T
e
m
p
e
B
a
r
l
I
n
v
e
s
t
m
e
n
t
T
r
u
s
t
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
&
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2
0
1
6
ANNUAL REPORT & FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
Temple Bar Investment Trust’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 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.
CONTENTS
STRATEGIC REPORT
GOVERNANCE REPORT
FINANCIAL REPORT
1 Summary of results
1 6 Directors
3 4 Statement of
SHAREHOLDER
INFORMATION
2 Chairman’s statement
1 7 Report of Directors
3 Ten year record
2 0 Report on directors’
4 Manager’s review
8 Attribution analysis
9 Overview of strategy
14 Portfolio of investments
remuneration
2 2 Corporate governance
2 5 Report of the audit
committee
2 7 Statement of directors’
responsibilities
28 Independent auditor’s
report
Comprehensive Income
49 Notice of meeting
5 3 Useful information
for shareholders
5 4 Management and
administration
5 5 Glossary of terms
3 5 Statement of Changes
in Equity
3 6 Statement of Financial
Position
3 7 Statement of
Cash Flows
38 Notes to the Financial
Statements
48 Other information
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
Perivan Financial Print 243596
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
SUMMARY OF RESULTS
Assets as at 31 December
Net assets
Ordinary Shares
Net asset value per share with debt at book value
Net asset value per share with debt at market value
Market price
Discount with debt at book value
Discount with debt at market value
Revenue for the year ended 31 December
Revenue return attributable to ordinary shareholders
Revenue return per ordinary share
Dividends per ordinary share – interim and proposed fi nal
Capital for the year ended 31 December
Capital return attributable to ordinary shareholders
Capital return attributable per ordinary share
Net gearing*
Ongoing charges**
Total Returns for the year to 31 December 2016
Return on share price
Return on net assets
Return on gross assets
Return on FTSE All- Share Index
Change in Retail Prices Index over year
Dividend Yields (Net) as at 31 December 2016
Yield on ordinary share price (1,223p)***
Yield on FTSE All-Share Index
2016
£000
2015
£000
%
change
879, 940
755,755
1 6.4%
1,315.8 4p
1,298.0 1p
1,223.00p
7.1%
5.8 %
29,2 53
43.7 4p
40.45p
121,75 1
182.06p
2.4 %
0.51%
1,130.14p
1,115.46p
1,052.00p
6.9%
5.6%
26,663
39.87p
39.66p
(38,877)
(58.14p)
3.8%
0.49%
1 6.4%
16. 4%
16.3%
2.0%
20.7
20.4
18.6
16.8
2.5
3.3
3.5
*
Defi ned as total assets less current liabilities (excluding maturi ng debt) and cash or cash equivalents (including gilt holdings) divide d by shareholders‘ funds expressed as a
percentage.
** Defi ned as the total of the investment management fee and administrative expenses divided by the average cum income net asset value throughout the year.
*** Based on the three interim dividends paid during the year together with the recommended fi nal dividend for the year.
CAPITAL STRUCTURE
Ordinary Shares
9.875% Debenture Stock 2017
5.5% Debenture Stock 2021
66,872,765
£25,000,000
£38,000,000
4.05% Private Placement Loan 2028
£50,000,000
VOTING STRUCTURE
Ordinary shares 100%
BENCHMARK
Performance is measured
against the FTSE All-Share Index.
TOTAL ASSETS LESS
CURRENT LIABILITIES
£ 968,790,000
TOTAL EQUITY*
£ 879,9 40,000
MARKET CAPITALISATION
£ 817,854,000
* With debenture and loan stocks at book value
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
1
CHAIRMAN’S STATEMENT
The latter part or 2016 has begun to see the value investment style, central to
Temple Bar’s investment process, returning to favour.
PERFORMANCE
For a number of years, conditions in global investment
markets have caused the contrarian/value investment style
to underperform. While all investment styles are cyclical, this
period of weak performance by the value investment style
has been unduly protracted , in part because of central bank
action to maintain interest rates at unprecedentedly low
levels. There are now emerging signs that that this period is
drawing to a close and I am pleased to report that the latter
part of 2016 has begun to see the value investment style,
central to Temple Bar’s investment process, returning to
favour. In terms of the Temple Bar portfolio this manifested
itself in out-performance relative to its benchmark index
during the year. The total return on the net assets of Temple
Bar in 2016 was 20.4% which compares with a total return of
the FTSE All Share Index of 16.8%. In the longer term Temple
Bar continues to outperform its benchmark over both fi ve
and ten year periods.
The Manager’s review on pages 4 to 7 sets out some of
the themes driving portfolio construction during the year.
By any conventional yardstick 2016 bore witness to some
extraordinary outcomes on the political front, signifi cantly
shaping the direction of markets. In this context the portfolio
manager comments on some of the positive and negative
contributors to performance at an individual stock level.
DIVIDEND
There have been three interim dividend payments during
the year each of 8.09p per share and the directors are
now recommending a fi nal dividend payment for the year
ended 31 December 2016 of 16.18p per share to be paid
on 31 March 2017 to those shareholders on the register as
at 1 0 March 2017. The ex-dividend date for this payment is
9 March 2017. If approved this would give an increase in the
total dividend payment for the year as a whole of 2% and
would be the 33rd consecutive year in which the Company
has raised its annual dividend payment.
GEARING
In recent years the Company’s fi xed long term borrowings
have largely been offset by a fairly high cash or near cash
position on the portfolio while the portfolio manager
patiently waited for more interesting investment
opportunities to appear. The position was unchanged
throughout most of 2016 such that at the year end, gearing
(calculated net of cash and related liquid assets, including our
investment in a UK short dated gilt) was 2.4 % .
SHARE CAPITAL MANAGEMENT
Shareholders may recall that discounts in the UK Equity
Income sector generally widened during the course of
2015. This trend was continued into 2016 as discounts in the
sector increased further. Temple Bar was not immune to this
process; at the year end its discount stood at 5.8%. I reiterate
my observation from last year that the Board is prepared to
undertake share buy backs if the discount widens both in
absolute terms and relative to the Company’s peer group.
While no share repurchase took place during the year, the
Board therefore recommends that the existing authorities
to issue new ordinary shares and to repurchase shares in the
market for cancellation or to hold in Treasury be continued.
Accordingly it is seeking approval from shareholders to
renew the share issue and repurchase authorities at the
forthcoming annual general meeting.
2
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
The 3 3rd consecutive year in which the Company has raised
its annual dividend payment.
THE BOARD
ANNUAL GENERAL MEETING
The Board remained unchanged throughout the year but
in January 2017 Nick Lyons was appointed as an additional
director. I am delighted to welcome Nick to the Board
and I am confi dent that with his wealth of experience,
particularly in the fi nancial sector, he will make a valuable
contribution to the Company in the coming years.
Every year the Board undertakes a thorough evaluation
of each director, including myself as Chairman. In line
with best practice in this regard, all directors are subject
to annual re-election by shareholders. I refer you to the
directors’ biographies on page 16 for further details.
SAVINGS SCHEME
Towards the end of the year, having received notice from
the Administrator that it did not wish to continue in that
role, the Board took the diffi cult decision that the most
sensible course of action was to close the Savings Scheme,
almost 30 years after it was fi rst established. It was clear
that the ever-increasing amount of regulation involved
with the management and administration of schemes of
this nature meant that fi nding a cost effective alternative
service provider was not possible. It was therefore decided
to offer existing investors in the Scheme the option,
amongst others, of transferring their investment in Temple
Bar to a share dealing platform with similar characteristics
managed by Equiniti, the outgoing Administrator.
The AGM this year will be held at 2 Gresham Street, London
EC2V 7QP on Monday 27 March 2017 at 11am. Please note
this is a change in the address of the meeting from that of
the past few years. In addition to the formal business of
the meeting the portfolio manager will, as usual, make a
presentation reviewing the past year and commenting on
the outlook. He will also be available to answer questions
alongside the directors. Shareholders who are unable to
attend are encouraged to use their proxy votes.
OUTLOOK
The dramatic political events of 2016, together with
their unpredictable impact on investment markets,
indicate that any form of forecasting is fraught with
risk. At the very least it is clear that a combination of
Brexit and a change in the US Administration is likely to
cause continuing uncertainties, potentially leading to a
slowdown in economic activity in the UK. The portfolio
manager will continue to seek to invest in companies that
are undervalued by the market and where the potential
for improvement exists irrespective of shorter term
uncertainties.
John Reeve
Chairman
1 7 February 2017
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
TEN YEAR RECORD
Total assets less
current liabilities (£000)
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
557,712
422,408
553,392
603,444
585,480
664,648
905,775
913,198
869,535
968 , 790
Net assets (£000)
494,340
359,020
489,988
540,022
522,040
601,191
792,070
799,444
755,755
879,9 40
Net assets per
ordinary share (pence)
Revenue return to ordinary
shareholders (£000)
Revenue return
per share (pence)
Dividends per share* (pence)
847.33
612.76
831.03
915.89
874.42
992.86 1,250.84 1,195.47 1,130.14 1,315.8 4
19,361
20,614
20,017
18,915
22,552
24,873
22,274
25,782
26,663
29,2 53
33.19
30.98
35.33
32.84
33.98
33.50
32.08
34.20
38.08
35.23
41.39
36.65
36.17
37.75
39.82
38.88
39.87
39.66
43.7 4
40.45
* Interim(s) and proposed fi nal for the year
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
3
MANAGER’S REVIEW
A review of a year typically offers fund managers an ideal
opportunity to explain how events unravelled as expected
and how their portfolios were placed perfectly to benefi t.
However, in 2016 it‘s reasonable to assume few managers
predicted Brexit and the Trump presidential victory, never
mind the markets‘ reactions to these events. If this provides
a lesson, it simply reminds us of the dangers of building a
portfolio around a precise forecast, particularly with the aim
of maximising short-term returns.
Probably of greater relevance to forecasting correctly share
price performance in 2016 was the observation at the start
of the year that the cheapest stocks in the market (‘value’
stocks) had fallen to valuation extremes, specifi cally when
compared with stocks exhibiting very low historic price
volatility or those deemed to be of the highest quality
(stocks operating under the soubriquet of ‘bond proxies’) .
This relationship did reverse in the fi rst part of the year, but
the benefi t was quickly lost during the market volatility post
the Brexit vote. A more sober assessment of the resulting
price movements (or merely a refl ection of their severity)
subsequently produced another value recovery which was
supported by the increase in government bond yields after
Trump’s victory. We were a bit cautious about investing fully
at this time due to our perception of stretched valuations,
notwithstanding short-term price falls.
Having highlighted the extreme unpopularity of value stocks
the portfolio was reasonably well placed for their return to
favour, although as usual we were too early in committing
ourselves.
Most of the very best performers in the UK market last
year were mining stocks, which partially recovered some
dreadful underperformance of previous years. The portfolio
participated in some of this rally by virtue of holdings in the
silver company, Fresnillo which rose over 70% during the year,
and the VanEck Gold Mining Exchange Traded Fund which
rose almost 50%. However, the portfolio’s only meaningful
industrial metal holding was Rio Tinto and even this was sold
very early in the rally. We struggle to value mining companies
with suffi cient confi dence for us to take large holdings. Their
valuations are very sensitive to the prices of the commodities
they mine, most of which are currently very reliant on
demand generated by the Chinese economy. There has been
very high private sector debt growth in China in recent years
and similar rates of debt growth in other economies have
typically resulted in sub-par economic growth, recessions or
even economic crises.
Our favoured investments are companies positioned to
benefi t from self-help and which are, in the main, masters
of their fortune. Of course, one could argue that most
companies are exposed to the vagaries of the economic
cycle, but at least there is a reasonably dependable cycle
upon which to base an estimate of a company’s average
earnings. Resources companies are probably the most
removed from this framework.
ACTIVITY
Over the last few years the portfolio has held two food
retailers, Tesco and Wm Morrison, both of which are now
recovering after their poor trading experience of previous
years. We invested in these two companies as we believed
they could outperform the very competitive food retail
ALASTAIR MUNDY
Alastair is head of the Value Team at Investec Asset
Management having joined in 2000 from Morley
Fund Management.
In addition to Temple Bar Investment Trust, Alastair
manages a number of funds including the Investec
Cautious Managed Fund and the Investec UK Special
Situations Fund.
Alastair graduated from City University in 1988 with a
Bachelor of Science degree in Actuarial Science.
4
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
It‘s reasonable to assume few managers predicted Brexit and the
Trump presidential victory, never mind the markets‘ reactions to
these events.
market rather than because we thought that the sales pool
of this mature market was likely to increase signifi cantly or
that industry profi tability would greatly exceed previous
peaks. Whilst we retain this view, there is now evidence of
improving market dynamics with lower capital expenditure
and the return of food price infl ation. Just as importantly,
the larger retailers are competing more successfully against
the discounters. The discounters have grown market share
by selling good quality food at very low prices, retailed in
low cost formats, but the incumbents are now pricing much
more keenly, have improved product quality and increased
service standards. Consequently, the extraordinary sales
and profi ts growth of the discounters ha ve probably peaked
and the market’s assumption of sizeable market share
increases over the next few years may be too optimistic.
This increases our confi dence that the larger food retailers
can continue their recovery and so we have added
J Sainsbury to the portfolio. Sainsbury’s valuation has begun
to look somewhat anomalous versus that of its peers; in
enterprise value terms (i.e. equity value plus the group’s
net debt), Sainsbury is currently valued at approximately
25% of its sales whereas both Morrison and Tesco are
valued at more than 40% of their revenues. Sainsbury’s
purchase of the Home Retail Group, the owner of Argos,
could prove to be a compelling deal as it will allow the
group to make more productive use of its excess space and
drive signifi cant footfall, whilst creating an enterprise with
more than 2,000 collection points. The Argos deal clearly
has some risks (both in terms of being a management
distraction and pushing Sainsbury more into competition
with Amazon) but we feel these are adequately refl ected in
the share price.
We have long been aware of both the risks and attractions
of the large integrated oil companies. The companies
are high cost producers of a commodity whose price is
artifi cially infl ated by a reasonably unstable cartel. What’s
more, the long-term outlook for oil is questionable as the
search for cheaper and more environmentally friendly
alternatives evolves. This raises the probability of the
lowest cost producers such as Saudia Arabia being left
with extensive stranded assets and therefore increases the
risk of them pumping more oil even if that causes a lower
price. Against this (rather bleak) long-term outlook is the
opportunity for the major oil companies to fi nd operational
effi ciencies. In the last few years they have cut costs faster
than expected and are confi dent that more can be done. If
cashfl ow can be improved further by containing large scale
capital expenditure – and focusing on optimising returns
from current assets – the security of the dividends will
improve. The shares of these companies bounced strongly
during the year refl ecting operational improvements, dollar
strength and a recovery in the oil price. With the two way
pull in mind and given the share price strength we reduced
our holdings in both BP and Royal Dutch Shell in 2016.
Given the increasingly bold actions of central bankers in
recent years, we have long felt it prudent to hold insurance
of some form on the portfolio. The authorities seem eager
to outlaw both recessions and bear markets, and on this
measure their strategy has been successful since the Global
Financial Crisis. However, the long term cost is unknown.
We remain convinced that the authorities have a longer-
term strategy of minimising the cost of future liabilities
and thus want to generate higher levels of infl ation. They
appear confi dent a combination of traditional interest rate
moves and more modern ‘unconventional‘ policies will both
support economic growth and fi ne-tune the infl ationary
outcome. Perhaps it will, but history suggests a less benign
outcome and consequently we maintain exposure to
precious metals.
PORTFOLIO DISTRIBUTION %
Temple Bar
portfolio
FTSE
All-Share Index
1
2
3
4
5
6
7
8
9
10
1 1
1 2
1 3
Financials
Consumer Services
Industrials
Oil & Gas
Health Care
Basic Materials
Consumer Goods
Utilities
Physical Gold and Silver
Telecommunications
Technology
Total Equities
Fixed Interest
Cash
%
25.62
11.66
10.65
13.2 6
9.1 4
6.86
14.39
3.60
–
3.98
0.84
100.00
%
23 .2 7
15.37
13. 60
11.15
6. 60
5.62
4.3 2
4.00
2.96
1.96
1.41
90.26
7.99
1.75
100.00
13
11
12
10
9
8
7
6
5
4
3
1
2
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
5
MANAGER’S REVIEW CONTINUED
The authorities seem eager to outlaw both recessions and bear markets,
and on this measure their strategy has been successful .
In the second half of the year we switched some of our
physical gold holdings into silver. We believe both metals
will perform well if confi dence in central bankers falls, but
we now have a preference for silver. The current silver price
insuffi ciently incentivizes new silver mining and expectations
are for medium term supply to reduce. The quality of silver
being mined is deteriorating and the cost of its extraction is
increasing. This suggests that the silver price must increase
signifi cantly to ensure that long-term supply matches
demand.
WHAT WENT WRONG?
As always not everything went right during the year. The
largest detractors from portfolio performance were building
related stocks and RBS.
The builder’s merchant market has bounced less than
predicted since the lows of the last recession. Historically,
industry sales have been highly correlated to housing
transaction volumes and these volumes remain fairly low
relative to history. A further depressant has been the
changing ownership structure of the UK housing stock in
recent years with a signifi cant increase in rented stock;
stock on which the landlord is typically likely to spend less
than a proud owner. Both transaction volumes and repair,
maintenance and improvement of the housing stock have also
been affected by the increasing number of under-occupied
houses – houses where the ageing owner is rattling around
with a number of spare rooms, but reluctant or unable to
downsize.
It is clear that government policy is reducing the fi nancial
attractions to both new and current landlords through stamp
duty increases and some disadvantageous tax changes. The
Bank of England is also forcing banks to tighten buy-to let
mortgage criteria for new loans. Whilst this may initially lead
to a reduction in transaction volumes, the changes are clearly
designed to help prospective owner occupiers compete
against buy to let investors.
We believe the builder’s merchant market remains structurally
sound with depressed demand ultimately likely to recover,
further consolidation probable in this reasonably fragmented
market and IT spend and logistics improvements likely to
widen the advantage of the big players over smaller ones.
Our sizeable holdings in Travis Perkins and Grafton Group
should benefi t from these trends.
As a distributor, primarily of insulation materials, SIG is
more exposed to the commercial property market than the
builder’s merchants. However, regardless of its business
drivers, many of the company’s problems appear self-
infl icted, something recognized in recent management
changes. Although the company operates in some very
competitive and commoditized markets, we would expect
the business could be run more entrepreneurially. If the new
management team does not act quickly, it is possible that the
very low valuation will attract some corporate interest.
The largest individual performance detractor was RBS. The
company’s road to recovery since its near-death experience
has been tortuous and a number of potential fi nes and legal
payments of unknown quantity still overhang the business.
The company is also struggling to sell the Williams & Glyn
retail banking business the EU forced it to off-load as a
consequence of the Government rescue operation. This
news drove the shares lower and pushed back the likely
date for the reintroduction of dividend payments. Rather
than increasing our holding, we decided to complement the
RBS position by purchasing Barclays – a share also suffering
from very poor sentiment, but which was already paying a
dividend. Following the lows of the post Brexit panic, both
of these banks’ shares performed very well with the positive
contribution from Barclays cancelling out much of the
negative contribution of RBS over the course of the year.
WHAT WENT RIGHT?
Mention has already been made elsewhere of recoveries in
Barclays, Wm Morrison, Tesco, BP and precious metal shares.
In addition, Best Buy (a US electrical retailer) performed well.
The company proved it could compete against Amazon, no
doubt helped by the desire of its suppliers to see a strong
physical retail presence for its brands. A bid was received for
mining equipment manufacturer Joy Global, and Drax made a
well-received acquisition of some gas stations and an energy
supplier to businesses and also fi nally received EU state aid
approval for its converted biomass plant.
The revenue account in particular benefi ted from US dollar
strength given that a large proportion of total revenue
receipts are paid in US dollars.
BREXIT
Much has been written about the pros, cons and
consequences of Brexit and it is fascinating to observe
the certainty of the two camps’ views. Undoubtedly to the
amusement of behavioural psychologists, each side appears
to have become more entrenched since the vote. It is clearly
impossible to tell how Brexit negotiations will evolve and
given the breadth of possible outcomes it is simply pointless
speculating.
It is interesting, however, to refl ect that the Bank of
England (and quite possibly the most senior members of
the Conservative party) is clearly apprehensive about the
downside risks of Brexit. Since the Brexit vote, the Bank of
England has reduced the Bank Rate to 0.25%, expanded
quantitative easing and introduced a new funding scheme
allowing banks to borrow funds from the Bank of England
more cheaply. Meanwhile, Chancellor Hammond has
announced the end of the previous Chancellor’s objective
6
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
I
S
S
T
T
R
R
A
A
T
T
E
E
G
G
C
C
R
R
E
E
P
P
O
O
R
R
T
T
G
G
O
O
V
V
E
E
R
R
N
N
A
A
N
N
C
C
E
E
R
R
E
E
P
P
O
O
R
R
T
T
I
I
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
R
R
E
E
P
P
O
O
R
R
T
T
S
S
H
H
A
A
R
R
E
E
H
H
O
O
L
L
D
D
E
E
R
R
I
I
N
N
F
F
O
O
R
R
M
M
A
A
T
T
I
I
O
O
N
N
The valuation of the average UK listed stock remains high and consequently
the number of portfolio holdings remains relatively low.
excitement in recent years. It is therefore promising that
there is now more to interest us. Well regarded companies
such as Easyjet and Next have declining earnings for
reasons at least partially beyond their control, previous high
fl iers such as Essentra, Mitie and Capita have signifi cantly
disappointed investors with poor profi t announcements ,
the likes of IG Group and International Personal Finance
have been hit by regulatory issues and Sports Direct and
Restaurant Group have come unstuck as their growth
stories have dried up and management pushed too hard
to maintain profi tability. All these companies have fairly
straightforward business models and, therefore, we would
be comfortable investing in them at the right price. So far,
our patience has not been rewarded, but we are willing to
wait and indeed are often happiest to act when others are
most fearful. A bumpy 2017 could quite possibly allow us to
seize some of these prospects.
Alastair Mundy
For Investec Fund Managers Limited
1 7 February 2017
of a balanced budget. This suggests that the authorities
will react quickly if UK economic conditions deteriorate
(or are believed likely to deteriorate), therefore making an
infl ationary boom perhaps just as likely as a defl ationary
bust.
PORTFOLIO POSITIONING
The bank sector remains the largest sector weighting in
the portfolio. All the sector constituents have bounced
some distance from their lows, but valuations remain
undemanding. The twin evils of regulation and fi nes that
have worried investors in recent years appear to be easing,
balance sheets are stronger, underlying profi tability
continues to be impressive and the potential for generous
dividend payments remains.
Other signifi cant exposures to food retailing and builder’s
merchants companies are highlighted elsewhere. We also
have a notable exposure to general retailers through two
US retailers, Best Buy and Signet Jewelers (both covered
in the interim report), perennial recovery stock Marks &
Spencer (also covered in the interim report) and smaller
holdings in niche retailers N Brown (plus sized clothes
retailer) and Games Workshop (a miniature war-gaming
manufacturer and retailer).
OUTLOOK
A number of factors suggest that companies, in particular
those exposed to the UK economy, will in general struggle
to grow earnings over the next few years. Minimum
wage increases, the ratcheting cost effects of those
employees higher up the pay scale, and skill shortages
will boost labour costs, the weak pound will increase costs
of imported products, many rental costs are linked to
infl ation, other costs such as business rates are increasing
and new costs such as apprenticeship taxes are being
introduced. While other factors may off-set these rises,
most companies have been very focussed on costs since
the last recession. In fact, a number of companies may well
have under-invested in their businesses over this time. One
should probably not, however, be excessively bearish as
the UK corporate tax rate continues to fall and, of course,
companies will try and regain cost increases through
infl ation.
The valuation of the average UK listed stock remains high
and consequently the number of portfolio holdings remains
relatively low. Over the last few years, commentators have
justifi ed high equity valuations by favourable comparison
with low bond yields. However, if the three decade
reduction in bond yields is now over, this crutch may soon
vanish.
Our opportunity set – those stocks which have fallen
signifi cantly relatively to the market – ha s offered little
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
7
ATTRIBUTION ANALYSIS
By stocks held in the portfolio
Source: Factset
TOP TEN CONTRIBUTORS
BOTTOM TEN CONTRIBUTORS
%
7
9
.
2
l
c
p
P
B
%
3
6
.
3
l
B
s
s
a
C
c
P
l
l
l
e
h
S
h
c
t
u
D
l
a
y
o
R
%
7
8
.
1
%
5
7
.
1
%
1
4
.
1
%
5
3
.
1
%
2
3
.
1
l
l
i
c
p
s
g
n
d
o
H
C
B
S
H
l
c
p
e
n
i
l
K
h
t
i
m
S
o
x
a
G
l
l
c
p
s
t
e
k
r
a
m
r
e
p
u
S
n
o
s
i
r
r
o
M
m
W
.
c
n
I
,
.
o
C
y
u
B
t
s
e
B
c
.
l
.
p
o
c
c
a
b
o
T
n
a
c
i
r
e
m
A
h
s
i
t
i
r
B
%
3
2
.
1
C
L
P
s
y
a
c
r
a
B
l
%
3
1
.
1
%
0
1
.
1
l
c
p
p
u
o
r
G
x
a
r
D
l
i
F
T
E
s
r
e
n
M
d
o
G
s
r
o
t
c
e
V
k
c
E
n
a
V
%
1
1
.
1
-
l
c
P
p
u
o
r
G
n
o
t
f
a
r
G
%
5
4
.
1
-
l
c
p
p
u
o
r
G
d
n
a
l
t
o
c
S
f
o
k
n
a
B
l
a
y
o
R
%
3
7
.
0
-
%
2
7
.
0
-
l
c
p
G
S
I
l
c
p
p
u
o
r
G
g
n
k
n
a
B
s
d
y
o
L
i
l
%
8
6
.
0
-
A
S
c
e
r
u
o
l
l
a
V
%
1
6
.
0
-
l
c
p
p
u
o
r
G
T
B
%
4
4
.
0
-
l
c
p
p
u
o
r
G
r
e
c
n
e
p
S
d
n
a
s
k
r
a
M
%
6
2
.
0
-
l
c
p
p
u
o
r
G
d
a
e
h
A
-
o
G
%
9
1
.
0
-
C
L
P
y
n
a
p
m
o
C
d
n
a
L
h
s
i
t
i
r
B
%
5
1
.
0
-
l
c
P
p
u
o
r
G
e
c
n
a
r
u
s
n
I
e
n
L
i
t
c
e
r
i
D
The bar charts above show the top and bottom contributors to total performance during the year from those stocks
held in the portfolio.
Relative to the benchmark index
Source: Factset
TOP TEN CONTRIBUTORS
BOTTOM TEN CONTRIBUTORS
%
4
7
.
0
.
c
.
l
.
p
P
B
%
7
7
.
0
c
n
I
l
l
a
b
o
G
y
o
J
%
3
1
.
1
C
L
P
s
y
a
c
r
a
B
l
%
3
9
.
0
%
5
8
.
0
.
c
n
I
,
.
o
C
y
u
B
t
s
e
B
l
c
p
s
t
e
k
r
a
m
r
e
p
u
S
n
o
s
i
r
r
o
M
m
W
%
1
7
.
0
i
l
F
T
E
s
r
e
n
M
d
o
G
s
r
o
t
c
e
V
k
c
E
n
a
V
%
9
6
.
0
l
c
p
p
u
o
r
G
x
a
r
D
%
6
5
.
0
l
*
c
P
p
u
o
r
G
e
n
o
f
a
d
o
V
%
3
5
.
0
C
L
P
o
l
l
i
n
s
e
r
F
%
7
4
.
0
.
d
t
L
s
e
i
t
i
r
u
c
e
S
n
o
i
l
l
u
B
d
o
G
l
%
4
6
.
1
-
%
3
6
1
-
.
l
c
P
p
u
o
r
G
n
o
t
f
a
r
G
l
c
p
p
u
o
r
G
d
n
a
l
t
o
c
S
f
o
k
n
a
B
l
a
y
o
R
%
8
1
.
1
-
%
1
0
.
1
-
%
0
7
.
0
-
%
6
6
.
0
-
l
c
p
G
S
I
l
*
c
p
e
r
o
c
n
e
G
l
l
c
p
p
u
o
r
G
r
e
c
n
e
p
S
d
n
a
s
k
r
a
M
l
c
p
p
u
o
r
G
g
n
k
n
a
B
s
d
y
o
L
i
l
%
0
6
.
0
-
A
S
c
e
r
u
o
l
l
a
V
%
4
5
.
0
-
l
*
c
p
n
a
c
i
r
e
m
A
o
g
n
A
l
%
7
4
.
0
-
l
*
c
P
n
o
t
i
l
l
i
B
P
H
B
%
5
4
.
0
-
l
c
p
p
u
o
r
G
d
a
e
h
A
-
o
G
The bar charts above show the top and bottom contributors relative to the performance of the FTSE All-Share Index during the
year and include the impact of stocks not held in the portfolio. Both positive and negative relative performance can be derived
from stocks that are not owned by Temple Bar.
* Not held in portfolio
8
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
OVERVIEW OF STRATEGY
The directors present the strategic report for the Company
for the year ended 31 December 2016.
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.
From time to time fi xed interest holdings or non
equity interests may be held for yield enhancement
and other purposes. Derivative instruments are used in
certain circumstances, and with the prior approval of the
Board, for hedging purposes or to take advantage of
specifi c investment opportunities.
BUSINESS OF THE COMPANY
Temple Bar Investment Trust PLC was incorporated
in England and Wales in 1926 with the registered
number 214601.
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.
The Company’s principal business activity of investment
management is sub-contracted to Investec Fund Managers
Limited (‘IFM’), the Alternative Investment Fund Manager
of the Company. IFM delegates the management of the
Company’s portfolio to Investec Asset Management
Limited (‘IAM’).
A review of the business is given in the Chairman’s Statement
and the Manager’s Review. The results of the Company are
shown on page 34.
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 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.
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 20% of
the portfolio may be held in listed international equities in
developed economies. The Company may continue to hold
securities that cease to be quoted or listed if the 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 specifi c industrial or commercial
sector of 25%, in each case irrespective of their weightings
in the benchmark index.
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 diversifi ed portfolio of investments,
typically comprising 70-80 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:
• Achieving a portfolio yield of between 120-140%
of that of the FTSE All-Share Index.
• Stocks of companies that are out of favour and whose
share prices do not match the Manager’s assessment of
their longer term value.
Liquidity and borrowings are managed with the aim of
increasing returns to shareholders. The Company’s net
gearing range may fl uctuate 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 diversifi cation of holdings,
investment limits set by the Board and appropriate fi nancial
and other controls relating to the administration of assets.
INVESTMENT APPROACH
The investment approach of the Manager is premised on
a contrarian view on the timing of buy and sell decisions,
buying the shares of companies when sentiment towards
them is thought to be near its worst and selling them as
fundamental profi t improvement and/or re-evaluation of
their long term prospects takes place.
The belief is that repeated investor behaviour in driving
down the prices of ‘out of favour’ companies to below their
fair value will offer investment opportunities. This will allow
the Company to purchase shares at signifi cant discounts to
their fair value and to sell them as they become more fully
valued, principally as a result of predictable patterns in
human psychology.
The Manager’s process is designed to produce ‘best ideas’
to drive active fund management within a rigorous control
framework. The framework begins through narrowing down
the universe of stocks by passing those companies with a
market capitalisation above £200 million through a screening
process which highlights the weakest performing stocks.
This isolates opportunities with the most negative sentiment
characteristics which are then in turn scrutinised in greater
detail to identify investment opportunities.
The process is very much bottom up and can result in large
sector positions being taken if enough stocks of suffi cient
interest are found within a single sector. However, top down
risk analysis is undertaken to identify potential concentration
of risk and to factor this awareness into portfolio construction.
The portfolio comprises stocks which have been purchased
for different reasons and at different times. In general,
because of the bottom up approach to stockpicking, each of
these reasons is independent of the other and the portfolio,
therefore, is not excessively vulnerable to longer term macro
trends. Cash is a residual of the process and normally will not
exceed 5% of the portfolio value.
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
9
OVERVIEW OF STRATEGY CONTINUED
The approach to stock selection and portfolio construction is
driven by four core beliefs:
1.
Markets overreact to news on the upside and the
downside. The Manager aims to be sceptical of the crowd
and aware of investor psychology, which often causes
overvaluation of those stocks that are deemed to have
good prospects and an undervaluation of those which are
out of favour.
KEY PERFORMANCE INDICATORS
The principal 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:
• Net asset value total return relative to the FTSE
All-Share Index and to competitors within the UK Equity
Income sector of investment trust companies;
• Discount/premium on net asset value;
• Earnings and dividends per share; and
• Ongoing charges.
While some elements of performance against KPIs are
beyond management control they provide measures of
the Company’s absolute and relative performance and are,
therefore, monitored by the Board on a regular basis.
Net asset value (‘NAV’) total return
In reviewing the performance of the assets of 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 net asset value
total return of the Company was 20.4% compared with a total
return of 16.8% by the FTSE All-Share Index. The fi ve year net
asset value total return performance is shown below.
Net asset value total return
180
160
140
120
100
80
2011
2012
2013
2014
2015
2016
Source: Thomson Reuters Datastream
Temple Bar share price – total return
Temple Bar NAV – total return
FTSE All-Share Index – total return
2. There are few companies which sustain below normal
profi ts over the longer term. Weaker companies tend to
leave an industry, thus improving the balance of supply
and demand, are bid for or management is changed.
Similarly, there are few companies which can sustain
supernormal profi ts over the longer term. Such profi ts
tend to be competed or regulated away.
3. Fundamental valuation is the key determinant of share
price performance over the long term. In other words
‘cheap’ stocks will outperform ‘expensive’ stocks.
4. Diversifi cation is an important control. Particular
companies or sectors can be out of favour for a
considerable time.
PERFORMANCE
In the year to 31 December 2016 the net asset value total
return of the Company was 20.4% compared with a total
return of the Company’s benchmark index of 16.8%. The
effect of removing gearing from the performance calculation
is shown in the following graph of investment performance
over a fi ve year period compared with the FTSE All-Share
Index. The Chairman’s Statement on pages 2 and 3 and
the Manager’s Review on pages 4 to 7 include a review of
developments during the year together with information on
investment activity within the Company’s portfolio and an
assessment of future developments.
Ungeared 5 year performance
180
160
140
120
100
80
2011
2012
2013
2014
2015
2016
Temple Bar – gross assets, excluding effects of gearing and associated costs
FTSE All-Share Index - total return
Sources: Thomson Reuters Datastream and IAM
10
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
Discount on net asset value
The Board monitors the premium/discount at which the
Company’s shares trade in relation to the net assets.
During the year the shares traded at an average discount
to NAV of 7.3%. This compares with an average discount of
3.7% in the previous year. The Board and Manager closely
monitor both movements in the Company’s share price and
signifi cant 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 the
buy back of shares and their issuance which can assist in the
management of the discount or premium.
(Discount)/premium to net asset value
(excluding current year revenue)
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
-9%
-10%
-11%
2011
2012
2013
2014
2015
2016
Cum income NAV, debt at market value
Source: Morningstar
Earnings and 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, subject
to preserving a prudent balance in revenue reserves to
facilitate a smooth dividend progression. The Manager aims
to maximise total returns from the portfolio and attaches
great importance to dividends in achieving total return.
The portfolio will typically provide a yield premium to the
market. The fi nal dividend recommended for the year is
16.18p per ordinary share which brings the total for the
year to 40.45p per ordinary share, an increase of 2%. This
will be the 33rd consecutive year in which the Company has
increased the overall level of its dividend payment.
10 Year Comparative Dividend Growth
140
130
120
110
100
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Temple Bar
Retail Prices Index
Source: Bloomberg
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
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 2016 were
0.51% (2015: 0.49%). The Board compares the Company’s
ongoing charges with those of its peers on a regular basis.
At the present time the Company has one of the lowest
ongoing charges in the UK Equity Income sector of
investment trust companies.
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
11
OVERVIEW OF STRATEGY CONTINUED
PRINCIPAL RISKS AND UNCERTAINTIES
With the assistance of the Manager the Board has drawn up
a risk matrix which identifi es the key risks to the Company.
The Board reviews and agrees policies, which have remained
unchanged since the beginning of the accounting period, for
managing these risks, as summarised below.
Investment strategy risk
An inappropriate investment strategy on matters such
as asset allocation or the level of gearing may lead to
underperformance against the Company’s benchmark
index or peer companies, resulting in the Company’s shares
trading on a wider discount. The Board manages such risks
by diversifi cation of investments through its investment
restrictions and guidelines, which are monitored and
reported on by the Manager. The Manager provides the
directors with regular management information including
absolute and relative performance data, attribution analysis,
revenue estimates, liquidity reports, risk profi le and
shareholder analysis. The Board monitors the implementation
and results of the investment process with the portfolio
manager, who attends Board meetings. Periodically the
Board holds a separate meeting devoted to strategy, the
most recent being in January 2016.
Income risk – dividends
Generating the necessary level of income from portfolio
investments to meet the Company’s expenses and to
provide adequate reserves from which to base a sustainable
programme of increasing dividend payments to shareholders
is subject to the risk that income generation from investments
fails to meet the level required. The Board monitors this risk
through the receipt of detailed income reports and forecasts
which are considered at each meeting. As at 31 December
2016 the Company had distributable revenue reserves of
£ 32.0 million before declaration of the fi nal dividend
for 2016 of £ 10.8 million.
Share price risk
The Company’s share price and premium or discount to
NAV are monitored by the Manager and considered by the
Board on a regular basis. The directors attach considerable
importance to any premium or discount to NAV at which
the shares trade, both in absolute terms and relative to the
average rating at which the UK Equity Income sector of
investment trusts as a whole is trading. Premiums judged
to be excessive will be addressed by repeated share
issues, either new or from Treasury. Discounts judged to be
excessive will be addressed by repeated share buybacks,
for Treasury or cancellation. The directors are prepared to
be proactive in premium/discount management to minimise
potential disadvantages to shareholders. However, market
sentiment is beyond the absolute control of the Manager and
the Board.
Accounting, legal & regulatory
In order to qualify as an investment trust the Company must
comply with Section 1158 of the Corporation Tax Act 2010.
Were the Company to breach Section 1158 it might lose
investment trust status and, as a consequence, gains within
the Company’s portfolio would be subject to capital gains
tax. The Section 1158 qualifi cation criteria are, therefore,
monitored by the Board at each meeting.
The Company must also comply with the provisions of the
Companies Act and, since its shares are listed on the London
Stock Exchange, the UKLA Listing Rules. A breach of the
Companies Act could result in the Company being fi ned or
subject to criminal proceedings. Breach of the UKLA Listing
Rules could result in the Company’s shares being suspended
from Listing which in turn would breach Section 1158. The
Board relies on the services of its Company Secretary, IAM,
and its professional advisers to ensure compliance with the
Companies Act and the UKLA Listing Rules and is satisfi ed that
they are able to provide an appropriate service in this regard.
Corporate governance and shareholder relations
Details of the Company’s compliance with corporate
governance best practice including information on
relations with shareholders, are set out in the corporate
governance report on pages 22 to 24 which forms part
of this strategic report.
Control systems risk
Disruption to, or failure of, IFM’s accounting, dealing or
payments systems or the custodian’s records could prevent
accurate reporting and monitoring of the Company’s fi nancial
position or adversely impact the ability to trade. Details of
how the Board monitors the services provided by IFM and
its associates and the key elements designed to provide
effective internal control are included within the internal
control section of the corporate governance report on
page 22.
Other risks
Other risks to which the Company is exposed and which
form part of the market risks referred to above are included
in note 22 to the fi nancial statements together with
summaries of the policies for managing these risks. These
comprise; market price risk, interest rate risk, liquidity risk,
credit risk and currency risk.
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 risks it faces.
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 Code
Provision C.2.2 of the UK Corporate Governance Code, the
Board considers that assessing the Company’s prospects
over a period of fi ve years is appropriate given the nature of
the Company and the inherent uncertainties of looking out
over a longer time period. The directors believe that a fi ve
year period appropriately refl ects 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 signifi cant change to the current
principal risks and to the adequacy of the mitigating controls
in place.
12
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
In assessing the viability of the Company the directors have
conducted a thorough assessment of each of the Company’s
principal risks and uncertainties as set out on page 12.
Particular scrutiny was given to the impact of a signifi cant
fall in global 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 fi xed
rate borrowings, notably the £25 million debenture due to
expire in December 2017 and the £40 million debenture
due to expire in March 2021, its income and expenditure
projections and the fact the Company’s investments comprise
mainly readily realisable quoted securities which can be sold
to meet funding requirements if necessary.
All 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.
Having taken into account the Company’s current
position and the potential impact of its principal 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 fi ve years
from the date of this Report.
MODERN SLAVERY ACT
Due to the nature of the Company’s business, being
a company that does not offer goods and services to
customers, the Board considers that it is not within the
scope of the Modern Slavery Act 2015 because it has no
turnover. The Company is therefore not required to make
a slavery and human traffi cking statement. In any event,
the Board considers the Company’s supply chains, dealing
predominantly with professional advisers and service
providers in the fi nancial services industry, to be low risk in
relation to this matter.
GENDER DIVERSITY
At the year end there were four male directors and two
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 report on page 22.
GREENHOUSE GAS EMISSIONS
All the Company’s activities are outsourced to third parties.
The Company therefore has no greenhouse gas emissions to
report from its operations.
EMPLOYEE, SOCIAL, ENVIRONMENTAL, ETHICAL
AND HUMAN RIGHTS POLICY
The Company is managed by IFM, has no employees and
all its directors are non-executive. There are, therefore, no
disclosures to be made in respect of employees. The Board
notes the Manager’s policy statement in respect of Social,
Environmental and Governance issues, as outlined below.
STEWARDSHIP/ENGAGEMENT
The Manager recognises its wider stewardship
responsibilities to its clients as a major asset owner. To this
end, it supports the FRC Stewardship Code, which sets out
the responsibilities of institutional shareholders in respect of
investee companies. Under the Code, managers should:
• publicly disclose their policy on how they will discharge
their stewardship responsibilities to their clients;
• disclose their policy on managing confl icts of interest;
• monitor their investee companies;
• establish clear guidelines on how they escalate engagement;
• be willing to act collectively with other investors
where appropriate;
• have a clear policy on proxy voting and disclose their
voting record; and
•
report to clients.
The Manager endorses the Stewardship Code for its UK
investments and supports the principles as best practice
elsewhere. The Manager believes that regular contact with
the companies in which it invests is central to its investment
process and it also recognises the importance of being an
‘active’ owner on behalf of its clients.
The Manager believes that companies should act in a
socially responsible manner. Although its priority at all times
is the best economic interests of its clients, it recognises
that, increasingly, non-fi nancial issues such as social and
environmental factors have the potential to impact the share
price, as well as the reputation of companies. Specialists
within the Manager’s Environmental, Social and Governance
(ESG) team work with the investment teams to appropriately
integrate material ESG factors into the investment process.
The Manager’s Voting Policy and Corporate Governance
Guidelines are available on request from the Company
Secretary or can be downloaded from its website.
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 on page 2 and the Manager’s
Review on page 4.
By order of the Board of Directors
John Reeve
Chairman
1 7 February 2017
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
13
PORTFOLIO OF INVESTMENTS
INDUSTRY
PLACE OF
PRIMARY LISTING
VALUATION OF
HOLDING £M
% OF PORTFOLIO
1
2
3
4
5
6
7
8
9
HSBC HOLDINGS
HSBC Holdings is one of the world ’s largest banks. It
operates four global businesses; retail banking and wealth
management, commercial banking, global banking and
markets and private banking. The company has been
reducing exposure to peripheral areas and refocussing on
under-managed core assets. Approximately 2/3 of pre-tax
profi ts are from Asia .
UK TREASURY 1.00% 201 7
Held in the portfolio in lieu of cash.
GLAXOSMITHKLINE
GlaxoSmithKline is a global health care company focussing
on pharmaceuticals, vaccines and consumer healthcare. After
a number of years of earnings disappointment profi tability
seems to have stabilised. The new chief executive may
investigate the possibility of breaking up the company.
ROYAL DUTCH SHELL
Royal Dutch Shell is a global oil and gas company. It is one
of the six oil and gas “ supermajors”. It is vertically-integrated
and is active in oil and gas exploration and production,
refi ning, distribution and marketing, petrochemicals,
power generation and trading. The fall in the oil price has
focussed management attention on cost effi ciencies. The
B G acquisition increased debt and has necessitated some
disposals.
BP
BP is a global oil and gas company and is one of the
six oil and gas “supermajors”. It is vertically-integrated
and is active in oil and gas exploration and production,
refi ning, distribution and marketing, petrochemicals,
power generation and trading. Like Shell, the Company is
concentrated on operating effi ciencies.
GRAFTON GROUP
Grafton is a distributor of building products that operates
across the UK and Ireland and also has a small Benelux
business. The group operates from about 500 sites in the UK,
and this is by far its most important market, accounting for
approximately 75% of sales. UK profi tability has been held
back by disappointing spend on improvement of the UK
housing stock but this spending should bounce back.
BARCLAYS
Barclays has signifi cant consumer, corporate and investment
banking positions, particularly focussed on the UK and
the US. New management has been quick to reduce the
non-core part of the business and re-build capital strength.
Signifi cant efforts are being made to improve UK profi tability
of investment banking.
LLOYDS BANKING GROUP
Lloyds Banking Group operates across a wide range of UK
centric banking activities including retail and commercial
banking and insurance. The company still has an extensive
branch network which may be reduced signifi cantly when the
government sells its shareholding.
WM MORRISON SUPERMARKETS
Morrison‘s is one of the big four food retail chains in the
UK. In the last few years management has concentrated
the business on its large superstores and improved
pricing, products and service. The company’s large food
manufacturing business has benefi tted as the stores’
performance has improved.
Financials
Financials
Fixed
Interest
Healthcare
Oil & Gas
Oil & Gas
Industrials
Financials
Financials
10
SIG
S IG is a specialist distributor of building products in Europe.
Its three core product areas are insulation and energy
management, exteriors and interiors. New management has
the opportunity to improve disappointing earnings history.
Consumer Services
Industrials
UK
75 .133
7.72 %
UK
68 .356
7.02%
UK
65 .428
6.72%
UK
59 .191
6.08 %
UK
51 .272
5.27 %
UK
41 .333
4.25 %
UK
38 .402
3.95%
UK
34 .772
3.57%
UK
28 .454
2.92%
UK
28 .131
2.89%
Top Ten Investments
£490 .472
50.39%
14
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
PORTFOLIO OF INVESTMENTS CONTINUED
COMPANY
Royal Bank of Scotland
Tesco
11
12
13 Marks & Spencer
14
15
16
17
18
19
20
CitiGroup
Centrica
Travis Perkins
BT Group
Drax
Best Buy
British American Tobacco
INDUSTRY
Financials
Consumer Services
Consumer Services
Financials
Utilities
Industrials
Telecommunications
Utilities
Consumer Services
Consumer Goods
PLACE OF
PRIMARY LISTING
VALUATION OF
HOLDING £M
% OF
PORTFOLIO
UK
UK
UK
USA
UK
UK
UK
UK
USA
UK
27 .682
24 .892
24 .565
23 .202
20 .769
19 .476
19 .365
18 .843
18 .540
18 .383
2.84%
2.56%
2.52%
2.38%
2.13%
2.00%
1.99%
1.94%
1.91%
1.89%
Top Twenty Investments
706 .189
72.55%
I
I
S
S
T
T
R
R
A
A
T
T
E
E
G
G
C
C
R
R
E
E
P
P
O
O
R
R
T
T
G
G
O
O
V
V
E
E
R
R
N
N
A
A
N
N
C
C
E
E
R
R
E
E
P
P
O
O
R
R
T
T
21
22
23
24
25
CRH
Yara International
Direct Line Insurance
ETFS Physical Silver
Vaneck Vectors Gold Miners
26 Go Ahead
27
28
29
Imperial Brands
Sainsbury (J)
Computacenter
30 Gold Bullion Securities ETF
Top Thirty Investments
31 Qinetiq
32
Signet Jewellers
33 Green REIT
Ladbrokes Coral
Land Securities REIT
Standard Chartered
Royal Mail
Top Forty Investments
41
42
43
Brown (N) Group
Fresnillo
British Land REIT
44 Games Workshop
Hammerson 6.875% 2020
Kingspan
Future
34
35
36
37
38
39
40
45
46
47
48
49
50
International Personal Finance 5% 2021
Fixed Interest
Avon Products
Chemring
Consumer Goods
Industrials
RSA Insurance 6.701% 2017 Variable
Perpetual
Aviva 2020 5.9021% FRN Perpetual
Lloyds Banking Group – preference
shares
Fixed Interest
Fixed Interest
Financials
Top Fifty Investments
51
52
53
St. Ives
Hochschild Mining
Johnston Press
Total Valuation of Portfolio
Industrials
Basic Materials
Consumer Services
Industrials
Basic Materials
UK
Norway
Financials
Financials
Financials
Consumer Services
Consumer Goods
Consumer Services
Technology
Financials
Industrials
Consumer Services
Financials
Consumer Services
Financials
Financials
Industrials
Consumer Services
Basic Materials
Financials
Consumer Goods
Fixed Interest
Industrials
Consumer Services
UK
UK
USA
UK
UK
UK
UK
UK
UK
U SA
Ireland
UK
UK
UK
UK
UK
USA
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
I
I
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
R
R
E
E
P
P
O
O
R
R
T
T
S
S
H
H
A
A
R
R
E
E
H
H
O
O
L
L
D
D
E
E
R
R
I
I
N
N
F
F
O
O
R
R
M
M
A
A
T
T
I
I
O
O
N
N
18 .015
17 .786
17 .240
15 .864
15 .778
15 .322
15 .169
14 .161
13 .955
13 .478
1.85%
1.83%
1.77%
1.63%
1.62%
1.57%
1.56%
1.46%
1.43%
1.39%
862 .957
88.66%
12 .476
11 .054
10 .109
8 .078
7 .435
7 .170
6 .516
5 .859
5 .837
5 .834
1.28%
1.14%
1.04%
0.83%
0.76%
0.74%
0.67%
0.60%
0.60%
0.60%
943 .325
96.92%
5 .577
5 .539
4 .356
3 .404
2 .952
2 .166
1 .628
1 .015
0.971
0.834
971 .767
0.816
0.762
0.008
973 .353
0.57%
0.57%
0.45%
0.35%
0.30%
0.22%
0.17%
0.10%
0.10%
0.09%
99.84%
0.08%
0.08%
0.00%
100.0%
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
15
BOARD OF DIRECTORS
JOHN REEVE
RICHARD JEWSON*
ARTHUR COPPLE
John Reeve, Chairman, was appointed
a director in 1992. He was formerly
executive chairman of the Willis Group,
group managing director of Sun Life
Assurance Society and a member of
the boards of the Association of British
Insurers and the International Insurance
Society. He is a director of a number of
other companies.
Richard Jewson, senior independent
director, was appointed a director in
2001. He fi rst worked in the timber
and building material supply industry,
becoming managing director of
Jewson, the builders’ merchants, for
twelve years from 1974, and then
managing director and chairman of its
parent company Meyer International
PLC from which he retired in 1993. He
is currently chairman of Raven Russia
Limited and Tritax Big Box REIT PLC
and a non-executive director of other
private companies.
Arthur Copple was appointed a
director in 2011. He has specialised
in the investment company sector for
over 30 years. He was a partner at
Kitcat & Aitken, an executive director of
Smith New Court PLC and a managing
director of Merrill Lynch.
JUNE DE MOLLER
June de Moller was appointed a
director in 2005. She is a former
managing director of Carlton
Communications PLC and was
previously a non-executive director of J
Sainsbury PLC, Cookson Group PLC, BT
PLC and Derwent London PLC.
DAVID WEBSTER
David Webster was appointed a
director in 2009. His career started in
corporate fi nance at Samuel Montagu
before becoming a founder and
subsequently chairman of Safeway
PLC from which he retired in 2004. He
is currently a non-executive director
of Amadeus IT Holdings SA. He
has a wide range of other business
interests including membership of
the Appeals Committee of the Panel
on Takeovers and Mergers. He was
previously chairman of InterContinental
Hotels Group PLC and a non-executive
director of Reed Elsevier PLC.
LESLEY SHERRATT
Lesley Sherratt was appointed a
director in 2015. She was formerly
Investment Director for the Save &
Prosper and Fleming Flagship range
of funds, and CEO & CIO of Ark Asset
Management Ltd. She has over twenty
years experience investing in the
fi nancial sector, including investment
trusts, and served as a director
and Chair of US Small Companies
Investment Trust. She is currently
a director of a private foundation,
lectures in global business ethics at
King‘s College London and is the
author of ‘Can Microfi nance Work?
How to Improve its Ethical Balance and
Effectiveness‘.
NICHOLAS LYONS
Nicholas Lyons was appointed
a director in 2017. He worked in
investment banking for 21 years,
retiring in 2003 from Lehman
Brothers as a Managing Director
where he specialsied in advising
fi nancial institutions on mergers and
acquisitions and capital raising. He is
currently Senior Independent Director
at Pension Insurance Corporation,
Chairman of Price Forbes Holdings
Limited and of Clipstone Logistics
REIT plc. He was previously Chairman
of Miller Insurance Services LLP and a
non-executive director of Catlin Group
Limited, Friends LIfe Group Limited and
of other private companies.
All the directors are independent and
members of the audit and nomination
committees.
* Chairman of the audit committee and
Senior Independent Director.
16
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
243596 TBR – AR 01pp-31pp.indd 16
23/02/2017 15:30
REPORT OF DIRECTORS
The directors present their report and accounts for the
year ended 31 December 2016.
THE ALTERNATIVE INVESTMENT FUND MANAGERS
DIRECTIVE (‘AIFMD’)
Investec Fund Managers Limited (‘IFM’), an affi liate of
Investec Asset Management Limited (‘IAM’), is the Company’s
alternative investment fund manager (‘AIFM’ or ‘Manager’) .
For the purposes of the AIFMD the Company is an alternative
investment fund (‘AIF’). IFM has delegated responsibility for
the day to day management of the Company’s portfolio to
IAM.
IFM is required to ensure that a depositary is appointed and
accordingly IFM and the Company have appointed HSBC as
the depositary and custodian. HSBC is responsible for the
custody of the Company’s assets and for monitoring its
cash fl ows.
The AIFMD requires certain information to be made available
to investors in AIFs before they invest and requires that
material changes to this information be disclosed in the
annual report of each AIF. An Investor Information Document,
which sets out information on the Company’s investment
strategy and policies, leverage, risk, liquidity, administration,
management, fees, confl icts of interest and other shareholder
information is available on the Company’s website at
www.templebarinvestments.co.uk.
There have been no material changes to this information
requiring disclosure. Any information requiring immediate
disclosure pursuant to the AIFMD will be disclosed to the
London Stock Exchange through a primary information
provider. As an authorised AIFM, IFM will make the requisite
disclosures on remuneration levels and policies to the
Financial Conduct Authority (‘FCA’) at the appropriate time.
MANAGEMENT FEES
The Company has a management agreement with Investec
Fund Managers Limited (‘IFM’) for the provision of investment
management services. The agreement is subject to one year’s
notice of termination by either party.
IFM receives an investment management fee of 0.35%
per annum, payable quarterly, based on the value of the
investments (including cash) of the Company together with
an additional fee of £125,000 pa, plus or minus 0.005% of
the value of the investments (including cash) of the Company
above or below £750 million, calculated and payable
quarterly. Investments in funds managed by IFM are wholly
excluded from this charge.
There is also a fee payable to Investec Asset Management
Limited of £45,450 pa in respect of the provision of
secretarial and administrative services, adjusted annually
in line with the Retail Price Index.
IFM’s performance under the contract and the contract
terms are reviewed at least annually. This covers, inter
alia, the performance of the Manager, its management
processes, investment style, resources and risk controls.
The Board endorses the investment approach adopted by
the Manager, recognising that while the contrarian style can
sometimes lead to periods of underperformance it usually
delivers superior investment returns over the longer term.
In addition, the portfolio has produced high and growing
dividend income to shareholders. In the opinion of the
directors the continued appointment of the Manager on the
terms set out above is, therefore, in the best interests of
shareholders.
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 signifi cant doubt about the ability
of the Company to continue as a going concern. After making
enquiries, the directors have a reasonable expectation
that the Company has adequate resources to continue in
operational existence for the foreseeable future, including
recourse to a £7.5 million overdraft facility with HSBC Bank.
Accordingly, the directors continue to adopt the going
concern basis in preparing the accounts.
ORDINARY DIVIDENDS
Interim dividends of 8.09p per ordinary share were paid on
30 June 2016, 30 September 2016 and 30 December
2016 (2015: 7.9 3p in each case) and the directors are
recommending a fi nal dividend of 16.18p per ordinary share
(2015: 15.87p), a total for the year of 40.45 p (2015: 39.66p).
Subject to shareholders’ approval, the fi nal dividend will be
paid on 31 March 2017 to shareholders on the register on
1 0 March 2017.
ISAs
The Company has conducted its investment policy so
as to remain a qualifying investment trust under the ISA
regulations. It is the intention of the Board to continue to
satisfy these regulations.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
17
REPORT OF DIRECTORS CONTINUED
SHARE CAPITAL
No new ordinary shares were issued during the year.
SECTION 992 OF THE COMPANIES ACT 2006
The following information is disclosed in accordance with
Section 992 of the Companies Act 2006.
Capital structure
The Company’s capital structure is summarised on page 44.
Voting Rights in the Company’s Shares
The voting rights at 31 December 2016 were:
Share class
Ordinary shares
of 25p each
Number of
shares issued
Voting rights
per share
Total
voting rights
66,872,765
1
66,872,765
As at 1 7 February 2017, the share capital of the Company and
total voting rights was 66,872,765. There are no restrictions
on the transfer of securities in the Company and there are
no special rights attached to any of the shares. Deadlines for
the exercise of voting rights and details of arrangements by
which someone other than the registered shareholder can
exercise voting rights are provided in the Notes to the Notice
of Meeting on page 51. The Company’s ordinary shares have
a Premium listing on the London Stock Exchange.
To the extent that they exist, the revenue profi ts and capital
of the Company (including accumulated revenue and capital
reserves) are available for distribution by way of dividends to
the holders of the ordinary shares. Upon a winding-up, after
meeting the liabilities of the Company, the surplus assets
would be distributed to the shareholders pro rata to their
holding of ordinary shares.
Change of control
There are no agreements that may be altered or terminated
on change of control of the Company.
DIRECTORS
The directors of the Company who held offi ce at the end
of the year are detailed on page 1 6. Nicholas Lyons was
appointed as an additional director on 23 January 2017.
No other person was a director during any part of the year.
Details of directors’ benefi cial shareholdings may be found in
the Report on Directors‘ Remuneration on page 20.
All the directors will be retiring in compliance with the
provisions of the AIC Code and, each being eligible, the
Board recommends their re-election. In making these
recommendations the Board has carefully reviewed the
composition of the Board as a whole and borne in mind the
need for a proper balance of skills and experience. The Board
does not believe that length of service of itself detracts from
the independence of a director, particularly in relation to an
investment trust, and on that basis considers that all directors
standing for re-election are independent. It is confi rmed that,
following formal evaluation, the performance of each director
continues to be effective and each continues to demonstrate
commitment to the role.
There were no contracts subsisting during or at the end
of the year in which a director of the Company is or was
interested and which are or were signifi cant in relation to the
Company’s business. No director has a service contract with
the Company.
The Company maintains insurance cover for its directors
under a Directors’ & Offi cers’ Liability policy, as permitted by
the Companies Act 2006. Directors are also covered by the
indemnity provisions in the Company‘s Articles of Association.
SUBSTANTIAL SHAREHOLDERS
As at 31 December 2016 and 1 7 February 2017 the following
were registered or had indicated an interest in 3% or more of
the issued ordinary shares of the Company.
Brewin Dolphin Ltd
Alliance Trust Savings Ltd
Speirs & Jeffrey Ltd
Investec Wealth & Investment Ltd
Equiniti Financial Services
AXA SA
%
8.7
7.6
6.5
5.1
3.8
3.1
DISCLOSURE OF INFORMATION TO AUDITOR
The directors are not aware of any relevant information of which
the auditor is unaware and have taken all the steps that they
ought to have taken as directors in order to make themselves
aware of any relevant audit information and to establish that
the Company’s auditor is aware of that information.
AUDITOR
A resolution to re-appoint Ernst & Young LLP as auditor
to the Company will be proposed at the Annual General
Meeting on 27 March 2017.
ANNUAL GENERAL MEETING
The notice of the Annual General Meeting of the Company
to be held on 27 March 2017 is on page 49. In addition to
the ordinary business the following matters are proposed
as special business.
Authority to allot shares and disapplication
of pre-emption rights
It is proposed that the directors be authorised to allot up to
£1,671,819 of relevant securities in the Company (equivalent
to 6,687,276 ordinary shares of 25p each, representing 10.0%
of its ordinary shares in issue as at 17 February 2017).
When shares are to be allotted for cash, the Companies
Act 2006 requires such new shares to be offered fi rst to
existing shareholders in proportion to their existing holdings
of ordinary shares. However, in certain circumstances, it is
benefi cial to allot shares for cash otherwise than pro rata to
existing shareholders and the ordinary shareholders can by
special resolution waive their pre-emption rights. Therefore,
a special resolution will be proposed at the AGM which, if
passed, will give the directors the power to allot for cash
equity securities up to an aggregate nominal amount of
£1,671,819 (equivalent to 6,687,276 ordinary shares of 25p
each or 10.0% of the Company’s existing issued ordinary
share capital).
18
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
The directors intend to use this authority to issue new shares
to prospective purchasers whenever they believe it may be
advantageous to shareholders to do so. Any such issues
would only be made at prices greater than net asset value
per share, as adjusted for the market value of the Company’s
debt, and would, therefore, increase the assets underlying
each share. The issue proceeds would be available for
investment in line with the Company’s investment policy.
No issues of shares will be made which would alter the
control of the Company without the prior approval of
shareholders in general meeting.
Directors’ authority to purchase the Company’s
own shares
The directors consider it desirable to give the Company the
opportunity to buy back shares in circumstances where the
shares may be bought for a price which is below the net asset
value per share of the Company. The purchase of ordinary
shares is intended to reduce the discount at which ordinary
shares trade in the market through the Company becoming
a new source of demand for such shares. The rules of the
UK Listing Authority provide that the maximum price which
can be paid by the Company is 5% above the average of the
market value of the ordinary shares for the fi ve business days
before the purchase is made.
Recommendation
The Board considers the resolutions to be proposed at the
AGM to be in the best interests of the Company and its
members as a whole. Accordingly, the directors unanimously
recommend that shareholders should vote in favour of the
resolutions to be proposed at the AGM, as they intend to do
so in respect of their own benefi cial holdings, amounting to
126,159 ordinary shares.
By order of the Board of Directors
John Reeve
Chairman
1 7 February 2017
I
I
S
S
T
T
R
R
A
A
T
T
E
E
G
G
C
C
R
R
E
E
P
P
O
O
R
R
T
T
G
G
O
O
V
V
E
E
R
R
N
N
A
A
N
N
C
C
E
E
R
R
E
E
P
P
O
O
R
R
T
T
I
I
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
R
R
E
E
P
P
O
O
R
R
T
T
S
S
H
H
A
A
R
R
E
E
H
H
O
O
L
L
D
D
E
E
R
R
I
I
N
N
F
F
O
O
R
R
M
M
A
A
T
T
I
I
O
O
N
N
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
19
REPORT ON DIRECTORS’ REMUNERATION
The Board presents the report on directors’ remuneration for
the year ended 31 December 2016 which has been prepared
in accordance with Section 421 of the Companies Act 2006.
The report comprises a policy report, which is subject to a
triennial binding shareholder vote, or sooner if an alteration
to the policy is proposed, and a remuneration policy
implementation report, which is subject to an annual advisory
vote. The remuneration policy was last approved at the AGM
held on 24 March 2014 and is therefore required to be re-
submitted to shareholders for approval. The remuneration
policy is set out in the Future Policy Table on this page.
The law requires the Company’s auditor to audit certain parts
of the disclosures provided. Where disclosures have been
audited, they are indicated as such. The auditor’s opinion is
included in their report on page 28.
The principles remain the same as for previous years. There
have been no changes to remuneration policy during the
period of this Report nor are there any proposals for change
in the foreseeable future.
DIRECTORS’ REMUNERATION POLICY REPORT
The Company does not have any executive directors and,
as permitted under the Listing Rules, has not, therefore,
established a remuneration committee. Remuneration of
non-executive directors is viewed as a decision of the Board,
subject to any shareholder approvals which may
be necessary.
The level of directors’ fees is determined with reference to
a range of factors including the remuneration paid to the
directors of other investment trusts, comparable in terms
of both size and investment characteristics, and the rate
of infl ation. The Manager of the Company compiles such
analysis as part of the management and secretarial services
provided to the Company. These data, together with
consideration of any alteration in non-executive directors’
responsibilities, are used to review whether any change in
remuneration is necessary. No other external advice is taken
in considering such fees.
It is the Company’s policy that no director shall be entitled to
any performance related remuneration, benefi ts in kind, long
term incentive schemes, share options, pensions or other
retirement benefi ts or compensation for loss of offi ce. None
of the Directors has a service contract with the Company.
The Company has no employees and consequently no
consideration is required to be given to employment
conditions elsewhere in setting directors’ pay.
Consideration of Shareholders’ Views
An ordinary resolution to approve the remuneration report
is put to shareholders at each AGM, and shareholders
have the opportunity to express their views and raise any
queries in respect of remuneration policy at this meeting.
To date, no shareholders have commented in respect of
remuneration policy.
FUTURE POLICY TABLE
Purpose and link to strategy
Fees payable to directors should be suffi cient to attract and
retain individuals of high calibre with suitable knowledge and
experience. Those chairing the Board and key committees
should be paid higher fees than other directors in recognition of
their more demanding roles. Fees should refl ect the time spent
by directors on the Company’s affairs and the responsibilities
borne by the directors.
Maximum and minimum levels
Remuneration consists of a fi xed fee each year, set in accordance
with the stated policies, and any increase granted must be in line
with the stated policies.
The Company’s Articles of Association set a limit of £250,000 in
respect of the total remuneration that may be paid to directors
in any fi nancial year.
The Board reviews the quantum of directors’ pay each year to
ensure this is in line with the level of remuneration for other
investment trusts of a similar size.
When making recommendations for any changes in pay, the
Board will consider wider factors such as the average rate of
infl ation over the period since the previous review, and the level
and any change in complexity of the directors’ responsibilities
(including additional time commitments as a result of increased
regulatory or corporate governance requirements).
There is no compensation for loss of offi ce.
REMUNERATION IMPLEMENTATION REPORT
A single fi gure for the total remuneration of each
director is set out in the table below for the year ended
31 December 201 6. These fees exclude employers’ national
insurance contributions and VAT where applicable:
John Reeve
Arthur Copple
June de Moller
Richard Jewson
Martin Riley
Lesley Sherratt
David Webster
Total
Total amount
of fees1
2016
33,400
22,600
22,600
25,500
–
22,600
22,600
149,300
2015
33,400
22,600
22,600
25,500
5,650
16,950
22,600
149,300
1 Other columns have been omitted as no payments of any other type were made.
The information in the above table has been audited. The
amounts paid by the Company to the directors were for
services as non-executive directors.
20
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
Expenditure by the Company on remuneration
and distributions to shareholders
As the Company has no employees, the directors cannot
show a table comparing remuneration paid to employees
with distributions to shareholders.
Performance graph
The directors consider that the most appropriate measure
of the Company’s performance is its share price total return
compared with the total return on the FTSE All-Share Index.
A graph illustrating this relative performance over an eight
year period is shown below.
Directors’ shareholdings
The directors’ shareholdings are detailed below:
Share price total return
John Reeve
Arthur Copple
June de Moller
Richard Jewson
Lesley Sherratt
David Webster
31 December 2016
1 January 2016
60,959
32,643
10, 231
10,275
7,500
4,279
57,613
27,924
9,305
9,760
–
4,151
All the above interests are benefi cial. None of the directors
had at any date any interest in either of the Company’s
debenture stocks.
On 4 January 2017 Mr Reeve acquired an additional
386 ordinary shares as a result of a dividend reinvestment.
On 11 January 2017 and 10 February 2017 Mr Reeve
acquired a further 78 and 78 ordinary shares respectively
in the Company through his regular monthly saving in an
ISA . On 4 January 2017 and 6 February 2017, Mr Jewson
acquired a further 20 and 19 ordinary shares respectively in
the Company through his regular monthly savings in Temple
Bar. On 19 January 2017 and 9 February 2017 respectively,
Mrs de Moller acquired a further 39 and 38 ordinary shares in
the Company through a regular monthly saving programme.
No other changes in the interests shown above occurred
between 31 December 201 7 and 1 7 February 2017.
The portfolio manager also holds 58,255 ordinary shares in
the Company.
Statement of Voting at General Meeting
At the Company‘s last AGM held on 30 March 2016
shareholders approved the Directors‘ Remuneration Report
in respect of the year ended 31 December 2015. 99.4% of
proxy votes were in favour of the resolution, 0.6% were
against and 52,686 votes were withheld.
300
280
260
240
220
200
180
160
140
120
100
80
2008
2009
2010
2011
2012
2013
2014
2015
2016
Temple Bar share price (total return)
FTSE All-Share Index (total return)
Source: Thomson Reuters Datastream
Annual statement
The Board confi rms that the above Remuneration
Implementation Report in respect of the year ended
31 December 2016 summarises:
•
the major decisions on directors’ remuneration;
• any signifi cant changes relating to directors’
remuneration made during the year; and
•
the context in which the changes occurred
and decisions have been taken.
By order of the Board of Directors
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
At the AGM held on 24 March 2014, a resolution for the
approval of the Remuneration Policy, as set out in the future
policy table above, was approved by 99.1% of proxy votes,
0.4% were against and 0.5% votes were withheld.
John Reeve
Chairman
1 7 February 2017
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
21
CORPORATE GOVERNANCE
THE AIC CODE OF CORPORATE GOVERNANCE
Corporate Governance is the process by which the board of
directors of a company looks after shareholders’ interests and
by which it seeks to enhance shareholder value. Shareholders
hold the directors responsible for the stewardship of a
company’s affairs, delegating authority and responsibility
to the directors to manage the company on their behalf and
holding them accountable for its performance.
The Board considers the practice of good governance to
be an integral part of the way it manages the Company
and is committed to maintaining high standards of fi nancial
reporting, transparency and business integrity.
As Temple Bar is a UK-listed company the Board’s principal
governance reporting obligation is in relation to the UK
Corporate Governance Code (the “UK Code”) issued
by the Financial Reporting Council (‘FRC’) in September
2014. However, it is recognised that investment companies
have special circumstances which have an impact on their
governance arrangements. An investment company typically
has no employees and the roles of CEO, portfolio manager,
administration, accounting and company secretarial tend to
be outsourced to a third party. The Association of Investment
Companies has therefore drawn up its own set of guidelines
known as the AIC Code of Corporate Governance (the “AIC
Code”) issued in February 2013 and updated in 2015, which
recognises the nature of investment companies by focusing
on matters such as board independence and the review
of management and other third party contracts. The FRC
has endorsed the AIC Code and confi rmed that companies
which report against the AIC Code will be meeting their
obligations in relation to the UK Corporate Governance
Code and paragraph LR9.8.6 of the FCA’s Listing Rules.
The Board believes that reporting against the principles
and recommendations of the AIC Code will provide better
information to shareholders.
The Company has complied with the recommendations
of the AIC Code (which incorporates the UK Corporate
Governance Code), except as set out below. The UK
Corporate Governance Code includes provisions relating to:
•
the role of the chief executive
• executive directors’ remuneration
•
the need for an internal audit function
The Board considers these provisions are not relevant to
the position of Temple Bar, being an externally managed
investment company. In particular, all of the Company’s
day-to-day management and administrative functions are
outsourced to third parties. As a result, the Company has no
executive directors, employees or internal operations. The
Company has therefore not reported further in respect of
these provisions.
COMPLIANCE WITH THE PRINCIPLES OF THE AIC
CODE OF CORPORATE GOVERNANCE
Operation of the Board
The Board is ultimately responsible for framing and
executing the Company’s strategy and for closely
monitoring risks. There is a formal schedule of matters to
be specifi cally approved by the Board and it has delegated
investment management, within clearly defi ned parameters
and dealing limits, to Investec Fund Managers Limited
(‘IFM’) and the administration of the business to Investec
Asset Management Limited (‘IAM’). The Board reviews the
performance of the Company at Board meetings and sets
the objectives for the Manager.
The Corporate Company Secretary (‘the Company Secretary’)
is responsible to the Board, inter alia, for ensuring that Board
procedures are followed and for compliance with applicable
rules and regulations including the AIC Code. Appointment
or removal of the nominated representative of the Company
Secretary is a matter for the Board as a whole.
The content and presentation of Board papers circulated
before each meeting contain suffi cient information on the
fi nancial condition of the Company. Key representatives of
IFM attend each Board meeting enabling directors to probe
on matters of concern or seek clarifi cation on certain issues.
Biographies of those directors in offi ce at the date of signing
of the fi nancial statements are set out on page 16. Nicholas
Lyons was appointed as a director on 23 January 2017. There
were seven Board meetings, two audit committee meetings
and two nomination committee meetings held during the
year and the attendance by the directors was as follows:
Number of meetings attended
Board
Audit
Committee
Nomination
Committee
7
7
5
6
6
7
2
2
2
1
2
2
2
2
1
2
2
2
John Reeve
Arthur Copple
June de Moller
Richard Jewson
Lesley Sherratt
David Webster
22
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
and experience relevant to the direction of the Company.
Mr Jewson is the Senior Independent Director.
Re-election of directors
Directors are subject to re-election by shareholders at the
fi rst AGM following their appointment and, thereafter, are
subject to retirement on an annual basis. In addition, the
appointment of each director is reviewed by other members
of the Board every year. Directors are not, therefore, subject
to automatic re-appointment. Non-executive directors are
not appointed for specifi ed terms. Because of the nature of
an investment trust the Board believes that the contribution
and independence of a director is not diminished by long
service .
The Board has carefully considered the position of each
of the directors and believes it would be appropriate for
them to be proposed for re-election. Each of the directors
continues to be effective and to display an undiminished
enthusiasm and commitment to the role.
Diversity
The Board’s policy on diversity, including gender, is to
take this into consideration during the recruitment and
appointment process. Typically, the Board seeks to ensure
that there is a suitable balance between directors with
industrial/commercial and traditional ‘City’ backgrounds.
However, the Board is committed to appointing the most
appropriate candidate, regardless of gender or other forms
of diversity, and therefore no targets have been set against
which to report.
Induction and training
New directors appointed to the Board are provided with
an induction programme which is tailored to the particular
circumstances of the appointee. Regular briefi ngs are
provided during the year on industry and regulatory matters
and the directors receive other relevant training as required.
Individual directors may seek independent advice at the
expense of the Company within certain limits.
Ongoing evaluation
On an annual basis the Board formally reviews its
performance, together with that of the audit and nomination
committees and the effectiveness and contribution of the
individual directors, including the Chairman, within the
context of service on those bodies. The review encompasses
an assessment of how cohesively these bodies work as a
whole as well as the performance of the individuals within
them. In 2016 the Board also employed the services of Board
Evaluation, an external evaluation agency, to carry out an
external independent evaluation of its performance. On the
basis of these reviews the Board has concluded that it has an
appropriate balance of skills and is operating effectively.
Audit committee
The audit committee is a formally constituted committee
of the Board with defi ned terms of reference. Its role
and responsibilities are set out in the Report of the Audit
Committee on page 25. The Board is satisfi ed that members
of the audit committee have relevant and recent fi nancial
experience to fulfi l their role effectively. The auditor, who
the Board has identifi ed as being independent, is invited
to attend the audit committee meeting at which the annual
accounts are considered and any other meetings that the
committee deems necessary. The committee is chaired by
Mr Jewson, the Senior Independent Director.
Nomination committee
A nomination committee comprising all the directors has
been established to oversee a formal review procedure
governing the appointment of new directors and to
evaluate the overall composition of the Board from time to
time, taking into account the existing balance of skills and
knowledge. This committee is chaired by Mr Reeve.
After the year end the Board appointed Nick Lyons as
an additional director. The process leading up to this
appointment involved the identifi cation and interview of
potential candidates put forward by an external agency
alongside the evaluation of various other candidates either
known personally to or recommended by individual board
members. Following an extensive review process it was
decided to proceed with the appointment of Nick Lyons,
as the candidate best qualifi ed to complement the existing
balance of skills and experience on the board. He will stand
for election at the AGM alongside all other board members
proposed for re-election in accordance with our policy.
The committee is also responsible for assessing on an annual
basis the individual performance of directors and for making
recommendations as to whether they should remain in offi ce.
Management engagement committee
As all the directors are fully independent of the management
company, the Board as a whole fulfi ls the function of a
management engagement committee.
Independence of the directors
Each of the directors is independent of any association with
the Manager and has no other relationships or circumstances
which might be perceived to interfere with the exercise
of independent judgement. Three of the seven directors
(Mr Reeve, Mr Jewson and Mrs de Moller) have served on
the Board for more than nine years from the date of their
fi rst election, but given the nature of the Company as an
investment trust and the strongly independent mind set of
the individuals involved, the Board is fi rmly of the view that
all of the directors can be considered to be independent.
In arriving at this conclusion the Board makes a clear
distinction between the activities of an investment trust and
a conventional trading company. An investment trust has
no employees or executive directors, the most signifi cant
relationship being with the Manager. In overseeing this
relationship it is the view of the Board that long service
aids the understanding and judgement of the directors .
The directors have a range of business and fi nancial skills
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
23
CORPORATE GOVERNANCE CONTINUED
Shareholder communications
Shareholder relations are given high priority by both the
Board and the Manager. The principal medium by which the
Company communicates with shareholders is through half
yearly reports and annual reports. The information contained
therein is supplemented by daily NAV announcements and by
a monthly fact sheet available on the Company’s website.
The Board largely delegates responsibility for communication
with shareholders to the management company and, through
feedback, both from the Manager and the Company’s
stockbroker, expects to be able to develop an understanding
of their views. The Board receives a quarterly report from
the Manager summarising any shareholder correspondence
together with any comments about Temple Bar on social
media. Members of the Board are willing to meet with
shareholders for the purpose of discussing matters in relation
to the operation and prospects of the Company.
The Board encourages investors to attend the AGM and
welcomes questions and discussion on issues of concern or
areas of uncertainty.
Following the formal AGM proceedings the p ortfolio manager
makes a presentation to the meeting outlining the key
investment issues that face the Company.
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. The safeguarding of assets is entrusted
to an independent reputable custodian with whom the
holdings are regularly reconciled.
The effectiveness of the overall system of internal control is
reviewed on an annual basis by the Board. Such a system can
provide only reasonable and not absolute assurance against
material misstatement or loss. The Board believes that there
is a robust framework of internal controls in place to meet
the requirements of the AIC Code.
The Board receives reports from its advisers on internal
control matters. Based on the foregoing the Company has a
continuing process for identifying, evaluating and managing
the risks it faces. This process has been in place for the
reporting period and to the date of this report.
By order of the Board of Directors
Accountability, internal controls and audit
The Board pays careful attention to ensuring that all
documents released by the Company, including the Annual
Report, present a fair and accurate assessment of the
Company’s position and prospects.
John Reeve
Chairman
1 7 February 2017
The Board confi rms that there is an ongoing process for
identifying, evaluating and managing the risks faced by the
Company in accordance with the FRC’s document ‘Guidance
on Risk Management, Internal Controls and Related Financial
and Business Reporting’.
The directors are responsible for the Company’s system of
internal control and for reviewing its effectiveness. In order
to facilitate the control process the Board has requested
the Manager to confi rm annually that it has conducted the
Company’s affairs in compliance with the legal and regulatory
obligations which apply to the Company and to report on the
systems and procedures within IFM which are applicable to
the management of Temple Bar’s affairs. The Board meets on
seven scheduled occasions in each year and at each meeting
receives suffi cient fi nancial and statistical information to
enable it to monitor adequately the investment performance
and status of the business. In addition, fi nancial information is
circulated to the directors on a monthly basis.
24
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
REPORT OF THE AUDIT COMMITTEE
SIGNIFICANT ISSUES CONSIDERED REGARDING THE
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Committee also considered signifi cant issues and areas
of key audit risk in respect of the Annual Report and Financial
Statements, as outlined below. The Committee reviewed the
external audit plan at an early stage and concluded that the
appropriate areas of audit risk relevant to the Company had
been identifi ed and that suitable audit procedures had been
put in place to obtain reasonable assurance that the fi nancial
statements as a whole would be free of material misstatements.
The table below sets out the key areas of risk identifi ed and also
explains how these were addressed by the Committee.
Signifi cant Issue
How the issue was addressed
Verifi cation of the
existence of the
assets in the portfolio
The valuation of the
investment portfolio
Going concern
Compliance with
Sections 1158
and 1159 of the
Corporation Tax
Act 2010
The verifi cation of
investment income
The Committee reviews reports from its
service providers on key controls over the
assets of the Company. Any signifi cant
issues are reported by the Manager to the
Committee.
The Committee reviews detailed portfolio
valuations on a regular basis throughout
the year and receives confi rmation from
the Manager that the pricing basis is
appropriate. The audit includes a check
of pricing back to source data to confi rm
that the correct valuation basis has
been applied in accordance with the
accounting policies adopted, as disclosed
in note 1 to the Financial Statements.
Having considered the Company’s
investment objective, risk management
policies and cash fl ow projections
the Committee is satisfi ed that the
Company has adequate resources and
an appropriate fi nancial structure to
continue in operational existence for the
foreseeable future.
Ongoing compliance with the
eligibility criteria is monitored on
a regular basis by the board.
The Committee reviews income
forecasts and receives explanations
from the Manager for any variations or
signifi cant movements from previous
forecasts and prior year numbers.
The provision of portfolio valuation, accounting and
administration services is delegated to the Company’s
Manager, who sub-delegates fund accounting to a third party
service provider, and the provision of custody services is
contracted to HSBC.
I am pleased to present the Committee’s report to
shareholders on the effectiveness of the external audit
process and how this has been assessed for the year
ended 31 December 2016.
ROLE AND RESPONSIBILITIES
The Company has established a separately chaired
Audit Committee (“the Committee”) whose duties include
considering and recommending to the Board for approval the
contents of the half yearly and annual fi nancial statements,
and providing an opinion as to whether the Annual Report,
taken as a whole, is fair, balanced, understandable and
provides the information necessary for shareholders to assess
the Company’s performance, business model and strategy.
The Committee also reviews the external auditor’s report
thereon and is responsible for reviewing and forming an
opinion on the effectiveness of the external audit process
and audit quality. Other duties include reviewing the
appropriateness of the Company’s accounting policies and
ensuring the adequacy of the internal control systems and
standards, as set out in more detail below. The Terms of
Reference of the Committee are available on the Company’s
website at www.templebarinvestments.co.uk
The Committee meets at least twice a year. The two
planned meetings are held prior to the Board meetings
to approve the half yearly and annual results.
COMPOSITION
All the directors are members of the Committee, which
is chaired by Mr Jewson. The Board considers that the
members of the Committee have suffi cient recent and
relevant fi nancial experience for the Committee to discharge
its function effectively. The Chairman of the Company is a
member of the Committee to enable him to be kept fully
informed of any issues which may arise.
RESPONSIBILITIES AND REVIEW OF
THE EXTERNAL AUDIT
During the year the principal activities of the
Committee included:
• considering and recommending to the Board for
approval the contents of the half yearly and annual
fi nancial statements and reviewing the external
auditor’s report thereon;
•
•
•
•
reviewing the scope, execution, results, cost
effectiveness, independence and objectivity of the
external auditor;
reviewing and recommending to the Board for approval
the audit and non-audit fees payable to the external
auditor and the terms of their engagement;
reviewing and approving the external auditor’s plan
for the fi nancial year, with a focus on the identifi cation
of areas of audit risk, and consideration of the
appropriateness of the level of audit materiality adopted;
reviewing the quality of the audit engagement
partner and the audit team, and making a
recommendation to the Board with respect to
the re-appointment of the auditor;
•
reviewing the appropriateness of the Company’s
accounting policies; and
• ensuring the adequacy of the internal control
systems and standards.
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
25
REPORT OF THE AUDIT COMMITTEE CONTINUED
AUDITOR AND AUDIT TENURE
The Company’s current auditor, Ernst & Young LLP, has
acted in this role since 2003 pursuant to a competitive tender
process which took place at that time. There has not been a
subsequent tender process. The appointment of the auditor
is reviewed each year and the audit partner changes at least
every fi ve years in accordance with professional and regulatory
standards in order to protect independence and objectivity
and to provide fresh challenge to the business. The last fi ve
yearly audit rotation took place in 2012. The Committee
is aware that EU legislation requires listed companies to
rotate their auditor every 10 years. Under the transitional
arrangements for fi rms where the tenure was between 11
and 20 years on the effective date under the new EU rules,
there will be a grace period of nine years after the enactment
of the EU legislation. Accordingly, based upon the new
legislation, Ernst & Young will not be able to act as auditor to
the Company after June 2023 so the last fi nancial year that
they could serve as auditor would end on 31 December 2022.
The Committee has not decided when to put the audit out to
tender but will keep this matter under review. There are no
contractual obligations that restrict the Company’s choice of
auditor. Other non-audit fees of £ 2,300 (excluding VAT) paid
to Ernst & Young LLP relate to their services in the electronic
fi ling of tax returns ; due to this amount being negligible,
the Board does not consider this a threat to the auditor's
independence.
ASSESSMENT OF THE EFFICIENCY OF THE EXTERNAL
AUDIT PROCESS
To assess the effectiveness of the external audit, members of
the Committee work closely with the Manager to obtain a good
understanding of the progress and effi ciency of the audit.
Feedback in relation to the audit process, and also of the
effectiveness of the Manager in performing its role, is also
sought from relevant involved parties, notably the audit
partner and team. The external auditor is invited to attend
the Committee meeting at which the annual accounts are
considered, where they have the opportunity to meet with
the Committee without representatives of the Manager
being present.
The effectiveness of the Board and the Manager in the
external audit process is assessed principally in relation to
the timely identifi cation and resolution of any process errors
or control breaches that might impact the Company’s NAVs
and accounting records. It is also assessed by reference to
how successfully any issues in respect of areas of accounting
judgement are identifi ed and resolved, the quality and
timeliness of papers analysing these judgements, the Board
and the Manager’s approach to the value of independent
audit, the booking of any audit adjustments arising and the
timely provision of draft public documents, for review by the
auditor and the Committee.
To form a conclusion with regard to the independence of the
external auditor, the Committee considers whether the skills
and experience of the auditor make them a suitable supplier
of any non-audit service and whether there is any threat to
their objectivity and independence in the conduct of the
audit resulting from the provision of such services. On an
annual basis, Ernst & Young LLP review the independence of
their relationship with the Company and report to the Board,
providing details of any other relationships with the Manager.
As part of this review, the Committee also receives information
about policies and processes for maintaining independence
and monitoring compliance with relevant requirements from
the Company’s auditor, including information on the rotation
of audit partners and staff, and details of any relationships
between the audit fi rm and its staff and the Company, as
well as an overall confi rmation from the auditor of their
independence and objectivity. As a result of their review,
the Committee has concluded that Ernst & Young LLP is
independent of the Company and the Manager.
The Company confi rms that it has complied with the
September 2014 Competition and Markets Authority Order.
CONCLUSIONS IN RESPECT OF THE ANNUAL
REPORT AND FINANCIAL STATEMENTS
The production and audit of the Company’s Annual Report
and Financial Statements is a comprehensive process
requiring input from a number of different contributors. One
of the key governance requirements of a Company’s fi nancial
statements is for the Report and Financial Statements to
be fair, balanced and understandable. In order to reach a
conclusion on this matter, the Board has requested that the
Committee advise on whether it considers that the Annual
Report and Financial Statements fulfi ls these requirements.
As a result of the work performed, the Committee has
concluded that the Annual Report for the year ended
31 December 2016, taken as a whole, is fair, balanced
and understandable and provides the information necessary
for shareholders to assess the Company’s performance,
business model and strategy. The Committee has reported
on these fi ndings to the Board. The Board’s conclusions
in this respect are set out in the Statement of Directors’
Responsibilities on page 27.
Richard Jewson
Chairman
Audit Committee
1 7 February 2017
26
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors confi rm that to the best of their knowledge:
•
•
the fi nancial statements, prepared in accordance with
the applicable accounting standards, give a true and fair
view of the assets, liabilities, fi nancial position and profi t
or loss of the Company; and
the Annual Report includes a fair review of the development
and performance of the business and the position of the
Company, together with a description of the principal
risks and uncertainties that the Company faces.
The UK Corporate Governance Code also requires Directors
to ensure that the Annual Report and Accounts are fair,
balanced and understandable. In order to reach a conclusion
on this matter, the Board has requested that the Audit
Committee advise on whether it considers that the Annual
Report and Accounts fulfi ls these requirements. The process
by which the Committee has reached these conclusions is set
out in the Audit Committee’s report on pages 25 and 26. As
a result, the Board has concluded that the Annual Report for
the year ended 31 December 2016, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Company’s
performance, business model and strategy.
On behalf of the Board
John Reeve
Chairman
1 7 February 2017
The directors are responsible for preparing the Annual
Report and the fi nancial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare fi nancial
statements for each fi nancial year. Under that law the
directors have chosen to prepare the fi nancial statements in
accordance with International Financial Reporting Standards
as adopted by the European Union. Under company law the
directors must not approve the fi nancial statements unless
they are satisfi ed that they give a true and fair view of the
state of affairs of the Company and of the profi t or loss of
the Company for that period. In preparing these fi nancial
statements, the directors are required to:
•
select suitable accounting policies in accordance
with IAS8: Accounting Policies, Changes in
Accounting Estimates and Errors, and then apply
these consistently;
• present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information;
• provide additional disclosures when compliance with the
specifi c requirements in IFRS is insuffi cient to enable users
to understand the impact of particular transactions, other
events and conditions on the entity’s fi nancial position and
fi nancial performance; and
•
state that the Company has complied with IFRS, subject
to any material departures disclosed and explained in the
fi nancial statements.
The directors are responsible for keeping adequate
accounting records which are suffi cient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the fi nancial position of the Company and
enable them to ensure that the fi nancial statements comply
with the Companies Act 2006 . They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The directors are responsible for ensuring that the
Annual Report includes a fair review of the development
and performance of the business and the position of the
Company, together with a description of the principal
risks and uncertainties it faces.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
27
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TEMPLE BAR INVESTMENT TRUST PLC
Our opinion on the fi nancial statements
In our opinion the fi nancial statements:
•
give a true and fair view of the state of the company’s affairs as at 31 December 2016 and of its profi t for the year then
ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
•
the fi nancial statements have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
We have audited the fi nancial statements of Temple Bar Investment Trust plc for the year ended 31 December 2016 which
comprise the Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Financial Position, Statement
of Cash Flows and the related notes 1 to 2 2. The fi nancial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Overview of our audit approach
Risks of material misstatement
• Incomplete or inaccurate revenue recognition .
Materiality
• £8.8m which represents 1% of total net assets.
• Incorrect valuation and existence of the investment portfolio .
Our assessment of risk of material misstatement
We identifi ed the risks of material misstatement described below as those that had the greatest effect on our overall audit
strategy, the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks,
we have performed the procedures below which were designed in the context of the fi nancial statements as a whole and,
consequently, we do not express any opinion on these individual areas.
Risk
Our response to the risk
What we concluded to the Audit Committee
The results of our procedures identifi ed no
issues with the accuracy or completeness of
income receipts.
We concurred with the accounting treatment
adopted for material special dividends.
Based on the work performed, we had no
matters to report.
Incomplete or Inaccurate revenue
recognition
We performed the following
procedures:
(as described on page 25 in the Report of the
Audit Committee and as per the accounting
policy set out on page 38)
As can be seen in note 4 in the notes to
the fi nancial statements, the Company has
reported investment income of £34 million
(2015: £31 million). This includes special
dividends of £2.7m (2015: £4.6m).
For special dividends the Company
determines whether amounts should be
credited to the revenue or capital columns
of the income statement based on the
underlying substance of the transaction.
We focus on the recognition of revenue and
its presentation in the fi nancial statements
because revenue return is a key area of focus
for shareholders.
Obtained an understanding of
processes and controls for the
recognition of investment income at
Investec Fund Managers Ltd (“Investec”
or “the Manager”) and State Street
Global Service s (“State Street” or
the “Administrator”) by performing
walkthrough procedures, reviewing
the Administrator’s and the Manager’s
internal control reports and discussing
with the Manager the governance
structure and protocols for oversight of
investment income recognition.
Agreed a sample of dividends received
from the underlying fi nancial records
to an independent pricing source and
to bank statements as supporting
documentation.
Tested all accrued dividends at
the period end for occurrence and
measurement.
To test the risks of management
override within investment income we
tested all material special dividends
received during the period and
assessed the appropriateness of the
accounting treatment adopted.
Performed a review of revenue related
journal entries focusing in particular
on manual journals, journals posted
around the year end date and raised in
the processing and recording of special
dividends.
28
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
Risk
Our response to the risk
What we concluded to the Audit Committee
The results of our procedures identifi ed no
material error in the valuation or existence of
the investment portfolio assets.
Based on the work performed, we had no
matters to report.
Incorrect valuation and existence of the
investment portfolio
We performed the following
procedures:
(as described on page 25 in the Report of the
Audit Committee and as per the accounting
policy set out on page 39)
The investment portfolio at the year-end
comprised listed securities of £973m
(2015: £856m).
The valuation of the assets held in the
investment portfolio is the key driver of the
Company’s net asset value and investment
return. Incorrect valuation and existence
of assets by the Company could have a
signifi cant impact on portfolio valuation
and, therefore, the return generated for
shareholders.
Obtained an understanding of the
Administrator and the Manager’s
processes and controls for the
valuation of investments by performing
walkthrough procedures, reviewing
the Administrator’s and the Manager’s
internal control reports and discussing
with the Manager the governance
structure and protocols for oversight of
investment valuations.
We agreed all investment holding
prices to a relevant independent
source.
We have agreed the exchange rates
used to translate the year end valuation
of non-sterling investments to external
sources.
We recalculated the value of
investments in foreign currencies
to verify the accuracy of the
corresponding sterling balances.
We agreed all investment holdings
in the portfolio to third party
confi rmations received from the
Custodian and the Depositary.
The scope of our audit
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit
scope for the Company. Taken together, this enables us to form an opinion on the fi nancial statements. We take into account
size, risk profi le, the organisation and effectiveness of controls, changes in the business environment and other factors such as
recent Service Organisation Control (‘SOC’) reporting when assessing the level of work to be performed.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identifi ed misstatements
on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to infl uence
the economic decisions of the users of the fi nancial statements. Materiality provides a basis for determining the nature and
extent of our audit procedures.
We determined materiality for the Company to be £8.8m million (2015: £7.6 million), which is 1% (2015: 1%) of total net assets.
We believe that total net assets is the most important fi nancial metric on which shareholders judge the performance of the
Company.
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
29
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF TEMPLE BAR INVESTMENT TRUST PLC
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately
low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our
judgement was that performance materiality was 75% (2015: 75%) of our planning materiality, namely £6.6m (2015: £5.7m).
We have set performance materiality at this percentage due to our past experience of the audit that indicates a lower risk of
misstatements, both corrected and uncorrected.
Given the importance of the distinction between revenue and capital for the Company we also applied a separate testing
threshold of £1.5m (2015: £1.3m) for the revenue column of the income statement, being 5% of the revenue profi t before
taxation.
Reporting threshold
An amount below which identifi ed misstatements are considered as being clearly trivial.
We agreed with the audit committee that we would report to them all uncorrected audit differences in excess of £440k
(2015: £380k), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.
Scope of the audit of the fi nancial statements
An audit involves obtaining evidence about the amounts and disclosures in the fi nancial statements suffi cient to give
reasonable assurance that the fi nancial statements are free from material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are appropriate to the Company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of signifi cant accounting estimates made by the directors;
and the overall presentation of the fi nancial statements. In addition, we read all the fi nancial and non-fi nancial information
in the annual report to identify material inconsistencies with the audited fi nancial statements and to identify any information
that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors’ Responsibilities set out on page 27, the directors are responsible for the
preparation of the fi nancial statements and for being satisfi ed that they give a true and fair view. Our responsibility is to audit
and express an opinion on the fi nancial statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
•
the part of the Report on Directors’ Remuneration to be audited has been properly prepared in accordance with the
Companies Act 2006; and
• based on the work undertaken in the course of the audit:
•
the information given in the Strategic Report and the Report of Directors for the fi nancial year for which the fi nancial
statements are prepared is consistent with the fi nancial statements ;
•
the Strategic Report and the Report of Directors have been prepared in accordance with applicable legal requirements.
30
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
We have no
exceptions to report.
We have nothing
material to add or to
draw attention to.
Matters on which we are required to report by exception
ISAs (UK and
Ireland) reporting
We are required to report to you if, in our opinion, fi nancial and non-fi nancial
information in the annual report is:
We have no
exceptions to report.
(cid:129) m aterially inconsistent with the information in the audited fi nancial statements; or
(cid:129) apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Company acquired in the course of performing our audit; or
(cid:129) otherwise misleading.
In particular, we are required to report whether we have identifi ed any inconsistencies
between our knowledge acquired in the course of performing the audit and the
directors’ statement that they consider the annual report and accounts taken as a
whole is fair, balanced and understandable and provides the information necessary
for shareholders to assess the entity’s performance, business model and strategy,
and whether the annual report appropriately addresses those matters that we
communicated to the audit committee that we consider should have been disclosed.
Companies Act
2006 reporting
In light of the knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have identifi ed no material misstatements in the
Strategic Report or Report of Directors .
We have no
exceptions to report.
We are required to report to you if, in our opinion:
(cid:129) adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
(cid:129) the fi nancial statements and the part of the Report of Directors’ Remuneration to be
audited are not in agreement with the accounting records and returns; or
(cid:129) certain disclosures of directors’ remuneration specifi ed by law are not made; or
(cid:129) we have not received all the information and explanations we require for our audit.
We are required to review:
(cid:129) the directors’ statement in relation to going concern, set out on page 17, and longer-
term viability, set out on page 12 ; and
(cid:129) the part of the Corporate Governance Report relating to the Company’s compliance
with the provisions of the UK Corporate Governance Code specifi ed for our review
Listing Rules review
requirements
Statement on the Directors’ Assessment of the Principal Risks that Would Threaten
the Solvency or Liquidity of the Entity
ISAs (UK and
Ireland) reporting
We are required to give a statement as to whether we have anything material to add or
to draw attention to in relation to:
(cid:129) the directors’ confi rmation in the annual report that they have carried out a robust
assessment of the principal risks facing the entity, including those that would threaten
its business model, future performance, solvency or liquidity;
(cid:129) the disclosures in the annual report that describe those risks and explain how they are
being managed or mitigated;
(cid:129) the directors’ statement in the fi nancial statements about whether they considered it
appropriate to adopt the going concern basis of accounting in preparing them, and
their identifi cation of any material uncertainties to the entity’s ability to continue to do
so over a period of at least twelve months from the date of approval of the fi nancial
statements; and
(cid:129) the directors’ explanation in the annual report as to how they have assessed the
prospects of the entity, over what period they have done so and why they consider that
period to be appropriate, and their statement as to whether they have a reasonable
expectation that the entity will be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifi cations or assumptions.
Ashley Coups (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
February 2017
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
31
STATEMENTS CONTINUED
32
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
I
G
S
O
T
V
R
E
A
R
T
N
E
G
A
N
C
C
R
E
E
R
P
E
O
P
R
O
T
R
T
I
I
G
O
F
V
N
E
A
R
N
N
C
A
N
A
C
L
E
R
R
E
E
P
P
O
O
R
R
T
T
I
I
S
H
A
R
F
E
N
H
O
A
N
L
D
C
E
A
R
L
I
N
R
E
F
O
P
O
R
M
R
T
A
T
I
O
N
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
FINANCIAL REPORT
34 Statement of Comprehensive Income
35 Statement of Changes in Equity
36 Statement of Financial Position
37 Statement of Cash Flows
38 Notes to the Financial Statements
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
33
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
Investment Income
Other operating income
Notes
4
4
Revenue
£000
34,069
5
34,074
2016
Capital
£000
–
–
–
Total
£000
34,069
5
Revenue
£000
31,243
10
34,074
31,253
2015
Capital
£000
–
–
–
Total
£000
31,243
10
31,253
Profi t/( losses) on investments
Profi t/( losses) on investments held at fair
value through profi t or loss
12(b)
Total income
Expenses
Management fees
Other expenses
Profi t/(loss) before fi nance costs and tax
Finance costs
Profi t/(loss) before tax
Tax
–
34,074
128,792
128,792
128,792
162,866
–
31,253
(31,615)
(31,615)
(31,615)
(362)
6
7
8
9
(1,380)
(6 33)
32,0 61
(2,645)
29,4 16
(163)
(1,990)
(1,039)
(3,370)
(1,6 72)
125,763
157,8 24
(4,012)
(6,657)
121,751
151,1 67
–
(163)
(1,374)
(581)
29,298
(2,635)
26,663
–
(1,980)
(1,282)
(34,877)
(4,000)
(38,877)
–
(3,354)
(1,863)
(5,579)
(6,635)
(12,214)
–
Profi t/(loss) for the year
29,2 53
121,751
151,0 04
26,663
(38,877)
(12,214)
Earnings per share (basic and diluted)
11
43.7 4p
182.06p
225.8 0p
39.87p
(58.14p)
(18.27p)
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 Association
of Investment Companies. 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 net profi t for the year. Accordingly, the
net profi t for the year is also the Total Comprehensive Income for the Year, as defi ned in IAS1 (revised).
The notes on pages 38 to 48 form an integral part of the fi nancial statements.
34
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Balance at 1 January 2015
Unclaimed dividends
(Loss)/profi t for the year
Dividends paid to equity shareholders
Balance at 31 December 2015
Unclaimed dividends
Profi t for the year
Dividends paid to equity shareholders
Balance at 31 December 2016
Notes
Ordinary
share capital
£000
16,719
Share
premium
account
£000
9 6,040
–
–
–
Capital
reserves
£000
652,304
–
(38,877)
–
–
–
–
16,719
96,040
613,427
–
–
–
–
–
–
–
121,751
–
16,719
96,040
735,178
10
10
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
Retained
earnings
£000
Total
equity
£000
34,381
799,444
35
26,663
(31,510)
29,569
24
29,2 53
(26,843)
32,0 0 3
35
(12,214)
(31,510)
755,755
24
151,0 04
(26,843)
879,9 40
As at 31 December 2016 the Company had distributable revenue reserves of £ 32,0 03,000 (2015: £29,569,000) and distributable
realised capital reserves of £596,215,000 (2015: £573,113,000) for the payment of future dividends. The only distributable
reserves are the retained earnings and realised capital reserves.
The notes on pages 38 to 48 form an integral part of the fi nancial statements.
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
35
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
Non-current assets
Investments held at fair value through profi t or loss
Current assets
Receivables
Cash and cash equivalents
Total assets
Current liabilities
Interest bearing borrowings
Payables
Total assets less current liabilities
Non-current liabilities
Interest bearing borrowings
Net assets
Equity attributable to equity holders
Ordinary share capital
Share premium
Capital reserves
Retained earnings
Total equity
Net asset value per share
31 December 2016
31 December 2015
Notes
£000
£000
£000
£000
12
13
14
14
15
16
17
18
20
973,353
855,625
4,266
17,340
2,722
12,262
21,606
994,959
(25,000)
(1,1 69)
968,790
( 88,850)
879,9 40
14,984
870,609
–
(1,074)
869,535
(113,780)
755,755
16,719
96,040
735,178
32,0 03
16,719
96,040
613,427
29,569
879,9 40
1,315.8 4p
755,755
1,130.14p
The notes on pages 38 to 48 form an integral part of the fi nancial statements.
The fi nancial statements on pages 34 to 48 were approved by the board of directors and authorised for issue on
1 7 February 2017. They were signed on its behalf by:
J Reeve
Chairman
36
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
Cash fl ows from operating activities
Profi t/(loss) before tax
Adjustments for:
(Gains)/l osses on investments
Finance costs
Purchases of investments1
Sales of investments1
Dividend income
Interest income
Dividend received
Interest received
Decrease in receivables
Increase in payables
Overseas withholding tax suffered
Net cash fl ows from operating activities
Cash fl ows from fi nancing activities
Issue costs relating to 4.05% Private Placement Loan
Unclaimed dividends
Interest paid on borrowings
Equity dividends paid
Net cash used in fi nancing activities
Net increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at the start of the year
Cash and cash equivalents at the end of the year
2016
2015
Notes
£000
£000
£000
£000
151, 167
(12,214)
(128,792)
6,657
(335,164)
346,228
(32,841)
(1,233)
32,078
1,683
(1,231)
95
(163)
12(b)
8
12(a)
12(a)
4
4
9
10
31,615
6,635
(360,358)
346,899
(29,919)
(1,334)
30,662
1,344
(218)
10
–
(112,683)
38,484
–
24
(6,58 7)
(26,843)
(33,40 6)
5,078
12,262
17,340
25,335
13,121
(24)
35
(6,585)
(31,510)
(38,084)
(24,963)
37,225
12,262
1 Purchases and sales of investments are considered to be operating activities of the Company, given its purpose, rather than investing activities.
The notes on pages 38 to 48 form an integral part of the fi nancial statements.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
37
NOTES TO THE FINANCIAL STATEMENTS
1 PRINCIPAL ACCOUNTING POLICIES
Basis of accounting
The fi nancial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’), which
comprise standards and interpretations approved by the International Accounting Standards Board (‘IASB’), and International
Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting
Standards Committee (‘IASC’) that remain in effect, and to the extent that they have been adopted by the European Union.
The principal accounting policies adopted by the Company are set out below. Where presentational guidance set out in the
Statement of Recommended Practice (‘SORP’) for investment trusts issued by the Association of Investment Companies (‘AIC’)
in November 2014 is consistent with the requirements of IFRS, the directors have sought to prepare the fi nancial statements on
a basis compliant with the recommendations of the SORP.
All values are rounded to the nearest thousand pounds unless otherwise indicated.
Presentation of Statement of Comprehensive Income
In order better to refl ect 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 gain in the Statement of Comprehensive Income.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the fi nancial
asset to that asset’s net carrying amount.
Special dividends are credited to capital or revenue according to their circumstances.
Foreign Currency
The fi nancial 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
profi t or loss are expensed to capital in the Statement of Comprehensive Income.
• 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 fi nance costs
have been allocated 40% to revenue and 60% to capital, in order to refl ect the directors’ long term view of the nature of
the expected investment returns of the Company.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the
taxable profi t for the year. The taxable profi t differs from profi t 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.
38
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t 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 profi ts will be available against
which deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are 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
Financial assets and fi nancial liabilities are recognised in the Statement of Financial Position when the Company becomes a
party to the contractual provisions of the instrument. The Company shall offset fi nancial assets and fi nancial liabilities if it has a
legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis. Financial assets
and liabilities are derecognised when the Company settles its obligations relating to the instrument.
Receivables
Receivables do not carry any interest, are short term in nature and are accordingly stated at their nominal value as reduced
by appropriate allowances for estimated irrecoverable amounts.
Investments
Investments held at fair value through profi t or loss are initially recognised at fair value, being the consideration given and
excluding transaction or other dealing costs associated with the investment.
After initial recognition, investments are measured at fair value through profi t or loss. Gains or losses on investments measured
at fair value through profi t or loss are included in net profi t 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 fi nancial 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 classifi ed 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 stocks and loan 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. The fair value is
determined by reference to quoted market mid prices at close of business on the year-end date.
Payables
Payables are non interest bearing and are stated at their nominal value.
Equity dividends payable
Equity dividends payable are recognised when the shareholders’ right to receive payment is established.
Finance costs
Interest payable on the debenture stocks and loan in issue is accrued on the effective interest rate basis. In accordance
with the expected long term division of returns, 40% of the interest for the year is charged to revenue, and the other 60% is
charged to capital, net of any incremental corporation tax relief.
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.
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
39
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Company’s fi nancial statements requires the directors to make judgements, estimates and assumptions
that affect the reported amounts recognised in the fi nancial statements and disclosure of contingent liabilities. However,
uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the
carrying amount of the asset or liability affected in future periods. There have been no signifi cant judgements, estimates or
assumptions for the current or preceding fi nancial year.
3 ADOPTION OF NEW AND REVISED STANDARDS
At the date of authorisation of these fi nancial statements, the following Standards and Interpretations, which have not been
applied in these fi nancial statements, were in issue but were not yet effective (and in some cases had not yet been adopted by
the European Union):
IAS 1 Amendment Discloure Initiative
IAS 7 Amendment Discloure Initiative
IAS 12 Amendment Recognition of Deferred Tax Assets for Unrealised Losses
IAS 34 Amendment (AI 2013-14) Disclosure of information ‘ elsewhere in the interim report ’
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Amendment – Clarifi ca tion
The Company does not believe that there will be a material impact on the fi nancial statements from the adoption of these
standards/interpretations.
4
INCOME
Income from investments
UK dividends
UK REITs
Overseas dividends
Interest from fi xed interest securities
Other income
Deposit interest
Total income
Investment income comprises:
Listed investments
5 SEGMENTAL REPORTING
2016
£000
30,634
525
1,682
1,228
34,069
5
34,074
34,069
34,069
2015
£000
27,212
749
1,958
1,324
31,243
10
31,253
31,243
31,243
The directors are of the opinion that the Company is engaged in a single segment of business being investment business.
6
INVESTMENT MANAGEMENT FEE
Investment management fee
Secretarial fee
2016
Capital
£000
1,990
–
1,990
Revenue
£000
1,326
54
1,380
Total
£000
3,316
54
3,370
Revenue
£000
1,320
54
1,374
2015
Capital
£000
1,980
–
1,980
Total
£000
3,300
54
3,354
As at 31 December 2016 an amount of £ 870,483 (2015: £761,789) was payable to the Manager in relation to management fees
for the quarter ended 31 December 2016.
Details of the terms of the investment management agreement are provided on page 17.
40
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
7 OTHER EXPENSES
Transaction costs on fair value
through profi t or loss assets1
Directors’ fees (see Report on
Directors Remuneration on page 2 0)
Registrar’s fees
AIC membership costs
Marketing costs
Printing & postage
Directors’ liability insurance
Auditor’s remuneration – annual audit2
– non audit fee
Stock exchange fees
FCA fee
Depositary fee
Safe custody fees
Other expenses
Revenue
£000
2016
Capital
£000
Total
£000
Revenue
£000
–
163
12 5
21
25
37
15
31
3
22
20
95
11
65
1,039
1,039
–
–
–
–
–
–
–
–
–
–
–
–
–
163
12 5
21
25
37
15
31
3
22
20
95
11
65
–
160
111
21
29
35
14
30
2
24
22
87
15
31
2015
Capital
£000
Total
£000
1,282
1,282
–
–
–
–
–
–
–
–
–
–
–
–
–
160
111
21
29
35
14
30
2
24
22
87
15
31
6 33
1,039
1,6 72
581
1,282
1,863
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
1
Transaction costs on fair value through profi t or loss assets represent such costs incurred on both the purchase and sale of those assets.
Transaction costs on purchases amounted to £ 898,478 (2015: £1,147,897) and on sales amounted to £ 140,080 (2015: £134,285).
2 During the year there were audit fees of £ 25,000 (2015: £25,000) (excluding VAT) paid to the Auditor.
All expenses are inclusive of VAT where applicable.
8 FINANCE COSTS
Interest on borrowings
9.875% debenture stock 2017
5.5% debenture stock 2021
4.05% Private placement loan 20281
Bank interest payable
Total fi nance costs
Revenue
£000
2016
Capital
£000
Total
£000
Revenue
£000
990
838
812
2,640
5
2,645
1,486
1,276
1,250
4,012
–
4,012
2,476
2,114
2,062
6,652
5
6,657
988
836
810
2,634
1
2,635
2015
Capital
£000
1,481
1,272
1,247
4,000
–
4,000
Total
£000
2,469
2,108
2,057
6,634
1
6,635
The amortisation of the debenture and loan issue costs is calculated using the effective interest method.
1 The 4.05% Private Placement Loan contains the following principal fi nancial or other covenants, with which failure to comply could necessitate the early repayment of the loan:
• net tangible assets of at least £275 million
• aggregate principal amount of fi nancial indebtedness not to exceed 50% of net tangible assets
• prior approval by the note holder of any change of Manager
• prior approval by the note holder of any change in the Company’s investment objectives and policies
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
41
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
9 TAXATION
(a) There is no corporation tax payable (2015: nil).
(b) The charge for the year can be reconciled to the profi t per the Statement of Comprehensive Income as follows:
Profi t/(loss) before taxation
Tax at UK corporation tax rate of 20. 00%
(201 5:2 0. 25%)
Tax effects of:
Non-taxable gains on investments
Disallowed expenses
Non-taxable UK dividends1
Overseas withholding tax suffered
Non-taxable overseas dividends1
Increase in excess management expenses
in the year2
Total tax charge for the year
Revenue
£000
29,4 16
2016
Capital
£000
121,751
Total
£000
151,1 67
Revenue
£000
26,663
2015
Capital
£000
(38,877)
Total
£000
(12,214)
5,8 83
24,350
30,2 33
5,430
(7,871)
(2,441)
–
–
(6,14 5)
163
(316)
57 8
163
(25,758)
(25,758)
208
–
–
–
1,200
–
208
(6,14 5)
163
(316)
1,77 8
163
–
–
(5,521)
–
(454)
545
–
6,401
259
–
–
–
1,211
–
6,401
259
(5,521)
–
(454)
1,756
–
1 Investment trusts are not subject to corporation tax on these items.
2 The Company has not recognised a deferred tax asset of £ 14, 013,219 (2015: £13,225,300) based on an effective tax rate of 20.0% (2015: 20.0%) arising as a result of having
unutilised management expenses since, under current tax legislation, it is unlikely that the Company will obtain any benefi t from the asset.
10 DIVIDENDS
Amounts recognised as distributions to equity holders in the year
Final dividend for the year ended 31 December 2015 of 15.87p (2014: 23.33p) per share
Interim dividends (three) for the year ended 31 December 2016 of 8.09p (2015: three payments of 7.93p) per share
2016
£000
10,613
16,230
26,843
2015
£000
15,601
15,909
31,510
Proposed fi nal dividend for the year ended 31 December 2016 of 16.18p (2015: 15.87p) per share
10,820
10,613
The proposed fi nal dividend is subject to approval by shareholders at the Annual General Meeting and has not
been included as a liability in these fi nancial statements. Therefore, also set out below is the total dividend payable in respect
of these fi nancial years, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are
considered.
Interim dividends (three) for the year ended 31 December 2016 of 8.09p (2015: three payments of 7.93p) per share
Proposed fi nal dividend for the year ended 31 December 2016 of 16.18p (2015: 15.87p) per share
2016
£000
16,230
10,820
27,050
2015
£000
15,909
10,613
26,522
11 EARNINGS PER SHARE
Earnings per ordinary share
Revenue
pence
43.7 4p
2016
Capital
pence
182.06p
Total
pence
225.8 0p
Revenue
pence
39.87p
2015
Capital
pence
(58.14p)
Total
pence
(18.27p)
The calculation of the above is based on revenue returns of £ 29,2 53,000 (2015: £26,663,000), capital returns of £ 121,75 1,000
(2015: (£38,877,000)) and total returns of £ 151,0 04,000 (2015: (£12,214,000)) and a weighted average number of ordinary shares
of 66,872,765 (2015: 66,872,765).
42
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
12 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
(a) Movements in the year
Opening cost at 1 January
Investment holding gains at 1 January
Opening fair value
Purchases at cost
Sales – proceeds
– realised gains on sales
Increase/(decrease) in investment holding gains
Closing fair value at 31 December
Closing cost at 31 December
Investment holding gains at 31 December
(b) Gains/(losses) on investments
Gains on sales of investments based on historical book cost
Revaluation gains recognised in previous years
Gains/(losses) on investments sold in the year based on carrying value at previous statement of fi nancial
position date
Increase/(decrease) in investment holding gains
2016
£000
2015
£000
815,311
743,492
40,314
130,289
855,625
873,781
335,164
360,358
(346,228)
(346,899)
30,143
98,649
58,358
(89,973)
973,353
855,625
834,390
815,311
138,963
40,314
973,353
855,625
30 ,143
58,358
(16,337)
(99,255)
13,806
(40,897)
114,986
9,282
128,792
(31,615)
All investments are listed.
(c) Fair value of fi nancial instruments
FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that refl ects the signifi cance of the
inputs used in making the measurements. The fair value hierarchy has the following classifi cations:
• Level 1 – quoted prices in active markets for identical investments.
• Level 2 – other signifi cant observable inputs (including quoted prices for similar investments, interest rates, prepayments,
credit risk, etc). There are no level 2 fi nancial assets (2015: £nil).
• Level 3 – signifi cant unobservable inputs (including the Company’s own assumptions in determining the fair
value of investments). There are no level 3 fi nancial assets (2015: £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. The total value of the investments of
£ 973,353,000 (2015: £855,625,000) has therefore been determined as Level 1.
Please refer to Note 22 on page 46 for the disclosure and fair value categorisation of the fi nancial liabilities.
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
43
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13 RECEIVABLES
Accrued income
Other receivables
2016
£000
2,757
1,509
4,266
2015
£000
2,437
285
2,722
The above receivables do not carry any interest and are short term in nature. The directors consider that the carrying values
of these receivables approximate their fair value.
14 CURRENT LIABILITIES
Payables
Accruals
2016
£000
1,1 69
1,1 69
2015
£000
1,074
1,074
The above payables do not carry any interest and are short term in nature. The d irectors consider that the carrying values of
these payables approximate their fair value.
Interest bearing borrowings
9 7/8% Debenture stock 2017
15 NON-CURRENT LIABILITIES
Interest bearing borrowings
Amounts payable after more than one year:
9 7/8 % Debenture stock 2017
5.5% Debenture stock 2021
4.05% Private placement loan 2028
2016
£000
25,000
25,000
2016
£000
–
38,535
50,315
88,850
2015
£000
–
–
2015
£000
25,000
38,491
50,289
113,780
The 9.875% Debenture stock 2017 is secured by a fl oating charge over the assets of the Company. The stock is repayable at
par on 31 December 2017. No issue costs were capitalised on the issue of this debenture.
The 5.5% Debenture stock 2021 is secured by a fl oating charge over the assets of the Company. The stock is repayable at
par on 8 March 2021.
The 4.05% Private Placement Loan is secured by a fl oating charge over the assets of the Company. The loan is repayable at
par on 3 September 2028.
16 ORDINARY SHARE CAPITAL
Issued, allotted and fully paid
Ordinary shares of 25p each
There were no shares issued during 201 6 (201 5: Nil)
17 SHARE PREMIUM
Balance at 1 January 201 6
Premium arising on issue of new shares
Balance at 31 December 201 6
2016
Number
2015
Number
2016
£000
2015
£000
66,872,765
66,872,765
16,718,191
16,718,191
2016
£000
96,040
–
96,040
2015
£000
96,040
–
96,040
44
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
18 CAPITAL RESERVES
The capital reserves comprise both realised and unrealised gains. A summary of the split is shown below.
Capital reserves – realised
Capital reserves – unrealised
2016
£000
596,215
138,963
735,178
2015
£000
573,113
40,314
613,427
19 CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
As at 31 December 2016 there were no contingent liabilities or capital commitments for the Company (2015: £nil).
20 NET ASSET VALUES
Ordinary shares of 25p each
Net asset
value per
ordinary share
Pence
Net assets
attributable
£000
1,315.8 4p
879,9 40
The net asset value per ordinary share is based on net assets at the year-end of £ 879,9 40,000 (2015: £755,755,000) and on
66,872,765 (2015: 66,872,765) ordinary shares in issue at the year-end.
21 RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH THE MANAGER
IAS 24 ‘Related party disclosures’ requires the disclosure of the details 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 on page 20. There were no
contracts subsisting during or at the end of the year in which a director of the Company is or was interested and which are
or were signifi cant 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 2016 there was £ 40,797 (2015: £40,797) payable to the directors for fees and expenses.
Manager – Investec Fund Managers Limited is the Alternative Investment Fund Manager of the Company and has delegated
portfolio management to Investec Asset Management Limited . Details of the services provided by the Manager and the fees
paid are given on page 17.
22 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The Company’s investing activities undertaken in pursuit of its investment objective, as set out on page 9, involve certain
inherent risks. The main fi nancial risks arising from the Company’s fi nancial 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. These policies have remained substantially unchanged during the current and preceding periods.
Market price risk
Market price risk arises mainly from uncertainty about future prices of fi nancial 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 Board
meets on seven scheduled occasions in each year and at each meeting it receives suffi cient fi nancial and statistical information
to enable it to monitor adequately the investment performance and status of the business. In addition, fi nancial information is
circulated to the directors on a monthly basis. 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. The Company’s borrowings have the effect
of increasing the market risk faced by shareholders. This gearing effect is such that, for example, for a 10% movement in the
valuation of the Company’s investments, the net assets attributable to shareholders would move by approximately 11.1%.
Interest rate risk
Interest rate risk is the risk of movements in the value of fi nancial instruments or interest income cash fl ows that arise as a
result of fl uctuations in interest rates. The Company fi nances its operations through retained profi ts including capital profi ts,
and additional fi nancing is obtained through the two debenture stocks in issue and the Private Placement Loan, on all of
which interest is paid at a fi xed rate.
Liquidity risk
The Company’s assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if
necessary. Short term fl exibility is achieved through the use of cash balances and short term bank deposits.
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
45
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS CONTINUED
Credit risk
Credit risk is the risk that one party to a fi nancial instrument will fail to discharge an obligation and cause the other party to
incur a fi nancial loss. This is mitigated by the Manager reviewing the credit ratings of broker counterparties. The risk attached
to dividend fl ows is mitigated by the Manager’s research of potential investee companies. 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 fi nancial assets represent their maximum exposure to credit risk. The full portfolio can
be found on pages 1 4 to 1 5.
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 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 liabilities; 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 at fair
value based on the exchange rates ruling at the respective year-ends. They are not representative of the currency exposures
during the year as a whole.
31 December 2016
Investments
£000
Cash
£000
Receivables
£000
Payables
£000
Euro
US Dollar
NOK
Pounds Sterling
Euro
US Dollar
Pounds Sterling
18,134
103,753
17,786
833,680
973,353
Investments
£000
49,631
55,003
750,991
855,625
–
1
1
17, 338
17, 340
Cash
£000
236
–
12,026
12,262
Non-current
liabilities
£000
–
–
–
–
–
–
(1,1 69)
(1,1 69)
(113,850)
(113,850)
328
–
–
3,938
4,266
31 December 2015
Receivables
£000
Payables
£000
124
1,102
1,496
2,722
–
–
(1,074)
(1,074)
Non-current
liabilities
£000
–
–
(113,780)
(113,780)
Total
£000
18,462
103,754
17,787
739, 937
879,9 40
Total
£000
49,991
56,105
649,659
755,755
Foreign currency sensitivity
The following table illustrates the sensitivity of the profi t after tax for the year and the net assets for the year in relation to
foreign exchange movements in Euro, NOK and US Dollar. The analysis below assumes that the Euro, NOK and US Dollar
exchange rates may move +/-2% against Pounds Sterling.
Projected movement
Effect on net assets for the year
Effect on capital return
£000
+2%
2,800
2,793
£000
-2%
(2,800)
(2,793)
Financial assets – Interest rate risk
The majority of the Company’s fi nancial assets are equity shares and other investments which neither pay interest nor have
a maturity date. The Company’s fi xed interest holdings have a market value of £ 79,15 3,000, representing 9% of net assets of
£ 879,9 40,000 (2015: £78,118,000; 10.34%). The weighted average running yield as at 31 December 2016 was 1.6% (2015: 4.9%)
and the weighted average remaining life was 1.9 years (2015: 2.0 years). The Company’s cash balance of £ 17,340,000 (2015:
£12,262,000) earns interest, calculated on a tiered basis, depending on the balance held, by reference to the base rate.
If the bank base rate had increased by 0.5%, the impact on the profi t or loss and net assets would have been a positive £ 86,700
(2015: £61,309). If the bank base rate had decreased by 0.5%, the impact on the profi t or loss and net assets would have been
a negative £ 86,700 (2015: negative £61,309). The calculations are based on the cash balances at the respective balance sheet
dates and are not representative of the year as a whole.
46
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
Financial liabilities – Interest rate risk
All of the Company’s fi nancial liabilities of £ 11 5,019,000 (2015: £114,854,000) are denominated in Pounds Sterling. All current liabilities
have no interest rate and are repayable within one year. The 9.875% debenture stock, the 5.5% debenture stock and the 4.05%
Private Placement Loan, which are repayable in 2017, 2021 and 2028 respectively, pay interest at fi xed rates. The weighted average
period until maturity of the loans is 7 years (2015: 8 years) and the weighted average interest rate payable is 6.0% (2015: 6.0%) p.a.
Other price risk exposure
If the investment valuation fell by 10% at 31 December 201 6, the impact on profi t or loss and net assets would have been
negative £ 97.3 million (2015: negative £85.6 million). If the investment portfolio valuation rose by 10% at 31 December 2016,
the impact on profi t or loss and net assets would have been positive £ 97.3 million (2015: positive £85.6 million). The calculations
are based on the portfolio valuations as at the respective year-end dates and are not representative of the year as a whole.
The Company held the following categories of fi nancial instruments, all of which are included in the Statement of Financial
Position at fair value or an approximation to fair value, with the exception of interest bearing borrowings which are shown at
book value at 31 December 2016. The valuation techniques are explained in the Principal Accounting Policies note.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
Assets at fair value through profi t or loss
Cash
Loans and receivables
Investment income receivable
Other receivables
Payables
Interest bearing borrowings:
9.875% Debenture Stock1
5.5% Debenture Stock2
4.05% Private Placement Loan3
1 Effective interest rate is 9.875%
2 Effective interest rate is 5.583%
3 Effective interest rate is 4.133%
2016
2015
Book value
£000
Fair value
£000
Book value
£000
973,353
17,340
973,353
17,340
855,625
12,262
Fair value
£000
855,625
12,262
2,757
1,509
(1,1 69)
(25,000)
(38,535)
(50,315)
2,757
1,509
(1,1 69)
(27,500)
( 43,431)
(54,843)
2,437
285
(1,074)
(25,000)
(38,491)
(50,289)
2,437
285
(1,074)
(28,568)
(43,010)
(52,018)
879,9 40
868,0 16
755,755
745,939
The 9.875% Debenture Stock 2017 and the 5.5% Debenture Stock 2021 are classifi ed as Level 1 instruments (2015: Level 1).
The 4.05% Private Placement Loan 2028 is classifi ed as a Level 2 instrument (2015: Level 2).
Liquidity risk exposure
This is the risk that the Company will encounter diffi culty in meeting obligations associated with fi nancial liabilities.
Contractual maturities of the fi nancial liabilities at the year end, based on the earliest date on which payment can be
required, are as follows:
2016
2015
Three
months
or less
£000
Not more
than one
year
£000
More
than one
year
£000
Three
months
or less
£000
Not more
than one
year
£000
More
than one
year
£000
Total
£000
Total
£000
Creditors: amounts falling due
after more than one year
Debenture stocks and Loan
2,058
29,526
1 17,590
149,174
2,058
6,584
155,759
164,401
Creditors: amounts falling due
within one year
Accruals and deferred income
870
2,928
299
–
1,1 69
59,351
1 17,590
150,3 43
766
2,824
308
–
1,074
6,892
155,759
165,475
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
47
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS CONTINUED
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.
The Company’s capital is its equity share capital and reserves that are shown in the Statement of Financial Position and
debentures and fi xed term loan (see note 15) at a total of £ 993, 790,000 (2015: £869,535,000).
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 profi ts 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.
the terms of the debenture trust deeds have various covenants that prescribe that moneys borrowed should not exceed the
adjusted total capital and reserves as defi ned in the debenture trust deeds. The Note Purchase Agreement governing the
terms of the Private Placement Loan also contains certain fi nancial covenants. These are measured in accordance with the
policies used in the annual fi nancial statements.
The Company has complied with all of the above requirements.
OTHER INFORMATION
Securities Financing and Total Return Swap Disclosure
During the year the Company did not engage in securities lending or any total return swaps.
Alternative Investment Fund Managers (AIFM) Directive
In accordance with the AIFM Directive, information in relation to the Company’s leverage and the remuneration of the
Company’s AIFM, Investec Fund Managers Limited (‘IFM’), is required to be made available to investors. In accordance with the
Directive, the AIFM remuneration policy is available at www. investecassetmanagement.com or from the Company Secretary
on request (see contact details on page 5 4 ) and the numerical remuneration disclosures in respect of the AIFM’s fi rst relevant
reporting period (year ended 31 March 2016) are also available at www .investecassetmanagement.com .
Leverage
For the purposes of the AIFM Directive, leverage is any method which increases the Company’s exposure, including the
borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company’s exposure and its net asset
value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of
the Company’s positions after the deduction of sterling cash balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and
after certain hedging and netting positions are offset against each other. The Company’s maximum and actual leverage levels
at 31 December 2016 are shown below:
Leverage Exposure
Maximum limit
Actual
Gross
method
Commitment
method
250%
115%
200%
117%
Remuneration
Remuneration paid for 2016 to all staff employed by the AIFM, split into fi xed and variable remuneration paid
IFML does not directly employ staff.
Aggregate remuneration paid for 2016 to senior management and members of staff whose actions have a m a terial
impact on the risk profi le of IFM
Other
members of
staff with
material
impact
£2,736
£837
2
Senior
Management
£15,940
£132,839
7
Fixed Remuneration
Variable Remuneration
Number of Staff
48
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
NOTICE OF MEETING
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you
should take you should consult your stockbroker, bank manager, solicitor, accountant or other independent fi nancial 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 91st Annual General Meeting of Temple Bar Investment Trust PLC will be held
at 11.00am on Monday 2 7 March 2017 at 2 Gresham Street, London EC2V 7QP for the following purposes:
ORDINARY BUSINESS:
1.
To approve the Company’s Annual Report and Financial Statements for the year ended 31 December 2016 (together with
the reports of the directors and auditor thereon).
2. To approve the report on directors’ remuneration for the year ended 31 December 2016.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
3. To approve the Company’s remuneration policy.
4. To declare a fi nal dividend of 16.18p per ordinary share.
5. To re-elect Mr A T Copple as a director of the Company.
6. To re-elect Mrs J F de Moller as a director of the Company.
7. To re-elect Mr R W Jewson as a director of the Company.
8. To re-elect Mr J Reeve as a director of the Company.
9. To re-elect Dr L R Sherratt as a director of the Company.
10. To re-elect Mr D G C Webster as a director of the Company.
11. To elect Mr N S L Lyons as a director of the Company.
12. To re-appoint Ernst & Young LLP as the auditor to the Company and to authorise the audit committee to determine their
remuneration.
SPECIAL BUSINESS:
To consider and, if thought fi t, pass the following resolutions:
ORDINARY RESOLUTION:
13. 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 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 £1,671,819,
being 10% of the issued share capital of the Company as at 1 7 February 2017 and representing 6,687,276 ordinary shares
of 25p each 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), provided that:
(i)
(ii)
the authority granted shall expire at the conclusion of the Annual General Meeting of the Company in 2018 or
15 months from the date of the passing of this resolution, whichever is the earlier, but may be revoked or varied by
the Company in general meeting and may be renewed by the Company in general meeting; and
the said authority shall allow and enable the directors to make an offer or agreement before the expiry of that
authority which would or might require shares to be allotted or Rights to be granted after such expiry and the
directors may allot shares and grant Rights in pursuance of any such offer or agreement as if that authority had
not expired.
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
49
NOTICE OF MEETING CONTINUED
SPECIAL RESOLUTIONS:
1 4. That, in substitution of all existing powers but, subject to the passing of resolution 1 3 set out above , the directors be and
they are hereby generally empowered pursuant to Section 570-573 of the Companies Act 2006 (the ‘Act’) to allot equity
securities (as defi ned in Section 560 of that 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 them by this meeting to allot shares as
if Section 561(i) of that Act did not apply to the allotment, provided that the power conferred by this resolution shall be
limited to:
(i)
(ii)
the allotment of equity securities in connection with a rights issue, open offer or the pre-emptive offer in favour
of ordinary shareholders where the equity securities respectively attributable to the interests of all ordinary
shareholders are proportionate to the respective numbers of ordinary shares held by them on the record date of such
allotment (but subject to such exclusions or other arrangements as the directors may deem necessary or expedient to
deal with equity securities in relation to fractional entitlements or legal or practical problems under the law of or the
requirements of any regulatory body or any stock exchange in any territory or any other matter whatsoever); and
the allotment (otherwise than pursuant to sub paragraph (i) above) of equity securities up to an aggregate nominal
value not exceeding £1,671,819, being 10% of the issued share capital of the Company as at 17 February 2017 and
representing 6,687,276 shares of 25p each in the capital of the C ompany (‘Shares’) (or, if changed, the number
representing 10% of the issued share capital of the C ompany at the date at which this resolution is passed), and
provided further that (i) the number of equity securities to which this power applies shall be reduced from time
to time by the number of treasury shares which are sold pursuant to any power conferred on the directors by
resolution 13 set out above and (ii) no allotment of equity securities shall be made under this power which would
result in Shares being issued at a price which is less than the higher of the Company’s estimated cum or ex income net
asset value per Share as at the latest practicable time before such allotment of equity securities as determined by the
directors in their reasonable discretion; and
such power shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this
resolution or 15 months from the date of passing this resolution, whichever is earlier, unless previously revoked, varied
or renewed by the Company in general meeting and save that the Company may make an offer or agreement before this
power has expired, which would or might require equity securities to be allotted after such expiry and the directors may
allot equity securities in pursuance of such offer or agreement as if the authority conferred hereby had not expired.
1 5. That the Company generally be and is hereby authorised for the purpose of Section 701 of the Companies Act 2006
(the ‘Act’) to make one or more market purchases (as defi ned in Section 693 of the Act) of ordinary shares of 25p each in
the capital of the Company (‘ordinary shares’) either for retention as treasury shares for future reissue, resale, transfer or
cancellation provided that:
(i)
(ii)
(iii)
(iv)
(v)
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;
the minimum price (exclusive of expenses payable by the Company) which may be paid for such ordinary shares is
25p per share;
the maximum price (exclusive of expenses payable by the Company) which may be paid for such ordinary shares shall
be 5% above the average of the market value of the share quotations taken from the London Stock Exchange Daily
Offi cial List for the fi ve business days immediately before the purchase is made;
the authority hereby conferred shall (unless previously renewed or revoked) expire at the end of the Annual General
Meeting of the Company to be held in 2018, or, if earlier, the date falling fi fteen months from the date of this
resolution;
the Company may make a contract to purchase its own ordinary shares under the authority hereby conferred prior to
the expiry of such authority which will or may be executed wholly or partly after the expiry of such authority, and may
make a purchase of its own shares in pursuance of any such contract.
By order of the Board of Directors
M K Slade
For Investec Asset Management Limited
Secretary
1 7 February 2017
50
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
Woolgate Exchange
25 Basinghall Street
London EC2V 5HA
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
SHOWN IS A PLAN OF THE
LOCATION OF INVESTEC
ASSET MANAGEMENT
LIMITED, 2 GRESHAM STREET,
LONDON EC2V 7QP WHERE
THE ANNUAL GENERAL
MEETING WILL BE HELD ON
MONDAY 27 MARCH 2017 AT
11.00AM.
NOTES
1. Entitlement to attend and vote
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
Members who hold ordinary shares in the Company in uncertifi cated form must have been entered on the Company’s
register of members by 6. 30pm on 23 March 2017 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 fi xed 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 him. 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 specifi ed number of shares within
his 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 11.00am on 23 March 2017. Completion and return of the form of proxy will not preclude
shareholders from attending and voting at the meeting in person should they wish to do so.
As an alternative to completing a hard copy Form of Proxy, you can appoint a proxy or proxies electronically by visiting
www.sharevote.co.uk. You will need your Voting ID, Task ID and Shareholder Reference Number (this is the series of
numbers printed at the top right-hand side of the Form of Proxy). Alternatively, if you have already registered with Equiniti
Limited’s online portfolio service, Shareview, you can submit your Form of Proxy at www.shareview.co.uk. You may not use
any electronic address provided in this notice of meeting to communicate with the Company for any purposes other than
those expressly stated. Full instructions are given on both websites. To be valid, your proxy appointment(s) and instructions
should reach Equiniti Limited no later than 11am on 23 March 2017.
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) thereof 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 specifi cations
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.
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
51
NOTICE OF MEETING CONTINUED
2. Proxies continued
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 Uncertifi cated Securities Regulations 2001.
3. 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 2006, 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.
4. Nominated persons
In accordance with Section 325 of the Companies Act 2006, the right to appoint proxies does not apply to persons
nominated to receive information rights under Section 146 of the Act. Persons nominated to receive information rights
under Section 146 of the Act who have been sent a copy of this notice of meeting are hereby informed, in accordance with
Section 149 (2) of the 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.
5. Members’ requests under Section 527 of the 2006 Act
Under Section 527 of the Companies Act 2006 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 Annual
General Meeting for the fi nancial year beginning 1 January 201 6; or (ii) any circumstance connected with an auditor of the
Company appointed for the fi nancial year 1 January 201 6 ceasing to hold offi ce 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
2006. Where the Company is required to place a statement on a website under Section 527 of the Companies Act 2006, 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 Annual General Meeting for the relevant fi nancial year includes any
statement that the Company has been required under Section 527 of the Companies Act 2006 to publish on a website.
6. 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 confi dential 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.
7. Inspection of documents
None of the directors has a service contract with the Company.
8. Total number of shares and voting rights
As at 1 7 February 2017, the latest practicable date prior to publication of this document, the Company had 66,872,765
ordinary shares in issue with a total of 66,872,765 voting rights.
9. Website
In accordance with Section 311A of the Companies Act 2006, the contents of this notice of meeting, 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: www.templebarinvestments.co.uk.
52
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
USEFUL INFORMATION FOR SHAREHOLDERS
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 2 Gresham Street, London EC2 V 7QP (see map on page 5 1 ), on 2 7 March 2017 at
11.00am.
FINANCIAL CALENDAR
The fi nancial calendar for 2017 is set out below:
Ordinary shares
Final dividend, 2016 – payable
– ex-dividend
– record date
First interim dividend, 2017
Second interim dividend, 2017
Third interim dividend, 2017
Final dividend, 2017
9.875% Debenture Stock 2017
Interest payments
5.5% Debenture Stock 2021
Interest payments
PAYMENT OF DIVIDENDS
31 March 2017
9 March 2017
1 0 March 2017
30 June 2017
29 September 2017
29 December 2017
End of March 2018
30 June and 31 December
8 March and 8 September
Cash dividends will be sent by cheque to the fi rst-named shareholder on the Register at his or her registered address together
with a tax voucher. At shareholders’ request, dividends may instead be paid direct into the shareholder’s bank account through
the Bankers’ Automated Clearing System (‘BACS’). This may be arranged by contacting the Company’s Registrar
on 0371 384 2432.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
PRICE AND PERFORMANCE INFORMATION
The Company’s ordinary shares and debenture stocks are traded on the London Stock Exchange. The market price of the
ordinary shares is shown daily in the Financial Times, other leading newspapers and on the Company’s website.
SHARE REGISTER ENQUIRIES
The Company’s Registrar, Equiniti, maintains the share register. In the event of queries regarding your holding, please contact
the Registrar on 0371 384 2432 (overseas +44 (0)121 415 7047). Lines are open from 8.30am to 5.30pm Monday to Friday.
Changes of name or address must be notifi ed in writing to the Registrar.
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
SEDOL CODES FOR ORDINARY SHARES AND DEBENTURE STOCKS
Ordinary shares
9.875% Debenture Stock 2017
5.5% Debenture Stock 2021
0882532
0882640
0530529
The ISIN Number for the ordinary shares is GB0008825324
TAX INFORMATION EXCHANGE
Local laws may require Temple Bar to disclose investor, holding and income data to UK and other tax authorities. This will only
happen where required by law.
ASSOCIATION OF INVESTMENT COMPANIES
The Company is a member of the Association of Investment Companies, which produces monthly publications of detailed
information on the majority of investment trusts. The Association of Investment Companies can be contacted by telephone
on 020 7282 5555.
TEMPLE BAR WEBSITE
The Company’s own website can be found at www.templebarinvestments.co.uk and includes useful background information on
the Company together with helpful downloads of published documentation such as previous Annual Reports .
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
53
MANAGEMENT AND ADMINISTRATION
Alternative Investment Fund Manager (AIFM)
Investec Fund Managers Limited
Authorised and Regulated by the Financial Conduct Authority
Portfolio Manager, Alastair Mundy
Woolgate Exchange
25 Basinghall Street
London EC2V 5HA
Telephone No. 020 7597 2000
Independent auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
Depositary, bankers and custodian
HSBC Bank plc
Poultry
London EC2P 2BX
Stockbrokers
JPMorgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Solicitors
Eversheds LLP
1 Wood Street
London EC2V 7WS
Registered offi ce
Woolgate Exchange
25 Basinghall Street
London EC2V 5HA
Company Secretary
Investec Asset Management Limited,
represented by Martin Slade
Registered number
Registered in England No. 214601
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Telephone No:
+44 121 415 7047 (overseas shareholder helpline)
0371 384 2432 (shareholder helpline)*
0906 559 6025 (broker helpline)
*Lines open 8.30 a.m. to 5.30 p.m., Monday to Friday.
54
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
R
E
P
O
R
T
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
I
O
N
GLOSSARY OF TERMS
ABSOLUTE PERFORMANCE
The return that an asset achieves over a period of time, relative to the investment itself.
ANNUAL MANAGEMENT FEE
The annual consideration paid to an asset management company for managing clients’ investments.
ATTRIBUTION ANALYSIS
A performance-evaluation tool used to analyse the abilities of portfolio or fund managers. Attribution analysis
uncovers the impact of the manager’s investment decisions with regard to overall investment policy, asset allocation,
security selection and activity.
BENCHMARK
A comparative performance index.
BORROWING
See gearing.
BOTTOM-UP STOCK SELECTION
An investment approach that concentrates on the analysis of individual companies and considers the company’s history,
management and potential as more important than macroeconomic trends.
CASH ALTERNATIVES/EQUIVALENT
Also known as cash equivalents. A class of investments considered relatively low-risk because of their high liquidity,
meaning they can be quickly converted into cash.
CONTRARIAN APPROACH
An investment style that goes against prevailing market trends. In very simple terms the approach is defi ned by buying
assets that are performing poorly and then selling when they perform well.
DEBENTURE STOCKS
A type of stock entitling the bearer to a certain fi xed dividend at set periods of time.
DERIVATIVE INSTRUMENTS
An instrument whose value depends on the performance of an underlying security or rate which requires no initial
exchange of principal. Options, futures and swaps are all examples of derivatives.
DIVERSIFICATION
Holding a range of assets to reduce risk.
DIVIDEND
The portion of company net profi ts paid out to shareholders.
FIXED INTEREST
Fixed interest securities, also known as bonds, are loans usually taken out by a government or company which normally
pay a fi xed 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 900 companies, including investment trusts, the name FTSE is taken from the Financial Times (FT) and
the London Stock Exchange (SE), 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.
GEARING
In accounting terms, gearing is the amount of a company’s total borrowings divided by its share capital. High gearing means
a proportionately large amount of debt, which may be considered more risky for equity holders. However, gearing also entails
tax advantages. In investment analysis, a highly geared company is one where small changes in sales produce big swings in
profi ts. Also known as leverage.
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
55
GILTS
A bond that is issued by the British government which is generally considered low risk.
HEDGING
A technique seeking to offset or minimise the exposure to a specifi c risk by entering an opposing position.
LIQUIDITY
The ease with which an asset can be 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.
NET ASSET VALUE
In a company context, the net asset value describes total assets minus total liabilities.
ONGOING CHARGE
This fi gure includes the annual management fee and administrative costs but excludes any performance fee or portfolio
transaction costs. Ongoing charges may vary from year to year.
PEER COMPANIES
Companies that operate in the same industry sector and are of similar size.
RELATIVE PERFORMANCE
The return that an asset achieves over a period of time, compared to a benchmark.
SHARE BUYBACK
When a company buys some of its own shares in the market, which leads to a rise in the share price. It changes the company’s
debt-to-equity ratio and is a tax-effi cient alternative to paying out dividends.
STOCK LENDING
Also known as securities lending. The act of loaning a stock, derivative, or other security to an investor or fi rm. It requires the
borrower to put up collateral, whether cash, security or a letter of credit. When a security is loaned, the title and the ownership
is also transferred to the borrower.
TOTAL RETURN
Captures both the capital appreciation/depreciation of an investment as well as the income generated over a holding period.
VALUATION
Determination of the value of a company’s stock based on earnings and the market value of assets.
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 fl at 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.
56
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
Temple Bar Investment Trust’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 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.
CONTENTS
STRATEGIC REPORT
GOVERNANCE REPORT
FINANCIAL REPORT
1 Summary of results
1 6 Directors
3 4 Statement of
SHAREHOLDER
INFORMATION
2 Chairman’s statement
1 7 Report of Directors
3 Ten year record
2 0 Report on directors’
4 Manager’s review
8 Attribution analysis
9 Overview of strategy
14 Portfolio of investments
remuneration
2 2 Corporate governance
2 5 Report of the audit
committee
2 7 Statement of directors’
responsibilities
28 Independent auditor’s
report
Comprehensive Income
49 Notice of meeting
5 3 Useful information
for shareholders
5 4 Management and
administration
5 5 Glossary of terms
3 5 Statement of Changes
in Equity
3 6 Statement of Financial
Position
3 7 Statement of
Cash Flows
38 Notes to the Financial
Statements
48 Other information
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 6
Perivan Financial Print 243596
T
e
m
p
e
B
a
r
l
I
n
v
e
s
t
m
e
n
t
T
r
u
s
t
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
&
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2
0
1
6
ANNUAL REPORT & FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016