ANNUAL REPORT
2023
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
Law Debenture named winners of
the Investment Company of the Year
Awards 2023 – UK Income category,
forthe third year running.
At the Investment Week 25th Investment
Company of the Year Awards, in
association with the AIC we were thrilled
to, once again win this UK income
category. The awards recognise managers
in this important part of the market, who
have delivered consistently for investors
across a variety of sectors.”
Denis Jackson, Chief Executive Officer, Law Debenture
The shortlists for the awards were constructed using
scores provided by the AIC, using Morningstar data.
Investment companies needed a three-year track
record to 30 June 2023 to be shortlisted and a market
cap of £50m or above.
CEO Denis Jackson pictured collecting the Award at
the Investment Week award ceremony.
Law Debenture wins the AJ Bell
Investment Awards for the second
year running.
UK Equity Income Sector
Investment Trust of the Year
UK Equity Income Sector
Investment Trust of the Year
Law Debenture has been named winner
of the AJ Bell Investment Awards in
the Active – Income category. Great
recognition for our investment trust and
the wider LawDeb.”
Trish Houston, COO, Law Debenture
Photographed with the Award, our COO Trish Houston
and CEO Denis Jackson.
1
AT A GLANCE
* Portfolio c.94% of NAV and IPS c.6% of NAV per the Group financial statements position. Please refer to the Company balance sheet on page 113.
1
Please refer to page 155 for an explanation of net asset value with debt and IPS at fair value.
2
Considered to be alternative performance measure and is described in more detail on page 156.
3
Source: Association of Investment Companies (AIC) industry average as at 31 December 2023.
Portfolio
c.80% 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.20% 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 1.20%
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
We believe Law Debenture has a highly dierentiated
andunique business model
lawdebenture.com
2
Financial summary
31 December 2023
£000
31 December 2022
£000
Change
%
Net Asset Value – with debt and IPS at fair value
1
* 1,048,304 972,566 7.79
Total Net Assets per the statement of financial position 854,229 799,067 6.90
Pence
Pence
Net Asset Value (NAV) per share at fair value
1
* 802.67 761.69 5.38
Revenue return per share
Portfolio 22.41 24.06 (6.86)
Independent professional services 11.02 10.38 6.36
Group revenue return per share 33.43 34.44 (2.87)
Capital return/(loss) per share 24.47 (103.17) 123.72
Dividends per share 32.00 30.50 4.92
Share price
4
801 771 3.89
% %
Ongoing charges
3
* 0.49 0.49
Gearing
3
13 12
Discount/(premium)* (0.21) 1.22
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) 8.9 22.7 51.8 101.4
NAV total return
2
* (with IPS and debt at fair value) 9.4 35.1 62.4 111.9
FTSE Actuaries All-Share Index Total Return
4
7.9 28.1 37.7 68.2
Share price total return
4
* 8.1 30.6 85.3 120.2
Change in Retail Price Index
5
5.3 27.7 32.1 48.9
Relative performance (NAV at FV) 1.4 7.0 24.7 43.7
Relative performance (Share Price) 0.2 2.4 47.6 52.0
* Items marked “*” are considered to be alternative performance measures and are described in more detail on pages 155 and 157.
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 156.
4 Source: Refinitiv.
5 Source: Office for National Statistics.
AT A GLANCE
3
Key statistics
for the year ended 31 December 2023
AT A GLANCE
* Items marked “*” are considered to be alternative performance measures and are described in more detail on pages 155 and 156.
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 156.
3 Calculated using the published fair value of IPS business over the past 5 years.
Past performance is not a guide to future performance. Capital at risk.
8.1%
*
Share price total return
(2022: 0.4%)
9.4%
1
Growth in Net Asset Value – including debt
and IPS at fair value total return
(2022: 0.6%)
Total Net Assets per statement of financial position
percentage increase of 6.9% (2022: decrease of 9.08%)
1.2%
*
Average premium in share price versus NAV
(with debt and IPS at fair value)
in 2023
10.5%
Growth in IPS profit before tax
(2022: 8.1%)
0.49%
2*
Ongoing charges ratio
– compared to industry average of 1.20%
(2022: 1.04%)
(2022: 0.49%)
8.7%
5 year compounding annual growth rate
in IPS profit before tax
4.9%
Proposed increase
in 2023 dividend pershare
(2022: 5.2%)
101.9%
3
Increase in IPS valuation
from 2018 to 2023
A consistent long-term out-performer
Providing real value with a combination of prudent
decisions and responsive services
Law Debenture’s investment proposition
135years
of history
Consistent
dividend
growth
45 years of increasing or
maintaining dividends to
shareholders (113% increase
in dividend over the
lasttenyears)
7.9% CAGR of dividend
overthelast 10 years
4.9% increase in 2023 DPS
(2022: 5.2%)
c.39% of total 2023 (2022:
25%) dividend funded by our
Independent Professional
Services business
IPS enables
greater exibility
in Portfolio
holdings
IPS accounts for c.20% of the
2023 NAV but has funded c.34%
of dividends over the last 10 years
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
Long-term
track record
of value creation
for shareholders
Strength and
diversity
ofincome
Flexibility and valuation uplift
from IPS + consistent portfolio
outperformance
Focus on
delivering
long-term
outperformance
Outperformance of our
benchmark, the FTSE Actuaries
All-Share Index, by 52.0% over
ten years (47.6%over five years
and 2.4% over threeyears)
Low ongoing charges ratio of
0.49% compared to industry
average of 1.20%
IPS has aproven
record of growth
under the
management team
CAGR of 11.3% in net revenue
and 8.7% in profit before tax
over last five years
Ambition to grow profits
of IPS by mid to high single
percentage growth
IPS valuation has increased
by 111.4% between 2018 and 2023
to £185.1m
1
UK weighting
(88% Portfolio)
has potential to
outperform
UK has lagged global
stockmarkets in recent years
Around 75% earnings
of the FTSE 100
come from
outside the UK
Significant UK valuation
discount has attracted
M&A activity
AT A GLANCE
1 Increase in total annual valuation of Independent Professional Services business. For a calculation of this please refer to page 136.
Past performance is not a guide to future performance. The value of shares and income from them may fall as well as rise and investors may not get back the amount
they originally invested. Capital at risk. None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
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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 Ocer’s review 8-15
IPS 5 year performance at a glance 16
Investment managers’ review 17-20
Portfolio by sector and value 21
Fieen largest holdings 22-23
Classication of investments 24
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 38-41
Viability statement 42-43
Section 172(1) Statement 45-48
Environmental, Social and Governance (ESG) 49-57
CORPORATE GOVERNANCE
The Board 58-59
Directors’ report 61-65
Corporate governance report 66-69
Nomination Committee report 70-73
Audit and Risk Committee report 74-77
Directors’ remuneration report 79-98
FINANCIAL STATEMENTS
Independent auditor’s report 100-110
Consolidated statement of prot or loss 112
Consolidated statement of comprehensive income 112
Statement of nancial position 113
Consolidated statement of changes in equity 114
Statement of changes in equity 115
Cash ow statement 116
Notes to the accounts 117-153
CORPORATE INFORMATION
Alternative performance measures 155-157
Company advisers and information 158
Financial calendar 159
Subsidiary company details 159
Notice of Annual General Meeting (AGM) 160-162
Explanatory notes to the Notice 163-164
Shareholder notes 165-166
AGM venue 167
5
Performance
Law Debenture has again performed creditably in the face of
macroeconomic conditions which continue to be challenging for
many consumers and businesses alike. 2023 saw global interest
rates continue to rise to levels that are above those experienced
for the majority of the period post the global financial crisis of
2008/09. Equity markets have also had to contend with global
economic uncertainty, relatively high levels of inflation, combined
with the ongoing war in Ukraine and the Israel/Palestine conflict,
all of which has resulted in ongoing market volatility. Nonetheless,
the combination of our diversified Portfolio and another good IPS
performance has enabled Law Debenture to continue to deliver
on its commitment to produce capital growth over the longer
term and steadily increasing dividend income. Law Debenture’s
long-term record of benchmark outperformance remains strong,
with share price outperformance of the FTSE Actuaries All-Share
Index over the last five years of c.48%. I am proud that Law
Debenture has been a leading performer in the UK Equity Income
sector over the long term, which reflects well on the hard work of
our investment managers and talented employees.
Our benchmark, the FTSE Actuaries All-Share Index, delivered a
7.9% total return in 2023. The Company’s share price total return
marginally outperformed this with a total return of 8.1% for 2023.
The Net Assets Value (‘NAV’) with debt and the independent
professional services (‘IPS’) business at fair value delivered a
return of 9.4%.
We were delighted to receive recognition for all the hard work
of our great team of people in the shape of two awards. At the
2023 Investment Company of the Year Awards in November,
in association with the AIC, we were named winner in the UK
Income category for the third year running and in the Active-
Income category for the second year in a row at the September
2023 AJ Bell Investment Awards. The continued success in
industry-leading awards demonstrates the excellent short and
longer-term track record of our investment managers, supported
by the IPS business.
Dividend
We retain a proud record of increasing or maintaining our dividend
payments for the 45th year in a row. The current climate has
naturally affected yields from our Portfolio, and it is likely that the
enduring impact of the past year’s difficulties will continue to
affect dividend flows. 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 9.125 pence per ordinary
share. The proposed 2023 dividend is fully covered by retained
profits earned this year, with no requirement to call uponreserves.
The dividend will be paid on 11 April 2024 to holders on the register
on the record date of 8 March 2024. This will provide shareholders
with a total dividend of 32 pence per share for 2023, an increase
of 4.9% compared with 2022. This represents a dividend yield of
4.1% based on our closing share price of 778 pence on 23 February
2024. Over the last 10 years, we have increased the dividend by
113% in aggregate which ranks Law Debenture very high versus its
key sector peers.
Capital structure
In 2023, the Group issued 3.0 million new ordinary shares at a
premium to NAV, to existing and new investors, with net proceeds
of £24.2m to support ongoing investment. Shares were issued at a
premium to NAV to be accretive to existing shareholders.
Our Portfolio
James Henderson and Laura Foll, our investment managers,
continue to invest in a differentiated selection of well-managed
and high-quality businesses with competitive advantage and
good long-term growth prospects. Dividend income of £33.5m
from the Portfolio was slightly lower than in 2022. This was driven
by a combination of factors but most influential was a reduction in
special dividend income in 2023. However, it is pleasing to report a
total capital profit for the year of £31.7m. Of this, £37.4m relates to
movements in the value of the holdings within the Portfolio.
We remain confident that James’s and Laura’s disciplined
approach of buying at attractive entry point valuations will
continue to deliver over the longer term for our shareholders.
Pages 17 to 20 offer more detailed commentary on the Portfolio's
performance with a review from our investment managers.
IPS
We believe our professional services business has been a crucial
differentiator in driving consistent long-term outperformance
compared to other UK income funds and, the Board believes, is
well positioned to continue this, with a strong platform built in
recent years from which to grow further. Although accounting for
only c.20% of our NAV (with IPS and Debt at Fair Value), the IPS
business has funded around a third of our dividends in the last
10 years and has now delivered a compound annual growth in
profit before tax of 8.7% over the last five years. Through its strong
STRATEGIC REPORT
Chairman’s statement
lawdebenture.com
6
7
cashflow and consistent mid-to high single digit growth rates,
IPS enables our investment managers to build a more flexible
Portfolio that includes both income and growth-focused stocks,
rather than having to ‘chaseyield’.
In a year where many businesses faced a challenging trading
backdrop, it is pleasing to see IPS continue to show robust overall
growth. Some of our businesses benefit from a degree of counter-
cyclicality, which is in part, why IPS had another year of creditable
profit growth. This is underpinned by our specialist knowledge and
record of providing excellent client service. Pensions recorded the
highest revenue growth rate in 2023 but there is good momentum
and grounds for optimism in a number of other areas. The Board
is pleased to see continued good employee engagement and
satisfaction scores and we remain focused on strengthening
our processes and management information systems. With
this ongoing investment in talent and technology, the Board is
confident IPS has the potential to sustain mid to high single digit
growth over the medium term.
Environmental, Social and Governance (ESG)
Our Executive Leadership team has continued their work to
create a working culture that encompasses our four values: Make
Change Happen; Better Together; Believe It’s Possible and Never
Stop Learning.
In 2023, we were ranked 1st in the Financial Services and 2nd
overall amongst the FTSE 250 in the FTSE Women Leaders
Review for the second consecutive year – an achievement that
we are extremely proud of. We understand that gender balance
needs to be treated as a business issue, not an HR issue or one for
a dedicated DE&I team to manage alone.
We were pleased to host an expert panel in December alongside
FTSE Women Leaders Review and INSEAD Alumni Balance in
Business Initiative. Our panel chair, Avivah Wittenberg-Cox,
and speakers, Fiona Cannon, OBE, Sarah Findlater and our CEO,
Denis Jackson, shared practical guidance around how they have
made change within their organisations, what has worked, and
whathasn’t.
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 56% of the senior leadership team.
As an organisation, we believe that long-term growth is
underpinned by sustainability. This presents opportunities for
investment in the IPS business. It has a relatively small carbon-
footprint compared to other FTSE 250 groups but, over the years,
we have taken steps to further reduce this, most notably with our
choice of office space.
Further, as part of our commitment to the ESG agenda, Law
Debenture has continued to make voluntary disclosures in
relation to Task Force on Climate-Related Financial Disclosures
(‘TCFD’). This can be found on page 51.
Our investment managers remain 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 49.
The Board
Tim Bond will retire from the Board at the close of the 2024
AGM having served nine years. We thank him for his invaluable
contributions over the years and wish him the best for the future.
At the same time, we welcome Maarten Slendebroek who has
extensive experience in financial services, including as CEO of
Jupiter Fund Management for five years from 2014 until 2019,
having joined the firm as Strategy and Distribution Director in
2012. His key skills and experience include fund management
and investment, strategy, corporate finance, ESG matters and
distribution to investors.
Looking forward
The end of 2023 brought some tentative optimism from investors
that inflation and the cost-of-living crisis will be at less elevated
levels going forward. This improved equity market backdrop still
has, however, to contend with interest rates that look likely to
stay at significantly higher levels than those experienced for the
majority of the period post the global financial crisis of 2008/09.
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 remain low in
both absolute and relative terms and offer some attractive longer-
term growth opportunities with a lot of bad news already priced
in. Many UK companies are leveraging their robust balance sheets
and good cash flow to consider share buy-backs. In addition,
many overseas corporates and private equity firms continue to
see ongoing attractions in UK company valuations. Companies
with robust business models and supportive long-term trends
are now frequently overlooked by investors who cannot see past
a gloomy UK economic environment. Law Debenture is well
positioned with a long-term focus and a clear emphasis on the
value provided by the companies we invest in.
The Board and our investment managers therefore remain
confident in our future medium-term performance, due to
the diversified and resilient nature of our Portfolio and the
good growth potential for IPS. Its services are generally well
sought after, its brand reputation is good and the market share
opportunities remain significant. During these uncertain
macroeconomic times, our consistent delivery has only been
possible due to the good work of our investment managers and
our skilled workforce. On behalf of the Board, I would like to thank
them all, as well as our shareholders, for their continuing support.
Robert Hingley
Chair of the Board
26 February 2024
STRATEGIC REPORT
Chairman’s statement continued
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8
STRATEGIC REPORT
Introduction
2023 has been an encouraging year overall for Law Debenture,
despite continued macroeconomic
uncertainty. Elevated levels of inflation and
interest rates proved to be challenging
for many consumers and businesses
alike. Despite this, Law Debenture’s
overall performance reflected well on the
Group’s ability to adapt to a changeable
economic climate and navigate short-
term headwinds. We delivered on our
two main objectives, producing NAV
growth and continuing to increase
income for shareholders. Our total share
price performance and NAV modestly
outperformed the index again, we are
proud to have had our 45th year of
maintaining or increasing dividends.
In this context, James Henderson and
Laura Foll have continued to perform well.
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 and compared to our key sector
peers. We see this as continuing validation of our consistent
strategy. Law Debenture offers a cost-effective way to access
an active and expertly managed portfolio and provides good
liquidity to investors given the size of our market capitalisation.
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 another two prestigious
investment trust awards this year – the UK Income category at
the Investment Company of the Year Awards 2023, for the third
year running, and the Active Income category at the AJ Bell
Investment Awards.
Our IPS business has delivered its sixth consecutive year of
middle to high single digit revenue and profit growth. The
economic backdrop over this extended period has been volatile
and generally uncertain, which makes IPS’s performance all the
more noteworthy. The Group takes considerable pride in IPS’s
strong and consistent record with a five-year CAGR in PBT of
c.8.7%.
IPS business net revenues (gross revenue less direct costs
incurred) for 2023 rose by 11.8% to £50.5m (2022: £45.2m) and
profit before tax was up 10.5%. The diversification of our income
streams again served us well, with Pensions an especially
strong performer. We continue to invest to ensure our IT
infrastructure and wider operating model are fit for purpose as
we seek to further scale and sustain our medium-term growth
ambitions, whilst also working hard to ensure our profit margins
aresustainable.
We have placed significant focus on cash and debtor
management within our IPS business. The benefit of this
has been magnified as a result of the
change in the interest rate environment,
meaning that the cash we hold in IPS
has generated a good return for our
shareholders. Overall, we continue to
target mid to high single digit growth in
profit going forward.
For 135 years, we have stuck to our
principles of independence, trust and
excellence. Our investment for growth
over the last six years has positioned us
well for the future. I am encouraged by
the new business wins in 2023 and by
our strong client relationships, which
means that approximately two-thirds of
our business is repeated year on year. As
we continue to face a relatively uncertain
macroeconomic environment in 2024,
our aim is that IPS should continue to
provide an element of structural growth
and counter-cyclical revenue that will support our overall
performance. High-quality governance services should remain
core to our clients, regardless of the economic cycle.
Chief Executive Ocer’s review
We delivered
on our two
main objectives,
producing NAV
growth and
continuing to
increase income
forshareholders
9
DIVISION
Net revenue
2019
£000
Net revenue
2020
£000
Net revenue
2021
£000
Net revenue
2022
£000
Net revenue
2023
£000
Growth
2022/2023
%
Corporate trust 9,024 10,789 9,771 10,620 12,473 17.4%
Pensions 10,598 11,479 13,060 14,343 17, 396 21.3%
Corporate services 12,167 12,226 18,755 20,206 20,640 2.1%
Total 31,789 34,494 41,586 45,169 50,509* 11.8%
We are proud to have delivered a 113% increase in dividend
over the last ten years. This record has been supported by the
diversified nature and consistently strong performance 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. This gives James and Laura the flexibility to
invest in a broader and higher-growth portfolio than many
sector peers, helping to position the Portfolio for future longer-
termgrowth.
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 bond issues.
Normal obligations for the bond trustee to support performing
issues could include communication to the bond holders of
financial or security data, together with the distribution of
covenant information. For this 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 necessary changes.
When bonds default, the work flow, risk and revenue profiles
of our role can change significantly. A key duty of the bond
trustee is to be the legal creditor of the issuer on behalf of the
bondholders. Our role in such default situations often requires
incremental work that, given a favourable outcome, can lead
to significant additional income for us. That said, 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 be somewhat lumpy.
However, such post-issuance work has strong economic
countercyclicality and has produced sound returns for our
shareholders over time.
Market dynamics
Following two very challenging years, deal volumes in primary
debt markets remained patchy in 2023. Primary debt issuance
in Europe recovered modestly by 11% (source: Dealogic) off a low
base. However, Primary Debt Issuance volumes in Asia (excluding
Japan) were down by 18% (source: Dealogic) and overall issuance
levels remain significantly below those experienced in 2019
to 2021 (source: Dealogic). Perhaps unsurprisingly, given the
tough primary market conditions, major banks, brokers and
other participants in this market continue to reduce capacity in
thisarea.
Our post-issuance work increased modestly during the year.
Bankruptcies continued to rise from historically low levels across
our main market in the UK (source: ONS). The combined effects
of the withdrawal of stimulus packages provided during the
Covid pandemic, inflation levels that in some cases hit 40-year
highs in major developed economies (source: ONS) and higher
interest rates has exposed many businesses to challenges of
which they have limited institutional memory. We do not wish
distress on any of our client base, but it would not be a surprise
if demand for our post-issuance services were to increase as we
move further through this economic cycle.
Highlights
Following a solid 8.7% growth in net revenues in 2022, we are
pleased to report net revenue growth of 17.4% in 2023 despite the
difficult market environment.
As we noted last 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
STRATEGIC REPORT
We are proud to have delivered a 113% increase in dividends per share over the
last ten years, with 45 years of increasing or maintaining dividends.
Chief Executive Ocer’s review continued
* Total net revenue is calculated by reducing segment income of £58,543k by cost of sales of £8,034k. Please refer to note 6 for the IPS segmental analysis.
Corporate services: 2021 includes additional revenue arising from the acquisition of the CSS business from Eversheds Sutherland (International) LLP.
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10
Chief Executive Ocer’s review continued
Pensions
Under the leadership of Vicky Paramour, we are the longest-
serving, and one of the largest, independent providers of
Pension Trustees in the UK with over 200 appointments. In 2023,
we continued to support our existing clients as well as bring
new clients into our Portfolio.
Our Pegasus offering of outsourced pensions executive
solutions, led by Sankar Mahalingham, continues to be a leading
provider in a competitive market. It also continues to develop
new services that further support our clients and demonstrate
our investment and commitment to the industry.
Market dynamics
Coming into 2023 after the LDI crisis of September 2022,
many UK pension schemes were still getting to grips with
changes in their funding position. A large number of schemes
were finding that their aspiration of reaching self-sufficiency
or being in a position to insure their pension liabilities
through buy-in appeared achievable over a relatively short
time horizon. However, the Mansion House reforms in July
and then the changes announced in the Autumn Budget
statement highlighted the Government’s desire to encourage
pensions schemes to consider running on and investing in
UKcorporations.
These developments have led to pension schemes re-examining
their long-term strategies. Some schemes are looking to
accelerate their journey to buy-in with others re-structuring
their funding and investment strategies for run-on. This was
reflected in an increasing demand for professional trustees
with both buy-in and continuation expertise, as well as broader
governancesupport.
The UK Pensions Regulator’s General Code was announced in
January 2024 and the Defined Benefit Funding Code is also
expected to come into effect during 2024. We have continued
to support our clients in enhancing and improving their
governance arrangements and preparing for the introduction of
thesechanges.
2023 was an interesting year for the Pensions Trustee market
with further consolidation amongst providers. Although this has
increased competition, we have continued to see a steady flow of
new opportunities and we believe we remain well positioned for
the longer term.
Highlights
2023 was another strong year for our Pensions and Pegasus
business, with growth in net revenue of 21.3%. Over the past five
years, compound net revenue growth is a healthy 13%. In our
core Trustee business, we were delighted to add incremental
appointments that included names such as Aviva MasterTrust,
ArvinMeritor, Lafarge UK Pension Plan, Aggregate Industries
Pension Plan and SLB. A notable 2023 appointment for our
Jersey office included The RBS International Pension Trust.
Ireland continued to grow its book of business with some strong
STRATEGIC REPORT
our services. These fee increases are applied on the transaction
anniversary. Consequently, as higher levels of inflation have
filtered through since late 2021, associated inflation-linked
increases have fed through to our book of business.
Despite challenging primary market conditions, there were
notable new transactions that we completed during the year
which included acting as both security agent and facility agent
on the inaugural debt raise (£175m credit facility) by Pulse Clean
Energy. The proceeds of this issue will be used to support the
development of multiple new energy storage and grid stability
facilities across the UK, as well as the acquisition of 30MW of
battery assets in Manchester, which will come online next year.
We also supported Yondr Group in their project to develop
a 40MW data centre in Bischofsheim, Frankfurt. Again, Law
Debenture acted as both security agent and facility agent
on this complex project financing for the construction and
development of the data centre.
Our expertise in Japanese Convertible Bonds is well known
and we were delighted to be involved with issuances for long-
established names such as Tokyo Corporation, Kobe Steel Ltd
and OSG Corporation. Closer to home, we also closed new
deals for household names that included Metrobank, GSK and
NationalGrid.
Our escrow business continues to grow steadily. During 2023,
we were appointed to a well-diversified range of transactions
that included mergers and acquisitions, litigation, commercial
real estate, source code, sporting events and global trade
incommodities.
Outlook for our corporate trust business
As we have mentioned many times, on a year-to-year basis,
levels of both primary market activity and post-issuance work
are hard to predict. We do know that post-issuance work has a
strong economic counter-cyclicality and that we have a long-
established, well-diversified book of business. This underpins
a high-quality element of recurring revenue, built on enduring
client relationships. At the time of writing, it appears that
inflation levels are dropping quite rapidly. Over the last two years,
we have benefitted from elevated inflation due to the large
element of contractual inflation linkage in our engagements.
Correspondingly, we will face downward pressure on the growth
rate of our revenues as inflationdecreases.
Eliot Solarz was appointed to head our Corporate Trust business
at the beginning of 2018. Over the past six years, he has
reinvigorated a business that celebrates its 135th anniversary
this year. We have added to our product mix, broadened our
range of technical knowledge and significantly raised our
external profile. At the same time, our commitment to the
pillars on which the business was built, namely trust and
independence, domain expertise, and an ability to move fast,
have been reinforced.
We are confident that, over time, we can continue to grow this
business within our stated target range of mid to high single
digits annually.
11
STRATEGIC REPORT
In the last twelve months, we have helped deliver over 15 large
buy-in transactions for our clients. This includes the largest
single transaction to date between the Boots Pension Scheme
and Legal & General (see case study) and the first ever super
fund transaction between Clara Pensions and the Sears Retail
Pension Scheme.
We continued to evolve our approach to providing Corporate
Sole Trustee services, with a particular focus on new offerings
specifically designed for smaller schemes looking for holistic
cost-effective governance solutions. The Pegasus business
continues to broaden its range of services to meet the needs of
our clients. We are seeing increasing demand for Guaranteed
Minimum Pension equalisation projects – projects to remove
historical gender inequalities in pension provision. Support
for de-risking projects has also increased, as schemes work to
deliver their chosen endgame strategy.
We also provide outsourced pension executive services and
interim support for in-house teams that have resource issues.
We now cover the full range of responsibilities, including
administration and investment oversight, as well as more
traditional governance duties.
We welcomed 10 new members of staff into the Pensions
team in 2023, including senior additions Scott Pinder as Head
of Corporate Sole Trustee Services, Ian McKinlay as Director of
Investment Services for Pegasus and Lok Ma as an investment
specialist in our Trustee team.
Outlook for our Pensions business
2024 promises to be a year full of pension policy changes with
new guidance and legislation expected. This will cover new
disclosure and governance requirements, measures to ensure
value for members in DC schemes as well as proposals on
consolidation. In addition, we continue to see increased interest
in mechanisms to avoid trapped surplus within pensions
schemes. Our own escrow business has worked with a number
of schemes looking for solutions in this area.
This constantly changing financial and regulatory environment
underlines the need for increased professionalisation of pension
trusteeship and strong governance. We are well placed to deliver
on this challenge and believe that demand for our expanding
range of pension trustee and governance services will continue
to increase steadily over time.
Corporate services
Corporate Services comprises four constituents: Structured
Finance Services, our whistleblowing division, Safecall, Service
of Process (SoP) and our Corporate Secretarial Services business
(CSS). The combined result of these businesses in 2023 as
revenues being approximately flat. This reflects strong progress
in our Safecall and small Structured Finance areas, a largely
flat revenue contribution from CSS, and a difficult year for our
SoPbusiness.
Chief Executive Ocer’s review continued
Case Study: Boots Pension Scheme
Buy-In
Law Debenture’s Alan Baker is Chair of Trustees for the
Boots Pension Scheme. In 2023, the Trustee of the Boots
Pension Scheme agreed a £4.8 billion buy-in with Legal
& General (L&G) to insure all 53,000 members, making
it the largest single transaction of its kind. The Trustees’
key objective was to provide added long-term protection
to members’ benefits by removing market uncertainty,
longevity risk and reliance on the long-term covenant
ofBoots.
The company wanted to complete the transaction in
2023. This was challenging as the scheme had significant
investments in illiquid assets. Insurers and advisers were
tasked to come up with innovative solutions to give price
certainty and certainty of execution within that timeframe.
The Trustee ran a full tender process to agree the insurer
and found L&G’s solution to be the most compelling.
The solution included:
• Selling some assets on the secondary market.
• Selling some illiquid assets to existing investors with the
support of the relevant fund manager.
• Transferring some assets to the insurer in-specie.
• Warehousing some assets on Law Debenture’s balance
sheet while Legal & General took on responsibility for the
sale ofthem.
The other challenge the Trustees faced was the shifting
size of the deficit. A cash injection from Boots was required
to make this deal work. In a scheme this size, a small
movement in the liabilities relative to the assets can have
a big impact on the amount of cash required and there
was a risk that the whole transaction might become
unaffordable. As soon as it became clear that a full buyout
was within reach, the Trustee, with the support of the
Company, began to reshape the assets to better align with
the insurer’s pricing to mitigate this risk – largely by selling
down volatile liquid assets and aligning rates and inflation
hedging. Excellent project management and a strong
focus on collaborative working between the Company and
the Trustees ensured good prioritisation. As a
result, the Scheme will not be reliant on Boots
to pay benefits to members and their members’
pensions will be protected for decades to come.
wins. The Manchester-based Pensions team is also growing
and they have firmly put Law Debenture on the map for
opportunities in the North of England.
lawdebenture.com
12
STRATEGIC REPORT
Chief Executive Ocer’s review continued
Service of Process (SoP)
SoP – Market dynamics
This is our business with the fewest recurring revenues and with
the greatest dependency on global macroeconomic factors
and deal flow in capital markets. Our long history in this market
informs us that, from one year to the next, revenues can vary
significantly and market conditions can be quick to turn.
SoP – Highlights
The widely reported slowdowns reported in GDP growth,
particularly in developed markets (source: IMF), combined with
the difficult market conditions in primary markets (covered
in the Corporate Trust section above) have, unsurprisingly,
made for a challenging year. We ended the year with revenues
marginally down.
Despite slowdowns, we have not been inert. We have increased
investment in training for our staff and in our referral partner
relationships. We have much improved systems which is
enabling a more proactive approach to business development.
We are confident that SoP will remain a material contributor to
our profits over financial market and economic cycles.
Critical to SoP’s long-term success has been the leadership of Anne
Hills, soon to celebrate her 39th anniversary with the Company. A
recent visit to Hong Kong reminded me first hand of both her and
our Company’s excellent global brand for this service.
Corporate Secretarial Services (CSS)
CSS – Market dynamics
Law makers and regulators worldwide continue to raise the bar
for Corporate Governance standards, which underpin demand for
our services. Our current focus includes solutions that will support
companies in navigating the new UK Corporate Governance Code
requirements and the fundamental changes to the way in which
companies will interact with Companies House as a result of the
Economic Crime and Corporate Transparency Act.
We have been solving client challenges in this sector for over
twenty years and operate in three main products areas:
Managed services: Global Entity Management services (GEMS)
provide a single outsourced point of contact to multinational
corporations to ensure that their legal entities are kept in good
standing. 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 for 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 entity
validation work. Effective workflow management and use of
technology are critical to compete effectively and we continue
to invest heavily here. We have teams based in our Manchester,
Hong Kong and Dublin offices, as well as a dedicated, UK-
focused entity management team in London.
Corporate governance services: We offer a complete range of
board and committee support, from full outsourced company
secretarial support to attending and minuting meetings, board
evaluations and governance reviews. We also have expertise in
providing practical company secretarial support to companies
preparing for an IPO transaction. Our clients range from major
Main Market and AIM listed companies, including investment
trusts, to leading UK operating subsidiaries of top global brands.
Our fees are often 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 an in-house setting to an outsourced
provider. This team in based inLondon.
Interim resourcing: We can provide immediate access to
qualified governance professionals, whether on-site or remote,
full time or part time, as required by the client. Typically, we are
paid on a time-spent basis, but also complete some work on a
fixed-fee basis. This team is based in London.
CSS – Highlights
We continue to invest in and restructure CSS. We have
increased our headcount in this business by over 50% since its
acquisition from Eversheds Sutherland (International) LLP just
under three years ago. The progress that we have made in our
operational infrastructure and improved client delivery in our
CSS offerings during 2023 did not filter through to our revenues
which were broadly flat. However, we remain confident that
the significant investments that we have made in new people,
skills, technologies and operational workflows will underpin
sustainable growth overtime.
During 2023, we invested in a dedicated business development
resource and, as a result, our sales pipelines are improving. Iam
Case Study: TBC Bank Group
Each year the Financial Reporting Council (FRC)
undertakes a review of FTSE 350 annual reports and
provides feedback on areas of improvement and highlights
examples of good practice. We act as Company Secretary
for TBC Bank Group plc and one of our responsibilities is
drafting the governance sections of the annual report.
TBC Bank Group plc were mentioned twice by the FRC
for examples of good practice. Firstly for its disclosures
regarding stakeholder and workforce engagement,
the FRC highlighted that TBC Bank Group had not only
disclosed what matter to its stakeholders but had also
gone further to detail issues that had been raised and
how they had been addressed. Secondly the company
reported on its data and technology committee setting
out its activities in relation to its cyber security
governance. Both instances demonstrated
examples of the company being at the forefront
of governancereporting.
13
delighted that a number of multinationals joined our GEMS
client roster on multi-year deals with effect from January 2024.
The project nature that is naturally embedded in a significant
element of the CSS revenue stream demands constant
replenishment. It is pleasing that there have been a number of
wins during 2023 with both existing and new FTSE 250 and AIM
listed clients on the corporate governance services side.
We remain confident of our ability to increase our market
share over time in a growing market driven by increased
regulatorydemands.
I would like to thank Trish Houston who, in addition to her COO
responsibilities, has led this business for the past 16 months
after returning from maternity leave. From 1 January 2024, Trish
will focus fully on her role as COO and the much-improved CSS
platform and its leadership now reports directly to me.
Structured Finance Services
Structured finance services – Market dynamics
Demand for our special purpose vehicle (SPV) management
and accounting services fluctuates directly with the demand for
raising funds via secured bond issuances. The market remains
very competitive and is driven by the cost of raising finance by
this method, compared with other means.
Loan agency services are dependent on the appetite for
outsourcing administration work on syndicated loans and we
have seen an increase in enquiries from financial institutions for
this role.
Whilst our paying agency services are dependent upon the
market fluctuations in mergers & acquisitions work, we are
seeing increase demand as law firms are stepping away from
providing this role.
We operate in three main product areas:
Management of Special Purpose Vehicles (‘SPVs’) and other
similar corporate structures: We provide directors, accounting
and day-to-day corporate administrative services to entities
set up to help financial institutions, including challenger banks
and boutique asset managers (private equity and hedge
funds) seeking to diversify their funding using securitisation
techniques. The SPVs are established to raise funds in the bond/
loan markets which are then used to acquire distinct pools
of assets (including mortgages, receivables, credit card debt,
aircraft, whole businesses etc.) against which the funds are
secured. The funding is non-recourse, meaning that the funds
raised only have recourse to the pool of assets on which they are
secured and to no other party.
Accounting services: We provide management and statutory
accounting services to corporate entities who wish to outsource
this area or where they do not have local accounting knowledge.
We do not provide audit services to clients.
Facility and Paying Agency services: We manage and
provide outsourced administration for corporate loans and
facilities by acting as a conduit between multiple lenders
and a single borrower. Our paying agency services relate
primarily to managing the payments for law firms involved in
M&A transactions. Unlike facility agent work, which provides
recurring fees, paying agent services generally incur one-off
transactionfees.
The competitive landscape in each of these three areas
is dominated by larger providers with long-established
relationships. We are a small player in the sector, which is
dominated by private equity-backed competitors. Thanks to
Mark Filer and his team, we continue to receive consistent praise
from our clients and are growing our market presence steadily.
Structured finance services – Highlights
Despite capital markets new issuance levels being challenged
during 2023, we were delighted to receive repeat appointments
from a number of leading names operating in the sector,
including Atom Bank and LendInvest. Our facility and paying
agent business also grew steadily during the year. Gratifying too
was to see rewards from our business development efforts, with
an increasing number of professional firms around the country
referring business to us.
Quotations for new business and wins were both at new high
levels, which resulted in pleasing revenue growth.
We have a sound product and good momentum. Our challenge
is to raise our profile with a broader universe of clients and
referral partners in order to accelerate our growth.
Whistleblowing: Safecall
Safecall – Market dynamics
Regulatory frameworks and standards continue to be
strengthened across the developed world. News headlines
are increasingly underpinned by some sort of whistleblowing
activity. Early adopters were often larger entities, but smaller
I am condent that IPS is well positioned for medium-term growth, in line with
our mid to high single percentage target.
STRATEGIC REPORT
Chief Executive Ocer’s review continued
lawdebenture.com
14
STRATEGIC REPORT
Chief Executive Ocer’s review continued
and mid-sized employers are increasingly seeing the value
of an independent and trusted partner to deliver this service.
Investors are increasingly demanding a robust, independent
whistleblowing structure to be in place prior to allocating capital.
All enquiries are dealt with by our highly-trained staff that
continues to consist largely of former police officers. The quality
of the work they do for our clients receives high praise. A number
of competitors in the sector run business models based off
low-cost call centres. We have every intention of remaining a
premium provider of high-quality product.
Safecall – Highlights
We provided a record number of reports to our clients in 2023,
up 15% on 2022. Towards year end, digital channels (as opposed
to voice) accounted for over 70% of issues raised. We delivered
increased client functionality via our portal in 2023 and client
feedback is encouraging. We rebranded our offering and
launched a new website in Q4. We have more to deliver here
in 2024 but are increasingly confident in our ability to compete
effectively for larger mandates as they come up for renewal.
Under the successful leadership of Joanna Lewis, we have
expanded our training and investigations offerings and have
made solid progress, doubling revenues in this service in 2023.
Once again, we experienced strong year-on-year revenue
growth, with a significant number of new relationship wins.
Among the 132 new clients we onboarded in 2023 were
Whitbread, Balfour Beatty and Imperial College London.
As well as the investment in our technology platform, we will add
further capacity and expertise to the operations team, managed
by Tim Smith. Moreover, we will continue to add further resource
to our sales, account management and marketing initiatives in
order to accelerate our growth.
It is a really exciting time to be a provider of solutions in this fast-
growing sector.
Central Functions
A refreshed five-year plan for the IPS business as a whole by the
Senior Leadership Team was a key piece of work undertaken
during the year.
The larger and more consistent the earnings growth within IPS,
the more optionality it creates for the Managers of the Portfolio
to deliver on our objective of long-term capital gains and steadily
increasing income.
In order to grow our earnings and dividends, we need to focus
on growing our capital and we have approximately doubled the
revenues and profits for the IPS business over the past six years.
The aim is to approximately double these again over the next
five years. We expect our growth to be largely organic, but we
continue to be open to opportunities presented by acquisitions
where we believe this could add value to our clients and
shareholders.
Our business development teams, overseen centrally by Suzy
Walls, are increasingly joined up and ambitious. We have a
structured programme to deepen and broaden our referral
partner relationships. We are strengthening our ties with industry
bodies and continue to optimise our output using digital channels
to raise our profile. Our calendar of industry events is anchored
around the Law Debenture Debate for Pensions in May (now in its
21st year) and our Lens Photo competition in January (now in its
7th year). We also continue to build momentum around our Law
Firm Reception in early September (now in its 4th year).
In October, we held a well-attended Golden Jubilee party for our
business in Hong Kong as the city emerged from a particularly
difficult period during extensive Covid lockdowns.
Our improved business pipelines are a function of thousands
of individual touch points and increased commitment to our
firm-wide business development initiatives is helping to build
positivemomentum.
Case Study: Adidas – the largest
sportswear manufacturer in Europe,
and the second largest in the world
We spoke to Dr Markus Kuerten (Vice President
Compliance & Privacy) and Wesley Hagemann (Director of
Compliance) about their experience working with Safecall
“We chose Safecall as our whistleblowing services provider
because we did not have the internal resources to operate
a 24/7 reporting mechanism. We wanted to offer availability
in terms of time and language to our employees.
As a client, our experience with Safecall has been excellent.
We have a long history of working together and are happy
with the service provided, especially the quality of the
call handlers. They accurately capture the reports and
complaints, and their reports are precise and well-written.
The call handlers foster real discussions and ensure
confidentiality, which encourages employees to provide
full insight and information. The reports we receive,
especially from telephone reports, are actionable and of
high quality. We appreciate the stability of the Safecall
team and the sense of familiarity we have with them.
From a regulatory and compliance perspective, Safecall
has been instrumental in helping our business. The EU
Whistleblowing Directive introduced key mechanisms
and requirements that Safecall complies with, ensuring
our global compliance. Safecall’s service elements and
best practices meet the compliance requirements across
the world. Safecall’s offering goes beyond
compliance: it is a crucial element in Adidas’
commitment to empowering the voices of
our workers and creating the best working
community possible.”
15
As we have noted in past annual reports, we are making a
significant investment in modernising our central support
functions. With oversight from our CFO, Hester Scotton, we
have made substantial improvements, including changing our
general ledger accounting system and establishing our shared
service centre in Manchester. During the second half of 2023,
we started the process of onboarding a new PSA (Professional
Services Automation) operating system. As we look to double the
size of our IPS business over the next five years, it is critical that
we do this in a controlled and sustainable manner. To enable this,
we are moving towards a new Target Operating Model that we
will embed across the IPS business during 2024. We have also
added capacity to our Legal team, overseen by Kelly Stobbs, our
General Counsel.
We have invested further in our HR team to support our
headcount globally, which is now nearing 300. We have
much increased rigour around appraisals process and career
frameworks. We held our third annual culture week in July
and have a number of clubs that have gathered good support
from within the employee base. Our charity community group
also raised its ambitions with two volunteering days at the
Whitechapel Mission towards the end of the year. During 2024,
we will continue to build on our cultural vision.
Information Technology
Our IT strategy is centred around being flexible users of third-
party software applications. We want our businesses to be easy
to find, easy to engage with and easy to use. We had a number
of successes in this regard under our Chief Technology Officer's,
David Williams, leadership in2023.
Safecall added several new modules to its client portal, including
deliveries that help to support expanding investigation efforts.
In CSS Global Entity Management, we delivered a new client
interface that enables clients to view legal entity work status. In
both cases, our employees and our clients are viewing outputs
in real time. We will continue to build on our technological
capabilities.
It is important that we receive third party certification of our
technology standards to give confidence to all our stakeholders.
I am pleased that Safecall are well on their way to achieving ISO
27001 certification, the leading international standard focused on
information security, by mid-2024.
Towards the year end, we rolled out a digital workplace project
across the UK offices. This consists of improved system access,
new laptops, headsets, meeting room technology and network
infrastructure. In addition to the ability to work more effectively
when on the move, it improves our ability to work collaboratively
with our clients. This roll-out required significant investment in
new hardware, moving us on to a modern platform built around
hybrid/mobile working. In addition, we added resource focussed
solely on IT security.
From January 2024, David Williams will report to our COO, Trish
Houston, to ensure that all of our operational improvements are
as effectively joined up as possible.
Prospects
Law Debenture is well diversified and resilient by design. The
combination of IPS with the Portfolio is a well-proven model
and I am cautiously optimistic about the Group’s progress in
2024 and beyond, despite an external environment which is
expected to remain challenging. I am confident that IPS is well
positioned for medium-term growth, in line with our mid to high
single percentage target. We continue to look for opportunities
to grow IPS through organic investment in some of our fastest
growing businesses. We are encouraged by good new business
momentum and continue to invest in operational fitness, talent
and technology to ensure we gain market share and maintain
longer-term growth.
On behalf of the Board, I want to thank my colleagues for their
excellent dedication to developing Law Debenture’s client
service. I am also very grateful for the continued support
ofshareholders.
We are cognisant that 2024 will likely present its own set of
challenges but, given the modest current valuation of the
UK equity market, we are optimistic about the investment
opportunities we can see. We believe James and Laura have
constructed a well-diversified portfolio of strong and well-
managed businesses on relatively low valuation multiples,
capable of delivering attractive capital returns, and further
increases in dividends, over the medium term.
Denis Jackson
Chief Executive Officer
26 February 2024
We are encouraged by good new business momentum and continue to invest
in operational tness, talent and technology to ensure we gain market share
andmaintain longer-term growth.
STRATEGIC REPORT
Chief Executive Ocer’s review continued
lawdebenture.com
16
IPS 5 year performance at a glance
Department
2019
£000
2020
£000
2021
£000
2022
£000
2023
£000
5yr Revenue
Variance
£000
5yr Revenue
Variance
%
Pensions 10,598 11,479 13,060 14,343 17, 396 6,798 64.1%
Corporate trust 9,024 10,789 9,771 10,620 12,473 3,449 38.2%
Corporate services 12,167 12,226 18,755
1
20,206 20,640 8,473 69.6%
IPS net revenue 31,789 34,494 41,586 45,169 50,509
2
18,720 58.9%
% Net Revenue growth 7.5% 8.5% 20.1% 8.6% 11.8%
Profit before tax 11,465 12,227 13,340 14,422 15,936 4,471 39.0%
% PBT growth 9.4% 6.6% 9.1% 8.1% 10.5%
5 YEAR IPS NET REVENUE
20232019 2020 2021 2022
Pensions Corporate trust Corporate services
£000
0
10,000
20,000
30,000
40,000
50,000
60,000
Source: Law Debenture as at 31 December 2023.
5 YEAR PROFIT BEFORE TAX
Profit Before tax
2019 2020 2021 2022 2023
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
£000
Source: Law Debenture as at 31 December 2023.
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
31.12.2023
£000
5yr growth
%
EBITDA 10,424 11,515 13,335 15,369 16,588 17,625 69.1%
Multiple 8.4 9.2 9.4 10.8 10.5 10.5 25.0%
IPS fair value (excluding net assets) 87,562 105,938 125,349 165,985 174,174 185,063 111.4%
NAV adjustment: total value less net assets already included 78,439 91,860 112,407 135,885 148,376 160,836 105.0%
IPS EBITDA & APPLIED MULTIPLE
EBITDA Multiple
2018 2019 2020 2021 20232022
0
2
4
6
8
10
12
0
5,000
10,000
15,000
20,000
Multiple x£000
Source: Law Debenture as at 31 December 2023.
TOTAL IPS FAIR VALUE (excluding net assets)
£000
2018 2019 2020 2021 2022 2023
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 2023.
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 £8.0m from gross revenue of £58.5m.
See page 35 for commentary on the IPS valuation.
STRATEGIC REPORT
STRATEGIC REPORT
Investment managers’ review
17
Our investment strategy
The investment approach adopted has not changed for many
years, but it has hopefully been improved with lessons learnt.
There is a relatively long list of stocks which allows for a blend of
large, medium and small companies. There are overseas holdings
where a similar company cannot be found in the UK market or
the overseas company is cheaper. Over 80% of the Portfolio is in
UK quoted companies at present, as this is where we are finding
superior value despite concerns about the UK economy. The
belief behind portfolio construction is that genuine diversity
in the holdings is how capital is preserved in the long term.
We employ different approaches to how we look at potential
investments. Around 50% of the Portfolio is in FTSE100
companies. These are, we believe, sound long-term investments
and they are often well-known companies that feature in other
portfolios with similar objectives. However, it is what you do
differently to others that makes you perform differently. The
structure of a cash-generative operating company and a Portfolio
gives the opportunity to have a wider range of investments and
still produce an attractive level of earnings. Therefore, unusually
for an income growth trust, there are investments that do not
pay a dividend. Early-stage small companies and operationally
challenged large companies feature. The small companies that
succeed will give substantial returns, while large companies that
have a recovery plan that they implement with determination will
in time return to paying dividends at a considerably higher share
price. The different elements of the Portfolio, when blended
together, provide real diversification of underlying operating
activities. It does mean there are usually around 150 holdings
and we do not go over 175. The absolute stock-specific risk is
relatively low compared to the index and the exposure to small
and medium-sized companies has contributed, in the long term,
to the better performance of your Company.
Economic and market backdrop
The central economic debate in 2023 was the balance between
bringing down inflation while avoiding recession. Consensus
opinion for economic growth ultimately proved too pessimistic.
lawdebenture.com
18
Investment managers’ review
STRATEGIC REPORT
inflation fell from over 10% to below 4%. This meant that, by
the end of the year, the UK consumer was again receiving real
wagegrowth.
As we look ahead to 2024, we see that a similar dynamic has the
potential to occur again. Consensus currently expects modest
0.4% real GDP growth. However, household cash flows (after
all essential expenses such as energy and food bills) have the
potential to grow mid- to high-single digit, aided by good levels
of nominal wage growth. We therefore see the potential for a
better UK economic backdrop than is widely forecast.
Performance
Our aim as portfolio managers is to outperform the FTSE
Actuaries All-Share benchmark over both the short- and long-
term. It is our view that our structure of the Company provides
a favourable backdrop for this, as it broadens the investible
universe beyond higher dividend-paying shares. When we come
on to look in more detail at stock attribution, in a similar pattern
to recent years, it is often the lowest dividend-paying shares that
have been among the best performers.
In 2023, the Portfolio performed approximately in line with
the FTSE Actuaries All-Share benchmark. Unlike in 2022,
when good performance in the UK equity market was heavily
dominated by large companies in the FTSE 100, this year share
price performance was more balanced across different sizes of
company. Performance drivers were therefore more esoteric,
driven by individual stock performance. While ‘recovery’ holdings
such as Marks & Spencer and Rolls-Royce performed very well,
these were balanced by some poor performers, predominantly
within the natural resources and financials sectors. We will now
examine the stock-specific performance drivers in more detail.
The swing factor in the economy was always likely to be the
UK consumer and whether they were willing to draw down on
their pandemic savings to smooth cost-of-living pressures. This
has proven to be the case, with more resilient retail sales than
expected, benefitting some of this Portfolio’s largest holdings
such as Marks & Spencer. From an inflation perspective (the
second chart above), while there was some persistence to UK
inflation during the summer months (largely caused by nuances
surrounding the energy price cap), over the course of the year
At the time of writing, real GDP growth in 2023 looks likely to be
closer to 0.5% growth. The chart below shows how UK real GDP
expectations progressed over the course of the calendar year:
Alternative Performance Measures
1 year
%
3 years
%
5 years
%
10 years
%
NAV total return (with IPS at fair value and debt at par)
1
8.9 22.7 51.8 101.4
NAV total return (with debt and IPS at fair value)
1
9.4 35.1 62.4 111.9
FTSE Actuaries All-Share Index total return
2
7.9 28.1 37.7 68.2
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 155).
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
Top five absolute contributors to performance:
Stock £ Appreciation % Appreciation
Rolls Royce 25,243,022 287.0%
Marks & Spencer 11,603,227 134.4%
HSBC 5,195,260 23.2%
Hill & Smith 4,898,816 62.8%
Senior 4,436,460 41.5%
Source: Law Debenture. Note performance figures are capital only, not total return.
PROGRESS OF UK REAL GDP EXPECTATIONS
-1.0
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
UK 2023 Real GDP Expectations (%)
12/2022
01/2023
02/2023
03/2023
04/2023
05/2023
06/2023
07/2023
08/2023
09/2023
10/2023
11/2023
12/2023
Source: Bloomberg.
THE DYNAMIC OF UK INFLATION
0
2.0
4.0
6.0
8.0
10.0
12.0
UK CPI (%)
12/2022
01/2023
02/2023
03/2023
04/2023
05/2023
06/2023
07/2023
08/2023
09/2023
10/2023
11/2023
Source: Lazarus Economics.
19
STRATEGIC REPORT
Investment managers’ review continued
Top five losses
Top five absolute detractors from performance:
Stock £ Depreciation % Depreciation
Anglo American (5,879,700) (40.4%)
Ceres Power (5,577,078) (70.2%)
i3 Energy (4,133,490) (53.7%)
NatWest (2,983,500) (17. 3%)
Indus Gas (2,951,570) (71.1%)
Source: Law Debenture. Note performance figures are capital only, not total return.
Rolls-Royce and Marks & Spencer, while clearly very different
businesses, arguably have similar reasons for their strong
performance this year. Both have long had potential for
successful turnarounds – Rolls-Royce has won considerable
market share in supplying engines for the next generation
of wide-bodied planes, while M&S has long had a successful
food business while clothing and home profitability had
dwindled. Both have seen recent management change that
have proven the catalyst for an earnings (and share price)
recovery. It is important to note that, in both cases, the
dividend yield is low (or indeed zero in the case of Rolls-
Royce). When companies are in the midst of recovery, it
is often right to pause dividend payments, as companies
may be in a cash consumptive phase that often comes
with substantial restructuring costs. These positions
would therefore be challenging to hold, in size, within a
traditional income fund structure. Our Group structure is
therefore an advantage in being able to hold, in scale, these
‘recovery’holdings.
In the case of M&S, it was the new Chairman (Archie Norman)
in 2017 that spurred the change. It was at this point that
the business recognised the need for a fundamental re-
set – closing legacy stores, lowering prices on both sides of
the business to become more affordable and reducing (in
clothing) the sometimes overwhelming amount of items
on offer (instead becoming more focussed, with buying
in greater depth that allowed better buying terms, as well
as better availability). These changes, put in place over a
number of years, have become gradually more apparent,
but it was only this year that we began to see a series of
material earnings upgrades following market share gains in
bothcategories.
In the case of Rolls-Royce, their technical expertise had
long been apparent. However, the shares had struggled for
external reasons (namely Covid, with the long-haul market,
served by wide-bodied planes, being particularly slow to
recover) and company-specific reasons, in particular a
frustration that market share success had not translated into
substantial cash generation. These historical frustrations have
been (at least) partially resolved this year, with passenger
demand for travel continuing to recover and, under a new
CEO, the company announcing material cost savings and
ambitious free cash flow targets. The ongoing aerospace
market recovery also aided another of the best performers
this year, Senior, which makes aerospace components.
HSBC performed well, aided by rising interest rates, although,
relative to the benchmark, it was a detractor (as the position
is comparatively smaller than that of the benchmark). Hill &
Smith, an industrial conglomerate with significant exposure
to the US infrastructure market, also performed well on
structural growth in many of its end markets.
While in 2023 Rolls-Royce saw favourable end markets
combined with ‘self help’, Anglo American in effect saw the
opposite. There were undoubtedly challenging operating
conditions, for example cyclical demand weakness in diamonds
(where they own De Beers) and power and transport outages
in one of their key geographies, South Africa. These external
factors combined with self-inflicted issues, such as a material
downgrade to production guidance for copper, which is seen as
one of the key sources of future earnings growth for the shares.
We continue to hold the shares on the grounds that, relative to,
for example, copper-focussed peers, they present good value
with the prospect for earnings recovery, but undoubtedly this
year’s operating performance has been disappointing.
Ceres Power has made progress operationally, but investors
are disappointed that there has been no large licensing deal
signed with China and more generally the uptake in hydrogen
fuel cells is slower than was initially hoped. Due to substantial
profits taken in the shares at a higher share price, Ceres
remains the top contributor to Portfolio performance over the
last five years.
Commodity prices such as natural gas spiked in the immediate
aftermath of the war in Ukraine. However, this year there
was a degree of normalisation, which impacted commodity
producers such as i3 Energy and Indus Gas.
Within financials, NatWest was a poor performer, both in
absolute terms and also relative to its key UK peer, Lloyds
(also held in this Portfolio). While, at the start of the year,
NatWest looked more attractive from a valuation perspective
and therefore was a bigger position in this Portfolio, the
banking sector has a remarkable ability to snatch defeat from
the jaws of victory. A steep rise in interest rates should be a
positive for bank margins, but shares have often performed
poorly despite this. In this case it was Nigel Farage being
‘debanked’ and the subsequent departure of the CEO that led
to poorperformance.
lawdebenture.com
20
Investment managers’ review continued
STRATEGIC REPORT
Portfolio income
During the year dividend income totalled £33.5m, down modestly
from last year’s £34.4m. The key difference between the two
years was a lower level of special dividends in 2023, in particular
from the mining and banks sectors. As we look ahead to 2024,
in our view the backdrop for UK dividends is encouraging as the
dividend payout ratio has been reset to more sustainable levels
following Covid.
Portfolio activity
During the year we were modest net investors, investing £37m.
This net investment was largely matched by a rise in the Trust’s
net asset value and some share issuance, meaning gearing at
calendar year end rose only modestly, reaching 12.7% at year-
end, compared to 12% at the beginning of the year.
The approach is to take a long-term view about the holdings
we will buy as our confidence grows and valuations remain
undemanding and sell when these factors are going in the
opposite direction. We are always looking for opportunities
to refresh the Portfolio in an opportunistic way. The property
sector has had the perfect storm in recent years with interest
going up and changes in behaviour such as the move to online
from physical stores in retail, while in the office area the move
to working from home has altered property requirements.
These problems have meant the share prices for quoted
property stocks have been very weak in recent years. They are
trading at substantial discounts to the recent asset values.
This is an opportunity for good operators in property to show
their worth. Purchases were made in Shaftesbury, which
has an iconic London portfolio of properties, and Workspace
which repurposes properties to uses the economy of today
needs. These companies add value to their properties under
management and, when interest rates stabilise, their strengths
should come to be recognised by investors. It is important to
focus on companies that genuinely add value in their activities
rather than just hope they will be helped by a change in the
economic conditions. Holdings were also built up in Johnson
Matthey and Air Products, both well-managed companies
that will benefit from the move towards alternative forms of
energy. There were also a number of positions built up in smaller
companies in order to refresh the Portfolio for the future.
On sales, two of the largest were taking profits in US companies
that have operated well but where the valuation is now relatively
high given the macroeconomic headwinds, namely Caterpillar
and Applied Materials.
Outlook
There is a long list of investor concerns. They range from major
global conflicts to the seemingly low productivity of the UK
economy. However, we do not own shares in an economy but
rather dynamic companies with management teams that will
deal with the circumstances they find. It is usually the general
worries that have led individual company share prices to fall to
historically low levels. These low valuation levels are apparent at
both the UK market level (see chart below) and the Portfolio level.
The prospective Price Earnings Ratio for the Portfolio, at sub
10 times, is substantially lower than its historical average. The
Portfolio yield has looked this high before but that was before
dividends were going to be cut in the banking crisis. This time,
the dividend cover is relatively high and there is little hopeful
thinking in the projections. For all the confidence at a stock
level, it will probably need some lift of the gloom about the
macro picture for share prices to appreciate. The most obvious
event will be when interest rates are cut, especially if it is from a
position in which there is no actual recession being experienced.
In the meantime, we will focus on companies that are managing
themselves in a way that positions them for long-term growth,
through providing excellent product and services to their clients.
This is the best way to face economic uncertainty.
James Henderson and Laura Foll
Investment managers
26 February 2024
BACKDROP FOR UK DIVIDEND INCOME
0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Dividend payout* (%)
* Dividend payout represents dividend per share as a percentage of earnings per share.
Source: Lazarus Economics.
JPM UK V ROW PE DATA NOVEMBER 2023
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1995 1998 2001 2004 2007 2010 2013 2016 2019 2022
MSCI UK 12m Fwd P/E relative to MSCI World
Median +2 Stdev -2 Stdev
Source: Bloomberg.
Portfolio by sector
2023
Portfolio by sector
2022
Geographical distribution
of Portfolio by value
2023
Geographical distribution
of Portfolio by value
2022
Basic materials 6.0%
Oil and gas
10.3%
Consumer goods
7.8%
Health care
6.0%
Consumer services
10.4%
Utilities
3.1%
Financials
27.4%
Telecommunications
1.9%
Industrials
25.6%
Technology 1.5%
21
STRATEGIC INFORMATION
Portfolio by sector and value
Europe 7.4%
North America 3.2%
United Kingdom 88.2%
Japan 1.2%
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%
Europe 10.6%
North America 5.1%
United Kingdom 83.2%
Japan 1.1%
lawdebenture.com
22
STRATEGIC REPORT
Fieen largest holdings: investment rationale
as at 31 December 2023
Rank
2023 Company Location
% of
Portfolio
Approx
Market
Cap.
Valuation
2022
£000
Purchases
£000
(Sales)
£000
Appreciation/
(Depreciation)
£000
Valuation
2023
£000
1. Rolls Royce UK 3.85 £69.76bn 8,797 3,223 — 25,243 37, 263
Rolls-Royce is a designer and manufacturer of engines for use across a number of end markets, most materially civil aerospace. They
have won significant market share on the next generation of wide-bodied planes, where flying hours are recovering post Covid. Under
a new CEO they are reducing costs and have laid out ambitious medium term goals for cash generation.
2. Shell UK 3.32 £105.76bn 29,075 — — 3,044 32,119
Shell is a vertically integrated oil & gas company, with significant exposure to natural gas within its production mix. The business is
highly cash generative at current commodity prices, allowing attractive cash returns to shareholders as well as funding significant
capital expenditure. The company is targeting net-zero carbon emissions from it’s own operations and the use of the end products it
sells by 2050, with an intermediary target of 50% emission reduction by 2030.
3. HSBC UK 2.85 £124.56bn 22,360 — — 5,195 27,555
HSBC is a large global lender and financial services business. It provides geographic diversification to the Portfolio while becoming
more focused on geographies where they are among the market leaders.
4. BP UK 2.74 £85.18bn 27,069 — — (498) 26,571
BP is a vertically integrated oil & gas company. Similar to Shell it is highly cash generative at current commodity prices, providing
optionality for the company to both fund significant capital expenditure and return cash to shareholders. The company aims to
achieve net zero carbon emissions by 2050 or sooner across its own operations and the products it sells.
5. Rio Tinto UK 2.26 £46.67bn 21,743 — — 165 21,908
Rio Tinto is a diversified miner with significant exposure to iron ore. As a results of its low position on the cost curve, it is able to remain
cash generative despite volatility in commodity prices and pays an attractive dividend yield.
6. Marks & Spencer UK 2.25 £3.67bn 8,631 1,558 — 11,603 21,792
M&S is a food and clothing retailer. After a long period of underperformance it has been reinvigorated under a new Chairman and
management team. It is regaining market share in both clothing and food at good margins, meaning substantial earnings upgrades
were achieved during 2023.
7. Flutter Entertainment UK 2.23 £11.32bn 17,492 — — 4,084 21,576
Flutter is a global gambling provider and owner of brands such as Paddy Power and Betfair. It is successfully rolling out in the US as
states gradually legalise gambling, providing a potential route to substantial earnings growth in the medium term.
8. GlaxoSmithKline UK 2.08 £69.91bn 19,983 — — 175 20,158
GSK is a global pharmaceutical company. It has had some success in recent years with launched products such as a shingles vaccine
and, more recently, an RSV vaccine for older adults. The shares trade at a valuation discount to global pharmaceutical peers that in
our view is unjustified.
9. Barclays UK 1.96 £15.63bn 19,498
— — (583) 18,915
Barclays is one of the largest lenders in the UK as well as owning a global investment bank. It trades at a lower valuation than many of
its peers because of scepticism that the investment bank can generate good returns. On evidence of better execution on, for example,
Investment Bank cost discipline it could have potential to re-rate from its low starting valuation.
10. Senior UK 1.57 £0.79bn 10,682 — — 4,436 15,118
Senior produces specialist components for use across aerospace and industrial end markets. The civil aerospace market was
significantly impacted by Covid and is still in a period of recovery. This means there is scope for further earnings growth at Senior,
while the business remains well managed.
2323
Rank
2023 Company Location
% of
Portfolio
Approx
Market
Cap.
Valuation
2022
£000
Purchases
£000
(Sales)
£000
Appreciation/
(Depreciation)
£000
Valuation
2023
£000
11. Tesco UK 1.52 £16.47bn 11,888 — (619) 3,404 14,673
Tesco is the largest food retailer in the UK. It has used its scale to its advantage, setting prices at competitive levels for the consumer
while generating good levels of free cash flow, much of which is returned to shareholders via dividends and share buybacks.
12. BAE Systems UK 1.50 £13.94bn 11,128 — — 3,309 14,437
BAE is a global provider of defence equipment and systems. The shares have performed well in recent years on higher defence
spending as well as good execution under a new management team.
13. Lloyds Banking Group UK 1.48 £32.41bn 13,623 — — 689 14,312
Lloyds is one of the largest lenders in the UK. The rise in interest rates from historically low levels has enabled it to generate higher
returns while the valuation remains modest. It pays an attractive dividend yield.
14. NatWest UK 1.48 £22.15bn 17,238 — — (2,983) 14,255
NatWest is one of the largest lenders in the UK with a strong position in both retail and SME lending. Their returns have improved
materially in recent years as interest rates have risen, while they have also paid an attractive dividend yield to shareholders.
15. National Grid UK 1.43 £28.19bn 13,058 — — 793 13,851
National Grid is a regulated utility company with assets in both the US and the UK. The need to reduce carbon emissions, for example
via electric vehicles, is likely to put increasing pressure on electricity networks and therefore creates the need for significant future
investment. In time this should mean faster regulated asset growth. Within the overall Portfolio mix the shares should act defensively
and pay a good dividend yield.
STRATEGIC REPORT
Fieen largest holdings: investment rationale continued
as at 31 December 2023
lawdebenture.com
24
Classication of investments
based on market values as at 31 December 2023
The above table excludes bank balances and short-term deposits.
UK
%
North
America
%
Europe
%
Rest of
the world
%
Total
2023
%
Total
2023
£000
Total
2022
%
Total
2022
£000
Oil and gas
Alternative energy 1.10 — — — 1.10 10,651 0.51 4,542
Oil & gas producers 6.79 1.14 — — 7.93 76,646 8.92 79,384
Oil equipment services & distribution 1.07 — — — 1.07 10,396 1.38 12,313
8.96 1.14 — — 10.1 97,693 10.81 96,239
Basic materials
Chemicals 0.85 0.12 0.25 — 1.22 11,759 1.65 14,623
Forestry & paper 0.84 — — — 0.84 8,067 0.83 7,400
Mining 3.82 — — — 3.82 36,913 6.11 54,417
5.51 0.12 0.25 — 5.88 56,739 8.59 76,440
Industrials
Aerospace & defence 7.68 — 0.45 — 8.13 78,454 4.40 39,209
Construction & materials 5.08 — — — 5.08 48,970 4.39 39,199
Electronic & electrical equipment 2.55 — 0.09 — 2.64 25,509
2.88 25,623
General industrials 1.07 — 0.11 — 1.18 11,365 1.25 11,169
Industrial engineering 3.13 0.92 — — 4.05 39,016 4.56 40,597
Industrial transportation 0.83 — — — 0.83 8,016 0.62 5,536
Support services 3.20 — 0.15 — 3.35 32,261 3.32 29,533
23.54 0.92 0.80 — 25.26 243,591 21.42 190,866
Consumer goods
Automobiles & parts 0.36 0.56 — 1.23 2.15 20,621 2.00 17,807
Beverages — — 0.08 — 0.08 802 1.33 11,888
Food & drug retailers 1.52 — — — 1.52 14,673 1.27 11,375
Food producers 0.94 — 0.45 — 1.39 13,418 1.83 16,372
Household goods & home construction 2.14 — — — 2.14 20,696 0.25 2,259
Leisure goods — — 0.23 — 0.23 2,173 — —
Personal goods — — 0.20 — 0.20 1,886 0.89 7,988
4.96 0.56 0.96 1.23 7.71 74,269 7. 57 67,689
Health care
Health care equipment & services 0.52 — 0.07 — 0.59 5,710 1.33 11,917
Pharmaceuticals & biotechnology 2.75 0.50 2.08 — 5.33 51,442 6.62 59,068
3.27 0.50 2.15 — 5.92 57,152 7.95 70,985
Consumer services
General retailers 4.35 — — — 4.35 42,164 2.99 26,631
Media 1.89 — 0.07 — 1.96 18,890 2.21 19,706
Travel & leisure 2.91 — 1.01 — 3.92 37,943 3.71 33,085
9.15 — 1.08 — 10.23 98,997 8.91 79,422
Telecommunications
Fixed line telecommunications 0.93 — — — 0.93 8,943 0.91 8,124
Mobile telecommunications 0.78 — 0.17 — 0.95 9,202 1.07 9,474
1.71 — 0.17 — 1.88 18,145 1.98 17,598
Utilities
Electricity 0.61 — — — 0.61 5,839 0.61 5,369
Gas, water & multiutilities 2.46 — — — 2.46 23,769 2.62 23,264
3.07 — — — 3.07 29,608 3.23 28,633
Financials
Banks 9.06 — 0.38 — 9.44 91,179 10.02 89,121
Equity investment instruments 2.81 — — — 2.81 27,195 2.85 25,404
Financial services 4.55 — 0.43 — 4.98 48,199 4.75 42,365
Life insurance/assurance 3.36 — — — 3.36 32,378 4.08 36,359
Nonlife insurance 2.01 — 0.23 — 2.24 21,544 2.99 26,633
Real estate investment trusts 3.97 — 0.31 — 4.28 41,246 2.44 21,691
25.76 — 1.35 — 27.11 261,741 27.13 241,573
Technology
Advanced medical equipment & technology 0.53 — — — 0.53 5,082 0.27 2,442
Software & computer services 0.20 — 0.26 — 0.46 4,409
0.20 1,778
Technology hardware & equipment 0.24 — 0.23 — 0.47 4,604 0.83 7, 394
0.97 — 0.49 — 1.46 14,095 1.30 11,614
Other
Other 0.09 — — — 0.09 784 0.10 913
Sustainable energy 1.17 — 0.12 — 1.29 12,412 1.01 9,033
1.26 — 0.12 — 1.38 13,196 1.11 9,948
TOTAL 2023 88.16 3.24 7. 37 1.23 100.00 965,226
TOTAL 2022 83.26 5.11 10.57 1.06 —
— 100.00 891,005
STRATEGIC REPORT
STRATEGIC REPORT
25
lawdebenture.com
26
Portfolio valuation
based on market values as at 31 December 2023
STRATEGIC REPORT
Holding name Country Sector Industry £000 %
Rolls Royce UK Industrials Aerospace & defence 37, 263 3.85
Shell UK Oil & Gas Oil & gas producers 32,119 3.32
HSBC UK Financials Banks 27,555 2.84
BP UK Oil & Gas Oil & gas producers 26,571 2.74
Rio Tinto UK Basic Materials Mining 21,908 2.26
Marks & Spencer UK Consumer Services General retailers 21,792 2.25
Flutter Entertainment UK Consumer Services Travel & leisure 21,576 2.23
GlaxoSmithKline UK Health Care Pharmaceuticals & biotechnology 20,158 2.08
Barclays UK Financials Banks 18,915 1.96
Senior UK Industrials Aerospace & defence 15,118 1.57
Tesco UK Consumer Goods Food & Drug Retailers 14,673 1.52
BAE Systems UK Industrials Aerospace & defence 14,437 1.50
Lloyds Banking Group UK Financials Banks 14,312 1.48
NatWest UK Financials Banks 14,255 1.48
National Grid UK Utilities Gas, water & multiutilities 13,851 1.43
M & G UK Financials Financial services 13,344 1.38
Sanofi France Health Care Pharmaceuticals & biotechnology 13,264 1.37
Hill & Smith UK Industrials Industrial engineering 12,700 1.32
Standard Chartered UK Financials Banks 12,563 1.30
Land Securities UK Financials Real estate investment trusts 12,501 1.30
Shaftesbury Capital UK Financials Real estate investment trusts 12,420 1.29
Morgan Advanced Materials UK
Industrials Electronic & electrical equipment 12,028 1.25
Toyota Motor Corporation Japan Consumer Goods Automobiles & parts 11,877 1.23
IMI UK Industrials Industrial engineering 11,578 1.20
Herald Investment Trust UK Financials Equity investment instruments 11,484 1.19
Aviva UK Financials Life insurance/assurance 11,160 1.16
Anglo American UK Basic Materials Mining 10,838 1.12
Marshalls UK Industrials Construction & materials 10,487 1.09
DS Smith UK Industrials General industrials 10,343 1.07
Severn Trent UK Utilities Gas, water & multiutilities 9,918 1.03
Kingfisher UK Consumer Goods Household goods & home construction 9,852 1.02
Direct Line Insurance UK Financials Nonlife insurance 9,825 1.02
Irish Continental Group Ireland Consumer Services Travel & leisure 9,797 1.01
Hiscox UK Financials Nonlife insurance 9,534 0.99
Johnson Service Group UK Industrials Support services 9,330 0.97
Kier UK Industrials Construction & materials 9,246 0.96
Boku UK Industrials Support services 9,229 0.96
Balfour Beatty UK Industrials Construction & materials 9,155 0.95
Dunelm UK Consumer Services General retailers 9,105 0.94
Cranswick UK Consumer Goods Food producers 9,100 0.94
BT Group UK Telecommunications Fixed Line Telecommunications 8,943 0.93
Cummins USA Industrials Industrial engineering 8,844 0.92
AFC Energy UK Oil & Gas Alternative Energy 8,573 0.89
Prudential Corp UK Financials Life insurance/assurance
8,285 0.86
27
Holding name Country Sector Industry £000 %
Scottish Oriental Small Co UK Financials Equity investment instruments 8,216 0.85
Elementis UK Basic Materials Chemicals 8,115 0.84
Mondi UK Basic Materials Forestry & paper 8,067 0.84
ITV UK Consumer Services Media 8,066 0.84
Spectris UK Industrials Electronic & electrical equipment 8,011 0.83
Ibstock UK Industrials Construction & materials 7,797 0.81
Hammerson UK Financials Real estate investment trusts 7,631 0.79
Vodafone
UK Telecommunications Mobile telecommunications 7,541 0.78
Phoenix Group Holdings UK Financials Life insurance/assurance 7,476 0.77
Hipgnosis Songs Fund UK Financials Equity investment instruments 7,470 0.77
Babcock UK Industrials Aerospace & defence 7,289 0.76
International Distribution Services UK Industrials Industrial transportation 7,075 0.73
Ceres Power UK Oil & Gas Oil equipment services & distribution 6,882 0.71
Halfords UK Consumer Services General retailers 6,489 0.67
Haleon UK Health Care Pharmaceuticals & biotechnology 6,433 0.67
Vanquis Banking Group UK Financials Financial services 6,148 0.64
International Personal Finance
UK Financials Financial services 6,129 0.63
Accsys Technologies UK Industrials Construction & materials 5,946 0.62
Next Fifteen Communications
Group
UK Consumer Services Media 5,775 0.60
IP Group UK Financials Financial services 5,726 0.59
Workspace Group
UK Financials Real estate investment trusts 5,655 0.59
SSE UK Utilities Electricity
5,568 0.58
Gibson Energy Canada Oil & Gas Oil & gas producers 5,564 0.58
Chesnara
UK Financials Life insurance/assurance 5,457 0.57
Air Products and Chemicals Canada Oil & Gas Oil & gas producers 5,377 0.56
General Motors USA Consumer Goods Automobiles & parts 5,359 0.56
Abrdn UK Financials Financial services 5,351 0.55
International Consolidated Airlines UK Consumer Services Travel & leisure 5,328 0.55
Oxford Sciences Innovation
UK Financials Financial services 5,133 0.53
Oxford Nanopore Technologies UK Technology Advanced Medical Equipment &
Technology
5,082 0.53
Smith & Nephew UK Health Care Health care equipment & services 5,062 0.52
Vertu Motors UK Consumer Services General retailers 4,777 0.49
VH Global Sustainable Energy
Opportunities
UK Other Sustainable Energy 4,632 0.48
TT Electronics UK Industrials Electronic & electrical equipment 4,560 0.47
Reach UK Consumer Services Media 4,329 0.45
Johnson Matthey
UK Other Sustainable Energy 4,244 0.44
Redde Northgate UK Industrials Support services 4,237 0.44
Ricardo
UK Industrials Support services 4,087 0.42
Epwin Group UK Consumer Goods Household goods & home construction 3,972 0.41
Inchcape UK Industrials Support services 3,935 0.41
Bellway UK Consumer Goods Household goods & home construction 3,840 0.40
Weir Group UK Industrials Industrial engineering 3,773 0.39
STRATEGIC REPORT
Portfolio valuation continued
based on market values as at 31 December 2023
lawdebenture.com
28
STRATEGIC REPORT
Portfolio valuation continued
based on market values as at 31 December 2023
Holding name Country Sector Industry £000 %
Jubilee Metals Group UK Basic Materials Mining 3,627 0.38
Bristol-Myers Squibb
USA Health Care Pharmaceuticals & biotechnology 3,625 0.38
i3 Energy
UK Oil & Gas Oil & gas producers 3,557 0.37
ITM Power
UK Oil & Gas Oil equipment services & distribution 3,475 0.36
SigmaRoc UK Industrials Construction & materials 3,406 0.35
Nestle Switzerland Consumer Goods Food producers 3,157 0.33
Novo Nordisk Denmark Health Care
Pharmaceuticals & biotechnology 3,147 0.33
Grit Real Estate Income Group Guernsey Financials Real estate investment trusts 3,040 0.31
Watkin Jones UK Consumer Goods
Household goods & home construction 3,032 0.31
Castings UK Industrials Construction & materials 2,933 0.30
Roche Switzerland Health Care Pharmaceuticals & biotechnology 2,754 0.29
SAP Germany Technology Software & computer services 2,524 0.26
XP Power UK Technology Technology hardware & equipment 2,344 0.24
ASML Netherlands Technology Technology hardware & equipment 2,259 0.23
Airbus SE Netherlands Industrials Aerospace & defence 2,206 0.23
Munchener Rueckver Germany Financials Nonlife insurance 2,184 0.23
Safran SA France Industrials Aerospace & defence 2,142 0.22
Renold UK Industrials Industrial engineering 2,121 0.22
Gelion UK Other Sustainable Energy 2,088 0.22
Moncler Italy Consumer Goods Personal goods 1,886 0.20
Zoo Digital Group UK Technology Software & computer services 1,885 0.20
Surface Transforms UK
Consumer Goods Automobiles & parts 1,884 0.20
Deutsche Boerse Germany Financials Financial services 1,852 0.19
LVMH France Consumer Goods Leisure Goods 1,798 0.19
Amundi France Financials Financial services 1,739 0.18
UniCredit Italy Financials Banks 1,709 0.18
Cellnex Telecom Spain Telecommunications Mobile telecommunications 1,662 0.17
Saietta Group UK Consumer Goods Automobiles & parts 1,500 0.16
DSM-Firmenich AG Netherlands Basic Materials Chemicals 1,475 0.15
SGS SA Switzerland Industrials Support services 1,443 0.15
Marstons UK Consumer Services Travel & leisure 1,242 0.13
Ondine Biomedical Inc. Canada Health Care
Pharmaceuticals & biotechnology 1,204 0.12
Indus Gas UK Oil & Gas Oil & gas producers 1,201 0.12
Invinity Energy Systems UK Oil & Gas Alternative Energy 1,190 0.12
EDP Renovaveis SA Spain Other Sustainable Energy 1,185 0.12
Arbuthnot Banking Group UK Financials Financial services 1,166 0.12
Danone SA France Consumer Goods Food producers 1,162 0.12
Plant Health Care USA Basic Materials Chemicals 1,133 0.12
BNP Paribas SA France Financials Banks 1,131 0.12
Sig Combibloc Switzerland Industrials
General industrials 1,022 0.11
Allied Minds UK Financials Financial services 971 0.10
Logistics Development Group UK Industrials Industrial transportation 941 0.10
Arkema SA France Basic Materials Chemicals 927 0.10
ASM International NV Netherlands Industrials Electronic & electrical equipment
911 0.09
29
Region
Valuation
31 December
2022
£000
Purchases
£000
Costs of
acquisition
£000
Sales
proceeds
£000
Appreciation/
(Depreciation)*
£000
Valuation
31 December
2023
£000 %
United Kingdom 743,255 85,814 308 (18,405) 41,409 852,381 88.16
North America 45,482 7,581 — (17, 324) (4,632) 31,107 3.24
Europe 92,842 5,855 8 (26,364) (2,481) 69,860 7. 37
Japan 9,426 — — — 2,452 11,878 1.23
891,005 99,250 316 (62,093) 36,748 965,226 100.00
Changes in geographical distribution
* Please refer to note 2 on page 127.
STRATEGIC REPORT
Portfolio valuation continued
based on market values as at 31 December 2023
Holding name Country Sector Industry £000 %
Ilika UK Oil & Gas Alternative Energy 887 0.09
Grifols Spain Health Care Pharmaceuticals & biotechnology 856 0.09
Allfunds Group UK Other Other 852 0.09
Heineken NV Netherlands Consumer Goods Beverages 802 0.08
Bawag Austria Financials Banks 741 0.08
Kistos UK Oil & Gas Oil & gas producers 734 0.08
Universal Music Group Netherlands Consumer Services Media 720 0.07
Sartorius AG Germany Health Care Health care equipment & services 648 0.07
Longboat Energy UK Oil & Gas Oil & gas producers 585 0.06
Serica Energy UK Oil & Gas Oil & gas producers 574 0.06
Brockhaus Capital Management Germany Financials Financial services 541 0.06
First Tin UK Basic Materials Mining 540 0.06
Adidas Germany Consumer Goods Leisure Goods 375 0.04
Deltic Energy UK Oil & Gas Oil & gas producers 365 0.04
SIMEC Atlantis Energy UK Utilities Electricity 271 0.03
Libertine Holdings UK Other Sustainable Energy 263 0.03
Carclo UK Basic Materials Chemicals 108 0.01
LDIC Investments UK Financials Financial services 100 0.01
Velocys
UK Oil & Gas Oil equipment services & distribution 39 —
Better Cap UK Financials Equity investment instruments 25 —
965,226 100.00
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 a Portfolio and an Independent
Professional Services (IPS) 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 135 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.
The Board endorses our purpose and values
and is responsible for ensuring that our culture
is aligned with our strategy by assessing,
monitoring and challenging the same where
appropriate. The Board discharges this duty by
reviewing the relevant policies, practices and
behaviours throughout the business including
its own conduct as a Board and of its individual
directors and by ensuring our stated purpose, values and
objectives 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 by reviewing:
•
reports on the results of our quarterly eNPS surveys;
•
reports on stakeholder engagement as described on page 62
and our Section 172(1) Statement on pages 45 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;
•
reports on the diversity and inclusion of the Board and the
IPS business 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 92.
Following on from the project to articulate the culture and
values of our business in 2021, we organised another culture
week during 2023 to continue to embed, share
and celebrate our values as a business and are in
the process of planning for 2024.
We believe the culture of the Group is strong
and a contributing factor to our consistent
performance in challenging market conditions.
Our strategy – implementation
Our strategy is centred around the unique
combination of the Portfolio and our IPS business.
Whilst overseen by the Board, the IPS business
operates independently from the Portfolio.
The IPS business provides a reliable source of
revenue to the investment trust. This supports
the dividend and ensures our investment
managers are not constrained to choosing stocks
solely based 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 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 2023 is described in more detail in
the investment managers’ review on pages 17 to 20.
Annual performance 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. Performance against
KPIs is discussed on page 34.
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 AIC UK Equity Income investment trust sector.
Law Debenture’s shares are intended for private investors in the UK (retail investors), professionally advised private clients and
institutional investors. When choosing an equity focussed 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.
Total Shareholder Return
PORTFOLIO
(c.80% 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.20% 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 and
the Channel Islands.
Group employees are employed by L.D.C. Trust Management Limited (LDCTM) 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 part of the ongoingcharges.
More details about the performance of the IPS business in 2023 are given in the Chief Executive Officer’s review on pages 8 to 15.
PORTFOLIO
• The 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 Portfolio.
Whilst performance is measured against the FTSE Actuaries All-Share Index, the composition of the index does not influence
theconstruction of the Portfolio. As a consequence, it is expected that the 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 Portfolio, including gilts and cash
•
The value of a new acquisition in any one holding may not exceed 5% of the
total 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 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 156 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 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 Group 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 2023,
our gearing was 13% (2022: 12%) (refer page 156).
The Group has four debentures (long dated sterling denominated
financing) details of which are on page 146. The weighted average
interest payable on the debentures is 3.96% (2022: 3.96%).
The fair value of long-term borrowings held by the Group is
disclosed in note 20 to the accounts. The fair value calculation of
all long-term borrowings benchmarks the Group debt against
A-rated UK corporate bondyields.
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
FCArules.
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 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
investment trust are:
• NAV total return 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 pages 155 and 156.
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 51 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
Company overview continued
NAV total return with IPS and debt at fair value
1 year 3 years 5 years 10 years
9.4% 35.1% 62.4% 111.9%
Premium/(discount)
31 December 2023 31 December 2022
Year end
(0.2%) 1.2%
High for year
3.0% 4.5%
Low for year
(4.0%) (6.6%)
Ongoing charges ratio
Year ended 31 December 2023 Year ended 31 December 2022
0.49% 0.49%
is therefore best placed to engage with Portfolio companies
and discharge stewardship obligations. The Board is of the
view that becoming a signatory to the Stewardship Code
would unnecessarily duplicate the work of the investment
manager and therefore continues to rely on Janus Henderson
in 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 129 and 130) to these accounts which shows a
detailed breakdown of the split between the Portfolio and the
IPS business.
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.1
The current fair value of the IPS business is calculated
based upon maintainable earnings before interest, taxation,
depreciation and amortisation (EBITDA) for 2023, with an
appropriate multiple applied. The EBITDA for the IPS business
for 2023 was £17.6m. This number is reached by taking the
return, including profit before interest and tax of £15.1m from
note 6 on page 129 and adding back the depreciation charge for
property, plant and equipment and right-of-use assets of £1.3m,
the amortisation of intangible assets of £0.9m, and net interest
expense shown in note 6 on page 129.
The calculation of the IPS valuation and methodology used are
included at note13 on page 136. 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 toapply.
There is no one single comparator who's business is an accurate
proxy for the unique collection of businesses that make up IPS.
Whilst the group of companies presented in the table have some
likeness to the IPS business, further work has been required in
producing a multiple reflective of the fair value to attribute to the
IPS business. 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 six years of revenue
and profit growth. The multiple selected has remained the same
as the prior year.
The comparable companies used, and their recent performance,
are presented in the table below:
Company
Revenue
LTM
2
(£m)
LTM EV/
EBITDA
31 December
2023
Net
revenue
CAGR
2019-2023
EBITDA
margin LTM
Law Deb IPS 51 10.5x 12.0% 32.0%
SEI Investments
Company
1,550 14.4x 5.6% 24.9%
SS&C
Technologies
Holding, Inc
4,449 10.4x 6.2% 33.2%
EQT Holdings
Limited
74 12.6x 9.7% 25.1%
Perpetual
Limited
542 10.9x 17.2% 20.5%
Begbies
Traynor
Groupplc
122 7.6x 19.3% 18.8%
Christie
Groupplc
69 21.9x (3.1%) 3.3%
JTC plc 229 16.3x 26.9% 26.0%
Link
Administration
Holdings
Limited
500 7.8x (10.3%) 20.1%
2 LTM refers to the trailing 12 months ‘results’ which are publicly available.
Source: Capital IQ.
Valuation guidelines require that the fair value of the IPS
business be established on a stand-alone basis. Therefore, the
valuation does not reflect the value of Group tax relief applied
from the investment trust to the IPSbusiness.
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 2024. The
total valuation (including surplus net assets) of the business has
increased by £119m/132% 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
1 Note the daily NAV is refreshed six monthly to reflect the IPS business at fair value
and therefore the daily NAV has the most recent annual or interim IPS FV valuation.
lawdebenture.com
36
STRATEGIC REPORT
Calculation of net asset value (NAV) per share
31 December 2023 31 December 2022
£000 Pence per share £000 Pence per share
Net asset value (NAV) per Group statement of financial position 854,229 654.07 799,067 625.81
Fair valuation of IPS: EBITDA at a multiple of 10.5x (2022: 10.5x) 185,063 141.70 174,174 136.41
IPS net assets attributable to IPS valuation 25,729 19.70 27, 566 21.59
Fair value of IPS business 210,792 161.40 201,740 158.00
Removal of IPS net assets included in Group net assets (49,956) (38.25) (53,364) (41.79)
Fair value uplift for IPS business 160,836 123.15 148,376 116.20
Debt fair value adjustment 33,239 25.45 25,123 19.68
NAV at fair value 1,048,304 802.67 972,566 761.69
NAV attributable to IPS 210,792 20% 201,740 21%
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 (£50.0m) and substituted with the calculation of
the fair value and surplus net assets of the business £210.8m. An adjustment of £33.2m 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 2023 of £1,048.3m or 802.67 pence per share.
31 December 2023
Value £000 Pence per share
Reconciliation of published NAV to results NAV:
Published NAV cum income with debt at fair value 1,042,279 798.06
Reconciliation of shareholders’ funds to net assets:
Published NAV (855,259) (654.86)
Results NAV 854,229 654.07
Revised IPS valuation uplift:
Published NAV (valuation per 30 June 2023) (153,381) (117.4 4)
Results NAV 160,836 123.15
Revised Fair Value of Debentures:
Published NAV (33,639) (25.76)
Results NAV 33,239 25.45
Total NAV at fair value per results 1,048,304 802.67
The ‘results’ NAV at fair value calculated above differs to the ‘published’ NAV at fair value for 29 December 2023 (year end NAV released by
RNS on 2 January 2024). As such, please see below for a reconciliation:
37
Long-term performance record
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Net assets per the statement
offinancial position (£m)
1
574.2 557. 3 662.3 748.3 669.4 775.3 727.0 878.8 799.1 854.2
Revenue return (pence) 16.95 18.10 15.96 21.66 21.26 30.68 21.56 28.09 34.44 33.43
Capital return (pence) 3.87 (17.47) 89.30 67.10 (71.85) 79.27 (19.06) 94.60 (103.17) 24.47
Total (pence) 20.82 0.63 105.26 88.76 (50.59) 109.95 2.50 122.69 (68.73) 57.90
Revenue return (pence)
Portfolio 10.08 11.01 10.88 11.61 13.23 22.18 12.12 18.09 24.06 22.41
Independent professional
services
6.87 7.09 7.68 9.93* 7.87 8.54 9.35 10.00 10.38 11.02
16.95 18.10 18.56 21.54 21.10 30.72 21.47 28.09 34.44 33.43
Group charges — — (2.60) 0.12 0.16 (0.04) 0.09 — — —
Total (pence) 16.95 18.10 15.96 21.66 21.26 30.68 21.56 28.09 34.44 33.43
Dividends (pence) 15.70 16.20 16.70 17. 30 18.90 26.00 27. 50 29.00 30.5 32.0
2
Share price (pence)
1
530.0 498.0 530.0 629.0 540.0 650.0 690.0 799.0 771.0 801.0
(Discount)/premium (%)
1
(2.3) (5.1) (11.4) (6.0) (12.1) (7.4) 3.6 1.4 1.2 (0.2)
NAV at fair value (pence)
1
542.3 524.5 598.5 669.5 614.1 702.2 666.2 787.8 761.7 802.7
Market capitalisation (£m)
1
627.1 589.3 627. 2 744.5 639.3 769.8 817. 3 982.1 984.4 1,046.1
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 2023.
*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 (2014) to reflect the fair value of the IPS business and the long-term borrowings.
Ten year dividend growth of 113% has been calculated based on growth since the 2013 total dividend of 15.0 pence per share.
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. The diagram below summarises our risk
reporting and governance, with risks effectively managed and
monitored in a continuous risk management process. Top-
down Board-level oversight for the Portfolio and IPS business is
provided by the Audit and Risk Committee (ARC).
In discharging its oversight responsibilities in relation to the
Portfolio, the Board considers risk matters during the year by
meeting periodically with the investment managers and receives
a wide range of reports about the Portfolio including investment
review, risk reporting, governance reporting and comparative
peer reporting.
Thematic discussions are held with the investment manager
at two out of six of the scheduled Board meetings each year to
address market trends and insights.
The ARC supports the Board in reviewing the internal control
environment of the investment managers.
The Executive Risk Committee has responsibility for the oversight
of overall risk management 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 where it relates to the Shared
Services Centre or other central function. Risk identification and
management is analysed by the Group Risk Manager.
The ARC reviews the principal risks to the Group and the
adequacy of the controls in place to appropriately manage those
risks as part of our ongoing risk management. Consideration is
also given to emerging risks to ensure that the risk management
framework is updated to protect thebusiness.
The ARC recognises that there are certain risks which are
inherent in the Group’s activities, such as taking market risk with
respect to its Portfolio, and the controls to manage such risks are
paramount to the delivery of ourobjectives.
Risk management
RISK MANAGEMENT PROCESS AND GOVERNANCE OVERVIEW
Internal risk
reporting
Parties
involved
External risk
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 ARC
Principal risks
and uncertainties
• A summarised version
of principal risks for
external reporting
• Review and approval
by the ARC and
theBoard
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 Law Debenture
Corporation p.l.c.
Board
• Group ARC
• Executive Risk
Committee
• Group Risk
Manager
•
Group Risk
Manager
• Business Unit
RiskCommittees
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 attention.
Those risks which have a higher probability and significant impact
on strategy, reputation or financial impact under the risk scoring
system are identified as principal risks on pages 40 and 41.
Governance
The Group’s risk management and internal control framework
is governed via the “parties involved” section of the diagram
above and overseen by the ARC. IPS business risks are managed
through business unit risk committees and management
meetings. The outputs of these are fed through to the Executive
Risk Committee and then the ARC for review and to the Board
for approval as appropriate.
Risk reporting
Risk reporting includes identification of thematic risk trends, risk
reporting, and risk registers which set out risk types, key risks
identified and their status, the internal controls and mitigating
factors in place to address these risks.
Our risk reporting for the IPS business is managed by the
Executive Risk Committee, made up of the CEO, COO and CFO,
supported by the Group Risk Manager. The Executive Risk
Committee meets quarterly. IPS business risks have a lower
materiality threshold than for the Group, however the Executive
Risk Committee identifies risk events or risk topics of relevance
which are taken to the ARC, who oversees Group risks. The Group
Risk Manager also speaks directly to the Chair of the ARC.
The ARC assesses whether Group risks are reported externally,
for example under our principal group risks on page 40.
Group reporting also includes risks associated with the
investment trust, overseen by the ARC. As part of risk
management we monitor the investment managers, perform
operational due diligence and review the internal control reports
of key service providers to the investment trust.
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 of 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 assurance about the effectiveness of first and second-
line controls, with a direct reporting line to the ARC.
Governing bodies and senior management
The ARC, the Board and Executive Risk Committee sit above
the three lines. Part of their job is to set the risk appetite for the
Group, and the IPS business respectively.
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 the Law Debenture Group. 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:
Principal Group risks
The identified Group risks predominantly relate to the
Portfolio as that comprises approximately 80% of net asset
value and the concentration risk of the IPS business as a
whole which represents approximately 20% of our NAV.
Emerging risks
Given our objective to deliver long-term capital growth and
steadily increasing income, we continually horizon scan for
emerging risks which although, not an immediate threat, may
impact our ability to deliver on our objectives to shareholders.
STRATEGIC REPORT
lawdebenture.com
40
STRATEGIC REPORT
Risk management continued
PRINCIPAL GROUP RISKS
CHANGES TO
RISK IN 2023 MITIGATING FACTORS
1. Investment Performance and Market Risk
The risk of the Portfolio failing to deliver and/
or failing to consider and react to market
conditions to deliver the 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,
ourbenchmark.
The principal risk is a material decline in the
value of the NAV and under-performance
against the benchmark. Investment
performance and market risk are the largest
risks to which the Group is exposed.
Our investment risk includes market risk,
gearing risk, credit risk and liquidity risk.
Unchanged
The risk level
remains high
as geopolitical
tensions and
global economic
pressures
continue to have
an unfavourable
impact on global
markets and
therefore the
Portfolio. High
global inflation
in the year
undermines the
value of investment
returns.
•
Market risk is an accepted risk given the nature of the
Portfolio. To manage this inherent risk the Board regularly
reviews the investment managers’ report including risk
indicators, MI, and other financial information and has
open dialogue, robust discussion and challenge to the
investment managers on their approach andperformance,
seeking explanations from the investment managers where
performance is not in line withour objectives.
• The investment trust is closed ended therefore 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.
• To mitigate leverage risk, all borrowings require the prior
approval of the Board and gearing levels are kept under
close review by the Board. We have substantial headroom
on all of our existing borrowings.
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, as in any technology-enabled
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, our investment
manager.
Increased
risk
The cyber threat
landscape is rapidly
changing, with
cyber-attacks
growing ever more
sophisticated and
their increasing
frequency and
scale is well
publicised. Industry
data suggests
that “bad actors”
are becoming
increasingly well-
financed, with
cyber experts
warning of a rising
use of commercial
hackingtools.
•
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. Cyber insurance is also in place.
• We place focus on training our staff about cyber security
risks including phishing training and testing.
• We adopt a continuous improvement approach to IT
security and work closely with our supply chain and industry
recognised best in class security providers.
• The ARC is alert to the threat and risks of cyber security and
receives regular updates on the strategic improvements
toIT.
• 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. We also reviewed Janus
Henderson’s internal controls reports and ISAE 3402
report with a particular focus on IT, and no major issues
werehighlighed.
Group risk summary and mitigating actions
41
Risk management continued
PRINCIPAL GROUP RISKS
CHANGES TO
RISK IN 2023 MITIGATING FACTORS
3. IPS Concentration Risk
The unique setup of the Group as a
Portfolio with the unquoted IPS business,
which represents 20% of NAV and
accounted for 33% of revenue return
per share in 2023, creates an illiquid
concentration risk.
Failure to deliver on the 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 steadily
increasingincome.
IPS Concentration risk also includes
aggregation of litigation, compliance,
regulatory and internal control failures
and people risk.
Unchanged
The IPS business
includes some
counter-cyclical
services which
may help to
counteract any
adverse market
conditions for
other business
lines.
•
The IPS business comprises a diversified range of services with
little 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 Board approval. This
reduces the risk of unplanned concentration risk.
• Valuation of the IPS business takes into account the illiquid nature
of the holding.
• The ARC has oversight of internal control findings from second/third
line and external audit; and review and approval of the IPS valuation
to ensure it appropriately reflects the risk of the IPSbusiness.
STRATEGIC REPORT
EMERGING RISKS
CHANGES TO
RISK IN 2023 MITIGATING FACTORS
1. ESG Considerations
As ESG becomes an area of increased
focus and regulation, we must consider the
impact of ESG factors adversely affecting
the Group’s reputation and performance
both directly and indirectly.
The ESG regulatory landscape continues
to change, therefore we must ensure that
we do not fall behind in meeting these
requirements including climate and ESG-
related targets, as well as ESG-related
disclosure requirements.
There is also the risk of ESG issues in the
companies that we invest in. We run the risk
that one or a number of investee companies
lose value, due to either not adapting to the
ESG agenda, or from specific ESG incidents,
resulting in a loss of value.
Unchanged
The level of risk
has been broadly
in line with last
year. We observe
continued
stakeholder
recognition on
the prominence
of ESG risks.
Challenges around
the consistency
and reliability of
ESG ratings data
remain.
•
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.
• The investment managers regularly meet with the management
of the companies that they hold in the Portfolio, which allows
informed discussion around ESG-related issues.
• Janus Henderson’s research team continues to monitor
regulations that impact our Portfolio.
• We continue to engage and monitor with stakeholders on ESG, in
order to identify trends, patterns and areas of key concern.
Looking to the future
In 2024 our focus is preparation and readiness for the UK Corporate Governance Code reforms around internal controls, as well
as investing internally in systems and software that will support our future growth plans. We are also investigating the risks and
opportunities that AI brings.
Emerging risks and mitigating actions
lawdebenture.com
42
STRATEGIC REPORT
Viability statement
Viability statement
The Board has considered the Group’s current financial position
and the potential impact of its principal risks and uncertainties,
and has a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due
for a period of five years from the date of this report. The Board
have increased the assessment period from three to five years,
consistent with market peers and long-term nature of the
investment trust.
In assessing the viability of the Group over 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 Group 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, potentially avoiding any untimely
requirements to sell down the Portfolio.
• As an investment trust, we benefit from the unique structure
of a predominately 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 Portfolio and the IPS revenue streams provide protection
to the long-term viability of the Group. Over a five year period,
the share-price total return is 85.3%. The NAV total return with
debt at FV is 62.4% compared to the FTSE Actuaries All-Index
Total Return of 37.7%.
• One of the principal group risks relates to investment
performance and market risk. Part of the risk to the Group is
that a breach of our debt covenants results 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 Covid and more recently the macroeconomic environment
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 reoccurring, 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 liquidate assets,
should the need arise.
•
The investment trust has an ongoing charge of 2023: 0.49%
(2022: 0.49%). This is the third lowest OCR in the UK Equity
Income sector*.
Our business operations
• The investment trust 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 of our assets and further safeguard
the interests of our shareholders.
• The Group’s cash is all held with banks approved by the
Board. The Company’s cash balance, including money
market funds, as at 31 December 2023 amounted to £12.4m
(31December 2022: £29.8m), with IPS holding a further
£19.0m. Cash is treated as a fungible across the Group and it is
deployed on a basis of need with periodic clear down of inter-
company balances via an intra-group net-off agreement.
• There is long term borrowing in place comprising four
debentures;
The weighted average cost of borrowing is 3.96%. 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 12.6%, 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 monthly
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
Group’s business model. This assessment has been shared
separately and is 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 Group and will
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: 3.96%
* Source: The AIC Compare investment companies | The AIC
STRATEGIC REPORT
43
continue to actively review the likely impact of these potential
risks. This is set out at page 40.
The ongoing conflicts from Russia-Ukraine and Israel-
Hamas, combined with geopolitical uncertainty from the US
presidential election and likely UK general election in 2024
continue to influence the global and UK economy. The Board
does not consider this will have an impact on the longer term
viability of the Group, given the headroom identified in the risk
sensitivities from the far more extreme scenarios.
In light of the current conditions, the Board has considered
the Group’s current financial position and the potential impact
of its principal risks and uncertainties, and has a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due for a period of
five years from the date of this report.
Balance sheet resilience
As at the 31 December 2023, Law Debenture Corporation held
total investments, including cash and the IPS business of £1.21bn
(31 December 2022: £1.14bn). 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 2023, the Group holds cash
of £31.4m (31 December 2022: £49.6m). In addition to this, the
Company has an overdraft facility of £50m to protect against any
significant fall of cash inflows.
Viability statement continued
STRATEGIC REPORT
lawdebenture.com
44
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 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 Company and the wider Group, setting
investment principles and ensuring that it 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 its long-term
success, including oversight of stakeholder engagement, feedback from the same as appropriate and ensuring that obligations to its
key stakeholders are fulfilled. Those impacted by the Company and the wider Group’s activities and considered key to its operations
can be placed into the following six main categories:
Case Study: Digital Workplace Project
Based on feedback from our colleagues in our quarterly eNPS surveys, our IT team is advanced in the delivery of a digital
workplace project to create a more seamless working experience whether our people work in the office, remotely or on the
move. This project will help to enhance our flexible working arrangements and tighten our operational capability whilst we
continue to provide premium services to our clients.
We have also taken the opportunity to re-base and improve our controls around information security including data
loss prevention, detection and pro-active monitoring.
The Audit and Risk Committee have been active in the oversight of the project with regular updates presented at that forum.
Shareholders,
potential
investors and
debenture
holders
Employees
Community
and the
environment
Principal service
providers
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.
06
05
04
03
02
01
Governmental
agencies/
regulatory
bodies
45
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STRATEGIC REPORT
Section 172(1) Statement continued
KEY STAKEHOLDERS KE Y PRIORITIES ENGAGEMENT ACTIVITIES IN 2023
Shareholders, potential investors
and debenture holders
Investment from shareholders and
debenture holders 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
• Registrar call centre/company secretarial inbox
• Award nominations and wins*
• Circulation of debenture compliance certificates
• Engagement via the press and social media
platforms including LinkedIn
• AGM*
• Institutional investor meetings (c. 50 held in2023)*
• Analyst and 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
• Client satisfaction surveys
• Annual and/or other periodic reviews
• 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*
• Employee wellbeing week
• Quarterly meetings on colleague matters
between the Workforce Engagement Director,
COO and Head of Human Resources*
• Celebration of culture and values via our annual
culture week
• Monthly culture carrier awards
• Quarterly eNPS surveys
• 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 Discovering Leaders programme
* Direct engagement with Directors or the Board. All other items are overseen by management and reported to the Board or its Committees, as appropriate.
Key priorities and main methods of engagement with key stakeholders in 2023
STRATEGIC REPORT
47
KEY STAKEHOLDERS KE Y PRIORITIES ENGAGEMENT ACTIVITIES IN 2023
Principal service providers
We engage service providers to manage
and safeguard our Portfolio, and to
provide critical 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*
• Annual review of the investment manager’s
controls and compliance
• Law Debenture route to market summit. An
event to discuss shareholder engagement,
held between internal stakeholders and
representatives from our key external investment
trust advisors
• Quarterly meetings with custodian and depository
• Quarterly meetings with our corporate brokers*
• Annual service review with our registrar
• Active engagement with large suppliers of the
IPSinfrastructure
Governmental agencies/regulatory bodies
We have a duty to ensure we are
compliant with any laws, regulations
and applicable best practice. We also
ensure that we engage in consultations
and relevant discussions regarding new
implementations or updates that might
affect any of our key stakeholders and
our ability to operate effectively within
the market.
To comply with existing laws,
regulations and applicable
best practice and to contribute
to discussions when these
are being made, in the best
interests of shareholders and our
other key stakeholders.
•
Responses to external consultations on proposed
legal and regulatory changes including the
Consumer Duty, UK Corporate Governance Code
and changes affecting the responsibility of audit
committees and audit standards
• Regulatory and compliance updates to the Board
and its Committees by the General Counsel, CFO,
Group Company Secretary and Group MLRO, Risk
and ESGManager
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 the University
ofGreenwich
• Charity group supporting two named charities
• Paperless initiative
• Deemed consent for shareholders to receive
electronic communications
• Whitechapel Mission attended by our Executive
and Senior Leadership teams
• Observation of Sustainability Day
• Voluntary TCFD disclosures
• Energy efficient office buildings in London,
Manchester and Sunderland
• 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, as appropriate.
Key priorities and main methods of engagement with stakeholders in 2023
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STRATEGIC REPORT
Section 172(1) Statement continued
Review of stakeholder engagement mechanisms
During the reporting period, the Board conducted a review of the effectiveness of its stakeholder engagement practices, including
the existing governance structure around engagement, its list of key stakeholders and the engagement activities adopted. This
included feedback from Clare Askem, in her capacity as Workforce Engagement Director, on the effectiveness of workforce
engagement tools used since her appointment to the role in April 2022.
Regarding workforce engagement, it was determined that listening groups were a helpful tool however, they needed to be used when
there were specific issues to explore given the Company’s relatively small colleague base. Otherwise the existing level of employee
engagement was found to be appropriate. Additionally, in an effort to explore ways to improve our shareholder engagement, a route
to market summit was held during the reporting period and attended by the Executive Leadership team, our Business Development
and Marketing team and our key investment trust advisors to discuss shareholder engagement and the revision of our marketing and
investor relations strategy. An initial update was provided to the Board at its December meeting.
The Board concluded that the governance structure and current stakeholder engagement practices in general, remained effective.
Debenture holders and governmental agencies/regulatory bodies have now been added as key stakeholders to the Group.
Key strategic decisions impacting stakeholders in 2023
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 Group 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.
1) REVIEW OF OUR TARGET OPERATING MODEL
Management has commenced a project to redesign our IPS operating model. This is aimed at driving consistent operational
processes to support our business to scale and to further support our client facing teams as they focus on delivering value for
our clients. As part of this project we have launched a new professional services automation tool for process improvements and
to provide data driven insights. Management have engaged with colleagues from each of the IPS businesses to identify their
operational challenges and potential solutions.
2) DIGITAL WORKPLACE PROJECT
Following employee feedback, we are in the process of implementing our digital workplace project, as described in the case study
on page 45. This will improve communications and working efficiency across our business and with clients.
3) CONTINUED INVESTMENT IN DELIVERING LONG-TERM IPS REVENUE GROWTH
In the last year, the Executive Leadership team in consultation with the various Business and Department Heads have developed
a five year strategic growth plan for IPS, which has been presented and discussed with the Board. The aim being to continue to
deliver long-term and steadily increasing income to shareholders and premium services to our IPS clients.
4) CONSUMER DUTY
The FCA determined that the Company is within the scope of the Consumer Duty, which requires firms to deliver good outcomes
for retail customers. As a result, the General Counsel and Group Company Secretary under the oversight of the Board conducted
a review of the governance mechanisms in place to ensure that with respect to retail shareholders the Company (1) acts in good
faith (2) avoids causing foreseeable harm and (3) is able to provide the appropriate support in pursuing their financial objectives.
This process also included engagement with distributors as defined by the relevant regulations, the Association of Investment
Companies, external counsel and other external and internal stakeholders. Further details on the review may be found in the
Directors report on page 61.
STRATEGIC REPORT
Environmental, Social and Governance (ESG)
Group approach to ESG
ESG considerations may help to underpin sustainable long-term
returns for our shareholders, as well as promoting behaviours
aligned to our corporate purpose and values, as set out on page7.
In 2023, we remained committed to making further change
happen by enhancing the availability of ESG specific information
in the public domain, continuing with our voluntary TCFD
disclosures for 2023 year end, increasing our Corporate Social
Responsibility initiatives, and adding further content to the ESG
web page https://www. lawdebenture.com/about-us/esg. In 2024
we continue to increase ESG awareness across the Group via
education, communication, and a range of activities.
ESG considerations when investing
Whilst we are not positioned as an ESG investment trust, our
investment managers consider ESG factors as part of their
fundamental analysis. As part of their overall investment risk
analysis, the investment managers consider ESG risks that
are material and could impact a company’s prospects, would
likely to have a significant impact on the financial condition or
operating performance of a business, and therefore are risks
with potential to influence investment decisions. Our investment
managers also evaluate a company’s ability to manage these
risks when making a decision to invest. Therefore we consider
ESG materiality if omitting, obscuring or misstating it could be
reasonably expected to influence investment decisions.
Whilst ESG data is considered, the managers’ approach to ESG is
more qualitative which means that companies with weaker ESG
risk profiles are not automatically excluded from the portfolio.
The team proactively engages with senior management on key
ESG issues and risks, assessing their responses and subsequent
actions. Typically the managers meet at least annually with
the companies held in the Portfolio with part of the discussion
covering material ESG concerns.
The managers do not explicitly exclude any stocks or sectors,
but they will divest or not invest in companies where company
management are not considered to be appropriately managing
risks, or where they believe companies do not present an
attractive risk reward proposition.
The Board reviews quantitative ESG metric reporting for the
Portfolio. The inclusion of this data informs discussion and
debate regarding our ESG positioning. We will continue to
consider our approach to ESG as data improves and the asset
management industry becomes more experienced in analysing
the ESG impact of investing.
Environmental
As a business, we are conscious that our decisions could impact
the environment. The Group’s Scope 2 carbon emissions arise
from its consumption of energy in maintaining its offices. Our
London and Manchester offices use 100% renewable energy
with no carbon emissions and are each built according to high
sustainability standards. 80% of global staff are based at these
two offices.
49
Case study: Understanding the factors which impact Shell and BP’s journey to
decarbonise operations
Our investment managers have engaged a number of times with Shell and BP on the companies’ progress to decarbonise their
operations and their work to reduce methane emissions.
Our investment managers have spoken with both companies on methane emissions and believe there is positive progress being
made as both companies are operating widespread Leak Detection and Repair programmes, leveraging available satellite data
and have already targeted the super emitting sites. Continued engagement is focused on increasing the scope of reporting and
target setting, specifically to cover assets which the companies are part owners of.
BP downgraded its interim carbon reduction targets from a 40% carbon emission cut (based on 2019 emissions) by 2030, to a 25%
cut to emissions by 2030. This is because the company is increasing investment in oil and gas projects. Oil & gas companies have a
key role in providing energy for customers, with the Russian invasion of Ukraine energy supply becoming a larger issue.
Decarbonisation needs to be considered alongside energy accessibility and affordability. BP maintains its long run target
to have net zero carbon emissions by 2050 and we will continue to engage with BP regularly to ensure the company
continues to reduce its carbon emissions and provide a credible pathway to meet its longer term targets.
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STRATEGIC REPORT
Environmental, Social and Governance (ESG)
Emissions data (unaudited)
Of the remaining office space, 11% of Scope 2 emissions are from
UK IPS operations with the remainder from our overseas offices.
The Group is not yet required to 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. In our smallest office space, which forms part
of a much larger building, accurate data on energy consumption
is not readily available so we used an alternative calculation
methodology of an average of Group energy consumption
peremployee.
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 (energy used in our offices),
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 as
we do not yet calculate Scope 3 emissions. The parent company,
The Law Debenture Corporation p.l.c., heads the Group and
reports on the streamlined energy and carbon reporting (SECR)
regulations in the table above. None of the Group subsidiaries
meets the 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.
Case Study: Our IPS business
supporting Pulse Clean Energy to help
deliver the UK’s Net Zero targets
We acted as security agent on a £175m credit facility for
Pulse Clean Energy, Pulse’s first debt raise. The proceeds
are to be used to support the development of multiple
new energy storage and grid stability facilities across
the UK, which will help to create jobs across the country
and deliver on the UK’s Net Zero targets. Pulse has just
completed the acquisition of 30MW of battery assets in
Manchester which will come online in 2024 and
their pipeline includes 300MW of Battery Energy
Storage System projects due to come online by
the end of 2024.
Tonnes of CO2e
As at 31 December
2023* 2022** 2021
Scope 1 — — —
Scope 2 36.43 47.21 138.50
Tonnes of CO2e per £000 of IPS revenue
As at 31 December
2023* 2022 2021
Scope 1 — — —
Scope 2 0.0006 0.0009 0.0028
* Decrease year-on-year due to carbon improvement in energy providers’ fuel mix, and
better availablity of utility bills for the period in one overseas office, allowing for more
accurate reporting of energy (with a less intensive carbon outcome) rather than
DEFRA carbon average.
** Reduction in CO2e due to renewable energy use at main offices during 2023.
51
STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
Environmental - Safecall team members join SeaScapes
Tyne to Tees for a litter pick at South Shields beach
Task Force on Climate-Related Financial Disclosures (TCFD)
Law Debenture are not required to provide Climate-related Financial Disclosures in accordance with the Companies Act, nor required to
disclose alignment with TCFD recommendations as an investment trust with less than £5bn of Assets Under Management. However, we
are sharing voluntary TCFD across 3 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).
After careful consideration we have chosen to retain our existing TCFD reporting level until these become mandatory, in order to
focus on areas which are more significant for our Group in order to achieve its strategic objectives.
As part of this exercise to understand climate change materiality risks on our financial statements we have undertaken an
assessment and concluded there are no material climate change risks impacting our financial statements.
The Portfolio has no sector exclusions and is not an ESG-focused fund. The Portfolio does not concentrate 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. We do not include ESG terms such as ‘responsible’, ‘ethical’, ‘climate’ or ‘social’ in the Company
name. Our IPS business is a low carbon emitter as shown on page 50 on our Scope 1 and 2 emissions data table, which is very low
for an operational business within the FTSE 250 index.
In the table of voluntary TCFD disclosures on pages 52 to 53, we have presented a view of TCFD across the Portfolio and the IPS
business for greater transparency, as opposed to a single set of disclosures for the entire Group.
Our investment managers at Janus Henderson manage our Portfolio. Further information on Janus Henderson’s TCFD disclosures
can be found on its website www.janushenderson.com.
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STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
VOLUNTARY TCFD REPORTING
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 in July 2022.
We will continue to evolve the Plan as the industry matures, based on feedback from the ARC and Board taking into consideration
views of key stakeholders such as shareholders and their representatives.
Law Debenture does not currently have climate-related goals and targets because we are not an ESG fund. Due to the nature of the
IPS business already being a low direct carbon emitter as our Scope 1 and 2 emissions on page 50, are very low for an operational
business within the FTSE 250. The Board will revisit climate-related goals when TCFD reporting becomes mandatory for investment
trusts of our size.
Portfolio IPS Business
Within the Portfolio, climate-related risks and opportunities
are assessed where they are considered to be material to
the investment rationale, refer to “ESG Considerations when
investing” on page 49 for further information. 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 active engagement 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. 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.
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. This will be reviewed on a periodic basis by the Executive Leadership team and
the ARC.
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. The investment managers seek
to identify material risks and opportunities relevant to each investment case over a
variety of time horizons as per their investment decisions. The need to decarbonise
the global economy over the long term presents investment opportunities. For
example, industrial gas company Air Products & Chemicals and sustainable
technology company Johnson Matthey are currently benefitting from the need to
decarbonise. We continue to invest in early-stage companies, Ceres Power, AFC
Energy and ITM, who are developing and manufacturing technologies that will
benefit from decarbonsation trends over the longer term.
The investment managers report to the Board on ESG related considerations as part
of their regular updates.
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
energysources.
Legislative change in relation to carbon,
including reporting requirements and
taxation implications poses an immaterial
risk to our business along with others in
the marketplace and we must ensure
we are able to meet such reporting
requirements.
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STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
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 are reported to the ARC annually, most recently
in December 2023. We have assessed the impact of climate change on the financial statements of the Group and concluded that
presently there are no adjustments required to the financial statements.
We consider climate risk for the Group to be low and it is not considered to be a principal risk under the Group’s scoring assessment
of principal risks in Risk Management on page 39. ESG considerations, including climate regulatory reporting requirements such as
TCFD, remain an emerging risk and we will continue to review this on a regular basis.
Portfolio IPS Business
Climate-related risks within the Portfolio are predominantly
assessed through investment 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 reductiontargets.
Our investment managers utilise reporting in their
investment decisions that includes a screening for portfolio
companies held with the highest contribution to portfolio
carbon risk.
Climate considerations are reviewed at an 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 IPS assets impaired because of climate-related
physical risks.
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, it has been decided not to accelerate the implementation of metrics. During
the year, we undertook an assessment on calculating Scope 3 emissions across the Group and have decided not to publish Scope3
emissions given that a) we are not an ESG fund, and b) due to the highly complex and costly barriers to entry in calculating this
metric in the operational IPS business.
Portfolio IPS Business
There are currently no KPIs to assess climate-related risks
that are applied to the 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.
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STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
Social
Diversity and inclusion
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 have been ranked 2nd in the FTSE 250 Rankings for
Women on Boards and in Leadership (and 1st in the Financial
Services sector), for two consecutive years by the FTSE Women
Leaders Review. We fully support all the recommendations in
thisreport.
For more information on the progress of our diversity and
inclusion objectives please refer to pages 72 and 73 and our
published Gender Pay Gap Summary (https://www.lawdebenture.
com/news/ lawdeb-publishes-gender-pay-gap-summary) which
highlights areas where we have made excellent progress.
At Law Debenture we provide governance solutions to some of
the UK’s largest organisations. We understand the impact that
we can have and commit to lead by example. Examples of our
achievements in the ESG space include:
• Three of our colleagues nominated in BDO’s #EmbraceEquity
campaign to mark International Women’s day 2023; Trish
Houston, COO; Hester Scotton, CFO; and Lily Frost, Associate
Director in Corporate Trust and ESG Committee member.
REPORTING ON GENDER IDENTITY (unaudited)
As at
31December
Number of
Board
members
Percentage
of the Board
Numberof
senior
positions on
the Board
(CEO, COO, SID
and Chair)
1
Number in
executive
management
2
Percentage
of executive
management
2
Number in
senior
management
3
Percentage
of senior
management
3
Number
in Group
employees
Percentage
of Group
employees
2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022* 2023 2022 2023 2022 2023 2022
Men 4 4 57% 57% 3 3 1 1 33% 33% 8 9 44% 38% 136 118 45% 45%
Women 3 3 43% 43% 1 1 2 2 67% 67% 10 15 56% 62% 163 144 55% 55%
Total 7 7 100% 100% 4 4 3 3 100% 100% 18 24 100% 100% 299 262 100% 100%
REPORTING ON ETHNIC BACKGROUND (unaudited)
White British
or other White
(including
minority-white
groups)
6 6 86% 86% 4 4 3 3 100% 100% 16 22 89% 92% 200 182 67% 69%
Mixed/Multiple
Ethnic Groups
— — 0% 0% — — — — 0% 0% 1 1 6% 4% 9 12 3% 5%
Asian/Asian
British
1 1 14% 14% — — — — 0% 0% — — 0% 0% 41 30 14% 11%
Black/African/
Caribbean/
Black British
— — 0% 0% — — — — 0% 0% — — 0% 0% 21 15 7% 6%
Other ethnic
group,
including Arab
— — 0% 0% — — — — 0% 0% 1 1 6% 4% 13 8 4% 3%
Not specified/
prefer not tosay
— — 0% 0% — — — — 0% 0% — — 0% 0% 15 15 5% 6%
Total 7 7 100% 100% 4 4 3 3 100% 100% 18 24 100% 100% 299 262 100% 100%
* Restated
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.
2 Executive management report to the Board.
3 We have aligned our definition of “senior management” to that of the Parker review (https://parkerreview.co.uk/) during 2023, therefore 2022 numbers have been restated.
The Parker review defines senior management as members of the Executive Committee (or equivalent) and of the senior managers who report directly to the members of the
Executive Committee; “ExCo and ExCo minus one”. We have excluded the CEO and COO who are also members of the Board as well as members of the Executive Committee.
Changes to female representation among senior management largely due to organisational changes. There remains strong female representation across the Group.
55
STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
Law Debenture Senior Leadership Team volunteering
at The Whitechapel Mission
Social Case Study: Engaging with
Sanofi on clinical trial diversity
Our investment managers engaged with healthcare
company Sanofi on clinical trial diversity and ongoing
litigation. The efficacy and safety of medicines can vary based
on a number of factors including gender, race and age.
Sanofi is working to increase the diversity of the
application of its medicines through clinical trials
and is creating a team dedicated to improving
diversity across its pipeline at eachstage.
• Trish Houston is also a diversity champion and most inspiring
returner finalist in the Women in Investment Awards 2023.
• Women in Pensions Awards 2023 for Law Debenture
Organisational Award for Supporting Diversity, and a number
of Law Debenture colleagues including Natalie Winterfrost as
Sustainability/ESG Woman of the Year.
• Chartered Governance Institute UK & Ireland Diversity &
Inclusion Initiative of the Year 2023 (Law Debenture Shortlist).
• Shortlisted in the 2023 INSEAD alumni balance in business
awards which recognises trail-blazing FTSE350 organisations
levelling the playing field for women and men in the
workplace.
DE&I considerations are ingrained in the way we operate. A few of
the actions undertaken in 2023 include:
• Ongoing culture initiatives – such as Culture Week 2023 to
bring together colleagues across the business to meet and
share ideas and with our charity partners coming in to talk
with us around how we can help our local communities.
• Encouraging volunteering days, including the Sunderland team
attending a beach clean, volunteering at The Whitechapel
Mission, and working with Wood Street Mission in Manchester.
• Workforce engagement director facilitating a listening and
discussion group with colleagues on their concerns, ideas and
mechanisms for improving DE&I.
• Ethnicity and gender shortlisting requirement with our
preferred recruitment providers.
• 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 which employees are encouraged
to complete at enrolment. Where gaps and missing fields are
identified, targeted emails are sent out on an annual basis
encouraging colleagues to provide the missing data.
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 (https://www.
lawdebenture.com/investment-trust/shareholder-information/
corporate-governance/modern-slavery).
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 69.
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56
STRATEGIC REPORT
Environmental, Social and Governance (ESG) continued
30% of meetings with at least one
vote against management
Voting
We delegate stewardship activities to our investment managers.
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 in line with shareholder interests or where
engagement proves unsuccessful, they will voteagainst.
Law Debenture Voting Summary
During 2023, our investment manager voted on behalf of Law
Debenture at 168 company meetings, 50 with at least one vote
against management.
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.
70% of meetings where we did not
vote against management
Source: Janus Henderson using
Institutional Shareholder Services
(‘ISS’) categories, 31 December 2023,
for the period 1 January 2023 to
31December 2023.
Note: Some meetings had
more than one vote against
management.
Notable votes cast
against management proposals:
Bristol-Myers Squibb
We voted against management, in favour of a proposal
which would separate the role of the Chair from the role of
the CEO as we believe this is best corporate governance
practice.
Notable votes cast
in favour of management proposals:
AFC Energy
We voted in favour of management, against the
recommendations of our proxy advisor. We acknowledge
that early-stage companies can have some governance
shortcomings, however the company is aware of the
need to deal with this. The focus during the year was on
operational change and there has been some success.
They will be able to recruit better as they become a
stronger business.
i3 Energy
We voted in favour of management, against the
recommendations of our proxy advisor. The company is
changing fast and has worked to improve governance
issues in the past.
% of AGMs with at least
one vote against management
Voting by category
Source: Janus Henderson using
Institutional Shareholder Services
(ISS) categories, 31 December 2023,
for the period 1 January 2023 to
31December 2023.
26% Director-related
18% Compensation
12% Capitalisation
10% Auditor-related
10% Environmental & Social
5% Routine Business
4% Related-Party Transaction
4% Strategic Transaction
3% Financial Statements
3% Shareholder Rights
2% Equity Issuance
1% Company Continuation
1% Political Donation
1% Strategy
57
Environmental, Social and Governance (ESG) continued
STRATEGIC REPORT
Governance Case Study: Hipgnosis
Songs Fund
The portfolio holds a position in Hipgnosis Songs Fund
(SONG), with the view that music streaming is an area
of structural growth and the trust holds a high quality
collection of assets. The SONG Board recently proposed
an asset sale of a catalogue of songs to a related party
(Hipgnosis Songs Capital, a partnership between SONG’s
investment advisor and Blackstone) at a substantial discount
to the published NAV. This proposed asset sale highlighted
several corporate governance concerns. For example the
majority of the disposal was agreed bilaterally, without the
potential for competing third-party bids. While there was
a ‘Go-Shop’ provision for competing bids to potentially
be put forward, this came with a large termination fee if
agreed which we felt was unjustifiable. We met with the
management team and the Board of SONG on several
occasions in the weeks leading up to the vote on the asset
sale, as well as the continuation vote for the Trust. Following
these meetings we decided to vote against both the
proposed asset sale and the continuation of the Trust. The
Trust has recently put in place a new Chairman
and Non-Executive from Round Hill (a competing
trust that was recently sold). We are meeting with
the new Chairman in the comingweeks.
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 15.
Law Debenture ESG Committee
The ESG Committee met seven times during 2023 and is
chaired by the Group ESG Manager who also attends meetings
of the Audit and Risk Committee. ESG matters relating to
strategy are escalated to the Board for approval.
For 2024, 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
26February 2024 and signed on its behalf by
Law Debenture Corporate Services Limited
Company Secretary
Case Study: Review and Selection of
aStaff Pension Scheme
In Q4 2022 the Law Debenture Pensions Governance
Committee supported by an independent employee
benefits adviser undertook a review of its staff pension
provision. This review was driven by a strong commitment
to deliver value for members, enhancing administration
and service capabilities, and placing a greater weight on
Environmental, Social and Governance (ESG) considerations
within the default investment strategy.
The selected default strategy - Aviva’s My Future Focus
investment is designed with ESG considerations integrated
throughout its construction and ongoing management.
Through engagement and voting activities, good practice
is promoted among the investments held in the underlying
funds managed by Aviva Investors, reducing investment
risk on ESG issues.
The Committee noted Aviva’s ambition is to be a net zero
emissions company by 2040, including net zero
from investments, with a clear pathway for this
journey and ahead of the 50% cut required by
the Paris Agreement.
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CORPORATE GOVERNANCE
The Board
Robert Hingley
Board Chair, Independent Non-Executive
Director
N
R
Appointed to the Board on 1 October 2017
and appointed Chair 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,
Marathon Asset Management and
chairman of governors at North London
Collegiate School. He is also 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
A
Audit and Risk Committee
R
Remuneration Committee
N
Nomination 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 2023, 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. Tim Bond will retire at the end of the 2024 AGM, having completed nine
years on the Board.
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 an extensive background in strategic
development and in-depth experience in business change and digital transformation. 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. Clare is currently a non-executive director of
Portmeirion Group PLC and IG Design Group plc.
Key skills and experience contributed to the Company include strategy, corporate transactions and
digital marketing and distribution.
A
R
N
Maarten Slendebroek Independent Non-Executive Director
Appointed to the Board on 11 January 2024 — Maarten has over 35 years of investment management
experience and extensive knowledge in strategic development having previously worked as
distribution and strategy director and later CEO of Jupiter Fund Management plc until November
2019. Before then he was managing director and head of international retail at BlackRock for over 18
years. Maarten is currently chair of the supervisory board at Robeco (Rotterdam), chair of Mintus and a
non-executive director at Brooks Macdonald Group plc. He also serves on the board of trustees for the
Orchestra of Age of Enlightenment Trust.
Key skills and experience include an in-depth knowledge of the financial services sector, fund and
investment management, strategic development and governance.
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CORPORATE GOVERNANCE
61
CORPORATE GOVERNANCE
The Directors present their Annual Report and the audited financial statements for the year ended 31 December 2023. The Company
operates as an investment trust in accordance with sections 1158-1159 of the Corporation Tax Act 2010 as amended (CTA 2010) 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 the CTA 2010. 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 2023 was 33.43p per share. The
Directors recommend a final dividend of 9.125p per share, which,
together with the three interim dividends of 7.625p paid in each
of July and October 2023 and January 2024, will produce a total
of 32.0p per share if approved by shareholders at the AGM (2022:
30.5p). The final dividend will be paid on 11 April 2024 to holders
on the register on the record date as at 8March 2024. After
deduction of the interim and final dividends of £41.9m (2022:
£38.9m), consolidated revenue reserves increased by £1.5m
(2022: increased by £4.5m).
Directors
The Directors at the date of this report are listed on pages 58
and 59. All Directors held office throughout the year, other than
Maarten Slendebroek who was appointed on 11 January 2024.
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. As mentioned
in the Chairman’s statement, Tim Bond will be retiring as a
Director of the Company at the upcoming AGM, having served on
the Board for nine years.
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 15 in the strategic report.
Regulatory obligations
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 128
9.8.4 (7) Allotment of equity securities Note 17, page 139
9.8.4 (2-6) (8-14) N/A 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 156), leverage being any
method of borrowing that increases the Company’s exposure,
Directors’ report
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CORPORATE GOVERNANCE
Directors’ report continued
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
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 2023, the leverage calculated under
the gross method was 0.98, and under the commitment method
was 1.01.
ESG considerations
The Group gives ongoing consideration to ESG factors in both
the management of the 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 page 50.
Repurchase and issue of shares
At the 2023 AGM, the Directors were given power to buy back
up to 19,274,822 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 2024 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 2024 AGM.
The Directors were also given power to allot up to 12,858,454
ordinary shares at the 2023 AGM. From the 2023 AGM to the
26February 2024 the Company issued a total of 8.3m ordinary
shares under its share issuance programme and our SAYE
scheme. The authority will expire at the 2024 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 26 February 2024.
Donations
The Company made a charitable donation of £1,520 (2022: £nil) to
Place2Be, a children and young people’s mental health charity,
and no political donations (2022: £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 2023, there were 131,191,892 ordinary shares in issue
with 131,191,892 voting rights. Note 17 includes details of share
capital changes in theyear.
As at 31 December 2023, there were no shareholders that had
notified the Company of a beneficial interest of 3% or more of the
issued share capital. Additionally, no such disclosures had been
made to the Company as at 26 February 2024. Share information
as required by section 992 of the Companies Act 2006 appears at
pages 62 and139.
Workforce engagement
Our people are key to our IPS business, and we rely on their
expertise to provide excellent services to our clients. We have
offices in the UK and in other jurisdictions as disclosed on page
159 of this report. During 2023, workforce engagement was
conducted through various methods including:
•
Employee wellbeing week.
•
Quarterly meetings on colleague matters between the
Workforce Engagement Director, COO and Head of Human
Resources.
•
Quarterly eNPS surveys.
•
Our annual culture week.
•
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 to focus on
their operations, the wellbeing of staff based in that region and
to track performance.
As set out in the Section 172(1) Statement, Clare Askem is the
appointed Workforce Engagement Director. 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
Group 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, the Board reviewed
workforce engagement as part of a wider review on stakeholder
63
CORPORATE GOVERNANCE
engagement mechanisms. Further details are disclosed in the
Section 172(1) Statement on page 48. Clare continues to work
closely with the Group Company Secretary, Human Resources and
the Chief Operating Officer to fulfil herrole.
Disability statement
We have policies in place to ensure that full and fair
consideration is given to applications for employment from
disabled persons, where they are able to adequately fulfil the
role requirement.
Whilst we endeavour to build our workforce from within, we
also recognise the benefit of introducing new talent into our
organisation and sometimes need to look externally for strong
talent. We search for candidates through a number of different
avenues, which allows us access to a more diverse candidate
pool. One of our key criteria when selecting our recruiting
partners is to ensure our values are aligned. We also actively
review recruitment procedures on a regular basis to encourage
applications from and the employment of, persons with
disabilities.
We are committed to promoting equal opportunities for
colleagues with disabilities and we continue to review our
policies and practices to ensure that persons with a disability
do not encounter obstacles or discrimination throughout the
application, training, promotion and career development stages.
Wherever possible we will retain the services of a colleague
who is or becomes disabled, including retraining and/or
redeployment where reasonable and practicable. 3.9% of our
colleagues 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 March 2023, the Board was pleased to have been able to
engage with shareholders in person during and after its AGM.
Shareholders engaged with us on the future of the Pensions
business, the effect of Liability-Driven Investing on Law
Debenture’s defined benefit pension scheme for employees,
the investment manager’s views on legacy companies within
the Portfolio and their ability to remain relevant in the market,
how investment in the IPS business was managed given its
increasing contribution to the net asset value, the increase
in the Corporation’s external audit fees and whether the
Long-Term Incentive Plan awards had been audited. We also
published a video recording of our AGM, in addition to the
PowerPoint presentation, on our website for year-round access.
In line with governance recommendations, if 20% or more
of the votes cast were against any Board resolution, the
Company would announce the actions it intended to take
including consultation with shareholders and a summary on
the outcome of those discussions. The Board confirms that
none of the resolutions put to shareholders at the AGM in
2023 received more than 20% votes against, 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 2024 AGM are set
out at pages 160 to 162.
During 2022 the FCA determined that the Company is within
scope of the Consumer Duty regulations. The Board therefore
commissioned a review of whether any additional actions over
and above those under section 172(1) of the Companies Act
2006 were required, to enhance its delivery of good outcomes
for retail shareholders.
The General Counsel and Group Company Secretary completed
a mapping exercise and gap analysis, and engaged with its
distributors, key internal stakeholders, external counsel and the
Association of Investment Companies, among others, to identify
the actions required to ensure compliance with the Consumer
Duty regulations by the July 2023 deadline.
Relevant actions included a review of existing Board
authorities and practices, the drafting of a new shareholder
engagement policy and target market assessment, a review
of existing Group policies, an assessment of the value of
the Company’s shares by the Board and publication of a
revised European MiFID Template on the Company’s website.
Consumer Duty training was also delivered to the Board
and relevant members of staff and updates made to other
applicable staff training modules.
The Company’s website has a dedicated shareholder
information section, which includes all Regulatory News
Service announcements, our monthly factsheets about the
Portfolio's performance, a financial calendar, previous annual
and half-yearly reports and other important shareholder
information are available fordownload.
Other engagement activities undertaken during 2023 may be
found on page 46 of the Section 172(1) Statement.
Directors’ report continued
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CORPORATE GOVERNANCE
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 Group 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 46.
Investment managers – interests held
Laura Foll held 13,650 shares in the Company as at 31 December 2023
(2022: 13,650). James Henderson did not have a beneficial interest
as at 31December 2023 (2022: nil), although persons connected
to him had an interest of 134,000 shares (2022: 134,000 shares). In
addition, a charity with which James Henderson has non-beneficial
connections owns 117,000 shares (2022: 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 50,951 shares in the
Company as at 31December 2023 (2022: 263,288 shares).
Employee participation/issue of shares
Employees are informed of the financial aspects of the Group’s
performance through regular all staff calls and periodic
management meetings. As with all our shareholders, employees
are able to view the Annual Report online or can request physical
copy. Bi-annual updates, for all staff, on our financial performance
are also held. 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
2023 were:
Date of grant
Number of
option holders
Shares
under option
Exercise
price
15 August 2018 2 5,445 606.00p
14 August 2019 11 17, 375 592.00p
26 August 2020 17 47,022 539.00p
1 September 2021 25 34,967 778.00p
8 September 2022 19 24,401 781.00p
11 September 2023 35 41,618 775.00p
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
65
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
26February 2024 and signed on its behalf by
Law Debenture Corporate Services Limited
Company Secretary
Directors’ report continued
lawdebenture.com
66
CORPORATE GOVERNANCE
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.
In January, the FRC published the 2024 UK Corporate
Governance Code, which will apply to listed companies with
financial years beginning on or after 1 January 2025 save for
provision 29 relating to risk management and internal controls,
which will apply on or after 1 January 2026. Management are
already in the planning stages of ensuring compliance by the
given deadlines and will disclose their progress in the next
annual report and accounts.
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 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
Board Chair 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 Board Chair 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 70. 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 2023 are set out in the table below. Maarten
Slendebroek was appointed to the Board and its Committees on
11 January 2024
Board Remuneration
Audit
and Risk Nomination
Number of
Meetings
6 4 6 1
Attended by:
Denis Jackson 6 1* 6* 1*
Trish Houston 6 1* 6* 1*
Robert Hingley 6 4 6* 1
Tim Bond 6 4 6 1
Pars Purewal 6 4 6 1
Claire Finn 6 4 6 1
Clare Askem 6 4 6 1
* Whilst not members of the Board Committees, Denis Jackson and Trish Houston
attend meetings by invitation. Similarly, Robert Hingley’s attendance at Audit and
Risk Committee meetings is by invitation only.
.
67
CORPORATE GOVERNANCE
Corporate governance report continued
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 Group 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.
The Board – independence
At least half of the Board, excluding the Chair, must be
independent Non-Executive Directors (NEDs). The Board can
confirm that, as at the date of this report, excluding the Chair, five
of the seven 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). When
assessing time commitment, the Board takes into account
Directors’ private company and pro-bono 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 Chair, 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 Chair.
Similarly, the Board is satisfied that Tim Bond, Pars Purewal,
Claire Finn, Clare Askem and Maarten Slendebroek 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 will remain the Senior Independent Director (SID) until
the date of his retirement at the upcoming AGM. Clare Askem
will succeed Tim as the SID following his retirement and will be
available to shareholders who have concerns that cannot be
addressed through the Chair, CEO or COO.
Directors’ remuneration
Details of the Directors’ remuneration appear in the Directors’
Remuneration Report on pages 79 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
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68
CORPORATE GOVERNANCE
Corporate governance report continued
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 70, 74 and 79.
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. Refer to the Going Concern Statement on
page 117.
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 Chair 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.
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,
including any ISAE 3402 auditor reports and bridging letters
provided;
• 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;
69
Corporate governance report continued
• 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
2023 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 Workforce Engagement Director. 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 41.
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 160.
This report was approved by the Board of Directors on
26February 2024 and signed on its behalf by
Law Debenture Corporate Services Limited
Company Secretary
CORPORATE GOVERNANCE
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70
Nomination Committee report
Annual statement by the Chair of the
Nomination Committee
I am pleased to present the Company’s Nomination Committee
report for the year ending 31 December 2023.
Other than me as Chair, the members of the Committee who
served during the year were Tim Bond, 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 their 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 Group Company Secretary, until the conclusion of the
2024 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, including
meetings with the CEO, COO, CFO, General Counsel, each of the
Business Heads and the investment manager.
Following a competitive tender process, Teneo (formerly
Ridgeway Partners prior to acquisition), a global CEO advisory
firm which also provides executive recruitment services, was
engaged to assist with the appointment of a new Non-Executive
Director. Teneo remains a signatory to the Enhanced Voluntary
Code of Conduct for Executive Search Firms. A separate arm
of Teneo’s business also provides public relations consulting
services to the Company.
After almost nine years of service, Tim Bond will be retiring
from the Board at the end of the 2024 AGM. Accordingly and
following a rigorous selection process against an agreed set of
criteria and consideration of Board members’ and candidates’
independence, time commitment, skills, experience, knowledge
and multi-diversity factors, Maarten Slendebroek was appointed
on 11 January 2024.
The Committee is also responsible for reviewing and applying
the Board’s policy on tenure and succession planning for
members and the Chair 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.
CORPORATE GOVERNANCE
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CORPORATE GOVERNANCE
Principal activities of the Committee
During the year, the Committee’s principal activities included:
• Recommending the appointment of a new Non-Executive
Director 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.
• Discussing the actions from the external performance evaluation
of the Board, its Committees and each of the directors and
monitoring progress on actions from the 2022 internal evaluation.
• Reviewing each of the directors’ independence and time
commitments.
• 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 all of them (except Tim Bond who is retiring
after nine years’ service) for shareholder approval at the
forthcoming AGM.
2023 external Board evaluation
During the reporting year, the Directors participated in a
comprehensive external Board evaluation process examining all
aspects of its performance, conducted by independent external
consultant, Clare Chalmers. Clare Chalmers provides no other
services to the Company.
A competitive tender process was undertaken prior to deciding
on an external evaluation firm and the decision delegated
to a panel of the Board, consisting of the Board Chair and a
Non-Executive Director. Support and access to any relevant
documentation was provided by the Group Company Secretary.
The Board Chair was the point of contact for agreeing the
scope of the review and for any matters requiring escalation.
Each Director, the Chief Financial Officer, the General Counsel,
the Group Company Secretary, the External Audit Partner and
the Board’s Remuneration Consultant were interviewed on a
one-to-one, confidential basis. A cycle of Board and Committee
meetings was also observed.
The evaluation focused on (1) Board and Committee composition,
including Directors’ skills, experience and behaviours, Board
dynamics, processes, meeting papers and decision-making
mechanisms; (2) Board succession planning; (3) strategy,
performance and risk; (4) stakeholder engagement; (5) relationships
with Board advisors; and (6) purpose, values andculture.
RECOMMENDATIONS ACTIONS
Improve the presentation
of forecasts on IPS’ financial
performance to the Board
Following the modernisation of the Company’s finance systems over the past two years, the
central finance team improved the presentation of management information to the Board and
its Committees, including forecasts on IPS’ financial performance and debtor management.
Further improvements are expected following the ongoing review of the Company’s
target operating model, which includes the implementation of a new professional services
automation tool. Details are disclosed in the Section 172(1) Statement on page 48.
Appropriately balance increasing
regulatory and governance
requirements relative to the size of
the IPS business
Regulatory and governance requirements are continually monitored by the Board and the
Audit and Risk Committee with the support of the General Counsel, Group Company Secretary,
Group MLRO, Risk and ESG Manager and other internal and external advisors. The Board is
comfortable that it has the right expertise to ensure that a proportionate approach is adopted
in light of the size of the business and taking into account the interests of its key stakeholders.
Streamline the criteria for evaluating
the Company’s investment manager
A formalised list of criteria to facilitate a more in-depth analysis of the investment manager’s
performance by the Board was introduced following the 2022 internal Board evaluation and was
applied for the second consecutive year in December 2023.
Review the effectiveness of
ESG oversight and workforce
engagement
The Board assessed its workforce engagement practices as part of a wider stakeholder
engagement review. Details of this review are disclosed in the Section 172(1) Statement on
page 48. The review on ESG oversight has been deferred to 2024. Related disclosures may be
found in the ESG report on page 49.
Nomination Committee report continued
Board evaluation
The recommendations from the 2022 internal Board and Committee performance evaluation have been discharged as set out below,
save for the review of the effectiveness of ESG oversight:
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72
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
Tenure and Succession Planning 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 succession plans for
short-term absences in line with governance best practice. The process
adopted for the recent appointment of Maarten Slendebroek, is disclosed
on page 70.
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.
As at 31 December 2023 the Company satisfied all recommendations of the
FTSE Women Leaders and Parker Reviews, namely:
•
43% of the Directors on the Board are female and 57% male (at least 40%
female representation on the Board required).
• 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 (at least
one individual on the Board should be from a minority ethnic background).
• The CFO and COO functions of the Company are held by women (at least
one of the senior positions on the Board should be held by a woman).
The description of the evaluation process was reviewed by Clare
Chalmers prior to its inclusion in the annual report.
The findings of the evaluation were presented to and discussed
with the Board in late September 2023. The evaluation concluded
that the Non-Executive Directors were interested and engaged,
providing strong challenge and scrutiny with a focus on strategic
planning, customers and workforce engagement, while Executives
were credited with delivering strong performance and setting and
embedding the culture. The Board was said to have a good range
of skills to cover both the IPS and Portfolio sides of the business.
Key actions arising from the 2023 external evaluation were to:
•
review the balance between IPS business and the Portfolio
Board discussions;
•
review the structure of Board and Committee meetings to
create more time for discussion;
•
review the succession plans for the Executive Leadership team
and their direct reports; and
•
improve certainty around non-financial targets for the Executive
Directors.
Actions against each of these recommendations are currently
underway. The Board will continue to conduct an externally
facilitated performance evaluation every three years and internal
evaluations in the intervening years.
Based on the outcome of the evaluation and on the basis that
they continued to make valuable contributions and exercise
judgement and express opinions in an independent manner, the
Board on the recommendation of the Nomination Committee
has proposed the re-election of all of the Directors (except Tim
Bond who is retiring after nine years’ service), as set out in the
Notice of AGM on pages 160 to 162.
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 is set out below.
We are proud of the progress we have 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 itsobjectives.
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Nomination Committee report continued
OBJECTIVES PROGRESS
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, is 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 gender and ethnicity pay gaps across all levels
of the Group. Further details can be found in the ESG section of the strategic
report on page 54.
The Committee considered the Parker Review’s recommendation for FTSE
350 companies to set 2027 ethnicity targets for their senior management
teams and is supportive of the initiative. Following consultation with the
Parker Review, the Committee has decided to delay setting its target until the
2024 year end, following a review of its leadership structure and associated
succession plans. In the interim, a commitment has been made to:
• take the recommendation into consideration when reviewing the leadership
structure and succession plans for senior management;
• give greater focus to ensuring credible applicants from ethnically diverse
backgrounds are included in candidate pools being considered for
recruitment at the senior leadership level;
• continue to review the Group’s policies on recruitment, training and career
progression to ensure they are non-discriminatory to persons from ethnic
minority backgrounds;
• increase engagement with staff on firm wide objectives regarding diversity
and specifically those on ethnic diversity; and
• consider starting or participating in programmes (whether internal or
external), which promote the recruitment, training and progression of
persons from an ethnic minority background, within Law Debenture.
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 2023 external Board evaluation, suggestions were proposed by
the external evaluator to further enhance the existing Board dynamic. Further
details on the external board evaluation are disclosed on pages 71 and 72. These
and other related matters will be continually reviewed.
This report was approved by the Board of Directors on 26 February 2024 and signed on its behalf by
Robert Hingley
Chair, Nomination Committee
CORPORATE GOVERNANCE
Audit and Risk Committee report
Annual statement by the Chair of the Audit
and Risk Committee
As I complete my second year as Chair of the Audit and Risk
Committee (‘the Committee’), I reflect on what has been a year
of change at Law Debenture. In the CEO’s statement, you will
have read about the ongoing investment in the Independent
Professional Services (‘IPS’) business. With any transformation
initiative, there is always a degree of risk attached to the delivery
and this has been a significant area of focus for the Committee.
In particular, we have been active in our oversight of the
technology infrastructure project and the design of the target
operating model (‘TOM’). Given that 20% of our investments are
concentrated in the IPS business, the Committee believe that the
successful delivery of both these initiatives is critical to managing
the concentration risk associated with IPS by supporting the
delivery of sustainable growth in IPS and protecting our margins
over the middle to long term.
As part of these ongoing transformations, the Head of Internal
Audit has undertaken work to provide assurance over the
project governance framework in place within the IPS business.
Work has also been undertaken to provide assurance over the
delivery of the first stage of TOM, with further internal audit work
assurance work expected in the early part of 2024 to assess the
design of controls.
During 2023, the Committee reviewed the threshold for
reporting accounting judgements up to the Committee to
ensure this remains appropriate and aligned to the wider risk
management framework. In terms of areas of accounting
judgment, the most significant continues to be the valuation
of the IPS business. Considerable time and attention has been
given to determining the appropriate methodology to value the
IPS business and ensuring that the relevant macroeconomic
factors are considered when making recommendations to
theBoard.
Given the macroeconomic environment, where we are seeing
higher interest rates and low growth within the UK economy,
the timely collection and recoverability of our debtors was an
area of focus for the Committee. We were supportive of the
decision to invest more experienced resource into Credit Control
to help manage the risk of debtor write-off. We have been
actively monitoring the levels of aged debt within the business
throughout the year and we are pleased to report that gross
trade receivables at the year-end have reduced (see note 19 on
page 145).
During the year, we have closely monitored the developments
relating to the Department of Business, Energy and Industrial
Strategy’s (‘BEIS’) white paper on audit reform to ensure that
the Group is able to meet the requirements in a timely manner.
Whilst the formalisation of the proposed changes is on hold,
the Financial Reporting Council (‘FRC’) have announced the
outcomes of their review which the Group will adopt in line
with the required timeframes. The Committee believe that the
work the Group is completing on the TOM will stand us in good
stead to implement the attestations regarding the control
environment as at the balance sheet date in 2025.
A key area of responsibility for the Committee is the
recommendation of the final dividend to shareholders. The
Committee has sought to balance the inflationary pressures
that our shareholders have faced whilst looking forward at the
forecasted dividend income from the Portfolio and IPS business.
In line with previous years, we recommended that each of the
first three interim dividends be set at a quarter of the total
dividend for the previous year, resulting in growth of 5.2% in the
level of each interim dividend. 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 9.125 pence per share, resulting in a total dividend of
32.0 pence.
Composition and Meetings
The members of the Committee during the year were myself,
as Chair, Tim Bond, Clare Askem and Claire Finn. Robert
Hingley, Chair of the Board, is not a member of the Committee,
but attends meetings by invitation, along with the Executive
Directors. The Committee also extends invitations to the Chief
Financial Officer, external auditors, and personnel from the
financial, legal, risk and internal audit functions to attend and
report to the Committee on relevant matters. The Committee
meets at least four times per year. The attendance of the
Committee members is shown on page 66.
The Committee believes that it is in the best interests of the
Company for the Chair of the Board to attend Committee
meetings given his in depth knowledge of the business and to
facilitate the communication of all key discussions and decisions
between the Committee and the Board. All the members of
the Committee are independent Non-Executive Directors.
The Board facilitates reviews of the Committee’s composition
and it considers that, collectively, its members have sufficient
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recent and relevant financial, audit and sector experience to
fully discharge their responsibilities. This year’s review of the
operation of the Board and its committees was conducted by an
external board evaluation firm, the details of which are set out on
page 71 of this report.
As part of my duties as Committee Chair, I met regularly with the
audit partner of Deloitte LLP and also with the Chief Financial
Officer, the Head of Risk and the Head of Internal Audit to
discuss matters of significance. In addition, during the year, the
Committee met privately with the external auditor to give them
an opportunity to raise any issues without management present.
We have also met privately with the Internal auditor without
Managment present.
Role and Responsibility of the Committee
The main function of the Committee is to ensure the integrity
of the Company’s financial reporting and the appropriateness
of the risk management processes and internal controls. The
Committee’s authority and duties are defined in its term of
reference, which were reviewed during the course of the year,
and can be found on our company website. The principal
activities carried out during the year were:
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.
•
Meetings with the external auditor included discussing the
2022 financial statements and, in the fourth quarter, to plan the
2023 audit. The meetings included discussions on fees, auditor
independence, key risks, non-audit services and developments
in accounting standards.
•
Providing review and challenge where necessary over key
areas of judgement, including the assumptions in support
of the going concern statement and the Company’s long-
term viability and risks thereto. As part of our review, we have
engaged with the Executive Leadership team to determine the
appropriate period over which to assess our viability. Given our
proposition as a medium to long term investment, we have
taken the decision to increase the period of assessment from
three to five years.
Risk management and Internal control
The approach to risk management adopted by the Group is
set out in the Principal Risks and Internal Controls section on
page 38. Whilst the Board as a whole is responsible for the
effectiveness of internal control mechanisms, it is informed
by more specific work carried out by the Committee, which
includes the initiation and oversight of any investigations
that may be necessary to address control weaknesses or
breaches identified. Our work in this area was supported by
reporting from the Head of Internal Audit on the results of
the programme of internal audits completed and their overall
assessment of the internal control environment, with reference
to the results of their work.
During the year, work was commenced to review all the sources
of assurance, which will be mapped against the principal risks,
and we expect this work to be completed during the course of
2024 as the TOM is fully embedded. In addition, the Committee
take comfort from the internal audit work performed by
RSM over the control environment of our IT systems and
infrastructure. This work was outsourced so that we brought in
the necessary skills and expertise in a complicated and highly
specialised area.
In addition to this, the Committee reviews the adequacy and
effectiveness of the Group’s risk management systems and
processes, with the Group Risk Manager providing reports
on risk matters at each meeting of the Committee. Principal
activities during the year, included:
•
Considering 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.
•
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. The
Committee are encouraged by the Executive Leadership
team’s plans for the TOM and feel that this will support
ongoing improvements in our control environment.
•
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. This included the work
completed to review the internal materiality thresholds for
reporting to the Committee.
•
Reviewing the inherent and emerging risks in the business
and the system of internal controls necessary to monitor such
risks. This included a review of the Company’s Fraud Risk
policy and the controls in place to mitigate this risk.
•
Reviewing reports from the General Counsel and the Group
Risk Manager and other applicable persons on risk and
internal control matters and the adequacy and effectiveness
of the control functions.
•
Review of the External Auditor’s Management Letter and
the monitoring of the programme of work undertaken
by Management to address recommendations made by
theauditor.
Audit and Risk Committee report continued
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Compliance
• Review of regular reports on compliance matters and
keeping under review the adequacy and effectiveness of
the Company’s and the wider Group’s compliance reporting
andobligations.
• Review of 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. This included oversight of the process
and outcome of a regulatory review of our money laundering
procedures in respect to the Corporate Secretarial Services
business. We are pleased that there were no significant
concerns raised in this review.
• Review of the Company’s and wider Group’s procedures,
systems and controls for ethical behaviour and the prevention
of fraud, including the Fraud Risk Policy. There have been
no reported cases of bribery or breaches to our modern
slaverypolicy.
• Review of the arrangements in place for Group staff,
contractors and external parties to raise concerns in
confidence about possible improprieties in 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. A question regarding our arrangements was
included in a recent staff survey and we feel satisfied that the
arrangements we have in place are trusted by our people.
Internal audit
• Monitoring the effectiveness of the Head of Internal Audit’s
work and overseeing the implementation of any corrective
actions. This has been done through regular meetings to
discuss progress and there have been no concerns regarding
the effectiveness of the function.
• 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. Once again, the
Committee agreed a thematic risk-based internal audit plan
for this year which is directly aligned to the Group’s principal
risks and looks at the Group as a whole.
• Ensuring internal audit has sufficient access to perform
its function effectively and in accordance with relevant
standards.
• Review of reports from the Head of Internal Audit, considering
any major findings from their work and monitoring
management’s responsiveness to internal audit’s findings
and recommendations.
External audit
• The Committee recommended to the Board the
reappointment of the external auditors.
• The Committee also met the external auditors in order to
inform considerations regarding their independence and
effectiveness and to discuss the 2023 financial statements
and to ensure their presentation is fairly stated.
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
UK Corporate Governance Code. Under these requirements a
tender for the external audit must be undertaken no later than
2031. The last tender took place in 2021.
External auditors – assessing effectiveness
One of the principal 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 external audit partner
to plan that year’s audit. Part of that process requires the
external auditor to give the Committee a written assessment
of how the external 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 external audit process also enables the Committee
to examine in detail the scope of the external audit, ensuring
that the external 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 external
audit, the Committee receives a presentation from the external
audit partner on their principal findings.
This provides the opportunity for robust challenge, particularly
in areas where management’s judgement has been required.
The Committee also gives the external auditors an opportunity,
without the Executive Leadership team present, to comment
on the quality and standard of the Finance function as well as
the Executive Leadership team’s support of the external audit.
Similarly, the Committee seeks the views of the Executive
Leadership team on the effectiveness and performance of the
external audit team. The auditors made a number of helpful
observations and comments which have been considered
and incorporated in the design of the internal controls and
development of the TOM.
Non-audit services
Non-audit services provided by the external 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, which relate to
assurance services such as an agreed upon procedures audit,
have historically been low and in the year under review were
£21,825 (2022: £65,000).
Audit and Risk Committee report continued
CORPORATE GOVERNANCE
77
Significant financial issues relating
to the 2023 accounts
The UK Corporate Governance Code requires the Committee to
describe any significant issues considered in relation to the 2023
financial statements and how those issues were addressed.
The significant issues and judgements considered by the
Committee include the valuation of IPS, oversight of the
Corporate Secretarial Services impairment review, the existence
and valuation of investments, discussions around the control
environment and the accounting for the Pension Defined
Benefit Scheme.
No new significant issues arose during the course of the
external audit. There continued to be a focus on embedding
the improved Finance operations and we have continued to
make investments in this area to support the strategy for long
term growth. We are pleased with the progress made and the
improved control environment.
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 and report to the Board 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.
This report was approved by the Board of Directors on
26February 2024 and signed on its behalf by
Pars Purewal
Chair, Audit and Risk Committee
Audit and Risk Committee report continued
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Dear Shareholder
On behalf of the Remuneration Committee (the Committee), I am
pleased to present the Director’s Remuneration Report for 2023
(the Report).
The Report is in four sections:
•
Part 1: Committee Chair’s Statement
• Part 2: Remuneration Committee Responsibilities
• Part 3: Remuneration Policy Table and Implementation
in 2023 and 2024
•
Part 4: Annual Report on Remuneration for 2023
The sections are set out in accordance with the UK Directors’
Remuneration Report Regulations 2013, as amended in 2018
and2019.
Shareholder support
During 2022, we conducted a thorough review of the
Remuneration Policy, and consulted major shareholders and
voting agencies on some proposed amendments, in preparation
for the triennial vote at the AGM in 2023.
Shareholders who responded were generally supportive of the
proposed changes, and made several helpful and constructive
suggestions which were taken into consideration by the
Committee and included in the policy proposed in last year’s
remuneration report. The Committee is pleased to report that,
at the 2023 AGM, 95.76% of shareholders voted in favour of the
proposed policy, which has been implemented in respect of 2023
and will be in place until the end of December 2025. No changes
to the policy are being proposed at the 2024 AGM.
Restraint in executive director remuneration
The Committee seeks to ensure that a balance is struck between
a restrained approach to Executive Director remuneration and
ensuring that our CEO and COO are appropriately rewarded for
their roles. We reported in 2022, that compared to a benchmark of
the FTSE SmallCap, the current CEO base salary and the variable
remuneration for the CEO and COO roles at Law Debenture
were below market levels. We detailed in the policy the plan
to address the CEO base salary position and see no reason to
deviate from the proposal that was approved at the 2023 AGM.
The Remuneration Policy approved in 2023 included higher
maximum annual bonus opportunity (125% of salary increased
from 100% previously). However, this was accompanied by an
increase in the weight on financial metrics to 60% from 50%
previously, and a more demanding profit growth range (5% at
threshold and 12% at stretch, compared with 4% and 9% previously).
The approved policy also included a higher maximum LTIP grant
(150% of salary compared with 100% previously), accompanied by a
more demanding 3-year CAGR range of 4% to 14%, compared with
4% to 10% previously, and a reduction in the vesting percentage at
threshold to 20% of maximum (compared with 25% previously).
The pension allowance for Executive Directors was also reduced to
9% from 1 January 2023 (from 12% previously), which is below the
level applied to employees with the same length of service as the
Executive Directors.
Annual performance and bonus outcomes
for 2023
As reflected in both the Board Chair’s and the CEO’s statements,
2023 presented a set of ongoing challenges for the organisation
to navigate but the Executive Directors have continued to work
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, 2023 saw
ongoing inflationary pressures, with rising interest rates
creating a lack of certainty in some of our key markets. Towards
the end of 2023, some of those inflationary pressures had
reduced and the competition for talent has eased slightly.
Going into 2024, our objective is to provide security for our
people through these uncertain times, whilst protecting the
interests of ourshareholders.
The Executive Leadership team aims to foster an environment
which both promotes growth of the Independent Professional
Services (IPS) business and a strong corporate culture. The
Committee would like to see this further translated into the
PART 1: COMMITTEE CHAIR’S STATEMENT
Directors’ remuneration report
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organisation’s employee net promoter score (eNPS) and this will
be an area of focus in the forthcoming year.
2023 was another year of growth for our IPS business, with
revenue growth of 11.8% and an increase in profit before tax
of 10.5%. 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 Board Chair’s
statement on pages 6 and 7 for further overview of the financial
and operational highlights for 2023. Delivery of sustainable
growth is a key metric for the success of the business. With
that in mind, the Committee was particularly pleased with the
work conducted on the five-year strategy, led by the Executive
Directors and the wider Senior Leadership team, as we feel this
is critical to the long-term success of IPS.
The Executive Leadership team are driving a culture of
continuous operational improvement. During the year, this
has been underpinned by the enhancements made to the IT
infrastructure and data protection strategy.
Towards the end of the year, the Committee were encouraged
to see the development of a target operating model (TOM) to
underpin the strategic growth plans. This presents the business
with some solid opportunities to drive further efficiencies in
operational processes, allowing us to scale the business in
a sustainable manner. The Committee would like to see the
successful execution of this over the next 12 to 18 months to
ensure we both deliver the operational enhancements required
to support a growing business and meet the requirements
announced by the Financial Reporting Council (FRC) regarding
controls assurance.
The Committee evaluated the performance of the Executive
Directors in relation to the financial and non-financial metrics set
out on page 92 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; and
•
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 75.7% of the maximum annual bonus should be
awarded to Executive Directors for 2023. In accordance with the
Policy, fifty percent of the portion of the bonus above £100,000 is
deferred into shares for three years.
The performance criteria and outcomes are fully explained in the
Report on page 92. 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, LTIP outcomes
for 2021-23 and 2023 LTIP grant
It has been a successful period for the IPS business. Over the
period, revenues in the business have grown from £34.5m at
the end of 2020 to £50.5m at the end of 2023. 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 to high single
digit growth. During the 3 years, IPS PBT has grown 30%, with a
compound annual growth rate (‘CAGR’) of 9.2%.
Based on this, the total metric-driven outcome for the 2021-23
LTIP cycle was 90.0% 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; and
•
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 period and
nodiscretionary adjustment was required.
The resulting vested shares are subject to a two-year, post-
vesting holding period, in accordance with the Policy.
LTIP grants of 150% of base salary were made to the Executive
Directors in 2023, in accordance with the approved policy.
The performance condition for vesting is IPS PBT growth over
the 3-year performance period, with a range of 4% CAGR at
threshold to 14% CAGR at maximum, which is more demanding
than the range used for previous awards. Also, the vesting
percentage at threshold performance is 20% of maximum,
compared with 25% previously.
The Notice of AGM for 2024 includes a resolution to amend the
LTIP rules to permit additional shares to accrue on the vested
awards to the value of dividends paid to shareholders (‘dividend
equivalents’) up to the end of the mandatory 2-year post-vesting
holding period. This creates closer alignment between the
executives and shareholders and brings the plan into line with
normally accepted best practice.
Base salaries
Base salary increases in 2024 for employees at Law Debenture
averaged 5.6%, 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 inrole.
As previously communicated by the Committee, extensive work
was done in 2022 to benchmark the salaries of the CEO and COO.
At the time, the CEO’s base salary fell well below CEO norms, not
only in the FTSE 250, but also the FTSE Small Cap.
Directors’ remuneration report continued
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The Committee felt that the CEO’s salary had fallen so far out of
line with the market that it was not at a fair level, either relative
to others in less senior roles in the Company or relative to other
CEOs in the market. The situation was not consistent with the
Company’s values, and did not support motivation, retention
and, when necessary, recruitment of talent. The salary was also
becoming increasingly out-of-line each year.
The Committee therefore set out plans to re-position the
CEO’s base salary in stages over the three-year policy period,
subject to continued good performance in role. During 2023,
the CEO’s salary was increased to £354k (which comprised a 5%
general increase, below the average for LDC employees, and
3.9% towards repositioning the salary relative to the market).
The Committee will now deliver stage 2 and increase the CEO’s
salary to £400k (a 13% increase). The Committee plans to deliver
a further increase next year to £450k to continue the journey to
alignment with the FTSE SmallCap CEOs.
Trish Houston’s (COO) base salary has increased by 1.2% from
£290,000 to £293,500 for 2024; this is below the average
percentage increase for LDC employees of 5.6%.
Board Chair fee and NED fees for 2024
The Committee reviewed the Board Chair fee of £110,000 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 Portfolio, but also exercising governance
oversight of the IPS business within LDC. The Committee
therefore increased the Board Chair fee to £130,000, to go some
way towards recognising the breadth of responsibility and
time requirements of the role. The remuneration for the other
Committee Chairs and NED roles will not be increased.
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 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 staff in 2024 will be 5.6%. LDC is committed to
paying all staff at or above the Real 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 all of our staff are
rewarded appropriately for their contribution and that our
salaries are in line with those on offer in the market. Those on
lower salaries have generally been granted larger percentage
increases in salaries than more senior colleagues.
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
£2,202 at the end of 2023, which is more than 1.3 times the rate of
return for the FTSE Actuaries All-Share Index.
Conclusion
The remuneration outcomes for 2023 reflect good performance
during the year.
The Committee encourages you to vote for the Directors’
Remuneration Report for 2023. We 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
26 February 2024
Directors’ remuneration report continued
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REMUNERATION COMMITTEE MEMBERSHIP ANDACTIVITIES DURING 2023
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:
• Implementing the Remuneration Policy following the triennial review and shareholder engagement in 2022;
• Preparing the 2023 Directors’ Remuneration Report;
• Determining 2023 annual bonus outcomes and payments for the Executive Directors and approving
outcomes for the Senior Managers (including the Company Secretary);
• Setting performance objectives, annual bonus measures and targets for 2024;
• Reviewing the operation of the annual bonus process;
• Benchmarking pay for the Executive Directors and Board Chair;
• Determining the Board Chair’s fees;
• Determining performance conditions for the grant of LTIP awards in 2023;
• Determining LTIP awards to vest in 2023;
• Reviewing the LTIP Rules, following the triennial review of the Remuneration Policy;
• Reviewing the Remuneration Committee Terms of Reference;
• Reviewing the Gender and Ethnicity Pay Gap report; and
• Reviewing the remuneration consultant’s, Alvarez & Marsal’s, performance and fees
Support
provided
to the
Committee
Alvarez & Marsal was appointed by the Committee as independent adviser following a formal selection process
in 2022. Alvarez & 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’s fees for the provision of
independent advice to the Committee during the year amounted to £85,786. Other than in relation to advice
on remuneration, Alvarez & 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
and independence.
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 team and 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 is 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 triennial review of the Remuneration Policy 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 Chair;
• 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
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CORPORATE GOVERNANCE
PART 3: REMUNERATION POLICY TABLE AND IMPLEMENTATION IN 2023 AND 2024
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
the 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
for2023
Denis Jackson’s annual salary was £354k. He also opted to participate in the Company’s health care plan.
Trish Houston’s annual salary was £290k. She also opted to participate in the Company’s health care plan.
Implementation
in 2024
As set out in the Policy, the 2023 base salary for the CEO (£354k) remains substantially out of line with market
norms. As approved in the Policy, the CEO salary is being re-positioned in stages over three years, subject to
continued good performance in role:
2023: £354,000
2024: £400,000
2025: £450,000
His benefits are unchanged in 2024.
Trish Houston’s salary will be increased by 1.2% to £293,500. This increase is below that of the wider workforce.
Her benefits are unchanged in 2024.
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
for2023
Denis Jackson received the cash allowance in lieu of contributions equivalent of 9% of salary.
Trish Houston received a cash allowance in lieu of part of her pension contributions, the remainder was
received in pension contributions.
Implementation
in 2024
Denis Jackson’s pension contribution is unchanged in 2024.
Trish Houston’s pension contribution is unchanged in 2024.
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ANNUAL BONUS
Purpose
To incentivise and reward the achievement of annual business objectives to enable successful
implementation of the Group strategy, and to align the interests of Executive Directors with shareholders
and support retention.
Operation and
opportunity
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
the award.
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
for2023
Denis Jackson has been awarded a 94.6% of base salary bonus, out of a maximum 125% of base salary. The
basis for award is explained on pages 91 to 92.
Trish Houston has been awarded a 94.6% of base salary bonus, out of a maximum 125% of base salary. The
basis for award is explained on pages 91 to 92.
Implementation
in2024
The maximum individual annual bonus opportunity continues to be 125% of base salary for Denis Jackson.
The maximum individual annual bonus opportunity continues to be 125% of base salary for Trish Houston.
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 of 150%, was accompanied by a reduction in the vesting
percentage at threshold performance of 20%, and by more demanding performance requirements.
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.
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Directors’ remuneration report continued
CORPORATE GOVERNANCE
LTIP continued
Outcomes
for2023
The Committee uses 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.
Denis Jackson was awarded an LTIP in 2021 which vests in March 2024. Based on the IPS PBT CAGR over the
3year period of 9.2%, relative to threshold to stretch performance range of 4% to 10% CAGR, Denis Jackson will
receive 90% of the maximum of award.
Trish Houston was awarded an LTIP in 2021 which vests in March 2024. Based on the IPS PBT CAGR over the
3year period of 9.2%, relative to threshold to stretch performance range of 4% to 10% CAGR, Trish Houston will
receive 90.0% of the maximum of award.
The Executive Directors were each granted LTIP awards in 2023 of 150% of base salary, and will be granted
2024 awards, also of this percentage of base salary.
The IPS Profit before Tax Annual Growth percentages at threshold and stretch for the 2023 and 2024 grants
are 4% and 14%, respectively, and the percentage vesting at threshold performance was reduced to 20% with
effect from the 2023 grants (from 25% previously).
Implementation
in 2024
The IPS Profit before Tax Annual Growth percentages at threshold and stretch for the 2024 grant are 4% and
14%, respectively.
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
for2023
Denis Jackson held 129,074 shares through his own account, deferred bonus, LTIP vested awards, SAYE and
the SIP against a target of 88,390 as at 31 December 2023.
Trish Houston held 22,973 shares on her own account, deferred bonus, SAYE and the SIP against a target of
72,410 as at 31 December 2023.
Implementation
in 2024
No changes to the policy.
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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
welcomes the opportunity to hold individual meetings with
shareholders, if requested, as outlined in the Directors’ Report
on pages 46 to 47.
Any feedback provided is taken into account when developing
Executive remuneration arrangements, in addition to
guidelines of investor bodies. The Committee monitors trends
and developments in corporate governance and market
practice to ensure the structure of Executive remuneration
remains appropriate and will undertake a shareholder
consultation in advance of any material changes to the
Remuneration Policy, as we did for the Policy approved at the
2023 AGM.
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 base 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 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.
Directors’ remuneration report continued
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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
respective Non-Executive Directors). Fees
are reviewed periodically, considering time
commitment, scope and responsibilities,
and appropriate market data.
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 £400,000
COO £293,500
Pension:
9% of salary or cash equivalent.
Benefits:
As disclosed in single figure table on page 94.
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.
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
£2,000
£0
£200
£400
£600
£800
£1,000
£1,200
£1,400
£1,600
£1,800
100% 42% 29% 24%
30%
32% 27%
28%
39%
49%
100% 42% 29% 24%
30%
32% 27%
28%
39%
49%
£436
£1,049
£1,536
£1,836
£319
£768
£1,345
£1,125
Illustration of total remuneration opportunity for 2024
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 circumstances. The adjustment may result in the value being reduced to nil.
Clawback is the recovery of cash payments made under the annual bonus, deferred annual bonus award or
vested LTIP awards as a result of the occurrence of one or more circumstances listed. Clawback may apply to all
or part of a participant’s payment or award and may be effected, among other means, by requiring the transfer of
shares, payment of cash or reduction of awards or bonuses.
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 2023, there were no external appointments held
by the Executive Directors.
CORPORATE GOVERNANCE
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Directors’ remuneration report continued
‘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. 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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Directors’ remuneration report continued
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
awards lapse.
•
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 in control.
•
Alternatively, awards may be
exchanged for new equivalent
awards in the acquiring company.
1 The Committee has discretion to determine that an Executive Director is a good leaver. It is the Committee’s intention to only use this discretion in circumstances where there is an
appropriate business case which will be explained in full to shareholders. A good leaver is typically defined as an employee who ceases to hold employment by reason of: death, injury, ill-
health or disability; retirement with the agreement of the Group; redundancy; the participant’s employing Company being transferred to an entity which is not a Group member; transfer
of undertaking; or any other reason at the Committee’s discretion.
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 (i.e. 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 described above.
The Committee may authorise payments for statutory
entitlements in the event of termination, reasonable settlement of
potential legal claims, and payment of reasonable reimbursement
of professional fees in connection with such agreements.
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Directors’ remuneration report continued
Performance measures selection for the annual bonus
Performance measures for 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 2023 was PBT. The Executive Directors’ awards are based on
the performance against agreed thresholds, which can be found in the
table below.
60%
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.
40%
MEASURE
For 2023 the maximum bonus opportunity for the Executive Directors was 125% of salary. Performance conditions were based 60% on
financial metrics and 40% 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 60% 5% 12% 10.5% 62.1%
IPS non-financial performance 40% Further details set out below 32.5%
Total 100% 94.6%
PART 4: ANNUAL REPORT ON REMUNERATION FOR 2023
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Directors’ remuneration report continued
Remuneration Outcomes for 2023
Performance against Non-Financial Objectives for 2023
Key
Performance
Area
Max bonus
eligibility
(% of base
salary)
Score
(out of 5)
Bonus
awarded
(% of base
salary) Commentary on objectives set and achievements
Operational
Excellence
12.5% 2.5 6.25% The Committee set several targets in relation to Operational
Excellence which encompassed leadership and governance
structures across the organisation as well as actioning areas
for enhancement identified through internal and external
audits. Following the strategic review, the Executive Directors
designed a new Target Operating Model and an ambitious
implementation plan which is now underway. Progress has
been made on internal and external audit findings. However,
there is still work to be done to drive operational excellence
across the business and this objective will therefore be carried
forward into 2024.
IPS Business
18.75% 3 11.25% The Committee identified several strategic priorities that were
important to facilitate continued growth in IPS. They included
targets around business development, customer satisfaction,
structures to ensure revenues grow faster than costs in 2023
and beyond, as well as further targets for enhancing the
contribution of CSS to IPS. Some good progress was made on
all objectives. Business development was a particular highlight
with increased collaboration and cross-selling across IPS
businesses. The Executive Directors have also overseen the
development of customer satisfaction metrics for some of our
businesses, with more to follow in 2024. There is also further
work needed on CSS to fully realise the value of that addition to
our suite ofbusinesses.
Strategy,
M&A,
Brand and
Marketing
18.75% 4 15% The Remuneration Committee asked the Executive Directors
to undertake a strategic review of the IPS business with a
view to informing plans for future investment and growth. In
addition, the Executive Directors were tasked with developing
and implementing a marketing strategy and plan to support
growth of the IPS business and promotion of the investment
trust. They were also asked to implement these plans. The
Committee was pleased with the work done on the strategic
review, the five-year strategic plan and the marketing plan.
Implementation of the five-year strategic plan began towards
the end of the year, as did the marketing plan.
Total (of a maximum 50% of base salary)
32.5%
2023 PERFORMANCE AND PAY OUTCOMES
Performance against Financial Objectives for 2023
Total Annual Bonus for 2023: 94.6% of a potential maximum of 125% of base salary.
The IPS business delivered PBT growth of 10.5% resulting in an award of 62.1% of base salary out of a maximum of 75% of base salary
for financial performance (60% weighting of the maximum total bonus of 125% of base salary).
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CORPORATE GOVERNANCE
Long Term Incentive Plan
The Committee used growth in IPS PBT as the metric for determining the level of vesting over the relevant performance period. The LTIP
award granted to both the CEO and COO in 2021 reached the end of its performance period on 31 December 2023. The table below shows
the performance target. The outcome was CAGR of 9.2% (compared with a threshold to maximum range of 4% to 10% CAGR), resulting in a
vesting of 90.0% of the maximum award.
In 2023, both the CEO and the COO were granted LTIP awards at the level of 150% 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. Grants in 2024 will also be at the level of 150% of base salary, with the CAGR ranges shown below:
% vesting IPS 3-year PBT CAGR
Below threshold 0% Less than 4%
Threshold 20% 4%
Stretch 150% 14%
Directors’ remuneration report continued
2023 PERFORMANCE AND PAY OUTCOMES
Total remuneration 2023
Denis Jackson
Chief Executive Officer
Salary and benefits 32%
Annual bonus 31%
Pension 3%
LTIP 34%
Trish Houston
Chief Operating Officer
Salary and benefits 34%
Annual bonus 33%
Pension 3%
LTIP 31%
Share ownership
Shareholding is a key means by which the interests of Executive Directors are aligned with those of shareholders.
1 Denis Jackson has 34,826 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 14,075 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 801p as at 29 December 2023.
The value of the shareholdings disclosed have been calculated using the close price as at 29 December 2023, 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
29December 2023 have been included as there are no performance conditions to be met. The unvested LTIP awards have not been
factored in.
Denis Jackson
1
Chief Executive Officer
Current holdings: 110,090 shares
3
Two times salary: 88,390 shares
4
Total target value
3
: £708,000
Trish Houston
2
Chief Operating Officer
Current holdings: 15,279 shares
3
Two times salary: 72,410 shares
4
Total target value
3
: £580,000
Actual
Total Policy Requirement
£882k
£122k
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CORPORATE GOVERNANCE
Directors’ remuneration report continued
Year ended
Salary
1
£000
Benefits
2
£000
Bonus
£000
LTIP
£000
Pension
4
£000
Total
£000
Total Fixed
£000
Total Variable
£000
Denis Jackson 2023 347 2 335 368 32 1,084 381 703
2022 325 2 250 474 34 1,084 361 724
Trish Houston
5
2023 286 33 274 260 22 875 341 534
2022 219 1 211 — 33 464 253 211
1 Changes to salary are affective from 1 April.
2 Benefits shown are available to all eligible employees. Both Denis Jackson and Trish
Houston receive healthcare insurance. In 2023, Trish Houston also received benefits
relating to her return to work from maternity leave in line with our wider policy.
3 Includes dividend reinvestment and dividend equivalent. Value is based on average
share price for the period of 1 October 2023 to 31 December 2023 of 777.67p plus the
final dividend of 0.0925 pence per share. The share price at the time of the grant
in respect of the LTIP vesting in 2024 was 712.8 pence per share compared to the
average share price of 777.67p for the 3-month period to 31 December 2023.
The share price at the time of the grant in respect of the LTIP vesting in 2023 was
462.9p per share. The award that vested in 2023 did so at a share price of 809p
per share. The 2022 award has been updated to reflect the share price at point
ofvesting.
4 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.
5 Trish Houston’s service for 2022 includes a period of maternity leave. The
remuneration figures in the table are actual earnings for 2022.
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 31 December
2023. In the period between 31 December 2023 and 26 February 2024, Denis Jackson’s shareholding has increased by 582 shares, as a result of
dividend reinvestment. Trish Houston’s shareholding has increased by 158 shares, as a result of dividend reinvestment.
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 30,058 34,826 5,565 154,193 58,625 129,074 200% 292% Yes
Trish Houston 5,776
6
14,075 3,856 122,358 — 23,707 200% 65% 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 29 December 2023 of 801p. 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
2023
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
2023
Vesting/
first
exercise
date
Denis Jackson
1
DSP 2020 18,712 166 13.03.20 587.2 18,878 n/a n/a n/a n/a
1
DSP 2021 13,271 539 12.03.21 704.7 n/a n/a 13,810 12.03.24
1
DSP 2022 11,360 462 14.03.22 799.1 n/a n/a 11,822 12.03.25
1
DSP 2023 8,913 15.03.23 841.5 n/a n/a 8,913 16.03.26
2
LTIP 2020 70,210 07.04.20 462.9 58,625 11,585 n/a n/a n/a 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 28.02.22 799.1 n/a n/a 41,806 28.02.25
2
LTIP 2023 66,792 04.04.23 795.0 n/a n/a 66,792 04.04.26
3
SAYE 2020 5,565 26.08.20 539.0 539 n/a 5,565 26.08.25
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. 74% of Denis Jackson’s 2020 LTIP
award vested on 7 April 2023. The remaining number of shares lapsed accordingly.
The vested awards are subject to a two year holding period.
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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CORPORATE GOVERNANCE
Executive Directors’ interests in shares and option plans (audited) continued
Scheme
Interests
held at
1January
2023
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
31December
2023
Vesting/
first
exercise
date
Trish Houston
1
DSP 2022 6,977 283 14.03.22 799.1 n/a n/a 7, 260 12.03.25
1
DSP 2023 — 7,098 15.03.23 841.5 n/a n/a 7,098 16.03.26
2
LTIP 2021 32,267 — 01.03.21 712.8 n/a n/a 32,267 01.03.24
2
LTIP 2022 35, 374 — 28.02.22 799.1 n/a n/a 35,374 28.02.25
2
LTIP 2023 — 54,717 04.04.23 795 n/a n/a 54,717 04.04.26
3
SAYE 2021 3,856 01.09.21 778 778 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.
Law Debenture share price total return, assuming
the investment of £1,000 on 31 December 2013 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
2013 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
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
2023
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 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.
Directors’ remuneration report continued
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CORPORATE GOVERNANCE
Directors’ remuneration report continued
Historical remuneration and TSR chart
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Incumbent
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
D. Jackson
3
C. Banszky M. Adams
CEO single figure of total
remuneration (£000)
690.7 677. 5
180.5 142.2
611.2 643.4 643.0 643.2 1,084
4
1,084
5
757.8 344.1
Annual bonus and deferred bonus
awarded (against maximum %)
62.0% 100.0%
65.1% 100.0%
100.0% 90.9% 85.0% 85.0% 76.8% 75.7%
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 74% 90.0%
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 equivalent. Total number of shares which vested was 58,006 at a share price of 809 pence per share.
5 Includes dividend reinvestment and dividend equivalent. Total number of shares due to vest is 46,835 at an average share price of 777.67 pence per share for the 3-month
period to 31 December 2023.
CEO pay ratio
UK regulations require companies with more than 250 UK employees to publish ratios to show CEO Total pay versus that of its UK
employees. In line with these regulations, we have provided ratios based on Method B as prescribed by the regulations, under which a
single total figure of remuneration is derived for each employee identified using the Gender Pay Gap data and the quartiles analysed.
The employee pay figures were calculated by reference to and as at the year ended 31 December 2023 using full-time equivalent data
for relevant employees in service as at 31December 2023. The Committee is satisfied that the median pay ratio is consistent with the
pay, reward and progression policies for our UK employees.
CEO pay ratios can be volatile due to the variable nature of the CEO remuneration outcomes based on performance.
Financial year Methodology 25th percentile ratio 50th percentile ratio 75th percentile ratio
2023 B 32:1 19:1 10:1
CEO
£000
25th percentile
£000
50th percentile
£000
75th percentile
£000
Total pay £1,044,798 £36,133 £60,517 £114,673
Base salary £346,749.99 £30,250 £51,046 £80,670
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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
2023
Taxable
Benefits
2023
Annual
Bonus
2023
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) 8.9% 0% 34% 0% 0% -10% 0% 0% 0% 3% 3% -4%
Trish Houston (COO) 0% >100% 30% 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 n/a n/a n/a 6% 6% n/a
Robert Hingley (NED) 16.1% n/a n/a 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 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 n/a n/a n/a
Tim Bond (NED) 5% n/a n/a 5% n/a n/a 0% n/a
n/a 3% n/a n/a
Claire Finn (NED) 10.4% n/a n/a 5% n/a n/a 0% n/a n/a 3% n/a n/a
Clare Askem (NED) 8.4% n/a n/a 5% n/a n/a n/a n/a n/a n/a n/a n/a
Pars Purewal (NED) 10.4% n/a n/a 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% 6% n/a 0% 5% 0% 30% 3% 0% 11%
1 Katie Thorpe resigned from the Board on 11 September 2020 and left
LawDebenture 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 2023. There have been no changes in Directors’ interests in the period between 31 December 2023 and 26 February 2024.
Shares owned outright
Robert Hingley 4,870
Tim Bond —
Pars Purewal
1
13,954
Claire Finn 2,576
Clare Askem
Maarten Slendebroek
1 Pars Purewal’s shares are held jointly with a connected person.
Non-Executive Directors
Salary/fees
2023
Total
2023
Salary/fees
2022
Total
2022
Robert Hingley £105,500 £105,500 £90,888 £90,888
Tim Bond £49,400 £49,400 £47,030 £47,030
Pars Purewal £58,387 £58,387 £51,264 £51,264
Claire Finn £58,387 £58,387 £52,909 £52,909
Clare Askem £55,575 £55,575 £51,264 £51,264
Maarten Slendebroek
1
£0 £0 £0 £0
1 Maarten Slendebroek was appointed to the Board on 11 January 2024 and therefore did not receive fees during 2023.
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 2023 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 Directors’ Remuneration Policy and the Annual
Remuneration Report at the AGM on 30 March 2023. The full policy is contained in the Company’s annual report and accounts for the
year ended 31 December 2022, 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
2022 Directors’ Remuneration Report 96.75% 3.25% 26,595,461 893,225 344,264
Directors’ Remuneration Policy 2023 - 2025 95.76% 4.24% 26,326,896 1,165,584 340,470
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.
This report was approved by the Board of Directors on 26 February 2024 and signed on its behalf by
Claire Finn
Chair, Remuneration Committee
Directors’ remuneration report continued
The average number of employees has increased from 260 in 2022 to 288 in 2023, which has led to an increase in employee pay expenditure.
The increase also includes the effect of the annual review of base salaries. 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 2022 and 31 December 2023.
2023
£000
2022
£000 % change
Total employee pay expenditure
1
26,960 23,995 12.4%
Total distributed to shareholders
2
41,982 38,865 8.0%
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.
Non-Executive Director fees
For 2024, the fees for the Chair has increased as shown below, and explained in the Committee Chair’s introductory statement.
Fee
Fees effective
1 April 2024
Fees effective
1 April 2023 % change
Chair fee £130,000 £110,000 18.2%
Non-Executive Director base fee £50,000 £50,000 0%
Additional fee for Chair of Audit Committee £10,000 £10,000 0%
Additional fee for Chair of Remuneration Committee £10,000 £10,000 0%
Additional fee for oversight of workforce engagement £6,250 £6,250 0%
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FINANCIAL STATEMENTS
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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 plc (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 2023 and of the Group’s profit 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 Consolidated statement of profit and loss;
• the Consolidated statement of comprehensive income;
• Statement of financial position;
• Consolidated statement of changes in equity;
• Consolidated statement of changes in equity;
• Cash Flow Statement; 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
ourreport.
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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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 considerations regarding whether
they consider it appropriate to adopt the going concern basis
ofaccounting;
• assessing the compliance with covenants including the
headroom associated with the covenants;
• assessing the liquidity of the assets of the group and whether
there is sufficient liquidity for the group to continue to operate
and meet its financial obligation.
• 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.
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.
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 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 £8.5m 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 to group materiality.
Together, this accounts for 100% of the Group’s investment portfolio, 95% of the Group’s revenue and
96% 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
There were no 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 £965.2m (2022: £891.0m) are key to its performance and account for the
majority of the total assets, 96.4% at 31 December 2023 (2022: 88.7%).
Quoted investments are valued at their fair value, which is represented by the market bid price. Unlisted
investments’ fair value is determined in accordance with International Private Equity and Venture Capital
Valuation (IPEV) guidelines. 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 Group and
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 31
December 2023:
•
Obtained an understanding of the relevant controls over valuation and existence of quoted
investments.
• Agreed 100% of the Company’s investment portfolio at the year-end to confirmations received directly
from the custodian and depositary.
• Independently 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.
• Tested the accuracy of a sample of purchases and sales of investments.
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
thesematters.
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FINANCIAL STATEMENTS
Independent auditor’s report continued
5.2. Occurrence 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.
Fees are manually recorded. The basis of fees vary across the various divisions of IPS, increasing the
relative risk of misstatement. The accounting policy for revenue recognition is detailed in note 1 and note
6 to the financial statements.
Fees of £58.5m were recorded for the year-ended 31 December 2023 (2022: £53.5m). The fees require the
implementation of appropriately authorised client contracts for services performed by the Group, as well
as appropriate accounting treatment in line with IFRS 15 Revenue from contracts with customers.
Revenue is a balance of key importance to stakeholders and impacts long-term incentives. Additionally,
recording revenue which did not occur 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.
In the current period, we no longer assessed accuracy or cut-off of IPS revenue to be relevant to this key
audit matter. Given the simplicity of determining the correct amounts, and the majority of the revenue
being annual fees, we no consider there to be a low likelihood of a material misstatement associated
with accuracy and cut-off.
How the scope of our
audit responded to the
key audit matter
We have performed the following procedures to test the occurrence of independent professional
services fees for the year:
• We obtained an understanding of the relevant controls over the occurrence of IPS fees.
• We independently agreed a sample of fees to signed client agreements, sales invoices and bank
receipts as further evidence that the transaction occurred due to the manual process. Where
amendments were made to client agreements, we assessed whether these had been recorded
accurately and timely.
• Finally, we evaluated revenue recorded to assess whether the revenue has been accounted for in
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 £8.5m (2022: £8.0m) £7.7m (2022: £7.2m)
Basis for determining
materiality
1% (2022: 1%) of net assets as at the year end. Company materiality equates to 0.90% (2022:
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% (2022: 70%) of Group materiality 70% (2022: 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;
•
significant control deficiencies identified in previous audits;
•
the nature, volume and size of misstatements (corrected and/or uncorrected) in the previous audit;
and
•
management’s willingness to correct misstatements identified.
NAV £854m
NAV
Group materiality
Group materiality
£8.5m
Component materiality
£3.4m
Error reporting threshold
£0.4m
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FINANCIAL STATEMENTS
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 factors, our assessment included 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 Company 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 Group-wide analytical review procedures.
These five entities represent the principal operating companies and account for 95% of the Group’s total assets and 88% 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 which were
lower than Group materiality and were capped at £3.4 million for all components. 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.
5%
95%
5%
95%
Full audit scope
Specified audit procedures
Review at group level
Full audit scope
Specified audit procedures
Review at group level
Net assetsTotal assets
5%
7%
88%
Full audit scope
Specified audit procedures
Review at group level
Revenue
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 (2022:
£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.
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 finance software 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 Net asset value (NAV), an in-house tool which is used in recording the net asset value of the investment portfolio.
With the involvement of our IT specialists, we obtained an understanding of relevant IT controls.
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 49. 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.
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7.2. Our consideration of the control environment continued
Furthermore, as noted by the Audit and Risk Committee on page 74, the Group’s finance operations (including its control environment)
is undergoing a Target operating model (TOM) programme that involves the improvement in the overall control environment.
Therefore, considering the on-going changes to 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 2023.
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FINANCIAL STATEMENTS
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.
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, including those that are specific to the Group’s sector;
• 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 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 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 (“FCA”) (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 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 68;
• 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 68;
• the directors’ statement on fair, balanced and understandable set out on page 68;
• 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 74 to 77.
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 parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent 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 three years, covering the years ending 31 December 2021 to
31December 2023.
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) 4.1.15R – DTR 4.1.18R, these
financial statements will form part of the Electronic Format Annual Financial Report filed on the National Storage Mechanism of the
FCA in accordance with DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides no assurance over whether the Electronic Format
Annual Financial Report has been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R.
Andrew Partridge (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Glasgow, United Kingdom
26 February 2024
Independent auditor’s report continued
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FINANCIAL STATEMENTS
2023 | 2022 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Notes | £000 | £000 | £000 | £000 | £000 | £000 | |
UK dividends | |||||||
UK special dividends | |||||||
Overseas dividends | |||||||
Total dividend income | |||||||
Interest income | 5 | ||||||
Independent professional services fees | 6 | ||||||
Other income | |||||||
Total income | |||||||
| Net gain/(loss) on investments held | |||||||
at fair value through profit or loss | 2 | ( | ( | ||||
Total income and capital gains/(losses) | ( | ( | |||||
Cost of sales | ( | ( | ( | ( | |||
Administrative expenses | 3 | ( | ( | ( | ( | ( | ( |
Operating profit/(loss) | ( | ( | |||||
| Finance costs | |||||||
Interest payable | 5 | ( | ( | ( | ( | ( | ( |
Profit/(loss) before taxation | 6 | ( | ( | ||||
Taxation | 7 | ( | ( | ( | ( | ||
Profit/(loss) for the year | 6 | ( | ( | ||||
Return per ordinary share (pence) | 9 | ( | ( | ||||
Diluted return per ordinary share (pence) | 9 | ( | ( |
FINANCIAL STATEMENTS
Consolidated statement of prot or loss
For the year ended 31 December 2023
Consolidated statement of comprehensive income
For the year ended 31 December 2023
2023 | 2022 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| GROUP | £000 | £000 | £000 | £000 | £000 | £000 |
Profit/(loss) for the year | ( | ( | ||||
Foreign exchange on translation of foreign operations | ( | ( | ||||
Pension actuarial (losses)/gains | ( | ( | ( | ( | ||
Taxation on pension | ||||||
Other comprehensive (loss)/income for year | ( | ( | ( | |||
Total comprehensive income for the year | ( | ( |
All items stated in the statement of comprehensive income will be subsequently classified to profit or loss when specific conditions
are met.
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Statement of nancial position
As at 31 December 2023
GROUP | COMPANY | ||||
| 2023 | 2022 | 2023 | 2022 | ||
| Assets | Notes | £000 | £000 | £000 | £000 |
| Non-current assets | |||||
Goodwill | 10 | — | — | ||
Property, plant and equipment | 11 | — | — | ||
Right-of-use assets | 22 | — | — | ||
Other intangible assets | 12 | 16 | 16 | ||
Investments held at fair value through profit or loss | 13 | 965,126 | 890,905 | ||
Investments in subsidiary undertakings | 13 | 61,368 | 61,368 | ||
Retirement benefit asset | 23 | — | — | ||
Total non-current assets | 1,026,510 | 952,289 | |||
| Current assets | |||||
Trade and other receivables | 14 | 3,014 | 1,284 | ||
Contract assets | 14 | — | — | ||
Cash and cash equivalents | 15 | 12,382 | 29,825 | ||
Total current assets | 15,396 | 31,109 | |||
Total assets | 1,041,906 | 983,398 | |||
| Current liabilities | |||||
Amounts owed to subsidiary undertakings | 18,558 | 19,603 | |||
Trade and other payables | 16 | 11,023 | 10,046 | ||
Lease liabilities | 22 | — | — | ||
Corporation tax payable | — | — | |||
Other taxation including social security | 839 | 1,860 | |||
Contract liabilities | 16 | 8 | 7 | ||
Total current liabilities | 30,428 | 31,516 | |||
| Non-current liabilities | |||||
Long-term borrowings | 20 | 124,343 | 124,389 | ||
Contract liabilities | 16 | — | 125 | ||
Deferred tax liabilities | 7 | — | — | ||
Lease liabilities | 22 | — | — | ||
Total non-current liabilities | 124,343 | 124,514 | |||
Total net assets | 887,135 | 827,368 | |||
| Equity | |||||
Called up share capital | 17 | 6,557 | 6,407 | ||
Share premium account | 107,110 | 83,022 | |||
Own shares | 17 | ( | ( | — | — |
Capital redemption | 8 | 8 | |||
Foreign exchange translation reserve | — | — | |||
Capital reserves | 18 | 740,146 | 708,382 | ||
Retained earnings | 33,315 | 29,549 | |||
Total equity | 887,135 | 827,368 | |||
Total equity pence per share |
As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own income statement, however its
profit for the year was £76,763,000 (2022: loss £89,312,000). The financial statements were approved by the Board of Directors and
authorised for issue on 26 February 2024. They were signed on its behalf by:
FINANCIAL STATEMENTS
Consolidated statement of changes in equity
As at 31 December 2023
| Share | premium | Own | Capital | translation | Capital | Retained | ||
| capital | account | shares | redemption | reserve | reserves | earnings | Total equity | |
| GROUP | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
Balance at 1 January 2023 | ( | |||||||
Profit/(loss) for the year | ||||||||
Foreign exchange | ( | ( | ( | |||||
Actuarial (loss)/gain on pension scheme (net of tax) | ( | ( | ||||||
| Total comprehensive | ||||||||
profit/(loss) for the year | ( | |||||||
Issue of shares | ( | |||||||
Dividend relating to 2022 | ( | ( | ||||||
Dividend relating to 2023 | ( | ( | ||||||
Balance at 31December 2023 | ( | |||||||
| Foreign | ||||||||
| Share | exchange | |||||||
| Share | premium | Own | Capital | translation | Capital | Retained | ||
| capital | account | shares | redemption | reserve | reserves | earnings | Total equity | |
| GROUP | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
Balance at 1 January 2022 | ( | |||||||
(Loss)/profit for the year | ( | ( | ||||||
Foreign exchange | ||||||||
Actuarial (loss)/gain on pension scheme (net of tax) | ( | ( | ||||||
| Total comprehensive | ||||||||
profit/(loss) for the year | ( | ( | ||||||
Issue of shares | ||||||||
Dividend relating to 2021 | ( | ( | ||||||
Dividend relating to 2022 | ( | ( | ||||||
Balance at 31December 2022 | ( | |||||||
| 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. |
Share
Foreign
exchange
FINANCIAL STATEMENTS
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FINANCIAL STATEMENTS
Statement of changes in equity
As at 31 December 2023
COMPANY
Share
capital
£000
Share
premium
£000
Capital
redemption
£000
Capital
reserves
£000
Retained
earnings
£000
Total
£000
Balance at 1 January 2023 6,407 83,022 8 708,382 29,549 827,368
Profit/(loss) for the year — — — 31,764 44,999 76,763
Total comprehensive profit for the year — — — 31,764 44,999 76,763
Issue of shares 150 24,088 — — — 24,238
Dividend relating to 2022 — — — — (11,276) (11,276)
Dividend relating to 2023 — — — — (29,957) (29,957)
Total equity at 31 December 2023 6,557 107,110 8 740,146 33,315 887,135
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 2022 6,145 41,865 8 835,293 27,364 910,675
(Loss)/profit for the year — — — (129,608) 40,296 (89,312)
Foreign exchange — — — 2,697 (103) 2,594
Total comprehensive loss for the year — — — (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
Cash Flow Statement
For the year ended 31 December 2023
GROUP | COMPANY | ||||
| 2023 | 2022 | 2023 | 2022 | ||
| Notes | £000 | £000 | £000 | £000 | |
| Cash flows from operating activities | |||||
(before dividends received) and taxation paid | 28 | (5,780) | (6,361) | ||
Cash dividends received | 48,964 | 47,136 | |||
Taxation paid | ( | — | — | ||
Cash generated from operating activities | 43,184 | 40,775 | |||
| Investing activities | |||||
Acquisition of property, plant and equipment | 11 | ( | ( | — | — |
Acquisition of right of use assets | 22 | ( | — | — | |
Expenditure on intangible assets | 12 | ( | ( | — | — |
Purchase of investments (less cost of acquisition) | 13 | ( | ( | (98,934) | (170,653) |
Sale of investments | 13 | 62,093 | 145,892 | ||
Interest received | 323 | 204 | |||
Cash flow from investing activities | ( | ( | (36,518) | (24,557) | |
| Financing activities | |||||
Interest paid | 5 | ( | ( | (6,653) | (6,653) |
Dividends paid | 8 | ( | ( | (40,518) | (37,167) |
Payment of lease liabilities | 22 | ( | ( | — | — |
Proceeds of increase in share capital | 24,237 | 41,419 | |||
Purchase of own shares | 17 | ( | — | — | |
Amounts receivable from intercompany | (18,037) | (23,207) | |||
Intercompany funding | 16,994 | 11,114 | |||
Net cash flow from financing activities | ( | ( | (23,977) | (14,494) | |
Net (decrease)/increase in cash and cash equivalents | ( | (17, 311) | 1,724 | ||
Cash and cash equivalents at beginning of year | 29,825 | 25,507 | |||
Foreign exchange (losses)/gains on cash and cash equivalents | ( | (132) | 2,594 | ||
Cash and cash equivalents at end of year | 12,382 | 29,825 |
FINANCIAL STATEMENTS
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FINANCIAL STATEMENTS
Notes to the accounts
For the year end 31 December 2023
1. Summary of significant accounting policies
Country of incorporation | Registered number | |
Law Debenture Corporation (Deutschland) Limited | UK | 04019781 |
Law Debenture Governance Services Limited | UK | 07466833 |
LDC (NCS) Limited | UK | 07384180 |
Law Debenture Intermediary Corporation p.l.c. | UK | 01525148 |
Law Debenture Trustees Limited | UK | 00625705 |
Safecall Limited | UK | 03769031 |
L.D.C. Trust Management Limited | UK | 01234879 |
Pegasus Pensions p.l.c. | UK | 11429849 |
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Notes to the accounts continued
For the year end 31 December 2023
Going concern continued
1. Summary of significant accounting policies continued
119
Notes to the accounts continued
For the year end 31 December 2023
Segment reporting continued
1. Summary of significant accounting policies continued
FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
Revenue recognition continued
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1. Summary of significant accounting policies continued
121
FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
Business combinations continued
1. Summary of significant accounting policies continued
Financial instruments continued
Notes to the accounts continued
For the year end 31 December 2023
1. Summary of significant accounting policies continued
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FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
Financial instruments continued
1. Summary of significant accounting policies continued
1. Summary of significant accounting policies continued
Financial instruments continued
Notes to the accounts continued
For the year end 31 December 2023
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1. Summary of significant accounting policies continued
Notes to the accounts continued
For the year end 31 December 2023
Reserves continued
FINANCIAL STATEMENTS
1. Summary of significant accounting policies continued
Notes to the accounts continued
For the year end 31 December 2023
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Notes to the accounts continued
For the year end 31 December 2023
FINANCIAL STATEMENTS
| 2023 | 2022 | |
| £000 | £000 | |
Realised (losses)/gains based on historical cost | (18,797) | 51,984 |
Amounts recognised as unrealised in previous years | 12,119 | (36,288) |
Realised (losses)/gains based on carrying value at previous year end date | (6,678) | 15,696 |
Unrealised gains/(losses) on investments | 44,057 | (141,930) |
Net capital gain/(loss) on investments | 37,379 | (126,234) |
2. Net capital gain/(loss) on investments
| 2023 | 2022 | |
| £000 | £000 | |
| Administrative expenses include: | ||
Salaries and Directors’ fees | 22,938 | 20,137 |
Social security costs | 2,286 | 2,112 |
Other pension costs | 1,736 | 1,746 |
26,960 | 23,995 | |
| Investment management fee | 584 | 566 |
Depreciation – property, plant and equipment | 403 | 328 |
Depreciation – right-of-use assets | 891 | 931 |
Amortisation – intangible assets | 892 | 675 |
Interest on lease liabilities | 267 | 294 |
Net foreign exchange loss/(gain) | 365 | 25 |
Auditors’ remuneration | 746 | 660 |
Other property costs | 1,032 | 801 |
IT infrastructure | 1,380 | 1,163 |
Business development | 338 | 250 |
Professional fees | 2,171 | 1,156 |
Other expenses | 3,679 | 3,488 |
Administrative expenses | 39,708 | 34,332 |
During the year, the Group employed an average of 288 staff (2022: 253). All staff are engaged in the provision of independent
professional services. The Company has no employees.
Details of the terms of the investment management agreement are provided on page 33 of the strategic report.
Administrative expenses charged to capital are transaction costs and foreign exchange differences on the purchase of investments
held at fair value through profit or loss.
Notes to the accounts continued
For the year end 31 December 2023
| 2023 | 2022 | |
| £000 | £000 | |
| Audit services | ||
– fees payable to the Group’s auditors for the audit of its financial statements | 314 | 239 |
– fees payable for the audit of the accounts for subsidiaries of the Company | 407 | 356 |
– audit related regulatory | 25 | 65 |
746 | 660 |
| 2023 | 2022 | |
| £000 | £000 | |
Short-term benefits including fees in respect of Directors | 1,541 | 1,300 |
Deferred share bonus scheme | 131 | 110 |
1,672 | 1,410 |
4. Remuneration of Directors (key management personnel)
The remuneration of the Directors, who are the key management personnel of the Group, comprises the following:
Details for each individual Director are shown in the remuneration report on pages 79 to 98.
3. Administrative expenses continued
| 2023 | 2022 | |
| £000 | £000 | |
| Interest Income | ||
Interest on bank deposits | 126 | 111 |
Returns on money market funds | 1,071 | 155 |
1,197 | 266 | |
| Interest Payable | ||
Interest on long-term debt – revenue | (1,635) | (1,636) |
Interest on long-term debt – capital | (4,908) | (4,908) |
Total | (6,543) | (6,544) |
Net interest payable | (5,346) | (6,278) |
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FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
| Independent | ||||||
| Investment Portfolio | Professional Services | Total | ||||
| 31 December | 31 December | 31 December | 31 December | 31 December | 31 December | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Revenue | ||||||
| Dividend income | 33,504 | 34,464 | — | — | 33,504 | 34,464 |
| IPS revenue: | ||||||
| Corporate Services | — | — | 25,041 | 25,792 | 25,041 | 25,792 |
| Corporate Trust | — | — | 16,043 | 13,292 | 16,043 | 13,292 |
| Pensions | — | — | 17,459 | 14,368 | 17,459 | 14,368 |
| Segment revenue | 33,504 | 34,464 | 58,543 | 53,452 | 92,047 | 87,916 |
| Other income | 1,369 | 847 | — | — | 1,369 | 847 |
| Cost of sales | (221) | (125) | (8,034) | (8,283) | (8,255) | (8,408) |
| Administration costs | (4,271) | (3,522) | (35,437) | (30,810) | (39,708) | (34,332) |
| Profit before interest and tax | 30,381 | 31,664 | 15,072 | 14,359 | 45,453 | 46,023 |
| Interest payable (net) (note 5) | (1,302) | (1,432) | 864 | 62 | (438) | (1,370) |
| Profit before tax | 29,079 | 30,232 | 15,936 | 14,421 | 45,015 | 44,653 |
| Income tax | — | — | (1,626) | (1,392) | (1,626) | (1,392) |
| Profit for the year | 29,079 | 30,232 | 14,310 | 13,029 | 43,389 | 43,261 |
| Revenue return per ordinary share | ||||||
| (pence) | 22.41 | 24.06 | 11.02 | 10.38 | 33.43 | 34.44 |
| Assets | 980,587 | 922,080 | 82,056 | 84,640 | 1,062,643 | 1,006,720 |
| Liabilities | (176,314) | (176,377) | (32,100) | (31,276) | (208,414) | (207,653) |
| Total net assets | 804,273 | 745,703 | 49,956 | 53,364 | 854,229 | 799,067 |
Gross Revenue | Cost of sales | Net Revenue | ||||
| 31 December | 31 December | 31 December | 31 December | 31 December | 31 December | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Pensions | 17,459 | 14,368 | (63) | (25) | 17, 396 | 14,343 |
| Corporate Trust | 16,043 | 13,292 | (3,570) | (2,672) | 12,473 | 10,620 |
| Corporate Services | 25,041 | 25,792 | (4,401) | (5,586) | 20,640 | 20,206 |
| Total IPS revenue | 58,543 | 53,452 | (8,034) | (8,283) | 50,509 | 45,169 |
Notes to the accounts continued
For the year end 31 December 2023
6. Segment analysis continued
Investment Portfolio | Independent Professional Services | Total | ||||
| 31 December | 31 December | 31 December | 31 December | 31 December | 31 December | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Other information | ||||||
Capital expenditure | — | — | 1,319 | 745 | 1,319 | 745 |
Depreciation and amortisation | — | — | 1,295 | 1,003 | 1,295 | 1,003 |
Depreciation – right-of-use assets | — | — | 891 | 931 | 891 | 931 |
7. Income tax
| 2023 | 2022 | |
| £000 | £000 | |
| Taxation based on revenue for the year comprises: | ||
UK Corporation tax at 23.5% (2022: 19.0%) | 1,013 | 620 |
Foreign tax charge | 169 | 431 |
Total current tax charge | 1,182 | 1,051 |
Deferred tax charge | 444 | 341 |
Charge for the year | 1,626 | 1,392 |
For the current year, the calculation of Corporation tax takes into accounts a weighted average of tax rates, where 25% and 19% were
applied, resulted in an average tax of 23.5%.
Taxation
The charge for the year can be reconciled to the profit before tax as follows:
| 2023 | 2022 | |
| £000 | £000 | |
Profits before taxation | 76,779 | (84,955) |
Tax on ordinary activities at standard rate 23.5% (2022: 19.0%) | 18,043 | (16,141) |
| Effects of: | ||
Permanent tax adjustments | (52) | (52) |
Higher rates of tax on foreign income | (275) | 200 |
Non-taxable capital (gains)/losses | (9,106) | 23,371 |
Tax credit on dividend income | (7,873) | (6,548) |
Limit on Group relief for UK interest expense | 295 | 418 |
Prior year (over)/under provision in respect of current tax | 150 | (197) |
Total current tax charge | 1,182 | 1,051 |
The Group expects that a substantial portion of its future income will continue to be in the form of dividend receipts and capital gains
and losses, which constitute non-assessable income. On this basis, the Group tax charge is expected to remain significantly different to
the standard UK rate of 25%.
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FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
8. Dividends on ordinary shares
| 2023 | 2022 | ||
| £000 | £000 | ||
| Dividends on ordinary shares comprise the following: | |||
2023 | Interims † 22.875p (2022: 21.75p) | 29,957 | 27,612 |
2022 | Final 8.75p (2021: 8.375p) | 11,276 | 10,396 |
Total | 41,233 | 38,008 |
†
2023 interim dividends were paid in July 2023, October 2023 and January 2024.
Proposed final dividend for the year ended 31 December 2023
The proposed dividend is payable to all shareholders on the Register of Members on 8 March 2024. The total estimated dividend to be
paid is 9.125 p per share.
Set out below is the total dividend payable in respect of the financial year, which is the basis on which the requirements of Sections
1158-1159 of the Corporation Tax Act 2010 are considered.
| 2023 | 2022 | ||
| £000 | £000 | ||
2023 | Interims † 22.875p (2022: 21.75p) | 29,957 | 27,612 |
2023 | Final | 11,971 | 11,295 |
Total | 41,928 | 38,907 |
†
2023 interim dividends were paid in July 2023, October 2023 and January 2024.
On this basis, The Law Debenture Corporation p.l.c. satisfies the requirements of Sections 1158-1159 of the Corporation Tax Act 2010, as an
approved investment trust company.
7. Taxation continued
| Retirement | |||
| GROUP | Accelerated tax | benefit | |
| depreciation | obligations | Total | |
| Deferred tax assets/(liabilities) | £000 | £000 | £000 |
At 31 December 2021 | 195 | (1,255) | (1,060) |
(Charge) to income | (132) | (209) | (341) |
Credit/(charge) to other comprehensive income | — | 57 | 57 |
At 31 December 2022 | 63 | (1,407) | (1,344) |
Credit/(charge) to income | 269 | (713) | (444) |
Credit/(charge) to other comprehensive income | — | — | — |
At 31 December 2023 | 332 | (2,120) | (1,788) |
Notes to the accounts continued
For the year end 31 December 2023
9. Net asset value/return per share
NAV per share is calculated based on 130,602,252 (2022: 127,685,028) shares, being the total number of shares on issue of
131,191,892 (2022: 128,172,019), less 589,640 (2022: 486,991) shares, acquired by the ESOT on the open market. The net asset value of
£1,048,304,000 (2022: £972,566,000) comprises the NAV per the balance sheet of £854,229,000 (2022: £799,067,000) plus the fair
value adjustment for the IPS business of £160,836,000 (2022: £148,376,000), less the fair value adjustment for the debt of £33,239,000
(2022: (£25,123,000)).
Revenue return per share is based on profits attributable of £43,388,000 (2022: £43,261,000).
Capital gain per share is based on capital gains for the year of £31,764,000 (2022: losses £129,608,000).
Total return per share is based on net profit for the year of £75,153,000 (2022: loss £86,347,000).
The calculations of returns per share are based on 129,785,836 (2022: 125,628,620) shares, being the weighted average number of
shares in issue during the year after adjusting for shares owned by the ESOT. In 2023, total revenue and capital diluted returns per
share were calculated using 129,811,509 shares (2022: 125,659,676 shares), being the diluted weighted average number of shares in
issue assuming exercise of options at less than fair value. There were nil (2022: nil) antidilutive shares.
| 2023 | 2022 | |
| GROUP | £000 | £000 |
| Cost | ||
At 1 January | 19,509 | 19,396 |
Additions | — | — |
Foreign exchange | (52) | 113 |
At 31 December | 19,457 | 19,509 |
| Accumulated impairment losses | ||
At 1 January | 473 | 423 |
Foreign exchange | (22) | 50 |
At 31 December | 451 | 473 |
| Net book value | ||
Net book value at 31 December | 19,006 | 19,036 |
| Balance at | |||||
| Balance at | Business | Movements in | |||
| Combinations | exchange rates | Impairment | 2023 | ||
| GROUP | £000 | £000 | £000 | £000 | £000 |
CGU Safecall | 1,419 | — | — | — | 1,419 |
CGU Delaware Corporate Services (DCS) | 580 | — | (30) | — | 550 |
CGU CSS | 17,037 | — | — | — | 17,037 |
Total | 19,036 | — | (30) | — | 19,006 |
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FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
10. Goodwill continued
| Balance at | |||||
| Balance at | Business | Movements in | |||
| Combinations | exchange rates | Impairment | 2022 | ||
| GROUP | £000 | £000 | £000 | £000 | £000 |
CGU Safecall | 1,419 | — | — | — | 1,419 |
CGU Delaware Corporate Services (DCS) | 517 | — | 63 | — | 580 |
CGU CSS | 17,037 | — | — | — | 17,037 |
Total | 18,973 | — | 63 | — | 19,036 |
| Short-term | Short-term | Terminal | Terminal | |||
| Discount Rate | Discount Rate | growth rates | growth rates | growth rates | growth rates | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
| GROUP | % | % | % | % | % | % |
CGU Safecall | 10.5 | 10.5 | 8.0 | 8.0 | 5.0 | 2.0 |
CGU DCS | 10.5 | 10.5 | 8.0 | 8.0 | 5.0 | 2.0 |
CGU CSS | 10.5 | 10.5 | 8.0 | 8.0 | 5.0 | 2.0 |
Notes to the accounts continued
For the year end 31 December 2023
2023 | 2022 | |||||
| Office | Furniture and | Office | Furniture and | |||
| improvements | equipment | Total | improvements | equipment | Total | |
| GROUP | £000 | £000 | £000 | £000 | £000 | £000 |
| Cost | ||||||
At 1 January | 114 | 2,498 | 2,612 | 83 | 2,440 | 2,523 |
Additions at cost | 3 | 871 | 874 | 92 | 58 | 150 |
Disposals at cost | (18) | (37) | (55) | (61) | — | (61) |
Foreign exchange | — | (7) | (7) | — | — | — |
At 31 December | 99 | 3,325 | 3,424 | 114 | 2,498 | 2,612 |
| Accumulated depreciation | ||||||
At 1 January | 75 | 741 | 816 | 83 | 466 | 549 |
Charge | 27 | 376 | 403 | 53 | 275 | 328 |
Disposals at cost | (53) | (2) | (55) | (61) | — | (61) |
Foreign exchange | — | (7) | (7) | — | — | — |
At 31 December | 49 | 1,108 | 1,157 | 75 | 741 | 816 |
| Net book value | ||||||
Net book value at 31 December | 50 | 2,217 | 2,267 | 39 | 1,757 | 1,796 |
2023 | 2022 | |||||||
| Computer | IT project | Customer | Intangible | Computer | IT project | Customer | Intangible | |
| Software | Costs | Relationships | Total | Software | Costs | Relationships | Total | |
| GROUP | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
| Cost | ||||||||
At 1 January | 1,166 | 1,546 | 2,979 | 5,691 | 1,183 | 968 | 2,963 | 5,114 |
Additions at cost | 54 | 455 | — | 509 | — | 578 | 16 | 594 |
Disposals at cost | — | — | — | — | (17) | — | — | (17) |
At 31 December | 1,220 | 2,001 | 2,979 | 6,200 | 1,166 | 1,546 | 2,979 | 5,691 |
| Accumulated amortisation | ||||||||
At 1 January | 1,151 | 413 | 710 | 2,274 | 1,138 | 121 | 340 | 1,599 |
Charge for the year | 1 | 521 | 370 | 892 | 13 | 292 | 370 | 675 |
At 31 December | 1,152 | 934 | 1,080 | 3,166 | 1,151 | 413 | 710 | 2,274 |
| Net book value | ||||||||
Net book value at 31 December | 68 | 1,067 | 1,899 | 3,034 | 15 | 1,133 | 2,269 | 3,417 |
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10. Goodwill continued
Sensitivity analysis continued
135
FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
2023 | 2022 | |||||
| Listed | Unlisted | Total | Listed | Unlisted | Total | |
| GROUP | £000 | £000 | £000 | £000 | £000 | £000 |
Opening cost at 1 January | 880,982 | 9,711 | 890,693 | 811,314 | 3,431 | 814,745 |
Gains at 1 January | 3,112 | (2,800) | 312 | 176,104 | 1,629 | 177,733 |
Opening fair value at 1 January | 884,094 | 6,911 | 891,005 | 987,418 | 5,060 | 992,478 |
Investments delisted in the current year | — | — | — | (1,277) | 1,277 | — |
Purchases at cost | 99,250 | — | 99,250 | 166,198 | 5,000 | 171,198 |
Cost of acquisition | (316) | — | (316) | (545) | — | (545) |
Sales – proceeds | (62,093) | — | (62,093) | (145,892) | — | (145,892) |
– realised gains on sales | (18,796) | — | (18,796) | 51,984 | — | 51,984 |
Gains/(losses) in the income statement | 56,948 | (772) | 56,176 | (173,792) | (4,426) | (178,218) |
Closing fair value at 31 December | 959,087 | 6,139 | 965,226 | 884,094 | 6,911 | 891,005 |
Closing cost at 31 December | 899,027 | 9,711 | 908,738 | 880,982 | 9,711 | 890,693 |
Gains | 60,060 | (3,572) | 56,488 | 3,112 | (2,800) | 312 |
Closing fair value at 31 December | 959,087 | 6,139 | 965,226 | 884,094 | 6,911 | 891,005 |
2023 | 2022 | |||||
| Listed | Unlisted | Total | Listed | Unlisted | Total | |
| COMPANY | £000 | £000 | £000 | £000 | £000 | £000 |
Opening cost at 1 January | 880,982 | 9,611 | 890,593 | 811,314 | 3,331 | 814,645 |
Gains at 1 January | 3,112 | (2,800) | 312 | 176,104 | 1,629 | 177,733 |
Opening fair value at 1 January | 884,094 | 6,811 | 890,905 | 987,418 | 4,960 | 992,378 |
Investments delisted in the current year | — | — | — | (1,277) | 1,277 | — |
Purchases at cost | 99,250 | — | 99,250 | 166,198 | 5,000 | 171,198 |
Cost of acquisition | (316) | — | (316) | (545) | — | (545) |
Sales – proceeds | (62,093) | — | (62,093) | (145,892) | — | (145,892) |
– realised gains on sales | (18,796) | — | (18,796) | 51,984 | — | 51,984 |
Gains/(losses) in the income statement | 56,948 | (772) | 56,176 | (173,792) | (4,426) | (178,218) |
Closing fair value at 31 December | 959,087 | 6,039 | 965,126 | 884,094 | 6,811 | 890,905 |
Closing cost at 31 December | 899,027 | 9,611 | 908,638 | 880,982 | 9,611 | 890,593 |
Gains | 60,060 | (3,572) | 56,488 | 3,112 | (2,800) | 312 |
Closing fair value at 31 December | 959,087 | 6,039 | 965,126 | 884,094 | 6,811 | 890,905 |
Notes to the accounts continued
For the year end 31 December 2023
| 2023 | 2022 | |
| £000 | £000 | |
| Cost | ||
At 1 January | 61,368 | 61,368 |
Additions in year | — | — |
At 31 December | 61,368 | 61,368 |
| 2023 | 2022 | |
| Fair valuation of IPS | £000 | £000 |
EBITDA at a multiple of 10.5x (2022: 10.5x) | 185,063 | 174,174 |
Surplus net assets | 25,729 | 27, 566 |
Total | 210,792 | 201,740 |
13. Investments continued
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137
FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
13. Investments continued
Notes to the accounts continued
For the year end 31 December 2023
13. Investments continued
GROUP | COMPANY | |||
| 2023 | 2022 | 2023 | 2022 | |
| Contract assets: current | £000 | £000 | £000 | £000 |
Amounts included in contract assets that were recognised as revenue | 8,604 | 5,436 | — | — |
| 2023 | 2022 | 2023 | 2022 | |
| Trade and other receivables: current | £000 | £000 | £000 | £000 |
Trade receivables | 15,700 | 18,186 | 21 | 515 |
Other receivables | 353 | 592 | 359 | — |
Portfolio dividends receivables | 4,120 | 1,746 | 2,634 | 769 |
Prepayments | 1,323 | 919 | — | — |
21,496 | 21,443 | 3,014 | 1,284 |
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GROUP | COMPANY | |||
| 2023 | 2022 | 2023 | 2022 | |
| £000 | £000 | £000 | £000 | |
Cash at bank | 12,023 | 15,280 | 2,376 | 6,858 |
Short-term money market deposits | 19,416 | 34,279 | 10,006 | 22,967 |
31,439 | 49,559 | 12,382 | 29,825 |
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Notes to the accounts continued
For the year end 31 December 2023
FINANCIAL STATEMENTS
GROUP | COMPANY | |||
| 2023 | 2022 | 2023 | 2022 | |
| Contract liabilities: Current | £000 | £000 | £000 | £000 |
Deferred Income | 8,000 | 5,223 | 8 | 7 |
| 2023 | 2022 | 2023 | 2022 | |
| Contract liabilities: Non-current | £000 | £000 | £000 | £000 |
Deferred Income | 2,403 | 3,976 | — | 125 |
GROUP | COMPANY | |||
| 2023 | 2022 | 2023 | 2022 | |
| Trade and other payables: Current | £000 | £000 | £000 | £000 |
Trade payables | 2,365 | 5,880 | 50 | — |
Dividend payable | 10,003 | 9,292 | 10,003 | 9,292 |
Other payables and accruals | 10,185 | 4,643 | 970 | 754 |
22,553 | 19,815 | 11,023 | 10,046 |
| 2023 | 2022 | |
| Allotted, issued and fully paid share capital – GROUP AND COMPANY | £000 | £000 |
| Value (Ordinary shares at 5p each) | ||
At 1 January | 6,407 | 6,145 |
Issued in year | 150 | 262 |
At 31 December | 6,557 | 6,407 |
| Shares (Ordinary shares at 5p each) | Number | Number |
At 1 January | 128,172,019 | 122,915,835 |
Issued in year | 3,019,873 | 5,256,184 |
At 31 December | 131,191,892 | 128,172,019 |
Notes to the accounts continued
For the year end 31 December 2023
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17. Share capital continued
| 2023 | 2022 | |
| Own shares held – GROUP | £000 | £000 |
At 1 January | 3,128 | 3,215 |
Issue of shares | 798 | (87) |
At 31 December | 3,926 | 3,128 |
2023 | 2022 | |||||
| Unrealised | Realised | Unrealised | Realised | |||
| appreciation | reserves | Total | appreciation | reserves | Total | |
| GROUP | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 January | (11,652) | 674,164 | 662,512 | 166,777 | 622,646 | 789,423 |
Transfer on disposal of investments | 12,119 | (12,119) | — | (36,288) | 36,288 | — |
Net gains/(losses) on investments | 44,057 | (6,677) | 37,380 | (141,930) | 15,696 | (126,234) |
Cost of acquisition | (316) | — | (316) | (545) | — | (545) |
Foreign exchange | (8) | — | (8) | 334 | — | 334 |
Transfers to revenue | — | (384) | (384) | — | (2,829) | (2,829) |
Transfers to capital | — | (4,908) | (4,908) | — | 2,363 | 2,363 |
At 31 December | 44,200 | 650,076 | 694,276 | (11,652) | 674,164 | 662,512 |
2023 | 2022 | |||||
| Unrealised | Realised | Unrealised | Realised | |||
| appreciation | reserves | Total | appreciation | reserves | Total | |
| COMPANY | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 January | (18,371) | 726,753 | 708,382 | 160,058 | 675,235 | 835,293 |
Transfer on disposal of investments | 12,119 | (12,119) | — | (36,288) | 36,288 | — |
Net gains on investments | 44,057 | (6,677) | 37,380 | (141,930) | 15,696 | (126,234) |
Cost of acquisition | (316) | — | (316) | (545) | — | (545) |
Foreign exchange | (8) | — | (8) | 334 | — | 334 |
Transfers to revenue | — | (384) | (384) | — | (2,829) | (2,829) |
Transfers to capital | — | (4,908) | (4,908) | — | 2,363 | 2,363 |
At 31 December | 37,481 | 702,665 | 740,146 | (18,371) | 726,753 | 708,382 |
19. Financial instruments
The Group’s investment objective is to achieve long-term capital growth through investing in a diverse portfolio of investments. In
pursuit of this objective, the Group has the power to deploy the following financial instruments:
• Quoted equities, unlisted equities and fixed interest securities
• Cash and short-term investments and deposits
• Debentures, term loans and bank overdrafts to allow the Group to raise finance
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Notes to the accounts continued
For the year end 31 December 2023
• Derivative transactions to manage any of the risks arising from the use of the above instruments
• Derivative transactions to hedge the net investment in overseas subsidiaries
It remains the Group’s policy that no trading in derivatives is undertaken. Information in respect of the Portfolio is included on pages
17 to 29. Additionally, there are no net investment hedges in place in 2022 or 2023.
| 2023 | 2022 | |
| GROUP | £000 | £000 |
| Assets | ||
| Financial assets held at fair value through profit or loss: | ||
Equity investments | 965,226 | 891,005 |
| Financial assets held at amortised cost | ||
Trade and other receivables | 17,369 | 19,697 |
Cash and cash equivalents | 31,439 | 49,559 |
48,808 | 69,256 | |
Total financial assets | 1,014,034 | 960,261 |
| Liabilities | ||
| Financial liabilities measured at amortised cost | ||
Trade and other payables | 22,553 | 19,815 |
Long-term borrowings | 163,889 | 163,909 |
Lease liabilities | 4,716 | 6,650 |
Total financial liabilities | 191,158 | 190, 374 |
| 2023 | 2022 | |
| COMPANY | £000 | £000 |
| Assets | ||
| Financial assets held at fair value through profit or loss: | ||
Equity investments | 965,126 | 890,905 |
| Financial assets held at amortised cost | ||
Trade and other receivables | 380 | 515 |
Cash and cash equivalents | 12,382 | 29,825 |
12,762 | 30,340 | |
Total financial assets | 977,888 | 921,245 |
| Liabilities | ||
| Financial liabilities measured at amortised cost | ||
Amounts owed to subsidiary undertakings | 18,558 | 19,603 |
Trade and other payables | 11,023 | 10,046 |
Long-term borrowings | 124,343 | 124,389 |
Total financial liabilities | 153,924 | 154,038 |
19. Financial instruments continued
FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
19. Financial instruments continued
2023 | 2022 | |||||
| Net monetary | Total currency | Net monetary | Total currency | |||
| Investments | assets | exposure | Investments | assets | exposure | |
| GROUP | £000 | £000 | £000 | £000 | £000 | £000 |
US Dollar | 24,062 | 1,766 | 25,828 | 35,552 | 7,681 | 43,233 |
Canadian Dollar | 5,564 | — | 5,564 | 6,700 | — | 6,700 |
Euro | 56,492 | 2,829 | 59,321 | 64,452 | 3,508 | 67,960 |
Danish Krone | 3,147 | — | 3,147 | 2,405 | — | 2,405 |
Swedish Krona | — | — | — | — | — | — |
Swiss Franc | 8,376 | — | 8,376 | 7,237 | — | 7,237 |
Hong Kong Dollar | — | 1,455 | 1,455 | — | 976 | 976 |
Japanese Yen | 11,877 | — | 11,877 | 9,426 | — | 9,426 |
Total | 109,518 | 6,050 | 115,568 | 125,772 | 12,165 | 137,937 |
2023 | 2022 | |||||
| Net monetary | Total currency | Net monetary | Total currency | |||
| Investments | assets | exposure | Investments | (liabilities) | exposure | |
| COMPANY | £000 | £000 | £000 | £000 | £000 | £000 |
| US Dollar | 24,062 | — | 24,062 | 35,552 | — | 35,552 |
| Canadian Dollar | 5,564 | — | 5,564 | 6,700 | — | 6,700 |
| Euro | 56,492 | — | 56,492 | 64,452 | — | 64,452 |
| Danish Krone | 3,147 | — | 3,147 | 2,405 | — | 2,405 |
| Swedish Krona | — | — | — | — | — | — |
| Swiss Franc | 8,376 | — | 8,376 | 7,237 | — | 7,237 |
| Japanese Yen | 11,877 | — | 11,877 | 9,426 | — | 9,426 |
Total | 109,518 | — | 109,518 | 125,772 | — | 125,772 |
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FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
| 2023 | |||||||
GROUP | COMPANY | ||||||
| Sterling | HK Dollars | US Dollars | Euro | Sterling | US Dollars | Euro | |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
Floating rate assets | 25,740 | 1,455 | 1,766 | 2,829 | 12,425 | — | — |
GROUP | COMPANY | |||
| 2023 | 2022 | 2023 | 2022 | |
| Sterling | Sterling | Sterling | Sterling | |
| £000 | £000 | £000 | £000 | |
Fixed rate liabilities | 163,892 | 163,909 | 124,343 | 124,389 |
Weighted average fixed rate for the year | 3.962% | 3.961% | 3.274% | 3.276% |
19. Financial instruments continued
| 2022 | |||||||
GROUP | COMPANY | ||||||
| Sterling | HK Dollars | US Dollars | Euro | Sterling | US Dollars | Euro | |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
Floating rate assets | 37, 351 | 976 | 7,681 | 3,508 | 14,357 | 5,780 | 2,662 |
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Notes to the accounts continued
For the year end 31 December 2023
19. Financial instruments continued
| 2023 | 2022 | |||||||
| Interest | Interest | Interest | Interest | Interest | Interest | Interest | Interest | |
| payable | payable | payable | payable | payable | payable | payable | payable | |
| GROUP | < 1 year | 1 - 5 years | 5 - 10 years | > 10 years | < 1 year | 1 - 5 years | 5 - 10 years | > 10 years |
| INSTRUMENT | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
6.125% guarenteed secured bonds 2034 | 2,450 | 9,800 | 12,250 | 4,900 | 2,450 | 9,800 | 12,250 | 4,900 |
3.77% secured senior notes 2045 | 2,828 | 11,310 | 14,138 | 36,758 | 2,828 | 11,310 | 14,138 | 36,758 |
2.54% secured senior notes 2041 | 508 | 2,032 | 2,540 | 4,572 | 508 | 2,032 | 2,540 | 4,572 |
2.53% secured senior notes 2050 | 759 | 3,036 | 3,795 | 13,662 | 759 | 3,036 | 3,795 | 13,662 |
Lease liabilities: undiscounted cash flows | 1,163 | 3,674 | 1,647 | — | 1,259 | 3,966 | 2,518 | — |
Total Group | 7,708 | 29,852 | 34,370 | 59,892 | 7,804 | 30,144 | 35,241 | 59,892 |
| 2023 | 2022 | |||||||
| Interest | Interest | Interest | Interest | Interest | Interest | Interest | Interest | |
| payable | payable | payable | payable | payable | payable | payable | payable | |
| COMPANY | < 1 year | 1 - 5 years | 5 - 10 years | > 10 years | < 1 year | 1 - 5 years | 5 - 10 years | > 10 years |
| INSTRUMENT | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
3.77% secured senior notes 2045 | 2,828 | 11,310 | 14,138 | 36,758 | 2,828 | 11,310 | 14,138 | 36,758 |
2.54% secured senior notes 2041 | 508 | 2,032 | 2,540 | 4,572 | 508 | 2,032 | 2,540 | 4,572 |
2.53% secured senior notes 2050 | 759 | 3,036 | 3,795 | 13,662 | 759 | 3,036 | 3,795 | 13,662 |
Total Company | 4,095 | 16,378 | 20,473 | 54,992 | 4,095 | 16,378 | 20,473 | 54,992 |
145
FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
19. Financial instruments continued
| Trade receivables - days past due | ||||||
| 1 - 30 days | 31 - 60 days | 61 - 90 days | 91+ days | |||
| Current | overdue | overdue | overdue | overdue | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| 31 December 2023 | ||||||
| Expected loss rate | 0.80% | 2.08% | 2.85% | 5.38% | 5.86% | 3.31% |
| Gross carrying amount | 5,902 | 2,409 | 1,965 | 1,375 | 6,192 | 17,843 |
| Expected credit loss provision | (47) | (50) | (56) | (74) | (363) | (590) |
| Specific provision | — | — | — | — | (1,553) | (1,553) |
| Net carrying amount | 5,855 | 2,359 | 1,909 | 1,301 | 4,276 | 15,700 |
| Trade receivables - days past due | ||||||
| 1 - 30 days | 31 - 60 days | 61 - 90 days | 91+ days | |||
| Current | overdue | overdue | overdue | overdue | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| 31 December 2022 | ||||||
| Expected loss rate | 1.71% | 5.64% | 3.75% | 4.68% | 3.59% | 3.79% |
| Gross carrying amount | 2,634 | 3,562 | 2,162 | 1,367 | 11,640 | 21,365 |
| Expected credit loss provision | (45) | (201) | (81) | (64) | (418) | (809) |
| Specific provision | — | — | — | — | (3,144) | (3,144) |
| Net carrying amount | 2,589 | 3,361 | 2,081 | 1,303 | 8,078 | 17,412 |
GROUP | COMPANY | |||
| 2023 | 2022 | 2023 | 2022 | |
| £000 | £000 | £000 | £000 | |
Between 31 and 60 days | 1,965 | 2,162 | — | — |
Between 61 and 90 days | 1,375 | 1,367 | — | — |
More than 91 days | 6,192 | 11,640 | 21 | 15 |
Total | 9,532 | 15,169 | 21 | 15 |
Notes to the accounts continued
For the year end 31 December 2023
GROUP | COMPANY | |||
| 2023 | 2022 | 2023 | 2022 | |
| Trade and other payables | £000 | £000 | £000 | £000 |
Due in less than one month | 22,553 | 19,815 | 11,023 | 10,046 |
Due in more than one month and less than three months | — | — | — | — |
Total | 22,553 | 19,815 | 11,023 | 10,046 |
GROUP | COMPANY | |||
| 2023 | 2022 | 2023 | 2022 | |
| Secured | £000 | £000 | £000 | £000 |
6.125% guaranteed secured bonds 2034 | 39,546 | 39,520 | — | — |
3.77% secured senior notes 2045 | 74,427 | 74,434 | 74,427 | 74,434 |
2.54% secured senior notes 2041 | 19,936 | 19,966 | 19,936 | 19,966 |
2.53% secured senior notes 2050 | 29,980 | 29,989 | 29,980 | 29,989 |
Total | 163,889 | 163,909 | 124,343 | 124,389 |
19. Financial instruments continued
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Notes to the accounts continued
For the year end 31 December 2023
FINANCIAL STATEMENTS
20. Long-term borrowings continued
| GROUP | ||
| Minimum lease payments | ||
| 2023 | 2022 | |
| Amounts payable under leases | £000 | £000 |
Within one year | 1,168 | 1,259 |
Between one and five years | 3,756 | 3,966 |
After five years | 1,642 | 2,518 |
6,566 | 7,743 | |
Less: future finance charges | (825) | (1,093) |
Present value of lease obligations | 5,741 | 6,650 |
Less: amounts due for settlement within one year (shown within current liabilities) | (1,025) | (991) |
Amounts due for settlement after one year (shown within non current liabilities) | 4,716 | 5,659 |
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Notes to the accounts continued
For the year end 31 December 2023
Office building leases | Total right-of-use assets | |||
| 2023 | 2022 | 2023 | 2022 | |
| £000 | £000 | £000 | £000 | |
| Cost | ||||
At 1 January | 5,040 | 5,542 | 5,040 | 5,542 |
| Accumulated depreciation | ||||
Adjustment to opening balance | — | 199* | — | 199* |
Leases signed in year | — | 195 | — | 195 |
Lease extension | 39 | 40 | 39 | 40 |
Depreciation | (891) | (931) | (891) | (931) |
Foreign exchange difference | (57) | (5) | (57) | (5) |
| Net book value | ||||
At 31 December | 4,131 | 5,040 | 4,131 | 5,040 |
22. Leases continued
| 2023 | 2022 | |
| £000 | £000 | |
| Amounts recognised in profit and loss | ||
Depreciation expense on right-of-use assets | 891 | 931 |
Interest expense on lease liabilities | 267 | 294 |
1,158 | 1,225 |
| 2023 | 2022 | |
| £000 | £000 | |
Current | 1,025 | 991 |
Non-Current | 4,716 | 5,659 |
Total lease liability | 5,741 | 6,650 |
149
FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
2023 | 2022 | |
| Significant actuarial assumptions: | ||
Retail Price Inflation | % | 3.20% |
Consumer Price Inflation* | RPI less 1.0% p.a. | RPI less 1.0% p.a. |
| prior to 2030, | prior to 2030, | |
| RPI less 0.1% p.a. | RPI less 0.1% p.a. | |
| thereafter | thereafter | |
CPI single equivalent rate | 2.50% | 2.60% |
Discount rate | 4.55% | 4.80% |
5% limited RPI pension increases in payment | n/a | n/a |
General salary increases | n/a | n/a |
| 2023 | 2022 | |
| £000 | £000 | |
| The amounts recognised in the income statement are as follows: | ||
Interest (income)/expense | (300) | 100 |
Total (income)/expense recognised in the income statement | (300) | 100 |
| The amounts recognised outside the income statement are as follows: | ||
Remeasurements | 1,400 | 300 |
Loss/(gain) recognised outside the income statement | 1,400 | 300 |
| 2023 | 2022 | |
| years | years | |
Life expectancy of male/female aged 65 in 2023 | 22.9/25.1 | 23.2/25.3 |
Life expectancy of male/female aged 65 in 2040 | 24.4/26.5 | 24.7/26.8 |
Weighted average duration | 14.0 | 13.8 |
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Notes to the accounts continued
For the year end 31 December 2023
2023 | 2022 | |||
Allocation % | £000 | Allocation % | £000 | |
| The current allocation of plan assets is as follows: | ||||
Equities | 15 | 7,000 | 30 | 13,500 |
Corporate bonds | 30 | 14,000 | 10 | 4,500 |
LDI | 23 | 10,700 | 21 | 9,700 |
Pensioner annuities | 1 | 500 | 1 | 500 |
Diversified growth funds | — | — | 8 | 3,600 |
Infrastructure | 15 | 6,700 | 15 | 6,800 |
Cash/other | 16 | 7,200 | 15 | 6,900 |
Total | 100 | 46,100 | 100 | 45,500 |
23. Pension commitments continued
| 2023 | 2022 | |
| Movement in present value of defined benefit obligation | £000 | £000 |
Opening defined benefit obligation at 1 January | 38 100 | 61,700 |
Interest on obligation | 1,800 | 1,200 |
Benefits paid | (1,800) | (2,800) |
| Actuarial losses/(gains) due to: | ||
Experience loss/(gain) | 200 | 2,400 |
Changes in financial assumptions loss/(gain) | 800 | (24,100) |
Changes in demographic assumptions (gain)/loss | (400) | (300) |
Closing defined benefit obligation at 31 December | 38,700 | 38,100 |
| 2023 | 2022 | |
| Movement in fair value of plan assets | £000 | £000 |
Opening fair value of plan assets at 1 January | 45,500 | 68,300 |
Interest on assets | 2,100 | 1,300 |
Contributions by the employer | 1,100 | 1,000 |
Benefits paid | (1,800) | (2,800) |
Actual returns net of interest | (800) | (22,300) |
Closing fair value of plan assets at 31 December | 46,100 | 45,500 |
Actual return on assets | 1,300 |
151
FINANCIAL STATEMENTS
Notes to the accounts continued
For the year end 31 December 2023
| 2023 | 2022 | |
| Movement in the net defined benefit liability | £000 | £000 |
Opening net defined benefit (asset)/liability at 1 January | (7,400) | (6,600) |
(Income)/expense charged to profit and loss | (300) | (100) |
Employer contributions | (1,100) | (1,000) |
Amount recognised outside of profit and loss | 1,400 | 300 |
Closing net defined benefit (asset)/liability at 31 December | (7,400) | (7,400) |
| 2023 | 2022 | |
| Amounts recognised in statement of financial position | £000 | £000 |
Present value of defined benefit obligation | 38,700 | 38,100 |
Fair value of plan assets | (46,100) | (45,500) |
(Surplus)/deficit | (7,400) | (7,400) |
Effect of asset ceiling | — | — |
Net defined benefit (asset)/liability | (7,400) | (7,400) |
23. Pension commitments continued
| Increase/(decrease) | ||
| in defined benefit obligations | ||
| At 31 December | At 31 December | |
| 2023 | 2022 | |
| £ million | £ million | |
Discount rate +0.5% | (2.4) | (2.5) |
RPI Inflation assumptions +0.5% | 1.9 | 1.9 |
Life expectancy at 65 +1 year | 1.6 | 1.5 |
RPI/CPI gap 0.5% increase in wedge between RPI and CPI at all durations | (0.5) | (0.5) |
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Notes to the accounts continued
For the year end 31 December 2023
| 2023 | 2022 | |
| £000 | £000 | |
Dividends from subsidiaries | 16,000 | 9,638 |
Interest on intercompany balances charged by subsidiaries | 721 | 2,559 |
Management charges from subsidiaries | 850 | 850 |
| 31 December | Non-cash items | 31 December | Non-cash items | 31 December | Non-cash items | |
| 2023 | movement | 2022 | movement | 2021 | movement | |
| GROUP | £000 | £000 | £000 | £000 | £000 | £000 |
| Long-term borrowings | ||||||
6.125% guaranteed secured bonds 2034 | 39,546 | 26 | 39,520 | (139) | 39,659 | 27 |
3.77% secured senior notes 2045 | 74,427 | (7) | 74,434 | (152) | 74,586 | 17 |
2.54% secured senior notes 2041 | 19,936 | (30) | 19,966 | (34) | 20,000 | — |
2.53% secured senior notes 2050 | 29,980 | (9) | 29,989 | (11) | 30,000 | — |
163,889 | (20) | 163,909 | (336) | 164,245 | 44 |
| COMPANY | ||||||
| Long-term borrowings | ||||||
3.77% secured senior notes 2045 | 74,427 | (7) | 74,434 | (152) | 74,586 | 17 |
2.54% secured senior notes 2041 | 19,936 | (30) | 19,966 | (34) | 20,000 | — |
2.53% secured senior notes 2050 | 29,980 | (9) | 29,989 | (11) | 30,000 | — |
124,343 | (46) | 124,389 | (197) | 124,586 | 17 |
Notes to the accounts continued
For the year end 31 December 2023
153
FINANCIAL STATEMENTS
28. Note to the statement of cash flows
GROUP | COMPANY | |||
| 2023 | 2022 | 2023 | 2022 | |
| £000 | £000 | £000 | £000 | |
Operating profit/(loss) before interest and taxation | 82,125 | (78,677) | 83,093 | (82,863) |
| Adjust for non-cash flow items: | ||||
Adjust for (gains)/losses on investments | (37,379) | 126,234 | (37,379) | 126,234 |
Movement in amortised cost of borrowings | (20) | (336) | (46) | (197) |
Depreciation of property, plant and equipment | 403 | 328 | — | — |
Depreciation of right-of-use assets | 891 | 931 | — | — |
Amortisation of intangible assets | 892 | 675 | — | — |
(Increase)/decrease in receivables | (3,221) | 198 | (1,730) | 860 |
Decrease/(increase) in payables | 2,027 | (9,604) | 267 | (4,269) |
Decease/(increase) in deferred income | 1,204 | (475) | — | — |
Normal pension contributions in excess of cost | (1,400) | (1,123) | — | — |
(Decrease)/increase in other taxation payable | (1,290) | 1,330 | (1,021) | 1,010 |
Dividends receivable | (32,964) | (37,498) | (48,964) | (47,136) |
Cash flows from operating activities (before dividends received and taxation paid) | 11,268 | (1,983) | (5,780) | (6,361) |
CORPORATE INFORMATION
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CORPORATE INFORMATION
Alternative performance measures
Alternative performance measures are numerical measures of the Company’s current, historical or future performance, financial position
or cash flows, other than financial measures defined or specified in the financial framework that the Company has chosen to apply
(International Financial Reporting Standards and the AIC SORP). The Directors use these measures as a means of assessing the Company’s
performance. The measures are particularly relevant for investment trusts and are widely used across the investment trust sector.
Net Asset Value per ordinary share
The value of the Company’s assets (i.e. investments (see note 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 9). 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 pages 146 and 147) 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 146. 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 132). The NAV with debt at fair value At 31 December 2023 was £1,048,304,000 (802.67 pence per
ordinary share) and the NAV with debt at par was £1,015,065,000 (777.22 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 2023 802.67 777.22 801 (0.2%) 3.1%
At 31 December 2022 761.69 742.02 771 1.2% 3.9%
Average premium in share price versus NAV (with debt and IPS at fair value)
The discount or premium to share price is calculated in accordance with AIC methodology using performance data held by Law
Debenture. The daily average is calculated from the daily share premium/discount recorded throughout the year and divided by the
NAV (with debt and IPS at fair value).
lawdebenture.com
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CORPORATE INFORMATION
Alternative performance measures continued
Gearing/(Net cash)
Net gearing is calculated by dividing total borrowings less cash and cash equivalents by adjusted shareholders’ funds, expressed as a
percentage.
2023
£000
2022
£000
Borrowings (at PAR) Statement of financial position 163,889 163,909
Cash and cash equivalents Statement of financial position (31,439) (49,559)
Borrowings less cash (a) 132,450 114,350
Net assets per Balance Sheet 854,229 799,067
Fair value uplift for IPS business 160,836 148,376
Debt fair value adjustment 33,239 25,123
Adjusted shareholders’ funds Page 36 (b) 1,048,304 972,566
Net gearing (a/b) 13% 12%
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 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.
2023
£000
2022
£000
Management fee revenue expense 584 566
Other attributable administration costs 2,699 2,448
Administration costs 3,283 3,014
Management fee capital expense 1,752 1,697
Ongoing charge 5,035 4,711
Average net assets
1
1,023,604 959,711
Ongoing charge ratio 0.49% 0.49%
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 132).
CORPORATE INFORMATION
157
Alternative performance measures continued
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 131.
NAV per share
with debt at
fair value Share price
NAV/Share price per share at 31 December 2022 (pence) 761.69 771
NAV/Share price per share At 31 December 2023 (pence) 802.67 801
Change in the year (%) 5.4% 3.9%
Impact of dividends reinvested
1
(%) 4.0% 4.2%
Total return for the year (%) 9.4% 8.1%
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.
2023
£000
2022
£000
Annual dividend (pence) 32.0 30.5
Share price
1
(pence) 801 771
Yield (%) 4.0% 4.0%
1 Based on the closing share price as at 31 December 2023.
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.
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 6ZY
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.
CORPORATE INFORMATION
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CORPORATE INFORMATION
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 136 and 137, 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 Room 901, 420 Lexington Avenue, New York, NY 10017, USA
other than Delaware Corporate Services
Companies registered in USA - 919 N Market St, Suite 725, Wilmington, DE 19801, USA
Delaware Corporate Services
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
160
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the 134
th
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 28 March 2024 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 2023.
2. To approve the Directors’ remuneration report for the year ended 31 December 2023.
3. To declare a final dividend of 9.125p per share in respect of the year ended 31 December 2023.
4. To re-elect Denis Jackson as a Director.
5. To re-elect Trish Houston as a Director.
6. To re-elect Robert Hingley as a Director.
7. To re-elect Pars Purewal as a Director.
8. To re-elect Claire Finn as a Director.
9. To re-elect Clare Askem as a Director.
10. To elect Maarten Slendebroek as a Director.
11. 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.
12. To authorise the Audit and Risk Committee to determine the auditor’s remuneration.
13. 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 £655,971.80 (representing 13,119,436 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.
14
. Amendment to the rules of The Law Debenture Corporation p.l.c. Long-Term Incentive Plan.
THAT current rule 8.9 of The Law Debenture Corporation p.l.c. Long-Term Incentive Plan relating to dividend equivalents
be amended to include the following wording that is underlined and in italics (other text is unchanged and included for
information only):
“An Award may include the right to receive an amount in Plan Shares or cash on or following Vesting (or if there is a Holding
Period and the Grantor so specifies, following the end of the Holding Period) equal in value to the dividends which were
payable on the number of Plan Shares in respect of which the Award has Vested during the period between the Award Date
and the date of Vesting (or in the case of an Option the number of Plan Shares subject to the Option shall be increased as at
the date of Vesting by the relevant value in Plan Shares).
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The Grantor in its absolute discretion, may also determine that an amount in Plan Shares or cash equal in value to the
dividends payable on the number of Plan Shares in respect of which the Award has Vested may accrue from the date of
Vesting until the end of the Holding Period (or in the case of an Option the number of Plan Shares subject to the Option shall
be increased as at the date of the end of the Holding Period by the relevant value in Plan Shares).
The Grantor may determine at its absolute discretion the method used to calculate the value of dividends and whether or not
the method used to calculate the value of dividends shall assume that such dividends have been reinvested into Plan Shares,
on such basis as the Grantor determines.
The Grantor may decide at any time not to apply this Rule 8.9 to all or any part of a special dividend or dividend in specie.”
Special resolutions
To consider and, if thought fit, to pass the following resolutions which will be proposed as special resolutions:
15. Disapplication of statutory pre-emption rights.
THAT if resolution 13 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 £655,971.80 (representing 13,119,436 ordinary shares),
such authority to expire at the next AGM of the Company (or, if earlier, at the close of business on 27 June 2025) 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.
16. Additional authority to disapply pre-emption rights for acquisitions or specified capital investment.
THAT, if resolution 13 is passed, the Directors be authorised in addition to any authority granted under resolution 15 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 £655,971.80 (representing
13,119,436 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 27 June 2025) 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
17. 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 19,666,035;
(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.
18. 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 26 February 2024 and signed on its behalf by
Law Debenture Corporate Services Limited
Company Secretary
Registered office:
8th Floor
100 Bishopsgate
London EC2N 4AG
Registered No. 00030397
Notice of Annual General Meeting continued
163
CORPORATE INFORMATION
Explanatory notes to the Notice
The Notice of the Annual General Meeting (the ‘Notice’) to be
held on 28 March 2024 (the ‘Meeting’) is set out on pages 160 to
162. 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 2023 (the ‘2023
Annual Report’), which was sent to shareholders on 4 March
2024.
Resolution 2
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 79
to 98 of the 2023 Annual Report.
Resolution 3
The Board proposes a final dividend of 9.125 pence per share in
respect of the year ended 31 December 2023. If approved, the
recommended final dividend will be paid on 11 April 2024 to
all ordinary shareholders who are on the register of members
on 8March 2024. The shares will be marked ex-dividend on
7March 2024.
Resolutions 4 – 10
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 and Directors in their first year
of appointment to election, so Denis Jackson, Trish Houston,
Robert Hingley, Pars Purewal, Claire Finn and Clare Askem will
retire from office and offer themselves for re-election. Tim Bond
will not seek re-election. The UK Corporate Governance Code
and the Articles also require any new Directors appointed by the
Board since the last annual general meeting to stand for election
at the next annual general meeting. Accordingly, Maarten
Slendebroek, having joined the Board in January 2024, also
retires from office and offers himself for election.
The biographical details for each Director are set out on pages
58 and 59 of the 2023 Annual Report.
In proposing the election/re-election of the Directors, the Chair
confirms that, following the external performance evaluation
(described on pages 71 and 72 of the 2023 Annual Report),
each individual continues to make an effective and valuable
contribution to the Board and demonstrates commitment to
their role. With respect to Maarten Slendebroek, who is newly
appointed to the Board, his skills, knowledge and experience
are welcomed and we look forward to his contributions for the
remainder of 2024. Accordingly, the Board recommends their
election or re-election as appropriate.
Resolution 11
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 12
This resolution, if passed, will authorise the Audit and Risk
Committee to agree the remuneration of Deloitte LLP for their
services as auditors.
Resolution 13
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 30March 2023, 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 £655,971.80 (representing
13,119,436 ordinary shares), representing approximately ten
per cent of the nominal value of the issued ordinary shares
on 26 February 2024 (being the last practicable date prior to
the publication of this document). As at 26 February 2024, 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 14
Resolution 14 seeks to approve the proposed amendment to
rule 8.9 of The Law Debenture Corporation p.l.c. Long-Term
Incentive Plan (‘the Plan’), which gives the Grantor as defined
in the Plan, the discretion to authorise the accrual of ‘dividend
equivalents’ (amounts equal in value to the dividends paid) on
vested awards or options post vesting, up until the end of the
mandatory holding period that normally runs for two years after
vesting and during which the executive director is required to
retain the shares or options. This brings this aspect of the rules
in line with normally accepted best practice and ensures that
executive directors’ interests are more closely aligned with
those of shareholders.
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Explanatory notes to the Notice continued
Resolution 15
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 30
March 2023, will expire at the end of this year’s AGM.
Resolution 15 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 £655,971.80
(representing 13,119,436 ordinary shares), being no more than
ten per cent of the issued ordinary share capital in issue on the
26February 2024, in each case without the equity securities first
being offered to the existing shareholders in proportion to their
existing holdings.
Resolution 16
Resolution 16 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 £655,971.80 (representing
13,119,436 ordinary shares), as at 26 February 2024, 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 17
Resolution 17 is a special resolution that will grant the Company
authority to make market purchases of up to 19,666,035 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 18
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 2025.
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.
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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, 26 March 2024 (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, 26 March
2024 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 to 11 on pages 165 and 166).
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
issuer’s agent by 11:00 am on Tuesday, 26 March 2024. For this
purpose, the time of receipt will be taken to mean the time
166
lawdebenture.com
CORPORATE INFORMATION
Shareholder notes continued
(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 26 February 2024 (being the latest practicable business
day prior to the publication of this Notice), the Company had
an issued share capital of 131,194,367 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 131,194,367.
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, 4March 2024 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;
(b) a copy of the Articles of Association of the Company; and
(c) a copy of the Company’s Long Term Incentive Plan Rules.
A copy of the 2023 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
(Elizabeth, 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
167
CORPORATE INFORMATION
The Law Debenture Corporation p.l.c. 8th Floor, 100 Bishopsgate, London, EC2N 4AG
Tel: 020 7606 5451 | www.lawdebenture.com