ANNUAL REPORT
2022
Law Debenture is an investment trust and a leading
provider of independent professional services, listed
on the LondonStock Exchange.
lawdebenture.com
For more information visit our website:
https://www.lawdebenture.com/investment-trust
The Law Debenture Corporation p.l.c.
wins Best Investment Trust for
Income in Shares Awards 2022
This is Law Debenture’s third award win this
year, and one that we are delighted to receive as it
represents direct recognition by retail investors of
our investment managers’ excellent track record
and their continued efforts to offer resilience,
long term outperformance and dividend growth
to shareholders, successfully using the flexibility
provided by the cash flows of our Independent
Professional Services business.”
Trish Houston, COO and Head of Corporate Secretarial
Services, Law Debenture
The Law Debenture Corporation p.l.c.
winsbest UK Equity – Active category
in the AJBell Fund and Investment
Trust Awards 2022
We are proud to receive such great recognition
from the industry. I am delighted that Law
Debenture continues to offer investors resilience,
long term outperformance and dividend growth
against a background of turbulent global markets.”
Denis Jackson, Chief Executive Officer, Law Debenture
COO and Head of Corporate Secretarial Services Trish
Houston, CFO Hester Scotton and CEO Denis Jackson
at the Investment Week award ceremony.
The Law Debenture Corporation p.l.c.
named UK Equity Income Investment
Trust of the Year, for the second
year running, at Investment Week’s
Investment Company of the Year
Awards 2022
The Law Debenture Corporation p.l.c.: AIC Investment
Trust Awards, UK Equity Income Sector Winner 2022.
UK Equity Income Sector
Investment Trust of the Year
UK Equity Income Sector
Investment Trust of the Year
This is Law Debenture’s second award win
of 2022, and we are extremely pleased to be
recognised for the quality of our operations and
performance by the investment trust industry
and our peers. Our investment managers, James
Henderson and Laura Foll, seek to deliver
resilience, long termoutperformance and
dividend growth to shareholders, and this award is
an acknowledgement of Law Debenture’s ongoing
commitment to these goals.”
Hester Scotton, CFO, Law Debenture
1
AT A GLANCE
1 Please refer to page 152 for an explanation of net asset value with debt and IPS at fair value.
2
Calculated based on data held by Law Debenture for the year ended 31 December 2022.
3
Source: Association of Investment Companies (AIC) industry average as at 31 December 2022.
Investment
Portfolio
c. 79% of NAV
including IPS and long-term
borrowings at fair value
1
Managed by James Henderson and Laura Foll
ofJanus Henderson
Independent Professional
Services (IPS) business
c. 21% of NAV
including IPS and long-term
borrowings at fair value
1
OBJECTIVE: LONG-TERM CAPITAL
GROWTH IN REAL TERMS AND STEADILY
INCREASINGINCOME
– Focused on long-term returns
– Low ongoing charges ratio at 0.49%
2
compared to industry average of 1.04%
3
– Contrarian investment style:
• High quality companies with strong
competitive advantage at attractive
valuations
•
Out of favour equities standing at
valuation discounts to their long-term
historical average
– Selective, bottom-up approach
– Diversified portfolio by sector
(predominant UK weighting)
PENSIONS
The longest
established and
one of the
largest UK
providers of
pension trustee
services
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, Cayman Islands and
Channel Islands
We believe that all divisions have potential
for further growth in expanding markets.
Our plan to achieve this is by increasing our
market share through better leveraging
oftechnology, our strong relationships
and our brand
Significant, consistent income contribution from IPS gives greater flexibility in stock selection
AT A GLANCE
Law Debenture:
has a highly differentiated and unique business model
lawdebenture.com
2
Financial summary
31 December 2022
£000
31 December 2021
£000
Change
Net Asset Value – with debt and IPS at fair value
1
* 972,566 964,493 0.84%
Total Net Assets per the statement of financial position 799,067 878,837 (9.08%)
Pence Pence
Net Asset Value (NAV) per share at fair value
1
* 761.69 787.83 (3.3%)
Revenue return per share
Investment Portfolio 24.06 18.09 33.0%
Independent professional services 10.38 10.00 3.8%
Group revenue return per share 34.44 28.09 22.6%
Capital return/(loss) per share (103.17) 94.60 (209.1%)
Dividends per share 30.50 29.00 5.2%
Share price
4
771 799 (3.5%)
% %
Ongoing charges
3
* 0.49% 0.50%
Gearing
3
12% 13%
Premium/(discount)* 1.22% 1.42%
For reconciliation of NAV at fair value per the above to published year end NAV please refer to page 36.
Performance
1 year
%
3 years
%
5 years
%
10 years
%
NAV total return
2
* (with IPS at fair value and debt at par) (6.8) 16.8 30.3 141.5
NAV total return
2
* (with IPS and debt at fair value) 0.6 26.0 39.9 154.6
FTSE Actuaries All-Share Index Total Return
4
0.3 7.1 15.5 88.2
Share price total return
4
* 0.4 37.7 51.6 161.2
Change in Retail Price Index
5
13.4 23.5 29.6 46.0
* Items marked “*” are considered to be alternative performance measures and are described in more detail on page 152.
1 Please refer to page 36 for calculation of net asset value. Please note change in NAV per share in the financial summary does account for the effect of dividends on total return.
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 and both total returns account for shareholder returns through dividends.
3 Ongoing charges are calculated based on AIC guidance, using the administrative costs of the investment trust and include the Janus Henderson Investors’ management
fee, charged at the annual rate of 0.30% of the NAV. There is no performance related element to the fee. Gearing is described in the strategic report on page 33 and in our
alternative performance measures on page 152.
4 Source: Refinitiv.
5 Source: Office for National Statistics.
AT A GLANCE
3
Key statistics
for the year ended 31 December 2022
AT A GLANCE
1 Please refer to page 36 for calculation of net asset value.
2 Ongoing charges are calculated based on AIC guidance, using the administrative costs of the investment trust and include the Janus Henderson Investors’ management
fee, charged at the annual rate of 0.30% of the NAV. There is no performance related element to the fee. Gearing is described in the strategic report on page 33 and in our
alternative performance measures on page 152.
0.4%
Share price total return
(2021: 19.2%)
0.6%
1
Growth in Net Asset Value
– including debt and IPS
at fair value total return
(2021: 25.1%)
1.04%
Average premium in share price versus NAV
(with debt and IPS at fair value)
in 2022
8.1%
Growth in IPS profit before tax
(2021: 9.1%)
0.49%
Ongoing charges ratio
– compared to industry average of 1.04% (2021: 1.05%)
(2021: 0.50%)
8.2%
5 year compounding annual growth rate
in IPS net profit before tax
5.2%
Proposed increase
in 2022 dividend pershare
(2021: 5.5%)
113%
Increase in IPS valuation
from 2017 to 2022
A consistent long-term out-performer
Total Net Assets per statement of financial position
percentage decrease (9.08%) (2021: increase of 20.9%)
Providing real value with a combination of prudent
decisions and responsive services
Law Debenture’s investment proposition
A proud
history
134 years of value creation
forshareholders
Consistent
dividend
growth
44 years of increasing or
maintaining dividends to
shareholders (114% increase
in dividend over the
lasttenyears)
7.91% CAGR of dividend
overthelast 10 years
5.2% increase in 2022 DPS
25% of total 2022 dividend
funded by our Independent
Professional Services business
IPS enables
greater flexibility
in portfolio
holdings
IPS accounts for c.21% of the
2022 NAV but has funded 34% of
dividends over the last 10 years
Investment Portfolio
differentiators:
• Ability to hold zero/low
dividend yield shares
(eg; Ceres, ITM, Herald)
• Ability to avoid high dividend
yield industries in structural
decline (e.g. BAT)
• Ability to invest flexibly overseas
(e.g. Air Products & Chemicals
(purchased in January 2023))
Strength and
diversity
ofincome
Flexibility and valuation uplift
from IPS + consistent portfolio
outperformance
Proven record
delivering
consistent
long-term
outperformance
Outperformance of our
benchmark, the FTSE Actuaries
All-Share Index, by 73% over
ten years (36.1%over five years
and 30.6% over threeyears)
Low ongoing charges ratio of
0.49% compared to industry
average of 1.04%
IPS has aproven
record of growth
under the
management
team
CAGR of 10.7% in net revenue
and 8.2% in profit before tax
over last five years
1
Ambition to grow profits
of IPS by mid to high single
percentage growth
IPS valuation has increased
by 113% between 2017 and 2022
to £201.7m
2
UK weighting
(83% portfolio)
has potential to
outperform
UK has lagged global
stockmarkets in recent years
Around 80% earnings
of the FTSE 100
come from
outside the UK
Significant UK valuation
discount has attracted
M&A activity
AT A GLANCE
1 Includes acquisition of the Company Secretarial Services business from Eversheds Sutherland (International) LLP in 2021.
2 Increase in total annual valuation of Independent Professional Services business. For a calculation of this please refer to page 36.
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4
AT A GLANCE
Contents
AT A GLANCE
At a glance 1
Financial summary and performance 2
Key statistics 3
Investment Proposition 4
STRATEGIC REPORT
Chairman’s statement 6-7
Chief Executive Officer’s review 8-14
IPS 5 year performance at a glance 15
Investment managers’ review 17-20
Portfolio by sector and value 21
Fifteen largest holdings 22-23
Classification of investments 24
Investment Portfolio valuation 26-29
Changes in geographical distribution 29
Company overview 30-35
Calculation of net asset value (NAV)per share 36
Long-term performance record 37
Risk Management 38-42
Viability statement 44-45
Section 172(1) Statement 46-48
Environmental, Social and Governance (ESG) 50-57
CORPORATE GOVERNANCE
The Board 58-59
Directors’ report 61-65
Corporate governance report 66-68
Nomination Committee report 69-71
Audit and Risk Committee report 72-74
Directors’ remuneration report 76-98
FINANCIAL STATEMENTS
Independent auditor’s report 100-110
Group income statement 112
Statement of comprehensive income 112
Statement of financial position 113
Statement of changes in equity 114-115
Statements of cash flows 116
Notes to the accounts 117-151
CORPORATE INFORMATION
Alternative performance measures 152-153
Company advisers and information 154
Financial calendar 155
Subsidiary company details 155
Notice of Annual General Meeting (AGM) 156-158
Explanatory notes to the Notice 159-160
Shareholder notes 161-162
AGM venue 163
5
Performance
I am pleased to report that Law Debenture has performed
creditably in the midst of the ongoing global economic
uncertainty. Rising interest rates and inflation, combined with
tumultuous domestic politics and the ongoing war in Ukraine,
have resulted in market volatility and low risk appetite. Despite
these headwinds, the combination of our diversified Portfolio and
another good IPS performance have ensured that Law Debenture
continues to deliver on its commitment to produce capital
growth over the longer term and steadily increasing income to
benefit all our shareholders.
Our benchmark, the FTSE Actuaries All-Share Index, delivered a
0.3% total return, and we are satisfied that the Company’s share
price total return marginally outperformed this with a total return
of 0.4% for 2022. The Net Assets Value (‘NAV’) with debt and the
independent professional services (‘IPS’) at fair value delivered a
return of 0.6%.
The highlight was receiving recognition for all the hard work of
our great team of people from the investment community in
the shape of three awards. At the 2022 Shares Awards, we were
recognised as the Best Investment Trust for Income, and it was
also a great honour to be the recipient of the UK Equity Income
Investment Trust of the Year award for the second year running.
We also came out on top in the UK Equity – Active category at
the AJ Bell Fund and Investment Awards. The triple success
demonstrates the excellent short- and longer-term record of our
investment managers, and the continued resilience, long-term
outperformance and dividend growth offered by ourTrust.
Dividend
We retain a proud record of increasing or maintaining our
dividend payments for the 44
th
year in a row. The current climate
has naturally affected yields from our Investment Portfolio, and
it is likely that the enduring impact of the past year’s difficulties
will continue to affect dividends across capital markets. However,
the consistent and reliable cash flows from our diversified IPS
business have helped ensure that we can continue our strong
dividend record.
Subject to your approval, we propose paying a final dividend of
8.75 pence per ordinary share. The dividend will be paid on 13April
2023 to holders on the register on the record date of 10March 2023.
This will provide shareholders with a total dividend of 30.50pence
per share for 2022, an increase of 5.2% compared with 2021.
1
This
represents a dividend yield of 3.7% based on our closing share price
of 827 pence on 24 February 2023. Over the last 10 years, we have
increased the dividend by 114% inaggregate.
Capital structure
In 2022, the Group issued 5.2 million new ordinary shares at a
premium to NAV, to existing and new investors, with net proceeds
of £41.4m to support ongoing investment. Shares were issued at a
premium to NAV to be accretive to existing shareholders.
Our Investment Portfolio
Despite recessionary pressures and high inflation, James
Henderson and Laura Foll, our investment managers, continue to
invest in a differentiated selection of high-quality businesses with
competitive advantage and good long-term growth prospects.
We are pleased to report dividend income of £34.4m from the
Portfolio, representing growth of 31% compared to the prior year.
Stocks globally were buffeted over the past year resulting in an
understandable, but disappointing, total capital loss for the year of
£129.6m. Of this, £126.2m is unrealised as it relates to movements
in the value of the holdings within Portfolio and is offset by the
movement of £75m in the fair value of debt and £12.5m in the fair
value uplift of IPS. However, we are confident that their disciplined
approach of buying at attractive entry point valuations will
continue to deliver over the longer term for our shareholders. The
high-margin and revenue flows that IPS generates give James
and Laura the opportunity to explore a more flexible portfolio that
includes both income and growth-focused stocks.
Pages 17 to 20 offer more detailed commentary on the Portfolio
performance with a review from our investment managers.
STRATEGIC REPORT
Chairman’s statement
1 Refer to financial summary on page 2.
lawdebenture.com
6
7
IPS
Our professional services business, a unique offering that lends
an advantage compared to other UK income funds, has grown
from strength to strength in recent years with a compound
annual growth in profit before tax of 8.2%
2
over the last five years.
The turmoil caused by the ‘mini budget’ brought the pensions
industry into widespread focus, and, while it was undoubtedly a
difficult period, I am proud of how our Trustee business delivered
for clients.
In a year where global uncertainty badly affected capital markets,
the value of IPS for shareholders became more evident. Some of
our businesses benefit from a degree of counter-cyclicality, which
is, in part, why IPS had another year of mid-
high single digit revenue and profit growth.
This is underpinned by our specialist
knowledge and record of providing
excellent client service. The Board is
pleased to see employee engagement
and satisfaction scores improving and
this ongoing investment in talent and
technology, leaves us confident IPS should
have the potential to sustain mid to high
single digit growth over the medium term.
Environmental, Social and
Governance (ESG)
Those with whom we have worked over
the past few years will likely be aware of
the cultural changes at Law Debenture.
I want to give credit to our Executive
Leadership team who have been
instrumental in creating a working culture
that encompasses our four values: Make Change Happen; Better
Together; Believe It’s Possible and Never Stop Learning.
Our IPS business is built upon the provision of independent
governance services. A central tenet of this work is our
commitment to diversity, and we are delighted that we have
established a balanced gender pay gap position and have strong
female representation both at Board and senior executive level,
with women making up 47% of the senior leadership team. In
2022, we ranked 1st in the Financial Services category of the FTSE
Women Leaders Review – an achievement that we are extremely
proud of. Supporting our people is directly beneficial to our clients,
with improved representation promoting broader perspectives,
experiences, and skillsets.
As an organisation, we believe that long-term growth is
underpinned by sustainability. This presents opportunities for
investment within the Portfolio. The IPS business has a relatively
small carbon-footprint and, over the years, we have taken steps
to further reduce this. As part of our commitment to the ESG
agenda, Law Debenture has voluntarily chosen to adopt the Task
Force on Climate-Related Financial Disclosures (‘TCFD’). This can
be found on page 51.
Our investment managers are committed to investing in businesses
that have a sustainable business model and carefully take ESG into
consideration when making investment decisions. For more details
please see page 50.
The Board
During the course of 2022, Mark Bridgeman stepped down as
Chair of the Audit and Risk Committee and from the Board, having
served nine years. I would like to thank him for his significant
contribution to the Board and the Company over the years.
Pars Purewal, who joined the Board in December 2021, was
appointed as our new Chair of the Audit and Risk Committee. Pars
brings extensive Audit and Risk experience,
having been a Senior Partner and worked
in the PwC Audit Practice for 35 years.
Following Mark’s departure, Clare Askem
has taken over as Workforce Engagement
Director and has already invested time
in hosting listening groups with our staff
to provide feedback to our Executive
Leadership team and the Board.
Looking forward
The beginning of 2023 has brought
some tentative optimism from investors
that inflation and the cost-of-living
crisis will perhaps subside sooner
than first thought. While I welcome a
more optimistic outlook on UK market
valuations, particularly with the more
stable environment that we are now
seeing, there is still some way to go, and
it is reasonable to expect much of this year to follow the current
trends. The majority of the Portfolio is invested in UK equities,
although many of the earnings are derived from outside the UK.
James and Laura continue to believe that UK market valuations
are too low and offer some attractive longer-term growth
opportunities with a lot of bad news already priced in.
The Board and our investment managers remain confident
in our future performance, due to the diversified and resilient
nature of our Portfolio and the good growth potential for
IPS. Its services are well sought after and the market share
opportunities are considerable.
During these challenging times, our consistent delivery has only
been possible due to the hard work of our talented people and,
on behalf of the Board, I would like to thank them all.
Robert Hingley
Chairman of the Board
27 February 2023
Law Debenture is a rare
proposition: an investment
trust supported by a
wholly owned professional
services business. The
whole is greater than
the sum of these parts,
providing a hedge to
market volatility
STRATEGIC REPORT
Chairman’s statement continued
2 Calculated using the published PBT of the IPS business over the past 5 years.
lawdebenture.com
8
STRATEGIC REPORT
Introduction
2022 has been an encouraging year overall for Law Debenture,
despite the continued macroeconomic uncertainty we have
seen. Markets have been difficult across
the world and the UK saw political volatility
which exacerbated the turbulence
in financial markets. Despite this,
LawDebenture’s performance reflected
well on the Group’s ability to adapt to
a changeable economic climate and
navigate short-term headwinds. Law
Debenture delivered on its two main
objectives; producing some, albeit modest,
share price growth and continuing to
steadily increase income for shareholders.
The sharp jump in inflation and interest
rates and overall challenging economic
environment for businesses has not been
easy for our investment managers to
navigate. The median share price for the
UK was down 18% over the course of the
year and so I am pleased with our total
share price performance, which was very
marginally up. Capital has been preserved
in a year when many global stock markets fell sharply and we
had our 44
th
year of maintaining or increasing dividends.
James Henderson and Laura Foll have continued to perform
creditably in difficult market conditions. The Group takes great
pride in our long-term record over one, three, five and ten years,
with consistent outperformance of the benchmark, the FTSE
Actuaries All Share Index. James and Laura have a consistent
and proven valuation-driven process which aims to identify
market-leading, high-quality companies that are undervalued
at the point of purchase. It is a testament to the continued
outperformance and the investment team that Law Debenture
has won three prestigious investment trust awards this year.
Our IPS business has shown its fifth consecutive year of middle
to high single digit growth. For 134 years, we have stuck to our
principles of independence, trust and excellence. Our investment
for growth over the last five years has positioned us well for the
future. The acquisition of Eversheds Sutherland (International)
LLP’s Corporate Secretarial Services (‘CSS’) business in 2021 has
strengthened its client offering. I am very proud of our strong
client relationships and approximately two-thirds of our business
is repeated year on year. As we face a complex macro-economic
environment in 2023, our aim is that IPS should continue to
provide an element of counter cyclical revenue that will support
our overall performance. High-quality governance should remain
core to our clients, regardless of the economic cycle.
IPS business net revenues (gross revenue less direct costs
incurred) for the full year 2022 were up 8.6% at £45.2m (2021:
£41.6m) and profit before tax was up 8.1%. The diversification
of our income streams again served us well, but we have had
to compete with the challenging recruitment environment
to retain our people who underpin the quality of service we
deliver. However, we are active in the management of our cost
base and are working hard to ensure
our profit margins are sustainable.
We are proud to have delivered a 114%
increase in dividend over the last ten
years. This is supported by the diversified
nature of IPS, which makes Law
Debenture a unique investment trust.
The flow of income from IPS has funded
around 34% of dividends over that period
and gives James and Laura the flexibility
to invest in a broader and higher-growth
portfolio than many sector peers, helping
to position the equity portfolio for future
longer-term growth.
Corporate trust
Law Debenture was incorporated to
act as a bond trustee in 1889. The role
of a bond trustee is to act as a bridge
between the issuer of a bond and the
individual bondholders. Our responsibilities as bond trustee
can vary materially, whether servicing performing or defaulted
bondissues.
Chief Executive Officer’s review
At the core of
LawDebenture’s
financial objectives
are two keys aims;
to achieve long-term
capital growth,
and to steadily
increase income for
ourshareholders.
9
DIVISION
Net revenue
2018
£000
Net revenue
2019
£000
Net revenue
2020
£000
Net revenue
2021
£000
Net revenue
2022
£000
Growth
2021/2022
%
Corporate trust 8,362 9,024 10,789 9,771 10,620 8.7%
Pensions 9,488 10,598 11,479 13,060 14,343 9.8%
Corporate services 11,734 12,167 12,226 18,755 20,206 7.7%
Total 29,584 31,789 34,494 41,586 45,169* 8.6%
Normal obligations for the bond trustee to support performing
issues include communication to the bondholders of financial
or security data, together with the distribution of covenant
information. For this type of work, we are typically paid an
annual fee throughout the lifetime of the bond. This fee
is inflation linked for the majority of our existing book of
business. When an amendment to bond documentation is
required, we can also earn additional revenues to complete the
necessarychanges.
When bonds default, the workflow, risk and revenue profiles
of our role can materially change. A key duty of the bond
trustee is to be the legal creditor of the issuer on behalf of the
bondholders. We never wish our clients to suffer bad fortune,
but our role in such default situations requires material
incremental work that, given a favourable outcome, can lead
to significant additional income for the firm. Defaults often
take years to play out and the results are uncertain. Given this
long-dated and fluctuating backdrop, our revenues for this
work in any specific calendar year can fluctuate. However, such
post issuance work has strong economic countercyclicality
and has produced sound returns for our shareholders
overtime.
Highlights
Following a difficult 2021, when we reported a 9.4% decrease
in revenues for the Corporate Trust business, we are pleased
to report revenue growth of 8.7% in 2022, despite challenging
market conditions.
As noted at the half year, the majority of the capital markets
transactions that sit on our books have been built up over many
decades and have contractual inflation-linked fee increases for
our services. These fee increases are applied on each transaction
anniversary. As 2022 progressed and inflation remained at
elevated levels, the more such inflation-linked increases fed
through to our book of business.
Despite the extremely tough primary market conditions, under
the leadership of Eliot Solarz, we completed some notable
new transactions, including an appointment Trustee for the
Real Estate Investment Trust, SEGRO plc’s €1.15 billion senior
unsecured Green Bond issue. The proceeds of the issue will
principally be used to finance and/or refinance Eligible Green
Projects as outlined in the SEGRO Green Finance Framework,
as well as providing funding for general corporate purposes.
Later in the year we were also appointed as Trustee on the
€750 million senior unsecured Green bond issue for the SEGRO
European Logistics Partnership (‘SELP’) jointventure.
Our escrow business continues to build momentum and
broaden its diversification of use. During 2022 we were
appointed to a range of roles that included M & A, litigation,
commercial real estate, sporting events, sales of ships, and to
support global trade in commodities.
Our business is built on trust and independence, our domain
expertise, and our ability to move fast.
Outlook for our corporate trust business
Levels of primary market activity are difficult to predict. Growth
in European primary debt issuance revenues over the past four
years illustrate this well at -14% for 2019, +21% for 2020, +1% for
2021 and -23% for 2022 respectively (source; Dealogic). Our post-
issuance work is equally difficult to predict, but historically has
had a strong economic countercyclicality.
We continue to increase our range of products and broaden and
deepen our relationships with clients, law firms and financial
institutions that underpin activity in this market. We have
hired extra business development resource to help to grow
this business and we are increasingly raising our profile within
the marketplace for our services. Even if year-on-year revenue
growth can be somewhat lumpy, we are confident that, over
time, we can continue to grow this business.
STRATEGIC REPORT
Our leading independent professional services business is built on three pillars:
our pensions, corporate trust and corporate services businesses.
Chief Executive Officer’s review continued
*Total net revenue is calculated by reducing segment income of £53,452k by cost of sales of £8,283k.
Corporate services: 2021 includes additional revenue arising from the acquisition of the CSS business from Eversheds Sutherland (International) LLP.
lawdebenture.com
10
Chief Executive Officer’s review continued
Highlights
As I announced in the 2021 Annual Report, Vicky Paramour was
appointed as Managing Director for our Pensions business,
with Sankar Mahalingham heading up the fast-growing
Pegasus side of the business. 2022 was another strong year for
our Pensions and Pegasus business with growth in revenues
of 9.8%. Over the past five years, compound revenue growth is
a healthy 12%. In our core Trustee business, we were delighted
to add incremental appointments that included names such as
Riverstone, SEI Master Trust and Invesco.
We recognise that revenue growth is driven by investing in
the best people and we remain committed to continuing to
do so. During the year, we continued to invest in our trustee
team both at the director level as well as professional trustees
with a specific focus on broad pension industry and pensions’
management skillsets, to service our increasing portfolio of
smaller to medium sized schemes. We also continued to invest
in regional and international talent. In Manchester, we hired our
first pensions trustees alongside our Pegasus employees to
service a large pool of potential clients based in this region and
we will continue to add to this capability. We also expanded our
capability in Ireland, to cover increasing opportunities in the
Irish market from both local and international companies.
During the year, Pegasus continued to grow, with more full
outsourced pension management wins, alongside interim
resource and project support. Pegasus offers a range of
services from simple pension scheme secretarial services
through to fully outsourced pensions management and
professional sole trustee solutions. After five years, this
business now has revenues of approximately £4m per annum.
We have a broad product range and client base and we see
increasing demand for our expertise to independently support
projects such as GMP equalisation and de-risking. We also
continue to invest in hiring professionals with buy in, buy out
and wind-down experience which is of value to a growing
number of schemes.
Outlook for our Pensions business
The increasing governance burden for UK pensions schemes
means that there are more opportunities for providing
independent professional support to schemes of all sizes.
Forexample:
• The knock-on effects of the LDI crisis in 2022 are likely to give
added impetus to the appointment of professional trustees
• New funding and investment regulations are likely to require
greater support and challenge from trustee boards, including
negotiations with sponsors
• Corporate sponsors will consider to what extent the efficient
processes associated with professional corporate sole trustee
models will ensure value for money while helping schemes
manage their risks
• Schemes moving towards full de-risking solutions are likely to
need to call on greater professional expertise and experience.
STRATEGIC REPORT
Pensions
We are one of the largest independent providers of Pension
Trustees in the UK and, throughout 2022, continued to support
our clients as the pensions landscape evolved.
Our Pegasus offering of outsourced pensions executive
solutions is a leading provider in the UK in a fast-growing
market.
Market dynamics
While many large pension schemes have a professional
trustee appointed to their board, around 50% of schemes in
the UK have not yet appointed a professional trustee – these
are mainly small to medium-sized schemes.
In 2022, the DWP published its consultation on new funding
and investment regulations, with a focus on having a longer-
term strategy for all pension schemes. Together with the
new code of practice on funding due to be in force in 2023,
this will push schemes to consider investment strategies and
their “end-game” planning in more detail. We expect that this
will continue the trend of sponsors and schemes to look to
strengthen the level of professional expertise on their pension
scheme trustee boards.
In addition to these regulatory developments, the gilt market
and associated LDI crises in late September and October
2022 further highlighted the need for professionalism, good
governance and the need to react quickly to significant
market events.
The UK regulator will also, in 2023, introduce a single
combined code of practice, focusing on improving governance
and requiring schemes to assess the risks being run in their
schemes. These new requirements will encourage schemes to
identify gaps in governance. Any resulting resourcing issues
may encourage more to outsource.
Case study: National Lottery
We have worked with Camelot since the inception of
the National Lottery in 1994. Our role as Security Trustee
is designed to protect players from the insolvency of
the operator and requires our daily engagement with
Camelot, with whom we have built a tremendous
relationship. In September 2022 the Gambling
Commission announced that it had awarded the fourth
National Lottery Licence to Allwyn. We are delighted
that Allwyn, recognising our long-standing experience
and expertise in this area, selected us to be the
Trustee for their bid and that as such we will
continue our work on the National Lottery for at
least a further 10 years.
11
Many sponsors of pension schemes continue to face resourcing
issues, for example where:
• In-house administration is outsourced for the first time
• Succession planning issues become relevant as pension
managers and their teams retire
• Increased governance requirements put stress on already
under-resourced teams
Rather than continue to operate with full in-house teams, there
are likely to be an increasing number who will look to outsource
all or part of their functions to third parties. This provides
opportunities for the Pegasus business to grow substantially by
taking on these large, outsourced mandates.
In addition, given the highlighted market dynamics, driving
the increased professionalisation of pension governance and
complex pensions laws that require expert navigation, we believe
that the market for our expanding range of pension governance
services will continue to increase steadily over time.
Corporate services
Corporate Services has four well-diversified constituents:
Corporate Secretarial Services (‘CSS’), our whistleblowing
division, Safecall, Structured Finance Services and Service of
Process. Pleasingly, all businesses grew or maintained their
revenue during the year, although the total increase in revenues,
up 7.7%, was affected by CSS. In the prior year, the CSS result was
for an 11-month period, the acquisition having completed at the
end of January 2021.
Corporate Secretarial Services
CSS – Market dynamics
We operate in three main product areas.
Managed services: We deliver Global Entity Management
services to over 350 clients, acting as a single point of contact
to ensure that overseas legal entities are kept in good standing
for international compliance. Client appointments vary in scale
and coverage, ranging from a single legal entity in one country
at its simplest to over 300 subsidiaries in 50 countries at its
most complex. We are paid a fixed annual fee to deliver annual
compliance and corporate records maintenance. We may also
earn incremental revenues from additional projects such as
incorporations and dissolutions, the co-ordination of global
corporate change projects and performing entity validation
work. Excellent workflow management and use of technology
is critical to compete effectively in this space and we are
investing heavily here. Our team is based in our London and
Manchesteroffices.
Corporate governance services: This work stream covers all
aspects of board and committee support, from full outsourced
company secretarial support to attending and minuting
meetings. We also provide practical company secretarial,
governance and listing rules support to companies preparing
STRATEGIC REPORT
for an IPO, including support post listing. Our clients range
from major Main Market and AIM listed companies, including
investment trusts, to UK operating subsidiaries of top global
brands. Our fees vary between fixed annual fees for specifically
scoped mandates but can also be time or project-based.
Demand here is often for skilled professionals with prior
experience in a particular industry and/or governance framework
who can seamlessly transition work from being completed in-
house. This team in based in London.
Interim resourcing: Here we provide immediate access to
qualified governance professionals, whether on-site or remote,
and full time or part time, as required by the client. Typically, we
are paid on a time spent basis, but also complete certain work on
a fixed fee basis. This team is based in London.
Corporate governance standards are being elevated worldwide
and our evidence is that outsourcing growth trends have
been accelerated by the pandemic. Large in-house company
secretarial departments are typically decreasing in number and
are suffering from underinvestment. We have been offering
solutions in this sector for over twenty years, have critical mass
and are confident of our ability to increase our market share over
time in a growing market.
We continue to strive to provide services to which support
our clients’ needs. In response to changes in legislation, we
have become authorised to act as a verifier for the Register of
Overseas Entities, providing an essential service for overseas
clients and contacts acquiring property in the UK.
CSS – Highlights
Frustratingly, we were unable to expand our client base as much
as we would have liked during the year because the demand for
our products and services in 2022 exceeded our ability to offer
appropriate resourcing, particularly in the interim and corporate
governance services areas.
Increasing our capability with appropriately qualified people is
something that we are continuing to address. We transferred
across 46 people at the time of the acquisition in 2021 and, at 2022
year end, our headcount in this business was 64. We will continue
to hire and develop the right people, skills, technology and
infrastructure that we require in order to deliver a first-class service.
We have also invested in the leadership of this business. Upon
her return from maternity leave in late summer 2022, our COO
and Executive Director, Trish Houston, took on the responsibility
for the day-to-day running of this growing business. Trish brings
renewed rigour to ensure that this business can grow sustainably
over time and take full advantage of the opportunities that exist
in this growing market.
Despite the capacity constraints referred to above, we added
to our client roster, winning work to support several Investment
Trusts managed by Schroders, as well as the LXI REIT. It is
pleasing too that there have been a number of new clients
on the Managed Service side, including several FTSE 100 and
Fortune 500 groups and FTSE 250 groups on the corporate
governance services side.
Chief Executive Officer’s review continued
lawdebenture.com
12
STRATEGIC REPORT
Chief Executive Officer’s review continued
Whistleblowing: Safecall – Market dynamics
The emerging regulatory frameworks and standards that we
have highlighted for some time now continue to accelerate
throughout the developed world. The whistleblowing concept
is understood and widely discussed, and we are seeing a
growing demand for our products and services. Several 2022
news headlines on a national level were driven by some sort
of whistleblowing activity. Early adopters of independent
whistleblowing services were often larger entities, but
increasingly smaller and mid-sized employers are adopting this
emerging best practice.
Unsurprisingly, competition is increasing in this growing market.
As with all of our IPS business, what differentiates us is the
quality of our people. All enquiries are dealt with by our highly
trained staff that consists of former police officers. Time and
again, the quality of the work that we do for our clients receives
high praise.
Whistleblowing: Safecall – Highlights
Yet again we provided a record number of reports to our clients
in 2022, up 20% on 2021. Increasingly, digital channels are being
used to raise and manage issues, so we were delighted to
have rolled out our new client portal during the year. In order
to compete more effectively, we will invest in further digital
capability throughout 2023.
Under new leadership of Joanna Lewis, who joined us at the end
of August 2021, we have expanded our sales team and invested
in an expanded account management set up. Results to date
have been encouraging, with increasing demand from existing
clients for our training and investigations offerings. During the
course of 2023, we will look to expand these offerings.
Revenues from new clients were again a record and among
the 134 new clients we took on in 2022 were EDF Renewables,
WHSmith, The Entertainer Ltd and CFC Underwriting.
In order to build on our momentum, we will be investing further
across all aspects of the business in 2023. As well as investment
in our technology platform, we will add further capacity to our
operations team, expertly managed by Tim Smith. Moreover, we
will add further headcount to our sales, account management
and marketing initiatives in order to accelerate our growth.
Structured finance services – Market dynamics
This business is based on providing accounting and corporate
administrative services mainly to Special Purpose Vehicles
(‘SPV’s’) and other similar corporate structures. Typical buyers
would include financial institutions that wish to gain risk
exposure to a particular asset type- for example Aircraft Leases
or Mortgages or companies being established as part of a
corporate acquisition. These buyers regularly access third-party
outsource providers to help them with the servicing of the
assets. Boutique asset managers (Private Equity and Hedge
Funds) and challenger banks are growing users of these services
together with overseas businesses acquiring companies in the
jurisdictions we serve.
The competitive landscape is dominated by the larger providers
with long-established relationships. We are a small player in
the sector but, thanks to Mark Filer and his team, receive strong
praise from our clients.
Structured finance services – Highlights
Despite capital markets new issuance levels being particularly
challenged during 2022, we were delighted to receive repeat
appointments from a number of names operating in the sector.
Quotes for new business and wins were both new records. Our
challenge is to raise our profile with a broader universe ofclients.
Our paying agency business also grew steadily during the year
to record levels and we were pleased to see the number of
professional firms referring business to us continuing to increase.
Case Study: Schroder Investment
Management Limited – interim
company secretarial support
Global investment manager, Schroder Investment
Management Limited, part of Schroders plc, which has a
market capitalisation of over £7bn, listed on the London
Stock Exchange and a constituent of the FTSE 100 Index,
was seeking to use a professional services team to provide
interim support to their specialist investment trusts
secretariat team. They selected LawDeb.
LawDeb’s Investment Trust Company Secretarial Services
team, a specialised team within the Corporate Secretarial
Services division, provided interim support to a number of
Schroders’ investment trusts for eight months during 2022.
Our team was seconded to Schroders’ company secretarial
team, predominantly working remotely but also from their
offices on occasion to provide a more integrated
solution. Services included full Board and
Committee support, governance advisory and
corporate and regulatory reporting support.
Case study: Keller – a global
whistleblowing partner
“The company has been working with Safecall for a number
of years now for the provision of a speak-up hotline on a
global basis. I only joined the company a couple of years
ago but have been quickly reassured by the professionalism
of the team, their common sense approach and timely
advice. The training opportunities are also of high quality.
We recently extended the speak-up hotline to our supply
chain and the process has gone smoothly. Very
happy overall with the services.”
Silvana Glibota-Vigo, Group Head of Secretariat,
Keller
13
A particular highlight was being asked to take over an
appointment from a competitor on a new innovative protective
cell company structure for the London insurance markets.
These structures are in their infancy and have been created
with the aim of keeping reinsurance in London rather than in
offshorecentres.
Another win, was the appointment to undertake operational
accounting work for one of our CSS clients. We believe that this is
a potential area of growth for our business.
Service of process – Market dynamics
Under the leadership of Anne Hills, this remains our highest
volume business. We have well over 50,000 appointments on
our books and typically enter into over 10,000 new appointments
each year. Of all of the IPS business, its results are most
correlated to levels of global economicactivity.
Service of process – Highlights
Following an encouraging first half of the year, the surge in
inflation and interest rates and the corresponding slowdowns
reported in GDP growth around the world unsurprisingly made
for a much tougher second half of the year. We ended the year
essentially flat to 2021. Given the significant reduction in primary
capital markets activity (a key source of appointments), we
believe this is a result with which we can be satisfied.
Our upgraded technology, together with our increased
headcount, has built capacity. We are more outward looking and
better coordinated with our business development and sales
activities and so well-positioned for future growth.
Outlook – for our corporate services business
We are pleased to have grown revenues in all four businesses in
our Corporate Services reporting segment in 2022.
It is an important advantage in these sectors to be an integral
part of a well-capitalised, 134 year old, listed organisation willing
to invest for the long term. Many of our competitors are private
equity owned and subject to different operating demands.
The markets in which we operate are growing and we believe we
are well placed to exploit future opportunities.
Support functions
Over the last few years, we have made a significant investment
in modernising our central support functions. With oversight
from our CFO, Hester Scotton, we have now fully embedded our
shared service centre in Manchester to support our Accounts
Payable, Accounts Receivable and Debtor management
operations. We have grown our HR team, with a new approach
to appraisals and objectives, put in place career frameworks to
provide visibility and support to our staff as they look to develop
their roles and rolled out the first two of our “Future Leaders”
training programmes.
We launched new healthcare and pensions arrangements across
the firm at the start of 2022. We also made a one-off payment
of £1,000 to support our lowest-paid employees navigate the
cost-of-living crisis. We have added expertise in Finance, Risk,
Legal and Compliance, and, under the leadership of Suzy Walls,
boosted our Business Development resource. These investments
are essential to be able to grow our businesses sustainably. While
we will selectively add resource in these areas in 2023, at this
point, from a headcount perspective, we consider much of the
significant incremental investment to have beencompleted.
Information Technology
Our IT capability has radically changed over the past few years.
Thanks to David Williams and his team, we now have a cloud-
based infrastructure, our employees (circa 300 colleagues) can
be fully remote or office based as required, and an IT team of 17,
whose proactive role is to deliver new software solutions for our
businesses and clients in a controlled, scalablemanner.
In last year’s Annual Report, we wrote that professional services
firms’ success will be increasingly defined by their commercial
offerings’ “ease of use”. We made solid progress here in 2022.
Among our accomplishments were delivery of a new client
portal for Safecall, implementation of a new client and supplier
onboarding portal and roll-out of an invoice payment portal
forclients.
Nonetheless , we still have further work to do and will continue to
accelerate our technology improvements. Our main deliverables
in 2023 will include rolling out new modules for our Safecall
clients and establishing an improved workflow management
infrastructure for our CSS business.
Prospects
Law Debenture is resilient by design. The combination of IPS
with the Investment Portfolio is a well proven model and I am
cautiously optimistic about the Group’s progress in 2023 and
beyond. I think that IPS is well positioned for medium-term
We are proud to have delivered a 114% increase in dividends per share
over the last ten years with 44 years of increasing or maintaining dividends.
STRATEGIC REPORT
Chief Executive Officer’s review continued
lawdebenture.com
14
STRATEGIC REPORT
Chief Executive Officer’s review continued
growth in line with our mid to high single percentage target. We
continue to look for opportunities to grow IPS through organic
investment and disciplined acquisitions, where appropriate.
We are encouraged by recent senior hires, good new business
momentum and continue to invest to ensure we gain market
share and maintain longer-term growth.
On behalf of the Board, I want to thank my colleagues for
their outstanding dedication to developing Law Debenture’s
client service. I am also very grateful for the continued support
ofshareholders.
We are cognisant that 2023 will present challenges but I am
confident that the people, investment and significant actions we
have taken mean that we are well positioned to take advantage
of longer-term growth opportunities and maintain our 44-year
record of maintaining or raising the dividend.
Denis Jackson
Chief Executive Officer
27 February 2023
STRATEGIC REPORT
IPS 5 year performance at a glance
Department
2018
£000
2019
£000
2020
£000
2021
£000
2022
£000
5yr Revenue
Variance
£000
5yr Revenue
Variance
%
Pensions 9,488 10,598 11,479 13,060 14,343 4,855 51%
Corporate trust 8,362 9,024 10,789 9,771 10,620 2,258 27%
Corporate services 11,734 12,167 12,226 18,755
1
20,206 8,472 72%
IPS net revenue 29,584 31,789 34,494 41,586 45,169
2
15,585 53%
% Revenue growth 9% 7% 9% 21% 9%
Profit before tax 10,481 11,465 12,227 13,340 14,422 3,941 38%
% growth in PBT 8% 9% 7% 9% 8%
5 YEAR IPS NET REVENUE
2018 2019 2020 2021 2022
£’000s
Pensions Corporate trust Corporate services
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Source: Law Debenture as at 31 December 2022.
5 YEAR PROFIT BEFORE TAX
Profit Before tax
£’000s
2018 2019 2020 2021
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
2022
Source: Law Debenture as at 31 December 2022.
IPS net revenue and PBT – 5 year performance
IPS Valuation
31.12.2018
£000
31.12.2019
£000
31.12.2020
£000
31.12.2021
£000
31.12.2022
£000
5yr growth
%
EBITDA 10,424 11,515 13,335 15,369 16,588 59%
Multiple 8.4 9.2 9.4 10.8 10.5 25%
IPS fair value (excluding net assets) 87,562 105,938 125,349 165,985 174,174 99%
NAV adjustment: total value less net assets already included 78,439 91,860 112,407 135,885 148,376 89%
IPS EBITDA & APPLIED MULTIPLE
EBITDA Multiple
2018 2019 2020 2021 2022
0
2
4
6
8
10
12
0
5,000
10,000
15,000
20,000
Multiple x£’000s
Source: Law Debenture as at 31 December 2022.
TOTAL IPS FAIR VALUE (excluding net assets)
£’000s
2018 2019 2020 2021 2022
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
Source: Law Debenture as at 31 December 2022.
1 Includes revenue from the acquisition of the Company Secretarial Services business from Eversheds Sutherland (International) LLP.
2 This figure is included in the income statement by subtracting cost of sales of £8.2m from gross revenue of £53.4m.
See page 35 for commentary on the IPS valuation.
15
Photo credit: Jason Hawkes
STRATEGIC REPORT
lawdebenture.com
16
STRATEGIC REPORT
Investment managers’ review
17
Our investment strategy
Over the long term it is our view that the diversification in
our underlying holdings aids consistency of performance
and protects capital. That said, in 2022, as we explore in the
Performance section below, this worked against us to some
degree. There is no common theme to the stocks held other than
they are good at what they do and, we believe, have forward-
thinking, dynamic management teams. They cover a wide variety
of activities. They are all sizes (in market capitalisation terms).
We try and blend the different risk profiles they have within the
Portfolio. For instance, we have conventional energy stocks as
well as alternative energysuppliers.
This diversification does not stop us making strong views about
an individual company count in the portfolio. It is an approach
focused on stocks. We believe that, by paying attention to what is
happening at companies, value can be added. It is better to do it
this way rather than having a Portfolio built around large macro-
economic views. There are too many variables and unknowns
to have conviction at a macro level. However, if we are paying
proper attention to companies, investments can be made in
businesses that can produce results, almost regardless of what is
happening in the wider economy. While there are fewer variables
and unknowns at the micro level, they do still exist and this is the
reason for long lists and diversification.
Unusually for a portfolio that is in the equity income sector,
there are a number of zero dividend-paying shares. The
contribution from the Independent Professional Services
business to the revenue pool means the Portfolio can hold
these shares without affecting the level of income generated
overall. This is a significant advantage Law Debenture has
over other investment trusts in our peer group and means we
have a larger choice of investment opportunities than most
other funds in the income sector. We take advantage of this
freedom by buying some recovery shares before they become
dividend payers and young, immature companies we believe
will be significant businesses of the future. It is fundamentally
important to grow the capital value of the Portfolio if long-
lawdebenture.com
18
Investment managers’ review
STRATEGIC REPORT
illustrated by the table below, the FTSE 100 top 20 made positive
returns during the year. It is within the FTSE 100 top 20 that the
very large oil and resource companies reside. For instance BP,
Shell and Glencore all made very good share price progress as
a result of the Ukraine war leading to the appreciation of raw
material prices. At the same time the rise in the price of oil and
gas has hurt energy using companies and this led to a slowdown
in UK economic activity. In the largest 20 companies in the UK
FTSE 100 index more than 80% of their earnings are derived from
overseas. The smaller quoted companies are more closely tied
to the fortunes of the UK economy. During the year, funds with
a broad list of companies large, medium and small were very
likely to underperform when virtually only a select few very large
international companies could prosper.
Stock attribution
Given the ramifications of the Russia Ukraine war, it is not
surprising that the best performers were oil and resource stocks,
such as BP and Glencore, as well as a manufacturer of defence
term income growth is to be achieved. The recovery and small
company element of the Portfolio can help to provide long-
term capital growth. When successful small company and
recovery investments can be recycled into income-producing
investments, underpinning longer-term dividend growth.
Investment process
Different valuation metrics are used in different sectors. The
investment approach has a valuation filter because the entry
price a stock is bought at matters, as even the best companies
are likely, over time, to mature and decline. The life cycle for
many businesses is getting shorter as the global economy is
competitive, with new entrants always likely to challenge the
established order. Therefore, high valuations are vulnerable
because of the pace of this economic change.
We visit and meet potential investments, looking for companies
that are in a strong competitive position with management
teams that have the qualities needed to grow the business. There
is no blueprint for this other than drive and a degree of flexibility.
The Portfolio turnover is usually around 20% per annum, so a
relatively long-term time horizon is fundamental to the process.
Performance
We always aim to outperform the benchmark over one, three,
five and ten years. Whilst we continue to outperform in the
medium and long term, this last year has been challenging with
the Portfolio declining in value by ~10%. This has been offset by
the fair valuation of debt and the increase in the fair value of
the IPS business. The under-performance of the Portfolio was
driven by holding a larger weighting in smaller size companies
relative to the benchmark. In comparison, the benchmark is
heavily weighted in the largest 20 stocks in the UK market. As
Alternative Performance Measures
1 year
%
3 years
%
5 years
%
10 years
%
NAV total return (with IPS at fair value and debt at par)
1
(6.8) 16.8 30.3 141.5
NAV total return (with debt and IPS at fair value)
1
0.6 26.0 39.9 154.6
FTSE Actuaries All-Share Index total return
2
0.3 7.1 15.5 88.2
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, whereas NAV total return with debt at fair value includes the fair value adjustment (see page 152).
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.
Top five gains
The five largest gains during the year were:
Stock £ Appreciation % Appreciation
BP 8,230,800 43.69%
BAE Systems 5,375,563 54.32%
Glencore 3,854,182 58.74%
Rio Tinto 3,397,500 18.52%
Standard Chartered 3,281,142 38.80%
Top five losses
The five largest losses during the year were:
Stock £ Depreciation % Depreciation
Accsys Technologies (10,689,194) (67.98%)
Ceres Power (8,842,543) (67.72%)
Marks & Spencer (6,752,893) (47.84%)
IP Group (6,188,997) (54.89%)
Watkin Jones (5,973,819) (61.74%)
Index
Full Year 2022
%
FTSE All-Share 0.34
FTSE 100 4.70
– FTSE 100 top 20 15.70
– FTSE 100 bottom 80 -17.20
FTSE 250 -17.39
Numis Smaller Companies Index (excluding Its) -17.87
FTSE AIM All-Share -30.67
19
STRATEGIC REPORT
Investment managers’ review continued
equipment, BAE. The detractors are a mixed group. Accsys, a
company that focuses on the sustainable transformation of wood,
was a large positive contributor in the past. However, it has had
problems building and commissioning a new plant. Therefore,
although the demand for its products is growing, the growth
of the company has been severely held back. It is hoped that
the new plant will come on stream and the company will again
progress. Ceres Power was the largest contributor to the fund
in 2020 and considerable profits were taken but, unfortunately,
we did not sell the entire holding. The share price had got ahead
of what has actually been achieved and this has unwound. The
company may play a real role in the move away from fossil fuels
with its fuel cell technology. The company appears to be making
progress even if this is happening at a slower pace than investors
had hoped so, on the share price fall, we are buying back some of
the stock we sold.
Portfolio income
The income that was generated by the portfolio rose from
£26.3m in 2021 to £34.4m for 2022, an increase of 31%. There are
several reasons behind this. Some companies returned to paying
dividends having stopped paying during the pandemic. The
level of special dividends was particularly high, the most notable
being NatWest Bank of £1.2m, and a distribution of capital from
Aviva of £3.4m. There was underlying good repeatable dividend
growth across our holdings. The reduction of the US holdings
and the increased exposure to the UK has also benefitted
the income account. The dividend yield on the UK market is
substantially higher than other major stock markets. We think
it is likely the dividend growth from the underlying stocks will
continue in 2023.
Portfolio activity
The relative low turnover of stocks and value bias approach has
been behind the activity.
The valuation on US stocks, particularly early on in the year,
looked stretched, so holdings in Applied Materials and
Schlumberger were sold. They are both excellent companies; the
issue was valuation. Applied Materials fell as economic slowdown
concerns surfaced. The fall was substantial and has allowed us to
buy the stock back towards the end of the year. High valuations
among the select few companies in favour in the UK meant the
holding in Relx was sold. It has been in the Portfolio for many
years adding considerable value, but the valuation meant we
believed we could recycle into other UK stocks. Among the new
purchases within the Portfolio were Cranswick which produces
and supplies meat products. It has been a consistently successful
company and this is expected to continue. A holding in Castings
was added. It is a UK foundry business that has weathered
recessionary conditions many times. There is a lack of foundry
capacity in the UK, which should mean it will keep performing
well in operational terms and this is not reflected in the valuation.
The Portfolio in recent years has benefited from an exposure to
alternative energy stocks. During the year, we made a purchase in
an unquoted company, Britishvolt, that intended to manufacture
batteries for EV cars. Britishvolt had been seen as a landmark
project to boost the country’s production of EV components. The
project was saved from administration in November 2022 after
securing additional funding, only to re-enter administration in
January 2023. We wrote the investment down to zero before the
year end. It illustrates the problems facing the alternative energy
sector and the lack of access to meaningful amounts of capital
which will be needed if EV car manufacturing is to flourish in the
UK. The only other unquoted investment of note in the Portfolio
is Oxford Science Innovation. This is a company that helps early-
stage businesses that come out of Oxford University. It has been a
successful investment since we invested in it in 2015 with the NAV
up over 60%. The unquoted exposure in the Portfolio will remain
small. The low level of valuations has led to corporate activity,
with companies taking the opportunity to take over quoted
companies. The notable example during the year for the Portfolio
was Euromoney that received a successful cash bid.
The number of stocks in the Portfolio has risen and the Board
has given authority for the maximum number to be 175. This is
because we often start by buying a small holding in developing
companies and adding when they have good projects that need
more capital. This feature of the overall Portfolio differentiates us
from other funds in our sector and, we believe, has added value
over time.
Economic background
The major event in the global economy during the period
was the upward move in interest rates, as a result of inflation
breaking out everywhere. The catalyst was the Russian attack
on Ukraine, forcing up oil prices as well as agricultural products.
Prices in other products and services responded by increasing
at rates not seen for forty years. However, inflationary pressures
had been building before the Russian attack. The effect of
Covid-related restrictions led to supply issues in many product
areas. The monetary expansion required to alleviate the worst
effects the pandemic had in many areas was always likely to
stimulateinflation.
20 YEAR UK GILT MID YIELD TO MATURITY
0
1
2
3
4
5
6
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Yield (%)
Source: Bloomberg, January 2022.
lawdebenture.com
20
Investment managers’ review continued
STRATEGIC REPORT
The upward move in interest rates, as illustrated by the chart
above, after a prolonged period of unnaturally low rates led to
a number of foreseeable consequences. Property prices fell,
as did other alternative asset classes, as investors demanded
higher yields. However, the fall in the economy generally has
not so far been as marked as some predicted, the reason
being that, although interest rates were very low, this had not
resulted in high levels of bank borrowing overall in the economy.
The regulations brought in after the banking crisis had made
accessing the low rates difficult for many. Therefore, the rapid
rise in interest rates has slowed the economy, but not brought
about deep recessionary conditions. This can be evidenced in
the UK by the continued low level of unemployment. Inflation, as
well as meaning interest rates rise, has put an upward pressure
on wages, leading to public sector strikes. The debate rages
about how entrenched inflation hasbecome.
We remain mindful of this difficult economic backdrop, but the
Portfolio is invested in individual companies not in “UKplc”. The
businesses we regularly see are dealing with the cost pressures
and achieving price increases for their products, which is
resulting in a preservation of operating margin.
Portfolio update and gearing
During the year we reduced the exposure to US stocks by
around £16m and increased the holdings in the UK by about
£40m. The UK market is not only relatively attractive but is on a
cheap valuation, as can be seen in the chart above. The overall
gearing on the portfolio fell from 13.3% to 11.8% by year end as a
result of share issuances, which brought in £41.4m over the year.
This gives us the ability to remain active net buyers of equity as
opportunities present themselves. It will allow us to keep the
Portfolio refreshed.
Outlook
The intention is to be a net buyer of equities. Investors’ macro
concerns have meant that valuation levels for companies are at
historical lows. This is particularly the case with UK shares. There
are opportunities to add positions for the Portfolio in companies
that fulfil our investment criteria and we will continue to add
to the Portfolio. The purchases will be in a diverse range of
companies, as the testing economic conditions will mean some
companies disappoint expectations. However, the dynamism
and strengths to be found in some UK companies is not being
recognised but, we are confident, it will become so, as some of
the economic concerns are slowly resolved.
James Henderson and Laura Foll
Investment managers
27 February 2023
0
5
10
15
20
25
30
35
40
45
50
1999 2003 2007 2011 2015 2019
2023
North America Europe ex UK UK
REGIONAL EQUITY INDICES CYCLICAL ADJUSTED PE(X)
Source: Refinitiv DataStream, Janus Henderson Investors Analysis, as at 10 January 2023.
Notes: Cyclically adjusted PE based on 10 year average earnings. Indices shown are FTSE
All-Share, FTSE World Europe ex UK and FTSE North American.
Portfolio by sector
2022
Portfolio by sector
2021
Geographical distribution
of portfolio by value
2022
Geographical distribution
of portfolio by value
2021
Basic materials 8.7%
Oil and gas
10.9%
Consumer goods
7.7%
Health care
8.1%
Consumer services
9.0%
Utilities
3.2%
Financials
27.4%
Telecommunications
2.0%
Industrials
21.7%
Technology 1.3%
21
STRATEGIC INFORMATION
Portfolio by sector and value
Europe 10.6%
North America 5.1%
United Kingdom 83.2%
Japan 1.1%
Basic materials 9.7%
Oil and gas
10.1%
Consumer goods
7.4%
Health care
7.2%
Consumer services
8.8%
Utilities
4.4%
Financials
27.5%
Telecommunications
2.6%
Industrials
20.7%
Technology 1.6%
Europe 10.0%
North America 5.4%
Other Pacific 0.7%
United Kingdom 82.6%
Other 0.2%
Japan 1.1%
lawdebenture.com
22
STRATEGIC REPORT
Fifteen largest holdings: investment rationale
as at 31 December 2022
Rank
2022 Company Location % of portfolio
Approx
Market
Cap.
Valuation
2021
£000
Purchases
£000
(Sales)
£000
Appreciation/
(Depreciation)
£000
Valuation
2022
£000
1. Shell UK 3.27 £113.51bn 20,280 — — 8,795 29,075
Shell is a vertically integrated oil & gas company, with a diverse range of businesses including upstream oil & gas, renewables,
chemicals and retail. Within the upstream division, Shell has a significant exposure to natural gas, which, in our view, will serve as a
key transition fuel on the route to de-carbonisation. The fossil fuel business has experienced strong cash generation due to high oil
& gas prices, with this being used to fund the material investment required within the renewables area to facilitate the company’s
transition and provide for cash returns to shareholders via dividends and share buybacks.
2. BP UK 3.05 £90.05bn 18,838 — — 8,231 27,069
BP is a vertically integrated oil and gas company. Under a new CEO, BP has 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 &
gas business should enable this transition to take place, while also continuing to fund cash returns to shareholders via dividends and
share buybacks.
3. HSBC UK 2.52 £129.16bn 19,454 — — 2,906 22,360
The company is one of the largest banking and financial services companies in the world serving more than 40m customers around
the globe. It has brought a clearer focus to its business by exiting areas where it lacks clear advantages.
4. Rio Tinto UK 2.44 £46.61bn 18,345 — — 3,398 21,743
The company focuses on mining aluminum, copper, gold, iron ore, lead, silver, tin, uranium, zinc, diamonds and zircon. It is often the
lowest cost producer which allows it to deal with the volatility of commodity prices.
5. GlaxoSmithKline UK 2.24 £69.56bn 26,911 718 — (7,646) 19,983
The company is a research based pharmaceutical company with a strong R & D pipeline. There is a clearer focus after disposals on the
science of the immune system, human genetics and the use of advanced technologies.
6. Barclays UK 2.19 £16.39bn 20,196 2,355 — (3,053) 19,498
Barclays has a strong retail lending franchise combined with an investment bank. Over time its strong retail franchise should allow
it to generate good returns on capital. However, in the past, these have not consistently come through because of bad debts and
persistently low interest rates. The bad debt provisions appear now to be robust and the direction of interest rates from here is likely
to be upwards. Therefore, the strengths of the bank are expected to come to the fore.
7. Flutter Entertainment UK 1.96 £19.89bn 8,812 6,919 — 1,761 17,492
The company offers betting on a wide range of sports as well as online games including bingo and poker. They are growing fast in the
US as gambling opens up in more states. They have a responsible attitude towards their customers.
8. NatWest UK 1.93 £24.33bn 14,100 — — 3,138 17,238
NatWest is one of the largest commercial and retail lenders in the UK. In recent years it has largely exited its markets business and re-
focussed on its original area of strength (domestic lending). The balance sheet has been steadily improved over the decade since the
financial crisis, leaving the business in a good position to steadily return cash to shareholders via dividends and share buybacks.
9. Anglo American UK 1.63 £28.00bn
13,572 — — 977 14,549
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 as well as 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.
10. Direct Line Insurance UK 1.59 £4.18bn 13,950 3,211 — (3,004) 14,157
Direct Line is one of the leading motor and home insurers in the UK, with a well-known consumer facing brand. The company is a
disciplined underwriter, with a history of generating good returns in a competitive UK insurance market. The company has recently
warned on its profits as a result of poor underwriting. Management change is underway and we will be reviewing the position.
2323
Rank
2022 Company
Location
% of
portfolio
Approx
Market
Cap.
Valuation
2021
£000
Purchases
£000
(Sales)
£000
Appreciation/
(Depreciation)
£000
Valuation
2022
£000
11. Lloyds Banking Group UK 1.53 £34.31bn 14,340 — — (717) 13,623
Lloyds is a leading retail and commercial lender in the UK. Its strong market share within UK mortgage lending allowed it to
historically generate good returns versus peers. In the period since the financial crisis, the balance sheet has been gradually
strengthened, which could allow good returns to shareholders via dividends and share buybacks.
12. Morgan Advanced Materials UK 1.5 £0.75bn 13,783 1,071 — (1,488) 13,366
The company produces advanced materials that provide components used in aerospace, satellites, power generation, the medical
sector and trains. Their strong positions in these sectors is expected to give rise to sustained long term growth.
13. National Grid UK 1.47 £27.97bn 14,934 — (1,218) (658) 13,058
National Grid is 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.
14. Sanofi France 1.44 £103.68bn 8,559 3,639 — 617 12,815
Sanofi manufactures and develops prescription pharmaceuticals in particular for the treatment of thrombosis and the central nervous
system. They are a leader in oncology medicines, These are all areas of real growth.
15. Tesco UK 1.33 £17.13bn 13,488 1,697 — (3,297) 11,888
Tesco is the largest food retailer in the UK. Its leading market share means it is in a strong position to negotiate volume discounts with
its suppliers, which can in turn be passed onto the end consumer allowing Tesco to maintain a competitive price point. The business
produces substantial free cash flow which can be returned to shareholders via an attractive dividend yield and share buybacks.
STRATEGIC REPORT
Fifteen largest holdings: investment rationale continued
as at 31 December 2022
lawdebenture.com
24
Classification of investments
based on market values as at 31 December 2022
The above table excludes bank balances and short-term deposits.
UK
%
North
America
%
Europe
%
Rest of the
world
%
Total
2022
%
Total
2022
£000
Total
2021
%
Total
2021
£000
Oil and gas
Alternative energy 0.51 — — — 0.51 4,542
1.24 12,330
Oil & gas producers 8.16 0.75 0.01 — 8.92 79,384
5.67 56,137
Oil equipment services & distribution 1.38 — — — 1.38 12,313
3.13 31,063
10.05 0.75 0.01 — 10.81 96,239
10.04 99,530
Basic materials
Chemicals 0.88 0.33 0.44 — 1.65 14,623
2.84 28,074
Forestry & paper 0.83 — — — 0.83 7,400
0.87 8,674
Mining 4.87 — 1.24 — 6.11 54,417
5.93 58,793
6.58 0.33 1.68 — 8.59 76,440
9.64 95,541
Industrials
Aerospace & defence 4.02 — 0.38 — 4.4 39,209
3.92 38,876
Construction & materials 4.27 — 0.12 — 4.39 39,199
5.15 51,143
Electronic & electrical equipment 2.79 — 0.09 — 2.88 25,623
2.86 28,363
General industrials 1.14 — 0.11 — 1.25 11,169
1.26 12,478
Industrial engineering 2.39 2.17 — — 4.56 40,597
3.98 39,518
Industrial transportation 0.62 — — — 0.62 5,536
0.86 8,577
Support services 2.76 — 0.56 — 3.32 29,533
2.45 24,370
17.99 2.17 1.26 — 21.42 190,866
20.48 203,325
Consumer goods
Automobiles & parts 0.35 0.59 — 1.06 2.00 17,807
2.49 24,727
Food & drug retailers 1.33 — — — 1.33 11,888
1.36 13,488
Food producers 0.79 — 0.48 — 1.27 11,375
0.55 5,512
Household goods & home construction 1.83 — — — 1.83 16,372
2.15 21,338
Leisure goods — — 0.25 — 0.25 2,259
0.81 8,012
Personal goods 0.70 — 0.19 — 0.89 7,988
— —
5.00 0.59 0.92 1.06 7.57 67,689
7.36 73,077
Health care
Health care equipment & services 1.29 — 0.04 — 1.33 11,917
1.53 15,163
Pharmaceuticals & biotechnology 3.23 0.69 2.70 — 6.62 59,068
5.62 55,648
4.52 0.69 2.74 — 7.95 70,985
7.15 70,811
Consumer services
General retailers 2.99 — — — 2.99 26,631
3.92 38,889
Media 2.06 — 0.15 — 2.21 19,706
2.11 20,925
Travel & leisure 2.60 — 1.11 — 3.71 33,085
2.67 26,508
7.65 — 1.26 — 8.91 79,422
8.70 86,322
Telecommunications
Fixed line telecommunications 0.91 — —
— 0.91 8,124
1.26 12,492
Mobile telecommunications 0.90 — 0.17 — 1.07 9,474
1.29 12,858
1.81 — 0.17 — 1.98 17,598
2.55 25,350
Utilities
Electricity 0.61 — — — 0.61 5,369
0.53 5,224
Gas, water & multiutilities 2.62 — — — 2.62 23,264
3.79 37,709
3.23 — — — 3.23 28,633
4.32 42,933
Financials
Banks 9.49 — 0.53 — 10.02 89,121
8.41 83,642
Equity investment instruments 2.85 — — — 2.85 25,404
3.24 32,294
Financial services 4.15 0.08 0.52 — 4.75 42,365
5.80 57,565
Life insurance/assurance 4.08 — — — 4.08 36,359
3.75 37,190
Nonlife insurance 2.70 — 0.29 — 2.99 26,633
2.50 24,780
Real estate investment trusts 1.93 — 0.51 — 2.44 21,691
3.36 33,372
25.20 0.08 1.85 — 27.13 241,573
27.06 268,843
Technology
Advanced medical equipment & technology 0.27
— — — 0.27 2,442
0.45 4,466
Software & computer services — — 0.20 — 0.20 1,778
0.76 7,519
Technology hardware & equipment — 0.50 0.33 — 0.83 7,394
0.33 3,229
0.27 0.50 0.53 — 1.30 11,614
1.54 15,214
Other
Other 0.10 — — — 0.10 913 — —
Sustainable energy 0.86 — 0.15 — 1.01 9,033 — —
0.96 — 0.15 — 1.11 9,948 — —
TOTAL 2022 83.26 5.11 10.57 1.06 100.00 891,005
TOTAL 2021 82.57 5.41 10.00 2.02 —
— 100.00 992,478
STRATEGIC REPORT
25
STRATEGIC REPORT
lawdebenture.com
26
Investment Portfolio valuation
based on market values as at 31 December 2022
STRATEGIC REPORT
Holding name Country Sector Industry £000 %
Shell UK Oil & Gas Oil & gas producers 29,075 3.27
BP UK Oil & Gas Oil & gas producers 27,069 3.05
HSBC UK Financials Banks 22,360 2.52
Rio Tinto UK Basic Materials Mining 21,743 2.44
GlaxoSmithKline UK Health Care Pharmaceuticals & biotechnology 19,983 2.24
Barclays UK Financials Banks 19,498 2.19
Flutter Entertainment UK Consumer Services Travel & leisure 17,492 1.96
NatWest UK Financials Banks 17,238 1.93
Anglo American UK Basic Materials Mining 14,549 1.63
Direct Line Insurance UK Financials Nonlife insurance 14,157 1.59
Lloyds Banking Group UK Financials Banks 13,623 1.53
Morgan Advanced Materials UK Industrials Electronic & electrical equipment 13,366 1.50
National Grid UK Utilities Gas, water & multiutilities 13,058 1.47
Sanofi France Health Care Pharmaceuticals & biotechnology 12,815 1.44
Tesco UK Consumer Goods Food & Drug Retailers 11,888 1.33
Standard Chartered UK Financials Banks 11,737 1.32
Aviva UK Financials Life insurance/assurance 11,391 1.28
BAE Systems UK Industrials Aerospace & defence 11,128 1.25
Glencore Switzerland Basic Materials Mining 11,048 1.24
Land Securities UK Financials Real estate investment trusts 11,021 1.24
Senior UK Industrials Aerospace & defence 10,682 1.20
Herald Investment Trust UK
Financials Equity investment instruments 10,632 1.19
Prudential Corp UK Financials Life insurance/assurance 10,531 1.18
M & G UK Financials Financial services 10,332 1.16
Severn Trent UK Utilities Gas, water & multiutilities 10,206 1.15
DS Smith UK Industrials General industrials 10,147 1.14
Caterpillar USA Industrials Industrial engineering 9,900 1.11
Irish Continental Group Ireland Consumer Services Travel & leisure 9,882 1.11
Hiscox UK Financials Nonlife insurance 9,855 1.11
Kingfisher UK Consumer Goods Household goods & home construction 9,561 1.07
Toyota Motor Corporation Japan Consumer Goods Automobiles & parts 9,426 1.06
Cummins USA Industrials Industrial engineering 9,412 1.06
Balfour Beatty UK Industrials Construction & materials 9,332 1.05
Boku UK Industrials Support services 9,317 1.05
IMI UK Industrials Industrial engineering 8,855 0.99
Haleon UK Health Care Pharmaceuticals & biotechnology 8,837 0.99
Rolls Royce UK Industrials Aerospace & defence 8,797 0.99
Marks & Spencer UK Consumer Services General retailers 8,631 0.97
Phoenix Group Holdings UK Financials Life insurance/assurance 8,520 0.96
Dunelm UK Consumer Services General retailers 8,126 0.91
BT Group UK Telecommunications Fixed Line Telecommunications 8,124 0.91
Vodafone UK Telecommunications Mobile telecommunications 8,003 0.90
Ceres Power UK Oil & Gas Oil equipment services & distribution 7,941 0.89
27
Holding name Country Sector Industry £000 %
Hill & Smith UK Industrials Industrial engineering 7,801 0.88
i3 Energy UK Oil & Gas Oil & gas producers 7,691 0.86
Elementis UK Basic Materials Chemicals 7,650 0.86
Hipgnosis Songs Fund UK Financials Equity investment instruments 7,444 0.84
Mondi UK Basic Materials Forestry & paper 7,400 0.83
ITV UK Consumer Services Media 7,328 0.82
Scottish Oriental Small Co UK Financials Equity investment instruments 7,303 0.82
Cranswick
UK Consumer Goods Food producers 7,047 0.79
Gibson Energy Canada Oil & Gas Oil & gas producers 6,700 0.75
Ibstock UK Industrials Construction & materials 6,410 0.72
Johnson Service Group UK Industrials Support services 6,385 0.72
Spectris UK Industrials Electronic & electrical equipment 6,379 0.72
Reckitt Benckiser Group UK Health Care Health care equipment & services 6,329 0.71
Unilever UK Consumer Goods Personal goods 6,273 0.70
Halfords UK Consumer Services General retailers 6,241 0.70
Hammerson UK Financials Real estate investment trusts 6,109 0.69
Accsys Technologies
UK Industrials Construction & materials 6,084 0.68
Chesnara UK Financials Life insurance/assurance 5,916 0.66
Standard Life Aberdeen UK Financials Financial services 5,689 0.64
Jubilee Metals Group UK Basic Materials Mining 5,668 0.64
Marshalls
UK Industrials Construction & materials 5,541 0.62
Oxford Sciences Innovation UK Financials Financial services 5,533
0.62
Next Fifteen Communications Group UK Consumer Services Media 5,445 0.61
Bayer AG
Germany Health Care Pharmaceuticals & biotechnology 5,367 0.60
Bristol-Myers Squibb USA Health Care Pharmaceuticals & biotechnology 5,351 0.60
Reach UK Consumer Services Media 5,326 0.60
General Motors USA Consumer Goods Automobiles & parts 5,281 0.59
Babcock UK Industrials Aerospace & defence 5,210 0.58
Smith & Nephew
UK Health Care Health care equipment & services 5,205 0.58
Provident Financial UK Financials Financial services 5,178 0.58
SSE UK Utilities Electricity 5,135 0.58
Kier UK Industrials Construction & materials 5,106 0.57
IP Group UK Financials Financial services 5,085 0.57
TT Electronics UK Industrials Electronic & electrical equipment 5,074 0.57
VH Global Sustainable Energy
Opportunities
UK Other Sustainable Energy 5,050 0.57
iEnergizer
Guernsey Industrials Support services 5,030 0.56
Redde Northgate UK Industrials Support services 4,803 0.54
Grit Real Estate Income Group
Guernsey Financials Real estate investment trusts 4,560 0.51
International Distribution Services UK Industrials Industrial transportation 4,473 0.50
Applied Materials USA Technology Technology hardware & equipment 4,427 0.50
International Consolidated Airlines UK Consumer Services Travel & leisure 4,257 0.48
Indus Gas UK Oil & Gas Oil & gas producers 4,153 0.47
Ricardo UK Industrials Support services 3,999 0.45
STRATEGIC REPORT
Investment Portfolio valuation continued
based on market values as at 31 December 2022
lawdebenture.com
28
STRATEGIC REPORT
Investment Portfolio valuation continued
based on market values as at 31 December 2022
Holding name Country Sector Industry £000 %
Watkin Jones UK Consumer Goods Household goods & home construction 3,950 0.44
AFC Energy
UK Oil & Gas Alternative Energy 3,946 0.44
International Personal Finance
UK Financials Financial services 3,765 0.42
Vertu Motors
UK Consumer Services General retailers 3,633 0.41
Weir Group UK Industrials Industrial engineering 3,335 0.37
Nestle Switzerland Consumer Goods Food producers 3,323 0.37
ITM Power UK Oil & Gas
Oil equipment services & distribution 3,230 0.36
Surface Transforms UK Consumer Goods Automobiles & parts 3,101 0.35
SigmaRoc UK Industrials
Construction & materials 2,969 0.33
ASML Netherlands Technology Technology hardware & equipment 2,968 0.33
Plant Health Care USA Basic Materials Chemicals 2,907 0.33
Roche Switzerland Health Care Pharmaceuticals & biotechnology 2,892 0.32
Bellway UK Consumer Goods Household goods & home construction 2,861 0.32
Koninklijke DSM Netherlands Basic Materials Chemicals 2,719 0.31
Castings UK Industrials Construction & materials 2,710 0.30
Munchener Rueckver Germany Financials Nonlife insurance 2,621 0.29
UniCredit Italy Financials Banks 2,548 0.29
Amundi France Financials Financial services 2,494 0.28
Oxford Nanopore Technologies UK Technology Advanced Medical Equipment &
Technology
2,442 0.27
Novo Nordisk Denmark Health Care Pharmaceuticals & biotechnology 2,405 0.27
Bawag Austria Financials Banks 2,111 0.24
Kistos
UK Oil & Gas Oil & gas producers 1,935 0.22
Airbus SE Netherlands Industrials Aerospace & defence 1,789 0.20
SAP Germany Technology Software & computer services 1,777 0.20
Moncler Italy Consumer Goods Personal goods 1,715 0.19
LVMH France Consumer Goods Leisure Goods 1,701 0.19
Deutsche Boerse Germany Financials Financial services 1,636 0.18
Safran SA France Industrials Aerospace & defence 1,603 0.18
Cellnex Telecom Spain Telecommunications Mobile telecommunications 1,471 0.17
Libertine Holdings UK Other Sustainable Energy 1,470 0.16
Marstons UK Consumer Services Travel & leisure 1,455 0.16
First Tin UK Basic Materials
Mining 1,410 0.16
Universal Music Group Netherlands Consumer Services Media 1,370 0.15
EDP Renovaveis SA Spain Other Sustainable Energy 1,347 0.15
Renold UK Industrials Industrial engineering 1,294 0.15
Allied Minds UK Financials Financial services 1,277 0.14
Arkema SA France Basic Materials Chemicals 1,190 0.13
Gelion UK Other Sustainable Energy 1,166 0.13
Velocys UK Oil & Gas Oil equipment services & distribution 1,142 0.13
Logistics Development Group UK Industrials
Industrial transportation 1,063 0.12
Kion Group AG Germany Industrials Construction & materials 1,047 0.12
Sig Combibloc Switzerland Industrials General industrials 1,022 0.11
Danone SA France Consumer Goods Food producers 1,005 0.11
29
Region**
Valuation
31 December
2021
£000
Purchases
£000
Costs of
acquisition
£000
Sales
proceeds
£000
Appreciation/
(Depreciation)*
£000
Valuation
31 December
2022
£000 %
United Kingdom 828,365 135,201 (431) (91,658) (128,222) 743,255 83
Europe 99,297 30,815 (98) (32,739) (4,433) 92,842 11
North America 53,665 5,182 (16) (21,495) 8,146 45,482 5
Japan 11,151
— — — (1,725) 9,426 1
992,478 171,198 (545) (145,892) (126,234) 891,005 100
Changes in geographical distribution
* Please refer to note 2 on page 126.
**’Other’ and ‘Other Pacific’ regions from 2021 have been reclassified according to their location of listing.
STRATEGIC REPORT
Investment Portfolio valuation continued
based on market values as at 31 December 2022
Holding name Country Sector Industry £000 %
Allfunds Group UK Other Other 915 0.10
Ondine Biomedical Inc. Canada Health Care Pharmaceuticals & biotechnology 833 0.09
ASM International NV Netherlands Industrials Electronic & electrical equipment 804 0.09
Deltic Energy UK Oil & Gas Oil & gas producers 793 0.09
Tullow Oil UK Oil & Gas Oil & gas producers 738 0.08
Jackson Financial USA Financials Financial services 671 0.08
Ilika UK Oil & Gas Alternative Energy 596 0.07
Harbour Energy UK Oil & Gas Oil & gas producers 571 0.06
Adidas Germany Consumer Goods Leisure Goods 558 0.06
Longboat Energy UK Oil & Gas Oil & gas producers 555 0.06
Brockhaus Capital Management Germany Financials Financial services 537 0.06
Grifols Spain Health Care Pharmaceuticals & biotechnology 510 0.06
Sartorius AG Germany Health Care Health care equipment & services 382 0.04
Mirriad Advertising UK Consumer Services Media 237 0.03
SIMEC Atlantis Energy UK Utilities Electricity 235 0.03
Carclo UK Basic Materials Chemicals 157 0.02
Barryroe Offshore Energy Ireland Oil & Gas Oil & gas producers 103 0.01
LDIC Investments UK Financials Financial services 100 0.01
EuroAPI Sasu
France Health Care Pharmaceuticals & biotechnology 75 0.01
Morses Club UK Financials Financial services 67 0.01
Better Cap
UK Financials Equity investment instruments 25
—
Permanent TSB Ireland Financials Banks 4
—
891,005 100.00
In accordance with listing rule 15.6.8, The Law Debenture Corporation p.l.c. announces that it has no investments in other UK listed investment companies that require to be
disclosed.
lawdebenture.com
30
Company overview
STRATEGIC REPORT
Who we are
From its origins in 1889, Law Debenture has diversified to
become a Group which provides our shareholders, clients and
people a unique combination of an Investment Portfolio and an
Independent Professional Services business.
Our purpose and objective
Our purpose is to deliver peace of mind for our shareholders,
clients and people. This is central to our strategy, both at the
portfolio and IPS levels, and underpins the way we think and
behave every day.
Our objective as an 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.
To our IPS clients we are trusted, independent
experts who have 134 years of experience to call
on in delivering vital aspects of their business
cycle.
Our purpose and objective are underpinned by
our corporate values of:
• We believe it’s possible.
• We make change happen.
• We are better together.
• We never stop learning.
Our culture
Our purpose and values are central to our
objective. They are reinforced by our culture
as a business, which is one of excellence,
independence and trust for our shareholders,
clients and our people.
The Board is responsible for ensuring that our
culture is aligned with our purpose, values and
strategy, by promoting, assessing and monitoring
the same. The Board discharges this duty by
reviewing the relevant policies, practices and
behaviours throughout the business including
its own conduct as a Board and individual
directors. The Board endorses the stated purpose
and values and ensures they are reflected in its
discussions and decision-making.
Some of the ways in which the Board monitors the Group’s
culture, with the assistance of its committees, senior managers
and external advisors, are as follows:
•
reports on the results of our quarterly eNPS surveys which are
internal and ask staff for feedback on their experience;
• reports on workforce engagement as described on page 62 and
our Section 172(1) Statement on pages 46 to 48;
•
reports on risk management, internal controls, internal audits,
compliance, anti-bribery and whistleblowing arrangements;
•
cyclical presentations from our Business and Department
Heads at each Board meeting;
•
feedback from our key external advisors such as our external
auditors and investment manager on their relationship with the
relevant teams within the business;
•
review of diversity and inclusion of the Board and oversight of
the statistics set out in the ESG section on page 54; and
•
Board, Committee and individual directors’ performance
evaluations, the process and outcome of which is set out on
page 93.
Following on from the project to articulate the culture and values
of our business in 2021, we organised another culture week during
2022 to continue to embed, share and celebrate
our values as a business.
We believe the culture of the Company and wider
Group is strong and a contributing factor to us
performing well in challenging market conditions.
Our strategy – implementation
Our strategy is centred round the unique
combination of the Investment Portfolio and our
IPS business. Whilst overseen by the Board, the
IPS business operates independently from the
Investment Portfolio.
The IPS profits provide a reliable source of
revenue to the investment trust, helping to
smooth out equity peaks and troughs. This
supports the delivery of steadily increasing
income for our shareholders and ensures our
investment managers are not constrained to
choosing stocks on yield. Instead, the investment
managers benefit from increased flexibility in
stock selection supporting the delivery of long-
term capital growth.
Our unique structure is also tax efficient as some
tax relief, arising from excess costs and interest
payments which would otherwise be unutilised,
can be passed from the Investment Portfolio to
the IPS business reducing the tax liability for the
Group and increasing shareholder returns.
The way in which we implemented the investment strategy
during 2022 is described in more detail in the investment
managers’ review on pages 17 to 20.
Performance against KPIs is set out on pages 2 to 29, which
contain tables, charts and data to explain performance both
during the year under review and over the long-term.
Our unique
structure allows
our investment
managers to
focus on capital
generation,
while knowing
that historically
approximately
one-third ofthe
Trust’s incomehas
been provided by
the IPS business.
31
Our business model
Our business model is designed to position the Company for optimal performance in the investment trust sector.
Total Shareholder Return
INVESTMENT PORTFOLIO
(c. 79% of NAV – including IPS
and long-term borrowings at fair value)
•
Invests in a diverse equity portfolio
• Earns capital returns and dividends
• Low ongoing charges
INDEPENDENT PROFESSIONAL SERVICES
(c. 21% of NAV – including IPS
and long-term borrowings at fair value)
•
Trusted provider of independent governance
services, generating recurring revenue.
•
Profits provide the investment trust with a
steadily increasing revenue stream.
•
Tax efficient
INDEPENDENT PROFESSIONAL SERVICES
Operating through a number of wholly owned subsidiary companies, (see note 13 to the accounts), we provide pension trustee
executives, outsourced pension services, corporate trust services and corporate services to companies, agencies, organisations and
individuals throughout the world. The services are provided through offices in the UK, Dublin, New York, Delaware, Hong Kong, the
Channel Islands and the CaymanIslands.
Group employees are employed by L.D.C. Trust Management 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 ongoingcharges.
More details about the performance of the IPS business in 2022 are given in the Chief Executive Officer’s review on pages 8 to 14.
Law Debenture’s 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 thevolatility in share price
movements that can affect individualequities.
INVESTMENT PORTFOLIO
• The Company’s portfolio will typically contain over 70 and up to 175 stocks, the maximum permitted.
• The portfolio is diversified in order to spread investment risk with no obligation to hold shares in any particular type of company
orindustry.
• The IPS business does not form part of the Investment Portfolio.
Whilst performance is measured against the FTSE Actuaries All-Share Index, the composition of the index does not influence the
construction of the portfolio. As a consequence, it is expected that the Company’s Investment Portfolio and performance will deviate
from the comparator index.
Company overview continued
STRATEGIC REPORT
lawdebenture.com
32
Company overview continued
STRATEGIC REPORT
Our strategy – guidelines
The Board sets the investment strategy and actively monitors
both the investment managers’ and Executive Leadership team’s
adherence through a series of guidelines and parameters in each
scheduled Board meeting. The strategy is reviewed periodically to
ensure we deliver on our objective.
Investments
Permitted types of
investments are:
• Equity Shares
• Cash/Liquid Assets
Restrictions:
•
Trading is not permitted in suspended shares or short positions
•
No more than 15% of gross assets will be invested in other UK listed
investment trusts
•
No more than 175 stocks
•
No investment may be made which raises the aggregate value of the largest
20 holdings, excluding holdings in collective investment vehicles that give
exposure to Japan, Asia/Pacific or emerging market regions, to more than
40% of the Investment Portfolio, including gilts and cash
•
The value of a new acquisition in any one holding may not exceed 5% of the
total Investment Portfolio value (including cash) at the time the investment
is made
•
Further additions shall not cause a single holding to exceed 5%, and
Executive approval must be sought (to be reported at the next Board
meeting), to retain a holding should its value increase above the 5% limit
•
No investment in any investment vehicle managed or advised by Janus
Henderson shall be made without prior Board approval
•
No investment other than in equity shares quoted on a major international
Stock Exchange (including AIM for the avoidance of doubt) or instruments
convertible into the same may be made without prior Executive approval
•
The Company may not make investments in unlimited liability companies
The current regional
parameters are:
Derivatives
May be used with prior authorisation of the Board
Hedging
Currency hedges may be put in place with Board approval to protect against foreign exchange
movements on the capital and income accounts
Stock-lending
Up to 30% of the market value of the Investment Portfolio may be lent
Gearing
A ceiling on net gearing of 50% is applied. Typically net gearing, (i.e. gearing net of cash), is between 10%
and 20% of the total Trust value. The Board retains the ability to reduce equity exposure so that net cash
is above 10% if deemed appropriate. Refer to page 152 for calculation of gearing
Daily dealing limit
Net purchases in any dealing day are to be limited to £30 million unless prior Executive approval isobtained
Underwriting
Permitted capital at risk up to 5% of the value of the Investment Portfolio
Corporate approval
Where indicated, the investment manager must obtain prior approval to exceed permitted limits either
through Board or Executive approval. Executive approval shall be the approval of either the Board
Chair or the Chief Executive Officer. The Board may make non-material adjustments or changes to the
investment policy from time to time. Any changes to the investment policy, which the Board deem to be
material, require prior shareholder approval
Minimum
%
Maximum
%
United Kingdom 55 100
North America 0 20
Continental Europe 0 20
Japan 0 10
Asia/Pacific 0 10
Other (including South America) 0 10
33
Agreement with the investment
managers
Appointed investment managers: James Henderson and Laura
Foll, Janus Henderson Investors.
On a fully discretionary basis, our investment managers are
responsible for implementing the Company’s investment strategy.
The contract is terminable by either side on six months’ notice.
The agreement with Janus Henderson does not cover custody,
which is the responsibility of the depository (see section on
regulatory compliance in the Directors’ Report, page 61). It
also does not cover the preparation of data associated with
investment performance or record keeping, both of which
remain the responsibility of the Company.
Fee structure and ongoing charges
Investment trusts are required to publish their ongoing charges
ratio. This is the cost of operating the trust and includes the
investment management fee, depository and custody fees,
investment performance data, accounting, company secretary
and back office administration.
The Company continues to have one of the more competitive
fee structures in the UK Equity Income Sector with investment
management fees of 0.30% p.a. of the value of net assets of the
Group (excluding the net assets of IPS), calculated on the basis
adopted in the audited financial statements, and total ongoing
charges of 0.49%.
No performance fee is paid to the investment manager.
Reappointment of the investment
managers
On an annual basis, at a minimum, the Board assesses whether
the investment managers should be reappointed. The key
criterion for assessment is the long-term performance of the
Portfolio.
Given Janus Henderson’s proven record of performance, and the
competitive fee arrangements in place, the Board has concluded
that the continued appointment of our existing investment
manager remains in the interests of our shareholders.
Gearing and long-term borrowing
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. Alternatively, assets from within the Portfolio can be sold
to reduce debt and the Portfolio can 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 2022,
our gearing was 12% (2021: 13%) (refer page 152).
The Company has four debentures (long dated sterling
denominated financing) details of which are on page 145.
The weighted average interest payable on the Company’s
debentures is 3.961% (2021: 3.966%).
The fair value of long-term borrowings held by the Group is
disclosed in note 20 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.
Capital structure
Law Debenture has 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.
We consider our ordinary shares to be 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 in understanding the nature of
the underlying investments they are buying into when investing
in Law Debenture’s shares, we publish our NAV on a daily basis.
We also publish the entire Portfolio monthly – with additional
monthly updates on the composition of the top ten holdings in
thePortfolio.
Future trends and factors
Law Debenture will continue to strive to deliver its business
objectives for both the Investment Portfolio and the IPS
business.
The Chairman’s statement, the CEO’s review and the Investment
managers’ review (all of which form part of this strategic report)
set out the Company’s views on futuredevelopments.
Performance and related data
Pages 2 and 17 to 20, which contain performance and related
data, form part of this strategic report.
Company overview continued
STRATEGIC REPORT
lawdebenture.com
34
STRATEGIC REPORT
Key performance indicators (KPIs) and
alternative performance measures
The KPIs used to measure the progress and performance of the
Group are:
• NAV total return per share with IPS and debt at fair value
(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
• the costs and ongoing charges of running the Portfolio as a
percentage of its value.
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.
Alternative Performance Measures as defined under ESMA
guidelines have beenadopted and these are described in detail
on page 152.
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 “goodvalue”.
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 ensure that its investment strategy is delivered
with due emphasis 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
management or withhold a vote where appropriate.
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
managers) may enter into dialogue with the company
concerned in an attempt to alter the management’s position.
Where this is not possible, or where incumbent management
declines to alter its behaviour, Law Debenture will consider
voting against resolutions proposed by the management.
Further, if it is deemed necessary or desirable, the Company
would consider acting collectively with other institutional
investors to try and achieve a particular goal.
Janus Henderson, on Law Debenture’s behalf, monitors
companies in which Law Debenture is invested, and from time
to time may discuss matters of corporate responsibility with
such companies. Law Debenture’s investment managers have
voting discretion but may notify Law Debenture on occasion
and when appropriate, should matters arise that might lead
the Company to consider intervening, abstaining or voting
against a particular proposal. During the year, the Company
abstained or voted against one or more resolutions at 45
shareholder meetings of 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 itsshareholders.
The Company does not believe that conflicts arise between its
duties as an institutional shareholder and the work undertaken
by the IPS business. The investment managers have 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 is a signatory 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 to engage with Portfolio companies
and discharge stewardship obligations. The Board is of the
Company overview continued
NAV total return with IPS and debt at fair value
1 year 3 years 5 years 10 years
0.6% 26.0% 39.9% 154.6%
Premium/(discount)
31 December 2022 31 December 2021
Year end
1.2% 1.4%
High for year
4.5% 5.4%
Low for year
(6.6%) (4.6%)
Ongoing charges ratio
Year ended 31 December 2022 Year ended 31 December 2021
0.49% 0.50%
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 thisregard.
Valuation of our IPS business
Accounting standards require us to consolidate the income,
costs and taxation of our IPS business into the Group income
statement on page 112. The assets and liabilities of the
business are also consolidated into the Group column of the
statement of financial position on page 113. A segmental
analysis is provided in note 6 (pages 128 and 129) to these
accounts which shows a detailed breakdown of the split
between the Investment Portfolio, IPS business and
Groupcharges.
Consolidating the value of the IPS business in this way does
not fully recognise the value created for the shareholder by
the IPS business in the NAV. To address this, from December
2015, the NAV we have published for the Group has included a
fair value for the standalone IPS business.
The current fair value of the IPS business is calculated
based upon maintainable earnings before interest, taxation,
depreciation and amortisation (EBITDA) for 2022, with an
appropriate multiple applied. The EBITDA for the IPS business
for 2022 was £16.6m. This number is reached by taking the
return, including profit attribution on ordinary activities
before interest and taxation of £14.4m from note 6 on page
128 and adding back the depreciation charge for property
plant and equipment of £2.2m, the amortisation of intangible
assets of £1.0m, and interest on the lease liabilities shown in
note3 on page 126.
The calculation of the IPS valuation and methodology used
are included at note13 on pages 134 to 137. In determining a
calculated basis for the fair valuation of the IPS business, the
Board has taken appropriate external professional advice.
The multiple applied in valuing the IPS business is based
on comparable companies sourced from market data, with
appropriate adjustments to reflect the difference between
the comparable companies and IPS business in respect of
size, liquidity, margin and growth. A range of multiples is then
provided by the professional valuation firm, from which the
Board selects an appropriate multiple to apply.
The challenge that we faced in this valuation cycle is that
many of our core comparators, have been subject to mergers
and acquisition activity in the past year. As a result of the
premium this builds into the valuations, the companies most
like our IPS business were excluded from the comparator
group. Whilst the group of companies presented in the table
have some likeness to IPS, further work has been required in
producing a multiple reflective of the fair value to attribute
to IPS. Given this, as a cross-check, we have validated the
valuation using a discounted cash flow with an externally
advised WACC and are satisfied it is in range.
The multiple of 10.5x has been applied to value the business.
The uplift reflects that the IPS business now has five years
of revenue and profit growth. The multiple selected has
decreased since the prior year in line with wider market trends.
The comparable companies used, and their recent performance,
are presented in the table below:
Of the comparator companies previously presented, the
following were the subject of mergers and acquisitions activity:
Sanne Group plc was subject to a valuation 30x of EBITDA and
Intertrust a valuation at 12-13x of EBITDA.
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 IPSbusiness, which reduced
the tax charge by £2.06m (2021: £1.89m).
It is hoped that our continued initiatives to achieve growth
into the IPS business will result in a corresponding increase in
valuation over time. As stated above, management is aiming
to achieve mid to high single percentage growth in 2023. The
total valuation (including surplus net assets) of the business has
increased by £111m/123% since the first valuation of the business
as at 31December 2015.
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 ten years. This information is provided in the Annual Report
within the 10-year record on page 37.
Company overview continued
STRATEGIC REPORT
35
Company
Revenue
LTM
1
(£m)
LTM EV/
EBITDA
31 December
2022
Net
revenue
CAGR
2018-2022
EBITDA
margin LTM
Law Deb IPS 45 10.5x 11.0% 35.0%
SEI
Investments
Company
1,827 11.9x 9.4% 28.3%
SS&C
Technologies
Holding, Inc
4,702 10.1x 15.0% 33.9%
EQT Holdings
Limited
63 13.2x 6.3% 37.8%
Perpetual
Limited
425 6.2x 8.9% 23.7%
1 LTM refers to the trailing 12 months ‘results’ which are publicly available.
Source: Capital IQ.
lawdebenture.com
36
STRATEGIC REPORT
Calculation of net asset value (NAV) per share
31 December 2022 31 December 2021
£000 Pence per share £000 Pence per share
Net asset value (NAV) per Group statement of financial position 799,067 625.81 878,837 717.86
Fair valuation of IPS: EBITDA at a multiple of 10.5x (2021: 10.8x) 174,174 136.41 165,985 135.58
IPS net assets attributable to IPS valuation 27,566 21.59 4,041 3.30
Fair value of IPS business 201,740 158.00 170,026 138.88
Removal of IPS net assets included in Group net assets (53,364) (41.79) (34,141) (27.89)
Fair value uplift for IPS business 148,376 116.20 135,885 111.00
Debt fair value adjustment 25,123 19.68 (50,229) (41.03)
NAV at fair value 972,566 761.69 964,493 787.83
NAV attributable to IPS 201,740 21% 170,026 18%
See commentary for the breakdown of the assets already included in the NAV per the financial statements.
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 have been removed (£53.4m) and substituted with the calculation of the fair
value and surplus net assets of the business £201m. An adjustment of £25.1m is then made to show the Group’s debt at fair value, rather
than the amortised 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 31December 2022 of £972.6m or 761.69 pence per share.
31 December 2022
Reconciliation of published NAV to results NAV:
Value £000 Pence per share
Published NAV cum income with debt at fair value 956,030 748.74
Reconciliation of shareholders’ funds to net assets:
Published NAV (803,226) (629.07)
Results NAV 799,067 625.81
Subtotal (4,159)
Revised IPS valuation uplift:
Published NAV (valuation per 30 June 2022) (133,964) (104.92)
Results NAV 148,376 116.20
Subtotal 14,412
Revised Fair Value of Debentures:
Published NAV (18,840) (14.75)
Results NAV 25,123 19.68
Subtotal 6,283
Total NAV at fair value per results 972,566 761.69
The ‘results’ NAV at fair value calculated above differs to the ‘published’ NAV at fair value for 30 December 2022 (year end NAV released by
RNS on 3 January 2023). As such, please see below for a reconciliation:
37
Long-term performance record
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net assets per the statement
offinancial positions (£m)
1
569.1 574.2 557.3 662.3 748.3 669.4 775.3 727.0 878.8 799.1
Revenue return (pence) 16.27 16.95 18.10 15.96 21.66 21.26 30.68 21.56 28.09 34.44
Capital return (pence) 97.18 3.87 (17.47) 89.30 67.10 (71.85) 79.27 (19.06) 94.60 (103.17)
Total (pence) 113.45 20.82 0.63 105.26 88.76 (50.59) 109.95 2.50 122.69 (68.73)
Revenue return (pence)
Investment Portfolio 9.31 10.08 11.01 10.88 11.61 13.23 22.18 12.12 18.09 24.06
Independent professional
services
6.96 6.87 7.09 7.68 9.93* 7.87 8.54 9.35 10.00 10.38
16.27 16.95 18.10 18.56 21.54 21.10 30.72 21.47 28.09 34.44
Group charges — — — (2.60) 0.12 0.16 (0.04) 0.09 — —
Total (pence) 16.27 16.95 18.10 15.96 21.66 21.26 30.68 21.56 28.09 34.44
Dividends (pence) 15.00 15.70 16.20 16.70 17.30 18.90 26.00 27.50 29.00 30.50
2
Share price (pence)
1
529.0 530.0 498.0 530.0 629.0 540.0 650.0 690.0 799.0 771.0
(Discount)/premium (%)
1
(2.4) (2.3) (5.1) (11.4) (6.0) (12.1) (7.4) 3.6 1.4 1.2
NAV at fair value (pence)
1
541.8 542.3 524.5 598.5 669.5 614.1 702.2 666.2 787.8 761.7
Market capitalisation (£m)
1
625.0 627.1 589.3 627.2 744.5 639.3 769.8 817.3 982.1 984.4
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 Proposed total dividend for 2022.
*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.
STRATEGIC REPORT
STRATEGIC REPORT
lawdebenture.com
38
Our approach to risk
The Group’s risk management and internal control framework
is embedded in everyday operations and subject to regular
enhancements in a continuous risk management process as
demonstrated in the diagram below to ensure that risks are
effectively managed and monitored. Top-down Board-level
oversight for the Investment Portfolio and IPS business is
provided by the Audit and Risk Committee.
The Executive Risk Committee has responsibility for the oversight
of operational risk within the IPS business. Detailed, bottom-up
risk identification and management is owned by either individual
business lines where they are specific to that business function, or
centrally if relates to the Shared Services Centre or other central
function. The risk identification and management is supported by
the Group Risk Manager.
During the year, the Audit and Risk Committee carried out
a robust assessment of principal risks to the Group and the
adequacy of the controls in place to appropriately manage
those risks to support the delivery of long-term priorities.
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 inplace.
The Board recognises that there are certain risks which are
inherent in the Group, 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.
During 2022, we launched our incident risk management
reporting system. We ran extensive training and awareness
sessions as we continue to build an open risk-reporting
and no-blame culture to better understand risks across
ourbusiness.
Risk management
RISK MANAGEMENT PROCESS AND GOVERNANCE OVERVIEW
Internal risk reporting Parties involved External reporting
Risk management
process
Consolidated Group-level risks
• Business area risk registers consolidated to draw
out significant risks
• Principal risks identified, including emerging risks
• Review and agreement of the principal risks
by the Executive Risk Committee
• Review and approval by the Audit and
Risk Committee
Principal risks
and uncertainties
• A summarised version
of principal risks for
external reporting
• Review and approval
by the Audit and Risk
Committee and the
Board
Business and functional risk registers
•
Continual review and assessment
of business area risk registers and
challenge on mitigating actions, including
consideration of emerging risks, by the
business andGroup Risk Manager
• Review and challenge of risks at
Executive Risk Committee meetings
Real-time issues and areas of change
•
Monitoring of emerging areas of increasing
significance to the Group and establishing
sufficient mitigating actions
•
The LDC plc Board
• Group Audit and
Risk Committee
• Executive Risk
Committee
• Group Risk Manager
•
Group Risk Manager
• Business Units
Bottom-up
Top-down
Risk identification
Continual risk monitoring
and reporting
Risk assessment
Risk evaluation
and response
39
Risk management continued
The risk assessment process evaluates the probability of the risk
materialising and the financial, strategic or reputational impact
of the risk using a scoring system approved by the ARC. There
may be uncertainty in measuring certain risks, but the aim is
to inform and guide decisions and pinpoint areas which may
require more urgent attention.
Those risks which have a higher probability and significant
impact on strategy, reputation or a financials under the risk
scoring system are identified as principal risks on page 42.
Governance
The Group’s risk management and internal control framework
is managed through its governance structure shown in the
diagram above and overseen by the Audit and Risk Committee.
IPS business risks are managed through regular business unit
risk committees and management meetings. The outputs
ofthese are fed through to the Executive Risk Committee and
then the Audit and Risk Committee for review and to the Board
if appropriate.
Executive Risk Committee
The Executive Risk Committee is made up of the Executive
Leadership team, supported by the Group Risk Manager, and
meets at least quarterly to review business level risks, incidents,
and ensure effective risk management oversight.
The key focus of the Executive Risk Committee is:
• The review of high or out of appetite risks and risk-acceptance
of low risks.
• Internal controls and mitigating actions.
• Emerging risks.
• Escalations from Business Units.
The Executive Risk Committee escalates risk events to the Audit
and Risk Committee, as appropriate. The Group Risk Manager
also speaks directly to the Chair of the Audit and Risk Committee
on any matters arising as required.
The governance framework is continually under review to
ensure that it is fit for purpose with annual reviews of the terms
of reference and oversight across the Group by the Chair of the
Audit and Risk Committee.
Three Lines of Defence
The Group has organised risk management according to the
three lines of defence model. Roles and responsibilities are
described below to show accountability between management
which owns the risks, oversight by the Risk function and
independent assurance provided by Internal Audit.
First line:
Frontline staff
Primary responsibility for management for operational risks and
taking adequate governance and control measures to manage
the risks.
Second line:
Risk and Compliance
Responsible for the design, implementation and effectiveness of
risk management and monitoring of the first line of defence.
Third line:
Internal Audit
To provide risk assurance about the effectiveness of first- and
second-line controls, with a direct reporting line to the Audit and
Risk Committee.
Governing bodies and senior management
The Audit and Risk Committee, the Board and Executive
Leadership sit above the three lines
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STRATEGIC REPORT
Risk management continued
PRINCIPAL GROUP RISKS CHANGES TO RISK IN 2022 MITIGATING ACTIVITIES
1. Investment Performance and Market Risk
The risk of the Investment
Portfolio failing to deliver and/
or failing to consider and react
to market conditions to deliver
the publicly stated strategic
objectives to:
•
Achieve long-term capital
growth.
•
Deliver steadily increasing
income.
•
Achieve a rate of return
greater than the FTSE
Actuaries All-Share Index.
Investment performance and
market risk is the largest risk
to which the Group is exposed.
However, this is an accepted
risk and one which the Board
actively adopts as it believes
long-term equity investment
is the fundamental reason
our shareholders invest in
ourCompany.
Our investment risk includes
market risk, gearing risk, credit
risk and liquidity risk.
Increased risk
The risk level has increased due
to the war in Ukraine, volatility
of domestic politics and global
economic pressures, all of which
have had an unfavourable impact
on global markets and therefore the
Investment Portfolio. Rising global
inflation runs undermines the value
of investmentreturns.
•
Market risk is an accepted risk given the nature of
the Investment Portfolio. To manage this inherent
risk the Board regularly reviews the investment
managers’ report including risk indicators and has
open dialogue with the investment managers on
their approach andperformance.
•
The Investment Portfolio is closed ended so it does
not have to sell investments to provide liquidity
to shareholders who wish to sell. This enables our
investment managers to invest for the long-term
and take advantage of any opportunities created
by externalfactors.
•
To mitigate leverage risk, all borrowings require
the prior approval of the Board and gearing levels
are kept under close review by the Board.
•
The negotiated covenants in our debt arrangements
are such that the decline in markets would have to
be extreme before any breach occurred.
Group risk summary and mitigating actions
Overall risk trend in 2022
We recognise the heightened global geopolitical and macroeconomic risks that impact our global community in the last year and are
conscious of the risk and uncertainty they pose for the Investment Portfolio and IPS business. These macroeconomic risks are a key
driver behind the in-year change in risk profile to many of our principal risks with continuing uncertainty extending into 2023 and are
incorporated into our “changes to risk in 2022” section of the table below.
Categorisation of Group risks
A principal risk is a risk or combination of risks that could seriously affect the performance, future prospects or reputation of Law
Debenture, and represent the top risks of concern. The principal risks of the Group which could impact the achievement of strategic
objectives are split into two categories: Principal Group risks and Emerging risks:
Group risks
The identified Group risks predominantly relate to the Investment Portfolio as that comprises 79% of net asset value and the
concentration risk of the IPS business as whole which represents approximately 21% of our NAV.
Emerging risks
Given our objective to deliver sustainable long-term capital growth, we continually horizon scan for emerging risks which may
impact our ability to deliver to shareholders.
41
Risk management continued
PRINCIPAL GROUP RISKS CHANGES TO RISK IN 2022 MITIGATING ACTIVITIES
2. Cyber, Technology and Systems Risk
We rely on a set of critical IT
systems which are fundamental
to the day-to-day running of
the business. The threat of
unauthorised or malicious
attacks on our IT systems is an
ongoing risk.
Failures in these systems
could lead to reduced revenue,
increased costs, liability claims,
or harm to our reputation or
competitive position. This
includes the systems of Janus
Henderson.
Increased risk
Cyber-attack trends and high-profile
cases in the media demonstrates the
increasing frequency and scale of this
risk including trends on increased
“impersonation” scams from bogus
email addresses and ransomware.
•
The Group is Cyber Essentials Plus certified, the
highest level of certification offered under the
Government-backed, industry-supported Cyber
Essentials scheme which helps organisations
protect themselves against common online
securitythreats.
•
During 2022, we further enhanced our internal
monitoring system (SIEM) to track aspects of IT
cyber security e.g. unusual log-in attempts and
unwanted traffic on our Group website. Cyber
insurance is also inplace.
•
We conduct regular penetration testing and take
steps to address identified weaknesses.
•
We place focus on training our staff about cyber
security risks including phishing testing.
•
We adopt a continuous improvement approach to
IT security and continue to invest in cloud-based
technology across the Group.
•
Janus Henderson are subject to an independent
annual controls review to ensure there are
no material deficiencies. During the year we
conducted an on- site assessment of Janus
Henderson’s information system and business
continuity/disaster recovery plans and consider
them to beacceptable for our purposes.
3. IPS Concentration Risk
The unique setup of the
Group as an Investment
Portfolio with the unquoted
IPS business, which
represents 21% of NAV
and accounted for 30% of
revenue return per share
in 2022, creates an illiquid
concentration risk.
Failure to deliver on IPS
strategy could result in a
significant reduction in
valuation of the Group’s
largest asset thereby putting
pressure on our ability to
meet our stated objective
of long-term capital growth,
and to steadily increase
income for our shareholders.
Unchanged
The IPS business includes some
counter-cyclical services providing
opportunity for some business lines
during market downturn which helps
protect overall IPS performance;
therefore, concentration risk is broadly
the same year-on-year.
•
The IPS business comprises a diversified range of
services with very limited client concentration risk.
•
The CEO and COO are accountable for the day-to-
day running and operation of the IPS business with
independent oversight and challenge from the
Non-Executive Directors. The performance of the IPS
business is reviewed at all regular Board meetings.
•
The annual IPS budget is subject to review and
approval by the Board which provides robust scrutiny
and challenge on IPS strategic plans.
•
Any significant IPS investment requires
Boardapproval. This reduces the risk of unplanned
concentration risk.
•
Valuation of the IPS business takes into account the
illiquid nature of the holding.
STRATEGIC REPORT
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STRATEGIC REPORT
Risk management continued
EMERGING RISKS CHANGES TO RISK IN 2022 MITIGATING ACTIVITIES
1. ESG Considerations
As ESG becomes an area of
increased focus, we must
consider the impact of ESG
factors adversely affecting
the Group’s reputation and
performance. These can
impact the Group both
directly and indirectly through
our shareholders and other
stakeholders.
There is also a significant
uptick in the ESG regulatory
landscape; we must ensure
that we do not fall behind in
meeting these requirements
including climate and ESG-
related targets.
Unchanged
This risk continues to present
challenges around consistency and
reliability of ESG ratings.
•
ESG is considered by our investment managers
when selecting investments. ESG ratings and events
in relation to our Portfolio holdings are regularly
reviewed by the Board and challenged where
necessary.
•
Considerable ESG progress has been made in 2022 –
including voting data, voluntary TCFD, defining our
ESG Strategy, and creating an ESG area on our Group
website.
•
We continue to engage and monitor with
stakeholders on ESG, in order to identify trends,
patterns and areas of key concern.
PRINCIPAL RISKS REMOVED DURING 2022
During 2022, the ARC performed a robust review of principal risks under the approved principal risk scoring system. At full
year 2022, following our risk assessment process, we present “IPS Concentration Risk” to include the 2021 “IPS risks” including
“Strategic & Financial”, “Change Management” and “ Financial Crime” and emerging risk “Digital Disruptors and Change” . “IPS
Concentration Risk” better represents the Group principal risk using the approved principal risk scale.
“Financial Reporting” risk was removed as the residual risk score fell below the threshold for principal risk reporting following the
Audit and Risk Committee’s robust assessment of principal risks during 2022.
OUR RISK AGENDA 2023
In 2023 we will continue to understand the impact of the UK corporate governance reform and BEIS consultation on the Law
Debenture Group.
Emerging risks and mitigating actions
43
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44
STRATEGIC REPORT
Viability statement
Viability statement
The Board has considered the Company’s current financial
position and the potential impact of its principal risks and
uncertainties, and have 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 report.
In assessing the viability of the Company of the review period,
the Board has considered a number of key factors, including:
Our business model and strategy
• The Board seeks to ensure that the Company delivers
long-term performance. The closed ended nature of the
investment trust creates a stable capital basis which enables
our investment managers’ to take a longer-term view in their
construction and management of the Portfolio. This partially
mitigates the risk to the Group of potential liquidity issues
should 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
demonstrated by our long-term performance, the combination
of the Investment Portfolio and the IPS revenue streams
provide protection to the long-term viability of the Company.
Over a three year period, the share-price total return is 37.7%.
The NAV total return with debt at fair value is 26.0% compared
to the FTSE Actuaries All-Index Total Return of 7.1%.
• One of the principal Group risks relates to investment strategy
and market performance. Part of the risk to the Group is a
breach of our debt covenants resulting in a requirement for
the Group to repay the debentures at short notice, potentially
requiring the sale of assets during a market downturn. Whilst
the Board acknowledges this risk, the uncertainty arising due
to the Covid-19 pandemic demonstrates the Group’s ability to
navigate these challenges. At the height of market decline on
23 March 2020, the Group maintained significant headroom on
all covenants.
• The IPS business currently holds enough working capital to
meet any short term requirements of the Group and our book
of clients provides a steady, largely recurring, flow of income.
There has been a concerted focus on debtor management
which has enhanced the IPS business’s cashflow over the past
year and improved our working capital cycle.
Furthermore, the majority of the Portfolio is invested in UK
listed securities which are traded on major stock exchanges,
providing the Group with the ability to quickly liquidiate assets,
should the need arise.
• The Company has an ongoing charge of 0.49%. This is the
fourth lowest OCR in the UK Equity Income sector.*
Our business operations
• The Company retains ownership of all assets held by the
Custodian under the terms of formal agreements with the
Custodian and Depositary. This supports our ability to meet
our Legal and Regulatory requirements and acts as a control to
both verify the existence our assets and further safeguard the
interests of our Shareholders.
• The Company’s cash is all held with banks approved by
the Board. The Company’s cash balance, including money
market funds, at the 31 December 2022 amounted to £29.8m
(30December 2021: £25.5m), with IPS holding a further
£18.7m. Cash is treated as fungible across the Group and it is
deployed on a basis of need. During the course of 2022, there
has been a concerted effort to clear down inter-company
balances and a netting-off agreement has also been put
inplace.
• There is long term borrowing in place comprising of four
debentures:
The weighted average cost of borrowing based on the debt
at PAR values is 3.966%. Each debenture is subject to a
formal agreement, including financial covenants which the
Company has complied with in full during the year. As at the
end of December, net gearing was 12%, which is well within
the typical operating range of 10%-20%.
• During January 2021, the Company also made arrangements
to put in place a £50m unsecured overdraft facility with
HSBC. Whilst available, this facility is currently not in use but
provides further mitigation of any liquidity risk.
• The Board reviews the Portfolio performance including
revenue forecasts, along with other key metrics such as
gearing at each Board Meeting and receives regular financial
reporting to monitor and manage the principal risk relating to
investment performance.
In addition to this, the Board carries out an assessment of our
principal risks and uncertainties which could threaten the
Company’s business model. This assessment has been shared
separately and will be presented as part of the Annual Report.
As part of this exercise, the Board has assessed the emerging
risks which may impact the operations of the Company and will
continue to actively review the likely impact of these potential
risks. This is set out at page 38.
The political and economic situation has placed a strain on the
Maturity date PAR Value Interest
2034 £40m 6.125%
2041 £20m 2.54%
2045 £75m 3.77%
2050 £30m 2.53%
Total £165m Weighted average: 3.966%
* Source: The AIC – https://www.theaic.co.uk/aic/find-compare-investment-companies/advanced-compare?end=2563
STRATEGIC REPORT
45
global and UK economy, bringing with it uncertainty, supply-
side inflation and rising interest rates. The IPS business has also
felt the impact of the competition for talent in the UK market.
This has resulted in rising salary expectations of both our people
and any potential new hires. At present, the Board does not
consider this will have an impact on the longer-term viability of
the Company.
Balance sheet resilience
As at the 31 December 2022, Law Debenture Corporation held
total investments, including cash and the IPS business, of
£1.14bn (31 December 2021: £1.20bn). With the exception of the
IPS business, the majority of these assets are liquid and could
be sold down within a short period of time, i.e. less than 10
working days.
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 31 December 2022, the Group holds cash
and cash equivalents of £49.6m (31 December 2021: £35.8m). In
addition to this, the Company has an overdraft facility of £50m to
protect against any significant fall of cash inflows.
Viability statement continued
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46
STRATEGIC REPORT
Section 172(1) Statement
As reported on page 30, the Company’s purpose is to deliver peace of mind for our shareholders, clients and staff through the
combination of our Investment Portfolio and IPS business. Our purpose, values and strategy are inextricably linked and are reflected
in our policies, practices and high standards of business conduct.
The Board is responsible for the overall strategy and overseeing the management of the Group, setting investment principles and
ensuring that the Company is acting in accordance with its legal and regulatory obligations. In discharging its responsibilities, the
Board takes into account the Group’s purpose, values and culture and acts in good faith to promote the long-term success of the
Company, including oversight of stakeholder engagement, feedback from the same as appropriate and ensuring that the Company
fulfils its obligations to its key stakeholders. Those impacted by the Company’s activities and considered key to its operations can be
grouped into the following five main categories:
Case Study: Manchester listening group
In September 2022, the Workforce Engagement Director, Clare Askem, hosted a listening group in our Manchester office with
some of our staff from a cross section of the teams based there. The objective was to provide insight into colleague eNPS scores
and to provide the Executive and the Board with an independent view of potential issues and opportunities.
Feedback from the listening group was discussed with the Chief Operating Officer and was also reported to the Board, along
with other activities undertaken by Clare in her capacity as Workforce Engagement Director, during the year. All feedback was
presented on an anonymous basis.
The Executive Leadership team and Board gained greater insight into Manchester colleagues’ views on the Company’s
remuneration structure and their experience of the team dynamic and style of leadership in that office, adding depth to
knowledge already gleaned from the Group’s previous eNPS surveys.
The Executive Leadership team, with the support of the Board, are taking steps to continue to improve our people’s inclusion in
the matters that affect them the most and to enhance their daily experience of the working environment. Some of the
decisions resulting from workforce engagement, including the Manchester listening group, are set out on page 48.
We are pleased that our first listening group was a success and additional sessions are being planned for 2023.
05
04
03
02
01
Shareholders
and potential
investors
Employees
Community
and the
environment
Suppliers
Clients
of our
IPS business
THE BOARD
Our principal service
provider is the
investment manager,
Janus Henderson
Investors.
Other key suppliers
include our joint
corporate brokers,
registrar, depositary,
global custodian
and external auditor.
STRATEGIC REPORT
47
Section 172(1) Statement continued
STAKEHOLDERS KE Y PRIORITIES ENGAGEMENT ACTIVITIES IN 2022
Shareholders and potential investors
Investment from shareholders makes
up the majority of the Company’s
capital, funding the principal investment
activities. Shareholders also hold the
Board accountable to its investment and
governance objectives.
To deliver against our stated
objective to provide long-term
capital growth in real terms and
a steadily increasing income.
To provide a fair, balanced and
understandable representation
of the Company and the Group’s
position, performance, business
model and strategy.
•
Consultation with major shareholders
onDirectors’ Remuneration Policy*
•
Distribution of the Annual and Half Year Reports
•
AGM*
•
Institutional investor meetings (c.50 held in 2022)*
•
Analyst and shareholder meetings
•
Individual shareholder meetings
•
Quarterly dividends
•
Daily NAV publications
•
Monthly Factsheets
Clients
Clients help to create, maintain and
grow demand for our IPS services. Their
feedback is encouraged to help us
continue to improve as a business.
Seek to provide peace of mind
to our clients through delivery of
an excellent service.
•
Client care meetings
•
Hybrid approach to client events
•
Lens photography competition
•
Summer networking event
•
Annual Pensions Debate
Employees
Our people are key to our IPS operations
and we rely on their support and expertise
to provide excellent services to our clients.
To provide a diverse and
inclusive workplace which
supports our people to grow
their careers in a way that is
both meaningful to them and
promotes the delivery of our
long-term strategy.
•
Listening groups with the Workforce Engagement
Director*
•
Embedding of culture and values via our annual
culture week*
•
Monthly culture carrier awards
•
Quarterly eNPS surveys
•
Diversity and inclusion strategy and initiatives set
out on pages 54 to 55.
•
Monthly all-staff hybrid business updates
•
Bi-annual all-staff financial performance updates
•
Community groups to bring our people together
•
Learning and development training modules
•
Team and Company-wide events
•
Reports from Business and Department Heads at
Board meetings*
•
Delivery of our Emerging Leaders programme
Principal service providers
We rely on our service providers to manage
our Investment Portfolio and provide the
infrastructure and advice to meet our
shareholders’ expectations, service our
client base and remain compliant with legal
and regulatory requirements.
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.
•
The investment managers attend all Board
meetings*
•
Quarterly meetings with custodian and depository
•
Quarterly meetings with our corporate broker*
•
Annual meeting with our registrar
•
Active engagement with large suppliers of the IPS
infrastructure
Community and the environment
We recognise that we are stewards of our
community and the environment and
that investment geared toward these
helps to improve economic stability and
build a more inclusive community. This
in turn contributes to the Company’s
sustainability and subsequently helps
us to deliver on our objective for
our shareholders in light of our key
stakeholders’ interests.
To act responsibly as an
institutional shareholder and
to ensure we have a positive
impact on the Company’s
operations, the community and
our environment.
•
Mentoring programme with widening participation
•
Charity group supporting two named charities
•
Paperless initiative
•
Deemed consent for shareholders to receive
electronic communications
•
Energy efficient office buildings in London,
Manchester and Sunderland
•
Increased recycling in all offices
•
Liaising with ESG rating agencies
•
Minimal carbon emissions
*Direct engagement with Directors or the Board. All other items are overseen by management and reported to the Board or its committees, where appropriate.
Key priorities and main methods of engagement with stakeholders in 2022
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STRATEGIC REPORT
Section 172(1) Statement continued
1) REVIEW OF OUR REMUNERATION POLICY
Following feedback received from major shareholders at the start of 2022 and during the triennial review of the Directors’
Remuneration Policy, the Remuneration Committee has proposed changes to the Directors’ Remuneration Policy for approval at
the 2023 AGM. Further details may be found in the Directors’ Remuneration Report on page 76.
2) WORKFORCE ENGAGEMENT OUTCOMES
Workforce engagement activities held during the year are listed on page 47, with details of our first listening group described in
the case study on page 46. Feedback from these activities led or contributed to the following outcomes:
•
Revision of our junior staff members’ remuneration packages during the February 2023 pay review cycle
• The implementation and addition of various learning and development courses for our people including manager training,
discovering leadership training and other courses on self-awareness, wellbeing and community. Feedback from staff has been
reported to the Board by the Executive Leadership team.
•
A CSS UK team day, which brought our colleagues from the London and Manchester offices together to further support our
collaboration and unity as a business.
3) CONTINUED INVESTMENT IN DELIVERING LONG-TERM IPS REVENUE GROWTH
During the course of 2022, further investment has been made in our technology offering to support our Safecall business. The
new Safecall portal has been well-received by our clients.
We have also appointed Trish Houston to manage our CSS business, in addition to her role as COO, to drive the future growth of
this business.
4) REVIEW OF IMPACT OF COST OF LIVING AND INFLATIONARY PRESSURES ON STAKEHOLDERS
During the year, the Board held in depth discussions on the impact of the economic climate on the Investment Portfolio and
how the investment managers proposed to manage performance in light of market volatility. The Board was satisfied from
those discussions that the team at Janus Henderson continue to manage the Investment Portfolio appropriately and in the best
interests of shareholders. Further details on the investment manager’s approach can be found in their review on page 17.
The Board will continue to monitor the effects of the economic climate on the market.
5) ENGAGEMENT WITH ESG RATING AGENCIES
Following the ongoing focus on ESG by UK government and regulatory bodies, the Audit and Risk Committee commissioned
engagement with ESG rating agencies to better understand its importance to investors. Those discussions have resulted in
enhanced ESG reporting, which has led to improved ESG scores. This has not only educated the Board on matters which are
important to investors but also adds to the attractiveness of our investment proposition in the long-term. Further details may be
found in the ESG section on page 50.
Key strategic decisions impacting stakeholders in 2022
Where appropriate, information or feedback received from shareholders and other key stakeholders are routinely reported to the
Board by the Executive Leadership team, the General Counsel, the Company Secretary, IPS Business Heads, the Group Risk, MLRO
and ESG Manager and the investment managers.
During the year, 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. Each decision taken by the Board is with a view to ensuring that we deliver on
our commitment to our shareholders to deliver long-term capital growth and steadily increasing income. 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.
49
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Environmental, Social and Governance (ESG)
Group approach to ESG
ESG considerations underpin sustainable long-term returns for
our shareholders, as well as promoting behaviours aligned to our
corporate purpose and values, as set out on page 7.
ESG factors are integrated into our investment analysis and
decision-making as it is our view that it delivers a resilient
portfolio and better outcomes for our shareholders, clients,
people, the wider community and the environment.
Our IPS colleagues are also afforded peace of mind that they are
part of a team which is fair, ethical and committed to doing the
right thing through our corporate values. They are the building
blocks for a successful and sustainable future and will facilitate
meeting our Group goals alongside our ESG objectives.
What we achieved in 2022
2022 has been a significant year in Law Debenture’s ESG
development:
•
Regular ESG Committee meetings; 11 held during the year.
•
Launched an ESG-focussed section of our website:
https://www.lawdebenture.com/about-us/esg
•
Published our Environmental Policy, available on the above link.
•
Published our summary gender pay gap summary:
https://www.lawdebenture.com/news/lawdeb-publishes-
gender-pay-gap-summary
•
Published our first voluntary TCFD on pages 51 to 53.
•
Agreed employee diversity targets and thresholds.
•
Continued engagement with ESG rating providers.
Looking ahead to 2023
In 2023, we are committed to make further change happen by
taking more action and enhancing the availability of our ESG
information in the public domain by:
•
Continuing the development of our TCFD disclosures for
2023 year end.
•
Increasing our Corporate Social Responsibility initiatives.
•
Adding further content to the ESG section of our website.
ESG considerations when investing
Our investment managers consider ESG factors as part of their
fundamental analysis. The managers focus on material ESG
risks that are likely to have a significant impact on the financial
condition or operating performance of a business, as well as
evaluating a company’s ability to manage these risks.
The managers’ approach to ESG facilitates investment in
companies that are actively improving their ESG profiles.
Companies with weaker ESG risk profiles are not automatically
excluded provided they are making progress in mitigating these
risks. The team proactively engages with senior management on
key ESG issues and risks, assessing their responses and subsequent
actions. We continue to hold the view that active engagement with
companies like Shell and BP achieves more than divestment, and
our investment rationale on these stocks is detailed on page 22.
The Board regularly reviews quantitative ESG metric reporting
for the portfolio. The inclusion of this data informs discussion
and debate and allows us to ensure the portfolio continues to
deliver against the commitments made to our shareholders. We
will continue to evolve our approach as ESG data becomes more
available and the asset management industry becomes more
sophisticated and experienced in analysing the ESG impact
ofinvesting.
Environmental
As a business, we are conscious that our decisions impact
the environment. The majority of our staff are employed to
provide services under our IPS business, and so our greatest
consideration in this area is our offices. With this in mind, we
consciously selected offices that reflect these values within our
recent office moves; our London, Manchester and Safecall offices
are each built according to high sustainability standards.
Emissions data (unaudited)
A significant portion of the Group’s carbon emissions arises from
its consumption of energy in maintaining its offices.
Tonnes of CO2e
As at 31 December
2022* 2021 2020
Scope 1 — — —
Scope 2 47.21 138.50 179.65
Tonnes of CO2e per £000 of IPS revenue
As at 31 December
2022* 2021 2020
Scope 1 — — —
Scope 2 0.0009 0.0028 0.0059
* Reduction in CO2e due to renewable energy use at main offices during 2022.
Over 80% of scope 2 emissions are from UK operations. The Group
does not yet calculate Scope 3 emissions. The following describes
the methodology used to calculate our Scope 2 emissions. Where
available, direct energy bills from office energy consumption are
used. Energy bills are pro-rated where we share office space in the
building. The CO2e of the energy provider is used with this data to
calculate the net emissions impact. During data collection we faced
challenges on obtaining accurate data on energy consumption
at a small number of offices, where we lease a part of an office
from a larger building and did not successfully receive pro-rated
energy usage data. In such cases, an average of Group energy
consumption per employee is used, and the CO2e of the energy
provider or, if unavailable, DEFRA conversion factors are used.
51
STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
The ratio used “Tonnes of CO2e per £000 of IPS revenue” uses IPS
revenue from notes to the accounts “6. Segment analysis”. As we are
calculating scope 2 emissions (office space), IPS revenue is used in
the ratio, as the Portfolio has nil scope 1 and 2 CO2e emissions. The
energy calculations have not been externally audited.
The Group does not have defined “net zero emissions” targets.
None of the entities within the Group (subsidiaries or parent
company) meets the streamlined energy and carbon reporting
(SECR) regulations at an individual level.
Greenhouse gas reporting definitions
Carbon greenhouse gas (GHG) usage is calculated and presented
in three categories using The Greenhouse Gas (GHG) Protocol:
Scope 1 - direct GHG emissions from combustion in owned or
controlled boilers, vehicles (nil consumption for Group)
Scope 2 – energy emissions from own consumption of purchased
electricity, heat, steam and cooling – e.g. offices where we are in
control of our energy
Scope 3 - other indirect emissions of wider operational reach
including investments, business travel, supply chain, and office
energy not captured in scope 1 or 2.
LawDeb Lens 2022
– Annual Photography Competition
Law Debenture is pleased to continue to host its annual amateur
photography competition, with entries received from investors,
clients, industry contacts, referral partners as well as staff. Last
year’s competition categories were based upon our long lived
but newly articulated LawDeb values. For 2022 we challenged
entrants with a new set of categories which are equally important
to us, Environmental, Social and Governance (ESG).
In our continuing journey and focus on the importance of ESG we
were confident that these broad categories would yield an exciting
variety of images and styles: this has certainly proven to be the case.
The conversation and consideration of ESG principles this event has
encouraged, internally and externally, has also beenpleasing.
With our congratulations to LawDeb Lens 2022 winners announced
in January 2023 and photos shown on pages 51 and 55.
Task Force on Climate-Related Financial
Disclosures (TCFD)
Investment trusts are not required to publish TCFD disclosures until
30 June 2024. However, we are sharing voluntary TCFD disclosures
across three of the 11 TCFD Recommendations available at https://
www.fsb-tcfd.org/recommendations/
Fully compliant disclosures have been provided in respect of:
• Governance – disclosures a) and b); and
•
Risk management – disclosure a).
In addition, we are partially compliant with metrics and targets
disclosure b) (disclosures provided are partially compliant because
Scope 3 emissions are not yet disclosed).
For all remaining TCFD recommendations, we have not provided
fully compliant disclosures in the current period, due to the
Group focusing on embedding the ESG Committee and related
ESG activities including policies, website, ESG Strategy and
Implementation Plan, engagement with ESG ratings providers and
regular reporting to the ARC on ESG matters, given that investment
trusts are not in scope for mandatory TCFD in the current period.
Planned actions include a standalone climate risk register to
identify risks and opportunities as well as a TCFD delivery plan, with
progress updates shared with the ARC on a quarterly basis. The
ARC will continue to review the Group’s principal risks including
climate change, at least twice a year. A key focus of the Board,
Executive Leadership and the ESG Committee in the coming year
will therefore be to provide fully compliant disclosures by required
deadline for investment trusts.
The Investment Portfolio is not an ESG fund as there are no sector
exclusions. The Portfolio does not focus solely on promoting
environmental and/or social characteristics (which must also
have good governance practices) and does not have sustainable
investment as its principal objective. Our IPS business is a low
carbon emitter as shown on page 50.
In the table of voluntary TCFD disclosures on pages 52 to 53, we
have presented a view of TCFD across the Investment Portfolio and
the IPS business for greater transparency, as opposed to a single set
of disclosures for the entire Group.
Environmental - Frog on the Run
Photo credit : Phil Symes
lawdebenture.com
52
STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
GOVERNANCE
Disclose the Company’s governance around climate-related risks and opportunities.
Overview to Governance
The Audit and Risk Committee (ARC) reviewed the ESG Strategy and Implementation Plan (the Plan) for the Group and
recommended that the Board approve the Plan in July 2022. The ARC is now monitoring progress against the Plan and updating
the Board accordingly. The ESG Manager will continue to evolve the Plan based on feedback from the ARC and Board taking into
consideration views of shareholders, and voting agencies.
Law Debenture does not currently have climate related goals and targets. However, this will be reviewed during 2023.
Investment Portfolio IPS Business
Within the Investment Portfolio, climate-related risks and
opportunities are assessed where they are considered to
be material to the investment rationale. This assessment is
alongside the fundamental research that is integral to the
investment process.
There are no sector exclusions in the Portfolio. Instead, the focus
is on engaging with companies in order to better understand
how climate risks and opportunities are managed. Interactions
and engagements with companies are reported to the Board
on a quarterly basis. These discussions can take place either
directly via the investment managers or via Janus Henderson’s
Governance and Stewardship team.
Climate related risks and opportunities are overseen by our ESG
Committee which reports to the ARC. The ESG Committee is
made up of a cross-function mix of Law Debenture employees
to drive, create and review Law Debenture's ESG policies for
approval by Executive Leadership and the ARC.
In line with this approach, climate-related risks are also
considered as part of our ESG risk management procedures.
In line with the Group's policy for identifying risks and
opportunities, risks are identified through a "bottom up"
approach by Business Units and central functions, including
the Shared Services Centre, and are documented, assessed
and monitored in Business Unit risk registers or via the ESG
Committee which oversees the TCFD disclosures and impacts.
Reporting to the ARC and Executive Leadership Team on ESG
matters takes place on at least a quarterly basis.
STRATEGY
Disclose the actual and potential impacts of climate-related risks and opportunities on the company’s businesses, strategy,
and financial planning where such information is material.
Overview to Strategy
In undergoing our financial planning, no climate-related impact to our balance sheet or income statement is expected at present
and therefore no financial adjustments are required. We are working on finalising our strategy including disclosures in relation to
time-related definitions of short, medium and long term time horizons and associated risks and opportunities. The Board does not
currently have any defined timeline agreed for this.
Investment Portfolio IPS Business
The investment managers are tasked with growing capital and
income by investing in a diversified portfolio of companies.
There are no specific ESG or carbon-related targets. Within
the Investment Portfolio, the investment managers will seek
to identify material risks and opportunities relevant to each
investment case over a variety of time horizons. For example,
the need to de-carbonise the global economy over the long
term presents investment opportunities in companies working
to deliver this, such as Ceres Power, AFC Energy and ITM Power.
We are a minor scope 2 emitter; from the energy consumed
in the organisation via our offices. Our head offices use green
energy from 100% renewable energy sources.
53
STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
STRATEGY continued
Investment Portfolio IPS Business
The investment managers will also seek to assess companies
where there is a risk to earnings from, for example, the need
to diversify away from fossil fuels. These considerations will
form a role in assessing the fundamental value of companies
and whether there is an attractive total return opportunity. The
investment managers report to the Board on these discussions
at least quarterly.
Legislative change in relation to carbon, including reporting
requirements and taxation implications poses a small risk
to our business and we must ensure we are able to meet
suchrequirements.
RISK MANAGEMENT
Disclose how the company identifies, assesses, and manages climate-related risks.
Overview to Risk Management
Our approach to risk management includes a review of climate-related risks that has been reported to the ARC during 2022 and
will be presented to the ARC on at least an annual basis going forward. We will evolve this further during 2023 including a review of
the transition risks which may impact the Investment Portfolio and IPS business.
We consider climate risk for the Group to be low and is not considered a principal risk under the Group’s scoring assessment of
principal risks in risk management on page 39. However, ESG considerations, including climate regulatory reporting requirements
such as TCFD, are an emerging risk.
Investment Portfolio IPS Business
Climate-related risks within the Investment Portfolio are
predominantly assessed through fundamental analysis.
This includes scheduled company reporting, meetings with
company management and access to third party research.
Where appropriate we engage with company management
in order to increase climate disclosures and to set clear and
measurable greenhouse gas reduction targets.
Janus Henderson also produces monthly reports available to
the investment managers that include a screening for portfolio
companies held with the highest contribution to portfolio
carbon risk.
Climate considerations are reviewed at operational level
where feasible. The majority of direct carbon and energy
usage is via the office locations. There has been an active
decision to move into sustainable premises at our two largest
offices, the London head office and Manchester sites (c.80%
employees), which are both sustainable BREEAM offices.
There have been no assets impaired because of climate-
related physical risks; the Group leases its office premises
and does not consider the right-of-use asset (note 22 of the
financial statements) to be impaired by climate risks. Fixed
assets (note 11 of the financial statements) relate to leasehold
improvements, office furniture and equipment, none of
which are affected by climate-change.
METRICS AND TARGETS
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities.
Overview to Metrics and Targets
As the direct climate risk for Law Debenture is low we have decided not to accelerate the implementation of metrics. The Group is
working on the data collection required for the calculation of Scope 3 analysis for mandatory TCFD reporting.
Investment Portfolio IPS Business
There are currently no KPIs to assess climate-related risks that
are applied to the Investment Portfolio in aggregate.
Our current reporting metric is Scope 1 and 2 carbon emissions,
which we publish on page 50 using the Greenhouse Gas
Protocol.
lawdebenture.com
54
STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
Social
Diversity and inclusion
Following several senior appointments and promotions over
the last five years the composition of our Board and Executive
Leadership team reflects a diverse cross section of gender,
ethnicity, age and background. We are proud of the progress
we have made and believe we are reaping the rewards of
genuine diversity of thought. We were particularly pleased to
have been ranked 2nd in the FTSE 250 Rankings for Women on
Boards and in Leadership (and 1st in the Financial Services
sector), in the inaugural report by the FTSE Women Leaders
Review, announced on 22 February 2022. We fully support all the
recommendations in this report.
The Company satisfies all recommendations of the FTSE Women
Leaders and Parker reviews. For more information on the
progress of our diversity and inclusion objectives please refer to
page 71.
We have worked hard to create a working culture that supports
and celebrates diversity in the workplace. Our recently published
Gender Pay Gap Summary (https://www.lawdebenture.com/news/
lawdeb-publishes-gender-pay-gap-summary) highlights areas
where we have made excellent progress.
We know that a diverse workforce and inclusive culture directly
benefits our clients. For our Corporate Secretarial Services and
REPORTING ON GENDER IDENTITY OR SEX (unaudited)
As at
31December
Number of
Board
members
Percentage
of the Board
Number
of senior
positions on
the Board
(CEO, CFO,
SID and
Chair)
1
*Number in
executive
management
*Percentage
of executive
management
**Number in
senior
management
**Percentage
of senior
management
Number
in Group
employees
Percentage
of Group
employees
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
Men 4 5 57% 62% 3 3 1 1 33% 33% 3 4 38% 50% 118 81 45% 45%
Women 3 3 43% 38% 1 1 2 2 67% 67% 5 4 62% 50% 144 98 55% 55%
Total 7 8 100% 100% 4 4 3 3 100% 100% 8 8 100% 100% 262 179 100% 100%
REPORTING ON ETHNIC BACKGROUND
White
British or
other White
(including
minority-
white groups)
6 7 86% 88% 4 4 3 3 100% 100% 8 8 100% 100% 182 126 69% 71%
Mixed/
Multiple
Ethnic Groups
— — 0% 0% — — — — 0% 0% — — 0% 0% 12 7 5% 4%
Asian/Asian
British
1 1 14% 12% — — — — 0% 0% — — 0% 0% 30 22 11% 12%
Black/African/
Caribbean/
Black British
— — 0% 0% — — — — 0% 0% — — 0% 0% 15 10 6% 6%
Other ethnic
group,
including
Arab
— — 0% 0% — — — — 0% 0% — — 0% 0% 8 6 3% 3%
Not specified/
prefer not
tosay
— — 0% 0% — — — — 0% 0% — — 0% 0% 15 8 6% 4%
Total 7 8 100% 100% 4 4 3 3 100% 100% 8 8 100% 100% 262 179 100% 100%
1 At Law Debenture, the role of COO has been defined as a Senior Board position. The CFO is not a Board position but is a member of the executive management.
* Executive management report to the Board.
** Senior managers are 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. Senior managers report to the executive management.
55
STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
Pensions businesses, for example, having our women sit on the
boards of our clients supports the diversity and representation within
our clients’ businesses. For our other services the diversity of thought
we bring ensures innovation and challenge that may otherwise
be missing. There is always more to do but we are committed to
continuing to improve diversity in ourworkplace.
Over the last 12 months we have held workshops with each of the IPS
business units to understand diversity in their industry, inclusivity in
their teams, as well as their progress and experiences. This insight fed
into the wider diversity and inclusion strategy. We will articulate this
in full in 2023 but a few of the actions undertaken include:
• Ongoing culture initiatives – such as Culture Week 2022 to bring
together colleagues across the business to meet and share ideas.
• Training on unconscious bias.
• Roll-out of LawDeb Landmarks, our career progression framework.
• Actively encouraging women into the recruitment process.
• Offering mentoring via the University of Greenwich, and internships.
• Supporting our nominated charities of the year, the Samaritans and
Marie Curie, via a wide variety of activities.
Data collection
Collection of data for the table on page 54 is based on HR system
data and on a voluntary basis where employees are encouraged
to complete at enrolment. Where gaps and missing fields are
identified, targeted emails are sent out on an annual basis for them
to complete.
Human rights and modern slavery
The Group believes in the importance of doing business in ways
that value and respect the human rights of our staff, customers, and
business partners.
The Group will not knowingly engage with companies that use
unlawful child labour or forced labour, nor will it knowingly accept
products or services from suppliers that employ or utilise child
labour or forced labour.
Pursuant to the UK Modern Slavery Act, our Modern Slavery
Statement is published on our website.
Governance
Good governance is central to Law Debenture.
As a FTSE 250 PLC, we comply with the requisite laws and
regulations including the UK Corporate Governance Code and the
Financial Conduct Authority’s Listing Rules – for further details see
our Corporate Governance report on pages 66 to 68.
As an investment trust, we also adhere to the UK Stewardship Code
(the Code) through our investment manager. The Code sets out
investment standards to be applied by institutional investors, asset
managers and service providers.
Social - All in the Round
Photo credit: Simon Lee
Governance - He who commands the sea
has command of everything, Themistocles
Photo credit: Charlotte Drake
lawdebenture.com
56
STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
Source: Janus Henderson using Institutional Shareholder Services (‘ISS’)
categories, 31 December 2022, for the period 1 January 2022 to 31 December 2022.
Note: Some meetings had more than one vote against management.
Notable votes cast
against management proposals:
SigmaRoc
SigmaRoc is a UK and European heavy building materials
company. We voted against the Financial Statements and
Statutory Reports as the (former) CFO was granted options
which we deemed to be too large and therefore outside of
best practice.
Irish Continental
Irish Continental is a ferry company that operates
predominantly between Holyhead and Dublin. We voted
against the Remuneration Report because the senior
management team were awarded pay rises significantly
above inflation without, in our view, a compelling rationale.
GlaxoSmithKline
GlaxoSmithKline (now GSK) is a global pharmaceutical
business (which at the time of the shareholder vote also
owned a consumer healthcare business, now separately listed
called Haleon). We voted against the remuneration policy as it
included a substantial increase in bonus opportunity which in
our view was outside of best practice.
Notable votes cast
in favour of management proposals:
Halfords
Halfords is a specialist auto parts and cycling retailer,
as well as offering repair services. We voted against ISS
recommendation and in favour of management with
regards to their ability to issue shares, as well as their ability
to issue shares without pre-emptive rights. We voted with
management as in our view the ability of management to
quickly undertake acquisitions should not be impaired (in this
case they bought a business called Axle Group), and we felt
that Halfords had acted within the spirit of the current pre-
emption rules.
Convatec
Convatec is a global medical products company. We
voted against ISS recommendation and in favour of the
Remuneration Report. In our view the current senior
leadership team are executing well in a challenging operating
backdrop and are outperforming relevant peers. We therefore
felt it was in the best interest of shareholders to vote in favour.
28% Director Election
25% of meetings
with at least one vote
against management
34% Compensation
10% Routine Business
5% Corporate Governance
3% Social
2% Company Articles
2% Environmental
11% Capitalisation
Voting
We delegate stewardship activities to our Investment Manager. As an active manager their preference is to engage with management
and boards to resolve issues of concern rather than to vote against shareholder meeting proposals. In their experience, this approach
is more likely to be effective in influencing company behaviour. However, where they believe proposals are not line with shareholder
interests or where engagement proves unsuccessful, they will voteagainst.
Law Debenture Voting Summary
During 2022, our Investment Manager voted on behalf of Law Debenture at 174 company meetings, 45 with at least one vote against
management.
75% of meetings
where we did not vote
against management
% of AGMs with at least
one vote against management
Voting by category
5% Strategic Transactions
57
IPS as a provider of governance services
From its origins over 130 years ago Law Debenture has diversified
to become a group with a range of governance services, further
details can be found in the Chief Executive Officer’s review found
on pages 8 to 14.
Environmental, Social and Governance (ESG) continued
STRATEGIC REPORT
Case Study: Supporting a leading
accountancy firm through their
carbon-reduction commitments
Last year we reported on the work our pension trustees
are doing with large pension funds, such as the M&S
pension scheme, to set net zero targets. After much work
by the ESG committee chaired by LawDeb, the M&S
pension scheme went on to announce a target of net zero
by 2030 for its asset portfolio.
Law Debenture has continued to support the pension
industry in driving forward the ESG Agenda. An example
of a good partnership is between Law Debenture and a
leading accountancy firm.
Together the client and Law Debenture looked at various
industry initiatives on ESG that the pension scheme could
align with, and considered the implications in terms of
the investible universe, carbon reduction commitments
and other exclusions. The scheme is now aiming to invest
with ESG criteria in mind that include, among others, the
following objectives:
• ensuring at least 70% of financial emissions in materials
are aligned to a net zero pathway or subject to direct
engagement
• reducing carbon emissions by 50% by 2030
• net zero by 2050
• investing less in companies with weak ESG credentials
and more in companies that are ESG leaders.
• excluding from the investible universe
companies that seriously breach the UN Global
Compact.
Law Debenture ESG Committee
The ESG Committee met 11 times during 2022 and is chaired by
the Group ESG Manager.
The Group ESG Manager attends meetings of the Audit and
Risk Committee to oversee ESG matters that have been
delegated. ESG matters relating to strategy are escalated to the
Board for approval.
For 2023, the ESG Committee and Audit and Risk Committee
will continue to drive forward the Group’s commitment to the
environment, social responsibility, corporate governance and
sustainability and take the necessary steps to enhance its
disclosures to investors and the wider market.
This report was approved by the Board of Directors on
27February 2023 and signed on its behalf by
Law Debenture Corporate Services Limited
Company Secretary
Case Study: Supporting our clients
through Whistleblowing
Safecall works in partnership with companies by giving
their employees and key stakeholders a voice to speak
out on key issues, especially where Social and Governance
considerations are very high on the agenda.
Experienced call handlers take telephone calls and inbound
emails concerning human rights & labour, health & safety,
and modern slavery, alongside issues surrounding anti
bribery & corruption, diversity, cyber security, corporate
behaviour and gender pay gaps; all areas linked to ESG.
By putting mechanisms in place to help encourage
and embrace a culture of speaking up, organisations
can demonstrate how they promote compliance and
bestpractice.
The strength of an organisations’ ethics culture is measured
through multiple indicators of employee behaviours. It
includes reporting misconduct, at various levels within
anorganisation.
“We always want whistleblowers to speak out. When they
speak for the planet, for people, for products, and for good
governance, organisations can strive to do better and show
their commitment for a better future. In turn,
this demonstrates your organisation is an open
and fully transparent business.”
Jo Lewis, Safecall Managing Director
lawdebenture.com
58
CORPORATE GOVERNANCE
The Board
Robert Hingley
Chairman, Independent 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,
Euroclear UK and International Limited
and chairman of governors at North
London Collegiate School. He is also
a non-executive director of Marathon
Asset Management, a member of the
Takeover Panel and a trustee at the
BishopsgateInstitute.
Key skills and experience contributed to
the Company include strategy, corporate
finance, corporate governance and
mergers and acquisitions.
Denis Jackson
Chief Executive Officer
Appointed to the Board on 1 January
2018.
Denis joined Law Debenture in July 2017
as Chief Commercial Officer. He was
previously at Capita plc as director of
new business enterprise, having been
a director at Throgmorton UK Limited
(which Capita acquired). Prior to that,
he was regional general manager for
Europe and the United States at Tibra
Trading Europe Limited, a FCA regulated
proprietary trading company, which he
joined from Citigroup (formerly Salomon
Brothers). He spent almost 20 years there
in a variety of roles including in Treasury
(both in New York and London), as head
of the finance desk in Hong Kong, head
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 strategy,
commerce, corporate finance
and governance and operational
and transactional leadership in
regionalorganisations.
Trish Houston
Chief Operating Officer
Appointed to the Board on 2 September
2020.
Trish brings twenty years of experience in
leadership roles in the financial services
industry. Previously, she was a member
of the senior management team at
JDX Consulting Limited, where she had
executive responsibility for HR, IT and
facilities and oversaw the merger of
three businesses. Prior to that, Trish was
a partner at Ruffer LLP where she held
several roles including global head of HR
and global head of risk. She was also a
member of the investment management
team at PricewaterhouseCoopers LLP
and worked in their offices in the UK,
Australia and Switzerland.
Key skills and experience contributed to
the Company include operational growth,
risk management, strategy and human
resource management.
Key
R
Remuneration Committee
N
Nomination Committee
A
Audit and Risk Committee Committee Chair
59
CORPORATE GOVERNANCE
A
R
N
Tim Bond Senior Independent Director
Appointed to the Board on 14April 2015 — Tim was previously a partner at Odey Asset
Management LLP until March 2022, having joined in 2010 as its head of macroeconomic strategy,
and then subsequently managed Odey’s Odyssey Fund. Before joining Odey, Tim spent 12 years
at Barclays Capital as managing director and head of global asset allocation. Tim was editor and
principal author of Barclays Capital’s Equity Gilt Study and chief advisor to the bank’s RADAR Fund.
Prior to Barclays, Tim worked at Moore Capital and spent 10 years as a strategist and trader for Tokai
Bank Europe, a proprietary trading boutique.
Key skills and experience contributed to the Company include fund management and investment,
strategy, corporate finance, ESG matters and distribution to investors.
A
R
N
Pars Purewal Independent Non-Executive Director
Appointed to the Board on 16December 2021 — After a career spanning more than thirty-five years,
Pars retired as a senior partner of PricewaterhouseCoopers (PwC) in June 2019. His experience
included being PwC’s UK Asset Management leader for ten years and finance partner for both asset
and wealth management. He was also chair of the Audit Committee of both Brewin Dolphin Holdings
PLC and Federated Hermes International. He is a Fellow of the ICAEW, board chair of Beyond Food
Foundation, a non-executive director of Finsbury Growth & Income Trust PLC and Royal London
Mutual Insurance Limited.
Key skills and experience contributed to the Company include an in-depth knowledge of the financial
services sector, audit and accounting, fund management, risk management and compliance.
R
A
N
Claire Finn Independent Non-Executive Director
Appointed to the Board on 2September 2019 — Claire’s most recent executive experience was at
Blackrock, where she spent almost 13 years, becoming managing director and head of UK DC, Unit
Linked and Platforms, responsible for strategy, innovation and growth. Previous roles at Blackrock
included director/managing director, head of strategic alliances, director of sales and relationship
management, and vice president of product development. She previously held roles in product
management at Henderson Global Investors (2001 – 2005) and relationship management at Bank of
Tokyo-Mitsubishi, London (1999 – 2001). Claire is currently chair of UBS Asset Management Life Limited
and a non-executive director of Artemis Fund Managers Limited, Sparrows Capital Limited, Octopus
Apollo VCT and Baillie Gifford Shin Nippon Public Limited Company.
Key skills and experience contributed to the Company include investment management, distribution
to retail and institutional investors, strategic innovation and growth in the UK asset management,
pensions and insurance industries and corporate governance.
A
R
N
Clare Askem Independent Non-Executive Director
Appointed to the Board on 10June 2021 — Clare has extensive background in strategic
development and in-depth experience in business change and digital transformation. She is also
a non-executive director of Portmeirion Group PLC and IG Design Group plc. Previously, Clare
was managing director of Habitat at Sainsbury plc and was a director on the Sainsbury’s Argos
operating board. Prior to her role at Habitat, Clare held a number of executive positions at Home
Retail Group plc including director of strategic development, chair of the group’s technology
committee and director on the operating board for Homebase. Prior to these roles Clare also held
other executive positions at Dixons Carphone plc.
Key skills and experience contributed to the Company include strategy, corporate transactions and
digital marketing and distribution.
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CORPORATE GOVERNANCE
The Directors present their Annual Report and the audited financial statements for the year ended 31 December 2022. 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 part of the Directors’ report.
Essential contracts
In the view of the Board, the only contract that is essential to the
business of the Group is the investment management agreement
with Janus Henderson, details of which are set out in the strategic
report on page 33.
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 19 to the Accounts.
Revenue, dividends and reserves
The Group revenue return attributable to shareholders for
the year ended 31 December 2022 was 34.44p per share. The
Directors recommend a final dividend of 8.75p per share, which,
together with the three interim dividends of 7.25p paid in each
of July and October 2022 and January 2023, will produce a total
of 30.5p per share if approved by shareholders at the AGM (2021:
29.0p). The final dividend will be paid on 13 April 2023 to holders
on the register on the record date as at 10March 2023. After
deduction of the interim and final dividends of £38.9m (2021:
£35.7m), consolidated revenue reserves increased by £4.5m (2021:
increased by £4.4m).
Directors
The Directors at the date of this report are listed on pages 58 and
59. All Directors held office throughout the year. Mark Bridgeman
remained a Director of the Company until his retirement at the
end of the 2022 AGM.
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 AGM. 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 58 and 59.
Directors’ conflicts of interests
The Directors have a statutory duty to avoid conflicts of interest.
The Board has in place appropriate procedures to deal with
conflicts and potential conflicts, including an annual review, and
can confirm that those procedures are operating effectively.
Whether any new conflicts are to be declared is also considered at
each Board meeting. Each Director has declared all matters that
might give rise to a potential conflict of interest and these have
been considered and, where necessary, approved by the Board.
Future developments
Details of future developments are disclosed in the Chairman’s
statement on page 7 and the Chief Executive Officer’s review on
page 13 in the strategic report.
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:
Rule Detail Where
9.8.4 (1) Interest capitalised Note 5, page 127
9.8.4 (7) Allotment of equity securities Note 17, page 138
9.8.4 (2-6) (8-14) Not applicable N/A
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.
The AIFM is required to provide portfolio management, risk
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 athttps://www.
lawdebenture.com/investment-trust/shareholder-information/
corporate-governance/the-aifmd.
The AIFMD requires us to report on ‘leverage’. This is slightly
different from gearing (refer to page 152), 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’ and a ‘commitment’
method. Under the gross method, exposure represents the sum
of the Company’s positions after the deduction of sterling cash
Directors’ report
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Directors’ report continued
balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is
calculated without the deduction of sterling cash balances and
after certain hedging and netting positions are offset against
each other. At 31 December 2022, the leverage calculated under
the gross method was 0.95, and under the net method was 1.00.
ESG considerations
The Group gives ongoing consideration to ESG factors in both
the management of the Investment Portfolio and the IPS
business. This is reflected throughout the strategic report on
pages 6 to 57.
Our energy and carbon emissions are reported in the ESG
section on pages 50 to 51.
Repurchase and issue of shares
At the 2022 AGM, the Directors were given power to buy back
up to 18,567,488 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 2023
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 2023 AGM.
The Directors were also given power to allot up to 12,386,583
ordinary shares at the 2022 AGM. From the 2022 AGM to the
27 February 2023 the Company issued a total of 3.7m ordinary
shares under its share issuance programme, launched in
February 2021 and our SAYE scheme. The authority will expire
at the 2023 AGM at which the Company intends to seek
shareholder approval to renew its powers to issue shares up to
10% of the Company’s share capital in issue at 27 February 2023.
Donations
The Company made no political or charitable donations during
the year (2021: £nil).
Share capital and significant
shareholdings
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 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 31December 2022, there were 128,172,019
ordinary shares in issue with 128,172,019 voting rights. Note 17
includes details of share capital changes in theyear.
As at 27 February 2023, there were no shareholders that had
notified the Company of a beneficial interest of 3% or more
of the issued share capital. Share information as required by
section 992 of the Companies Act 2006 appears at pages 62
and138.
Workforce engagement
Our people are key to our IPS business, and we rely on their
expertise to provide excellent services to our clients. Employee
wellbeing remained a priority during the year particularly as
we continued to support our people in their gradual return to
the office from remote working arrangements due to Covid-19.
During 2022, workforce engagement was conducted through
various methods including:
• Quarterly eNPS surveys.
• Our annual culture week in which our Workforce
Engagement Director participated.
• An employee listening group with our designated Workforce
Engagement Director and other events as set out in the
Section 172(1) Statement on page 46.
The Board also receives cyclical presentations from our
Business and Department Heads at each Board meeting and
holds one Board meeting per year in our Manchester office,
designed to focus on their operations, the wellbeing of staff
based in that region and to track progress on the continued
integration of the CSS business following its acquisition from
Eversheds Sutherland (International) LLP in 2021.
As set out in the Section 172(1) Statement, Clare Askem was
appointed Workforce Engagement Director on 7 April 2022.
Some of her responsibilities include:
• Being available to employees to discuss their views on
working conditions and other relevant work-related matters
or concerns.
• Understanding and interpreting the views of the workforce.
• Reporting the views of the workforce to the Executive
Leadership team and the Board.
• Agreeing an annual calendar of engagement events with the
Company Secretary.
• Providing feedback on existing workforce engagement
mechanisms.
The Board continues to see significant value in having a
Workforce Engagement Director. During the year, Clare Askem
and the Company Secretary agreed a calendar of events
with input from the Executive Leadership team and Human
Resources, to facilitate further Board engagement with our
people throughout the year. This included the hosting of
informal listening groups between Clare Askem and members
of staff without the presence of senior management, the
Executive Leadership teams or other members of the Board,
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CORPORATE GOVERNANCE
to encourage candid feedback. The objective of these groups
is to gain greater insight into the employee perspective and
ways in which their experience of the working environment
can be enhanced. Information gathered from any engagement
is reported on an anonymous basis to the Executive
Leadership team and/or the Board, as appropriate. The first
of the listening groups was held in September 2022. The
outcome of those discussions is disclosed in the Section 172(1)
Statement on page 48. Given their recent implementation,
the effectiveness of these engagement mechanisms were
not reviewed in 2022. Clare works closely with the Company
Secretary, Human Resources and the Chief Operating Officer
to fulfil her role.
Disability statement
We have policies in place to ensure that we give full and fair
consideration to applications for employment from disabled
persons, where a disabled person can adequately fulfill the
job’srequirements.
Our views on an inclusive workplace are that we value all
employees for their strengths and we offer employees with
disabilities, whether visible or invisible, an equal opportunity to
succeed, to learn, to be compensated fairly and to advance.
Training, career development and promotion also form part
of our policy for employees that become disabled during their
employment; reasonable adjustments are made to enable their
progression, which will allow them to continue to advance in
their career. 4.2% of our people have declared a disability.
Shareholder relations
The Board encourages communication with shareholders
on matters of mutual interest throughout the year. The
Executive Leadership team has primary responsibility for
managing regular and effective communications with
analysts and institutional investors on various matters such
as operational, financial performance and strategy. The Board
and Committee Chairs are also available upon request to meet
with shareholders and they ensure that the Board/Committee
as a whole have a clear understanding of investors’ views,
taking these into consideration when making decisions,
asappropriate.
The Board recognises the value of the AGM as an opportunity
to communicate with shareholders and encourages their
participation. Separate resolutions are put to the AGM on
each issue. The number of votes lodged for and against each
resolution and the number of votes withheld are published
immediately after the AGM to the London Stock Exchange and
on the Company’s website.
In April 2022, the Board was pleased to have been able to
engage with shareholders in person during and after its
hybrid AGM. Shareholders were given the opportunity to join
the meeting virtually and engage with the Board via that
medium where unable to attend in person. Shareholders
engaged with us on the share issuance programme, tax
efficiencies afforded by the Company’s group structure,
progress on the integration of CSS within the group structure
and on stocks selected for the Investment Portfolio. For
the first time we also published a video recording of our
AGM, in addition to the PowerPoint presentation, on our
website for year-round access. Given there has been minimal
engagement at the AGM via the virtual platform, the 2023
AGM will be an in person only meeting. Shareholders may
submit any queries in advance of the AGM if preferred or if
they are unable to attend.
In line with governance recommendations, if 20% or more
of the votes cast were 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 2022 received votes against,
above 20% of the votes cast.
Shareholders are sent a copy of the Annual Report, which
includes our Notice of AGM, at least 21 clear days before the
AGM. The Company also provides this service to shareholders
in nominee companies where the nominee has made
appropriate arrangements. Details of the 2023 AGM are set
out at pages 156 to 158.
During the latter half of 2022, the Remuneration Committee,
following its triennial review of the Directors’ Remuneration
Policy (the “Policy”), approached the Company’s major
institutional shareholders and proxy voting agencies on
various changes being proposed. We are grateful for the
supportive responses and constructive feedback received
during the consultation and have amended our final
proposals as a result. A resolution to approve the Policy will be
put to shareholders at the 2023 AGM. Further details may be
found in the Directors’ Remuneration Report on page 76.
The Financial Conduct Authority has determined that the
Company is subject to the Consumer Duty, which is designed
to ensure in scope companies deliver good outcomes for
retail customers. Whilst the Board already actively seeks to
do this pursuant to its obligations under section 172(1) of the
Companies Act 2006, it is early in the process of reviewing
whether any additional actions are required under these
newregulations and will report on its progress for the 2023
year-end.
The Company’s website has a dedicated shareholder
information section, which includes all Regulatory News
Service announcements, our monthly factsheets about
the Investment Portfolio performance, a financial calendar,
previous copies of our annual and half-yearly reports
and other important shareholder information available
fordownload.
Other engagement activities undertaken during 2022 may be
found on page 47 of the Section 172(1) Statement.
Directors’ report continued
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Directors’ report continued
Other stakeholder relations
Day-to-day relationships with the Company’s key stakeholders
are managed by the Executive Leadership team, the General
Counsel, the Company Secretary and IPS Business Heads and
where appropriate, their activities are reported to the Board. The
Board, directly or through its committees, engages or oversees
engagement.
The Board is given the opportunity to interact with stakeholders
at employee, client and investor focused events held throughout
the year. Further details may be found in the Section 172(1)
Statement found on page 47.
Investment managers – interests held
Laura Foll held 13,650 shares in the Company as at 31 December 2022
(2021: 13,650). James Henderson did not have a beneficial interest
as at 31December 2022 (2021: nil), although persons connected
to him had an interest of 134,000 shares (2021: 134,000 shares). In
addition, a charity with which James Henderson has non-beneficial
connections owns 117,000 shares (2021: 117,000 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 263,288 shares in
the Company as at 31December 2022 (2021: 276,612 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 available on the Company’s website with physical copies only
being made available upon request. The Company operates a
SAYE scheme in which all UK full-time employees are eligible to
participate after completing a minimum service requirement.
Options outstanding under the SAYE scheme as at 31 December
2022 were:
Date of grant
Number of
option holders
Shares
under option
Exercise
price
15 August 2017 2 3,530 594.75p
15 August 2018 13 31,788 606.00p
14 August 2019 11 17,375 592.00p
26 August 2020 17 47,022 539.00p
1 September 2021 30 47,498 778.00p
8 September 2022 22 26,705 781.00p
Employees are invited to participate in our SAYE scheme annually,
where they are given the opportunity to save up to £500 each
month for a period of five years. After five years, employees may
either withdraw their savings and not buy any of the Company’s
shares or exercise the right to purchase shares at a price that is
fixed at the date they entered into the scheme.
Directors’ responsibility for financial
reporting
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with international
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
itapplies in the European Union.
In preparing these financial statements, the Directors are
requiredto:
• 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 material departures disclosed and
explained in the financial statements;
• 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 Directors’
remuneration report which comply with the requirements of
the Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time, 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 IASRegulation.
They are also responsible for safeguarding the assets of the
Group and for taking reasonable steps for the prevention
and detection of fraud and other irregularities. The Directors
are responsible for ensuring that the Annual Report and
financial statements, taken as a whole are fair, balanced and
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CORPORATE GOVERNANCE
understandable and provides the information necessary for
shareholders to assess the Company’s performance, business
model and strategy.
Website publication
The Directors are responsible for ensuring the Company’s 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.
Auditors
In the case of each Director in office at the date the Directors’
report is approved:
• so far as each 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
as a Director in order to make themselves aware of any
relevant audit information and to establish that the Group and
Company’s auditors are aware of that information.
This report was approved by the Board of Directors on
27February 2023 and signed on its behalf by
Law Debenture Corporate Services Limited
Company Secretary
Directors’ report continued
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Corporate governance report
Corporate governance
The Directors are required to report on how the Company has
applied the main and supporting principles in the UK Corporate
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 Financial Reporting Council (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 6 to 57.
The Board has concluded that, as demonstrated by the
disclosures made throughout the strategic and Directors’
reports, the Company has complied with all of the requirements
applicable to it under theCode.
The Board – role and modus operandi
The names and biographies of the Directors at the date of this
report are on pages 58 and 59 of the Annual Report.
The Board is responsible for the overall strategy and
management of the Group, setting investment strategy and
ensuring that the Company is operating in compliance with
statutory and legal obligations. There is a formal schedule of
matters specifically reserved for Board decision, published
on the Company’s website (https://www.lawdebenture.
com/investment-trust/shareholder-information/corporate-
governance/matters-reserved-for-the-board). Matters connected
with strategy and management, structure and capital, financial
reporting and control, the investment trust portfolio, contracts,
stakeholder engagement and shareholder communication,
Board membership and other appointments, remuneration and
corporate governance are reserved for theBoard.
In discharging its responsibilities, the Board takes account of
the Group’s purpose, values and culture, aiming to promote
enhanced value for shareholders in both capital and income
terms. The Board sets a cultural tone that encourages openness,
diversity and attention to the needs and views of shareholders
and those who transact with us through our IPS business. The
Chairman also ensures that the interests of the Company’s
institutional and retail shareholders are tabled for discussion, to
further the Board’s understanding of their views and to garner
responses, where appropriate.
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 decision, a vote will be taken and the views of a dissenting
Director recorded in the minutes. Where appropriate, the Chairman
also holds meetings with the Non-Executive Directors without the
Executive Directors present and vice versa.
Procedures are in place to enable independent professional advice
to be taken by individual Directors at the Company’s expense. The
Company has made qualifying third party indemnity provisions
for the benefit of its Directors and directors of its wholly owned
subsidiaries, and these remain in force at the date of this report.
The process for the appointment of Directors is set out in the
Nomination Committee report on page 69. The Company may
amend its Articles of Association by special resolution at a
general meeting of its shareholders, at which at least 75% of the
votes cast must be in favour of the resolution.
The Board meets regularly throughout the year. The attendance
records of the Directors at scheduled Board and Committee
meetings during 2022 are set out in the table below.
Board Remuneration Audit and Risk Nomination
Meetings 6 4 6 2
Attended by:
Denis Jackson 6 — — —
Trish Houston 5 — — —
Robert Hingley 6 4 — 2
Tim Bond 6 4 6 2
Mark Bridgeman 2 2 2 —
Pars Purewal 6 4 6 2
Claire Finn 6 4 6 2
Clare Askem 6 4 6 2
Whilst not members of the Board Committees, Denis Jackson
and Trish Houston attend meetings upon invitation. Similarly,
Robert Hingley’s attendance at Audit and Risk Committee
meetings is by invitation only.
Trish Houston was on maternity leave from 22 February 2022 and
resumed attendance at Board meetings from 25 May 2022. Mark
Bridgeman attended all meetings until his retirement from the
Board on 7 April 2022.
Division of responsibilities
Board Chair
The Chair is responsible for the leadership and overall effectiveness
of the Board and individual directors. He sets the agenda for each
meeting with the support of the Company Secretary. The Chair
manages the meeting timetable, promotes open and effective
discussion and challenge at meetings and creates an environment in
which all participants feel comfortable to share their views. He is also
responsible for ensuring that shareholders’ views are understood by
the Board as a whole.
Senior
Independent
Director (‘SID’)
The SID provides a sounding board for the Chair and, if necessary, acts
as an intermediary for the other Non-Executive Directors. The SID is
also available for communication with shareholders where normal
lines of communication via the Chair, CEO or COO are not successful
or where it is considered more appropriate. The SID also leads the
annual appraisal of the Chair and an orderly succession process for the
Chair, working closely with the Nomination Committee in both cases.
Executive
Directors
The Executive Directors are responsible for the leadership and
management of the business within the scope of the authorities
delegated by the Board. They must exercise those authorities to
achieve the strategic objectives set by the Board, implement Board
decisions and ensure that the Group complies with all of its regulatory
and legal obligations. The Executive Directors are also responsible
for communicating the views of the senior management team on
business issues to the Non-Executive Directors of the Board.
Non-Executive
Directors
The Non-Executive Directors help to set the strategy for the business,
offer specialist advice, constructively challenge the Executive Directors
and scrutinise the performance of the Executive Directors in relation
to the delivery of that strategy and their personal objectives, the
implementation of Board decisions and compliance with the Group’s
regulatory and legal obligations.
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CORPORATE GOVERNANCE
Corporate governance report continued
The Board – independence
At least half of the Board, excluding the Chairman, must be
independent Non-Executive Directors (NEDs). The Board
can confirm that, as at the date of this report, excluding the
Chairman, 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. The Board is also satisfied that
each Director dedicates sufficient time to Law Debenture, and
that none of the Directors is ‘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 58 and 59 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 dedicates sufficient time to discharge
his duties as Chairman.
Similarly, the Board is satisfied that Tim Bond, Mark Bridgeman,
Pars Purewal, Claire Finn and Clare Askem were independent
at their respective dates of appointment and that the current
directors of the Company have remained independent,
having no previous connection with the Company or any of
itssubsidiaries.
Denis Jackson and Trish Houston, as Executive Directors, are
notindependent.
Tim Bond is the Senior Independent Director and is available
to shareholders who have concerns that cannot be addressed
through the Chairman, CEO or COO.
Directors’ remuneration
Details of the Directors’ remuneration appear in the Directors’
Remuneration Report on pages 76 to 98.
Board Committees
The Board has established Nomination, Audit and Risk and
Remuneration Committees, to each of which it has delegated
certain responsibilities. Each Committee has terms of reference,
which are reviewed annually and published on the Company’s
website (www.lawdebenture.com/investment-trust/corporate-
governance). Membership of the Committees is reviewed
annually. 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
remains 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. Reports with respect to each
of the Committees may be found on pages 69, 72 and 76.
The Board does not operate a management engagement
committee; the duties of such a committee are undertaken
directly by the Board.
Accountability and audit, fair balanced
and understandable reporting and
goingconcern
The statement of Directors’ responsibilities in relation to
the financial statements appears on pages 64 and 65. The
independent auditors’ report appears on pages 100 to 110. 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. 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
financialstatements.
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 and risk management
systems
The framework of internal controls underpins the Company’s
risk management framework, enabling it to operate within
the desired risk appetite. The following paragraphs provide a
description of the main features of the internal control and 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
Group’sbusiness.
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Corporate governance report continued
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 a
risk-based methodology and an evaluation of the existing process
controls. Other mechanisms in place to monitor risk include:
• Board review of the Group’s matrix of key risks and controls
managed by the Group Risk Manager, reporting to an
Executive Risk Committee;
• an internal audit function, reporting directly to the Audit and
Risk Committee, which involves business departments and
business wide processes (including overseas offices) being
subject to audit on a regular basis;
• testing of the FCA regulated business’ systems and controls;
• testing of the Company’s compliance with its AIFMD
obligations;
• review of reports by the depositary and the sub-custodian;
• 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
• review of the reports produced by the external auditors on
their annual audit work.
The Board considers that the above measures constitute the
continuing application of the FRC risk guidance and form an
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. 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 assets are
safeguarded. This includes having data that allows the Board
to consider country and currency exposure and potential
impairment of assets (both financial and non-financial).
Key elements of the systems of internal control continue to be:
• regular qualitative self-assessment of the effectiveness of the
individual controls maintained in the overall internal financial
control framework;
• preparation by management of a comprehensive and
detailed budget, involving annual Board approval and
comparison at Board level of actual results with budgets and
forecasts at everymeeting;
• systematic reporting to the Board of matters relating
to litigation, insurance, pensions, taxation, accounting,
counterparty risk and cash management as well as legal,
compliance and company secretarial issues;
• review of internal audit reports by the Executive Risk
Committee and the Audit and Risk Committee;
• review of the internal controls of those services, such as
investment management, which have been delegated to
third parties. This review was conducted during the initial
contractual negotiations and on a regular basis, including
regular discussions with the senior management and
compliance staff of Janus Henderson, and the performance of
an on-site independent review of operational controls;
• monitoring by the Board of the investment management
process, including the establishment and maintenance
of 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 sub-custodian; and
• receipt of frequent and detailed reports about the performance
of the IPS business, including the overseas subsidiaries.
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 2022 and is
reviewed by the Board on a regular basis.
We have a robust whistleblowing procedure which allows people
to raise concerns under the Public Interest Disclosure Act 1998
about possible improprieties in matters of financial reporting or
other matters. 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 Head of HR or
if those avenues are not appropriate, to the Chairman of the
Audit and Risk Committee. If they do not wish to report to any
of these persons for any reason, they may report their concerns
using our whistleblowing service provided by Safecall, which
is available 24 hours a day. Reports using this channel may be
madeanonymously. Further details on risk management may be
found on pages 38 to 42.
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) on page 62 and Notice of AGM (total voting rights) on page
162.
This report was approved by the Board of Directors on
27February 2023 and signed on its behalf by
Law Debenture Corporate Services Limited
Company Secretary
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CORPORATE GOVERNANCE
Nomination Committee report
Annual statement by the Chairman
of the Nomination Committee
I am pleased to present the Company’s Nomination Committee
report for the year ending 31 December 2022.
Other than myself as Chair, the members of the Committee who
served during the year were Tim Bond, Mark Bridgeman, Pars
Purewal, Claire Finn and Clare Askem. Details of Committee
meetings and attendance can be found on page 66.
Role and duties
The Committee’s role is 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
Board vacancies, with particular regard for the need to develop
a diverse pipeline to the Board and Executive Leadership levels.
• Succession planning for the Board.
• Making recommendations for the election and re-election of
Directors.
• Ensuring that the Board and its Committees are constituted
to comply so far as practicable with legal and regulatory
requirements and the Code.
The Nomination Committee ensures that the Board has in
place arrangements for orderly and transparent appointments
to the Board. It is the Board’s policy that meetings be chaired
by a Director other than the Board Chair, when dealing with
the appointment of his successor. 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 at the Company’s registered office upon request
to the company secretary, until the conclusion of the 2023 AGM.
Particular care is taken to ensure that NEDs are independent,
have sufficient time to commit to the duties expected of them
and that diversity factors are taken into consideration. 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
therole. The Committee considers using open advertising or the
services of external search firms to recruit new directors. Any
external search firms used are expected to be a signatory to the
standard voluntary code of conduct for executive search firms.
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.
The Committee is also responsible for reviewing and applying
the Board’s policy on tenure and succession planning for
members and the Chairman of the Board. I was appointed to
the Board in October 2017 and, in line with the policy and the
recommendations of the Code, I will stand down after nine
years although this period may be extended for a limited time to
facilitate an effective handover.
The Board is committed to achieving and maintaining a diverse
and inclusive membership to ensure optimal decision-making
and to assist in the development and execution of strategy,
for the benefit of its shareholders and other key stakeholders.
The Board’s policies on diversity and inclusion and tenure
and succession planning both embody this principle, which
is considered and applied in the appointment and succession
planning processes.
At the date of this report, the Company is compliant with the
recommendations under the FTSE Women Leaders and Parker
reviews.
Principal activities of the Committee
During the year, the Committee’s principal activities included:
• Recommending the appointment of a new designated Non-
Executive Director for Workforce Engagement to the Board for
approval.
•
Reviewing the Board’s policies on Diversity and Inclusion and
Tenure and Succession Planning.
• Reviewing the Board’s short, medium and long-term
succession plans.
• Facilitating the internal evaluation of the performance of the
Board, its Committees and each of the directors.
• Reviewing each of the directors’ independence and time
commitments.
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CORPORATE GOVERNANCE
• Reviewing the composition and constitution of the Board and
its Committees.
• Considering and recommending the re-election of each of the
Directors to the Board, who have subsequently recommended
the same for shareholder approval at the forthcoming AGM.
Board evaluation
Progress on recommendations made following the 2021 internal evaluation of Board and Committee performance:
2022 internal Board evaluation
Under the UK Corporate Governance Code, it is recommended
that companies conduct externally facilitated board and
committee evaluations every three years. The most recent of
these was conducted by the Company in 2020 and therefore
an internal Board evaluation was conducted during the
reporting period by an internal questionnaire and facilitated by a
representative of the corporate secretary.
The evaluation focused on the Board and its Committees’
composition, knowledge and behaviours, governance processes
and support, work undertaken during 2022 and priorities for 2023.
For the Board, the questionnaire also focused on: investment,
strategic and governance matters, investor and stakeholder
engagement and major decisions taken during the year. The
anonymity of responses was guaranteed throughout the process,
to promote candid feedback.
The results were discussed by the Nomination Committee in
September 2022 during which the Directors, led by the Senior
Independent Director, in the Board Chair’s absence, reviewed the
Board Chair’s performance over the past year. This was followed
by a discussion, led by the Board Chair, with the Non-Executive
Directors and Executive Directors as separate groups, in the
absence of the other, and finally a full Board discussion.
Key actions arising from the 2022 internal evaluation were to:
•
improve the presentation of forecasts on IPS’ financial
performance to the Board;
• appropriately balance increasing regulatory and governance
requirements relative to the size of the IPS business;
• streamline the criteria for evaluating the Company’s investment
manager; and
• review the effectiveness of ESG oversight and workforce
engagement.
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.
RECOMMENDATIONS ACTIONS
Improve time management
of meetings and further
streamline meeting packs
Board and Committee Chairs were rated highly in the 2022 internal Board evaluation in relation to
time management of meetings. It was also acknowledged that the structure and length of meeting
papers had improved. However it was requested that some additional adjustments be considered.
TheChair and Secretary have arranged to discuss this further in Q12023.
Continue to enhance
engagement with investors
and other key stakeholders
The Board and management have increased their engagement with key stakeholders during the year.
Details are disclosed in the Section 172(1) Statement on page 46. Engagement activities undertaken
by directors, management and corporate advisors including the investment manager and corporate
brokers are reported to the Board, who have oversight. The Board will continue to review its approach
and engage with stakeholders, as appropriate.
Continue to ensure an
appropriate balance between
discussions regarding the
portfolio and the IPS business
The Board discusses the business of both the Investment Portfolio and IPS business at each scheduled
meeting. In addition to the routine quarterly investment management reports, thematic discussions
are now scheduled at least twice per year. With regard to the IPS business, in addition to receiving
updates from Business Heads, the Board has also been focused on a review of the strategy for IPS,
which is ongoing.
Agree a director training
schedule
During the year, the Board received training on the FCA’s Senior Managers and Certification Regime,
the upcoming changes on audit and corporate governance reform and continue to receive routine
updates on regulatory and governance developments through the external auditor, company
secretary and other corporate advisors. The Board has access to Deloitte Academy, which provides a
wide range of technical briefings and bespoke training. Areas where the Company and its advisors
can continue to support the Board will be assessed each year.
Reassess the Company’s
principal and emerging risks
Throughout the year, the Audit and Risk Committee reviewed the Company’s principal and emerging
risks and will continue to reassess these each year as prescribed in its terms of reference. Further details
can be found in the risk management section of the strategic report on pages 38 to 42.
Nomination Committee report continued
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CORPORATE GOVERNANCE
Nomination Committee report continued
OBJECTIVES PROGRESS
To continue to adopt a formal, rigorous and
transparent process, taking into account diversity
and inclusion, when considering the appointment
of Directors. The Board is committed to using
search firms that access talent from wide and
diverse pools and whose values and approach in
identifying and proposing suitable candidates, are
aligned with the Policy.
During the year the Board reviewed its Tenure and Succession Planning Policy,
to ensure it remained fit for purpose. The policy sets out the procedures for the
appointment of new Directors and short, medium and long-term succession
plans in line with governance best practice. There were no new Board
appointments during 2022.
To achieve and maintain, with respect to gender
and ethnic diversity at Board and Committee
levels, the recommendations of the FTSE Women
Leaders and Parker Reviews, recognising that
unexpected changes in Board composition may
result in temporary periods when this balance is
not achieved.
The Company satisfies all recommendations of the FTSE Women Leaders and
Parker Reviews, namely:
•
43% of the Directors on the Board are female and 57% male.
• 40% of the members on the Remuneration and Nomination Committees are
female and 60% male.
• There is a 50:50 split between male and female representation on the Audit
and RiskCommittee.
• 66.67% of the Executive Leadership team are female and 33.33% male.
• One Director on the Board is from an ethnically diverse background.
• The CFO and COO functions of the Company are held by women.
To be kept updated on the Executive Directors’
progress in ensuring the proportion of direct
reporting roles to the Board and the Executive
Management team, held by women and persons
from ethnically diverse backgrounds, are
compliant with the FTSE Women Leaders and
Parker Review recommendations.
The Executive Leadership team presented its annual report on gender and
ethnic diversity across the IPS business including analyses of employee positions
held by women and ethnic minorities and gender pay gaps across all levels of
the Group. Further details can be found in the ESG section of the strategic report
on page 54. Additionally, this year, the Executive Leadership team presented its
Diversity, Equity and Inclusion Strategy for the IPS business to the Board, which
included employee gender, ethnicity and age targets and thresholds.
To continue to facilitate a culture of inclusivity
among Board and Committee members and to
encourage active contributions from all Directors,
recognising that a clear tone and example must
be set at Board level.
Following the 2022 internal Board evaluation, it was found that the culture and
dynamic of the Board, Directors’ individual performances and discussions at
meetings continued to be effective and in line with the Company’s values as set
out on page 30 of the strategic report. These and other related matters will be
continually reviewed on an annual basis.
This report was approved by the Board of Directors on 27 February 2023 and signed on its behalf by
Robert Hingley
Chair, Nomination Committee
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
Board on the recommendation of the Nomination Committee
has proposed the re-election of the Directors, as set out in the
Notice of AGM on pages 156 to 158.
All Directors are submitted for annual re-election, subject
to continued satisfactory performance, which is assessed as
previously described.
Diversity and inclusion
The Board is committed to achieving the objectives set out in its
Diversity and Inclusion Policy, which may be found on our website.
Progress against those objectives are set out below.
We are proud of the progress we’ve made in becoming a more
diverse and inclusive Board and workforce, which has resulted in,
among other benefits, more independent and diverse thoughts
and solutions, greater debate and challenge on pertinent
matters and an integrated approach towards continually
achieving long-term capital growth in real terms and steadily
increasing income for our shareholders.
Whilst we have achieved our diversity targets and those set by
the FTSE Women Leaders and Parker Reviews, we will continue
to regularly evaluate our culture and composition and make
enhancements for the benefit of our shareholders, clients,
people and other key stakeholders, as appropriate. We also
review our succession plans at least annually to ensure we have
the right persons in place to support the group in achieving
itsobjective.
CORPORATE GOVERNANCE
Audit and Risk Committee report
Annual statement by the Chairman
of the Audit and Risk Committee
After the Annual General Meeting in April, Mark Bridgeman
stepped down as Chair of the Audit and Risk Committee (‘ARC’),
having served nine years. On behalf of the ARC, I would like
to thank Mark for his hard work and the support he provided
to the Group. It was a pleasure to work with him during the
handoverperiod.
During my first year as Chair of the ARC for the Law Debenture
Corporation Plc, I have focused on building on my understanding
of the Group and supporting the organisation enhance our
management of the key Group risks. During the year, we have
refreshed our assessment of Risk, along with conducting a full
risk review for each of the Business areas.
As part of this, I have reviewed the approach to Internal Audit
and worked with our Head of Internal Audit to introduce an
approach which applies a holistic view of how the Group
mitigates the principal risks. This refreshed approach is more
aligned to the way the business now operates.
I have also ensured that the Group has an appropriate audit
and non-audit services policy to ensure that we have clearly
articulated the oversight and governance we have in place.
During the year, we have also continued to build our relationship
with our auditors, Deloitte LLP, who are in their second year. We
are pleased with how that relationship has developed.
In terms of significant areas of accounting judgment, the most
significant continues to be the valuation of the IPS business.
Considerable time and attention has been given over to
considering the appropriate methodology and ensuring the
macro-economic factors are considered to coming up with the
recommendation for the Board.
Another key area of responsibility for the ARC is the
recommendation of the dividend payments made to
Shareholders. In line with previous years, we recommended that
each of the first three interim dividends were set at a quarter
of the total dividend for the previous year. The ARC has sought
to balance the inflationary pressures faced by our shareholders
with the potential risk of an extended period of recession within
the UK. As a Group, we remain committed to providing our
shareholders with steadily increasing income and, with these
factors in mind, we are recommending the final dividend of
8.75pence, resulting in a total dividend of 30.5 pence.
From an operational risk perspective, the ARC has spent time in
Manchester understanding the operating model with the Shared
Services Centre, along with the programme of continuous
improvements which is underway. The ARC has also supported
the Executive navigate the fall-out of the Russian invasion
of Ukraine, ensuring that economic restrictions have been
appropriately applied.
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.
• 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
long term viability and risks thereto.
The Company is in compliance with the requirements of
the Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Audit Committee Responsibilities) Order 2014 and the
Corporate Governance Code. Under these requirements a tender
for the external audit must be undertaken no later than 2031.
During the prior year, the Company completed the Audit Tender
Process which was overseen by the Audit and Risk Committee,
following which Deloitte LLP were appointed as auditors for the
group. The 2021 year-end was the first audited by Deloitte.
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Internal controls and risk management
• Reviewing the adequacy and effectiveness of the risk
management and internal controls framework, through
engagement with the Executive Leadership team, the Head of
Internal Audit and the Risk, MLRO and ESG Manager.
• 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.
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
theirremuneration.
• 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
correctiveactions.
• 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. The Committee agreed
a thematic risk-based internal audit plan for this year which is
directly aligned to the Group principal risks and looks at the
Company as a whole.
• 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.
Compliance
• Reviewing regular reports on compliance matters and keeping
under review the adequacy and effectiveness of the Company’s
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.
• Reviewing the arrangements in place for Group staff,
contractors and external parties in confidence to raise
concerns about possible improprieties in matters of financial
reporting or other matters insofar as they may affect the
Group (whistleblowing). The Committee ensures that
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 regularly
with the audit partner of Deloitte and also with the Chief
Financial Officer and General Counsel to discuss matters
ofsignificance.
The Committee considers that, as a chartered accountant,
Iam appropriately qualified with relevant experience due to
my extensive career as a senior partner at PwC. Similarly, Tim
Bond satisfies the requirement having spent time as an active
fundmanager.
Principal activities of the Committee
During the year, the Committee’s business included:
• 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
IPSbusiness.
• Review of the depositary’s contract and services.
• Meetings with the external auditor to discuss the 2021 financial
statements and, in the fourth quarter, to plan the 2022
audit. These meetings included discussions on fees, auditor
independence, key risks, non-audit services and developments
in accounting standards.
•
Oversight and recommendation to the Board of the re-
appointment of our external auditor, Deloitte LLP.
• Review and approval of the internal audit programme.
• Consideration of all internal audit reports.
• Review of reports about reconciliations, procedures in place
to prevent fraud and anti-bribery and corruption and anti-
moneylaundering.
Audit and Risk Committee report continued
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• Receiving a presentation on the proposed new BEIS rules
regarding audit reform and the changes to assurance.
Shortly after the year end, the Committee met with the external
auditors in order to inform considerations regarding their
independence, effectiveness and discuss the 2022 financial
statements to ensure that the presentation of the financial
information within is materially correct.
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
38. The Board as a whole is responsible for the effectiveness of
internal control mechanisms, but it is informed by more specific
work carried out by the Audit and Risk Committee, which
includes the initiation and oversight of any investigations that
may be necessary to address control weaknesses or breaches,
asidentified.
In particular, the Committee reviews the adequacy and
effectiveness of the Group’s risk management systems and
processes. The Group Risk Manager reports through the Executive
Risk Committee. The Group Risk Manager also provides reporting
on risk matters each meeting of the Committee.
The internal auditor, who reports to me as Chairman of the Audit
and Risk Committee, presents her annual audit programme to
the Committee for approval each year and attends Committee
meetings, presenting all of her reports including management’s
actions in response to the findings and recommendations.
The internal auditor has the right, should she wish, to meet
separately with the Audit and Risk Committee to raise any
matters of concern that may arise, no concerns were raised
during the reporting period.
The Committee is satisfied that the quality, experience and
expertise of the internal auditor is appropriate for the business.
External auditors – assessing effectiveness
One of the most important functions of the Committee is to
monitor the independence and objectivity of the external
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 with the description of the safeguards that
it has in place to avoid 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’s 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 Leadership team’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
underreview.
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 £65,000 (2021: £29,000).
Significant financial issues relating
to the 2022 accounts
The Code requires us to describe any significant issues
considered in relation to the financial statements and how those
issues were addressed.
The significant issues considered by the Audit and Risk
Committee include the valuation of IPS, oversight of the CSS
impairment review, the existence and valuation of Investments,
discussions around the control environment and the accounting
for Pension Defined Benefit Scheme.
No new significant issues arose during the course of the audit.
During 2022, there was a big focus on embedding the improved
Finance operations, which we invested in heavily during 2021. We
are pleased with the progress made and the improved control
environment which has resulted.
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
reported to the Board.
This report was approved by the Board of Directors on
27February 2023 and signed on its behalf by
Pars Purewal
Chair, Audit and Risk Committee
Audit and Risk Committee report continued
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CORPORATE GOVERNANCE
Dear Shareholder
On behalf of the Remuneration Committee (the Committee), I am
pleased to present the Director’s Remuneration Report for 2022
(the Report).
The Report is in four sections:
•
Part 1: Committee Chair’s Statement
• Part 2: Remuneration Committee Responsibilities
• Part 3: Directors Remuneration Policy for 2023 to 2025
• Part 4: Annual Report on Remuneration for 2022
The sections are set out in accordance with the UK Directors’
Remuneration Report Regulations 2013, as amended in 2018
and2019.
Shareholder support
The Policy that applied for the 2020-22 period was approved by
shareholders at the AGM on 7 April 2020 with 97.65% of votes cast
in favour. The Committee’s implementation of that Policy has also
received strong support at the AGMs in 2021 and 2022, with 97.21%
and 99.23% votes in favour, respectively.
We closely monitor developments in shareholder and voting
agency guidance on remuneration. During 2022, we conducted a
thorough review of the Policy, and consulted major shareholders
and voting agencies on some proposed amendments, in
preparation for the normal triennial vote at the AGM in 2023.
Shareholders who responded were generally supportive of
the proposed changes, and made a number of helpful and
constructive suggestions for the Committee to consider. This
feedback was taken into account as the proposed Policy was
finalised for inclusion in this Report. In particular, having listened
to shareholders, the Committee has substantially reduced
the salary increase for the CEO in 2023 from the level that was
originally proposed, and further strengthened the performance
requirements in the annual bonus.
Restraint in executive director remuneration
In light of the current financial pressures being felt by
shareholders and colleagues, as a matter of principle, the
Committee has continued to take a restrained approach to
executive remuneration.
Based on LDC’s ranking in the FTSE 250, the current base
salaries and variable remuneration for the CEO and COO roles
at LDC are substantially below market levels. However, while
the CEO and COO roles include overseeing the management
and performance of the investment portfolio, and fiduciary
duties for LDC as Board Directors, they have more direct
influence over the financial performance of the IPS business
within LDC. Furthermore, the financial performance metrics for
the incentives applying to the CEO and COO are based on the
growth in IPS profits. The Committee has therefore selected the
FTSE SmallCap as the relevant benchmark to reflect the size of
the IPS business.
The current maximum variable pay levels for both the CEO and the
COO, and the CEO’s base salary (which has remained unchanged
for the last three years) remain below the relevant benchmarks
within the FTSE SmallCap. The Committee has considered these
elements as part of the triennial Policy review, and seeks to align
them closer to the benchmark over the next threeyears.
Annual performance and bonus outcomes
for 2022
As reflected in both the Chairman’s and the CEO’s statement,
2022 presented a new set of challenges for the organisation
to navigate but the Executive Directors have worked hard
to protect the interests of our shareholders and support our
objective as a business of producing long-term capital growth
and steadily increasing income.
From an economic and operational perspective, 2022 saw rising
inflationary pressures and strong competition for talent in the
marketplace. Under the stewardship of our Executive Leadership
team, there is ongoing progress in creating an environment
which both promotes growth of the IPS business and a strong
corporate culture. We were particularly pleased with the launch
of the ‘Emerging Leaders Programme’, which supports the
development of future leaders of the business, something we
feel is critical to the long-term success of the business.
PART 1: COMMITTEE CHAIR’S STATEMENT
Directors’ remuneration report
77
Further progress was made in enhancing the infrastructure
of our business. Good progress has been made in further
embedding the Corporate Secretarial Services business (‘CSS’),
which we believe will be accelerated under the leadership of
Trish Houston, our COO, during 2023. The Executive Directors
also responded to the need to invest technology resource in our
whistle-blowing business, Safecall, to enhance our client facing
platform. This project has been completed and well received
by our clients. Having established a Finance shared service
centre in Manchester in 2021, it is satisfying to see that this is
now fully operational. The Committee would like the Executive
Directors to make further progress on articulating the strategy
for growth and investment within the IPS business, along with
further development of the brand and marketing strategy and
plans. This will be a continued area of focus in 2023.
2022 was another year of growth for our IPS business with
revenue growth of 8.6%, an increase in profit before tax of 8.1%
and an increase in earnings per share of 3.8%. The growth in
earnings per share has been diluted due to the issuance of
shares during the year. This builds on the momentum of last
year and is a positive reflection of the efforts of our staff and
the success of our Senior Leadership team. Please refer to the
Chairman’s statement on pages 6 and 7 for further overview of
the financial and operational highlights for 2022.
The Committee evaluated the performance of the Executive
Directors in relation to the financial and non-financial metrics
set out on page 93 of this report. Before approving the
performance outcome, the Committee considered whether
there were any wider performance factors that might require a
downward discretionary adjustment. These included:
•
the need to maintain a fair balance between the interests of
different stakeholders, including shareholders, employees
and Executive Directors;
•
the desire to encourage and reward the behaviours that
reflect our purpose, values and culture;
After consideration, the Committee decided that these
outcomes were appropriate and consistent for the year and no
discretionary adjustment was required.
Based on this assessment of performance, the Committee
determined that 76.8% of the maximum annual bonus should
be awarded to Executive Directors for 2022. In accordance with
the Policy, fifty percent of the portion of bonus above £100,000
is deferred into shares for three years.
The performance criteria and outcomes are fully explained
in the Report. The Committee has continued to enhance the
level of detail and clarity of information in the Report about
the non-financial performance criteria, and the Committee’s
assessment of this part of the scorecard.
Long-term performance, and LTIP
outcomes for 2020-22
It has been a successful period for the IPS business. Over the
period, revenues in the business have grown from £31.8m at
the end of 2019 to £45.2m at the end of 2022. There has been
significant investment into IPS over the period to protect the
long-term future of the business, but this has been done in a
controlled manner, which has resulted in growth in profit before
tax (PBT), in line with our stated objective of mid-high single
digit growth. During the 3 years, IPS PBT has grown 25%, with a
compound annual growth rate (‘CAGR’) of 7.9%.
Based on this, the total metric-driven outcome for the 2020-22
LTIP cycle was 74% of maximum. Before approving the vesting
outcome the Committee considered whether there were any
wider performance factors that might require a downward
discretionary adjustment. These included:
•
the need to maintain a fair balance between the interests of
different stakeholders, including shareholders, employees and
Executive Directors;
•
the desire to encourage and reward the behaviours that reflect
our purpose, values and culture;
The Committee also considered whether any adjustment should
be made for ‘windfall gains’ (see below).
After consideration, the Committee decided that these
outcomes were appropriate and consistent for the period and
no discretionary adjustment was required.
The resulting vested shares are subject to a two-year, post-
vesting holding period, in accordance with the Policy.
‘Windfall gains’
The Committee carefully considered whether a downward
adjustment should be made to the LTIP vesting outcome in
2023, which relates to the CEO as the only recipient of LTIP
in 2020. This would take account of the Covid-related stock
market ‘shock’ just prior to the grant in April 2020 – specifically
the impact of this on the number of shares under the award.
Due to the general stock market dip, the LDC share price at
the time of grant was £4.63, compared to £5.98 a year earlier in
April 2019. This resulted in the Chief Executive being granted
29% more shares at the 2020 grant than he would have
received had the share price in April 2020 been the same as in
April 2019.
The Committee considered a number of balancing factors in
assessing whether an adjustment should be made at vesting
for this apparent ‘windfall gain’:
•
The dip in the share price just prior to grant was not
a consequence of LDC performance or that of the
management team. It was a global phenomenon resulting
from the Covid ‘shock’.
•
The grant size for the CEO in April 2020 was set at 100%
of base salary, which was relatively low for a business of
IPS’s size. Also, the CEO’s base salary of £325,000 was
substantially below market benchmarks. As a consequence,
the overall maximum value of the CEO’s 2020 grant was
£325,000, compared to a CEO median in the FTSE Small Cap
of over £600,000. Therefore, the LTIP grant for the LDC CEO
was, in effect, already set at a substantial discount.
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• LDC did not benefit from Government support under the
Coronavirus Job Retention Scheme (furlough), nor make any
Covid-related redundancies, and the Company did not cancel
dividends for 2019 or 2020.
•
The Executive Directors are granted shares in LDC rather than
IPS and are therefore exposed to broad market risk in their
discretionary awards.
•
If there had, instead, been a share price ‘spike’ at the time of
grant, the Committee would not have increased the size of
grant to bring the number of shares awarded back to a ‘normal’
level.
Having considered all the relevant factors, the Committee
concluded that it was not appropriate to make a downward
adjustment to the performance-related LTIP vesting outcome
in2023.
Proposed Director’s Remuneration Policy
for 2023-25 period
The Committee has undertaken a thorough review of the Policy
in preparation for the triennial AGM vote, including consulting
with major shareholders as set out above, and taking account
of remuneration for other LDC employees. The Committee
concluded that the overall remuneration structure continues
to be suitable for the Company. Where amendments have
been proposed to the Policy, these are intended to: support the
continued growth of the Company over the next three years; to
assist retention and, when necessary, recruitment of talent; and,
to ensure that the Policy includes the features of best practice in
UK executive remuneration.
The key proposed changes to Policy are as follows:
•
To increase the weight on financial metrics in the annual bonus
to 60% (from 50% currently), with a corresponding reduction
in the non-financial metrics weighting to 40% (from 50%
currently). This is intended to give additional focus to driving
growth in IPS profits;
•
To increase the performance requirements for both annual
bonus and LTIP, with accompanying increases in the maximum
opportunity to bring these closer into line with market
benchmarks:
•
For 2023, the IPS profit growth range in the annual bonus will
increase to 5% at threshold and 12% at maximum, from the
previous range of 4% to 9%. In conjunction with this, the Policy
maximum for annual bonus will increase from the current 100%
of base salary to 125% of base salary.
•
For the 2023 LTIP grant, the IPS profit growth range will be
4% to 14% (Compound Annual Growth), compared to 4% to
10% for the previous grant in 2022. Also, the percentage of the
award vesting at threshold performance will be reduced to 20%
of maximum, from 25% currently. In conjunction with these
changes, the maximum LTIP grants size will increase from the
current 100% of base salary to 150% of base salary.
•
There will also be a reduction in the existing Executive
Directors’ pension allowance from 1 January 2023 to 9% of
base salary (from 12% currently), which aligns it with the level
applicable to new employees, and below the level applying
to employees with the same length of service as the two
Executive Directors. The majority of LDC employees have a 9%
employer contribution.
•
The Policy also re-positions the CEO’s base salary in stages
over three years, to a level that more fairly reflects market
practice and appropriate internal relativity to other roles in the
Company (see below).
Base salaries
Base salary increases in 2023 for employees in LDC averaged
6%, with the largest percentages going to individuals in lower
paid roles, and where there is need for significant market re-
alignment or to recognise a promotion or change in role.
The CEO’s current base salary (£325k) falls well below CEO
norms, not only in the FTSE 250 (lower quartile of £530k),
but also the FTSE Small Cap (median £466k). The salary has
remained unchanged for the last three years.
The Committee feels that the current CEO salary has fallen so
far out of line with the market that it is not at a fair level, either
relative to others in less senior roles in the company or relative
to other CEOs in the market. This situation is not consistent
with the Company’s values, and does not support motivation,
retention and, when necessary, recruitment of talent. The salary
is also becoming increasingly out of line each year, as market
pay levels rise. Whilst the current economic and cost of living
environment is not an ideal context in which to re-align the
CEO’s base salary, the Committee has concluded that the current
situation is not sustainable.
The Committee therefore plans to re-position the CEO’s base
salary in stages over the three-year policy period, subject to
continued good performance in role:
Stage 1 (2023): £354k (which comprises 5% general
increase, below the average for LDC
employees, and 3.9% towards repositioning
the salary relative to the market)
Stage 2 (2024): £400k
Stage 3 (2025): £450k
A salary of £450k will still be below the current median for FTSE
SmallCap CEOs and this benchmark may rise materially over the
3-year period.
Directors’ remuneration report
79
Trish Houston’s (COO) base salary has increased by 5.4% from
£275,000 to £290,000 for 2023; this is below the average
percentage increase for LDC employees.
In November 2022, Trish was appointed Head of the CSS
business, in addition to her COO role. This has added direct
responsibility for a client facing business to Trish’s role as the
Group COO for LDC. The Committee will consider the impact of
this greater responsibility in the next base salary review in 2024,
taking account of her performance in the role.
Board Chair fee and NED fees for 2023
The Committee reviewed the Board Chair fee of £92,000 and
concluded that this current fee level does not adequately
recognise the role’s time commitment and responsibilities. The
role includes not only overseeing the strategy, management
and performance of the Investment Portfolio, but also
exercising governance oversight of the IPS business within
LDC. The Committee therefore increased the Board Chair fee to
£110,000, to go some way towards recognising the breadth of
responsibility and time requirements of the role.
The Board (excluding the NEDs) reviewed the NED fee rates, and
increased these by £2,400 to £50,000, from £47,600 previously,
taking account of market fee levels for NED roles with similar
levels of time commitment and responsibility. The fees for the
roles of Chair of the Audit Committee and Chair Remuneration
Committee have also been increased to £10,000 from £5,950
taking account of market fee levels for these roles with similar
levels of time commitment and responsibility. The fee for the
Workforce Engagement Director role has been increased to
£6,250 from £5,950.
Wider workforce considerations and
consultation with colleagues
The responsibility for determining the reward practices on a
firm-wide basis lies with the Committee.
The Committee receives regular updates on overall pay and
conditions, including (but not limited to) changes in base pay
and the incentive schemes in operation, pay ratio and diversity
pay data. The Committee also has oversight of the all-employee
share plan which Executive Directors and all other employees
can participate in on the same terms and conditions.
As in previous years, the Committee has oversight of overall
remuneration for employees across LDC. The average salary
increase for our people in 2023 will be 6%. LDC is committed
to paying all staff at or above the Real Living Wage, which is in
excess of the National Living Wage.
People are key to the long-term success of our business,
particularly in a competitive marketplace for attracting and
retaining talent. This year, we have focused on ensuring that
our all of our people are rewarded appropriately for their
contribution and that our salaries are in line with those on offer
within the market. Those on lower salaries have generally been
granted larger percentage increases in salaries than more senior
colleagues. During 2022, a one-off payment of £1,000 was also
made to our lowest paid people to support them with the cost-
of-living crisis.
One of our Committee members, Clare Askem, is also the Non-
Executive Director with responsibility for leading Workforce
Engagement. Clare conducts meetings with employee panels,
which include a cross-section of colleagues. These provide an
opportunity for colleagues to raise any issues directly with a non-
Executive Board Director, including asking any questions about
remuneration policy or practice.
In addition, the Remuneration Committee seeks feedback from
the Senior Leadership team which is taken into consideration
when determining remuneration outcomes for Executive
Directors, objective setting and strategic planning.
UK Corporate Governance Code
The Committee regularly monitors how remuneration Policy
and practice meets the requirements of the UK Corporate
Governance Code.
In reviewing the Policy, the Committee has considered the
six principles set out in Provision 40, of the UK Corporate
Governance Code: clarity, simplicity, predictability, alignment
to culture, proportionality, and management of risk. The Policy
section of this report provides further information on how we
have applied these principles.
Total Shareholder Return
The Company has sustained consistent levels of return to
shareholders. £1,000 invested in LDC a decade ago was worth
£2,612 at the end of the 2022, which is more than 1.8 times the
rate of return for the FTSE All-Share Index.
Conclusion
The remuneration outcomes for 2022 reflect good performance
during the year. The proposed Policy amendments are balanced,
proportionate and aligned to shareholders’ interests. I thank
shareholders who assisted the Committee in the consultation
process for their constructive feedback and support for the
proposals.
I encourage you to vote both for the Directors’ Remuneration
Report for 2022, and for the Directors’ Remuneration Policy for
the 2023-25 period. I also welcome any feedback you may have
during the year.
By order of the Board
Claire Finn
Chair, Remuneration Committee
On behalf of the Remuneration Committee
27 February 2023
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REMUNERATION COMMITTEE MEMBERSHIP ANDACTIVITIES DURING 2022
Members
The members of the Committee
who served during the year were:
C. Finn (Chair)
R. Hingley
T. Bond
P. Purewal
C. Askem
Details of Committee meetings
and attendance can be found on
page 66.
Key activities
of the
Committee
during the year
included:
• Overseeing the tri-annual review of the Remuneration Policy with Shareholder Engagement;
• Determining 2022 annual bonus outcomes and payments for the Executive Directors and Senior Managers;
• Preparing the 2022 Annual Remuneration Report;
• Determining salary adjustments for the Executive Directors and Senior Managers;
• Setting performance objectives, annual bonus measures and targets for 2023;
• Reviewing the operation of the annual bonus process;
• Benchmarking pay for the Executive Directors and Senior Managers;
• Determining the total executive pay for 2022, including performance conditions for the LTIP awards in 2023;
• Review of Remuneration Committee Terms of Reference; and
• Reviewing Gender Pay Gap reporting.
Support
provided
to the
Committee
Alvarez & Marsal was appointed by the Committee as independent adviser following a formal selection
process. Alvarez and Marsal is a member of the Remuneration Consultants Group and voluntarily operates
under its Code of Conduct in its dealings with the Committee. Alvarez & Marsal fees charged for the provision
of independent advice to the Committee during the year were £44,643. Other than in relation to advice on
remuneration, Alvarez and Marsal provides no other support to the Company or wider Group. The Committee
is satisfied that Alvarez & Marsal does not have connections with the Group that may impair their objectivity
andindependence.
During the year, the Committee also took advice from the CEO and COO, 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 and for the wider workforce.
No Director participated in 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 (https://www.lawdebenture. com/
investment-trust/shareholder-information/corporate-governance). The key responsibilities of the Committee
are to:
• undertake a tri-annual review of the Remuneration arrangements for the Executive Directors;
• 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 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 Board 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 Annual Remuneration Report, ensuring compliance with legal and governance requirements.
PART 2: REMUNERATION COMMITTEE RESPONSIBILITIES
Remuneration Committee
81
Directors’ Remuneration Policy
The Committee is required to put the new Directors’ Remuneration Policy to a binding shareholder vote at the next Annual General
Meeting on 30 March 2023, as the current Policy, that was approved at the 2020 AGM, is approaching the end of its three-year approval
period. This new Policy, set out below, will take effect from the date of that meeting and is intended to apply to remuneration in respect
of 2023-25.
Remuneration principles
In preparation for the review of our Directors’ remuneration policy, the Committee reviewed the reward frameworks for the wider
workforce, alongside our more specific debates on Executive remuneration. From this, we have drawn a unifying set of remuneration
principles that apply equally to Executives and to employees at all levels of our workforce hierarchy.
CORPORATE GOVERNANCE
PART 3: DIRECTORS REMUNERATION POLICY FOR 2023 TO 2025
REMUNERATION PRINCIPLES
Alignment
Our remuneration programmes will align with Law Debenture’s strategic priorities, of delivering
capital growth and steadily increasing income to our shareholders.
Competitiveness
Total remuneration will be competitive but not extravagant for the role taking into account sector,
complexity of responsibility and geography. When setting Executive Director 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 Executive Directors should be rewarded for the
performance of the IPS business, which is central to Law Debenture’s business model and
uniqueidentity.
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 Annual Remuneration Report.
Committee Process to determine the newRemuneration Policy
In determining the 2023-25 Directors’ Remuneration Policy, the
Committee:
•
Considered the Company’s strategy, how the current Policy
related to and supported this, and assessed what amendments
were required to the Policy to further align it with the strategy;
•
Considered feedback from shareholders and investor bodies on
the Directors’ Remuneration Reports over recent years;
•
Sought advice from independent remuneration consultants
on the remuneration requirements of the 2018 UK Corporate
Governance Code and current investor priorities and guidelines,
and market best practice in formulating the new Policy;
•
Reviewed wider workforce remuneration and incentives to
ensure consistent principles;
•
Consulted Executive Directors on the proposed changes to the
Policy; and
•
Conducted a full consultation exercise with major shareholders
and investor bodies on the changes.
The Committee was mindful in its deliberations on the new
Policy of any potential conflicts of interest and sought to
minimise them: through an open and transparent consultation
with the Executive Directors; by seeking independent advice
from its external advisers; and, by undertaking a full shareholder
consultation exercise.
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Directors’ remuneration report continued
In determining the new Remuneration Policy, the Committee paid attention to Provision 40 of the 2018 UK Corporate Governance Code,
as follows:
FACTOR HOW OUR NEW REMUNERATION POLICY ALIGNS
Clarity
remuneration arrangements
should be transparent and promote
effective engagement with
shareholders and the workforce.
•
Bonus and LTIP performance conditions are based on clear financial and strategic metrics.
There is a clear link between their delivery and reward provided toExecutive Directors and
seniormanagers.
•
The LTIP provides annual grants of shares which must be retained for the longer-term to
ensure a focus on sustainable performance. This provides complete clarity of the alignment
of the interests of Executive Directors, Senior Managers and shareholders.
Simplicity
remuneration structures should
avoid complexity and their
rationale and operation should be
easy to understand.
•
The remuneration package is simple, with three main components: base salary, annual bonus
with deferral, and LTIP.
•
The performance conditions for the annual bonus and LTIP are based on the Company’s key
strategic objectives. This alignment of reward with the delivery of key markers of the success
of the implementation of the strategy ensures simplicity .
Risk
remuneration arrangements
should ensure reputational
and other risks from excessive
rewards, and behavioural risks
that can arise from target-based
incentive plans, are identified and
mitigated.
The Remuneration Policy includes:
•
Compulsory deferral of a substantial proportion of bonus in shares for a material period;
• Aligning the performance conditions with the strategy of the Company;
• Ensuring a focus on long-term sustainable performance through the LTIP; and
• Ensuring there is enough flexibility to adjust payments through malus and clawback and an
overriding discretion to depart from formulaic outcomes.
These elements mitigate against the risk of target-based incentives by:
•
Deferring the value in shares for the long-term which helps ensure that the performance
earning the award was sustainable and thereby discouraging short term behaviours;
•
Aligning any reward to the agreed strategy of the Company;
• The LTIP supports a focus on the sustainability of performance over the longer term;
• Reducing the awards or cancelling them if the behaviours giving rise to the awards are
inappropriate; and
•
Reducing the awards or cancelling them if it appears that the criteria on which the award
was based do not reflect the underlying performance of the Company.
Predictability
the range of possible values of
rewards to individual Directors
and any other limits or discretions
should be identified and explained
at the time of approving the policy.
•
The Remuneration Policy sets out clearly the range of values and discretions in respect of the
remuneration of management.
•
Annual bonus and LTIP award levels are capped, with a clear calibration to performance
targets.
Proportionality
the link between individual
awards, the delivery of strategy
and the long-term performance
of the company should be clear.
Outcomes should not reward poor
performance.
•
The annual bonus and LTIP provide a clear link between the reward provided to management and
the delivery of the strategy through incentivising management to deliver the KPIs.
•
The LTIP provides a focus on long-term sustainable performance through the build-up of a
long-term locked in shareholding.
•
Both incentive plans allow the Committee to exercise its discretion to override formulaic outcomes.
• Executive Director bonuses are also subject to an aggregate cap based on a percentage of the
general bonus pool to prevent excessive bonuses relative to the wider workforce.
Alignment to culture
incentive schemes should drive
behaviours consistent with company
purpose, values and strategy.
•
The annual bonus drives behaviours consistent with the strategy.
• The LTIP drives behaviours consistent with the Company’s purpose and values which are
focused on the long-term future of the business throughout the business cycle.
UK Corporate Governance Code Principles
83
Directors’ remuneration report continued
Summary of changes to the Directors’ Remuneration Policy
CORPORATE GOVERNANCE
ELEMENT CURRENT POLICY PROPOSED CHANGES RATIONALE
Long-Term
Incentive Plan
(LTIP)
Annual award of performance
shares.
Maximum limit of 100% of base
salary per annum, vesting after
three years, with a 2-year post-
vesting holding requirement.
25% of the award vests at threshold
performance.
Maximum limit of 150% of salary.
Vesting percentage at threshold
performance reduced to 20% of
maximum.
More stretching performance
requirements (see later section of
the Remuneration Report)
Brings the LTIP maximum closer
into line with market norms, but
with an accompanying increase in
performance requirements.
Further drives long-term
sustainable growth of the IPS
business, in line with the strategy.
Enhances the lock-in of critical
talent and long-term alignment
with shareholders
Enables the Company to retain
and, when necessary, recruit
talented executives.
Annual bonus
Awards of up to 100% of base
salary.
Minimum of 50% of the award is
based on financial performance
conditions.
Awards of up to 125% of base salary.
Minimum of 60% of the award is
based on financial performance
outcomes.
More stretching performance
requirements (see later section of
the Remuneration Report)
Further enhancement of disclosure
of metrics, targets and the
assessment of bonus outcomes.
Brings the annual bonus
maximum closer into line
with market norms, with an
accompanying increase in
performance requirements.
Places greater emphasis on driving
growth in profits.
Improved clarity and transparency
for all stakeholders.
Enables the Company to retain
and, when necessary, recruit
talented executives.
CEO base salary
positioning
CEO base salary currently
£325,000, which is substantially
below the market median.
Re-position the base salary in
stages over three years, subject
to continued good performance
inrole:
£354,000 in 2023
£400,000 in 2024
£450,000 in 2025
Current base salary, which has
been frozen since 2020, is not at a
fair level, either relative to others
in the Company or relative to
FTSE Small Cap CEOs. The current
situation is not consistent with the
Company’s values and does not
support motivation, retention and,
when necessary, recruitment of
talent.
Repositioning the salary in three
stages is a balanced and restrained
approach to this transition.
Pension
Currently 12% of base salary for
existing Executive Directors which
is in line with other employees who
joined the Company at the same
time as the current incumbents.
Reduce the pension allowance for
both current Executive Directors,
and any new appointees, to 9%
from the 1 January 2023 .
Brings the pension allowance for
existing Executive Directors in line
with the majority of the workforce.
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Directors’ remuneration report continued
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 increase percentages for Executive Directors and Senior Managers are determined at the discretion of
Committee but will normally not be higher than 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 responsibilities of the role;
• To ensure salaries are 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.
Benefits may include (but are not limited to) private medical insurance, life insurance cover, disability income
plan, season ticket loans and professional subscriptions.
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 Committee may award non- pensionable cash payments in lieu of one or more of these benefits.
Benefits may vary by role and individual circumstance and are reviewed periodically.
Performance
framework
None
Outcomes for
2022 under
previous policy
Denis Jackson’s annual salary was £325k. He also opted to participate in the Company’s health care plan.
Trish Houston’s annual salary was £275k. She also opted to participate in the Company’s health care plan.
Implementation
in 2023
The current base salary for the CEO (£325k) is substantially out of line with market norms and does not permit
appropriate internal relativities. The salary will be re-positioned in stages over three years, subject to continued
good performance in role:
His benefits are unchanged in 2023.
Trish Houston’s salary will be increased by 5.4% to £290,000. This increase is below that of the wider workforce.
Her benefits are unchanged in 2023.
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) to receive a contribution of 9% of base
salary in line with the contribution for the majority of the workforce.
Performance
framework
None
Outcomes for
2022 under
previous policy
Denis Jackson received the cash allowance in lieu of contributions equivalent of 12% of salary.
Trish Houston received pension contributions equivalent of 12% of salary.
Implementation
in 2023
Denis Jackson’s pension contribution has been reduced to 9%, in line with the majority of the workforce.
Trish Houston’s pension contribution has been reduced to 9%, in line with the majority of the workforce.
Remuneration Policy Table
£354,000 in 2023 £400,000 in 2024 £450,000 in 2025
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Directors’ remuneration report continued
CORPORATE GOVERNANCE
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
Financial and non-financial objectives, targets and metrics are set at the start of the year.
Maximum individual annual bonus opportunity is 125% of base salary. 60% of maximum (equivalent to 75% of
salary) is payable for financial performance. 40% of maximum (equivalent to 50% of salary) is payable for non-
financial performance.
Half of any bonus earned above £100,000 will be deferred in shares for three years. Dividend equivalents may
accrue on deferred bonus awards and be paid on those shares which vest.
The Plan contains malus and clawback provisions (see below for details).
The total aggregate annual bonus payment for Executive Directors is capped at 25% of the general bonus pool
for employees.
Performance
framework
Performance versus financial and non-financial objectives is assessed at the end of each year to determine
theaward.
The financial component of the bonus is calculated on a formulaic basis. Threshold and stretch financial
performance levels of 5% to 12% annual growth in profits are applied, with a pay-out of 20% of maximum at
minimum threshold performance rising to 100% of maximum at stretch performance, calculated on a straight-
line basis.
The Committee assesses performance against strategic objectives and associated targets and metrics to
determine the non-financial component of the bonus to be awarded.
The Committee has discretion to set suitable metrics and targets, and to adjust the formulaic bonus 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
2022
under previous
policy
Denis Jackson is recommended to receive a 76.8% bonus. The basis for award is explained on pages 92 to 94.
Trish Houston is recommended to receive a 76.8% bonus. The basis for award is explained on pages 92 to 94.
Implementation
in2023
The higher maximum bonus in this Policy (125% compared with 100% previously) is accompanied by more
demanding performance requirements. For 2023, the threshold and stretch IPS annual profit growth
percentages are raised to 5% and 12%, respectively, from 4% and 9% for 2022.
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 may be granted annually.
Awards vest after three years, subject to performance and continued employment. Following vesting, an additional
two-year holding period will apply (net of tax), such that shares are not released until five years from grant.
Award levels and performance conditions are reviewed in advance of each grant to ensure they remain appropriate.
Dividend equivalents may accrue on shares held under the Plan and be paid on those shares which vest. These
will be delivered in shares in line with the Investment Association Guidelines.
Performance
framework
The award is currently based on financial measures, normally profit-based measures linked to the IPS business.
The Committee has the discretion to set suitable metrics and targets for each grant.
The higher maximum award size in this Policy (150% compared with 100% previously) is accompanied by a
reduction in the vesting percentage at threshold performance (20% compared to 25% previously), and by more
demanding performance requirements.
Remuneration Policy Table continued
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LTIP continued
Performance
framework
continued
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
2022 under
previous policy
For LDC, the use of growth in IPS EPS as a performance metric is likely to cause distortions as the numerator
(IPS profit) relates to only part of LDC’s overall business, but the denominator is the Company’s entire share
capital. This is different from most companies, which measure growth in the EPS of the entire business.
Accordingly, the Committee will use growth in IPS PBT for both existing and future LTIP awards as the metric
for determining the level of vesting over the relevant performance period. In the event that an acquisition is
made for IPS, an appropriate adjustment to starting PBT will be made so as to ensure a like-for-like comparison.
The IPS Profit before Tax Annual Growth percentages at threshold and stretch for the 2022 grant are 4% and
10%, respectively.
Denis Jackson was awarded an LTIP in 2020 which vests in April 2023. Based on the IPS PBT CAGR over the 3
year period of 7.9%, Denis Jackson will receive 74% of the maximum of award.
Trish Houston has no vesting LTIP in relation to the 2020 award.
Implementation
in 2023
The IPS Profit before Tax Annual Growth percentages at threshold andstretch for the 2023 grant are 4% and
14%, respectively, compared to 4% and 10% for 2022 grants.
Denis Jackson will be awarded an LTIP of up to 150%, subject to meeting the performance conditions.
Trish Houston will be awarded an LTIP of up to 150%, subject to meeting the performance conditions.
ALL EMPLOYEE PLANS
Purpose
To encourage share ownership throughout the workforce.
Operation and
opportunity
The Executive Directors are eligible to participate in an HMRC-approved Save As You Earn Share Save Plan
(SAYE) and/or Share Incentive Plan (SIP) on the same basis as all other eligible UK employees. The Committee
intends to maintain and operate these schemes in accordance with scheme rules and HMRC Regulations.
The prevailing HMRC approved limits apply.
Performance
framework
None
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 Directors’ actual shareholding is required to be
retained on the same terms and for the same periods.
The Company has established a process for monitoring and enforcement of in-role and post-cessation
shareholding requirements.
Performance
framework
None.
Outcomes for
2022 under
previous policy
Denis Jackson currently holds 43,914 shares through his own account, deferred bonus, SAYE and the SIP
against a target of 84,306.
Trish Houston currently holds 7,435 shares on her own account, SAYE and the SIP against a target of 71,336.
Implementation
in 2023
No changes to the policy.
Directors’ remuneration report continued
Remuneration Policy Table continued
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CORPORATE GOVERNANCE
Consideration of shareholder views
The Remuneration Committee is committed to shareholder
dialogue and engages with shareholders as appropriate to
address any remuneration issues that arise in relation to the
Executive Directors. Shareholders are given the opportunity
to engage with decisions in relation to Executive Director pay
at the AGM. The Chair of the Remuneration Committee is also
open to holding individual meetings with Shareholders, if
requested, as outlined in our S172 Statement on pages 46 to 48.
Any feedback provided is taken into account when developing
Executive remuneration arrangements, in addition to
guidelines of investor bodies. The Committee continues to
monitor trends and developments in corporate governance
and market practice to ensure the structure of Executive
remuneration remains appropriate and commits to undertake
a shareholder consultation in advance of any material changes
to the remuneration policy, as we have done for the new
proposedPolicy.
Minor amendments
The Committee may make minor amendments to the Policy set
out above (for regulatory, exchange control, tax or administrative
purposes or to take account of a change in legislation) without
obtaining shareholder approval for that amendment.
Differences in remuneration policy
forExecutive Directors compared with
other employees
In determining the remuneration arrangements for Executive
Directors, the Committee considers pay and conditions of
other employees across the business and aims to ensure a
consistent approach. To facilitate this, the Committee receives
information on wider workforce remuneration, ensuring a good
understanding of the structure and application of the reward
policies throughout the Group.
One of the Non-Executive Directors, Clare Askem, has
responsibility for leading engagement with the workforce,
including on remuneration matters. Various methods of
communication (including presentations, email correspondence
and availability for face-to-face meetings) may be utilised for
thisengagement.
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. Pension and principal benefits
are also provided to all employees. All employees are eligible to
participate in an annual bonus scheme with business area-
specific metrics and individual performance taken into account
where appropriate.
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 takes account of the Executive Directors’
oversight of the Investment Portfolio, 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.
LDC’s average UK employee headcount in 2022 was more
than 250 employees. As average employee headcount in 2021
was below 250, the regulations do not require the CEO pay
ratio to be disclosed for 2022. If the average UK headcount
for 2023 is above 250, the ratio will be included in the
Remuneration Report for 2023.
Directors’ remuneration report continued
CORPORATE GOVERNANCE
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Policy for Board Chair and Non-Executive Directors
The Non-Executive Directors, including the Board Chair, do not
have service contracts and are appointed for an indefinite term.
Non-Executive Directors are not 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 are not eligible to join the Company’s
pension scheme or participate in any bonus scheme or share
incentive plans. 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
Directors of the
required calibre
by offering market
competitive fees.
The Board Chair is paid a single annual all-inclusive fee
for all Board responsibilities.
Non-Executive Directors receive a base annual Board
fee. Additional fees may be payable for additional Board
responsibilities such as Chairship of a sub-committee
of the Board or the role of ‘Employee Engagement
Designated NED’.
The Board Chair’s fee is determined by the Committee
(excluding the Board Chair), and fees for Non-Executive
Directors are determined by the Board (excluding
the Non-Executive Directors). Fees are reviewed
periodically, considering time commitment, scope and
responsibilities, and appropriate marketdata.
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.
Fee levels are disclosed in the Directors’
Remuneration Report and reviewed periodically.
Any fee increases may take into account, material
misalignment with the market or a change in the
complexity, responsibility or time commitment
required to fulfil the role. The Board may make
appropriate adjustments to fee levels to ensure
they remain market competitive and fair to the
Director.
The Board may, in exceptional circumstances,
award additional fees to recognise significant
additional responsibilities or time commitment
required of individuals.
The maximum annual aggregate fee for all Non-
Executive Directors will be within any limits set
out in the Company’s Articles of Association.
ELEMENT ASSUMPTIONS
Total fixed
pay
Base salary
:
CEO £354,000,
COO £290,000.
Pension:
9% of salary or cash equivalent.
Benefits:
As disclosed in single figure table on page 95.
Annual
bonus
Minimum: No payout.
On-target: 50% of maximum.
Maximum: 100% of maximum (125% of salary).
LTIP
Minimum: No vesting.
On-target: 50% of maximum.
Maximum: 100% of maximum (150% of salary).
Share price
growth
Calculated based on the impact of 50% share
price appreciation on LTIP.
Illustration of total remuneration opportunity
Denis Jackson (CEO)
Fixed pay Annual bonus LTIP
Trish Houston (COO)
Minimum Target Maximum Maximum + 50%
share price growth
Minimum Target Maximum Maximum + 50%
share price growth
Remuneration (£000s)
Remuneration (£000s)
£0
£200
£400
£600
£800
£1,000
£1,200
£1,400
£1,600
£1,800
100% 44% 28% 24%
30%
39%
49%
100% 44% 28% 24%
30%
39%
49%
£0
£200
£400
£600
£800
£1,000
£1,200
£1,400
£1,600
£1,800
25%
33% 27%
25%
33% 27%
£388
£875
£1,361
£1,627
£317
£716
£1,332
£1,115
CORPORATE GOVERNANCE
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Directors’ remuneration report continued
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 according to the rules and discretions contained therein to
ensure that the implementation of the remuneration policy is fair, both to the individual Director and to the
shareholders. The discretions cover aspects such as (but not limited to):
•
selection of participants;
• 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 on an assessment of performance;
• settlement of awards in cash or shares;
• treatment of awards on termination of employment and change of control;
• adjustment of awards in certain circumstances, e.g. changes in capital structure, demerger, special dividend,
distribution or any other corporate event which may affect the current or future value of an award;
•
adjustments to take account of windfall gains on LTIP awards;
• adjustment of performance conditions in exceptional circumstances provided the new targets are fair and
reasonable and neither materially more or less challenging, in the context of exceptional circumstances,
than the original targets; and
•
application of malus and/or clawback.
Any such use of discretion will be fully disclosed 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 bonus awards or unvested LTIP awards, because of the occurrence
of one or more unforeseen circumstance. 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.
The circumstances in which malus and clawback could apply are as follows:
•
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.
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 2022, there were no external appointments held
by the Executive Directors.
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‘Buy-out’ awards
To facilitate recruitment, it may be necessary to ‘buy-out’
remuneration arrangements forfeited on leaving a previous
employer. This will be considered on a case-by-case basis and
may comprise cash or performance and non-performance related
share awards and would be in such form as the Committee
considers appropriate considering all relevant factors such as the
form, performance conditions, expected value, anticipated vesting
and timing of the forfeited remuneration. The Committee’s
intention is that the value awarded would be no more than the
commercial value of the awards forfeited.
For internal promotions, the approach will be consistent with the
policy for external appointees. Where an individual has contractual
commitments made prior to their promotion to Executive Director
level, the Company will continue to honour these arrangements.
Service contracts
Executive Director service contracts can 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 the contract. The Directors are
subject to annual re-election at the AGM. Non-Executive Directors’
contracts are available to view at the Company’s registered office.
Approach on recruitment
ELEMENT ASSUMPTIONS
Salary
• The base salaries of new appointees will be determined by reference to the individual’s role and responsibilities,
experience and skills, relevant market data and pay and conditions elsewhere in the Company.
• Base salary may be higher or lower than the previous incumbent. Salaries may be set at a lower level initially
with the intention of increasing salaries at a higher than usual rate as the executive gains experience in the role.
Pension
• New appointees will be eligible to receive pension contributions (or cash in lieu) in line with the Policy.
Benefits
• New appointees will be eligible to receive benefits in line with the Policy, including relocation benefits if the
Committee deems it appropriate.
Annual bonus
• The structure described in the Policy table will normally apply to new appointees with the relevant maximum
being pro-rated to reflect the proportion of the year served. The Committee retains the flexibility to determine
that for the first year of appointment any annual incentive award will be subject to such terms as it may
determine.
LTIP
• New appointees will be eligible for awards under the LTIP which will normally be on the same terms as other
executives, as described in the Policy table.
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;
• The Committee will appoint new Executive Directors with a
package that is in line with the Remuneration Policy in place
at the time, as indicated in the table below. In particular, the
maximum level of variable remuneration will be in line with the
limits set out in the Policy table.
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PLAN GOOD LEAVERS
1
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 worked, 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.
• No bonus payable.
• Unvested deferred bonus
awardslapse.
• Normally paid immediately on
the effective date of change of
control, subject to the extent of
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 normally
vest immediately in full on the
effective date of change of
control.
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 performance
period served, unless the
Committee determines otherwise.
• Vested awards will remain subject
to any post-vesting holding
period.
• Unvested awards lapse.
• Vested awards will remain subject
to any holding period.
• Unvested LTIP awards will
typically vest immediately in
full on the effective date of
change of control, subject to
the Committee’s assessment
of the achievement of the
performance conditions and
pro-rated for the proportion
of the performance period
served to the date of change of
control, unless the Committee
determines otherwise.
• The post-vesting holding period
applicable to any awards will
end at the time of change
incontrol.
• 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.
Termination Payments
Executive Directors may receive base salary, pension and benefits
during the notice period, which may be paid during a period
of ‘garden leave’ or ‘payment in lieu of notice’ (PILON) for all or
part of any period of notice. Payments will normally be made
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. Individuals will be eligible for
annual bonus only in respect of periods worked (ie. excluding
any periods of garden leave or PILON) subject to the normal
performance conditions. Further detail on the treatment of
annual bonus and LTIP for leavers is provided in the table below.
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 describedabove.
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.
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Part 4: Annual Report on Remuneration for 2022
Performance measures selection for the annual bonus
Performance measures used under the annual bonus are selected annually to reflect the Company’s main short and long-term objectives
and reflect both financial and non-financial priorities. For Executive Directors, performance measures in incentives focus predominantly
on the profitability of the IPS business which is central to Law Debenture’s business model and is the area of the business fully within their
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.
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 as appropriate.
STRATEGIC OBJECTIVES Description Weighting
IPS financial performance
The Committee reviews financial metrics when assessing the Executive
Directors’ delivery against financial performance targets. The metric
used for 2022 was PBT. The Executive Directors’ awards are based on
the performance against agreed thresholds, which can be found in the
table below.
50%
IPS non-financial
performance
The success of the IPS business is dependent on the effective
leadership and 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
operational infrastructure, a well embedded risk management
framework and high calibre people.
Engagement with investors, potential investors, market analysts,
clients and the media is considered to be beneficial to our
shareholders as it raises awareness of the unique investment
proposition which is offered by Law Debenture and supports the
future growth of the IPS business.
The Remuneration Committee believe that the efforts made by the
Executive Directors to further enhance the areas outlined above
should be rewarded.
50%
MEASURE
For 2022 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 and outcome achieved are set out below:
Measure Weighting
Threshold
(20% of max.)
Maximum
(100% of max.) Actual
Outcome
(% of salary)
IPS financial performance - PBT 50% 4% 9% 8.1% 42.8%
IPS non-financial performance 50% Further details set out below 34%
Total 100% 76.8%
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Remuneration Outcomes for 2022
Performance against Non-Financial Objectives for 2022
Key
Performance
Area
Max bonus
eligibility
(% of base
salary)
Score
(out of 5)
Bonus
awarded
(% of base
salary) Commentary on objectives set and achievements
People
5% 4 4% The Committee set several objectives in the People category,
encompassing culture, succession planning and leadership
training, which were generally achieved or exceeded. Executive
Directors continued to build a performance-driven and inclusive
culture investing in people and training and setting the
business up to succeed for the years to come. The Committee
received positive feedback from employees and senior leaders
in respect of this category.
IPS Business
15% 4.5 13.5% The Committee identified several strategic priorities that were
important to facilitate continued growth in IPS. Our Safecall
business required technology investment and a new platform,
which was delivered on time and to budget in 2022. The
leadership team has made good progress during the year to
further integrate CSS into the wider Law Debenture business.
Business Development resources and initiatives increased
and delivered cross-selling successes. In IT, operating platform
priorities were addressed successfully. The Finance Shared
Service Centre also made good progress through the year.
ESG
5% 4 4% We asked the Executive Directors to review developing best
practice for ESG and to implement a strategy for our own
operations. This included engagement with ESG ratings
providers and shareholders to help inform priorities. An ESG
Committee has been established with a cross-section of
employees from across Law Debenture’s operations. The
Audit and Risk Committee approved the ESG strategy and
implementation plan (further details of which are set out in the
ESG section of this report on page 50). We are pleased with the
progress that has been made in this important area.
Strategy,
Brand &
Marketing
25% 2.5 12.5% The Remuneration Committee asked the Executive Directors
to undertake a strategic review of the IPS business with a view
to informing future investment, growth, brand and marketing
plans. While some good progress has been made, there is
further work to do, which will be carried forward in 2023.
Total (of a maximum 50% of base salary)
34%
2022 PERFORMANCE AND PAY OUTCOMES
Performance against Financial Objectives for 2022
Total Annual Bonus for 2022: 76.8% of a potential maximum of 100% of base salary.
The IPS business delivered PBT growth of 8.1% resulting in an award of 42.8% of a 50% maximum
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CORPORATE GOVERNANCE
Long Term Incentive Plan
For LDC, the use of growth in IPS EPS as a performance metric is likely to cause distortions as the numerator (IPS profit) relates to only
part of LDC’s overall business, but the denominator is the Company’s entire share capital. This is different from most companies, which
measure growth in the EPS of the entire business. Accordingly, the Committee will use growth in IPS PBT for both existing and future LTIP
awards as the metric for determining the level of vesting over the relevant performance period. In the event that an acquisition is made for
IPS, an appropriate adjustment to starting PBT will be made so as to ensure a like-for-like comparison.
The LTIP award granted to the CEO in 2020 reached the end of its performance period on 31 December 2022. The table below shows the
performance target. The outcome was actual CAGR of 7.9% resulting in a vesting of 74% of the maximum award.
In 2022, both the CEO and the COO were granted LTIP awards at the level of 100% of salary. The award will vest after three years based on
IPS PBT 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 PBT CAGR % vesting IPS 3-year PBT CAGR
Below threshold 0% Less than 4%
Threshold 25% 4%
Stretch 100% 10%
Directors’ remuneration report continued
2022 PERFORMANCE AND PAY OUTCOMES
Total remuneration 2022
Denis Jackson
Chief Executive Officer
Salary and benefits 31%
Annual bonus 24%
Retirement benefits 3%
Performance Shares 42%
Trish Houston
Chief Operating Officer
Salary and benefits 55%
Annual bonus 39%
Retirement benefits 6%
Performance Shares 0%*
* No long-term incentives or scheme interests vested in 2022 for the COO.
Share ownership
Shareholding is a key means by which the interests of Executive Directors are aligned with those of shareholders.
1 Denis Jackson has 43,343 vesting in 1-4 years time subject to a service condition but not a performance condition.
This holding has been adjusted to reflect tax and NI payable.
2 Trish Houston has 6,977 vesting in 1-4 years time subject to a service condition but not a performance condition.
This holding has been adjusted to reflect tax and NI payable.
3 Includes shares held in own account
4 Calculated based on a close price of 771p as at 31 December 2022.
The value of the shareholdings disclosed have been calculated using the close price as at the 31 December 2022 the time of
acquisition of the shares. For these purposes, shares held in the deferred bonus scheme (on a net of tax/NIC basis), the SIP and SAYE
as at 31 December 2022 have been included as there are no performance conditions to be met. The LTIP awards have not been
factored in.
Denis Jackson
1
Chief Executive Officer
Current holdings: 33,907 shares
3
Two times salary, 84,306 shares
4
Total target value
3
of £650,000
Trish Houston
2
Chief Operating Officer
Current holdings: 7,435 shares
3
Two times salary, 71,336 shares
4
Total target value
3
of £550,000
Actual
Total Policy Requirement
£261,423
£57,321.69
95
CORPORATE GOVERNANCE
Directors’ remuneration report continued
Year ended
Salary
£000
Benefits
3
£000
Bonus
4
£000
LTIP1
£000
Pension
5
£000
Total
£000
Total Fixed
£000
Total Variable
£000
Denis Jackson 2022 325 2 250 438 34 1,048 361 688
2021 325 4 275 — 34 638 363 275
Trish Houston
2
2022 219 1 211 — 33 464 253 211
2021 245 1 208 — 25 479 271 208
1 ncludes dividend reinvestment and dividend equivilent. Total number of shares
due to vest is 58,006. Value is based on average share price for the period of
1October 2022 to 31 December 2022 of 746.86p plus the final dividend of £5,076.
2 Trish Houston’s service for 2022 includes a period of maternity leave. The
remuneration figures in the table are actual earnings for 2022. For 2022, Trish
Houston received pension contributions rather than cash allowances paid in lieu of
pension contributions.
3 Benefits shown relate to provision of health insurance.
4 In accordance with the Policy, half of the portion of the bonus above £100k is
deferred into shares for three years.
5 The pension values relate to the cash allowances paid in lieu of pension
contribution. The amount shown is the value of the allowance received, which
reflects a reduction for the cost of employer’s NIC.
Single total figure of remuneration (audited)
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
31December 2022. In the period between 31 December 2022 and 27 February 2023, Denis Jackson’s shareholding has increased by 451
shares, as a result of dividend reinvestment. There have been no changes to Trish Houston’s holding.
Outstanding scheme interests
Shares
owned
outright
Unvested
shares not
subject to
performance
1
Unvested
options not
subject to
performance
2
Unvested
shares
subject to
performance
3
Vested but
unexercised
share options
Total scheme
interests
4
Shareholding
guideline
(% of salary)
Current
shareholding
(% of salary)
5
Guideline
met
Denis Jackson 13,883 43,343 5,565 157,611 — 62,791 200% 193% No
Trish Houston 2,935
6
6,977 3,856 67,641 — 13,768 200% 39% No
1 Includes deferred bonus awards granted under the Deferred Share Plan.
2 Includes options awarded under Save As You Earn Share Save Plan.
3 Includes options awarded under the LTIP.
4 Total scheme interests excludes the shares subject to performance conditions.
5 Based on a share price on 31 December 2022 of 771p. Shares owned outright
have been included.
6 Includes person closely associated (‘PCA’) holdings of 734 shares.
Executive Directors’ interests in shares and option plans (audited)
Scheme
Interests
held at
1January
2022
Granted
in the
year
Date of
grant
Market
price at
grant
Vested in
the year
Lapsed/
forfeited
in the
year
Exercised
in the
year
Exercise
price*
Market
price at
date of
exercise
Interests
held at
31 December
2022
Vesting/
first
exercise
date
Denis Jackson
1
DSP 2019 18,532 — 11.03.19 582 18,532 — — n/a n/a n/a n/a
1
DSP 2020 18,166 546 13.03.20 587.19 — — — n/a n/a 18,712 13.03.23
1
DSP 2021 12,884 387 12.03.21 704.66 — — — n/a n/a 13,271 12.03.24
1
DSP 2022 — 11,360 14.03.22 7.991 — — — n/a n/a 11,360 12.03.25
2
LTIP 2020 70,210 — 07.04.20 462.9 — — — n/a n/a 70,210 07.04.23
2
LTIP 2021 45,595 — 01.03.21 712.8 — — — n/a n/a 45,595 01.03.24
2
LTIP 2022 — 41,806 28.02.22 7.991 — — — n/a n/a 41,806 28.02.25
3
SAYE 2020 5,565 — 26.08.20 539 — — — 539 n/a 5,565 26.08.25
Trish Houston
1
DSP 2022 — 6,977 14.03.22 7.991 — — — n/a n/a 6,977 12.03.25
2
LTIP 2021 32,267 — 01.03.21 712.8 — — — n/a n/a 32,267 01.03.24
2
LTIP 2022 — 35,374 28.02.22 7.991 — — — n/a n/a 35,374 28.02.25
3
SAYE 2021 3,856 — 01.09.21 7.78 — — — 778 n/a 3,856 01.09.26
1 Deferred Share Plan (share grant price is based on the market close on the date of
the grant). Includes dividend reinvestment. DSP 2019 is now owned outright.
2 Long Term Incentive Plan (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 93.
3 Save As You Earn Save Plan (share grant price is based on market close on the date
of the grant).
* Exercise price is based on market price at grant.
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96
CORPORATE GOVERNANCE
Directors’ remuneration report continued
Law Debenture share price total return, assuming
the investment of £1,000 on 31 December 2012 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
2012 and the reinvestment of all income (excluding
dealing expenses)
£600
£800
£1,000
£1,200
£1,400
£1,600
£1,800
£2,000
£2,200
£2,400
£2,600
£2,800
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
2022
Notes
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 Portfolio.
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.
Historical remuneration and TSR chart
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Incumbent
C. Banszky C. Banszky C. Banszky
M. Adams
1
T. Fullwood
2
D. Jackson
3
D. Jackson
3
D. Jackson
3
D. Jackson
3
D. Jackson
3
C. Banszky M. Adams
CEO single figure of total
remuneration (£000)
636.9 690.7 677.5
180.5 142.2
611.2 643.4 643.0 643.2 1,048
4
757.8 344.1
Annual bonus and deferred bonus
awarded (against maximum %)
72.1% 62.0% 100.0%
65.1% 100.0%
100.0% 90.9% 85.0% 85.0% 76.8%
0.0% 0.0%
LTIP award due to vest
(against maximum %)
n/a n/a n/a n/a n/a n/a n/a n/a n/a 74%
1 C. Banszky stepped down as CEO on 31 August 2016 and was succeeded by M. Adams on the same date following his appointment to the Board on 4 August 2016.
2 T. Fullwood was appointed interim Chief Executive Officer from 22 October 2017 for a fixed term until retirement at 1 January 2018.
3 D. Jackson was appointed as CEO on 1 January 2018.
4 Includes dividend reinvestment and dividend equivilent. Total number of shares due to vest is 58,006. Value is based on average share price for the period of 1 October 2022
to 31 December 2022 of 746.86p plus the final dividend of £5,076.
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CORPORATE GOVERNANCE
Directors’ remuneration report continued
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.
Salary/fees
2022
Taxable
Benefits
2022
Annual
Bonus
2022
Salary/fees
2021
Taxable
Benefits
2021
Annual
Bonus
2021
Salary/fees
2020
Taxable
Benefits
2020
Annual
Bonus
2020
Denis Jackson (CEO) 0% 0% -10% 0% 0% 0% 3% 3% -4%
Trish Houston (COO) 0% 0% 1% 17% 0% 0% n/a n/a n/a
Katie Thorpe (CFO)
1
n/a n/a n/a n/a n/a n/a 6% 6% n/a
Robert Hingley (NED) 5% n/a n/a n/a n/a n/a 3% n/a n/a
Robert Laing (NED)
2
n/a n/a n/a n/a n/a n/a 3% n/a n/a
Mark Bridgeman (NED)
3
n/a n/a n/a n/a n/a n/a n/a n/a n/a
Tim Bond (NED) 5% n/a n/a 0% n/a n/a 3% n/a n/a
Claire Finn (NED) 5% n/a n/a 0% n/a n/a 3% n/a n/a
Clare Askem (NED) 5% n/a n/a n/a n/a n/a n/a n/a n/a
Pars Purewal (NED) 5% n/a n/a n/a n/a n/a n/a n/a n/a
All other Employees
(excluding directors)
4
6% n/a 0% 5% 0% 30% 3% 3% 11%
1 Katie Thorpe resigned from the Board on 11 September 2020 and left Law Debenture in October 2020.
2
Robert Laing retired from the Board in April 2021.
3
Mark Bridgeman retired from the Board in April 2022.
4
For the purposes of this table, all other employees excluding Directors have been taken to mean employees of LDC Trust Management Limited and Safecall Limited.
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
31December 2022. There have been no changes in Directors’ interests in the period between 31 December 2022 and 27 February 2023.
Shares owned outright
Robert Hingley 4,870
Mark Bridgeman
1
4,513
Tim Bond —
Claire Finn 2,576
Clare Askem —
Pars Purewal
2
13,373
1 Retired at the AGM in April 2022. Interests of connected persons in addition to Mark Bridgeman’s beneficial holding – 25,620.
2
Pars Purewal’s shares are held jointly with a connected person.
Non-Executive Directors
Salary/fees
2022
Total
2022
Salary/fees
2021
Total
2021
Robert Hingley £90,888 £90,888 £87,550 £87,550
Mark Bridgeman* £15,307 £15,307 £56,650 £56,650
Tim Bond £47,030 £47,030 £45,320 £45,320
Claire Finn £52,909 £52,909 £49,547 £49,547
Clare Askem
1
£51,264 £51,264 £25,275 £25,275
Pars Purewal
1
£51,264 £51,264 £2,092 £2,092
1 Clare Askem and Pars Purewal were appointed as Workforce Engagement Director and Chair of the Audit and Risk Committee, respectively, at the AGM in April 2022.
* Mark Bridgeman retired from the Board at the AGM in April 2022.
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
31December 2022 and the prior period:
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CORPORATE GOVERNANCE
Statement of shareholder voting at the Company’s AGM
The table below sets out the results of the most recent shareholder votes on the Annual Remuneration Report at the AGM on 7 April
2022. The remuneration policy was last approved by shareholders at the Company’s Annual General Meeting held on 7 April 2020 at the
end of which it received 30,239,120 votes in favour (97.65%), 728,373 votes against (2.35%) and 250,424 votes were withheld. The full policy
is contained in the Company’s annual report and accounts for the year ended 31 December 2019, which may be found at https://www.
lawdebenture.com/investment-trust/shareholder-information/annual-reports-and-half-yearly-reports.
Percentage of votes cast Number of votes cast
For Against For Against Withheld
1
2021 Directors’ Remuneration Report 99.23% 0.77% 28,493,980 220,771 67,557
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.
Implementation of the policy for 2023 has been included in the policy table on page 84.
This report was approved by the Board of Directors on 27 February 2023 and signed on its behalf by
Claire Finn
Chair, Remuneration Committee
Directors’ remuneration report continued
Non-Executive Director fees
For 2023, the fees for the Chairman and Non-Executive Directors have been increased as shown below, and explained in the Committee
Chair’s introductory statement.
Fee
Fees effective
1 April 2023
Fees effective
1 April 2022 % change
Chairman fee £110,000 £92,000 20%
Non-Executive Director base fee £50,000 £47,600 5%
Additional fee for Chairman of Audit Committee £10,000 £5,950 68%
Additional fee for Chairman of Remuneration Committee £10,000 £5,950 68%
Additional fee for oversight of workforce engagement £6,250 £5,950 5%
The number of employees has increased from 239 in 2021 to 260 in 2022, 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 6 and 7.
Relative importance of spend on pay
The table 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 2020, 31 December 2021 and 31 December 2022.
2020
£000
2021
£000
2022
£000 % change
Total employee pay expenditure
1
16,156 21,417
3
23,995 12%
Total distributed to shareholders
2
32,572 35,662 38,865 9%
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.
3 Includes salaries and bonuses paid the staff who joined us as part of the acquisition of the Company Secretarial Services business on 1 February 2021.
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FINANCIAL STATEMENTS
99
FINANCIAL STATEMENTS
Independent auditor’s report
to the Members of The Law Debenture Corporation p.l.c.
Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of The Law Debenture Corporation p.l.c. (the ‘Company’) and its subsidiaries (the ‘Group’) give a true
and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2022 and of the Group’s loss for the year
then ended;
• the Group financial statements have been properly prepared in accordance with United Kingdom adopted international
accounting standards and International Financial Reporting Standards (IFRSs) as issued by the International Accounting
Standards Board (IASB);
• the Company financial statements have been properly prepared in accordance with United Kingdom adopted international
accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
•
the Group income statement;
• the Group statement of comprehensive income;
• the Group and Company statements of financial position;
• the Group and Company statements of changes in equity;
• the Group and Company cash flow statements; and
• the related notes 1 to 28.
The financial reporting framework that has been applied in their
preparation is applicable law and United Kingdom adopted
international accounting standards and, as regards the Company
financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
2. 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 are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services
provided to the Group and Company for the year are disclosed in note 3 to the financial statements. We confirm that we have not
provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
100
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101
FINANCIAL STATEMENTS
Independent auditor’s report continued
4. Conclusions relating to going concern
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’s and
Company’s ability to continue to adopt the going concern basis of
accounting included:
• assessing the Directors’ forecasts and considerations regarding
whether they consider it appropriate to adopt the going
concern basis of accounting;
• assessing the financing facilities including nature of facilities,
repayment terms and covenants;
• assessing the relevance and reliability of underlying data and
key assumptions, such as cash flows and liquidity assumptions
used in the prepared forecasts;
• evaluating management’s plans for future actions in relation to
their going concern assessment;
• assessing the appropriateness of the going concern disclosures
in the financial statements; and
• reviewing management’s going concern and viability papers for
reasonableness.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group’s and Company’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.
3. Summary of our audit approach
Key audit matters The key audit matters that we identified in the current year were:
• valuation and existence of investments; and
• occurrence, accuracy and cut-off of independent professional services fees.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality The materiality that we used for the Group financial statements was £8.00m which was determined on
the basis of 1% of net assets.
Scoping We performed a full scope audit on the Company and specified audit procedures on prescribed balances
performed to component materiality on four of the Company’s subsidiaries which we consider to be
significant components. In addition, we performed audits of specified account balances within a further
two subsidiaries.
Together, this accounts for 100% of the Group’s Investment Portfolio, 96% of the Group’s revenue and
99.2% of the Group’s total assets.
Audit work to respond to the risks of material misstatement identified was performed directly by the
group audit engagement team.
Significant changes
in our approach
Accounting for the acquisition of Konexo UK’s company secretarial business (“CSS”), including valuation
of goodwill and intangible assets, and the associated impairment assessment of those assets, ceased
to be a key audit matter in the current year due to the acquisition accounting in 2021 being deemed
appropriate. We continue to perform procedures over impairment of goodwill recognised in relation to
CSS. However, following the goodwill impairment assessment in the prior period, we have not assessed
this as one of the most significant risks in our current year audit and it is not separately identified in our
report this year.
There were no other significant changes in our approach apart from in relation to these key audit matters.
FINANCIAL STATEMENTS
Independent auditor’s report continued
5.1. Valuation and existence of investments
Key audit matter
description
The investments of the Group of £891.0m (2021: £992.5m) are key to its performance and account for the
majority of the total assets, 88.7% at 31 December 2022 (2021: 90.9%).
Quoted investments are valued at their fair value, which is represented by the market bid price. Please
see the accounting policy in note 1 and note 13 .
Investments listed on recognised exchanges are valued at the closing bid price at the year end.
There is a risk that investments within the portfolio may not be actively traded and the prices quoted
may not be reflective of fair value.
Additionally, there is a risk the investment assets recorded may not represent property of the Company.
There is a risk that the investment valuation and investment existence of the Group can be manipulated
by applying an incorrect share price and number of shares owned. This could result in material
misstatement of the net asset value of the Group.
How the scope of our
audit responded to the
key audit matter
We have performed the following procedures to test the valuation and existence of investments at
31December 2022:
•
Obtained an understanding of the relevant controls over valuation and ownership of quoted investments;
• Agreed 100% of the Company’s Investment Portfolio at the year-end to confirmations received directly
from the custodian;
• I ndependently agreed 100% of the bid prices of quoted investments on the investment ledger at year
end to closing bid prices published by an independent pricing source;
• Assessed the liquidity of a sample of the holdings at year-end by comparing the holding size to the
shares traded after the year end to determine if the valuation is reflective of quoted prices in an active
market;
• Evaluated the completeness and appropriateness of disclosures in relation to fair value measurements
and liquidity risk; and
• Made enquiries of the manager and directors regarding their assessment of the portfolio pricing and
liquidity.
Key observations Based on the work performed we concluded that the valuation and existence of quoted investments is
appropriate.
5. 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 fraud) that we identified. These matters included those
which had the greatest 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.
4. Conclusions relating to going concern continued
In relation to the reporting on how the Group 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.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of
this report.
102
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FINANCIAL STATEMENTS
Independent auditor’s report continued
5.2. Occurrence, accuracy and cut-off of independent professional services fees
Key audit matter
description
Independent professional services (“IPS”) revenue consists of fees receivable from the provision of
services, and is recognised based on the delivery of performance obligations and an assessment of when
control is transferred to the customer.
The transaction price can be based on one or more principal pricing mechanisms:
• Time at a contracted charge out rate and recoverable expenses
• Annual fixed fees
• Acceptance and appointment fees
• Special fees/out of scope fee
Fees are manually calculated and recorded. The basis of fees vary across the various dividions of IPS,
increasing the relative risk of misstatement. The accounting policy for revenue recognition is detailed in
Note 1 to the financial statements.
Fees of £53.5m were recorded for the year-ended 31 December 2022 (2021: £49.5m).
The fees require the accurate implementation of client contracts, as well as appropriate accounting
treatment in line with IFRS 15 ‘Revenue from contracts with customers’.
There is a fraud risk associated with the accuracy of revenue due to this balance’s importance to
stakeholders and link to long-term incentives. Additionally, inaccurate revenue, recording revenue which
did occur, or recording revenue in the incorrect period could have a significant impact on the Group’s
earnings per share. Given the manual processes involved in accounting for this revenue, we consider it to
be a key audit matter.
How the scope of our
audit responded to the
key audit matter
We have performed the following procedures to test the completeness, accuracy and cut-off of
independent professional services fees for the period:
• We obtained an understanding of the relevant controls over the occurrence, accuracy and cut-off of
IPS fees.
• We independently agreed a sample of fees to signed client agreements, sales invoices and bank
receipts. Where amendments were made to client agreements, we assessed whether these had been
recorded accurately and timely.
• Finally, we reviewed revenue recorded either side of the year-end to assess whether the revenue
has been accounted for in the correct period and assessed for compliance with IFRS 15 for revenue
recognition criteria.
Key observations Based on our work, independent professional service fees are appropriately recorded.
FINANCIAL STATEMENTS
Independent auditor’s report continued
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements Company financial statements
Materiality £8.0m (2021: £8.49m) £7.2m (2021: £7.64m)
Basis for determining
materiality
1% (2021: 1%) of net assets as at the year end. Parent company materiality equates to 0.90%
(2021: 0.9%) of net assets, which is capped at 90% of
group materiality.
Rationale for the
benchmark applied
Net assets has been chosen as a benchmark as
it is considered the most relevant benchmark for
investors and is a key driver of shareholder value.
Company materiality has been capped at 90%
Group materiality to ensure errors identified in the
parent entity that may present an aggregate risk
of material misstatement to the Group financial
statements are detected.
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole.
Group financial statements Company financial statements
Performance materiality 70% (2021: 70%) of Group materiality 70% (2021: 70%) of Company materiality
Basis and rationale for
determining performance
materiality
In determining performance materiality, we considered the following factors:
•
our understanding of the entity, its environment and the investment company sector;
•
the quality of the entity’s internal controls over financial reporting;
•
the nature, volume and size of misstatements (corrected and/or uncorrected) in the previous audit; and
management’s willingness to correct misstatements identified.
6.3. Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of £0.4m, as well
as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit and Risk
Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
NAV £799m
NAV
Group materiality
Group materiality
£8m
Component materiality
range £4m to £6m
Audit Committee
reporting threshold
£0.4m
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FINANCIAL STATEMENTS
Photo credit: Jayne Pocock
Independent auditor’s report continued
7. An overview of the scope of our audit
7.1. Identification and scoping of components
The organisation is headquartered and operates principally out of the UK, but also operates overseas subsidiaries in United Kingdom
Ireland, Hong Kong, Cayman Islands, Channel Islands and the United States.
In determining the scope of work to be performed on specific components of the group, we considered each entity with reference to
both quantitative and qualitative factors. Our quantitative assessment was primarily based on each entity’s total assets.and revenue,
though we also considered the overall coverage obtained.
For qualitative assessment current year events and any significant risks or management interest including management’s strategy for
the Group.
Based on that assessment, which is broadly consistent with the prior year, we focused our Group audit scope primarily on the audit
work at the parent and four of the largest subsidiary companies in the group, which were subject to an audit of specified account
balances where the extent of our testing was based on our assessment of the risks of material misstatement and of the materiality of
the Group’s operations in each of those entities.
All other subsidiaries were subject to analytical review procedures.
These five entities represent the principal operating companies and account for 98.7% of the Group’s total assets and 90.1% of the
Group’s revenue. They were also selected to provide an appropriate basis for undertaking audit work to address the risks of material
misstatement identified above. Our audit work at the four subsidiaries was executed at levels of component materiality applicable to
each individual entity which were lower than Group materiality and ranged from £4 million to £5.6 million. Parent company materiality
is set out at section 6 above.
As all of the significant components identified are located in the UK, audit work to respond to the risks of material misstatement
identified was performed directly by the group audit engagement team.
14%
6%
80%
1%
99%
Full audit scope
Specified audit procedures
Review at group level
Full audit scope
Specified audit procedures
Review at group level
Net assetsRevenue
7.2. Our consideration of the control environment
We identified that the following key IT systems were relevant to the audit:
• Sage Intacct, which is the ERP system used across all components of the Group and is used to record underlying transactions within
the Group;
• BQE Core, which is used for recording key customer data and billing in respect of the IPS business;
• Investment NAV, an in-house tool which is used in recording the NAV of the Investment Portfolio.
We involved IT specialists to obtain and understand controls related to these IT systems.
Furthermore, as noted by the Audit and Risk Committee on page 74, the Group’s finance operations (including its control environment)
has been undergoing a programme of change and improvement during the current year. Therefore, considering the evolving nature of
the overall control environment, we concluded that a fully substantive approach was appropriate in all aspects of the audit for the year
ended 31 December 2022.
FINANCIAL STATEMENTS
Independent auditor’s report continued
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the Group’s business and its financial statements.
The Group continues to develop its assessment of the potential impacts of environmental, social and governance (“ESG”) related
risks, including climate change, as outlined on page 50. As a part of our audit, we have obtained management’s climate-related risk
assessment documentation and held discussions with the Group ESG Manager to understand the process of identifying climate-related
risks, the determination of mitigating actions and the impact on the Group’s financial statements. We also reviewed management’s
financial statement disclosures on the impact of climate-related risks on the financial statements (as disclosed on page 117) and
evaluated whether the disclosure was appropriate.
We performed our own qualitative risk assessment of the potential impact of climate change on the Group’s account balances and
classes of transactions, including an assessment of how the potential impacts of climate change affect the financial statements, in
particular judgements and estimates made in the recognition and measurement of assets and liabilities and related disclosures. These
risk assessment procedures did not identify any additional risks of material misstatement.
In addition, we involved our TCFD specialists to assist us in assessing whether the voluntary TCFD disclosures provided were consistent
with the 11 TCFD recommendations. We also considered whether the TCFD disclosures provided were consistent with knowledge of the
Group obtained during the audit.
8. Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially 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.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, 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 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 Company or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise 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.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
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FINANCIAL STATEMENTS
11. Extent to which the audit was considered 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.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws
and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
• results of our enquiries of management, internal audit, and the Audit and Risk Committee about their own identification and
assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-
compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team and relevant internal specialists, including tax, valuations, pensions and IT
specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas:
• valuation and existence of investments; and
• occurrence, accuracy and cut-off of independent professional service fees.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management
override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those
laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The
key laws and regulations we considered in this context included UK Companies Act, Listing Rules, pensions legislation, tax legislation
and matters regulated by the Financial Conduct Authority (the Group’s lead regulator).
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the Group’s
operating licence and regulatory solvency requirements.
Independent auditor’s report continued
FINANCIAL STATEMENTS
11.2. Audit response to risks identified
As a result of performing the above, we identified (i) valuation and existence of investments and (ii) occurrence, accuracy and cut-off
of independent professional services fees as key audit matters related to the potential risk of fraud. The key audit matters section of
our report explains the matters in more detail and also describes the specific procedures we performed in response to those key audit
matters.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
• enquiring of management, the Audit and Risk Committee and in-house legal counsel concerning actual and potential litigation and
claims;
• enquiring of management and the Audit and Risk Committee regarding their identification and assessment of risks of irregularities,
including those that are specific to the entity’s business sector;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence
with HMRC, FCA and other regulators globally; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including
internal specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
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 the Company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
Independent auditor’s report continued
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13. 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 Group’s compliance with the provisions of the UK Corporate Governance Code
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 and our knowledge obtained during the audit:
• the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on page 67;
• the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period
is appropriate set out on page 44;
• the directors’ statement on fair, balanced and understandable set out on page 67;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 68;
• the section of the annual report that describes the review of effectiveness of risk management and internal control systems
set out on page 68; and
• the section describing the work of the Audit and Risk Committee set out on pages 72 to 74.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the Company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not
been made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Independent auditor’s report continued
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit and Risk Committee, we were appointed by the Audit and Risk Committee on 1 October 2021
to audit the financial statements for the year ending 31 December 2021 and subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments of the firm is 2 years, covering the years ending 31 December 2021 to
31December 2022.
15.2. Consistency of the audit report with the additional report to the Audit and Risk Committee
Our audit opinion is consistent with the additional report to the Audit and Risk Committee we are required to provide in accordance
with ISAs (UK).
16. Use of our report
This report is made solely to the 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 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 Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these financial
statements form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National Storage
Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no
assurance over whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS.
Andrew Partridge (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Glasgow, United Kingdom
27 February 2023
Independent auditor’s report continued
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FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Group income statement
as at 31 December 2022
2022 2021
Notes
Revenue
£000
Capital
£000
Total
£000
Revenue
£000
Capital
£000
Total
£000
UK dividends 29,837 — 29,837 21,426 — 21,426
UK special dividends 1,176 3,442 4,618 250 — 250
Overseas dividends 3,451 — 3, 451 4,583 — 4 ,583
Total dividend income 34,464 3,442 37 ,906 26,259 — 26,259
Interest income 5 266 — 266 — — —
Independent professional services fees 6 53,452 — 53,452 49,513 — 49,513
Other income 84 7 — 84 7 551 — 551
Total income 89,029 3,442 92,4 71 76,323 — 7 6,323
Net (loss)/gain on investments held
value through profit or loss 2 — (126,234 ) (126,234 ) — 121, 170 121,170
Total income and capital gains/(losses) 89,029 (122,792 ) (33,7 63 ) 76,323 121,170 197,493
Cost of sales (8,408 ) — (8,408 ) (8,037 ) — (8,037 )
Administrative expenses 3 (34,332 ) (1,908 ) (36,240 ) (31,680 ) (2,456 ) (34 ,136 )
Operating profit/(loss) 46,289 (124,7 00 ) (78,4 11 ) 36,606 118,714 155,320
Finance costs
Interest payable 5 (1,636 ) (4,908 ) (6,544 ) (1,319 ) (3,958 ) (5, 277 )
Profit/(loss) before taxation 6 44,653 (129,608 ) (84 ,955 ) 35,287 114 ,756 150,04 3
Taxation 7 (1,392 ) — (1,392 ) (1, 210 ) — (1,210 )
Profit/(loss) for the year 6 43,261 (129,608 ) (86,34 7 ) 34 ,077 114,756 148,833
Return per ordinary share (pence) 34.44 (103.17 ) (68 .73 ) 28.09 94 .60 122.69
Diluted return per ordinary share (pence) 3 4 .42 (103.14 ) (68.72 ) 28.08 94.57 122.66
Group statement of comprehensive income
as at 31 December 2022
2022 2021
GROUP
Revenue
£000
Capital
£000
Total
£000
Revenue
£000
Capital
£000
Total
£000
Profit/(loss) for the period 43,261 (129,608 ) (86,347 ) 34,077 114,756 148 ,833
Foreign exchange on translation of foreign operations — 199 199 — 654 654
Pension actuarial (losses)/gains (300 ) — (300 ) 8,500 — 8,500
Taxation on pension 57 — 57 (1,615 ) — (1,615 )
Other comprehensive income/(loss) for year (2 43 ) 199 44 6, 885 654 7 ,539
Total comprehensive income/(loss) for the year 43,018 (129,409 ) (86 ,391 ) 40,962 115,4 10 156,372
All items stated in the statement of comprehensive income will be subsequently classified when specific conditions are met.
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Statement of financial position
as at 31 December 2022
GROUP COMPANY
Assets
Notes
2022
£000
2021
£000
2022
£000
2021
£000
Non-current assets
Goodwill 10 19, 036 18 ,973 — —
Property, plant and equipment 11 1,796 1,97 4 — —
Right-of-use assets 22 5,040 5,542 — —
Other intangible assets 12 3,4 17 3,516 16 16
Investments held at fair value through profit or loss 13 891,005 992,4 78 890,905 992,378
Investments in subsidiary undertakings 13 — — 61,368 61,283
Retirement benefit asset 23 7, 400 6 ,577 — —
Total non-current assets 927 ,694 1,029,060 952,289 1,053,677
Current assets
Trade and other receivables 14 19,697 20,466 515 57,581
Contract assets 14 7 ,182 6 ,611 769 583
Cash and cash equivalents 15 49,559 35,880 29,825 25,507
Total current assets 76, 438 62,957 31,109 83,671
Total assets 1,004,132 1,092,017 983,398 1,137,348
Current liabilities
Amounts owed to subsidiary undertakings — — 19,603 87,631
Trade and other payables 16 19,815 29,329 10,046 13,447
Lease liability 22 991 287 — —
Corporation tax payable 1,256 925 — —
Other taxation including social security 2,892 1,543 1,860 850
Contract liabilities 16 5, 223 5,620 7 34
Total current liabilities 30,177 3 7, 7 0 4 31,516 101,962
Non-current liabilities
Long-term borrowings 20 163,909 164 ,245
124,389 124,586
Contract liabilities 16 3,97 6 4 ,054 125 125
Deferred tax liability 7 1,344 1,060 — —
Lease liability 22 5,659 6,117 — —
Total non-current liabilities 174,888 175, 4 76 124,514 124,711
Total net assets 799,067 878,837 827,368 910,675
Equity
Called up share capital 17 6 ,407 6,145 6,407 6,145
Share premium 83,022 41,865 83,022 41,865
Own shares 17 (3, 128 ) (3,215 ) — —
Capital redemption 8 8 8 8
Translation reserve 2 ,855 2,656 — —
Capital reserves 18 662,512 789,4 23 708,382 835,293
Retained earnings 4 7 ,391 41,955 29,549 27,364
Total equity 799,067 878,837 827,368 910,675
Total equity pence per share 625.81 717 .86
As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own income statement, however its loss
for the year was £89,312,000 (2021: profit £151,510,000). Approved and authorised for issue by the Board on 27 February 2023 and signed
on its behalf by:
R. Hingley,
Chairman | D. Jackson, Chief Executive Officer
The Law Debenture Corporation p.l.c. registered number 00030397.
FINANCIAL STATEMENTS
Group statement of changes in equity
as at 31 December 2022
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 2022 6 ,145 4 1,865 (3,215 ) 8 2,656 789,423 4 1,955 878,837
Profit/(loss) for the period — — — — — (129,608 ) 4 3,261 (86,347 )
Foreign exchange — — — — 199 2,697 426 3,322
Actuarial gain on pension
scheme (net of tax) — — — — — — (243 ) (243 )
Total comprehensive loss
for the period — — — — 199 (126,911 ) 43,444 (83,268 )
Issue of shares 262 4 1,157 87 — — — — 4 1,506
Dividend relating to 2021 — — — — — — (10,396 ) (10,396 )
Dividend relating to 2022 — — — — — — (27, 612 ) (27 ,612 )
Total equity at
31 December 2022 6 ,407 83,022 (3,128 ) 8 2,855 662 ,512 4 7 ,391 799,067
Capital reserves comprises realised and unrealised gains on investments held at fair value through profit or loss (see note 18).
Please refer to note 8 for details of dividends paid.
FINANCIAL STATEMENTS
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 2021 5,923 9,277 (1,461 ) 8 2,002 67 4,591 36,654 726 ,994
Profit/(loss) for the period — — — — — 114,756 34 ,077 14 8,833
Foreign exchange — — — — 654 76 (738 ) (8 )
Actuarial gain on pension
scheme (net of tax) — — — — — — 6,885 6, 885
Total comprehensive loss
for the period — — — — 654 114 ,832 40,224 155,710
Issue of shares 222 32 ,588 — — — — — 32,810
Movement in own shares — — (1,7 54 ) — — — — (1,754 )
Dividend relating to 2020 — — — — — — (9,614 ) (9 ,614 )
Dividend relating to 2021 — — — — — — (25,309 ) (25, 309 )
Total equity at
31 December 2021 6,145 41,865 (3, 215 ) 8 2 ,656 7 89,423 41,955 878,837
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FINANCIAL STATEMENTS
Statement of changes in equity
as at 31 December 2022
COMPANY
Share
capital
£000
Share
premium
£000
Capital
redemption
£000
Capital
reserves
£000
Retained
earnings
£000
Total
£000
Balance at 1 January 2022
6,145 41,865 8 835,293 27,364 910,675
Profit/(loss) for the period — — —
(129,608) 40,296 (89,312)
Foreign exchange — — —
2,697 (103) 2,594
Total comprehensive loss
for the period — — — (126,911) 40,193 (86,718)
Issue of shares 262 41,157 — — — 41,419
Dividend relating to 2021 — — — — (10,396) (10,396)
Dividend relating to 2022 — — — — (27,612) (27,612)
Total equity at
31 December 2022 6,407 83,022 8 708,382 29,549 827,368
Capital reserves comprises realised and unrealised gains on investments held at fair value through profit or loss (see note 18).
Please refer to note 8 for details of dividends paid.
COMPANY
Share
capital
£000
Share
premium
£000
Capital
redemption
£000
Capital
reserves
£000
Retained
earnings
£000
Total
£000
Balance at 1 January 2021
5,923 9,277 8 733,189 12,881 761,278
Profit/(loss) for the period
— — — 114,756 36,754 151,510
Total comprehensive profit
for the period — — — 114,756 36,754 151,510
Issue of shares 222 32,588 — — — 32,810
Dividend relating to 2020 — — — — (9,614) (9,614)
Dividend relating to 2021 — — — (12,652) (12,657) (25,309)
Total equity at
31 December 2021 6,145 41,865 8 835,293 27,364 910,675
Cash Flow Statement
for the year ended 31 December 2022
GROUP COMPANY
Notes
2022
£000
2021
£000
2022
£000
2021
£000
Cash flows from operating activities
(before dividends received) and taxation paid 28 2,2 49 4 ,422 (6,157) (1,534)
Cash dividends received 37 ,498 27 ,550 47,136 42,500
Taxation paid (700 ) (307 ) — —
Cash generated from operating activities 3 9,047 31, 665 40,979 40,966
Investing activities
Acquisition of property, plant and equipment 11 (151 ) (1,075 ) — —
Acquisition of right of use assets 22 (428 ) — — —
Expenditure on intangible assets (639 ) — — —
Cash consideration transferred in relation to acquisition — (18 ,214 ) — —
Purchase of investments (less cost of acquisition) 13 (170 ,653 ) (200,096 ) (170,653) (200,096)
Sale of investments 13 145, 892 140,440 145,892 140,327
Cash flow from investing activities (25,979 ) (7 8,945 ) (24,761) (59,769)
Financing activities
Interest paid 5 (6 ,544 ) (5,277 ) (6,653) (5,567)
Dividends paid (37 ,167 ) (34,923 ) (37,167) (34,923)
Payment of lease liability 22 (505 ) (371 ) — —
Proceeds of increase in share capital 4 1,4 19 32,810 41,419 32,810
Proceeds of issuance of long-term borrowings — 50,000 — 50,000
Purchase of own shares 17 87 (1,754 ) — —
Amounts receivable from intercompany — — (23,207) (55,935)
Intercompany funding — — 11,114 25,933
Net cash flow from financing activities (2,710 ) 40,485 (14,494) 12,318
Net increase/(decrease) in cash and cash equivalents 10 ,358 (6,488 ) 1,724 (6,485)
Cash and cash equivalents at beginning of period 35,880 41,7 62 25,507 32,098
Foreign exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at end of period 49,559 35,880 29,825 25,507
FINANCIAL STATEMENTS
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Notes to the accounts continued
for the year end 31 December 2022
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for the year end 31 December 2022
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for the year end 31 December 2022
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for the year end 31 December 2022
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for the year end 31 December 2022
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for the year end 31 December 2022
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for the year end 31 December 2022
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for the year end 31 December 2022
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for the year end 31 December 2022
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for the year end 31 December 2022
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for the year end 31 December 2022
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for the year end 31 December 2022
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 13)) and cash at bank (see Statement of Financial Position) less any
liabilities (i.e. long-term borrowings (see note 20)) for which the Company is responsible, divided by the number of shares in issue (see
note 8). 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 36 of the Annual Report. From 1 July 2022, 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 2, 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 20 on page 145) is valued in the Statement of Financial
Position (page 113) 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 145. 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
9 on page 131). The NAV with debt at fair value at 31 December 2022 was £972,566,000 (761.69 pence per ordinary share) and the NAV
with debt at par was £947,443,000 (742.02 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.
NAV per share
with debt and IPS
at fair value
pence
NAV per share
with debt
at par value
pence
Share price
pence
Premium/
(discount) to
fair value NAV
Premium/
(discount) to
par value NAV
At 31 December 2022 761.69 742.02 771 1.2% 3.9%
At 31 December 2021 787.83 828.86 799 1.4% (3.6%)
Gearing/(Net cash)
Net gearing is calculated by dividing total borrowings less cash and cash equivalents by adjusted shareholders’ funds, expressed as a
percentage.
2022
£000
2021
£000
Borrowings (at PAR) Statement of financial position 163,909 164,245
Cash and cash equivalents
Statement of financial position (49,559) (35,880)
Borrowings less cash (a) 114,350 128,365
Net assets per Balance Sheet 799,067 878,837
Fair value uplift for IPS business 148,376 135,885
Debt fair value adjustment 25,123 (50,229)
Adjusted shareholders’ funds Page 36 (b) 972,566 964,493
Net gearing (a/b) 12% 13%
CORPORATE INFORMATION
Alternative performance measures
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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 applicable administrative expenses expressed as a percentage of the average net asset values with debt at
fair value throughout the year.
2022
£000
2021
£000
Management fee revenue expense 566 569
Other attributable administration costs 2,448 2,220
Administration costs 3,014 2,789
Management fee capital expense 1,697 1,706
Ongoing charge 4,711 4,495
Average net assets
1
959,711 893,572
Ongoing charge ratio 0.49% 0.50%
1 Calculated using the average month-end net asset value with debt at fair value.
Revenue earnings per share
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 9 on page 131).
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 8 on page 130.
NAV per share
with debt at
fair value Share price
NAV/Share price per share at 31 December 2021 (pence) 787.83 799
NAV/Share price per share at 31 December 2022 (pence) 761.69 771
Change in the year (%) (3.3%) (3.5%)
Impact of dividends reinvested
1
(%) 3.9% 3.9%
Total return for the year (%) 0.6% 0.4%
1 The impact of dividends reinvested is calculated by calculating the total NAV/share price return for the year without the impact of re-invested dividends and comparing this to the
total return including the impact of re-invested dividends.
Yield
The yield is the annual dividend expressed as a percentage of the year end share price.
2022
£000
2021
£000
Annual dividend (pence) 30.5 29.0
Share price
1
(pence) 771 799
Yield (%) 4.0% 3.6%
1 Based on the closing share price as at 31 December 2022.
Alternative performance measures continued
Registered office
T: 020 7606 5451
F: 020 7606 0643
W: www.lawdebenture.com
(Registered in England – No. 00030397)
Investment managers
James Henderson and Laura Foll are joint managers. They also
manage Lowland Investment Company plc, Henderson Opportunities
Trust plc 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.
Laura joined Janus Henderson Investors in 2009 and has held the
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 2020.
Alternative Investment Fund Manager
The Law Debenture Corporation p.l.c.
Investment Portfolio manager
Janus Henderson Global Investors
201 Bishopsgate, London EC2M 3AE
Auditors
Deloitte LLP, 110 Queen Street, Glasgow, G1 3BX
Depositary
NatWest Trustee and Depositary Services Limited
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
T: 0370 707 1129
Company advisers and information
Joint brokers
J.P. Morgan Securities PLC
25 Bank Street, London E14 5JP
Peel Hunt LLP
100 Liverpool Street, London EC2M 2AT
AIC
A member of the Association of Investment
Companies
Shareholder information
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 also published daily in the Financial Times.
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 post.
Internet dealing: The fee for this service will be 1.4% of the value
of each transaction (subject to a minimum of £40).
Website address: www.computershare.com/dealing/uk
Registry Postal Share Dealing Service: The fee for this service will
be 1.4% of the value of each transaction (subject to a minimum of
£40). Forms can be found at: www.computershare.com/dealing/uk
or requested by calling: 0370 703 0084.
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
their shares via anominee).
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.
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Financial calendar
Dividend and interest payments
Ordinary shares:
Three interim dividends Announced in May, September and December
Paid July, October and January
Final dividend
Announced in February
Paid April
6.125% guaranteed secured notes Paid April and October
3.77% senior secured notes Paid March and September
2.54% series A senior secured notes Paid May and November
2.53% series B senior secured notes Paid May and November
Group results:
Half year results
Announced in July
Full year results
Announced in February
Report and accounts
Published in March
Annual General Meeting
Held each year in March/April
Factsheets 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 on pages 135 and 136, are registered at the following addresses:
Companies registered in Hong Kong
Suite 1301, 13/F Ruttonjee House, Ruttonjee Centre,
11 Duddell Street, Central, Hong Kong
Companies registered in the Republic of Ireland
38/39 Fitzwilliam Square West, Dublin 2, Ireland
Companies registered in USA
801 2nd Avenue, Suite 403, New York,
other than Delaware Corporate Services NY 10017, USA
Companies registered in USA - 919 N Market St, Suite 725, Wilmington,
Delaware Corporate Services DE 19801, USA
Company registered in Jersey 3rd Floor, IFC 5, Castle Street, St. Helier, Jersey JE2 3BY
Company registered in Cayman Islands
Governors Square, Suite 5-204, 23 Lime Tree Bay Avenue, Grand Cayman,
Cayman Islands, KY1-1108
156
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the 133rd Annual General Meeting of the Company will be held in-person at the offices of The Law
Debenture Corporation p.l.c., 8th Floor, 100 Bishopsgate, London, EC2N 4AG on 30 March 2023 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 2022.
2. To approve the Directors’ remuneration policy.
3. To approve the Directors’ remuneration report for the year ended 31 December 2022.
4. To declare a final dividend of 8.75p per share in respect of the year ended 31 December 2022.
5. To re-elect Denis Jackson as a Director.
6. To re-elect Trish Houston as a Director.
7. To re-elect Robert Hingley as a Director.
8. To re-elect Tim Bond as a Director.
9. To re-elect Pars Purewal as a Director.
10. To re-elect Claire Finn as a Director.
11. To re-elect Clare Askem as a Director.
12. To re-appoint Deloitte 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.
13. To authorise the Audit and Risk Committee to determine the auditor’s remuneration.
14. 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 (‘AGM’), 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 £642,922.70 (representing 12,858,454 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.
15. Amendment to the rules of The Law Debenture Corporation p.l.c. Long-Term Incentive Plan.
THAT current rule 3.2 of The Law Debenture Corporation p.l.c. Long Term Incentive Plan be deleted in its entirety and that the
following new rule 3.2 be and is hereby approved:
Rule 3.2:
“An Award must not be granted to an Eligible Employee if the result of granting the Award would be that, at the proposed
Award Date, the Market Value of the Plan Shares subject to that Award, when aggregated with the Market Value of the Plan
Shares subject to any other Award granted to them in the same Financial Year, would exceed:
1. in relation to a Financial Year up to and including the Financial Year ending on 31 December 2022, 100% of their Annual
Remuneration; or
2. in relation to a Financial Year commencing on or after 1 January 2023, the higher of 100% of their Annual Remuneration or
the limit included in the Directors’ Remuneration Policy.
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The limit as set out in this Rule 3.2 shall not apply to Buy-Out Awards.
For the purpose of this Rule 3.2:
1. Annual Remuneration means the higher of:
(a) basic salary paid by the Group expressed as an annual rate as at the Award Date; and
(b) basic salary paid by the Group for the period of 12 months ending on the last day of the month immediately
preceding the month in which the Award Date occurs.
2. Financial Year means the financial year of the Company.
3. The Market Value of Plan Shares subject to an Award shall be measured as an average over the five Dealing Days ending
on the date on which the Award was granted or, if the Board so determines for the purpose of the grant of the Award, on
the date on which that Award was granted.
Where a payment of salary is made in a currency other than sterling, the payment shall be treated as equal to the equivalent
amount of sterling determined by using any rate of exchange which the Board may reasonably select.”
Special resolutions
To consider and, if thought fit, to pass the following resolutions which will be proposed as special resolutions:
16. Disapplication of statutory pre-emption rights.
THAT if resolution 14 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 £642,922.70 (representing 12,858,454 ordinary shares),
such authority to expire at the next AGM of the Company (or, if earlier, at the close of business on 28 June 2024) 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.
17. Additional authority to disapply pre-emption rights for acquisitions or specified capital investment.
THAT, if resolution 14 is passed, the Directors be authorised in addition to any authority granted under resolution 16 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) limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £642,922.70 (representing
12,858,454 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 close of business on 28 June 2024) 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.
Notice of Annual General Meeting continued
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CORPORATE INFORMATION
18. 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 19,274,822;
(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 AGM 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.
19. Authority to convene a general meeting – notice.
THAT a general meeting of the Company, other than an AGM, may be called on not less than 14 clear days’ notice.
This Notice was approved by the Board of Directors on 27 February 2023 and signed on its behalf by
Law Debenture Corporate Services Limited
Company Secretary
Registered No. 00030397
Registered office:
8th Floor
100 Bishopsgate
London EC2N 4AG
Notice of Annual General Meeting continued
159
CORPORATE INFORMATION
Explanatory notes to the Notice
The Notice of the Annual General Meeting (the ‘Notice’) to be
held on 30 March 2023 (the ‘Meeting’) is set out on pages 156 to
158. The 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 Annual Report and financial
statements for the year ended 31 December 2022 (the ‘2022
Annual Report’), which was sent to shareholders on 6 March
2023.
Resolution 2
The Act requires quoted companies to present to their
shareholders a Directors’ remuneration policy (the ‘Policy’) for
approval at least every three years. The Policy was last approved
by shareholders at the AGM held on 7April 2020. During the
past year, the Board’s Remuneration Committee reviewed and
amended the Policy to ensure that it was appropriate, market
competitive and aligned with the Group’s strategic goals and
financial key performance indicators as well as developments
in UK corporate governance best practice. Following a robust
and objective review, and taking account of the views of
shareholders, the proposed Policy is set out on pages 81 to 91
of the 2022 AnnualReport for approval. This should be read
in conjunction with the Remuneration Committee Chair’s
introductory statement to the Directors’ remuneration report on
pages 76 to 79 of the 2022 Annual Report.
Resolution 3
In accordance with the provisions of the Act, the Company’s
Report on Directors’ remuneration is being put to an annual
shareholder vote by ordinary resolution. This resolution is an
advisory vote, as provided by law, meaning that the Directors’
entitlements to remuneration are not conditional upon the
resolution being passed. The report is set out in full on pages 76
to 98 of the 2022 Annual Report.
Resolution 4
The Board proposes a final dividend of 8.75 pence per share in
respect of the year ended 31 December 2022. If approved, the
recommended final dividend will be paid on 13 April 2023 to
all ordinary shareholders who are on the register of members
on 10March 2023. The shares will be marked ex-dividend on
9March 2023.
Resolutions 5 – 11
Under the Company’s Articles of Association (the ‘Articles’), one
third of the Directors must retire from office by rotation at each
AGM and may offer themselves for re-election (this does not
include Directors appointed to the Board since the last AGM).
The 2018 UK Corporate Governance Code recommends that
all directors of premium listed companies should be subject
to annual re-election, so Denis Jackson, Trish Houston, Robert
Hingley, Tim Bond, Pars Purewal, Claire Finn and Clare Askem
will retire from office and offer themselves for re-election.
The biographical details for each Director are set out on pages
58 and 59 of the 2022 Annual Report.
In proposing the re-election of the Directors, the Chairman
confirms that, following the internal performance evaluation
(described on pages 70 and 71 of the 2022 Annual Report),
each individual continues to make an effective and valuable
contribution to the Board and demonstrates commitment to
their role. Accordingly, the Board recommends their re-election.
Resolution 12
The Company’s auditors must offer themselves for appointment
at each AGM at which accounts are presented. Accordingly, the
Board, on the recommendation of the Audit and Risk Committee,
recommends the re-appointment of Deloitte LLP as the
Company’s auditors.
Resolution 13
This resolution, if passed, will authorise the Audit and Risk
Committee to agree the remuneration of Deloitte LLP for their
services as auditors.
Resolution 14
Under the Act, Directors may not allot shares in the Company
(or grant certain rights over shares) without the authority of
shareholders in a 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 AGM of the Company held on
7April 2022, will expire at the end of this year’sAGM.
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 aggregate nominal amount of £642,922.70 (representing
12,858,454 ordinary shares), representing approximately ten
per cent of the nominal value of the issued ordinary shares
on 27 February 2023 (being the last practicable date prior to
the publication of this document). As at 27 February 2023, the
Company did not hold any shares in treasury.
The authority conferred will expire (unless previously revoked,
varied or renewed) at the end of the next AGM. However, the
Company may make an offer or agreement prior to the expiry of
this authority which would or might require shares to be allotted
after the expiry of this authority – in this case, the Directors
will be permitted to allot securities pursuant to such offer or
agreement as if this authority had not expired.
Resolution 15
Resolution 15 seeks to approve the proposed amendment to
rule 3.2 of The Law Debenture Corporation p.l.c. Long Term
Incentive Plan (‘the Plan’) to amend the maximum value
of awards an eligible employee can receive in any financial
year commencing on and after 1 January 2023 to the higher
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Explanatory notes to the Notice continued
of 100% of base salary or the limit included in the Directors’
Remuneration Policy. This amendment is being proposed
to ensure that the rules of the Plan are consistent with the
Directors’ Remuneration Policy. The exception to this limit for
buy-out awards will remain unchanged.
Resolution 16
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 AGM held on
7April 2022, will expire at the end of this year’s AGM.
Resolution 16 seeks approval to disapply the pre-emption rights,
by allowing Directors to allot equity securities (including a sale
of treasury shares) for cash: (i) in connection with rights issues
and other preemptive issues in favour of existing shareholders in
proportion to their existing holdings (subject to certain exclusions);
(ii) by way of an open offer or other issue of securities in favour
of existing shareholders in proportion to their existing holdings
(subject to certain exclusions); and (iii) to persons other than existing
shareholders up to an aggregate nominal amount of £642,922.70
(representing 12,858,454 ordinary shares), being no more than
ten per cent of the issued ordinary share capital in issue on the
27February 2023, in each case without the equity securities first
being offered to the existing shareholders in proportion to their
existing holdings.
Resolution 17
Resolution 17 seeks an additional and separate approval to
disapply pre-emption rights by allowing Directors to allot equity
securities (or sell treasury shares) for cash, of up to a further
ten per cent of the total ordinary share capital, representing up
to an aggregate nominal amount of £642,922.70 (representing
12,858,454 ordinary shares), as at 27 February 2023, 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
originaltransaction.
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.
Resolution 18
Resolution 18 is a special resolution that will grant the Company
authority to make market purchases of up to 19,274,822 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
theDirectors.
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 shareholdersgenerally.
This authority shall expire at the AGM to be held in 2024 when a
resolution to renew the authority will beproposed.
Resolution 19
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
AGM) may be held on at least 14 clear days’ notice where:
• 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 AGM or a general meeting held since that AGM.
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 AGM to be held in 2024.
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.
If you are in any doubt about the contents of this document,
you should immediately consult your stockbroker, bank
manager, solicitor, accountant or other independent
financial adviser authorised under the Financial Services and
Markets Act 2000, or if outside the United Kingdom, another
appropriately authorised financial adviser, without delay.
If you have sold or otherwise transferred all of your shares in
the Company you should immediately send this document,
together with the accompanying form of proxy, to the
stockbroker, bank or other agent through whom the sale
or transfer was effected, for transmission to the purchaser
ortransferee.
161161
CORPORATE INFORMATION
Shareholder notes
The following notes explain your general rights as a shareholder
and your right to attend and vote at the Meeting or to appoint
someone else to vote on your behalf.
1. To be entitled to attend and vote at the meeting (and for the
purpose of the determination by the Company of the number
of votes they may cast), shareholders must be registered in the
register of members of the Company at close of business on
Tuesday, 28 March 2023 (or, in the event of any adjournment,
close of business on the date which is 48 hours before the
time of the adjourned meeting). Changes to the register of
members after the relevant deadline shall be disregarded in
determining the rights of any person to attend and vote at the
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
respect of the share.
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
ordinary share or ordinary shares held by that shareholder. A
proxy need not be a shareholder of the Company. A form of
proxy, which accompanies this Notice, may be used to make
such appointment and give proxy instructions. If you do not
have a form of proxy and believe that you should have one, or
if you require additional forms, please contact the Company's
registrar, whose contact details are provided above.
3. Dispatch instructions: To be valid, any form of proxy and any
power of attorney or other authority under which it is executed
(or a duly certified copy of any such power or authority), must
be returned by no later than 11:00 am on Tuesday, 28 March
2023 through any one of the following methods:
(a) by post at Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol, BS99 6ZY, United Kingdom
(Tel: 0370 707 1129 if dialling from the UK and
+44 370 707 1129 if dialling from abroad); or
(b) by hand or courier (during normal business hours only) to
the Company’s UK registrar at: Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol,
BS13 8AE, United Kingdom
(Tel: 0370 707 1129 if dialling from the UK and
+44 370 707 1129 if dialling from abroad); or
(c) electronically through the website of the Company’s
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 berequired:
• the meeting control number;
• your shareholder reference number; and
• your unique pin code; or
(d) in the case of shares held through CREST, via the CREST
system (see notes 8-11 on pages 161 and 162).
4. Any person to whom this Notice is sent who is a person
nominated under Section 146 of the Companies Act 2006 (the
'Act') to enjoy information rights (a ‘Nominated Person’) may,
under an agreement between him/her and the shareholder by
whom he/she was nominated, have a right to be appointed (or
to have someone else appointed) as a proxy for the meeting.
If a Nominated Person has no such proxy appointment right
or does not wish to exercise it, he/she may, under any such
agreement, have a right to give instructions to the shareholder
as to the exercise of voting rights.
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.
6. A vote withheld is not a vote in law, which means that the vote
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.
7. If you return more than one proxy appointment (except where
multiple proxies have been appointed), either by paper or
electronic communication, that appointment received last by
the Registrar before the latest time for the receipt of proxies
will take precedence. You are advised to read the terms and
conditions of use carefully. Electronic communication facilities
are open to all shareholders and those who use them will not
be disadvantaged.
8. The return of a completed form of proxy, electronic filing or any
CREST proxy instruction (as described in note 10 below) will not
prevent a shareholder from attending the meeting and voting
in person if he/she wishes to do so.
9. CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service
may do so for the meeting (and any adjournment of the
meeting) 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
a service provider/(s), should refer to their CREST sponsor
or voting service provider/(s), who will be able to take the
appropriate action on their behalf.
10. In order for a proxy appointment or instruction made by
means of CREST to be valid, the appropriate CREST message
(a ‘CREST Proxy Instruction’) must be properly authenticated
in accordance with Euroclear UK & International 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
162162
lawdebenture.com
CORPORATE INFORMATION
Shareholder notes continued
issuer’s agent by 11:00 am on Tuesday, 28 March 2023. 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
instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
11. CREST members and, where applicable, their CREST sponsors,
or voting service providers should note that Euroclear UK
& International 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 appointed a voting service provider, to procure that his
CREST sponsor or voting service provider takes such action
as shall be necessary to ensure that a message is transmitted
by means of the CREST system by any particular time. In this
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
in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
12. Any corporation which is a member can appoint one or more
corporate representative(s) who may exercise, on its behalf,
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 27 February 2023 (being the latest practicable business
day prior to the publication of this Notice), the Company had
an issued share capital of 128,584,541 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 128,584,541.
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
setting out any matter relating to:
(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
(ii) any circumstances connected with an auditor of the
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 theAct.
15. Any shareholder attending the meeting has the right to ask
questions. The Company must answer any such question
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.
Registered shareholders may submit their questions to the
Directors in advance of the meeting by sending an email to
the Company Secretary at TSU.cosec@lawdeb.com and the
Company will answer these in due course.
16. The following documents are available for inspection during
normal business hours from Monday, 6March 2023 until the
conclusion of the AGM at the Company’s registered office and
may also be inspected at the AGM venue from 10.30 am on the
day of the AGM until its conclusion:
(a) copies of the Directors’ letters of appointment and service
contracts; and
(b) a copy of the Articles of Association of the Company.
A copy of the 2022 Annual Report and financial statements
(including the Notice of AGM) will be available for viewing
at the Financial Conduct Authority’s National Storage
Mechanism, from the mailing date of this Notice.
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.
18. Personal data provided by shareholders at or in relation to the
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
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.
The offices of The Law Debenture Corporation p.l.c., 8th Floor, 100 Bishopsgate, London EC2N 4AG.
Annual General Meeting venue
RAILWAY UNDERGROUND BUSES PARKING
Main line stations within one
mile include:
• Liverpool Street
• London Bridge
• Farringdon
• Fenchurch Street
• Cannon Street
• Blackfriars
• Holborn Viaduct
Liverpool Street
(Central, Circle, Hammersmith
& City and Metropolitan lines)
Monument
(Circle and District lines)
Bank
(Central, Northern, Waterloo &
City lines and Docklands Light
Railway)
London Bridge
(Northern and Jubilee lines)
You may select the 149, 35,
47 or 388 bus services from
London Bridge or the 26 or 8
bus services from St. Paul’s to
Wormwood Street, which is
directly across from the venue.
You may also take the 205
from Old Street or the 43 or 133
bus services from Moorgate
to Liverpool Street, which is a
5-minute walk from the venue.
There is limited meter parking
in business hours near the
venue. Parking is available at
Broadgate or London Finsbury
Square. There is also multi-
storey parking at Aldersgate
Car Park near London Wall.
Fenchurch
Street
Bank
Tower
Gateway
Aldgate
Aldgate
East
Monument
Tower
Hill
Cannon
Street
Liverpool
Street
Shoreditch
High Street
Moorgate
London
Bridge
London
Bridge
City
Tower
St. Katharine
Southwark
Cathedral
City Hall
Bank of
England
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GRACECHURCH
STREET
HOUNDSDITCH
BISHOPSGATE
WORMWOOD
LONDON WALL
BISHOPSGATE
ST. BOTOLPH
S
T
BEVIS MARKS
ST. MARY
AXE
163163
CORPORATE INFORMATION
The Law Debenture Corporation p.l.c. 8th Floor, 100 Bishopsgate, London, EC2N 4AG
Tel: 020 7606 5451 | www.lawdebenture.com