Temple Bar Investment Trust Pl

Annual Financial Report

Temple Bar Investment Trust PLC

Full Year Results for the year ended 31 December 2020

Temple Bar Investment Trust PLC (the “Company”) is pleased to present its full year results for the year ended 31 December 2020.

The Company's Annual Report and Financial Statements for the year ended 31 December 2020 is also being published in hard copy format and an electronic copy will shortly be available to download from the Company's website: www.templebarinvestments.co.uk.  

Please click on the following link to view the document: https://mma.prnewswire.com/media/1471252/TBIT_RA20_48_WEB.pdf


UK equities appear still to be extremely modestly valued and if there is any sort of economic recovery in the UK, as our Investment Manager expects there will be, we could see a major upward re-rating in many of our investee companies

R eview
Your Company has performed very well over the last few months, but the results for the year ended 31 December 2020 overall were very disappointing. In what was for obvious reasons a very difficult year, not only for investors but for the world, your Company performed extremely badly up until the final quarter. As detailed in the Half-Yearly Report for the six months ended 30 June 2020, as a result of hugely disappointing performance and the retirement due to ill health of the named fund manager, Alastair Mundy, in April 2020 the Board commenced a management review advised by Stanhope Consulting. We considered whether we should change our investment style and/or our investment manager. We analysed carefully how much of the fall of the portfolio was due to the sharp underperformance of value stocks as the pandemic gripped and dividends were cut, and how much was due to individual stock selection by the investment manager within the value universe. After an exhaustive process we came to the conclusion that this was not the stage in the cycle to change investment style (a decision so far justified by subsequent events). However, we did decide that it was in the interests of shareholders to change investment manager. After reviewing in detail a large number of proposals, interviewing remotely a short list of investment managers and finally interviewing the final two in person, socially distanced, RWC Asset Management LLP (“RWC”) was appointed as Investment Manager on 30 October 2020, with Ian Lance and Nick Purves being the new named Portfolio Managers. This appointment preceded by only a few days the announcement of the success of the BioNTech/Pfizer vaccine and the subsequent major rally in value stocks.

Notwithstanding the recent performance I would like to note that Mr Mundy, the previous named fund manager, served your Company with great dedication over very many years and generated outperformance of the benchmark in the majority of them.

From 1 January 2020 to 29 October 2020, while the Company was under Ninety One Fund Managers UK Limited (‘Ninety One’s’) management, the total return on net assets was -45.58%. From 30 October 2020 to 31 December 2020 when the Company was under RWC’s management, the total return on net assets was +32.24%. This resulted in the totalmreturn on net assets for the year of -28.04%. This compares with the total return on our benchmark index, the FTSE All Share Index, of -9.82% and is obviously disappointing to say the least. It would be remiss of me not to add, though, that the bare figures are a little unflattering to Ninety One as their performance too would undoubtedly have benefited from the post vaccine bounce in value stocks.

Unlike previous years, there is no attribution analysis detailed in this Annual Report as the change in Investment Manager and the consequent increased turnover of the portfolio would render any such analysis relatively meaningless this year. However, going forward this analysis will be reinstated.

As can be seen below, there have been major changes in the Company’s portfolio holdings. This repositioning was achieved very efficiently, and at a relatively low cost, by the combination of RWC and a specialist transition agent. Within eight days of the start of transition trading, the portfolio was predominantly structured as per the new Investment Manager’s preferences.

Up until 2020 the Company had raised its dividend every year for 36 years and there had been no cut in the annual payment for over 50 years. Unfortunately, as previously announced, this record was impossible to maintain in the period under review. A consequence of the COVID-19 pandemic was that the majority of our investee companies either significantly reduced the level of their dividend payments or made no payment at all. This resulted in income generated from the portfolio plummeting from £39.7 million to £12.7 million, a fall of 68%.

During the year, the Company paid four interim dividends totalling 38.5p. The Board does not intend to recommend the payment of a final dividend. The total payment for the 2020 financial year represents a decline of 25.1% from the dividend paid in 2019. Even this reduced level of dividend has required a significant transfer from revenue reserves, such has been the scale of the fall in the Company’s income. Going forward, however, the Board hopes to resume dividend growth from this lower level.

At the year end, gearing (calculated net of cash and related liquid assets) was 6.1%. The Company’s £38 million 5.5% debenture stock matured on 8 March 2021. The Board does not intend to replace this.

Purpose and Culture
The purpose of the Company is to deliver long term returns for shareholders from a diversified portfolio of investments. These investments will primarily be UK listed. As an investment trust, the Company has no employees, but the culture of the Board is to promote strong governance and a long term investment outlook with an emphasis on investing in businesses that can deliver sustainable value to shareholders. Therefore, the Board asks the Company’s Investment Manager to invest in stocks that fulfil the traditional metrics of the value style, but possess a business model that is sustainable in to the long term.

Environmental, Social & Governance ( ESG ) And Stewardship Issues
The Board shares the Investment Manager’s belief that ESG issues can be a material factor in determining the valuation of a company. Bad practice can have a negative impact on society which could in time threaten a company’s social licence to operate and therefore detract from investors’ capital.

The Board embraces the concept of active stewardship, asking the Investment Manager to monitor, evaluate and actively engage with investee companies with the aim of preserving or adding value to the portfolio. Further, conscious that on some issues, particularly globally catastrophic negative externalities, one manager acting alone can have limited effect, the Board asks the Investment Manager to collaborate with other investors to work with investee companies to minimise these. The Investment Manager reports back to the Board regularly on engagement in these specific areas.

The Investment Manager’s approach is expanded upon in the full Annual Report. The Investment Manager is a signatory of the UK Stewardship Code 2020, the UN Principles of Responsible Investment (UNPRI) and uses the Investor Forum and PRI Collaboration Platform for its collaborative efforts.

The Board
Following Sir Richard Jewson’s retirement at the last Annual General Meeting (“AGM”), Lesley Sherratt succeeded Sir Richard in his capacity as Senior Independent Director (“SID”) and chair of the Audit and Risk Committee. As mentioned in last year’s Annual Report, Sonita Alleyne resigned from the Board in January 2020. There were no other changes to the Board during the year.

In terms of gender, ethnicity, experience and knowledge, the Board demonstrates great diversity. We believe that this diversity is immensely helpful to developing and implementing our strategic goals.

The Board does not believe that long service should automatically render a Director to be considered as non-independent. However, in recognition of the importance attached to tenure in the AIC Code of Corporate Governance (the “AIC Code”), it has been agreed that a Director will ordinarily serve on the Board for a maximum of nine years. This month I will have been on the Board for ten years and accordingly under normal circumstances I would be looking to stand down. However, a significant percentage of the Board has only recently been appointed and it is intended to appoint at least one new Director over the next 12 months. In addition, the Company has been through a period of massive change. Therefore in these exceptional circumstances, and in the interests of optimising Board balance in terms of experience, it has been proposed that I should continue to serve for a further two years.

Every year the Board undertakes a thorough evaluation of each Director, including myself as Chairman. This year a very detailed independent analysis of the Board’s functioning was carried out by Stogdale St James. Details of this evaluation can be found in the full Annual Report. In addition, in line with best practice in this regard, all Directors are subject to annual re-election by shareholders.

Directors’ Fees
A recent, independent study demonstrated that the current level of fees paid to the Company’s Directors is significantly below that of comparable investment trusts with similar market capitalisations. Nevertheless, in light of the Company’s performance in 2020, the Board is not recommending any increase in fees at this time. The position will be reviewed in the autumn. As mentioned above, the Board will be looking to recruit at least one new member over the next 12 months and fees must be set at a competitive level in order to attract the most able candidates.

Service Provider Changes
Following the change in Investment Manager from Ninety One to RWC, on 30 October 2020 the Company appointed Link Fund Solutions Limited (“LFS”) as its Alternative Investment Fund Manager (“AIFM”) in place of Ninety One and the Bank of New York Mellon (International) Limited (“BNYM”) to act as Custodian and Depositary in place of HSBC Bank plc. It also entered into a fund administration agreement with Link Alternative Fund Administrators Limited (“LAFA”) and appointed Link Company Matters Limited (“Company Matters”) as the new Company Secretary in place of Ninety One UK Limited.

Share Capital Management
Due to extreme volatility in markets, during the past year the Company’s share price relative to its net asset value fluctuated in a more volatile manner than it had for many years. At 31 December 2020 it stood at a discount of 4.1% to net asset value with debt at market value. The Board is prepared to undertake share buy backs if the discount widens excessively, either in absolute terms or 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 AGM.

The AGM this year will be held at the offices of RWC Asset Management LLP, Verde 4th Floor, 10 Bressenden Place, London SW1E 5DH on Thursday, 13 May 2021 at 12.30 pm.

In light of the UK Government’s health advice in response to the COVID-19 outbreak, including to limit travel and public gatherings, the Company strongly advises all shareholders to submit their form of proxy, appointing the Chairman of the AGM as proxy. The AGM has been arranged on the assumption that the UK Government’s guidance will continue to apply at the date of the AGM. As a result, the AGM will be held as a closed meeting, while still allowing for shareholders to exercise their voting rights.

Unless notified otherwise after publication of the Notice of AGM, no shareholder, proxy or corporate representative (other than those required for a quorum to exist) should attend the meeting in person. The Chairman of the AGM will exercise their powers to exclude any person who attempts to attend the AGM in person, and they will not be permitted entry to the location of the AGM in person.

The situation regarding COVID-19 is constantly evolving, and the UK Government may change current restrictions or implement further measures relating to the holding of general meetings during the affected period. Any changes to the AGM (including any change to the location of the AGM) will be communicated to shareholders before the AGM through our website at www.templebarinvestments.co.uk and, where appropriate, by announcement made by the Company to a Regulatory Information Service.

Shareholders are encouraged to send any questions to the Board via [email protected].

As announced in last year’s Annual Report, following regulations on compulsory auditor rotation, BDO LLP was appointed as the Company’s Auditor in respect of the year ended 31 December 2020 and the Board is recommending their re-appointment at the forthcoming AGM.

Having experienced the seismic changes that 2020 brought about it is difficult to have any confidence in any prediction made by anybody. Nonetheless, UK equities appear still to be extremely modestly valued and if there is any sort of economic recovery in the UK, as our Investment Manager expects there will be, we could see a major upward re-rating in many of our investee companies. In any event, I can assure shareholders that both the Board and the Investment Manager will work as hard as they can to ensure the best possible outcome for shareholders no matter what the market conditions.

Arthur Copple

22 March 2021


Investors should not lose sight of the fact that a share provides its owner with a claim on a long stream of corporate cash flows, stretching 20 to 30 years into the future. Often, therefore, extreme declines in share prices, of the sort that we saw at the beginning of last year, are an overreaction by fearful investors

We should start by saying how honoured we feel that RWC has been appointed as the new Investment Manager for such a prestigious Company, at what we believe is a challenging yet exciting time for value-oriented investors.

It is an understatement to say that 2020 was a tumultuous year in stock markets. The Coronavirus pandemic and the associated lockdowns imparted a significant deflationary shock to the global economy, resulting in a large decline in economic output which rivalled the decline seen during the financial crisis of 2008. Stock markets responded savagely, falling by around a third at the lows in March 2020. Unsurprisingly, the declines were led by cyclical stocks whose profits would be most affected by the pandemic, with many such companies seeing their shares halve in value. However, this time round, Central Banks and Governments alike responded with unprecedented monetary and fiscal support to prevent a deflationary shock from becoming a full-blown crisis. Stock markets took comfort from the fact that the authorities were prepared to support companies and consumers through what they saw as a painful but nevertheless temporary crisis, and by Spring 2020, had recouped a significant portion of the initial losses. Positive vaccine news in  Autumn 2020 drove a further recovery in stock markets in which the more cyclical stocks led the markets up.

The Company delivered disappointing performance in the twelve months, with all of the underperformance coming in the first half of the year, as the extent of the Coronavirus crisis really became apparent. A number of the Company’s holdings were particularly badly affected; namely, Capita, BP, Royal Dutch Shell, Barclays, Lloyds, SIG and Travis Perkins, as the market worried that profitability would be impaired and that some companies would be required to raise additional equity in order to get through the crisis. The Company was, however, able to recoup a portion of the lost ground post the vaccine announcements in November 2020, with holdings such as ITV, Royal Mail Group, NatWest Group, BP, Easyjet and RSA rebounding very strongly into the year end on hopes of an economic recovery in 2021.

The transition of the legacy portfolio to RWC in early November 2020 necessitated a significant amount of trading, requiring the involvement of a specialist third-party transition manager. This agent, working on behalf of the Company and in close conjunction with the RWC team, was able to greatly reduce both the time taken to restructure the assets and the transactional costs of doing so. By executing trading in a low- participation approach and taking advantage of natural liquidity in the market, even some very illiquid transactions were completed with minimal price disruption. RWC also worked with the transition manager to maximise retentions from the existing portfolio where it was deemed appropriate, further reducing costs to the Company.

Whilst stock market volatility of the type that we saw last year can feel extremely uncomfortable, investors should not lose sight of the fact that a share provides its owner with a claim on a long stream of corporate cash flows, stretching 20 to 30 years into the future. Therefore, a relatively short period of depressed profitability resulting from an economic downturn does not significantly alter the value of the share. This is provided of course that the company’s profitability is not permanently impaired. Often, therefore, extreme declines in share prices, of the sort that we saw at the beginning of last year, are an overreaction by fearful investors. This provides those with a longer-term timeframe and a focus on a company’s profit potential, once the crisis has passed, with the opportunity to purchase shares in sound businesses at a very meaningful discount to their true worth. It has become a cliché to say that one should be fearful when others are greedy and greedy when others are fearful, but it is true nevertheless and we are confident that we were able to take advantage of last year’s dislocation for the considerable long term benefit of the Company. Of course, we cannot plot a clear course out of the pandemic, and therefore can’t be sure how quickly economies might recover, but given today’s starting valuations in a range of stocks and the fact that, in a number of sectors, the stock market is not discounting any profit recovery at all, we think that the rewards will be significant for those that are prepared to be patient. John Maynard Keynes once said that: ‘remoter gains are discounted at a very high rate.’ That is certainly the case today.

There are some investors who seem to have bought into the narrative that valuations do not matter anymore. For them, the mantra is just buy good businesses, almost regardless of price, and you will be rewarded with handsome returns. For them, these companies are one decision stocks. However, anyone with a good understanding of stock market history will know that this is emphatically not the case, as the iron law of valuation says that, for a given stream of corporate cash flow, the price that you pay is inversely correlated to the investment return that you will ultimately receive. Starting valuations do matter and investors should not be convinced into thinking otherwise.

Unfortunately, this narrative is proving to be attractive to many investors who feel scarred by last year’s volatility. The result is that stock markets have, temporarily at least, placed unreasonably high valuations on those companies that generally offer little in the way of growth, although they are seen to offer relative predictability in a highly uncertain world. With many of these names now valued at multiples of 30 to 40 times earnings, investors run the risk that the relatively meagre returns they can expect to get from growth in profits over time will be more than wiped out by a de-rating back to a more reasonable level. Using some simple arithmetic, one can see that a share which delivers 5% per annum profit growth over five years but which sees its valuation multiple fall from say 35 times earnings to a more reasonable high teens multiple would lose more than a third of its capital value over that period. In their desire to purchase what is in vogue and what feels comfortable to own, many investors have lost sight of this fact.

As corporate profits are inherently volatile, it can be very misleading to value companies based on one year’s earnings, as those earnings may be unsustainably high or unusually depressed. We therefore stress the importance of valuing businesses based on a conservative view of their longer-term profit potential, thereby adjusting for the effect of the economic cycle. We ask ourselves what level of profits can a company generate in a reasonable year? Are its finances sound, thereby allowing it to survive a severe economic downturn without requiring additional equity? Finally, does the company have a sustainable future and can it thereby create value for shareholders whilst simultaneously protecting the interests of all its stakeholders? If a company’s shares can be bought at a multiple of eight to ten times its ‘normal’ earnings potential and the answer to the other questions is ‘yes’, then we are minded to invest. Because of the uncertainty caused by Coronavirus, such has been the level of fear in the stock market, that many companies are currently available at these valuations. Examples include Royal Mail Group, Marks & Spencer, CK Hutchison, WPP, Centrica and ITV, with all of these included in the new portfolio at the time of transition, replacing companies where the valuation was high, or the finances were unsound. The new portfolio offers the potential for significant gains over a very reasonable timeframe and the Company looks set to benefit from the likely recovery that will come as economies open up again. Value investing is sometimes described as ‘simple but not easy’: ‘simple’ because there is nothing inherently complicated about it; not easy because it requires the emotional discipline to invest almost always in the face of bad news.

We recognise of course, that we live in a time of huge technological change and that many industries are being permanently disrupted with the result that many will never return to an acceptable level of profitability. We work hard therefore to differentiate between those companies where an adverse change in customer behaviour has left the asset fundamentally impaired and the shares are therefore lowly valued for a good reason and those which offer sustainable value because despite the fact that they operate in challenging and competitive markets, they still resonate and remain relevant with their customers.

Two areas that offer particular value at the current time are energy and banks. The energy companies have set out their strategies to get to net zero carbon emissions by 2050, which is where we as a society have to get to if we are to meet the goals set out in the Paris climate change accord. They will achieve this by altering their energy mix, with a greater focus on clean gas and renewables, and heavy investment in carbon offset and carbon capture technologies. At the same time, the companies have reengineered their cost bases to generate attractive returns even at lower oil prices. At today’s share prices, the companies trade on single digit price to earnings multiples, assuming Brent oil prices of $50 per barrel, somewhat below where we are today.

Whilst the banks have been negatively impacted by ultra-low interest rates, they are still able to make a reasonable return on equity capital as lending spreads remain satisfactory. They also are using technology to reengineer their cost bases for the world in which they now operate. Whilst it is difficult to imagine that these companies will ever again make the mid-teens return on equity that they did pre the financial crisis, a high single digit return, as targeted by the management teams, will be possible in the medium term. This would leave the companies trading at around six times their earnings potential, giving an earnings yield of 15% or more. The banks’ capital position is also extremely robust. Underwriting standards have generally been high and, typically, the companies have three times the amount of equity capital that they did in 2008. The Company is well represented in both sectors.

The stock markets of today show parallels with both the technology bubble of 1999/2000 and the global financial crisis of 2008. On both occasions, there was extreme dislocation in the markets, with some areas looking very overpriced, whilst other areas offered significant value. On each of these occasions, we were able to take advantage of the dislocation to purchase sound businesses at bargain prices, thereby setting our clients up for several years of strong excess returns. We are at the same juncture today and whilst the future is inherently uncertain and the path will be uneven, we believe that, after a difficult 2020, the Company is well positioned to deliver outsized rewards for its shareholders in the years to come.

Ian Lance and Nick Purves
RWC Asset Management LLP

22 March 2021


The Board has overall responsibility for reviewing the effectiveness of the system of risk management and internal control which is operated by the Investment Manager and the Company’s other service providers. The Company’s ongoing risk management process is designed to identify, evaluate and mitigate the significant risks that the Company faces.

The Board undertakes a risk review with the assistance of the Audit and Risk Committee, to assess the adequacy and effectiveness of the Investment Manager and other service providers’ risk management and internal control processes.

The Board has carried out a robust assessment of its principal and emerging risks during the period under review, including those that would threaten its business model, future performance, solvency or liquidity.

The principal and emerging risks and uncertainties faced by the Company are set out below. The risks arising from the Company’s financial instruments are set out in note 22 to the financial statements in the full Annual Report.

An inappropriate investment strategy on matters such as asset allocation or the level of gearing may lead to underperformance compared with the Company’s benchmark index or peer companies.

The Board manages such risks by diversification of investments through its investment restrictions and guidelines, which are monitored and reported on by the Investment Manager. The AIFM also monitors RWC against the investment guidelines. The Investment Manager provides the Directors with regular management information including absolute and relative performance data, attribution analysis, revenue estimates, liquidity reports and risk profile. The Board monitors the implementation and results of the investment process with the Portfolio Managers who attend Board meetings. During the year under review, the high level of market volatility and recent underperformance by the previous investment manager resulted in increased focus on this risk. As part of its review of the investment management arrangements the Board considered the risks and potential rewards of continuing with its current investment style.
A sudden departure of the Portfolio Managers or several members of the investment management team could result in a short term deterioration in investment performance.

The investments of the Company are managed by a team of two Portfolio Managers, Ian Lance and Nick Purves. The Investment Manager takes steps to reduce the likelihood of such an event by aligning the interests of the investment team with the wider organisation, including special efforts to retain key personnel. Furthermore, the AIFM, in consultation with the Company, may terminate the Investment Management Agreement should Ian Lance and Nick Purves cease to be able to perform their duties as Portfolio Managers or cease to be employees of the Investment Manager and not be replaced by people with relevant experience. The Board demonstrated its ability to effect change in the year under review and the new service provider model makes the future removal of an investment manager more straightforward.
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 2020 the Company had distributable revenue reserves of £12.98 million. Furthermore, income risk is mitigated by the Company’s ability to distribute realised capital gains if required to meet any revenue shortfall. As many companies cut or suspended dividend payments in 2020, the Board reviewed its approach and decided to use only a limited proportion of the reserves available and to cut the Company’s own dividend to a level from which it hopes to resume dividend growth in due course, without recourse to reserves.
Should the market price of the Company’s ordinary shares trade at a significant discount to the underlying net asset value per share, shareholders might not be able to realise the full value of their investment and the Company might itself be vulnerable to some form of corporate activity.

The Company’s share price and premium or discount to net asset value are monitored by the Investment Manager and considered by the Board on a regular basis. The Directors attach considerable importance to the level of premium or discount to net asset value at which the shares trade, both in absolute terms and relative to the rating at which the UK Equity Income sector of investment trusts is trading. 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.
The Company has no employees and relies on a number of third-party service providers, principally the Investment Manager, AIFM, Company Secretary, Registrar, Administrator, Custodian and Depositary. It is dependent on the effective operation of its service providers’ control systems with regard to the security of the Company’s assets, dealing procedures, accounting records and the maintenance of regulatory and legal requirements.

The Company operates through a series of contractual relationships with its service providers. These agreements set out the terms on which a service is to be provided to the Company. During the year, the Board established a Management Engagement Committee to monitor and evaluate the performance of the Company’s service providers. The Committee will meet at least twice a year. The Board undertook an extensive review of its management arrangements and as a result of the review, appointed RWC as Investment Manager, LFS as AIFM, Company Matters as Company Secretary, BNYM as Custodian and Depositary and LAFA as the Company’s Administrator.

The Audit and Risk Committee receives assurance or internal controls reports from key service providers and in the year under review paid close attention to the additional risks posed by disruption due to the COVID-19 pandemic.
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, inter alia, realised gains within the Company’s portfolio would be subject to capital gains tax. The Company must also comply with the provisions of the Companies Act 2006 and, since its shares are listed on the London Stock Exchange, the Listing Rules. A breach of the Companies Act 2006 could result in the Company being fined or subject to criminal proceedings. Breach of the Listing Rules could result in the Company’s shares being suspended from listing which in turn would breach Section 1158. This risk would be exacerbated by inadequate resources or insufficient training within the Company’s third party service providers leaving them unable to properly manage compliance with current and future requirements. The Company’s business model could become non-viable as a result of new or revised rules or regulations arising from, for example, policy change or financial monitoring pressure.

Compliance with investment trust status regulations is reviewed at each Board meeting. The Board reviews compliance with other regulatory, tax and legal requirements and is kept informed of forthcoming regulatory changes.
The Company has limited direct exposure to cyber risk. However, the Company’s operations or reputation could be affected if any of its service providers suffered a major cyber security breach.

The Audit and Risk Committee receives control reports and confirmation from its service providers regarding the measures that they take in this regard.
Unforeseen global emergencies such as a pandemic could lead to dramatically increased market and Company share price volatility. Fraud and cyber security vulnerability could increase for key service providers.

During the year, particular attention was paid to the ability of the principal service providers to maintain business as usual while operating under restrictions imposed to control the spread of the COVID-19 pandemic.

The COVID-19 virus outbreak spread rapidly throughout the world in the first quarter of 2020, resulting in both severe economic stress which affected the market value of the Company’s investments and resulted in changes to the way in which the investment managers and key service providers conducted their day-to-day operations. While the Board always takes a close interest in the performance of the Company’s investments it paid close attention to the effect of the pandemic on the portfolio and the revenue account. It became apparent that due to the large decline in revenue receipts from investee companies resulting from the pandemic, the previous level of dividend was unsustainable. Accordingly, the Board announced a cut in dividends in the Half-Yearly Report, in order to rebase future dividend payments to a more sustainable level. The Board monitored the developing situation closely and sought regular reassurance that the Company’s operations would continue to be managed effectively.


The Board has in place a robust process to identify, assess and monitor the principal risks and uncertainties and also to identify and evaluate newly emerging risks. The Board regularly reviews all risks to the Company, including emerging risks, which are identified by a variety of means, including advice from the Company’s professional advisors, the AIC, and Directors’ knowledge of markets, changes and events. The following new or emerging risks were identified and reviewed during the year.

Following the COVID-19 pandemic in 2020 and the huge disruption it caused both to everyday life and financial markets across the world, the risk of new global pandemics must now be considered an ever-present emerging risk. Indeed, epidemiologists and health organisations are already searching for the next possible candidate, which could originate from a number of different sources. Human interactions with animals as well as their integration into the food system, and ancient pathogens uncovered in melting permafrost caused by climate change are two such areas of concern. When these factors are combined with ever-increasing global travel and trade, a follow-up pandemic of equal or greater severity at some point in the future cannot be discounted.

The changes to the investment management arrangements announced in September 2020 resulted in a number of changes to the management arrangements of the Company. The Board worked closely with its advisors and its newly appointed and departing service providers to ensure that the process was completed efficiently and with minimum risk to the Company.

The Directors have reviewed the going concern basis of accounting for the Company. The Company’s assets consist substantially of equity shares in listed companies and in most circumstances are realisable within a short timescale. The use of the going concern basis of accounting is appropriate because there are no material uncertainties related to events or conditions that may cast significant doubt about the ability of the Company to continue as a going concern. The Directors therefore have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the accounts.

The Board makes an assessment of the longer term prospects of the Company beyond the timeframe envisaged under the going concern basis of accounting, having regard to the Company’s current position and the principal and emerging risks and uncertainties it faces. The AIFM and Investment Manager have assisted the Board in making this assessment via financial modelling and income forecasting, which demonstrates the financial viability of the Company. Stress-testing scenarios, such as an extreme drop in equity markets, have also been carried out and the projected financial position remains strong and all payment obligations meetable.

The Company is a long term investment vehicle and the Directors, therefore, believe that it is appropriate to assess its viability over a long-term horizon. For the purposes of assessing the Company’s prospects in accordance with the AIC Code, the Board considers that assessing the Company’s prospects over a period of five years is appropriate given the nature of the Company and the inherent uncertainties over a longer time period.

The Directors believe that a five year period appropriately reflects the long term strategy of the Company and over which, in the absence of any adverse change to the regulatory environment and the favourable tax treatment afforded to UK investment trusts, they do not expect there to be any significant change to the current principal and emerging risks and to the adequacy of the mitigating controls in place.

In assessing the viability of the Company, the Directors have conducted a thorough assessment of each of the Company’s principal and emerging risks and uncertainties set out above. Particular scrutiny was given to the impact of a significant fall in equity markets on the value of the Company’s investment portfolio. The Directors have also considered the Company’s leverage and liquidity in the context of its long dated fixed-rate borrowings, its income and expenditure projections and the fact that the Company’s investments comprise mainly readily realisable quoted securities which can be sold to meet funding requirements if necessary. As a result, the Directors do not believe that there will be any impact on the Company’s long-term viability.

All of the key operations required by the Company are outsourced to third party providers and alternative providers could be secured at relatively short notice if necessary.

Having taken into account the Company’s current position and the potential impact of its principal and emerging risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of five years from the date of this Annual Report.


1. Royal Mail Industrials UK 41,948 5.4
2. Anglo American Basic Materials UK 38,467 5.0
3. BP Oil & Gas UK 36,031 4.6
4. Standard Chartered   Financials   UK 35,622 4.6
5. Natwest Group Financials UK 35,586  4.6
6. Royal Dutch Shell Oil & Gas UK 33,789  4.4
7. ITV Consumer
UK 32,000 4.1
8. Marks and Spencer Group Consumer
UK 31,517 4.1
9. Aviva Financials UK 27,773 3.6
10. Vodafone Group      Telecommunications UK 24,557 3.2
Top Ten Investments 337,290 43.6
11. Dixons Carphone  Consumer Services UK 24,338 3.2
12. Centrica Utilities UK 24,303 3.1
13. Citigroup Financials USA 24,280 3.1
14. Easyjet Consumer Services UK 23,918 3.1
15. Barclays Financials UK 22,264 2.9
16. WPP Consumer Services UK 21,643 2.8
17. Total Oil & Gas France 21,562 2.8
18. Forterra Industrials UK 20,815 2.7
19. Capita Industrials UK 19,630 2.5
20. Pearson Consumer Services UK 16,790 2.2
Top 20 Investments 556,833 72.0
21. BT Group Telecommunications UK 16,235 2.1
22. Continental Consumer Goods Germany 15,762 2.0
23. HP Technology USA 15,582 2.0
24. Tesco Consumer Services UK 13,750 1.8
25. Rsa Insurance Group Financials UK 13,576 1.7
26. Ck Hutchison Holdings Industrials Hong Kong 13,425 1.7
27. Honda Motor Consumer Goods Japan 12,969 1.7
28. Kingfisher Consumer Services UK 12,543 1.6
29. GlaxoSmithKline Health Care UK 12,222 1.6
30. Newmont Basic Materials USA 11,349 1.5
Top 30 Investments 694,246 89.7
31. Morrison (Wm.) Supermarkets Consumer Services UK 9,828 1.3
32. Barrick Gold Unclassified Canada 8,453 1.1
33. Sprott Physical Silver Trust Financials USA 5,896 0.8
Total Equity Investments 718,423 92.9
Short-dated UK Gifts 55,193 7.1
Total Valuation of Portfolio 773,616 100.0


1. Consumer Services 23.6 9.2
2. Financials 20.9 25.6
3. Industrials 12.2   12.2
4. Oil & Gas  11.6 7.2
5. Basic Materials 6.3 11.3
6. Telecommunications 5.2  4.2
7. Consumer Goods 3.6 16.1
8 Utilities 3.1 3.3
9. Technology 2.0 1.9
10 Health Care 1.6 9.0
11 Physical Gold and Silver 1.1 -
Total Equities 91.2 100.0
12 Fixed Interest 7.0
13 Cash 1.8


Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period. The Directors are also required to prepare financial statements in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

In preparing these financial statements, the Directors are required to:

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the financial statements, Article 4 of the International Accounting Standard (“IAS”) Regulation.

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 and Financial Statements, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the position and performance, business model and strategy.

Website Publication
The Directors are responsible for ensuring the Annual Report and Financial Statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors’ Responsibilities Pursuant t o DTR4
The Directors confirm to the best of their knowledge:

On behalf of the Board

Arthur Copple

22 March 2021

Non-statutory Accounts
The financial information set out below does not constitute the Company’s statutory accounts for the year ended 31 December 2020 but is derived from those accounts. Statutory accounts for the year ended 31 December 2020 will be delivered to the Registrar of Companies in due course. The Independent Auditor has reported on those accounts; its report was (i) unqualified, (ii) did not include a reference to any matters to which the Independent Auditor drew attention by way of emphasis without qualifying its report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Independent Auditor’s Report can be found in the Company’s full Annual Report and Financial Statements on the Company’s website.


2020 2019
Investment Income 12,687  12,687  39,750  39,750 
Other operating income 51  51 
12,693  12,693  39,801  39,801 
(Losses)/profit on investments
(Losses)/profit on investments held at fair value through profit or loss (277,554)  (277,554)  188,920   188,920 
Currency exchange gain 90  90 
Total Income/(loss) 12,693  (277,464)  (264,771)  39,801  188,920  228,721 
Management fees (1,052)  (1,497)  (2,549)  (1,555)  (2,244)  (3,799) 
Other expenses (943)  (3,726)  (4,669)  (585)  (533)  (1,118) 
Profit/(loss) before finance costs and tax 10,698  (282,687)  (271,989)  37,661  186,143  223,804 
Finance costs (1,977)  (2,963)  (4,940)  (1,966)  (2,976)  (4,942) 
Profit/(loss) before tax 8,721  (285,650)  (276,929)  35,695  183,167  218,862 
Tax (331) (331)  (172) (172)
Profit/(loss) for the year 8,390  (285,650)  (277,260)  35,523  183,167  218,690 
Earnings per share (basic and diluted) 12.55p (427.15)p (414.60)p 53.12p 273.90p 327.02p

The total column of this statement represents the Statement of Comprehensive Income prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance issued by the AIC. All items in the above statement derive from continuing operations.

No operations were acquired or discontinued during the year.

The Company does not have any income or expense that is not included in profit for the year. Accordingly, the profit for the year is also the Total Comprehensive Income for the Year, as defined in IAS1 (revised).




Balance at 1 January 2019 16,719 96,040 672,212 (20,136) 37,347  802,182 
Total comprehensive income for the year - - (4,912) 188,079  35,523  218,690 
Contributions by and distributions to owners
Unclaimed dividends - - -
Dividends paid to equity shareholders - - - (35,757) (35,757)
Balance at 31 December 2019 16,719 96,040 667,300 167,943 37,121  985,123 
Total comprehensive loss for the year - - (119,895) (165,755) 8,390  (277,260)
Contributions by and distributions to owners
Dividends paid to equity shareholders - - - (32,527) (32,527)
Balance at 31 December 2020 16,719 96,040 547,405 2,188 12,984  675,336 

As at 31 December 2020, the Company had distributable revenue reserves of £12,984,000 (2019: £37,121,000) and distributable realised capital reserves of £547,405,000 (2019: £667,300,000) for the payment of future dividends. The only distributable reserves are the retained earnings and realised capital reserves.


31 December 2020 31 December 2019
£000  £000  £000  £000 
Non-current assets
Investments held at fair value through profit or loss 718,423  1,085,844 
Current assets
Investments held at fair value through profit or loss           55,193                    -
Cash & cash equivalents 14,217  11,149 
Receivables 2,466  3,245 
71,876  14,394 
Total assets 790,299  1,100,238 
Current liabilities
Payables        (1,675)            (1,066)
Interest bearing borrowings (38,654)    -
Total assets less current liabilities 749,970  1,099,172 
Non-current liabilities
Interest bearing borrowings (74,634) (114,049)
Net assets 675,336  985,123 
Equity attributable to equity holders
Ordinary share capital 16,719  16,719 
Share premium 96,040  96,040 
Capital reserves 549,593  835,243 
Retained revenue earnings 12,984  37,121 
Total equity attributable to equity holders 675,336  985,123 
Net asset value per share 1,009.88p 1,473.13p

The financial statements of Temple Bar Investment Trust plc (registered number: 00214601) were approved by the Board of Directors and authorised for issue on 22 March 2021. They were signed on its behalf by:

Arthur Copple


2020 2019*
£000  £000  £000  £000 
Cash flows from operating activities
Profit/(loss) before tax (276,929) 218,862 
Adjustments for:
Losses/(gains) on investments 277,554  (188,920)
Finance costs 4,940  4,942 
Dividend income (12,558) (39,465)
Interest income (135) (313)
Dividends received 13,362  39,578 
Interest received 1,223  336 
Increase in receivables (139)
(Decrease)/increase in payables (230) 106 
Overseas withholding tax suffered (331) (172)
283,686  (183,908)
Net cash flows from operating activities 6,757  34,954 
Cash flows from investing activities
Purchases of investments (1,061,110) (152,237)
Sales of investments 1,094,811  160,040 
Net cash flows from investing activities               33,701    7,803 
Cash flows from financing activities
Unclaimed dividends
Equity dividends paid (32,527) (35,757)
Interest paid on borrowings (4,863) (4,864)
Net cash flows from financing activities (37,390) (40,613)
Net increase in cash and cash equivalents 3,068  2,144 
Cash and cash equivalents at the start of the year 11,149  9,005 
Cash and cash equivalents at the end of the year 14,217  11,149 

* The 2019 purchases and sales of investment figures have been reclassified, see note 1 ‘ cash flows from investing activities’ in the full Annual Report and Financial Statements for further details.


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 in the full Annual Report. There were no contracts existing during or at the end of the year in which a Director of the Company is or was interested and which are or were significant in relation to the Company’s business. There were no other material transactions during the year with the Directors of the Company.

At 31 December 2020, there was £nil (2019: £nil) payable to the Directors for fees and expenses.

AIFM and Investment Manager – On 30 October 2020, LFS was appointed the AIFM of the Company and has delegated portfolio management to RWC, who is deemed to be Key Management Personnel for the purposes of disclosing related party information under IAS24. Details of the services provided by the Investment Manager are given in the full Annual Report. No fees were accrued during this period. Prior to 30 October 2020, these roles were carried out by Ninety One and the fees paid for these services are set out in the full Annual Report.



Association of Investment Companies

A comparative performance index.

See net gearing.

Debenture Stocks
A type of stock entitling the bearer to a certain fixed income at set periods of time.

D iscount*
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.

The portion of company net profits paid out to shareholders.

Dividends p er Ordinary Share
Dividends per share paid or proposed for the financial year for Section 1158 purposes.

In 2020 there were two interim payments of 11.0p per share, one interim payment of 8.25p per share and a declared fourth interim dividend of 8.25p per share, totalling 38.5p.

In 2019 there were three interim payments of 11.0p per share and a final dividend of 18.39p per share, totalling 51.39p.

FTSE All-Share Index
A comparative index that tracks the market price of the UK’s leading companies listed on the London Stock Exchange. Covering around 600 companies, including investment trusts, the name FTSE is taken from the Financial Times and the London Stock Exchange, who are its joint owners.

The ease with which an asset can be purchased or sold at a reasonable price for cash.

Market Capitalisation
The total value of a company’s equity, calculated by the number of shares multiplied by their market price.

Net Gearing*
In accounting terms, gearing is the amount of a company’s total borrowings divided by its shareholder funds.

The gearing ratio as at 31 December 2020 is calculated as the ratio of the Company’s borrowings of £113,288,000 (2019: £114,049,000) less cash and cash equivalents (including gilts) of £69,409,000 (2019: £27,927,000), divided by investments of £718,423,000 (2019: £1,085,844,000). The resultant ratio of 6.1% can be seen in the full Annual Report.

Peer Companies
Companies that operate in the same industry sector and are of similar size.

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-efficient alternative to paying out dividends.

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
Expressed in percentage terms, Morningstar’s calculation of total return is determined each month by taking the change in monthly net asset value, reinvesting all income, and dividing by the starting net asset value. Reinvestments are made using the actual reinvestment net asset value.

The total returns do account for management and administrative fees and other costs taken out of assets.

Determination of the value of a company’s stock based on earnings and the market value of assets.

Value Investing
An investment strategy that aims to identify under-valued yet good quality companies with strong cash flows and robust balance sheets, putting an emphasis on financial strength.

A measure of the income return earned on an investment. In the case of a share the yield expresses the annual dividend payment as the percentage of the market price of the share. In the case of a bond the running yield (or flat or current yield) is the annual interest payable as a percentage of the current market price. The redemption yield (or yield to maturity) allows for any gain or loss of capital which will be realised at the maturity date.

* Alternative Performance Measures


Link Fund Solutions Limited
6th Floor
65 Gresham Street
London EC2V 7NQ
The Bank of New York Mellon (International) Limited
One Canada Square
London E14 5AL
RWC Asset Management LLP
Verde 4th Floor
10 Bressenden Place
London SW1E 5DH
JP Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Beaufort House
51 New North Road
Exeter EX4 4EP
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Link Company Matters Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
55 Baker Street
London W1U 7EU
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Equiniti Limited
Aspect House
Spencer Road
West Sussex BN99 6DA
Telephone number s:
+44 121 415 7047 (overseas shareholder helpline)
0371 384 2432 (shareholder helpline)*
0906 559 6025 (broker helpline)
0345 603 0561 (Equiniti Investment Account holders)
+44 121 415 0223 (overseas Equiniti Investment Account holders)

*Lines open 8.30 a.m. to 5.30 p.m., Monday to Friday.
ISIN (ordinary shares) – GB0008825324
SEDOL (ordinary shares) – 0882532
Legal Entity Identifier – 213800O8EAP4SG5JD323
Registered in England Number 00214601

National Storage Mechanism

A copy of the Annual Report and Financial Statements will shortly be submitted to the National Storage Mechanism (‘NSM’) and will be available for inspection at the NSM, which is situated at: https://data.fca.org.uk/a/nsm/nationalstoragemechanism.


Neither the contents of the Company’s website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.