Temple Bar Investment Trust Plc - Annual Financial Report

3 April 2024

Temple Bar Investment Trust Plc

(the “Company”)

 

This announcement contains regulated information

 

Annual Financial Report for the year ended 31 December 2023

 

Objective

The investment objective of Temple Bar Investment Trust Plc* is to provide growth in income and capital to achieve a long-term total return greater than the benchmark FTSE All-Share Index, through investment primarily in UK-listed securities. The Company’s policy is to invest in a broad spread of securities with the majority of the portfolio typically selected from the constituents of the FTSE 350 Index.

Purpose

The purpose of the Company is to deliver long-term returns for shareholders from a diversified portfolio of investments.

*  “Temple Bar”, the “Trust” or the “Company”

 

Summary of Results

	2023	20224	% change
NAV total return with debt at fair value1,2,3	12.3%	0.9%
Share price total return1,3	12.5%	3.6%
FTSE All-Share Index (the “Benchmark”)4	7.9%	0.3%
Change in Retail Price Index over year5	5.2%	13.4%
NAV per share with debt at book value	248.0p	228.5p	8.5%
NAV per share with debt at fair value1,2	252.2p	233.5p	8.0%
Share price	238.0p	220.5p	7.9%
Discount of share price to NAV per share with debt at fair value1	5.6%	5.6%
Dividends per share	9.60p	9.35p	2.7%
Dividend Yield1	4.0%	4.2%
Net gearing with debt at book value1	9.8%	8.4%
Ongoing charges1	0.56%	0.54%

1  Alternative Performance Measure – See glossary of terms for definition and more information.

2  Debt fair value is calculated based on unobservable input, see note 20.

3  Source: Morningstar.

4  Source: Redwheel.

5  Source: ons.gov.uk.

Chairman’s Statement

Review

In the year under review, I am pleased to report that the Trust’s Net Asset Value total return with debt at fair value was +12.3%, outperforming the total return on the FTSE All-Share Index of +7.9%. The share price total return was slightly better at +12.5%.

Since Redwheel took over the management of the Trust at the end of October 2020, the Net Asset Value total return to the end of 2023 has been 86.7% compared with 50.0% for the Benchmark, a significant outperformance. Although annual metrics are of course important, the Board continues to focus primarily on the Trust’s longer-term performance.

Capital

Challenging stock market conditions have continued to have a negative impact on share price discounts across the investment company sector, with the average level of discount standing at c.12.3%* for equity investment trusts, compared to the Trust’s discount of 10.1% as at 2 April 2024. The Board has continued with its active share buyback policy, purchasing 27,209,505 shares to be held in treasury for a total consideration of £63.5m during the year. These buybacks not only have the effect of stabilising the supply/ demand balance but are also accretive to the Trust’s Net Asset Value, adding 1.4p per share to our year-end Net Asset Value.

On 31 December 2023, there were 290,612,881 shares in issue (excluding the 43,750,944 shares held in treasury). Since this date to 2 April 2024, a further 3,771,869 shares have been bought back for treasury, at a cost of £8.9m.

Portfolio

Portfolio turnover^ increased in 2023, although remained comparatively low at 16.9% (2022: 7.2%) with our Portfolio Manager being generally satisfied with the positioning of the portfolio.

Further details of the Portfolio Manager’s investment approach, portfolio construction and significant contributors to and detractors from return in the year can be found in the Portfolio Manager’s Report.

Dividend

Total dividends for the year amounted to 9.60p per share (2022: 9.35p per share), an increase of 2.7% and representing a current yield of 4.0% This increase has been supported by a marginal contribution from the Trust’s distributable revenue reserves this year.

The Board closely monitors the Trust’s net revenue position and, based on the latest forecasts, expects future annual dividends to increase from this level over time.

Gearing

At the year end, the Trust’s net gearing was 9.8% (2022: 8.4%).

Environmental, Social & Governance (“ESG”) Issues

ESG matters continue to be an important priority for the Board and our objective is to have full, transparent disclosure on the topic. The Board continues to advocate the concept of active stewardship, requesting that our Portfolio Manager monitors, evaluates and actively engages with investee companies with the aim of preserving or adding value to the portfolio. The Portfolio Manager reports back to the Board regularly on ESG related matters. Further details can be found in the Portfolio Manager’s Report.

*  Source: Cavendish Securities

^  See glossary for definition.

The Board

Lesley Sherratt, the Company’s Senior Independent Director and the Chair of the Audit and Risk Committee, having served on the Board since 2015, will retire at the conclusion of the Company’s Annual General Meeting on Tuesday, 7 May 2024. Lesley’s leadership, and her financial and investment industry experience have been invaluable to the Board. Carolyn Sims, a Chartered Accountant, will take over from Lesley as the Chair of the Audit and Risk Committee and Charles Cade will take over as the Senior Independent Director.

Annual General Meeting (“AGM”)

Like last year, the AGM this year will be held at 25 Southampton Buildings, London WC2A 1AL. It will be held on Tuesday,7 May 2024 at 11.00am. Shareholders are welcome to attend in person where you will be able to hear a presentation from the portfolio management team Nick Purves and Ian Lance and also to meet the Board of Directors.

I encourage all shareholders to exercise their right to vote at the AGM and to register your votes in advance of the meeting. Registering your vote in advance will not restrict you from attending and voting at the meeting in person should you wish to do so.

Shareholders are invited to register their vote in advance by 11.00am on Thursday, 2 May 2024 at the latest.

Outlook

Against a backdrop of continued concerns regarding the level of inflation in the UK and uncertainty for the global economy and also rising geopolitical tensions, the valuation of UK equities looks compelling compared to their equivalents overseas.

Your Board shares the view of our Portfolio Manager that the Trust’s portfolio continues to be priced to offer shareholders further excess investment returns in the future.

The UK equity market continues to be valued at a significant discount to its international peers as many market participants in the UK have been allocating away from UK equities. This has resulted in large portions of the UK equity market being valued at a significant discount to intrinsic value. Unless this changes, it seems likely that we will continue to see overseas corporate buyers step in to take advantage of these depressed valuations, with ownership falling into foreign hands and the number of quoted UK businesses continuing to decline. Whilst this process is likely to be very rewarding for the Company’s shareholders, with takeover premiums often between 50% and 100% of the previously prevailing share price, your Board believes that a healthy equity market is beneficial to the functioning of the economy.

Richard Wyatt
Chairman

3 April 2024

 

Investment Approach

A classic approach to value investing

The portfolio management team of Nick Purves and Ian Lance are long-term intrinsic value investors who believe that short-term sentiment amongst many market participants causes them to overreact to news which has little or no impact on the long-run value of a business. This overreaction causes share prices to diverge from the intrinsic value of the underlying business and provides an opportunity for long-term investors to purchase shares at less than their true value. In the long term the share price tends to move closer to the intrinsic value of the business and this creates excess returns for investors who purchased shares at low valuations. The team form a view of a company’s long-run profit potential and make balance sheet adjustments to assess intrinsic value. They use their experience and knowledge of companies and sectors to identify those companies that are more likely to recover and improve in the future.

Identifying quality and avoiding value traps

Some value strategies simply apply mechanistic measures to identify undervalued stocks but this can lead to investing in businesses that are in structural decline; they may be cheap but their potential to recover is limited. Instead, the portfolio management team’s ‘intrinsic value’ approach aims to identify undervalued, yet good, quality companies with strong cash flows and robust balance sheets. The portfolio management team put a strong emphasis on financial strength because it gives them the confidence that a company can survive through a prolonged period of lower profitability caused by company-specific issues, or an unexpected downturn in the economy.

As Temple Bar’s Portfolio Manager, Redwheel, aims to avoid lower-quality stocks or so called ‘value traps’ by monitoring companies against three different types of risk:

· Valuation – extrapolating favourable trends and paying more than the intrinsic value of the business (e.g. avoiding a situation where something is positively impacting a company’s share price in the short term but that isn’t sustainable longer term);

· Earnings – the risk that the earnings of the Company decline for cyclical or secular reasons (e.g. the industry or sector that the business operates in is itself in cyclical or long-term decline);

· Environmental, Social & Governance – unethical or neglectful behaviour by a company in one of these areas can harm those who invest as well as the environment or society in which a company is located. We believe that applying ESG best practices, such as consideration of environmental and product safety, workplace diversity and strong corporate governance can contribute to long-term investment returns while mitigating risks.

Redwheel have set out some of the key factors it considers when seeking to uncover the most compelling value opportunities:

Consider probabilities and payoffs

No matter the research, there are always surprises, positive and negative. Think best and worst case scenarios. If we think a share price could go to zero in one scenario, but has 400% upside in another, there is probably a case for investing.

Enhance, don’t drift

Discipline is key to value investing –stick to your philosophy, you’re here for the long run. Always look to improve and adapt as things change.

Simple but not easy

Buying shares for less than their worth then selling when the value has been realised is easy to understand. But most don’t invest this way due to a lack of ‘sticking with it’. Value investing is tricky – we are hard-wired to conform – but can be rewarding.

Cycles, cycles, cycles

Profits and share prices are impacted by cycles such as credit, commodity and business. An investor’s overreaction can throw up opportunities. An advantage lies in knowing which cycles impact an investment and where we are in that cycle.

Be contrarian but not mindless contrarian

Investors love to buy what everyone else hates. But having respect for what the market is saying is key. Eagerly buying shares being sold in companies with too much debt, or declining profits, can prove costly and mindlessly contrarian.

Don’t buy rubbish

Recently the market has become fixated with quality and growth. Quality and growth are intrinsic to a business’ value. We’ve had success when high quality businesses have been questioned by the market, resulting in low value entry.

Bargains are rare, make the most of them

It’s unlikely that you’re going to buy a business trading at half its intrinsic value. However, a company or an industry will suffer a drawdown at some stage, which may present an opportunity to buy at a good value.

Adopt an absolute return mindset

Value investing is a risk averse strategy born out of a reaction to the Great Depression. By buying a dollar of value for 50 cents, you build in a ‘margin of safety’ in case the economy and/or the stock market suffer. Value investors see risk as the risk of permanent capital impairment, so, invest with this at top of mind.

Be patient, be long term

A struggling, out-of- favour business is unlikely to turn around the day after you invest. It’s more likely that things continue to get worse, so we try to be patient, allowing for profitability to improve and for the market to recognise it. Our typical holding period is at least five years.

There is no single correct method

Value investing relies on estimating the intrinsic worth of a business. Our experience tells us to be flexible, by adjusting earnings for cyclicality, and to recognise the positive (hidden value), and the negative (e.g. pension fund deficit), on a balance sheet.

The Portfolio Manager’s Report

How do you describe your approach to investing?

We are value investors. This means that we invest the Trust’s assets in companies whose stock market value is at a significant discount to the fair or intrinsic value of the business. Investing in undervalued companies provides two benefits. First, it provides investors with a margin of safety if events don’t unfold in a way that investors would have hoped and second, they can expect to receive an excess investment return as and when this undervaluation is corrected by the stock market.

How does this work in practice?

A company’s shares will trade at a discount to its intrinsic value for one of two reasons: neglect or controversy. Where the cause is neglect, the stock market is not concerned that there is a particular problem with the business; it is just that the company is seen to offer relatively dull prospects in a world where many investors crave excitement. Where there is a controversy surrounding the company, investors are worried that a downturn in the economy or some secular change in the company’s industry will negatively impact profitability. This uncertainty is unsettling for many investors and can cause them to sell the shares. In a desire to avoid what are sometimes seen as troubled businesses, investors often forget that the purchase of a share exposes them to a very long-term stream of corporate cash flows, the true value of which only changes by a relatively small amount even in the event of a severe recession. The result is that share prices will often overreact to short-term news flow. Temple Bar seeks to take advantage of this excess volatility by investing in companies whose shares are significantly undervalued based on a conservative view of a business’s long-term profit potential.

What evidence is there supporting this style of investment?

Numerous academic studies1 have shown that systematically investing in lowly valued companies has seen investors enjoy an excess long-term investment return above the wider stock market, even though it is often these companies that are seen to operate in the most challenged industries. The reason for this outperformance comes down to psychological factors where investors systematically overpay for those companies whose prospects are seen to be the most attractive, whilst being too quick to overlook or dismiss companies where the outlook is more difficult. By investing the Trust’s assets in lowly valued companies, we aim to take advantage of these behavioural inconsistencies to the benefit of the Temple Bar’s shareholders.

1 One study from Professors Dimson, Marsh and Staunton used dividend yield as a measure of valuation and demonstrated that the highest yielding part of the US stock market between 1927 and 2022 generated a total return of 11.2% per annum versus 9.4% per annum for the lowest yielding part, meaning that $1 at the start of the period became $25,277 in the former but only $5,513 in the latter. The data for the UK market starts from 1900 with £1 invested producing £199,040 in high yielding stocks versus £9,717 for low yielding stocks. Source: © Elroy Dimson, Paul Marsh and Mike Staunton; US data is from Professor Kenneth French, Tuck School of Business, Dartmouth. UK data is from Elroy Dimson, Paul Marsh, and Mike Staunton, London Share Price Database. The following link can be used to obtain further information online: https://assets.london.edu/hxo16fanegqh/
2IqOF6Hm6WFzJrm96rPwFY/ a00257bcf04cd917a821b3e40084de89/global-investments-yearbook.pdf Past performance is not a guide to future returns. The information shown above is for illustrative purposes.

So, what is that you look for in companies?

We seek to identify fundamentally sound but lowly valued companies whose shares are priced to offer higher investment returns in the future. A fundamentally sound business is one that can grow its profits over time (although not necessarily in each year), has strong finances and a capable and sensible management team who allocate capital in the best interests of their shareholders.

How would you describe the investment backdrop in the last year?

Most stock markets delivered attractive returns in 2023, despite having to contend with further interest rate rises, the ongoing war in Ukraine and instability in the US banking sector. In the US, the UK and Continental Europe, Central Banks have been raising rates to bring inflation back to the target level of around 2%. In the summer, there were concerns that Central Banks were losing this battle which led to fears that interest rates might have to take another step up, thereby increasing the risk of a hard landing in the economy. However, in the fourth quarter, the narrative changed considerably thanks to several downside surprises in inflation readings, which led to hopes that inflation would soon be back to around target levels. For stock markets, this led to optimism that an economic soft landing was coming into view, whereby inflation would be back at target levels without a recession taking place.

Turning to the financial year, how has the portfolio performed and what were the major winners and losers?

Despite the depressed starting valuation, the UK equity market was a laggard in 2023, delivering a total return of around 8%, however, the Trust’s portfolio performed well in the year, outpacing the rise in the FTSE All-Share. Temple Bar benefitted from significant rises in the share prices of Marks & Spencer, Centrica and International Distribution Services (the old Royal Mail Group). Each of these three companies added over a per cent to the Trust’s return, with Marks & Spencer more than doubling during the year. The Trust’s portfolio was negatively impacted by a more than 30% fall in the share price of Anglo American.

In 2023, Marks & Spencer continued to perform well from an operational perspective, taking market share in both clothing and food and continuing to make good progress towards its longer-term profitability targets. Although it can’t be quantified, there is little doubt that the company is benefiting from the demise of several competitors during the COVID pandemic, and the company is able to invest capital at high returns in rightsizing and re-orientating its store estate. If achieved, the company’s profitability targets would simply bring the retailer’s profitability in line with its peers and would result in significant growth in shareholder earnings, thereby suggesting that the shares continue to be undervalued.

Centrica announced the results of a strategic review in the summer. The company has a unique place in the energy value chain and can add value as a producer of power, through the provision of energy infrastructure, system optimisation through its Marketing and Trading business and energy retail through British Gas. Having simplified and de-risked the business, management intend to invest in the energy transition and thereby create further value for shareholders. Nevertheless, the company’s profits will continue to be sensitive to the level of energy prices. Even assuming a ‘normalisation’ of commodity prices from today’s elevated levels to pre COVID levels, the company continues to be valued at around nine times it annual profits. The company also has significant portion of its market capitalisation as net cash on its balance sheet, and this needs to be factored into any consideration of value.

International Distribution Services performed well in 2023 as a new agreement with its unions bedded in well. A successful execution of the agreement will enable the company to release significant unrealised potential in the company’s UK business and thereby drive group profitability higher. Making just modest assumptions about the potential profitability in the company’s UK business, suggests that the company is valued at less than six times its earnings potential. For some time, we have believed that more than 100% of the company’s market capitalisation can be justified by its overseas (parcels only) business alone, suggesting that the stock market is placing a negative valuation on the more challenged UK business. This is even though more than half of the company’s UK revenues are derived from parcels (rather than letters) and it has around a 50% market share in the UK parcels market.

On the negative tack, Anglo American downgraded its production guidance for 2024 and 2025 and as a result 2024 earnings estimates were cut by 20% to 25%. These profit downgrades are unwelcome although the accompanying share price fall has left the shares looking very undervalued. To address balance sheet issues, the company went through a radical restructuring in 2015, halving the number of assets in its portfolio and consequently, the assets that remain are generally of good quality. Anglo American has significant investments in publicly quoted assets and stripping these out, the company’s Copper, Diamond, Metallurgical Coal and Nickel assets are valued at just five times earnings before interest and tax. We would therefore not be surprised to see some corporate activity if the operating performance of the company does not improve. This could take the form of asset disposals to demonstrate value or a bid for all or parts of the group.

How has the Trust’s portfolio changed over the year?

In 2023, the Trust purchased shares in Stellantis, a company formed by the merger of Fiat Chrysler and Peugeot in 2021. The rationale for the merger was to combine the European strength of the Peugeot business with the North American strength of Fiat Chrysler. Combining the entities has allowed for significant cost savings and created a stronger and more diversified business. At the time of purchase, the company was valued at around three times its annual profits and the shares offered a dividend yield of around 8%. In the last two years, the auto industry has enjoyed high profitability as strong demand post COVID, coupled with muted supply drove price increases in most markets. Whilst profitability is likely to decline in future years as industry conditions normalise, in our view, the company would nevertheless continue to be very attractively valued. The company has significant net cash on its balance sheet, equating to around one third of its market capitalisation. Stellantis has performed well since its purchase and in 2023 added over 1% to the Trust’s return.

We also established a position in GlaxoSmithKline (“GSK”), a high-quality global franchise which has traditionally struggled with execution and whose shares have therefore significantly underperformed its peers over almost all-time frames. The company’s vaccines business is the global leader, with the widest product and technology portfolio, and is well insulated from threats, with more than 90% of revenues coming from vaccines with more than 90% efficacy. In combination with GSK’s pharmaceutical business, the company should be capable of delivering good levels of growth. The management targets annual sales and operating profit growth of more than 5% and 10% respectively over the five years to 2026.

A new position in the Dutch Insurer, NN Group, was also established which derives most of its profits from the Dutch pension market. The company targets moderate growth in profits in the coming years and its balance sheet is strong. At the time of purchase, the company was valued at a multiple of six-times profits and offered a dividend yield of around 9% and is expected to return another 3% of its market capitalisation in share buybacks in respect of 2023.

The UK stock market continues to be compared negatively with other major equity markets. Do you think this is justified and are you able to find appealing investment opportunities in the UK?

The UK stock market remains very out of favour with investors who continue to sell UK assets to channel money overseas. Here investment prospects are seen to be more exciting even though a large portion of the profits of companies listed in the UK are derived from outside the UK. The result of this negative sentiment towards the UK however is that UK listed stocks are valued at a significant discount to their overseas listed peers for no other reason than they happen to be listed in the UK. Today, your portfolio in aggregate is valued at a multiple of around eight times last year’s estimated earnings. In contrast, in the US, the S&P 500 is valued on a multiple of over twenty times, more than 2.5x the valuation of the Trust’s portfolio. In respect of the UK, you should take comfort from the fact that markets don’t de-rate forever and that this headwind will ultimately abate and maybe even become a tailwind. If the Trust’s portfolio simply re-rated back to a still conservative ten times earnings on an earnings base that was unchanged, the Trust would deliver a return of around 25% to its shareholders from this re-rating alone. Whilst many will no doubt continue to take a dim view of UK economic prospects; it is important to remember that the Trust buys companies and not economies. The companies in which the Trust is invested are sound, conservatively run businesses with strong finances and capable management teams.

How is the portfolio currently positioned and what is your outlook for the year ahead?

Whilst it is somewhat frustrating that UK listed shares continue to attract such miserly valuations, the attraction for the long-term investor is significant as stock market history has shown that the best predictor of long-term future investment return is starting valuation. Time and time again, those that have invested in highly valued assets have been rewarded with suboptimal returns, even though the underlying asset has continued to perform well from an operational perspective. Conversely, those that have invested in lowly valued, but fundamentally sound businesses, which did not happen to fit with the prevailing investment narrative at the time of purchase, have enjoyed outsized gains. We are often asked when UK equities will re-rate and whilst we can’t answer this question, we would point out that one doesn’t need the Trust’s portfolio to re-rate to enjoy an attractive investment return. A lowly valued company that converts a significant portion of its profits into cash can pay a generous dividend and undertake value enhancing share buybacks whilst holding debt at a constant level. As we enter 2024, the Trust’s portfolio continues to be priced to offer its shareholders further excess investment return in the future.

Could you provide your views on the post-period takeover bids that were received on holdings within the portfolio?”

So far in 2024, there have been two bids for companies held in the Trust’s portfolio; first Currys and then Direct Line Group. Whilst takeover bids can come at any time, this is perhaps not a surprise as many of the companies in the portfolio carry a stock market valuation which is significantly below a reasonable view of their true value. The UK continues to be an attractive place to invest and given the rock bottom valuations that exist in some parts of the UK market, it is understandable that private equity and corporate buyers would want to take advantage of that.

We have mixed feelings about these takeover approaches. Takeover bids highlight the undervaluation that exists in the target companies and can result in a rapid crystallisation of the upside that we believed existed at the time of a stock’s purchase. However, we must also remember that private equity bidders especially are intent on paying a price which continues to undervalue the company and from which they themselves can make an attractive investment return. They will therefore rarely be prepared to pay what we think the target company is worth. Currys is a case in point. Our view of the company’s fair value was significantly higher than the 67p offered by hedge fund Elliott who have since said that they are not prepared to bid any more.

In 2022, the private equity group, Apollo Capital, made three takeover offers for Pearson, the educational publisher, and last year, First Abu Dhabi Bank approached Standard Chartered. It is reasonable to expect that there will be more bids for companies in the Trust’s portfolio and shareholders should expect to benefit further from that.

 

Ian Lance and Nick Purves
Redwheel

3 April 2024

Portfolio of Investments

As at 31 December 2023

			Place of primary	Valuation	% of
	Company	Sector	listing	£’000	portfolio
1	Royal Dutch Shell
	Shell explores for, produces, and refines petroleum. The company produces fuels, chemicals, and lubricants. Shell owns and operates gasoline filling stations worldwide.	Energy	UK	57,818	7.3
2	BP
	BP is an oil and petrochemicals company. The company explores for and produces oil and natural gas, refines, markets, and supplies petroleum products, generates solar energy, and manufactures and markets chemicals.	Energy	UK	50,819	6.5
3	TotalEnergies
	TotalEnergies operates as an energy company. The company produces, transports, and supplies crude oil, natural gas, and low carbon electricity, as well as refines petrochemical products. TotalEnergies owns and manages gasoline filling stations worldwide.	Energy	France	43,078	5.5
4	Marks & Spencer Group
	Marks & Spencer Group operates a chain of retail stores. The company sells consumer goods and food products, as well as men’s, women’s, and children’s clothing and sportswear	Consumer Staples	UK	42,012	5.3
5	NatWest Group
	NatWest Group operates as a banking and. financial services company. The Bank provides personal and business banking, consumer loans, asset and invoice financing, commercial and residential mortgages, credit cards, and financial planning services, as well as life, personal, and income protection insurance.	Financials	UK	40,581	5.1
6	Aviva
	Aviva operates as an international insurance company that provides all classes of general and life assurance. The Company also offers a variety of financial services, including long-term savings and fund management	Financials	UK	35,019	4.4
7	ITV
	ITV provides broadcasting services. The company produces and distributes content on multiple platforms. ITV serves customers in the United Kingdom.	Communications	UK	34,338	4.3
8	Stellantis
	Stellantis manufactures and markets automobiles and commercial vehicles. The Company also produces metallurgical products and production systems for the automobile industry, as well as owning publishing and insurance companies. Stellantis serves customers worldwide.	Consumer Discretionary	Netherlands	32,110	4.1
9	Barclays
	Barclays is a global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management, and investment management services	Financials	UK	31,721	4.0
10	Anglo American
	Anglo American is a global mining company. The company’s mining portfolio includes bulk commodities including iron ore, manganese, and metallurgical coal, base metals including copper and nickel, and precious metals and minerals including platinum and diamonds.	Materials	UK	30,013	3.8
		Top Ten Investments		397,509	50.3
11	NN Group	Financials	Netherlands	29,939	3.8
12	Standard Chartered	Financials	UK	29,199	3.7
13	WPP	Communications	UK	28,513	3.6
14	GSK	Healthcare	UK	26,536	3.4
15	Kingfisher	Consumer Discretionary	UK	26,145	3.3
16	International Distributions	Industrials	UK	24,933	3.1
17	HP	Information Technology	United States	24,010	3.0
18	Centrica	Utilities	UK	23,471	3.0
19	Pearson	Consumer Discretionary	UK	22,762	2.9
20	Citigroup	Financials	United States	20,453	2.6
		Top 20 Investments		653,470	82.7
21	Currys	Consumer Discretionary	UK	16,434	2.1
22	Honda Motor	Consumer Discretionary	Japan	14,609	1.8
23	BT Group	Communications	UK	14,249	1.8
24	Forterra	Materials	UK	14,142	1.8
25	Vodafone Group	Communications	UK	13,098	1.7
26	Capita	Industrials	UK	11,014	1.4
27	Newmont	Materials	United States	10,590	1.3
28	CK Hutchison Group	Industrials	Hong Kong	10,394	1.3
29	Barrick Gold	Materials	Canada	9,892	1.3
30	Continental	Consumer Discretionary	Germany	8,983	1.1
		Total Equity Investments		776,875	98.3
	Short-dated UK T-Bills	Fixed Interest	UK	13,713	1.7%
		Total Valuation of Portfolio		790,588	100%

 

Portfolio Distribution

As at 31 December 2023

Discount to NAV	Industry	Temple Bar %	FTSE All-Share %
1	Financials	23.6	18.6
2	Energy	19.3	11.7
3	Consumer Discretionary	15.3	8.8
4	Communications	11.4	2.9
5	Materials	8.2	9.0
6	Industrials	5.8	13.8
7	Consumer Staples	5.3	15.7
8	Healthcare	3.4	11.1
9	Information Technology	3.0	1.7
10	Utilities	3.0	4.0
11	Real Estate	–	2.7
Total Equities		98.3	100.0
Fixed Interest		1.7	–
Total Portfolio		100.0	100.0

Source: Redwheel

* FTSE All-Share ex investment Trusts

Overview of Strategy

The Strategic Report is designed to help shareholders assess how the Directors have performed their duty to promote the success of the Company during the year under review.

Business of the Company

Temple Bar Investment Trust Plc was incorporated in England and Wales in 1926 with the registered number 00214601.

The Company carries on business as an investment company under Section 833 of the Companies Act 2006 and has been approved by HM Revenue & Customs as an investment trust in accordance with Section 1158 of the Corporation Tax Act 2010.

Section 172 Statement

The Directors’ overarching duty is to act in good faith and in a way that is the most likely to promote the success of the Company as set out in Section 172 of the Companies Act 2006 (“Section 172”). In doing so, Directors must take into consideration the interests of the various stakeholders of the Company, having regard, amongst other matters, to the following six items:

The likely consequences of any decision in the long term	All Board discussions include consideration of the longer-term consequences of any key decisions and their implications for the relevant stakeholders. In managing the Company during the year under review, the Board acted in the way which it considered, in good faith, would be most likely to promote the Company’s long-term sustainable success and to achieve its wider objectives for the benefit of our shareholders as a whole, having had regard to our wider stakeholders and the other matters set out in Section 172.
The interests of the Company’s employees	This provision is not relevant as the Company does not have any employees.
The need to foster the Company’s business relationships with suppliers, customers and others	The Board’s approach is described under “Stakeholders” in in the Strategic Report.
The impact of the Company’s operations on the community and the environment	The Board takes a close interest in responsible investment issues and sets the overall strategy. Management of the portfolio is delegated to the Portfolio Manager, which is responsible for the practical implementation of policy. A description of the Company’s approach to stewardship and the role of the Portfolio Manager is set out in the Strategic Report.
The desirability of the Company maintaining a reputation for high standards of business conduct	The Board’s approach is described under “Culture” in the Strategic Report.
The need to act fairly between shareholders of the Company	The Board’s approach is described under “Stakeholders” in the Strategic Report.

In considering the primary purpose of the Company, the Board made several key decisions during the year. The Board:

· continued to instruct the use of share buy backs as a means of stabilising the share price discount to NAV in response to sector weakness;

· worked with the Portfolio Manager and Frostrow Capital to maintain a high level of shareholder engagement via webinars and newsletters; and

· increased dividend payments at a sustainable level based on income received from investments (for further details see the dividend per share section in the Strategic Report).

The Directors have reviewed and discussed each aspect of Section 172 and consider that the information set out in the Strategic Report is particularly relevant in the context of the Company’s business as an externally managed investment company which does not have any employees or suppliers.

Stakeholders

The Board continuously seeks to understand the needs and priorities of the Company’s stakeholders, and these are taken into account during all of its discussions and as part of its decision making. As the Company is an externally managed investment company and does not have any employees or customers, it therefore has very little direct impact on the community or the environment. Its key stakeholders comprise its shareholder base and its lender. The Company also has important contractual relationships with its key service providers but does not consider these to be stakeholders. The Company recognises the indirect impact it may have on the community and the environment through its investee companies. Further details on this are set out in the Strategic Report. The sections below outline why these key stakeholders are considered of importance to the Company and the actions taken to ensure that their interests are considered.

Shareholders

The primary purpose of the Company is to deliver long-term returns for shareholders from a diversified portfolio of investments. Continued shareholder support and engagement are critical to the existence of the Company and the delivery of its long-term strategy.

The Board recognises the importance of engaging with shareholders on a regular basis to maintain a high level of transparency and accountability and to inform the Company’s decision making and future strategy.

The Board primarily engages with shareholders through direct engagement by the Chairman and through the Portfolio Manager and Frostrow Capital who maintain an ongoing dialogue with shareholders through regular shareholder communications, both written and verbal. The Portfolio Manager has continued to publish quarterly newsletters written by the portfolio management team, which explore their ideas and philosophies around investing and explain the positioning of the portfolio. Online statistics on engagement show that these newsletters remain very popular with shareholders. Additional dialogue with shareholders is achieved through the annual and half-yearly reports, both of which contain reports from the Portfolio Manager, the daily NAV announcements and the monthly fact sheet which is available on the Company’s website. Portfolio data is also provided to external providers such as Morningstar, which feeds several websites on a monthly basis.

One of the Board’s long-term strategic aspirations has been that the Company’s shares should trade consistently at a price close to the NAV per share. During the year under review investment companies as a sector again saw discounts widen significantly, in the face of economic headwinds and political instability (the average discount was 13.5%* as at 31 December 2023). The Company continued to use share buy backs throughout the year to protect its discount, generally maintaining it at a level less than 6%. Both the Board and the Portfolio Manager has continued to focus heavily on the promotion of the Company, in order to maintain buying interest in the Company’s shares and to support a natural narrowing of the discount.

An important role of the Board is to ensure that the Company’s ongoing charges are competitive both in terms of its peer group and other comparable investment products. While having an optimal service provider structure brings inevitable cost, excessive expense can eat away at investment returns over time. For that reason, despite the exercise described later in the document the Board remains focused on limiting cost increases to shareholders as far as possible, despite the current inflationary environment.

All shareholders are encouraged to attend and vote at AGMs, at which the Board and the portfolio management team are available to discuss issues affecting the Company and to answer any questions. Further details regarding the AGM are set out in the Notice of AGM.

* Source: Cavendish Securities.

Lenders

Alongside shareholders’ equity, the Company is partly funded by debt. All the Company’s debt is subject to contractual terms and restrictions. We have an established procedure to report regularly to our lender on compliance with debt terms. It is our policy that all interest payments and repayments of principal will continue to be made in full and on time.

Service Providers

To function as an investment trust with a premium listing on the London Stock Exchange, the Company relies on a number of suppliers and advisers for support in complying with all relevant legal and regulatory obligations.

The Company’s day-to-day operational functions are delegated to a number of third-party service providers, each engaged under separate contracts. The Company’s principal service providers are the Portfolio Manager, Alternative Investment Fund Manager, Administrator and Company Secretary, Custodian and Depositary, Broker, Solicitor and the Registrar.

Over the past three years the Board believes it has continued to develop a close and constructive working relationship with the Portfolio Manager, which it believes is crucial to promoting the long-term success of the Company. Representatives of the Portfolio Manager attend Board meetings and provide reports and verbal updates on matters relating to investments, performance and marketing.

The Board, primarily through the Audit and Risk and Management Engagement Committees, keeps the ongoing performance of the Portfolio Manager and the Company’s other principal third-party service providers under continual review.

Culture

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

Investment Objective and Policy

The Company’s investment objective is to provide growth in income and capital to achieve a long-term total return greater than the benchmark FTSE All-Share Index, through investment primarily in UK-listed securities. The Company’s policy is to invest in a broad spread of securities with typically the majority of the portfolio selected from the constituents of the FTSE 350 Index.

Investment Guidelines

The UK equity element of the portfolio will be mostly invested in the FTSE All-Share Index; however, exceptional positions may be sanctioned by the Board and up to 30% of the portfolio may be held in listed international equities, subject to a maximum 10% exposure to emerging markets. The Company may continue to hold securities that cease to be quoted or listed if the Portfolio Manager considers this to be appropriate. There is an absolute limit of 10% of the portfolio in any individual stock with a maximum exposure to a specific sector of 35%, in each case irrespective of their weightings in the Benchmark.

It is the Company’s policy to invest no more than 15% of its gross assets in other listed investment companies (including listed investment trusts).

The Company maintains a diversified portfolio of investments, typically comprising 30-50 holdings, but without restricting the Company from holding a more or less concentrated portfolio from time-to-time as circumstances require.

The Company’s long-term investment strategy emphasises stocks of companies that are out of favour and whose share prices do not match the Portfolio Manager’s assessment of their longer-term value.

From time-to-time fixed interest holdings or non-equity interests may be held for yield enhancement and other purposes. Derivative instruments may be used in certain circumstances, and with the prior approval of the Board, for hedging purposes or to take advantage of specific investment opportunities.

Liquidity and borrowings are managed with the aim of increasing returns to shareholders. The Company’s gross gearing range may fluctuate between 0% and 30%, based on the current balance sheet structure, with an absolute limit of 50%.

As a general rule, it is the Board’s intention that the portfolio should be reasonably fully invested. An investment level of 90% of shareholder funds is regarded as a guideline minimum investment level dependent on market conditions.

Risk is managed through diversification of holdings, investment limits set by the Board and appropriate financial and other controls relating to the administration of assets.

Key Performance Indicators

The key performance indicators (“KPIs”) used to determine the progress and performance of the Company over time, and which are comparable to those reported by other investment trusts, are:

· NAV total return relative to the FTSE All-Share Index;

· Discount/premium to NAV;

· Dividends per share; and

· Ongoing charges.

While some elements of performance against KPIs are beyond the Board’s and Portfolio Manager’s control, they provide measures of the Company’s absolute and relative performance and are, therefore, monitored by the Board on a regular basis.

NAV Total Return

In reviewing the performance of the assets in the Company’s portfolio the Board monitors the NAV in relation to the FTSE All-Share Index. This is the most important KPI by which performance is judged. During the year the NAV total return with debt at fair value of the Company was 12.3% compared with a total return of 7.9% by the FTSE All-Share Index. As noted in both the Chairman’s Statement and Portfolio Manager’s Report, the Company outperformed the FTSE All-Share Index on both a NAV and share price basis.

Discount to NAV

The Board monitors the premium/discount at which the Company’s shares trade in relation to their NAV. During the year the shares traded at an average discount to NAV of 6.0%. This compares with an average discount of 5.1% in the previous year. As set out in the Chairman’s Statement, during the year the Board closely monitored the discount and utilised share buy backs when it was considered appropriate to do so. The Board and Portfolio Manager closely monitor both movements in the Company’s share price and significant dealings in the shares. In order to avoid substantial overhangs or shortages of shares in the market the Board asks shareholders to approve resolutions which allow for both the buy back of shares and their issuance, which can assist in the management of the discount or premium.

Dividend per Share

It remains the Directors’ intention to distribute, over time, by way of dividends, substantially all of the Company’s net revenue income after expenses and taxation. The Portfolio Manager aims to maximise total returns from the portfolio. The Company has paid dividends totalling 9.60 pence per ordinary share for the year ended 31 December 2023 (2022: 9.35 pence). The Board hopes to continue sustainable dividend growth over the coming years. This is explained in more detail in the Chairman’s Statement.

Ongoing Charges

Ongoing charges is an expression of the Company’s management fees and other operating expenses as a percentage of average daily net assets over the year. The ongoing charges for the year ended 31 December 2023 were 0.56% (2022: 0.54%). The Board reviews the Company’s ongoing charges on a regular basis. The Company’s ongoing charges ratio has remained relatively consistent and compares favourably with peers in the UK Equity Income sector of investment trust companies.

Ten-Year KPI Summary

Discount to NAV	2014	2015	2016	2017	2018	2019	2020^	2021	2022	2023
Total Returns
NAV with debt at fair value3	-2.6%	-1.2%	20.6%	10.2%	-11.3%	27.9%	-28.0%	24.6%	0.9%	12.3%
Share Price3	-1.4%	-7.9%	20.7%	11.0%	-9.7%	34.3%	-31.5%	20.0%	3.6%	12.5%
FTSE All-Share Index3	1.2%	1.0%	16.8%	13.1%	-9.5%	19.2%	-9.8%	18.3%	0.3%	7.9%
NAV per share* (p)	239.1	226.0	236.2	280.0	239.9	294.6	202.0	241.7	228.5	248.0
NAV per share with debt at fair value* (p)	234.9	222.9	259.6	277.4	238.1	292.5	199.2	240.4	233.5	252.2
Share Price* (p)	238.2	210.4	244.6	262.8	229.2	295.2	191.0	221.6	220.5	238.0
Premium/(Discount)2	1.4%	(5.6%)	(5.8%)	(5.3%)	(3.7%)	0.9%	(4.1%)	(7.8%)	(5.6%)	(5.6%)
Dividends per share* (p)	7.78	7.93	8.09	8.49	9.34	10.28	7.70	7.90	9.35	9.60
Dividend Yield1	3.3%	3.8%	3.3%	3.2%	4.1%	3.5%	4.0%	3.6%	4.2%	4.0%
Ongoing Charges	0.48%	0.49%	0.51%	0.49%	0.47%	0.49%	0.50%	0.48%	0.54%	0.56%

* Comparative periods have been restated for the sub-division of each ordinary share into 5 new ordinary shares, approved at the AGM held on 10 May 2022 and completed on 13 May 2022.

^  Redwheel was appointed as Portfolio Manager on 30 October 2020.

1  Calculated as dividends per share divided by the year end share price.

2  Premium / (Discount) of share price to NAV per share with debt at fair value

3  Source: Morningstar for Company returns, Redwheel for FTSE All-Share returns.

Risk	Mitigation and Management
Market Risk
By the nature of its activities and Investment Objective, the Company’s portfolio is exposed to fluctuations in market prices (from both individual security prices and foreign exchange rates). As such investors should be aware that by investing in the Company they are exposing themselves to market risks. The Company also uses gearing, via the private placement loans issued, the effect of which is to amplify the gains or losses the Company experiences.	To manage these risks the Board and the AIFM have appointed Redwheel to manage the portfolio within the remit of the investment objective and policy, and imposed various limits and guidelines, set out in the Strategic Report. These limits ensure that the portfolio is diversified, reducing the risks associated with individual stocks. The compliance with those limits and guidelines is monitored daily by Frostrow and Redwheel and reported to the Board weekly. In addition, Redwheel reports at each Board meeting on the performance of the Company’s portfolio, including the rationale for investment decisions, the make-up of the portfolio and the investment strategy. As part of its review of the viability of the Company, the Board also considers the sensitivity of the Company to changes in market prices and foreign exchange rates (see note 20), how the portfolio would perform during a market crisis, and the ability of the Company to liquidate its portfolio if the need arose. Further details are included in the Going Concern and Viability Statements contained in the Strategic Report.
Geopolitical and Macro Risks
As recent years have demonstrated, global events, including unforeseen events, can have a dramatic effect on both financial markets and everyday life. The Company is at risk from both the financial impacts of such events, as well as possible disruption to the day-to-day activities of its service providers and portfolio companies. Ongoing geopolitical tensions around the world while not currently directly affecting the Company may have an impact on its investments.	While global events are outside the control of the Company the Board reviews regularly, and discusses with the Portfolio Manager, the wider economic and political environment, along with the portfolio exposure and the execution of the investment policy against the long-term objectives of the Company. The Portfolio Manager performs risk analysis, including country and industry specific monitoring, on an ongoing basis.
Climate Risks
While the Company itself faces limited direct risk from climate change, the board is cognisant of the potential impact on portfolio companies and their operations. Significant changes in climate, or indeed Government measures taken to combat climate change, could present a material risk to the value of the portfolio.	The Board regularly reviews global environmental, geopolitical and economic developments with the Portfolio Manager, along with the implications of these risks and events on portfolio construction and the Company’s operations. ESG considerations are incorporated into the investment process of Redwheel, as part of the drive to invest in companies with long-term viability. The Portfolio Manager also uses its voting powers to engage with and influence investee companies towards taking positive steps against climate change and other environmental impacts.
Shareholder Relations and Share Price Performance Risk
The Company is exposed to the risk, particularly if the investment strategy and approach are unsuccessful, that the Company may underperform resulting in the Company becoming unattractive to investors, a widening of the share price discount to NAV per share and the Company may become vulnerable to activist shareholders.	In managing this risk the Board: · reviews the Company’s investment strategy and objective in relation to market and economic conditions, and the operation of the Company’s peers; · discusses at each Board meeting the Company’s future development and strategy; · reviews the shareholder register at each Board meeting; and, · actively seeks to promote the Company to current and potential investors. In addition the Company’s share price and premium or discount to NAV are monitored by the Portfolio Manager and the Board on a regular basis. The Directors attach considerable importance to the level of premium or discount to NAV at which the shares trade, both in absolute terms and relative to the rating at which the UK Equity Income sector of investment trusts is trading, and will take action where levels are deemed to be excessive. The Directors are prepared to be proactive in premium/ discount management to minimise potential disadvantages to shareholders, which continued to be demonstrated during 2023.
Loss of Investment Team or Portfolio Manager
A sudden departure of the members of the portfolio management team could result in a short-term deterioration in investment performance.	The investments of the Company are managed by a team of two managers, Ian Lance and Nick Purves. The Portfolio Manager takes steps to reduce the likelihood of such an event by aligning the interests of the investment team with the wider organisation, as well as providing a high degree of autonomy with no overarching chief investment officer or investment committee. Furthermore, the AIFM, in consultation with the Board, may terminate the Portfolio Management Agreement should Ian Lance and Nick Purves cease to be able to perform their duties or cease to be associated with the Portfolio Manager and not be replaced by people with relevant experience.
Income Risk – Dividend
Risk that the portfolio does not generate the necessary level of income, over time, from which to maintain progressive dividend payments to shareholders.	The Board monitors this risk through the review of detailed income reports and forecasts which are considered at each meeting, with input from the Portfolio Manager. As at 31 December 2023 the Company had distributable revenue reserves of £12.7 million. Furthermore, income risk is mitigated by the Company’s ability to distribute realised capital gains if required to meet any revenue shortfall. With the level of income paid and forecast by investee companies continuing to increase across the year, the Company has been able to raise its dividend.
Cyber Security
The Company has limited direct exposure to cyber risk. However, the Company’s operations or reputation could be affected if any of its service providers suffered a major cyber security breach. A State-backed cyber-attack could also result in widespread disruption across the financial services industry.	The Audit and Risk Committee receives control reports and confirmation from its service providers regarding the measures that they take in this regard. The cyber security policies of all providers have also been reviewed by the Board. For more widespread disruption such as a state-backed cyberattack limited mitigation is possible, however all service providers remain vigilant given the increased likelihood of such an event in the current climate.
Service Provider Risk
The Company is reliant on the systems of its service providers and as such disruption to, or a failure of, those systems (including, for example, as a result of cyber-crime or a ‘black swan’ event) could lead to a failure to comply with law and regulations leading to reputational damage and/or a financial loss.	To manage these risks the Board, via its Management Engagement Committee and Audit and Risk Committee: · receives reports from Frostrow at each Board meeting, which includes, inter alia, details of compliance with applicable laws and regulations; · reviews internal control reports, key policies, including measures taken to combat cyber security issues, and also the disaster recovery procedures of its service providers; · maintains a risk matrix with details of risks the Company is exposed to and the controls/mitigation in relation to those risks; · receives updates on pending changes to the regulatory and legal environment and progress towards the Company’s compliance with these; and · has considered the increased risk of cyber-attacks and received reports and assurance at meetings with its service providers that appropriate information security controls are in place. The AIFM, in addition, to its ongoing monitoring of the investment portfolio and transactions, carries out a formal due diligence exercise on the Portfolio Manager annually, ensuring that the appropriate controls, processes and resourcing are in place to manage the portfolio within the stated investment policies and guidelines. Responsibility for this process moved from Link Group to Frostrow during the year, with Frostrow performing initial due diligence process prior to their appointment.

Emerging Risks

The Board has in place a robust process to identify, assess and monitor the principal risks and uncertainties and also to identify and evaluate newly emerging risks. The Board, through the Audit and Risk Committee, regularly reviews all risks to the Company, including emerging risks, which are identified by a variety of means, including advice from the Company’s professional advisors, the Association of Investment Companies (the “AIC”), and Directors’ knowledge of markets, changes and events. No new or emerging risks were identified during the year.

Going Concern

The Directors have reviewed the going concern basis of accounting for the Company. The Company’s assets consist substantially of equity shares in listed companies and in most circumstances are realisable within a short timescale. The use of the going concern basis of accounting is appropriate because there are no material uncertainties related to events or conditions that may cast significant doubt about the ability of the Company to continue as a going concern. The Directors therefore have a reasonable expectation that the Company has adequate resources to continue in operational existence for 12 months from the date of the approval of these financial statements. Accordingly, the Directors continue to adopt the going concern basis in preparing the accounts. See note 1 for further detail.

Viability Statement

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

The stress-testing scenarios used to assess future viability incorporate a number of inputs. The financial structure of the Company is stable, with known payment obligations that can be modelled for future years with a low likelihood of any changes. Revenue expectations are modelled by the Portfolio Manager for future years with decreasing levels of certainty over time, based on the financial position and performance of investee companies. This is combined with an expectation of the rate of dividend payments to be made by the Company over the coming years to give an overall financial projection in normal market conditions.

To stress-test this projection, scenarios are then modelled for a 20% and 50% fall in both investee company valuations and the level of dividend payments made. In both cases, because the Company has both the ability to control its own dividend payments and a liquid portfolio of investments, the impact to reserves could be managed and the Company would remain viable during such periods.

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

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

In assessing the viability of the Company, the Directors have conducted a thorough assessment of each of the Company’s principal and emerging risks and uncertainties set out in the Strategic Report. Particular scrutiny was given to the impact of a significant fall in equity markets on the value of the Company’s investment portfolio.

The Directors have also considered the Company’s leverage and liquidity in the context of its long-dated fixed-rate borrowings (see notes 8 and 15 for further details on the borrowings), its income and expenditure projections and the fact that the Company’s investments comprise mainly readily realisable quoted securities which can be sold to meet funding requirements if necessary. As a result, the Directors do not believe that there will be any impact on the Company’s long-term viability.

All of the key operations required by the Company are outsourced to third-party providers and alternative providers could be secured at relatively short notice if necessary. The change from Link Group to Frostrow has demonstrated this and leaves the Company strongly positioned.

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

Modern Slavery Act

Due to the nature of the Company’s operational model and the fact that it generates no turnover, the Board is satisfied that the Company is not subject to the UK’s Modern Slavery Act 2015. The Company does not therefore make a modern slavery and human trafficking statement. The Board however appreciates the significance of Modern Slavery as an issue but considers the Company’s supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to represent a low risk of exposure to modern slavery.

In relation to the Company’s investments, the Board has noted that the Portfolio Manager signed a letter in 2023, and will again in 2024, which is sent to FTSE 350 companies considered at that time not to be in compliance with the requirements of the Modern Slavery Act 2015. This initiative, coordinated by Rathbones, was awarded the Stewardship Initiative of the Year award in 2022 by the UN Principles for Responsible Investment. Infractions tend to be of a technical nature, such as not having a Modern Slavery Statement available on websites, or not evidencing that such Statements have approval from the board of the relevant organisation. In 2023, the Portfolio Manager engaged with investee companies to highlight where corrections were required to achieve compliance and worked with Rathbones to monitor responses.

Within investments, Redwheel principally assesses the risk of modern slavery exposure through reference to the Corporate Human Rights Benchmark (which scores companies on governance and policies; remedies and grievance mechanisms; and embedding respect and human rights due diligence) and through company compliance with the UN Global Compact, the UN Guiding Principles on Business and Human Rights, and the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises.

The Portfolio Manager also uses Sustainalytics data to monitor breaches in global norms and controversies including employee incidents. The Materiality Map developed originally by the Sustainability Accounting Standards Board helps improve understanding of the sectors in which companies are most at risk of exposure to labour and modern slavery issues.

Gender Diversity

At the year end, there were two male and three female Directors on the Board. The Company has no employees and therefore there is nothing further to report in respect of gender representation within the Company.

The Company’s policy on diversity is detailed in the Corporate Governance Statement.

Bribery Act

The Company has a zero-tolerance policy towards bribery and is committed to carrying out business fairly, honestly and openly. The Portfolio Manager also adopts a zero-tolerance approach and has policies and procedures in place to prevent bribery.

Criminal Finances Act 2017

The Company has a commitment to zero tolerance towards the criminal facilitation of tax evasion.

Stewardship/Engagement

The Board requires the Portfolio Manager to adopt an active stewardship role, including the effective exercising of shareholders’ ownership rights. It believes that this is central to the achievement of its aim to preserve and grow the long-term real purchasing power of the assets entrusted to it by shareholders.

The Portfolio Manager thus monitors, evaluates and if necessary, actively engages or withdraws from investments with the aim of preserving or adding value to the portfolio. It became a signatory to the UN Principles for Responsible Investment in 2020, had been a signatory to the UK Stewardship Code 2012 and in 2023 was again endorsed as a signatory to the UK Stewardship Code 2020.

Both the Board and the Portfolio Manager firmly believe that environmental, social and governance issues can have a material financial impact on the value of a company along with its social licence to operate, and therefore on the value of its investors’ capital. It is thus important for a long-term responsible investor to integrate these issues into the investment process.

The Portfolio Manager believes that its stewardship role is wholly consistent with supporting companies to grow in a sustainable way, for executive teams and board members to run their companies for the long term and for the benefit of all stakeholders. Moreover, it believes that companies not run in a sustainable manner, from lack of prudence on financial strength and recklessness in the pursuit of growth at the expense of the environment and relations with business stakeholders, have significant potential to put shareholders’ capital at risk. Conversely, companies run in a prudent manner for all stakeholders are believed to be more likely to be successful, resilient, and financially rewarding for shareholders.

Further detail on the Portfolio Manager’s approach to stewardship is detailed within its Stewardship Policy1.

1 www.redwheel.com/uk/en/individual/resources

Environment

As an investment trust which outsources all of its operations, there are no greenhouse gas emissions to report from the operations of the Company other than those of the service providers and limited home working by the Board. The Company does not have responsibility for any other emissions producing sources reportable under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 or the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. Consequently, the Company consumed very little direct energy during the year and therefore is exempt from the disclosures required under the Streamlined Energy and Carbon Reporting criteria.

Environmental and climate considerations – both in a systemic sense and idiosyncratically – have become increasingly important for many in the investment industry and beyond over the past decade. Physical and transitional climate risks remain very much at the top of the list of factors considered to potentially have a material financial impact over the longer term. Attention is now also increasing in relation to the use and management by companies of natural resources, such as water, as well as biodiversity impacts arising in particular from pollution and waste management practices. The Portfolio Manager believes active engagement with portfolio companies is required to address these kinds of challenges. Divesting simply does not address the problem. Instead, by supporting companies as they transition over time to more sustainable business models, the Portfolio Manager believes that environmental impacts can be both reduced and mitigated.

Detail on the carbon characteristics of the Company is shown in the following sections.

When monitoring and reporting the carbon credentials of the Company, we use the metrics and methodologies recommended by the Taskforce on Climate-Related Financial Disclosures (TCFD). Analysis focuses on the emissions of companies that are considered to be either “Scope 1” or “Scope 2”. Scope 1 emissions are the emissions directly attributable to a company’s operations, whereas Scope 2 emissions are the emissions indirectly attributable to a company’s operations (e.g. relating to the power it consumes). Both are expressed in terms of tonnes of carbon dioxide equivalent (t CO2eq), the universal unit of measurement used to indicate the global warming potential of greenhouse gases, definition and methodology by Greenhouse Gas Protocol.

The integration into the analysis of corporate “Scope 3” emissions remains an aspiration as there are issues relating to data quality and the double-counting of emissions within methodologies which continue to hamper expansion of the analysis.

Total Scope 1 & 2 Emissions

A chart contained in the published Annual Report and Accounts provides representations of the absolute greenhouse gas emissions (GHG) attributable both to Temple Bar, and also to a notional investment of equal value in the FTSE All-Share.

An equity ownership approach is used to allocate both Scope 1 and Scope 2 emissions to investments. Under this approach, if an investor holds shares equal in value to 5 percent of a company’s total market capitalisation, then the investor is considered to own 5 percent of the Company; accordingly, it is considered to be liable for 5 percent of the Company’s GHG (or carbon) emissions.

As compared to the FTSE All-Share, Temple Bar exhibits a higher value for its Scope 1 and Scope 2 emissions (+37%).

These metrics are presented on an absolute basis; as the value of the Company increases, we would expect the overall emissions attributable to Temple Bar to increase. The respective values for Temple Bar and the FTSE All-Share, normalised by the value of the Company, which in essence is the carbon footprint metric, are 157.2 and 116.5 tCO2eq/ GBPm, respectively. Temple Bar’s carbon footprint is 35% higher as it has a higher exposure to sectors responsible for a considerable amount of emissions, such as Energy and Consumer Discretionary.

Weighted Average Carbon Intensity (WACI):

This chart shows the asset-weighted emissions intensity both of Temple Bar, and also of an investment of equal value in the FTSE All-Share.

Emissions intensity as a metric reflects the value of a company’s Scope 1 and Scope 2 carbon emissions (t CO2eq), normalised by revenues derived (here, using GBP millions), over a particular period in line with the carbon reporting one, which is financial year 2022 and 2021 respectively.

The weighted average carbon intensity of the Company is 3% lower than the FTSE All-Share, indicating on average a lower allocation to carbon intensive companies.

Observations

As compared to the FTSE All-Share (ex Investment Trusts), Temple Bar has a higher allocation to the Energy sector (+7.6%), Consumer Discretionary sector (+6.5%)At the same time, the Company’s allocation to the Materials and Utilities sectors is roughly the same as the FTSE All-Share. These are sectors responsible for a significant amount of carbon emissions and the previous figures and charts above demonstrate this.

That said, it is important to note that whilst Temple Bar has 100% reported emissions coverage, this is not the case for the FTSE All-Share. Here, only 60.1% of companies disclose emissions data directly. For some of the remaining 38.5% of companies it is possible to make an estimate; for others it is not. Where there is no available emissions data or third party estimates the companies have been excluded from the FTSE All-Share’s analysis, this portion of companies represent around 2.6% of the FTSE All-Share weight in terms of total invested.

Social

The Portfolio Manager continues to believe that the financial impact from social issues can be substantial.

Companies treating their employees, customers or suppliers inappropriately, store up future problems for the business in terms of human capital (lower productivity, disruption to production, staff turnover), brand value (dissatisfied customers, litigation) and reputation (supply-chain issues, health and safety). Local communities are also important to consider, particularly in extractive industries.

Cyber security is a notable risk for many companies, particularly for those holding customer information, sensitive sectors such as banks or utilities or where intellectual property is the basis of the value of a company.

The Portfolio Manager researches and monitors social risks, reviewing issues for focus based on the Company’s composition. Exposure to conflict regions is monitored for a risk of human rights abuses. Where there is potential exposure the Portfolio Manager will monitor news flow and speak with the investee companies to evaluate the risk. It may also speak to a company’s wider stakeholders in order to seek a more holistic assessment of specific situations. For instance, during the course of the year, a representative of the Portfolio Manager attended an event hosted by the Trades Union Congress to hear more about the experience of companies engaging with their workforces via unions.

Governance

The consideration of companies’ approaches to governance has been at the heart of the Portfolio Manager’s process since inception. Governance describes the controls and oversight processes in place to manage operational risks (including environmental and social risks); it also sets the basis for the culture of a firm. The Portfolio Manager seeks investee companies whose management runs the business as owners, and thinks long term about customers, employees, suppliers, and community. Such an approach is believed ultimately to benefit shareholders.

The Portfolio Manager believes in the importance of investee companies possessing a strong board, with non-executive directors possessing the requisite skills, experience and independence to counter the impact of a powerful or dominant chief executive officer. Diversity can support this aim and helps to counter ‘group think’ and incorporate better the views of wider stakeholders. Remuneration is an area of controversy, with management pay ratcheting higher, often without consequence for failure or poor performance. Compensation packages must be tied to long-term drivers of sustainable value, rather than a function of financial engineering. The timeframe for executive evaluations should be extended and there should also be a downside risk by requiring management to put significant ‘skin in the game’.

If companies behave responsibly and act sustainably there are benefits for society in terms of economic prosperity, political stability, and trust in free markets. This in turn drives further benefits for the companies themselves. The Portfolio Manager therefore believes it makes sense to integrate into the investment process the consideration of a company’s performance in addressing sustainability issues, even if the advantages of doing so take time to emerge.

Remuneration

The Portfolio Manager believes that governance within UK companies is generally of a very high standard. This reflects the UK Corporate Governance Code and the long history of efforts to raise standards. Whilst there are many individual aspects of corporate governance that the Portfolio Manager considers, remuneration – the design and implementation in practice of pay structures to reward and incentivise behaviours that help the Company execute against its strategy – remains one of the most important.

The Portfolio Manager’s view is that the basis of a good corporate remuneration policy is a well-constituted remuneration committee. This requires both the independence of the committee members and relevant experience in the field of remuneration. A committee must guard against the ratcheting upward of compensation awards, balancing this with attracting and retaining talent.

The Portfolio Manager encourages companies to set remuneration metrics that align with the overall strategy, reflecting appropriate financial incentives, in combination with non-financial metrics relating to environment and social issues. Environmental metrics should be calibrated to help address specific operational challenges, while on social issues relations with employees, customers, suppliers and the community should be reflected as appropriate.

Remuneration is a complex area and challenging to find the right balance between the various objectives and agendas. Shareholders will invariably give conflicting feedback to remuneration committees. Where the Portfolio Manager can have significant influence, they will engage with companies in the construction of the remuneration policy. Where they feel their shareholding in a given company is too low to ensure a constructive basis for engagement, they will share their own remuneration expectations document which sets out for companies what the Portfolio Manager expects to see.

The Portfolio Manager in conjunction with the Board will continue to develop the overall approach and push for higher standards, ensuring that they collectively protect shareholder interests and promote long-termism, set in the context of sustainability for all stakeholders.

 

Engagement Policy

Engagement is central to the Portfolio Manager’s process. Communicating with investee companies on areas of concern is a key aspect of the Portfolio Manager’s approach. Having a long-term investment horizon and concentrated portfolio allows the Portfolio Manager to build meaningful relationships.

The engagement process is led and carried out by the Portfolio Manager, consistent with the Redwheel Stewardship Policy. The specifics of each process will be determined by the size of the exposure within the portfolio and the materiality of the identified risk, amongst other factors. The Portfolio Manager will draw from its own experience in assessing materiality risks as well as both the Company’s own materiality assessment and independent assessments on a sector basis, such as the Materiality Map developed originally by the Sustainability Accounting Standards Board.

The method of engagement will depend on the engagement objectives. For example, where the Portfolio Manager holds a position in an investee company and is materially at odds with the Company’s strategic direction or specific actions, it will usually set out its concerns in a letter to the Company and follow up with a meeting. In some instances, the Portfolio Manager will go further and set out a detailed analysis of the business or sector, with proposed alterations to strategy, and discuss this analysis with management.

The Portfolio Manager will engage with the chair of an investee company, particularly at times of management change or in relation to long-term questions on strategic direction. It may also engage with the investee company’s senior independent director should it have concerns about the chair or about board effectiveness. Other engagements may take place in response to a request from the investee company themselves, such as engagements with the chair of the remuneration committee to discuss incentive structures and policies. Engaging in collaboration with other shareholders, and casting votes against management at a company’s AGM provide further means to escalate concerns when direct bilateral engagement fails. As regards remuneration, the Portfolio Manager aligns its approach to reflect the guidance provided by the Pensions and Lifetime Savings Association, the UK Corporate Governance Code and The Investment Association, as updated from time to time.

The evaluation of the outcome of the Portfolio Manager’s engagements will depend on the type of engagement and the extent to which the original objective can be considered to have been achieved.

Where the Portfolio Manager looks for specific actions, it will assess the outcome on whether management or the board engaged and subsequently chose to act on the suggestions made. On other issues, the evaluation of the engagement may be more qualitative and not as transparent. The Portfolio Manager tries to be very open about the nature of its engagements and the outcomes of them.

Case studies of the Portfolio Manager’s engagement with investee companies during the year are provided in the Company’s full Annual Report and are just some of numerous calls, meetings and written correspondence that the Portfolio Manager had with companies to discuss a variety of sustainability and ESG-related issues.

Externalities and Non-Environmental Issues

In addition to adopting a stewardship approach to investment and integrating sustainability and ESG considerations into its investment approach, the Board asks the Portfolio Manager to consider systemic externalities when assessing a company’s suitability for inclusion in the portfolio. Systemic externalities are costs, usually considered as costs to society or the environment, which are not captured by market pricing. In particular, there are some areas where companies operating legally and ethically may, through their joint actions (whether or not coordinated), inadvertently contribute to the delivery of unintended consequences for people and planet, particularly in relation to climate change, global financial fragility and antimicrobial resistance.

These are areas where the Board believes that engagement with investee companies, in conjunction with other asset owners, is of particular importance in order to raise awareness amongst companies of the need for market-based response. The Portfolio Manager reports regularly to the Board with regard to its engagement with portfolio companies in relation to such issues.

Future Developments

The future development of the Company is dependent on the success of its investment strategy in the light of economic and equity market developments. The outlook is discussed in the Chairman’s Statement and the Portfolio Manager’s Report.

Strategic Report
On behalf of the Board

Richard Wyatt
Chairman

3 April 2024

Statement of Comprehensive Income

		2023			2022
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£000	£000	£000	£000	£000	£000
Total Income	4	32,422	–	32,422	34,791	–	34,791
Profit/(losses) on investments	12	–	62,826	62,826	–	(42,572)	(42,572)
Currency exchange loss		–	(143)	(143)	–	(13)	(13)
Total income/(loss)		32,422	62,683	95,105	34,791	(42,585)	(7,794)
Expenses
Portfolio management fees	6	(1,103)	(1,654)	(2,757)	(1,175)	(1,762)	(2,937)
Other expenses	7	(1,068)	(721)	(1,789)	(1,057)	(487)	(1,544)
Profit/(loss) before finance costs and tax		30,251	60,308	90,559	32,559	(44,834)	(12,275)
Finance costs	8	(1,123)	(1,685)	(2,808)	(1,123)	(1,685)	(2,808)
Profit/(loss) before tax		29,128	58,623	87,751	31,436	(46,519)	(15,083)
Tax	9	(926)	–	(926)	(886)	–	(886)
Profit/(loss) for the year		28,202	58,623	86,825	30,550	(46,519)	(15,969)
Earnings per share	11	9.3p	19.4p	28.7p	9.4p	(14.3p)	(4.9p)

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

No operations were acquired or discontinued during the year.

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

The notes to the financial statements form an integral part of the financial statements.

Statement of Changes in Equity

		Called-up share	Share premium	Capital	Revenue	Total
		capital	account	reserves	reserve	equity
	Notes	£’000	£’000	£’000	£’000	£’000
Balance at 1 January 2022		16,719	96,040	672,616	11,708	797,083
(Loss)/profit for the year		–	–	(46,519)	30,550	(15,969)
Contributions by and distributions to owners
Cost of shares bought back for treasury		–	–	(25,891)	–	(25,891)
Dividends paid to equity shareholders	10	–	–	–	(28,877)	(28,877)
Balance at 31 December 2022		16,719	96,040	600,206	13,381	726,346
Profit for the year		–	–	58,623	28,202	86,825
Contributions by and distributions to owners
Cost of shares bought back for treasury		–	–	(63,535)	–	(63,535)
Dividends paid to equity shareholders	10	–	–	–	(28,932)	(28,932)
Balance at 31 December 2023		16,719	96,040	595,294	12,651	720,704

As at 31 December 2023, the Company had distributable revenue reserves of £12,651,000 (2022: £13,381,000) and distributable capital reserves of £595,294,000 (2022: £600,206,000) for the payment of future dividends. Only the revenue reserve and capital reserves are distributable.

The notes to the financial statements form an integral part of the financial statements.

Statement of Financial Position

		31 December 2023		31 December 2022
	Notes	£’000	£’000	£’000	£’000
Non-current assets
Investments	12		776,875		782,463
Current assets
Investments	12	13,713		5,170
Cash and cash equivalents		4,275		13,240
Receivables	13	2,979		2,257
			20,967		20,667
Total assets			797,842		803,130
Current liabilities
Payables	14		(2,394)		(2,077)
Total assets less current liabilities			795,448		801,053
Non-current liabilities
Interest bearing borrowings	15		(74,744)		(74,707)
Net assets			720,704		726,346
Equity attributable to equity holders
Ordinary share capital	16	16,719		16,719
Share premium		96,040		96,040
Capital reserves		595,294		600,206
Revenue reserve		12,651		13,381
Total equity attributable to equity holders			720,704		726,346
NAV per share	18		248.0p		228.5p
NAV per share with debt at fair value1	18		252.2p		233.5p

1  Alternative Performance Measure – See glossary of terms for definition and more information.

The notes to the financial statements form an integral part of the financial statements.

The financial statements of Temple Bar Investment Trust Plc (registered number: 00214601) were approved by the Board of Directors and authorised for issue on 3 April 2024. They were signed on its behalf by:

Richard Wyatt
Chairman

Statement of Cash Flows

		31 December 2023		31 December 2022
	Notes	£’000	£’000	£’000	£’000
Cash flows from operating activities
(Loss)/profit before tax			87,751		(15,083)
Adjustments for:
Losses/(gains) on investments		(62,826)		42,572
Finance costs		2,808		2,808
Dividend income	4	(32,278)		(34,504)
Interest income	4	(144)		(287)
Dividends received		32,037		37,680
Interest received		(97)		584
Decrease/(increase) in other receivables		38		(361)
Increase in other payables		584		70
Net overseas withholding tax paid	9	(1,229)		(886)
			(61,107)		47,676
Net cash flows from operating activities			26,644		32,593
Purchases of investments		(137,215)		(127,456)
Sales of investments		197,110		154,148
Net cash flows from investing activities			59,895		26,692
Cash flows from financing activities
Equity dividends paid	10	(28,932)		(28,877)
Interest paid on borrowings		(2,773)		(2,772)
Shares bought back for treasury		(63,799)		(26,022)
Net cash flows used in financing activities			(95,504)		(57,671)
Net (decrease)/increase in cash and cash equivalents			(8,965)		1,614
Cash and cash equivalents at the start of the year			13,240		11,626
Cash and cash equivalents at the end of the year			4,275		13,240

The notes to the financial statements form an integral part of the financial statements.

Notes to the Financial Statements

General information

Temple Bar Investment Trust Plc was incorporated in England and Wales in 1926 with the registered number 00214601.

The Company carries on the business as an investment trust company within the meaning of Sections 1158/1159 of the Corporation Tax Act 2010.

1. Principal Accounting Policies

Basis of accounting

The financial statements have been prepared on a going concern basis, under the historical cost convention, modified by the valuation of investments at fair value, prepared in accordance with UK adopted international accounting standards.

The annual financial statements have also been prepared in accordance with the AIC SORP for investment trusts issued by the AIC in July 2022, except to any extent where it is not consistent with the requirements of IFRS. The principal accounting policies adopted by the Company are set out below.

All values are rounded to the nearest thousand pounds unless otherwise indicated.

Going concern

The Directors are required to make an assessment of the Company’s ability to continue as a going concern and that the Company has adequate resources to continue in operational existence for 12 months from the date when these financial statements are approved.

In making this assessment, the Directors have considered a wide variety of emerging and current risks to the Company, as well as mitigation strategies that are in place. The Board has also reviewed stress-testing and scenario analyses prepared by the AIFM to assist it in assessing the impact of changes in market value and income with associated cash flows. In making this assessment, the AIFM has considered plausible downside scenarios.

These tests are carried out as an arithmetic exercise, which can apply equally to any set of circumstances in which asset value and income are significantly impaired. It was concluded that in a plausible downside scenario, the Company could continue to meet its liabilities. Whilst the economic future is uncertain, the opinion of the Directors is that no foreseeable downside scenario would be to a level which would threaten the Company’s ability to continue to meet its liabilities as they fall due.

Based on the information available to the Directors at the time of this report, including the results of the stress tests and scenario analyses, and having taken account of the liquidity of the investment portfolio, the Company’s cash flow and borrowing position (see notes 8 and 15 for further details on borrowings), the Directors are satisfied that the Company has adequate financial resources to continue in operation for 12 months from the date of signing of these financial statements and that, accordingly, it is appropriate to adopt the going concern basis.

Presentation of Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income.

Income

Dividend income from investments is recognised when the Company’s right to receive payment has been established, normally the ex-dividend date.

Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of cash dividend foregone is recognised as income. Any excess in the value of shares received over the amount of cash dividend foregone is recognised as a capital gain in the Statement of Comprehensive Income.

Interest income is recognised in line with coupon terms on a time-apportioned basis. Special dividends are credited to capital or revenue according to their circumstances.

Foreign currency

The financial statements are prepared in pounds sterling because that is the currency of the primary economic environment in which the Company operates.

The primary objective of the Company is to generate returns in pounds sterling, its capital-raising currency. The liquidity of the Company is managed on a day-to-day basis in sterling as the Company’s performance is evaluated in that currency. Therefore, the Directors consider pounds sterling as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.

Transactions involving foreign currencies are converted at the exchange rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities as well as instruments carried at fair value are translated into pounds sterling at the exchange rate ruling on the year-end date. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income.

Expenses

All expenses are accounted for on the accruals basis. In respect of the analysis between revenue and capital items presented within the Statement of Comprehensive Income, all expenses have been presented as revenue items except as follows:

· transaction costs which are incurred on the purchases or sales of investments designated as fair value through profit or loss are expensed to capital in the Statement of Comprehensive Income; and

· expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated and, accordingly, the investment management fee and finance costs have been allocated 40% to revenue and 60% to capital, in order to reflect the Directors’ long-term view of the nature of the expected investment returns of the Company; this remains consistent with the prior year.

Taxation

The tax expense represents the sum of the current tax expense. The tax currently payable is based on the taxable profit for the year. The taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using a blended rate as applicable throughout the year.

In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the ‘marginal basis’. Under this basis, if taxable income is capable of being entirely offset by expenses in the revenue column of the income statement, then no tax relief is transferred to the capital column.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated at the enacted tax rate that is expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the revenue return of the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

· Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.

· Irrecoverable withholding tax is recognised on any overseas dividends on an accruals basis using the applicable rate for the country of origin.

Financial instruments

The Company classifies its financial assets as subsequently measured at amortised cost or measured at fair value through profit or loss on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Financial assets are measured at fair value through profit or loss if their contractual terms do not give rise to cash flows on specified dates that are solely payments of principal and interest and at amortised cost if they do. Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Company becomes party to the contractual provisions of the instrument. The Company will offset financial assets and financial liabilities if it has a legally enforceable right to offset the recognised amounts and interest and intends to settle on a net basis. A financial asset is derecognised when the right to receive cash flows from the asset expires or the rights to receive cash flows from the asset have been transferred and a financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired.

Investments

Equity investments are held at fair value through profit or loss as they fail the contractual cash flows test under IFRS 9. Debt instruments that pass the contractual cash flow test are held under a business model to manage them on a fair value basis for investment income and fair value gains and are therefore classified as fair value through profit or loss.

Upon initial recognition, investments are measured at fair value through profit or loss. Gains or losses on investments measured at fair value through profit or loss are included in net profit or loss as a capital item and transaction costs on acquisition or disposal of investments are expensed. For investments that are actively traded in organised financial markets, fair value is determined by reference to stock exchange quoted market bid prices at the close of business on the year-end date.

All purchases and sales of investments are recognised on the trade date, i.e. the date that the Company commits to purchase or sell an asset.

Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.

Interest bearing borrowings

Interest bearing borrowings, being the debenture stock and loans issued by the Company, are initially recognised at a carrying value equivalent to the proceeds received net of issue costs associated with the borrowings. After initial recognition, interest bearing borrowings are subsequently measured at amortised cost using the effective interest rate method.

When calculating the NAV with debt at fair value the fair value of the private placement loans is determined using discounted cash flow techniques which utilise inputs including interest rates obtained from comparable loans in the market.

Equity dividends payable

Equity dividends payable are recognised when the shareholders’ right to receive payment is established. For interim dividends this is when they are paid and for final dividends this is when they are approved by shareholders.

Cash and cash equivalents

Cash and cash equivalents (which are presented as a single class of asset on the Statement of Financial Position) comprise cash at bank and in hand, and deposits with an original maturity of three months or less.

The carrying value of these assets approximates their fair value.

Reserves

The share capital represents the nominal value of the Company’s ordinary shares.

The share premium account represents the excess over nominal value of the fair value of consideration received for the Company’s ordinary shares, net of expenses of the share issue. This reserve cannot be distributed.

The capital reserve represents realised and unrealised capital and exchange gains and losses on the disposal and revaluation of investments and of foreign currency items. Realised gains can be distributed, unrealised gains cannot be distributed.

The revenue reserve represents retained profits from the income derived from holding investment assets less the costs and interest on cash balances associated with running the Company. This reserve can be distributed.

2. Significant Accounting Judgements, Estimates and Assumptions

There are no significant judgements, estimates or assumptions involved in the presentation of the Company’s accounts, other than the judgement on the functional and presentational currency of the Company as set out in the preceding note.

3. Adoption of New and Revised Standards New standards, interpretations and amendments adopted from 1 January 2023

There are no new standards impacting the Company that have had a significant effect on the annual financial statements for the year ended 31 December 2023.

Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements)

In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2. The amendments aim to make accounting policy disclosures more informative by replacing the requirement to disclose ‘significant accounting policies’ with ‘material accounting policy information’. The amendments also provide guidance under what circumstance, the accounting policy information is likely to be considered material and therefore requiring disclosure.

These amendments have no effect on the measurement or presentation of any items in the financial statements of the Company nor do they affect the disclosure of accounting policies of the Company.

Standards issued but not yet effective

There are no standards or amendments not yet effective which are relevant or have a material impact on the Company.

4. Income

	2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Investment Income
UK dividends	23,085	–	23,085	26,541	–	26,541
Overseas dividends	9,193	–	9,193	7,963	–	7,963
Interest from fixed-interest securities	84	–	84	256	–	256
	32,362	–	32,362	34,760	–	34,760
Other income
Deposit interest	60	–	60	31	–	31
Total income	32,422	–	32,422	34,791	–	34,791

During the year ended 31 December 2023, the Company received special dividends totalling £nil (2022: £3,183,079). All the special dividends in 2022 were recognised as revenue and included within investment income.

5. Segmental Reporting

The Directors are of the opinion that the Company is engaged in a single segment of business being investment business.

6. Portfolio Management Fee

	2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Portfolio management fee	1,103	1,654	2,757	1,175	1,762	2,937
	1,103	1,654	2,757	1,175	1,762	2,937

Under the terms of the Portfolio Management Agreement, Redwheel is entitled to a management fee, details of which are set out in the Report of the Directors. As at 31 December 2023, an amount of £1,306,000 (2022: £741,000) was payable to Redwheel in relation to the management fees.

7. Other Expenses

	2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Transaction costs1	–	430	430	–	310	310
Directors’ fees (see Report on Directors’ Remuneration)	181	–	181	155	–	155
AIFM fee	194	291	485	83	124	207
Company Secretary fee	69	–	69	104	–	104
Registrar’s fee	60	–	60	113	–	113
Marketing costs	59	–	59	108	–	108
Auditor’s remuneration – annual audit2	51	–	51	47	–	47
Depositary fee	92	–	92	95	–	95
Other expenses	362	–	362	352	53	405
	1,068	721	1,789	1,057	487	1,544

All expenses are inclusive of VAT where applicable.

1 Transaction costs represent costs incurred on both the purchase and sale of investments. Transaction costs on purchases amounted to £360,000 (2022: £283,100) and on sales amounted to £70,000 (2022: £27,000).

2  During the year audit fees of £42,600 (2022: £39,500) (excluding VAT) were due to the Auditor.

8. Finance Costs

	2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
4.05% Private Placement Loan 20281	823	1,234	2,057	823	1,234	2,057
2.99% Private Placement Loan 20471	300	451	751	300	451	751
Total finance costs	1,123	1,685	2,808	1,123	1,685	2,808

The amortisation of the loan issue costs is calculated using the effective interest method.

1 The 4.05% and 2.99% Private Placement Loans contain the following principal financial or other covenants, with which failure to comply could necessitate the early repayment of the loan.

These were all complied with during the current and previous year:

· net tangible assets of at least £275 million;

· aggregate principal amount of financial indebtedness not to exceed 50% of net tangible assets;

· prior approval by the note holder of any change of Portfolio Manager; and

· prior approval by the note holder of any change in the Company’s investment objective and policy.

9. Taxation

The Company has no corporation tax liability for the year ended 31 December 2023 (2022: nil).

	2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Analysis of charge for the year:
Overseas withholding tax suffered	926	–	926	886	–	886
	926	–	926	886	–	886

The charge for the year can be reconciled to the profit per the Statement of Comprehensive Income as follows:

	2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Profit/(loss) before taxation	29,128	58,623	87,751	31,436	(46,519)	(15,083)
Tax at UK corporation tax rate of 23.5% (2022: 19.0%)	6,845	13,776	20,621	5,973	(8,839)	(2,866)
Tax effects of:
Non–taxable(gains)/losses on investments1	–	(14,730)	(14,730)	–	8,091	8,091
Disallowed expenses	–	101	101	–	69	69
Non–taxable UK dividends	(5,425)	–	(5,425)	(5,043)	–	(5,043)
Overseas withholding tax suffered	926	–	926	886	–	886
Non–taxable overseas dividends	(2,161)	–	(2,161)	(1,513)	–	(1,513)
Excess management expenses	741	853	1,594	583	679	1,262
Total tax charge for the year	926	–	926	886	–	886

1  Investment trusts are not subject to corporation tax on these items.

No provision for deferred taxation has been made in the current year. The Company has not provided for deferred tax on capital profits arising on the revaluation of investments, as it is exempt from tax on these items because of its status as an investment trust company.

The Company has not recognised a deferred tax asset on the excess management expenses of £130,092,000 (2022: £124,374,000). It is not anticipated that these excess expenses will be utilised in the foreseeable future.

10. Dividends

	2023	2022
	£’000	£’000
Amounts recognised as distributions to equity holders in the year
Fourth interim dividend for year ended 31 December 2022 of 2.5p (2022: fourth interim dividend for year ended 31 December 2021 of 2.05p*) per share	7,790	6,759
Interim dividends for year ended 31 December 2023. Two payments of 2.3p and one payment of 2.5p (2022: one payment of 2.05p, one payment of 2.3p and one payment of 2.5p) per share	21,142	22,118
	28,932	28,877
Fourth interim dividend for the year ended 31 December 2023 of 2.5p (fourth interim dividend 2022: 2.5p) per share	7,214	7,791

The fourth interim dividend is not included as a liability in these financial statements.

Therefore, also set out below is the total dividend payable in respect of these financial years, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered.

	2023	2022
	£’000	£’000
Interim dividends (three)	21,142	22,118
Fourth interim dividend for year ended 31 December 2023 of 2.5p (2022: 2.5p) per share	7,214	7,791
	28,356	29,909

*  Restated to reflect the subsequent 5 for 1 share split.

11. Earnings per Share

	2023			2022
	Revenue	Capital	Total	Revenue	Capital	Total
Basic and diluted
Profit/(loss) for the year (£000’s)	28,202	58,623	86,825	30,550	(46,519)	(15,969)
Weighted average number of ordinary shares			302,388,667			325,567,365
Earnings per ordinary share (pence)	9.3	19.4	28.7	9.4	(14.3)	(4.9)

12. Investments

(a) Investment portfolio summary

	2023			2022
	Quoted	Debt		Quoted	Debt
	equities	securities	Total	equities	securities	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Opening cost at the beginning of the year	734,594	5,172	739,766	736,629	7,948	744,577
Opening unrealised appreciation/(depreciation) at the beginning of the year	47,869	(2)	47,867	112,521	(4)	112,517
Opening fair value at the beginning of the year	782,463	5,170	787,633	849,150	7,944	857,094
Movements in the year:
Purchases at cost	123,559	13,680	137,239	59,648	67,611	127,259
Sales proceeds	(191,910)	(5,200)	(197,110)	(83,787)	(70,361)	(154,148)
Realised gain/(loss) on sale of investments	67,070	–	67,070	22,104	(26)	22,078
Change in unrealised (depreciation)/ appreciation	(4,307)	63	(4,244)	(64,652)	2	(64,650)
Closing fair value at the end of the year	776,875	13,713	790,588	782,463	5,170	787,633
Closing cost at the end of the year	733,313	13,652	746,965	734,594	5,172	739,766
Closing unrealised appreciation/(depreciation) at the end of the year	43,562	61	43,623	47,869	(2)	47,867
Closing fair value at the end of the year	776,875	13,713	790,588	782,463	5,170	787,633

The Company received £197,110,000 (2022: £154,148,000) from investments sold in the year. The book cost of these investments when they were purchased was £130,040,000 (2022: £132,070,000). These investments have been revalued over time and until they were sold any gains/losses were included in the fair value of the investments.

(b) Fair value of financial instruments

IFRS 13 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications:

· Level 1 – valued using quoted prices in active markets for identical investments.

· Level 2 – valued using other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments, credit risk, etc). There are no level 2 financial assets (2022: £nil).

· Level 3 – valued using significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments). There are no level 3 financial assets (2022: £nil).

All of the Company’s investments are in quoted securities actively traded on recognised stock exchanges, with their fair value being determined by reference to their quoted bid prices at the reporting date and have therefore been determined as Level 1.

There were no transfers between levels in the year (2022: no transfers) and as such no reconciliation between levels has been presented.

13. Receivables

	2023	2022
	£’000	£’000
Accrued income	1,937	1,481
Other receivables	1,042	776
	2,979	2,257

Accrued income includes dividends and fixed-interest income.

14. Current Liabilities

		2023	2022
		£’000	£’000
Accruals		2,363	1,782
Due to broker		31	295
		2,394	2,077

Accruals include the interest payable on borrowings amount to £802,000 (£2022: £805,000).

15. Borrowings

	2023	2022
	£’000	£’000
Interest bearing borrowings
Amounts payable after more than one year:
4.05% Private Placement Loan 2028	49,849	49,817
2.99% Private Placement Loan 2047	24,895	24,890
Total	74,744	74,707

 

	2023	2022
	£’000	£’000
Opening balance as per the Statement of Financial Position	74,707	74,671
Borrowings repaid	–	–
Interest movement	(2,771)	(2,772)
Finance costs for the year as per the Statement of Comprehensive Income	2,808	2,808
Closing balance as per the Statement of Financial Position	74,744	74,707

The 4.05% Private Placement Loan is secured by a floating charge over the assets of the Company. The loan is repayable at par, £50,000,000, on 3 September 2028.

The 2.99% Private Placement Loan is secured by a floating charge over the assets of the Company. The loan is repayable at par, £25,000,000, on 24 October 2047.

See note 20 for the disclosure and fair value categorisation of the financial liabilities.

16. Ordinary Share Capital

	2023	2022
	Number	Number
As at 1 January	317,822,386	65,951,785
Purchase of shares into treasury pre-share split	–	(260,125)
Issue of shares following 5 for 1 share split	–	262,766,640
Purchase of shares into treasury post-share split	(27,209,505)	(10,635,914)
As at year end:
In circulation	290,612,881	317,822,386
In Treasury	43,750,944	16,541,439
Listed	334,363,825	334,363,825
Nominal Value of 5p ordinary shares (£’000)	16,719	16,719

During the year, the Company bought back ordinary shares at a cost of £63,535,000 (Year ended 31 December 2022: £25,891,000).

At the AGM of the Company held in May 2022, shareholders approved a resolution for a five for one share split such that each shareholder would receive five shares with a nominal value of 5 pence each for every one share held. 267,491,060 additional shares (262,766,640 to shareholders and 4,724,420 in relation to shares held in treasury) were issued following this approval.

17. Contingent Liabilities And Capital Commitments

As at 31 December 2023, there were no contingent liabilities or capital commitments for the Company (2022: £nil).

18. Net asset value (“NAV”) per share

The NAV per share is based on the net assets attributable to the equity shareholders of £720,704,000 (31 December 2022: £726,346,000) and 290,612,881 (31 December 2022: 317,822,836) shares being the number of shares in issue at the year end.

The NAV per share with debt at fair value is based on the net assets attributable to the equity shareholders, adjusted for the difference between the debt at book value and fair value as shown in note 20, and the number of shares in issue at the year end. Adjusting for debt at fair value resulted in an increase in net assets of £12,290,000 or 4.2p per share (31 December 2022: increase of £15,938,000 or 5.0p per share).

19. Related Party Transactions and Transactions with the Portfolio Manager

IAS 24 ‘Related party disclosures’ requires the disclosure of material transactions between the Company and any related parties. Accordingly, the disclosures required are set out below:

Directors – The remuneration of the Directors is set out in the Report onDirectors’ Remuneration. There were no contracts existing during or at the end of the year in which a Director of the Company is or was interested and which are or were significant in relation to the Company’s business. There were no other material transactions during the year with the Directors of the Company.

At 31 December 2023, there was £nil (2022: £nil) payable to the Directors for fees and expenses.

AIFM and Portfolio Manager – On 1 July 2023, Frostrow Capital LLPwas appointed the AIFM of the Company and has delegated portfolio management to Redwheel, who are deemed to be Key Management Personnel for the purposes of disclosing related party information under IAS24. Details of the services provided by the Portfolio Manager are given in the Report of the Directors and their fees for the year, along with outstanding balances to them, are set out in note 6.

20. Risk Management and Financial Instruments

The Company’s investing activities undertaken in pursuit of its investment objective involve certain inherent risks. The main financial risks arising from the Company’s financial instruments are market price risk, interest rate risk, liquidity risk, credit risk and currency risk. The Board reviews and agrees policies for managing each of these risks as summarised below. The Board has also established a series of investment parameters, which are reviewed annually, designed to limit the risk inherent in managing a portfolio of investments. These policies have remained substantially unchanged during the current and preceding periods. The Board meets on four scheduled occasions in each year and at each meeting it receives sufficient financial and statistical information to enable it to monitor adequately the investment performance and status of the business.

Market price risk

Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s business. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. The Company’s borrowings have the effect of increasing the market risk faced by shareholders.

Interest rate risk

Interest rate risk is the risk of movements in the value of financial instruments or interest income cash flows that arise as a result of fluctuations in interest rates. The Company finances its operations through retained profits including capital profits, and additional financing is obtained through the two Private Placement Loans, on both of which interest is paid at a fixed rate and therefore subject to fair value interest rate risk.

Cash flow interest rate risk

The majority of the Company’s financial assets are equity shares and other investments which neither pay interest nor have a maturity date. The Company’s fixed-interest holdings have a market value of £13,713,000, representing 1.9% of net assets (2022: £5,170,000; 0.7%). The weighted average running yield as at 31 December 2023 was 5.0% (2022: 4.0%) and the weighted average remaining life was 1.6 years (2022: 0.7 years). The Company’s cash balance of £4,275,000 (2022: £13,240,000) earns interest, calculated on a tiered basis, depending on the balance held, by reference to the base rate. Cashflow interest rate risk is not considered a significant risk to the Company.

Fair value interest rate risk

The 4.05% Private Placement Loan and the 2.99% Private Placement Loan, which are repayable in 2028 and 2047 respectively, pay interest at fixed rates. The weighted average period until maturity of the loans is 11 years (2022: 12 years) and the weighted average interest rate payable is 3.7% (2022: 3.7%) per annum. The fair value of the loans will vary with changes in interest rates. As interest rates increase the fair value of the loan liability is expected to decrease, while when interest rates decrease the fair value of the loan liability is expected to increase.

Liquidity risk

The Company’s assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of cash balances and short-term bank deposits.

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. This is mitigated by the Portfolio Manager reviewing the credit ratings of broker counterparties. The Company’s Custodian is responsible for the collection of income on behalf of the Company. Cash is held either with reputable banks with high quality external credit ratings or in liquidity/cash funds providing a spread of exposures to various underlying banks in order to diversify risk. The carrying amounts of financial assets represent their maximum exposure to credit risk. The debt security held at the year end has a credit rating of AA.

Currency risk

The income and capital value of the Company’s investments and liabilities can be affected by exchange rate movements as some of the Company’s assets and income are denominated in currencies other than Pounds Sterling, which is the Company’s reporting currency. The Company does not currently hedge its currency exposure. The key areas where foreign currency risk could have an impact on the Company are:

· movements in rates that would affect the value of investments; and

· movements in rates that would affect the income received.

The Company had the following currency exposures, all of which are included in the Statement of Financial Position based on the exchange rates ruling at the respective year ends. Exposures vary throughout the year as a consequence of changes in the composition of the net assets of the Company arising out of the investment and risk-management processes.

	2023
	Investments	Cash	Receivables	Payables	Borrowings	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Euro	114,111	–	–	–	–	114,111
US Dollar	55,052	–	189	–	–	55,241
Canadian Dollar	9,892	–	–	–	–	9,892
Hong Kong Dollar	10,394	–	–	–	–	10,394
Japanese Yen	14,609	–	–	–	–	14,609
Pounds Sterling	586,530	4,275	2,790	(2,394)	(74,744)	516,457
	790,588	4,275	2,979	(2,394)	(74,744)	720,704
	2022
	Investments	Cash	Receivables	Payables	Borrowings	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Euro	50,086	–	–	–	–	50,086
US Dollar	55,995	–	151	–	–	56,146
Canadian Dollar	9,919	–	–	–	–	9,919
Hong Kong Dollar	12,350	–	–	–	–	12,350
Japanese Yen	11,434	–	–	–	–	11,434
Pounds Sterling	647,849	13,240	2,106	(2,077)	(74,707)	586,411
	787,633	13,240	2,257	(2,077)	(74,707)	726,346

Foreign currency sensitivity

	2023		2022
	£’000	£’000	£’000	£’000
Projected movement	+10%	-10%	+10%	-10%
Effect on net assets for the year	(18,568)	22,694	(12,858)	15,380

Other price risk exposure

If the investment valuation fell by 20% at 31 December 2023, the impact on the profit or loss and net assets would have been negative £158.1 million (2022: 20% negative £157.5 million). If the investment portfolio valuation rose by 20% at 31 December 2023, the impact on the profit or loss and net assets would have been positive £158.1 million (2022: 20% positive £157.5 million). The calculations are based on the portfolio valuation as at the respective year-end dates.

The Company held the following categories of financial instruments, all of which are included in the Statement of Financial Position at fair value or amortised cost which is an approximation of fair value, with the exception of interest-bearing borrowings which are shown at amortised cost at 31 December.

	2023		2022
	Amortised		Amortised
	cost	Fair value	cost	Fair value
	£’000	£’000	£’000	£’000
Assets at fair value through profit or loss	790,588	790,588	787,633	787,633
Cash	4,275	4,275	13,240	13,240
Receivables and Payables
Investment income receivable	1,937	1,937	1,481	1,481
Other receivables	1,042	1,042	776	776
Payables	(2,394)	(2,394)	(2,077)	(2,077)
Interest- bearing borrowings:
4.05% Private Placement Loan	(49,849)	(47,291)	(49,817)	(44,872)
2.99% Private Placement Loan	(24,895)	(15,163)	(24,890)	(13,987)
	720,704	732,994	726,346	742,194

The 4.05% Private Placement Loan 2028 and the 2.99% Private Placement Loan 2047 do not have prices quoted on an active market, however their fair values have been calculated using observable inputs. As such they have been classified as Level 2 instruments (2022: Level 2).

Liquidity risk exposure

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

Contractual maturities of the financial liabilities at the year end, including future interest payments not yet accrued for, based on the earliest date on which payment can be required, are as follows:

	2023
	Three	Not more
	months	than one			More than
	or less	year	Two years	Three years	three years	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Loan Interest due	1,012	1,760	2,772	2,772	19,748	28,064
Loan principle	–	–	–	–	75,000	75,000
Accruals	1,452	140	–	–	–	1,592
	2022
	Three	Not more
	months	than one			More than
	or less	year	Two years	Three years	three years	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Loan Interest due	1,012	1,760	2,772	2,772	22,520	30,836
Loan principle	–	–	–	–	75,000	75,000
Accruals	1,133	139	–	–	–	1,272

Capital management policies and procedures

The Company’s capital management objectives are to ensure that it will be able to continue as a going concern, and to provide long-term growth in revenue and capital, principally by investment in UK securities. There have been no changes in the Company’s objectives, policies and processes for managing capital from the prior year.

The Company’s capital is its equity share capital and reserves that are shown in the Statement of Financial Position and fixed-term loans (see note 15) at a gross total of £795,488,000 (2022: £801,053,000).

The Company is subject to several externally imposed capital requirements:

· as a public Company, the Company has a minimum share capital of £50,000;

· in order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by company law; and

· the Note Purchase Agreements governing the terms of the Private Placement Loans also contain certain financial covenants as set out in note 8. These are measured in accordance with the policies used in the Annual Report & Financial Statements.

The Company has complied with all of the above requirements during the current and prior year.

21. Post Balance Sheet Events

Subsequent to the year end and up to 2 April 2024, the Company bought back 3,771,869 ordinary shares for treasury, at a total cost of £8,910,000, representing 1.3% of the issued share capital as at 31 December 2023.

On 15 February 2024, the Board approved a fourth interim dividend for the year ended 31 December 2023, of 2.5 pence per ordinary share payable on 2 April 2024.

Notice of Annual General Meeting

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the action you take you should consult your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 immediately.

If you have sold or otherwise transferred all of your ordinary shares in Temple Bar Investment Trust Plc, please forward this document and the accompanying form of proxy as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was or is being effected for delivery to the purchaser or transferee.

NOTICE IS HEREBY GIVEN that the 98th Annual General Meeting (“AGM”) of Temple Bar Investment Trust Plc will be held at 25 Southampton Buildings, London WC2A 1AL on Tuesday, 7 May 2024 at 11.00 am for the purpose of considering and, if thought fit, passing the resolutions below.

1. To approve the Company’s Annual Report & Financial Statements for the year ended 31 December 2023 (together with the reports of the Directors and Auditor therein).

2. To approve the Report on Directors’ Remuneration for the year ended 31 December 2023.

3. To re-elect Mrs Carolyn Sims as a Director of the Company.

4. To re-elect Mr Charles Cade as a Director of the Company.

5. To re-elect Mr Richard Wyatt as a Director of the Company.

6. To re-elect Dr Shefaly Yogendra as a Director of the Company.

7. To re-appoint BDO LLP as the Auditor to the Company, to hold office from the conclusion of this meeting until the conclusion of the next meeting at which financial statements are laid before the Company.

8. To authorise the Audit and Risk Committee to determine the remuneration of the Auditor.

9. To approve the Company’s dividend policy, authorising the Directors of the Company to declare and pay all dividends of the Company as interim dividends, and for the last dividend referable to a financial year not to be categorised as a final dividend that is subject to shareholder approval.

10. That, in substitution of all existing authorities, the Directors be and are hereby generally and unconditionally authorised in accordance with Section 551 of the Companies Act 2006 (the “Companies Act”) to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company (‘Rights’) up to an aggregate maximum nominal amount of £1,434,055, being 10% of the issued share capital of the Company as at 2 April 2024 and representing 28,684,101 ordinary shares in the capital of the Company (or if changed, the number representing 10% of the issued share capital of the Company at the date at which this resolution is passed), such authority to expire at the conclusion of the AGM of the Company to be held in 2025 (unless previously renewed, varied, revoked or extended by the Company in general meeting), save that the Company may, before such expiry, make offers or agreements which would or might require ordinary shares to be allotted after such expiry, and the Directors may allot ordinary shares in pursuance of such offers or agreements as if the authority conferred by this resolution had not expired.

SPECIAL RESOLUTIONS

11. That, subject to the passing of resolution 10 set out above, the Directors be and they are hereby generally empowered pursuant to Sections 570 and 573 of the Companies Act to allot equity securities (as defined in Section 560 of the Companies Act) for cash, including for the avoidance of doubt, the sale of shares held by the Company as treasury shares, in accordance with the authority conferred on the Directors by resolution 11, as if Section 561 of the Companies Act did not apply to the allotment or sale, up to an aggregate nominal amount of £1,434,055 (being 10% of the issued ordinary share capital of the Company at 2 April 2024), (or, if changed, the number representing 10% of the issued share capital of the Company at the date at which this resolution is passed), such power to expire at the conclusion of the AGM of the Company to be held in 2025 (unless previously renewed, varied, revoked or extended by the Company in general meeting) save that the Company may, at any time prior to the expiry of such power, make an offer or enter into an agreement which would or might require ordinary shares to be allotted or sold from treasury after the expiry of such power and the Directors may allot or sell ordinary shares from treasury in pursuance of such an offer or agreement as if such power had not expired.

12. That, the Company generally be and is hereby authorised for the purpose of Section 701 of the Companies Act to make market purchases (as defined in Section 693 of the Companies Act) of its ordinary shares in issue, either for retention as treasury shares for future reissue, resale, transfer or cancellation provided that:

i) the maximum number of ordinary shares hereby authorised to be purchased is 14.99% of the issued share capital of the Company as at the date of the passing of this resolution;

ii) the minimum price (exclusive of expenses payable by the Company) which may be paid for such ordinary shares is the nominal value per share;

iii) the maximum price (exclusive of expenses payable by the Company) which may be paid for such ordinary shares shall be the higher of:

i) an amount equal to 105% of the middle market quotations for an ordinary share as derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the date on which the ordinary shares are purchased; and

ii) the higher of the price of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out.

This authority shall expire at the conclusion of the AGM of the Company to be held in 2025 (unless previously revoked, varied, renewed or extended by the Company in general meeting) save that the Company may, before such expiry, enter into a contract to purchase shares which will or may be executed wholly or partly after the expiry of such authority.

13. That, a general meeting, other than an annual general meeting, may be called on not less than 14 clear days’ notice.

By order of the Board	Registered Office:
Frostrow Capital LLP	25 Southampton
	Buildings
3 April 2024	London
	WC2A 1AL

 

NOTES

1. Entitlement to attend and vote

Members who hold ordinary shares in the Company in uncertificated form must have been entered on the Company’s register of members by 6.30pm on Thursday, 2 May 2024 in order to be able to attend and vote at the meeting, or if the meeting is adjourned, 6.30pm on the day two business days before the time fixed for the adjourned meeting. Such members may only vote at the meeting in respect of ordinary shares held at the time.

2. Proxies

A member entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend the meeting to speak and vote on a show of hands and, on a poll, to vote instead of them. A proxy need not be a member of the Company. A member wishing to appoint more than one proxy must appoint each proxy in respect of a specified number of shares within their holding. For this purpose, a member may photocopy the enclosed form of proxy before completion and must indicate the number of shares in respect of which each proxy is appointed.

Instruments of proxy should be sent to Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to arrive no later than 11.00 am on Thursday, 2 May 2024. Completion and return of the form of proxy will not preclude shareholders from attending and voting at the meeting should they wish to do so.

It is possible for you to submit your proxy votes online by going to Equiniti’s Shareview website, www.shareview.co.uk, and logging in to your Shareview Portfolio. Once you have logged in, simply click ‘View’ on the ‘My Investments’ page and then click on the link to vote and follow the on-screen instructions. If you have not yet registered for a Shareview Portfolio, go to www.shareview.co.uk and enter the requested information. It is important that you register for a Shareview Portfolio with enough time to complete the registration and authentication processes.

CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the meeting and any adjournment(s) there of by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members and those CREST members who have appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s) who will be able to take the appropriate action on their behalf. In order for a proxy appointment made using the CREST service to be valid, the appropriate CREST message (a “CREST proxy instruction”) must be properly authenticated in accordance with Euroclear’s specifications and must contain the information required for such instructions, as described in the CREST Manual (available via www.euroclear.com). The CREST message must be transmitted so as to be received by the issuer’s agent (ID RA19) by not later than 48 hours (excluding non-working days) before the time appointed for the holding of the meeting or the adjourned meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the CREST message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the CREST message by enquiry to CREST in the manner prescribed by CREST.

After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service provider(s), should note that Euroclear does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST proxy instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member(s) is/are a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that the CREST sponsor or voting service provider takes) such action as shall be necessary to ensure that a CREST message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service provider(s) is/are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST proxy instruction in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securities Regulations 2001.

3. Proxymity

If you are an institutional investor you may be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 11.00 am on Thursday, 2 May 2024 in order to be considered valid. Before you can appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy.

4. Corporate representatives

A member of the Company which is a corporation may authorise a person or persons to act as its representative(s) at the AGM. In accordance with the provisions of the Companies Act, each such representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual member of the Company, provided that they do not do so in relation to the same shares. It is no longer necessary to nominate a designated corporate representative.

5. Nominated persons

In accordance with Section 325 of the Companies Act, the right to appoint proxies does not apply to persons nominated to receive information rights under Section 146 of the Companies Act. Persons nominated to receive information rights under Section 146 of the Companies Act who have been sent a copy of this Notice are hereby informed, in accordance with Section 149 (2) of the Companies Act, that they may have a right under an agreement with the registered member by whom they were nominated to be appointed, or to have someone else appointed, as a proxy for this meeting. If they have no such right, or do not wish to exercise it, they may have a right under such an agreement to give instructions to the member as to the exercise of voting rights. Nominated persons should contact the registered member by whom they were nominated in respect of these arrangements.

6. Joint holders

In the case of joint holders, the signature of only one of the joint holders is required on the proxy form and, where more than one joint holder has signed the proxy form or where more than one joint holder purports to appoint a proxy, only the signature of, or the appointment submitted by the most senior holder will be accepted to the exclusion of the other joint holders. Seniority is determined by the order in which the names of the joint holders appear in the Company’s Register of Members in respect of the joint holding (the first named being the most senior).

7. Members’ requests under Section 527 of the Companies Act

Under Section 527 of the Companies Act, members meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to (i) the audit of the Company’s accounts (including the Auditor’s report and the conduct of the audit) that are to be laid before the AGM for the financial year ended 31 December 2023; or (ii) any circumstance connected with an Auditor of the Company appointed for the financial year ended 31 December 2023 ceasing to hold office since the previous meeting at which annual accounts and reports were laid. The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with Sections 527 or 528 (requirements as to website availability) of the Companies Act. Where the Company is required to place a statement on a website under Section 527 of the Companies Act, it must forward the statement to the Company’s Auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the AGM for the relevant financial year includes any statement that the Company has been required under Section 527 of the Companies Act to publish on a website.

8. Members’ rights to ask questions

Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, (b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.

9. Members’ rights under Sections 338 and 338A of the Companies Act

Shareholders meeting the threshold under Sections 338 and 338A of the Companies Act can instruct the Company: (i) to give shareholders (entitled to receive notice of the AGM) notice of a resolution which may properly be proposed and is intended to be proposed at the AGM; and/or (ii) to include in the business to be dealt with at the AGM any matter (other than a proposed resolution) which may be properly included in the business. A resolution may properly be proposed or a matter may properly be included in the business unless: (a) (in the case of a resolution only) it would, if passed, be ineffective; (b) it is defamatory of any person; or (c) it is frivolous or vexatious. Such a request may be in hard copy form or in electronic form, must identify the resolution of which notice is to be given or the matter to be included in the business, must be authorised by the person or persons making it, must be received by the Company not later than 26 March 2024, being the date six weeks before the meeting, and (in the case of a matter to be included in the business only) must be accompanied by a statement setting out the grounds for the request.

10. Total number of shares and voting rights

As at 2 April 2024, the latest practicable date prior to publication of this Notice, the Company had 334,363,825 ordinary shares in issue, with a total of 286,841,012 voting rights. 47,522,813 shares were held in treasury.

11. Website

In accordance with Section 311A of the Companies Act, the contents of this Notice, details of the total number of shares in respect of which members are entitled to exercise voting rights at the AGM and, if applicable, any members’ statements, members’ resolutions or members’ matters of business received by the Company after the date of this Notice will be available on the Company’s website at: www.templebarinvestments.co.uk .

12. Documents available for inspection

Copies of letters of appointment between the Company and the Non-Executive Directors may be inspected during usual business hours on any weekday (public holidays excepted) at the registered office of the Company from the date of this Notice until the date of the AGM and at the place of the Meeting from 10.45 am until the Meeting’s conclusion. Any shareholders wishing to inspect the documents are requested to contact the Company Secretary by email at [e-mail] in advance of any visit to ensure that appropriate arrangements can be made and access can be arranged.

Glossary of Terms

Discount or Premium of share price to NAV per share*

A description of the difference between the share price and the net asset value per share. The size of the discount or premium is calculated by subtracting the share price from the net asset value per share and is usually expressed as a percentage (%) of the net asset value per share. If the share price is higher than the net asset value per share the result is a premium. If the share price is lower than the net asset value per share, the shares are trading at a discount.

Fixed Interest

Fixed-interest securities, also known as bonds, are loans usually taken out by a government or company which normally pay a fixed rate of interest over a given time period, at the end of which the loan is repaid.

FTSE All-Share Index

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

FTSE 350 Index

A comparative index that tracks the market price of the UK’s 350 largest companies, by market value, listed on the London Stock Exchange.

Gilts

A bond that is issued by the British government which is generally considered low risk.

Gross Gearing

Total assets divided by shareholders funds expressed as a percentage.

Liquidity

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

Market Capitalisation

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

NAV (‘Net Asset Value’) per Share

The value of total assets less liabilities, with debenture and loan stocks at book value. Book value is the amount borrowed less the current loan arrangement fee debtor still to be expensed. The NAV per share is calculated by dividing this amount by the number of ordinary shares outstanding.

NAV per Share with debt at fair value

The value of total assets less liabilities, with the loans at fair value. The NAV per share with debt at fair value is calculated by dividing this amount by the number of ordinary shares outstanding.

Net asset value (NAV) per share total return with debt at fair value*

The theoretical total return on shareholders’ funds per share, reflecting the change in NAV with debt at fair value assuming that dividends paid to shareholders were reinvested at NAV with debt at fair value at the time the shares were quoted ex-dividend. A way of measuring performance which is not affected by movements in discounts/premiums.

	Year to	Year to
	31 December	31 December
	2023	2022
	(p)	(p)
Opening NAV with debt at fair value	233.5	240.4
Increase /(decrease) in NAV	29.1	(3.9)
Less dividends paid	(9.60)	(9.35)
Adjustment for movement in fair value of debt	(0.8)	6.4
Closing NAV with debt at fair value	252.2	233.5
% increase in NAV with debt at fair value	12.1%	1.0%
Impact of reinvesting dividends	0.2%	(0.1%)
NAV total return with debt at fair value	12.3%	0.9%

Net Gearing

Total assets (less cash and cash equivalents) divided by shareholders’ funds expressed as a percentage.

Ongoing Charge Ratio*

Ongoing charges is calculated on an annualised basis. This figure excludes any portfolio transaction costs and may vary from period to period. The calculation below is in line with AIC guidelines.

		Year to	Year to
		31 December	31 December
		2023	2022
		(p)	(p)
Investment management fee		2,757	2,937
Other expenses (excluding transaction costs)		1,359	1,234
Less: one off legal and professional fees		(21)	(18)
Total	(a)	4,095	4,153
Average cum income net asset value throughout the period	(b)	731,023	762,206
Ongoing charges (c=a/b)	(c)	0.56%	0.54%

*  Alternative Performance Measure.

Portfolio Turnover

The portfolio turnover rate measures the Company’s trading activity. It is calculated by taking the lower of investment purchases and sales and dividing by the average gross asset value (net assets with debt added back) of the Company. It is expressed as a % and the lower the % the lower the turnover. For example a turnover rate of 25% would suggest that the fund holds stocks for four years on average, while a 50% turnover rate would suggest a two year holding period.

Transactions in gilts are excluded from the investment purchases and sales for the purposes of calculating the turnover rate.

Share Price Total Return*

Return to the investor on mid-market prices assuming that all dividends paid were reinvested at the share price at the time the shares were quoted ex-dividend.

	Year to	Year to
	31 December	31 December
	2023	2022
	(p)	(p)
Opening share price	220.5	221.6
Increase in share price	27.1	8.3
Less: dividends paid	(9.60)	(9.35)
Closing share price	238.0	220.5
% increase in share price	12.3%	3.7%
Impact of reinvesting dividends	0.2%	(0.1%)
Share price total return	12.5%	3.6%

Value Investing

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

Dividend Yield*

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

*  Alternative Performance Measure.

 

Annual Report and Financial Statements

 

Copies of the Annual Report and financial statements will be posted to shareholders on 10 April 2024 and will be available on the Company’s website (www.templebarinvestments.co.uk) or in hard copy format from the Company Secretary.

 

The Company's Annual Report for the year ended 31 December 2023 has been submitted to the Financial Conduct Authority and will shortly be available for inspection on the National Storage Mechanism (NSM) via https://data.fca.org.uk/#/nsm/nationalstoragemechanism. 

 

The Annual General Meeting will be held on Tuesday, 7 May 2024.

 

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

 

-ENDS-

 

For further information please contact

Mark Pope

For and on behalf of Frostrow Capital LLP

Company Secretary

0203 008 4913

 

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