Change of investment manager and dividend outlook

This announcement contains inside information as defined under the Market Abuse Regulations (EU) No 596/2014. This announcement has been approved for issue by Temple Bar’s board of directors (the “Board”).

23 September 2020

Temple Bar Investment Trust PLC (“Temple Bar” or the “Trust”)

Change of investment manager and dividend outlook

Change of investment manager

Further to the announcement made on 2 September 2020, the Board is pleased to announce the proposed change of the Trust’s investment manager to RWC Asset Management LLP (“RWC”). Temple Bar has today entered into heads of terms with RWC (the “Heads of Terms”) under which, subject to the satisfaction of conditions detailed below, RWC will become the Trust’s investment manager. It is currently anticipated that the appointment of RWC will become effective on or around the end of October 2020 at which time a further announcement will be made.

Background

Following the disappointing performance of the Trust in 2020 and the departure due to ill health of the named fund manager, the Board announced that it would conduct a review of its management arrangements. The Board chose the services of Stanhope Consulting (“Stanhope”), initially to conduct an independent analysis of the performance of the value style both internationally and in the context of the UK equity market. It is apparent that this style can be characterised by quite long periods of relative weakness followed by sharp periods of strong outperformance. The Board concluded that this is not a time in the cycle of returns to abandon this value style bias. The Board, advised by Stanhope, then invited investment management proposals from providers internationally. These were all examined in great detail and after an exhaustive, multi-stage process, the Board concluded that the investment proposition from RWC, offering a sustainable value investment style, was in the current circumstances by far the strongest that they had received.

Investment objective, investment policy, strategy and style

The Trust’s investment objective will remain unchanged; to provide growth in income and capital to achieve a long-term return greater than the benchmark FTSE All-Share Index, through investment primarily in UK securities. Likewise, the investment policy (including investment restrictions) will remain unchanged.

Temple Bar has for many years had a value investment approach and the Board has selected RWC for its proven expertise and excellent long-term track record in this investment discipline, thereby ensuring continuity in the investment approach for Shareholders.

About the new investment management team

The Trust’s portfolio will be managed by the long-term partnership of Nick Purves and Ian Lance, each of whom has around 30 years investment experience. They employ a long-term, value-oriented approach, which takes advantage of stock market over-reaction to enable them to purchase shares in sound businesses at a significant discount to their intrinsic value. They have applied this tried and tested approach in a disciplined manner over many years, and this has resulted in creating significant added value for their clients.

Benefits of the proposals

The Board believes that the change in investment manager will provide the following benefits to Shareholders:

• Added value of two highly experienced fund managers, backed by a proven long term track record: 20 year fund total return of 234 per cent. vs. 122 per cent. for FTSE All-Share.
• Exposure to UK equities which are trading at their greatest discount to World equities for fifty years and in particular to UK value stocks which are trading at their greatest ever discount to growth stocks.
• Future capital appreciation alongside attractive dividends and steady income growth, to be delivered by investing in a focused list of sustainable companies which can grow profits over time, whose finances are strong and which the new managers believe are significantly under-valued.
• Maintained management fee of 0.35 per cent of total assets and competitive fixed costs mean that the total expense ratio will continue to be one of the lowest in the sector.
• Material contribution, by fee waiver to 30 June 2021, by the incoming investment manager to offset transition costs.

About RWC

RWC is a specialist, independent investment manager established in 2000 with circa £13.4 billion (as at 31 August 2020) under management.

The organisation focuses on building strong teams of people who have clear and disciplined investment processes. RWC further believes in ensuring that its investment teams have the resources and autonomy that enable them to focus on the long-term returns for its clients. This is underpinned by the majority of the organisation being owned by the people who work at RWC.

The RWC UK income and value team have been at RWC for over a decade having over 60 years experience between the two lead managers. They are market leading UK value investors and are responsible for over £3 billion of client assets. 

The Heads of Terms

Under the Heads of Terms the formal appointment of RWC as the Trust’s investment manager is conditional upon the satisfaction of a number of conditions, including: (i) the negotiation and entering into a form of Alternative Investment Fund Manager’s Agreement (the “AIFM Agreement”) with an independent Alternative Investment Fund Manager (“AIFM”) under the terms of which (and pursuant to a portfolio management agreement to which Temple Bar will also be a party (the “Portfolio Management Agreement”) the AIFM will delegate portfolio management to RWC; (ii) all necessary regulatory approvals; and (iii) the Trust concluding arrangements with Ninety One Fund Managers UK Limited (“Ninety One”) for the termination of the existing investment management arrangements.

Under the terms of the proposed Portfolio Management Agreement RWC will be paid a management fee equal to 0.35 per cent. per annum of the Trust’s total assets. Furthermore, as Ninety One is contractually entitled to receive the management fee for the remainder of the notice period which it is currently serving, RWC has agreed that it will forgo the management fee to which it would otherwise be entitled to 30 June 2021 in order largely to defray the fixed costs and expenses incurred by Temple Bar in connection with the appointment of RWC. It is proposed that RWC’s appointment will be for an initial term if 18 months and may thereafter be terminated by either party giving 6 months’ notice. It is proposed that the Portfolio Management Agreement is capable of summary termination in certain usual circumstances including in the event that both Nick Purves and Ian Lance cease to be responsible for the management of the Trust’s assets or otherwise become incapacitated. 

Dividend outlook

Having reviewed the Trust’s income position with RWC, the Board intends to recommend a total dividend for the current year of 38.5 pence per ordinary share, with both the third interim dividend and the final dividend recommended to be 8.25p. This new total dividend, unfortunately, represents a cut of 25 per cent. from the previous level. From this base level, however, the Board believes that it will be possible to renew dividend growth going forward. Current projections suggest that there will have to be transfers from reserves to enable the 2020 and the 2021 dividend to be paid, but thereafter the dividend should be covered by earnings.

Comments from the Chairman and named fund managers

Arthur Copple, Chairman of Temple Bar, commented “Up until recently Temple Bar had a long history of providing attractive investment returns. In selecting RWC as investment manager we aim to reinvigorate the Trust and return it to its former position as one of the market leaders in the sector.

It is obviously very disappointing for us to announce a fall in the dividend for the first time in many years, but this has been an especially challenging year for many dividend paying companies and unfortunately the portfolio of the Trust has been particularly adversely impacted. We understand how important dividends are to our Shareholders and this played a large part in our rationale in selecting RWC as manager. We strongly believe they are well placed to put Temple Bar back on the path to provide not only a high but growing dividend over the medium to longer term”.

Nick Purves and Ian Lance, proposed fund managers of Temple Bar, commented “In our long investing career, we have seen three occasions when dislocation in the stock market has created the most exceptional opportunities for long term, value investors; post the technology bubble of the late nineties, coming out of the global financial crisis and today. We verymuch look forward to harnessing these opportunities for the benefit of the Temple Bar Shareholders.”

Dan Mannix, CEO of RWC Partners, commented “It’s a real privilege to have been appointed as only the third portfolio manager of Temple Bar in its 94 year history. Our appointment comes at an interesting moment as investors consider whether there will be a change of leadership in equity markets, and where to allocate capital in a world of low interest rates and high valuations. Nick and Ian’s track record of over twenty years is steeped in sustainable value; they are arguably one of the most experienced portfolio management partnerships in the industry and have always run money consistently to this ethos, regardless of wider market sentiment. We are honoured to now have the opportunity to start building a track record with Temple Bar, at what feels like a very exciting juncture in the world of true value investing.”

For further information please contact:

Temple Bar Investment Trust PLC via J.P. Morgan Cazenove

Arthur Copple (Chairman)

J.P. Morgan Cazenove 

William Simmonds  [phone]

Monfort Communciations  [e-mail] 

Gay Collins  [phone]

Toto Reissland-Burghart  [phone] 

LEI: 213800O8EAP4SG5JD323

Appendix

Further details of the key individuals

Nick Purves and Ian Lance joined RWC in August 2010 and together manage over £3 billion of client assets, including the TM RWC Equity Income Fund. After qualifying as a Chartered Accountant, Nick worked at Schroders for over 16 years. Ian has been working with Nick since 2007, initially at Schroders and then at RWC. Prior to joining Schroders, Ian was Head of European Equities and Director of Research at Citigroup and Head of Global Research at Gartmore.

Appointment of AIFM

The Board is also announcing that Link Fund Solutions Limited is expected to be appointed as the AIFM. They believe that this enhances the trust’s long-term governance structure and independence.

Re-statement of buyback authorities

Temple Bar is amending its disclosure policy to include on a regulatory information service (“RIS”) details of its share buyback powers which it renews annually. It is expected that similar announcements will be made every time the share buyback authority is renewed.

Temple Bar re-confirms that it has authority to repurchase a maximum of 10,024,227 of its ordinary shares (being its outstanding Shareholder authority). Such authority lasts until the next Shareholder authority is granted, or where expressly revoked by Shareholders. Any buyback may be funded from the Trust’s resources (including redemptions on funds that the Trust has invested in and debt facilities). No maximum consideration payable has been determined by the Trust, but the Trust will not pay a price for any ordinary shares pursuant to any buy-back which would equate to a premium to the net asset value per ordinary share.

The Trust has appointed J.P. Morgan Securities plc to act as its broker in respect of any buy-back. Any buy-back will be undertaken pursuant the Trust’s discount management programme. This arrangement is in accordance with Chapter 12 of the UKLA Listing Rules and the Trust’s general authority to repurchase shares.