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2022-12-31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Report Financial Statements

For the year ended 31 December 2022

 

 

 

 

 

 

 

 

 

 

 

 

TEMPLE BAR Investment Trust Plc

 

 

Board of Directors

 

Chairman of the Board and Member of the Management Engagement, Nomination and Audit and Risk Committees

 

Arthur Copple, Chairman, was appointed a Director in 2011. He has specialised in the investment company sector for over thirty years. He was a partner at Kitcat & Aitken, an executive director of Smith New Court PLC and a managing director of Merrill Lynch. He is currently Chairman of Montanaro UK Smaller Companies Investment Trust PLC.

 

Senior Independent Director, Chair of the Audit and Risk Committee and member of the Management Engagement and Nomination Committees

 

Lesley Sherratt, PhD was appointed a Director in 2015. She has twenty five years' experience as an investment manager, specialising in the analysis of financial services companies but also running the global equity team at Flemings. She was formerly Investment Director of the Save & Prosper and Fleming Flagship ranges of funds, and CEO and CIO of Ark Asset Management Ltd, a hedge fund she founded. She is currently a trustee of the Henry Moore Foundation, a Visiting Lecturer at King's College, London and writes on ethics in finance.

 

Member of the Audit and Risk, Management Engagement and Nomination Committees

 

Richard Wyatt was appointed a Director in 2017. He is a former Group Managing Director at Schroders and a Partner at Lazard. He was chairman of the media agency Engine Group and served on the Regulatory Decisions Committee of the FSA. He is currently a global partner of Rothschild & Co, chairman of Loudwater Partners Limited and a director of a number of other companies.

 

Member of the Audit and Risk Committee and Chair of the Management Engagement and Nomination Committees

 

Shefaly Yogendra, PhD was appointed a Director in 2019. She became an independent Non-Executive Director of Witan Investment Trust Plc in February 2023 and was recently the COO of Ditto AI, a symbolic AI startup. She built her career in the technology industry, followed by strategic advisory work on emerging technologies, and specialises in governance, growth, risk, and decision-making. She is an independent governor of London Metropolitan University, and a non-executive director of Harmony Energy Income Trust PLC and JP Morgan US Smaller Companies Investment Trust PLC. She was listed among the "100 Women To Watch" in the Female FTSE Board Report 2016.

 

Member of the Audit and Risk Committee, Management Engagement Committee and Nomination Committees

 

Charles Cade was appointed as a Director in 2022. He has over twenty five years' experience in the investment companies' sector and was ranked among the leading analysts throughout his career at Numis Securities, Winterflood Securities, HSBC and Merrill Lynch. Charles joined the City following an MBA from Warwick Business School, having previously worked for a consultancy firm and as an economist in the UK government. He currently sits on the Investment Committee of the Rank Foundation charity and is an independent member of the Investment Research Monitoring Group for interactive investor, the retail platform.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Report of Directors

 

The Directors present the Annual Report & Financial Statements of the Company for the year ended 31 December 2022.

 

Directors

The Directors of the Company who held office at 31 December 2022 and up to the date of the signing of the Annual Report are detailed on page 37. As at 31 December 2022, the Board of Directors of the Company comprised three male and two female Directors. Since the end of the financial year, Carolyn Sims has been appointed to the Board which means there are three female Directors on the Board as at the date of this report.

 

Charles Cade was appointed with effect from 24 March 2022 as an independent non-executive Director of the Company.

 

Carolyn Sims joined the Board on 1 January 2023 as an independent non-executive Director and will stand for election at the forthcoming AGM on 9 May 2023, being her first AGM post her appointment.

 

Arthur Copple will retire as a Director of the Company following the AGM. All other Directors, with the exception of Arthur Copple, will retire and stand for re-election at the Company's AGM on 9 May 2023.

 

The rules concerning the appointment and replacement of Directors are set out in the Company's Articles of Association. There are no agreements between the Company and its Directors concerning any compensation for their loss of office.

 

Ordinary Dividends

The interim dividends paid by the Company are set out in note 10 to the financial statements.

 

Subsequent to the year end, the Board approved a fourth interim dividend for the year ended 31 December 2022 of 2.5 pence per ordinary share, which will be paid on 31 March 2023.

 

Share Capital

At the AGM held on 10 May 2022, the Company was granted authority to allot ordinary shares in the Company up to an aggregate nominal amount of £1,671,819, being 10% of the total issued share capital at that date, amounting to 6,687,276 ordinary shares. No shares were issued during the year.

 

The Company was also granted authority to purchase up to 14.99% of the Company's ordinary share capital in issue at that date, amounting to 50,121,137 ordinary shares. On 13 May 2022 the Company undertook a sub-division of each existing ordinary share of 25 pence each into 5 new ordinary shares of 5 pence each, as approved by shareholders at the Company's Annual General Meeting on 10 May 2022 (the "Share Split"). Further detail regarding the Share Split can be found below.

 

Before the Share Split had taken place, the Company bought back 260,125 shares of 25p each with a nominal value of £65,031.25 at a total cost of £2,975,197.

 

Post the Share Split, the Company bought back 10,635,914 shares of 5p each with a nominal value of £531,795.70 at a total cost of £22,915,649.

 

This represented 3.18% of the issued share capital at 31 December 2022. The shares bought back are held in treasury.

 

At 31 December 2022, the Company had 334,363,825 ordinary shares in issue, 16,541,439 of which were held in treasury. The total voting rights of the Company at 31 December 2022 were 317,822,386.

 

Subsequent to the year end and up to the date of this Annual Report, the Company bought back 8,010,042 ordinary shares for treasury, at a total cost of £19,221,361, representing 2.40% of the issued share capital as at 31 December 2022. At the date of this Annual Report, the Company has 334,363,825 ordinary shares in issue, 24,551,481 of which are held in treasury. The total voting rights at the date of this Annual Report are 309,812,344.

 

Authorities given to the Directors at the 2022 AGM to allot shares, disapply statutory pre-emption rights and buy back shares will expire at the forthcoming AGM.

 

At general meetings of the Company, shareholders are entitled to one vote on a show of hands and on a poll, for every share held.

 

The ordinary shares carry the right to receive dividends and have one voting right per ordinary share. To the extent that they exist, the revenue, profits and capital of the Company (including accumulated revenue and realised capital reserves) are available for distribution by way of dividends to holders of ordinary shares. Upon a winding-up, after meeting the liabilities of the Company, the surplus assets would be distributed to the shareholders pro rata to their holding of ordinary shares.

 

There are no restrictions on the transfer of securities in the Company or on the voting rights of each ordinary share. There are no special rights attached to any of the shares and no agreements between holders of shares regarding their transfer known to the Company and no agreements which the Company is party to that might affect its control following a takeover bid.

 

An amendment to the Company's Articles of Association and the giving of authority to issue or buy back the Company's shares requires an appropriate resolution to be passed by shareholders. Proposals for the renewal of the Board's current authorities to issue and buy back shares are set out in the Notice of AGM on pages 87 to 91.

 

Subdivision of Ordinary Shares

As disclosed by the Company in its 2021 Annual Report, and as announced to the market on 24 March and 12 May 2022 respectively, the Company confirmed its intentions and successful completion of a sub-division of each previously existing ordinary share of 25 pence each ("Existing Ordinary Shares") into five new ordinary shares of 5 pence each ("New Ordinary Shares"). The Company's shareholders approved the Share Split at the AGM held on 10 May 2022.

 

The last day of trading in the Existing Ordinary Shares was 12 May 2022 after which the Share Split took effect. The New Ordinary Shares were admitted to trading on the premium segment of the Main Market of the London Stock Exchange on 13 May 2022 and shareholders received five New Ordinary Shares in exchange for each Existing Ordinary Share. The New Ordinary Shares rank pari passu with each other and have the same rights and restrictions as the Existing Ordinary Shares including the same rights to participate in dividends paid by the Company. A holding of New Ordinary Shares following the Share Split represents the same proportion of the issued ordinary share capital of the Company as the corresponding holding of Existing Ordinary Shares immediately prior to the Share Split. The Share Split therefore had no effect on the overall value of a shareholder's holding in the Company.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Report of Directors continued

 

Substantial Shareholders

As at 31 December 2022, the Company had received notification of the following disclosable interests in the voting rights of the Company. This information was correct at the date of notification, however in certain instances the information has been restated following the Share Split and since receipt of the notifications. It should be noted that these holdings may have changed since notified to the Company and may not therefore be wholly accurate statements of actual holdings as at 31 December 2022. However, notification of any change is not required until the next applicable threshold is crossed:

 

 

Number

of ordinary

shares

Percentage

of voting

rights

City of London Investment Management Company Limited*

18,697,940

5.88

Rathbone Investment Management Limited

16,620,717

5.23

Investec Wealth & Investment Limited*

16,636,270

5.23

1607 Capital Partners LLC*

16,473,165

5.18

 

*

Restated for Share Split since receipt of the notifications.

 

In addition to the substantial shareholders identified in the table above who have notified the Company of their respective shareholdings, the Company is aware that a significant portion of the share register is represented by retail investors via private investor platforms.

 

The Company has not been informed of any other changes to the notifiable interests between 31 December 2022 and the date of this Annual Report.

 

Management Arrangements

Under the terms of the Portfolio Management Agreement, Redwheel will be paid a management fee equal to 0.35% per annum of the Company's total assets. Redwheel's initial term has now passed and the Portfolio Management Agreement may be terminated on six months' notice. The Portfolio Management Agreement is also capable of termination in certain circumstances including in the event that both Nick Purves and Ian Lance cease to be responsible for the management of the Company's assets or otherwise become incapacitated.

 

Continued Appointment of the AIFM and Investment Manager

The Board keeps the performance of the Manager under continual review, and the Management Engagement Committee conducts an annual appraisal of the Manager's performance, and makes a recommendation to the Board about the continuing appointment of the Manager. It is the opinion of the Board that the continuing appointment of the Manager, on the existing terms, is in the best interests of shareholders as a whole. The reasons for this view are that the Manager has executed the investment strategy according to the Board's expectations and has produced positive returns relative to the broader market.

 

As set out in further detail on page 20 and as announced to the market on 21 December 2022, the Company intends to appoint Frostrow Capital LLP ('Frostrow') as its AIFM with effect from 1 July 2023, subject to contract and FCA approval. The Company's investment manager, RWC Asset Management LLP ('Redwheel'), will continue in its role. Frostrow will also take on a number of marketing and distribution tasks currently undertaken by Redwheel. It is the Directors' opinion that the appointment of Frostrow as AIFM is also in the best interests of the Company and its shareholders as a whole.

 

Requirements of the Listing Rules

Listing Rule 9.8.4 requires the Company to include certain information in a single identifiable section of the Annual Report or a cross reference table indicating where the information is set out. The Directors confirm that there are no disclosures to be made in this regard.

 

Streamlined Energy and Carbon Reporting

The Company's approach to ESG is set out on page 12.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Stakeholder Engagement

While the Company has no employees, or customers, the Directors give regular consideration to the need to foster the Company's business relationships with its stakeholders. The effect of this consideration upon the principal decisions taken by the Company during the financial year is set out in further detail in the Strategic Report on page 18.

 

Financial Risk Management

Information about the Company's financial risk management objectives and policies is set out in note 22 to the financial statements.

 

Disclosure of Information to the Auditor

The Directors who held office at the date of the approval of the Annual Report confirm that, so far as they are aware, there is no relevant audit information of which the Company's Auditor is unaware, and each Director has taken all reasonable steps that he/ she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

 

BDO LLP has expressed its willingness to continue in office as Auditor of the Company and resolutions for its reappointment and to authorise the Directors to determine its remuneration will be proposed at the forthcoming AGM.

 

Post Balance Sheet Events

Post balance sheet events are disclosed in note 23 to the financial statements.

 

Future Developments

Details on the outlook of the Company are set out in the Chairman's Statement on page 4 and the Investment Manager's Report on pages 9 to 11.

 

Annual General Meeting

The Notice of the AGM of the Company to be held on 9 May 2023 is on pages 87 to 91. In addition to the ordinary business the following items of business will also be proposed.

 

Dividend Policy

Resolution 11 set out in the Notice of AGM is for shareholders to approve the Company's dividend policy which is to authorise 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 to not be categorised as a final dividend. This is subject to shareholder approval.

 

Authority to Allot Shares

Resolution 12 set out in the Notice of AGM is an ordinary resolution and will, if passed, authorise the Directors to allot up to 33,436,383 ordinary shares with a nominal value of £1,671,819 or 10% of the Company's ordinary shares in issue at the date at which this resolution is passed. This will replace the current authority granted to the Directors at the last AGM. This authority will expire at the AGM to be held in 2024 when a resolution to renew the authority will be proposed.

 

The Directors intend to use this authority whenever they believe it would be in the best interests of shareholders to do so. Any such issues would only be made at prices greater than the prevailing NAV per share at the time of issue, including current year income, as adjusted for the market value of the Company's debt and would therefore increase the assets underlying each share. The issue proceeds would be available for investment in line with the Company's investment policy.

 

Authority to Disapply Pre-Emption Rights

When shares are to be allotted for cash, the Companies Act 2006 requires such new shares to be offered first to existing shareholders in proportion to their existing holdings of ordinary shares. However, in certain circumstances, it is beneficial to allot shares for cash otherwise than by pro rata to existing shareholders and the ordinary shareholders can, by special resolution, waive their pre-emption rights.

 

Resolution 13 set out in the Notice of AGM is a special resolution and will, if passed, authorise the Directors to allot up to 33,436,383 ordinary shares with a nominal value of £1,671,819 or 10% of the Company's ordinary shares in issue at the date at which this resolution is passed, for cash on a non-pre-emptive basis. This will replace the current authority granted to the Directors at the last AGM. This authority will expire at the AGM to be held in 2024 when a resolution to renew the authority will be proposed.

 

The Directors intend to use this authority whenever they believe it would be in the best interests of shareholders to do so. Any such issues would only be made at prices greater than the prevailing NAV per share at the time of issue, including current year income, as adjusted for the market value of the Company's debt and would therefore increase the assets underlying each share. The issue proceeds would be available for investment in line with the Company's investment policy.

 

No issues of shares will be made which would alter the control of the Company without the prior approval of shareholders in general meeting.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Report of Directors continued

 

Authority to Purchase the Company's Own Shares

The Directors consider it desirable to give the Company the opportunity to buy back shares in circumstances where the shares may be bought for a price which is below the NAV per share of the Company. The purchase of ordinary shares is intended to reduce the discount at which ordinary shares trade in the market through the Company becoming a source of demand for such shares, as well as being accretive to the NAV per share. During the year, the Company continued to buy back shares for this purpose with the shares being held in treasury.

 

Resolution 14 set out in the Notice of AGM is a special resolution and will, if passed, authorise the Directors to buy back up to 14.99% of the Company's shares in issue at the date at which the resolution is passed. This will replace the current authority granted to the Directors at the last AGM. This authority will expire at the AGM to be held in 2024 when a resolution to renew the authority will be proposed. 10,635,914 shares have been bought back under this authority during the year and 8,010,042 shares have been bought back under this authority post year end. The maximum price (exclusive of expenses) which may be paid by the Company in relation to any such purchase is the higher of:

 

i)

5% above the average of the mid-market value of shares for the five business days before the day of purchase; or

 

 

ii)

the higher of the price of the last independent trade and the highest current independent bid on the London Stock Exchange.

 

The minimum price which may be paid for an ordinary share is the nominal value of 5 pence each.

 

The decision as to whether to buy back any ordinary shares will be at the discretion of the Board. Ordinary shares bought back in accordance with the authority granted to the Board will either be held in treasury or cancelled. Shares held in treasury may be reissued from treasury but will only be reissued at a price that is in excess of the Company's then prevailing NAV per share. This authority will expire at the AGM to be held in 2024 when a resolution to renew the authority will be proposed.

 

Notice Period for General Meetings

Under the Companies Act 2006, the notice period of general meetings (other than an AGM) is 21 clear days' notice unless the Company: (i) has gained shareholder approval for the holding of general meetings on a shorter notice period (subject to a minimum of 14 clear days' notice) by passing a special resolution at the most recent AGM; and (ii) offers the facility for all shareholders to vote by electronic means.

 

The Company would like the ability to call general meetings (other than an AGM) on less than 21 clear days' notice. The shorter notice period proposed by Resolution 15, a special resolution, would not be used as a matter of routine, but only where the flexibility is merited taking into account the business of the meeting and is thought to be in the interests of shareholders as a whole. The approval will be effective until the end of the AGM to be held in 2024, when it is intended that a similar resolution will be proposed.

 

Recommendation

The Board considers the resolutions to be proposed at the AGM to be in the best interests of the Company and its shareholders as a whole. Accordingly, the Directors unanimously recommend that shareholders should vote in favour of the resolutions to be proposed at the AGM, as they intend to do so in respect of their own beneficial holdings.

 

On behalf of the Board

 

 

 

Arthur Copple

Chairman

 

22 March 2023

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Statement of Directors' Responsibilities

 

Directors' responsibilities

The Directors are responsible for preparing the Annual Report & Financial Statements in accordance with UK-adopted international accounting standards and applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the company financial statements in accordance with UK-adopted international accounting standards. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss for the company for that period.

 

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

 

·

select suitable accounting policies and then apply them consistently;

 

 

·

make judgements and accounting estimates that are reasonable and prudent;

 

 

·

state whether they have been prepared in accordance with UK-adopted international accounting standards, subject to any material departures disclosed and explained in the financial statements;

 

 

·

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business; and

 

 

·

prepare a Directors' report, a strategic report and Directors' remuneration report which comply with the requirements of the Companies Act 2006.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006.

 

They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for, and confirm that to the best of their knowledge, the Annual Report and Financial Statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the company's position and performance, business model and strategy.

 

Website publication

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

 

Directors' responsibilities pursuant to DTR4

The Directors confirm to the best of their knowledge:

 

·

the financial statements have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

 

 

·

the Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that it faces.

 

On behalf of the Board

 

 

 

Arthur Copple

Chairman

 

22 March 2023

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Independent Auditor's Report

to the Members of Temple Bar Investment Trust Plc

 

Opinion on the financial statements

In our opinion the financial statements:

 

·

give a true and fair view of the state of the Company's affairs as at 31 December 2022 and of its loss for the year then ended;

 

 

·

have been properly prepared in accordance with UK adopted international accounting standards; and

 

 

·

have been prepared in accordance with the requirements of the Companies Act 2006.

 

We have audited the financial statements of Temple Bar Investment Trust Plc (the 'Company') for the year ended 31 December 2022 which comprise the Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Financial Position, Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.

 

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the Audit and Risk Committee.

 

Independence

Following the recommendation of the Audit and Risk Committee, we were appointed by the Board of Directors on 30 March 2020 to audit the financial statements for the year ended 31 December 2020 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is three years, covering the years ended 31 December 2020 to 31 December 2022. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company.

 

Conclusions Relating to Going Concern

In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included:

 

·

Assessing the appropriateness of the Directors' assumptions and judgements made by comparing the prior year forecasted costs to the actual costs incurred to assess the reliability of the Directors forecasting ability as well as comparing the projected costs to the current year actuals to assess whether they are reasonable;

 

 

·

Assessing the projected management fees for the year to check that it was in line with the current assets under management levels and the projected market growth forecasts for the following year;

 

 

·

Sensitising the forecasts based on an economic downturn and calculating financial ratios to ascertain the financial health of the Company, including performing calculations assessing the net asset position of the Company to understand the reliance on loans;

 

 

·

Assessing the liquidity of the Company's investments as a source to settle liabilities; and

 

 

·

Reviewing the loan agreements to identify the covenants and assess the likelihood of them being breached based on Directors' forecasts and our sensitivity analysis.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

In relation to the Company's reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors' statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting.

 

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

 

Overview

 

 

 

2022

2021

Key audit matters

Valuation and ownership of investments

 

Revenue Recognition

√

√

Materiality

Financial statements as a whole

 

£7,260,000 (2021: £7,970,000) based on 1% (2021: 1%) of Net Assets

√

√

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

An Overview of the Scope of our Audit

Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

 

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

Key audit matter

How the scope of our audit addressed the key audit matter

Valuation and Ownership of Investments

Notes 1 and 12

 

The investment portfolio at the year-end comprised of quoted level 1 equity and debt investments held at fair value through profit or loss.

 

There is a risk that the prices used for the listed investments held by the Company are not reflective of fair value and the risk that errors made in the recording of investment holdings result in the incorrect reflection of investments owned by the Company.

 

Therefore we considered the valuation and ownership of investments to be the most significant audit area as the investments also represent the most significant balance in the financial statements and underpin the principal activity of the entity.

 

Furthermore, we consider the valuation disclosures to be a significant area as they are expected to be a key area of interest for the users of the financial statements.

 

For these reasons and the materiality of the balance in relation to the financial statements as a whole, we considered this to be a key audit matter.

We have responded to this matter by testing the valuation and ownership of 100% of the portfolio of investments. We performed the following procedures:

 

·       Confirmed that year-end bid price has been used by agreeing to externally quoted prices;

 

·       Agreed the foreign exchange rates used in the translation of foreign currency investments at year end to independent third party sources;

 

·       Assessed if there were contra indicators, such as liquidity considerations, to suggest bid price is not the most appropriate indication of fair value by considering the realisation period for individual holdings;

 

·       Obtained direct confirmation of the number of shares held per equity investment from the custodian regarding all investments held at the balance sheet date; and

 

·       Recalculated the valuation by multiplying the number of shares held per the statement obtained from the custodian by the valuation per share.

 

We also considered the completeness, accuracy and clarity of investment-related disclosures against the requirements of relevant accounting standard.

 

Key observations:

Based on our procedures performed we did not identify any matters to suggest the valuation or ownership of the investments was not appropriate.

Revenue Recognition

Notes 1 and 4

 

Income arises predominately from dividends and can be volatile, but is a key factor in demonstrating the performance of the portfolio.

 

As such there may be an incentive to recognise income as revenue where it is more appropriately of a capital nature.

 

Additionally, judgement is required by management in determining the allocation of dividend income to revenue or capital for certain corporate actions or special dividends.

 

For this reason we considered revenue recognition to be a key audit matter.

We have responded to this matter by developing an independent expectation of income using data analytics based on the investment holding and distributions from independent sources and compared to that recorded by the Company.

 

We assessed the treatment of dividend income from corporate actions and special dividends and challenged if these had been appropriately accounted for as income or capital by reviewing the underlying reason for issue of the dividend and whether it could be driven by a capital event.

 

We analysed the whole population of dividend receipts to identify items for further discussion that could indicate a capital distribution, for example where a dividend represents a particularly high yield. In these instances we performed a combination of inquiry with management and our own independent research, including inspection of financial statements of investee companies, to ascertain whether the underlying event was indeed of a capital nature.

 

Key observations:

Based on our procedures performed we found the judgements made by management in determining the allocation of income to revenue or capital to be appropriate.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Independent Auditor's Report continued

to the Members of Temple Bar Investment Trust Plc

 

Our Application of Materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements.

 

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

 

Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:

 

 

Financial

statements

Financial

statements

 

2022

2021

Materiality

£7,260,000

£7,970,000

Basis for determining materiality

 

1% of Net Assets

Rationale for the benchmark applied

As an investment trust, the net asset value is the key measure of performance for the users of the financial statements.

Performance materiality

£5,450,000

£5,980,000

Basis for determining performance materiality

In setting performance materiality we considered the number of unadjusted audit differences in prior year, number of accounts subject to estimation and the history of misstatements based on our knowledge obtained in the previous year, aggregation effect of planned nature of testing and the overall size and complexity of the entity.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Specific Materiality

We also determined that for items impacting revenue return, a misstatement of less than materiality for the financial statements as a whole, specific materiality, could influence the economic decisions of users. As a result, we determined materiality for these items based on revenue return before tax to be £1,570,000 (2021: £1,200,000). Specific materiality was determined using 5% (2021: 5%) of revenue return before tax. We further applied a performance materiality level of 75% (2021: 75%) of specific materiality being £1,180,000 (2021: £900,000) to ensure that the risk of errors exceeding specific materiality was appropriately mitigated.

 

Reporting Threshold

We agreed with the Audit and Risk Committee that we would report to them all individual audit differences in excess of £80,000 (2021: £60,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

 

Other Information

information included in the Annual Report and Financial Statements other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

 

Corporate Governance Statement

The Listing Rules require us to review the Directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified for our review.

 

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit.

 

Going concern and longer-term viability

·       The Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified; and

 

·       The Directors' explanation as to their assessment of the Company's prospects, the period this assessment covers and why the period is appropriate.

Other Code provisions

·       Directors' statement on fair, balanced and understandable;

·       Board's confirmation that it has carried out a robust assessment of the emerging and principal risks;

·       The section of the annual report that describes the review of effectiveness of risk management and internal control systems; and

·       The section describing the work of the Audit and Risk Committee.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Independent Auditor's Report continued

to the Members of Temple Bar Investment Trust Plc

 

Other Companies Act 2006 reporting

 

Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.

 

Strategic report and Directors' report

In our opinion, based on the work undertaken in the course of the audit:

 

·       the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

 

·       the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.

 

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors' report.

Directors' remuneration

In our opinion, the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

 

·       adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

 

·       the financial statements and the part of the Directors' remuneration report to be audited are not in agreement with the accounting records and returns; or

 

·       certain disclosures of Directors' remuneration specified by law are not made; or

 

·       we have not received all the information and explanations we require for our audit.

 

Responsibilities of Directors

As explained more fully in the Statement of Directors' Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

 

We gained an understanding of the legal and regulatory framework applicable to the Company and industry in which the Company operates, and considered the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud. We considered the significant laws and regulations to be Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate Governance Code, industry practice represented by the AIC SORP and UK adopted international accounting standards. We also considered the Company's qualification as an Investment Trust under UK tax legislation.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

We focused on laws and regulations that could give rise to a material misstatement in the Company financial statements. Our procedures in response to the above included:

 

·

agreement of the financial statement disclosures to underlying supporting documentation;

 

 

·

obtaining an understanding of the control environment in monitoring compliance with laws and regulations;

 

 

·

making enquiries of management and those charged with governance as to their knowledge of any actual or suspected non-compliance with laws and regulations and fraud;

 

 

·

reviewing correspondence with the relevant authorities to identify any instances of non-compliance with laws and regulations; and

 

 

·

reviewing minutes of board meetings throughout the period for any instances of non-compliance with laws and regulations or known or suspected instances of fraud.

 

We assessed the susceptibility of the financial statements to material misstatement, including fraud and considered the fraud risk areas to be management override of controls and revenue recognition.

 

Our procedures in response to the above included:

 

·

testing the appropriateness of a samples of journal entries in the general ledger and adjustments made in the preparation of the financial statements to supporting documentation and reviewing accounting estimates for possible bias; and

 

 

·

the procedures set out in the Key Audit Matters section above.

 

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

 

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

 

A further description of our responsibilities is available on the Financial Reporting Council's website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor's report.

 

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

 

 

Peter Smith (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor London, UK

22 March 2023

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Statement of Comprehensive Income

 

 

 

2022

2021

 

Notes

Revenue

£000

Capital

£000

Total

£000

Revenue

£000

Capital

£000

Total

£000

Investment Income

4

34,760

-

34,760

27,721

3,026

30,747

Other operating income

4

31

-

31

-

-

-

 

 

34,791

-

34,791

27,721

3,026

30,747

(Losses)/profit on investments

 

 

 

 

 

 

 

(Losses)/profit on investments held at fair value through profit and loss

12

-

(42,572)

(42,572)

-

133,841

133,841

Currency exchange loss

 

-

(13)

(13)

-

(12)

(12)

Total income/(loss)

 

34,791

(42,585)

(7,794)

27,721

136,855

164,576

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Management fees

6

(1,175)

(1,762)

(2,937)

(1,031)

(1,546)

(2,577)

Other expenses

7

(1,057)

(487)

(1,544)

(1,022)

(369)

(1,391)

Profit/(loss) before finance costs and tax

 

32,559

(44,834)

(12,275)

25,668

134,940

160,608

Finance costs

8

(1,123)

(1,685)

(2,808)

(1,267)

(1,901)

(3,168)

Profit/(loss) before tax

 

31,436

(46,519)

(15,083)

24,401

133,039

157,440

Tax

9

(886)

-

(886)

(664)

-

(664)

Profit/(loss) for the year

 

30,550

(46,519)

(15,969)

23,737

133,039

156,776

Earnings per share (basic and diluted)*

11

9.38p

(14.29p)

(4.91p)

7.11p

39.87p

46.98p

 

*

In accordance with IAS 33 'Earnings per Share', the comparative return per ordinary share figures have been restated using the new number of shares in issue following the five for one share split. For weighted average purposes, the share split has been treated as happening on the first day of the accounting period.

 

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 on pages 67 to 84 form an integral part of the financial statements.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Statement of Changes in Equity

 

 

 

Called-up

share

capital

Share

premium

account

Capital

reserves

realised

Capital

reserves

unrealised

Revenue

reserve

Total

equity

 

Notes

£000

£000

£000

£000

£000

£000

Balance at 1 January 2021

 

16,719

96,040

561,256

(11,663)

12,984

675,336

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

-

-

8,859

124,180

23,737

156,776

Contributions by and distributions to owners

 

 

 

 

 

 

 

Cost of share bought back for treasury

 

-

-

(10,016)

-

-

(10,016)

Dividends paid to equity shareholders

10

-

-

-

-

(25,013)

(25,013)

Balance at 31 December 2021

 

16,719

96,040

560,099

112,517

11,708

797,083

 

 

 

 

 

 

 

 

Total comprehensive income/(loss) for the year

 

 

 

18,131

(64,650)

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

552,339

47,867

13,381

726,346

 

As at 31 December 2022, the Company had distributable revenue reserves of £13,381,000 (2021: £11,708,000) and distributable realised capital reserves of £552,339,000 (2021: £560,099,000) for the payment of future dividends. The only distributable reserves are the retained earnings and realised capital reserves.

 

The notes on pages 67 to 84 form an integral part of the financial statements.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Statement of Financial Position 31 December 2022

 

 

 

31 December 2022

31 December 2021

 

Notes

£000

£000

£000

£000

Non-current assets

 

 

 

 

 

Investments held at fair value through profit or loss

12

 

782,463

 

849,150

 

 

 

 

 

 

Current assets

 

 

 

 

 

Investments held at fair value through profit or loss

12

5,170

 

7,944

 

Cash and cash equivalents

 

13,240

 

11,626

 

Receivables

13

2,257

 

5,172

 

 

 

 

20,667

 

24,742

Total assets

 

 

803,130

 

873,892

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Payables

14

 

(2,077)

 

(2,138)

Total assets less current liabilities

 

 

801,053

 

871,754

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Interest bearing borrowings

15

(74,707)

 

(74,671)

 

Net assets

 

 

726,346

 

797,083

 

 

 

 

 

 

Equity attributable to equity holders

 

 

 

 

 

Ordinary share capital

16

16,719

 

16,719

 

Share premium

17

96,040

 

96,040

 

Capital reserves

18

600,206

 

672,616

 

Retained revenue earnings

 

13,381

 

11,708

 

Total equity attributable to equity holders

 

 

726,346

 

797,083

Net asset value per ordinary share*

20

 

228.54p

 

241.72p

 

*

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.

 

The notes on pages 67 to 84 form an integral part of the financial statements.

 

The financial statements of Temple Bar Investment Trust Plc (registered number: 00214601) on pages 63 to 84 were approved by the Board of Directors and authorised for issue on 22 March 2023. They were signed on its behalf by:

 

 

 

Arthur Copple

Chairman

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Statement of Cash Flows

 

 

 

31 December 2022

31 December 2021

 

Notes

£000

£000

£000

£000

Cash flows from operating activities

 

 

 

 

 

(Loss)/profit before tax

 

 

(15,083)

 

157,440

 

 

 

 

 

 

Adjustments for:

 

 

 

 

 

Losses/(gains) on investments

 

42,572

 

(133,841)

 

Finance costs

 

2,808

 

3,168

 

Dividend income

4

(34,504)

 

(30,761)

 

Interest income

4

(287)

 

14

 

Dividends received

 

37,680

 

28,065

 

Interest received

 

584

 

932

 

Increase in receivables

 

(361)

 

(276)

 

Increase in payables

 

70

 

69

 

Overseas withholding tax suffered

9

(886)

 

(664)

 

 

 

 

47,676

 

(133,294)

Net cash flows from operating activities

 

 

32,593

 

24,146

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchases of investments

 

(127,456)

 

(124,529)

 

Sales of investments

 

154,148

 

174,213

 

Net cash flows from investing activities

 

 

26,692

 

49,684

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Repayment of borrowing

 

-

 

(38,000)

 

Equity dividends paid

10

(28,877)

 

(25,013)

 

Interest paid on borrowings

 

(2,772)

 

(3,818)

 

Shares bought back for treasury

 

(26,022)

 

(9,590)

 

Net cash flows used in financing activities

 

 

(57,671)

 

(76,421)

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

 

1,614

 

(2,591)

Cash and cash equivalents at the start of the year

 

 

11,626

 

14,217

Cash and cash equivalents at the end of the year

 

 

13,240

 

11,626

 

The notes on pages 67 to 84 form an integral part of the financial statements.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

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 financial statements have been prepared on a going concern basis and on the basis that approval as an investment trust company will continue to be met.

 

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company has adequate resources to continue in operational existence for a period of at least 12 months from the date when these financial statements were 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. In the wake of the global COVID-19 pandemic the possibility of further pandemic incidents remains an ongoing consideration, either from a new strain of COVID or an entirely new disease, as well as the disruption to supply chains still being seen in parts of the world. Sadly, the conflict in Ukraine has continued throughout the year, causing ongoing disruption to global supply chains and contributing to the global inflationary environment. The ongoing impacts of this senseless war to both the Company and the investment portfolio remain a focus for the Directors and Investment Manager. UK political instability is a new risk that has emerged during the year and must also now be considered in relation to domestic and even international financial markets.

 

Despite this, the Directors are not aware of any material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern, having taken into account the liquidity of the Company's investment portfolio and the Company's financial position in respect of its cash flows, borrowing facilities and investment commitments (of which there are none of significance). Therefore, the financial statements have been prepared on a going concern basis.

 

The Board has reviewed stress-testing and scenario analyses prepared by the Investment Manager to assist it in assessing the impact of changes in market value and income with associated cash flows. In making this assessment, the Investment Manager 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 foreseen downside scenario would be to a level which would threaten the Company's ability to continue to meet its liabilities as they fall due.

 

The Investment Manager and the Company's third-party service providers have contingency plans to ensure the continued operation of their businesses in the event of widespread disruption, such as via a natural disaster or health emergency situation. The Board was satisfied that these plans were successfully implemented during the period of the COVID-19 pandemic and remain confident that this will continue to be the case. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern, having taken into account the liquidity of the Company's investment portfolio and the Company's financial position in respect of its cash flows, borrowing facilities and investment commitments (of which there are none of significance). Therefore, the financial statements have been prepared on a going concern basis.

 

Presentation of Statement of Comprehensive Income

In order better to 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.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

1.

Principal Accounting Policies continued

 

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 tax currently payable and deferred tax. 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.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Notes to the Financial Statements continued

 

1.

Principal Accounting Policies continued

 

Receivables

Receivables held to collect contractual cash flows, do not carry any interest, are short term in nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. The Company has applied the simplified approach for expected credit losses ("ECL") under IFRS 9 to all its receivables. Therefore the Company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Company's approach to ECLs reflects a probability-weighted outcome, based on reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. Receivables are recognised and carried at amortised cost. The effect of ECL on Receivables and Cash and cash equivalents is immaterial and no adjustments for expected credit losses have been recognised.

 

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. The fair value of the debenture stock is determined by reference to quoted market mid prices at close of business on the year-end date, while the fair value of private placement loans is determined using discounted cash flow techniques which utilise inputs including interest rates obtained from comparable loans in the market.

 

Payables

Payables are non-interest bearing, are stated at their nominal value and are recognised and carried at amortised cost.

 

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.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

2.

Significant Accounting Judgements, Estimates and Assumptions

 

The preparation of the Company's financial statements requires the Directors to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements and disclosure of contingent liabilities. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods. The area requiring the most significant judgement is recognition and classification of unusual or special dividends received as either revenue or capital in nature. The estimates and underlying assumptions are reviewed on an ongoing basis.

 

3.

Adoption of New and Revised Standards New standards, interpretations and amendments adopted from 1 January 2022

 

There are no new standards impacting the Company that have had a significant effect in the annual financial statements for the year ended 31 December 2022.

 

No new standards that have been adopted in the annual financial statements for the year ending 31 December 2022 that have had a significant effect on 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. The standards or amendments not yet effective are:

 

·

Amendment to IAS 1, classification of liabilities as current or non-current, effective from 1 January 2024.

 

 

·

Amendment to IAS 1, presentation of financial statements and disclosure of accounting polices, effective from 1 January 2023; and

 

 

·

Amendment to IAS 12, Income taxes effective from 1 January 2023.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Notes to the Financial Statements continued

 

4.

Income

 

 

2022

2021

 

Revenue

Capital

Total

Revenue

Capital

Total

 

£000

£000

£000

£000

£000

£000

Income from listed investments

 

 

 

 

 

 

UK dividends

26,541

-

26,541

22,002

3,026

25,028

Overseas dividends

7,963

-

7,963

5,733

-

5,733

Interest from fixed-interest securities

256

-

256

(14)

-

(14)

 

34,760

-

34,760

27,721

3,026

30,747

 

 

 

 

 

 

 

Other income

 

 

 

 

 

 

Deposit interest

31

-

31

-

-

-

Total income

34,791

-

34,791

27,721

3,026

30,747

 

During the year ended 31 December 2022, the Company received special dividends totalling £3,183,079 (2021: £6,372,362). Of this £3,183,079 (2021: £3,346,149) is recognised as revenue and is included within investment income and £nil (2021: £3,026,213) is recognised as capital and is included within investment income.

 

For the year ended 31 December 2021, interest from fixed-interest securities is negative due to the Company's adjustment for effective yields.

 

5.

Segmental Reporting

 

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

 

6.

Investment Management Fee

 

 

2022

2021

 

Revenue

Capital

Total

Revenue

Capital

Total

 

£000

£000

£000

£000

£000

£000

Investment management fee - current

1,175

1,762

2,937

637

956

1,593

Investment management fee - previous

-

-

-

394

590

984

 

1,175

1,762

2,937

1,031

1,546

2,577

 

The AIFM appointed Redwheel as Portfolio Manager, effective from 30 October 2020. Under the terms of the new Portfolio Management Agreement, Redwheel is entitled to a management fee, details of which are set out in the Directors' Report on page 39. As at 31 December 2022, an amount of £741,000 (2021: £804,000) was payable to Redwheel in relation to the management fees for the quarter ended 31 December 2022.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

7.

Other Expenses

 

 

2022

2021

 

Revenue

Capital

Total

Revenue

Capital

Total

 

£000

£000

£000

£000

£000

£000

Transaction costs on fair value through profit or loss assets1

-

310

310

-

242

242

Directors' fees (see Report on Directors' Remuneration on page 48)

155

-

155

121

-

121

AIFM fee

83

124

207

84

127

211

Administration fee

-

-

-

94

-

94

Company Secretary fee

104

-

104

87

-

87

Registrar's fee

113

-

113

73

-

73

Marketing costs

108

-

108

128

-

128

Auditor's remuneration - annual audit2

47

-

47

36

-

36

Depositary fee

95

-

95

97

-

97

Other expenses

352

53

405

302

-

302

 

1,057

487

1,544

1,022

369

1,391

 

1

Transaction costs on fair value through profit or loss assets represent such costs incurred on both the purchase and sale of those assets. Transaction costs on purchases amounted to £283,100 (2021: £220,223) and on sales amounted to £27,000 (2021: £21,630).

2

During the year there were audit fees of £39,500 (2021: £30,000) (excluding VAT) paid to the Auditor.

 

All expenses are inclusive of VAT where applicable.

 

There are no employees and therefore no employee costs.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Notes to the Financial Statements continued

 

8.

Finance Costs

 

 

 

2022

 

 

2021

 

 

Revenue

Capital

Total

Revenue

Capital

Total

 

£000

£000

£000

£000

£000

£000

Interest on borrowings

 

 

 

 

 

 

5.5% debenture stock 2021

-

-

-

157

235

392

4.05% Private Placement Loan 20281

823

1,234

2,057

810

1,215

2,025

2.99% Private Placement Loan 20471

300

451

751

300

451

751

Total finance costs

1,123

1,685

2,808

1,267

1,901

3,168

 

The amortisation of the debenture and 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 Investment Manager; and

 

·

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

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

9.

Taxation

 

 

(a)

There is no corporation tax payable (2021: nil).

(b)

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

 

 

2022

2021

 

Revenue

Capital

Total

Revenue

Capital

Total

 

£000

£000

£000

£000

£000

£000

Profit/(loss) before taxation

31,436

(46,519)

(15,083)

24,401

133,039

157,440

Tax at UK corporation tax rate of 19% (2021: 19%)

5,973

(8,839)

(2,866)

4,636

25,277

29,913

Tax effects of:

 

 

 

 

 

 

Non-taxable(gains)/losses on investments1

-

8,091

8,091

-

(25,428)

(25,428)

Disallowed expenses

-

69

69

(1)

46

45

Non-taxable UK dividends'

(5,043)

-

(5,043)

(4,180)

(575)

(4,755)

Overseas withholding tax suffered

886

-

886

664

-

664

Non-taxable overseas dividends

(1,513)

-

(1,513)

(1,089)

-

(1,089)

Movement in deferred tax not recognised2

583

679

1,272

634

680

1,314

Total tax charge for the year

886

-

886

664

-

664

 

 

2022

2021

 

Revenue

Capital

Total

Revenue

Capital

Total

 

£000

£000

£000

£000

£000

£000

Analysis of charge for the year:

 

 

 

 

 

 

Overseas withholding tax suffered

886

-

886

664

-

664

 

886

-

886

664

-

664

 

The Company has no corporation tax liability for the year ended 31 December 2022 (2021: nil).

 

1

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

2

The Company has not recognised a deferred tax asset of £31,094,000 (2021: £29,654,000) based on an effective tax rate of 25% (2021: 25%). This rate has been enacted and will apply from 1 April 2023. The Company is not expected to make sufficient profits to utilise these losses as it is not liable to corporation tax on its chargeable gains due to its status as an investment trust. Due to the Company's status as an investment trust, and the intention to continue meeting the conditions required for approval in the foreseeable future, the Company has not provided for deferred tax on any chargeable gains and losses arising on the revaluation or disposal of investments.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Notes to the Financial Statements continued

 

10.

Dividends

 

 

2022

2021

 

£000

£000

Amounts recognised as distributions to equity holders in the year

 

 

Fourth interim dividend for year ended 31 December 2021 of 2.05p, restated from 10.25p (2020 final dividend: 1.65p, restated from 8.25p) per share

6,759

5,517

Interim dividends (three) for year ended 31 December 2022. One payment of 2.05p per share, one payment of 2.3p per share and one payment of 2.5p (2021: three payments of 1.95p, restated from 9.75p) per share

22,118

19,496

 

28,877

25,013

Fourth interim dividend for the year ended 31 December 2022 of 2.5p (fourth interim dividend 2021: 2.05p, restated from 10.25p) per share

7,791

6,760

 

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.

 

 

2022

2021

 

£000

£000

Interim dividends (three) for year ended 31 December 2022. One payment of 2.05p per share, one payment of 2.3p per share and one payment of 2.5p (2021: three payments of 1.95p, restated from 9.75p) per share

22,118

19,496

Fourth interim dividend for year ended 31 December 2022 of 2.5p (2021: 2.05p, restated from 10.25p)

 

 

per share

7,791

6,760

 

29,909

26,256

 

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

 

11.

Earnings per Share

 

 

2022

2021

 

Revenue

Capital

Total

Revenue

Capital

Total

Basic and diluted

 

 

 

 

 

 

Profit/(loss) for the year (£000's)

30,550

(46,519)

(15,969)

23,737

133,039

156,776

Weighted average number of ordinary shares

 

 

325,567,365

 

 

333,675,440*

Earnings per ordinary share (pence)

9.38

(14.29)

(4.91)

7.11*

39.87*

46.98*

 

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

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

12.

Investments Held at Fair Value Through Profit or Loss

 

(a) Investment portfolio summary

 

 

2022

2021

 

Quoted

equities

Debt

securities

Total

Quoted

equities

Debt

securities

Total

 

£000

£000

£000

£000

£000

£000

Opening cost at the beginning of the year

736,629

7,948

744,577

730,079

55,200

785,279

Opening unrealised appreciation/ (depreciation) at the beginning of the year

112,521

(4)

112,517

(11,656)

(7)

(11,663)

Opening fair value at the beginning of the year

849,150

7,944

857,094

718,423

55,193

773,616

Movements in the year:

 

 

 

 

 

 

Purchases at cost

59,648

67,611

127,259

62,295

61,555

123,850

Sales proceeds

(83,787)

(70,361)

(154,148)

(65,445)

(108,768)

(174,213)

Realised gain/(loss) on sale of investments

22,104

(26)

22,078

9,700

(39)

9,661

Change in unrealised (depreciation)/ appreciation

(64,652)

2

(64,650)

124,177

3

124,180

Closing fair value at the end of the year

782,463

5,170

787,633

849,150

7,944

857,094

Closing cost at the end of the year

734,594

5,172

739,766

736,629

7,948

744,577

Closing unrealised appreciation/ (depreciation) at the end of the year

47,869

(2)

47,867

112,521

(4)

112,517

Closing fair value at the end of the year

782,463

5,170

787,633

849,150

7,944

857,094

 

The Company received £154,148,000 (2021: £174,213,000) from investments sold in the year. The book cost of these investments when they were purchased was £132,070,000 (2021: £164,551,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Notes to the Financial Statements continued

 

12.

Investments Held at Fair Value Through Profit or Loss continued

 

(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 (2021: £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 (2021: £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 (2021: no transfers) and as such no reconciliation between levels has been presented.

 

 

2022

2021

 

Level 1

Level 1

 

£000

£000

Financial assets

 

 

Quoted equities

782,463

849,150

Debt securities

5,170

7,944

 

787,633

857,094

 

13.

Receivables

 

 

2022

2021

 

£000

£000

Accrued income

1,481

4,757

Other receivables

776

415

 

2,257

5,172

 

Accrued income includes dividends and fixed-interest income.

 

14.

Current Liabilities

 

 

2022

2021

 

£000

£000

Accruals

1,782

1,712

Due to broker

295

426

 

2,077

2,138

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

15.

Borrowings

 

 

2022

2021

 

£000

£000

Interest bearing borrowings

 

 

Amounts payable after more than one year:

 

 

4.05% Private Placement Loan 2028

49,817

49,785

2.99% Private Placement Loan 2047

24,890

24,886

 

74,707

74,671

Total

74,707

74,671

 

 

2022

2021

 

£000

£000

Opening balance as per the Statement of Financial Position

74,671

113,288

Borrowings repaid

-

(38,000)

Interest movement

(2,772)

(3,785)

Finance costs for the year as per the Statement of Comprehensive Income

2,808

3,168

Closing balance as per the Statement of Financial Position

74,707

74,671

 

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 22 on page 82 for the disclosure and fair value categorisation of the financial liabilities.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Notes to the Financial Statements continued

 

16.

Ordinary Share Capital

 

 

2022

2021

2022

2021

 

Number

Number*

£000

£000

Allotted, called up and fully paid

 

 

 

 

Ordinary shares of 5p (2021: 25p) each

 

 

 

 

Listed

334,363,825

66,872,765

16,719

16,719

In treasury

(16,541,439)

(920,980)

-

-

In circulation

317,822,386

65,951,785

16,719

16,719

 

During the year the Company bought back 260,125* prior to the share split and 10,635,914 post share split (2021: 920,980*) ordinary shares.

 

At the AGM of the Company held on 10 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.

 

There were no shares issued during 2022 (2021: nil.)

 

* Balances stated prior to the subsequent 5 for 1 share split.

 

17.

Share Premium

 

 

2022

2021

 

£000

£000

Balance at 1 January

96,040

96,040

Balance at 31 December

96,040

96,040

 

18.

Capital Reserves

 

The capital reserves comprise both realised and unrealised amounts. A summary of the split is shown below:

 

 

2022

2021

 

£000

£000

Capital reserves realised

552,339

560,099

Capital reserves unrealised

47,867

112,517

 

600,206

672,616

 

19.

Contingent Liabilities And Capital Commitments

 

As at 31 December 2022, there were no contingent liabilities or capital commitments for the Company (2021: £nil).

 

20.

Net Asset Values

 

 

2022

 

2021

 

 

Net asset value

per ordinary

share

Net assets

attributable

Net asset value

per ordinary

share

Net assets

attributable

 

Pence

£000

Pence

£000

Ordinary shares of 25p each

228.54

726,346

241.72*

797,083

 

The net asset value per ordinary share is based on net assets at the year end of £726,346,000 (2021: £797,083,000) and on 317,822,386 (2021: 329,758,925*) ordinary shares in circulation at the year end.

 

*

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 on13 May 2022.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

21.

Related Party Transactions and Transactions with the Investment 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 on Directors' Remuneration on pages 47 to 48. 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. See page 48 for details of Directors' shareholdings.

 

At 31 December 2022, there was £nil (2021: £nil) payable to the Directors for fees and expenses.

 

AIFM and Investment Manager - On 30 October 2020, Link Fund Solutions Limited was appointed the AIFM of the Company and has delegated portfolio management to Redwheel, who is deemed to be Key Management Personnel for the purposes of disclosing related party information under IAS24. Details of the services provided by the Investment Manager are given on page 39. Fees of £2,937,000 were accrued during the year (2021: £1,593,000).

 

22.

Risk Management and Financial Instruments

 

The Company's investing activities undertaken in pursuit of its investment objective, as set out on page 13, 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, although the affects of COVID-19 have been closely monitored by the Board. 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. This gearing effect is such that, for example, for a 20% movement in the valuation of the Company's investments, the net assets attributable to shareholders would move by approximately 21.5%.

 

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 not subject to interest rate risk.

 

Financial assets - 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 £5,170,000, representing 0.7% of net assets of £726,346,000 (2021: £797,083,000; 1.0%). The weighted average running yield as at 31 December 2022 was 4.0% (2021: 4.0%) and the weighted average remaining life was 0.7 years (2021: 0.7 years). The Company's cash balance of £13,240,000 (2021: £11,626,000) earns interest, calculated on a tiered basis, depending on the balance held, by reference to the base rate.

 

If the bank base rate had increased by 0.5%, the impact on the profit or loss and net assets would have been a positive £66,200 (2021: £58,130). If the bank base rate had decreased by 0.5%, the impact on the profit or loss and net assets would have been a negative £66,200 (2021: £58,130). The calculations are based on the cash balances at the respective Statement of Financial Position dates.

 

Financial liabilities - 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 12 years (2021: 13 years) and the weighted average interest rate payable is 3.7% (2021: 3.7%) per annum. All current liabilities are repayable within one year.

 

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 Investment 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 full portfolio can be found on pages 32 to 34. The debt securities held at the year end have credit ratings ranging from AA to BB+.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Notes to the Financial Statements continued

 

22.

Risk Management and Financial Instruments continued

 

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 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.

 

 

31 December 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

 

 

 

 

 

 

 

 

31 December 2021

 

Investments

Cash

Receivables

Payables

Borrowings

Total

 

£000

£000

£000

£000

£000

£000

Euro

50,520

-

-

-

-

50,520

US Dollar

69,093

77

136

-

-

69,306

Canadian Dollar

10,389

-

-

-

-

10,389

Hong Kong Dollar

12,531

-

-

-

-

12,531

Japanese Yen

13,172

-

-

-

-

13,172

Pounds Sterling

701,389

11,549

5,036

(2,138)

(74,671)

641,165

 

857,094

11,626

5,172

(2,138)

(74,671)

797,083

 

Foreign currency sensitivity

 

 

2022

2021

 

£000

£000

£000

£000

Projected movement

+10%

-10%

+10%

-10%

Effect on net assets for the year

12,858

(15,380)

14,367

(17,087)

Effect on capital return

12,844

(15,363)

14,355

(17,072)

 

A movement of 10% is believed unlikely and has been used to show a worst case scenario.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

22.

Risk Management and Financial Instruments continued

 

Other price risk exposure

If the investment valuation fell by 20% at 31 December 2022, the impact on the profit or loss and net assets would have been negative £157.5 million (2021: 20% negative £169.8 million). If the investment portfolio valuation rose by 20% at 31 December 2022, the impact on the profit or loss and net assets would have been positive £157.5 million (2021: 20% positive £171.4 million). The calculations are based on the portfolio valuation as at the respective year-end dates. A movement of 20% is believed unlikely and has been used to show a worst case scenario.

 

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 with is an approximation of fair value, with the exception of interest-bearing borrowings which are shown at book value at 31 December 2022.

 

 

2022

2021

 

Carrying

value

Fair value

Carrying

value

Fair value

 

£000

£000

£000

£000

Assets at fair value through profit or loss

787,633

787,633

857,094

857,094

Cash

13,240

13,240

11,626

11,626

Loans and receivables

 

 

 

 

Investment income receivable

1,481

1,481

4,757

4,757

Other receivables

776

776

415

415

Payables

(2,077)

(2,077)

(2,138)

(2,138)

Interest-bearing borrowings:

 

 

 

 

4.05% Private Placement Loan1

(49,817)

(44,872)

(49,785)

(54,223)

2.99% Private Placement Loan2

(24,890)

(13,987)

(24,886)

(24,941)

 

726,346

742,194

797,083

792,590

 

1

Effective interest rate is 4.133%.

2

Effective interest rate is 3.015%.

 

The 4.05% Private Placement Loan 2028 and the 2.99% Private Placement Loan 2047 do not have prices quoted on an active market but their fair values are based on observable inputs. As such they have been classified as Level 2 instruments (2021: Level 2).

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Notes to the Financial Statements continued

 

22.

Risk Management and Financial Instruments continued

 

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, based on the earliest date on which payment can be required, are as follows:

 

 

31 December 2022

 

Three

months

or less

Not more

than one

year

Two years

Three years

More than

three years

Total

 

£000

£000

£000

£000

£000

£000

Creditors: amounts falling due after more than one year

 

 

 

 

 

 

Loans

-

-

2,772

2,773

22,520

28,065

Loan principle

 

 

 

 

75,000

75,000

Creditors: amounts falling due within one year

 

 

 

 

 

 

Accruals

1,938

139

-

-

-

2,077

Loans

1,013

1,760

-

-

-

2,773

 

2,951

1,899

2,772

2,773

97,520

107,915

 

 

 

 

 

 

 

 

31 December 2021

 

Three

months

or less

Not more

than one

year

Two years

Three years

More than

three years

Total

 

£000

£000

£000

£000

£000

£000

Creditors: amounts falling due after more than one year

 

 

 

 

 

 

Loans

-

-

2,773

2,772

25,292

30,837

Loan principle

 

 

 

 

75,000

75,000

Creditors: amounts falling due within one year

 

 

 

 

 

 

Accruals

1,998

140

-

-

-

2,138

Loans

1,013

1,760

-

-

-

2,773

 

3,011

1,900

2,773

2,772

100,292

110,748

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

22.

Risk Management and Financial Instruments continued

 

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 total of £726,346,000 (2021: £797,083,000).

 

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 terms of the Debenture Trust Deed had various covenants that prescribed that monies borrowed should not exceed the adjusted total capital and reserves as defined in the Debenture Trust Deed. The Note Purchase Agreements governing the terms of the Private Placement Loans also contain certain financial covenants. 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.

 

23.

Post Balance Sheet Events

 

Subsequent to the year end and up to the date of this Annual Report, the Company bought back 8,010,042 ordinary shares for treasury, at a total cost of £19,221,361, representing 2.40% of the issued share capital as at 31 December 2022.

 

On 14 February 2023, the Board approved a fourth interim dividend for the year ended 31 December 2022, of 2.5 pence per ordinary share payable on 31 March 2023.

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022

 

Corporate Information

 

Alternative Investment Fund Manager

Depositary, bankers and custodian

Link Fund Solutions Limited

The Bank of New York Mellon (International) Limited

6th Floor

One Canada Square

65 Gresham Street

London E14 5AL

London EC2V7NQ

 

 

 

Investment Manager

Stockbroker

RWC Asset Management LLP

Cenkos Securities plc

Verde 4th Floor

6.7.8 Tokenhouse Yard

10 Bressenden Place

London EC2R 7AS

London SW1E 5DH

 

 

 

Registered Office

Solicitor

6th Floor

Gowling WLG (UK) LLP

65 Gresham Street

4 More London Riverside

London EC2V 7NQ

London SE1 2AU

 

 

Company Secretary

Independent Auditor

Link Company Matters Limited

BDO LLP

6th Floor

55 Baker Street

65 Gresham Street

London W1U 7EU

London EC2V 7NQ

 

 

 

Fund Administrator

Registrar

Link Alternative Fund Administrators Limited

Equiniti Limited

6th Floor

Aspect House

65 Gresham Street

Spencer Road

London EC2V 7NQ

Lancing

 

West Sussex BN99 6DA

 

 

 

Telephone numbers:

 

+44 121 415 7047 (overseas shareholder helpline)

 

0371 384 2432 (shareholder helpline)*

 

0906 559 6025 (broker helpline)

 

 

 

* Lines open 8.30 a.m. to 5.30 p.m., Monday to Friday.

 

Temple Bar Identifiers

ISIN (ordinary shares) - GB00BMV92D64

SEDOL (ordinary shares) - BMV92D6

Legal Entity Identifier - 213800O8EAP4SG5JD323

 

Registered number

Registered in England Number 00214601

 

 

Temple Bar Investment Trust Plc

Annual Report & Financial Statements for the year ended 31 December 2022