Liontrust Asset Management : Annual Report & Financial Statements 2019

PRIDE IN OUR

PERFORMANCE

LIONTRUST ASSET MANAGEMENT PLC

ANNUAL REPORT & FINANCIAL STATEMENTS 2019

Introduction

Highlights

Chairman's Statement

Strategic Report

Chief Executive's report Vision and Strategic objectives Business model

Key performance measures Fund Management review Distribution review Operations review Financial review

Principal risks and mitigations

Our People, Our Impact and Our Corporate Responsibilities

Governance

Board of Directors

Directors' report

Directors' responsibility statement Corporate Governance report

Risk management and internal controls report

Directors Board Attendance Report Audit & Risk Committee report Nomination Committee report

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3

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1. A specialist asset manager that seeks
2. sustainable growth in our funds, portfolios
3. and the business, for the benefit of

14	investors, shareholders and society.
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27	INDEPENDENCE
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32We do not follow the herd. Our fund managers have

35differentiated investment processes and are independent thinkers. Liontrust is an independent business with no corporate parent, is innovative and is nimble.

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49EXCELLENCE

51We pride ourselves on the quality of our fund management teams and the knowledge and ability of our staff across

55the business. We strive to provide first-class service to our

56investors and stakeholders and are transparent about the

59management of our funds, portfolios and the business,

Remuneration report

Financial Statements - Group and Company

Consolidated Statement of

Comprehensive Income

Consolidated Balance Sheet

61

88

89

communicating clearly and frequently.

ETHICS

We seek to manage the company sustainably and

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

Notes to the Financial Statements

Liontrust Asset Management Plc Financial Statements

Liontrust Asset Management Plc Notes to the Financial Statements

Independent Auditors' Report

Shareholder Information

90responsibly. We treat staff, investors and stakeholders

91fairly and with respect. We are committed to contributing to and benefiting the wider society.

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118

Forward Looking statements

This report contains certain forward-looking statements with

124respect to the financial condition, results of operations and businesses and plans of the Group. These statements and

132forecasts involve risk and uncertainty because they relate to events and depend on circumstances that have not yet occurred. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this report should be construed as a profit forecast.

Highlights

Sustained growth of our AuM from £10,475 million to £12,655 million demonstrates the substantial progress made in this year. To have recorded 9 consecutive years of net inflows shows the progress the business has made.

31 March

2019

£12,655 million

31 March

2018

£10,475 million

2017

Assets under management

20192018

£12,655million£10,475 million 21% increase

Net flows

2016

£1,775milllion	£1,004 million	77% increase

	Gross profit	£84..66milllion	£76.8 million	10% increase
			£12.3 million	55% increase
	Profit before tax	£19.0millillion
	Adjusted profit		£27.4 million	10% increase
2015	£30..11milllion
before tax1
	Adjusted diluted
	46..99pence	42.7 pence	10% increase
	earnings per share1
			£27.4 million	22% increase
	Net cash2	£33.6.434 million
	Total Dividend
2014	2726.pence0 pence	21.0 pence	29% increase
	per share3

1. This is an alternative performance measure 'APM' see page 31.
2. Cash and Cash equivalents plus other current assets less current liabilities.
3. Total dividend shown for the relevant financial year.

2013

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019

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What differentiates Liontrust

EXPERTISE

We focus only on those areas of investment in which we have particular expertise.

PROCESS DRIVEN

Each fund management team applies rigorous and documented investment processes to managing funds and portfolios to ensure the way they manage money is predictable and repeatable and to prevent them from investing in stocks for the wrong reasons.

INVESTMENT FOCUSED

Our fund managers can concentrate on managing their funds and portfolios without being distracted by other day-to-day aspects of running an asset management business.

CULTURE

How a fund manager or team performs is not just down to the talent of the individuals but also due to the culture and environment in which they work. Our fund managers have the freedom to manage their portfolios according to their own investment processes and market views.

ACTIVE MANAGEMENT

Our fund managers have the courage of their convictions in making investment decisions, ensuring our funds and portfolios are truly actively managed for the long-term benefit of our clients and investors.

STRONG AND DISTINCTIVE BRAND

Our brand is accessible and engaging, and represents our strength, conviction, independence, innovation, excellence, transparency and ethics.

COMMUNITY ENGAGEMENT

We focus on financial education, providing opportunities for vulnerable children and young people, promoting gender equality and wildlife conservation.

• LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019

Chairman's Statement

Introduction

To be absolutely certain about something, one must know everything or nothing about it.

This quote was famously uttered by Henry Kissinger, the former US Secretary of State, and originally attributed to the French philosopher Voltaire. There are different interpretations over what Voltaire meant by it, but I feel it is an apt summing up of the world we live in today.

Everyone now has the opportunity to express their opinion on any subject to the rest of the world through social media, whether it is based on knowledge or not. And often this opinion is voiced with an incredible amount of certainty. It may be an age thing, but the world currently seems an unhappy place.

The irony of this proliferation of strident views is the fact we can be less certain about the future rather than more given the breathtaking pace of change which is driven by technology and is having a profound effect not just on the financial world, but also on the social, political and economic.

For investors, this presents opportunities and challenges. Our fund managers at Liontrust focus on their investment processes, ignoring the market noise. And our Sustainable Investment team identifies transformational trends that will improve people's lives and then invests in companies likely to benefit from them.

It is because of the attractions of such investment approaches that I believe investors will continue to put money into actively managed funds. Well, at least those funds that offer well-defined investment processes so they do "what it says on the tin" and provide superior returns over the long term.

This is my 47th year in the fund management industry and I have witnessed many crashes, bubbles, too

many businesses going bust and extreme irrationality. But it feels like we live in ever more perilous times

today. Global debt, for example, could rise to $500 trillion in a few years' time, and governments seem unable or unwilling to grapple with the rising costs of healthcare, pensions or, for that matter, the rising explosion of personal debt.

To avoid the pitfalls and headwinds that there will always be and to cope with increased longevity and the new world of pensions, the need for good quality fund management has never been greater.

I am pleased to report that your Company continues to be in good shape to meet this growing need. Our Chief Executive John Ions has alluded to some of the developments and successes of the last year in his report and I am very proud of the achievements of everyone at Liontrust.

This is my last Chairman's Statement. After 10 years as Executive and Non-executive Chairman of the Company, I will be stepping down and leaving the Board of Directors after the AGM in September. I have enjoyed the past decade as your Chairman and look back with immense pride at how we steered the ship away from the rocks back in 2009 and 2010 when Liontrust was in a perilous state and was losing assets under management at an alarming and unsustainable rate.

Back in 2009, we undertook a radical review of the Company and then in 2010 appointed John as Chief Executive. We introduced a highly disciplined approach to the most important area of activity - the management of our investors' funds. It has been this single- minded approach and some tactical acquisitions which have led to a transformation of your Company over the past nine years. There are many measures of success of the business, and the share price is a key one. From 31 March 2010 to 31 March 2019, the share price rose from 101.25p to 607p, with a low of 70p in July 2010, and has subsequently gone above 700p.

One headwind confronting asset managers is the rise in regulatory costs, which are becoming an ever-higher proportion of "fixed" costs and may have a profound impact on the future landscape of our industry. We must all be vigilant against asset managers becoming so large that they resemble utility companies unable to deliver superb performance. If this is the eventual outcome, it will be a sad day.

Liontrust is counteracting this by assembling an excellent group of fund management teams and funds and striving to become more efficient. It is partly for the latter reason that we have just completed a major project to streamline our middle and back office.

As previously announced, Alastair Barbour will take over as your Chairman, and I will leave Liontrust in a very good place and safe hands, being in robust financial shape and well positioned to face the challenges ahead. With John as Chief Executive, along with the rest of the senior management and fund management teams, I have every confidence Liontrust will continue to prosper.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019

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