Investment policies

Stock lending

The Company does not currently engage in stock lending activity

Gearing

This is the ability of the Company to borrow money to magnify the potential returns on its portfolio, and relies on the fact that stock market returns have exceeded the cost of borrowing over the longer term. The Company currently has two debenture stocks in issue: a 9.875% debenture stock 2017 for £25 million and a 5.5% debenture stock 2021 for £38 million. The Company also has in place a 4.05% private placement note for £50m, for repayment in September 2028.

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

Discount management

Investment trusts have a Net Asset Value, which is reached by adding up the value of each of the underlying investments and after deducting the fair value of any liabilities. The actual trading price is determined by supply and demand. If the actual price exceeds the Net Asset Value, the trust is said to be trading at a premium. If it’s below, they’re at a discount.

The Directors attach considerable importance to any premium or discount to Net Asset Value (NAV) at which the shares trade, both in absolute terms and relative to the average rating at which the UK Equity Income sector of Investment Trusts as a whole is trading. Premiums judged to be excessive will be addressed by repeated share issues, either new or from Treasury. Discounts judged to be excessive will be addressed by repeated share buybacks, for Treasury or cancellation. The Directors are prepared to be proactive in premium / discount management to minimise potential disadvantages to shareholders.

In order to avoid substantial oversupply or shortages of shares in the market the Board asks shareholders to approve resolutions which allow for the buyback of shares and their issuance which can assist in the management of the discount. Regular demand generated by monthly investment in the Savings Scheme and the use of marketing and promotional activity also assist in keeping the discount at an acceptable level. However, market sentiment is beyond the absolute control of the Manager and Board.

Depositary/custodian

Temple Bar has appointed HSBC as the depositary responsible for the custody of its assets and monitoring of cash management activities. This means that the assets beneficially owned by Temple Bar are held in a designated nominee account at HSBC entirely ring-fenced from the other assets of either HSBC or the Investment Manager.

Liquidity

To provide a guide to the liquidity of Temple Bar's shares, over a one year period the average daily volume of shares traded in Temple Bar is around 60,000. In normal circumstances individual trades of around 25,000 shares can be absorbed in the market without difficulty and trades of up to 250,00 shares are usually possible subject in some circumstances to the introduction of a wider spread.

Portfolio restrictions

Yield target

  • 120-140% of that of the FTSE All-Share Index

Number of holdings

  • The portfolio will normally contain 70-80 holdings but it may be more or less concentrated from time to time as circumstances require

Turnover

  • Annual turnover will normally be limited to 50% of the portfolio (average of purchases and sales during the year)

Stock and sector limits

  • There will be an absolute limit of 10% on individual stocks and 25% on a specific sector irrespective of their weighting in the benchmark

International investment

  • Up to 20% of the portfolio can be invested in listed international equities in developed economies

Cash limits

  • A level of 10% of shareholder funds is regarded as a guideline maximum holding in cash, although this is dependent on market conditions

Fixed interest

  • From time to time fixed interest holdings or non-equity interests may be held on an opportunistic basis

Derivative instruments

  • Derivative instruments are not normally used but in certain circumstances, and with the prior approval of the Board, their use might be considered either for hedging purposes or to exploit a specific investment opportunity

© Temple Bar Investment Trust PLC

We recommend that you seek independent financial advice to ensure Temple Bar is suitable for your investment needs.

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