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7
ANNUAL REPORT & FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
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 Listed securities.
The Company’s policy is to invest in a broad spread of
securities with typically the majority of the portfolio selected
from the constituents of the FTSE 350 Index.
CONTENTS
STRATEGIC REPORT
GOVERNANCE REPORT
FINANCIAL REPORT
1 Summary of results
17 Directors
36 Statement of
SHAREHOLDER
INFORMATION
2 Chairman’s statement
18 Report of Directors
3 Ten year record
21 Report on directors’
5 Manager’s review
9 Attribution analysis
10 Overview of strategy
15 Portfolio of investments
remuneration
23 Corporate governance
26 Report of the audit
committee
28 Statement of directors’
responsibilities
29 Independent auditor’s
report
Comprehensive Income
51 Notice of meeting
37 Statement of Changes
in Equity
55 Useful information
for shareholders
38 Statement of Financial
56 Corporate Information
57 Glossary of terms
Position
39 Statement of
Cash Flows
40 Notes to the Financial
Statements
50 Other information
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
Perivan Financial Print 247986
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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 cash)/gearing*
Ongoing charges**
Total Returns for the year to 31 December 2017
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 2017
Yield on ordinary share price (1,314 p)****
Yield on FTSE All-Share Index
2017
£000
2016
£000
%
change
936,366
879,940
1,400.22 p
1,386.92 p
1,314.00 p
6.2 %
5.3 %
28,958
43.30 p
42 .47 p
54,989
82.23 p
(3 .0) %
0.49 %
1,315.84p
1,298.01p
1,223.00p
7.1%
5.8%
29,253
43.74p
40.45p
121,751
182.06p
2.4%
0.51%
6.4 %
6.4 %
6.8 %
7.4 %
5 .0 %
11.0%
9.7%
9.5%
13.1%
4.1%
3.1%
3.6%
*
Defi ned as total assets less current liabilities and cash or cash equivalents (including gilt holdings) divided 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.
*** See glossary of terms on page 57 for more information and for Alternative Performance Measures.
**** Based on the three interim dividends paid during the year together with the fi nal dividend for 2016.
BENCHMARK
Performance is measured
against the FTSE All-Share Index.
CAPITAL STRUCTURE
Ordinary Shares
5.5% Debenture Stock 2021
66,872,765
£38,000,000
4.05% Private Placement Loan 2028
£50,000,000
2.99% Private Placement Loan 2047
£25,000,000
VOTING STRUCTURE
Ordinary shares 100%
TOTAL ASSETS LESS
CURRENT LIABILITIES
£1,050,285 ,000
TOTAL EQUITY*
£936,366 ,000
MARKET CAPITALISATION
£878,708 ,000
* With debenture and loan stocks at book value
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
1
CHAIRMAN’S STATEMENT
T he 34th consecutive year in which the Company has raised its annual dividend
payment.
PERFORMANCE
I have commented for a long time about the protracted
timescale in which the Value investing style has been out of
favour relative to other styles. There have been brief periods
during which the tide appeared to be turning in favour of
Value but these rallies have thus far proved to be fairly short
lived and, consequently, the underperformance of Value
continued into 2017. As our portfolio manager is a disciplined
adherent of the Value investing style this has had a negative
impact on the short to near term performance of Temple Bar
compared with its nominated benchmark, the FTSE All Share
Index. During the year the total return on the net assets of
Temple Bar was 9.7%, underperforming the total return of the
FTSE All Share Index of 13.1%. We attach greater signifi cance
to the longer term performance and in this context I am
pleased to report that Temple Bar continues to outperform
its benchmark over both fi ve and ten year periods on the
same basis.
The Manager’s Review on pages 5 to 8 sets out some of
the main themes driving both portfolio construction and
performance during the year, including 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 8.33p per share and the directors are now
recommending a fi nal dividend payment for the year ended
31 December 2017 of 17.48p per share, to be paid on 29 March
2018 to those shareholders on the register as at 9 March
2018. The ex-dividend date for this payment is 8 March 2018.
If approved this would give an increase in the total dividend
payment for the year as a whole of 5.0%. The dividend has
been increased in light of the signifi cant accretion to revenue
reserves in recent years and the availability of income in the
current year. This would be the 34th consecutive year in which
the Company has raised its annual dividend payment. The
Board is proud of the Company’s record of generating long
term dividend growth, such consistency being refl ected in
Temple Bar’s status as one of The Association of Investment
Companies’ ‘Dividend Heroes’.
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 pending the emergence of
attractively priced investment opportunities. The position
was unchanged throughout 2017 such that at the year end,
net gearing (calculated net of cash and related liquid assets,
including our investment in a UK short dated gilt) was -3.0% .
From a long term gearing perspective, however, I am pleased
to be able to report that the Company’s expensive £25m
9.875% debenture matured on 31 December 2017 and was
duly repaid in full on that date. In advance of its repayment
the Board took the decision in October to replace it with
an additional private placement loan in the same amount
but with a much more attractive coupon of 2.99%. The loan,
which covers a fi xed 30 year period extending to 2047, was
provided by the Prudential Insurance Company of America,
who also provided funding for the existing 4.05% private
placement loan undertaken in 2013. It may seem somewhat
anomalous that the Company has taken out a new borrowing
facility at the same time that the Manager has highlighted
a lack of attractive investment opportunities in the market.
I should, therefore, emphasise that an important factor in
taking out this additional loan was to secure attractive fi xed
rate funding for the purposes of pursuing the Company’s
investment objectives over a very long period, mindful of the
likelihood of future interest rate increases and the potential
for future investment opportunities.
2
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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A project to re-design the Temple Bar website was undertaken and the
new site will go live early in 2018.
SHARE CAPITAL MANAGEMENT
Temple Bar’s shares traded at a modest discount
throughout most of the year and at the year end the
discount stood at 5.3 %. 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 repurchases took place during the year, the Board
nonetheless 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.
THE BOARD
In November of last year Richard Wyatt was appointed
as an additional director of the Company. Richard brings
a wealth of broad based business experience to the role
including valuable insight gleaned from the technology
sector. I am confi dent that he will add a great deal to the
Board’s discussions in the coming years. The Board is
proposing to make a further appointment , for which an
independent recruitment process is already underway.
Shareholders might reasonably enquire about the rationale
for this expansion in the size of the Board. I can confi rm
that these additional appointments are being made in
anticipation of three or four existing Board members
retiring over the next two years and are designed to ensure
an orderly transition and the refreshment of the Board. The
fi rst such retirement has already taken place, with David
Webster stepping down as a director on 31 December
2017. David made an outstanding contribution to the Board
over the nine years that he served as a director and we
wish him the very best in his future life. Furthermore, I will
be standing down as Chairman this summer. It has been
a privilege to serve on the Board as both a director since
1992 and as Chairman for nearly 15 years. A decision on my
successor as Chairman will be made in the coming months
and notifi ed to shareholders in due course. Temple Bar
has historically benefi ted from a strong Board and I am
confi dent that this will continue into the future.
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.
PACKAGED RETAIL AND INSURANCE-BASED
INVESTMENT PRODUCTS (PRIIPS)
New EU originated regulations require investment entities
such as Temple Bar to prepare Key Information Documents
(KIDs) that are available to be perused prior to making an
investment decision. The intention is that investors are
able to make comparisons between different products
based on highly prescribed information, as set out in the
regulations. Accordingly, Temple Bar has prepared its own
KID, which is available on its website and has also been
disseminated to various platform providers and investment
allocators. However, the Board believes that there are
aspects to the way that some of the information is required
to be calculated and presented which cast signifi cant
doubts over the validity of comparisons, particularly with
non-investment trust products. As but one example, the
KID rules require investment trusts to include as part of
an ongoing cost calculation the cost of their borrowings.
These borrowings are designed to enhance shareholder
returns over the longer term; however, the costs of such
borrowings are required to be included within total costs
TEN YEAR RECORD
Total assets less
current liabilities (£000)
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
422,408
553,392
603,444
585,480
664,648
905,775
913,198
869,535
968,790 1,050,285
Net assets (£000)
359,020
489,988
540,022
522,040
601,191
792,070
799,444
755,755
879,940
936,366
Net assets per
ordinary share (pence)
Revenue return to ordinary
shareholders (£000)
Revenue return
per share (pence)
Dividends per share* (pence)
612.76
831.03
915.89
874.42
992.86 1,250.84 1,195.47 1,130.14 1,315.84
1,400.22
20,614
20,017
18,915
22,552
24,873
22,274
25,782
26,663
29,253
28,958
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
43.74
40.45
43.30
41.66
* Interim(s) and proposed fi nal for the year
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
3
CHAIRMAN’S STATEMENT CONTINUED
Our preference is to focus on individual compan ies’ fi nancial strength and
performance rather than seek to predict the direction of markets.
OUTLOOK
It may be something of a statement of the obvious to
recognise that we face a number of political and economic
risks over the short to medium term, such as the ramifi cations
of Brexit negotiations, the consequences of attempts by
certain central bankers to reverse ‘experimental’ policies
relating to ultra-low interest rates and the accumulation on
balance sheet of vast quantities of fi xed interest securities,
and the possible impact of developments in US domestic and
foreign policy under President Trump. However, over the long
90 year existence of Temple Bar there have been numerous
even more perilous events that it has successfully negotiated
to provide good long term returns to its shareholders, not
least by exploiting value opportunities arising from such
dislocations.
In these circumstances our preference is to focus on
individual compan ies’ fi nancial strength and performance
rather than seek to predict the direction of markets. Through
maintaining our approach of investing in a diversifi ed
portfolio of mainly UK domiciled companies and with strict
adherence to a Value based approach we believe that
Temple Bar can continue to thrive notwithstanding future
uncertainties. Furthermore, Temple Bar is well positioned to
maintain its policy of paying a high and growing dividend for
the foreseeable future.
John Reeve
Chairman
20 February 2018
shown on the KID, without corresponding recognition of
the potential benefi ts of such gearing, while ungeared
investment vehicles have no such costs, thus distorting cost
comparisons. Furthermore, investment trusts are required
to show portfolio transaction costs while UCITS vehicles can
currently exclude them, rendering comparisons meaningless.
The Board also has signifi cant reservations about the
prescribed methodology for the calculation of performance
projections in the KID, which, it believes, does not provide
a reliable guide to investors and should not, therefore, be
taken as an indicator of future performance expectations.
As a result of these and other concerns the Board believes
that more helpful and comparable information about Temple
Bar’s costs and performance can be obtained both from the
monthly factsheet published on the Temple Bar website and
from information contained in the Annual Report.
WEBSITE
As the permanent representation of the Temple Bar brand
and investment philosophy and the primary source for up-
to-date relevant information, the effi cacy of the website for
shareholders and other key users is paramount. A review
of competitor websites revealed that the majority of
‘independent’ investment company websites felt somewhat
dated from both a design and technology perspective,
and adopted a very similar ‘corporate’ online experience.
As such, we believe there is an opportunity to make our
website more modern looking, technologically advanced
and easier to navigate, with the ultimate aim of improving
the online experience for users. Consequently, a project to
re-design the Temple Bar website was undertaken and the
new site will go live early in 2018.
ANNUAL GENERAL MEETING
The AGM this year will be held once again at 2 Gresham
Street, London EC2V 7QP on Monday 26 March 2018 at
11am. 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.
4
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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MANAGER’S REVIEW
After strong performance in 2016, relative returns were
weaker in 2017. We were far from fully invested for the whole
year, which did us no favours, but mainly it was poor stock
selection in a diffi cult environment that held us back.
A decade after the onset of the Global Financial Crisis,
monetary policy remains on an emergency setting with short-
term interest rates still at historically low levels and long-term
rates refl ecting the extraordinary amount of bond purchases
that Central Banks have made. With economic growth across
developed economies healthier than it has been for many
years, policymakers are probably claiming victory. However,
until monetary policy has been reversed we believe it would
be premature for Central Bankers to conduct a victory lap.
There is some offi cial acknowledgement of the unknown
consequences of Quantitative Easing – the printing of money
and subsequent purchase of fi nancial assets, normally bonds
– together with other articulated concerns such as the lack
of justifi cation for a continued emergency setting and the
need for these policies to be available when next required.
This suggests that the reversal of QE is at the forefront of the
minds of central bankers.
If Central Banks reduce signifi cantly the amount of bonds
they own, bond markets will probably react to the absence of
the massive buyer of the last decade. We believe that
falling bond yields have caused some peculiar outcomes:
i) investors keen to maintain a certain amount of income
have gravitated towards riskier assets; ii) a signifi cant amount
of new bond issuance has been made at negative yields
(thus guaranteeing the buyers a loss if held to maturity);
and iii) countries with less than stellar fi nancial histories (and
probably futures) have been welcomed back to the sovereign
bond market with so much enthusiasm that coupons on
their bonds were reduced from initial expectations despite
borrowing periods of up to 100 years.
As bond yields are used as a valuation tool for many other
assets one must wonder how vulnerable fi nancial markets are
in general to an increase in bond yields.
Our concern is that markets are pricing in a perfect scenario:
one in which economic growth is buoyant, infl ation remains
subdued and monetary policy is carefully normalised with
minimal volatility. However, one slip either way – for example
through infl ation surprising on the upside or higher bond
yields choking off economic growth – could very quickly
affect investor sentiment. At a time when bonds and many
equities stand at high valuations, markets could react very
badly to any disappointment.
With markets assuming that Central Banks have their
backs, asset volatility has plummeted. Many investors
have embraced the lower volatility by taking on more risk,
effectively assuming high volatility is a relic of the past.
A reversal in volatility could, therefore, very quickly force
investors to liquidate positions, thus adding signifi cant
momentum to any sell-off.
Obviously, when markets are complacent about downside
risk it becomes much harder for investors to stand to one
side. However, we are convinced that patience is a vital
part of our investment process and that we must not let the
market bully us out of our concerns.
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.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
5
MANAGER’S REVIEW CONTINUED
Infl ation may well have been written off too easily.
Heightened bond and equity valuations are often justifi ed
by the claim that we are in a new environment of low
infl ation and low interest rates. The narrative around low
infl ation (the reduction in the bargaining power of labour,
globalisation, technology) is indeed persuasive, but may
tell us more about where we are rather than where we are
going. If these drivers were so obvious, it is curious that
long-term infl ation forecasts made say 10 years ago proved
so inaccurate. One should therefore at least question
today’s conventional wisdom. For example, while there is
much written about robots taking human jobs this could
be a very long-term trend, while in the short term skilled
labour shortages could prove more important. The rise
of populism worldwide could, as it has done historically,
herald a rise in protectionism, a reversal of globalisation
and higher prices. Infl ation may well have been written off
too easily.
THE UK EQUITY MARKET
In the UK equity market we have found this backdrop of
‘low yields forever’ diffi cult. This has been compounded by
concerns surrounding Brexit. The market has bifurcated,
with a group of growth stocks trading at very high
valuations contrasting with a basket of mainly domestically
orientated stocks trading at low valuations. This bifurcation
is a direct consequence of the growth companies’ expected
future profi ts being discounted at ever lower interest rates
(as bond yields have fallen) whilst profi t downgrades in the
domestic stocks have encouraged investors to extrapolate
any bad news.
History tells us that extrapolation of good and bad news at
ever more extreme valuations is rarely a sensible long-term
investment strategy. Those companies priced to do well
often disappoint and those priced for failure often surprise
positively. The valuations of the cheap stocks currently
discount a reasonable amount of negativity and our sense is
that investors are already expecting a challenging outcome
to Brexit.
Before we are too easily attracted to these lower
valuations, however, we must accept there are genuine
risks to consider. We are, in general, not simply analysing
companies whose profi ts are purely cyclical; many are
facing structural impediments too. For example, retailers
are dealing with a signifi cant percentage of sales moving
on-line and banks are facing an increasing amount of new
competition and more onerous regulation. A number of
the cheapest companies fi nd their actions constrained by
high levels of debt (such as many pub companies) or face
concerns over political involvement (the utilities) or low cost
competition (the food retailers). It is easy to see why many
investors would claim these stocks are cheap for a reason.
We would not be surprised if a switch of investment style
preferences from growth to value could prove quite violent.
As usual there is unlikely to be a catalyst for any change
in style and, even if there is, most investors will fi nd it
impossible to re-align their portfolios at the prices they
hoped.
PORTFOLIO POSITIONING
The overall shape of the Temple Bar portfolio is little
different from a year ago. We have no exposure to highly
rated stocks and consequently a clear skew to cheap stocks
– a majority of which are dependent on the UK economy for
their turnover. However, we still believe the UK domestic
focused stocks could become cheaper (on the back of, for
example, a nasty recession) so we retain a signifi cant cash
position.
We continue to hold exposure to gold and silver as
insurance against a number of uncertainties. The issues
are manifold, but the central premise is that policymakers
PORTFOLIO DISTRIBUTION %
Temple Bar
portfolio
FTSE
All-Share Index
1
2
3
4
5
6
7
8
9
10
11
12
13
Financials
Consumer Services
Industrials
Oil & Gas
Health Care
Basic Materials
Utilities
Physical Gold and Silver
Consumer Goods
Telecommunications
Technology
Total Equities
Fixed Interest
Cash
%
26.60
11.08
10.79
12.89
8.00
7.59
2.6 5
–
15.61
3.61
1.18
100.00
%
25.38
15.41
15.12
11.03
5.27
3.87
2.73
2.72
1.77
1.37
1.09
85.76
13.08
1.16
100.00
13
12
11
10
9
8
7
6
5
4
3
1
2
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TEMPLE BAR INVESTMENT TRUST PLC
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We would not be surprised if a switch of investment style preferences
from growth to value could prove quite violent.
will be reluctant to raise interest rates too quickly (believing
that infl ation is not a long-term threat) and will be content to
print more money if they believe it necessary. Precious metals
therefore act as insurance against Central Bankers either
reacting to events with slothfulness or excessive enthusiasm.
PORTFOLIO ACTIVITY
Over the year we slightly reduced our banking exposure by
lightening the holdings in HSBC and Lloyds Banking Group,
although we added to Barclays .
We also increased exposure to the UK residential
construction market through a purchase of brick maker
Forterra and added to our holdings in builder’s merchant
Travis Perkins and DIY retailer Kingfi sher (albeit we reduced
our two largest holdings, SIG and Grafton). Increasingly, there
is acceptance from both main political parties that there is a
shortage of housing in the UK. Although we have been here
many times this has now clearly become a signifi cant political
issue and, therefore, we would expect to see some action.
New housebuilding must surely increase from the current
depressed levels (to the benefi t of Forterra) whilst capacity
can also be increased by working on the current housing
stock (extensions, conversions etc) thus supporting our
exposure to the building related stocks.
We have only a small exposure to housebuilders – through
Bovis Homes – believing it is safer to position the portfolio
for greater housing activity in preference to continued house
price infl ation. So far this strategy has proved to be wrong.
We switched some of our gold bullion and holding in gold
miners into silver bullion and silver miners believing the
supply and demand characteristics were superior for silver.
Silver supply grows very slowly as not much of it is recycled
and at current prices there is little incentive for silver
miners to start new projects. Around two thirds of silver
supply comes as a consequence of miners removing other
commodities from the ground so any decrease in supply of
these commodities (driven by, say a reduction in demand
from China) could tighten the market signifi cantly. Demand
for silver comes from a reasonably stable industrial sector
plus its status as a precious metal.
The holdings in BAT and Imperial Brands were sold – the last
remaining ‘bond proxies’ (the shares being highly correlated
to the movement in bond prices). We believed this market
theme had reached extreme levels and left these companies
standing at valuations so high that they were vulnerable to
any earnings disappointment or rise in bond yields.
Following a signifi cant de-rating of its shares, we purchased
Next. The UK clothing market has been weak for some time
and many commentators see no obvious signs of a reversal.
There have been worries that Next’s margins, and profi ts ,
are unsustainably high and that as the clothing market moves
increasingly online and new competition wins market share
these margins will come under pressure. The company had
also suspended its share buy-back programme, thus giving
investors the impression its shares were no longer cheap.
We believed these arguments were over-cooked. Weak
clothing sales are probably a cyclical issue rather than a
structural issue and could be corrected with a new fashion
cycle. Next is handling the changes in buying behaviour
very well, as evidenced by a fairly stable market share and a
proactive approach to changing its store profi le. Although
management was probably unwise to suspend its buy-back
programme, Next’s cashfl ow seems suffi cient for it to
continue paying its dividends or to reinstate buy-backs.
EasyJ et was a victim of the Brexit referendum as investors
worried about its customers’ ability to handle higher prices
post a fall in the value of the pound and the effects of Brexit
on EU airline regulation. This came at a time when both
EasyJet and the industry were adding to capacity in the
European short-haul market with concerns over whether this
would affect pricing. We believed the market was missing the
signifi cant competitive advantage EasyJet holds by virtue of
its strong market share in the low-cost market, an advantage
which should grow over the medium term as less effi cient
competitors struggle to generate acceptable returns for their
shareholders.
WHAT WORKED?
Grafton and SIG contributed most to our performance over
the year. Whilst Grafton’s UK business continues to perform
well, particularly Selco, its fi xed–price (non-negotiable)
builder’s merchant, it has also benefi ted from an excellent
recovery in its Irish business (both DIY and builder’s
merchants) and its Benelux business. The shares moved
to a premium rating to its competitors and we therefore
lightened our holding whilst retaining signifi cant exposure
to the company. SIG, primarily a distributor of insulation
materials, appointed a new chief executive and operational
performance improved very quickly. The share price rose
signifi cantly refl ecting confi dence in the new management
and once again we reduced our holding.
As a retailer specialising in fantasy games, Games Workshop
has a dedicated and loyal customer base. The company
has responded well to the challenge of meeting its
customers’ aspirations for interesting games and characters;
consequently sales and profi tability consistently surprised the
market in 2017. EasyJ et performed well as the fears voiced
by investors (see above) subsided and Computacenter, an IT
services company, continued to deliver better than expected
profi tability.
WHAT DIDN’T WORK?
Following a good run in the second half of 2016, Barclays
underperformed the market. Investors were particularly
frustrated at the lack of progress in turning around the
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
7
MANAGER’S REVIEW CONTINUED
We remain very defensively positioned and recognise that this has proved an
expensive stance.
PORTFOLIO POSITIONING
The exposure to the bank sector remains the largest on the
portfolio. Whilst one could be dissuaded from investment
by regulatory fears, we believe this overlooks a number of
positive factors. Underlying profi tability remains strong in
the sector and it appears the regulators are now
comfortable with the amount of capital the sector holds.
We expect dividend payments to increase markedly in the
next few years and believe that any increases in bad debts
could, to some extent, be mitigated by margin expansion.
Low interest rates and a fl at yield curve have created a very
diffi cult backdrop for banks and any change here would be
positive.
OUTLOOK
We remain very defensively positioned and recognise that
this has proved an expensive stance. However, we believe
that central bank policy has taken many assets well beyond
fair value and, therefore, believe that reversal of this policy
could have the opposite effect. In contrast, if central banks
fi nd it diffi cult to reverse policy, they may suspend such
actions leading investors to conclude that we are stuck in a
world of perpetual QE.
Alastair Mundy
For Investec Fund Managers Limited
20 February 2018
investment bank (and an increase in capital allocated to it).
We still feel the company’s recovery is on the right track
and that it has opportunities to cut operational costs and
reduce its fi nancing costs. It would also be a signifi cant
benefi ciary of higher interest rates.
We have owned GlaxoSmithKline for the diversifi ed stream
of earnings it provides the portfolio. We had also hoped
that as a diverse healthcare conglomerate its earnings
stream would prove fairly stable. After some years of
decline, the company’s fortunes have indeed improved
since the beginning of 2016. However, the new chief
executive announced plans to increase costs (with the
intention of more fully backing new drug launches) and
also alluded to plans for an acquisition in its Consumer
Healthcare division. Investors took the combination of
higher costs and a potentially weaker balance sheet badly.
We believe it is right to support the new management
particularly as the shares stand on a very low rating and
thus are sensitive to any unexpected good news.
Signet Jewelers has a leading position in the US jewellery
market and we hoped this would enable it to drive profi ts
higher. However, very weak customer traffi c in US shopping
malls along with some signifi cant operational mistakes
combined to produce a very poor trading performance.
Once again, and this has been a recurring theme in the
market in 2017, the profi t disappointment was so harshly dealt
with that the shares have been left at depressed levels.
We had hoped that Centrica would also provide a durable
and defensive profi t stream. However, it has faced a
number of diffi culties such as loss of UK customers to
cheaper competitors at a higher rate than expected plus
operational disappointment in its US business. Reasonably
new management has not endeared itself to investors with a
surprise share placing, some acquisitions (suggesting a lack
of confi dence in its core business) and a lack of clarity as to
the cashfl ow investors can expect the company to generate.
The fall in oil, gas and power prices of the last few years has
not helped. Once again, we believe the shares discount a lot
of bad news so we have held on to them.
As a supplier of electricity from coal-fi red stations many
investors view Drax with great scepticism particularly as
coal-fi red plants in the UK are expected to close by 2025.
Drax has partially re-structured its activities by increasing
its exposure to the business market, but it seems that
Centrica’s woes have, unfairly we think, affected sentiment
around Drax’s business. A large percentage of its profi ts
now come from using biomass as a fuel and the company
also holds meaningful exposure to the business energy
supply market. The company believes it could convert its
remaining coal–fi red plants to gas fi red at an economic
cost. The market also has very low expectations for the
amount of profi ts that could be generated from coal over
the next eight, or even more, years.
8
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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ATTRIBUTION ANALYSIS
By stocks held in the portfolio
Source: Factset
TOP TEN CONTRIBUTORS
BOTTOM TEN CONTRIBUTORS
%
9
0
.
2
%
0
0
.
2
%
1
7
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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
S
H
A
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E
H
O
L
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%
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%
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%
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%
5
3
.
0
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B
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*
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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
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
9
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OVERVIEW OF STRATEGY
The directors present the strategic report for the Company
for the year ended 31 December 2017.
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 36 .
INVESTMENT OBJECTIVE AND POLICY
The Company’s investment objective is to provide growth
in income and capital to achieve a long term total return
greater than the benchmark FTSE All-Share Index, through
investment primarily in UK Listed securities. The Company’s
policy is to invest in a broad spread of securities with typically
the majority of the portfolio selected from the constituents of
the FTSE 350 Index.
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 15% of the portfolio value.
10
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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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
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 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;
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 2017 the net asset value total
return of the Company was 9.7 % compared with a total return
of the Company’s benchmark index of 13.1 %. 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 to 4 and the Manager’s
Review on pages 5 to 8 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
• 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 9.7 % compared with a total
return of 13.1 % 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
2012
2013
2014
2015
2016
2017
Source: Thomson Reuters Datastream
Temple Bar share price – total return
Temple Bar NAV – total return
FTSE All-Share Index – total return
The Board also monitors Temple Bar’s performance relative
to its peer group over various time periods and believes that
this is satisfactory.
2013
2014
2015
2016
2017
Temple Bar – gross assets, excluding effects of gearing and associated costs
FTSE All-Share Index - total return
Sources: Thomson Reuters Datastream and IAM
180
160
140
120
100
80
2012
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
11
OVERVIEW OF STRATEGY CONTINUED
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 4.7 %. This compares with an average discount of 7.3% 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 both 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%
2012
2013
2014
2015
2016
2017
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
17.48 p per ordinary share which brings the total for the year
to 42.47 p per ordinary share, an increase of 5.0 % from the
prior year. This will be the 34th consecutive year in which
the Company has increased the overall level of its dividend
payment.
140
130
120
110
100
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Temple Bar
Retail Prices Index
Source: Bloomberg
10 Year Comparative Dividend Growth
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 2017 were
0.49 % (2016: 0.51%). 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.
12
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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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 has carried out a robust assessment of these risks
which includes those that would threaten the Company’s
business model, future performance, solvency or liquidity.
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
2017 the Company had distributable revenue reserves of
£33.4 million before declaration of the fi nal dividend
for 2017 of £11.7 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.
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 23 .
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
beyond 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.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
13
OVERVIEW OF STRATEGY CONTINUED
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 13 .
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 long
dated fi xed rate borrowings, 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 fi ve 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 23 .
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.
BRIBERY ACT
The Company has a zero tolerance policy towards bribery
and is committed to carrying out business fairly, honestly and
openly. The Managers also adopt a zero tolerance approach
and have policies and procedures in place to prevent bribery.
CRIMINAL FINANCES ACT 2017
The Company has a commitment to zero tolerance towards
the criminal facilitation of tax evasion.
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 5 .
By order of the Board of Directors
John Reeve
Chairman
20 February 2018
14
TEMPLE BAR INVESTMENT TRUST PLC
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PORTFOLIO OF INVESTMENTS
INDUSTRY
PLACE OF
PRIMARY LISTING
VALUATION OF
HOLDING £ 000
% OF PORTFOLIO
1
2
3
4
5
6
7
8
9
UK TREASURY 1.25% 2018
Held in the portfolio in lieu of cash.
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 .
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
BG acquisition increased debt and has necessitated some
disposals.
GLAXOSMITHKLINE
GlaxoSmithKline is a global health care company focussing
on pharmaceuticals, vaccines and consumer healthcare. After
a number of years of earnings disappointment a new chief
executive has been appointed.
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.
BARCLAYS
Barclays has signifi cant consumer, corporate and investment
banking positions, particularly focussed on the UK and the
US. M anagement has reduced the non-core part of the
business and re-buil t capital strength. Signifi cant efforts are
being made to improve the profi tability of the investment
banking division.
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.
SIG
SIG 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.
ROYAL BANK OF SCOTLAND
RBS operates across a wide range of banking activities
including personal and corporate lending, capital markets,
leasing, personal fi nancial services and private banking.
The majority of the bank’ s assets are located in the UK.
The company’s balance sheet is strong and we hope to see
dividend payments resume soon.
10
LLOYDS BANKING GROUP
Lloyds Banking Group operates across a wide range of UK
centric banking activities including retail and commercial
banking and insurance. We believe the UK banking sector
is through the worst on regulation and that consequently
investors should expect attractive dividend payments.
UK
128,815
12.4 %
UK
76,013
7.3 %
UK
62,990
6.1 %
UK
55,261
5.3 %
UK
52,541
5.1 %
UK
46,619
4.5 %
UK
42,354
4.1 %
UK
37,162
3.6 %
UK
34,239
3.3 %
UK
34,091
3.3 %
Fixed
Interest
Financials
Oil & Gas
Healthcare
Oil & Gas
Financials
Industrials
Industrials
Financials
Financials
Top Ten Investments
£570,085
55.0 %
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
15
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PORTFOLIO OF INVESTMENTS CONTINUED
PLACE OF
PRIMARY LISTING
VALUATION OF
HOLDING £ 000
% OF
PORTFOLIO
COMPANY
Travis Perkins
Tesco
CitiGroup
11
12
13
14 WM Morrison Supermarkets
15 Marks & Spencer
16
17
18
19
20
ETFS Physical Silver
Yara International
Direct Line Insurance
Centrica
CRH
Top Twenty Investments
21
22
Signet Jewel ers
Easyjet
23 Global X Silver Miners ETF
24
25
BT Group
Land Securities REIT
26 Next
27 Games Workshop
28
Ladbrokes Coral
29 Green REIT
30
Forterra
Top Thirty Investments
31
32
33
Computacenter
Kingfi sher
Drax
34 Go Ahead
35
Aggreko
INDUSTRY
Industrials
Consumer Services
Financials
Consumer Services
Consumer Services
UK
UK
USA
UK
UK
Physical Gold and Silver UK
Basic Materials
Norway
Financials
Utilities
Industrials
Consumer Services
Consumer Services
Basic Materials
Telecommunications
Financials
Consumer Services
Consumer Goods
Consumer Services
UK
UK
UK
USA
UK
USA
UK
UK
UK
UK
UK
Financials
Industrials
Ireland
UK
Technology
Consumer Services
Utilities
Consumer Services
Industrials
UK
UK
UK
UK
UK
36 Gold Bullion Securities ETF
Physical Gold and Silver UK
37
38
39
40
International Personal Finance 5% 2021
Fixed Interest
Brown (N) Group
Consumer Services
Royal Mail
Chemring
Industrials
Industrials
Top Forty Investments
41
42
43
44
45
46
47
48
49
50
VanEck Vectors Gold Miners
Bovis Homes
Avon Products
British Land REIT
Countrywide
Dixons Carphone
Basic Materials
Consumer Goods
Consumer Goods
Financials
Financials
Consumer Services
Lloyds Banking Group – preference
shares
Financials
Aviva 2020 5.9021% FRN Perpetual
Fixed Interest
Hochschild Mining
St Ives
Basic Materials
Industrials
Top Fifty Investments
UK
UK
UK
UK
USA
UK
USA
UK
UK
UK
UK
UK
UK
UK
51
Johnston Press
Consumer Services
UK
Total Valuation of Portfolio
27,448
26,710
26,540
26,014
20,873
19,666
18,938
17,809
17,455
16,998
2.7 %
2.6 %
2. 6%
2.5 %
2.0 %
1.9 %
1.8 %
1.7 %
1.7 %
1.6 %
788,536
76.1 %
15,844
15,717
15,618
14,328
13,631
13,592
12,769
12,671
11,845
11,761
1.5 %
1.5 %
1.5 %
1.4 %
1.3 %
1.3 %
1.2 %
1.2 %
1.1 %
1.1 %
926,312
89.4 %
11,390
11,243
11,200
10,178
9,513
8,875
7,201
6,777
6,388
6,306
1.1 %
1.1 %
1.1 %
1.0 %
0.9 %
0.9 %
0.7 %
0.7 %
0.6 %
0.6 %
1,015,383
98.1 %
5,052
3,549
2,264
2,053
2,007
1,802
1,062
1,031
950
511
0.5 %
0.3 %
0.2 %
0.2 %
0. 2 %
0.2 %
0.1 %
0.1 %
0.1 %
0.1 %
1,035,664
100.0 %
6
1,035,670
0.0 %
100.0 %
16
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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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. He is currently
a director of Montanaro UK Smaller
Companies Investment Trust PLC and
The University of Brighton Academies
Trust.
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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.
RICHARD WYATT
Richard Wyatt was appointed a director
in 2017. He is a former Group Managing
Director at Schroders, Lazard and a
Vice Chairman at Rothschild. He was
Chairman of the media agency Engine
Group and served on the Regulatory
Decisions Committee of the FSA. He
is currently Chairman of Loudwater
Partners Limited and Jack Wills Limited
and a director of a number of other
companies.
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NICHOLAS LYONS
LESLEY SHERRATT
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 and of
Clipstone Logistics REIT plc. He was
previously Chairman of Miller Insurance
Services LLP and Price Forbes Holdings
Limited and a non-executive director
of Catlin Group Limited, Friends LIfe
Group Limited and of other private
companies.
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‘.
All the directors are independent and
members of the audit and nomination
committees.
* Chairman of the audit committee and
Senior Independent Director.
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
17
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REPORT OF DIRECTORS
The directors present their report and accounts for the
year ended 31 December 201 7.
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
A lternative Investment Fund Manager (‘AIFM’ or ‘Manager’).
For the purposes of the AIFMD the Company is an A lternative
I nvestment F und (‘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.
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 8.33p per ordinary share were paid on
30 June 201 7, 29 September 2017 and 29 December
2017 (2016: 8.09p in each case) and the directors are
recommending a fi nal dividend of 17.48 p per ordinary share
(2016: 16.18p), a total for the year of 42.47 p (2016: 40.45p).
Subject to shareholders’ approval, the fi nal dividend will be
paid on 29 March 2018 to shareholders on the register on
9 March 2018.
ISAs
The Company has conducted its investment policy so as to
remain a qualifying investment trust under the Individual
Savings Account (ISA) regulations. It is the intention of the
Board to continue to satisfy these regulations.
18
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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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 46.
Voting Rights in the Company’s Shares
The voting rights at 31 December 2017 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 20 February 2018 , the share capital of the Company and
total voting rights were 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 53 . 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 realised
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 17 . David Webster retired
as a director on 31 December 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 21 .
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 2017 and 20 February 2018 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
Investec Wealth & Investment Ltd
Speirs & Jeffrey Ltd
Equiniti Financial Services
AXA SA
%
10.5
7.8
7.1
5.0
4.0
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 26 March 2018.
ANNUAL GENERAL MEETING
The notice of the Annual General Meeting of the Company
to be held on 26 March 2018 is on page 51 . 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 20 February 2018).
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).
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Annual Report & Financial Statements for the year ended 31 December 201 7
19
REPORT OF DIRECTORS CONTINUED
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
135,714 ordinary shares.
By order of the Board of Directors
John Reeve
Chairman
20 February 2018
20
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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REPORT ON DIRECTORS’ REMUNERATION
The Board presents the report on directors’ remuneration for
the year ended 31 December 2017 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 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 29 .
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. To support such analysis the Board
commissioned Trust Associates to carry out an independent
assessment of the remuneration paid to Temple Bar’s
Board relative to its peer group. The Company has no other
relationship with Trust Associates. These data, together with
consideration of any alteration in non-executive directors’
responsibilities, are used to review whether any change in
remuneration is necessary. Based on these inputs it has been
agreed that the Chairman's fee for the year commencing
1 January 2018 will be £36,750 pa. The chairman of the audit
committee will receive a fee of £29,400 pa and the directors
will receive a fee of £24,500 pa .
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
(AUDITED)
A single fi gure for the total remuneration of each
director is set out in the table below for the year ended
31 December 2017. These fees exclude employers’ national
insurance contributions and VAT where applicable:
John Reeve
Arthur Copple
June de Moller
Richard Jewson
Nicholas Lyons2
Lesley Sherratt
David Webster
Richard Wyatt 3
Total
Total amount
of fees1
2017
33,400
22,600
22,600
25,500
21,325
22,600
22,600
2,231
2016
33,400
22,600
22,600
25,500
–
22,600
22,600
–
172,856
149,300
1 Other columns have been omitted as no payments of any other type were made.
2 Appointed 23 January 2017.
3 Appointed 27 November 2017.
The amounts paid by the Company to the directors were for
services as non-executive directors.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
21
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
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 a nine year
period is shown below.
Directors’ shareholdings (audited)
The directors’ shareholdings are detailed below:
Share price total return
31 December 2017
1 January 2017
63,833
32,643
10,474
10,660
–
7,500
N/A
10,000
60,959
32,643
10,231
10,275
N/A
7,500
4,279
N/A
John Reeve
Arthur Copple
June de Moller
Richard Jewson
Nicholas Lyons1
Lesley Sherratt
David Webster3
Richard Wyatt2
1 Appointed 23 January 2017.
2 Appointed 27 November 2017.
3 Retired 31 December 2017.
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 3 January 2018 Mr Reeve acquired an additional
394 ordinary shares in the Company as a result of a dividend
reinvestment. On 10 January 2018 and 12 February 2018
Mr Reeve acquired a further 74 and 78 ordinary shares
respectively through his regular monthly saving in an ISA.
On 2 January 2018, Mr Jewson acquired a further 58 ordinary
shares through a dividend reinvestment. No other changes in
the interests shown above occurred between 31 December
2017 and 20 February 2018.
The portfolio manager also holds 59,942 ordinary shares in
the Company.
Statement of Voting at General Meeting
At the Company‘s last AGM held on 27 March 2017
shareholders approved the Directors‘ Remuneration Report
in respect of the year ended 31 December 2016. 99.8% of
proxy votes were in favour of the resolution, 0.2% were
against and 16,064 votes were withheld.
At the AGM held on 27 March 2017, a resolution for the
approval of the Remuneration Policy, as set out in the future
policy table above, was approved by 99.8% of proxy votes,
0.2% were against and 12,540 votes were withheld.
300
280
260
240
220
200
180
160
140
120
100
80
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
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 2017 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
John Reeve
Chairman
20 February 2018
22
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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CORPORATE GOVERNANCE
THE AIC CODE OF CORPORATE GOVERNANCE
Corporate Governance is the process by which the board of
directors of a company protects 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’) . 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 2016, 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 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 Code), except
as set out below. The UK 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. I t 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
concerning 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 17 . There were
seven Board meetings, two audit committee meetings and
four 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
John Reeve
Arthur Copple
Nicholas Lyons*
June de Moller
Richard Jewson
Lesley Sherratt
David Webster
Richard Wyatt**
*appointed 23 January 2017
**appointed 27 November 2017
7
7
5
7
6
7
7
1
2
2
1
2
2
1
2
–
4
4
2
4
4
4
4
–
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Annual Report & Financial Statements for the year ended 31 December 201 7
23
CORPORATE GOVERNANCE CONTINUED
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 26 . The Board is satisfi ed that members
of the audit committee have relevant and recent fi nancial
experience, with at least one member having audit or
accounting experience, to fulfi l their role effectively and also
have suffi cient experience relevant to the sector. 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.
During the year the Board appointed Richard Wyatt 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,
Nurole, an independent fi rm of consultants, 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 Mr Wyatt, 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 mindset 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
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
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.
24
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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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 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 shareholders’ 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 portfolio 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
20 February 2018
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.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
25
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.
The valuation of the
investment portfolio
REPORT OF THE AUDIT COMMITTEE
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 2017.
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
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. At least one member of
the Committee has audit or accounting experience and the
Committee has members with suffi cient experience relevant
to the sector. 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.
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 by the
Committee and also explains how these were addressed by it .
Signifi cant Issue
How the issue was addressed
Verifi cation of the
existence of the
assets in the portfolio
The Committee reviews reports from its
service providers on key controls over
the assets of the Company. Monthly
reconciliations are performed by the
independent Depositary together with
an annual verifi cation of the existence
of all portfolio holdings carried out
by the auditor. 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. All investments
are in quoted securities in active markets,
are considered to be liquid and have been
categorised as level 1 within the IFRS 13
hierarchy.
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.
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.
Going concern
The verifi cation of
investment income
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. T he provision of custody services is
contracted to HSBC.
26
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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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 2017, 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 28 .
Richard Jewson
Chairman
Audit Committee
20 February 2018
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 partner rotation took place in 2017. 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
is 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
for accounting periods starting on or after 17 June 2023 so
the last fi nancial year that they could serve as auditor would
end on 31 December 202 3. 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 Committee 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 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.
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 its 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.
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Annual Report & Financial Statements for the year ended 31 December 201 7
27
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 26 and 27 . As
a result, the Board has concluded that the Annual Report for
the year ended 31 December 2017, 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
20 February 2018
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.
28
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TEMPLE BAR INVESTMENT TRUST PLC
Opinion
We have audited the fi nancial statements of Temple Bar Investment Trust Plc (‘the Company’) for the year ended 31 December
2017 which comprise the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Financial
Position, the Statement of Cash Flows and the related notes 1 to 22, including a summary of signifi cant accounting policies.
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.
In our opinion, the fi nancial statements:
•
•
•
give a true and fair view of the Company’s affairs as at 31 December 2017 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
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the fi nancial
statements section of our report below. We are independent of the Company in accordance with the ethical requirements that
are relevant to our audit of the fi nancial statements in the UK, including the FRC’s Ethical Standard as applied to public interest
entities, and we have fulfi lled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our opinion.
Use of our report
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.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK)
require us to report to you whether we have anything material to add or draw attention to:
•
•
•
•
•
the disclosures in the annual report set out on page 13 that describe the principal risks and explain how they are being
managed or mitigated;
the directors’ confi rmation set out on page 13 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;
the directors’ statement set out on page 18 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;
whether the directors’ statement in relation to going concern required under the Listing Rules in accordance with Listing
Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
the directors’ explanation set out on pages 13 and 14 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.
Overview of our audit approach
Key audit matters
• Incomplete or inaccurate income recognition through failure to recognise proper income
entitlements or to apply the appropriate accounting treatment.
• Incorrect valuation and existence of the investment portfolio, including incorrect application of
exchange rate movements or failure to assess stock liquidity appropriately.
Materiality
• Overall materiality of £9.36 million which represents 1% of net assets.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most signifi cance in our audit of the fi nancial
statements of the current year and include the most signifi cant assessed risks of material misstatement (whether or not due
to fraud) that we identifi ed. These matters included those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the fi nancial statements as a whole, and in our opinion thereon, and we do not provide a separate
opinion on these matters.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
29
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF TEMPLE BAR INVESTMENT TRUST PLC
Key observations communicated to the
Audit Committee
We have no matters to communicate
with respect to our assessment of the
Manager’s and Administrator’s processes
and controls surrounding revenue
recognition and allocation of special
dividends.
We noted no issues in agreeing the
accounting treatment adopted with respect
to special dividend receipts above our
testing threshold that we reviewed.
We noted no issues in agreeing the sample
of dividend receipts to an independent
source, recalculating these amounts and
agreeing them to the bank statements.
We noted no issues in agreeing the sample
of investee Company announcements to
the income entitlements recorded by the
Company.
We noted no issues in recalculating the
accrued dividends, agreeing the rate to
Company announcements, agreeing, where
possible, to post year end bank statements
and confi rming that the income obligation
arose prior to 31 December 2017.
We noted no issues in recalculating a
sample of effective interest rates on fi xed
interest income securities.
Risk
Our response to the risk
Incomplete or inaccurate income
recognition through failure to recognise
proper income entitlements or apply the
appropriate accounting treatment.
Refer to the Report of the Audit Committee
(page 26), Accounting policy 1 (page 40) ,
and Note 4 of the Financial Statements
(page 42)
The investment income receivable by the
Company during the year directly affects
the Company’s ability to make a dividend
payment to shareholders.
The income receivable for the year to
31 December 2017 was £34.0 million,
split between dividends from the listed
investments held (£32.4 million) and fi xed-
interest securities (£1.6 million.)
Included within the dividend income fi gure
above were special dividends totalling
£0.6 million (2016: £ 1.6 million). In addition
to these special dividends the Company
received special dividends of £0.9 million
(2016: £ 1.0 million) which were recognised
within capital.
Given the manual and judgemental element
in allocating special dividends between
revenue and capital, we considered there to
be a fraud risk in accordance with Auditing
Standards in this area of our audit.
We performed the following procedures:
Obtained an understanding of the
Manager’s and Administrator’s
processes and controls surrounding
revenue recognition and allocation of
special dividends and also performed a
walkthrough to evaluate the design and
effectiveness of controls;
Reviewed the income report and the
acquisition and disposal report to
identify special dividends greater than
our testing threshold (set at 25% of our
revenue tolerable threshold) received
in the year. We reviewed the treatment
of all special dividends greater than our
testing threshold based on the underlying
motives and circumstances for the payment
and considered the treatment of the
classifi cation of these dividends as either
revenue or capital that was adopted by the
directors;
Agreed a sample of dividends and interest
received from the income report to the
corresponding announcement made by
the investee Company, recalculated the
dividend and interest amount received and
agreed cash received to bank statements;
Agreed a sample of dividends and
interest paid on investments held from
an independent source to the income
recorded by the Company;
Agreed 100% of accrued dividends and
interest to an independent source to assess
whether the dividend obligation arose
prior to 31 December 2017. We agreed the
dividend and interest rate to corresponding
announcements made by the investee
company, recalculated the dividend and
interest amount receivable and agreed cash
received to post year end bank statements,
where possible; and
Recalculated a sample of effective interest
rates on fi xed interest income securities
and confi rmed the accuracy of the interest
income recognised in the year end.
30
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Annual Report & Financial Statements for the year ended 31 December 2017
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Risk
Our response to the risk
Incorrect valuation and existence of the
investment portfolio, including incorrect
application of exchange rate movements
or failure to assess stock liquidity
appropriately.
We performed the following procedures:
Obtained an understanding of the
Manager’s and the Administrator’s systems
and controls in relation to the valuation and
existence of the investment portfolio;
Refer to the Report of Audit Committee
(page 26); Accounting policy 1 (page 41);
and Note 12 of the Financial Statements
(page 45)
The valuation of the assets held in the
investment portfolio is the key driver of the
Company’s investment return. The value
of the Company’s investment portfolio as
at 31 December 2017 was £1,035.7 million
(2016: £973.4 million), consisting of
listed equities of £898.7 million (2016:
£894.2 million) and fi xed income securities
of £137.0 million (2016: £79.2 million).
Incorrect asset pricing or a failure
to maintain proper legal title of the
investments held by the Company could
have an impact on the portfolio valuation
and, therefore, the return generated for
shareholders.
Independently checked 100% of the
investment prices in the portfolio and
exchange rates applied to an external
source;
In order to validate the appropriate
legal title is held for all investments in
the portfolio, we have independently
obtained confi rmation from the
Company’s Custodian and Depositary of
the investments held as at 31 December
2017 and agreed these to the underlying
fi nancial records; and
Reviewed pricing exception and stale
pricing exception reports to highlight and
review any unexpected price movements in
investments held as at the year end.
Key observations communicated to the
Audit Committee
We have no matters to communicate
with respect to our assessment of the
Manager’s and Administrator’s processes
and controls surrounding the valuation
and existence of the investment
portfolio.
For all investments, we noted no
differences in market value or exchange
rates when compared to an independent
source in excess of our reporting threshold.
We noted no differences between the
Custodian and Depositary confi rmations
and the Company’s underlying fi nancial
records.
We noted no issues with our review of
pricing exception and stale pricing reports.
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An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit
scope for the Company. This enables us to form an opinion on the fi nancial statements. We take into account size, risk profi le,
the organisation of the Company and effectiveness of controls, including controls and changes in the business environment
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.
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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 £9.36 million (2016: £8.80 million), which is 1% (2016: 1%) of net assets.
We believe that net assets are the most important fi nancial metric on which shareholders would judge the performance of the
Company and, accordingly, consider this to be an appropriate metric to determine materiality.
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% (2016: 75%) of our planning materiality, namely £7.02 million (2016:
£6.60 million). We have set performance materiality at this percentage based on our understanding of the control environment
that indicates a lower risk of material misstatements, both corrected and uncorrected.
Given the importance of the distinction between revenue and capital for the Company we have also applied a separate
tolerable threshold of £1.46 million for the revenue column of the Statement of Comprehensive Income, being 5% of 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 £0.47 million
(2016: £0.44 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
31
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INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF TEMPLE BAR INVESTMENT TRUST PLC
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.
Other information
The other information comprises the information included in the annual report other than the fi nancial statements and our
auditor’s report thereon. The directors are responsible for the other information.
Our opinion on the fi nancial statements does not cover the other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the fi nancial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the fi nancial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the fi nancial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifi cally address the following items in the
other information and to report as uncorrected material misstatements of the other information where we conclude that those
items meet the following conditions:
(cid:129) Fair, balanced and understandable set out on page 28 – the statement given by the directors that they consider the
annual report and fi nancial statements 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, is materially inconsistent
with our knowledge obtained in the audit; or
(cid:129) Audit committee reporting set out on page 26 – the section describing the work of the audit committee does not
appropriately address matters communicated by us to the audit committee; or
(cid:129) Directors’ statement of compliance with the UK Corporate Governance Code set out on page 23 – the parts of
the directors’ statement required under the Listing Rules relating to the Company’s compliance with the UK Corporate
Governance Code containing provisions specifi ed for review by the auditor in accordance with Listing Rule 9.8.10R(2)
do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the fi nancial year for which the fi nancial
statements are prepared is consistent with the fi nancial statements; and
•
the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we
have not identifi ed material misstatements in the strategic report or directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches
not visited by us; or
•
the fi nancial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’ remuneration specifi ed by law are not made; or
• we have not received all the information and explanations we require for our audit
Responsibilities of directors
As explained more fully in the Statement of directors’ responsibilities set out on page 28, 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, and for such internal
control as the directors determine is necessary to enable the preparation of fi nancial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the fi nancial statements, the directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
32
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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Auditor’s responsibilities for the audit of the fi nancial statements
Our objectives are to obtain reasonable assurance about whether the fi nancial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to infl uence the economic decisions of users taken on the basis of these
fi nancial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the fi nancial
statements due to fraud; to obtain suffi cient appropriate audit evidence regarding the assessed risks of material misstatement
due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected
fraud identifi ed during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both
those charged with governance of the entity and management.
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined
that the most signifi cant are the Companies Act 2006, the Listing Rules, the UK Corporate Governance Code and section
1158 of the Corporation Tax Act 2010.
• We understood how the Company is complying with those frameworks through discussions with the Audit Committee and
Company Secretary and review of the Company’s documented policies and procedures.
• We assessed the susceptibility of the Company’s fi nancial statements to material misstatement, including how fraud might
occur by considering the key risks impacting the fi nancial statements. We identifi ed a fraud risk with respect to incomplete
or inaccurate revenue recognition relating to the recognition of special dividends. Further discussion of our approach is set
out in the section on key audit matters above.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
Our procedures involved review of the reporting to the Directors with respect to the application of the documented
policies and procedures and review of the fi nancial statements to ensure compliance with the reporting requirements of the
Company.
A further description of our responsibilities for the audit of the fi nancial statements is located on the Financial Reporting
Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
• We were appointed as auditors by the Board of Directors with effect from 1 January 2003 for the year ended 31 December
2003 and signed an engagement letter on 12 November 2003.
• The period of total uninterrupted engagement including previous renewals and reappointments is 15 years, covering the
years ending 31 December 2003 to 31 December 2017.
• The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Company and we remain
independent of the Company in conducting the audit.
• The audit opinion is consistent with the additional report to the audit committee
Caroline Mercer (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Edinburgh
20 February 2018
Notes:
1.
The maintenance and integrity of the Temple Bar Investment Trust plc web site is the responsibility of the directors; the
work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the fi nancial statements since they were initially presented on the
web site.
2. Legislation in the United Kingdom governing the preparation and dissemination of fi nancial statements may differ from
legislation in other jurisdictions.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
33
L STATEMENTS CONTINUED
34
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
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FINANCIAL REPORT
36 Statement of Comprehensive Income
37 Statement of Changes in Equity
38 Statement of Financial Position
39 Statement of Cash Flows
40 Notes to the Financial Statements
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
35
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
Investment Income
Other operating income
Notes
4
4
Revenue
£000
33,990
8
33,998
2017
Capital
£000
–
–
–
Total
£000
33,990
8
Revenue
£000
34,069
5
33,998
34,074
2016
Capital
£000
–
–
–
Total
£000
34,069
5
34,074
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
Profi t/(loss) for the year
–
33,998
62,251
62,251
62,251
96,249
–
34,074
128,792
128,792
128,792
162,866
6
7
8
9
(1,532)
(600)
31,866
(2,701)
29,165
(207)
28,958
(2,215)
(969)
59,067
(4,078)
54,989
–
54,989
(3,747)
(1,569)
90,933
(6,779)
84,154
(207)
83,947
(1,380)
(633)
32,061
(2,645)
29,416
(163)
(1,990)
(1,039)
(3,370)
(1,672)
125,763
157,824
(4,012)
(6,657)
121,751
151,167
–
(163)
29,253
121,751
151,004
Earnings per share (basic and diluted)
11
43.30p
82.23p
125.53p
43.74p
182.06p
225.80p
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 profi t for the year. Accordingly, the
profi t for the year is also the Total Comprehensive Income for the Year, as defi ned in IAS1 (revised).
The notes on pages 40 to 50 form an integral part of the fi nancial statements.
36
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Balance at 1 January 2016
Unclaimed dividends
P rofi t for the year
Dividends paid to equity shareholders
Balance at 31 December 2016
Unclaimed dividends
Profi t for the year
Dividends paid to equity shareholders
Balance at 31 December 2017
Notes
Ordinary
share capital
£000
16,719
Share
premium
account
£000
96,040
–
–
–
Capital
reserves
£000
613,427
–
121,751
–
–
–
–
16,719
96,040
735,178
–
–
–
–
–
–
–
54,989
–
16,719
96,040
790,167
10
10
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Retained
revenue
earnings
£000
Total
equity
£000
29,569
755,755
24
29,253
(26,8 43)
32,003
11
28,958
(27,532 )
33,440
24
151,004
(26,8 43)
879,940
11
83,947
(27,532 )
936,366
As at 31 December 2017 the Company had distributable revenue reserves of £ 33,440,000 (2016: £32,003,000) and
distributable realised capital reserves of £ 642,323,000 (2016: £596,215,000) for the payment of future dividends. The only
distributable reserves are the retained earnings and realised capital reserves.
The notes on pages 40 to 50 form an integral part of the fi nancial statements.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
37
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
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 revenue earnings
Total equity
Net asset value per share
31 December 2017
31 December 2016
Notes
£000
£000
£000
£000
12
13
14
14
15
16
17
18
20
1,035,670
973,353
3,613
12,161
4,266
17,340
15,774
1,051,444
–
(1,159)
1,050,285
(113,919)
936,366
21,606
994,959
(25,000)
(1,169)
968,790
(88,850)
879,940
16,719
96,040
790,167
33,440
16,719
96,040
735,178
32,003
936,366
1,400.22p
879,940
1,315.84p
The notes on pages 40 to 50 form an integral part of the fi nancial statements.
The fi nancial statements on pages 36 to 50 were approved by the board of directors and authorised for issue on
20 February 2018. They were signed on its behalf by:
J Reeve
Chairman
38
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2017
Cash fl ows from operating activities
Profi t/(loss) before tax
Adjustments for:
(Gains)/losses on investments
Finance costs
Purchases of investments1
Sales of investments1
Dividend income
Interest income
Dividend received
Interest received
Decrease/(increase) in receivables
(Decrease)/increase in payables
Overseas withholding tax suffered
Net cash fl ows from operating activities
Cash fl ows from fi nancing activities
Repayment of 9.875% 2017 debenture
Proceeds from issue of 2.99% Private Placement Loan
Issue costs relating to 2.99% Private Placement Loan
Unclaimed dividends
Equity dividends paid
Interest paid on borrowings
Net cash fl ows from fi nancing activities
Net (decrease) / increase 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
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2017
2016
Notes
£000
£000
£000
£000
84,154
151,167
12(b)
8
12(a)
12(a)
4
4
9
10
(62,251)
6,779
(437,327)
437,261
(32,410)
(1,588)
32,189
1,248
1,212
(10)
(207)
(25,000)
25,000
(121 )
11
(27,532)
(6,587)
(128,792)
6,657
(335,164)
346,228
(32,841)
(1,233)
32,078
1,683
(1,231)
95
(163)
(55,104)
29,050
(112,683)
38,484
–
–
–
24
(26,843)
(6,587)
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(33,406)
5,078
12,262
17,340
(34,229)
(5,179)
17,340
12,161
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 40 to 50 form an integral part of the fi nancial statements.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
39
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 capital 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.
40
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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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 stock and loans issued by the Company, are initially recognised at a carrying
value equivalent to the proceeds received net of issue costs associated with the borrowings. After initial recognition, interest
bearing borrowings are subsequently measured at amortised cost using the effective interest rate method. 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. For interim dividends
this is when they are paid and for fi nal dividends this is when they are approved by shareholders.
Finance costs
Interest payable on the debenture stock and loans 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 .
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.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
41
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 judgements, estimates or assumptions
which have had a signifi cant impact on the fi nancial statements 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 , 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):
IFRS 9 Financial Instruments – effective from 1 January 2018
IFRS 15 Revenue from Contracts with Customers – effective from 1 January 2018
IFRS 9 – Financial Instruments (2014) replaces IAS 39 and deals with a package of improvements including principally a revised
model for classifi cation and measurement of fi nancial instruments, a forward looking expected loss impairment model and
a revised framework for hedge accounting. In terms of classifi cation and measurement the revised standard is principles
based depending on the business model and nature of cash fl ows. Under this approach instruments are measured at either
amortised cost or fair value. Under IFRS 9 equity and derivative investments will be held at fair value because they fail the
‘solely payments of principal and interest’ test and debt investments will be held at fair value because the business model is to
manage them on a fair value basis. The scope of the fair value option is reduced within IFRS 9. The standard is effective from
1 January 2018 with earlier application permitted. The Company does not plan to early adopt this standard. The Standard is
not expected to have any impact on the Company as all its investments are held at fair value through profi t or loss.
4
INCOME
Income from investments
UK dividends
Overseas dividends
Interest from fi xed interest securities
Other income
Deposit interest
Total income
Investment income comprises:
Listed investments
2017
£000
30,717
1,693
1,580
33,990
8
33,998
33,990
33,990
2016
£000
31,159
1,682
1,228
34,069
5
34,074
34,069
34,069
During the year ended 31 December 2017, the Company received special dividends totalling £1,448,799 (2016: £2,666,852).
Of this, £583,324 (2016: £1,627,931) is recognised as revenue and is included within investment income and £865,475 (2016:
£1,038,921) is recognised as capital and is included in profi t on investments held at fair value through profi t or loss (see note 12(b)).
5 SEGMENTAL REPORTING
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
2017
Capital
£000
2,215
–
2,215
Revenue
£000
1,477
55
1,532
Total
£000
3,692
55
3,747
Revenue
£000
1,326
54
1,380
2016
Capital
£000
1,990
–
1,990
Total
£000
3,316
54
3,370
As at 31 December 2017 an amount of £ 916,852 (2016: £870,483) was payable to the Manager in relation to management fees
for the quarter ended 31 December 2017.
Details of the terms of the investment management agreement are provided on page 18 .
42
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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7 OTHER EXPENSES
Transaction costs on fair value
through profi t or loss assets1
Directors’ fees (see Report on
Directors Remuneration on page 21)
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
–
185
85
21
45
30
14
30
3
26
20
101
10
30
600
2017
Capital
£000
969
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£000
Revenue
£000
969
185
85
21
45
30
14
30
3
26
20
101
10
30
–
163
125
21
25
37
15
31
3
22
20
95
11
65
2016
Capital
£000
Total
£000
1,039
1,039
–
–
–
–
–
–
–
–
–
–
–
–
–
163
125
21
25
37
15
31
3
22
20
95
11
65
969
1,569
633
1,039
1,672
I
S
T
R
A
T
E
G
C
R
E
P
O
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T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
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N
A
N
C
A
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R
E
P
O
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S
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A
R
E
H
O
L
D
E
R
I
N
F
O
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M
A
T
I
O
N
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 £755,713 (2016: £898,478) and on sales amounted to £213,276 (2016: £140,080).
2 During the year there were audit fees of £25,000 (201 6: £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
2.99% Private placement loan 20471
Bank interest payable
Total fi nance costs
Revenue
£000
2017
Capital
£000
Total
£000
Revenue
£000
988
839
815
56
2,698
3
2,701
1,481
1,269
1,242
86
4,078
–
4,078
2,469
2,108
2,057
142
6,776
3
6,779
990
838
812
–
2,640
5
2,645
2016
Capital
£000
1,486
1,276
1,250
–
4,012
–
4,012
Total
£000
2,476
2,114
2,062
–
6,652
5
6,657
The amortisation of the debenture and loan issue costs is calculated using the effective interest method.
1 The 4.05% and 2.99% Private Placement Loans contain 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
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
43
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
9 TAXATION
(a) There is no corporation tax payable (2016: 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 tax per accounts
UK corporation tax rate at 19 .25 %
(2016 : 20.00 %)
E ffects of:
Non-taxable gains on investments1
Disallowed expenses
Non-taxable UK dividends1
Non-taxable overseas dividends1
Increase in excess management expenses
in the year2
Overseas withholding tax suffered
Total tax charge for the year
Revenue
£000
29,165
2017
Capital
£000
54,989
Total
£000
84,154
Revenue
£000
29,416
2016
Capital
£000
121,751
Total
£000
151,167
5,615
10,585
16,200
5,883
24,350
30,233
–
–
(5, 814)
(31 9)
51 8
207
207
(11, 984)
(11, 984)
18 7
–
–
1,212
–
–
18 7
(5, 814)
(31 9)
1,730
207
207
–
–
(6,145)
(316)
578
163
163
(25,758)
(25,758)
208
–
–
1,200
–
–
208
(6,145)
(316)
1,778
163
163
1 Investment trusts are not subject to corporation tax on these items.
2 The Company has not recognised a deferred tax asset of £ 15,541,058 (201 6: £ 14,013,219) based on a future effective tax rate of 17 .0% (2016: 17.0%) 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 2016 of 16.18p (2015: 15.87p) per share
Interim dividends (three) for the year ended 31 December 2017 of 8.33p (201 6: three payments of 8.09p) per share
2017
£000
10,820
16,712
27,532
2016
£000
10,613
16,230
26,843
Proposed fi nal dividend for the year ended 31 December 2017 of 17.48 p (2016: 16.18p) per share
11,689
10,820
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 2017 of 8.33p (2016: three payments of 8.09p) per share
Proposed fi nal dividend for the year ended 31 December 2017 of 17.48 p (2016: 16.18p) per share
11 EARNINGS PER SHARE
Earnings per ordinary share
Revenue
pence
43.30p
2017
Capital
pence
82.23p
Total
pence
125.53p
Revenue
pence
43.74p
2017
£000
16,712
11,689
28 , 401
2016
Capital
pence
182.06p
2016
£000
16,230
10,820
27,050
Total
pence
225.80p
The calculation of the above is based on revenue returns of £ 28,958,000 (2016: £29,253,000), capital returns of £ 54,989,000
(2016: £121,751,000 ) and total returns of £ 83,947,000 (2016: £151,004,000 ) and a weighted average number of ordinary shares
of 66,872,765 (2016: 66,872,765).
44
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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I
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A
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G
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P
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G
O
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E
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N
A
N
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R
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P
O
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A
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C
A
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P
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A
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H
O
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I
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O
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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
2017
£000
2016
£000
834,390
815,311
138,963
40,314
973,353
855,625
437,327
335,164
(437,261)
(346,228)
53,370
8,881
30,143
98,649
1,035,670
973,353
887,825
834,390
147,845
138,963
1,035,670
973,353
53,370
30,143
(49,079)
(16,337)
4,291
13,806
57,960
114,986
62,251
128,792
All investments are listed.
(c) Fair value of fi nancial instruments
IFRS 13 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 (2016: £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 (2016: £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
£ 1,035,670,000 (2016: £973,353,000) has therefore been determined as Level 1.
Please refer to Note 22 on page 49 for the disclosure and fair value categorisation of the fi nancial liabilities.
13 RECEIVABLES
Accrued income
Other receivables
2017
£000
3,320
293
3,613
2016
£000
2,757
1,509
4,266
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.
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Annual Report & Financial Statements for the year ended 31 December 2017
45
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14 CURRENT LIABILITIES
Payables
Accruals
2017
£000
1,159
1,159
2016
£000
1,169
1,169
The above payables do not carry any interest and are short term in nature. The directors 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:
5.5% Debenture stock 2021
4.05% Private placement loan 2028
2.99% Private placement loan 2047
Opening balance as per the Statement of fi nancial position
Loans drawn in the year
Loans repaid in the year
Interest paid in the year
Finance costs for the year as per the Statement of comprehensive income
Closing balance as per the Statement of fi nancial position
2017
£000
–
–
2017
£000
38,550
50,349
25,020
2016
£000
25,000
25,000
2016
£000
38,535
50,315
–
113,919
88,850
2017
£000
2016
£000
(113,850)
(113,780)
(25,000)
25,000
6,707
(6,776)
–
–
6,582
(6,652)
(113,919)
(113,850)
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.
The 2.99% Private Placement Loan is secured by a fl oating charge over the assets of the Company. The loan is repayable at
par on 24 October 2047.
16 ORDINARY SHARE CAPITAL
Issued, allotted and fully paid
Ordinary shares of 25p each
There were no shares issued during 2017 (2016: Nil)
17 SHARE PREMIUM
Balance at 1 January 201 7
Premium arising on issue of new shares
Balance at 31 December 201 7
2017
Number
2016
Number
2017
£000
2016
£000
66,872,765
66,872,765
16,718,191
16,718,191
2017
£000
96,040
–
96,040
2016
£000
96,040
–
96,040
46
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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A
T
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G
C
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P
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N
A
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C
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P
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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
2017
£000
642,323
147,844
790,167
2016
£000
596,215
138,963
735,178
19 CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
As at 31 December 2017 there were no contingent liabilities or capital commitments for the Company (2016: £nil).
20 NET ASSET VALUES
Ordinary shares of 25p each
Net asset
value per
ordinary share
Pence
Net assets
attributable
£000
1,400.22p
936,366
The net asset value per ordinary share is based on net assets at the year-end of £ 936,366,000 (2016: £879,940,000) and on
66,872,765 (2016: 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 21 . 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 201 7 there was £48,910 (2016: £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 18 and also set out in note 6 on page 42 .
22 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The Company’s investing activities undertaken in pursuit of its investment objective, as set out on page 10 , 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 debenture stock in issue and the two Private Placement Loans, 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.
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Annual Report & Financial Statements for the year ended 31 December 2017
47
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 15 to 16 .
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. Exposures vary throughout the year as a consequence of
changes in the composition of the net assets of the Company arising out of the investment and risk management processes.
Euro
US Dollar
Norwegian Krone
Pounds Sterling
Euro
US Dollar
Norwegian Krone
Pounds Sterling
31 December 2017
Investments
£000
Cash
£000
Receivables
£000
Payables
£000
19,046
93,858
18,938
903,828
1,035,670
–
272
1
11,888
12,161
361
3
1
3,248
3,613
31 December 2016
Investments
£000
Cash
£000
Receivables
£000
Payables
£000
18,134
103,753
17,786
833,680
973,353
–
1
1
17,338
17,340
328
–
–
3,938
4,266
(1,159)
(1,159)
(113,919)
(113,919)
Non-current
liabilities
£000
–
–
–
Non-current
liabilities
£000
–
–
–
–
–
–
–
–
–
(1,169)
(1,169)
(113,850)
(113,850)
Total
£000
19,407
94,133
18,940
803,886
936,366
Total
£000
18,462
103,754
17,787
739,937
879,940
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 o n Euro, Norwegian Krone and US Dollar denominated investments. The analysis below assumes
that the Euro, Norwegian Krone 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%
2,65 0
2,637
£000
-2%
(2,65 0)
(2,637 )
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 £ 137,047,000, representing 14.6% of net assets of
£ 936,366,000 (2016: £79,153,000; 9.0%). The weighted average running yield as at 31 December 2017 was 1.5% (2016: 1.6%)
and the weighted average remaining life was 0.9 years (2016: 1.9 years). The Company’s cash balance of £ 12,161,000 (2016:
£17,340,000) 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 £ 60,805
(2016: £86,700 ). 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 £ 60,805 (2016: negative £86,700). The calculations are based on the cash balances at the respective balance sheet
dates and are not representative of the year as a whole.
48
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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Financial liabilities – Interest rate risk
All of the Company’s fi nancial liabilities of £ 115,078 ,000 (2016: £115,019,000) are denominated in Pounds Sterling. All current liabilities
have no interest rate and are repayable within one year. The 5.5% debenture stock, the 4.05% Private Placement Loan and the 2.99%
Private Placement Loan, which are repayable in 2021, 2028 and 2047 respectively, pay interest at fi xed rates. The weighted average
period until maturity of the loans is 12 years (2016: 7 years) and the weighted average interest rate payable is 4.0% (2016: 6.0%) p.a.
Other price risk exposure
If the investment valuation fell by 10% at 31 December 2017, the impact on profi t or loss and net assets would have been
negative £ 103.6 million (2016: negative £97.3 million). If the investment portfolio valuation rose by 10% at 31 December 2017,
the impact on profi t or loss and net assets would have been positive £ 103.6 million (2016: positive £97.3 million). Exposures
vary throughout the year as a consequence of changes in the net assets of the Company arising out of the investment and risk
management processes.
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 2017. The valuation techniques are explained in the Principal Accounting Policies note.
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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
2.99% Private Placement Loan4
1 Effective interest rate is 9.875%
2 Effective interest rate is 5.583%
3 Effective interest rate is 4.133%
4 Effective interest rate is 3.015 %
2017
2016
Book value
£000
1,035,670
12,161
Fair value
£000
1,035,670
12,161
Book value
£000
973,353
17,340
Fair value
£000
973,353
17,340
3,320
293
(1,159)
–
(38,550)
(50,349)
(25,020)
3,320
293
(1,159)
–
(42,510)
(54,846)
(25,456)
2,757
1,509
(1,169)
(25,000)
(38,535)
(50,315)
–
2,757
1,509
(1,169)
(27,500)
(43,431)
(54,843)
–
936,366
927,473
879,940
868,016
The 5.5% Debenture Stock 2021 is classifi ed as a Level 1 instrument (2016: Level 1).
The 4.05% Private Placement Loan 2028 and the 2.99% Private Placement Loan 2047 do not have prices quoted on an active
market but their fair values are based on observable inputs. As such they have been classifi ed as Level 2 instruments (2016:
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:
2017
2016
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 stock and Loans
2,058
2,805
160,153
165,016
2,058
29,526
117,590
149,174
Creditors: amounts falling due
within one year
Accruals and deferred income
917
2,975
242
–
1,159
3,047
160,153
166,175
870
2,928
299
–
1,169
59,351
117,590
150,343
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
49
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 its
debenture and fi xed term loans (see note 15) at a total of £1,050,285 (2016: £993,790,000).
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 deed have various covenants that prescribe that moneys borrowed should not exceed the
adjusted total capital and reserves as defi ned in the debenture trust deed. The Note Purchase Agreements governing the
terms of the Private Placement Loans also contain 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 56 ) and the numerical remuneration disclosures in respect of the AIFM’s relevant
reporting period (year ended 31 March 2017) 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 2017 are shown below:
Leverage Exposure
Maximum limit
Actual
Gross
method
Commitment
method
250%
120%
200%
124%
Remuneration
The table below shows the total amount of remuneration paid by the AIFM to its staff for the fi nancial year ending 31 March
2017, split into fi xed and variable remuneration, and showing the number of benefi ciaries. No performance fees or any other
type of remuneration was paid directly by the Fund.
IFM does not directly employ staff.
The table below shows, for the same period, the aggregate amount of remuneration paid to Identifi ed/Code Staff in respect of
activities related to the AIFM and the Fund. Identifi ed/Code Staff are staff and other individuals identifi ed by the AIFM whose
activities have a material impact on the risk profi le of the AIFM or the Fund. This table excludes Identifi ed/Code Staff activities
subject to a delegation agreement.
Aggregate Remuneration
Senior Management
Other individuals with material impact
Number of Staff
£162,675
£156,970
£5,705
10
50
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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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 92nd Annual General Meeting of Temple Bar Investment Trust PLC will be held
at 11.00am on Monday 26 March 2018 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 2017 (together with
the reports of the directors and auditor thereon).
2. To approve the report on directors’ remuneration for the year ended 31 December 2017.
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3. To declare a fi nal dividend of 17.48 p per ordinary share.
4. To re-elect Mr A T Copple as a director of the Company.
5. To re-elect Mr R W Jewson as a director of the Company.
6. To re-elect Mr J Reeve as a director of the Company.
7. To re-elect Mrs J F de Moller as a director of the Company.
8. To re-elect Mr N S L Lyons as a director of the Company.
9. To re-elect Dr L R Sherratt as a director of the Company.
10. To elect Mr R E J Wyatt as a director of the Company.
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11. 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:
12 . 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 20 February 2018 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 2019 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.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
51
NOTICE OF MEETING CONTINUED
SPECIAL RESOLUTIONS:
13 . That, in substitution of all existing powers but, subject to the passing of resolution 12 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 20 February 2018 and
representing 6,687,276 shares of 25p each in the capital of the Company (‘Shares’) (or, if changed, the number
representing 10% of the issued share capital of the Company 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 12 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.
14 . 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 2019, 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
20 February 2018
Woolgate Exchange
25 Basinghall Street
London EC2V 5HA
52
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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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 26 MARCH 2018 AT
11.00AM.
NOTES
1. Entitlement to attend and vote
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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 22 March 2018 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 2 2 March 2018. 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 11.00am on 22 March 2018.
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.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
53
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 2017 ; or (ii) any circumstance connected with an auditor of the
Company appointed for the fi nancial year 1 January 2017 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 20 February 2018, 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.
54
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
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USEFUL INFORMATION FOR SHAREHOLDERS
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 2 Gresham Street, London EC2V 7QP (see map on page 53), on 26 March 2018 at
11.00am.
FINANCIAL CALENDAR
The fi nancial calendar for 2018 is set out below:
Ordinary shares
Final dividend, 2017 – payable
– ex-dividend
– record date
First interim dividend, 2018
Second interim dividend, 2018
Third interim dividend, 2018
Final dividend, 2018
5.5% Debenture Stock 2021
Interest payments
PAYMENT OF DIVIDENDS
29 March 2018
8 March 2018
9 March 2018
29 June 2018
28 September 2018
27 December 2018
End of March 2019
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.
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PRICE AND PERFORMANCE INFORMATION
The Company’s ordinary shares and debenture stock 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.
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.
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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.
WHERE TO BUY TEMPLE BAR SHARES
1. Via a third party provider
Third party providers include:
AJ Bell
Alliance Trust Savings
Barclays Stockbrokers
Bestinvest
Charles Stanley Direct
FundsNetwork
Hargreaves Lansdown
Interactive Investor
James Brearley
James Hay
Selftrade
TD Direct
The Share Centre
Trustnet Direct
Please note this list is not exhaustive and the availability of Temple Bar may vary depending on the provider. These websites
are third party sites and Temple Bar does not endorse or recommend any. Please observe each site's privacy and cookie
policies as well as their platform charges structure.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
55
USEFUL INFORMATION FOR SHAREHOLDERS CONTINUED
2. Through a professional adviser
Professional advisers are usually able to access the products of all the companies in the market and can help you fi nd an
investment that suits your individual circumstances. An adviser will let you know the fee for their service before you go ahead.
You can fi nd an adviser at www.unbiased.co.uk
You may also buy investment trusts through stockbrokers, wealth managers and banks.
To familiarise yourself with the Financial Conduct Authority (FCA) adviser charging and commission rules, visit fca.org.uk
Independent auditor
Ernst & Young LLP
Atria One
144 Morrison Street
Edinburgh EH3 8EX
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
CORPORATE INFORMATION
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
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
Temple Bar Identifi ers
Ordinary Shares ISIN – GB0008825324
Ordinary Shares Sedol – 0882532
Legal Entity Identifi er – 213800O8EAP4SG5JD323
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.
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Annual Report & Financial Statements for the year ended 31 December 2017
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GLOSSARY OF TERMS
ABSOLUTE PERFORMANCE
The return that an asset achieves over a period of time, relative to the investment itself.
AIC
The Association of Investment Companies.
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.
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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.
DISCOUNT
The amount by which the market price per share of an investment trust is lower than the net asset value per share. The
discount is normally expressed as a percentage of the net asset value per share.
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.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
57
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.
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.
PREMIUM
The amount by which the market price per share of an investment trust exceeds the net asset value per share. The premium is
normally expressed as a percentage of the net asset value per share.
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 dividends generated over a holding
period.
Return on Net Asset Value
As at 31 December 2017, the difference between the Trust's opening and closing NAV stood at £56,426,000 (2017:
£936,366,000; 2016: £879,940,000); adding the dividend paid in the current year of £29,265,000 results in a total return of
£85,691,000 for the purposes of this calculation. Dividing this return by the opening NAV of the Trust results in the return of
9.7% (please see the Statement of Financial position and note 10 of the fi nancial statements on pages 38 and 44 respectively,
for the audited inputs to the calculation).
Return on Share price
As at 31 December 2017, the difference between the Trust's opening and closing market price per share stood at 91.00p (2017:
1,314.00p; 2016: 1,223.00p); adding the dividend accrued in the current year of 41.66p results in a total return per share of
132.66p for the purposes of this calculation. Dividing this return by the opening market value per share results in the return of
11. 0% (please see the Summary of Results on page 1 for the audited inputs to the calculation).
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Annual Report & Financial Statements for the year ended 31 December 2017
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VALUATION
Determination of the value of a company’s stock based on earnings and the market value of assets.
VALUE INVESTING
An investment strategy where stocks are selected that trade for less than their intrinsic values because it is believed that the
market has undervalued them based on certain forms of fundamental analysis.
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.
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
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TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 201 7
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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 Listed securities.
The Company’s policy is to invest in a broad spread of
securities with typically the majority of the portfolio selected
from the constituents of the FTSE 350 Index.
CONTENTS
STRATEGIC REPORT
GOVERNANCE REPORT
FINANCIAL REPORT
1 Summary of results
17 Directors
36 Statement of
SHAREHOLDER
INFORMATION
2 Chairman’s statement
18 Report of Directors
3 Ten year record
21 Report on directors’
5 Manager’s review
9 Attribution analysis
10 Overview of strategy
15 Portfolio of investments
remuneration
23 Corporate governance
26 Report of the audit
committee
28 Statement of directors’
responsibilities
29 Independent auditor’s
report
Comprehensive Income
51 Notice of meeting
37 Statement of Changes
in Equity
55 Useful information
for shareholders
38 Statement of Financial
56 Corporate Information
57 Glossary of terms
Position
39 Statement of
Cash Flows
40 Notes to the Financial
Statements
50 Other information
TEMPLE BAR INVESTMENT TRUST PLC
Annual Report & Financial Statements for the year ended 31 December 2017
Perivan Financial Print 247986
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ANNUAL REPORT & FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017