3 April 2024
Temple
Bar Investment Trust Plc
(the
“Company”)
This
announcement contains regulated information
Annual
Financial Report for the year ended 31
December 2023
Objective
The
investment objective of Temple Bar Investment Trust Plc* is to
provide growth in income and capital to achieve a long-term total
return greater than the benchmark FTSE All-Share Index, through
investment primarily in UK-listed securities. The Company’s policy
is to invest in a broad spread of securities with the majority of
the portfolio typically selected from the constituents of the FTSE
350 Index.
Purpose
The
purpose of the Company is to deliver long-term returns for
shareholders from a diversified portfolio of
investments.
*
“Temple
Bar”, the “Trust” or the “Company”
Summary
of Results
|
|
2023
|
20224
|
%
change
|
|
NAV total
return with debt at fair value1,2,3
|
12.3%
|
0.9%
|
|
|
Share
price total return1,3
|
12.5%
|
3.6%
|
|
|
FTSE
All-Share Index (the “Benchmark”)4
|
7.9%
|
0.3%
|
|
|
Change in
Retail Price Index over year5
|
5.2%
|
13.4%
|
|
|
NAV per
share with debt at book value
|
248.0p
|
228.5p
|
8.5%
|
|
NAV per
share with debt at fair value1,2
|
252.2p
|
233.5p
|
8.0%
|
|
Share
price
|
238.0p
|
220.5p
|
7.9%
|
|
Discount
of share price to NAV per share with debt at fair
value1
|
5.6%
|
5.6%
|
|
|
Dividends
per share
|
9.60p
|
9.35p
|
2.7%
|
|
Dividend
Yield1
|
4.0%
|
4.2%
|
|
|
Net
gearing with debt at book value1
|
9.8%
|
8.4%
|
|
|
Ongoing
charges1
|
0.56%
|
0.54%
|
|
1
Alternative
Performance Measure – See glossary of terms for definition and more
information.
2
Debt fair
value is calculated based on unobservable input, see note
20.
3
Source:
Morningstar.
4
Source:
Redwheel.
5
Source:
ons.gov.uk.
Chairman’s
Statement
Review
In the
year under review, I am pleased to report that the Trust’s Net
Asset Value total return with debt at fair value was +12.3%,
outperforming the total return on the FTSE All-Share Index of
+7.9%. The share price total return was slightly better at
+12.5%.
Since
Redwheel took over the management of the Trust at the end of
October 2020, the Net Asset Value
total return to the end of 2023 has been 86.7% compared with 50.0%
for the Benchmark, a significant outperformance. Although annual
metrics are of course important, the Board continues to focus
primarily on the Trust’s longer-term performance.
Capital
Challenging
stock market conditions have continued to have a negative impact on
share price discounts across the investment company sector, with
the average level of discount standing at c.12.3%* for equity
investment trusts, compared to the Trust’s discount of 10.1% as at
2 April 2024. The Board has continued
with its active share buyback policy, purchasing 27,209,505 shares
to be held in treasury for a total consideration of £63.5m during
the year. These buybacks not only have the effect of stabilising
the supply/ demand balance but are also accretive to the Trust’s
Net Asset Value, adding 1.4p per share to our year-end Net Asset
Value.
On
31 December 2023, there were
290,612,881 shares in issue (excluding the 43,750,944 shares held
in treasury). Since this date to 2 April
2024, a further 3,771,869 shares have been bought back for
treasury, at a cost of £8.9m.
Portfolio
Portfolio
turnover^ increased in 2023, although remained comparatively low at
16.9% (2022: 7.2%) with our Portfolio Manager being generally
satisfied with the positioning of the portfolio.
Further
details of the Portfolio Manager’s investment approach, portfolio
construction and significant contributors to and detractors from
return in the year can be found in the Portfolio Manager’s
Report.
Dividend
Total
dividends for the year amounted to 9.60p per share (2022: 9.35p per
share), an increase of 2.7% and representing a current yield of
4.0% This increase has been supported by a marginal contribution
from the Trust’s distributable revenue reserves this
year.
The Board
closely monitors the Trust’s net revenue position and, based on the
latest forecasts, expects future annual dividends to increase from
this level over time.
Gearing
At the
year end, the Trust’s net gearing was 9.8% (2022: 8.4%).
Environmental,
Social & Governance (“ESG”) Issues
ESG
matters continue to be an important priority for the Board and our
objective is to have full, transparent disclosure on the topic. The
Board continues to advocate the concept of active stewardship,
requesting that our Portfolio Manager monitors, evaluates and
actively engages with investee companies with the aim of preserving
or adding value to the portfolio. The Portfolio Manager reports
back to the Board regularly on ESG related matters. Further details
can be found in the Portfolio Manager’s Report.
*
Source:
Cavendish Securities
^
See
glossary for definition.
The
Board
Lesley Sherratt, the Company’s Senior Independent Director
and the Chair of the Audit and Risk Committee, having served on the
Board since 2015, will retire at the conclusion of the Company’s
Annual General Meeting on Tuesday, 7 May
2024. Lesley’s leadership, and her financial and investment
industry experience have been invaluable to the Board. Carolyn Sims, a Chartered Accountant, will take
over from Lesley as the Chair of the Audit and Risk Committee and
Charles Cade will take over as the
Senior Independent Director.
Annual
General Meeting (“AGM”)
Like last
year, the AGM this year will be held at 25 Southampton Buildings,
London WC2A 1AL. It will be held
on Tuesday,7 May 2024 at 11.00am. Shareholders are welcome to attend in
person where you will be able to hear a presentation from the
portfolio management team Nick
Purves and Ian Lance and also
to meet the Board of Directors.
I
encourage all shareholders to exercise their right to vote at the
AGM and to register your votes in advance of the meeting.
Registering your vote in advance will not restrict you from
attending and voting at the meeting in person should you wish to do
so.
Shareholders
are invited to register their vote in advance by 11.00am on Thursday, 2 May
2024 at the latest.
Outlook
Against a
backdrop of continued concerns regarding the level of inflation in
the UK and uncertainty for the global economy and also rising
geopolitical tensions, the valuation of UK equities looks
compelling compared to their equivalents overseas.
Your Board
shares the view of our Portfolio Manager that the Trust’s portfolio
continues to be priced to offer shareholders further excess
investment returns in the future.
The UK
equity market continues to be valued at a significant discount to
its international peers as many market participants in the UK have
been allocating away from UK equities. This has resulted in large
portions of the UK equity market being valued at a significant
discount to intrinsic value. Unless this changes, it seems likely
that we will continue to see overseas corporate buyers step in to
take advantage of these depressed valuations, with ownership
falling into foreign hands and the number of quoted UK businesses
continuing to decline. Whilst this process is likely to be very
rewarding for the Company’s shareholders, with takeover premiums
often between 50% and 100% of the previously prevailing share
price, your Board believes that a healthy equity market is
beneficial to the functioning of the economy.
Richard Wyatt
Chairman
3 April 2024
Investment
Approach
A
classic approach to value investing
The
portfolio management team of Nick
Purves and Ian Lance are
long-term intrinsic value investors who believe that short-term
sentiment amongst many market participants causes them to overreact
to news which has little or no impact on the long-run value of a
business. This overreaction causes share prices to diverge from the
intrinsic value of the underlying business and provides an
opportunity for long-term investors to purchase shares at less than
their true value. In the long term the share price tends to move
closer to the intrinsic value of the business and this creates
excess returns for investors who purchased shares at low
valuations. The team form a view of a company’s long-run profit
potential and make balance sheet adjustments to assess intrinsic
value. They use their experience and knowledge of companies and
sectors to identify those companies that are more likely to recover
and improve in the future.
Identifying
quality and avoiding value traps
Some value
strategies simply apply mechanistic measures to identify
undervalued stocks but this can lead to investing in businesses
that are in structural decline; they may be cheap but their
potential to recover is limited. Instead, the portfolio management
team’s ‘intrinsic value’ approach aims to identify undervalued, yet
good, quality companies with strong cash flows and robust balance
sheets. The portfolio management team put a strong emphasis on
financial strength because it gives them the confidence that a
company can survive through a prolonged period of lower
profitability caused by company-specific issues, or an unexpected
downturn in the economy.
As
Temple Bar’s Portfolio Manager, Redwheel, aims to avoid
lower-quality stocks or so called ‘value traps’ by monitoring
companies against three different types of
risk:
· Valuation
– extrapolating favourable trends and paying more than the
intrinsic value of the business (e.g. avoiding a situation where
something is positively impacting a company’s share price in the
short term but that isn’t sustainable longer term);
· Earnings
– the risk that the earnings of the Company decline for cyclical or
secular reasons (e.g. the industry or sector that the business
operates in is itself in cyclical or long-term decline);
· Environmental,
Social & Governance – unethical or neglectful behaviour by a
company in one of these areas can harm those who invest as well as
the environment or society in which a company is located. We
believe that applying ESG best practices, such as consideration of
environmental and product safety, workplace diversity and strong
corporate governance can contribute to long-term investment returns
while mitigating risks.
Redwheel
have set out some of the key factors it considers when seeking to
uncover the most compelling value opportunities:
Consider
probabilities and payoffs
No matter
the research, there are always surprises, positive and negative.
Think best and worst case scenarios. If we think a share price
could go to zero in one scenario, but has 400% upside in another,
there is probably a case for investing.
Enhance,
don’t drift
Discipline
is key to value investing –stick to your philosophy, you’re here
for the long run. Always look to improve and adapt as things
change.
Simple
but not easy
Buying
shares for less than their worth then selling when the value has
been realised is easy to understand. But most don’t invest this way
due to a lack of ‘sticking with it’. Value investing is tricky – we
are hard-wired to conform – but can be rewarding.
Cycles,
cycles, cycles
Profits
and share prices are impacted by cycles such as credit, commodity
and business. An investor’s overreaction can throw up
opportunities. An advantage lies in knowing which cycles impact an
investment and where we are in that cycle.
Be
contrarian but not mindless contrarian
Investors
love to buy what everyone else hates. But having respect for what
the market is saying is key. Eagerly buying shares being sold in
companies with too much debt, or declining profits, can prove
costly and mindlessly contrarian.
Don’t
buy rubbish
Recently
the market has become fixated with quality and growth. Quality and
growth are intrinsic to a business’ value. We’ve had success when
high quality businesses have been questioned by the market,
resulting in low value entry.
Bargains
are rare, make the most of them
It’s
unlikely that you’re going to buy a business trading at half its
intrinsic value. However, a company or an industry will suffer a
drawdown at some stage, which may present an opportunity to buy at
a good value.
Adopt
an absolute return mindset
Value
investing is a risk averse strategy born out of a reaction to the
Great Depression. By buying a dollar of value for 50 cents, you build in a ‘margin of safety’ in
case the economy and/or the stock market suffer. Value investors
see risk as the risk of permanent capital impairment, so, invest
with this at top of mind.
Be
patient, be long term
A
struggling, out-of- favour business is unlikely to turn around the
day after you invest. It’s more likely that things continue to get
worse, so we try to be patient, allowing for profitability to
improve and for the market to recognise it. Our typical holding
period is at least five years.
There
is no single correct method
Value
investing relies on estimating the intrinsic worth of a business.
Our experience tells us to be flexible, by adjusting earnings for
cyclicality, and to recognise the positive (hidden value), and the
negative (e.g. pension fund deficit), on a balance
sheet.
The
Portfolio Manager’s Report
How
do you describe your approach to investing?
We are
value investors. This means that we invest the Trust’s assets in
companies whose stock market value is at a significant discount to
the fair or intrinsic value of the business. Investing in
undervalued companies provides two benefits. First, it provides
investors with a margin of safety if events don’t unfold in a way
that investors would have hoped and second, they can expect to
receive an excess investment return as and when this undervaluation
is corrected by the stock market.
How
does this work in practice?
A
company’s shares will trade at a discount to its intrinsic value
for one of two reasons: neglect or controversy. Where the cause is
neglect, the stock market is not concerned that there is a
particular problem with the business; it is just that the company
is seen to offer relatively dull prospects in a world where many
investors crave excitement. Where there is a controversy
surrounding the company, investors are worried that a downturn in
the economy or some secular change in the company’s industry will
negatively impact profitability. This uncertainty is unsettling for
many investors and can cause them to sell the shares. In a desire
to avoid what are sometimes seen as troubled businesses, investors
often forget that the purchase of a share exposes them to a very
long-term stream of corporate cash flows, the true value of which
only changes by a relatively small amount even in the event of a
severe recession. The result is that share prices will often
overreact to short-term news flow. Temple Bar seeks to take
advantage of this excess volatility by investing in companies whose
shares are significantly undervalued based on a conservative view
of a business’s long-term profit potential.
What
evidence is there supporting this style of
investment?
Numerous
academic studies1
have shown
that systematically investing in lowly valued companies has seen
investors enjoy an excess long-term investment return above the
wider stock market, even though it is often these companies that
are seen to operate in the most challenged industries. The reason
for this outperformance comes down to psychological factors where
investors systematically overpay for those companies whose
prospects are seen to be the most attractive, whilst being too
quick to overlook or dismiss companies where the outlook is more
difficult. By investing the Trust’s assets in lowly valued
companies, we aim to take advantage of these behavioural
inconsistencies to the benefit of the Temple Bar’s
shareholders.
1 One
study from Professors Dimson, Marsh and Staunton used dividend
yield as a measure of valuation and demonstrated that the highest
yielding part of the US stock market between 1927 and 2022
generated a total return of 11.2% per annum versus 9.4% per annum
for the lowest yielding part, meaning that $1 at the start of the period became $25,277 in the former but only $5,513 in the latter. The data for the UK market
starts from 1900 with £1 invested
producing £199,040 in high yielding stocks versus £9,717 for low
yielding stocks. Source: © Elroy
Dimson, Paul Marsh and
Mike Staunton; US data is from
Professor Kenneth French, Tuck
School of Business, Dartmouth. UK data
is from Elroy Dimson, Paul Marsh, and Mike
Staunton, London Share Price Database.
The following
link can be used to obtain further information online:
https://assets.london.edu/hxo16fanegqh/
2IqOF6Hm6WFzJrm96rPwFY/
a00257bcf04cd917a821b3e40084de89/global-investments-yearbook.pdf
Past performance
is not a guide to future returns. The information shown above is
for illustrative purposes.
So,
what is that you look for in companies?
We seek to
identify fundamentally sound but lowly valued companies whose
shares are priced to offer higher investment returns in the future.
A fundamentally sound business is one that can grow its profits
over time (although not necessarily in each year), has strong
finances and a capable and sensible management team who allocate
capital in the best interests of their shareholders.
How
would you describe the investment backdrop in the last
year?
Most stock
markets delivered attractive returns in 2023, despite having to
contend with further interest rate rises, the ongoing war in
Ukraine and instability in the US
banking sector. In the US, the UK and Continental Europe, Central
Banks have been raising rates to bring inflation back to the target
level of around 2%. In the summer, there were concerns that Central
Banks were losing this battle which led to fears that interest
rates might have to take another step up, thereby increasing the
risk of a hard landing in the economy. However, in the fourth
quarter, the narrative changed considerably thanks to several
downside surprises in inflation readings, which led to hopes that
inflation would soon be back to around target levels. For stock
markets, this led to optimism that an economic soft landing was
coming into view, whereby inflation would be back at target levels
without a recession taking place.
Turning
to the financial year, how has the portfolio performed and what
were the major winners and losers?
Despite
the depressed starting valuation, the UK equity market was a
laggard in 2023, delivering a total return of around 8%, however,
the Trust’s portfolio performed well in the year, outpacing the
rise in the FTSE All-Share. Temple Bar benefitted from significant
rises in the share prices of Marks & Spencer, Centrica and
International Distribution Services (the old Royal Mail Group).
Each of these three companies added over a per cent to the Trust’s
return, with Marks & Spencer more than doubling during the
year. The Trust’s portfolio was negatively impacted by a more than
30% fall in the share price of Anglo
American.
In 2023,
Marks & Spencer continued to perform well from an operational
perspective, taking market share in both clothing and food and
continuing to make good progress towards its longer-term
profitability targets. Although it can’t be quantified, there is
little doubt that the company is benefiting from the demise of
several competitors during the COVID pandemic, and the company is
able to invest capital at high returns in rightsizing and
re-orientating its store estate. If achieved, the company’s
profitability targets would simply bring the retailer’s
profitability in line with its peers and would result in
significant growth in shareholder earnings, thereby suggesting that
the shares continue to be undervalued.
Centrica
announced the results of a strategic review in the summer. The
company has a unique place in the energy value chain and can add
value as a producer of power, through the provision of energy
infrastructure, system optimisation through its Marketing and
Trading business and energy retail through British Gas. Having
simplified and de-risked the business, management intend to invest
in the energy transition and thereby create further value for
shareholders. Nevertheless, the company’s profits will continue to
be sensitive to the level of energy prices. Even assuming a
‘normalisation’ of commodity prices from today’s elevated levels to
pre COVID levels, the company continues to be valued at around nine
times it annual profits. The company also has significant portion
of its market capitalisation as net cash on its balance sheet, and
this needs to be factored into any consideration of
value.
International
Distribution Services performed well in 2023 as a new agreement
with its unions bedded in well. A successful execution of the
agreement will enable the company to release significant unrealised
potential in the company’s UK business and thereby drive group
profitability higher. Making just modest assumptions about the
potential profitability in the company’s UK business, suggests that
the company is valued at less than six times its earnings
potential. For some time, we have believed that more than 100% of
the company’s market capitalisation can be justified by its
overseas (parcels only) business alone, suggesting that the stock
market is placing a negative valuation on the more challenged UK
business. This is even though more than half of the company’s UK
revenues are derived from parcels (rather than letters) and it has
around a 50% market share in the UK parcels market.
On the
negative tack, Anglo American
downgraded its production guidance for 2024 and 2025 and as a
result 2024 earnings estimates were cut by 20% to 25%. These profit
downgrades are unwelcome although the accompanying share price fall
has left the shares looking very undervalued. To address balance
sheet issues, the company went through a radical restructuring in
2015, halving the number of assets in its portfolio and
consequently, the assets that remain are generally of good quality.
Anglo American has significant
investments in publicly quoted assets and stripping these out, the
company’s Copper, Diamond, Metallurgical Coal and Nickel assets are
valued at just five times earnings before interest and tax. We
would therefore not be surprised to see some corporate activity if
the operating performance of the company does not improve. This
could take the form of asset disposals to demonstrate value or a
bid for all or parts of the group.
How
has the Trust’s portfolio changed over the
year?
In 2023,
the Trust purchased shares in Stellantis, a company formed by the
merger of Fiat Chrysler and Peugeot in 2021. The rationale for the
merger was to combine the European strength of the Peugeot business
with the North American strength of Fiat Chrysler. Combining the
entities has allowed for significant cost savings and created a
stronger and more diversified business. At the time of purchase,
the company was valued at around three times its annual profits and
the shares offered a dividend yield of around 8%. In the last two
years, the auto industry has enjoyed high profitability as strong
demand post COVID, coupled with muted supply drove price increases
in most markets. Whilst profitability is likely to decline in
future years as industry conditions normalise, in our view, the
company would nevertheless continue to be very attractively valued.
The company has significant net cash on its balance sheet, equating
to around one third of its market capitalisation. Stellantis has
performed well since its purchase and in 2023 added over 1% to the
Trust’s return.
We also
established a position in GlaxoSmithKline (“GSK”), a high-quality
global franchise which has traditionally struggled with execution
and whose shares have therefore significantly underperformed its
peers over almost all-time frames. The company’s vaccines business
is the global leader, with the widest product and technology
portfolio, and is well insulated from threats, with more than 90%
of revenues coming from vaccines with more than 90% efficacy. In
combination with GSK’s pharmaceutical business, the company should
be capable of delivering good levels of growth. The management
targets annual sales and operating profit growth of more than 5%
and 10% respectively over the five years to 2026.
A new
position in the Dutch Insurer, NN Group, was also established which
derives most of its profits from the Dutch pension market. The
company targets moderate growth in profits in the coming years and
its balance sheet is strong. At the
time of purchase, the company was valued at a multiple of six-times
profits and offered a dividend yield of around 9% and is expected
to return another 3% of its market capitalisation in share buybacks
in respect of 2023.
The
UK stock market continues to be compared negatively with other
major equity markets. Do you think this is justified and are you
able to find appealing investment opportunities in the
UK?
The UK
stock market remains very out of favour with investors who continue
to sell UK assets to channel money overseas. Here investment
prospects are seen to be more exciting even though a large portion
of the profits of companies listed in the UK are derived from
outside the UK. The result of this negative sentiment towards the
UK however is that UK listed stocks are valued at a significant
discount to their overseas listed peers for no other reason than
they happen to be listed in the UK. Today, your portfolio in
aggregate is valued at a multiple of around eight times last year’s
estimated earnings. In contrast, in the US, the S&P 500 is
valued on a multiple of over twenty times, more than 2.5x the
valuation of the Trust’s portfolio. In respect of the UK, you
should take comfort from the fact that markets don’t de-rate
forever and that this headwind will ultimately abate and maybe even
become a tailwind. If the Trust’s portfolio simply re-rated back to
a still conservative ten times earnings on an earnings base that
was unchanged, the Trust would deliver a return of around 25% to
its shareholders from this re-rating alone. Whilst many will no
doubt continue to take a dim view of UK economic prospects; it is
important to remember that the Trust buys companies and not
economies. The companies in which the Trust is invested are sound,
conservatively run businesses with strong finances and capable
management teams.
How
is the portfolio currently positioned and what is your outlook for
the year ahead?
Whilst it
is somewhat frustrating that UK listed shares continue to attract
such miserly valuations, the attraction for the long-term investor
is significant as stock market history has shown that the best
predictor of long-term future investment return is starting
valuation. Time and time again, those that have invested in highly
valued assets have been rewarded with suboptimal returns, even
though the underlying asset has continued to perform well from an
operational perspective. Conversely, those that have invested in
lowly valued, but fundamentally sound businesses, which did not
happen to fit with the prevailing investment narrative at the time
of purchase, have enjoyed outsized gains. We are often asked when
UK equities will re-rate and whilst we can’t answer this question,
we would point out that one doesn’t need the Trust’s portfolio to
re-rate to enjoy an attractive investment return. A lowly valued
company that converts a significant portion of its profits into
cash can pay a generous dividend and undertake value enhancing
share buybacks whilst holding debt at a constant level. As we enter
2024, the Trust’s portfolio continues to be priced to offer its
shareholders further excess investment return in the
future.
Could
you provide your views on the post-period takeover bids that were
received on holdings within the portfolio?”
So far in
2024, there have been two bids for companies held in the Trust’s
portfolio; first Currys and then Direct Line Group. Whilst takeover
bids can come at any time, this is perhaps not a surprise as many
of the companies in the portfolio carry a stock market valuation
which is significantly below a reasonable view of their true value.
The UK continues to be an attractive place to invest and given the
rock bottom valuations that exist in some parts of the UK market,
it is understandable that private equity and corporate buyers would
want to take advantage of that.
We have
mixed feelings about these takeover approaches. Takeover bids
highlight the undervaluation that exists in the target companies
and can result in a rapid crystallisation of the upside that we
believed existed at the time of a stock’s purchase. However, we
must also remember that private equity bidders especially are
intent on paying a price which continues to undervalue the company
and from which they themselves can make an attractive investment
return. They will therefore rarely be prepared to pay what we think
the target company is worth. Currys is a case in point. Our view of
the company’s fair value was significantly higher than the 67p
offered by hedge fund Elliott who have since said that they are not
prepared to bid any more.
In 2022,
the private equity group, Apollo Capital, made three takeover
offers for Pearson, the educational publisher, and last year, First
Abu Dhabi Bank approached Standard Chartered. It is reasonable to
expect that there will be more bids for companies in the Trust’s
portfolio and shareholders should expect to benefit further from
that.
Ian Lance and Nick
Purves
Redwheel
3 April 2024
Portfolio
of Investments
As at
31 December 2023
|
|
|
|
Place
of primary
|
Valuation
|
%
of
|
|
|
Company
|
Sector
|
listing
|
£’000
|
portfolio
|
|
1
|
Royal
Dutch Shell
|
|
|
|
|
|
|
Shell
explores for, produces, and refines petroleum. The company produces
fuels, chemicals, and lubricants. Shell owns and operates gasoline
filling stations worldwide.
|
Energy
|
UK
|
57,818
|
7.3
|
|
2
|
BP
|
|
|
|
|
|
|
BP is an
oil and petrochemicals company. The company
explores for and produces oil and natural gas, refines, markets,
and supplies petroleum products, generates solar energy, and
manufactures and markets chemicals.
|
Energy
|
UK
|
50,819
|
6.5
|
|
3
|
TotalEnergies
|
|
|
|
|
|
|
TotalEnergies
operates as an energy company. The company produces, transports,
and supplies crude oil, natural gas, and low carbon electricity, as
well as refines petrochemical products. TotalEnergies owns and
manages gasoline filling stations worldwide.
|
Energy
|
France
|
43,078
|
5.5
|
|
4
|
Marks
& Spencer Group
|
|
|
|
|
|
|
Marks
& Spencer Group operates a chain of retail stores. The company
sells consumer goods and food products, as well as men’s, women’s,
and children’s clothing and sportswear
|
Consumer
Staples
|
UK
|
42,012
|
5.3
|
|
5
|
NatWest
Group
|
|
|
|
|
|
|
NatWest
Group operates as a banking and. financial services company. The
Bank provides personal and business banking, consumer loans, asset
and invoice financing, commercial and residential mortgages, credit
cards, and financial planning services, as well as life, personal,
and income protection insurance.
|
Financials
|
UK
|
40,581
|
5.1
|
|
6
|
Aviva
|
|
|
|
|
|
|
Aviva
operates as an international insurance company that provides all
classes of general and life assurance. The Company also offers a
variety of financial services, including long-term savings and fund
management
|
Financials
|
UK
|
35,019
|
4.4
|
|
7
|
ITV
|
|
|
|
|
|
|
ITV
provides broadcasting services. The company produces and
distributes content on multiple platforms. ITV serves customers in
the United Kingdom.
|
Communications
|
UK
|
34,338
|
4.3
|
|
8
|
Stellantis
|
|
|
|
|
|
|
Stellantis
manufactures and markets automobiles and commercial vehicles. The
Company also produces metallurgical products and production systems
for the automobile industry, as well as owning publishing and
insurance companies. Stellantis serves customers
worldwide.
|
Consumer
Discretionary
|
Netherlands
|
32,110
|
4.1
|
|
9
|
Barclays
|
|
|
|
|
|
|
Barclays
is a global financial services provider engaged in retail banking,
credit cards, wholesale banking, investment banking, wealth
management, and investment management services
|
Financials
|
UK
|
31,721
|
4.0
|
|
10
|
Anglo
American
|
|
|
|
|
|
|
Anglo
American is a global mining company. The company’s mining portfolio
includes bulk commodities including iron ore, manganese, and
metallurgical coal, base metals including copper and nickel, and
precious metals and minerals including platinum and
diamonds.
|
Materials
|
UK
|
30,013
|
3.8
|
|
|
|
Top
Ten Investments
|
|
397,509
|
50.3
|
|
11
|
NN
Group
|
Financials
|
Netherlands
|
29,939
|
3.8
|
|
12
|
Standard
Chartered
|
Financials
|
UK
|
29,199
|
3.7
|
|
13
|
WPP
|
Communications
|
UK
|
28,513
|
3.6
|
|
14
|
GSK
|
Healthcare
|
UK
|
26,536
|
3.4
|
|
15
|
Kingfisher
|
Consumer
Discretionary
|
UK
|
26,145
|
3.3
|
|
16
|
International
Distributions
|
Industrials
|
UK
|
24,933
|
3.1
|
|
17
|
HP
|
Information
Technology
|
United
States
|
24,010
|
3.0
|
|
18
|
Centrica
|
Utilities
|
UK
|
23,471
|
3.0
|
|
19
|
Pearson
|
Consumer
Discretionary
|
UK
|
22,762
|
2.9
|
|
20
|
Citigroup
|
Financials
|
United
States
|
20,453
|
2.6
|
|
|
|
Top
20 Investments
|
|
653,470
|
82.7
|
|
21
|
Currys
|
Consumer
Discretionary
|
UK
|
16,434
|
2.1
|
|
22
|
Honda
Motor
|
Consumer
Discretionary
|
Japan
|
14,609
|
1.8
|
|
23
|
BT
Group
|
Communications
|
UK
|
14,249
|
1.8
|
|
24
|
Forterra
|
Materials
|
UK
|
14,142
|
1.8
|
|
25
|
Vodafone
Group
|
Communications
|
UK
|
13,098
|
1.7
|
|
26
|
Capita
|
Industrials
|
UK
|
11,014
|
1.4
|
|
27
|
Newmont
|
Materials
|
United
States
|
10,590
|
1.3
|
|
28
|
CK
Hutchison Group
|
Industrials
|
Hong
Kong
|
10,394
|
1.3
|
|
29
|
Barrick
Gold
|
Materials
|
Canada
|
9,892
|
1.3
|
|
30
|
Continental
|
Consumer
Discretionary
|
Germany
|
8,983
|
1.1
|
|
|
|
Total
Equity Investments
|
776,875
|
98.3
|
|
|
Short-dated
UK T-Bills
|
Fixed
Interest
|
UK
|
13,713
|
1.7%
|
|
|
|
Total
Valuation of Portfolio
|
790,588
|
100%
|
Portfolio
Distribution
As at
31 December 2023
|
Discount
to NAV
|
Industry
|
Temple
Bar %
|
FTSE
All-Share %
|
|
1
|
Financials
|
23.6
|
18.6
|
|
2
|
Energy
|
19.3
|
11.7
|
|
3
|
Consumer
Discretionary
|
15.3
|
8.8
|
|
4
|
Communications
|
11.4
|
2.9
|
|
5
|
Materials
|
8.2
|
9.0
|
|
6
|
Industrials
|
5.8
|
13.8
|
|
7
|
Consumer
Staples
|
5.3
|
15.7
|
|
8
|
Healthcare
|
3.4
|
11.1
|
|
9
|
Information
Technology
|
3.0
|
1.7
|
|
10
|
Utilities
|
3.0
|
4.0
|
|
11
|
Real
Estate
|
–
|
2.7
|
|
Total
Equities
|
|
98.3
|
100.0
|
|
Fixed
Interest
|
|
1.7
|
–
|
|
Total
Portfolio
|
|
100.0
|
100.0
|
Source:
Redwheel
* FTSE
All-Share ex investment Trusts
Overview
of Strategy
The
Strategic Report is designed to help shareholders assess how the
Directors have performed their duty to promote the success of the
Company during the year under review.
Business
of the Company
Temple Bar
Investment Trust Plc was incorporated in England and Wales in 1926 with the registered number
00214601.
The
Company carries on business as an investment company under Section
833 of the Companies Act 2006 and has been approved by HM Revenue
& Customs as an investment trust in accordance with Section
1158 of the Corporation Tax Act 2010.
Section
172 Statement
The
Directors’ overarching duty is to act in good faith and in a way
that is the most likely to promote the success of the Company as
set out in Section 172 of the Companies Act 2006 (“Section 172”).
In doing so, Directors must take into consideration the interests
of the various stakeholders of the Company, having regard, amongst
other matters, to the following six items:
|
The likely
consequences of any decision in the long term
|
All Board
discussions include consideration of the longer-term consequences
of any key decisions and their implications for the relevant
stakeholders. In managing the Company during the year under review,
the Board acted in the way which it considered, in good faith,
would be most likely to promote the Company’s long-term sustainable
success and to achieve its wider objectives for the benefit of our
shareholders as a whole, having had regard to our wider
stakeholders and the other matters set out in Section
172.
|
|
The
interests of the Company’s employees
|
This
provision is not relevant as the Company does not have any
employees.
|
|
The need
to foster the Company’s business relationships with suppliers,
customers and others
|
The
Board’s approach is described under “Stakeholders” in in the
Strategic Report.
|
|
The impact
of the Company’s operations on the community and the
environment
|
The Board
takes a close interest in responsible investment issues and sets
the overall strategy. Management of the portfolio is delegated to
the Portfolio Manager, which is responsible for the practical
implementation of policy. A description
of the Company’s approach to stewardship and the role of the
Portfolio Manager is set out in the Strategic Report.
|
|
The
desirability of the Company maintaining a reputation for high
standards of business conduct
|
The
Board’s approach is described under “Culture” in the Strategic
Report.
|
|
The need
to act fairly between shareholders of the Company
|
The
Board’s approach is described under “Stakeholders” in the Strategic
Report.
|
In
considering the primary purpose of the Company, the Board made
several key decisions during the year. The
Board:
· continued
to instruct the use of share buy backs as a means of stabilising
the share price discount to NAV in response to sector
weakness;
· worked
with the Portfolio Manager and Frostrow Capital to maintain a high
level of shareholder engagement via webinars and newsletters;
and
· increased
dividend payments at a sustainable level based on income received
from investments (for further details see the dividend per share
section in the Strategic Report).
The
Directors have reviewed and discussed each aspect of Section 172
and consider that the information set out in the Strategic Report
is particularly relevant in the context of the Company’s business
as an externally managed investment company which does not have any
employees or suppliers.
Stakeholders
The Board
continuously seeks to understand the needs and priorities of the
Company’s stakeholders, and these are taken into account during all
of its discussions and as part of its decision making. As the
Company is an externally managed investment company and does not
have any employees or customers, it therefore has very little
direct impact on the community or the environment. Its key
stakeholders comprise its shareholder base and its lender. The
Company also has important contractual relationships with its key
service providers but does not consider these to be stakeholders.
The Company recognises the indirect impact it may have on the
community and the environment through its investee companies.
Further details on this are set out in the Strategic Report. The
sections below outline why these key stakeholders are considered of
importance to the Company and the actions taken to ensure that
their interests are considered.
Shareholders
The
primary purpose of the Company is to deliver long-term returns for
shareholders from a diversified portfolio of investments. Continued
shareholder support and engagement are critical to the existence of
the Company and the delivery of its long-term strategy.
The Board
recognises the importance of engaging with shareholders on a
regular basis to maintain a high level of transparency and
accountability and to inform the Company’s decision making and
future strategy.
The Board
primarily engages with shareholders through direct engagement by
the Chairman and through the Portfolio Manager and Frostrow Capital
who maintain an ongoing dialogue with shareholders through regular
shareholder communications, both written and verbal. The Portfolio
Manager has continued to publish quarterly newsletters written by
the portfolio management team, which explore their ideas and
philosophies around investing and explain the positioning of the
portfolio. Online statistics on engagement show that these
newsletters remain very popular with shareholders. Additional
dialogue with shareholders is achieved through the annual and
half-yearly reports, both of which contain reports from the
Portfolio Manager, the daily NAV announcements and the monthly fact
sheet which is available on the Company’s website. Portfolio data
is also provided to external providers such as Morningstar, which
feeds several websites on a monthly basis.
One of the
Board’s long-term strategic aspirations has been that the Company’s
shares should trade consistently at a price close to the NAV per
share. During the year under review investment companies as a
sector again saw discounts widen significantly, in the face of
economic headwinds and political instability (the average discount
was 13.5%* as at 31 December
2023). The Company continued to use share buy backs
throughout the year to protect its discount, generally maintaining
it at a level less than 6%. Both the Board and the Portfolio
Manager has continued to focus heavily on the promotion of the
Company, in order to maintain buying interest in the Company’s
shares and to support a natural narrowing of the
discount.
An
important role of the Board is to ensure that the Company’s ongoing
charges are competitive both in terms of its peer group and other
comparable investment products. While having an optimal service
provider structure brings inevitable cost, excessive expense can
eat away at investment returns over time. For that reason, despite
the exercise described later in the document the Board remains
focused on limiting cost increases to shareholders as far as
possible, despite the current inflationary environment.
All
shareholders are encouraged to attend and vote at AGMs, at which
the Board and the portfolio management team are available to
discuss issues affecting the Company and to answer any questions.
Further details regarding the AGM are set out in the Notice of
AGM.
* Source:
Cavendish Securities.
Lenders
Alongside
shareholders’ equity, the Company is partly funded by debt. All the
Company’s debt is subject to contractual terms and restrictions. We
have an established procedure to report regularly to our lender on
compliance with debt terms. It is our policy that all interest
payments and repayments of principal will continue to be made in
full and on time.
Service
Providers
To
function as an investment trust with a premium listing on the
London Stock Exchange, the Company relies on a number of suppliers
and advisers for support in complying with all relevant legal and
regulatory obligations.
The
Company’s day-to-day operational functions are delegated to a
number of third-party service providers, each engaged under
separate contracts. The Company’s principal service providers are
the Portfolio Manager, Alternative Investment Fund Manager,
Administrator and Company Secretary, Custodian and Depositary,
Broker, Solicitor and the Registrar.
Over the
past three years the Board believes it has continued to develop a
close and constructive working relationship with the Portfolio
Manager, which it believes is crucial to promoting the long-term
success of the Company. Representatives of the Portfolio Manager
attend Board meetings and provide reports and verbal updates on
matters relating to investments, performance and
marketing.
The Board,
primarily through the Audit and Risk and Management Engagement
Committees, keeps the ongoing performance of the Portfolio Manager
and the Company’s other principal third-party service providers
under continual review.
Culture
The
purpose of the Company is to deliver long-term returns for
shareholders from a diversified portfolio of investments. These
investments will primarily be UK listed. The Company has no
employees, but the culture of the Board is to promote strong
governance and a long-term investment outlook with an emphasis on
investing in businesses that can deliver enduring value to
shareholders. Therefore, the Board asks the Company’s Portfolio
Manager to invest in stocks that fulfil the traditional metrics of
the value style but also possess a business model that is resilient
and viable in the long term.
Investment
Objective and Policy
The
Company’s investment objective is to provide growth in income and
capital to achieve a long-term total return greater than the
benchmark FTSE All-Share Index, through investment primarily in
UK-listed securities. The Company’s policy is to invest in a broad
spread of securities with typically the majority of the portfolio
selected from the constituents of the FTSE 350 Index.
Investment
Guidelines
The UK
equity element of the portfolio will be mostly invested in the FTSE
All-Share Index; however, exceptional positions may be sanctioned
by the Board and up to 30% of the portfolio may be held in listed
international equities, subject to a maximum 10% exposure to
emerging markets. The Company may continue to hold securities that
cease to be quoted or listed if the Portfolio Manager considers
this to be appropriate. There is an absolute limit of 10% of the
portfolio in any individual stock with a maximum exposure to a
specific sector of 35%, in each case irrespective of their
weightings in the Benchmark.
It is the
Company’s policy to invest no more than 15% of its gross assets in
other listed investment companies (including listed investment
trusts).
The
Company maintains a diversified portfolio of investments, typically
comprising 30-50 holdings, but without restricting the Company from
holding a more or less concentrated portfolio from time-to-time as
circumstances require.
The
Company’s long-term investment strategy emphasises stocks of
companies that are out of favour and whose share prices do not
match the Portfolio Manager’s assessment of their longer-term
value.
From
time-to-time fixed interest holdings or non-equity interests may be
held for yield enhancement and other purposes. Derivative
instruments may be used in certain circumstances, and with the
prior approval of the Board, for hedging purposes or to take
advantage of specific investment opportunities.
Liquidity
and borrowings are managed with the aim of increasing returns to
shareholders. The Company’s gross gearing range may fluctuate
between 0% and 30%, based on the current balance sheet structure,
with an absolute limit of 50%.
As a
general rule, it is the Board’s intention that the portfolio should
be reasonably fully invested. An investment level of 90% of
shareholder funds is regarded as a guideline minimum investment
level dependent on market conditions.
Risk is
managed through diversification of holdings, investment limits set
by the Board and appropriate financial and other controls relating
to the administration of assets.
Key
Performance Indicators
The key
performance indicators (“KPIs”) used to determine the progress and
performance of the Company over time, and which are comparable to
those reported by other investment trusts, are:
· NAV
total return relative to the FTSE All-Share Index;
· Discount/premium
to NAV;
· Dividends
per share; and
· Ongoing
charges.
While some
elements of performance against KPIs are beyond the Board’s and
Portfolio Manager’s control, they provide measures of the Company’s
absolute and relative performance and are, therefore, monitored by
the Board on a regular basis.
NAV
Total Return
In
reviewing the performance of the assets in the Company’s portfolio
the Board monitors the NAV in relation to the FTSE All-Share Index.
This is the most important KPI by which performance is judged.
During the year the NAV total return with debt at fair value of the
Company was 12.3% compared with a total return of 7.9% by the FTSE
All-Share Index. As noted in both the Chairman’s Statement and
Portfolio Manager’s Report, the Company outperformed the FTSE
All-Share Index on both a NAV and share price basis.
Discount
to NAV
The Board
monitors the premium/discount at which the Company’s shares trade
in relation to their NAV. During the year the shares traded at an
average discount to NAV of 6.0%. This compares with an average
discount of 5.1% in the previous year. As set out in the Chairman’s
Statement, during the year the Board closely monitored the discount
and utilised share buy backs when it was considered appropriate to
do so. The Board and Portfolio Manager closely monitor both
movements in the Company’s share price and significant dealings in
the shares. In order to avoid substantial overhangs or shortages of
shares in the market the Board asks shareholders to approve
resolutions which allow for both the buy back of shares and their
issuance, which can assist in the management of the discount or
premium.
Dividend
per Share
It remains
the Directors’ intention to distribute, over time, by way of
dividends, substantially all of the Company’s net revenue income
after expenses and taxation. The Portfolio Manager aims to maximise
total returns from the portfolio. The Company
has paid dividends totalling 9.60
pence per ordinary share for the year ended 31 December 2023 (2022: 9.35 pence). The Board hopes to continue
sustainable dividend growth over the coming years. This is
explained in more detail in the Chairman’s Statement.
Ongoing
Charges
Ongoing
charges is an expression of the Company’s management fees and other
operating expenses as a percentage of average daily net assets over
the year. The ongoing charges for the year ended 31 December 2023 were 0.56% (2022: 0.54%). The
Board reviews the Company’s ongoing charges on a regular basis. The
Company’s ongoing charges ratio has remained relatively consistent
and compares favourably with peers in the UK Equity Income sector
of investment trust companies.
Ten-Year
KPI Summary
|
Discount
to NAV
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020^
|
2021
|
2022
|
2023
|
|
Total
Returns
|
|
|
|
|
|
|
|
|
|
|
|
NAV with
debt at fair value3
|
-2.6%
|
-1.2%
|
20.6%
|
10.2%
|
-11.3%
|
27.9%
|
-28.0%
|
24.6%
|
0.9%
|
12.3%
|
|
Share
Price3
|
-1.4%
|
-7.9%
|
20.7%
|
11.0%
|
-9.7%
|
34.3%
|
-31.5%
|
20.0%
|
3.6%
|
12.5%
|
|
FTSE
All-Share Index3
|
1.2%
|
1.0%
|
16.8%
|
13.1%
|
-9.5%
|
19.2%
|
-9.8%
|
18.3%
|
0.3%
|
7.9%
|
|
NAV per
share* (p)
|
239.1
|
226.0
|
236.2
|
280.0
|
239.9
|
294.6
|
202.0
|
241.7
|
228.5
|
248.0
|
|
NAV per
share with debt at fair value* (p)
|
234.9
|
222.9
|
259.6
|
277.4
|
238.1
|
292.5
|
199.2
|
240.4
|
233.5
|
252.2
|
|
Share
Price* (p)
|
238.2
|
210.4
|
244.6
|
262.8
|
229.2
|
295.2
|
191.0
|
221.6
|
220.5
|
238.0
|
|
Premium/(Discount)2
|
1.4%
|
(5.6%)
|
(5.8%)
|
(5.3%)
|
(3.7%)
|
0.9%
|
(4.1%)
|
(7.8%)
|
(5.6%)
|
(5.6%)
|
|
Dividends
per share* (p)
|
7.78
|
7.93
|
8.09
|
8.49
|
9.34
|
10.28
|
7.70
|
7.90
|
9.35
|
9.60
|
|
Dividend
Yield1
|
3.3%
|
3.8%
|
3.3%
|
3.2%
|
4.1%
|
3.5%
|
4.0%
|
3.6%
|
4.2%
|
4.0%
|
|
Ongoing
Charges
|
0.48%
|
0.49%
|
0.51%
|
0.49%
|
0.47%
|
0.49%
|
0.50%
|
0.48%
|
0.54%
|
0.56%
|
* Comparative
periods have been restated for the sub-division of each ordinary
share into 5 new ordinary shares, approved at the AGM held on
10 May 2022
and completed on 13 May
2022.
^
Redwheel
was appointed as Portfolio Manager on 30
October 2020.
1
Calculated
as dividends per share divided by the year end share
price.
2
Premium /
(Discount) of share price to NAV per share with debt at fair
value
3
Source:
Morningstar for Company returns, Redwheel for FTSE All-Share
returns.
|
Risk
|
Mitigation
and Management
|
|
Market
Risk
|
|
|
By the
nature of its activities and Investment Objective, the Company’s
portfolio is exposed to fluctuations in market prices (from both
individual security prices and foreign exchange rates). As such
investors should be aware that by investing in the Company they are
exposing themselves to market risks.
The
Company also uses gearing, via the private placement loans issued,
the effect of which is to amplify the gains or losses the Company
experiences.
|
To manage
these risks the Board and the AIFM have appointed Redwheel to
manage the portfolio within the remit of the investment objective
and policy, and imposed various limits and guidelines, set out in
the Strategic Report. These limits ensure that the portfolio is
diversified, reducing the risks associated with individual stocks.
The compliance with those limits and guidelines is monitored daily
by Frostrow and Redwheel and reported to the Board
weekly.
In
addition, Redwheel reports at each Board meeting on the performance
of the Company’s portfolio, including the rationale for investment
decisions, the make-up of the portfolio and the investment
strategy.
As part of
its review of the viability of the Company, the Board also
considers the sensitivity of the Company to changes in market
prices and foreign exchange rates (see note 20), how the portfolio
would perform during a market crisis, and the ability of the
Company to liquidate its portfolio if the need arose. Further
details are included in the Going Concern and Viability Statements
contained in the Strategic Report.
|
|
Geopolitical
and Macro Risks
|
|
|
As recent
years have demonstrated, global events, including unforeseen
events, can have a dramatic effect on both financial markets and
everyday life. The Company is at risk from both the financial
impacts of such events, as well as possible disruption to the
day-to-day activities of its service providers and portfolio
companies. Ongoing geopolitical tensions around the world while not
currently directly affecting the Company may have an impact on its
investments.
|
While
global events are outside the control of the Company the Board
reviews regularly, and discusses with the Portfolio Manager, the
wider economic and political environment, along with the portfolio
exposure and the execution of the investment policy against the
long-term objectives of the Company. The Portfolio Manager performs
risk analysis, including country and industry specific monitoring,
on an ongoing basis.
|
|
Climate
Risks
|
|
|
While the
Company itself faces limited direct risk from climate change, the
board is cognisant of the potential impact on portfolio companies
and their operations. Significant changes in climate, or indeed
Government measures taken to combat climate change, could present a
material risk to the value of the portfolio.
|
The Board
regularly reviews global environmental, geopolitical and economic
developments with the Portfolio Manager, along with the
implications of these risks and events on portfolio construction
and the Company’s operations. ESG considerations are incorporated
into the investment process of Redwheel, as part of the drive to
invest in companies with long-term viability. The Portfolio Manager
also uses its voting powers to engage with and influence investee
companies towards taking positive steps against climate change and
other environmental impacts.
|
|
Shareholder
Relations and Share Price Performance Risk
|
|
|
The
Company is exposed to the risk, particularly if the investment
strategy and approach are unsuccessful, that the Company may
underperform resulting in the Company becoming unattractive to
investors, a widening of the share price discount to NAV per share
and the Company may become vulnerable to activist
shareholders.
|
In
managing this risk the Board:
· reviews
the Company’s investment strategy and objective in relation to
market and economic conditions, and the operation of the Company’s
peers;
· discusses
at each Board meeting the Company’s future development and
strategy;
· reviews
the shareholder register at each Board meeting; and,
· actively
seeks to promote the Company to current and potential
investors.
In
addition the Company’s share price and premium or discount to NAV
are monitored by the Portfolio Manager and the Board on a regular
basis. The Directors attach considerable importance to the level of
premium or discount to NAV at which the shares trade, both in
absolute terms and relative to the rating at which the UK Equity
Income sector of investment trusts is trading, and will take action
where levels are deemed to be excessive. The Directors are prepared
to be proactive in premium/ discount management to minimise
potential disadvantages to shareholders, which continued to be
demonstrated during 2023.
|
|
Loss
of Investment Team or Portfolio Manager
|
|
|
A sudden
departure of the members of the portfolio management team could
result in a short-term deterioration in investment
performance.
|
The
investments of the Company are managed by a team of two managers,
Ian Lance and Nick Purves. The Portfolio Manager takes steps to
reduce the likelihood of such an event by aligning the interests of
the investment team with the wider organisation, as well as
providing a high degree of autonomy with no overarching chief
investment officer or investment committee. Furthermore, the AIFM,
in consultation with the Board, may terminate the Portfolio
Management Agreement should Ian Lance and Nick Purves cease to be
able to perform their duties or cease to be associated with the
Portfolio Manager and not be replaced by people with relevant
experience.
|
|
Income
Risk – Dividend
|
|
|
Risk that
the portfolio does not generate the necessary level of income, over
time, from which to maintain progressive dividend payments to
shareholders.
|
The Board
monitors this risk through the review of detailed income reports
and forecasts which are considered at each meeting, with input from
the Portfolio Manager. As at 31 December
2023 the Company had distributable revenue reserves of £12.7
million. Furthermore, income risk is mitigated by the Company’s
ability to distribute realised capital gains if required to meet
any revenue shortfall. With the
level of income paid and forecast by investee companies continuing
to increase across the year, the Company has been able to raise its
dividend.
|
|
Cyber
Security
|
|
|
The
Company has limited direct exposure to cyber risk. However, the
Company’s operations or reputation could be affected if any of its
service providers suffered a major cyber security breach. A
State-backed cyber-attack could also result in widespread
disruption across the financial services industry.
|
The Audit
and Risk Committee receives control reports and confirmation from
its service providers regarding the measures that they take in this
regard. The cyber security policies of all providers have also been
reviewed by the Board. For more widespread disruption such as a
state-backed cyberattack limited mitigation is possible, however
all service providers remain vigilant given the increased
likelihood of such an event in the current climate.
|
|
Service
Provider Risk
|
|
|
The
Company is reliant on the systems of its service providers and as
such disruption to, or a failure of, those systems (including, for
example, as a result of cyber-crime or a ‘black swan’ event) could
lead to a failure to comply with law and regulations leading to
reputational damage and/or a financial loss.
|
To manage
these risks the Board, via its Management Engagement Committee and
Audit and Risk Committee:
· receives
reports from Frostrow at each Board meeting, which includes,
inter
alia, details
of compliance with applicable laws and regulations;
· reviews
internal control reports, key policies, including measures taken to
combat cyber security issues, and also the disaster recovery
procedures of its service providers;
· maintains
a risk matrix with details of risks the Company is exposed to and
the controls/mitigation in relation to those risks;
· receives
updates on pending changes to the regulatory and legal environment
and progress towards the Company’s compliance with these;
and
· has
considered the increased risk of cyber-attacks and received reports
and assurance at meetings with its service providers that
appropriate information security controls are in place.
The AIFM,
in addition, to its ongoing monitoring of the investment portfolio
and transactions, carries out a formal due diligence exercise on
the Portfolio Manager annually, ensuring that the appropriate
controls, processes and resourcing are in place to manage the
portfolio within the stated investment policies and guidelines.
Responsibility for this process moved from Link Group to Frostrow
during the year, with Frostrow performing initial due diligence
process prior to their appointment.
|
Emerging
Risks
The Board
has in place a robust process to identify, assess and monitor the
principal risks and uncertainties and also to identify and evaluate
newly emerging risks. The Board, through the Audit and Risk
Committee, regularly reviews all risks to the Company, including
emerging risks, which are identified by a variety of means,
including advice from the Company’s professional advisors, the
Association of Investment Companies (the “AIC”), and Directors’
knowledge of markets, changes and events. No new or emerging risks
were identified during the year.
Going
Concern
The
Directors have reviewed the going concern basis of accounting for
the Company. The Company’s assets consist substantially of equity
shares in listed companies and in most circumstances are realisable
within a short timescale. The use of the going concern basis of
accounting is appropriate because there are no material
uncertainties related to events or conditions that may cast
significant doubt about the ability of the Company to continue as a
going concern. The Directors therefore have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for 12 months from the date of the approval
of these financial statements. Accordingly, the Directors continue
to adopt the going concern basis in preparing the accounts. See
note 1 for further detail.
Viability
Statement
The Board
makes an assessment of the longer-term prospects of the Company
beyond the timeframe envisaged under the going concern basis of
accounting, having regard to the Company’s current position and the
principal and emerging risks and uncertainties it faces. The AIFM
and Portfolio Manager have assisted the Board in making this
assessment via financial modelling and income forecasting, which
demonstrates the financial viability of the Company. Stress-testing
scenarios, such as an extreme drop in equity markets, have also
been carried out and the projected financial position remains
strong and all payment obligations achievable.
The
stress-testing scenarios used to assess future viability
incorporate a number of inputs. The financial structure of the
Company is stable, with known payment obligations that can be
modelled for future years with a low likelihood of any changes.
Revenue expectations are modelled by the Portfolio Manager for
future years with decreasing levels of certainty over time, based
on the financial position and performance of investee companies.
This is combined with an expectation of the rate of dividend
payments to be made by the Company over the coming years to give an
overall financial projection in normal market
conditions.
To
stress-test this projection, scenarios are then modelled for a 20%
and 50% fall in both investee company valuations and the level of
dividend payments made. In both cases, because the Company has both
the ability to control its own dividend payments and a liquid
portfolio of investments, the impact to reserves could be managed
and the Company would remain viable during such periods.
The
Company is a long-term investment vehicle and the Directors,
therefore, believe that it is appropriate to assess its viability
over a long-term horizon. For the purposes of assessing the
Company’s prospects in accordance with the AIC Code of Corporate
Governance (the “AIC Code”), the Board considers that assessing the
Company’s prospects over a period of five years is appropriate
given the nature of the Company and the inherent uncertainties over
a longer time period.
The
Directors believe that a five-year period appropriately reflects
the long-term strategy of the Company and over which, in the
absence of any adverse change to the regulatory environment and the
favourable tax treatment afforded to UK investment trusts, they do
not expect there to be any significant change to the current
principal and emerging risks and to the adequacy of the mitigating
controls in place.
In
assessing the viability of the Company, the Directors have
conducted a thorough assessment of each of the Company’s principal
and emerging risks and uncertainties set out in the Strategic
Report. Particular scrutiny was given to the impact of a
significant fall in equity markets on the value of the Company’s
investment portfolio.
The
Directors have also considered the Company’s leverage and liquidity
in the context of its long-dated fixed-rate borrowings (see notes 8
and 15 for further details on the borrowings), its income and
expenditure projections and the fact that the Company’s investments
comprise mainly readily realisable quoted securities which can be
sold to meet funding requirements if necessary. As a result, the
Directors do not believe that there will be any impact on the
Company’s long-term viability.
All of the
key operations required by the Company are outsourced to
third-party providers and alternative providers could be secured at
relatively short notice if necessary. The change from Link Group to
Frostrow has demonstrated this and leaves the Company strongly
positioned.
Having
taken into account the Company’s current position and the potential
impact of its principal and emerging risks and uncertainties, the
Directors have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they fall
due for a period of five years from the date of this Annual
Report.
Modern
Slavery Act
Due to the
nature of the Company’s operational model and the fact that it
generates no turnover, the Board is satisfied that the Company is
not subject to the UK’s Modern Slavery Act 2015. The Company does
not therefore make a modern slavery and human trafficking
statement. The Board however appreciates the significance of Modern
Slavery as an issue but considers the Company’s supply chains,
dealing predominantly with professional advisers and service
providers in the financial services industry, to represent a low
risk of exposure to modern slavery.
In
relation to the Company’s investments, the Board has noted that the
Portfolio Manager signed a letter in 2023, and will again in 2024,
which is sent to FTSE 350 companies considered at that time not to
be in compliance with the requirements of the Modern Slavery Act
2015. This initiative, coordinated by Rathbones, was awarded the
Stewardship Initiative of the Year award in 2022 by the UN
Principles for Responsible Investment. Infractions tend to be of a
technical nature, such as not having a Modern Slavery Statement
available on websites, or not evidencing that such Statements have
approval from the board of the relevant organisation. In 2023, the
Portfolio Manager engaged with investee companies to highlight
where corrections were required to achieve compliance and worked
with Rathbones to monitor responses.
Within
investments, Redwheel principally assesses the risk of modern
slavery exposure through reference to the Corporate Human Rights
Benchmark (which scores companies on governance and policies;
remedies and grievance mechanisms; and embedding respect and human
rights due diligence) and through company compliance with the UN
Global Compact, the UN Guiding Principles on Business and Human
Rights, and the Organisation for Economic Co-operation and
Development Guidelines for Multinational Enterprises.
The
Portfolio Manager also uses Sustainalytics data to monitor breaches
in global norms and controversies including employee incidents. The
Materiality Map developed originally by the Sustainability
Accounting Standards Board helps improve understanding of the
sectors in which companies are most at risk of exposure to labour
and modern slavery issues.
Gender
Diversity
At the
year end, there were two male and three female Directors on the
Board. The Company has no employees and therefore there is nothing
further to report in respect of gender representation within the
Company.
The
Company’s policy on diversity is detailed in the Corporate
Governance Statement.
Bribery
Act
The
Company has a zero-tolerance policy towards bribery and is
committed to carrying out business fairly, honestly and openly. The
Portfolio Manager also adopts a zero-tolerance approach and has
policies and procedures in place to prevent bribery.
Criminal
Finances Act 2017
The
Company has a commitment to zero tolerance towards the criminal
facilitation of tax evasion.
Stewardship/Engagement
The Board
requires the Portfolio Manager to adopt an active stewardship role,
including the effective exercising of shareholders’ ownership
rights. It believes that this is central to the achievement of its
aim to preserve and grow the long-term real purchasing power of the
assets entrusted to it by shareholders.
The
Portfolio Manager thus monitors, evaluates and if necessary,
actively engages or withdraws from investments with the aim of
preserving or adding value to the portfolio. It became a signatory
to the UN Principles for Responsible Investment in 2020, had been a
signatory to the UK Stewardship Code 2012 and in 2023 was again
endorsed as a signatory to the UK Stewardship Code 2020.
Both the
Board and the Portfolio Manager firmly believe that environmental,
social and governance issues can have a material financial impact
on the value of a company along with its social licence to operate,
and therefore on the value of its investors’ capital. It is thus
important for a long-term responsible investor to integrate these
issues into the investment process.
The
Portfolio Manager believes that its stewardship role is wholly
consistent with supporting companies to grow in a sustainable way,
for executive teams and board members to run their companies for
the long term and for the benefit of all stakeholders. Moreover, it
believes that companies not run in a sustainable manner, from lack
of prudence on financial strength and recklessness in the pursuit
of growth at the expense of the environment and relations with
business stakeholders, have significant potential to put
shareholders’ capital at risk. Conversely, companies run in a
prudent manner for all stakeholders are believed to be more likely
to be successful, resilient, and financially rewarding for
shareholders.
Further
detail on the Portfolio Manager’s approach to stewardship is
detailed within its Stewardship Policy1.
1
www.redwheel.com/uk/en/individual/resources
Environment
As an
investment trust which outsources all of its operations, there are
no greenhouse gas emissions to report from the operations of the
Company other than those of the service providers and limited home
working by the Board. The Company does not have responsibility for
any other emissions producing sources reportable under the
Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 or the Companies (Directors’ Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations 2018.
Consequently, the Company consumed very little direct energy during
the year and therefore is exempt from the disclosures required
under the Streamlined Energy and Carbon Reporting
criteria.
Environmental
and climate considerations – both in a systemic sense and
idiosyncratically – have become increasingly important for many in
the investment industry and beyond over the past decade. Physical
and transitional climate risks remain very much at the top of the
list of factors considered to potentially have a material financial
impact over the longer term. Attention is now also increasing in
relation to the use and management by companies of natural
resources, such as water, as well as biodiversity impacts arising
in particular from pollution and waste management practices. The
Portfolio Manager believes active engagement with portfolio
companies is required to address these kinds of challenges.
Divesting simply does not address the problem. Instead, by
supporting companies as they transition over time to more
sustainable business models, the Portfolio Manager believes that
environmental impacts can be both reduced and mitigated.
Detail on
the carbon characteristics of the Company is shown in the following
sections.
When
monitoring and reporting the carbon credentials of the Company, we
use the metrics and methodologies recommended by the Taskforce on
Climate-Related Financial Disclosures (TCFD). Analysis focuses on
the emissions of companies that are considered to be either “Scope
1” or “Scope 2”. Scope 1 emissions are the emissions directly
attributable to a company’s operations, whereas Scope 2 emissions
are the emissions indirectly attributable to a company’s operations
(e.g. relating to the power it consumes). Both are expressed in
terms of tonnes of carbon dioxide equivalent (t CO2eq), the
universal unit of measurement used to indicate the global warming
potential of greenhouse gases, definition and methodology by
Greenhouse Gas Protocol.
The
integration into the analysis of corporate “Scope 3” emissions
remains an aspiration as there are issues relating to data quality
and the double-counting of emissions within methodologies which
continue to hamper expansion of the analysis.
Total
Scope 1 & 2 Emissions
A chart
contained in the published Annual Report and Accounts provides
representations of the absolute greenhouse gas emissions (GHG)
attributable both to Temple Bar, and also to a notional investment
of equal value in the FTSE All-Share.
An equity
ownership approach is used to allocate both Scope 1 and Scope 2
emissions to investments. Under this approach, if an investor holds
shares equal in value to 5 percent of a company’s total market
capitalisation, then the investor is considered to own 5 percent of
the Company; accordingly, it is considered to be liable for 5
percent of the Company’s GHG (or carbon) emissions.
As
compared to the FTSE All-Share, Temple Bar exhibits a higher value
for its Scope 1 and Scope 2 emissions (+37%).
These
metrics are presented on an absolute basis; as the value of the
Company increases, we would expect the overall emissions
attributable to Temple Bar to increase. The respective values for
Temple Bar and the FTSE All-Share, normalised by the value of the
Company, which in essence is the carbon footprint metric, are 157.2
and 116.5 tCO2eq/ GBPm, respectively. Temple Bar’s carbon footprint
is 35% higher as it has a higher exposure to sectors responsible
for a considerable amount of emissions, such as Energy and Consumer
Discretionary.
Weighted
Average Carbon Intensity (WACI):
This chart
shows the asset-weighted emissions intensity both of Temple Bar,
and also of an investment of equal value in the FTSE
All-Share.
Emissions
intensity as a metric reflects the value of a company’s Scope 1 and
Scope 2 carbon emissions (t CO2eq), normalised by revenues derived
(here, using GBP millions), over a particular period in line with
the carbon reporting one, which is financial year 2022 and 2021
respectively.
The
weighted average carbon intensity of the Company is 3% lower than
the FTSE All-Share, indicating on average a lower allocation to
carbon intensive companies.
Observations
As
compared to the FTSE All-Share (ex Investment Trusts), Temple Bar
has a higher allocation to the Energy sector (+7.6%), Consumer
Discretionary sector (+6.5%)At the same time, the Company’s
allocation to the Materials and Utilities sectors is roughly the
same as the FTSE All-Share. These are sectors responsible for a
significant amount of carbon emissions and the previous figures and
charts above demonstrate this.
That said,
it is important to note that whilst Temple Bar has 100% reported
emissions coverage, this is not the case for the FTSE All-Share.
Here, only 60.1% of companies disclose emissions data directly. For
some of the remaining 38.5% of companies it is possible to make an
estimate; for others it is not. Where there is no available
emissions data or third party estimates the companies have been
excluded from the FTSE All-Share’s analysis, this portion of
companies represent around 2.6% of the FTSE All-Share weight in
terms of total invested.
Social
The
Portfolio Manager continues to believe that the financial impact
from social issues can be substantial.
Companies
treating their employees, customers or suppliers inappropriately,
store up future problems for the business in terms of human capital
(lower productivity, disruption to production, staff turnover),
brand value (dissatisfied customers, litigation) and reputation
(supply-chain issues, health and safety). Local communities are
also important to consider, particularly in extractive
industries.
Cyber
security is a notable risk for many companies, particularly for
those holding customer information, sensitive sectors such as banks
or utilities or where intellectual property is the basis of the
value of a company.
The
Portfolio Manager researches and monitors social risks, reviewing
issues for focus based on the Company’s composition. Exposure to
conflict regions is monitored for a risk of human rights abuses.
Where there is potential exposure the Portfolio Manager will
monitor news flow and speak with the investee companies to evaluate
the risk. It may also speak to a company’s wider stakeholders in
order to seek a more holistic assessment of specific situations.
For instance,
during the course of the year, a representative of the Portfolio
Manager attended an event hosted by the Trades Union Congress to
hear more about the experience of companies engaging with their
workforces via unions.
Governance
The
consideration of companies’ approaches to governance has been at
the heart of the Portfolio Manager’s process since inception.
Governance describes the controls and oversight processes in place
to manage operational risks (including environmental and social
risks); it also sets the basis for the culture of a firm. The
Portfolio Manager seeks investee companies whose management runs
the business as owners, and thinks long term about customers,
employees, suppliers, and community. Such an approach is believed
ultimately to benefit shareholders.
The
Portfolio Manager believes in the importance of investee companies
possessing a strong board, with non-executive directors possessing
the requisite skills, experience and independence to counter the
impact of a powerful or dominant chief executive officer. Diversity
can support this aim and helps to counter ‘group think’ and
incorporate better the views of wider stakeholders. Remuneration is
an area of controversy, with management pay ratcheting higher,
often without consequence for failure or poor performance.
Compensation packages must be tied to long-term drivers of
sustainable value, rather than a function of financial engineering.
The timeframe for executive evaluations should be extended and
there should also be a downside risk by requiring management to put
significant ‘skin in the game’.
If
companies behave responsibly and act sustainably there are benefits
for society in terms of economic prosperity, political stability,
and trust in free markets. This in turn drives further benefits for
the companies themselves. The Portfolio Manager therefore believes
it makes sense to integrate into the investment process the
consideration of a company’s performance in addressing
sustainability issues, even if the advantages of doing so take time
to emerge.
Remuneration
The
Portfolio Manager believes that governance within UK companies is
generally of a very high standard. This reflects the UK Corporate
Governance Code and the long history of efforts to raise standards.
Whilst there are many individual aspects of corporate governance
that the Portfolio Manager considers, remuneration – the design and
implementation in practice of pay structures to reward and
incentivise behaviours that help the Company execute against its
strategy – remains one of the most important.
The
Portfolio Manager’s view is that the basis of a good corporate
remuneration policy is a well-constituted remuneration committee.
This requires both the independence of the committee members and
relevant experience in the field of remuneration. A committee must
guard against the ratcheting upward of compensation awards,
balancing this with attracting and retaining talent.
The
Portfolio Manager encourages companies to set remuneration metrics
that align with the overall strategy, reflecting appropriate
financial incentives, in combination with non-financial metrics
relating to environment and social issues. Environmental metrics
should be calibrated to help address specific operational
challenges, while on social issues relations with employees,
customers, suppliers and the community should be reflected as
appropriate.
Remuneration
is a complex area and challenging to find the right balance between
the various objectives and agendas. Shareholders will invariably
give conflicting feedback to remuneration committees. Where the
Portfolio Manager can have significant influence, they will engage
with companies in the construction of the remuneration policy.
Where they feel their shareholding in a given company is too low to
ensure a constructive basis for engagement, they will share their
own remuneration expectations document which sets out for companies
what the Portfolio Manager expects to see.
The
Portfolio Manager in conjunction with the Board will continue to
develop the overall approach and push for higher standards,
ensuring that they collectively protect shareholder interests and
promote long-termism, set in the context of sustainability for all
stakeholders.
Engagement
Policy
Engagement
is central to the Portfolio Manager’s process. Communicating with
investee companies on areas of concern is a key aspect of the
Portfolio Manager’s approach. Having a long-term investment horizon
and concentrated portfolio allows the Portfolio Manager to build
meaningful relationships.
The
engagement process is led and carried out by the Portfolio Manager,
consistent with the Redwheel Stewardship Policy. The specifics of
each process will be determined by the size of the exposure within
the portfolio and the materiality of the identified risk, amongst
other factors. The Portfolio Manager will draw from its own
experience in assessing materiality risks as well as both the
Company’s own materiality assessment and independent assessments on
a sector basis, such as the Materiality Map developed originally by
the Sustainability Accounting Standards Board.
The method
of engagement will depend on the engagement objectives. For
example, where the Portfolio Manager holds a position in an
investee company and is materially at odds with the Company’s
strategic direction or specific actions, it will usually set out
its concerns in a letter to the Company and follow up with a
meeting. In some instances, the Portfolio Manager will go further
and set out a detailed analysis of the business or sector, with
proposed alterations to strategy, and discuss this analysis with
management.
The
Portfolio Manager will engage with the chair of an investee
company, particularly at times of management change or in relation
to long-term questions on strategic direction. It may also engage
with the investee company’s senior independent director should it
have concerns about the chair or about board effectiveness. Other
engagements may take place in response to a request from the
investee company themselves, such as engagements with the chair of
the remuneration committee to discuss incentive structures and
policies. Engaging in collaboration with other shareholders, and
casting votes against management at a company’s AGM provide further
means to escalate concerns when direct bilateral engagement fails.
As regards remuneration, the Portfolio Manager aligns its approach
to reflect the guidance provided by the Pensions and Lifetime
Savings Association, the UK Corporate Governance Code and The
Investment Association, as updated from time to time.
The
evaluation of the outcome of the Portfolio Manager’s engagements
will depend on the type of engagement and the extent to which the
original objective can be considered to have been
achieved.
Where the
Portfolio Manager looks for specific actions, it will assess the
outcome on whether management or the board engaged and subsequently
chose to act on the suggestions made. On other issues, the
evaluation of the engagement may be more qualitative and not as
transparent. The Portfolio Manager tries to be very open about the
nature of its engagements and the outcomes of them.
Case
studies of the Portfolio Manager’s engagement with investee
companies during the year are provided in the Company’s full Annual
Report and are just some of numerous calls, meetings and written
correspondence that the Portfolio Manager had with companies to
discuss a variety of sustainability and ESG-related
issues.
Externalities
and Non-Environmental Issues
In
addition to adopting a stewardship approach to investment and
integrating sustainability and ESG considerations into its
investment approach, the Board asks the Portfolio Manager to
consider systemic externalities when assessing a company’s
suitability for inclusion in the portfolio. Systemic externalities
are costs, usually considered as costs to society or the
environment, which are not captured by market pricing. In
particular, there are some areas where companies operating legally
and ethically may, through their joint actions (whether or not
coordinated), inadvertently contribute to the delivery of
unintended consequences for people and planet, particularly in
relation to climate change, global financial fragility and
antimicrobial resistance.
These are
areas where the Board believes that engagement with investee
companies, in conjunction with other asset owners, is of particular
importance in order to raise awareness amongst companies of the
need for market-based response. The Portfolio Manager reports
regularly to the Board with regard to its engagement with portfolio
companies in relation to such issues.
Future
Developments
The future
development of the Company is dependent on the success of its
investment strategy in the light of economic and equity market
developments. The outlook is discussed in the Chairman’s Statement
and the Portfolio Manager’s Report.
Strategic
Report
On behalf
of the Board
Richard Wyatt
Chairman
3 April 2024
Statement
of Comprehensive Income
|
|
|
2023
|
2022
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
Notes
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
Total
Income
|
4
|
32,422
|
–
|
32,422
|
34,791
|
–
|
34,791
|
|
Profit/(losses)
on investments
|
12
|
–
|
62,826
|
62,826
|
–
|
(42,572)
|
(42,572)
|
|
Currency
exchange loss
|
|
–
|
(143)
|
(143)
|
–
|
(13)
|
(13)
|
|
Total
income/(loss)
|
|
32,422
|
62,683
|
95,105
|
34,791
|
(42,585)
|
(7,794)
|
|
Expenses
|
|
|
|
|
|
|
|
|
Portfolio
management fees
|
6
|
(1,103)
|
(1,654)
|
(2,757)
|
(1,175)
|
(1,762)
|
(2,937)
|
|
Other
expenses
|
7
|
(1,068)
|
(721)
|
(1,789)
|
(1,057)
|
(487)
|
(1,544)
|
|
Profit/(loss)
before finance costs and tax
|
|
30,251
|
60,308
|
90,559
|
32,559
|
(44,834)
|
(12,275)
|
|
Finance
costs
|
8
|
(1,123)
|
(1,685)
|
(2,808)
|
(1,123)
|
(1,685)
|
(2,808)
|
|
Profit/(loss)
before tax
|
|
29,128
|
58,623
|
87,751
|
31,436
|
(46,519)
|
(15,083)
|
|
Tax
|
9
|
(926)
|
–
|
(926)
|
(886)
|
–
|
(886)
|
|
Profit/(loss)
for the year
|
|
28,202
|
58,623
|
86,825
|
30,550
|
(46,519)
|
(15,969)
|
|
Earnings
per share
|
11
|
9.3p
|
19.4p
|
28.7p
|
9.4p
|
(14.3p)
|
(4.9p)
|
The total
column of this statement represents the Statement of Comprehensive
Income prepared in accordance with IFRS. The supplementary revenue
return and capital return columns are both prepared under guidance
issued by the AIC. All items in the above statement derive from
continuing operations.
No
operations were acquired or discontinued during the
year.
The
Company does not have any income or expense that is not included in
profit for the year. Accordingly, the profit for the year is also
the Total Comprehensive Income for the year, as defined in IAS1
(revised).
The notes
to the financial statements form an integral part of the financial
statements.
Statement
of Changes in Equity
|
|
|
Called-up
share
|
Share
premium
|
Capital
|
Revenue
|
Total
|
|
|
|
capital
|
account
|
reserves
|
reserve
|
equity
|
|
|
Notes
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Balance
at 1 January 2022
|
|
16,719
|
96,040
|
672,616
|
11,708
|
797,083
|
|
(Loss)/profit
for the year
|
|
–
|
–
|
(46,519)
|
30,550
|
(15,969)
|
|
Contributions
by and distributions to owners
|
|
|
|
|
|
|
|
Cost of
shares bought back for treasury
|
|
–
|
–
|
(25,891)
|
–
|
(25,891)
|
|
Dividends
paid to equity shareholders
|
10
|
–
|
–
|
–
|
(28,877)
|
(28,877)
|
|
Balance
at 31 December 2022
|
|
16,719
|
96,040
|
600,206
|
13,381
|
726,346
|
|
Profit for
the year
|
|
–
|
–
|
58,623
|
28,202
|
86,825
|
|
Contributions
by and distributions to owners
|
|
|
|
|
|
|
|
Cost of
shares bought back for treasury
|
|
–
|
–
|
(63,535)
|
–
|
(63,535)
|
|
Dividends
paid to equity shareholders
|
10
|
–
|
–
|
–
|
(28,932)
|
(28,932)
|
|
Balance
at 31 December 2023
|
|
16,719
|
96,040
|
595,294
|
12,651
|
720,704
|
As at
31 December 2023, the Company had
distributable revenue reserves of £12,651,000 (2022: £13,381,000)
and distributable capital reserves of £595,294,000 (2022:
£600,206,000) for the payment of future dividends. Only the revenue
reserve and capital reserves are distributable.
The notes
to the financial statements form an integral part of the financial
statements.
Statement
of Financial Position
|
|
|
31
December 2023
|
31
December 2022
|
|
|
Notes
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Non-current
assets
|
|
|
|
|
|
|
Investments
|
12
|
|
776,875
|
|
782,463
|
|
Current
assets
|
|
|
|
|
|
|
Investments
|
12
|
13,713
|
|
5,170
|
|
|
Cash and
cash equivalents
|
|
4,275
|
|
13,240
|
|
|
Receivables
|
13
|
2,979
|
|
2,257
|
|
|
|
|
|
20,967
|
|
20,667
|
|
Total
assets
|
|
|
797,842
|
|
803,130
|
|
Current
liabilities
|
|
|
|
|
|
|
Payables
|
14
|
|
(2,394)
|
|
(2,077)
|
|
Total
assets less current liabilities
|
|
|
795,448
|
|
801,053
|
|
Non-current
liabilities
|
|
|
|
|
|
|
Interest
bearing borrowings
|
15
|
|
(74,744)
|
|
(74,707)
|
|
Net
assets
|
|
|
720,704
|
|
726,346
|
|
Equity
attributable to equity holders
|
|
|
|
|
|
|
Ordinary
share capital
|
16
|
16,719
|
|
16,719
|
|
|
Share
premium
|
|
96,040
|
|
96,040
|
|
|
Capital
reserves
|
|
595,294
|
|
600,206
|
|
|
Revenue
reserve
|
|
12,651
|
|
13,381
|
|
|
Total
equity attributable to equity holders
|
|
|
720,704
|
|
726,346
|
|
NAV
per share
|
18
|
|
248.0p
|
|
228.5p
|
|
NAV
per share with debt at fair value1
|
18
|
|
252.2p
|
|
233.5p
|
1
Alternative
Performance Measure – See glossary of terms for definition and more
information.
The notes
to the financial statements form an integral part of the financial
statements.
The
financial statements of Temple Bar Investment Trust Plc (registered
number: 00214601) were approved by the Board of Directors and
authorised for issue on 3 April 2024.
They were signed on its behalf by:
Richard Wyatt
Chairman
Statement
of Cash Flows
|
|
|
31
December 2023
|
31
December 2022
|
|
|
Notes
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
(Loss)/profit
before tax
|
|
|
87,751
|
|
(15,083)
|
|
Adjustments
for:
|
|
|
|
|
|
|
Losses/(gains)
on investments
|
|
(62,826)
|
|
42,572
|
|
|
Finance
costs
|
|
2,808
|
|
2,808
|
|
|
Dividend
income
|
4
|
(32,278)
|
|
(34,504)
|
|
|
Interest
income
|
4
|
(144)
|
|
(287)
|
|
|
Dividends
received
|
|
32,037
|
|
37,680
|
|
|
Interest
received
|
|
(97)
|
|
584
|
|
|
Decrease/(increase)
in other receivables
|
|
38
|
|
(361)
|
|
|
Increase
in other payables
|
|
584
|
|
70
|
|
|
Net
overseas withholding tax paid
|
9
|
(1,229)
|
|
(886)
|
|
|
|
|
|
(61,107)
|
|
47,676
|
|
Net
cash flows from operating activities
|
|
|
26,644
|
|
32,593
|
|
Purchases
of investments
|
|
(137,215)
|
|
(127,456)
|
|
|
Sales of
investments
|
|
197,110
|
|
154,148
|
|
|
Net
cash flows from investing activities
|
|
|
59,895
|
|
26,692
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
Equity
dividends paid
|
10
|
(28,932)
|
|
(28,877)
|
|
|
Interest
paid on borrowings
|
|
(2,773)
|
|
(2,772)
|
|
|
Shares
bought back for treasury
|
|
(63,799)
|
|
(26,022)
|
|
|
Net
cash flows used in financing activities
|
|
|
(95,504)
|
|
(57,671)
|
|
Net
(decrease)/increase in cash and cash
equivalents
|
|
|
(8,965)
|
|
1,614
|
|
Cash
and cash equivalents at the start of the year
|
|
|
13,240
|
|
11,626
|
|
Cash
and cash equivalents at the end of the year
|
|
|
4,275
|
|
13,240
|
The notes
to the financial statements form an integral part of the financial
statements.
Notes
to the Financial Statements
General
information
Temple Bar
Investment Trust Plc was incorporated in England and Wales in 1926 with the registered number
00214601.
The
Company carries on the business as an investment trust company
within the meaning of Sections 1158/1159 of the Corporation Tax Act
2010.
1.
Principal Accounting Policies
Basis
of accounting
The
financial statements have been prepared on a going concern basis,
under the historical cost convention, modified by the valuation of
investments at fair value, prepared in accordance with UK adopted
international accounting standards.
The annual
financial statements have also been prepared in accordance with the
AIC SORP for investment trusts issued by the AIC in July 2022, except to any extent where it is not
consistent with the requirements of IFRS. The principal accounting
policies adopted by the Company are set out below.
All values
are rounded to the nearest thousand pounds unless otherwise
indicated.
Going
concern
The
Directors are required to make an assessment of the Company’s
ability to continue as a going concern and that the Company has
adequate resources to continue in operational existence for 12
months from the date when these financial statements are
approved.
In making
this assessment, the Directors have considered a wide variety of
emerging and current risks to the Company, as well as mitigation
strategies that are in place. The Board has also reviewed
stress-testing and scenario analyses prepared by the AIFM to assist
it in assessing the impact of changes in market value and income
with associated cash flows. In making this assessment, the AIFM has
considered plausible downside scenarios.
These
tests are carried out as an arithmetic exercise, which can apply
equally to any set of circumstances in which asset value and income
are significantly impaired. It was concluded that in a plausible
downside scenario, the Company could continue to meet its
liabilities. Whilst the economic future is uncertain, the opinion
of the Directors is that no foreseeable downside scenario would be
to a level which would threaten the Company’s ability to continue
to meet its liabilities as they fall due.
Based on
the information available to the Directors at the time of this
report, including the results of the stress tests and scenario
analyses, and having taken account of the liquidity of the
investment portfolio, the Company’s cash flow and borrowing
position (see notes 8 and 15 for further details on borrowings),
the Directors are satisfied that the Company has adequate financial
resources to continue in operation for 12 months from the date of
signing of these financial statements and that, accordingly, it is
appropriate to adopt the going concern basis.
Presentation
of Statement of Comprehensive Income
In order
to better reflect the activities of an investment trust company and
in accordance with guidance issued by the AIC, supplementary
information which analyses the Statement of Comprehensive Income
between items of a revenue and capital nature has been presented
alongside the Statement of Comprehensive Income.
Income
Dividend
income from investments is recognised when the Company’s right to
receive payment has been established, normally the ex-dividend
date.
Where the
Company has elected to receive its dividends in the form of
additional shares rather than cash, the amount of cash dividend
foregone is recognised as income. Any excess in the value of shares
received over the amount of cash dividend foregone is recognised as
a capital gain in the Statement of Comprehensive Income.
Interest
income is recognised in line with coupon terms on a
time-apportioned basis. Special dividends are credited to capital
or revenue according to their circumstances.
Foreign
currency
The
financial statements are prepared in pounds sterling because that
is the currency of the primary economic environment in which the
Company operates.
The
primary objective of the Company is to generate returns in pounds
sterling, its capital-raising currency. The liquidity of the
Company is managed on a day-to-day basis in sterling as the
Company’s performance is evaluated in that currency. Therefore, the
Directors consider pounds sterling as the currency that most
faithfully represents the economic effects of the underlying
transactions, events and conditions.
Transactions
involving foreign currencies are converted at the exchange rate
ruling at the date of the transaction. Foreign currency monetary
assets and liabilities as well as instruments carried at fair value
are translated into pounds sterling at the exchange rate ruling on
the year-end date. Foreign exchange differences arising on
translation are recognised in the Statement of Comprehensive
Income.
Expenses
All
expenses are accounted for on the accruals basis. In respect of the
analysis between revenue and capital items presented within the
Statement of Comprehensive Income, all expenses have been presented
as revenue items except as follows:
· transaction
costs which are incurred on the purchases or sales of investments
designated as fair value through profit or loss are expensed to
capital in the Statement of Comprehensive Income; and
· expenses
are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments
held can be demonstrated and, accordingly, the investment
management fee and finance costs have been allocated 40% to revenue
and 60% to capital, in order to reflect the Directors’ long-term
view of the nature of the expected investment returns of the
Company; this remains consistent with the prior year.
Taxation
The tax
expense represents the sum of the current tax expense. The tax
currently payable is based on the taxable profit for the year. The
taxable profit differs from profit before tax as reported in the
Statement of Comprehensive Income because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The
Company’s liability for current tax is calculated using a blended
rate as applicable throughout the year.
In line
with the recommendations of the SORP, the allocation method used to
calculate tax relief on expenses presented against capital returns
in the supplementary information in the Statement of Comprehensive
Income is the ‘marginal basis’. Under this basis, if taxable income
is capable of being entirely offset by expenses in the revenue
column of the income statement, then no tax relief is transferred
to the capital column.
Deferred
tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the
computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilised.
Deferred
tax is calculated at the enacted tax rate that is expected to apply
in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the revenue return
of the Statement of Comprehensive Income, except when it relates to
items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
· Investment
trusts which have approval under Section 1158 of the Corporation
Tax Act 2010 are not liable for taxation on capital
gains.
· Irrecoverable
withholding tax is recognised on any overseas dividends on an
accruals basis using the applicable rate for the country of
origin.
Financial
instruments
The
Company classifies its financial assets as subsequently measured at
amortised cost or measured at fair value through profit or loss on
the basis of its business model for managing the financial assets
and the contractual cash flow characteristics of the financial
asset. Financial assets are measured at fair value through profit
or loss if their contractual terms do not give rise to cash flows
on specified dates that are solely payments of principal and
interest and at amortised cost if they do. Financial assets and
financial liabilities are recognised in the Statement of Financial
Position when the Company becomes party to the contractual
provisions of the instrument. The Company will offset financial
assets and financial liabilities if it has a legally enforceable
right to offset the recognised amounts and interest and intends to
settle on a net basis. A financial asset is derecognised when the
right to receive cash flows from the asset expires or the rights to
receive cash flows from the asset have been transferred and a
financial liability is derecognised when the obligation under the
liability is discharged, cancelled or expired.
Investments
Equity
investments are held at fair value through profit or loss as they
fail the contractual cash flows test under IFRS 9. Debt instruments
that pass the contractual cash flow test are held under a business
model to manage them on a fair value basis for investment income
and fair value gains and are therefore classified as fair value
through profit or loss.
Upon
initial recognition, investments are measured at fair value through
profit or loss. Gains or losses on investments measured at fair
value through profit or loss are included in net profit or loss as
a capital item and transaction costs on acquisition or disposal of
investments are expensed. For investments that are actively traded
in organised financial markets, fair value is determined by
reference to stock exchange quoted market bid prices at the close
of business on the year-end date.
All
purchases and sales of investments are recognised on the trade
date, i.e. the date that the Company commits to purchase or sell an
asset.
Financial
liabilities and equity instruments
Financial
liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in
the assets of the Company after deducting all of its
liabilities.
Interest
bearing borrowings
Interest
bearing borrowings, being the debenture stock and loans issued by
the Company, are initially recognised at a carrying value
equivalent to the proceeds received net of issue costs associated
with the borrowings. After initial recognition, interest bearing
borrowings are subsequently measured at amortised cost using the
effective interest rate method.
When
calculating the NAV with debt at fair value the fair value of the
private placement loans is determined using discounted cash flow
techniques which utilise inputs including interest rates obtained
from comparable loans in the market.
Equity
dividends payable
Equity
dividends payable are recognised when the shareholders’ right to
receive payment is established. For interim dividends this is when
they are paid and for final dividends this is when they are
approved by shareholders.
Cash
and cash equivalents
Cash and
cash equivalents (which are presented as a single class of asset on
the Statement of Financial Position) comprise cash at bank and in
hand, and deposits with an original maturity of three months or
less.
The
carrying value of these assets approximates their fair
value.
Reserves
The share
capital represents the nominal value of the Company’s ordinary
shares.
The share
premium account represents the excess over nominal value of the
fair value of consideration received for the Company’s ordinary
shares, net of expenses of the share issue. This reserve cannot be
distributed.
The
capital reserve represents realised and unrealised capital and
exchange gains and losses on the disposal and revaluation of
investments and of foreign currency items. Realised gains can be
distributed, unrealised gains cannot be distributed.
The
revenue reserve represents retained profits from the income derived
from holding investment assets less the costs and interest on cash
balances associated with running the Company. This reserve can be
distributed.
2.
Significant Accounting Judgements, Estimates and
Assumptions
There are
no significant judgements, estimates or assumptions involved in the
presentation of the Company’s accounts, other than the judgement on
the functional and presentational currency of the Company as set
out in the preceding note.
3.
Adoption of New and Revised Standards New standards,
interpretations and amendments adopted from
1 January
2023
There are
no new standards impacting the Company that have had a significant
effect on the annual financial statements for the year ended
31 December 2023.
Disclosure
of Accounting Policies (Amendments to IAS 1 Presentation of
Financial Statements and IFRS Practice Statement 2 Making
Materiality Judgements)
In
February 2021, the IASB issued
amendments to IAS 1 and IFRS Practice Statement 2. The amendments
aim to make accounting policy disclosures more informative by
replacing the requirement to disclose ‘significant accounting
policies’ with ‘material accounting policy information’. The
amendments also provide guidance under what circumstance, the
accounting policy information is likely to be considered material
and therefore requiring disclosure.
These
amendments have no effect on the measurement or presentation of any
items in the financial statements of the Company nor do they affect
the disclosure of accounting policies of the Company.
Standards
issued but not yet effective
There are
no standards or amendments not yet effective which are relevant or
have a material impact on the Company.
4.
Income
|
|
2023
|
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Investment
Income
|
|
|
|
|
|
|
|
UK
dividends
|
23,085
|
–
|
23,085
|
26,541
|
–
|
26,541
|
|
Overseas
dividends
|
9,193
|
–
|
9,193
|
7,963
|
–
|
7,963
|
|
Interest
from fixed-interest securities
|
84
|
–
|
84
|
256
|
–
|
256
|
|
|
32,362
|
–
|
32,362
|
34,760
|
–
|
34,760
|
|
Other
income
|
|
|
|
|
|
|
|
Deposit
interest
|
60
|
–
|
60
|
31
|
–
|
31
|
|
Total
income
|
32,422
|
–
|
32,422
|
34,791
|
–
|
34,791
|
During the
year ended 31 December 2023, the
Company received special dividends totalling £nil (2022:
£3,183,079). All the special dividends in 2022 were recognised as
revenue and included within investment income.
5.
Segmental Reporting
The
Directors are of the opinion that the Company is engaged in a
single segment of business being investment business.
6.
Portfolio Management Fee
|
|
2023
|
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Portfolio
management fee
|
1,103
|
1,654
|
2,757
|
1,175
|
1,762
|
2,937
|
|
|
1,103
|
1,654
|
2,757
|
1,175
|
1,762
|
2,937
|
Under the
terms of the Portfolio Management Agreement, Redwheel is entitled
to a management fee, details of which are set out in the Report of
the Directors. As at 31 December
2023, an amount of £1,306,000 (2022: £741,000) was payable
to Redwheel in relation to the management fees.
7.
Other Expenses
|
|
2023
|
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Transaction
costs1
|
–
|
430
|
430
|
–
|
310
|
310
|
|
Directors’
fees
(see
Report on Directors’ Remuneration)
|
181
|
–
|
181
|
155
|
–
|
155
|
|
AIFM
fee
|
194
|
291
|
485
|
83
|
124
|
207
|
|
Company
Secretary fee
|
69
|
–
|
69
|
104
|
–
|
104
|
|
Registrar’s
fee
|
60
|
–
|
60
|
113
|
–
|
113
|
|
Marketing
costs
|
59
|
–
|
59
|
108
|
–
|
108
|
|
Auditor’s
remuneration – annual audit2
|
51
|
–
|
51
|
47
|
–
|
47
|
|
Depositary
fee
|
92
|
–
|
92
|
95
|
–
|
95
|
|
Other
expenses
|
362
|
–
|
362
|
352
|
53
|
405
|
|
|
1,068
|
721
|
1,789
|
1,057
|
487
|
1,544
|
All
expenses are inclusive of VAT where applicable.
1 Transaction
costs represent costs incurred on both the purchase and sale of
investments. Transaction costs on purchases amounted to £360,000
(2022: £283,100) and on sales amounted to £70,000 (2022:
£27,000).
2
During the
year audit fees of £42,600 (2022: £39,500) (excluding VAT) were due
to the Auditor.
8.
Finance Costs
|
|
2023
|
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
4.05%
Private Placement Loan 20281
|
823
|
1,234
|
2,057
|
823
|
1,234
|
2,057
|
|
2.99%
Private Placement Loan 20471
|
300
|
451
|
751
|
300
|
451
|
751
|
|
Total
finance costs
|
1,123
|
1,685
|
2,808
|
1,123
|
1,685
|
2,808
|
The
amortisation of the loan issue costs is calculated using the
effective interest method.
1 The
4.05% and 2.99% Private Placement Loans contain the following
principal financial or other covenants, with which failure to
comply could necessitate the early repayment of the
loan.
These were
all complied with during the current and previous year:
· net
tangible assets of at least £275 million;
· aggregate
principal amount of financial indebtedness not to exceed 50% of net
tangible assets;
· prior
approval by the note holder of any change of Portfolio Manager;
and
· prior
approval by the note holder of any change in the Company’s
investment objective and policy.
9.
Taxation
The
Company has no corporation tax liability for the year ended
31 December 2023 (2022:
nil).
|
|
2023
|
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Analysis
of charge for the year:
|
|
|
|
|
|
|
|
Overseas
withholding tax suffered
|
926
|
–
|
926
|
886
|
–
|
886
|
|
|
926
|
–
|
926
|
886
|
–
|
886
|
The charge
for the year can be reconciled to the profit per the Statement of
Comprehensive Income as follows:
|
|
2023
|
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Profit/(loss)
before taxation
|
29,128
|
58,623
|
87,751
|
31,436
|
(46,519)
|
(15,083)
|
|
Tax at UK
corporation tax rate of 23.5% (2022: 19.0%)
|
6,845
|
13,776
|
20,621
|
5,973
|
(8,839)
|
(2,866)
|
|
Tax
effects of:
|
|
|
|
|
|
|
|
Non–taxable(gains)/losses
on investments1
|
–
|
(14,730)
|
(14,730)
|
–
|
8,091
|
8,091
|
|
Disallowed
expenses
|
–
|
101
|
101
|
–
|
69
|
69
|
|
Non–taxable
UK dividends
|
(5,425)
|
–
|
(5,425)
|
(5,043)
|
–
|
(5,043)
|
|
Overseas
withholding tax suffered
|
926
|
–
|
926
|
886
|
–
|
886
|
|
Non–taxable
overseas dividends
|
(2,161)
|
–
|
(2,161)
|
(1,513)
|
–
|
(1,513)
|
|
Excess
management expenses
|
741
|
853
|
1,594
|
583
|
679
|
1,262
|
|
Total
tax charge for the year
|
926
|
–
|
926
|
886
|
–
|
886
|
1
Investment
trusts are not subject to corporation tax on these
items.
No
provision for deferred taxation has been made in the current year.
The Company has not provided for deferred tax on capital profits
arising on the revaluation of investments, as it is exempt from tax
on these items because of its status as an investment trust
company.
The
Company has not recognised a deferred tax asset on the excess
management expenses of £130,092,000 (2022: £124,374,000). It is not
anticipated that these excess expenses will be utilised in the
foreseeable future.
10.
Dividends
|
|
2023
|
2022
|
|
|
£’000
|
£’000
|
|
Amounts
recognised as distributions to equity holders in the
year
|
|
|
|
Fourth
interim dividend for year ended 31 December 2022 of 2.5p
(2022:
fourth interim dividend for year ended 31 December 2021 of 2.05p*)
per share
|
7,790
|
6,759
|
|
Interim
dividends for year ended 31 December 2023. Two payments of 2.3p and
one payment of 2.5p (2022: one payment of 2.05p, one payment of
2.3p and one payment of 2.5p) per share
|
21,142
|
22,118
|
|
|
28,932
|
28,877
|
|
Fourth
interim dividend for the year ended 31 December 2023 of
2.5p
(fourth
interim dividend 2022: 2.5p) per share
|
7,214
|
7,791
|
The fourth
interim dividend is not included as a liability in these financial
statements.
Therefore,
also set out below is the total dividend payable in respect of
these financial years, which is the basis on which the requirements
of Section 1158 of the Corporation Tax Act 2010 are
considered.
|
|
2023
|
2022
|
|
|
£’000
|
£’000
|
|
Interim
dividends (three)
|
21,142
|
22,118
|
|
Fourth
interim dividend for year ended 31 December 2023 of 2.5p (2022:
2.5p) per share
|
7,214
|
7,791
|
|
|
28,356
|
29,909
|
*
Restated to
reflect the subsequent 5 for 1 share split.
11.
Earnings per Share
|
|
2023
|
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
Basic
and diluted
|
|
|
|
|
|
|
|
Profit/(loss)
for the year (£000’s)
|
28,202
|
58,623
|
86,825
|
30,550
|
(46,519)
|
(15,969)
|
|
Weighted
average number of ordinary shares
|
|
|
302,388,667
|
|
|
325,567,365
|
|
Earnings
per ordinary share (pence)
|
9.3
|
19.4
|
28.7
|
9.4
|
(14.3)
|
(4.9)
|
12.
Investments
(a)
Investment portfolio summary
|
|
2023
|
2022
|
|
|
Quoted
|
Debt
|
|
Quoted
|
Debt
|
|
|
|
equities
|
securities
|
Total
|
equities
|
securities
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Opening
cost at the beginning of the year
|
734,594
|
5,172
|
739,766
|
736,629
|
7,948
|
744,577
|
|
Opening
unrealised appreciation/(depreciation) at the beginning of the
year
|
47,869
|
(2)
|
47,867
|
112,521
|
(4)
|
112,517
|
|
Opening
fair value at the beginning of the year
|
782,463
|
5,170
|
787,633
|
849,150
|
7,944
|
857,094
|
|
Movements
in the year:
|
|
|
|
|
|
|
|
Purchases
at cost
|
123,559
|
13,680
|
137,239
|
59,648
|
67,611
|
127,259
|
|
Sales
proceeds
|
(191,910)
|
(5,200)
|
(197,110)
|
(83,787)
|
(70,361)
|
(154,148)
|
|
Realised
gain/(loss) on sale of investments
|
67,070
|
–
|
67,070
|
22,104
|
(26)
|
22,078
|
|
Change in
unrealised (depreciation)/ appreciation
|
(4,307)
|
63
|
(4,244)
|
(64,652)
|
2
|
(64,650)
|
|
Closing
fair value at the end of the year
|
776,875
|
13,713
|
790,588
|
782,463
|
5,170
|
787,633
|
|
Closing
cost at the end of the year
|
733,313
|
13,652
|
746,965
|
734,594
|
5,172
|
739,766
|
|
Closing
unrealised appreciation/(depreciation) at the end of the
year
|
43,562
|
61
|
43,623
|
47,869
|
(2)
|
47,867
|
|
Closing
fair value at the end of the year
|
776,875
|
13,713
|
790,588
|
782,463
|
5,170
|
787,633
|
The
Company received £197,110,000 (2022: £154,148,000) from investments
sold in the year. The book cost of these investments when they were
purchased was £130,040,000 (2022: £132,070,000). These investments
have been revalued over time and until they were sold any
gains/losses were included in the fair value of the
investments.
(b)
Fair value of financial instruments
IFRS 13
requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used
in making the measurements. The fair value hierarchy has the
following classifications:
· Level
1 – valued using quoted prices in active markets for identical
investments.
· Level
2 – valued using other significant observable inputs (including
quoted prices for similar investments, interest rates, prepayments,
credit risk, etc). There are no level 2 financial assets (2022:
£nil).
· Level
3 – valued using significant unobservable inputs (including the
Company’s own assumptions in determining the fair value of
investments). There are no level 3 financial assets (2022:
£nil).
All of the
Company’s investments are in quoted securities actively traded on
recognised stock exchanges, with their fair value being determined
by reference to their quoted bid prices at the reporting date and
have therefore been determined as Level 1.
There were
no transfers between levels in the year (2022: no transfers) and as
such no reconciliation between levels has been
presented.
13.
Receivables
|
|
2023
|
2022
|
|
|
£’000
|
£’000
|
|
Accrued
income
|
1,937
|
1,481
|
|
Other
receivables
|
1,042
|
776
|
|
|
2,979
|
2,257
|
Accrued
income includes dividends and fixed-interest income.
14.
Current Liabilities
|
|
|
2023
|
2022
|
|
|
|
£’000
|
£’000
|
|
Accruals
|
2,363
|
1,782
|
|
Due to
broker
|
31
|
295
|
|
|
|
2,394
|
2,077
|
Accruals
include the interest payable on borrowings amount to £802,000
(£2022: £805,000).
15.
Borrowings
|
|
2023
|
2022
|
|
|
£’000
|
£’000
|
|
Interest
bearing borrowings
|
|
|
|
Amounts
payable after more than one year:
|
|
|
|
4.05%
Private Placement Loan 2028
|
49,849
|
49,817
|
|
2.99%
Private Placement Loan 2047
|
24,895
|
24,890
|
|
Total
|
74,744
|
74,707
|
|
|
2023
|
2022
|
|
|
£’000
|
£’000
|
|
Opening
balance as per the Statement of Financial Position
|
74,707
|
74,671
|
|
Borrowings
repaid
|
–
|
–
|
|
Interest
movement
|
(2,771)
|
(2,772)
|
|
Finance
costs for the year as per the Statement of Comprehensive
Income
|
2,808
|
2,808
|
|
Closing
balance as per the Statement of Financial
Position
|
74,744
|
74,707
|
The 4.05%
Private Placement Loan is secured by a floating charge over the
assets of the Company. The loan is repayable at par, £50,000,000,
on 3 September 2028.
The 2.99%
Private Placement Loan is secured by a floating charge over the
assets of the Company. The loan is repayable at par, £25,000,000,
on 24 October 2047.
See note
20 for the disclosure and fair value categorisation of the
financial liabilities.
16.
Ordinary Share Capital
|
|
2023
|
2022
|
|
|
Number
|
Number
|
|
As
at 1 January
|
317,822,386
|
65,951,785
|
|
Purchase
of shares into treasury pre-share split
|
–
|
(260,125)
|
|
Issue of
shares following 5 for 1 share split
|
–
|
262,766,640
|
|
Purchase
of shares into treasury post-share split
|
(27,209,505)
|
(10,635,914)
|
|
As
at year end:
|
|
|
|
In
circulation
|
290,612,881
|
317,822,386
|
|
In
Treasury
|
43,750,944
|
16,541,439
|
|
Listed
|
334,363,825
|
334,363,825
|
|
Nominal
Value of 5p ordinary shares (£’000)
|
16,719
|
16,719
|
During the
year, the Company bought back ordinary shares at a cost of
£63,535,000 (Year ended 31 December
2022: £25,891,000).
At the AGM
of the Company held in May 2022,
shareholders approved a resolution for a five for one share split
such that each shareholder would receive five shares with a nominal
value of 5 pence each for every one
share held. 267,491,060 additional shares (262,766,640 to
shareholders and 4,724,420 in relation to shares held in treasury)
were issued following this approval.
17.
Contingent Liabilities And Capital Commitments
As at
31 December 2023, there were no
contingent liabilities or capital commitments for the Company
(2022: £nil).
18.
Net asset value (“NAV”) per share
The NAV
per share is based on the net assets attributable to the equity
shareholders of £720,704,000 (31 December
2022: £726,346,000) and 290,612,881 (31 December 2022: 317,822,836) shares being the
number of shares in issue at the year end.
The NAV
per share with debt at fair value is based on the net assets
attributable to the equity shareholders, adjusted for the
difference between the debt at book value and fair value as shown
in note 20, and the number of shares in issue at the year end.
Adjusting for debt at fair value resulted in an increase in net
assets of £12,290,000 or 4.2p per share (31
December 2022: increase of £15,938,000 or 5.0p per
share).
19.
Related Party Transactions and Transactions with the Portfolio
Manager
IAS 24
‘Related party disclosures’ requires the disclosure of material
transactions between the Company and any related parties.
Accordingly, the disclosures required are set out below:
Directors
– The
remuneration of the Directors is set out in the Report on
Directors’
Remuneration. There were no contracts existing during or at the end
of the year in which a Director of the Company is or was interested
and which are or were significant in relation to the Company’s
business. There were no other material transactions during the year
with the Directors of the Company.
At
31 December 2023, there was £nil
(2022: £nil) payable to the Directors for fees and
expenses.
AIFM
and Portfolio Manager – On
1 July 2023, Frostrow Capital
LLP was
appointed the AIFM of the Company and has delegated portfolio
management to Redwheel, who are deemed to be Key Management
Personnel for the purposes of disclosing related party information
under IAS24. Details of the services provided by the Portfolio
Manager are given in the Report of the Directors and their fees for
the year, along with outstanding balances to them, are set out in
note 6.
20.
Risk Management and Financial Instruments
The
Company’s investing activities undertaken in pursuit of its
investment objective involve certain inherent risks. The main
financial risks arising from the Company’s financial instruments
are market price risk, interest rate risk, liquidity risk, credit
risk and currency risk. The Board reviews and agrees policies for
managing each of these risks as summarised below. The Board has
also established a series of investment parameters, which are
reviewed annually, designed to limit the risk inherent in managing
a portfolio of investments. These policies have remained
substantially unchanged during the current and preceding periods.
The Board meets on four scheduled occasions in each year and at
each meeting it receives sufficient financial and statistical
information to enable it to monitor adequately the investment
performance and status of the business.
Market
price risk
Market
price risk arises mainly from uncertainty about future prices of
financial instruments used in the Company’s business. It represents
the potential loss the Company might suffer through holding market
positions in the face of price movements. The Company’s borrowings
have the effect of increasing the market risk faced by
shareholders.
Interest
rate risk
Interest
rate risk is the risk of movements in the value of financial
instruments or interest income cash flows that arise as a result of
fluctuations in interest rates. The Company finances its operations
through retained profits including capital profits, and additional
financing is obtained through the two Private Placement Loans, on
both of which interest is paid at a fixed rate and therefore
subject to fair value interest rate risk.
Cash
flow interest rate risk
The
majority of the Company’s financial assets are equity shares and
other investments which neither pay interest nor have a maturity
date. The Company’s fixed-interest holdings have a market value of
£13,713,000, representing 1.9% of net assets (2022: £5,170,000;
0.7%). The weighted average running yield as at 31 December 2023 was 5.0% (2022: 4.0%) and the
weighted average remaining life was 1.6 years (2022: 0.7 years).
The Company’s cash balance of £4,275,000 (2022: £13,240,000) earns
interest, calculated on a tiered basis, depending on the balance
held, by reference to the base rate. Cashflow interest rate risk is
not considered a significant risk to the Company.
Fair
value interest rate risk
The 4.05%
Private Placement Loan and the 2.99% Private Placement Loan, which
are repayable in 2028 and 2047 respectively, pay interest at fixed
rates. The weighted average period until maturity of the loans is
11 years (2022: 12 years)
and the weighted average interest rate payable is 3.7% (2022: 3.7%)
per annum. The fair value of the loans will vary with changes in
interest rates. As interest rates increase the fair value of the
loan liability is expected to decrease, while when interest rates
decrease the fair value of the loan liability is expected to
increase.
Liquidity
risk
The
Company’s assets comprise mainly readily realisable securities,
which can be sold to meet funding commitments if necessary.
Short-term flexibility is achieved through the use of cash balances
and short-term bank deposits.
Credit
risk
Credit
risk is the risk that one party to a financial instrument will fail
to discharge an obligation and cause the other party to incur a
financial loss. This is mitigated by the Portfolio Manager
reviewing the credit ratings of broker counterparties. The
Company’s Custodian is responsible for the collection of income on
behalf of the Company. Cash is held either with reputable banks
with high quality external credit ratings or in liquidity/cash
funds providing a spread of exposures to various underlying banks
in order to diversify risk. The carrying amounts of financial
assets represent their maximum exposure to credit risk. The debt
security held at the year end has a credit rating of AA.
Currency
risk
The income
and capital value of the Company’s investments and liabilities can
be affected by exchange rate movements as some of the Company’s
assets and income are denominated in currencies other than Pounds
Sterling, which is the Company’s reporting currency. The Company
does not currently hedge its currency exposure. The key areas where
foreign currency risk could have an impact on the Company
are:
· movements
in rates that would affect the value of investments; and
· movements
in rates that would affect the income received.
The
Company had the following currency exposures, all of which are
included in the Statement of Financial Position based on the
exchange rates ruling at the respective year ends. Exposures vary
throughout the year as a consequence of changes in the composition
of the net assets of the Company arising out of the investment and
risk-management processes.
|
|
2023
|
|
|
Investments
|
Cash
|
Receivables
|
Payables
|
Borrowings
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Euro
|
114,111
|
–
|
–
|
–
|
–
|
114,111
|
|
US
Dollar
|
55,052
|
–
|
189
|
–
|
–
|
55,241
|
|
Canadian
Dollar
|
9,892
|
–
|
–
|
–
|
–
|
9,892
|
|
Hong Kong
Dollar
|
10,394
|
–
|
–
|
–
|
–
|
10,394
|
|
Japanese
Yen
|
14,609
|
–
|
–
|
–
|
–
|
14,609
|
|
Pounds
Sterling
|
586,530
|
4,275
|
2,790
|
(2,394)
|
(74,744)
|
516,457
|
|
|
790,588
|
4,275
|
2,979
|
(2,394)
|
(74,744)
|
720,704
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
Investments
|
Cash
|
Receivables
|
Payables
|
Borrowings
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Euro
|
50,086
|
–
|
–
|
–
|
–
|
50,086
|
|
US
Dollar
|
55,995
|
–
|
151
|
–
|
–
|
56,146
|
|
Canadian
Dollar
|
9,919
|
–
|
–
|
–
|
–
|
9,919
|
|
Hong Kong
Dollar
|
12,350
|
–
|
–
|
–
|
–
|
12,350
|
|
Japanese
Yen
|
11,434
|
–
|
–
|
–
|
–
|
11,434
|
|
Pounds
Sterling
|
647,849
|
13,240
|
2,106
|
(2,077)
|
(74,707)
|
586,411
|
|
|
787,633
|
13,240
|
2,257
|
(2,077)
|
(74,707)
|
726,346
|
Foreign
currency sensitivity
|
|
2023
|
2022
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Projected
movement
|
+10%
|
-10%
|
+10%
|
-10%
|
|
Effect on
net assets for the year
|
(18,568)
|
22,694
|
(12,858)
|
15,380
|
Other
price risk exposure
If the
investment valuation fell by 20% at 31
December 2023, the impact on the profit or loss and net
assets would have been negative £158.1 million (2022: 20% negative
£157.5 million). If the investment portfolio valuation rose by 20%
at 31 December
2023, the impact on the profit or loss and net assets would
have been positive £158.1 million (2022: 20% positive £157.5
million). The calculations are based on the portfolio valuation as
at the respective year-end dates.
The
Company held the following categories of financial instruments, all
of which are included in the Statement of Financial Position at
fair value or amortised cost which is an approximation of fair
value, with the exception of interest-bearing borrowings which are
shown at amortised cost at 31 December.
|
|
2023
|
2022
|
|
|
Amortised
|
|
Amortised
|
|
|
|
cost
|
Fair
value
|
cost
|
Fair
value
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Assets
at fair value through profit or loss
|
790,588
|
790,588
|
787,633
|
787,633
|
|
Cash
|
4,275
|
4,275
|
13,240
|
13,240
|
|
Receivables
and Payables
|
|
|
|
|
|
Investment
income receivable
|
1,937
|
1,937
|
1,481
|
1,481
|
|
Other
receivables
|
1,042
|
1,042
|
776
|
776
|
|
Payables
|
(2,394)
|
(2,394)
|
(2,077)
|
(2,077)
|
|
Interest-
bearing borrowings:
|
|
|
|
|
|
4.05%
Private Placement Loan
|
(49,849)
|
(47,291)
|
(49,817)
|
(44,872)
|
|
2.99%
Private Placement Loan
|
(24,895)
|
(15,163)
|
(24,890)
|
(13,987)
|
|
|
720,704
|
732,994
|
726,346
|
742,194
|
The 4.05%
Private Placement Loan 2028 and the 2.99% Private Placement Loan
2047 do not have prices quoted on an active market, however their
fair values have been calculated using observable inputs. As such
they have been classified as Level 2 instruments (2022: Level
2).
Liquidity
risk exposure
This is
the risk that the Company will encounter difficulty in meeting
obligations associated with financial liabilities.
Contractual
maturities of the financial liabilities at the year end, including
future interest payments not yet accrued for, based on the earliest
date on which payment can be required, are as follows:
|
|
2023
|
|
|
Three
|
Not
more
|
|
|
|
|
|
|
months
|
than
one
|
|
|
More
than
|
|
|
|
or
less
|
year
|
Two
years
|
Three
years
|
three
years
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Loan
Interest due
|
1,012
|
1,760
|
2,772
|
2,772
|
19,748
|
28,064
|
|
Loan
principle
|
–
|
–
|
–
|
–
|
75,000
|
75,000
|
|
Accruals
|
1,452
|
140
|
–
|
–
|
–
|
1,592
|
|
|
|
|
|
2022
|
|
|
Three
|
Not
more
|
|
|
|
|
|
|
months
|
than
one
|
|
|
More
than
|
|
|
|
or
less
|
year
|
Two
years
|
Three
years
|
three
years
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Loan
Interest due
|
1,012
|
1,760
|
2,772
|
2,772
|
22,520
|
30,836
|
|
Loan
principle
|
–
|
–
|
–
|
–
|
75,000
|
75,000
|
|
Accruals
|
1,133
|
139
|
–
|
–
|
–
|
1,272
|
Capital
management policies and procedures
The
Company’s capital management objectives are to ensure that it will
be able to continue as a going concern, and to provide long-term
growth in revenue and capital, principally by investment in UK
securities. There have been no changes in the Company’s objectives,
policies and processes for managing capital from the prior
year.
The
Company’s capital is its equity share capital and reserves that are
shown in the Statement of Financial Position and fixed-term loans
(see note 15) at a gross total of £795,488,000 (2022:
£801,053,000).
The
Company is subject to several externally imposed capital
requirements:
· as
a public Company, the Company has a minimum share capital of
£50,000;
· in
order to be able to pay dividends out of profits available for
distribution by way of dividends, the Company has to be able to
meet one of the two capital restriction tests imposed on investment
companies by company law; and
· the
Note Purchase Agreements governing the terms of the Private
Placement Loans also contain certain financial covenants as set out
in note 8. These are measured in accordance with the policies used
in the Annual Report & Financial Statements.
The
Company has complied with all of the above requirements during the
current and prior year.
21.
Post Balance Sheet Events
Subsequent
to the year end and up to 2 April
2024, the Company bought back 3,771,869 ordinary shares for
treasury, at a total cost of £8,910,000, representing 1.3% of the
issued share capital as at 31 December
2023.
On
15 February 2024, the Board approved
a fourth interim dividend for the year ended 31 December 2023, of 2.5
pence per ordinary share payable on 2
April 2024.
Notice
of Annual General Meeting
THIS
DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION.
If you are
in any doubt as to the action you take you should consult your
stockbroker, bank manager, solicitor, accountant or other
independent financial adviser authorised under the Financial
Services and Markets Act 2000 immediately.
If you
have sold or otherwise transferred all of your ordinary shares in
Temple Bar Investment Trust Plc, please forward this document and
the accompanying form of proxy as soon as possible to the purchaser
or transferee or to the stockbroker, bank or other agent through
whom the sale or transfer was or is being effected for delivery to
the purchaser or transferee.
NOTICE IS
HEREBY GIVEN that the 98th Annual General Meeting (“AGM”) of Temple
Bar Investment Trust Plc will be held at 25 Southampton Buildings,
London WC2A 1AL on Tuesday,
7 May 2024 at 11.00 am for the purpose of considering and, if
thought fit, passing the resolutions below.
1. To
approve the Company’s Annual Report & Financial Statements for
the year ended 31 December 2023
(together with the reports of the Directors and Auditor
therein).
2. To
approve the Report on Directors’ Remuneration for the year ended
31 December 2023.
3. To
re-elect Mrs Carolyn Sims as a
Director of the Company.
4. To
re-elect Mr Charles Cade as a
Director of the Company.
5. To
re-elect Mr Richard Wyatt as a
Director of the Company.
6. To
re-elect Dr Shefaly Yogendra as a
Director of the Company.
7. To
re-appoint BDO LLP as the Auditor to the Company, to hold office
from the conclusion of this meeting until the conclusion of the
next meeting at which financial statements are laid before the
Company.
8. To
authorise the Audit and Risk Committee to determine the
remuneration of the Auditor.
9. To
approve the Company’s dividend policy, authorising the Directors of
the Company to declare and pay all dividends of the Company as
interim dividends, and for the last dividend referable to a
financial year not to be categorised as a final dividend that is
subject to shareholder approval.
10. That,
in substitution of all existing authorities, the Directors be and
are hereby generally and unconditionally authorised in accordance
with Section 551 of the Companies Act 2006 (the “Companies Act”) to
allot shares in the Company or grant rights to subscribe for or to
convert any security into shares in the Company (‘Rights’) up to an
aggregate maximum nominal amount of £1,434,055, being 10% of the
issued share capital of the Company as at 2
April 2024 and representing 28,684,101 ordinary shares in
the capital of the Company (or if changed, the number representing
10% of the issued share capital of the Company at the date at which
this resolution is passed), such authority to expire at the
conclusion of the AGM of the Company to be held in 2025 (unless
previously renewed, varied, revoked or extended by the Company in
general meeting), save that the Company may, before such expiry,
make offers or agreements which would or might require ordinary
shares to be allotted after such expiry, and the Directors may
allot ordinary shares in pursuance of such offers or agreements as
if the authority conferred by this resolution had not
expired.
SPECIAL
RESOLUTIONS
11. That,
subject to the passing of resolution 10 set out above, the
Directors be and they are hereby generally empowered pursuant to
Sections 570 and 573 of the Companies Act to allot equity
securities (as defined in Section 560 of the Companies Act) for
cash, including for the avoidance of doubt, the sale of shares held
by the Company as treasury shares, in accordance with the authority
conferred on the Directors by resolution 11, as if Section 561 of
the Companies Act did not apply to the allotment or sale, up to an
aggregate nominal amount of £1,434,055 (being 10% of the issued
ordinary share capital of the Company at 2
April 2024), (or, if changed, the number representing 10% of
the issued share capital of the Company at the date at which this
resolution is passed), such power to expire at the conclusion of
the AGM of the Company to be held in 2025 (unless previously
renewed, varied, revoked or extended by the Company in general
meeting) save that the Company may, at any time prior to the expiry
of such power, make an offer or enter into an agreement which would
or might require ordinary shares to be allotted or sold from
treasury after the expiry of such power and the Directors may allot
or sell ordinary shares from treasury in pursuance of such an offer
or agreement as if such power had not expired.
12. That,
the Company generally be and is hereby authorised for the purpose
of Section 701 of the Companies Act to make market purchases (as
defined in Section 693 of the Companies Act) of its ordinary shares
in issue, either for retention as treasury shares for future
reissue, resale, transfer or cancellation provided that:
i) the
maximum number of ordinary shares hereby authorised to be purchased
is 14.99% of the issued share capital of the Company as at the date
of the passing of this resolution;
ii) the
minimum price (exclusive of expenses payable by the Company) which
may be paid for such ordinary shares is the nominal value per
share;
iii) the
maximum price (exclusive of expenses payable by the Company) which
may be paid for such ordinary shares shall be the higher
of:
i) an
amount equal to 105% of the middle market quotations for an
ordinary share as derived from the London Stock Exchange Daily
Official List for the five business days immediately preceding the
date on which the ordinary shares are purchased; and
ii) the
higher of the price of the last independent trade and the highest
current independent bid on the trading venue where the purchase is
carried out.
This
authority shall expire at the conclusion of the AGM of the Company
to be held in 2025 (unless previously revoked, varied, renewed or
extended by the Company in general meeting) save that the Company
may, before such expiry, enter into a contract to purchase shares
which will or may be executed wholly or partly after the expiry of
such authority.
13. That,
a general meeting, other than an annual general meeting, may be
called on not less than 14 clear days’ notice.
|
By order
of the Board
|
Registered
Office:
|
|
Frostrow
Capital LLP
|
25
Southampton
|
|
|
Buildings
|
|
3 April
2024
|
London
|
|
|
WC2A
1AL
|
NOTES
1.
Entitlement to attend and vote
Members
who hold ordinary shares in the Company in uncertificated form must
have been entered on the Company’s register of members by
6.30pm on Thursday, 2 May 2024 in order to be able to attend and vote
at the meeting, or if the meeting is adjourned, 6.30pm on the day two business days before the
time fixed for the adjourned meeting. Such members may only vote at
the meeting in respect of ordinary shares held at the
time.
2.
Proxies
A member
entitled to attend and vote at the above meeting is entitled to
appoint a proxy to attend the meeting to speak and vote on a show
of hands and, on a poll, to vote instead of them. A proxy need not
be a member of the Company. A member
wishing to appoint more than one proxy must appoint each proxy in
respect of a specified number of shares within their holding. For
this purpose, a member may photocopy the enclosed form of proxy
before completion and must indicate the number of shares in respect
of which each proxy is appointed.
Instruments
of proxy should be sent to Equiniti Limited, Aspect House, Spencer
Road, Lancing, West Sussex BN99
6DA so as to arrive no later than 11.00 am
on Thursday, 2 May 2024.
Completion and return of the form of proxy will not preclude
shareholders from attending and voting at the meeting should they
wish to do so.
It is
possible for you to submit your proxy votes online by going to
Equiniti’s Shareview website, www.shareview.co.uk,
and logging in to your Shareview Portfolio. Once you have logged
in, simply click ‘View’ on the ‘My Investments’ page and then click
on the link to vote and follow the on-screen instructions. If you
have not yet registered for a Shareview Portfolio, go to
www.shareview.co.uk
and enter
the requested information. It is important that you register for a
Shareview Portfolio with enough time to complete the registration
and authentication processes.
CREST
members who wish to appoint a proxy or proxies by utilising the
CREST electronic proxy appointment service may do so for the
meeting and any adjournment(s) there of by using the procedures
described in the CREST Manual. CREST personal members or other
CREST sponsored members and those CREST members who have appointed
a voting service provider(s) should refer to their CREST sponsor or
voting service provider(s) who will be able to take the appropriate
action on their behalf. In order for a proxy appointment made using
the CREST service to be valid, the appropriate CREST message (a
“CREST proxy instruction”) must be properly authenticated in
accordance with Euroclear’s specifications and must contain the
information required for such instructions, as described in the
CREST Manual (available via www.euroclear.com).
The CREST message must be transmitted so as to be received by the
issuer’s agent (ID RA19) by not later than 48 hours (excluding
non-working days) before the time appointed for the holding of the
meeting or the adjourned meeting. For this purpose, the time of
receipt will be taken to be the time (as determined by the
timestamp applied to the CREST message by the CREST Applications
Host) from which the issuer’s agent is able to retrieve the CREST
message by enquiry to CREST in the manner prescribed by
CREST.
After this
time any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means. CREST
members and, where applicable, their CREST sponsors or voting
service provider(s), should note that Euroclear does not make
available special procedures in CREST for any particular messages.
Normal system timings and limitations will therefore apply in
relation to the input of CREST proxy instructions. It is the
responsibility of the CREST member concerned to take (or, if the
CREST member(s) is/are a CREST personal member or sponsored member
or has appointed a voting service provider(s), to procure that the
CREST sponsor or voting service provider takes) such action as
shall be necessary to ensure that a CREST message is transmitted by
means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their CREST
sponsors or voting service provider(s) is/are referred, in
particular, to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings. The Company
may treat as invalid a CREST proxy instruction in the circumstances
set out in Regulation 35(5) (a) of the Uncertificated Securities
Regulations 2001.
3.
Proxymity
If you are
an institutional investor you may be able to appoint a proxy
electronically via the Proxymity platform, a process which has been
agreed by the Company and approved by the Registrar. For further
information regarding Proxymity, please go to www.proxymity.io.
Your proxy must be lodged by 11.00 am on
Thursday, 2 May 2024 in order
to be considered valid. Before you can appoint a proxy via this
process you will need to have agreed to Proxymity’s associated
terms and conditions. It is important that you read these carefully
as you will be bound by them and they will govern the electronic
appointment of your proxy.
4.
Corporate representatives
A member
of the Company which is a corporation may authorise a person or
persons to act as its representative(s) at the AGM. In accordance
with the provisions of the Companies Act, each such representative
may exercise (on behalf of the corporation) the same powers as the
corporation could exercise if it were an individual member of the
Company, provided that they do not do so in relation to the same
shares. It is no longer necessary to nominate a designated
corporate representative.
5.
Nominated persons
In
accordance with Section 325 of the Companies Act, the right to
appoint proxies does not apply to persons nominated to receive
information rights under Section 146 of the Companies Act. Persons
nominated to receive information rights under Section 146 of the
Companies Act who have been sent a copy of this Notice are hereby
informed, in accordance with Section 149 (2) of the Companies Act,
that they may have a right under an agreement with the registered
member by whom they were nominated to be appointed, or to have
someone else appointed, as a proxy for this meeting. If they have
no such right, or do not wish to exercise it, they may have a right
under such an agreement to give instructions to the member as to
the exercise of voting rights. Nominated persons should contact the
registered member by whom they were nominated in respect of these
arrangements.
6.
Joint holders
In the
case of joint holders, the signature of only one of the joint
holders is required on the proxy form and, where more than one
joint holder has signed the proxy form or where more than one joint
holder purports to appoint a proxy, only the signature of, or the
appointment submitted by the most senior holder will be accepted to
the exclusion of the other joint holders. Seniority is determined
by the order in which the names of the joint holders appear in the
Company’s Register of Members in respect of the joint holding (the
first named being the most senior).
7.
Members’ requests under Section 527 of the Companies
Act
Under
Section 527 of the Companies Act, members meeting the threshold
requirements set out in that section have the right to require the
Company to publish on a website a statement setting out any matter
relating to (i) the audit of the Company’s accounts (including the
Auditor’s report and the conduct of the audit) that are to be laid
before the AGM for the financial year ended 31 December 2023; or (ii) any circumstance
connected with an Auditor of the Company appointed for the
financial year ended 31 December 2023
ceasing to hold office since the previous meeting at which annual
accounts and reports were laid. The Company may not require the
shareholders requesting any such website publication to pay its
expenses in complying with Sections 527 or 528 (requirements as to
website availability) of the Companies Act. Where the Company is
required to place a statement on a website under Section 527 of the
Companies Act, it must forward the statement to the Company’s
Auditor not later than the time when it makes the statement
available on the website. The business which may be dealt with at
the AGM for the relevant financial year includes any statement that
the Company has been required under Section 527 of the Companies
Act to publish on a website.
8.
Members’ rights to ask questions
Any member
attending the meeting has the right to ask questions. The Company
must cause to be answered any such question relating to the
business being dealt with at the meeting but no such answer need be
given if (a) to do so would interfere unduly with the preparation
for the meeting or involve the disclosure of confidential
information, (b) the answer has already been given on a website in
the form of an answer to a question, or (c) it is undesirable in
the interests of the Company or the good order of the meeting that
the question be answered.
9.
Members’ rights under Sections 338 and 338A of the Companies
Act
Shareholders
meeting the threshold under Sections 338 and 338A of the Companies
Act can instruct the Company: (i) to give
shareholders (entitled to receive notice of the AGM) notice of a
resolution which may properly be proposed and is intended to be
proposed at the AGM; and/or (ii) to include in the business to be
dealt with at the AGM any matter (other than a proposed resolution)
which may be properly included in the business. A resolution may
properly be proposed or a matter may properly be included in the
business unless: (a) (in the case of a resolution only) it would,
if passed, be ineffective; (b) it is defamatory of any person; or
(c) it is frivolous or vexatious. Such a request may be in hard
copy form or in electronic form, must identify the resolution of
which notice is to be given or the matter to be included in the
business, must be authorised by the person or persons making it,
must be received by the Company not later than 26 March 2024, being
the date six weeks before the meeting, and (in the case of a matter
to be included in the business only) must be accompanied by a
statement setting out the grounds for the request.
10.
Total number of shares and voting rights
As at 2
April 2024, the latest practicable date prior to publication of
this Notice, the Company had 334,363,825 ordinary shares in issue,
with a total of 286,841,012 voting rights. 47,522,813 shares were
held in treasury.
11.
Website
In
accordance with Section 311A of the Companies Act, the contents of
this Notice, details of the total number of shares in respect of
which members are entitled to exercise voting rights at the AGM
and, if applicable, any members’ statements, members’ resolutions
or members’ matters of business received by the Company after the
date of this Notice will be available on the Company’s website
at:
www.templebarinvestments.co.uk .
12.
Documents available for inspection
Copies of
letters of appointment between the Company and the Non-Executive
Directors may be inspected during usual business hours on any
weekday (public holidays excepted) at the registered office of the
Company from the date of this Notice until the date of the AGM and
at the place of the Meeting from 10.45 am until the Meeting’s
conclusion. Any shareholders wishing to inspect the documents are
requested to contact the Company Secretary by email at
cosec@frostrow.com in advance of any visit to ensure that
appropriate arrangements can be made and access can be
arranged.
Glossary
of Terms
Discount
or Premium of share price to NAV per share*
A
description of the difference between the share price and the net
asset value per share. The size of the discount or premium is
calculated by subtracting the share price from the net asset value
per share and is usually expressed as a percentage (%) of the net
asset value per share. If the share price is higher than the net
asset value per share the result is a premium. If the share price
is lower than the net asset value per share, the shares are trading
at a discount.
Fixed
Interest
Fixed-interest
securities, also known as bonds, are loans usually taken out by a
government or company which normally pay a fixed rate of interest
over a given time period, at the end of which the loan is
repaid.
FTSE
All-Share Index
A
comparative index that tracks the market price of the UK’s leading
companies listed on the London Stock Exchange. Covering around 600
companies, including investment trusts, the name FTSE is taken from
the Financial Times and the London Stock Exchange, who are its
joint owners.
FTSE
350 Index
A
comparative index that tracks the market price of the UK’s 350
largest companies, by market value, listed on the London Stock
Exchange.
Gilts
A bond
that is issued by the British government which is generally
considered low risk.
Gross
Gearing
Total
assets divided by shareholders funds expressed as a
percentage.
Liquidity
The ease
with which an asset can be purchased or sold at a reasonable price
for cash.
Market
Capitalisation
The total
value of a company’s equity, calculated by the number of shares
multiplied by their market price.
NAV
(‘Net Asset Value’) per Share
The value
of total assets less liabilities, with debenture and loan stocks at
book value. Book value is the amount borrowed less the current loan
arrangement fee debtor still to be expensed. The NAV per share is
calculated by dividing this amount by the number of ordinary shares
outstanding.
NAV
per Share with debt at fair value
The value
of total assets less liabilities, with the loans at fair value. The
NAV per share with debt at fair value is calculated by dividing
this amount by the number of ordinary shares
outstanding.
Net
asset value (NAV) per share total return with debt at fair
value*
The
theoretical total return on shareholders’ funds per share,
reflecting the change in NAV with debt at fair value assuming that
dividends paid to shareholders were reinvested at NAV with debt at
fair value at the time the shares were quoted ex-dividend. A way of
measuring performance which is not affected by movements in
discounts/premiums.
|
|
Year
to
|
Year
to
|
|
|
31
December
|
31
December
|
|
|
2023
|
2022
|
|
|
(p)
|
(p)
|
|
Opening
NAV with debt at fair value
|
233.5
|
240.4
|
|
Increase
/(decrease) in NAV
|
29.1
|
(3.9)
|
|
Less
dividends paid
|
(9.60)
|
(9.35)
|
|
Adjustment
for movement in fair value of debt
|
(0.8)
|
6.4
|
|
Closing
NAV with debt at fair value
|
252.2
|
233.5
|
|
% increase
in NAV with debt at fair value
|
12.1%
|
1.0%
|
|
Impact of
reinvesting dividends
|
0.2%
|
(0.1%)
|
|
NAV
total return with debt at fair value
|
12.3%
|
0.9%
|
Net
Gearing
Total
assets (less cash and cash equivalents) divided by shareholders’
funds expressed as a percentage.
Ongoing
Charge Ratio*
Ongoing
charges is calculated on an annualised basis. This figure excludes
any portfolio transaction costs and may vary from period to period.
The calculation below is in line with AIC guidelines.
|
|
|
Year
to
|
Year
to
|
|
|
|
31
December
|
31
December
|
|
|
|
2023
|
2022
|
|
|
|
(p)
|
(p)
|
|
Investment
management fee
|
|
2,757
|
2,937
|
|
Other
expenses (excluding transaction costs)
|
|
1,359
|
1,234
|
|
Less: one
off legal and professional fees
|
|
(21)
|
(18)
|
|
Total
|
(a)
|
4,095
|
4,153
|
|
Average
cum income net asset value throughout the period
|
(b)
|
731,023
|
762,206
|
|
Ongoing
charges (c=a/b)
|
(c)
|
0.56%
|
0.54%
|
*
Alternative
Performance Measure.
Portfolio
Turnover
The
portfolio turnover rate measures the Company’s trading activity. It
is calculated by taking the lower of investment purchases and sales
and dividing by the average gross asset value (net assets with debt
added back) of the Company. It is
expressed as a % and the lower the % the lower the turnover. For
example a turnover rate of 25% would suggest that the fund holds
stocks for four years on average, while a 50% turnover rate would
suggest a two year holding period.
Transactions
in gilts are excluded from the investment purchases and sales for
the purposes of calculating the turnover rate.
Share
Price Total Return*
Return to
the investor on mid-market prices assuming that all dividends paid
were reinvested at the share price at the time the shares were
quoted ex-dividend.
|
|
Year
to
|
Year
to
|
|
|
31
December
|
31
December
|
|
|
2023
|
2022
|
|
|
(p)
|
(p)
|
|
Opening
share price
|
220.5
|
221.6
|
|
Increase
in share price
|
27.1
|
8.3
|
|
Less:
dividends paid
|
(9.60)
|
(9.35)
|
|
Closing
share price
|
238.0
|
220.5
|
|
%
increase in share price
|
12.3%
|
3.7%
|
|
Impact of
reinvesting dividends
|
0.2%
|
(0.1%)
|
|
Share
price total return
|
12.5%
|
3.6%
|
Value
Investing
An
investment strategy that aims to identify undervalued yet good
quality companies with strong cash flows and robust balance sheets,
putting an emphasis on financial strength.
Dividend
Yield*
A measure
of the income return earned on an investment. In the case of a
share the yield expresses the annual dividend payment as the
percentage of the market price of the share. In the case of a bond
the running yield (or flat or current yield) is the annual interest
payable as a percentage of the current market price. The redemption
yield (or yield to maturity) allows for any gain or loss of capital
which will be realised at the maturity date.
*
Alternative
Performance Measure.
Annual
Report and Financial Statements
Copies of
the Annual Report and financial statements will be posted to
shareholders on 10 April 2024 and will be available on the
Company’s website (www.templebarinvestments.co.uk)
or in hard copy format from the Company Secretary.
The
Company's Annual Report for the year ended 31 December
2023 has
been submitted to the Financial Conduct Authority and will shortly
be available for inspection on the National Storage Mechanism (NSM)
via https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The Annual
General Meeting will be held on Tuesday, 7 May 2024.
Neither
the contents of the Company's website nor the contents of any
website accessible from hyperlinks on the Company's website (or any
other website) is incorporated into, or forms part of, this
announcement.
-ENDS-
For
further information please contact
Mark
Pope
For and on
behalf of Frostrow Capital LLP
Company
Secretary
0203 008
4913