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LF Lindsell Train UK Equity Fund(Formerly CF Lindsell Train UK Equity Fund)

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MAY 2018

LF Lindsell Train UK Equity Fund | Annual Report 2018

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AUTHORISED CORPORATE DIRECTOR (‘ACD’) AND ALTERNATIVE INVESTMENT FUND MANAGER (‘AIFM’)

LINK FUND SOLUTIONS LIMITEDHead Office:6th Floor65 Gresham Street London EC2V 7NQTelephone: 0870 607 2555 Fax: 0870 607 2550Email: [email protected](Authorised and regulated by the Financial Conduct Authority)

DIRECTORS OF THE ACD

C. AddenbrookeN. BoylingB. HammondP. Hugh-SmithK.J. MidlA.J. Stuart (appointed 15 November 2017)

PORTFOLIO MANAGER

LINDSELL TRAIN LIMITED5th Floor66 Buckingham GateLondon SW1E 6AU(Authorised and regulated by the Financial Conduct Authority)

DEPOSITARY

THE BANK OF NEW YORK MELLON (INTERNATIONAL) LIMITEDOne Canada SquareLondon E14 5AL(Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority)

REGISTRAR

LINK FUND ADMINISTRATORS LIMITEDCustomer Service Centre:Arlington Business CentreMillshaw Park LaneLeeds LS11 0PATelephone: 0345 922 0044Fax: 0113 224 6001(Authorised and regulated by the Financial Conduct Authority)

INDEPENDENT AUDITOR

ERNST & YOUNG LLP25 Churchill PlaceCanary WharfLondon E14 5EY


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CONTENTS

ACD’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Authorised Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Important Information . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Investment Objective and Policy . . . . . . . . . . . . . . . . . . . . . 3

Remuneration Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Securities Financing Transactions . . . . . . . . . . . . . . . . . . . . 4

Portfolio Manager’s Report . . . . . . . . . . . . . . . . . . . . . . . 5

Fund Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Portfolio Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Summary of Material Portfolio Changes . . . . . . . . . . . . . . . . 19

Director’s Statement . . . . . . . . . . . . . . . . . . . . . . . . . 20

Statement of ACD’s Responsibilities in Relation to the Financial Statements . . . . . . . . . . . . . . . . . 21

Statement of Depositary’s Responsibilities . . . . . . . . . . . . . . . 22

Report of the Depositary . . . . . . . . . . . . . . . . . . . . . . . 23

Independent Auditor’s Report to the Shareholders of LF Lindsell Train UK Equity Fund . . . . . . . . . . . . . . . . . 24

FINANCIAL STATEMENTSStatement of Total Return . . . . . . . . . . . . . . . . . . . . . . . 27

Statement of Change in Net Assets Attributable to Shareholders . . . . 27

Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . 29

Distribution Table . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

General Information . . . . . . . . . . . . . . . . . . . . . . . . . . 44


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ACD’S REPORTfor the year ended 31 May 2018

Authorised StatusLF Lindsell Train UK Equity Fund (‘the Fund’) is an investment company with variable capital incorporated in England and Wales under registered number IC000459 and authorised by the Financial Conduct Authority with effect from 30 June 2006. The Fund has an unlimited duration.

The Fund is a Non-UCITS Retail Scheme and the base currency is pounds sterling.

Shareholders are not liable for the debts of the Fund. Shareholders are not liable to make any further payment to the Fund after they have paid the price on purchase of the shares.

The Alternative Investment Fund Manager (‘AIFM’) is the legal person appointed on behalf of the Fund and which (through this appointment) is responsible for managing the Fund in accordance with the AIFM Directive and The Alternative Investment Fund Managers Regulations 2013. This role is performed by the ACD and references to the ACD in this Annual Report and Financial Statements include the AIFM as applicable.

Important InformationWith effect from 1 July 2017, the minimum periodic fee charged by the BNY Mellon Trust & Depositary (UK) Limited (‘the Depositary’) to the Fund for acting as Depositary was increased. Please refer to the Charges, Fees and Expenses section of the Fund’s Prospectus for further details regarding the charge.

With effect from 16 October 2017, the address of the ACD has changed to 6th Floor, 65 Gresham Street, London EC2V 7NQ.

As a result of the completion of the acquisition of Capita Financial Managers Limited by Link Administration Holdings Limited on 3 November 2017, the name of the ACD has changed to Link Fund Solutions Limited. Additionally, the Registrar of the Fund has changed its name from Capita Financial Administrators Limited to Link Fund Administrators Limited and the trading name for the ACD and Administrator has also changed from Capita Asset Services to Link Asset Services.

With effect from 15 December 2017, the following Depositary changes were made:

• Name change from BNY Mellon Trust & Depositary (UK) Limited to The Bank of New York Mellon (International) Limited;

• Registered and head office address to One Canada Square, London E14 5AL; and

• The Depositary is authorised by the Prudential Regulation Authority and is dual regulated by the Financial Conduct Authority and Prudential Regulation Authority.

With effect from 18 December 2017, the new name of the ACD is reflected in the name of the Fund which has changed from CF Lindsell Train UK Equity Fund to LF Lindsell Train UK Equity Fund.

With effect from 14 May 2018, the auditor of the Fund changed from Grant Thornton UK LLP to Ernst & Young LLP.


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ACD’S REPORT continued

Investment Objective and PolicyThe investment objective of the Fund is to invest primarily in the securities of companies which are listed, quoted or dealt on any of the markets of the London Stock Exchange, including the Alternative Investment Market (‘AIM’), with the objective of achieving capital and income growth and providing a total return in excess of that of the FTSE All-Share TR Index.

It is the Fund’s policy to invest primarily in ordinary shares, preference shares and convertible bonds listed, quoted or dealt in or on any of the markets of the London Stock Exchange, including AIM. Whilst the primary focus will be in the UK, the Fund may also invest in other global markets. It is the Fund’s policy not to invest in unlisted securities, other collective investment schemes, warrants, derivatives, immovables or gold.

There is no guarantee that a positive return will be delivered.

Remuneration PolicyLink Fund Solutions Limited (‘LFSL’) is committed to ensuring that its remuneration policies and practices are consistent with, and promote, sound and effective risk management. LFSL’s remuneration policy is designed to ensure that excessive risk taking is not encouraged by or within LFSL including in respect of the risk profile of the Alternative Investment Funds (‘AIFs’) it operates, to manage the potential for conflicts of interest in relation to remuneration (having regard, inter alia, to its formal conflicts of interest policy) and to enable LFSL to achieve and maintain a sound capital base.

LFSL acts as the operator of both UCITS funds and AIFs.

LFSL delegates portfolio management for the AIFs to various investment management firms. The portfolio managers’ fees and expense for providing investment management services are paid by the ACD out of its own remuneration under the ACD agreement. The investment management firms make information on remuneration publicly available in accordance with the disclosure requirements of Pillar 3 of the Capital Requirements Directive. This disclosure is in respect of LFSL activities (including activities performed by its sister company Link Fund Administrators Limited (‘LFAL’) or by employees of that entity), and excludes activities undertaken by third party investment management firms. LFSL staff do not perform duties in respect of particular AIFs, nor are they remunerated by reference to the performance of any individual AIF. Accordingly, the information below is for LFSL as a whole. No attempt has been made to attribute remuneration to the Fund itself.

Information on LFSL’s remuneration arrangements is collated annually, as part of its statutory accounts preparation processes. Accordingly, the information disclosed relates to the year ended 31 December 2017, being the most recent accounting period for which accounts have been prepared for LFSL prior to the production of these accounts. As at 31 December 2017, LFSL operated 95 UCITS and 59 AIFs, whose respective assets under management (‘AuM’) were £41,425 million and £16,780 million. This Fund was valued at £4,847 million as at that date and represented 8.33% of LFSL’s total AuM and 28.89% of its AIF AuM.


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ACD’S REPORT continued

The disclosure below represents that required under FUND 3.3.5 R (5) and (6) for funds subject to AIFMD obligations.

Number of beneficiaries

Fixed£’000

Variable£’000

Total£’000

Total amount of remuneration paid by LFSL for the financial year to 31 December 2017 188 5,497 633 6,130

Total amount of remuneration paid to members of staff whose activities have a material impact on the risk profile of the funds for the financial year to 31 December 2017

Senior management (including all Board members) 6 551 132 683Staff engaged in control functions 4 310 – 310Risk takers and other identified staff 15 995 19 1,014Any employees receiving total remuneration that

takes them into the same remuneration bracket as senior management and risk takers – – – –

Securities Financing TransactionsThe Fund has the ability to utilise Securities Financing Transactions (being transactions such as lending or borrowing of securities, repurchase or reverse repurchase transactions, buy-sell back or sell-buy back transactions, or margin lending transactions). No such transactions have been undertaken in the period covered by this report.

LINK FUND SOLUTIONS LIMITEDACD of LF Lindsell Train UK Equity Fund17 August 2018


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PORTFOLIO MANAGER’S REPORTfor the year ended 31 May 2018

Sometimes I find it helpful to list out the key brands and franchises that comprise the earnings power of Lindsell Train (LT) UK’s investee companies. These are the assets I think about when I add to my own holding in LT’s UK Equity strategy. I place them in the three industry or thematic categories we use when constructing the portfolio. I also provide a brief commentary about each company below.

Consumer BrandsUnilever – Dove, Hellmans, Knorr, Magnum, Persil, Rexona, Tresemme Diageo – Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanquerey, Guinness, Crown Royal Heineken, Amstel, Kingfisher, Sol, Strongbow, Tiger Burberry Mondelez – Cadbury, Halls, Milka, Nabisco, Oreos, Ritz, Toblerone Dr Pepper, 7UP, Schweppes, Snapple Greene King IPA, Old Speckled Hen A.G. Barr – IRN-BRU, KA, Rubicon, Strathmore Fuller Smith & Turner – London Pride Youngs Remy Martin, Bruichladdich, Cointreau, Metaxa, Mount Gay

Media/Software/Intellectual PropertyRELX – Elsevier, The Lancet, Lexis-Nexis Sage Pearson – Longman, Addison-Wesley, Mylabs, Prentice Hall Daily Mail, MailOnline, RMS Euromoney, Metal Bulletin, Bank Credit Analyst, Institutional Investor Fidessa Celtic FC Manchester United

Stock Market ProxiesLSE, FTSE, LCH, Russell Schroders, Cazenove Rathbone Brothers Hargreaves Lansdown


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PORTFOLIO MANAGER’S REPORT continued

Corporate ActivityDr Pepper and Fidessa have received bids over the recent period, which look likely to be accepted, meaning that this pair will leave the portfolio sometime during the second half of 2018. Combined they represent c5% of the Fund. We are sorry to see them go, both offering more or less unique investment propositions. But there’s no shortage of things to do with the resultant monies. The FTSE All-Share Index is actually down marginally in calendar 2018, as this report is written, so there is opportunity to add more to existing holdings at favourable prices; as well as one or two possible new ideas presenting. Separately we sold the last of our inherited holding in Kraft Heinz.

HoldingsA.G. Barr. Shares are close to an all-time high as this is written, although they are little more than 2% higher than where they got to in 2015. What happened to the shares in 2016 were Brexit and the Sugar Tax. The most recent dividend increase, the March 2018 final, was up 9% and the company continues to deliver industry-beating revenue growth, admittedly only of c4%, while generating a lot of cash. Notwithstanding the Sugar Tax, IRN-BRU remains a beloved brand. As a result the company is likely to carry on creating economic value for its owners for decades to come. As with many of our holdings the central investment case we make for Barr is – that this likely durability, much further out than the average investor even begins to consider, with associated strong and inflation-proofed cash flows – just makes the asset fundamentally undervalued.

Burberry. I am thrilled we can invest in a luxury brand like Burberry for a UK Equity fund, particularly at what appears a cheap valuation compared to its global peers. Globally resonant luxury brands are rare and especially so in the UK; there is no other company like it in the FTSE 100. In addition, there is also definitely something in the increasingly well understood argument that says technology is accelerating the commoditisation of mainstream consumer brands and we need to be alert to that risk for, say, Unilever. But luxury looks just fine. Indeed you can argue that tech is a friend to luxury goods – in that it creates new wealth worldwide to be spent on Burberry trench coats and new ways for Burberry to deepen its relationship with its customers.

Celtic. We continue to accumulate Celtic shares for the Fund when we can. In 2017/18 the company again produced profits and cash on revenues of over £90m and maintains a net cash position. If the franchise were as valuable as the Houston Rockets – which was purchased last year in the most recent sports transaction we know – Celtic’s shares would be at £7.75, rather than today’s £1.30, implying a full value for the franchise of £725m. That might seem crazy, but we think the billions of dollars being invested into entertainment “content” each year by competing media companies, including, increasingly, the internet giants, justifies ever rising valuations for sports franchises.

Daily Mail & General Trust (‘DMGT’). The new CEO has duly taken measures to tidy up the “general trust” part of DMGT and to boost cash generation. As a result the stock is up 25% from its lows of last year. But more needs to be done to demonstrate the coherence of the company’s portfolio of digital assets. Meanwhile fake news and Facebook are helping the reputation and, perhaps, the trading of trusted “old” media assets. The New York Times,


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for instance, has doubled from its 2016 lows. Daily Mail is perhaps not the same calibre as the Old Gray Lady, but we wonder if the franchise might not endure for longer and more profitably than seemed the case a few years ago. Any possibility that the newspaper might retain meaningful economic or even “trophy” value would make DMGT stock very cheap indeed.

Diageo. Shares have finally broken out of what had been a long consolidation, with the stock up 22% over the period. Improved trends in premium spirit consumption in the US and, especially, Asia are the reason. Top spirits brands change hands at 10x sales. You pay c6x sales to own Diageo, with a c2.40% dividend yield, growing ahead of inflation, to pass the time. There is little sign of the world turning teetotal and every sign that consumers enjoy and aspire to enjoy Diageo’s products. It’s fantastic that periodically investors take it in their heads to sell the stock because of their worries about interest rates – because then we can buy more.

Euromoney Institutional Investor. Shares are up 7-fold since the 2008/9 financial crisis and 14% last year. The most recent final dividend was up 33%, as the company flexes its financial strength after its emergence as a fully fledged stock market entity, rather than a quoted subsidiary of Daily Mail – albeit DMGT still owns 49%. Euromoney is one of the most interesting media companies we know, having built several communities of paying users around proprietary digital content – notably in asset management and commodities.

Greene King. The shares continue to suffer the effects of the acquisition of Spirit in 2015. That deal increased the scale of the group and presented opportunities for cost savings, but the Spirit estate was not as high quality as Greene King’s and this has left the company vulnerable to increased competition in the market for casual dining. We watch for the chance to do the right thing with the shares, either buy more or dispose.

Hargreaves Lansdown (‘HL’). We added Hargreaves Lansdown to our global equity strategy accounts in 2017. This is a strong endorsement of our view on the investment case for the company. Of course a global equity strategy mandate can invest in equities worldwide. Yet we chose to initiate a holding in a domestic UK private client stock broker. The reason was in our global universe we could find no other company delivering tech-type growth rates, along with tech-type returns on revenues and capital, that were as out of favour and undervalued as HL was in 2017. We see some similarities between HL and a Facebook or Google. 138m individual visits to the HL website in 2017, up over 30% on the preceding year tell us that HL has created an exceptionally valuable piece of online real estate, where a million or more people go to be informed and, critically, to invest their precious savings.

Heineken. The recent final dividend up 13% continues the fabulous history of wealth creation for Heineken’s shareholders. The shares could easily take a nap after a 25% gain in calendar 2017 and consumer staple companies apparently out of favour. But we wouldn’t dream of selling – there’s no premium beer company in the world to match Heineken. Recent acquisitions in Latin America open up new sources of long term growth.

London Stock Exchange. This holding amazes us, up another 32% over the year. It goes up and up as its trading gets better and better. Doubtless a bear phase will catch me in my complacency and I’ll wonder why the stock is down 50%. But the logic for global exchange consolidation is still so compelling...



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Manchester United. The c$3.5bn market capitalisation strikes us as being far too low for an entertainment and trophy asset of this calibre. There can be few more globally-recognised brands, while 100s of millions of people want to watch the games it contests.

Mondelez. Confectionary and biscuits are “good” food brands – affordable treats that have successfully resisted own-label copycats. Over 70% of Mondelez’ sales are outside the US, meaning it is less exposed to the current malign pressures on US food brands than many. While roughly 40% of sales derive from Emerging Markets. Our appreciation of all this has encouraged me to add more to the holding over the last 18 months at lower and lower prices. I persist in regarding this as good news – that we are buying more of a good thing at better values – but it is disconcerting to see the shares so weak. Investors have got really quite bearish about food. The company hopes to generate $2.8bn of free cash in 2018. When I feel optimistic I might value that at a 3% discount rate, for a warranted equity value of MDLZ of $93bn – compared to the current $59bn market value.

Pearson. Up 59% from last year’s panic low. And there are some promising signs of stabilisation in the business. But what is more important is that newish investor in Pearson, Fidelity’s view of the company turns out to be correct. “Don’t think of it as a text book company, but a technology company”. That has indeed been our rationale for holding Pearson for longer than I care to think about. And if that technology promise is eventually delivered on then Pearson shares will sell on 3x sales, not 1.5x as today.

Rathbone Brothers. Breaking £39bn of assets, as it did in 2018, is a meaningful milestone for this company. It’s clear too there remain many growth avenues for it, including acquisition. We think “sticky” private client assets are worth up to 5% FUM. That would get to over £2bn for Rathbone Brothers, versus today’s market value of £1.2bn.

RELX. I can’t improve on Morgan Stanley’s bull case for RELX: “There is a growing appreciation of the fusion of Big Data and high speed computing power to inform and drive decision-making in the professional industries RELX serves – raising barriers to entry and the value of its services.” The company invests $1.3bn a year in technology and employs 7,000 technologists – underlining its credibility as a provider of Big Data and Artificial Intelligence services. A 10% dividend increase last year shows this is not just New Economy blather.

Remy Cointreau. Short term this has been a decent use of LT UK’s capital – the shares have more than doubled since we started accumulating back in 2015, with a boost from the Euro too. The position is now c2.2% and we will buy more on any weakness. As a generalisation there is too much cheap, undifferentiated vodka, rum and gin in the world and in the portfolios of drinks companies; and too much tasteless lager too. Companies like Remy Cointreau which own unique, premium products will take increasing share and become more valuable. Like Diageo it trades on c5x sales. It won’t be sold, but if it ever were it would command a much higher valuation.

Sage. The company must negotiate a period of disruptive technology change, which will require investment and it must deal with new competitors, themselves empowered by the new “cloud” technology. This is the curse of the successful incumbent. Arguably Sage was late to respond to these challenges and in the US has been forced to make an expensive acquisition to bolster its position. Yet Sage has loyal customers, sticky revenues and franchise



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power. These and a clear-sighted management team at least give the company a chance to stay in the game. Comparable US company Intuit is valued by investors at 9.0x its annual sales – having done a great job adjusting to the new circumstances. Sage on 4.0x its sales shows the potential if it can get things right.

Schroders (‘SDR’). Recent dividend up 23%, along with earnings – for all the talk about the demise of “active” management this remains a formidable franchise. When you have £450bn under management, with new business growing at 13% in 2017 and you have falling costs – all of which Schroders can demonstrate, then you have very nice leverage to stock markets going up. A 3% of AUM target valuation puts a £14.5bn value on SDR, versus £8.8bn today.

Unilever (‘ULVR’). For the last 5 years LT presentations have included a Unilever-derived statistic to explain why we own the stock. Namely that every day 2 billion people use a Unilever product. No longer. At the recent CAGNY conference (which our colleague attended) Unilever announced that today 2.5 billion people used a ULVR brand. Over the last half decade the company has switched on another 500 million consumers. And there’s plenty more to go for. In the end this is the key strategic justification for our holding.

Youngs/Fuller. Shares in these two family-controlled London-based brewers and pub owners have now traded sideways for a couple of years, meanwhile dividends grow at 5-7% pa. Perhaps neither yet at bargain prices, but beginning to look interesting again...

LINDSELL TRAIN LIMITEDPortfolio Manager19 June 2018



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Risk and Reward Profile

This indicator shows how much a fund has risen and fallen in the past, and therefore how much a fund’s returns have varied. It is a measure of a fund’s volatility. The higher a fund’s past volatility the higher the number on the scale and the greater the risk that investors in that fund may have made losses as well as gains. The lowest number on the scale does not mean that a fund is risk free.

The Fund has been classed as 5 because its volatility has been measured as above average.

This indicator is based on historical data and may not be a reliable indication of the future risk profile of this Fund.

The risk and reward profile shown is not guaranteed to remain the same and may shift over time.

Currency Risk: As the Fund invests in overseas securities movements in exchange rates may, when not hedged, cause the value of your investment to increase or decrease.

Concentrated Fund: The Fund intentionally holds a small number of investments and will be concentrated. The Fund may also invest in stocks with a particular industry, sector or geographical focus. The Fund may therefore be subject to large swings (both up and down) in its value.

Non-UCITS Retail Scheme (NURS): The Fund can be less diversified than UCITS schemes as it has higher investment limits for certain types of assets. It can also invest in assets which are not available to UCITS schemes. This can increase the potential rewards but can also increase risk.

For full details of the Fund’s risks, please see the Prospectus which may be obtained upon application and can be found on the ACD’s website, www.linkfundsolutions.co.uk, by following the link ‘Fund Information’.

Lower Risk

Typically Higher Rewards

TypicallyLower Rewards

Higher Risk

4

FUND INFORMATION


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Comparative Tables

INCOME SHARES

CHANGE IN NET ASSETS PER SHARE31 May 2018

per share31 May 2017


per share

Opening net asset value per share 279.22 228.41 230.55 Return before operating charges* 30.74 58.13 4.41 Operating charges (1.97) (1.84) (1.66)Return after operating charges 28.77 56.29 2.75 Distributions (5.55) (5.48) (4.89)Closing net asset value per share 302.44 279.22 228.41 * after direct transaction costs of: 0.29 0.40 0.42

PERFORMANCE

Return after charges 10.30% 24.64% 1.19%

OTHER INFORMATION

Closing net asset value (£’000) 1,170,729 1,012,809 866,173 Closing number of shares 387,098,582 362,730,322 379,223,048 Operating charges 0.69% 0.72% 0.74%Direct transaction costs 0.10% 0.16% 0.19%

PRICES

Highest share price 309.70 283.38 237.89 Lowest share price 269.40 216.44 206.00

FUND INFORMATION continued


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Comparative Tables continued

ACCUMULATION SHARES




per share

Opening net asset value per share 373.00 298.76 295.17 Return before operating charges* 41.27 76.62 5.73 Operating charges (2.64) (2.38) (2.14)Return after operating charges 38.63 74.24 3.59 Distributions (7.45) (7.21) (6.29)Retained distributions on accumulation shares 7.45 7.21 6.29 Closing net asset value per share 411.63 373.00 298.76 * after direct transaction costs of: 0.39 0.52 0.55

PERFORMANCE


OTHER INFORMATION

Closing net asset value (£’000) 2,608,375 2,003,791 1,102,950 Closing number of shares 633,666,848 537,205,155 369,178,013 Operating charges 0.69% 0.72% 0.74%Direct transaction costs 0.10% 0.16% 0.19%

PRICES




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‘D’ INCOME SHARES




per share

Opening net asset value per share 140.87 115.12 116.09 Return before operating charges* 15.51 29.32 2.22 Operating charges (0.73) (0.67) (0.62)Return after operating charges 14.78 28.65 1.60 Distributions (2.93) (2.90) (2.57)Closing net asset value per share 152.72 140.87 115.12 * after direct transaction costs of: 0.15 0.20 0.21

PERFORMANCE


OTHER INFORMATION

Closing net asset value (£’000) 730,981 525,046 37,502 Closing number of shares 478,636,693 372,707,340 32,575,505 Operating charges 0.51% 0.53% 0.54%Direct transaction costs 0.10% 0.16% 0.19%

PRICES




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‘D’ ACCUMULATION SHARES




per share

Opening net asset value per share 151.86 121.39 119.70 Return before operating charges* 16.82 31.18 2.32 Operating charges (0.79) (0.71) (0.63)Return after operating charges 16.03 30.47 1.69 Distributions (3.18) (3.07) (2.67)Retained distributions on accumulation shares 3.18 3.07 2.67 Closing net asset value per share 167.89 151.86 121.39 * after direct transaction costs of: 0.16 0.21 0.22

PERFORMANCE


OTHER INFORMATION

Closing net asset value (£’000) 837,416 404,800 254,011 Closing number of shares 498,789,188 266,559,763 209,245,909 Operating charges 0.51% 0.53% 0.54%Direct transaction costs 0.10% 0.16% 0.19%

PRICES



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Fund Performance to 31 May 2018 (%)

1 year 3 years 5 years

LF Lindsell Train UK Equity Fund 10.40 39.87 87.38FTSE All-Share TR Index1 6.53 24.29 45.40

1 Source: Bloomberg.

The performance of the Fund is based on the published price per Accumulation share which includes reinvested income.

The performance of the Fund disclosed in the above table may differ from the ‘Return after charges’ disclosed in the Comparative Table due to the above performance being calculated on the latest published price prior to the year end, rather than the year end return after operating charges.

Details of the distributions per share for the year are shown in the Distribution Table on pages 42 and 43.

RISK WARNINGAn investment in an open-ended investment company should be regarded as a medium to long term investment. Investors should be aware that the price of shares and the income from them can fall as well as rise and investors may not receive back the full amount invested. Past performance is not a guide to future performance. Investments denominated in currencies other than the base currency are subject to fluctuation in exchange rates, which can be favourable or unfavourable.



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Holding Portfolio of InvestmentsValue£’000

31 May 2018 %

UNITED KINGDOM – 81.73% (31.05.17 – 78.72%)

CONSUMER GOODS – 28.30% (31.05.17 – 28.00%)

BEVERAGES – 10.93% (31.05.17 – 10.85%)7,417,000 A.G. Barr 50,436 0.94

19,329,000 Diageo 533,867 9.99 584,303 10.93

PERSONAL GOODS – 17.37% (31.05.17 – 17.15%)20,258,500 Burberry 418,946 7.83 12,300,000 Unilever 510,020 9.54

928,966 17.37TOTAL CONSUMER GOODS 1,513,269 28.30

CONSUMER SERVICES – 19.46% (31.05.17 – 18.17%)

MEDIA – 16.34% (31.05.17 – 16.32%)30,797,000 Daily Mail & General Trust ‘A’ 205,416 3.84

2,995,500 Euromoney Institutional Investor 37,923 0.71 12,740,000 Pearson 114,813 2.15 31,214,000 RELX 515,811 9.64

873,963 16.34

TRAVEL & LEISURE – 3.12% (31.05.17 – 1.85%)7,097,789 Celtic1 9,085 0.17

461,527 Celtic 6% Perpetual1 556 0.01 300,407 Fuller Smith & Turner ‘A’ 2,812 0.05

4,121,000 Greene King 23,885 0.45 5,473,719 Manchester United 85,768 1.61 1,185,000 Young & Co's Brewery ‘A’1 19,967 0.37 2,055,000 Young & Co's Brewery (non-voting)1 24,660 0.46

166,733 3.12 TOTAL CONSUMER SERVICES 1,040,696 19.46

PORTFOLIO STATEMENTas at 31 May 2018


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31 May 2018 %

FINANCIALS – 25.17% (31.05.17 – 24.27%)

GENERAL FINANCIALS – 25.17% (31.05.17 – 24.27%)23,360,000 Hargreaves Lansdown 445,358 8.33 10,221,000 London Stock Exchange 457,594 8.56

4,277,000 Rathbone Brothers 104,017 1.94 10,480,000 Schroders 339,238 6.34

TOTAL FINANCIALS 1,346,207 25.17

TECHNOLOGY – 8.80% (31.05.17 – 8.28%)

SOFTWARE & COMPUTER SERVICES – 8.80% (31.05.17 – 8.28%)

4,612,209 Fidessa 177,339 3.32 44,270,000 Sage 293,245 5.48

TOTAL TECHNOLOGY 470,584 8.80 TOTAL UNITED KINGDOM 4,370,756 81.73

OVERSEAS – 16.53% (31.05.17 – 19.22%)

FRANCE – 2.37% (31.05.17 – 2.38%)1,138,959 Rémy Cointreau 126,490 2.37

NETHERLANDS – 6.14% (31.05.17 – 7.35%)4,496,000 Heineken 328,538 6.14

UNITED STATES – 8.02% (31.05.17 – 9.49%)1,061,000 Dr Pepper Snapple 95,188 1.78

11,298,000 Mondelez International 333,425 6.24 TOTAL UNITED STATES 428,613 8.02 TOTAL OVERSEAS 883,641 16.53

PORTFOLIO STATEMENT continued


Page 18


31 May 2018 %

Portfolio of investments 5,254,397 98.26 Net other assets 93,104 1.74 Net assets 5,347,501 100.00

The investments have been valued in accordance with note 1(F) and are ordinary shares listed on a regulated market unless stated otherwise.

The comparative figures have been restated to be consistent with the current period presentation. Unilever has been reclassified from Food Producers to Personal Goods.

1 Quoted on the Alternative Investment Market (AIM).

PORTFOLIO STATEMENT continued


Page 19

SUMMARY OF MATERIAL PORTFOLIO CHANGESfor the year ended 31 May 2018

Total purchases for the year £’000 (note 16) 1,059,028

Major purchasesCost

£’000

RELX 141,391Unilever 138,184Mondelez International 126,552Diageo 93,177Sage 91,665Burberry 83,965Manchester United 72,185Hargreaves Lansdown 67,030Schroders 66,105Daily Mail & General Trust ‘A’ 56,859Heineken 33,656London Stock Exchange 20,688Fidessa 17,286Rathbone Brothers 15,211Dr Pepper Snapple 12,253Euromoney Institutional Investor 8,343A.G. Barr 5,939Rémy Cointreau 3,121Fuller Smith & Turner ‘A’ 1,530Young & Co's Brewery ‘A’ 1,332

Total sales for the year £’000 (note 16) 75,785

SalesProceeds

£’000

Kraft Heinz 41,513Diageo 23,899Unilever 10,373

The summary of material portfolio changes represents the 20 largest purchases and all of the sales during the year.


Page 20

DIRECTOR’S STATEMENT

This report has been prepared in accordance with the requirements of the Collective Investment Schemes Sourcebook and the Investment Funds Sourcebook, as applicable, as issued and amended by the Financial Conduct Authority together with the relevant provisions of the Alternative Investment Fund Manager’s Directive and modified by a direction given by the Financial Conduct Authority where the ACD has opted to provide a NURS KII Document, a Key Investor Information Document for Non-UCITS Retail Schemes.

N. BOYLING

LINK FUND SOLUTIONS LIMITEDACD of LF Lindsell Train UK Equity Fund17 August 2018


Page 21

The ACD is responsible for preparing the financial statements in accordance with applicable law and United Kingdom Generally Accepted Accounting Practice, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

The Financial Conduct Authority’s Collective Investment Schemes Sourcebook (the ‘COLL Sourcebook’) and the Investment Funds Sourcebook (the ‘FUND Sourcebook’), as applicable, require the ACD to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Fund and of the net revenue/expense and of the net capital gains/losses on the scheme property of the Fund for that year. In preparing those financial statements, the ACD is required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable United Kingdom accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

• prepare the financial statements in accordance with the requirements of the IA SORP; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Fund will continue in business.

The ACD is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Fund and to enable it to ensure that the financial statements comply with the COLL and FUND Sourcebooks. The ACD is also responsible for safeguarding the assets of the Fund and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In so far as the ACD is aware:

• there is no relevant audit information of which the Fund’s Auditor is unaware; and

• the ACD has taken all steps that it ought to have taken to make itself aware of any relevant audit information and to establish that the Auditor is aware of that information.

STATEMENT OF ACD’S RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS


Page 22

The Depositary must ensure that the Fund is managed in accordance with the Financial Conduct Authority’s Collective Investment Schemes Sourcebook and, from 22 July 2014, the Investment Funds Sourcebook, the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228), as amended, the Financial Services and Markets Act 2000, as amended, (together ‘the Regulations’), the Fund’s Instrument of Incorporation and Prospectus (together ‘the Scheme documents’) as summarised below.

The Depositary must in the context of its role act honestly, fairly, professionally, independently and in the interests of the Fund and its investors.

The Depositary is responsible for the safekeeping of all custodial assets and maintaining a record of all other assets of the Fund in accordance with the Regulations.

The Depositary must ensure that:

• the Fund’s cash flows are properly monitored and that cash of the Fund is booked into the cash accounts in accordance with the Regulations;

• the sale, issue, redemption and cancellation of shares are carried in accordance with the Regulations;

• the value of shares of the Fund are calculated in accordance with the Regulations;

• any consideration relating to transactions in the Fund’s assets is remitted to the Fund within the usual time limits;

• the Fund’s income is applied in accordance with the Regulations; and

• the instructions of the Alternative Investment Fund Manager (‘the AIFM’) are carried out (unless they conflict with the Regulations).

The Depositary has a duty to take reasonable care to ensure that the Fund is managed in accordance with the Scheme documents and the Regulations in relation to the investment and borrowing powers applicable to the Fund.

STATEMENT OF DEPOSITARY’S RESPONSIBILITIES


Page 23

REPORT OF THE DEPOSITARY

Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the Fund, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Fund, acting through the AIFM:

(i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Fund’s shares and the application of the Fund’s income in accordance with the Regulations and the Scheme documents of the Fund; and

(ii) has observed the investment and borrowing powers and restrictions applicable to the Fund in accordance with the Regulations and the Scheme documents of the Fund.

THE BANK OF NEW YORK MELLON (INTERNATIONAL) LIMITEDDepositary of LF Lindsell Train UK Equity Fund17 August 2018


Page 24

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF LF LINDSELL TRAIN UK EQUITY FUND

OpinionWe have audited the financial statements of LF Lindsell Train UK Equity Fund (‘the Fund’) for the year ended 31 May 2018 which comprise the Statement of Total Return, the Statement of Change in Net Assets attributable to Shareholders, Balance Sheet, Distribution Table and the related notes 1 to 17, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 102 ‘The Financial Reporting Standard applicable to the UK and Republic of Ireland’.

In our opinion, the financial statements:

• give a true and fair view of the financial position of the Fund as at 31 May 2018 and of the net revenue and the net gains on the scheme property of the Fund for the year then ended; and

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice including FRS 102 ‘The Financial Reporting Standard applicable to the UK and Republic of Ireland’.

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We are independent of the Fund in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions Relating to Going Concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• them ACD’s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the ACD has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Fund’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other Information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The ACD is responsible for the other information.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.


Page 25

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on Other Matters Prescribed by the Rules of the Collective Investment Schemes Sourcebook of the Financial Conduct AuthorityIn our opinion:

• the financial statements have been properly prepared in accordance with the Statement of Recommended Practice relating to Authorised Funds, the rules of the Collective Investment Schemes Sourcebook of the Financial Conduct Authority and the Trust Deed;

• the information given in the ACD’s report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• there is nothing to indicate that proper accounting records have not been kept or that the financial statements are not in agreement with those records.

Matters on Which We Are Required to Report by ExceptionWe have nothing to report in respect of the following matters in relation to which the Collective Investment Schemes Sourcebook of the Financial Conduct Authority rules requires us to report to you if, in our opinion:

• we have not received all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of our audit.

Responsibilities of Authorised Corporate Director (ACD) As explained more fully in the ACD’s Responsibilities Statement set out on page 21, the ACD is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the ACD determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the ACD is responsible for assessing the Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the ACD either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so.

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF LF LINDSELL TRAIN UK EQUITY FUND continued


Page 26

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF LF LINDSELL TRAIN UK EQUITY FUND

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of Our ReportThis report is made solely to the shareholders of the Fund, as a body, pursuant to Paragraph 4.5.12 of the rules of the Collective Investment Schemes Sourcebook of the Financial Conduct Authority. Our audit work has been undertaken so that we might state to the shareholders of the Fund those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Fund and the shareholders of the Fund as a body, for our audit work, for this report, or for the opinions we have formed.

ERNST & YOUNG LLPStatutory AuditorLondon17 August 2018


Page 27

Notes £’00031 May 2018

£’000 £’00031 May 2017

£’000

Income:Net capital gains 3 405,791 647,151 Revenue 4 106,352 80,797 Expenses 5 (29,240) (21,120) Interest payable and

similar charges 7 – (4) Net revenue before taxation 77,112 59,673 Taxation 6 (1,541) (1,031) Net revenue after taxation 75,571 58,642 Total return before distributions 481,362 705,793 Distributions 8 (90,256) (69,240) Change in net assets

attributable to shareholders from investment activities 391,106 636,553

STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERSfor the year ended 31 May 2018

£’00031 May 2018

£’000 £’00031 May 2017

£’000

Opening net assets attributable to shareholders 3,946,446 2,260,636

Amounts receivable on issue of shares 1,108,320 1,089,839

Amounts payable on redemption of shares (159,285) (85,293)

949,035 1,004,546 Change in net assets

attributable to shareholders from investment activities 391,106 636,553

Retained distributions on Accumulation shares 60,914 44,711

Closing net assets attributable to shareholders 5,347,501 3,946,446

STATEMENT OF TOTAL RETURNfor the year ended 31 May 2018


Page 28

BALANCE SHEETas at 31 May 2018

Notes31 May 2018

£’00031 May 2017

£’000

ASSETS

Fixed assetsInvestments 5,254,397 3,865,081

Current assetsDebtors 9 21,469 17,508 Cash and bank balances 10 105,742 89,686 Total assets 5,381,608 3,972,275

LIABILITIES

CreditorsDistribution payable 11 (20,628) (17,855) Other creditors 11 (13,479) (7,974) Total liabilities (34,107) (25,829) Net assets attributable to shareholders 5,347,501 3,946,446


Page 29

NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 May 2018

1. Accounting Policies

The principal accounting policies, which have been applied in both the current and prior year, are set out below.

(A) BASIS OF ACCOUNTING

The financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments and in accordance with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. The financial statements have been prepared in accordance with the Statement of Recommended Practice (‘SORP’) for Financial Statements of UK Authorised Funds issued by the Investment Association (‘IA’) in May 2014, as amended.

(B) RECOGNITION OF REVENUE

Dividends on quoted equities and preference shares are recognised when the securities are quoted ex-dividend.

Interest on bank and other cash deposits is recognised on an accruals basis.

Revenue is recognised gross of any withholding taxes but excludes attributable tax credits.

(C) TREATMENT OF EXPENSES

All expenses, except for those relating to the purchase and sale of investments, are charged initially against revenue.

The Fund receives a rebate to ensure the operating charges figure does not exceed the value prescribed by the Portfolio Manager.

(D) ALLOCATION OF REVENUE AND EXPENSES TO MULTIPLE SHARE CLASSES

Any revenue or expense not directly attributable to a particular share class will normally be allocated pro-rata to the net assets of the relevant share classes unless a different allocation method is more appropriate.

All share classes are ranked pari passu and have no particular rights or terms attached, including rights on winding up.

(E) TAXATION

Corporation tax is provided at 20% on taxable revenue, after deduction of allowable expenses.

Where overseas tax has been deducted from overseas revenue that tax can, in some instances, be set off against the corporation tax payable by way of double tax relief and where this is the case the offset is reflected in the tax charge.


Page 30

NOTES TO THE FINANCIAL STATEMENTS continued

for the year ended 31 May 2018

Deferred tax is provided using the liability method on all timing differences arising on the treatment of certain items for taxation and accounting purposes, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in the future against which the deferred tax asset can be offset.

(F) BASIS OF VALUATION OF INVESTMENTS

All investments are valued at their fair value as at close of business on the last business day of the financial year.

Quoted investments are valued at fair value which generally is the bid price.

(G) EXCHANGE RATES

The base and functional currency of the Fund is pounds sterling. Transactions in foreign currencies are recorded in sterling at the rate ruling at the date of the transactions. Assets and liabilities expressed in foreign currencies at the end of the accounting period are translated into sterling at the exchange rate prevailing at close of business on the last business day of the financial year.

(H) DILUTION LEVY

The ACD may require a dilution levy on the purchase and redemption of shares if, in its opinion, the existing shareholders (for purchases) or remaining shareholders (for redemptions) might otherwise be adversely affected. For example, the dilution levy may be charged in the following circumstances: where the scheme property is in continual decline; on the Fund experiencing large levels of net purchases relative to its size; on ‘large deals’ (typically being a purchase or redemption of shares to a size exceeding 5% of the Net Asset Value of the Fund); in any case where the ACD is of the opinion that the interests of existing or remaining shareholders require the imposition of a dilution levy.

(I) PORTFOLIO TRANSACTION COSTS

Direct transaction costs may consist of fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Direct transaction costs do not include any difference between the quoted bid and offer prices or internal administrative or holding costs. The average portfolio dealing spread disclosed is the difference between the bid and offer prices of investments at the balance sheet date, including the effect of foreign exchange, expressed as a percentage of the value determined by reference to the offer price.

2. Distribution Policies

For the purpose of calculating the distributable amount 50% of all charges, costs and expenses (excluding transaction charges and the cost of establishing the Fund which will be wholly allocated to capital) are allocated to the capital of the Fund. This will increase the amount of revenue available for distribution; however, will erode capital and may constrain capital growth.


Page 31



Surplus revenue after expenses and taxation, as disclosed in the financial statements, after adjustment for items of a capital nature, is distributable to shareholders. Any deficit of revenue is deducted from capital.

Interim distributions may be made at the ACD’s discretion. Final distributions are made in accordance with the COLL Sourcebook.

Distributions which have remained unclaimed by shareholders for more than six years are credited to the capital property of the Fund.

The ordinary element of stock received in lieu of cash dividends is credited to capital in the first instance followed by a transfer to revenue of the cash equivalent being offered and this forms part of the distributable revenue of the Fund. In the case of an enhanced stock dividend, the value of the enhancement is treated as capital and does not form part of any distribution.

Special dividends are reviewed on a case by case basis in determining whether the dividend is to be treated as revenue or capital. Amounts recognised as revenue will form part of the distributable revenue. Amounts recognised as capital are deducted from the cost of the investment. The tax accounting treatment follows the treatment of the principal amount.

3. Net Capital Gains

The net capital gains during the year comprise:

31 May 2018£’000

31 May 2017£’000

Non-derivative securities 406,055 648,019Transaction charges (14) (14)Currency losses (250) (854)Net capital gains 405,791 647,151

The net capital gains figure includes realised gains of £33,708,000 and unrealised gains of £1,551,205,000 (31.05.17: includes realised gains of £9,077,000 and unrealised gains of £1,179,108,000). The realised gains on investments in the current year include amounts previously recognised as unrealised gains in the prior year.


Page 32

4. Revenue

31 May 2018£’000

31 May 2017£’000

Non-taxable dividends 106,299 80,768Bank interest 46 29Interest on receipt of withholding tax reclaims 7 –Total revenue 106,352 80,797

5. Expenses

31 May 2018£’000

31 May 2017£’000

Payable to the ACD, associates of the ACD and agents of either of them:

Annual Management Charge 27,208 18,813Rebate of Annual Management Charge (700) (52)Accounting fees 1,557 1,430Legal and professional fees 9 9Typesetting and printing costs 4 7Registration fees 427 393

28,505 20,600Payable to the Depositary, associates of the

Depositary and agents of either of them:

Depositary's fees 573 400Safe custody and other bank charges 155 112

728 512Other expenses:Audit fees 7 7Postage and distribution costs – 1

7 8Total expenses 29,240 21,120

The Portfolio Management fees and expenses (plus VAT thereon) for providing portfolio management services are paid by the ACD out of its remuneration.




Page 33

6. Taxation

31 May 2018£’000

31 May 2017£’000

a) Analysis of charge for the yearCorporation tax at 20% – – Overseas tax 1,541 1,031Current tax charge 1,541 1,031Deferred tax – origination and reversal of timing differences (note 6c) – – Total taxation (note 6b) 1,541 1,031

b) Factors affecting the tax charge for the year The tax assessed for the year differs from the standard rate of corporation tax in the UK for an authorised fund (20%) (31.05.17: 20%). The difference is explained below:

31 May 2018£’000

31 May 2017£’000

Net revenue before taxation 77,112 59,673Corporation tax at 20% 15,422 11,935

Effects of:Non-taxable dividends (21,260) (16,154)Unutilised excess management expenses 5,838 4,219

Corporation tax charge – –

Overseas tax 1,541 1,031Total tax charge (note 6a) 1,541 1,031

c) Deferred tax At the year end there is a potential deferred tax asset of £18,309,000 (31.05.17: £12,471,000) in relation to surplus management expenses. It is unlikely that the Fund will generate sufficient taxable profits in the future to utilise this amount and, therefore, no deferred tax asset has been recognised in the current or prior year.




Page 34

7. Interest Payable and Similar Charges

31 May 2018£’000

31 May 2017£’000

Interest payable – 4Interest payable and similar charges – 4

8. Distributions

The distributions take account of revenue received on the issue of shares and revenue deducted on redemption of shares, and comprise:

31 May 2018£’000

31 May 2017£’000

Interim 38,392 28,683Final 57,403 45,305

95,795 73,988

Add: Revenue deducted on redemption of shares 687 326Deduct: Revenue received on issue of shares (6,226) (5,074)Net distributions for the year 90,256 69,240

Details of the distributions per share are set out in the table on pages 42 and 43.

31 May 2018£’000

31 May 2017£’000

Distributions represented by:Net revenue after taxation 75,571 58,642Allocations to capital:Expenses 14,620 10,560

Equalisation on conversions* 65 38Net distributions for the year 90,256 69,240

* Where an investor converts to a class with a higher income yield, the investor will receive an equalisation as if they had held the new class throughout the period from the last distribution to the conversion date. The yield differential at the point of conversion is an equalisation which will be offset by capital erosion for the converted investor.




Page 35

9. Debtors

31 May 2018£’000

31 May 2017£’000

Amounts receivable for issue of shares 9,334 5,513Sales awaiting settlement – 2,823Accrued revenue:Non-taxable dividends 11,763 8,717

Amounts due from the Portfolio Manager:Refund of expenses 73 28

Taxation recoverable:Overseas withholding tax 299 427Total debtors 21,469 17,508

10. Cash and Bank Balances

31 May 2018£’000

31 May 2017£’000

Bank balances 105,742 89,686Total cash and bank balances 105,742 89,686

11. Creditors

31 May 2018£’000

31 May 2017£’000

Distribution payable 20,628 17,855

Other CreditorsAmounts payable for redemption of shares 6,609 1,063Purchases awaiting settlement 3,898 4,699




Page 36

31 May 2018£’000

31 May 2017£’000

Accrued expenses:Amounts payable to the ACD, associates

of the ACD and agents of either of them:

Annual Management Charge 2,650 1,971Accounting fees 145 121Legal and professional fees 2 2Typesetting and printing costs 2 3Registration fees 38 33

2,837 2,130Amounts payable to the Depositary, associates

of the Depositary and agents of either of them:Depositary's fees 56 42Transaction charges 6 2Safe custody and other bank charges 65 31

127 75

Other expenses 8 7Total other creditors 13,479 7,974

12. Related Party Transactions

The Annual Management Charge and legal and professional fees payable to Link Fund Solutions Limited (‘the ACD’), accounting fees, tax fees and registration fees payable to Link Fund Administrators Limited and typesetting and printing costs payable to Link Alternative Fund Administrators Limited (both companies are associates of the ACD) are disclosed in note 5 and amounts due at the year end are disclosed in note 11.

The aggregate monies received by the ACD through the issue of shares and paid on redemption of shares are disclosed in the Statement of Change in Net Assets Attributable to Shareholders on page 27 and amounts due at the year end are disclosed in notes 9 and 11.

Link Fund Solutions Limited and its associates (including other authorised investment funds managed by Link Fund Solutions Limited or its associates) held 6,419,691 (31.05.17: 6,419,691) of the Fund’s shares at the balance sheet date.




Page 37

A shareholder may be able to exercise significant influence over the financial and operating policies of the Fund and as such is deemed to be a related party. At the balance sheet date no shareholder held in excess of 20% of the shares in issue of the Fund (31.05.17: Hargreaves Lansdown Nominees Ltd held 20.48%).

13. Contingent Liabilities and Commitments

There are no contingent liabilities or unrecorded outstanding commitments (31.05.17: none).

14. Shares in Issue

Income Accumulation'D'

Income'D'

Accumulation

Annual Management Charge 0.65% 0.65% 0.45% 0.45%

Opening shares in issue 362,730,322 537,205,155 372,707,340 266,559,763 Issues 64,347,511 172,834,287 78,414,653 99,131,410 Redemptions (21,192,734) (16,959,827) (11,495,007) (10,951,623)Conversions (18,786,517) (59,412,767) 39,009,707 144,049,638 Closing shares in issue 387,098,582 633,666,848 478,636,693 498,789,188

15. Risk Management Policies

In pursuing the investment objective a number of financial instruments are held which may comprise securities and other investments, cash balances and debtors and creditors that arise directly from operations.

The main risks from the Fund’s holding of financial instruments, together with the ACD’s policy for managing these risks, are set out below:

The ACD has in place a Risk Management Policy and Procedures Document (‘RMPPD’) that sets out the risks that may impact a fund and how the ACD seeks, where appropriate, to manage, monitor and mitigate those risks. The RMPPD sets out both the framework and the risk mitigations operated by the ACD in managing the identified risks of the Fund. The ACD requires that the appointed Portfolio Manager to the Fund has in place its own governance structure, policies and procedures that are commensurate with its regulatory obligations and the risks posed by the Fund managed.

(A) CREDIT RISK

Credit risk is the risk that a counterparty may be unable or unwilling to make a payment or fulfil contractual obligations. This may be in terms of an actual default or by deterioration in a counterparty’s credit quality.




Page 38

Certain transactions in securities that the Fund enters into expose it to the risk that the counterparty will not deliver the investment for a purchase, or cash for a sale after the Fund has fulfilled its obligations. As part of its due diligence process, the ACD undertakes a review of the controls operated over counterparties by the Portfolio Manager, including initial and ongoing due diligence and business volumes placed with each counterparty. In cases which are dependent on the counterparty settling at the transaction’s maturity date, the ACD has policies in place which set out the minimum credit quality expected of a market counterparty or deposit taker at the outset of the transaction.

(B) INTEREST RATE RISK

Interest rate risk is the risk that the value of the Fund’s investments will fluctuate as a result of interest rate changes. Changes in the rate of return in one asset class may influence the valuation basis of other classes. The amount of revenue receivable from floating rate investments and bank balances or payable on bank overdrafts will be affected by fluctuations in interest rates.

As the Fund seeks to obtain its return from investing in equities and has no significant exposure to interest rate risk. No interest rate risk table or sensitivity analysis has been presented.

(C) FOREIGN CURRENCY RISK

Foreign currency risk is the risk that the sterling value of investments will fluctuate as a result of exchange rate movements. Assets denominated in currencies other than sterling will provide direct exposure to currency risk as a consequence of the movement in foreign exchange rates when calculating the sterling equivalent value.

Where the Fund invests in non-sterling assets, the Portfolio Manager allows for the foreign currency risk when considering whether to invest and does not seek to hedge this risk.

The table below shows the direct foreign currency risk profile:

31 May 2018£’000

31 May 2017£’000

Currency:Euros 455,327 384,161US dollars 514,233 372,118

969,560 756,279

Pounds sterling 4,377,941 3,190,167Net assets 5,347,501 3,946,446

A 5% change in the pounds sterling exchange rate against all other currencies, assuming all other factors remained the same, would have an impact of £48,478,000 on the net assets of the Fund (31.05.17: £37,814,000).




Page 39

(D) LEVERAGE

The ACD is required to calculate and monitor the level of leverage of the Fund, expressed as a ratio between the exposure of the Fund and its Net Asset Value, under both the gross and commitment methods (in accordance with articles 7 and 8 of The Alternative Investment Fund Managers Regulations 2013). For a fund with no borrowing or derivative usage the leverage ratio would be 1:1 under the commitment method. The gross method calculation excludes cash and cash equivalents which are highly liquid.

As at 31 May 2018, leverage under the gross method was 0.98:1 and leverage under the commitment method was 1:1 (31.05.17: 0.98:1 and 1:1 respectively).

(E) LIQUIDITY RISK

The main liability of the Fund is the redemption of any shares that investors want to sell. Investments may have to be sold to fund such redemptions should insufficient cash be held at the bank to meet this obligation.

To reduce liquidity risk the Portfolio Manager will ensure that a substantial portion of the Fund’s assets consist of cash and readily realisable investments.

All financial liabilities are payable in one year or less, or on demand.

(F) MARKET PRICE RISK

Market price risk is the risk that the value of the Fund’s financial instruments will fluctuate as a result of changes in market prices caused by factors other than interest rate or foreign currency movement. Market price risk arises primarily from uncertainty about the future prices of financial instruments that the Fund holds.

Market price risk represents the potential loss the Fund may suffer through holding market positions in the face of price movements. The Fund’s investment portfolio is exposed to price fluctuations, which are monitored by the ACD in pursuance of the investment objective and policy. The risk is generally regarded as consisting of two elements – stock specific risk and market risk. Adhering to investment guidelines and avoiding excessive exposure to one particular issuer can limit stock specific risk. Subject to compliance with the investment objective, spreading exposure across a broad range of global stocks can mitigate market risk.

A 5% increase in the value of the portfolio would have the effect of increasing the return and net assets by £262,720,000 (31.05.17: £193,254,000). A 5% decrease would have an equal and opposite effect.

(G) DERIVATIVES

The Fund held no derivatives during the current or prior year.




Page 40

16. Portfolio Transaction Costs

31 May 2018

Purchases/sales beforetransaction

costs£’000

Commissions£’000

Taxes£’000

Grosspurchases/

net sales£’000

Ordinary shares 1,054,484 518 4,026 1,059,028Purchases total 1,054,484 518 4,026 1,059,028

Transaction cost % of purchases total 0.05% 0.38%Transaction cost % of average NAV 0.01% 0.09%

Ordinary shares 75,823 (37) (1) 75,785Sales total 75,823 (37) (1) 75,785

Transaction cost % of sales total 0.05% – Transaction cost % of average NAV – –

Average portfolio dealing spread at 31.05.18 is 0.10 % (31.05.17: 0.11%)

31 May 2017

Purchases/sales beforetransaction

costs£’000

Commissions£’000

Taxes£’000

Grosspurchases/

net sales£’000

Ordinary shares 1,031,434 859 4,007 1,036,300Purchases total 1,031,434 859 4,007 1,036,300

Transaction cost % of purchases total 0.08% 0.39%Transaction cost % of average NAV 0.03% 0.13%

Ordinary shares 34,255 (12) – 34,243Sales total 34,255 (12) – 34,243

Transaction cost % of sales total 0.04% – Transaction cost % of average NAV – –




Page 41

17. Fair Value Hierarchy

Investments are categorised into the following levels based on their fair value measurement:

Level 1: Unadjusted quoted price in an active market for an identical instrument;

Level 2: Valuation techniques using observable inputs other than quoted prices within Level 1;

Level 3: Valuation techniques using unobservable inputs.

All of the Fund’s investments are ordinary shares categorised as Level 1 in the current and prior year.




Page 42

EQUALISATIONEqualisation applies only to shares purchased during the distribution period (Group 2 shares – the applicable distribution periods for each distribution are shown below). It represents the accrued revenue included in the purchase price of the shares. After averaging it is returned with the distribution as a capital repayment. It is not liable to Income Tax but must be deducted from the cost of the shares for Capital Gains Tax purposes.

Group 2 Interim Final

From1 June

20171 December

2017

To30 November

201731 May

2018

INCOME SHARES

Interim Net Revenue Equalisation

Paid 31 January

2018

Paid 31 January

2017

Group 1 2.3184 – 2.3184 2.2838 Group 2 0.8399 1.4785 2.3184 2.2838

Final Net Revenue Equalisation

Payable30 September

2018

Paid30 September

2017

Group 1 3.2321 – 3.2321 3.1982 Group 2 1.9380 1.2941 3.2321 3.1982

ACCUMULATION SHARES


Allocated31 January

2018

Allocated31 January

2017

Group 1 3.0967 – 3.0967 2.9881 Group 2 1.0020 2.0947 3.0967 2.9881


Allocation30 September

2018

Allocated30 September

2017

Group 1 4.3525 – 4.3525 4.2232 Group 2 2.3383 2.0142 4.3525 4.2232

DISTRIBUTION TABLEfor the year ended 31 May 2018 – in pence per share


Page 43

‘D’ INCOME SHARES


Paid 31 January

2018

Paid 31 January

2017

Group 1 1.2356 – 1.2356 1.2189 Group 2 0.4866 0.7490 1.2356 1.2189


Payable30 September

2018

Paid30 September

2017

Group 1 1.6957 – 1.6957 1.6779 Group 2 1.1035 0.5922 1.6957 1.6779

‘D’ ACCUMULATION SHARES


Allocated31 January

2018

Allocated31 January

2017

Group 1 1.3317 – 1.3317 1.2790 Group 2 0.4101 0.9216 1.3317 1.2790


Allocation30 September

2018

Allocated30 September

2017

Group 1 1.8434 – 1.8434 1.7869 Group 2 1.0304 0.8130 1.8434 1.7869

DISTRIBUTION TABLE continued

for the year ended 31 May 2018 – in pence per share


Page 44

GENERAL INFORMATION

Classes of SharesDifferent classes of shares can be issued in respect of the Fund.

Holders of Income shares are entitled to be paid the income attributable to such shares, in respect of each annual or interim accounting period.

Holders of Accumulation shares are not entitled to be paid the income attributable to such shares, but that income is retained and accumulated for the benefit of shareholders and is reflected in the price of shares.

Valuation PointThe valuation point of the Fund is 10.00am (London time) on each business day. Valuations may be made at other times under the terms contained within the Prospectus.

Buying and Selling SharesThe ACD will accept orders to buy or sell shares on normal business days between 8.30am and 5.30pm (London time) and transactions will be effected at prices determined by the following valuation. Instructions to buy or sell shares may be either in writing to: PO Box 389, Darlington DL1 9UF or by telephone on 0345 922 0044.

PricesThe prices of all shares are published on www.linkfundsolutions.co.uk and www.lindselltrain.com. The prices of shares may also be obtained by calling 0345 922 0044 during the ACD’s normal business hours.

Other Information The Instrument of Incorporation, Prospectus, Key Investor Information Document and the most recent interim and annual reports may be inspected at the office of the ACD which is also the Head Office. Copies of these may be obtained upon application and, excepting the Instrument of Incorporation, can be found on the ACD’s website, www.linkfundsolutions.co.uk, by following the link ‘Fund Information’.

Shareholders who have any complaints about the operation of the Fund should contact the ACD or the Depositary in the first instance. In the event that a shareholder finds the response unsatisfactory they may make their complaint direct to the Financial Ombudsman Service at Exchange Tower, London E14 9SR.

Data Protection ActShareholders’ names will be added to a mailing list which may be used by the ACD, its associates or third parties to inform investors of other products by sending details of such products. Shareholders who do not want to receive such details should write to the ACD requesting their removal from any such mailing list.

6th Floor, 65 Gresham Street, London EC2V 7NQ

www

0870 607 2555

0870 607 2550

Part of Link Group

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