Number of holdings
The portfolio will typically contain 30-50 holdings but it may be more or less concentrated from time to time as circumstances require.
Annual turnover will typically be no more than 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 35% on a specific sector irrespective of their weighting in the benchmark.
Up to 30% of the portfolio can be invested in listed international equities, including a maximum of 10% held in emerging market equities.
A level of 10% of shareholder funds is regarded as a guideline maximum holding in cash, although this is dependent on market conditions.
From time to time fixed interest holdings or non-equity interests may be held on an opportunistic basis.
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.
This is the ability of Temple Bar (the Company) to borrow money to magnify the potential returns on its portfolio, which should have a positive influence on performance due to the fact that stock market returns have exceeded the cost of borrowing over the longer term. The Company currently has 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%.
Please note that while the Company can borrow additional money to invest, known as leverage, this increases the exposure of the Company to markets above and beyond its total Net Asset Value. This can help to increase the rate of growth of the fund but can also cause losses to be magnified.
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.
The portfolio management fee (“Portfolio Management Fee”) to RWC will be (a) an annual rate of 0.35 per cent, payable quarterly, based on the value of the investments (including cash) of Temple Bar and (b) an additional fee of £125,000 pa, plus or minus 0.005% of the value of the investments (including cash) of the Company above or below £600 million, calculated and payable quarterly, subject to a minimum of £100,000 p.a and to be capped at the lower 0.25% of the net asset value or the market capitalisation for any financial year of Temple Bar.
Management fee summary
For services provided pursuant to the Alternative Investment Fund Managers Directive (AIFMD), including associated risk management monitoring, the Management Company will be paid a fee of 0.03% per annum on the first £250m of assets under management (including cash), 0.0225% per annum on the next £750m of assets under management and 0.015% per annum thereafter, subject to an annual minimum fee of £100,000.
Ongoing charge including stated management fee
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.
This information is accurate as at 30/09/2021