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LIONTRUST ASSET MANAGEMENT PLC

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Liontrust Asset Management : Annual Report & Financial Statements 2020

07/21/2020 | 04:20am EDT

PRIDE IN OUR

PERFORMANCE

LIONTRUST ASSET MANAGEMENT PLC

ANNUAL REPORT & FINANCIAL STATEMENTS 2020

Introduction

Highlights

Chairman's Statement

Strategic Report

Chief Executive's report Our vision

Our strategy

Business model

Key performance measures Fund Management review Sales and marketing review Operations review Financial review

Principal risks and mitigations

Our People, Sustainability and Corporate Responsibilities

Governance

1

3

8

A specialist asset manager whose

10

  1. purpose is to have a positive impact on
  2. our clients, stakeholders and society. Our
  3. values are:

14

28

29COURAGE

30We do not follow the herd and have the courage to have

34independence of thought. Our fund managers have the

courage of their convictions and have differentiated

37and robust investment processes. The business has the courage to do the right thing, make decisions and to be

Board of Directors

48

innovative and nimble.

Risk management and internal controls report

Directors' report

Directors' responsibility statement Corporate Governance report

49

53EXCELLENCE

56We strive for excellence in our products, service and people

57so we can have a positive impact on clients and stakeholders.

Directors Board Attendance Report

61

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

Nomination Committee report Audit & Risk Committee report Remuneration report

Financial Statements - Group and Company

Consolidated Statement of

Comprehensive Income

Consolidated Balance Sheet

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

62business. We provide first-class service and are transparent

65about the management of our funds, portfolios and the

68business, communicating clearly and frequently.

98

GOOD CITIZENSHIP

99

We seek to be a responsible company and investor. We

100uphold the highest standards of integrity in all of our actions, treating staff, clients and stakeholders fairly

101and with respect. We are committed to contributing

102to and benefiting the wider society, including through sustainability, financial education, diversity and equality.

125

Forward Looking statements

129This report contains certain forward-looking statements with respect to the financial condition, results of operations and

137businesses and plans of the Group. These statements and

Shareholder Information

146

forecasts 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 £12,655 million to £16,078 million demonstrates the substantial progress made in this year. To have recorded 10 consecutive years of net inflows shows the progress the business has made.

31 March

2020

£16,078 million

31 March

2019

£12,655 million

2017

Assets under management

2020

2019

£12.7 billion

27% increase

££1612,655.billion

Net flows

££2,6951,775milllion

£1,775 million

52% increase

2016

£84.6 million

26% increase

Gross profit

££10684.6.6million

£22.2 million*

26% decrease

Profit before tax

££1619.5millillion

Adjusted profit

2015

before tax

££3830..11milllion

£30.1 million

26% increase

Adjusted diluted earnings per share

5646..79pence

46.9 pence

21% increase

Total Dividend per share

3326..00pence

27.0 pence

22% increase

2014

  • 2019 restated see note 1(v) on page 106

2013

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

1

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 2020

Chairman's Statement

Introduction

This is my first Statement on Liontrust's Full Year Results as your Chairman and I would never have anticipated just a few long months ago that it would be written under such circumstances. While the successful momentum of Liontrust has continued since I became Chairman last September and, more significantly, through the COVID-19 pandemic, the world is confronting issues that will have a long-term impact on asset managers, along with other industries. This affects us both as investors and as a company.

Before I address some of the issues, I want to welcome Mandy Donald, who joined the Board in September. She has already made a significant contribution as a non-executive Director and will continue to do so into the future.

I also want to congratulate John Ions and Vinay Abrol as CEO and CFO/COO on their leadership and achievements over the past decade. This has culminated in Liontrust joining the FTSE250 in June and successfully navigating COVID-19.

The pandemic and subsequent lockdown have created challenges for all businesses in every industry. I and the rest of the Board have been impressed by how well our business moved to remote working and everyone at Liontrust has risen to the challenge with professionalism while maintaining productivity levels. The Directors would like to thank everyone at Liontrust for their dedication and energy especially as lockdown followed just five months after our acquisition of Neptune.

This achievement reflects well on the development of Liontrust over the past few years, the processes that have been in place and the quality of our fund managers, partners and employees.

I am pleased to be able to report that it has been another successful year for your company. The continued positive net inflows, the growth in assets under management and the profitability of the business are testament to the strong position the company is in.

The fact that Liontrust is in such good shape, along with the quality of the investment teams and their processes, gives me confidence about the resilience of the business as we head into a particularly uncertain economic environment.

While everyone's attention has been focused on COVID-19 for the past few months, the climate crisis still threatens the long-term health of the planet and therefore of our well-being. We all expect and hope for a greater focus on our relationship with nature and biodiversity going forward; and we were pleased Liontrust was able to provide enhanced support for the Zoological Society of London ('ZSL') during lockdown at a time when the organisation had no income.

Sustainability is an important issue for the Board. John Ions sets out the targets the Board wants the company to achieve in Liontrust's first Sustainability Report to be published in July 2020. These targets cover being a responsible investor, climate change, having a diverse and talented staff, and being a good corporate citizen.

Diversity and equality of opportunity is another key issue that the Board is addressing. The world is being confronted by the reality that the black community still faces inequality and discrimination. Society has a great deal more to do, as does the

asset management industry, in enabling black men and women to realise their full potential. At Liontrust, we seek to promote career progression and eradicate any hurdles that anyone feels they face; in particular, we seek to eliminate unconscious bias whether in recruitment or any other aspect of the business.

Liontrust is also committed to having a positive impact on society such as through charitable initiatives to provide education and employment opportunities across ethnic and social groups, including the black community, to promote greater equality.

Liontrust continues to make significant progress. This success puts us in a good position to have a positive impact on investors, stakeholders and society over the next few years.

Results

Profit before tax is £16.508 million (2019: £22.172 million), a decrease of 26%. The profit before tax for the financial year ended 31 March 2020 includes £9.7 million of acquisition and reorganisation related costs incurred as a result of the acquisition of Neptune Investment Management Limited ('Neptune') which completed on 1 October 2019.

Adjusted profit before tax was £38.054 million (2019: £30.093 million). Adjusted profit before tax is disclosed in order to give shareholders an indication of the profitability of the Group excluding non-cash (depreciation, intangible asset amortisation and share incentivisation related) expenses and non-recurring (professional fees relating to acquisition, cost reduction, restructuring and severance compensation related) expenses, see note 7 of the financial statements for a reconciliation of adjusted profit before tax.

Dividend

The success in fund performance and distribution has resulted in a 52% increase in net inflows, a 27% increase in assets under management and a 26% increase in revenues excluding performance fees when compared to last year. This has enabled the Board to declare a second interim dividend of 24.0 pence per share (2019: 20.0 pence), which will be payable on 21 August 2020 to shareholders who are on the register as at 17 July 2020, the shares going ex-dividend on 16 July 2020. The total dividend for the financial year ending 31 March 2020 is 33.0 pence per share (2019: 27.0 pence per share), an increase of 22% compared with last year.

The Company has a Dividend Reinvestment Plan ("DRIP") that allows shareholders to reinvest dividends to purchase additional shares in the Company. For shareholders to apply the proceeds of this and future dividends to the DRIP, application forms must be received by the Company's Registrars by no later than 31 July 2020. Existing participants in the DRIP will automatically have the dividend reinvested. Details on the DRIP can be obtained from Link Asset Services on 0371 664 0381 or at www.linkassetservices.com/ shareholders-and-investors/dividend-reinvestment-plan. (Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales).

Alastair Barbour

Chairman

7 July 2020

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

3

  • LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

5

  • LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Strategic report

Chief Executive's report

8

Our vision

10

Our strategy

10

Business model

11

Key performance measures

12

Fund Management review

14

Sales and marketing review

28

Operations review

29

Financial review

30

Principal risks and mitigations

34

Our People, Sustainability and Corporate Responsibilities

37

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

7

Strategic Report

Chief Executive's Report

Introduction

It has been another successful year for Liontrust, with the business making further significant progress.

Liontrust delivered record net positive inflows of £2.69 billion for the 12 months to 31 March 2020, taking our assets under management and advice (AuMA) to £16.1 billion. We generated strong net positive inflows of £492 million during the first three months of 2020 despite the spread of COVID-19 and lockdowns being imposed around the world.

This success led to Liontrust having the 6th highest net retail sales in the UK in 2019 and we had the 5th highest in the first quarter of 2020, according to the Pridham Report.

These sales are testament to the excellence of our investment teams and processes, the loyalty of our clients, the power of our brand and the strength of our sales and marketing capability.

There is increasing focus on environmental, social and governance (ESG) in people's lives, society and companies, and Liontrust is committed to integrating sustainability throughout our business. The first-ever Liontrust Sustainable Report is being published in July 2020, which provides detailed information about how we are managing the company to ensure we have a positive impact on clients, stakeholders and society. In the Report, we have set out our priorities and targets for being a responsible investor, climate change, having diverse and talented staff, and being a good corporate citizen.

These priorities and targets include providing the tools, training and resources for all our investment managers to consider ESG in their decision-making processes, including material ESG factors in our risk framework and to engage and push for positive change where we have concerns.

Liontrust disclose our scope 1 and 2 emissions as well as some scope 3 emissions including travel. We are working to be in

a position to disclose those of our key outsourced providers and our investments next year. We are developing an absolute reduction target by the end of this year that is to be met by 2025.

We are also committed to diversity across the Company as we believe this enhances the performance of businesses and leads to better decision-making.

The Sustainable Investment team has demonstrated for nearly 20 years that its investment process can deliver superior returns over conventional funds. All eight of the UK-domiciled

equity and managed funds run by the team are in the 1st quartile of their respective IA sectors over one, three and five years to 31 March 2020.

The benefits of active managers applying rigorous investment processes is also shown in the long-term performance of our other teams. The Economic Advantage team's UK Growth, Special Situations and UK Smaller Companies funds are in the 1st quartile of their respective IA sectors over one, three, five years and since launch or they took over to 31 March 2020.

The team's other fund, UK Micro Cap, was launched in March 2016 and is in the 1st quartile of the IA UK Smaller Companies sector over one, three years and since launch. The team of Anthony

Cross, Julian Fosh, Victoria Stevens and Matt Tonge was strengthened in March by Alex Wedge joining from N+1 Singer, where he was a senior member of the equity sales team.

We have successfully integrated Neptune Investment Management and rebranded the fund managers as the Liontrust Global Equity team. They have strengthened our equity income capability and added global equity and emerging markets funds. We have seen growing demand for a number of the team's funds over recent months, including Income, Global Dividend and Global Equity, and are confident that we will be growing their assets over the next year.

Despite the challenges and headwinds of the past few months facing all companies, everyone at Liontrust has reacted quickly and efficiently, showing the robustness of our business processes.

Communication with our clients and stakeholders has been key to maintaining momentum. Our investment teams held eight webinars between 19 March and 3 April alone. By mid-June, we had hosted a total of 45 webinars, for which we had had 5,855 viewings.

The Sales and Marketing teams have been communicating regularly with our clients, including through written updates and articles, which have been emailed directly and distributed through our partners and platforms. The success of this engagement has been shown by a 70% increase in visits to the Liontrust website compared to this time last year.

The pandemic and other recent events have also highlighted our responsibility to society, whether it is the need to ensure diversity and tackle inequality which has been so well articulated by the Black community or helping the vulnerable and less fortunate. We were proud to work with our community partners to provide extra support during lockdown, including to children of vulnerable families, food banks, the homeless and ZSL London Zoo.

Our numeracy project with Newcastle United Foundation, called Financial Football, has also progressed. By February, the project, which involves interactive games around football, had worked with 14 schools and 700 pupils. These games empower children to feel more confident about money and it is wonderful to see their increased engagement with numeracy.

Outlook

Liontrust is well positioned regardless of how long it takes for the world to navigate and recover from the pandemic, both health wise and economically.

We have assembled a strong range of funds and portfolios across equities, fixed income, multi-asset

and sustainable, and we focus on robust and repeatable investment processes to enable us to meet investor expectations. Performance is never predictable but process should always be.

The excellent fund performance and increasing profile of our team means we can continue to benefit from the growing demand for sustainable investing over the next few years.

The expansion of our investment solutions is continuing through our Multi-Asset target risk

portfolios, Sustainable Managed and our equity income funds. This is another part of the

market where we expect increasing growth in demand among financial advisers.

We are also benefiting from the loyalty of clients because of the power of our brand, excellent service and communications, and robust administration.

This all gives me confidence that Liontrust will maintain our positive momentum.

John Ions

Chief Executive

7 July 2020

  • LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Assets under management

On 31 March 2020, our AuMA stood at £16,078 million

(2019 : £12,655 million) an increase of 27% over the financial year. A reconciliation of AuMA as at 31 March 2020 is as follows:

Multi

Offshore

Total

Institutional

UK Retail

Asset

Funds

Process

(£m)

(£m)

(£m) (£m)

(£m)

Economic Advantage

6,316

190

5,956

-

170

Sustainable Investments

5,060

33

4,643

-

384

Global Equity

2,099

229

1,870

-

-

Cashflow Solution

815

536

209

-

70

Multi-Asset

840

-

-

840

-

Global Fixed Income

668

-

330

-

338

Macro Thematic

88

-

88

-

-

European Income

107

-

107

-

-

Asia

85

-

72

-

13

Total

16,078

988

13,275

840

975

Fund flows

Liontrust recorded net inflows of £2,695 million in the financial year to 31 March 2020 (2019 : £1,775 million). A reconciliation of fund flows over the financial year is as follows:

Multi

Offshore

Total

Institutional

UK Retail

Asset

Funds

Process

(£m)

(£m)

(£m)

(£m)

(£m)

Closing AuMA -

1 April 2019

12,655

845

10,317

844

649

Net flows

2,695

74

2,129

102

390

Acquisitions*

2,733

339

2,394

-

-

Market and Investment

performance

(2,005)

(270)

(1,565)

(106)

(64)

Closing AuMA -

31 March 2020

16,078

988

13,275

840

975

  • Relates to the acquisition of Neptune Investment Management which completed on 1 October 2019

31 March

31 March

2020

2020

£16,078 million

£2,695 million

31 March

31 March

2019

2019

1,775 million

£12,655 million

£

Increase of

Increase of

27%

52%

over the financial year

over the financial year

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

9

Strategic Report - Our vision

Our vision

Our vision is to have a positive impact on our investors, stakeholders and society. We aim to achieve this by providing the environment which enables our fund managers and employees to flourish, helping our investors achieve their financial goals, supporting companies in generating sustainable growth, and empowering and inspiring the wider community

Our strategy

Our strategy has six pillars:

1 Be a responsible company and investor

We take seriously our role as custodians of client assets and are committed to managing Liontrust responsibly. Liontrust is focused on treating all clients fairly, meeting investors' expectations

and ensuring the Group's objectives are aligned with those of our stakeholders.

Liontrust is committed to environmental, social and governance (ESG) initiatives, has been providing the tools to empower all our investment managers to consider ESG in their decision-making processes, and has been developing the risk framework to capture and evaluate environmental and social controversies.

The Liontrust Sustainability Report 2020, which is available on our website, shows how we are building sustainability into our business and our plan for being a responsible and transparent investor, employer and good corporate citizen.

We are continuing to develop our community engagement programme that is focused on financial education, helping the homeless and wildlife conservation. During the COVID-19 lockdown, Liontrust gave extra support to our existing partners.

2 Deliver strong long-term investment performance Liontrust focuses only on managing funds and portfolios in which we have particular expertise and by teams with rigorous and repeatable investment processes. We believe these processes are key to delivering strong long-term performance and effective risk control. Our funds strive to outperform their relevant benchmarks and the average returns of their respective peer groups over the medium to long term.

3 Expand our distribution and products

We are seeking to distribute our funds to as broad a client base in the UK and internationally as possible, striving continually

to raise awareness and knowledge of Liontrust and our funds, widen the number of clients who invest with us, deepen our relationships with existing investors and increase our assets under management. We add to our product range when we have the fund management expertise and there is investor demand.

4 Acquire and develop talent

We will continue to recruit fund managers who have excellent track records, expertise in their respective asset classes and who use rigorous and repeatable investment processes. We will make acquisitions that enhance and grow our business.

Liontrust is proud of the people who work at the company and we are investing in their training, qualifications and development as part of our strategy to retain talented fund managers, partners and employees. We are seeking greater diversity across the company as we believe this enhances the performance of businesses and leads to better decision making.

5 Enhance the investor experience

We aim to provide our investors with exceptional service and support, striving to be as transparent as possible. We communicate clearly and frequently with our investors, regularly updating them on the performance of each of our funds

and portfolios, the investment processes our funds and portfolios of the business as a

is investing in developing services and digital enhance client services

6 Ensure strong infrastructure

We aspire for excellence administration, risk

and corporate governance ensure we can deliver a class service as the expands further. We have been moving all our funds to one administrator to secure a solid foundation from which to support future expansion and

to ensure we and our investors benefit from efficiencies.

10 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Business Model

Business Model

Our business model is designed to operate in the best way to achieve our strategic objectives, comprising three interdependent divisions: Fund Management, Distribution and Operations.

Fund Management

The quality and performance of our fund management teams is one of our key potential competitive advantages.

We have a single fund management division of nine fund management teams who manage a range of funds, portfolios and segregated accounts using distinct investment processes and a centralised trading team. These rigorous investment processes ensure the way we manage money is predictable and repeatable. We have created an environment in which fund managers can focus on managing money and not get distracted by other day- to-day aspects of running a business, particularly administration. The fund management teams are mostly based in our London and Edinburgh offices.

Distribution

The strength of our brand, the breadth and depth of our client base and the relationships we have with our investors are potential competitive advantages.

Our distribution and marketing teams promote our funds and portfolios in the UK and internationally. In the UK, we market to institutional investors, discretionary fund managers, wealth managers, financial advisers and private investors. Outside the UK, we are focused on the wholesale market, primarily family offices, private banks, wealth managers and multi-managers in a

through our website, social media, email communications and online advertising and promotions. The regular research we conduct shows that Liontrust consistently scores well for brand awareness, understanding and positive opinion among financial intermediaries in the UK. The Marketing team is based at our London office, delivering one consistent brand for the UK and international markets.

Operations

The support provided to our clients, fund managers and the sales and marketing teams by operations is another key potential competitive advantage. We have a single Operations division, designed to support a fast-growing business, and have moved to one administrator - Bank of New York Mellon (BNYM)*. Having a single Operations function and administrator ensures the fund management and sales and marketing divisions have the appropriate tools to be effective, provides executive management with the performance and risk monitoring information required to manage the business and supports the requirements of external stakeholders such as clients, shareholders and regulators.

* Neptune operations fully transferred to BNYM in June 2020.

through our marketing These activities include client PR and both print and digital key and ever-more important and engagement, including

/LiontrustHeroes

@LiontrustHeroes

@LiontrustFuture

@LiontrustViews Liontrust

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 11

Strategic Report - Key performance measures

Key performance measures

Fund management ability and investment performance The strength of Liontrust's fund managers is shown by the fact that over the period from launch or fund manager appointment to the end of each of the last three financial years, on an AuMA weighted basis, we have consistently had over 60% of our actively managed UK retail AuMA in first quartile funds# (see Figure 1).

A Profitable and Growing business

Our AuMA has increased by 53% from 31 March 2018 to

31 March 2020 and by 27% from 31 March 2019 to 31 March 2020, reflecting acquisitions, market performance and net flows (see figure 3).

Figure 1 - AuMA* weighted quartile ranking since launch or

Figure 3 - AuMA* by investor type £'million

18,000

manager inception

100%

16,000

90%

14,000

80%

12,000

70%

10,000

60%

50%

8,000

40%

6,000

30%

4,000

20%

2,000

10%

0

0%

FY18

FY19

FY20

FY18

FY19

FY20

First Quartile

Third Quartile

Second Quartile

Fourth Quartile

  • This is an alternative performance measure ('APM'). See page 33 for further details.
  • net of fees and income reinvested.

See UK Retail fund Performance on page 25.

Fund management ability and investment performance Net inflows in the year have increased from £1,775 million to £2,695 million.

Figure 2 - Net flows £' million

£3,000

£2,700

£2,400

£2,100

£1,800

£1,500

£1,200

£900

£600

£300

0

FY18FY19FY20

  • This is an alternative performance measure ('APM'). See page 33 for further details.

Multi Asset (£'m)

UK Retail funds (£'m)

Institutional (£'m)

Offshore funds (£'m)

  • This is an alternative performance measure ('APM'). See page 33 for further details.

Our adjusted profit before tax has increased by 39% from

31 March 2018 to 31 March 2020 and by 26% from 31 March 2019 to 31 March 2020.

Figure 4 - Adjusted profit before tax* £'000

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

FY18

FY19

FY20

  • This is an alternative performance measure ('APM'). See page 33 for further details.

12 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

13

Strategic Report - Fund Management review

Fund Management review

"

Performance is not predictable,

process is.

"

John Ions, Chief Executive

Liontrust has nine fund management teams. Six of the teams invest in UK, European, Asian and Global equities, one team invests in Global Fixed income and we have a Sustainable Investment team that offers equity, fixed income and managed funds. Our ninth team manages target risk Multi-Asset portfolios.

14 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Fund Management review

Economic Advantage team

Anthony Cross, Julian Fosh, Victoria Stevens, Matt Tonge and Alex Wedge manage the Liontrust Economic Advantage Process. Anthony, who was previously at Schroders, has managed the Liontrust Special Situations and UK Smaller Companies Funds since launch and he started working with Julian at Liontrust in 2008. Julian has previously managed money at Scottish Amicable Investment Managers, Britannic Investment Managers, Scottish Friendly Assurance Society and Saracen Fund Managers.

Victoria Stevens and Matt Tonge joined the team in 2015 to research and analyse investment opportunities primarily across the small cap universe. In Victoria's previous role as deputy head of corporate broking at FinnCap, she built up an extensive knowledge of the smaller company investment universe. Matt added trading and analytical expertise to the team, having spent the previous nine years on the Liontrust dealing desk, latterly winning an industry award for his work in mid and small cap stocks.

Alex Wedge joined the team in March 2020 from N+1 Singer, one of the largest dedicated small cap brokers in London. Alex spent over seven years at N+1 Singer, latterly as a senior member of the equity sales team. His role included developing and communicating investment ideas to buy side clients, as well as advising corporate clients on shaping their investment case and raising equity capital.

SPECIAL SITUATIONS FUND

The multi-award-winning Fund has been managed since launch in November 2005 by Anthony Cross, who was joined by his co-manager Julian Fosh in 2008. The Fund aims to deliver capital growth over the long term (5 years or more) through using the Economic Advantage investment process. The process seeks

"It is important to understand the business model of the company you are investing in. As long as you get the business model and the compounding right, then the valuation will take care of itself. "

Anthony Cross

to identify companies with a durable competitive advantage that allows them to defy industry competition and sustain a higher than average level of profitability for longer than expected.

UK MICRO CAP FUND

The Fund, which aims to deliver capital growth over the long term (5 years or more), has been managed since launch in March 2016 by Anthony Cross, Julian Fosh, Victoria Stevens and Matt Tonge. The Fund seeks to invest in profitable, UK headquartered companies with high managerial ownership and a market capitalisation of under £150 million.

UK GROWTH FUND

The Fund, which aims to deliver capital growth over the long term (5 years or more), has been managed since March 2009 by Anthony Cross and Julian Fosh. The Fund predominantly invests in UK large and mid-cap stocks using the Economic Advantage investment process.

UK SMALLER COMPANIES FUND

The multi-award-winning Fund has been managed by Anthony Cross since 1998 and he was joined by his co-managers Julian Fosh in 2008 and Victoria Stevens and Matt Tonge in 2015. The Fund aims to deliver capital growth over the long term (5 years or more) through using the Economic Advantage investment process. All smaller companies in the Fund must have a minimum 3% senior managers' equity ownership, which the fund managers believe motivates key employees, helps to secure a company's competitive edge and leads to better corporate performance.

INVESTMENT PROCESS

The process seeks to identify companies that possess intangible assets which produce barriers to competition and provide a durable competitive advantage that allows the companies to defy industry competition and sustain a higher than average level of profitability for longer than expected. In the fund managers' experience, the hardest characteristics for competitors to replicate are three classes of intangible asset: intellectual property, strong distribution channels and significant recurring business.

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Strategic Report - Fund Management review

Sustainable Equity team

Peter Michaelis and Simon Clements are the lead managers of the Liontrust Sustainable Future Equities Process. The team transferred to Liontrust from Alliance Trust Investments (ATI) in April 2017 and were previously running the Sustainable Future Fund range at Aviva Investors. Peter was previously Head of SRI at Aviva Investors and has been running the funds since their launch in 2001. Simon was previously Head of Global Equities at Aviva Investors.

EQUITY FUNDS

The 13-strong team has been managing the Sustainable Future funds since 2001. They manage a broad range of equity and managed funds to meet different risk profiles, return objectives and geographical preferences of investors.

• SF Managed Growth

• SF Managed

• SF European Growth

• SF Cautious Managed

• SF Global Growth

• SF Defensive Managed

• SF UK Growth

• GF SF Pan European Growth

• UK Ethical

INVESTMENT PROCESS

The process starts with a thematic approach in identifying the key structural growth trends that will shape the global economy of the future. The team looks at the world through the prism of three mega trends - Better resource efficiency (cleaner), Improved health (healthier) and Greater safety and resilience (safer) - and 20 themes within these trends.

  • Cleaner: Using our resources more efficiently (water, increasing recycling of waste, lower carbon energy sources and energy efficiency).
  • Healthier: Improving our quality of life through better education, healthier lifestyles and diet or better healthcare.
  • Safer: Making the systems we rely on safer or more resilient. This includes car safety, keeping our online data safe with cybersecurity and spreading risk through appropriate insurance mechanisms.

The team invests in well-run companies whose products and operations capitalise on these transformative changes and, therefore, may benefit financially. The fund managers have four stages in identifying superior stocks:

  • Thematic analysis: identifies companies with strong and dependable growth prospects due to alignment with the 20 themes.
  • Sustainability analysis: focuses on those companies with excellent management and core products or services that contribute to society or the environment.
  • Analysis of business fundamentals: selects only those companies positioned to deliver high returns on equity.
  • Valuation analysis: determining that the shares of the company will be worth significantly more in the future.

If you judge the future by assuming it will look much

like the present, you risk being very wrong. Most

"investors underestimate the power and predictability

of positive trends and the growth prospects of

sustainable companies aligned with them.

"

Peter Michaelis

16 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Fund Management review

Sustainable Fixed Income team

Stuart Steven, Kenny Watson and Aitken Ross manage the Liontrust Sustainable Future Fixed Income Process. They transferred to Liontrust from ATI in April 2017. Stuart was previously Investment Director at Scottish Widows Investment Partnership. Kenny was formerly at Ignis Asset Management where he was responsible for the sub investment grade bond portfolios. Aitken started his career in the graduate scheme at ATI.

SF CORPORATE BOND

The Fund aims to deliver income with capital growth over the long term (5 years or more) through using the Sustainable Future investment process. At least 80% of the Fund is invested in investment grade corporate bonds that are sterling denominated or hedged back to sterling. The Fund can also invest in government bonds and other fixed income securities.

MONTHLY INCOME BOND FUND

The Fund has been managed by Stuart Steven since its launch in June 2010, with Aitken Ross joining the team in 2012 and Kenny Watson in 2013. The aim of the Fund is to produce monthly income payments together with capital growth by investing at least 80% of the portfolio in investment grade corporate bonds that are sterling denominated or hedged back to sterling. The Fund targets a net total return of at least the IBOXX GBP Corporates (5-15Y) Index over the long term (rolling 5-year periods). While the Fund has been structurally short duration since launch, it has the flexibility to revert to a standard duration fund as and when yields normalise.

GF SF European Corporate Bond Fund

The Fund aims to maximise total returns (a combination of income and capital growth) over the long term (5 years or more). The Fund seeks to achieve this objective predominantly through investing in euro denominated investment grade corporate bonds or non-euro denominated corporate bonds hedged back into euros.

INVESTMENT PROCESS

Macroeconomic analysis is used to determine the team's top-down view of the world and this helps shape all aspects of portfolio construction and appetite for risk. After this, the managers aim to focus on high-quality issuers and believe this can reduce bond specific risk. Their assessment of quality is a distinctive part of the process, in which they combine traditional credit analysis with a detailed sustainability assessment based on the proprietary model. The managers assess individual bonds for whether they believe they offer attractive long- term returns and for absolute and relative valuations. The managers seek the best value bonds issued by the high-quality issuers identified, looking at bonds issued across the capital structure, along the maturity curve, or issued into the primary credit markets (UK, US and Europe). Sustainability analysis is fully integrated into the investment process, helping to identify high-quality companies that the managers believe will both enhance returns and reduce issuer specific tail-risk.

Focusing on the more sustainable parts of the

"

market and avoiding companies and sectors

challenged by environmental and societal

considerations can drive performance. Not

only do sustainable companies typically have

better growth potential, they are also more

resilient than the market thinks.

Aitken Ross"

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Strategic Report - Fund Management review

Global Equity team

Led by Robin Geffen, who is the architect of the investment process, supported by James Dowey, the Global Equity team manages a range of global, regional and emerging markets funds. The funds are all managed according to the same investment process, which is founded on collaborative idea generation,

a culture of investing with conviction and three silo portfolio construction. The team transferred to Liontrust in October 2019 as part of the acquisition of Neptune Investment Management.

GLOBAL EQUITY FUNDS

The Liontrust Global Equity team manages 19 funds. The range comprises Global, Income, Regional and Emerging Markets funds.

• Balanced

• China

• Global Technology

• Global Alpha

• European Opportunities

• Global Equity

• Emerging Markets

• Global Dividend

• Latin America

  • Global Smaller Companies
  • Income
  • India
  • Japan Equity
  • Japan Opportunities
  • Russia
  • UK Mid Cap
  • UK Opportunities
  • US Income
  • US Opportunities

INVESTMENT PROCESS

The fund managers believe the key to generating long-term outperformance is through high conviction, long-term, research- led company selection. When combined with the team's portfolio construction, this approach can drive returns that are largely uncorrelated to the successes and failures of popular investment styles such as growth (investing in growing companies) and value (holding relatively cheap companies). There are three key elements to the investment process:

  1. Collaborative Idea Generation: each member of the Liontrust Global Equity team has a research responsibility covering an industry sector of the global economy, a particular economic trend or a theme such as industries adopting new technology and changing consumer tastes. This clear division of responsibility ensures that the fund managers do not overlook "unfavoured" companies and allow structured peer challenge for the generation of validated, independent and sometimes atypical investment ideas that underpin the collaborative original research required.
  2. Culture of Conviction: to enable ideas to drive investment returns rather than providing market returns, each one must be given sufficient weight in the portfolio and time to work. This results in concentrated portfolios with long holding periods.
  3. "Three Silo" Portfolio Construction: portfolios are constructed to be "style-free" with the aim of providing more consistent returns over the economic cycle by ensuring that ideas drive returns rather than style bias.

The process is implemented through four stages: idea generation, stock selection, portfolio construction, and monitoring and exiting.

"

While investment styles such as value and growth

enjoy periods of success, they can quickly lose

efficacy as economic conditions change.

"

James Dowey

18 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

James Inglis-Jones

Fund Management review

Cashflow Solution team

James Inglis-Jones and Samantha Gleave manage the Liontrust Cashflow Solution Process. They first worked together in 1998. James has previously managed money at Fleming Investment Management, JP Morgan Fleming and Polar Capital while Samantha formerly worked at Sutherlands Limited, Fleming Investment Management, Credit Suisse First Boston and Bank of America Merrill Lynch. Samantha was in a No 1 ranked equity research sector team (Extel & Institutional Investor Surveys) at Credit Suisse and won awards for Top Stock Pick and Earnings Estimates at Bank of America Merrill Lynch.

EUROPEAN GROWTH FUND

The Fund has been managed since launch in November 2006 by James Inglis-Jones, and he was joined by Samantha Gleave in 2012. The Fund aims to deliver capital growth over the long term (5 years or more) by using the Cashflow Solution process to identify and invest in companies incorporated, domiciled, listed or which conduct significant business in the EEA (European Economic Area) and Switzerland. The Fund has an equally weighted portfolio.

GF EUROPEAN STRATEGIC EQUITY FUND

The Fund has been managed since launch in April 2014 by James Inglis-Jones and Samantha Gleave. The fund managers seek to deliver a positive absolute return over the long term by taking long and short positions, primarily in European companies. The Fund buys companies that can generate strong cash returns from their capital and appear cheap on these cash flows and shorts companies that are both expensive and struggling to generate cash.

GF EUROPEAN SMALLER COMPANIES FUND

The Fund has been managed since launch on 1 February 2017 by James Inglis-Jones and Samantha Gleave. The Fund aims to achieve long-term capital growth (at least 5 years) by investing primarily in European smaller companies, with the majority having a market capitalisation of less than €5 billion at inception, and through having an equally weighted portfolio.

GLOBAL INCOME FUND

The Fund has been managed since March 2009 by James Inglis-Jones, and he was joined by Samantha Gleave in 2012. The Fund seeks to deliver a high level of income with the potential for capital growth over the long term (5 years or more) by using the Cashflow Solution process to identify and invest in companies globally. The aim of the Fund is to deliver a net target yield of at least the net yield of the MSCI World Index each year. The managers seek to achieve this by investing in high-yielding stocks with unusually strong cash flows where investors have low profit expectations.

INVESTMENT PROCESS

The process is based on the belief that the most important determinant of shareholder returns is company cash flows. The fund managers invest in companies that generate significantly more cash than they need to sustain their planned growth yet are lowly valued by investors on that measure and are run by managers committed to an intelligent use of capital. They sell short stocks that are expensive, are struggling to generate any cash and are run by management investing heavily for future growth. There is historical evidence that combining the Cashflow Solution process with a yield discipline is capable of generating strong returns. Companies generating significant cash flows are in a good position to pay generous and rising dividends to shareholders.

"We know that when investor anxiety is very high, 12-month forward returns for our investment process have historically been strong."

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Strategic Report - Fund Management review

Multi-Asset team

John Husselbee and Paul Kim are two of the most high-profilemulti-asset managers and manage the Liontrust Multi-Asset Process. John launched the portfolio management service at Rothschild Asset Management, was Director of Multi-Manager at Henderson Global Investors, where he was responsible for portfolio construction and fund selection of a range of portfolios totalling over £650 million, and founded North Investment Partners. Paul was instrumental in setting up Investment Manager Selection Ltd (IMS), was Head of Fund Selection and Multi-Manager at Liverpool Victoria Asset Management (LVAM) and has also managed portfolios at Capel Cure Myers, Sun Life Portfolio Counselling Services (AXA Sun Life), Christie Group Investment Management and Spencer Thornton Investment Management Services.

RANGE OF PORTFOLIOS

The team manages a broad range of 26 target risk and actively managed model portfolios to meet most clients' risk and return objectives. The higher the risk of the portfolio, the greater the potential for volatility, positive returns on the upside and losses

in down markets. The portfolios provide diversification across a range of different funds, fund managers, geographical regions and asset classes. Clients can stay invested in the service through the accumulation and decumulation phases of their lives and can switch between Growth, Income and Dynamic Beta portfolios as their risk profile and objectives change. A key objective of the Multi-Asset portfolios is to strive to "win over the long term by not losing". John Husselbee and Paul Kim achieve this by seeking

to manage risk and limit losses in falling markets to enhance long-term returns within each risk target.

INVESTMENT PROCESS

The process is designed to target the outcome expected by investors in terms of the level of risk, as measured by volatility, of each model portfolio and to maximise the return for each portfolio while still targeting the investors' level of risk. These two objectives are pursued through a quantitative and qualitative approach with four key stages to the process: the strategic asset allocation, followed by the tactical asset allocation, fund selection and portfolio construction.

"A central theme of our multi-asset proposition is that there is no 'best' investment for everyone at any point in time: when it comes to personal finance, the operative word is personal.

Someone's best investment will always depend on their financial goals and attitude to risk. Asset allocation should be determined

as much by how much someone is prepared to lose as by how

much they want to gain.

"

John Husselbee

20 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Fund Management review

Global Fixed Income team

David Roberts, Phil Milburn and Donald Phillips manage the Liontrust Global Fixed Income Process. Before joining Liontrust in early 2018, David and Phil worked together at Kames Capital for 14 years, where David was Head of the Fixed income team and Phil was Head of Investment Strategy. They launched one of the first strategic bond funds in 2003 and have been investing in high yield on a global basis since 2003. Donald was previously an investment manager

in the Credit team at Baillie Gifford and worked with David and Phil at Kames Capital for three years from 2005 to 2008. He was co-manager of the Baillie Gifford High Yield Bond Fund from June 2010 to 2017 and the US High yield strategy.

STRATEGIC BOND FUND

The Fund has been managed since launch in May 2018 by David Roberts and Phil Milburn, who are assisted by Donald Phillips. The aim of the Fund is to maximise its total return over the long term (5 years or more) through a combination of income and capital growth by investing in government bond and credit securities globally. The Fund may invest up to 40% of its net assets in emerging markets. The fund managers seek to take advantage of market inefficiencies through understanding the economic environment, bottom up stock analysis and flexibility over duration, credit, sector and geographical allocations. The managers only commit cash to the market when they believe investors will receive a return that justifies the risk they are taking.

GF HIGH YIELD BOND FUND

The GF High Yield Bond Fund has been managed since launch in June 2018 by Phil Milburn and Donald Phillips, who are assisted by David Roberts. The aim of the Fund is to maximise the total return over a long-term horizon (at least 5 years) through a combination of income and capital. The Fund invests predominantly in high yield and selected investment grade bond and credit markets worldwide (including developed and emerging markets).

GF ABSOLUTE RETURN BOND FUND

The Fund has been managed since launch in June 2018 by David Roberts, Phil Milburn and Donald Phillips. The Fund aims to generate positive absolute returns over a rolling 12-month period irrespective of market conditions through a combination of capital growth and income. The fund managers seek to achieve this objective by investing in bond and credit markets worldwide (including developed and emerging markets).

INVESTMENT PROCESS

The fund managers believe fixed income markets are inefficient and there are myriad ways of adding value to investors' portfolios. The inefficiencies are caused by many market protagonists who are not price sensitive, ranging from the macroeconomic distortions caused by central banks to the idiosyncratic scenarios when companies need to raise debt finance and price accordingly. The Liontrust Global Fixed Income investment process is designed to take advantage of these inefficiencies through

a thorough understanding of the economic environment and detailed bottom up stock analysis. The process uses the same framework to garner a thorough understanding of the economic environment and for bottom up stock analysis: fundamentals, valuations and technicals (FVT). These three factors are examined regardless of whether the managers are considering a duration position or an investment in a speculative grade rated company. In judging whether a company is attractive long-term investment, the managers analyse the following factors, which they call PRISM:

  • Protections: operational and contractual, such as structure and covenants
  • Risks: credit, business and market
  • Interest cover: leverage and other key ratios
  • Sustainability: of cash flows and environmental, social and governance (ESG) factors
  • Motivations: of management and shareholders

" I suspect that after a decade of supporting zombie companies and

depressing productivity, central banks

will need to be more prescriptive in

who they support going forward.

"

David Roberts

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Strategic Report - Fund Management review

Asia team

Mark Williams, Carolyn Chan and Shashank Savla manage the Liontrust Asia Income Process. Mark has been managing money since 1993 and has previously run funds at F&C and Occam. While managing the F&C Far East Fund, it was awarded first place in the Equity Asia Pacific (ex-Japan) sector over five years (out of 52 funds) by the S&P European awards in 2007. Carolyn started her career in 1992 and was previously at Hampton Investment Management before joining Liontrust. Shashank began his career in financial markets in 2004 and has also previously worked in the Consumer Goods and Telecoms industries.

ASIA INCOME FUND

The Fund, which has been managed since launch in March 2012 by Mark Williams, Carolyn Chan and Shashank Savla, invests in Asia Pacific ex-Japan companies and aims to deliver a high level of income with the potential for capital growth over the long term (5 years or more). The Fund seeks to deliver an annual net target yield of at least 110% of the yield of the MSCI All Countries Asia Pacific Excluding Japan Index.

INVESTMENT PROCESS

The investment process seeks to identify companies that will benefit from the growth in the Asia Pacific (ex-Japan) region, have an attractive yield and give a greater chance of expectations being beaten. The process aims to avoid those stocks that are likelier to miss expectations. By targeting at least 1.1 times

the dividend yield of the region across the portfolio, the fund managers believe this will ensure the equities they invest in are amongst the more conservative, better managed companies.

"Since I started managing money in Asia, it has gone from a relative investment backwater to one of the largest economies in the world, providing over half the global GDP growth."

Mark Williams

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Fund Management review

European Income team

Olly Russ and Oisin O'Leary manage the Liontrust European Income Process. Olly joined Liontrust in July 2016, having started his career at investment boutique Orbitex in 1998. At Orbitex, Olly worked on European Equity and UK Income funds and was responsible for running the Orbitex UK Equity Fund from its inception in March 2000. In 2002, Olly moved to Invicta Investment Management, a privately owned hedge fund, before joining Neptune Investment Management as a fund manager and financial analyst. He moved to Argonaut Capital in 2005. Oisin joined Liontrust in June 2017, having previously been

an investment analyst at Argonaut Capital Partners across the company's range of funds from September 2015. He was also formerly an investment analyst at Maris Capital and a debt capital markets analyst at HSBC Bank.

EUROPEAN INCOME FUND

The Fund has been managed by Olly Russ since launch in December 2005 and he was joined by Oisin O'Leary in June 2017. The aim of the Fund is to deliver a high level of income with the potential for capital growth over the long term (5 years or more) by investing in mainly European listed companies. The Fund seeks to deliver a net target yield of at least the net yield of the MSCI Europe ex UK Index each year.

EUROPEAN ENHANCED INCOME FUND

The Fund has been managed by Olly Russ since launch in April 2010, and he was joined by Oisin O'Leary in June 2017. The aim of the Fund is to deliver a high level of income and capital growth over the long term (5 years or more) by investing in mainly European listed companies. The Fund seeks to deliver a net target yield of at least 125% of the net yield of the MSCI Europe ex UK Index each year. The managers have the ability to use a covered call strategy to boost income and to implement hedging on hedged share classes.

INVESTMENT PROCESS

The process seeks to find companies whose asset base and business are defended by an economic moat, such as a strong brand, niche products or a dominant market position, and where analysts underestimate future earnings growth or have undervalued the expected earnings growth. The fund managers use dividends as a proxy for earnings growth and expect to see dividends rising over time as companies increase pay outs to shareholders and earnings grow.

"You need to know about the economics, the politics and, of course, the corporates in the region and how they all work together to make the modern economy."

Olly Russ

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Jamie Clark

Strategic Report - Fund Management review

Macro-Thematic team

Stephen Bailey and Jamie Clark manage the Liontrust Macro-Thematic Process. Stephen started his career in the mid-1980s and joined Walker Crips in 1987 as investment director. Jamie joined Walker Crips in 2003 and prior to that was a Junior Proprietary Trader at First New York Securities. Jamie Clark became co-manager of the Macro funds in 2007.

MACRO EQUITY INCOME FUND

The Fund has been managed since launch in October 2003 by Stephen Bailey and since 2007 by co-manager Jamie Clark. The aim of the Fund is to deliver a high level of income with the potential for capital growth over the long term (5 years or more) by investing at least 80% of the portfolio in companies incorporated, domiciled, listed or which conduct significant business in the United Kingdom (UK). The Fund seeks to deliver a net yield of at least 110% of the net yield of the FTSE All-Share Index each year.

MACRO UK GROWTH FUND

The Fund has been managed since August 2002 by Stephen Bailey, with Jamie Clark becoming co-manager in 2007. The aim of the Fund is to deliver income and capital growth over the

long term (5 years or more) by investing at least 80% of the portfolio in companies incorporated, domiciled, listed or which conduct significant business in the United Kingdom (UK). The fund managers' conviction is shown by the fact they may have 0% weightings in major sectors.

INVESTMENT PROCESS

The process is based on the analysis of economic, political, social and cultural developments to identify Macro-Themes. The fund managers define a Macro-Theme as an undiscounted, structural change in the process of realisation; and the related passage to theme maturity as the macro-trend. The fund managers believe this investment process equips them to locate unappreciated investment ideas and capture the full, long-term potential of each portfolio holding. There are four stages to the process: theme discovery; identification of theme-assisted and theme impaired companies; bottom-up analysis of prospective investments; portfolio construction and management.

"I never cease to be surprised by investors' love of story-telling and the extent to which this impacts asset prices and ultimately distorts valuations. But I won't

complain because this provides opportunities

for the rest of us.

"

24 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Fund Management review

Split of AuMA

By product type

Offshore Funds

5%

6%

Multi Asset

Institutional

6%

UK Retail

82%

UK Retail fund performance

The strength of Liontrust's fund management capability is shown by the weighted average AuMA of our actively managed unit trusts and ICVCs. Since launch or since the fund managers were appointed 68% were in the first quartile.

Figure 1 - AuMA weighted quartile ranking since launch or launch/manager inception

Detailed quartile rankings by fund over one, three and five years and since launch or the fund manager was appointed are shown in the table below:

By investment process

Asia

Sustainable

1%

Investments

31%

Economic

Advantage

Global Fixed

39%

Income

3%

Cashflow

Global Equities13%

Solution 5%

European

Income

1%

AssetMulti

Macro

5%

Thematic 1%

Third Quartile 8% Fourth Quartile 2%

Second

Quartile

28%

First

Quartile

63%

Quartile ranking

Launch Date/

- Since Launch/

Quartile ranking

Quartile ranking

Quartile ranking

Manager

Manager Appointed

- 5 year

- 3 year

- 1 year

Appointed

Economic Advantage funds

Liontrust UK Growth Fund

1

1

1

1

25/03/2009

Liontrust Special Situations Fund

1

1

1

1

10/11/2005

Liontrust UK Smaller Companies Fund

1

1

1

1

08/01/1998

Liontrust UK Micro Cap Fund

1

-

1

1

09/03/2016

Sustainable Future funds

Liontrust Monthly Income Bond Fund

3

2

4

4

12/07/2010

Liontrust SF Managed Growth Fund

2

1

1

1

19/02/2001

Liontrust SF Corporate Bond Fund

2

2

4

4

20/08/2012

Liontrust SF Cautious Managed Fund

1

1

1

1

23/07/2014

Liontrust SF Defensive Managed Fund

1

1

1

1

23/07/2014

Liontrust SF European Growth Fund

1

1

1

1

19/02/2001

Liontrust SF Global Growth Fund

3

1

1

1

19/02/2001

Liontrust SF Managed Fund

2

1

1

1

19/02/2001

Liontrust UK Ethical Fund

2

1

1

1

01/12/2000

Liontrust SF UK Growth Fund

2

1

1

1

19/02/2001

Source: Financial Express to 31 March 2020 as at 6 April 2020, bid-bid, total return, net of fees, based on primary share classes. Past performance is not a guide to future performance, investments can result in total loss of capital. The above funds are all UK authorised unit trusts or UK authorised ICVCs (primary share class).

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 25

Strategic Report - Fund Management review

Quartile ranking

Launch Date/

- Since Launch/

Quartile ranking

Quartile ranking

Quartile ranking

Manager

Manager Appointed

- 5 year

- 3 year

- 1 year

Appointed

Global Equity funds1

Liontrust Balanced Fund

1

1

1

1

31/12/1998

Liontrust China Fund

3

3

3

2

31/12/2004

Liontrust Emerging Market Fund

2

2

3

3

30/09/2008

Liontrust European Opportunities Fund

2

4

4

4

29/11/2002

Liontrust Global Smaller Companies Fund

1

2

1

3

01/07/2016

Liontrust Global Alpha Fund

1

1

1

1

31/12/2001

Liontrust Global Dividend Fund

2

2

1

1

20/12/2012

Liontrust Global Equity Fund

1

2

1

1

31/12/2001

Liontrust Global Technology Fund

2

1

1

3

15/12/2015

Liontrust Income Fund

1

1

1

2

31/12/2002

Liontrust Japan Equity Fund

3

1

4

3

22/06/2015

Liontrust Japan Opportunities Fund

1

4

4

4

30/09/2002

Liontrust UK Mid Cap Fund

1

4

4

4

15/12/2008

Liontrust UK Opportunities Fund

2

4

4

3

29/12/2006

Liontrust US Income Fund

3

3

3

3

30/09/2010

Liontrust US Opportunities Fund

1

3

1

2

31/12/2002

Macro Thematic, Cashflow, Asia Income and

European Income funds

Liontrust Macro Equity Income Fund

1

4

3

3

31/10/2003

Liontrust Macro UK Growth Fund

2

4

4

4

01/08/2002

Liontrust European Growth Fund

1

1

3

2

15/11/2006

Liontrust Global Income Fund

4

4

4

4

03/07/2013

Liontrust Asia Income Fund

2

3

4

3

05/03/2012

Liontrust European Income Fund

4

4

4

3

15/12/2005

Liontrust European Enhanced Income Fund

4

4

4

3

30/04/2010

(Hedged)

Source: Financial Express to 31 March 2020 as at 6 April 2020, bid-bid, total return, net of fees, based on primary share classes. Past performance is not a guide to future performance, investments can result in total loss of capital. The above funds are all UK authorised unit trusts or UK authorised ICVCs (primary share class).

  • Liontrust Latin America Fund, Liontrust Russia Fund and Liontrust India Fund are not included as they are in IA sectors that are not rankable (e.g. Specialist and Unclassified) as it would not be a fair comparison to make.

Liontrust and Fund Awards

We are proud to announce the following awards for Liontrust and our fund management teams in the financial year ended 31 March 2020:

FT Adviser 100 Club Awards 2019

FT Adviser 100 Club Awards 2019

Mixed Asset Fund of the Year

UK Smaller Companies fund of the year

Liontrust Sustainable Future Absolute Growth Fund

Liontrust UK Smaller Companies Fund

FT Adviser 100 Club Awards 2019

Portfolio Adviser Fund Awards 2020

Small to Mid Investment Group of the year

Best ESG Fund

Liontrust Asset Management PLC

Liontrust SF Global Growth Fund

26 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

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LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 27

Strategic Report - Sales and marketing review

Sales and Marketing review

Liontrust generated net inflows of £2.7 billion in the financial year to 31 March 2020, which was an increase of 52% over the previous year. This helped to raise assets under management and advice (AuMA) to £16.1 billion.

Key to this success has been the outstanding performance of many of our funds, the belief of our clients in Liontrust and the funds, the power of our brand and the strength of sales and marketing.

This was reflected in the fact that Liontrust had the 6th highest net retail sales in the UK for the calendar year 2019, according to The Pridham Report, which analyses flows for the asset management industry. This momentum continued into the 1st quarter of 2020, when Liontrust had the 5th highest net retail sales and the 8th highest gross retail sales in the UK.

This success is epitomised by the Sustainable Investment team. Since joining Liontrust on 1 April 2017, the AuMA of the team has more than doubled from £2.3 billion to £5.0 billion on 31 March 2020.

Research has shown that the Liontrust Sustainable Investment team is regarded as the best for sustainable investment among professional intermediaries (25% of those asked) and private investors (23%) (source: Research in Finance).

When advisers were asked recently by consultants and rating agency Square Mile which asset manager has the best messaging for their ESG strategy, Liontrust came top with 36%. The second placed asset manager had 16% of the votes.

Such is the growing interest in sustainable investing that we held our first dedicated conference in London in September 2019. Presenters included institutional fund buyers, companies which our Sustainable Investment team invest in, Jonathon Porritt and Leo Johnson.

While the retail market has primarily driven sales of our sustainable funds, there is growing interest from institutional investors and we are optimistic about increasing flows from non-UK investors. Liontrust has exclusive distribution deals with ABN Amro and SEB in continental Europe for the GF Sustainable Future Pan- European Growth Fund.

The acquisition of Neptune Investment Management on 1 October 2019 increased our European sales team to six, enabling them to cover the wholesale market across the continent.

Following the successful integration of Neptune, we have been promoting a number of the team's funds, including Income, Global Dividend and Global Equity.

We have expanded and enhanced the way in which we communicate with investors. This has included fund manager webinars for clients, podcasts, videos and promoting our views and insights via social media and other digital platforms, along with advertising, PR and events.

The awareness that Liontrust has generated has been shown by the fact that we are ranked 5th out of all asset managers for most recalled advertising among private investors.

The success of our digital marketing is shown by the fact that traffic to the Liontrust website was 60% higher in the 1st quarter of 2020 than the first three months of 2019 while LinkedIn drove 58% more traffic to the website over the past year.

28 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Operations review

Operations review

We are focused on maintaining an operations team that is efficient, scalable and that gives us the ability to continue to support our strategic objectives and the growth that has delivered and will deliver in future years, whilst also ensuing that they deliver value to all our stakeholders.

Our three key operations teams (together, the "Operations Team") are:

  • Operational Oversight team which is responsible for the oversight of our custody, middle office (transaction matching, corporate action management, derivatives management and reconciliations), fund accounting/valuation/pricing service providers and our transfer agency outsourced provider;
  • Technology team, which focuses on the development and implementation of a cloud-based server infrastructure, IT support, delivery of IT hardware upgrades, the maintenance of a higher quality technology environment that supports the business and data governance, quality and management systems and services;
  • Portfolio & Data Insights team to ensure the accuracy and consistency of performance measurement, attribution and risk data for all our investment portfolios, to provide institutional client reporting services, and maintain consultant databases.

The Operations Team have, in the last 12 Months, achieved the following:

  • Worked with Alpha Financial Markets PLC ("Alpha"), external consultants, to produce the Operations & IT Due Diligence Report on Neptune Investment Management Limited ("Neptune") prior to entering into the Sale & Purchase Agreement ("SPA") in relation to the acquisition of Neptune.
  • Successfully integrated the internal operational and technology aspects of the Global Equity funds following the acquisition of Neptune Investment Management Limited, which completed on 1 October 2019, including moving all Neptune staff from their Hammersmith office to our 2 Savoy Court office in February 2020; (The Hammersmith office is currently available as additional overflow office space that may be used given potential social distancing requirements in any return to work programme post COVID-19 pandemic)
  • Successfully transferred the Depositary, Custody, Fund Accounting and Valuation services for the Global Equity funds from State Street to BNY Mellon in January 2020;
  • Transferred the Investment Book of Records ("IBOR") from in-house systems to BNY Mellon, including cash and stock reconciliations, corporate action management and derivatives management services;
  • Started the project to transfer the Transfer Agency services our Global Equity funds from SS&C Technologies to BNY Mellon, which completed in June 2020;
  • Appointed Ross Carmichael as the Group's Chief Technology Officer on 2 January 2020, with responsibility for designing, developing and implementing technology and data strategies for the Liontrust group, operational delivery of the Technology function, managing the Technology team and managing relevant supplier relationships. Ross Carmichael reports to Vinay Abrol, Chief Operating & Chief Financial Officer;
  • Worked with Alpha, to implement CuriumEDM (enterprise data management) and CuriumDQM (data quality management), and to complete a project reviewing the target operating model for our Data Governance, Quality and Management team;
  • Appointed ThirdSpace, an IT Security company as our virtual Chief Information Security Officer to the Group. They have supported Liontrust in identifying and implementing improvements through a review of IT Security practices in 2019, leading to a series of recommendations around security and compliance. During the period we have also renewed our Cyber Security Essentials accreditation and had no data breaches;
  • Enhanced our Microsoft integration with the use of Skype for Business for Telephony, an upgrade of all PC's to Windows
    10 Operating system and the migration of all hosted servers to Microsoft Azure, including a data centre failover test;
  • Increased governance, data quality awareness and data transference capability by integration of Alteryx, Tableau and Python by the Portfolio & Data Insights team;
  • GIPS verification for Liontrust funds for 2018 and combined Group verification, and transitioning from tactical spreadsheets to FactSet tools;
  • Enhanced use of FactSet/UBS Delta/Morningstar/Style Analytics tools by the Portfolio & Data Insights team;
  • Revamped the Factsheet process to cut production times, facilitate the use of Tableau as a strategic solution, and enhanced content provision to the Portfolio Risk Committee; and
  • Successfully managed the technology and operational challenges (including oversight of administrators) of moving all employees and members to working from home in March 2020.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

29

Strategic Report - Financial review

Financial review

Financial performance

Profit before tax decreased to £16.508 million (2019: £22.172 million as restated). The profit before tax for the year includes £9.7 million of acquisition and reorganisation costs incurred as a result of the acquisition of Neptune.

Adjusted profit before tax*, which adjusts for share incentive costs, depreciation and amortisation costs and other costs relating to the acquisition and reorganisation of Neptune Investment Management Limited increased to £38.054 million from £30.093 million last year, reflecting the increased fund flows and growth in AuMA.

Table (a) Analysis of financial performance

Year ended

Year on

Year ended

31-Mar-19

31-Mar-20

(restated)#

Year

£'000

£'000

Change

Gross profit ex performance fees

105,628

84,600

25%

Performance fees

1,004

32

3038%

Realised & unrealised gains or losses

(283)

25

-1232%

Contingent consideration

-

(88)

-100%

Administration expenses

(89,711)

(62,407)

44%

Profit before tax

16,638

22,162

-25%

Adjustments - see note 7 on page 112

21,546

9,421

129%

Finance cost

(148)

-

Adjusted operating profit

38,036

30,083

26%

Interest receivable

18

10

80%

Adjusted profit before tax

38,054

30,093

26%

See note 7 on page 112 for reconciliation of adjusted profit before tax to profit for the year.

  • This is an alternative performance measure ('APM'). See page 33 for further details.

# Restated see Note 1(v) on page 106

Gross Profit

Gross Profit excluding performance fees increased by 25% compared to last year and by 46% compared to two years ago. (see Figure 2 below).

Figure 2 - Gross profit £'000

120,000

100,000

80,000

60,000

40,000

20,000

0

FY18 FY19 FY20 Performance fee revenues (£'000)

Non-performance fee revenues (£'000)

Average AuMA*

Average AuMA increased by 38% compared to last year and by 63% over two years (see Figure 1 below), reflecting acquisition, net flows and market performance.

Figure 1 - Average AuMA* £'million

£18,000

£16,000

£14,000

£12,000

£10,000

£8,000

£6,000

£4,000

£2,000

£0

FY18

FY19

FY20

  • This is an alternative performance measure ('APM'). See page 33 for further details.

Profit and operating margin

Adjusted operating profit* increased to £38.036 million from £30.083 million last year and from £27.375 million two years ago reflecting the increase in average AuMA, this in turn is reflected in strong growth in basic and diluted earnings per share (see Figures 3 and 4).

Figure 3 - Adjusted profit before tax* £'000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

FY18

FY19

FY20

  • This is an alternative performance measure ('APM'). See page 33 for further details.

30 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Financial review

Figure 4 - Adjusted basic and diluted earnings per

Figure 6 - Adjusted operating profit before tax* as %

share* (pence)

of Average - AuMA

70.00

0.28%

60.00

0.27%

50.00

0.26%

40.00

0.25%

30.00

0.24%

20.00

0.23%

10.00

0.22%

-

0.21%

FY18

FY19

FY20

FY18

FY19

FY20

Adjusted Basic earnings per share

Adjusted Diluted earnings per share

  • This is an alternative performance measure ('APM'). See page 33 for further details.

Adjusted for expenses for share incentivisation, severance compensation and related legal costs, acquisitions related costs, professional services (restructuring, acquisition related and other), depreciation and intangible asset amortisation, and the Financial Services Compensation Scheme Interim Levy.

  • This is an alternative performance measure ('APM'). See page 33 for further details.

Adjusted operating margin (calculated as Adjusted operating profit divided by Gross profit) reflects the strong operating gearing in the business (see Figure 5 below).

Figure 5 - Adjusted operating margin*

37%

36%

35%

34%

33%

32%

31%

30%

FY18

FY19

FY20

  • This is an alternative performance measure ('APM'). See page 33 for further details.

Administration expenses

The largest component of our costs, in common with other service companies, is Director, member and employee related expenses. Director, member/employee compensation as a percentage of Gross profit reduced reflecting increased revenues and cost controls. (see Figure 7 below).

Figure 7 - Director, employee and member related expenses as a percentage of Gross profit (including performance fees)*

47%

46%

45%

44%

43%

42%

41%

40%

FY18

FY19

FY20

Member and employee related costs are the sum of Director and employee costs, pensions, members drawings charged as an expense, and members' advance drawings (where applicable).

  • This is an alternative performance measure ('APM'). See page 33 for further details.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 31

Strategic Report - Financial review

Other administration expenses as a percentage of Gross Profit is at 20% (2019: 18%), (see Figure 8 below).

Figure 8 - Other administration expenses* as a percentage of Gross profit including performance fees

21.0%

20.5%

20.0%

19.5%

19.0%

18.5%

18.0%

17.5%

17.0%

16.5%

16.0%

FY18

FY19

FY20

  • This is an alternative performance measure ('APM'). See page 33 for further details.

Dividend

The Board has considered current market environment, the financial performance for the Group in the current year and its cash generation abilities in future years, and is declaring a second interim dividend of 24.0 pence per share (2019: 20.0 pence) which will result in total dividends for the financial year ending

31 March 2020 of 33.0 pence per share (2019: 27.0 pence) (See Figure 9 below). This reflects a dividend margin (dividend per share divided by Adjusted diluted earnings per share excluding performance fees) of 59% (See Figures 9 and 10 below).

Figure 9 - Dividend per share (pence)

35

30

25

20

15

10

5

0

FY18

FY19

FY20

Figure 10 - Dividend margin*

70%

60%

50%

40%

30%

20%

10%

0%

FY18

FY19

FY20

  • This is an alternative performance measure ('APM'). See page 33 for further details.

Dividend policy

Our policy is to grow our dividend progressively in line with our view of the underlying adjusted earnings per share on a diluted basis (excluding performance fees) and cash flow of Liontrust;

When setting the dividend, the Board looks at a range of factors, including:

  • the macro environment;
  • the current balance sheet; and
  • future plans.

It is our intention that dividends will be declared and paid half yearly.

Statement of viability

In accordance with provision C.2.2 of the 2018 revision of the Code, the Directors have assessed the prospects of the Group over a longer period than the 12 months required by the Going Concern provision.

The Directors confirm that they have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due, up to 31 March 2023. The Directors' assessment has been made with reference to the Group's current position and strategy, the Group's risk appetite, the Group's financial forecasts, and the Group's principal risks and mitigations, as detailed in the Strategic Report.

The three-year period is consistent with the Group's current strategic forecast and ICAAP. The forecast incorporates both the Group's strategy and principal risks. The forecast is approved by the Board at least annually. This formal approval is underpinned by regular Board discussions of strategy and risks, in the normal course of business. The forecast is updated as appropriate.

The three-year strategic forecast considers the Group's profitability, cash flows, dividend payments, share purchases, seed capital

and other key variables. These metrics are subject to sensitivity analysis, which involves flexing a number of the main assumptions in the forecast, both individually and in unison. Given the market volatility and economic uncertainty due to the COVID-19 pandemic, management produced additional sensitivity scenario analysis for the strategic forecast and has considered mitigating actions should any of these scenarios occur. Scenario analysis is also performed as part of the Group's ICAAP, which is approved by the Board.

32 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Financial review

Alternative Performance Measures ('APMs')

The Group uses the following APMs:

Adjusted profit before tax*

Definition: Profit before taxation, depreciation and amortisation, share incentivisation expenses and non-recurring items (which include: professional fees relating to acquisitions cost reduction; restructuring and severance compensation related costs).

Reconciliation: Note 7 on page 112.

Reason for use: This is used to present a measure of profitability of the Group which is aligned to the requirements of shareholders, potential shareholders and financial analysts, and which removes the effects of financing and capital investment, which eases the comparison with the Group's competitors who may use different accounting policies and financing methods.

Specifically, calculation of Adjusted profit before tax excludes share incentivisation expenses for similar reasons to above, and in particular provides shareholders, potential shareholders and financial analysts a consistent year on year basis of comparison of a "profit before

tax number", when comparing the current year to the previous year and also when comparing multiple historical years to the current year, of how the underlying business is performing without the effects of share incentivisation expenses which can be influenced by other factors such as timing of grants due to prohibited periods, shareholder approval of share incentivisation plans, and other factors.

Adjusted operating profit

Definition: Profit before interest, depreciation and amortisation, share incentivisation expenses and non-recurring items.

Reconciliation: Note 7 on page 112.

Reason for use: This is used to present a measure of profitability of the Group which is aligned to the requirements of shareholders, potential shareholders and financial analysts, and which removes the effects of financing and capital investment, which eases the comparison with the Group's competitors who may use different accounting policies and financing methods.

Specifically, calculation of Adjusted operating profit before tax excludes share incentivisation expenses for similar reasons to above, and in particular provides shareholders, potential shareholders and financial analysts a consistent year on year basis of comparison of a "profit before tax number", when comparing the current year to the previous year and also when comparing multiple historical years to the current year, of how the underlying business is performing without the effects of share incentivisation expenses which can be influenced by other factors such as timing of grants due to prohibited periods, shareholder approval of share incentivisation plans, and other factors.

Adjusted operating margin

Definition: Adjusted operating profit divided by Gross profit.

Reconciliation: Note 7 on page 112.

Reason for use: This is used to present a consistent year on year measure of revenues compared to costs, identifying the operating gearing within the business.

Revenues excluding performance fees

Definition: Gross profit less any revenue attributable to performance related fees.

Reconciliation: Note 4 on page 109.

Reason for use: This is used to present a consistent year on year measure of revenues within the business, removing the element of revenue that may fluctuate significantly year on year.

Adjusted earnings per share

Definition: Earnings before interest, depreciation and amortisation, share incentivisation expenses and non-recurring items divided by the weighted average number of shares in issue.

Reconciliation: Note 7 on page 113.

Reason for use: This is used to present a measure of profitability per share in line with the adjusted operating profit as detailed above.

Adjusted diluted earnings per share

Definition: Earnings before interest, depreciation and amortisation, share incentivisation expenses and non-recurring items divided by the diluted weighted average number of shares in issue.

Reconciliation: Note 7 on page 113.

Reason for use: This is used to present a measure of profitability per share in line with the adjusted operating profit as detailed above.

Director, member and employee related expenses

Definition: A component of administration expenses costs related to compensation costs of people within the business.

Reconciliation: Note 7 on page 113.

Reason for use: This is used to present a consistent year on year measure of staff cost within the business and is used relative to Gross profit.

Other administration expense

Definition: a component of administration expenses related to non-people related costs within the business.

Reconciliation: Note 5 on pages 110 and 111.

Dividend margin

Definition: This is the dividends declared for the year divided by the Adjusted diluted earnings per share excluding performance fees.

Reconciliation: This can be recalculated with the information in notes 7 and 9

Reason for use: This is used to identify the dividend cover versus adjusted operating profit.

Assets under Management and Advice ('AuMA') Definition: the total assets managed or advised by the Group.

Reconciliation: A detailed breakdown of AuMA is shown on page 9

Reason for use: AuMA is a key performance indicator for management and is used both internally and externally to determine the direction of growth of the business.

Average Assets under Management and Advice

Definition: The average of total assets managed or advised by the Group during the financial year

Reconciliation: average AuMA for the year is the average of each month end total AuMA during the period.

Reason for use: Average AuMA shows AuMA without the volatility of short term inflows or outflows and allows for comparability between years.

* This measure is used to assess the performance of the Executive Directors.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 33

Strategic Report - Principal Risks and mitigations

Principal Risks and mitigations

The Group takes a cautious and pro-active approach to risk management, recognising the importance of understanding risks to the business, setting and monitoring risk appetite and implementing the systems and controls required to mitigate them.

As detailed in the Risk Management and Internal Controls section of the Directors' Report on page 49, Liontrust has defined a Risk Universe and uses a Risk Appetite Statement as well as

a number of risk frameworks to capture the core risks inherent in our business and assess how those risks are managed and mitigated, the key indicators that would suggest if the risk is likely to materialise together with an assessment that each risk may have on our regulatory capital.

Our Professional Indemnity Insurance covers us for losses, errors, and fraud. Our current assessment of our key operational risks and our risk management framework suggest that we are not at material risk of breaching our insurance limits, although all our risk appetite and prudential planning incorporates the scenario of a failure of insurance cover.

In order to help identify, manage and control risk, Liontrust breaks it down into eight main categories. On the basis of disciplined risk assessment, the principal risks to the Group's business are considered. A high level summary is shown below with details of mitigating factors.

Credit risk

Credit risk covers the risk of loss due to a debtor's inability to pay. The Liontrust Group maintains a liquidity policy document which identifies the credit risks that may affect any area of the business and details how these risks are monitored and controlled.

These risks include:

  • failure of banks / significant counterparties;
  • failure of a client to pay fees;
  • failure of a client to pay funds for an investment; and
  • failure of a fund to pay redemption monies.

A Credit risk report is produced monthly which reviews all major counterparties and this covers, for each institution, agency ratings, interest rates currently offered and credit default swap spreads (where these measures are applicable or available). These are all indicators of any potential problems. If any such issues are identified the Group will take action to either move any functions or cash away from the institution or closely monitor the institution as per our counterparty selection and business continuity policies.

Market risk

Market risk is the risk that the value of assets will decrease due to the change in value of the market risk factors. Common market risk factors include asset prices, interest rates, foreign exchange rates, and commodity prices.

Liontrust as an investment management company is exposed to market risk in several forms, these include: seed investments; box management; funds under management; and management fee income. A significant fall in markets will reduce the management fee income from our assets under management. Due to the nature

of the mix of fixed and variable expenses, the Group's earnings will also reduce, although not at the same rate. The Group has extensively modelled the impact of a significant fall in markets at the same time as other potential capital impacts and have concluded that although our profitability may be significantly affected, the Group should remain within its prudential capital requirements under the majority of scenarios.

Operational risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. The management of operational risk is formalised in a number of ways including risk assessments and scorecards, documented procedures and compliance manuals, a comprehensive compliance monitoring programme (both internal and external), issue tracking and a regular assessment of third party providers. Liontrust manages its operational risk with a framework based upon the Basel Committee on Banking Supervision's paper "Sound Practices for the Management and Supervision of Operational Risk" using seven operational risk event types that may result in substantial losses including:

Event Type

Description/Examples

Internal Fraud

Misappropriation of assets, tax evasion, intentional

mismarking of positions, bribery

External Fraud

Theft of information, hacking damage, third-party theft

and forgery

Employment Practices

Discrimination, workers' compensation, employee and

Workplace Safety health and safety

Clients, Products, &

Market manipulation, antitrust, improper trade, product

Business practice

Damage to Physical

Natural disasters, terrorism, vandalism

Assets

Business Disruption &

Utility disruptions, software failures, hardware failures

System failures

and disruption due to external events such as war or

pandemic

Execution, Delivery &

Data entry errors, accounting errors, failed mandatory

Process Management

reporting, negligent loss of client assets

These risk event types are further broken down into 36 sub- categories. Each operational department undergoes a risk assessment for each of these risks to identify the likelihood of a risk materialising as well as the impact of the risk. The impact is the likely effect of a risk crystallising; these are two measures, the cost of a typical event as well as the cost of an extreme case. The output from the departmental risk assessments or risk registers are co-ordinated with the Group's Risk Appetite to ensure that we are capturing evolving risks for the Group as they emerge. The risk assessment and risk scorecard can then be used to create risk maps which visually model and communicate risks and their trends.

As we outsource many of our labour intensive operational functions, we commit high levels of resource to the management of these third party providers. We work hard to ensure that the relationship is a collaborative one and that both parties are working together towards the same goals, via a dedicated relationship management team and through a comprehensive monitoring programme. Failure of any outsource provider presents a real threat to the business and our continuity planning incorporates a stepped approach to manage and control these risks.

34 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Principal Risks and mitigations

The key operational risks that have been identified as potentially having a significant impact on our business or capital are as follows:

  • Trading errors
  • Failure of key systems
  • Failure of key supplier or outsource provider
  • Corporate action errors
  • Regulatory breaches
  • Breach of mandate restrictions
  • Business continuity failure
  • Account setup and standing instructions

Liontrust has worked on integrating the Neptune business over the last six months with most activities now fully transferred. The remaining work relates to the change of Authorised Corporate Director and transfer agency. There has been a higher risk of operational failures over this period due to the change of systems, controls and procedures as well as changing staff responsibilities. The Group made a significant investment in project oversight and appropriate resourcing, which has mitigated the risks and Liontrust has devoted considerable management time to minimise operational risk arising from the integration.

Cybersecurity and information technology risk

Liontrust is dependent on our IT infrastructure and systems. A successful cyber-attack could result in the loss of data; disrupt our ability to service our customers or in a worst-case scenario - a loss of clients' assets. Liontrust has included the management of cyber security into our governance framework for a number of years and this year have appointed a virtual Chief Information Security Officer to ensure we have the right infrastructure and defences in place. Liontrust also use specialist external consultants to review and test our IT infrastructure and security including penetration testing.

Staff awareness and training is an important part of our defence against attack. Liontrust demands the same commitment to tackling cybersecurity from its key outsourced providers.

Business risk

The potential strategic, business, operational and legal risks arising from poor strategy, competitive pressure, poor due diligence, poor integration of acquisition targets and badly managed divestitures.

The development of our business and increasing the diversification of our fund management talent is a core objective of the Group and, the business is willing to finance acquisitions, etc. to achieve this diversification where it is prudent to do so while leaving sufficient capital to operate the business.

Climate Change

There are multiple impacts of climate change on companies. Liontrust may be impacted directly, via our outsource partners or through our investments in companies on our clients behalf. The impacts may come from physical risks (extreme weather events, or supply shortages) or from exposure to transition risks which arise from society's response to climate change (technological change, social upheaval or regulation). These can change business costs, alter the viability of products or services, or alter asset values. There are also legal costs and potential liabilities for climate-related actions. Further information on our efforts to manage this risk and integrate sustainability throughout our business is in the section "Our People, Sustainability and Our Corporate Responsibilities on page 37.

Client Concentration and the risk of redemptions at short notice

Liontrust has several large, key clients and relationships. Should a large client leave (or conversely a new large client be acquired) there is a risk that earnings may be impacted. Liontrust has successfully grown our client base over the last few years and this has reduced the impact of a single client redeeming. Clients are also able to withdraw their assets at short notice. The retail funds have daily liquidity and most institutional mandates have no lock in periods or liquidity constraints. This may mean that in times of crisis assets under management may fall quickly increasing the potential volatility of earnings. This is mitigated by the Group's variable cost base as described in the Market risk section above.

Competitive Environment

Liontrust operates within a highly competitive environment with both local and global businesses, many of which have greater scale and resources. The changes to the regulatory and business landscape have resulted in a greater focus on fees & charges,

a growing importance of brand & marketing and distributor relationships. Failure to compete effectively in this environment may result in loss of existing clients and a reduced opportunity to capture new business which may have a material adverse impact on the Group's financial wellbeing and growth. Our governance and leadership help to ensure that the Group remains competitive and does not lose focus.

Client Management

The risks associated with poor distribution and poor client service including a failure to meet business objectives and suitability / mis-selling.

It is a key aim of the Group to ensure our clients and customers understand the products and services we offer and for us to deliver the products that a client expects. All our investment processes are fully documented, which enables clients to understand clearly how we manage assets. Ensuring that our clients understand the product is a core element in treating them fairly. We believe our documented processes, detailed reports and literature reduce the likelihood of a product either being misunderstood or not delivering the appropriate customer outcomes, this may also reduce the risk of client losses in the event of portfolio underperformance.

Portfolio Management, Investment and Liquidity risk

The risks arising from poor investment returns, incorrect levels of investment risk or liquidity issues in the funds.

Liontrust provides specialist, actively managed portfolios to its clients aiming to produce good relative investment returns over the medium to long term. There may be periods where the portfolios have a weaker performance record and clients may redeem their investments during these periods potentially impacting the Group's earnings. It is also harder to attract new clients during periods of under-performance in a fund, or across the Group's portfolios which may impact the ability for the Group to grow.

The Group has increased the number of investment teams and products and has no single house view which helps to diversify or reduce the impact of one or more teams suffering from poor short term performance.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 35

Strategic Report - Principal Risks and mitigations

Liquidity risk is the possibility that a fund may not be able to pay a redemption request due to being unable to sell the assets in the fund in time to meet the liability, especially in stressed markets. The funds are all managed on a basis that ensures there is appropriate liquidity within them to meet all likely redemption requests and we perform regular liquidity risk monitoring with controls and limits for funds that may be impacted by liquidity risks including normal and stressed redemption profiles from investors and the fund's liquidity in normal and stressed market conditions.

People

The risk of losing experienced and talented staff or a failure to develop staff.

People are a key part of our business and the stability of our investment and operational expertise is critical to our success.

The Group takes appropriate steps to manage expectations and minimise the loss of good quality staff. Any departure of significant personnel may result in a loss of funds under management, especially the loss of one of our fund management teams. Liontrust believes building and maintaining our distinct culture as well as providing a good working environment is key to the future success of our business and the engagement and retention of its staff, therefore, we invest significantly in our people, including through training and qualifications.

Regulatory, Compliance, Conduct and Financial Crime The risk of legal penalties, financial forfeiture and material loss if Liontrust fails to act in accordance with industry laws and regulations.

The regulatory environment that the Group operates in continues to grow more complex. Over the last year we worked on meeting the new requirements that came out of the Asset Management Market Study including the new governance requirements as well as implementing the senior managers regime. We continue to work on our value assessment project and will publish later this year.

The Group will continue to dedicate considerable time and resources to ensure the business meets its new and ongoing regulatory obligations which will impact both the Group and the investment vehicles operated by the Group.

Increasing and changing regulations bring additional, or increased, risks of errors or omissions which can result in financial or other penalties and could result in a loss of confidence by our clients. Regulatory changes may also affect the products and services the Group offers, to whom or where it may offer them and the fees and charges it is able to charge.

Liontrust's Compliance department operates a comprehensive compliance monitoring programme to confirm regulatory obligations are met and the Group works with industry bodies, lawyers and consultants to ensure all regulatory change is appropriately managed.

Other Principal risks:

Listed below are other emerging key risks that cut accross our risk categories.

Brexit

Following the referendum on Brexit, Liontrust has operated a number of work streams to identify potential issues to the business including the possible impact on our ability to service clients

and meet our regulatory obligations. The majority of these are complete, but we remain vigilant as the negotiations on the future trade agreement continue in case we need to act further, although at present it is not expected to have a significant impact on our business model - we continue to review and plan as we receive more clarity on the process.

In the last year we set up a MiFID licenced subsidiary in Luxembourg (Liontrust International Luxembourg SA) to replace our existing branch to ensure we can continue to market our funds and services into the EU. We also completed a number of changes to our offshore fund range for European clients' needs and to ensure we meet the regulations once the UK is a third country.

We have reviewed our execution and trading arrangements and put in place a number of new, or precautionary legal arrangements to ensure we can continue to trade and service our clients as necessary in the case of a hard Brexit.

COVID-19

As well as serious implications for health, COVID-19 (coronavirus) is significantly impacting businesses and the economy and may result in once in a generational change to people's lives.

The recent pandemic has caused significant changes to our working practices and operations. Liontrust moved from the initial stage of setting up/testing working from home ("WFH") capabilities for all departments, to 50% or more of departments WFH, and then to full WFH for all members of staff, other than a small technology group located at our London office. We are now in the position where it is business as usual other than having the physical presence in the office. Our operational resilience and continuity planning were based around the technology for working from outside of our main office and we continue to strengthen our systems and infrastructure to support this.

WFH does bring additional risks and challenges: a reliance on individual's internet connectivity, more digital controls, changes in sales techniques, more digital marketing, video client meetings and webinars. There are also the medium-term challenges of working digitally including reinforcing our culture remotely, developing and delivering online projects and improving productivity, recruiting talent and managing successful teams outside of the office.

Liontrust is also at risk from the potential medium to long term impact on the economy, further falls in the markets or possible mass unemployment reducing people's ability to save or invest.

We continue to consider the impact of these scenarios and any other emerging risks in our business decisions as well as in our capital planning, Liontrust is well capitalised and positioned to weather these changes and take advantage of the opportunities arising.

36 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Our People, Our Impact and Our Corporate Responsibilities

Our People, Sustainability and Corporate Responsibilities

Liontrust is committed to building a sustainable business and intends that our principles are embedded into our policies and practices, to the benefit of stakeholders as well as the wider community.

Liontrust produced its inaugural sustainability report which complements and expands on the information summarized in this section.

Our People

Liontrust's assets are our people. We are proud of the people who work at the company and we are investing in their training, qualifications and development as part of our strategy to retain talented fund managers, partners and employees. We are seeking greater diversity across the company as we believe this enhances the performance of businesses and leads to better decision making.

Staff engagement and development

Our aim is to have a stable and engaged workforce, and our average number of years' service is greater than 5 years across the business and rises with seniority.

Average Years' Service

21-25 years

16-20 years

3%

4%

Less than 1 year

11 - 15 years

10%

12%

6 - 10 years

23%

1 - 5 years

48%

We engage with our staff at regular intervals, encourage active Liontrust equity participation and promote ownership, accountability and responsibility for their contribution to Liontrust's success.

In February, we undertook our inaugural workforce engagement survey. The overall response rate was 69%, compared to an industry average of around 60%. Our engagement index was 81%, sitting 5% above the norm (The Group has been compared against a general normative databse of survey responses from over 150 organisations, across a variety of sectors. All surveys have been conducted within the last 3 years). The survey was benchmarked against the 5 pillars of engagement: Engaging Managers;

Employee Voice; Realising Potential; Organisational Integrity and Compelling Leadership - we scored above the norm for each and every pillar.

During the year, Liontrust established a Workforce Advisory Committee with representatives from across the business including two members of the Management Committee. The purpose of this Committee is to advise the Management Committee and the Board on issues relating to the workforce, ensuring all colleagues have the skills, motivation and opportunity to develop and grow.

Liontrust aims to address the needs and aspirations of all staff through greater diversity and inclusion, work-life balance and health and well-being policies and initiatives.

We are committed to providing our talented staff with opportunities to develop their capabilities. We make substantial and sustainable investments in the development of our people, and regularly review the relevance and outcomes of this training. In the last year we have switched to a new learning management system to enhance our internal training.

We also encourage our employees to take business relevant qualifications and offer support packages. Our investment professionals are required to achieve standards above the regulatory minimum with a particular focus on the Chartered Financial Analyst qualifications for investment staff.

Liontrust recognises the importance of an appropriate work- life balance, both to the health and welfare of employees and to the business. The recent move to working from home and all the associated challenges of home schooling has increased our focus on supporting employees and overcoming the challenge of maintaining our culture with additional training and communication initiatives.

Liontrust maintains a code of ethics that all staff must adhere to and has adopted the CFAI Asset Manager Code, a voluntary code of conduct to help asset managers practice ethical principles that put client interests first.

We have continued to embed our succession planning framework for directors and key executives; systematically identifying and reviewing potential successors and focusing on providing them with appropriate managerial and leadership training.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 37

Strategic Report - Our People, Our Impact and Our Corporate Responsibilities

Equal Opportunities, Diversity and Inclusion

Liontrust believes that its people should be appointed to their roles based on skills, merit and performance and makes all appointments within the guidelines of its equal opportunities policy. We are committed to greater diversity, including gender, and the benefits that this will bring to the business.

We are an equal opportunities employer and it is our policy to ensure that all job applicants and employees are treated fairly and on merit regardless of their race, gender, marital status, age, disability, religious belief or sexual orientation. The Group now has a diversity policy and Senior Management and the Board believe greater diversity will enhance the performance of the business.

The Board is committed to ensuring its composition is appropriate for the business and that staff and candidates should possess the broad range of skills, expertise, industry knowledge, and other experience necessary for the effective oversight and management of the Group. We now have a formal diversity policy, and senior management and the Board believe that greater diversity across the Group will enhance the performance of the business.

As at 31 March 2020, Liontrust's total of 163 employees/ partners was broken down as follows. (incl. the Board)

We have explicit gender diversity targets in the remuneration and performance targets of the executive directors to help ensure that change happens.

Liontrust is not required to publish its gender pay gap (the percentage male employees overall are paid more than female employees), however analysis has been carried out and it is more than the average for the financial services sector. Although the gender pay and bonus gaps between female and male employees could be expected to gradually decline as we continue to recruit and develop senior female talent across the business both the Board and senior management are seeking to transition the business more quickly.

Opportunities for training and career development are made equally available to all. Promotion within the Company is based on personal merit and the reasonable requirements of the job.

In order to further develop the existing staff and as part of a wider learning strategy, Liontrust encourages coaching and mentoring opportunities. The development of a pipeline of talented and diverse employees through both the internship programme and through coaching and mentoring will be fundamental to increasing diversity.

2020

Male

Female

Employees

76

46

Directors

5

2

Members of LLP's

31

3

To achieve greater diversity, we have set up graduate and intern schemes which aim to attract more young women into the industry and offer employment to younger people from diverse backgrounds, where they may not have otherwise had the opportunity to start their career in the industry. We are active members of the 30% club investor group and have included support for similar levels of diversity in our voting policies for the companies we invest in.

We ensure there is a good gender mix of candidates in all recruitment, removing all male recruitment processes, providing training to staff on diversity, reviewing our policies to remove unconscious bias and encourage diversity and offering flexible maternity, paternity and shared parental leave and flexible working policies to help support staff with children.

Liontrust's current gender balance is broadly 70:30/male:female with men predominating in more senior positions. This reflects the history of the asset management industry and is typical of the financial industry as a whole. The Board and senior management are actively seeking to address this. Senior management have been working to implement our aspirations and putting in place the strategies; the policy changes; and the culture changes that are required to address the gender balance and gap at Liontrust.

Remuneration

We maintain a remuneration approach that promotes a strong customer centric culture, as well as risk awareness and performance with a good alignment of staff, investor and shareholder interests.

Liontrust has a remuneration policy that aims to reward staff equally for doing equivalent jobs, at an identical level of performance and experience.

All staff have the opportunity to participate in a pension arrangement. Employees are encouraged to become involved in the financial performance of the group through a Share Incentive Plan. We provide health and well-being initiatives including private medical cover, annual medical examinations to all staff and a confidential advice service.

All our staff (including cleaning staff and temporary staff) receive at least the London Living rate per hour and Liontrust does not use zero-hour contracts.

Sustainability and corporate responsibility

Liontrust takes seriously our role as custodians of client assets and are committed to environmental, social and governance (ESG) initiatives. The Liontrust Sustainability Report 2020 shows in detail how we are building sustainability into our business and our plan for being a responsible and transparent investor, employer and good corporate citizen.

38 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Our People, Our Impact and Our Corporate Responsibilities

Stewardship for our investments

Liontrust recognises that good governance & stewardship, sustainability and social impact are important considerations in choosing and monitoring investments and longer-term performance. In particular, we have committed to integrate sustainability appropriately throughout the business in order to:

  • enhance returns and risk management;
  • demonstrate effective consideration of ESG exposures;
  • exercise responsible stewardship of investee companies; and
  • show the positive impact our investment management activities have on our clients and wider society.

In 2020, Liontrust established a Sustainability and Stewardship Committee "SSC" chaired by the Chief Executive Officer. The SSC is supported by a Working Group with representatives from the firm to facilitate the development and implementation of our Sustainability strategy.

We are working on achieving the following:

  • Enhancing our ESG data & analytics for all our strategies;
  • Continuing to train our investment staff;
  • Investing in our company engagement capacity and resourcing;
  • Disclosing how we integrate sustainability in each strategy and across the group;
  • Increasing our reporting for portfolios with their ESG and climate characteristics; and
  • Improving our aggregated group reporting.

Our Governance and Stewardship team co-ordinate the Group's overarching approach: producing ESG reporting; climate and emissions analysis; drawing up and implementing our voting policies; and engaging with companies. The team support our fund managers, helping to integrate and enhance sustainability for all our clients.

Liontrust's proprietary investment processes integrate stewardship and sustainability into the stock selection and portfolio construction process to different extents. Just under a third of our assets are managed by the Sustainable Investment team who fully integrate ESG issues into their investments and we continue to develop and launch new funds to meet client demand for a fully integrated sustainable investment approach.

As part of our commitment, we are signatories to a number of industry initiatives in this area.

  • The United Nations Principles for Responsible Investment (UN PRI), a set of voluntary guidelines that help companies to address social, ethical, environmental and corporate governance issues as part of the investment process.

Liontrust's wider approach to the PRI's six responsible investment principles were assessed in 2019 by the UN PRI for the year ending 31 December 2018 and a summary of the results are:

A+ for Strategy & Governance

A Listed Equity - Incorporation

A Listed Equity - Active Ownership

A Fixed Income

The 2019 assessment transparency report is available on our website.

  • The Financial Reporting Council's Stewardship Code, 12 principles for stewardship including the responsible allocation, management and oversight of capital to create long-termvalue for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society. Liontrust will report against the 12 principles of the revised code in March 2021. For further details on Liontrust's response to the former Stewardship code and how Liontrust complies with the responsibilities laid out in the code, please visit our website.
  • The Financial Stability Board's Task Force on Climate-related Financial Disclosures, voluntary, consistent climate-relatedfinancial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. Please see the section on Climate-relatedFinancial Disclosure below for further details.

Liontrust has continued to invest in additional, specialist resources to increase our commitment to integrating ESG throughout

the business, including into our investment processes and risk analysis with dedicated governance and stewardship staff.

During the year, Liontrust engaged MSCI ESG manager for all investment teams providing ESG ratings, ESG controversy monitoring and carbon analytics of all portfolios, which empowers our investment managers to consider ESG issues in their decision-making processes for each strategy as well as providing group wide analysis and action.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 39

Strategic Report - Our People, Our Impact and Our Corporate Responsibilities

The chart below shows the distribution of the MSCI ESG ratings of our holdings as at 31 March 2020 and a slight increase in the leading rated AA and AAA companies in the portfolios scores from last year (2020:30% 2019: 29%), and a very slight decrease in the average rated BB,BBB, A companies in the portfolios (2020:52% 2019: 53%), and a slight decrease in the laggard rated B, CCC companies in the portfolios score from last year (2020: 5% 2019: 3%):

ESG Rating Distribution

25

20

15

10

5

0

CCC

B

BB

BBB

A

AA

AAA

LAGGARD

AVERAGE

LEADER

  • 'Not Rated' shows the percentage of the portfolios that are invested in companies that do not have an ESG rating from MSCI, i.e. outside of their coverage, mainly due to size or location of the company.

Environment and Climate

Liontrust believes that businesses are responsible for achieving good environmental practice and operating in a sustainable manner. We are therefore committed to minimising our environmental impact and continually improving our environmental performance as an integral and fundamental part of our business strategy and operating methods. We are signatories to the Taskforce on Climate-related Financial Disclosures, please see below for our disclosures. Liontrust is not a significant producer of emissions, or consumer of water and we consider our direct climate-related impact to be limited.

During the reporting period our measured Scope 1 and 2 emissions (location-based) totalled 2,683 tCO2e. This comprised:

Greenhouse Gas

FY 2020

Emissions Scope

(tCO2e)

UK

Luxembourg

Total

Scope 1

255

0

255

Scope 2 - location-

2,428.1

0.7

2,428.8

based

Scope 2 - market-

31.6

0

31.6

based

Total Scope 1 & 2

2,682.9

0.7

2,683.6

(location-based)

Total Scope 1 & 2

286.4

0

286.4

(market-based)

Scope 1 & 2 intensity

17.1

0

17.1

per FTE* - location-

based

Scope 1 & 2 intensity

1.8

0

1.8

per FTE* - market-

based

  • The emissions intensity calculation is based on a figure of 157 employees in 2020.

Overall, our emissions intensity for Scope 1 and 2 emissions (market-based) were 1.8 tCO2e/FTE.

During the year, our electricity consumption totalled 9,504 MWh, of which 99.9% was consumed in the UK. The split between fuel and electricity consumption is displayed below.

Energy consumption

FY 2020

(MWh)

UK

Luxembourg

Total

Electricity

9,500

4

9,504

Liontrust are committed to understanding and reducing our operational greenhouse gas (GHG) emissions and this year we have worked with Carbon Intelligence to calculate our Scope

1 and 2 emissions for the period ending 31 March 2020. We plan to analyse and understand our indirect scope 3 emissions and identify where the material emissions are. We have started to engage with our key suppliers as part of this process. We disclose more detail on this along with a revised target to reduce emissions in the Liontrust Sustainability Report 2020 which is available on our website.

Green House Gas Emissions performance

The following information summarises our direct environmental performance over the reporting year ending 31 March 2020. This statement has been prepared in accordance with our regulatory obligation to report greenhouse gas (GHG) emissions pursuant to the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 which implement the government's policy on Streamlined Energy and Carbon Reporting.

Our London office replaced the lighting on all our floors to move to LED bulbs with improved energy efficiency. We will look to assess further opportunities to reduce energy consumption in the future, but this may be limited due to the age of our office space. In our London and Luxembourg offices, which account for over 98.8% of our overall electricity consumption, we purchase all our electricity from 100% renewable sources.

Indirect emissions (Scope 3)

We identified the air, rail travel and mileage components of our indirect scope 3 emissions from business travel, which emitted

108.65 tCO2e, as a material source of GHG emissions and committed to offset this for the period. More detail on business travel emissions as well as the offset projects will be disclosed in the Liontrust Sustainability Report 2020.

Liontrust has put in place an environmental policy that details the key points of our strategy on the environment and this is available on our website. We have an emissions target, which is to reduce our Scope 1 and 2 emissions intensity per member of staff each year.

40 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Our People, Our Impact and Our Corporate Responsibilities

Liontrust has previously disclosed its scope 1 & 2 emission intensity by utilising landlord estimated data which identified an emissions intensity per member of staff (employees and members) in 2019 as

0.67 tC02 per annum. Following our work with Carbon Intelligence, we have identified that previous years' data was significantly understating our actual emissions and means that direct comparisons are not valid. We will continue to work on improving our data and reducing our emissions to meet our target in the future.

As part of our counterparty selection and review process, we encourage our suppliers, service providers and all business associates to do the same and where appropriate we have obtained the environmental policies of these counterparties. Not only is this sound commercial sense for all; it is also a matter of delivering on our duty of care towards future generations.

Carbon Offsetting

Liontrust will purchase 364 tonnes of carbon offsets against our scope 3 business travel and scope 1 emissions incurred during the year, supporting two projects via the Gold Standard offsetting scheme to include safe water access in Rwanda and solar cooking for refugee families in Chad.

Environmental KPIs Commercial Waste

Liontrust aims to minimise its commercial waste and to recycle as much of its commercial waste as possible, with any non-recyclable items being incinerated to produce energy. In the year to

31 March 2020, Liontrust recycled on average 11,000kg*of materials saving 16,000kg of CO2 (year to 31 March 2019: 9,500kg*, 13,700kg CO2).

The Sustainability and Stewardship working group monitors the KPIs as part of their review of the ESG policy.

Climate-related Financial Disclosure

We believe that climate change will be a defining driver of the global economy, society and financial markets in the future, and that investors will be unable to avoid the impacts of this. We have been a supporter of the Financial Stability Board's Task Force on Climate- related Financial Disclosures (TCFD) since September 2018. TCFD seeks to provide investors with increased awareness of climate- related risks and opportunities, and we support this objective. We support the TCFD through our operational activities, engagement with investee companies and work with partner organisations.

We have been signatories to the Carbon Disclosure Project (CDP) since 2017. Throughout the year, we endorsed the 2019 Global Investor Statement to Governments on Climate Change and a member of the Sustainable Investment team joined the PRI Investor Working Group on the Just Transition.

We have structured this update in accordance to TCFD recommendations, providing insight into governance, strategy, risk management, and metrics and targets related to climate change. In order to best describe our efforts, we will report on Liontrust

  • information only available for 2 Savoy Court.

as a corporate on how we address climate change risks in our operations and business within the environmental section of this report and separately describe how we manage climate change risks in our investment portfolio on behalf of our clients under the TCFD recommendations.

Governance

The Group Board is responsible for Liontrust's corporate obligations, including our obligations as a PRI signatory and under the various other commitments we have made on ESG issues such as the TCFD. This includes reviewing executive actions and ensuring that the report and accounts and other reporting provides a full and fair account of our activities. The Board ensures that climate related issues are included in strategy discussions. Overall responsibility for climate-related risks and opportunities lies with the Chief Executive Officer.

The Board keeps these reporting obligations under review and receives a regular report on the Group's Governance and Stewardship activities at each meeting and holds the management team to account at these meetings.

In 2020, Liontrust updated the governance framework and established a Sustainability & Stewardship Committee chaired by the Chief Executive Officer. Part of the remit is oversight and accountability of climate-related issues. This committee is supported by a Working Group chaired by the Chief Risk Officer who have implementation responsibilities.

Strategy

Liontrust are not legally obliged to report on the TCFD recommendations, however we endeavour to be transparent by reporting on our trajectory. The TCFD recognises that climate- related disclosure is a journey for many companies that will evolve over time organisations, investors, and others contribute to the quality and consistency of the information disclosed.

In 2019, Liontrust have become familiar with the TCFD recommendations, established board-level oversight and an internal climate-risk management process, developed an implementation plan and aligned the governance structures around delivery of this plan, provided appropriate training and guidance to the Board, conducted portfolio analysis and identified the highest carbon emitting companies held across portfolios.

Liontrust engaged MSCI Carbon Analytics for all investment teams to provide detailed carbon emissions analysis across all portfolios. Analysis of these portfolios has been conducted and identifying the highest carbon emitting companies held across portfolios, we will endeavour to engage with these companies throughout 2020. This analysis however does not identify transitional and physical climate related risks and opportunities. We are currently in talks with service providers to procure data that captures the effects of these risks on a systematic basis.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 41

Strategic Report - Our People, Our Impact and Our Corporate Responsibilities

In the absence of a formal process currently in place, we expect our fund managers to perform due diligence by using a common sense approach in implementing these climate related risks into their investment decision making, such as consideration of the effects of carbon pricing, substitution of existing products and services with lower emissions options, changing customer behaviour, stranded assets etc. Our fund managers access third party research from a number of providers which often contain this analysis on a company or sectoral basis.

Following our analysis and work throughout the year, we are now in a position to take the following steps in 2020:

  • Approve our strategy and approach towards climate risk at Board level.
  • Finalise the integration of climate risks in the Group's investment risk management.
  • Expand our coverage of climate risk in our risk framework.
  • Continue to support the fund managers with tools and appropriate training.
  • Implement our monitoring plans.
  • Start to engage with those companies with significant emissions across all portfolios.

We endeavour to have the following steps fully integrated by the end of 2021:

  • Full integration of Climate Change risk within the risk management framework.
  • Full integration of Climate Change risk within investment risk and portfolio analysis.
  • Disclose how the organisation is integrating scenarios within its investment management.
  • Ensure all appropriate staff are trained on new policies and processes.
  • Full engagement programme in place.
  • Target full disclosure in the 2021 PRI's climate risk indicators and 2020 / 2021 annual report.

We recognise the challenges highlighted by TCFD, including the variability of climate-related impacts across and within different sectors and markets. As long-term active investors, helping to develop thought-leadership that advances the understanding of risks and opportunities related to climate change aligns with the commitment to investor stewardship we have made to our clients.

Risk Management

The Board regularly discusses the potential impact of climate change on our business and our future strategy, in particular the impact on our ability to deliver long-term superior performance due to the climate change risk on our client's investments. The key climate change factors that may impact us are increasing climate change regulation, actual changes in climate and its impact on crops, water and extreme weather.

Over the last year, we have been working to integrate climate risk into our group risk frameworks. We have introduced various scenarios into our internal capital adequacy assessment program to simulate the impact of climate change into our prudential modelling. The investment risk team are working with MSCI to automate the analysis of climate risk on our portfolios and report these into the fund management teams and into the governance committees in a consistent manner. We are also looking to improve our long-term risk planning for the Group, which will also incorporate climate change into our group wide risk framework as we try and understand how climate change will impact us and our investments.

Metrics and Targets

As at 31 March 2020, 8.4 % of the Liontrust equity and fixed income portfolios are in climate relevant sectors according to The Paris Agreement Capital Transition Assessment Tool, 2°C scenario analysis which focuses on the fossil fuel, power, and automotive sectors that account for between 70 and 90% of energy-related. The outputs provided in this report provide an analysis of the portfolio relative to an economic transition consistent with limiting global warming to 2°C above pre-industrial levels. The analysis provides answers to the following:

  1. What is the current exposure in the portfolio to economic activities affected by the transition to a low carbon economy?
  2. Does the portfolio increase or decrease its alignment with a Sustainable Development Scenario transition over the next 5 years?
  3. What is the expected future exposure to high- and low carbon economic activities? This report considers an SDS transition.

The analysis covers two asset classes: listed equity and corporate bonds. These are compared to either a portfolio or market, as if they would transition aligned to the SDS. The equity market is represented by all securities from publicly listed companies and the corporate bond market by all companies with outstanding debt from Bloomberg at the end of 2018.

Since 2012, the Sustainable Investment team have disclosed the aggregated carbon emissions for their single strategy funds. This work is carried out independently and, on average, the Sustainable Future funds emit 75 per cent less carbon dioxide than the markets in which they are invested, have 25 per cent exposure to companies whose products help to reduce emissions and hold 0 per cent in companies exposed to the extraction and production of fossil fuels (such as coal miners and oil and natural gas exploration and production). Further details can be found at www.liontrust.co.uk/sustainable

We recognise the climate emergency and are committed to developing our analysis and response to climate-related risks and opportunities in order to mitigate the risks and safeguard our client's investments.

42 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Our People, Our Impact and Our Corporate Responsibilities

In January 2020, the Liontrust Sustainable Investment team who manage over 30% of the company's assets under management launched a 1.5 degree energy transition challenge in which they commit to engaging with companies within their portfolios to ensure that they reduce their absolute carbon emissions to zero and will be report on their findings at the end of 2020.

Human Rights and Slavery

Liontrust has committed to the preservation of human rights. Liontrust is vehemently opposed to the use of slavery in all forms; cruel, inhuman or degrading punishments; and any attempt to control or reduce freedom of thought, conscience and religion.

Liontrust will not knowingly enter into any business arrangement with any person, company or organisation which fails to uphold the human rights of its workers or who breach the human rights of those affected by the organisation's activities. For further information, we publish our Corporate Social Responsibility policy and a statement on the Modern Slavery Act on our website.

Purchasing, Procurement and Bribery

Liontrust is committed to adhering to the highest standards of business conduct; compliance with the law and regulatory requirements; and best practice. The Group has established an anti-bribery policy to aid Liontrust's partners/directors, employees and associated persons in ensuring that they comply at all times with relevant anti-bribery laws. In implementing this policy, the Group demonstrates its commitment to preventing bribery, and establishing a zero-tolerance approach to bribery in all parts of our operations. We also perform an annual bribery risk assessment.

Liontrust is committed to procuring its works, goods and services in an ethically and environmentally sensitive way, yet with proper regard to its commercial obligations, ensuring that suppliers deliver to agreed timescales, quality and cost. Purchasing is undertaken in a manner that encourages competition, and offers fair and objective evaluation of offers from all potential suppliers. Any significant transaction or agreement is reviewed by the Board.

Tax

Liontrust aims to pay the appropriate levels of tax in a timely manner and this means that we comply with our tax filing, reporting and payment obligations globally. We have developed a formal tax strategy to detail how tax risks are managed including governance, systems and controls, Board oversight and our attitude to tax planning.

We perform a tax evasion risk assessment and have reviewed our procedures to prevent the facilitation of tax evasion. We do not tolerate tax evasion, nor do we tolerate the facilitation of tax evasion by any person(s) acting on the Group's behalf.

Financial Crime and Cybersecurity

Liontrust is committed to the prevention and detection of financial crime, including money laundering, terrorist financing,

bribery and corruption, tax evasion and fraud. Liontrust has set up a separate committee to deal with financial crime and cyber threats which oversees all aspects of the Group's financial crime prevention activities including policies and procedures. These measures are designed to ensure we comply with all applicable laws. All members of the Group undertake regular financial crime prevention training which includes more detailed anti-money laundering and insider trading aspects for some of our staff.

We have continued to invest in our technology and Cybersecurity remains a key focus for us, especially with the change to working from home. We have appointed a specialist third party to provide the Board with a virtual Chief Information Security Officer (vCISO) to ensure we have the knowledge and skillset to challenge our IT security team. A governance structure overseeing information security with a nominated responsible Board member is in place. The Board has received further training on the threats and challenges and all company staff receive regular training to keep their skills up to date and to help maintain threat awareness.

We rolled out specialist training following the shift to working from home to ensure staff were aware of the security ramifications for this shift. Further work on improving the technology resilience and capacity is being performed. We continue to use third

party specialists to help define, test and review our security arrangements at least annually with internal and external penetration testing happening a number of times a year. Liontrust have included certain cybersecurity extensions to our comprehensive crime insurance policy to provide additional cover in line with a standard cyber insurance policy.

Charitable Giving

Liontrust's Sponsorship and Charitable Donations Policy ensures that all donations, sponsorship and employee/member volunteer activities align with our corporate social responsibility policy and business goals. Generally, Liontrust will not make contributions to certain causes or activities; these include, but are not limited to the following:

  • Political parties;
  • Faith related causes, organisations or activities; and
  • Where a conflict arises between Liontrust and its Clients.

Charitable donations are normally for small sums of money by way of single donations with larger or ongoing payments requiring approval by the Board of Liontrust. Over the last 12 months, staff have fundraised for a number of charities and amounts were matched by Liontrust. We are proud to support our staff in this way.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 43

Strategic Report - Community Engagement

Community engagement

There are three key objectives that we are aiming to achieve through our community engagement programme:

    • Raise financial awareness and literacy throughout society
  • Provide opportunities for vulnerable children and young people and promote gender equality through sport, education and finance
    • Wildlife conservation

Financial Education

Liontrust has partnered with Newcastle United Foundation (NUF) to launch a numeracy programme, Financial Football. This is designed to give primary school children a head start in financial education.

The six-week programme has helped to break down any barriers that children face in understanding and learning about numeracy and finance, with the aim of improving children's understanding of money, as well as giving them the confidence to thrive in school maths lessons.

Financial Football uses the popularity and profile of Newcastle United football club to encourage primary school pupils to engage with maths problems, using real life scenarios such as buying and selling football players and paying fines for red cards to teach concepts such as budgeting.

From September 2020, we will be expanding Financial Football to reach more primary school children - 500 a year - and will introduce a new maths education programme to increase primary school children's confidence and understanding of this subject.

Phillip Cowler, Literacy and Numeracy Coordinator at Newcastle United Foundation, says: "By using football as the basis for the maths challenges, we've seen pupils who generally struggle to engage with numeracy feel more comfortable about getting involved due to their familiarity with Newcastle United.

The difference has been striking. We're thrilled to have the support from Liontrust to expand this programme across our primary school delivery."

Wildlife Conservation

We have supported the Zoological Society of London (ZSL) for the past eight years with their work in helping to protect the Asiatic lions in India and with the construction of the Land of the Lions exhibit at ZSL London Zoo.

Liontrust has also been supporting the Ruaha Carnivore Project (RCP), which is part of Oxford University's Wildlife Conservation Research Unit and was established in 2009 to help develop conservation strategies for large carnivores in Tanzania.

44 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Community Engagement

Enhanced Support During COVID-19

Liontrust has given extra support to existing partners during the COVID-19 lockdown in the following ways:

Newcastle United Foundation

Liontrust funded a range of activities in the community:

  • 320 activity packs were distributed to the children of vulnerable families across the region, offering engaging activities to
    help with their physical and mental wellbeing. The packages were delivered to families identified by the Foundation's partner schools who were in need of support during this challenging time.
  • Further parcels were sent to young people engaged with the Foundation's YOLO project, which aims to reduce reoffending and create positive behaviour change.
  • Support for job seekers in finding career opportunities during lockdown, providing self-employed participants with financial support and encouraging regular communication between Walking Footballers during the period of self-isolation.
  • A donation to the NUFC Fans Food Bank, which has close links with Newcastle West End Foodbank, the largest foodbank in England.

Help for the Homeless

  1. Donation to The Connection at St Martin's for supplies for the homeless in accommodation
  2. Liontrust took out a subscription to The Big Issue for each partner and employee at the Company. This is to help provide an income for street vendors who were unable to sell The Big Issue during the COVID-19 lockdown.

ZSL

Liontrust paid for the feed and equipment for the lions at ZSL London Zoo. While ZSL London Zoo was closed it was unable to generate income.

Approval

The strategic Report was approved by the Board on 7 July 2020 and signed on its behalf by:

John Ions

Chief Executive

7 July 2020

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

45

Governance

Board of Directors

48

Risk management and internal controls report

49

Directors' report

53

Directors' responsibility statement

56

Corporate Governance report

57

Directors' Board Attendance report

61

Nomination Committee report

62

Audit & Risk Committee report

65

Remuneration report

68

Board of Directors

Alastair Barbour, 67, (Non-executive Director appointed Non-executive Chairman 20th September 2019). Joined the Board in April 2011. Alastair is a chartered accountant with 25 years' experience spent auditing and advising boards and management of public companies in the UK and internationally, principally in the financial services industry. He trained with Peat, Marwick, Mitchell & Co in London before being admitted as a partner with KPMG in Bermuda in 1985. Alastair returned to the UK as a partner

of KPMG in 1991 and has specialised in financial services with extensive experience in advising on accounting, financial reporting and corporate governance. He is also a Director of RSA Insurance Group Plc, Phoenix Group Holdings and The Bank of N.T. Butterfield & Son Limited.

Mike Bishop, 69, (Senior Independent Director). Joined the Board in May 2011. Mike started in fund management in 1972, working at an in-house pension fund and then a merchant bank before joining Gartmore in 1984. Over 14 years at Gartmore he ran pension funds, served on a number of boards from 1984 including the main board for 9 years. Assets under management grew from £1.5bn to over £45bn. In his executive role he was heavily involved in corporate governance and shareholder activism from the early 1990s. Following 6 years at Morley Fund Management, he joined Hermes as an adviser and non-executive director of its activist funds, chairing the advisory boards of both the UK and European Funds. These funds were transferred to RWC Partners in 2012 where Mike continues to chair the European Fund's advisory board and sits on a number of fund boards.

John Ions, 54, (Chief Executive). Joined the Board in May 2010. Prior to joining Liontrust in February 2010, John was Chief Executive of Tactica Fund Management since it was established in 2005. Previously, John was Joint Managing Director of SG Asset Management and Chief Executive of Société Generale Unit Trusts Limited, having been a co-founder of the business in 1998. John was also formerly Head of Distribution at Aberdeen Asset Management.

Mandy Donald, 47, (Non-executive Director). Joined the Board on the 1st October 2019. Mandy is a chartered accountant and spent 18 years with Ernst & Young before steering her focus towards the growth of new companies, serving on the boards of a diverse range of start- up businesses. Mandy is a Trustee of The Institute of Cancer Research, where she is also the Chair of the Audit Committee, she is also a Non-executive Director and Chair of the Audit Committee of Punter Southhall Group.

Vinay Abrol, 55, (Chief Operating Officer & Chief Financial Officer). Joined the Board in September 2004. Vinay is responsible for overseeing all finance, information technology, operations, risk and compliance of the Group. After obtaining a first class degree in computing science from Imperial College London, Vinay worked for W.I. Carr (UK) Limited specialising in the development of equity trading systems for their Far East subsidiaries, and then at HSBC Asset Management (Europe) Limited where he was responsible for global mutual funds systems. Following a short period at S.G. Warburg and Co., he joined Liontrust in 1995.

Sophia Tickell 59 (Non-executive Director) Joined the board in October 2017. Sophia has over twenty years' experience of working with asset managers and corporate executives to in multi-stakeholder dialogues designed to enhance understanding of societal expectations and environmental constraints. As a Founding Partner of Meteos Ltd, Sophia designed and collaboratively ran the PharmaFutures, EnergyFutures and BankingFutures dialogues. She was Chair and co-Executive Director of SustainAbility Ltd from 2004-2009 and prior to that worked for ten years at Oxfam. Sophia has served on a number of commercial, financial, charitable and academic boards and advisory committees and is currently Strategic Advisor to Financing a Just Transition, at the Grantham Research Institute on Climate Change and the Environment, at the LSE.

George Yeandle, 62, (Non-executive Director). Joined the Board in January 2015. George is a chartered accountant with over 30 years' experience having specialised throughout most of his career in advising clients on executive pay and remuneration issues. He has also held a number of internal leadership roles. He trained with Coopers & Lybrand (now PricewaterhouseCoopers LLP) before being admitted as a partner in 1989. More recently, George was Operational Leader of the London Region Human Resource Services Business and a Senior Partner of PricewaterhouseCoopers LLP, retiring in December 2013.

Adrian Collins, 66, (Former Non-executive Chairman - resigned

20th September 2019). Joined the Board in June 2009. Adrian has worked in the fund management business for over 40 years, a large part of which was at Gartmore Investment Management Limited where, latterly, he was the Managing Director. He is also a Director of Bahamas Petroleum Company Plc, Tristar Resources Plc, and CIP Merchant Capital Limited.

48 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Risk Management and Internal Controls Report

The Board is ultimately responsible for determining the risk appetite, risk strategy and risk management framework of the Group. The FCA have noted that it is for each individual firm to determine, based on its nature, scale and complexity, as well as its attitude to exposure to risk, whether or not to establish a Risk Committee of the governing body. The Group has determined not to establish a separate Risk Committee but to combine it with the Audit Committee, although this is reviewed on an annual basis.

The Audit & Risk Committee, on behalf of the Board, is accountable for, and responsible for, overseeing the Group's financial reporting, risk management and system of internal controls, including suitable monitoring procedures, which are designed to provide reasonable, but not absolute, assurance against material misstatement or loss. The Audit & Risk Committee, on behalf of the Board, is also responsible for keeping under review the scope, results, fees and the independence of the external auditors.

Edward Catton, Chief Risk Officer, is responsible for overseeing all risk management of the Group and monitors the Group's risks in a pro-active manner, with all departments fully aware of and managing the key risks appropriate to their responsibilities. All material risks to the business are monitored, appropriate mitigations for each risk are recorded and identified to the Board with markers for those with increased risk levels. Management recognise the importance of risk management and view risk management as an integral part of the management process which is tied into the business model and is described further in the Principal risks and mitigations section of the Strategic Report on pages 34 to 36.

  1. Liontrust Investment Partners LLP Partnership Management Committee ("LIPPM") for fund management, dealing, trading systems, research tools (including fund management data services), investment operations, risk management (including portfolio risk), and investment processes (including performance of the process, outlook, amendments or enhancements to the investment processes and new instruments within funds).

Matters Reserved for the Board

All other powers of

general management

Partnership

Management Committees

Sub-Committees

Committee structure and delegation of powers

The Corporate Governance report on page 57 details the Board's and the Chief Executive's responsibilities for organising and directing the affairs of the Company. The Board has delegated a number of its powers to three subcommittees; the Audit & Risk Committee, the Nomination Committee and the Remuneration Committee.

Sub-Committees

Fig 1: Board and Sub-Committees

The Board has delegated the authority for the executive management of the Group to the Chief Executive except where any decision or action requires approval as a Reserved Matter in accordance with the Schedule of Matters Reserved for the Board. The Group have set up two management committees to assist the Chief Executive, namely the:

  1. Liontrust Fund Partners LLP Partnership Management Committee ("LFPPM") for retail and institutional sales and marketing, advertising, promotion of Liontrust Funds, Transfer Agency, Information Technology (including business continuity), Treating Customers Fairly, Compliance & Financial Crime, Human Resources, Finance, product development and other asset gathering related powers; and the

Fig 2: Board and Management committees and sub-committees

Partnership Management Committee Meetings are held regularly over the course of a financial year.

There are several sub-committees of the Partnership meetings that have been set up including the Treating Customers Fairly Committee, the Financial Crime Prevention Committee, the Portfolio Risk Committee, the Data Governance Committee, the Product Development Committee, the Client Assets Committee and the Health and Safety Committee.

Treating Customers Fairly Committee

The Treating Customers Fairly Committee ("TCFC") oversees the management of the Group's Treating Customers Fairly initiatives throughout the business, reviewing the suitability of products for clients and monitoring customer outcomes. The TCFC agrees and monitors the Group's approach to clients and how our responsibilities are discharged. It keeps track of any regulatory developments and also manages the training programmes. The core to the TCFC's work is the management of our TCF programme in relation to the six outcomes that the FCA has set out for the industry. This work includes an ongoing assessment of our business against those outcomes with any actions tracked accordingly.

Financial Crime Prevention Committee

The Financial Crime Prevention Committee ("FCPC") oversees the effectiveness, scope and performance of the procedures throughout the business to prevent money laundering (including the review of any sanctions breaches, review of politically exposed persons and suspicious activity reports), fraud including excessive or inappropriate gifts and entertainment given and received, cybersecurity and anti-bribery and corruption policies and procedures within Liontrust including the due diligence of third parties.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 49

Risk Management and Internal Controls Report continued

Portfolio Risk Committee

The Portfolio Risk Committee ("PRC") oversees the management of portfolio risk throughout the business. This oversight encompasses portfolio risk management systems and operations together with the monitoring of portfolio risk investment restrictions. The PRC has documented the approach to risk management in the Risk Management Process document ("RMP"). The PRC also monitors portfolio performance and investment processes, establishing parameters for exception reporting and ensuring that appropriate client communications are prepared as necessary. The Portfolio Risk Committee ensures that investment teams have appropriate risk processes in place and that each fund has an agreed risk profile which details all the monitored risk controls and the risk limits for each fund.

Client Asset Committee

The Client Asset Committee ("CAC") is responsible for how client money and assets are held by the Group or its outsourced providers. Identifying all client assets, the controls and procedures in place for handling client assets and identifying, managing and monitoring the risks to keep the money and assets as safe as possible in all circumstances.

Data Governance Committee

The Data Governance Committee ("DGC") is responsible for all matters relating to Data Governance for the Group including the related procedures and policies, the systems used for data governance, major projects with an impact on data and its' governance, data related training and any other matters relating to the Data Governance requirements.

Product Development Committee

The Product Development Committee ("PDC") is responsible for day-today product management and the coordination of each department's work to facilitate product development, product management and associated governance processes. Its remit also includes the definition and review of target markets and the value assessment analysis.

Health and Safety Committee

The Health and Safety Committee ("HSC") is responsible for all health and safety matters for the Group including the health and safety policy statement, any required health and safety related risk assessments for the Group, the first aid requirements, all fire safety and emergency procedures, the environmental policy and any other matters relating to the general health and safety requirements of the Group's staff.

There are Terms of Reference for all committees, setting out the way in which the meetings operate. The Terms of Reference are formally adopted by the Board and are reviewed annually. Minutes are taken of each meeting and are circulated to the Board for review and challenge where appropriate.

Risk Management Framework

The diagram below summarises the key elements of the Group's Risk Framework which is based around these risk areas to ensure a consistent approach across the framework.

There are three main elements to capturing and reviewing risk within the Group; the Risk Appetite Statement ("RAS"), the Internal Capital Adequacy Assessment Process ("ICAAP") and the regular risk reporting.

  • The RAS identifies key risks, their materiality and their likelihood of occurrence and sets the amount of risk we want to take or are willing to accept in order to achieve our business objectives.
  • The ICAAP combines the RAS and the Groups financials together with scenario analysis and stress testing to determine how the realisation of risks might impact on the Group's capital and regulatory requirements.
  • The Key Risk Report brings together the ongoing risk identification, management, monitoring and risk reporting across the risk universe to ensure the changing risk environment and the risk positioning of the Group versus the RAS is communicated effectively to the Board.

The risk and uncertainties that affect the Group's business can also be broken down into risks that are within the management's influence and risks that are outside it. Risks that are within management's influence include areas such as the expansion of the business, prolonged periods of underperformance, loss of key personnel, human error, poor communication and service leading to reputation damage and fraud. Risks outside the management's influence include pandemics, regulatory change, Brexit, climate change, falling markets, terrorism, a deteriorating UK economy, investment industry price competition and hostile takeovers.

Risk Management Process and Internal controls

The broad process for managing risk in the framework essentially follows these steps:

In order to ensure that the Group regularly reviews and monitors all the potential areas of risk to the business, including emerging risks Liontrust has implemented a risk management framework which allows management, the Audit & Risk Committee and the Board to be kept fully informed of potential risks to the business and also how these risks would impact the group's capital adequacy.

50 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Risk Universe

The Group has identified 8 Risk Areas across the business activities and functions of the Group and uses these Risk Areas to define, measure and mitigate risk in the business. This forms our risk universe:

  • Credit risk
  • Market risk
  • Operational risk
  • Business risk
  • Client management
  • Portfolio Management, Investment risk and Liquidity
  • People
  • Regulatory, Compliance, Conduct and Financial Crime

Further details of the risks are listed in the principal risks and mitigations section of the Strategic Report on pages 34 to 36.

Risk Appetite

Liontrust have documented a Risk Appetite Statement for each of the Risk Areas. They identify the Key Risks facing the Group, the Risk Appetite and detail a combination of qualitative and quantitative measures as appropriate to adequately cover the identified risks. This includes identifying measures that are not only financially focused, but also measures that align to customer outcomes, reputation and operational risks.

The risk appetite approach is consistent across the Group. The risks of each business entity reflects the strategic direction as set by the Group for their risk appetite in the financial year ahead, and gives due consideration to the broad range of internal and external risk factors from the risk universe that impact them.

Managing Risk

The internal control system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives. The Group's internal control system is based on a "three lines of defence" model summarised in the diagram below:

Liontrust Asset Management PLC Board

LIPPM/LFPPM

Audit & Risk Committee

Business Departments

Control Departments

Other Assurance

Providers

Front Office

Risk

Internal Audit

Operations

Compliance

External Audit

Sales & Marketing

Finance (Controls)

AAF Assurance Process

Finance (Treasury)

IT Security

Consultancy Reviews

1st Line of Defence

2nd Line of Defence

3rd Line of Defence

Liontrust's Business Departments, supervised by the Partnership Committees, are responsible for identifying and managing risk and control activities within their business lines. This is the first line of defence. The Control Departments supervised by the Audit & Risk Committee develop and implement risk frameworks to support the front line and objectively challenge the identification of risk and the design of the controls within the business as a whole. The third line is a review of the risk and control activities in the Group by parties independent from the design, implementation and execution to highlight weaknesses, and provide assurance on the effectiveness and suitability of the internal controls.

The main elements of the Internal Controls which have operated throughout the year are as follows:

  • a clear division of responsibilities and lines of accountability, allowing adequate supervision of staff;
  • detailed procedures and controls for each department;
  • the development and implementation of specific accounting policies;
  • preparation of annual plans and performance targets in light of the overall Group objectives;
  • an operational risk scorecard measuring risk levels across the Group;
  • reports from the Executive Directors to the Board on the actual performance against plans;
  • reports from the Chief Risk Officer highlighting the Principal risks faced by the Group detailing the exposures, controls and mitigations in place;
  • reports from the Chief Compliance Officer detailing the robustness of procedures and controls for each department;
  • reports from the Head of Finance on controls and risks concerning client money and assets;
  • reports from the Money Laundering Reporting Officer (MLRO) detailing the arrangements in place for anti-money laundering and financial crime prevention;
  • reports from the virtual Chief Information Security Officer (vCISO) on cybersecurity and data protection measures;
  • reports from Internal Audit on the effectiveness of the Group's systems and controls to the Board;
  • reports to the Board in respect of the management of, and results of visits to, third parties to whom functions have been outsourced;
  • compliance by all members of staff with the Group's policies and statement of business conduct, which seeks to ensure business is conducted in accordance with the highest standards; and
  • capture and evaluation of failings and weaknesses and confirmation that necessary action is taken to remedy the failings, particularly those categorised as 'significant'.

Risk Monitoring

The Group uses a Risk Scorecard system to track Risk Indicators for measuring levels of risk or to determine levels of Risk Appetite or Risk Capacity in each of the Risk Areas. Each Key Risk has one or more risk indicators associated with it. The Risk Indicators are the key mechanism for tracking of Risk Appetite performance throughout the financial year. They highlight when the Group is approaching the pre-defined appetite levels and highlight when action should be considered. The Board and senior management receive regular updates of the Group's Risk Profile, i.e. the status of the Risk Areas that highlight where any risks are reaching their Risk Appetite Limits. This cascades upwards from the individual Risk indicators attached to the Key Risks in the Risk Areas. This is designed to allow the Board and senior management to quickly identify areas of concern.

Effectiveness of Risk Management and Internal Controls

The Board has reviewed the effectiveness of the Group's system of internal controls for the financial year and up to the date of this annual report and financial statements. The Board has carried out a robust assessment of the principal risks affecting the business and has a process in place within the business to control and monitor risks on an ongoing basis, in accordance with the guidance from the Financial Reporting Council's Guidance on risk management, internal control and related financial and business reporting ('GRM').

The Board is of the view that all necessary actions have been, or are being, taken to address matters identified as part of the ongoing risk management process and that no significant weaknesses were identified during the year.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 51

Risk Management and Internal Controls Report continued

Assurance process

The senior management arrangements, systems and controls environment in place across the Group are reviewed by the Board and Audit & Risk Committee each year. The Group appoint an internal audit function to monitor the appropriateness and effectiveness of its systems and controls. The Audit & Risk Committee and the Internal Auditors have agreed a rolling three year Internal Audit plan. This includes the following Audit areas: front office controls; data protection, security and governance; risk management; significant financial systems; outsourcing arrangements and CASS. The Internal Auditors will also perform a full systems and controls review every three years.

On an annual basis, Liontrust commissions an external accountancy firm, to perform testing of integrity of aspects of the Group-wide control environment. Liontrust has adopted the principles established in the "Assurance Reports on internal controls of service organisations made available to third parties" as recommended by the Institute of Chartered Accountants of England and Wales in the March 2011 technical release of AAF 01/06. RSM UK Group LLP were appointed to test the controls and to produce the AAF report. The results of this testing, including any exceptions identified, are made available to senior management, the Board, the Audit & Risk Committee and our institutional clients.

Stakeholders

The Group has a significant number of stakeholders whose futures are linked to the success of our business.

These significant stakeholders are:

  • shareholders;
  • clients;
  • members & employees;
  • service providers that provide the Group with outsourced functions;
  • regulators & industry bodies; and
  • wider society.

Each of these groups presents different opportunities and uncertainties and the Group ensures that there is regular contact and monitoring of the various bodies. They are all integral to the future success of the business, detailed below is a summary of why they are important and how we engage with them:

  • We aim to provide our shareholders with sustainable growth and increasing returns. We regularly engage with our shareholders to support the long- term objectives of our business.
  • Clients are core to the success of our business. We strive to provide long term performance and meet the needs and expectations of our clients. Treating customers fairly, providing good service and good value is central to how we conduct business across the Group and we continually strive to improve our offering and service.
  • Liontrust is proud of our people and our culture and they help us to deliver on our vision and obligations to our stakeholders. We continue to invest in our staff to attract, retain, incentivise, develop and encourage the individuals in our company to meet and surpass our current and future objectives.
  • Outsourcing is an integral part of the Liontrust operating model. Liontrust outsources in two key areas, Transfer Agency and Fund Accounting & Fund Valuation Services across two main jurisdictions. Regular meetings and reviews helps to ensure that the relationship continually improves.
  • Liontrust acknowledges the importance of working closely and constructively with our regulators and our industry bodies to ensure we run our business in a compliant way and helps to improve the wider financial environment for clients in the longer term.
  • Liontrust also recognises the wider responsibility we have to society and the importance of doing the right thing. We continue to invest and improve our governance and corporate responsibility including via our community engagement projects to show the positive impact our investment management and corporate activities can have on our clients and wider society

52 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Directors' Report

The Directors present their report and the audited consolidated financial statements of Liontrust Asset Management PLC for the year ended 31 March 2020.

Principal activities

Liontrust Asset Management PLC is a holding company whose shares are quoted on the Official List of the London Stock Exchange and is domiciled and incorporated in the UK. It has four operating subsidiaries as follows:

% owned

by the

Subsidiary name

Company

Subsidiary principal activities

Liontrust Fund

100%

A financial services organisation

Partners LLP

managing unit trusts, authorised and

regulated by the Financial Conduct

Authority.

Liontrust Investment

100%

A financial services organisation

Partners LLP

offering investment management

services to professional investors

directly, through investment

consultants and through other

professional advisers, which is

authorised and regulated by the

Financial Conduct Authority. Liontrust

Investment Partners LLP is also

approved as an Investment Manager

by the Central Bank of Ireland.

Liontrust Investment

100%

A financial services organisation

Management Ltd

managing unit trusts and ICVCs,

authorised and regulated by the

Financial Conduct Authority

Liontrust International

100%

A Distribution business authorised

Luxembourg S.A.

and regulated by the CSSF

In addition to the operating subsidiaries listed above, Liontrust Asset Management PLC has three other 100% owned subsidiaries: Liontrust Investment Funds Limited and Liontrust Investment Services Limited which act as a corporate member in Liontrust Fund Partners LLP and Liontrust Investment Partners LLP respectively and Liontrust Investment Solutions Limited.

Results and dividends

Profit before tax was £16.508 million (2019: £22.172 million as restated)

Adjusted profit before tax was £38.1 million (2019: £30.1 million) after adding back expenses including, share incentivisation, severance compensation and related legal costs, acquisitions related costs, professional services (restructuring, acquisition related and other), drawings, depreciation and intangible asset amortisation, and is reconciled to profit before tax in note 7 to the financial statements.

The Directors declare a second interim dividend of 24 pence per share (2019: 20 pence per share). This results in total dividends of 33 pence per share for the financial year ending 31 March 2020 (2019: 27 pence per share).

Review of the business and future developments

A review of the business and future developments is set out in the Chairman's statement, Chief Executive's report and Strategic Report on page 3 and 8 to 46 respectively.

Directors

The Directors of the Company during the year and up to the date of the signing of the financial statements were as follows. Their interests in the share capital of the Company at 31 March 2020 are set out in the Remuneration report on page 86.

Alastair Barbour

Mike Bishop

John Ions

Vinay Abrol

Sophia Tickell

George Yeandle

Mandy Donald (appointed 1st October 2019)

Adrian Collins (resigned 20th September 2019)

Disclosure required under the Listing Rules

LR 4.1.5.(R) and DTR 4.1.8 R

Information which is the required content of the management report can be found in the Strategic Report and in this Directors' Report.

LR 9.8.4R

The following table is disclosed pursuant to Listing Rule 9.8.4R. The information required to be disclosed, where applicable to the Company, can be located in these Annual Report and Financial Statements at the references set out below:

Information required

Location

Interest capitalised

Not applicable

Shareholder waiver of dividends

Note 22 page 123

Shareholder waiver of future dividends

Note 22 page 123

Agreements with controlling shareholders

Not applicable

Provision of services by a controlling shareholder

Not applicable

Key contracts

Risk Management and

Internal Controls Report

Details of long-term incentive schemes

Remuneration report

Waiver of emoluments by a Director

Not applicable

Waiver of future emoluments by a Director

Not applicable

Non-pre-emptive issues of equity for cash

Allotment of 4,485,123

fully paid ordinary

shares of 1p each

to Shareholders or

Neptune Investment

Management Limited

Allotment of 298,257

fully paid ordinary shares

of 1p each under the

terms of the Liontrust

Long-Term Incentive

Plan.

Non-pre-emptive issues of equity for cash

in relation to major subsidiary

Not applicable

Participation by parent of a placing by a

listed subsidiary

Not applicable

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 53

Directors' Report continued

All the information cross referenced above is incorporated by reference into this Directors' Report.

DTR 7.2 Structure of capital and voting rights

As at 31 March 2020, there were 55,512,061 fully paid ordinary shares of 1p amounting to £555,121. As at 7 July 2020 there were 55,512,061 fully paid ordinary shares of 1p amounting to £551,120. Each share in issue is listed on the Official List maintained by the FCA in its capacity as the UK Listing Authority.

The Company has one class of ordinary shares which carry the right to attend, speak and vote at general meetings of the Company. The holders of ordinary shares have the right to participate in dividends and other distributions according to their respective rights and interests in the profits of the Company and a return of capital on a winding-up of the Company. Full details regarding the exercise of voting rights in respect of the resolutions to be considered at the Annual General Meeting to be held on 22 September 2020 are set out in the Notice of Annual General Meeting.

To be valid, the appointment of a proxy to vote at a general meeting must be received not less than 48 hours before the time appointed for holding the meeting. None of the ordinary shares carries any special rights with regard to control of the Company.

Under Resolution 16 of the Annual General Meeting held on 25 September 2019, the shareholders authorised the Company to purchase its own shares pursuant to section 701 of the Companies Act 2006. This authority is limited to the maximum number of 5,091,515 Ordinary shares of 1 pence each (equivalent to approximately ten per cent of the issued share capital of the Company). This authority expires at this year's Annual General Meeting of the Company or 18 December 2020 (whichever is the earlier). The maximum price that may be paid for an Ordinary share will be the amount that is equal to 5 per cent above the average of the middle market prices shown in quotations for an Ordinary share in the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which that Ordinary share is purchased. The minimum price which may be paid for an Ordinary share is 1 pence.

Corporate governance

A report on corporate governance appears on pages 57 to 60.

Risks and uncertainties

A report on principal risks appears in the Strategic Report on pages 34 to 36 and a report on the risk management and internal controls appear on pages 49 to 52.

Corporate social responsibility

Liontrust aims to be recognised as an organisation that is transparent and ethical in all its dealings as well as making a positive contribution to the community in which it operates. The Board recognises the Group's impact, responsibilities and obligations on and towards society and aims to promote equal opportunities and human rights, reduce environmental risk and operate in a sustainable manner.

The Group is committed to the highest standards of business conduct. Policies and procedures are in place to facilitate the reporting of suspect and fraudulent activities, including money laundering and anti-bribery policies.

The Group's health and safety policy aims, insofar as it is reasonably practical, to ensure the health and safety of all employees and other persons who may be affected by the Group's operations and provide a safe and healthy working environment. The Group has a good record of safety.

A report on Our People, Sustainability and Our Corporate Responsibilities can be found on Pages 37 to 43.

Employees

The Group gives fair consideration to any application for employment from disabled persons, where the person can adequately fulfil the job's requirements. Should any existing employee become disabled, the Group will aim to ensure, as far as is practicable, to provide continuing employment under normal terms and conditions and to provide training and career development to disabled employees.

Details of Equal Opportunities, Diversity and Inclusion can be found on page 38.

Financial instruments

The Group's financial instruments at 31 March 2020 comprise cash and cash equivalents, financial assets and receivable and payable balances that arise directly from its daily operations.

Receivables arise principally in respect of fees receivable on funds under management, cancellations of units in unit trusts and sales of units in unit trusts, and shares of ICVCs title to which are not transferred until settlement is received. The Group's credit risk is assessed as low.

Financial assets comprise assets held at fair value through profit or loss.

Assets held at fair value through profit or loss are unit trust units held in the 'manager's box' to ease the calculation of daily creations and cancellations, and shares in the sub-funds of the Liontrust Global Funds Plc.

Payables (excluding deferred income) represent amounts the Group is due to pay to third parties in the normal course of business. These include expense accruals as well as settlement accounts (amounts due to be paid for transactions undertaken). Trade payables are costs that have been billed, accruals represent costs, including remuneration, that are not yet billed or due for payment. They are initially recognised at fair value and subsequently held at amortised cost.

Cash flow is managed on a daily basis, both to ensure that sufficient cash is available to meet liabilities and to maximise the return on surplus cash through use of overnight and monthly deposits. The Group is not reliant on income generated from cash deposits.

Deposit banks are selected on the basis of providing a reasonable level of interest on cash deposits together with a strong independent credit rating from a recognised agency. Any banks selected for holding cash deposits are selected using a detailed counterparty selection and monitoring policy which is approved by the Board.

Based on holding the financial instruments as noted above the Group does not feel subject to any significant liquidity risks.

Full details of the Group's financial risk management can be found in note 2 on page 106 to 108.

Post Balance Sheet date event

On 1 July 2020 the Company announced that it had entered into a conditional sale and purchase agreement ("SPA") with Architas Limited, a wholly owned subsidiary of AXA S.A., to purchase the entire issued share capital of Architas-Multi Manager Limited and Architas Advisory Services Limited (the "Proposed Acquisition") for a total consideration of up to £75 million (the

"Consideration").

54 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

The Consideration, acquisition related costs, and re-organisation costs will be satisfied by the net proceeds of a non-pre-emptive placing of 5.09 million new ordinary shares of 1 pence in the capital of the Company ("New Ordinary Shares"), which was completed on 1 July 2020 with New Ordinary Shares admitted to trading on the main market for listed securities of the London Stock Exchange on 6 July 2020 ("Issue Date"), and existing Company cash resources.

The New Ordinary Shares as issued, are credited as fully paid and will rank pari passu in all respects with the existing issued ordinary shares in the capital of the Company, including the right to receive all dividends and other distributions declared, made or paid on or in respect of such shares by reference to a record date falling after their Issue Date.

Completion of the proposed acquisition is expected to take place on 30 October 2020, subject to regulatory and shareholder approval.

Annual General Meeting

The Annual General Meeting of the Company will be held in the Pinafore room at the Savoy Hotel, Strand, London, WC2R 0EZ on 22 September 2020 at 2.00 p.m. A notice convening this meeting will be sent to shareholders in August 2020.

Section 992, Companies Act 2006

The following information is disclosed in accordance with section 992 of the Companies Act 2006:

  • The Company's capital structure and voting rights are summarised on page 54.
  • Details of the most substantial shareholders in the Company are listed on page 58.
  • The rules concerning the appointment and replacement of Directors are contained in the Company's articles of association and are discussed on page 57.
  • There are: no restrictions concerning the transfer of the securities in the Company; no special rights with the regard to control attached to securities; no agreement between holders of the securities regards their transfer known to the Company; and no agreement which the Company is party to that might affect its control following a takeover bid.
  • There are no agreements between the Company and its Directors concerning compensation for loss of office as at 31 March 2020.

By order of the Board

Vinay Abrol

Chief Operating Officer & Chief Financial Officer

7 July 2020

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 55

Directors' Responsibility Statement

Basis of financial statements

Having given consideration to the uncertainties and contingencies disclosed in the financial statements, and also considered the COVID-19 pandemic, the Directors have satisfied themselves that the Group has adequate resources to continue in operation and they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Independent Auditors

PricewaterhouseCoopers LLP were the independent auditors to the Company during the year and have confirmed their willingness to continue in office. A resolution to reappoint PricewaterhouseCoopers LLP as auditors to the Company and to authorise the Directors to fix their remuneration will be proposed at the 2020 Annual General Meeting.

Political donations

The Group made no political donations or contributions during the year. (2019: £nil).

By order of the Board

Mark Jackson

Company Secretary

7 July 2020

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and Financial Statements and the Remuneration Report in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 the Company and of the profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:

  • select suitable accounting policies and then apply them consistently;
  • make judgements and accounting estimates that are reasonable and prudent;
  • state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and
  • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements and the Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the Annual Report and Financial Statements taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company's, position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed on page 48 confirm that, to the best of their knowledge and belief:

  • the Group and Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company; and
  • the Strategic Report contained on pages 8 to 46 includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.

In the case of each director in office at the date the Directors' Report is approved:

  • so far as the Director is aware, there is no relevant audit information of which the Group and Company's auditors are unaware; and
  • they have taken all the steps that they ought to have taken 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.

By order of the Board

Vinay Abrol

Chief Operating Officer & Chief Financial Officer

7 July 2020

56 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Corporate Governance Report

Compliance with the provisions of the Code

The Company is committed to the principles of the UK Corporate Governance Code (July 2018) (the "Code"). During the year the Company has applied the main principles and complied with the provisions of the Code.

The Board met thirteen times during the year. In addition, there were occasions when the Directors met as a committee of the Board in order to authorise transactions already agreed in principle at Board meetings. On those occasions, a quorum of either two or three Directors was required.

The Board

The Board is responsible for organising and directing the affairs of the Company and the Group in a manner that is in the best interests of the shareholders, meets legal and regulatory requirements and is also consistent with good corporate governance practices. There is a formal document setting out the way in which the Board operates, which is available upon request from the Company Secretary.

The division of responsibilities between Alastair Barbour, Chairman, and John Ions, Chief Executive, has been clearly established by way of written role statements, which have been approved by the Board. The Chairman's main responsibilities are to lead the Board, ensure that shareholders are adequately informed with respect to the Company's affairs and that there are efficient relations and communication channels between management, the Board and shareholders, liaising as necessary with the Chief Executive on developments, and to ensure that the Chief Executive and his executive management team have appropriate objectives and that their performance against those objectives is reviewed.

The Chief Executive's main responsibilities are the executive management of the Group, liaison with the Board and shareholders (as required by the Chairman), to manage the strategy of the Group, to manage the senior management team, oversee and manage the sales and marketing teams, and to be an innovator and facilitator of change. The Chief Executive discharges his responsibilities in relation to the executive management of the Group via two partnership management committees as detailed in the Risk management and internal controls report on page 49.

The Chairman and Chief Executive are responsible to the Board for the executive management of the Group and for liaising with the Board and keeping it informed on all material matters.

The Non-executive Director's role has the following key elements:

  • constructively challenging, and contributing to, the development of the strategy of the Company and the Group;
  • scrutinising the executive management team's performance in meeting agreed goals and objectives, and monitoring the reporting of performance to the Board;
  • satisfying themselves that financial information is accurate and that financial controls and risk management systems are robust and defensible; and
  • being responsible for determining appropriate levels of remuneration for executive directors and a prime role in appointing (and where necessary removing) senior management and in succession planning.

Under the Company's articles of association, one third of the Directors must retire from office by rotation at each Annual General Meeting and may offer themselves for re-election (this does not include Directors appointed to the Board since the last Annual General Meeting). Under the Company's Corporate Governance Guidelines, which reflect the provisions of the Code on Corporate Governance, Non-executive Directors must retire and may offer themselves for re-election annually once they have served nine or more years on the Board. The UK Corporate Governance Code recommends that all Directors of FTSE 350 companies retire and are put up for re-election at the Annual General Meeting. The Board considers this to be best practice and, accordingly, has decided to go beyond the requirements of the Company's articles of association and require that all Directors of the Company retire and offer themselves for re-election.

Directors

Biographical details of all current Directors can be found on page 48.

The Board has decided to adopt the revised UK Corporate Governance code issued in July 2018 and to implement its provision on consideration of independence. Adrian Collins retired as Chairman of the Company at the 2019 AGM and was replaced by Alastair Barbour who immediately stood down from his position as Chairman of the Audit and Risk Committee. Alastair, as Chairman, is overseeing succession planning and will bring directors' tenure into compliance with the Code over a period of years.

During the year a search was conducted in order to fill the position of Chair of the Audit & Risk Committee in succession to Alastair Barbour and after regulatory approval Mandy Donald was appointed to the position of non-executive director and Chair of the Audit and Risk Committee with effect from 1 October 2019.

At all times during the year there have been at least four Non-executive Directors. The Board believes that the balance achieved between Executive and Non-executive Directors is appropriate and effective for the control and direction of the business.

The Chairman has met during the year with the Non-executive Directors both individually and collectively without the other Executive Directors.

Having duly evaluated each of the Non-executive Directors, including their length of service, the Board considers that, all such Directors are independent, in that they neither represent a major shareholder group nor have any involvement in the day to day management of the Company or its subsidiaries. As such they continue to bring objectivity and independent judgement to the Board and complement the Executive Directors' skills, experience and detailed knowledge of the business.

None of the Executive Directors are on the board of a FTSE 100 company.

Non-executive Directors are aware that they have to report any change in their circumstances or those of the members of their families that might lead to the Board reconsidering whether they are independent. Directors are also aware that they have to inform the Board of any conflict of interest they might have in respect of any item of business and absent themselves from consideration of any such matter.

The Non-executive Directors have disclosed to the Company Secretary their significant commitments other than their directorship of the Company and have confirmed that they are able to meet their respective obligations to the Company.

Directors have the right to have any concerns about the running of the Company minuted and documented in a written statement on resignation.

The Company has arranged insurance cover in respect of legal action against its Directors and Officers.

Performance

The Board conducts a formal review and rigorous evaluation of its own performance and that of its committees. The evaluation process is constructively used to improve Board effectiveness, maximise strengths and address any weaknesses.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 57

Corporate Governance Report continued

The Executive Directors have been subject to a formal performance appraisal. These appraisals were carried out in 2020 and in all cases their performance was appraised as continuously effective. The performance of the Non-executive Directors during the year to 31 March 2020 has been reviewed by the Chairman. The review has confirmed that the performance of the Non-executive Directors is effective and appropriate.

Professional development and training

Every Director is entitled to receive appropriate training and guidance on their duties and responsibilities. Continuing professional development is offered to all Directors and the Board is given guidance and training on new developments, such as new regulatory requirements.

In order to promote awareness and understanding of the Group's operations, the Chairman ensures there are additional opportunities for the Non-executive Directors to meet with senior management outside of the Board and

its committees.

Communication with shareholders

The Chief Executive and Chief Operating Officer & Chief Financial Officer also have regular meetings with existing and potential new shareholders.

Each year, in advance of the Company's AGM we engage an investor relations company to contact our key shareholders to seek their voting intentions and to offer further engagement with our executive and non- executive directors. In addition, we further engage with the major proxy advisor organisations in order to ensure their voting recommendations are fair and reasonable and take full account of the published information available to them through our published financial report and accounts and our website.

Substantial shareholders

The Company has received notifications in accordance with the Financial Conduct Authority's ("FCA") Disclosure and Transparency Rule 5.1.2R of the following interests in 3% or more of the voting rights attaching to the Company's issued share capital as follows:

As at 31 March 2020

Number of

Percentage of

Name

voting rights

voting rights

BlackRock

5,240,448

9.44%

Schroders

4,980,939

8.97%

Canaccord Genuity Group Inc.

4,379,632

7.89%

Standard Life Aberdeen PLC

3,758,331

6.77%

Merian Global Investors (UK) Limited

2,779,979

5.01%

Slater Investments Limited

2,731,714

4.92%

Castlefield Fund Partners Limited

2,700,000

4.86%

JO Hambro Capital Management Limited

2,539,164

4.57%

Legal & General Group Plc

2,015,097

3.63%

As at 6 July 2020

Number of

Percentage of

Name

voting rights

voting rights

Blackrock

5,240,448

8.65%

Schroders

4,980,939

8.22%

Canaccord Genuity Group Inc.

4,379,632

7.23%

Jupiter Fund Management Plc

4,073,752

6.72%

Standard Life Aberdeen PLC

3,758,331

6.20%

Slater Investments Limited

2,731,714

4.51%

Castlefield Fund Partners Limited

2,700,000

4.46%

JO Hambro Capital Management Limited

2,539,164

4.19%

Legal & General Group Plc

2,015,097

3.33%

58 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Section 172 (1) statement

The Directors act in good faith to promote the success of the Liontrust Group (the "Group") for the benefit of its members' as a whole and in doing so, have regard (amongst other matters) to the following factors;

the likely consequences

The Board has set a clear strategic objective for the

of any decision in the

Group and ensures objectives are implemented by

long term

establishing effective governance and practices. The

Board and its executives engage with a wide set of

stakeholders, and the Chairman, Chief Executive

and Chief Operating Officer & Chief Financial

Officer attend meetings with major shareholders

on a regular basis. Shareholder interaction

allows the Board to discuss shareholder views

on the Group performance against its strategic

objectives. The Board is supported by several key

Committees, including Board Committees covering

Audit & Risk, Remuneration and Nomination

and business operational and regulatory matters

including Compliance, Portfolio Risk and Treating

Customers Fairly The Board and Board Committees

ensure ongoing robust governance, oversight and

implementation of the Groups long-term strategy for

the benefit of all stakeholders.

Please see the Directors' Report for further details

on shareholder and governance process.

the interests of the

The Board recognises the importance of ensuring

Group's employees,

the Group attracts and retains engaged, committed

and talented employees. The Board seeks to

continually inform and engage with employees and

is committed to their development and encourages

employees to take on responsibility and be

accountable for their own decisions, actions and

behaviour.

A workforce engagement survey was carried out

in February 2020 and the results are detailed on

page 37.

Employees' within the Group also have the facility

to interact with the Board through a Workforce

Advisory Committee which was also established in

2020 and who's members range from departments

the need to foster

The Board recognises the Group's impact on

the Group's business

wider stakeholders, including its customers and

relationships with

the community in which it operates. The Group is

suppliers, customers

committed to the highest standards of business

and others

conduct and the Board's work with stakeholders

is critical to the long-term sustainable success of

the Group. The Board acknowledges the important

role that relationships with 3rd parties play for

the Group to achieve its strategic objectives. The

Group is committed to procuring work and services

from suppliers in an ethically, sustainable and

environmentally sensitive way and seeks to ensure

that suppliers follow similar practices. The Group

encourages competition amongst suppliers whilst

purchasing is undertaken in a fair an objective

manner.

Please see the Directors Report and Sustainability

Report for further information.

the impact of the

The Board is committed to contributing to and

Group's operations on

benefiting wider society. Details of the various

the community and the

programmes can be found in the Community

environment

engagement section of the Strategic Report on

page 44.

The Group remains firmly committed to supporting

community and environmental projects and the

Board recognises the increasing importance

attached to environmental, social and governance

(ESG) issues. The Group is committed to minimising

the environmental impact of the Group and

improving the Group's environmental performance

as an integral and fundamental part of the Board's

strategy and operating methods. The Group is

always striving to reduce its commercial waste

and to recycle as much of its commercial waste

as possible, with any non-recyclable items being

incinerated to produce energy.

Please see the Group's Corporate Social

Responsibility Statement and Environmental, Social

and Governance policy for further details.

throughout the Group. The Group also has a Social

Committee who organises events of interest for

all employees and also provides feedback and

information to senior management and the Board.

The Board understands the importance of ensuring

employees feel part of the success of the Group

and employees are encouraged to participate in the

Group's Share Incentive Plan.

the desirability of the Group maintaining a reputation for high standards of business conduct, and

The Group is committed to the highest standards of business conduct and ensures robust governance is in place throughout the Group. The Group has a number of policies in place to ensure good governance is embedded within the Group. The Group is a participant in many external bodies and associations to ensure governance and stewardship is a focus throughout the business, these include being a signatory to the United Nations Principles of Responsible Investing , a voluntary set of guidelines that helps a company to address social, ethical, environmental and corporate governance issues, Carbon Disclosure Project, an independent organisation that measures corporate climate change, adhering to the Financial Reporting Council's Stewardship Code and Modern Slavery Act, amongst others.

For further details please see the Group's Social Responsibility Statement.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 59

Corporate Governance Report continued

the need to act fairly between members of the Group.

The Board recognise the need to provide a transparent, positive, and collaborative working environment for all employees and stakeholder groups who interact and work within the Group. The Board seeks to ensure all employees within the Group have access and the opportunity

to continue their ongoing career and personal development within their roles. The Group has established a working culture of collaboration and inclusion which supports a talented and diverse workforce. The Group ensures this is delivered through the Equal Opportunities and Dignity at Work policy, Recruitment policy and by delivering Equality and Diversity training to raise awareness. The Group also offers an Internship Programme, offering employment to younger people from diverse backgrounds, where they may not have otherwise had the opportunity to start their career in the industry. These policies reinforce the Board's commitment to form an inclusive culture where the principle of diversity are embedded at all levels, creating a working environment which promotes inclusion and is free from all forms of discrimination.

Further information, please see the Group's Annual Report under "Equal Opportunities, Diversity and Inclusion in Our People, Our Impact and Our Corporate Responsibilities" section.

Resources

Directors have access to the services and advice of the Company Secretary, and may take additional independent professional advice at the Group's expense in furtherance of their duties. The terms of reference of the Audit & Risk, Nomination and Remuneration Committees have been considered by their members with a view to ensuring they have available adequate resources to discharge their duties.

Committees

Details of the chairmen and membership of the Audit & Risk, Nomination and Remuneration Committees are set out in the table on page 61 together with details of attendance at meetings.

Share buy backs

At the 2019 Annual General Meeting shareholders gave approval for the Company to buy back up to 5,091,515 Ordinary shares. Shareholders have also renewed the Directors' authority to issue ordinary shares up to an aggregate nominal value of £50,915. There have been no share buy-backs in the year.

Annual General Meeting

Notices convening Annual General Meetings are despatched to shareholders at least twenty working days before the relevant meeting and contain separate resolutions on each issue, including a resolution to adopt the annual report and financial statements. At every Annual General Meeting, the Chairman of the Group and the chairmen of the Audit & Risk, Nomination and Remuneration Committees make themselves available to take questions from shareholders.

The Company has put arrangements in place with its registrars to ensure that all proxy votes are received and accurately accounted for. The level of proxies lodged on each resolution, including votes for, against and abstained, will be available on the Company's website or upon request from the Company.

60 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Directors Board Attendance Report

Board & Committee Attendance 2019-2020

Director

14.05

26.06

15.07

30.07

12.08

20.09

26.09

26.09

19.11

23.01

23.01

23.03

26.03

Total

**

***

****

*****

******

Board

Adrian Collins

9

9

9

9

9

NA

NA

NA

NA

NA

NA

NA

N/A

5/5

John Ions

9

9

Absent

9

9

9

9

9

9

9

9

9

9

12/13

Alastair Barbour

9

9

Absent

9

9

9

9

9

9

9

9

9

9

12/13

George Yeandle

9

9

9

9

9

9

9

9

9

9

9

9

9

13/13

Mike Bishop

9

9

9

9

9

9

9

9

9

9

9

9

9

13/13

Vinay Abrol

9

9

9

9

9

9

9

9

9

9

9

9

9

13/13

Sophia Tickell

9

9

Absent

Absent

9

9

9

9

9

9

9

9

9

11/13

Mandy Donald

NA

NA

NA

NA

NA

NA

NA

NA

9

9

9

Absent

9

4/5

Audit & Risk

Alastair Barbour

9

9

-

-

-

9

-

-

NA

NA

-

-

-

3/3

George Yeandle

9

9

-

-

-

9

-

-

9

9

-

-

-

5/5

Mike Bishop

9

9

-

-

-

9

-

-

9

9

-

-

-

5/5

Sophia Tickell

9

9

-

-

-

9

-

-

9

9

-

-

-

5/5

Mandy Donald

NA

NA

-

-

-

NA

-

-

9

9

-

-

-

2/2

Remuneration

George Yeandle

9

9

-

-

9

9

-

-

9

9

-

-

9

7/7

Alastair Barbour

9

9

-

-

9

9

-

-

NA

NA

-

-

NA

4/4

Mike Bishop

9

9

-

-

9

9

-

-

9

9

-

-

9

7/7

Sophia Tickell

9

9

-

-

9

9

-

-

9

9

-

-

9

7/7

Mandy Donald

NA

NA

-

-

NA

NA

-

-

9

9

-

-

9

3/3

Nomination

Mike Bishop

9

9

-

-

-

-

-

-

-

9

-

-

9

4/4

Adrian Collins

9

9

-

-

-

-

-

-

-

NA

-

-

NA

2/2

John Ions *

9

NA

-

-

-

-

-

-

-

NA

-

-

NA

1/1

Alastair Barbour

9

9

-

-

-

-

-

-

-

9

-

-

9

4/4

George Yeandle

9

9

-

-

-

-

-

-

-

9

-

-

9

4/4

Sophia Tickell

9

9

-

-

-

-

-

-

-

9

-

-

9

4/4

Mandy Donald

NA

NA

-

-

-

-

-

-

-

9

-

-

9

2/2

  • John Ions resigned from the Nomination Committee on the 14 May 2019 in line with PIRC guidelines that a CEO should not be a member of the Nomination Committee.
  • John Ions, Sophia Tickell and Alastair Barbour were unable to attend this Board meeting due to the fact the meeting was held at short notice. The meeting was held to approve the appointment of Mandy Donald and each of the Board members who were absent from this meeting were either present or in attendance at the Nomination Committee meeting held on the 26 June 2019 where it was agreed to recommend the appointment of Mandy Donald to the Board.
  • Sophia Tickell was unable to attend the 30 July 2019 Board meeting due to the fact it was held at short notice and she was unable to re-schedule her travel arrangements.
  • Adrian Collins resigned as Chairman of the Company at the AGM held on the 20 September 2019 and did not attend the Board and Committee meetings held later on that day.
  • Mandy Donald was appointed as a Non-Executive director with effect from 1 October 2019.

******

Mandy Donald was unable to attend the 23 March 2020 Board meeting as this was held at short notice and coincided with another meeting scheduled for

the same time.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 61

Nomination Committee Report

Introduction by the Chairman of the

Nomination Committee

Dear shareholder,

On behalf of the Nomination Committee (the "Committee"), I am pleased to present the Nomination Committee report for financial year ended 31 March 2020.

The Committee's principal duties are as follows:

  • review the structure, size and composition of the Board;
  • to evaluate the Directors' skills, knowledge and experience;
  • to consider the leadership needs and succession planning of the Board when making decisions on new appointments;
  • review annually the schedule of employees and members who carry out significance influence functions ("SIF") under the Senior Managers certification regime ("SMCR"), and to ensure the individuals continue to be fit and proper, competent and capable;
  • to consider and approve recommendations from the management committees of Liontrust Investment Partners LLP ("LIP") and Liontrust Fund Partners LLP ("LFP") for new SMCR employees or members, including details of the SMCR role that they will perform and consider; and
  • to approve recommendations from the management committees of LIP and LFP for amendments to the SMCR roles carried out by existing SMCR employees or members.

The terms of reference of the Committee, which explains its role and the authority delegated to it by the Directors, are available on the Company's website or upon request from the Company Secretary.

The terms and conditions of appointment of the Directors will be available for inspection at the 2020 Annual General Meeting.

This introduction is intended to provide a summary of key events during the year from a Committee perspective and to give further insight into the workings of the Committee and its approach. During the year, the Board's structure, size, composition and succession planning remained a major focus.

We will continue to focus on succession planning, talent-management and diversity throughout the financial year ending 31 March 2020. During the year Adrian Collins stepped down as Non-executive Chairman, and we are delighted that Alastair Barbour stepped up to Non-executive Chairman in his place. We are also delighted that Mandy Donald joined the Board as a Non-executive Director and Chairman of the Audit & Risk Committee. The recruitment of Mandy was supported by Nurole, an independent specialist executive search firm.

At the 14 May 2019 Committee meeting it was agreed that John Ions would step down from the Committee with immediate effect, thereby ensuring that the Committee membership comprised solely of Non-executive Directors, in line with best practice.

Mike Bishop

Chairman of the Nominations Committee

7 July 2020

Composition and attendance

During the year, the Committee comprised of independent Non-executive Directors and Executive Directors:

  • Mike Bishop (Chairman)
  • Alastair Barbour
  • Adrian Collins (retired from the Committee 20 September 2019)
  • Mandy Donald (appointed to the Committee 1 October 2019)
  • John Ions (retired from the Committee 14 May 2019)
  • Sophia Tickell
  • George Yeandle

The attendance record of members of the Committee during the year is shown in the table on page 61

Activities during the year

In the financial year ended 31 March 2020, the Committee met four times and its activities included, amongst other things:

  • reviewed reports on succession planning and organisational capability;
  • recruitment of a new Non-executive Director and Chairman of the Audit & Risk Committee, supported by Nurole;
  • a review of controlled function changes and consider recommendations from the management committees of LIP and LFP for new Significant Influence Function employees and members, including details of the controlled functions that they will perform;
  • review of the PIRC Corporate Governance Policy Changes for 2019. It was particularly noted that PIRC are now stating that they will oppose the re-election of any CEO to the Nomination Committee. The Committee considered the newly stated position from PIRC and it was agreed that Mr Ions would step down from being a member of the Committee;
  • review of the Stakeholder Identification paper;
  • review of structure, size and composition of the board and leadership needs of the Group;
  • appointment of Constal Limited to perform an independent evaluation of the Board and its committees;
  • decision to initiate a search for the replacement Non-executive Director for the Mike Bishop, who has indicated that he intends to retire from the Board at the 2021 AGM. It was agreed that in the first instance the Committee members and Executive Directors be invited to put forward the names of any person whom they felt would be a suitable candidate to fill the role. In June 2020 Ridgeway Partners an independent executive search firm have been appointed to assist the search;
  • consideration of further training for the Non-executive Directors;
  • a review of the SMCR report recording those employees and members now registered with the FCA as holding Senior Management roles and those other employees recorded as holding Certification roles; and
  • Non-executiveDirector time commitments.

The Committee received information and support from the Chief Executive, and the Chief Operating Officer & Chief Financial Officer during the year. In order to enable the Committee to carry out its duties and responsibilities effectively the Committee has the right to appoint external recruitment consultants or external advisers to fill vacancies where it believes that to be appropriate.

62 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Board split and Tenure

See below for two charts showing the split between Non-executive/Executive Directors. Tenure and gender diversity.

Board Split between Executive and Non-executive Directors:

Gender diversity of the Board improved to female directors representing 29% of the Board (2019: 14%):

Non-executive Chairman (1)

Non-executive Directors (4)

Executive Directors (2)

Tenure of Non-executive Directors (including the Non-executive Chairman):

Male (5)

Female (2)

Time commitment

As part of the review of the time required of Non-executive Directors to discharge their responsibilities, the Committee noted that Alastair Barbour, on account of his being on the boards of a three other public companies and chairing the Audit and Risk Committee for three them, has provided an analysis of his work commitments, which shows the level of time commitment required for certain of his other roles and the complimentary nature of his roles and the time has and plans to commit to Liontrust. The Committee confirms its satisfaction with the time and overall commitment given to Liontrust by Alastair Barbour and his time availability to act as Non-executive Chairman.

Independent Board and Committee Evaluation

Constal Limited ("Constal") carried out an independent evaluation of the Board and its committees, to take stock following the appointment of Alastair Barbour as Non-executive Chairman and consider how the Board and its committees can develop to best help drive long-term sustainable success.

Constal's approach was is to focus on the future and what do the Board members think the Board and its committees could and/or should do to be better? The development plan was based on confidential interviews with all the members of the Board and the Company Secretary. Through interviews Constal asked participants to reflect on various aspects of the Board and its committees, including the quality of debate and decision-making, the information they receive, how well Board discussion time is spent, how the committees are working, how to achieve and manage the aims for Group and how the Board might have to adapt to make sure it is best prepared to meet those challenges.

6+ years (2)

3-6 years (1)

1-3 years (2)

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 63

Nomination Committee Report continued

The key recommendations from the development plan, which have been adopted by the Board, are:

  • Board agenda: refocus on timing and agenda items with more to periodic deep dives operational matters those relating to strategy/long-term sustainable success;
  • Information flows: enhanced structure to papers including executive summaries, purpose, required actions and metrics ;
  • Scheduling: holding Board and Committee meetings over two days: and
  • Effectiveness of committees: reconsideration of terms of reference, agendas, frequency and presentations with aim of expanding time for discussion and debate

Diversity and inclusion

The Committee considers diversity, including gender and ethnic diversity, when looking to appoint additional Directors and strives to encourage all the Directors to create an inclusive culture within the Group in which difference is recognised and valued.

It is a prerequisite that each Director or proposed Director must have the skills, experience and character to contribute both individually and as part of the Board, to the effectiveness of the Board and the success of the Group and Group. Subject to this overriding principle, the Board believes that diversity, amongst its members, including gender diversity, is of great value and it is the Board's policy to give careful consideration to issues of overall Board balance and diversity, in making new appointments to the Board. The Group currently has two female Directors and the Committee aims to recommend the appointment and to increase the number of female Directors if appropriate candidates are available when Board vacancies arise.

The Group operates a policy of equal opportunity, details of which can be found in the Corporate Social Responsibility section of the Strategic Report.

Mike Bishop

Chairman of the Nomination Committee

7 July 2020

64 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Audit & Risk Committee Report

Dear shareholder,

On behalf of the Audit & Risk Committee (the "Committee"), I am pleased to present the Audit & Risk Committee report for the financial year ended 31 March 2020.

The Committee's key responsibilities remain unchanged during the year and included: assisting the Board in its presentation of the Group's financial results; continuing to review the effectiveness the Group's system of internal controls and risk management systems; monitor and periodically review the Company's procedures for ensuring compliance with regulatory and financial reporting requirements; monitor the effectiveness of internal audit and keep under review the independence and objectivity of the external auditors.

The terms of reference of the Committee, which explain its role and the authority delegated to it by the Board of Directors, are published on the Company's website and are available upon request from the Company Secretary.

I hope that you find this report a useful insight into the work of the Committee and I look forward to meeting with shareholders at our AGM on 22 September 2020.

Mandy Donald

Chair of the Audit & Risk Committee

7 July 2020

Key responsibilities

The Committee's key responsibilities remain unchanged during the year and continue to be to:

  • assist the Board in its presentation of the Group's financial results and position through review of the interim and full year financial statements before they are approved by the Board. The Committee focuses on compliance with accounting principles and policies, changes in accounting practice and major matters of judgement;
  • keep under review the effectiveness of the risk framework that is used to monitor the Group's system of internal controls and risk management systems. This includes suitable monitoring procedures for the identification, assessment, mitigation and management of all risks including liquidity, market, regulatory, credit, legal, operational and strategic risks, with particular emphasis on the principal risks faced by the Group. Such procedures are designed to provide reasonable, but not absolute, assurance against material misstatement or loss;
  • as part of the suite of risk management procedures, the Committee reviews and recommends to the Board for approval, the Group's Internal Capital Adequacy Assessment Process ("ICAAP") to fulfil its regulatory obligations under the Capital Requirements Directive and assess whether the Pillar 2 assessments and Pillar 3 disclosures remain appropriate;
  • monitor and periodically review the Group's procedures for ensuring compliance with regulatory and financial reporting requirements, including relationship with the relevant regulatory authorities;
  • review the Group's arrangements for the deterrence, detection, prevention and investigation of financial crime, including whistle blowing arrangements;
  • monitor and review the effectiveness of the Group's internal audit function and agree the scope of the internal audit plan; and
  • oversee the appointment, performance, remuneration and independence of the external auditors.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 65

Audit & Risk Committee Report continued

Composition and attendance

During the year, the Committee comprised of independent Non-executive Directors:

  • Mandy Donald (Chair from 1 October 2019)
  • Alastair Barbour (Chair until 1 October 2019)
  • Mike Bishop
  • Sophia Tickell
  • George Yeandle

The attendance record of members of the Committee during the year is shown in the table on page 61.

All the Committee's members who served during the year are considered by the Board to be appropriately experienced and sufficiently qualified to fulfil their duties and have competence relevant to the sector in which the Group operates. The Board considers both Mandy Donald and Alastair Barbour to have recent and relevant financial experience.

The Committee members' profiles are set out in full in the Board members' biographies.

The Chief Operating Officer & Chief Financial Officer, Head of Compliance and Financial Crime, Head of Finance and Head of Risk were regular attendees at the Committee meetings and reported on their respective areas. The external auditor, PricewaterhouseCoopers LLP, attended the meetings following the half and full year ends and met privately with the Committee.

Key Activities during the year

The Committee has a formal programme of matters which it covers during the year. This programme is formulated by the Committee Chair and the Chief Operating Officer & Chief Financial Officer and is designed to ensure that all matters that fall within the Committee's remit are reviewed during the year. The Committee has access to external independent advice at the Company's expense.

During the financial year to 31 March 2020 and up to the date of this report, the Committee met 5 times and its activities, amongst other things, covered the following matters:

  • Reviewing the annual financial statements for the year ended 31 March 2019 and 2020 and half year financial statements for the six months to 30 September 2019 with particular emphasis on their fair presentation, the reasonableness of judgements made and the valuation of assets and liabilities;
  • The appropriateness of the accounting policies used in drawing up the Group's financial statements;
  • Consideration of the Group's taxation requirements;
  • Review of the Group's governance, risk framework, risk management, risk management processes and related policies;
  • Review and approval of the Group's ICAAP;
  • Review of the Group's compliance monitoring programme, compliance manual (including whistle blowing arrangements) and annual anti-money laundering report;
  • Review and discussion of regular reports on financial reporting, key risks, compliance, Client Money & Assets ("CASS") and financial crime from the Head of Finance, Head of Risk and Head of Compliance & Financial Crime respectively;
  • Review and consideration of the external auditors' reports on Client Money & Assets;
  • Consideration of the external auditors' report on the financial year ending 31 March 2020 audit and discussion of their findings with them; and
  • Review of the internal audit plan in the context of the Company's overall risk management programme
  • In reviewing the annual financial statements for the year ended 31 March 2020, the committee considered the impact of COVID-19 Pandemic when considering judgements and significant accounting items. In particular the Committee considered the impact on the valuation of assets and liabilities and the suitability of disclosures in relation to the impact of COVID-19.
  • Review of the prior year adjustment to the 2019 financial statements.
  • Reviewed and discussed the findings of 5 internal audit reports, ensuring appropriate follow up by management of points raised. These internal audit areas included: CASS - Client assets; SYSC - Systems and controls; front office and trading teams; Governance of the back office transition project; and Governance of the Neptune integration project.
  • Consideration and approval of the external audit plan for 2020
  • Assessment of the performance, independence and objectivity of the external auditors;
  • Review and approval of all non-audit services to be carried out by the external auditors; and
  • Review of the Committee's terms of reference.

Significant accounting matters

During the year the Committee considered key accounting issues, including matters of judgement in relation to the Group's financial statements and disclosures relating to:

Revenue recognition

The risk of recognising revenue in incorrect periods via management manipulation is significant in that revenue levels may affect management's levels of remuneration and incentivisation. Risks of such manipulation are heightened where there is judgement applied in calculation or recognition of revenue. Any such calculations are subject to internal approvals and sign offs and are subject to independent verification. Revenue is recognised

in accordance with the accounting policy on Note 1m) on page 105. The Committee discussed recognition of revenue with management and questioned them on the application of the Group's accounting policy with particular emphasis on fee income, performance fees and profits from dealing in unit trusts and ICVCs. Revenue recognition was also a key focus for the auditors and they reported to the Committee on their work and findings.

Risk of management override of controls

International Standards on Auditing ('ISAs') require that this is identified as a significant risk by the auditors and, as such, it is treated as a significant risk by the Committee. Management have the potential to manipulate accounting records and financial reports by overriding controls. Reported financial information is regularly reviewed and discussed by the Committee and the Board with any significant deviations from expectations being queried. Findings from the audit are discussed with the external auditor.

Acquisition of Neptune Investment Management Limited

The Committee reviewed and challenged the determination of fair value of goodwill and intangible assets (management contracts) arising on the acquisition of Neptune Investment Management Limited ('Neptune') as described in note 13 and considered the allocation of the purchase consideration to the recognised assets and liabilities, taking into account the report and findings of the external auditors.

Goodwill and intangible assets

Goodwill and intangible assets comprise a significant proportion of the balance sheet. The Committee reviewed the assessment of the carrying value of both goodwill and intangible assets and considered the reasonableness of the underlying assumptions. On the basis of this review and discussion with management and the external auditor, the Committee is satisfied with the recorded carrying value of the assets.

66 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

Share based payments

Share based payments are a focus for the Committee in view of the complexity of accounting, interpretation of the reporting standard and valuation of awards. This also included reviewing the prior year adjustment in respect of share based payments. The Committee receives information and explanations from management which is discussed with them and with the auditors, taking into account the results of the auditors' work.

Taxation

The Committee receives regular reports on taxation and deferred tax amounts including information on positions proposed by management where tax regulation is subject to interpretation and the support for provisions established for amounts expected to be paid. These are discussed with the external auditors and the results of their reviews and audit are taken into account.

Internal audit

Minerva Risk Consulting Partnership Limited ("Minerva" or "Internal Auditor") have been appointed to carry out a programme of internal audit work as set by the Committee and act as the Group's internal auditors

Minerva have a direct reporting line to the Chairman of the Committee. The Committee believe that using an external firm will ensure that the internal audit function will be adequately resourced and staffed by competent individuals and be independent of the day-to-day activities of the firm whilst still having appropriate access to a firm's records.

The Committee and the Internal Auditors have agreed a rolling three year Internal Audit plan. This includes the following Audit areas: front office controls; data protection, security and governance; risk management; significant financial systems; outsourcing arrangements and CASS. The Internal Auditors will also perform a full systems and controls review every three years.

The Committee regularly meets with Minerva, with and without management present, throughout the year to receive updates and to review its findings.

Each year the Committee considers the scope of the internal audit plan and the performance of the Internal Auditors prior to the commencement of the next year's internal audit programme to ensure they remain consistent with the Group's requirements.

External auditors

PricewaterhouseCoopers LLP ("PwC") are the Group's external auditors and, having originally been appointed in February 2000, were re-appointed following a tender of the audit during 2015. Richard McGuire has been the lead audit partner since 2018 for the year ended 31 March 2019. In accordance with Competition and Markets Authority Order 2014, the Group intends to retender the external audit contract no later than 2025.

Each year the auditors present to the Committee the proposed scope of their full year audit plan, including their assessment of the material risks to

the Group's audit and their proposed materiality levels. The audit partner attends the committee meetings at which the half yearly and annual reports are reviewed. In addition, the Committee met twice with the external auditors without management present.

Each year, the Committee considers the performance of the external auditors prior to proposition of a resolution on their reappointment and remuneration at the Annual General Meeting.

Based on the satisfactory conclusion of the work described above carried out by the Committee to assess the performance of the external auditors and safeguard their independence, the Committee has recommended their reappointment to the Board and a resolution will be proposed at the 2020 Annual General Meeting for the reappointment of PwC as external auditors.

Non-audit services

The Committee has implemented a policy and guidelines on provision of non-audit services by the external auditors to safeguard their objectivity and independence. This policy has been approved by the Board. The policy provides that provision of certain types of non-audit services are not permitted under any circumstances ("Prohibited Services") whilst others allowed ("Allowed Services").

Prohibited Services are those where the Committee considers that the possibilities of a threat to auditor independence is high. Allowed Services are those considered to have a low threat to auditor independence. Nonetheless, Allowed Services still need the Committee's approval in advance if the expected fee exceeds £25,000. All services are reviewed and ratified by the Committee.

The policy also sets out certain disclosures the external auditors must make to the Committee, restrictions on employing the external auditors' former employees, partner rotation and the procedures for approving non-audit services provided by the auditors. The policy is reviewed regularly and updated to ensure compliance with all applicable regulations.

During the year, the external auditors were, on a number of occasions, engaged as advisers. The services provided included technical support in relation to employee and member incentivisation services and the regulatory CASS (client money) audits. The Committee is satisfied that the external auditors were best placed to provide these services because of their familiarity with the relevant areas of Group's business and that there are no matters that would compromise the independence of the external auditors or affect the performance of their statutory duties.

The Committee receives a regular report setting out the non-audit services provided by the external auditors during the year and the fees charged.

Details of fees paid to the auditors can be found in Note 6 of the financial statements on page 112. The non-audit services as identified in Note 6 have all complied with the policy as detailed above.

LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 67

Remuneration Report

Introduction by the Chairman of the

Remuneration Committee

Dear shareholder,

On behalf of the Remuneration Committee (the "Committee"), I am pleased to present the Remuneration Report for the year ended 31 March 2020. This letter is intended to provide a summary of key events during the year from

a Committee perspective and to give further insight into the workings of the Committee and its approach.

Directors' Remuneration Policy

Our full Directors' Remuneration Policy ("DRP"), which was approved by shareholders at a General Meeting ("DRP GM") in September 2018 with 60.7% of votes in favour, is available on the Company's website (in the Investor Relations section) and we have therefore only included the DRP's Elements of Reward table in this year's report. A full explanation of our response to the votes against the policy was included in last year's Remuneration Report. The conclusion last year was that no new policy is required and that concerns can be addressed through the implementation of the current policy. Once again, this year no changes are being proposed to the DRP as I believe it continues to provide a proper framework within which the Committee can operate and we should be held accountable for how in practice we have implemented that Policy. The Annual Report on Remuneration and this statement will be subject to an advisory vote at our 2020 Annual General Meeting, to be held on 22 September 2020.

Implementation of the DRP in 2020

I remain committed to openness and consultation on remuneration matters with transparency of performance metrics and their associated weighted outcomes and how in turn this affects annual bonus/variable allocation. We have also set out full disclosure of the performance conditions on granted LTIP awards.

It is impossible, however, at the time of writing this report not to make reference to the impact of COVID-19 and how the impact of the virus has influenced our decisions on the remuneration outturn for the year.

COVID-19 has been declared a pandemic by the World Health Organisation, and as the virus continues to spread extensively, it's presenting unprecedented disruption and uncertainty for businesses in the UK and globally. While workforce health and wellbeing is of paramount focus, the Committee has considered the impact of business performance on reward. However, noting:

  • the relevant resilience of the Company's share price fell by around 30% from its peak but has, more recently recovered strongly;
  • our AuMA which fell from a peak of over £19 billion to around £16 billion;
  • that the Group has not furloughed any employees or sought financial support from Government sponsored schemes;
  • is increasing its total dividend for the year by over 20%; and
  • has a strong and resilient balance sheet with no debt.

I have decided that limited change is required. However, the Committee wants to ensure that its decisions are appropriate in the context of wider business and social environment, and are properly prudent especially in conserving cash so has decided to require the Executive Directors to defer 80% of their annual bonus/variable allocation into Liontrust funds (2019: 50%). Thus, the cash element of the bonus is limited to 100% of base pay for John Ions and 60% for Vinay Abrol. In addition rather than award LTIPs at the maximum allowed (300% for John Ions and 210% for Vinay Abrol) as it intended based on their exceptional performance the Committee has decided to reduce the LTIP awards by 17% (roughly the fall in AuMA since the virus hit) to 250% and 175% respectively.

Fixed remuneration in 2021

Fixed remuneration outcome for the Executive Directors for the year ending

31 March 2021 can be summarised as follows:

  • Salary/fixed allocation for the Executive Directors to remain unchanged again for the financial year ending 31 March 2021 since I became Chairman of the Committee in 2015 there has been only one base pay rise of 5% for the Executive Directors;
  • Pension/cash payments in lieu of pension for the Executive Directors to remain unchanged at 10% salary/fixed allocation for the financial year ending 31 March 2021 (this percentage is the same for all employees and members);

Annual bonus/Variable allocation for 2021

The Committee intend to operate the assessment of annual bonus/variable allocation for 2021 along lines consistent with this year, being conscious that there will be a full review of DRP including appropriate shareholder consultation before bringing a new policy for shareholder approval in 2021.

Variable remuneration for 2020

Annual Bonus/Variable Allocation

Annual bonus/variable allocation to the Executive Directors are made from an aggregate annual bonus/variable allocation pool in which all employees and members participate and which is approved by the Committee each year. The Committee also consider, the Executive Directors' role in delivering the strategic objectives of the Group and any LTIP awards vesting during the year when assessing Executive Directors' annual bonus/variable allocation for the financial year ended 31 March 2020.

The Committee undertook a review of outcome against all bonus metrics both quantitative and qualitative having also considered the appropriateness of all the metrics following the announcement of the Neptune acquisition in the year. Disclosure of the full weighted outcome for each of the annual bonus metrics is included in the body of the Remuneration Report. Where the overall weighted percentage is above 80% The Committee consider that in the round the Director has had an above target performance for the year.

Although an above target performance could lead under the DRP to a bonus increase for the Directors of 13% being half of the increase in adjusted PBT the Committee have held annual bonuses and/or variable allocations to the Executive Directors for the financial year ending 31 March 2020 at 500% and 300% of base remuneration. In addition this year the cash element for John Ions is capped at 100% of salary/fixed allocation, with 80% of the award deferred into Liontrust funds (2019: 50%), in consideration of EU regulations (including AIFMD and UCITS V) and COVID-19. Further context for annual bonus/variable allocation outcome for the Executive Directors for the year ended 31 March 2020 is provided by the following ratios:

  • aggregate annual bonus/variable allocation for all employees and members including the Executive Directors for the financial year ended 31 March 2020, which is capped at 27% of pre-cash bonus/variable allocation Adjusted Profit before tax, has reduced again this this year and is now 15% of pre-cash bonus/variable allocation Adjusted Profit before tax (2019: 22%);
  • annual bonus/variable allocation for the Executive Directors as a percentage of the aggregate annual bonus/variable allocation pool for all employees and members (including fund managers) has decreased again this year, at 8.8% for the financial year ended 31 March 2020 (2019: 10%), with 5.6% allocated to John Ions and 3.2% to Vinay Abrol.

68 LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

LTIP

The LTIP award for the Executive Directors for the year ending 31 March

2021 can be summarised as follows:

  • LTIP awards for the financial year ended 31 March 2021 have been reduced to 250% for John Ions and 175% for Vinay Abrol (see COVID-19 section above), even though the exceptional performance of the business this year could have warranted an increase in LTIP awards up to the maximum allowed 300% for John Ions and 210% for Vinay Abrol.

The Group will make these awards as soon as possible after the announcement of the Group's annual results. The performance criteria for these LTIP awards will be absolute total shareholder return (20%), relative total shareholder return (20%) earnings per share (30%) and other strategic objectives (30%), with each of these criteria being in line with business strategy and objectives.

Pay vs. performance at Liontrust - business performance in the financial year ended 31 March 2020

Over the past year the Group has continued the excellent progress made in previous years in executing its business strategy, in particular;

Financial measures:

  • increasing revenues by 26%;
  • increasing profitability (on an adjusted basis excluding performance fees) by 26%; and
  • increasing dividends to shareholders by 24% to 33 pence this year. Strategic measures:
  • increasing assets under management by 27% to £16.1 billion
  • increasing net inflows by 52% to £2.7 billion;
  • successfully completing the final phase of the out-sourced administration project (Middle office move);
  • successfully completing the Neptune Investment Management Limited ("Neptune") acquisition and successfully integrating Neptune into Liontrust's operations; and
  • increasing gender diversity,

whilst, maintaining appropriate risk management controls.

Pay vs. Performance at Liontust - Group's overall performance in the year

Assets under Management

(27% increase)

and Advice

Net inflows

(52% increase)

Revenues

(26% increase)

Adjusted Profit before tax

(26% increase)

(ex-performance fees)

0.00

10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 110.00

2019

2020

During my time as Chairman of the Committee I have consistently stated my philosophy on Executive pay - Our 'Strategic rationale' - at this stage in the growth of Liontrust to be to keep the fixed cost of any base remuneration low and to gear reward for performance linked to the delivery of our strategy and with an increased emphasis on moving pay towards longer term equity incentives which would be subject to performance conditions.

With the second grant of LTIPs vesting in the financial year, I think it is again appropriate to update and once more look at results over the immediate three year vesting performance period and more generally since the LTIP was introduced in 2016 to determine whether my objectives continue to be broadly met.