000
COMPANY
2019
£000
2020
£000
39,632
74,569
114,201
39,606
74,551
114,157
—
74,569
74,569
—
74,551
74,551
The 6.125% bonds were issued by Law Debenture Finance p.l.c. and guaranteed by the Company. The £40m nominal tranche, which
produced proceeds of £39.1m, is constituted by a trust deed dated 12 October 1999 and the Company’s guarantee is secured by a floating
charge on the undertaking and assets of the Company. The bonds are redeemable at nominal amount on 12 October 2034. Interest (see
note 6) is payable semi-annually in equal instalments on 12 April and 12 October in each year.
The 3.77% notes were issued by the Company. The £75m nominal tranche, which produced proceeds of £74.5m, is constituted by a note
purchase agreement and the notes are secured by a floating charge which ranked pari passu with the charge given as part of the 6.125%
bond issue. The notes are redeemable at nominal amount on 25 September 2045. Interest (see note 6) is payable semi-annually in equal
instalments on 25 March and 25 September in each year.
The long-term borrowings are stated in the statement of financial position at book value. Including them at a fair value of £166.4m at
31 December 2020 (2019: £151.2m) would have the effect of decreasing the year end NAV by 44.16p (2019: 31.29p). The estimated fair value
is based on the redemption yield of reference gilts plus a margin derived from the spread of A rated UK corporate bond yields over UK gilt
yields (2019: A).
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Notes to the accounts continued
for the year end 31 December 2020
22. Contingent liabilities
The Group is from time to time party to legal proceedings and claims, which arise in the ordinary course of the IPS business. The Directors
do not believe that the outcome of any of these proceedings and claims, either individually or in aggregate, will have a material adverse
effect upon the Group’s financial position.
The Company has provided a guarantee to a subsidiary undertaking in respect of the ongoing liabilities of the Group defined benefit
pension scheme (see note 24). The Company has provided surety for the lease of the Group’s main property which is held by a subsidiary
undertaking. The annual rental is currently £871,000 and its full term ends in 2030. The Company provided a guarantee in respect of
liabilities that could arise from its US corporate trust business in the period before the business was sold. The guarantee ended in 2019.
23. Leases
i) Definition of a lease
The Group determines at contract inception whether an arrangement contains a lease. Under IFRS 16, a contract is, or contains, a lease if
the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
The Group leases various office properties. Rental contracts are typically made for fixed periods of 1 to 10 years and lease terms are
negotiated on an individual basis.
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
• Leases of low value assets (under £5,000); and
• Leases with a duration of 12 months or less.
Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease. If that rate cannot be readily determined, the Group’s incremental borrowing rate is used.
Generally, the Group uses its incremental borrowing rate as the Group’s borrowing rate which is 4.589% as of 1 January 2020.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is
remeasured when there is a change to future lease payments arising from a change in an index rate, a change in the estimate of the
amount expected to be payable under the residual value guarantee, or as appropriate, changes in the assessment of whether a purchase
or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
• Lease payments made at or before commencement of the lease;
•
•
Initial direct costs incurred; and
The amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset
(typically leasehold dilapidations).
When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or
termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised
term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an
equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the
remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in
profit or loss.
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Notes to the accounts continued
for the year end 31 December 2020
23. Leases continued
Right-of-use asset
Additional information on the right-of-use assets is as follows:
Opening balance at 1 January
Leases signed in year
Lease extension
Depreciation
Foreign exchange difference
Closing NBV at 31 December
Lease liabilities
Lease liabilities are presented in the statement of financial position as follows:
Current
Non-Current
Total lease liability
ii) Leases signed in the year
Office building leases
Total right-of-use assets
31 December
2020
£000
31 December
2019
£000
31 December
2020
£000
31 December
2019
£000
GROUP
1,057
5,157
388
(1,179)
(10)
5,413
2,009
149
—
(1,101)
—
1,057
1,057
5,157
388
(1,179)
(10)
5,413
2,009
149
—
(1,101)
—
1,057
GROUP
31 December
2020
£000
31 December
2019
£000
—
5,606
5,606
730
350
1,080
During the year the Group signed a 10-year lease for its new London Headquarters at 100 Bishopsgate. On the lease commencement
date the Group recognised a right-of-use asset of £5,157,000 and leasehold liability of £5,263,000. The right-of-use asset is recognised at
leasehold liability (£5,263,000), plus capitalised direct costs (£233,000), estimated costs of removal and restoring (£180,000) less landlord
lease incentives received (£519,000).
24. Pension commitments
For some employees, the Group operates a funded pension plan providing benefits for its employees based on final pensionable
emoluments. The assets of the plan are held in a separate trustee administered fund. The Company has appointed an independent
sole trustee to oversee the governance of the fund. The plan closed to future accrual of benefits on 31 December 2016 and benefits now
increase broadly in line with inflation.
Under the defined benefit pension plan, each member’s pension at retirement is related to their pensionable service and final
pensionable emoluments. The weighted average duration of the expected benefit payments from the plan is around 20 years. The defined
benefit scheme is operated from a trust, which has assets which are held separately from the Group and is overseen by an independent
sole trustee who ensures the plan’s rules are strictly followed.
These figures were prepared by an independent qualified actuary in accordance with IAS19 (revised), and are based on membership
data as at 31 December 2020. The funding target is for the plan to hold assets equal in value to the accrued benefits based on projected
pensionable emoluments. If there is a shortfall against this target, then the Group and the Trustee will agree deficit contributions to meet
this deficit over a period.
There is a risk to the Group that adverse experience could lead to a requirement for the Group to make additional contributions to reduce
any deficit that arises.
122
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Notes to the accounts continued
for the year end 31 December 2020
24. Pension commitments continued
Contributions are set based upon funding valuations carried out every three years; the next valuation in respect of 31 December 2020 is
currently underway. The estimated amount of total employer contributions expected to be paid to the plan during 2021 is £1.0m (2020
actual: £0.9m).
Actuarial gains and losses are recognised immediately through other comprehensive income.
The major assumptions in the 31 December 2020 disclosure under IAS19 (revised) are shown below and are applied to membership data
supplied at that date. This shows the net pension assets and liabilities.
Significant actuarial assumptions:
Retail Price Inflation
Consumer Price Inflation*
Discount rate
5% limited RPI pension increases in payment
General salary increases
* Relates to dividends unclaimed over 12 years old.
Life expectancy of male/female aged 65 in 2020
Life expectancy of male/female aged 65 in 2040
Weighted average duration
The amounts recognised in the income statement are as follows:
Interest income
Total (income)/expense recognised in the income statement
The current allocation of plan assets is as follows:
Equities
Bonds
Gilts
Pensioner annuities
Diversified growth funds
Infrastructure
Cash/other
Total
2020
2019
2.80%
2.20%
1.30%
n/a
n/a
2.90%
2.10%
2.10%
n/a
n/a
2020
years
2019
years
23.7/25.5
23.6 / 25.4
25.5/27.0
25.4 / 26.9
19.1
19.3
2020
£000
—
—
Allocation %
50
9
25
1
13
—
2
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2019
£000
(100)
(100)
2019
£000
30,000
5,600
14,900
700
8,100
—
1,200
Allocation %
41
9
24
1
13
10
2
2020
£000
25,800
5,900
15,000
800
8,300
6,000
1,200
100
63,000
100
60,500
•
•
•
The Plan holds a number of pensioner annuities which have been valued consistently with the defined benefit obligation using
membership data as at 1 January 2021.
At the time of writing, the value of the JP Morgan infrastructure fund on 31 December 2020 is unavailable. Therefore, the value of £6.0m
used is at an effective date of 1 October 2020.
The Plan's non-annuity assets are invested in pooled funds, which are not themselves quoted. However the pooled funds are invested in
assets with prices quoted and traded on public exchanges. The exception to this is the JP Morgan infrastructure fund, where underlying
investments are not quoted.
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Notes to the accounts continued
for the year end 31 December 2020
24. Pension commitments continued
Reconciliation of present value of defined benefit obligation
At 1 January
Interest on plan liabilities
Actuarial losses/(gains) due to:
Experience on benefit obligations
Changes in financial assumptions
Changes in demographic assumptions
Benefits paid
Update to 31 December 2020 membership data (gain)/loss
At 31 December
Reconciliation of fair value of plan assets
At 1 January
Interest on plan assets
Actual returns net of interest
Contributions by the employer
Benefits paid
At 31 December
2020
£000
2019
£000
57,800
1,200
(400)
9,100
—
(1,600)
(300)
65,800
51,600
1,500
(100)
6,200
—
(1,400)
—
57,800
2020
£000
2019
£000
60,500
1,200
1,900
1,000
(1,600)
63,000
54,100
1,600
5,300
900
(1,400)
60,500
The pension plan is exposed to investment risk, (the movement of the discount rate used against the value of the plans assets,) interest rate
risk (decreases/increases in the discount rate which will increase/decrease the defined benefit obligation) and longevity risk (changes in
the estimation of mortality rates of members).
2020
£000
2019
£000
(2,700)
(2,500)
—
6,500
(1,000)
2,800
(100)
800
(900)
(2,700)
2020
£000
2019
£000
65,800
57,800
(63,000)
(60,500)
2,800
(2,700)
Movement in the net defined benefit obligations
(Asset) at 1 January
(Income)/expense charged to profit and loss
Amount recognised outside of profit and loss
Employer contributions
Closing net liability/(assets) at 31 December
Plan assets and obligations
Present value of defined benefit
obligation
Fair value of plan assets
Deficit/(asset)
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Notes to the accounts continued
for the year end 31 December 2020
24. Pension commitments continued
Over the year to 31 December 2020, the balance sheet deteriorated from a surplus of £2.7m to a deficit of £2.8m.
This is driven by:
• a significant decrease in the discount rate during the year, which increases the value of the pension obligations.
This was partially offset by:
•
investment returns on assets being higher than anticipated; and
• deficit reduction contributions paid by the Company of £1.0m during the year.
25. Related party transactions
Group
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
Company
The related party transactions between the Company and its wholly owned subsidiary undertakings are summarised as follows:
Dividends from subsidiaries
Interest on intercompany balances charged by subsidiaries
Management charges from subsidiaries
2020
£000
13,709
2,378
700
2019
£000
3,000
2,562
600
The key management personnel are the Directors of the Company. Details of their compensation are included in note 5 to the accounts
and in Part 2 of the remuneration report on pages 67 to 82. Key management personnel costs inclusive of employers national insurance
are £1,352,977 (2019: £1,529,583).
26. Movement in borrowings
Under IAS 7, the movement in borrowings in the year are as follows:
GROUP
Long-term borrowings
6.125% guaranteed secured bonds 2034
3.77% secured senior notes 2045
COMPANY
Long-term borrowings
3.77% secured senior notes 2045
31 December
2020
£000
Non-cash items
movement
£000
31 December
2019
£000
Non-cash items
movement
£000
31 December
2018
£000
39,632
74,569
114,201
74,569
74,569
26
18
44
18
18
39,606
74,551
114,157
74,551
74,551
28
17
45
17
17
39,578
74,534
114,112
74,534
74,534
The Group had no short-term borrowings in 2020 (2019: nil).
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Notes to the accounts continued
for the year end 31 December 2020
27. Distributable reserves
All historical dividend payments have been made from revenue reserves. After paying the final dividend, the Company has retained
earnings to pay 0.1 years of dividend payments at the current level. After paying the final dividend, the Group has retained earnings to
pay 0.8 years of dividends at the current level. The Company has realised capital reserves of £637,959,000 (2019: £581,025,000) which
would allow 19.6 (2019: 18.9) years of dividend payments at the current level. The Group has realised capital reserves of £572,642,000
(2019: £151,708,000) which would allow 17.6 (2019: 16.8) years of dividend payments at the current level. The Company does not intend to
make dividend payments from capital reserves.
28. Stock lending revenue
At 31 December 2020 the total value of securities on loan by the Company for stock lending purposes was £19,325,000 (2019: nil). The
maximum aggregate value of securities on loan at any one time during the year ended 31 December 2020 was £38,936,000 (2019: nil).
Revenue derived from stock lending in 2020 is £219,000 (2019: nil).
29. Subsequent events
i) Acquisition
On 29 January 2021, the Group completed an acquisition of the company secretarial business (CSS) of Konexo UK, a division of Eversheds
Sutherland (International) LLP. The principal reason for this acquisition was to acquire a complementary business to the Group's
existing IPS offering, to increase our market share in this area of professional services and to support our stated objective to provide our
shareholders with a steadily increasing source of income. The total consideration for the acquisition is £20 million, paid in cash. Under the
terms of the purchase agreement, Law Debenture has agreed to acquire the business on a cash and debt free basis. For the financial year
ended 30 April 2020, CSS recorded revenues of £6.2m, estimated EBITDA of £2.2m. The acquisition completed at the end of January 2021.
Established for fifteen years, CSS is a respected part of the Konexo business with UK and international sector expertise. The transferring
team has 55 employees, with 15 based in London, 1 in Hong Kong and the remainder in Manchester. The business services a client base of
c.450 in more than 100 jurisdictions.
ii) Overdraft
During January 2021, the Company made arrangements to put in place a £50m unsecured overdraft facility. Interest is charged monthly in
arrears at a an aggregate of 1.5% plus base rate, and there are no additional fees for this facility.
126 lawdebenture.com
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The photograph shown is Winner – Best Overall Picture of the annual LawDeb Lens competition.
Photo credit: Doug Moody
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Alternative performance measures
Alternative performance measures are numerical measures of the Company’s current, historical or future performance, financial position
or cash flows, other than financial measures defined or specified in the financial framework that the Company has chosen to apply
(International Financial Reporting Standards and the AIC SORP). The Directors use these measures as a means of assessing the Company’s
performance. The measures are particularly relevant for investment trusts and are widely used across the investment trust sector.
Net Asset Value per ordinary share
The value of the Company’s assets (i.e. investments (see note 14)) and cash at bank (see Statement of Financial Position) less any liabilities
(i.e. long-term borrowings (see note 21)) for which the Company is responsible, divided by the number of shares in issue (see note 10).
The aggregate NAV is also referred to as total shareholders’ funds in the Statement of Financial Position. In Law Debenture’s case, the
published NAV will include adjustments to reflect the fair value of the IPS business and the Company’s long-term debt. There is a detailed
summary of the NAV, including a description of how it is calculated, on page 37 of the annual report. From 1 July 2020, the NAV per
ordinary share is published daily. Prior to that it was published weekly and immediately after each month end.
The change in NAV per share (see total return below) over one, three, five and ten years, as shown at page 3, is calculated by taking total
return over the respective period and dividing by the opening NAV at the start of each period.
Net Asset Value with Debt at Fair Value
The Group’s debt (long-term borrowings, further details can be found in note 21 on page 120) is valued in the Statement of Financial
Position (page 93) at amortised cost, which is materially equivalent to the repayment value of the debt on the assumption that it is held
to maturity. This is often referred to as ‘Debt at Par’. The current fair value of the debt, which assumes it is repaid under current market
conditions, is referred to as ‘Debt at Fair Value’. This fair value is detailed in note 20 on page 120. The difference between the fair and par
values of the debt is subtracted from or added to the Statement of Financial Position to derive the NAV with debt at fair value (see note 10
on page 108). The NAV with debt at fair value at 31 December 2020 was £726,994,000 (666.15 pence per ordinary share) and the NAV with
debt at par was £787,219,000 (710.31 pence per ordinary share).
Discount or Premium
The amount by which the market price per share of an investment trust is either higher (premium) or lower (discount) than the NAV per
share, expressed as a percentage of the NAV per ordinary share.
At 31 December 2020
At 31 December 2019
Gearing/(Net cash)
NAV per share
at fair value
pence
NAV per share
at par value
pence
Share price
pence
Premium/
(discount) to
fair value NAV
Premium/
(discount) to
par value NAV
666.15
702.17
710.31
733.46
690
650
3.6
(7.4)
(2.9)
(11.4)
Net gearing is calculated by dividing total borrowings less cash and cash equivalents by shareholders’ funds, expressed as a percentage.
Borrowings
Statement of financial position
Cash and cash equivalents
Statement of financial position
2020
£000
2019
£000
114,201
114,157
(41,762)
(71,236)
Borrowings less cash
(a)
72,439
42,921
Net assets per Balance Sheet
Fair value uplift for IPS business
Debt fair value adjustment
Shareholders’ funds
Net gearing
128 lawdebenture.com
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(b)
(a/b)
726,994
775,272
112,407
91,860
(52,182)
(36,993)
787,219
830,139
9%
5%
Alternative performance measures continued
We have reviewed our approach to the calculation of gearing. We believe that it is appropriate to show net gearing in relation to
shareholders’ funds as it represents the amount of debt funding on the investment portfolio.
Ongoing charges
The ongoing charge ratio has been calculated in accordance with guidance issued by the AIC. It represents the total investment
management fee and other administrative expenses expressed as a percentage of the average net asset values with debt at fair value
throughout the year.
Management fee revenue expense
Other administration costs
Administration costs (see note 7 )
Management fee capital expense
Ongoing charge
Average net assets1
Ongoing charge ratio
1 Calculated using the average month-end net asset value with debt at fair value.
Revenue Earnings per Share
2020
£000
447
2,123
2,570
1,341
3,911
2019
£000
512
1,674
2,186
1,537
3,723
717,235
770,001
0.55%
0.48%
The revenue earnings per share is the revenue return for the year (see Income Statement) divided by the weighted average number of
ordinary shares in issue during the year (see note 10 on page 108).
NAV Total Return
The total return is the return on the share price or NAV with debt at fair value taking into account both the rise and fall of NAVs/share
prices and dividends paid to shareholders. Any dividends received by a shareholder are assumed to have been reinvested in either
additional shares (for share price total return) or the Company’s assets (for NAV with debt at fair value total return). Dividends paid and
payable are set out in note 9 on page 107.
NAV/Share price per share at 31 December 2019 (pence)
NAV/Share price per share at 31 December 2020 (pence)
Change in the year (%)
Impact of dividends reinvested (%)
Total return for the year (%)
Yield
The yield is the annual dividend expressed as a percentage of the year end share price.
Annual dividend (pence)
Share price (pence)
Yield (C = A / B) (%)
NAV per share
with debt at
fair value
Share price
702.17
666.15
(5.1)
7.1
2.0
2020
£000
27
690
3.9%
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650
690
6.2
6.7
12.9
2019
£000
26
650
4.0%
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Company advisers and information
Registered office
Broker
8th Floor, 100 Bishopsgate, London, EC2N 4AG
T: 020 7606 5451
F: 020 7606 0643
W: www.lawdebenture.com
(Registered in England – No. 30397)
Investment managers
J.P. Morgan Cazenove Limited
25 Bank Street, London E14 5JP
AIC
A member of the Association of Investment
Companies
James Henderson and Laura Foll are joint managers. They also manage
Lowland Investment Company plc, Henderson Opportunities Trust plc
Shareholder information
and the Henderson UK Equity Income & Growth Fund.
James joined Henderson Global Investors (now Janus Henderson
Investors) in 1983 and has been an investment trust portfolio manager
since 1990. He first became involved in the management of Law
Debenture’s portfolio in 1994 and took over lead responsibility for
management of the portfolio in June 2003.
Investment trust status
The Company carries on business as an investment trust company
as defined in Sections 1158-1159 of the Corporation Tax Act 2010.
Company share information
Information about the Company can be found on its website
www.lawdebenture.com. The market price of its ordinary shares is
Laura joined Janus Henderson Investors in 2009 and has held the
also published daily in the Financial Times.
position of portfolio manager on the Global Equity Income team
since 2014. She first became involved with Law Debenture’s portfolio
in September 2011 and became joint portfolio manager in 2019.
Alternative Investment Fund Manager
The Law Debenture Corporation p.l.c.
Investment portfolio manager
Janus Henderson Global Investors
201 Bishopsgate, London EC2M 3AE
Auditors
BDO LLP, 55 Baker Street, London W1U 7EU
Depositary
Registrars
Our registrars, Computershare Investor Services PLC, operate a
dedicated telephone service for Law Debenture shareholders
– 0370 707 1129. Shareholders can use this number to access
holding balances, dividend payment details, share price data, or
to request that a form be sent to their registered address.
Share dealing
Computershare Investor Services PLC offers shareholders a share
dealing service via the internet or by telephone, details of which
are as follows:
www.computershare.trade
T: 0370 703 0084
Commission for the internet service is 1% with a minimum charge
of £30 and 1% for the telephone service, plus £50.
The service is available only to those shareholders who hold their
shares on the register (i.e. it is not available to those who hold
NatWest Trustee and Depositary Services Limited
their shares via a nominee).
250 Bishopsgate, London EC2M 4AA
Global custodian
HSBC Bank plc (under delegation by the depositary)
8 Canada Square, London E14 5HQ
Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ
Shareholders using the internet service will need their
Shareholder Reference Number (SRN) and post code to complete
their trade. The SRN can be found printed on your proxy card.
Computershare Brokerage Services are provided by The Share
Centre Ltd, which is a member of the London Stock Exchange
and is authorised and regulated by the FCA. The Company is not
responsible or liable for anything arising from a shareholder’s
decision to use the service. The Company is not acting as an
introducer for the share dealing service and receives no financial
benefit, either from making shareholders aware of the service
or from any share deals conducted by shareholders who use
T: 0370 707 1129
the service.
130 lawdebenture.com
Financial calendar
Dividend and interest payments
Ordinary shares:
Three interim dividends
Final dividend
Announced in June, September and December
Paid, July, October and January
Announced in February
Paid April
6.125% guaranteed secured notes
Paid April and October
3.77% senior secured notes
Paid March and September
Group results:
Half year results
Full year results
Report and accounts
Annual general meeting
Factsheets
Announced in July
Announced in February
Published in March
Held each year in April
Published monthly on the Company’s website
Payment methods for dividends
Dividends and interest can be paid to shareholders by means of BACS. Mandate forms for this purpose are available on request from the
Company’s registrars.
Subsidiary company details
Subsidiary companies not incorporated in the United Kingdom, as listed at pages 111 and 112, are registered at the following addresses:
Companies registered in Hong Kong
Suite 1301 Ruttonjee House, Ruttonjee Centre,
11 Duddell Street, Central, Hong Kong
Companies registered in the Republic of Ireland
38/39 Fitzwilliam Square, Dublin 2, Ireland
Companies registered in USA
other than Delaware Corporate Services
801 2nd Avenue, Suite 403, New York,
NY 10017, USA
Companies registered in USA -
Delaware Corporate Services
919 N Market St, Suite 725, Wilmington,
DE 19801, USA
Company registered in Jersey
3rd Floor, Standard Bank House, 47-49 La Motte Street,
St Helier, Jersey JE2 4SZ
Company registered in Cayman Islands
Governors Square, Suite 5-204, 23 Lime Tree Bay Avenue, P.O. Box 477,
Camana Bay, KY1-1108
Company registered in Australia
Watson Erskine and Co Pty Ltd, Level 4, 55 Clarence Street
Sydney NSW 2000
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131131
C O R P O R A T E I N F O R M A T I O N
Notice of annual general meeting
NOTICE IS HEREBY GIVEN that the 131st annual general meeting of the Company will be held electronically in accordance with the
information provided on page 142 on 7 April 2021 at 11.00am to transact the following business:
Ordinary resolutions
To consider and, if thought fit, to pass the following resolutions which will be proposed as ordinary resolutions:
1.
To receive the report of the Directors, the strategic report and the audited accounts and the auditor’s report for the year
ended 31 December 2020.
2. To receive and approve the Directors’ remuneration report for the year ended 31 December 2020.
3.
To declare a final dividend of 8.00p per share in respect of the year ended 31 December 2020.
4.
To re-elect Denis Jackson as a Director.
5. To re-elect Robert Hingley as a Director.
6. To re-elect Mark Bridgeman as a Director.
7.
To re-elect Tim Bond as a Director.
8. To re-elect Claire Finn as a Director.
9.
To elect Trish Houston as a Director.
10.
To re-appoint BDO LLP as auditors of the Company to hold office until the conclusion of the next general meeting at which
the accounts of the Company are laid.
11. To authorise the Audit and Risk Committee to determine the auditor’s remuneration.
12. General authority to allot shares.
THAT:
(a) in substitution for all existing authorities (but without prejudice to any allotments made pursuant to the terms of such
authorities), the Directors be generally and unconditionally authorised pursuant to and in accordance with section 551 of
the Companies Act 2006 (the ‘Act’) to exercise for the period ending on the date of the Company’s next annual general
meeting, all the powers of the Company to allot shares in the Company or to grant rights to subscribe for or to convert any
security into shares in the Company up to an aggregate nominal amount (within the meaning of sections 551(3) and (6) of
the Act) of £592,279 (representing 11,845,573 ordinary shares) (or, if less, the number representing 10% of the total ordinary
shares in issue (excluding treasury shares) as at the date of passing of this resolution); and
(b) the Company may during such period make offers or agreements which would or might require the making of allotments
of equity securities or relevant securities as the case may be after the expiry of such period.
Special resolutions
To consider and, if thought fit, to pass the following resolutions which will be proposed as special resolutions:
13. Disapplication of statutory pre-emption rights.
THAT if resolution 12 is passed, the Directors be authorised to allot equity securities (as defined in the Act) for cash under the
authority given by that resolution and/or to sell ordinary shares held by the Company as treasury shares for cash as if section 561
of the Act did not apply to any such allotment or sale, such authority to be limited to:
(a) the allotment of equity securities or sale of treasury shares in connection with a rights issue, open offer or other issue or
offer to ordinary shareholders in proportion (as nearly as possible) to their existing holding of shares (but subject to such
exclusions as the Directors may deem necessary or appropriate to deal with fractional entitlements, record dates or legal,
regulatory or practical problems arising in any overseas territory, the requirements of any regulatory body or stock exchange
or any other matter); and
(b) the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (a) above up to a nominal
amount of £296,139 (representing 5,922,787 ordinary shares),
132
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Notice of annual general meeting continued
such authority to expire at the next AGM of the Company (or, if earlier, at the close of business on 6 July 2022) but, in each case,
prior to its expiry the Company may make offers, and enter into agreements, which would, or might, require equity securities
to be allotted (and treasury shares to be sold) after the authority expires and the Directors may allot equity securities (and sell
treasury shares) under any such offer or agreement as if the authority had not expired.
14. Additional authority to disapply pre-emption rights for acquisitions or specified capital investment.
THAT, if resolution 12 is passed, the Directors be authorised in addition to any authority granted under resolution 13 to allot
equity securities (as defined in the Act) for cash under the authority given by that resolution and/or to sell ordinary shares
held by the Company as treasury shares for cash as if section 561 of the Act did not apply to any such allotment or sale, such
authority to be:
(a)
l imited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £296,139 (representing
5,922,787 ordinary shares); and
(b) used only for the purposes of financing (or refinancing, if the authority is to be used within six months of the original
transaction) a transaction which the Directors of the Company determine to be an acquisition or other capital investment
of a kind contemplated by the Statement of Principles on disapplying Pre-Emption Rights most recently published by the
Pre-Emption Group prior to the date of this notice,
such authority to expire at the next AGM of the Company (or, if earlier, at the at the close of business on 6 July 2022) but, in
each case, prior to its expiry the Company may make offers, and enter into agreements, which would, or might, require equity
securities to be allotted (and treasury shares to be sold) after the authority expires and the Directors may allot equity securities
(and sell treasury shares) under any such offer or agreement as if the authority had not expired.
15. General authority to buy back shares.
THAT the Company be and is generally and unconditionally authorised in accordance with sections 693 and 701 of the Act
to make market purchases (within the meaning of section 693(4) of the Act) of any of its issued ordinary shares of 5p each in
the capital of the Company, in such manner and upon such terms as the Directors of the Company may from time to time
determine, provided always that:
(a) the maximum aggregate number of shares that may be purchased is 17,756,514;
(b) the minimum price which may be paid for a share shall be 5p;
(c)
the maximum price which may be paid for a share shall be an amount equal to 105% of the average of the middle
market quotations (as derived from the London Stock Exchange Daily Official List) for the shares for the five business days
immediately preceding the day on which the share is purchased; and
(d) unless previously revoked, renewed or varied, the authority hereby conferred shall expire on the date of the Company’s
next annual general meeting provided that a contract of purchase may be made before such expiry which will or may be
executed wholly or partly thereafter, and a purchase of shares may be made in pursuance of any such contract.
16. Adoption of new articles.
THAT the Articles of Association contained in the document produced to the Meeting and signed by the Chairman for the
purposes of identification, be approved and adopted as the new Articles of Association of the Company in substitution for, and
to the exclusion of, the existing Articles of Association, with effect from the conclusion of the Meeting.
17. Authority to convene a general meeting – notice.
THAT a general meeting of the Company, other than an annual general meeting, may be called on not less than 14 clear days’
notice.
By order of the Board
Law Debenture Corporate Services Limited
Secretary | 25 February 2021
Registered No. 30397
Registered office:
8th Floor
100 Bishopsgate
London EC2N 4AG
133133
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The Law Debenture Corporation p.l.c.
Summary of Proposed Amendments to the Articles of Association
25 February 2021
ARTICLE
AMENDMENT
2 – Interpretation
The definitions have been updated so that they are in alphabetical order.
A definition of “Adjusted Capital and Reserves” has been included. This is used in Article 100.3
(Borrowing Powers).
A definition of “adjusted price” has been included. This is used in Article 119.4 (Capitalisation of
profits and reserves).
A definition of “Articles” has been included in order to clarify that all references to “Articles” means
these Articles of Association as amended from time to time. This is used throughout the Articles.
A definition of “Auditors” has been included. This is used in Articles 46.2 (Notice of General Meetings),
91.1 (Interests and conflicts of interest), 96 (General powers), 100.3 (Borrowing powers), 123 (Auditors)
and 124 (Auditor’s right to attend General Meetings).
A definition of “Board” has been included. This is used throughout the Articles.
A definition of “clear days” has been included. This is used in Articles 46 (Notice of General Meetings)
and 50 (Lack of quorum).
A definition of “Directors” has been included. This is used throughout the Articles.
A definition of “elected Ordinary Shares” has been included. This is used in Article 120.6 (Scrip
dividends).
A definition of “General Meeting” has been included. This is used throughout the Articles. The
amended Articles use terminology from the Companies Act 2006, and therefore all General
Meetings are referred to as General Meetings, with Annual General Meetings being specifically
referred to as such, where appropriate. The concept of Extraordinary General Meetings has
been removed.
A definition of “holding company” has been included. This is used in Article 96 (General powers).
A definition of “Listing Rules” has been included. This is used in Article 12 (Issue of share certificates).
A definition of “Market Rules” has been included. This is used in Articles 15 (Warrants or options to
subscribe for shares) and 39 (Further provisions on shares in uncertificated form).
A definition of “minority proportion” has been included. This is used in Article 100.3 (Borrowing
Powers).A definition of “Ordinary Resolution” has been included. This is used in Articles 6 (Rights
attaching to shares on issue), 54 (Amendments to resolutions), 70 (Number of directors), 72 (Directors’
fees), 79 (Re-election of retiring Director), 81 (Election or appointment of additional Director), 83
(Removal of Director), 92.4 (Restrictions on voting), 100.2 (Borrowing powers), 107 (Final dividends), 109
(Distribution in specie), 119.1 (Capitalisation of profits and reserves) and 120.2 (Scrip dividends).
A definition of “New Share” has been included. This is used in Article 119.4 (Capitalisation of profits
and reserves).
A definition of “principal meeting place” has been included. This is used in Article 47A (General
Meetings at more than one place).
A definition of “Relevant Company” has been included. This is used in Article 134.3 (Indemnity).
The definition of “Seal” has been updated to clarify that the Corporation only has one seal. This is
used in Articles 11 (Form of share certificate) and 103 (The Seal),
The definition of “Securities Seal” has been removed as this is no longer used by the Corporation.
A definition of “Special Resolution” has been included. This is used in Articles 5 (Purchase of own
shares), 30.1 (Manner of variation of rights), 47.2 (Contents of notice of General Meetings), 54.2
(Amendments to resolutions), 96 (General powers) and 132 (Distribution of assets in specie).
A definition of “subsidiary undertaking” has been included. This is used in Article 96 (General
powers).
The definition of “in writing” has also been amended to clarify that information may be sent or
supplied in hard copy, in electronic form or by being made available on a website. This is used
throughout the Articles.
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Summary of Proposed Amendments to the Articles of Association continued
25 February 2021
ARTICLE
AMENDMENT
2A – Unrestricted objects
A new Article 2A has been included to note that the Corporation’s objects shall be unrestricted. On
its incorporation, the Corporation was required to include an objects clause in its Memorandum of
Association. This set out the purpose of the Corporation and listed the activities that the Corporation
was able to undertake.
Following the implementation of the Companies Act 2006, the Corporation’s objects automatically
became part of its Articles of Association. As the objects clause only serves to limit the activities of
the Corporation and no longer reflect the current activities of the Corporation, it is proposed that
the Corporation’s objects shall be unrestricted.
2B – Change of name
As permitted by the Companies Act 2006, a new Article 2B has been included to allow the
Corporation to change its name by a resolution of the Directors.
4A – Redeemable shares
A new Article 4A has been included to authorise the Directors to issue redeemable shares. Any such
issue is subject to the provisions of the Companies Act 2006 and the Companies (Shareholders’
Rights) Regulations 2009, and to any rights previously conferred on the holders of any other shares.
7 – Directors’ power to allot
The language that referred to an allotment period ending in 2004 has been removed on the basis it
is now redundant.
12 – Issue of share certificates
Language has been included to note that a shareholder is entitled to a share certificate within
whichever is the earliest of (1) any time period required by the Listing Rules of the FCA; and (2) any
time limits prescribed by law.
15 – Warrants or options to
subscribe for shares
This Article has been simplified and notes that, subject to any restrictions prescribed by law,
the Articles, the Admission and Disclosure Standards of the London Stock Exchange and the
requirements of the FCA, the Corporation may issue warrants or options to subscribe for shares on
such terms and subject to such conditions as the Directors may determine.
32 – Form of transfer
The last sentence of Article 32.1 has been removed as it simply repeated the wording of Article 35.
Article 32.2 has been updated to clarify that all transfers of shares which are in uncertificated form
may be effected in accordance with the Uncertificated Securities Regulations 2001 and the rules of
any relevant system pursuant to such Regulations.
34.1 – Right to refuse
registration
This Article has been updated to clarify that an instrument of transfer must be lodged at the
Corporation’s registered office.
39 – Further provisions on
shares in uncertificated form
This Article has been updated to include reference to the FCA and the Admission and Disclosure
Standards of the London Stock Exchange, and to further clarify the position on shares held in
uncertificated form.
In particular, this Article authorises the Directors to permit title to shares to be evidenced other than
by a share certificate. This allows the holding and transfer of shares in electronic form, i.e. where
shares are held and traded in CREST.
This Article also notes that shares may be changed from an uncertificated share to a certificated
share (and vice versa) in accordance with the Uncertificated Securities Regulations 2001, and
clarifies that the Corporation shall not issue to any person a certificate in respect of an uncertificated
share.
44 – Annual General Meetings
As noted above and in accordance with the Companies Act 2006, reference to “Extraordinary
General Meetings” has been removed. All General Meetings are referred to as General Meetings, with
Annual General Meetings being referred to as such where appropriate.
46 – Notice of General
Meetings
Article 46.1 has been updated to provide that, subject to the provisions of the Companies Act 2006,
an Annual General Meeting shall be called by not less than 21 clear days’ notice in writing and any
other General Meeting shall be called by not less than 14 clear days’ notice in writing.
Article 46.2 has been updated to provide that notice of a General Meeting shall be given to the
Auditors, to the Directors and to all members who are entitled under the Articles to receive such
notices from the Corporation.
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Summary of Proposed Amendments to the Articles of Association continued
25 February 2021
ARTICLE
AMENDMENT
46 – Notice of General
Meetings continued
47.2 – Contents of notice of
General Meetings
47B – Omission or non-receipt
of notice
Article 46.3 has been updated to provide that the Directors may determine that persons entitled
to receive notice of meetings are those persons entered on the register of members at the close of
business on a day determined by the Directors, but if the Corporation is a participating issuer, the
day determined by the Directors may not be more than 21 clear days before the date on which the
relevant notice is being sent.
As section 307A of the Companies Act 2006 sets the minimum notice periods for General Meetings
of the Corporation, the consent to short notice provisions have been removed.
This Article has been updated to note that a notice of General Meeting shall also include any
statements required by law.
A new Article 47B has been included to provide that the accidental omission to give notice of a
General Meeting or of any resolution intended to be moved at a General Meeting or the accidental
omission to send any document relating to any General Meeting to, or the non-receipt of any such
notice or document by, any person entitled to receive the notice or document shall not invalidate
the proceedings at that meeting.
48 – Chairman
At Article 48.1, the time allowed for the Directors to choose a Director to act as chairman of a
General Meeting in the event that the Chairman or Deputy Chairman is not present has been
extended from five to fifteen minutes. This is simply for practical reasons.
A new Article 48.2 has been included to clarify that the decision of the chairman on points of order,
matters of procedure or arising incidentally out of the business of a General Meeting is conclusive.
A new Article 48.3 has been included to clarify that nothing in the Articles is intended to restrict or
exclude any of the powers or rights of a chairman of a meeting which are given by law.
48C – Entitlement to attend
and speak
Article 71 previously set out that a Director who is not a member of the Corporation is entitled to
attend and speak at a shareholders’ meeting. This language has been updated and added as a new
Article 48C.1.
A new Article 48C.2 has been included to note that the chairman of the meeting may permit other
persons, who are not members or otherwise entitled to exercise the rights of members in relation to
General Meetings, to attend and speak at a General Meeting.
49 – Quorum
The quorum required to conduct a General Meeting has been changed from three to two members
present in person or by proxy and entitled to vote.
50 – Lack of quorum
The time allowed for a General Meeting to be dissolved in the event a quorum is not present has
been increased from five to thirty minutes. This is simply for practical reasons.
54 – Amendments to
resolutions
New Articles 54.1 and 54.2 have been included to clarify how ordinary and special resolutions to be
proposed at a General Meeting may be amended.
Article 54.3 has also been amended to note that, with the consent of the chairman, an amendment
may be withdrawn by the proposer before it is voted on.
66 – Deposit of form of proxy
This Article has been updated to clarify that, if a form of proxy does not specify where it is to be
delivered, it must be delivered to the Corporation’s registered office.
68 – Revocation of proxy
This Article has been updated to clarify that written notice of the death or mental disorder of a member
or revocation of the appointment of a proxy must be delivered to the Corporation’s registered office.
The previous reference to “insanity” has been replaced with “mental disorder”.
71 – Share qualification
The reference to a Director who is not a member of the Corporation being entitled to attend and
speak at shareholders’ meeting has been removed, as this is now covered at Article 48C.
76 – Appointment of executive
Directors
Article 76.2 relating to the cessation of an executive Director’s appointment to the Board upon the
termination of their employment with the Corporation has been removed as it is redundant.
Article 76.3 relating to the cessation of an executive Director’s employment with the Corporation not
being automatic upon the cessation of their appointment as an executive Director to the Board has
been removed as it is redundant.
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Summary of Proposed Amendments to the Articles of Association continued
25 February 2021
ARTICLE
AMENDMENT
78 – Retirement and
re-election of Directors
This Article has been updated to clarify that at each annual general meeting of the Corporation, the
directors may resolve that all of the directors shall retire and may offer themselves for election or
re-election as appropriate.
80 – Nomination of Director
for election
A new Article 80.2 has been included to provide that the names of the persons submitted for
election or re-election shall be accompanied by sufficient biographical details and other relevant
information to enable shareholders to make an informed decision on the election or re-election of
such persons.
81 – Election of two or more
Directors
This Article has been removed as it is no longer relevant.
82 – Vacation of office
The list of events in which the office of a Director shall be vacated has been updated as follows:
•
•
•
•
to include reference to the expiry of a fixed term of appointment;
to include reference to section 253 of the Insolvency Act 1986;
to allow the Directors to resolve that a Director’s office be vacated in the event that such Director
becomes incapable by reason of illness or injury of administering his property and affairs; and
to include reference to a Director not being re-elected in accordance with Article 78.
84 – Convening of meetings
of Directors
All references to fax machines deleted.
96 – General Powers
The historic reference to "wives and widows" has been updated as it is no longer appropriate.
101 – President
The authority granted to Directors to elect a President either on an honorary or paid basis, with
the right to attend and speak but not vote at Board meetings has been removed, as it is no longer
relevant to the Corporation.
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Explanatory notes to the notice of annual general meeting
The notice of the Annual General Meeting (the ‘Notice’) to be held
Risk Committee, recommends the re-appointment of BDO LLP as
on 7 April 2021 (the ‘Meeting’) is set out on pages 132 and 133. The
the Company’s auditors.
following notes provide an explanation as to why the resolutions
set out in the notice are being put to shareholders.
Resolution 1
Under the Companies Act 2006 (the ‘Act’), the Directors are
required to present the annual accounts and reports of the
Company to shareholders at a general meeting. These are
contained in the Company’s 2020 annual report and financial
statements for the year ended 31 December 2020 (the ‘2020
Annual Report’), which was sent to shareholders on 3 March 2021.
Resolution 2
In accordance with the provisions of the Act, the Company’s
Resolution 11
This resolution, if passed, will authorise the Audit and Risk
Committee to agree the remuneration of BDO LLP for their
services as auditors.
Resolution 12
Under the Act, Directors may not allot shares in the Company
(or grant certain rights over shares) without the authority of
shareholders in general meeting (other than pursuant to an
employee share scheme). In certain circumstances this could be
unduly restrictive. The Directors’ existing authority to allot ordinary
shares, which was granted at the annual general meeting of
Report on Directors’ Remuneration will be put to an annual
the Company held on 7 April 2020, will expire at the end of this
shareholder vote by ordinary resolution. This vote is advisory in
year’s AGM.
nature and is in respect of the overall remuneration package
which is in place for Directors – it is not specific to individual
levels of remuneration nor is the entitlement of a Director to
remuneration conditional on the vote being passed. The report is
set out in full on pages 67 to 82 of the 2020 Annual Report.
Resolution 3
The Board proposes a final dividend of 8.00 pence per share in
The Investment Association’s Share Capital Management
Guidelines and the Pre-Emption Group Principles permit, and
regard as routine, an authority to allot up to two-thirds of a
company’s existing issued share capital. Subject to the passing of
this resolution, which will be proposed as an ordinary resolution,
the Directors will be authorised, in place of all existing authorities,
to allot shares (pursuant to section 551 of the Act)up to an
respect of the year ended 31 December 2020. If approved, the
aggregate nominal amount of £592,279 (representing 11,845,573
recommended final dividend will be paid on 15 April 2021 to all
ordinary shares), representing approximately ten per cent of the
ordinary shareholders who are on the register of members on
nominal value of the issued ordinary shares on 25 February 2021
12 March 2021. The shares will be marked ex-dividend on 11 March
(being the last practicable date prior to the publication of this
2021.
document). As at 25 February 2021, the Company did not hold any
Resolutions 4 – 9
Under the Company’s Articles of Association (the ‘Articles’), one
shares in treasury.
The authority conferred will expire (unless previously revoked,
third of the Directors must retire from office by rotation at each
varied or renewed) at the end of the next annual general meeting.
annual general meeting and may offer themselves for re-election
However, the Company may make an offer or agreement prior to
(this does not include Directors appointed to the Board since the
the expiry of this authority which would or might require shares
last annual general meeting). The 2018 UK Corporate Governance
to be allotted after the expiry of this authority – in this case, the
Code recommends that all directors of premium listed companies
Directors will be permitted to allot securities pursuant to such
should be subject to annual re-election, so Denis Jackson, Robert
offer or agreement as if this authority had not expired.
Hingley, Mark Bridgeman, Tim Bond and Claire Finn will retire
from office and offer themselves for re- election. Robert Laing will
not seek re-election. The UK Corporate Governance Code and the
Articles also require any new Directors appointed by the Board
since the last annual general meeting to stand for election at the
next annual general meeting. Accordingly, Trish Houston, having
joined the Board in September 2020, also retires from office and
offers herself for election.
Resolution 13
Unless they are given an appropriate authority by shareholders, if
the Directors wish to allot any shares for cash or grant rights over
shares (other than pursuant to an employee share scheme) they
must first offer them to existing shareholders in proportion to
their existing holdings. These are known as pre-emption rights.
The existing disapplication of these statutory pre-emption rights,
which was granted at the annual general meeting held on 7 April
The biographical details for each Director are set out on pages 50
2020, will expire at the end of this year’s annual general meeting.
and 51 of the 2020 Annual Report.
Resolution 13 seeks approval to disapply the pre-emption rights,
In proposing the election/re-election of the Directors, the
by allowing Directors to allot equity securities (including a sale
Chairman confirms that, following rigorous external performance
of treasury shares) for cash: (i) in connection with rights issues
evaluations (described on pages 56 and 57 of the 2020 Annual
and other preemptive issues in favour of existing shareholders in
Report), each individual continues to make an effective
proportion to their existing holdings (subject to certain exclusions);
and valuable contribution to the Board and demonstrates
(ii) by way of an open offer or other issue of securities in favour
commitment to their role. Accordingly, the Board recommends
of existing shareholders in proportion to their existing holdings
their election or re-election as appropriate.
(subject to certain exclusions); and (iii) to persons other than
Resolution 10
The Company’s auditors must offer themselves for reappointment
at each annual general meeting at which accounts are presented.
Accordingly, the Board, on the recommendation of the Audit and
existing shareholders up to an aggregate nominal amount of
£296,139 (representing 5,922,787 ordinary shares), being no more
than five per cent of the issued ordinary share capital in issue on
the 25 February 2021, in each case without the equity securities
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first being offered to the existing shareholders in proportion to
This authority shall expire at the Annual General Meeting to
their existing holdings.
be held in 2022 when a resolution to renew the authority will
The Directors confirm that in accordance with the Pre-Emption
Group’s Statement of Principles, they do not intend to issue
shares for cash representing more than seven and a half per cent
be proposed.
Resolution 16
The Board is proposing to make amendments to the Company’s
of the Company’s issued ordinary share capital in any rolling
current Articles of Association approved by shareholders on 11
three-year period other than to existing shareholders, save as
February 2021. A summary of the proposed changes is set out on
permitted in connection with an acquisition or specified capital
pages 134 to 137.
investment as described below, unless shareholders have been
notified and consulted in advance.
Resolution 14
Resolution 14 seeks an additional and separate approval to
Resolution 17
The Act requires that all general meetings must be held on at least
21 clear days’ notice. Notwithstanding the notice provisions in the
Articles, a general meeting (other than an annual general meeting)
disapply pre-emption rights by allowing Directors to allot equity
may be held on at least 14 clear days’ notice where:
securities (or sell treasury shares) for cash, of up to a further
five per cent of the total ordinary share capital, representing
up to an aggregate nominal amount of £296,139 (representing
5,922,787 ordinary shares), as at 25 February 2021, without such
equity securities first being offered to the existing shareholders
in proportion to their holdings, where the allotment is to
finance an acquisition or capital investment, and/or refinance a
transaction of that nature entered into within six months of the
original transaction.
The Directors confirm that they will only allot securities (or sell
treasury shares for cash) pursuant to this authority where that
allotment is in connection with an acquisition or specified capital
investment (as described in the Pre-Emption Group’s Statement
of Principles) which is announced at the same time as the
allotment, or which has taken place in the preceding six-month
period and is disclosed in the announcement of that allotment.
Further, the Directors confirm that they intend to adhere to
the Pre-Emption Group’s Statement of Principles and not to
allot shares for cash on a non-pre-emptive basis in excess
of an amount equal to seven and a half per cent of the total
issued share capital (excluding any treasury shares) within a
rolling three-year period other than in connection with an
acquisition or specified capital investment which is announced
contemporaneously with the allotment or which has taken
place in the preceding six-month period and is disclosed in the
announcement of the allotment.
Resolution 15
Resolution 15 is a special resolution that will grant the Company
authority to make market purchases of up to 17,756,514 shares,
representing 14.99% of the issued ordinary share capital as
at the date of the Notice. Any shares bought back will either
be cancelled or placed into treasury at the determination of
the Directors.
The maximum price which may be paid for each share must
not be more than 105% of the average of the mid-market values
of the Ordinary Shares for the five business days before the
purchase is made. The minimum price which may be paid for
each ordinary share is 5p.
The Directors are committed to managing the Company’s capital
effectively and do not intend to exercise such authority at present.
Purchases would only be made after considering the effect on
earnings per share and the benefits for shareholders generally.
•
the Company makes an electronic means of voting available
to all shareholders for the meeting. This condition is met by
the Company providing the facility for shareholders to appoint
a proxy via an online shareholder portal operated by our
Registrars; and
•
the shareholders pass a special resolution reducing the period
of notice to not less than 14 days either at the immediately
preceding annual general meeting or a general meeting held
since that annual general meeting.
It is not the Company’s intention to use the shorter notice period
as a matter of routine but only when the flexibility is merited by
the business of the meeting and is thought to be in the interests
of shareholders as a whole. If given, this approval will be effective
until the end of the next annual general meeting.
Recommendation
Full details of the above resolutions are contained in the Notice.
The Directors consider that all the resolutions to be proposed
at the Meeting are in the best interests of the Company and its
members as a whole. The Directors unanimously recommend that
shareholders vote in favour of all the resolutions, as they intend to
do in respect of their own beneficial holdings.
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Shareholder notes
The following notes explain your general rights as a shareholder
(d) in the case of shares held through CREST, via the CREST
and your right to attend and vote at the Meeting or to appoint
system (see notes 8-11 on pages 140 and 141).
someone else to vote on your behalf.
4.
Any person to whom this Notice is sent who is a person
1.
To be entitled to attend and vote at the meeting (and for the
nominated under Section 146 of the Companies Act 2006
purpose of the determination by the Company of the number
(the 'Act') to enjoy information rights (a ‘Nominated Person’)
of votes they may cast), shareholders must be registered in
may, under an agreement between him/her and the
the register of members of the Company at close of business
shareholder by whom he/she was nominated, have a right to
on Thursday, 1 April 2021 (or, in the event of any adjournment,
be appointed (or to have someone else appointed) as a proxy
close of business on the date which is 48 hours before the
for the meeting. If a Nominated Person has no such proxy
time of the adjourned meeting). Changes to the register of
appointment right or does not wish to exercise it, he/she may,
members after the relevant deadline shall be disregarded in
under any such agreement, have a right to give instructions to
determining the rights of any person to attend and vote at the
the shareholder as to the exercise of voting rights.
meeting. In the case of joint holders of a share, the vote of the
senior who tenders a vote, whether in person or by proxy, shall
be accepted to the exclusion of the votes of the other joint
holders and for this purpose seniority is determined by the
order in which the names stand in the register of members in
5.
The statement of the rights of shareholders in relation to
the appointment of proxies in notes 2 and 8 do not apply to
Nominated Persons. The rights described in these paragraphs
can only be exercised by shareholders of the Company.
respect of the share.
6.
A vote withheld is not a vote in law, which means that the vote
2.
Shareholders are entitled to appoint a proxy to exercise all or
part of their rights to attend, and to speak and vote on their
behalf at the meeting. A shareholder may appoint more than
one proxy in relation to the meeting provided that each proxy
is appointed to exercise the rights attached to a different
will not be counted in the calculation of votes for or against
the resolution. If no voting indication is given, your proxy will
vote or abstain from voting at his/her discretion. Your proxy
will vote (or abstain from voting) as he/she thinks fit in relation
to any other matter which is put before the meeting.
ordinary share or ordinary shares held by that shareholder. A
7.
If you return more than one proxy appointment (except where
proxy need not be a shareholder of the Company. A form of
multiple proxies have been appointed), either by paper or
proxy, which accompanies this Notice, may be used to make
electronic communication, that appointment received last by
such appointment and give proxy instructions. If you do not
the Registrar before the latest time for the receipt of proxies
have a form of proxy and believe that you should have one, or
will take precedence. You are advised to read the terms
if you require additional forms, please contact the Company's
and conditions of use carefully. Electronic communication
registrar, whose contact details are provided above.
facilities are open to all shareholders and those who use them
3.
Dispatch instructions: To be valid, any form of proxy and
will not be disadvantaged.
any power of attorney or other authority under which it
8.
The return of a completed form of proxy, electronic filing or
is executed (or a duly certified copy of any such power or
any CREST proxy instruction (as described in note 10 below)
authority), must be returned by no later than 11:00 am on
will not prevent a shareholder from attending the meeting
Thursday, 1 April 2021 through any one of the following
and voting in person if he/she wishes to do so.
methods:
9.
CREST members who wish to appoint a proxy or proxies
(a) by post at Computershare Investor Services PLC, The
through the CREST electronic proxy appointment service may
Pavilions, Bridgwater Road, Bristol, BS99 6ZY, United
do so for the meeting (and any adjournment of the meeting)
Kingdom
(Tel: 0370 707 1129 if dialling from the UK and
+44 370 707 1129 if dialling from abroad); or
by using the procedures described in the CREST Manual
(available from https://www.euroclear.com/site/public/
EUI). CREST personal members or other CREST sponsored
members, and those CREST members who have appointed
(b) by hand or courier (during normal business hours only) to
a service provider/(s), should refer to their CREST sponsor
the Company’s UK registrar at: Computershare Investor
or voting service provider/(s), who will be able to take the
Services PLC, The Pavilions, Bridgwater Road, Bristol, BS13
appropriate action on their behalf.
8AE, United Kingdom
10.
In order for a proxy appointment or instruction made by
(Tel: 0370 707 1129 if dialling from the UK and
means of CREST to be valid, the appropriate CREST message
+44 370 707 1129 if dialling from abroad); or
(a ‘CREST Proxy Instruction’) must be properly authenticated
(c) electronically through the website of the Company’s
UK registrar at www.investorcentre.co.uk/eproxy, where
the following details, which can be found on your proxy
card or in an email received from Computershare, will
be required:
• the meeting control number;
• your shareholder reference number; and
• your unique pin code; or
in accordance with Euroclear UK & Ireland Limited’s
specifications and must contain the information required
for such instructions, as described in the CREST Manual. The
message must be transmitted so as to be received by the
issuer’s agent by 11:00 am on Thursday, 1 April 2021. For this
purpose, the time of receipt will be taken to mean the time
(as determined by the timestamp applied to the message by
the CREST application host) from which the issuer’s agent
is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. After this time, any change of
140140 lawdebenture.com
Shareholder notes continued
instructions to proxies appointed through CREST should be
15.
Any shareholder attending the meeting has the right to ask
communicated to the appointee through other means.
questions. The Company must answer any such question
11.
CREST members and, where applicable, their CREST sponsors,
or voting service providers should note that Euroclear UK &
Ireland Limited does not make available special procedures
in CREST for any particular message. Normal system timings
and limitations will, therefore, apply in relation to the input
of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member
is a CREST personal member, or sponsored member, or has
relating to the business being dealt with at the meeting, but
no such answer need be given if: (a) to do so would interfere
unduly with the preparation for the meeting or involve the
disclosure of confidential information; (b) the answer has
already been given on a website in the form of an answer
to a question; or (c) it is undesirable in the interests of the
Company or the good order of the meeting that the question
be answered.
appointed a voting service provider, to procure that his CREST
Registered shareholders may submit their questions to the
sponsor or voting service provider takes such action as shall
Directors in advance of the meeting by sending an email to
be necessary to ensure that a message is transmitted by
the Company Secretary at TSU.cosec@lawdeb.com and the
means of the CREST system by any particular time. In this
Company will answer these in due course.
connection, CREST members and, where applicable, their
CREST sponsors or voting system providers are referred, in
particular, to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings. The
Company may treat a CREST Proxy Instruction as invalid
16.
The following documents are, subject to any security
arrangements or restrictions in place as a result of the current
Covid-19 pandemic, available for inspection from Monday,
15 March 2021 until the time of the meeting:
in the circumstances set out in Regulation 35(5)(a) of the
(a) copies of the Directors’ letters of appointment or service
Uncertificated Securities Regulations 2001.
contracts;
12.
Any corporation which is a member can appoint one or more
(b) a copy of the proposed new Articles of Association of the
corporate representative/(s) who may exercise, on its behalf,
Company; and
all its powers as a member provided that no more than one
corporate representative exercises powers in relation to the
same shares.
13.
As at 25 February 2021 (being the latest practicable business
day prior to the publication of this Notice), the Company had
an issued share capital of 118,455,732 ordinary shares, carrying
one vote each and no restrictions and no special rights with
regard to the control of the Company. There are no other
classes of share capital and none of the Company’s issued
shares are held in treasury. Therefore, the total voting rights in
the Company is 118,455,732.
14.
Under Section 527 of the Act, shareholders meeting the
threshold requirements set out in that Section have the right
to require the Company to publish, on a website, a statement
(c) a copy of the existing Articles of Association of the
Company.
Inspection of these documents may only take place in
accordance with measures imposed by the UK Government
in connection with the Covid-19 pandemic. The Company has
its own procedures in place to comply with those measures.
Accordingly, if you wish to inspect any of these documents,
you should email TSU.cosec@lawdeb.com to arrange an
appointment.
17.
You may not use any electronic address provided in either this
Notice or any related documents (including the form of proxy)
to communicate with the Company for any purposes other
than those expressly stated.
setting out any matter relating to:
18.
Personal data provided by shareholders at or in relation to the
(i) the audit of the Company’s financial statements (including
the auditor’s report and the conduct of the audit), which
are to be laid before the meeting; or
meeting will be processed in line with the Company’s privacy
policy. Detailed information on how the Company processes
your personal data and what your rights are under applicable
data privacy laws can be accessed on the Company’s website
(ii) any circumstances connected with an auditor of the
at https://www.lawdebenture.com/privacy-and-cookie-policy.
A copy of this Notice and other information required by section
311A of the Act, can be found on the Company’s website at
https://www.lawdebenture.com/investment-trust/shareholder-
information/corporate-governance/agm.
Company ceasing to hold office since the previous
meeting at which annual accounts and reports were laid
in accordance with Section 437 of the Act. The Company
may not require the shareholders requesting any such
website publication to pay its expenses in complying with
Sections 527 or 528 of the Act. Where the Company is
required to place a statement on a website under Section
527 of the Act, it must forward the statement to the
Company’s auditor not later than the time when it makes
the statement available on the website. Business which
may be dealt with at the meeting for the relevant financial
year includes any statement that the Company has been
required to publish on a website under Section 527 of
the Act.
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Annual general meeting online user guide
HOW TO JOIN
Annual general meeting virtual meeting
required to enter the
110-084-910.
meeting, you will be
unique 9-digit Meeting ID:
1 To participate in the
2 To register as a
shareholder, please
enter your SRN and
voting form.
PIN, which may be found on your
WELCOME PAGE
Once logged in, you
will see the welcome
3
page, which displays the meeting
documents (if any) and information
on the meeting. Icons will be
displayed in different areas,
depending on the device you
are using.
VIEW
LIVESTREAM
• Click on the ‘Broadcast’
4
arrow to watch the livestream.
• Video and/or slides will
appear after approx. 30 seconds
(depending on the speed of
your internet).
TO ASK QUESTIONS
• Click on the questions
icon to submit a question.
5
• Type your question in the
chat box at the bottom of
Meeting ID: 110-084-910
Meeting Access
Shareholders can participate in the AGM electronically, should they wish to do so. This can
be done by accessing the meeting website: https://web.lumiagm.com
This can be accessed online using most well-known internet browsers such as Internet
Explorer (not compatible with versions 10 and below), Chrome, Firefox and Safari on a PC,
laptop or internet-enabled device such as a tablet or smartphone.
On accessing the meeting website, you will be asked to enter a Meeting ID which is:
110-084-910
You will then be prompted to enter your unique shareholder reference number (SRN) and
PIN. These can be found printed on your voting form.
Access to the meeting will be available from 10:00 am on 7 April 2021; however, please note
that your ability to vote will not be enabled until the Chairman formally declares the poll open.
Broadcast
The meeting will be broadcast in audio format. Once logged in, and at the commencement
of the meeting, you will be able to listen to the proceeding of the meeting on your device.
Voting
Once the Chair has formally opened the meeting, the voting procedure will be explained.
Once voting has opened, the polling icon will appear on the navigation bar. From here, the
resolutions and voting choices will be displayed.
Select the option that corresponds with how you wish to vote. Once you have selected your
choice, the option will change colour and a confirmation message will appear to indicate
your vote has been cast and received. There is no submit button. If you make a mistake or
wish to change your vote, simply select the correct choice. If you wish to “cancel” your vote,
select the “cancel” button. You will be able to do this at any time whilst the poll remains
open and before the Chair announces its closure.
the screen and click the
‘Send’ arrow to the right.
• A confirmation that your
message has been received will
be displayed.
Questions
Shareholders attending electronically may ask questions by typing and submitting their
question in writing. Select the messaging icon from within the navigation bar and type
your question at the bottom of the screen. To submit your question, click on the arrow icon
TO VOTE
• Once the poll has
been opened, you will
6
automatically see it on the screen.
• To vote, tap one of the voting
options. Your response will
be highlighted.
• If there is more than one answer
option, press ‘Send’ to cast
your vote.
• You can change your vote until
the Chairman closes the poll.
to the right of the text box.
Requirements
An active internet connection is required at all times in order to allow you to cast your
vote when the poll opens, submit questions and listen to the audiocast. It is the user’s
responsibility to ensure you remain connected for the duration of the meeting.
Duly appointed proxies and corporate representatives
Following receipt of a valid appointment, please contact the Company’s registrar before
11.00 am on Thursday, 1 April 2021 on 0370 707 1129 or +44 370 707 1129 if you are calling
Simply select another option or
from outside the UK for your SRN and PIN. Lines are open 8:30am to 5:30pm Monday to
click ‘Cancel’.
Friday (excluding public holidays in England & Wales).
142 lawdebenture.com
The Law Debenture Corporation p.l.c. 8th Floor, 100 Bishopsgate, London, EC2N 4AG
Tel: 020 7606 5451 | www.lawdebenture.com