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Te m p l e B a r
Investment Tr u s t PLC
Report and
Accounts
2001
Brought to you by Global Reports
Contents
Company summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Summary of results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Ten year record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Comparative dividend growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Five year summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Management and administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Chairman’s statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Twenty largest equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Asset allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Manager’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Portfolio of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Report of the directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Statement of directors’ responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Independent auditors’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Statement of total return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Consolidated balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Company balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Consolidated cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Statement of accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Notes to the accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Useful information for shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Notice of meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Temple Bar Investment Trust Savings Scheme & ISA . . . . . . . . . . . . . . . . . . . . . .38
The front cover shows an artist’s impression of Temple Bar, when relocated to Paternoster Square, by
St Paul’s Cathedral, 2004.
Brought to you by Global Reports
Company summary
INVESTMENT OBJECTIVE To provide growing income combined with growth in capital, principally
through investment in a portfolio of UK equities.
INVESTMENT POLICY The Company invests with an emphasis on companies that offer
fundamental value in terms of good asset backing and above average yields.
The Company aims to maintain a balance between larger and
smaller/medium sized companies, with normally 70% of the portfolio
invested in large blue chip companies.
BENCHMARK Performance is measured against the FTSE All-Share Index and the FTSE
350 Higher Yield Index.
TOTAL ASSETS £430,262,000
SHAREHOLDERS’ FUNDS £356,292,000
MARKET CAPITALISATION £352,570,000
CAPITAL STRUCTURE Ordinary Shares 57,893,214 shares
5.5% Debenture Stock 2021 £38,000,000
9.875% Debenture Stock 2017 £25,000,000
VOTING STRUCTURE Ordinary shares 100%.
WINDING-UP DATE None.
MANAGERS’ FEES 0.35% per annum based on the value of the investments (including cash) of
the Company.
PEP/ISA STATUS Qualifying investment under the Personal Equity Plan regulations.The
Company’s shares are also capable of being held in an ISA.
AITC Member.
Te m p l e Bar Investment Tr u s t 1
Brought to you by Global ReportsSummary of results
Percentage
2001 2000 increase/
ASSETS as at 31 December £’000 £’000 (decrease)
––––––––– ––––––––– –––––––––
Consolidated net assets 356,292 388,917 (8.39)%
––––––––– –––––––––
Ordinary shares
Net asset value per share 615.43p 672.95p (8.55)%
Market price 609.00p 603.00p 1.00%
Discount 1.0% 10.4%
––––––––– –––––––––
2001 2000
REVENUE for the year ended 31 December £’000 £’000
––––––––– –––––––––
Revenue return attributable to ordinary
shareholders 14,198 13,428 5.73%
––––––––– –––––––––
Earnings per ordinary share 24.56p 23.24p 5.68%
––––––––– –––––––––
Dividends per ordinary share 24.84p 23.43p 6.02%
––––––––– –––––––––
2001 2000
CAPITAL for the year ended 31 December £’000 £’000
––––––––– –––––––––
Capital return attributable to ordinary shareholders (33,074) 19,639
––––––––– –––––––––
Capital return attributable per ordinary share (57.21)p 33.98p
––––––––– –––––––––
%
TOTAL RETURNS (capital plus revenue) for the year to 31 December 2001
Return on net assets (4.77)
Return on share price 5.21
FTSE All-Share Index (13.29)
FTSE 350 Higher Yield Index (2.23)
Change in Retail Prices Index over year 0.70
GROSS DIVIDEND YIELDS – 31 December 2001
Yield on ordinary share price (609p) 4.36
Yield on FTSE All-Share Index 2.92
Yield on FTSE 350 Higher Yield Index 3.98
2 Te m p l e Bar Investment Tr u s t
Brought to you by Global ReportsTe n y e a r r e c o r d
Net assets Revenue
Group Group per return to Dividends
Year total net ordinary ordinary Earnings per share
ended assets assets share shareholders per share (net)
£’000 £’000 p £’000 p p
1992 214,523 178,996 310.90 7,771 13.57 13.25
1993 255,296 221,000 384.17 7,900 13.79 13.55
1994 228,617 195,416 339.20 8,163 14.24 13.95
1995 260,235 228,092 395.42 10,252 17.86 14.55
1996 281,064 248,417 430.55 10,084 17.55 16.00
1997 341,446 308,290 533.82 11,339 19.70 17.60
1998 370,578 335,064 579.56 11,089 19.24 19.36
1999 442,136 369,391 639.16 12,102 20.96 21.30
2000 462,624 388,917 672.95 13,428 23.24 23.43
2001 430,262 356,292 615.43 14,198 24.56 24.84
NOTES
1. In 1994 there was a change of policy on the charging of investment management fees. Half of these fees are
now charged to capital. The figures shown for 1993 and subsequent years are based on this new policy but the
previous year has not been restated.
2. In 1996 there was a change of policy on the charging of finance expenses. Half of these expenses are now
charged to capital. The figures shown for 1995 and subsequent years are based on this new policy but earlier
years have not been restated.
Comparative Dividend Growth
100
200
75
175
50
150
% change
25
125
1000
-25
75
-50
50
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Year
Temple Bar Investment Trust Sector
FTSE All-Share Index Retail Prices Index
Te m p l e Bar Investment Tr u s t 3
Brought to you by Global ReportsFive year summary
D i s c o u n t ( P re m i u m ) t o N e t A s s e t Va l u e
-2.0
0.0
2.0
4.0
6.0
%
8.0
10.0
12.0
14.0
16.0
31.12.96
31.3.97
30.6.97
30.9.97
31.12.97
31.3.98
30.6.98
30.9.98
31.12.98
31.3.99
30.6.99
30.9.99
31.12.99
31.3.00
30.6.00
30.9.00
31.12.00
31.3.01
30.6.01
30.9.01
31.12.01
S h a r e P r i c e To t a l R e t u r n
220.0
200.0
180.0
160.0
140.0
120.0
100.0
80.0
1997 1998 1999 2000 2001
Year
Temple Bar – Share Price Total Return
FTSE All Share – Total Return Source: DATASTREAM
N e t A s s e t Va l u e C a p i t a l R e t u r n
180.0
170.0
160.0
150.0
140.0
130.0
120.0
110.0
100.0
90.0
1997 1998 1999 2000 2001
Year
Temple Bar – Share Price Temple Bar – NAV (Par)
FTSE All Share – Price Index Source: DATASTREAM
4 Te m p l e Bar Investment Tr u s t
Brought to you by Global ReportsDirectors
RONALD SCOTT BROWN *, Chairman, aged 65, was appointed a director in 1978.
He has been involved in investment management since 1961, initially with Brander & Cruickshank.
In 1983 he was one of the founding executives of Aberdeen Asset Management PLC and became a
non executive deputy chairman of that company in 1995. He is also a director of a number of
investment trusts.
GARY J ALLEN *†, aged 57, was appointed a Director in 2001. Mr Allen has over 35 years’
experience in engineering and is currently Chairman of IMI plc. His other directorships include The
London Stock Exchange, N V Bekaert SA, and The National Exhibition Centre.
JOHN L HUDSON *, aged 56, was appointed a director in 1992. He is a former chief
executive of Wagon plc and is currently chairman of Birmingham International Airport Limited and
Metal Castings Limited and is chairman and chief executive of Calder Industrial Materials Limited.
RICHARD W JEWSON *, aged 57, was appointed a director in 2001. He first worked in
the timber and building material supply industry, becoming managing director of Jewson the
builders merchants for twelve years from 1974, and then managing director and chairman of its
parent company Meyer International plc from which he retired in 1993. He is currently chairman
of Savills plc, Queens Moat House plc, InterX plc, Octagon Healthcare Limited and Eastern
Counties Newspapers Group Ltd, deputy chairman of awg plc and a non executive director of
Grafton Group plc.
JOHN REEVE *, aged 57, was appointed a director in 1992. He was formerly executive
chairman of the Willis Group, group managing director of Sun Life Assurance Society and a member
of the boards of the Association of British Insurers and the International Insurance Society; he is a
director of a number of other companies.
FIELD L J WALTON *, aged 61, was appointed a director in 1983. He started his career in
engineering management and moved to the City as an analyst with Cazenove in 1971. Subsequently
he held a number of positions in fund management. He is currently a director of MacArthur & Co.
Limited and a non-executive director of Martin International Holdings Plc and a number of
engineering and trust companies.
* Independent non-executive director and member of the audit committee.
† Chairman of the audit committee.
Te m p l e Bar Investment Tr u s t 5
Brought to you by Global ReportsManagement and administration
from left to right, Martin Slade, David Liddell, Chris Burvill
INVESTMENT MANAGER REGISTERED AUDITORS
Investec Investment Management Limited PricewaterhouseCoopers,
Regulated by the FSA Southwark Towers, 32 London Bridge Street,
2 Gresham Street, London EC2V 7QP London SE1 9SY
Telephone No. 020 7597 2000
BANKERS AND CUSTODIAN
Facsimile No. 020 7597 1803
HSBC Bank plc, Scottish Life House, Poultry,
REGISTERED OFFICE London EC2P 2BX
2 Gresham Street, London EC2V 7QP
STOCKBROKERS
Secretary: Investec Investment Management Limited, Warburg Dillon Read, 1 Finsbury Avenue,
represented by M K Slade FCIS London EC2M 2PA
REGISTERED NUMBER SOLICITORS
Registered in England No. 214601 Eversheds, Senator House, 85 Queen Victoria Street,
London EC4V 4JL
REGISTRAR
Lloyds TSB Registrars Scotland, PO Box 28448,
Finance House, Orchard Brae, Edinburgh EH4 1WQ
Telephone No: 0870 6015366 (shareholder helpline)
0891 105366 (broker helpline)
6 Te m p l e Bar Investment Tr u s t
Brought to you by Global ReportsC h a i r m a n ’s s t a t e m e n t
these concerns, but confidence has remained fragile, and the
bond markets are indicating that rates cannot be held at such
low levels for much longer.
NEW DIRECTORS
Turning to other matters I am delighted to welcome onto the
board Gary Allen, Chairman and former Chief Executive of
IMI plc, and Richard Jewson, Chairman of Savills plc, who will
add experience and perspective to the board and have already
made substantial contributions to our deliberations.
OUTLOOK
Some of the building blocks for an economic recovery are being
put in place, including greater capital discipline on the part of
companies, restructuring of weak balance sheets and more
realistic earnings projections. It is unlikely, however, that these
positive factors are strong enough at the moment to protect
investors if recovery comes through more slowly than
expected. For our own part, we are not convinced that all the
pieces are yet in place for a sustainable improvement in the
equity market and consequently aim to retain the Trust’s
RESULTS AND DIVIDEND
defensive positioning for the time being.
Despite the fact that 2001 was a difficult year for equity With the reduction in the level of inflation and the worldwide
investors I am pleased to be able to report that post tax economic recession, the rate of increase in dividends from our
earnings for the year were £14.2m, an increase of 5.7% on underlying investments has slowed.This will affect our capacity
2000. The board proposes a final dividend of 16.86p making to increase the Temple Bar dividend which for five years rose by
24.84p for the year, a rise of 6%.This will result in a small call 10% per annum and by 6% in the year just concluded. Our
on reserves of £175,000 and represents a further progression objective is to continue to increase the dividend to shareholders
of Temple Bar’s dividend against its sector and the wider equity at a rate greater than that of inflation.
market, as well as being usefully ahead of inflation.
12 February 2002
The board is always mindful of the need to achieve a reasonable Ronald Scott Brown
balance between income and capital growth, and we remain
convinced that by securing a growing level of income from a
carefully constructed higher yielding portfolio we can attain a
good degree of capital performance.
While we are obviously disappointed to have to report a fall in
total assets this year, it is pleasing to report a further period of
outperformance compared to the FT All Share Index. During
the year the Trust’s total assets fell by 7.0% which compares
with a fall in the FT All Share of 15.4%.The Higher Yield Index
did however outperform us marginally, falling by only 5.6% –
its characteristic defensiveness showing through. The shares
saw a narrowing of the discount during the year, resulting in a
small rise in the share price.
The year 2001 was always destined to be a difficult one, but the
problems were exacerbated by the terrorist attacks on the
United States and their aftermath. Many hoped that the
technology bubble might unwind in a controlled fashion, and
without damaging prospects elsewhere but this was bound to
be a test of hope against experience. When coupled with a
slowdown in investment spending, a lack of international
demand and some major companies being caught with
unsustainably high levels of borrowings, the effects had the
potential to cause a much more serious downturn. A policy of
aggressive interest rate cuts on the part of the US Federal
Reserve backed by other central banks, has done much to ease
Te m p l e Bar Investment Tr u s t 7
Brought to you by Global ReportsTw e n t y l a r g e s t e q u i t y i n v e s t m e n t s
as at 31 December 2001
Valuation Valuation
31 December Net Purchases/ Appreciation/ 31 December Total
2000 (Sales) (Depreciation) 2001 Assets
Company £’000 £’000 £’000 £’000 %
Lloyds TSB 20,439 (2,344) 1,088 19,183 4.46
BP 23,065 (4,587) 450 18,928 4.40
GlaxoSmithKline 22,398 (2,434) (1,653) 18,311 4.26
Shell Transport & Trading 17,203 140 (1,603) 15,740 3.66
Scottish Power 5,824 9,041 (2,296) 12,569 2.92
Safeway 9,718 1,857 746 12,321 2.86
Boots 14,987 (4,015) (183) 10,789 2.51
Rank 7,956 (575) 2,834 10,215 2.37
BT 7,742 4,162 (2,167) 9,737 2.26
British Sky Broadcasting 2,291 7,804 (426) 9,669 2.25
HBOS 9,581 (2,274) 1,972 9,279 2.16
Cable & Wireless 10,822 9,625 (11,264) 9,183 2.13
Lattice – 7,603 1,251 8,854 2.06
HSBC 10,726 (284) (1,627) 8,815 2.05
Prudential 13,185 (1,736) (3,038) 8,411 1.96
Gallaher – 6,851 1,550 8,401 1.95
AstraZeneca 6,447 2,335 (464) 8,318 1.93
Investec UK Smaller
Companies Fund 9,370 – (1,083) 8,287 1.93
Six Continents 9,771 (1,281) (479) 8,011 1.86
Rio Tinto 8,882 (2,187) 1,107 7,802 1.81
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––
210,407 27,701 (15,285) 222,823 51.79
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––
Convertibles and all classes of equity in any one company are treated as one investment.
Asset allocation as at 31 December 2001
BY CLASS(%) EQUITY PORTFOLIO DISTRIBUTION (%)
Fixed Preference Collective
interest shares Financials Investment
Convertibles Schemes Resources
Cash
Basic
Industries
General
Industries
Cyclical Consumer
Utilities Goods
Non-cyclical
Consumer
Ordinary Goods
shares Non-cyclical
Services Cyclical
Services
% % %
Ordinary shares 89.73 Resources 11.62 Cyclical Services 18.94
Convertibles 0.05 Basic Industries 4.93 Non-cyclical Services 10.48
Fixed interest 5.45 General Industries 3.13 Utilities 9.21
Preference shares 0.20 Cyclical Consumer Goods 1.02 Financials 21.82
Cash 4.57 Non-cyclical Consumer Collective Investment
Goods 16.70 Schemes 2.15
8 Te m p l e Bar Investment Tr u s t
Brought to you by Global ReportsM a n a g e r ’s r e p o r t
For those of us who have relied on the axiom that “equities downturn, which arguably was overdue anyway. Given these
always outperform in the longer term, don’t they?” the poor factors, not to mention the huge uncertainties generated by
stockmarket performance last year was not a tremendous the 11th September attacks, an outside observer might well
help. The harsh fact is that the All Share Index has effectively suggest that the performance of the equity market over the
gone sideways for some time now – it was actually higher in last year has demonstrated its resilience rather than weakness.
October 1997 than it is at the time of writing. Our own For this, much should be credited to the rehabilitation of
caution on the outlook this year, itself hardly controversial, stable mature companies in the eyes of the investing public.
seems to reflect the general air of disillusion creeping in. Not only have they been undervalued for some time, but
This was not how it was meant to be.The “new paradigm” generally they have been able to show some profit and
was expected to produce such huge improvements in dividend growth.Temple Bar’s reliance on such companies to
productivity that we would be able to look forward to faster form the core of the portfolio explains the relative
economic growth and lower inflation. Here very simply was performance against the wider market. As in previous years
the problem. We only have to look back to the heady, the chart below shows the relative contributions to our
frequently outlandish observations and valuations at the height returns compared with the All Share index. We hope it is
of the dot.com frenzy, to realise that too much was being helpful for investors in identifying the areas which have gone
expected too early. Now it has all become something of an well and badly, although the comparison with the All Share
embarrassment. Few are ready to take the apologist line, or needs to be viewed carefully in a year of diverging returns. For
even to acknowledge their involvement at the time. example, the Non Cyclical Services sector, (effectively
If we accept that a period of adjustment, possibly Telecoms) had another torrid year, and produced over 57% of
reflection, has to be gone through after the demise of the our negative returns. This compares with only 25% of the
technology bubble, we can then see the market background a losses for the All Share where weaker performances were
little more optimistically. It is worth pointing out that for more widespread. Although BT and Cable & Wireless
many longer term investors the direct effects have so far been performed badly, our underweight stance in the sector meant
quite minor. The huge collapse in valuations of technology that our actual performance here was much in line.
stocks has been less of a problem than the general economic
Contribution to equity capital returns –
Temple Bar and FTSE All Share Index 2001
20% –
10% –
0% –
-10% –
-20% –
-30% –
-40% –
-50% –
-60% –
Resources Basic General Cyclical Non-Cyclical Cyclical Non-Cyclical Utilities Information Financials
Industries Industries Consumer Consumer Services Services Technology
Goods Goods
Contribution to TBIT
Contribution to FTSE All Share Index
Te m p l e Bar Investment Tr u s t 9
Brought to you by Global ReportsManager’s report continued
What the table does make clear is the relatively better Temple Bar has joined the Shareholder Action Group and we
showings from the more defensive areas of the market, await recompense for the fair value of the trust’s shareholding.
mirrored not just by Telecoms weakness but also by the In the meantime the shares, which are currently suspended,
continued falls in Information Technology, Media (classified are being valued at 70p in the Trust’s portfolio.
within Cyclical Services) and Financials. We have seen some Conscious that the wisest short term policy last year
very strong showings in the consumer sector with Boots, a would have been to do nothing, we endeavoured tentatively to
longstanding favourite, WH Smith, and Northern Foods start looking at whether longer term opportunities could be
performing well, while what might have appeared to be a found in the fallen stars of the technology boom. This was in
speculative investment in Marks and Spencer at the beginning full recognition that events would probably get worse before
of the year turned out to be one of our best investments, with improving, but that calling the turn in these situations is never
the stock outperforming by 129%. Other successes on this easy. In part though the decision to start investing in lower
basis included holdings in the vehicle distributors, CD Bramall yielding shares was a reflection that many value orientated
and Vardy, Rank Group and Gallaher. Rank has continued to shares had to a large extent done their job. Holding a value
perform well and would normally have reached our target stock that has become expensive is not the wisest investment.
price levels, were it not for the fact that we believe the One of our largest purchases has been BSkyB, a stock paying
company is in a prime position to benefit from the no dividend which initially appears to be on an extremely high
forthcoming liberalisation of gaming regulations. While this valuation. However it is our belief that the group is one of the
cautious underpinning was generally important to the few with a strong enough franchise that it can continue
portfolio, it did result in us missing some opportunities. An growing for some time to come. Our decision to raise our
excellent performance from Royal Bank led us to take profits holding significantly in BT after its appalling performance of
early rather than risk the shares falling back on bad debt the last two years, again is not based on our normal yield
concerns. Plainly, with hindsight the attacks of considerations, but on the group’s longer term recovery
11th September presented a buying opportunity of which we potential, restructured balance sheet and new management.
only partially took advantage. This year a strategy of just picking cheap shares may not be
However in a market littered with spectacular collapses enough.The element of self help that BT may be able to bring
we had only one genuine disappointment. Our decision to to its earnings progression in the coming years is a theme
invest in Railtrack came after it had already fallen substantially, which was important to us last year and arguably will be of
on the view that its asset base and allowed rate of return made even greater significance in the challenging environment
it a good investment.We also argued that it would be difficult ahead. Most of our largest overweight positions such as
for the government to come up with an alternative and better Safeway, Scottish Power, Rank and BT all to some degree share
method of administering the railways. Although we are this characteristic. In an environment where most groups will
convinced that our underlying analysis was right, we plainly find it hard to maintain positive sales growth, those which still
failed to allow for what appears to have been a triumph of have restructuring potential or which have a clear strategy for
populism over economics on behalf of the government. progress should come out the winners.
Chris Burvill
Investec Investment
Management Limited
12 February 2002
10 Te m p l e Bar Investment Tr u s t
Brought to you by Global ReportsPortfolio of investments
Valuation of FTSE All-
holding as at Share Index
31 December Percentage of 31 December
2001 Portfolio 2001
£’000 % %
RESOURCES
Mining 1.91 2.71
Rio Tinto 7,802
Oil & Gas 9.05 12.35
BP 18,928
Shell Transport & Trading 15,740
Tullow Oil 2,181
––––––––––– –––––––––––
10.96 15.06
––––––––––– –––––––––––
BASIC INDUSTRIES
Chemicals 0.96 0.80
Scapa 1,232
Yule Catto 2,698
Construction & Building Materials 3.13 1.83
Bellway 4,440
RMC 6,179
Wilson (Connolly) 2,127
Forestry & Paper – 0.03
Steel & Other Metals 0.56 0.15
Corus Group 2,266
––––––––––– –––––––––––
4.65 2.81
––––––––––– –––––––––––
GENERAL INDUSTRIES
Aerospace & Defence 1.79 1.26
BAE Systems 1,725
Rolls-Royce 5,557
Electronic & Electrical Equipment – 0.53
Engineering & Machinery 1.16 0.61
Fenner 3,204
Senior 1,535
––––––––––– –––––––––––
2.95 2.40
––––––––––– –––––––––––
CYCLICAL CONSUMER GOODS
Automobiles & Parts 0.96 0.16
GKN 3,608
Torotrak 315
Household Goods & Textiles – 0.02
––––––––––– –––––––––––
0.96 0.18
––––––––––– –––––––––––
NON-CYCLICAL CONSUMER GOODS
Beverages 1.84 2.63
Allied Domecq 2,186
Diageo 5,323
Food Producers & Processors 4.19 2.17
Cadbury Schweppes 4,470
Northern Foods 5,743
Tate & Lyle 6,863
Health – 0.85
Packaging – 0.13
Personal Care & Household Products – 0.45
Pharmaceuticals 6.54 11.75
AstraZeneca 8,318
GlaxoSmithKline 18,311
Tobacco 3.18 1.18
British American Tobacco 4,551
Gallaher 8,401
––––––––––– –––––––––––
15.75 19.16
––––––––––– –––––––––––
Te m p l e Bar Investment Tr u s t 11
Brought to you by Global ReportsPortfolio of investments continued
Valuation of FTSE All-
holding as at Share Index
31 December Percentage of 31 December
2001 Portfolio 2001
£’000 % %
CYCLICAL SERVICES
Distributors 1.74 0.34
C D Bramall 1,051
Dixon Motors 1,606
Vardy (Reg) 2,238
Wincanton 2,161
General Retailers 5.85 3.31
Boots 10,789
Marks & Spencer 7,381
Smith (WH) 5,691
Leisure, Entertainment & Hotels 4.60 2.48
Rank 10,215
Six Continents 8,011
Whitbread 540
Media & Photography 3.77 4.21
British Sky Broadcasting 9,669
EMI 2,002
Granada 3,708
Support Services 1.07 2.27
BTG 2,795
Davis Services 1,568
Transport 0.83 1.59
British Airways† 2,284
Railtrack* 1,080
––––––––––– –––––––––––
17.86 14.20
––––––––––– –––––––––––
NON–CYCLICAL SERVICES
Food & Drug Retailers 4.08 2.10
Iceland 4,305
Safeway 12,321
Telecommunications Services 5.80 11.26
BT 9,737
Cable & Wireless 9,183
MM02 3,372
Securicor 1,364
––––––––––– –––––––––––
9.88 13.36
––––––––––– –––––––––––
UTILITIES
Electricity 4.23 2.05
National Grid 4,671
Scottish Power 12,569
Gas Distribution 2.17 0.99
Lattice 8,854
Water 2.28 0.66
AWG 3,505
United Utilities 5,794
––––––––––– –––––––––––
8.68 3.70
––––––––––– –––––––––––
12 Te m p l e Bar Investment Tr u s t
Brought to you by Global ReportsPortfolio of investments continued
Valuation of FTSE All-
holding as at Share Index
31 December Percentage of 31 December
2001 Portfolio 2001
£’000 % %
FINANCIALS
Banks 13.76 17.94
Alliance & Leicester 6,865
Bradford & Bingley 5,361
HBOS 9,279
HSBC 8,815
Lloyds TSB 19,183
Royal Bank of Scotland 934
Standard Chartered 5,608
Insurance 0.14 0.55
Ockham 569
Life Assurance 5.20 3.55
Britannic 3,321
CGNU 5,456
Friends Provident 4,013
Prudential 8,411
Investment Companies 1.04 2.43
Fleming Mercantile 3,320
Framlington Innovations 927
Real Estate 0.43 1.36
Slough Estates 1,750
Speciality & Other Finance – 1.56
––––––––––– –––––––––––
20.57 27.39
––––––––––– –––––––––––
INFORMATION TECHNOLOGY
Information Technology Hardware – 0.55
Software & Computer Services – 1.19
––––––––––– –––––––––––
– 1.74
––––––––––– –––––––––––
COLLECTIVE INVESTMENT SCHEMES
Investec UK Smaller Companies Fund 8,287 2.03 –
––––––––––– ––––––––––– –––––––––––
TOTAL EQUITIES† 384,266 94.29 100.00
––––––––––– ––––––––––– –––––––––––
UK FIXED INTEREST
Abbey National 11.5% 2017 1,524
Anglian Water 8.25% 2006 2,053
BAA 11.75% 2016 1,505
Innogy 8.375% 2006 3,227
Lloyds TSB 8.5% 2006 4,204
MEPC 12% 2006 1,883
Royal Bank of Scotland 9.25% Perpetual 2,346
UK Treasury 6.5% Stock 2003 2,434
UK Treasury 8.5% Stock 2005 4,114
––––––––––– ––––––––––– –––––––––––
TOTAL BONDS 23,290 5.71 –
––––––––––– ––––––––––– –––––––––––
––––––––––– ––––––––––– –––––––––––
TOTAL VALUATION OF PORTFOLIO 407,556 100.00 100.00
––––––––––– ––––––––––– –––––––––––
* Suspended Security
† Includes Convertibles
Te m p l e Bar Investment Tr u s t 13
Brought to you by Global ReportsReport of the directors
The directors present their report and accounts for the directors held office throughout the year except
the year ended 31 December 2001. for Mr E H Sharp who retired on 26 March 2001
and Mr G J Allen and Mr R W Jewson who were
GROUP ACTIVITIES
appointed as directors on 2 April 2001 and 21 May
The principal activity of the Company, which
2001 respectively.
remained unchanged throughout the year, is that of
an investment trust.The Inland Revenue has
31 December 1 January
approved the Company as an investment trust for the
2001 2001
purposes of section 842 of the Income and (or date of
Corporation Taxes Act 1988 for the year ended appointment)
31 December 2000 and its affairs are directed so as G J Allen 1,125 –
to enable it to continue to attain such approval.The J L Hudson 11,375 11,151
Company intends to conduct its business so as to R W Jewson 371 –
continue as an approved investment trust following J Reeve 16,798 14,392
the objective set out on page 1 of this report. R Scott Brown 15,118 14,736
The Company has one active wholly owned E H Sharp N/A 36,534
subsidiary company, whose principal activity is F L J Walton 6,724 6,724
investment dealing, and one dormant subsidiary.
The “close company” provisions of the Income All the above interests are beneficial. None of the
and Corporation Taxes Act 1988 do not apply to the directors had at any date any interest in either of the
Company. Company’s debenture stocks.
A review of the business is given in the On 15 January 2002 Mr J Reeve acquired a
Chairman’s statement and the Manager’s report. further 146 ordinary shares in the Company through
his regular monthly saving in the Temple Bar
ORDINARY DIVIDENDS Investment Trust ISA and on 22 January 2002
The results of the Group are shown on page 20. An Mr R W Jewson acquired a further 40 ordinary
interim dividend of 7.98p per ordinary share was shares in the Company through his regular monthly
paid on 28 September 2001 (2000, 7.53p) and the saving in the Temple Bar Investment Trust Savings
directors are recommending a final dividend of Scheme. No other changes in the interests shown
16.86p per ordinary share (2000, 15.90p), a total for above occurred between 31 December 2001 and
the year of 24.84p (2000, 23.43p). Subject to 12 February 2002.
shareholders’ approval, the final dividend will be paid No other person was a director during any part
on 28 March 2002 to shareholders on the register on of the year.
15 March 2002. After deducting the ordinary The director retiring by rotation is
dividend there is a revenue deficit of £175,000 to be Mr J L Hudson who, being eligible, the Board
transferred from consolidated revenue reserves. recommends for re-election. Mr G J Allen and
PERSONAL EQUITY PLANS/ISAs Mr R W Jewson were appointed as directors during
The Company has conducted its investment policy so the year and in accordance with the Articles of
as to remain a qualifying investment trust under the Association both directors will stand for re-election
ISA and Personal Equity Plan regulations. It is the at the annual general meeting. No director has a
intention of the Board to continue to satisfy these service contract with the Company.
regulations. There were no contracts subsisting during or at
the end of the year in which a director of the
SHARE CAPITAL Company is or was interested and which are or were
On 7 November 2001 and 15 November 2001 significant in relation to the Company’s business.
separate issues of 50,000 ordinary shares of 25p per
share were allotted fully paid for cash at prices of PAYMENT OF SUPPLIERS
617.5p and 631p respectively. The Company’s policy is to obtain the best possible
terms of payment from suppliers for all forms of
DIRECTORS business. All terms agreed with suppliers have been
The directors of the Company during the year were complied with during the year.There were no trade
as stated below and their interests in the ordinary creditors at the year end.
share capital of the Company are as follows. Each of
14 Te m p l e Bar Investment Tr u s t
Brought to you by Global ReportsReport of the directors continued
SUBSTANTIAL SHAREHOLDERS When shares are to be allotted for cash, section
So far as the directors are aware, no person has 89(1) of the Companies Act 1985 requires such new
disclosable interests in 3% or more of the issued shares to be offered first to existing shareholders in
ordinary shares of the Company. proportion to their existing holdings of ordinary
shares. However, in certain circumstances, it is
MANAGEMENT CONTRACT
beneficial to allot shares for cash otherwise than pro
The Company has a management agreement with
rata to existing shareholders and the ordinary
Investec Investment Management Limited (“IIM”) for
shareholders can by special resolution waive their
the provision of investment management, secretarial,
pre-emption rights.Therefore, a special resolution
accounting and administrative services to the
will be proposed at the Annual General Meeting
Company and its subsidiaries.The agreement is
which, if passed, will give the directors power to
subject to one year’s notice of termination by either
allot for cash equity securities up to an aggregate
party.
nominal amount of £725,000 (equivalent to
IIM receives an investment management fee of
2,900,000 ordinary shares of 25p each or 5.0% of
0.35% per annum, payable quarterly, based on the
the Company’s existing issued ordinary share
value of the investments (including cash) of the
capital), as if section 89(1) does not apply.
Company. Investments in funds managed by the
The directors intend to use this authority to issue
Investec Group are wholly excluded from this
new shares to participants in the Temple Bar
charge. One half of the investment management fee
Investment Trust Savings Scheme and the Temple Bar
payable to IIM is charged by the Company to capital
Investment Trust ISA or to other prospective
account and the remaining half to revenue account
purchasers whenever they believe it may be
on the basis of the expected long term split of
advantageous to shareholders to do so. Any such
returns.
issues would only be made at prices greater than net
The investment management fee charged for the
asset value and, therefore, would increase the assets
year ended 31 December 2001 amounted to
underlying each share.The issue proceeds would be
£1,479,635 (2000, £1,169,911 plus £98,250 for
available for investment in line with the Company’s
other duties). All amounts are stated net of value
investment policy.
added tax.
No issues of shares will be made which would
DONATIONS
alter the control of the Company without the prior
The Company entered into a deed of covenant to approval of shareholders in general meeting.
donate £1,000 per annum to Barnardo’s for a period The appropriate resolutions are set out in the
of four years from 1998 (2000, charitable donations notice of meeting on page 36.
£1,000). No political donations were made in 2001
(2000, Nil). DIRECTORS’ AUTHORITY TO PURCHASE
THE COMPANY’S OWN SHARES
AUDITORS The directors consider it desirable to give the
A resolution to re-appoint PricewaterhouseCoopers Company the opportunity to buy back shares in
as auditors to the Company will be proposed at the circumstances where the shares may be bought for a
Annual General Meeting on 25 March 2002. price which is below the net asset value per share of
the Company.The purchase of ordinary shares is
RENEWAL OF AUTHORITY TO ALLOT
intended to reduce the discount at which ordinary
SHARES AND DISAPPLICATION OF
shares trade in the market through the Company
PRE-EMPTION RIGHTS
becoming a new source of demand for ordinary
It is proposed that, as in previous years, the directors
shares.The rules of the UK Listing Authority provide
be authorised to allot up to £725,000 of relevant
that the maximum price which can be paid by the
securities in the Company (equivalent to 2,900,000
Company is 5% above the average of the market
ordinary shares of 25p each, representing 5.0% of its
value of the ordinary shares for the five business days
ordinary shares in issue).
before the purchase is made.
The Company is not intending to make such
purchases at present and will only exercise the
Te m p l e Bar Investment Tr u s t 15
Brought to you by Global ReportsReport of the directors continued
power after careful consideration and in
circumstances where, in the light of prevailing
market conditions, it is satisfied that it is in the
interests of the Company to do so.The appropriate
resolution is set out in the notice of meeting on
page 37.
By order of the Board of Directors
M K Slade
For Investec Investment Management Limited
Secretary
12 February 2002
Statement of directors’ responsibilities
in respect of the accounts
The directors are required by UK company law to year ended 31 December 2001.The directors also
prepare accounts for each financial year that give a confirm that applicable accounting standards have
true and fair view of the state of affairs of the been followed and that the accounts have been
Company as at the end of the financial year and of prepared on a going concern basis.
the profit or loss of the Company for that year. The directors are responsible for keeping proper
The directors confirm that suitable accounting accounting records, for safeguarding the assets of the
policies have been used and applied consistently and Company and hence for taking reasonable steps for
reasonable and prudent judgements and estimates have the prevention and detection of fraud and other
been made in the preparation of the accounts for the irregularities.
16 Te m p l e Bar Investment Tr u s t
Brought to you by Global ReportsCorporate governance
APPLICATION OF COMBINED CODE No chief executive or senior independent director
PRINCIPLES has, therefore, been identified in this Annual Report.
The board attaches great importance to ensuring that The content and presentation of board papers
the Company operates to high ethical and compliance circulated before each meeting contain sufficient
standards. In addition, the board seeks to observe the information on the financial condition of the
principles set out by the Report of the Committee on Company. Key representatives of IIM attend each
Corporate Governance insofar as these are consistent board meeting enabling directors to probe on
with the Company’s status and objectives as an matters of concern or seek clarification on certain
investment trust. issues.
The Company is headed by a board comprised Given the nature of the board, comprising
entirely of independent non-executive directors.There entirely non-executive directors, there is no
are no executive directors to monitor and accordingly nomination committee, as recommended in the
large parts of the Combined Code on matters such as Code, but any appointment will be a decision of the
ensuring a clear division of responsibilities at the head board as a whole.There is a formal review procedure
of the Company, a balance of executive and non- governing the appointment of new directors. Upon
executive directors and issues relating to remuneration appointment to the board each director receives
of executive directors do not have any specific relevant background information on the Company
relevance to the Company. together with a summary of the duties and
COMPLIANCE WITH THE DETAILED responsibilities of directors.There is, however, an
PROVISIONS OF THE COMBINED CODE assumption that any candidate considered suitable for
appointment to the board is already sufficiently
Directors
conversant with listed company requirements and
Each of the directors is independent of any
corporate governance procedures. If not, additional
association with the management company which
training and guidance will be provided by the
might interfere with the exercise of independent
Company Secretary.
judgement.
Directors are subject to election by shareholders
There is a formal schedule of matters to be
at the first AGM following their appointment and,
specifically approved by the board and individual
thereafter, are subject to retirement by rotation at
directors may seek independent advice at the
intervals of no more than three years. In addition,
expense of the Company within certain limits.
the appointment of each director is reviewed by
The board has delegated the investment
other members of the board every three years within
management, within clearly defined parameters and
the six month period before they are due to stand for
dealing limits, and the administration of the business
re-election in general meetings. Directors are not,
to Investec Investment Management Limited (‘IIM’).
therefore, subject to automatic re-appointment.
The board makes all strategic decisions, reviews the
Non-executive directors are not appointed for
performance of the Company at board meetings and
specified terms. Because of the nature of an investment
sets the objectives for the Managers.
trust the board believes that the contribution and
The Company Secretary is responsible to the
independence of a director is not diminished by long
board, inter alia, for ensuring that board procedures
service and, conversely, that a more detailed
are followed and for compliance with applicable
knowledge of the Company and its business has a
rules and regulations including the Combined Code.
beneficial impact.
Appointment or removal of the nominated
representative of the Corporate Company Directors’ Remuneration
Secretary (“the Company Secretary”) is a matter The Company does not have any executive directors
for the board as a whole. All directors have access to and has not, therefore, established a remuneration
the advice and services of the Company Secretary. committee.The board determines the remuneration
In the context of a board comprised entirely of of the management company. Remuneration of non-
non-executive directors, the directors believe there executive directors will be a decision of the board,
is no necessity to nominate a recognised senior subject to any shareholder approvals which may be
member, other than the Chairman, since no necessary. At the present time all directors are paid
individual or individuals have unfettered powers such the same fee with an additional amount payable to
that they can dominate the board’s decision taking. the Chairman.
Te m p l e Bar Investment Tr u s t 17
Brought to you by Global ReportsCorporate governance continued
Relations with Shareholders The effectiveness of the overall system of internal
The Board welcomes investors to attend the AGM control is reviewed on an annual basis by the Board.
and encourages discussion on issues of concern or Such a system can provide only reasonable and not
areas of uncertainty. Questions from shareholders are absolute assurance against material misstatement
welcomed. In addition, special arrangements have or loss. Guidelines were introduced in September
been established to allow Temple Bar Savings Scheme 1999 for the review of non-financial internal controls
investors to participate fully at annual general (‘the Turnbull guidance’).The Board has undertaken a
meetings. review of such guidance and believes that there is a
At general meetings the Chairman will announce robust framework in place to meet the requirements
the level of proxies lodged on each resolution and the of the Code.
balance for and against, after it has been dealt with The Board receives reports from its advisers on
on a show of hands. A separate resolution will be internal control matters and does not believe that
proposed at the AGM in respect of each substantially there is scope or necessity for an internal audit
separate issue.There is also a separate resolution function.This matter is subject to periodic review.
proposed in respect of the report and accounts. Based on the foregoing the Company has a continuing
In order to facilitate detailed discussion of key process for identifying, evaluating and managing the
issues, the notice of AGM is circulated to shareholders risks it faces.This process has been in place for the
at least 20 working days before the meeting. reporting period and to the date of this report and is
regularly reviewed by the Board in accordance with
Accountability, Internal Controls and Audit the Turnbull Committee’s guidelines.
The Board pays careful attention to ensuring that all The audit committee of the Company currently
documents released by the Company, including the comprises the entire Board of six non-executive
Annual Report, present a fair and accurate assessment directors with all matters being referred to the full
of the Company’s position and prospects. Board for discussion and approval. Members of the
After making enquiries, the directors have a audit committee are named in the report and accounts.
reasonable expectation that the Company has The auditors are invited to attend the audit committee
adequate resources to continue in operational meeting at which the annual accounts are considered.
existence for the foreseeable future including Included in the audit committee’s written terms
recourse to a £7.5 million overdraft facility with of reference is a responsibility for annually reviewing
HSBC Bank. Accordingly the directors continue to the scope and results of the audit and its cost
adopt the going concern basis in preparing the effectiveness.The objectivity and auditing rigour of
accounts. the auditors will be maintained by ensuring that they
The directors are responsible for the Company’s have direct access to the Board.The Board also
system of internal control and for reviewing its ensures that any other services which the auditors
effectiveness. In order to facilitate the control process provide to the Company would not be of significance
the Board has requested the Managers to confirm to them.The directors believe that the relationship
annually that they have conducted the Company’s with the auditors is objective and professional.
affairs in compliance with the legal and regulatory
obligations which apply to the Company and to Socially Responsible Investment
report on the systems and procedures within Investec The Board believes that it is its primary duty to act in
which are applicable to the management of Temple the best financial interests of the Company and its
Bar’s affairs.The Board meets on seven scheduled shareholders.While the board takes account of the
occasions in each year and at each meeting receives ethical stance of investee companies on matters such
sufficient financial and statistical information to as the environment or society as a whole, the ultimate
enable it to monitor adequately the investment objective is to deliver superior investment returns for
performance and status of the business. shareholders. Accordingly, while the Board seeks to
The Board has also established a series of favour companies which pursue best practice in these
investment parameters, which are reviewed areas this must not be to the detriment of the return
annually, designed to limit the risk inherent in on the investment portfolio.The managers have the
managing a portfolio of investments.The right to vote on behalf of the Company if they believe
safeguarding of assets is entrusted to an independent it to be appropriate, but any vote against the
reputable custodian with whom the holdings are recommendation of an incumbent board requires the
regularly reconciled. consent of the Trust’s own board.
18 Te m p l e Bar Investment Tr u s t
Brought to you by Global ReportsIndependent Auditors’ Report
to the members of Temple Bar Investment Trust PLC
We have audited the financial statements which for our review by the Listing Rules, and we report if
comprise the statement of total return, the it does not.We are not required to consider whether
consolidated and company balance sheets, the cash the board’s statements on internal control cover all
flow statement and notes 1 to 22, which have been risks and controls, or to form an opinion on the
prepared under the historical cost convention, as effectiveness of the Company’s corporate governance
modified by the revaluation of certain fixed assets procedures or its risk and control procedures.
and the accounting policies set out in the statement
of accounting policies. Basis of audit opinion
We conducted our audit in accordance with Auditing
Respective responsibilities of directors Standards issued by the Auditing Practices Board. An
and auditors audit includes examination, on a test basis, of
The directors’ responsibilities for preparing the evidence relevant to the amounts and disclosures in
Annual Report and the financial statements in the financial statements. It also includes an
accordance with applicable United Kingdom law and assessment of the significant estimates and
accounting standards are set out in the statement of judgements made by the directors in the preparation
Directors’ responsibilities. of the financial statements, and of whether the
Our responsibility is to audit the financial accounting policies are appropriate to the
statements in accordance with relevant legal and Company’s circumstances, consistently applied and
regulatory requirements, United Kingdom Auditing adequately disclosed.
Standards issued by the Auditing Practices Board and We planned and performed our audit so as to
the Listing Rules of the Financial Services Authority. obtain all the information and explanations which
We report to you our opinion as to whether the we consider necessary in order to provide us with
financial statements give a true and fair view and are sufficient evidence to give reasonable assurance that
properly prepared in accordance with the the financial statements are free from material mis-
Companies Act 1985.We also report to you if, in statement, whether caused by fraud or other
our opinion, the directors’ report is not consistent irregularity or error. In forming our opinion we also
with the financial statements, if the Company has evaluated the overall adequacy of the presentation of
not kept proper accounting records, if we have not information in the financial statements.
received all the information and explanations we
require for our audit, or if information specified by Opinion
law or the Listing Rules regarding directors’ In our opinion the financial statements give a true
remuneration and transactions is not disclosed. and fair view of the state of affairs of the Company
We read the other information contained in the and the Group at 31 December 2001 and the total
Annual Report and consider the implications for our return and cash flows of the Group for the year then
report if we become aware of any apparent mis- ended and have been properly prepared in
statements or material inconsistencies with the accordance with the Companies Act 1985.
financial statements.The other information
comprises only the directors’ report, the chairman’s PricewaterhouseCoopers
statement, the investment manager’s report and the Chartered Accountants and Registered Auditors
Corporate Governance statement. Southwark Towers
We review whether the Corporate Governance 32 London Bridge Street
statement reflects the Company’s compliance with London SE1 9SY
the seven provisions of the Combined Code specified 12 February 2002
Te m p l e Bar Investment Tr u s t 19
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