For professional investors

Trust facts

Launch date: 1926

Wind-up date: None

Year end: 31 December

Dividends paid: Quarterly in March, June, September and December

AGM:  March

Benchmark: FTSE All-Share

ISA status:  May be held in an ISA

Share class: Ordinary

Sedol: 0882532

Management:

Investec Fund Managers Limited
Woolgate Exchange
25 Basinghall Street
London
EC2V 5HA
UK

+44 20 7597 2000
www.investecassetmanagement.com

Investment process

Alastair and his Value team employ a disciplined investment process focused on making long-term investments in cheap, out-of-favour companies with appropriate balance sheets.

The process beings by narrowing down the universe of stocks. Companies with a market capitalisation above £200 million are put through a screening process which highlights the weakest performing stocks. This isolates opportunities with attractive sentiment characteristics which are then in turn scrutinised in greater detail to identify potential investment opportunities.

 

We have a set of core beliefs which drive our value approach to stock selection and portfolio construction:

  1. Sentiment: Markets overreact to news on the upside and the downside. We aim to be sceptical of the crowd and aware of investor psychology, which often leads to an overvaluation of those stocks that are deemed to have good prospects and an undervaluation of those which are out-of-favour.
  2. Mean reversion: Amongst those companies which are out-of-favour, some are more likely than others to generate a recovery in profitability. We believe some companies have characteristics which set them apart from others and focus on these for mean reversion.
  3. Valuation: Fundamental valuation is the key determinant of stock prices over the long term. In other words ‘cheap’ stocks should outperform ‘expensive’ stocks.
  4. Diversification: Diversification is an important control. Particular companies or sectors can be out-of-favour for a considerable time.
  5. Fundamental Analysis: We do not believe the market provides contrarian investors with sufficient reward for accepting balance sheet risk. We therefore search for those out-of-favour companies with balance sheets appropriate to their business models. However, there is no guarantee that a company’s valuation will recover and losses may be made.

The typical profile of a successful stock pick

 

 

What sets Temple Bar apart from its competitors?

  • We seek to be rational when other investors are irrational
  • We have long holding periods (on average 4-5 years); we are investors not speculators
  • Slow but steady turnover of the portfolio should ensure a good blend of companies and sectors with different characteristics and at different stages of recovery
  • We take a value approach but are very index aware
  • We undertake deep fundamental analysis
  • We use Enterprise Value (EV) rather than market capitalisation to ensure analysis allows for debt, pension deficits, contingent liabilities, working capital corrections, provisions and other liabilities
  • We are highly downside aware

 

Past performance should not be taken as a guide to the future and dividend growth is not guaranteed. The value of your shares in Temple Bar and the income from them can fall as well as rise and you may lose money. This Trust may not be appropriate for investors who plan to withdraw their money within the short to medium term.

 

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

 

Investment policies

Gearing

The Company currently has a 5.5% debenture stock 2021 in issue for £38m together with a 4.05% private placement note for £50m, for repayment in September 2028 and a 2.99% private placement loan for £25m, for repayment in October 2047.

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 policy 

The Board of 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 Portfolio Manager and Board.

Annual Charges

Management Fee Summary

For investment management services provided pursuant to the Alternative Investment Fund Managers Directive (AIFMD), including associated risk management monitoring, a fee of 0.35% p.a, payable quarterly, based on the value of the investments (including cash) of the Company together with a fee of £125,000 p.a, plus or minus 0.005% of the value of the investments of the Company, above or below £750 million. Under a Secretarial Services agreement, the manager also receives an annual fee of £45,450. There is no performance fee.

Ongoing Charge (2017) including stated management fee

0.49%

Charges to capital risk

Please note that a portion (60%) of the Company’s expenses are charged to its capital account rather than to its income, which has the effect of increasing income (which may be taxable) whilst reducing its capital to an equivalent extent. This could constrain future capital and income growth.

 

NAV performance

Click to view NAV performance

 

Dividends

Click to view our dividend history

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