Liontrust 2010.01 conference presentation economic advantage - print proof

Liontrust Economic AdvantageAnthony Cross and Julian Fosh

Professional Investors and Advisers only

Performance in 2011

Liontrust Special Situations

Ranked 1st/297

Liontrust UK Growth

Ranked 3rd/297

Liontrust UK Smaller Companies

Ranked 3rd/58

7.54%5%

10%

1.49%

0%

5%

10%

4.99%5%

10%

Ranked 1 /297in IMA UK All Companies sector

Ranked 3 /297in IMA UK All Companies sector

Ranked 3 /58 in IMA UK Smaller Companies sector

-3.46%

-7.04%

-15%

-10%

-5%

0%

-15.16%

-9.04%

-15%

-10%

-5%

0%

-3.46%

-7.04%

-15%

-10%

-5%

0%

Source: Financial Express 31/12/10 to 31/12/11, total return, bid-to-bid. Past performance is not a guide to future performance.

-20%

Liontrust Special

Situations Fund

FTSE All Share Index

IMA UK All Companies

-20%

Liontrust UK Smaller

Companies Fund

FTSE Small Cap ex ITs

IMA UK Smaller Companies

-20%

Liontrust UK Growth Fund

FTSE All Share IMA UK All Companies

1

Opportunities in UK equities

Attractive short term valuations

Long term growth opportunities

2

Company strengths that competitors struggle to reproduce

A process for exploiting opportunities in UK equities

Intellectual property

Distribution channels

Repeat business

The hardest to replicate:

Other intangible strengths:

Franchises & licences

Customer databases & relationships

Procedures & formats Culture Brand& licences relationships & formats

3

UK Equity Market: cash flow returns on capital

Measuring returns in competitive companies

15

7

9

11

13

15

-1

1

3

5

Source: Collins Stewart Quest ™ 29th November 2011. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted average cost of capital. UK equity market as defined by Collins Stewart’s Quest database, which currently covers 530 UK companies ex financials, with a current combined market cap of £2,025bn. * Estimated values. Estimates are not a reliable indicator of actual performance.

Cash Flow Returns on Capital Cost of capital

4

GlaxoSmithKline International Consolidated Airlines Group SA

Financial advantage - Value Creators & Destroyers

15

20

25

0

2

4

6

8

0

5

10

10

-8

-6

-4

-2

Source: Collins Stewart Quest ™ as at December 2010. * Estimated forecast values. Estimates are not a reliable indicator of actual performance. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted average cost of capital.

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

*

-10

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

*

2012

*

Cash flow returns on capital Cost of capital

5

Valuation - Buying at the right price

1. Price to earnings ratios

2. Sales & margins (EV/sales)

3. Yield and cash flow

4. Liontrust screens

Earnings surprises

Cyclical PE ratios

RoCE vs earnings yield

6

Employee motivation - The “owner-manager” culture

Why motivate? Academic and statistical evidence

Less financial gearing and fewer acquisitions

Smaller companies – directors’ ownership of at least 3%

Monitoring equity ownership – signals and relevance to all companies

7

Financial risk (gearing, cash generation, dangling liabilities, accounting, loss-making)

Scoring for risk

Product dependency

Customer dependency

Pricing risk

Regulatory change

Licence dependency

Acquisition risk

V l tiValuation

8

Stock example: Rotork PLC

A company with significant Intellectual Property and Distribution Strengths

20

25

30

0

5

10

15


1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

*

Cash Flow Returns on Capital Cost of Capital

9

Stock example: RWS Holdings PLC

A company with significant Intellectual Property and Distribution Strengths

25

30

35

40

0

5

10

15

20


0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*


10

Stock example: Tullett Prebon PLC

A company with significant Distribution Strengths

10

12

14

16

0

2

4

6

8


2005 2006 2007 2008 2009 2010 2011 2012*


11

Long term

Current position of funds

IP rich Manufacturing and Pharmaceuticals

Information Technology / Software

Fee based fund management

Global Consumer Goods

Global Services

No: Banks, Miners, underweight Domestic Consumer and Property

12

Liontrust UK Smaller Companies Fund (UK small cap. portfolio)

350%

Fund+282.4%

Sector+178.5%

150%

200%

250%

300%

Index+37.6%

0%

50%

100%

Percentage returns from launch (08.01.98), versus FTSE Small Cap Index (ex IT) and the IMA UK Smaller Companies sector.Source: Financial Express, bid to bid basis, total return, to 31.12.11. Past performance is not a guide to future performance.

-50%

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

13

F d

Liontrust Special Situations Fund (UK “all cap.” best ideas portfolio)

100%

120%

Fund+101.8%

Index+28.9%

40%

60%

80%

Sector+21.5%

40%

-20%

0%

20%

Percentage returns from launch (10.11.05), versus FTSE All-Share Index and the IMA UK all Companies sector.Source: Financial Express, bid to bid basis, total return, to 31.12.11. Past performance is not a guide to future performance.

-40%

Nov

'05

May

'06

Nov

'06

May

'07

Nov

'07

May

'08

Nov

'08

May

'09

Nov

'09

May

'10

Nov

'10

May

'11

Nov

'11

14

Fund+78.9%

Liontrust UK Growth Fund (UK large and mid cap. portfolio)

80%

90%

Index+59.2%Sector+54.4%

40%

50%

60%

70%

0%

10%

20%

30%

*Percentage returns since manager inception (25.03.09) versus FTSE All-Share Index and the IMA UK All Companies sector. Source: Financial Express, bid to bid basis, total return as at 31.12.11. Past performance is not a guide to future performance.

-10%

Mar

'09

Jun

'09

Sep

'09

Dec

'09

Mar

'10

Jun

'10

Sep

'10

Dec

'10

Mar

'11

Jun

'11

Sep

'11

Dec

'11

15

Strictly private and confidential information

Liontrust UK Growth Fund, Liontrust UK Smaller Companies Fund, Liontrust Special Situations Fund

Important noticeThis presentation is the property of Liontrust Investment Partners LLP (“LIP”), authorised and regulated by the Financial Services Authority, and is strictly confidential. It contains information intended only for the person to whom it is addressed or presented, and is intended for evaluation purposes only, with no licence to use the content or materials within. In receiving this presentation, the recipient acknowledges and agrees that: i) in the event the recipient does not wish to pursue this matter, this presentation will be returned as soon as possible; ii) the recipient will not copy, fax, reproduce, divulge or distribute this confidential presentation, in whole or in part, without the express written consent of LIP; iii) all of the information herein will be treated as confidential material with no less care than that afforded to the addressee’s own confidential material of the most sensitive nature; iv) information herein may constitute material non-public information disclosure of which may be prohibited byof the most sensitive nature; iv) information herein may constitute material non public information, disclosure of which may be prohibited by law, and the legal responsibility for its use is borne solely by the recipient. This presentation in no way constitutes an offer to sell, nor a solicitation to purchase securities in any company or investment product.

The value of units in a unit trust and the income generated from them can fall as well as rise and are not guaranteed; investors may not get back the amount originally subscribed. Past performance is not a guide to future performance. Some smaller companies may be less liquid than larger companies and the price swings in smaller company funds may therefore be greater than in larger company funds. The issue of units may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Equity investment should always be considered as long term.

The Prospectus or Simplified Prospectus for Liontrust’s unit trusts are available direct from Liontrust or from our website, www.liontrust.co.uk.

16

Style factors, measuring the portfolio on a weighted average basis, relative to the market, on a scale of +5 to -5.

UK Growth Fund style factors, relative to the market

Style factors, relative to the market

Quality: measured on 5 year average cash flow return on capital, 3 year average real capital growth and equilibrium growth, fixed cover charge and changes in cash flow return on capital.

Momentum: measured on a 9 month moving average relative price change, a comparison of the 100 and 200 day moving average, and of the 30 and 90 day moving average, a 12 month relative trading range, and 3 month EPS momentum.

Value: measured on the Collins Stewart Quest ™ measures ofLiontrust UK Growth Fund

+2.0

+0.1

-1.4Quality Momentum Value

Value: measured on the Collins Stewart Quest measures of valuation and market to book, on earnings value to sales, dividend yield and PE ratios.

Financial strength: Collins Stewart Quest's ™ Q score, a proprietary measure of financial strength/risk, scored on a composite of fixed cover charge, current ratio, cash flow return on operating assets (CFROA) and CFROA stability. Measured on a scale of 0 to 10, 10 being the safest, 0 the riskiest.

C h fl t it l t t l i t

UK stock market*

6.0

4.7

10.3%

5.9%

1.7

1.3

Cash flow return on capital: post tax, real economic return on total invested capital, as a percentage (5 year average).

Stability is the variance in operating returns (i.e. CFROA, the economic return on operating assets) over 5 years, including the most recent forecast year, minimum 0, maximum 2.5.

Source: Collins Stewart Quest ™ December 2010* As defined by Collins Stewart’s Quest database, which currently covers 530 UK companies ex financials, with a current combined market cap of £2,025bn.

Financial strength Cash flow return on capital Stability

17

Awards and Ratings

Liontrust UK Growth Fund 5 Crown Rated, Financial Express

Liontrust UK Smaller Companies Fund 5 Crown Rated, Financial Express

A Rated, OBSR

Liontrust Special Situations FundInvestment Week Fund Manager of the Year Awards 2011, UK Growth sector

5 Crown Rated, Financial Express

A Rated, OBSR

Anthony Cross & Julian FoshA rated by Citywire for their risk-adjusted performance from 30.11.08 to 30.11.11.

Julian Fosh FE Alpha Manager 2011Julian Fosh FE Alpha Manager 2011

Anthony CrossCitywire Top100 UK All Companies Manager of the Year 2009

LiontrustProfessional Adviser Best Smaller Companies Group 2009

18

Economy & Finance

Liontrust 2010.01 conference presentation economic advantage - print proof