The Law Debenture Corporation p.l.c. and its subsidiaries

HALF YEARLY REPORT FOR THE SIX MONTHS TO 30 JUNE 2017 (unaudited)

The directors recommend an interim dividend of 5.5p on the ordinary shares for the six months to 30 June 2017. The report including the unaudited results for the period was as follows:

Group summary

From its origins in 1889, Law Debenture has diversified to become a group with a unique range of activities in the financial and professional services sectors.  The group divides into two distinct areas of business.

Investment trust

We are a global investment trust, listed on the London Stock Exchange.

Our portfolio of investments is managed by Henderson Global Investors Limited and the fund manager is James Henderson under a contract terminable by either side on six months' notice.

Our objective is to achieve long term capital growth in real terms and steadily increasing income.  The aim is to achieve a higher rate of total return than the FTSE Actuaries All-Share Index through investing in a portfolio diversified both geographically and by industry.

Independent professional services

We have decided to rename our businesses, better to reflect the nature of the services that we provide. We are a leading provider of independent professional services. Our activities are corporate trusts, pension trusts, corporate services (including agent for service of process), whistle blowing services and governance services. We have offices in London, Sunderland, Dublin, New York, Delaware, Hong Kong, the Channel Islands and the Cayman Islands.

Companies, agencies, organisations and individuals throughout the world rely upon Law Debenture to carry out its duties with the independence and professionalism upon which its reputation is built.

Registered office

Fifth Floor

100 Wood Street

London EC2V 7EX

Telephone: 020 7606 5451

Facsimile:   020 7606 0643

(Registered in England No 30397)

Performance to 30 June 2017

1 Calculated in accordance with AIC methodology based on NAV at fair value

 Ongoing charges are based on the costs of the investment trust and include the Henderson management fee

 of 0.30% of NAV for the investment trust. There is no performance element related to the fee.

1 Source: AIC

Financial summary 

1 Calculated in accordance with AIC methodology based on NAV including fair value of IPS businesses and long term borrowings

NAV per share

Fair valuation of the independent professional services businesses

The fair valuation of the independent professional services businesses (IPS) is based upon the historic earnings before interest, taxation, depreciation and amortisation (EBITDA), an appropriate multiple and the surplus net assets of the business at their underlying fair value. The multiple applied in valuing the IPS is from comparable companies sourced from market data, with appropriate adjustments to reflect the difference between the comparable companies and the IPS in respect of growth, margin, size and liquidity.

Fair valuation of the IPS

An increase or decrease of 1 in the multiple would give rise to a £9.9 million change in the fair valuation of the IPS. The adjustment to NAV to reflect the IPS fair value is an increase of 65.99p per share (30 June 2016: 56.48p; 31 December 2016: 62.37p).

Half yearly management report

Performance

Our Net Asset Value total return for the six months to 30 June 2017 was 9.3%, compared to a total return of 5.5% for the FTSE Actuaries All-Share Index. Net revenue per share was 11.37p, 8.4% higher than the corresponding period last year (2016: 10.49p).

Dividend

The board has declared an interim dividend of 5.5p (2016: 5.2p). The dividend will be paid on 8 September 2017 to holders on the record date of 11 August 2017. The current expectation of the directors is that the final dividend will be at least maintained.

Investment trust

The NAV rose 9.3% (with debt at fair value) while the FTSE All-Share Index rose 5.5%.The underlying equity portfolio rose 8.5%. The global economy continued to grow and outside the UK inflation remained muted. This is a benign background for equity investment and is one of the factors behind the continued satisfactory performance of global markets. For UK investors, it was a more testing period, with renewed political uncertainty adding to the continuing murmur of concerns over Brexit and the currency devaluation last year adding inflationary pressure. That said, company results in aggregate came through marginally better than expected.

In absolute terms the holding in Rolls Royce added the most value during the period as its share price began to reflect the long term strengths of the company. The holdings in Watkin Jones (which builds student accommodation) and International Consolidated Airlines (which includes British Airways) were the next largest contributors. The biggest absolute detractor was Royal Dutch Shell as a result of the fall in the oil price. lnterserve and IP Group were also among the largest detractors. In both cases we have maintained the holdings as we believe they should recover in time.

During the period, Henderson Global Investors Limited, which continues to be our fund manager, formally became part of the Janus Henderson Group.

Outlook

Global equity markets have been moving upwards since the spring of 2009, but the global bull run will not continue indefinitely. In the UK, there are signs of a slowdown. Valuations are at the higher end of their long term range so equity investors need to be increasingly careful in stock selection. The companies held in the portfolio in aggregate are generating cash, which is leading to increased dividend payments. With interest rates continuing at historically low levels, and in the absence of alternatives, the income (and income growth) available from equities continues for the time being to make them look a relatively attractive asset class.

Independent professional services

As indicated in the 2016 annual report, we have implemented a strategy within each business line that is focused on organic growth. As part of this strategy we have decided to rename the independent fiduciary services business to Independent Professional Services, or IPS.

Law Debenture's IPS businesses will consistently highlight the unique strengths of our independent service offering, namely the quality of our:

• service;

• people;

• reputation; and

• clients.

The focus on growth will require some time and investment. The 2017 full year results are anticipated to be broadly in line with recent years. However the future growth agenda is already firmly in place and the early indicators are positive.

Revenue, net of cost of sales, which represents legal costs recharged to clients, decreased by 1.8% over the corresponding period last year. Administration costs decreased by 3.6%. Profit before tax increased by 4.7%. Performance in the first half was reasonable across all IPS businesses and we expect this to continue in the second half of the year. The tax charge has increased as a result of changes made by HMRC regarding tax relief of interest, which was highlighted in the 2016 Annual Report.

Group income statement

for the six months ended 30 June (unaudited)

Statement of comprehensive income

for the six months ended 30 June (unaudited)

Group statement of financial position

Group statement of cash flows

Group statement of changes in equity

Group segmental analysis

The capital element of the income statement is wholly attributable to the investment trust.