R e p o r t a n d
Te m p l e B a r
C o n t e n t s
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.
C o m p a n y s u m m a r y
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.
S u m m a r y o f r e s u l t s
Percentage
2001 2000 increase/
ASSETSas 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
REVENUEfor 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
CAPITALfor 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
T e 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.
C o m p a r a t i v e D i v i d e n d G r o w t h
50 75 100 125 150 175 200Investment Trust Sector Retail Prices Index FTSE All-Share Index
Temple Bar 1991 1992 1993 1994 1995 1996 Year 1997 1998 1999 2000 2001 % change 100 75 50 25 0 -25 -50
F i v e y e a r s u m m a r y
-2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 % D i s c o u n t ( P r e m i u m ) t o N e t A s s e t V a l u e 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 31.12.01 220.0 200.0 180.0 160.0 140.0 120.0 100.0 80.0 1997 1998 1999 2000 2001 Year S h a r e P r i c e T o t a l R e t u r nTemple Bar – Share Price Total Return
FTSE All Share – Total Return Source: DATASTREAM
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 N e t A s s e t V a l u e C a p i t a l R e t u r n
Temple Bar – Share Price Temple Bar – NAV (Par) FTSE All Share – Price Index Source: DATASTREAM
D i r e c t o r s
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.
M a n a g e m e n t a n d a d m i n i s t r a t i o n
from left to right, Martin Slade, David Liddell, Chris Burvill
INVESTMENT MANAGER
Investec Investment Management Limited Regulated by the FSA
2 Gresham Street, London EC2V 7QP Telephone No. 020 7597 2000 Facsimile No. 020 7597 1803
REGISTERED OFFICE
2 Gresham Street, London EC2V 7QP
Secretary: Investec Investment Management Limited, represented by M K Slade FCIS
REGISTERED NUMBER
Registered in England No. 214601
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)
REGISTERED AUDITORS PricewaterhouseCoopers,
Southwark Towers, 32 London Bridge Street, London SE1 9SY
BANKERS AND CUSTODIAN
HSBC Bank plc,Scottish Life House, Poultry, London EC2P 2BX
STOCKBROKERS
Warburg Dillon Read,1 Finsbury Avenue, London EC2M 2PA
SOLICITORS
Eversheds,Senator House, 85 Queen Victoria Street, London EC4V 4JL
C h a i r m a n ’ s s t a t e m e n t
RESULTS AND DIVIDEND
Despite the fact that 2001 was a difficult year for equity investors I am pleased to be able to report that post tax earnings for the year were £14.2m, an increase of 5.7% on 2000. The board proposes a final dividend of 16.86p making 24.84p for the year, a rise of 6%.This will result in a small call on reserves of £175,000 and represents a further progression of Temple Bar’s dividend against its sector and the wider equity market, as well as being usefully ahead of inflation.
The board is always mindful of the need to achieve a reasonable 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
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 defensive positioning for the time being.
With the reduction in the level of inflation and the worldwide economic recession, the rate of increase in dividends from our underlying investments has slowed.This will affect our capacity to increase the Temple Bar dividend which for five years rose by 10% per annum and by 6% in the year just concluded. Our objective is to continue to increase the dividend to shareholders at a rate greater than that of inflation.
12 February 2002
T w 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 2001Valuation 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.
A s s e t a l l o c a t i o n a s a t 3 1 D e c e m b e r 2 0 0 1
BY CLASS(%) EQUITY PORTFOLIO DISTRIBUTION (%)
Fixed interest Cash Convertibles Preference shares Ordinary shares Financials Basic Industries Resources Utilities Collective Investment Schemes Cyclical Consumer Goods General Industries Cyclical Services Non-cyclical Consumer Goods Non-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
M 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 always outperform in the longer term, don’t they?” the poor stockmarket performance last year was not a tremendous help. The harsh fact is that the All Share Index has effectively gone sideways for some time now – it was actually higher in October 1997 than it is at the time of writing. Our own caution on the outlook this year, itself hardly controversial, seems to reflect the general air of disillusion creeping in.
This was not how it was meant to be.The “new paradigm” was expected to produce such huge improvements in productivity that we would be able to look forward to faster economic growth and lower inflation. Here very simply was the problem. We only have to look back to the heady, frequently outlandish observations and valuations at the height of the dot.com frenzy, to realise that too much was being expected too early. Now it has all become something of an embarrassment. Few are ready to take the apologist line, or even to acknowledge their involvement at the time.
If we accept that a period of adjustment, possibly reflection, has to be gone through after the demise of the technology bubble, we can then see the market background a little more optimistically. It is worth pointing out that for many longer term investors the direct effects have so far been quite minor. The huge collapse in valuations of technology stocks has been less of a problem than the general economic
downturn, which arguably was overdue anyway. Given these factors, not to mention the huge uncertainties generated by the 11th September attacks, an outside observer might well suggest that the performance of the equity market over the last year has demonstrated its resilience rather than weakness. For this, much should be credited to the rehabilitation of stable mature companies in the eyes of the investing public. Not only have they been undervalued for some time, but generally they have been able to show some profit and dividend growth. Temple Bar’s reliance on such companies to form the core of the portfolio explains the relative performance against the wider market. As in previous years the chart below shows the relative contributions to our returns compared with the All Share index. We hope it is helpful for investors in identifying the areas which have gone well and badly, although the comparison with the All Share needs to be viewed carefully in a year of diverging returns. For example, the Non Cyclical Services sector, (effectively Telecoms) had another torrid year, and produced over 57% of our negative returns. This compares with only 25% of the losses for the All Share where weaker performances were more widespread. Although BT and Cable & Wireless performed badly, our underweight stance in the sector meant that our actual performance here was much in line.
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 equity capital returns – Temple Bar and FTSE All Share Index 2001
Contribution to TBIT
Manager’s report continued
What the table does make clear is the relatively better showings from the more defensive areas of the market, mirrored not just by Telecoms weakness but also by the continued falls in Information Technology, Media (classified within Cyclical Services) and Financials. We have seen some very strong showings in the consumer sector with Boots, a longstanding favourite, WH Smith, and Northern Foods performing well, while what might have appeared to be a speculative investment in Marks and Spencer at the beginning of the year turned out to be one of our best investments, with the stock outperforming by 129%. Other successes on this basis included holdings in the vehicle distributors, CD Bramall and Vardy, Rank Group and Gallaher. Rank has continued to perform well and would normally have reached our target price levels, were it not for the fact that we believe the company is in a prime position to benefit from the forthcoming liberalisation of gaming regulations. While this cautious underpinning was generally important to the portfolio, it did result in us missing some opportunities. An excellent performance from Royal Bank led us to take profits early rather than risk the shares falling back on bad debt
concerns. Plainly, with hindsight the attacks of
11th September presented a buying opportunity of which we only partially took advantage.
However in a market littered with spectacular collapses we had only one genuine disappointment. Our decision to invest in Railtrack came after it had already fallen substantially, on the view that its asset base and allowed rate of return made it a good investment.We also argued that it would be difficult for the government to come up with an alternative and better method of administering the railways. Although we are convinced that our underlying analysis was right, we plainly failed to allow for what appears to have been a triumph of populism over economics on behalf of the government.
Temple Bar has joined the Shareholder Action Group and we await recompense for the fair value of the trust’s shareholding. In the meantime the shares, which are currently suspended, are being valued at 70p in the Trust’s portfolio.
Conscious that the wisest short term policy last year would have been to do nothing, we endeavoured tentatively to start looking at whether longer term opportunities could be found in the fallen stars of the technology boom. This was in full recognition that events would probably get worse before improving, but that calling the turn in these situations is never easy. In part though the decision to start investing in lower yielding shares was a reflection that many value orientated shares had to a large extent done their job. Holding a value stock that has become expensive is not the wisest investment. One of our largest purchases has been BSkyB, a stock paying no dividend which initially appears to be on an extremely high valuation. However it is our belief that the group is one of the few with a strong enough franchise that it can continue growing for some time to come. Our decision to raise our holding significantly in BT after its appalling performance of the last two years, again is not based on our normal yield considerations, but on the group’s longer term recovery potential, restructured balance sheet and new management.
This year a strategy of just picking cheap shares may not be enough.The element of self help that BT may be able to bring to its earnings progression in the coming years is a theme which was important to us last year and arguably will be of even greater significance in the challenging environment ahead. Most of our largest overweight positions such as Safeway, Scottish Power, Rank and BT all to some degree share this characteristic. In an environment where most groups will find it hard to maintain positive sales growth, those which still have restructuring potential or which have a clear strategy for progress should come out the winners.
Chris Burvill Investec Investment Management Limited 12 February 2002
P o r t f o l i o o f i n v e s t m e n t s
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
Portfolio 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 ––––––––––– –––––––––––
Portfolio 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
––––––––––– –––––––––––
––––––––––– ––––––––––– –––––––––––
TOTAL VALUATION OF PORTFOLIO 407,556 100.00 100.00
––––––––––– ––––––––––– ––––––––––– 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 –
––––––––––– ––––––––––– –––––––––––
COLLECTIVE INVESTMENT SCHEMES
Investec UK Smaller Companies Fund 8,287 2.03 –
––––––––––– ––––––––––– ––––––––––– TOTAL EQUITIES† 384,266 94.29 100.00 ––––––––––– ––––––––––– ––––––––––– * Suspended Security † Includes Convertibles INFORMATION TECHNOLOGY
Information Technology Hardware – 0.55
Software & Computer Services – 1.19
––––––––––– –––––––––––
– 1.74
R e p o r t o f t h e d i r e c t o r s
The directors present their report and accounts for the year ended 31 December 2001.
GROUP ACTIVITIES
The principal activity of the Company, which remained unchanged throughout the year, is that of an investment trust.The Inland Revenue has
approved the Company as an investment trust for the purposes of section 842 of the Income and
Corporation Taxes Act 1988 for the year ended 31 December 2000 and its affairs are directed so as to enable it to continue to attain such approval.The Company intends to conduct its business so as to continue as an approved investment trust following the objective set out on page 1 of this report.
The Company has one active wholly owned subsidiary company, whose principal activity is investment dealing, and one dormant subsidiary.
The “close company” provisions of the Income and Corporation Taxes Act 1988 do not apply to the Company.
A review of the business is given in the Chairman’s statement and the Manager’s report.
ORDINARY DIVIDENDS
The results of the Group are shown on page 20. An interim dividend of 7.98p per ordinary share was paid on 28 September 2001 (2000, 7.53p) and the directors are recommending a final dividend of 16.86p per ordinary share (2000, 15.90p), a total for the year of 24.84p (2000, 23.43p). Subject to shareholders’ approval, the final dividend will be paid on 28 March 2002 to shareholders on the register on 15 March 2002. After deducting the ordinary dividend there is a revenue deficit of £175,000 to be transferred from consolidated revenue reserves.
PERSONAL EQUITY PLANS/ISAs
The Company has conducted its investment policy so as to remain a qualifying investment trust under the ISA and Personal Equity Plan regulations. It is the intention of the Board to continue to satisfy these regulations.
SHARE CAPITAL
On 7 November 2001 and 15 November 2001 separate issues of 50,000 ordinary shares of 25p per share were allotted fully paid for cash at prices of 617.5p and 631p respectively.
DIRECTORS
The directors of the Company during the year were as stated below and their interests in the ordinary share capital of the Company are as follows. Each of
the directors held office throughout the year except for Mr E H Sharp who retired on 26 March 2001 and Mr G J Allen and Mr R W Jewson who were appointed as directors on 2 April 2001 and 21 May 2001 respectively. 31 December 1 January 2001 2001 (or date of appointment) G J Allen 1,125 – J L Hudson 11,375 11,151 R W Jewson 371 – J Reeve 16,798 14,392 R Scott Brown 15,118 14,736 E H Sharp N/A 36,534 F L J Walton 6,724 6,724
All the above interests are beneficial. None of the directors had at any date any interest in either of the Company’s debenture stocks.
On 15 January 2002 Mr J Reeve acquired a further 146 ordinary shares in the Company through his regular monthly saving in the Temple Bar Investment Trust ISA and on 22 January 2002 Mr R W Jewson acquired a further 40 ordinary shares in the Company through his regular monthly saving in the Temple Bar Investment Trust Savings Scheme. No other changes in the interests shown above occurred between 31 December 2001 and 12 February 2002.
No other person was a director during any part of the year.
The director retiring by rotation is Mr J L Hudson who, being eligible, the Board recommends for re-election. Mr G J Allen and Mr R W Jewson were appointed as directors during the year and in accordance with the Articles of Association both directors will stand for re-election at the annual general meeting. No director has a service contract with the Company.
There were no contracts subsisting 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.
PAYMENT OF SUPPLIERS
The Company’s policy is to obtain the best possible terms of payment from suppliers for all forms of business. All terms agreed with suppliers have been complied with during the year.There were no trade creditors at the year end.
Report of the directors continued
SUBSTANTIAL SHAREHOLDERS
So far as the directors are aware, no person has disclosable interests in 3% or more of the issued ordinary shares of the Company.
MANAGEMENT CONTRACT
The Company has a management agreement with Investec Investment Management Limited (“IIM”) for the provision of investment management, secretarial, accounting and administrative services to the Company and its subsidiaries.The agreement is subject to one year’s notice of termination by either party.
IIM receives an investment management fee of 0.35% per annum, payable quarterly, based on the value of the investments (including cash) of the Company. Investments in funds managed by the Investec Group are wholly excluded from this charge. One half of the investment management fee payable to IIM is charged by the Company to capital account and the remaining half to revenue account on the basis of the expected long term split of returns.
The investment management fee charged for the year ended 31 December 2001 amounted to £1,479,635 (2000, £1,169,911 plus £98,250 for other duties). All amounts are stated net of value added tax.
DONATIONS
The Company entered into a deed of covenant to donate £1,000 per annum to Barnardo’s for a period of four years from 1998 (2000, charitable donations £1,000). No political donations were made in 2001 (2000, Nil).
AUDITORS
A resolution to re-appoint PricewaterhouseCoopers as auditors to the Company will be proposed at the Annual General Meeting on 25 March 2002.
RENEWAL OF AUTHORITY TO ALLOT SHARES AND DISAPPLICATION OF PRE-EMPTION RIGHTS
It is proposed that, as in previous years, the directors be authorised to allot up to £725,000 of relevant securities in the Company (equivalent to 2,900,000 ordinary shares of 25p each, representing 5.0% of its ordinary shares in issue).
When shares are to be allotted for cash, section 89(1) of the Companies Act 1985 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 pro rata to existing shareholders and the ordinary shareholders can by special resolution waive their pre-emption rights.Therefore, a special resolution will be proposed at the Annual General Meeting which, if passed, will give the directors power to allot for cash equity securities up to an aggregate nominal amount of £725,000 (equivalent to 2,900,000 ordinary shares of 25p each or 5.0% of the Company’s existing issued ordinary share capital), as if section 89(1) does not apply.
The directors intend to use this authority to issue new shares to participants in the Temple Bar
Investment Trust Savings Scheme and the Temple Bar Investment Trust ISA or to other prospective purchasers whenever they believe it may be advantageous to shareholders to do so. Any such issues would only be made at prices greater than net asset value and, therefore, would 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.
The appropriate resolutions are set out in the notice of meeting on page 36.
DIRECTORS’ 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 net asset value 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 new source of demand for ordinary shares.The rules of the UK Listing Authority provide that the maximum price which can be paid by the Company is 5% above the average of the market value of the ordinary shares for the five business days before the purchase is made.
The Company is not intending to make such purchases at present and will only exercise the
S t a t e m e n t o f d i r e c t o r s ’ r e s p o n s i b i l i t i e s
i n r e s p e c t o f t h e a c c o u n t s
Report of the directors continued
The directors are required by UK company law to prepare accounts for each financial year that give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit or loss of the Company for that year.
The directors confirm that suitable accounting policies have been used and applied consistently and reasonable and prudent judgements and estimates have been made in the preparation of the accounts for the
year ended 31 December 2001.The directors also confirm that applicable accounting standards have been followed and that the accounts have been prepared on a going concern basis.
The directors are responsible for keeping proper accounting records, for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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
APPLICATION OF COMBINED CODE PRINCIPLES
The board attaches great importance to ensuring that the Company operates to high ethical and compliance standards. In addition, the board seeks to observe the principles set out by the Report of the Committee on Corporate Governance insofar as these are consistent with the Company’s status and objectives as an investment trust.
The Company is headed by a board comprised entirely of independent non-executive directors.There are no executive directors to monitor and accordingly large parts of the Combined Code on matters such as ensuring a clear division of responsibilities at the head of the Company, a balance of executive and non-executive directors and issues relating to remuneration of executive directors do not have any specific relevance to the Company.
COMPLIANCE WITH THE DETAILED PROVISIONS OF THE COMBINED CODE Directors
Each of the directors is independent of any association with the management company which might interfere with the exercise of independent judgement.
There is a formal schedule of matters to be specifically approved by the board and individual directors may seek independent advice at the expense of the Company within certain limits.
The board has delegated the investment
management, within clearly defined parameters and dealing limits, and the administration of the business to Investec Investment Management Limited (‘IIM’). The board makes all strategic decisions, reviews the performance of the Company at board meetings and sets the objectives for the Managers.
The Company Secretary is responsible to the board, inter alia, for ensuring that board procedures are followed and for compliance with applicable rules and regulations including the Combined Code.
Appointment or removal of the nominated representative of the Corporate Company Secretary (“the Company Secretary”) is a matter for the board as a whole. All directors have access to the advice and services of the Company Secretary.
In the context of a board comprised entirely of non-executive directors, the directors believe there is no necessity to nominate a recognised senior member, other than the Chairman, since no
individual or individuals have unfettered powers such that they can dominate the board’s decision taking.
No chief executive or senior independent director has, therefore, been identified in this Annual Report.
The content and presentation of board papers circulated before each meeting contain sufficient information on the financial condition of the Company. Key representatives of IIM attend each board meeting enabling directors to probe on matters of concern or seek clarification on certain issues.
Given the nature of the board, comprising entirely non-executive directors, there is no nomination committee, as recommended in the Code, but any appointment will be a decision of the board as a whole.There is a formal review procedure governing the appointment of new directors. Upon appointment to the board each director receives relevant background information on the Company together with a summary of the duties and responsibilities of directors.There is, however, an assumption that any candidate considered suitable for appointment to the board is already sufficiently conversant with listed company requirements and corporate governance procedures. If not, additional training and guidance will be provided by the Company Secretary.
Directors are subject to election by shareholders at the first AGM following their appointment and, thereafter, are subject to retirement by rotation at intervals of no more than three years. In addition, the appointment of each director is reviewed by other members of the board every three years within the six month period before they are due to stand for re-election in general meetings. Directors are not, therefore, subject to automatic re-appointment.
Non-executive directors are not appointed for specified terms. Because of the nature of an investment trust the board believes that the contribution and independence of a director is not diminished by long service and, conversely, that a more detailed knowledge of the Company and its business has a beneficial impact.
Directors’ Remuneration
The Company does not have any executive directors and has not, therefore, established a remuneration committee.The board determines the remuneration of the management company. Remuneration of non-executive directors will be a decision of the board, subject to any shareholder approvals which may be necessary. At the present time all directors are paid the same fee with an additional amount payable to the Chairman.
Corporate governance continued
Relations with Shareholders
The Board welcomes investors to attend the AGM and encourages discussion on issues of concern or areas of uncertainty. Questions from shareholders are welcomed. In addition, special arrangements have been established to allow Temple Bar Savings Scheme investors to participate fully at annual general meetings.
At general meetings the Chairman will announce the level of proxies lodged on each resolution and the balance for and against, after it has been dealt with on a show of hands. A separate resolution will be proposed at the AGM in respect of each substantially separate issue.There is also a separate resolution proposed in respect of the report and accounts.
In order to facilitate detailed discussion of key issues, the notice of AGM is circulated to shareholders at least 20 working days before the meeting.
Accountability, Internal Controls and Audit
The Board pays careful attention to ensuring that all documents released by the Company, including the Annual Report, present a fair and accurate assessment of the Company’s position and prospects.
After making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future including recourse to a £7.5 million overdraft facility with HSBC Bank. Accordingly the directors continue to adopt the going concern basis in preparing the accounts.
The directors are responsible for the Company’s system of internal control and for reviewing its effectiveness. In order to facilitate the control process the Board has requested the Managers to confirm annually that they have conducted the Company’s affairs in compliance with the legal and regulatory obligations which apply to the Company and to report on the systems and procedures within Investec which are applicable to the management of Temple Bar’s affairs.The Board meets on seven scheduled occasions in each year and at each meeting receives sufficient financial and statistical information to enable it to monitor adequately the investment performance and status of the business.
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. The
safeguarding of assets is entrusted to an independent reputable custodian with whom the holdings are regularly reconciled.
The effectiveness of the overall system of internal control is reviewed on an annual basis by the Board. Such a system can provide only reasonable and not absolute assurance against material misstatement or loss. Guidelines were introduced in September 1999 for the review of non-financial internal controls (‘the Turnbull guidance’).The Board has undertaken a review of such guidance and believes that there is a robust framework in place to meet the requirements of the Code.
The Board receives reports from its advisers on internal control matters and does not believe that there is scope or necessity for an internal audit function.This matter is subject to periodic review. Based on the foregoing the Company has a continuing process for identifying, evaluating and managing the risks it faces.This process has been in place for the reporting period and to the date of this report and is regularly reviewed by the Board in accordance with the Turnbull Committee’s guidelines.
The audit committee of the Company currently comprises the entire Board of six non-executive directors with all matters being referred to the full Board for discussion and approval. Members of the audit committee are named in the report and accounts. The auditors are invited to attend the audit committee meeting at which the annual accounts are considered.
Included in the audit committee’s written terms of reference is a responsibility for annually reviewing the scope and results of the audit and its cost effectiveness.The objectivity and auditing rigour of the auditors will be maintained by ensuring that they have direct access to the Board.The Board also ensures that any other services which the auditors provide to the Company would not be of significance to them.The directors believe that the relationship with the auditors is objective and professional.
Socially Responsible Investment
The Board believes that it is its primary duty to act in the best financial interests of the Company and its shareholders.While the board takes account of the ethical stance of investee companies on matters such as the environment or society as a whole, the ultimate objective is to deliver superior investment returns for shareholders. Accordingly, while the Board seeks to favour companies which pursue best practice in these areas this must not be to the detriment of the return on the investment portfolio.The managers have the right to vote on behalf of the Company if they believe it to be appropriate, but any vote against the
recommendation of an incumbent board requires the consent of the Trust’s own board.
I n d e p e n d e n t A u d i t o r s ’ R e p o r t
to the members of Temple Bar Investment Trust PLCWe have audited the financial statements which comprise the statement of total return, the consolidated and company balance sheets, the cash flow statement and notes 1 to 22, which have been prepared under the historical cost convention, as modified by the revaluation of certain fixed assets and the accounting policies set out in the statement of accounting policies.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and accounting standards are set out in the statement of Directors’ responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements, United Kingdom Auditing Standards issued by the Auditing Practices Board and the Listing Rules of the Financial Services Authority. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the
Companies Act 1985.We also report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law or the Listing Rules regarding directors’ remuneration and transactions is not disclosed.
We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent mis-statements or material inconsistencies with the financial statements.The other information
comprises only the directors’ report, the chairman’s statement, the investment manager’s report and the Corporate Governance statement.
We review whether the Corporate Governance statement reflects the Company’s compliance with the seven provisions of the Combined Code specified
for our review by the Listing Rules, and we report if it does not.We are not required to consider whether the board’s statements on internal control cover all risks and controls, or to form an opinion on the effectiveness of the Company’s corporate governance procedures or its risk and control procedures.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an
assessment of the significant estimates and
judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the
Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we consider necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material mis-statement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 December 2001 and the total return and cash flows of the Group for the year then ended and have been properly prepared in
accordance with the Companies Act 1985. PricewaterhouseCoopers
Chartered Accountants and Registered Auditors Southwark Towers
32 London Bridge Street London SE1 9SY 12 February 2002
S t a t e m e n t o f t o t a l r e t u r n
(incorporating the revenue account) of the group for the year ended 31 December 2001
2001 2000
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
(Losses)/gains on investments 11 – (30,341) (30,341) – 22,223 22,223
Income 2 18,140 – 18,140 17,357 – 17,357
Investment management fee 3 (869) (869) (1,738) (687) (687) (1,374)
Other expenses 4 (378) – (378) (574) – (574)
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
NET RETURN BEFORE FINANCE
COSTS AND TAXATION 16,893 (31,210) (14,317) 16,096 21,536 37,632
Interest payable 6 (2,279) (2,280) (4,559) (2,279) (2,280) (4,559)
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
RETURN ON ORDINARY ACTIVITIES
BEFORE TAXATION 14,614 (33,490) (18,876) 13,817 19,256 33,073
Taxation 7 (416) 416 – (389) 383 (6)
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
RETURN ON ORDINARY ACTIVITIES
AFTER TAXATION 14,198 (33,074) (18,876) 13,428 19,639 33,067
Ordinary dividends 9 (14,373) – (14,373) (13,541) – (13,541)
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
TRANSFER (FROM)/TO RESERVES (175) (33,074) (33,249) (113) 19,639 19,526
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
RETURN PER ORDINARY SHARE 10 24.56p (57.21)p (32.65)p 23.24p 33.98p 57.22p
DIVIDENDS PER ORDINARY SHARE 24.84p 23.43p
The revenue column of this statement is the profit and loss account of the Group.
All principal activities of the Group are continuing operations as defined by Financial Reporting Standard 3. No operations were acquired or discontinued in the period.
C o n s o l i d a t e d b a l a n c e s h e e t
31 December 2001 31 December 2000 Notes £’000 £’000 £’000 £’000 FIXED ASSETS Investments 11 407,556 424,437 CURRENT ASSETS Debtors 12 3,174 6,414 Cash at bank 20 19,532 31,773 –––––––––––– –––––––––––– 22,706 38,187Creditors : amounts falling due within one year 13 10,970 10,707
–––––––––––– ––––––––––––
NET CURRENT ASSETS 11,736 27,480
–––––––––––– ––––––––––––
TOTAL ASSETS LESS CURRENT LIABILITIES 419,292 451,917
Creditors : amounts falling due after more than one year 14 63,000 63,000
–––––––––––– ––––––––––––
NET ASSETS 356,292 388,917
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
CAPITAL AND RESERVES
Called up share capital 16 14,473 14,448
Share premium account 17 2,092 1,493
Other reserves
Capital reserve – realised 17 279,420 246,759
Capital reserve – unrealised 17 48,717 114,452
Revenue reserves 17 11,590 11,765
–––––––––––– ––––––––––––
TOTAL SHAREHOLDERS’ FUNDS 18 356,292 388,917
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
The accounts on pages 20 to 33 were approved by the directors on 12 February 2002 and were signed on their behalf by R Scott Brown.
C o m p a n y b a l a n c e s h e e t
31 December 2001 31 December 2000 Notes £’000 £’000 £’000 £’000 FIXED ASSETS Investments 11 407,556 424,437 Subsidiary companies 11 50 50 –––––––––––– –––––––––––– 407,606 424,487 CURRENT ASSETS Debtors 12 3,180 6,420 Cash at bank 20 19,532 31,773 –––––––––––– –––––––––––– 22,712 38,193Creditors : amounts falling due within one year 13 10,970 10,707
–––––––––––– ––––––––––––
NET CURRENT ASSETS 11,742 27,486
–––––––––––– ––––––––––––
TOTAL ASSETS LESS CURRENT LIABILITIES 419,348 451,973
Creditors : amounts falling due after more than one year 14 63,624 63,577
–––––––––––– ––––––––––––
NET ASSETS 355,724 388,396
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
CAPITAL AND RESERVES
Called up share capital 16 14,473 14,448
Share premium account 17 2,092 1,493
Other reserves
Capital reserve – realised 17 279,420 246,759
Capital reserve – unrealised 17 48,717 114,452
Revenue reserves 17 11,022 11,244
–––––––––––– ––––––––––––
TOTAL SHAREHOLDERS’ FUNDS 355,724 388,396
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
The accounts on pages 20 to 33 were approved by the directors on 12 February 2002 and were signed on their behalf by R Scott Brown.
C o n s o l i d a t e d c a s h f l o w s t a t e m e n t
2001 2000
Notes £’000 £’000 £’000 £’000
NET CASH INFLOW FROM OPERATING
ACTIVITIES 20 16,587 14,279
RETURN ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (4,559) (4,559)
–––––––––––– ––––––––––––
Net cash outflow from return on investments and
servicing of finance (4,559) (4,559)
TAXATION
UK tax (paid)/recovered (111) 268
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchases of investments (193,069) (123,048)
Sales of investments 182,088 140,785
–––––––––––– ––––––––––––
Net cash (outflow)/inflow from capital expenditure and
financial investment (10,981) 17,737
EQUITY DIVIDENDS PAID (13,801) (12,703)
–––––––––––– ––––––––––––
CASH (OUTFLOW)/INFLOW BEFORE MANAGEMENT OF LIQUID RESOURCES
AND FINANCING (12,865) 15,022
MANAGEMENT OF LIQUID RESOURCES
Short term money market deposits withdrawn/(placed) 20 3,430 (7,430)
–––––––––––– ––––––––––––
(9,435) 7,592
FINANCING
Gross proceeds from issue of shares 624 –
–––––––––––– ––––––––––––
(DECREASE)/INCREASE IN CASH 20 (8,811) 7,592
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
(Decrease)/increase in cash (8,811) 7,592
Short term money market deposits (withdrawn)/placed (3,430) 7,430
–––––––––––– ––––––––––––
Change in net debt (12,241) 15,022
Net debt at 1 January 20 (31,227) (46,249)
–––––––––––– ––––––––––––
Net debt at 31 December 20 (43,468) (31,227)
–––––––––––– ––––––––––––
S t a t e m e n t o f a c c o u n t i n g p o l i c i e s
GENERAL
The accounts are prepared in accordance with applicable accounting standards and with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies” (SORP). The accounts have been prepared on the historical cost basis of accounting modified to include the revaluation of fixed asset investments.
CONSOLIDATION
All subsidiary companies make up accounts to 31 December and results for the year ended on that date are included in the Group results in full.
INVESTMENTS
Listed investments are stated at market value which is based upon middle market prices at the balance sheet date. Realised surpluses or deficits on the disposal of investments and permanent impairments in the value of investments are taken to capital reserve-realised and unrealised surpluses and deficits on the revaluation of investments are taken to capital reserve-unrealised. Suspended securities are included at directors’ valuation.
SUBSIDIARY COMPANIES
Investments in subsidiary companies are valued at the lower of cost or net asset value, as in the opinion of the directors this most fairly reflects the value of the investment.
INCOME AND EXPENSES
All income and expenses are treated on the accruals
basis and dividend income is included in revenue when an investment is quoted ex-dividend. UK dividends are stated net of related tax credits. Dividends received as scrip dividends are taken to the revenue account.The accounting treatment of special dividends is considered on a case by case basis.
The fixed returns on debt securities are recognised on a time apportionment basis so as to reflect their effective yield.
MANAGEMENT CHARGE
In accordance with the expected long term split of returns, one half of the investment management fee for the year is charged to the revenue account and the other half is charged to capital reserves, net of corporation tax relief and inclusive of any related irrecoverable value added tax.
DEFERRED TAXATION
Deferred taxation is provided by the liability method on timing differences, except where there is
reasonable probability that such liability will not arise in the foreseeable future.
DEBENTURE INTEREST
Interest payable is treated on an accruals basis. In accordance with the expected long term split of returns, one half of the interest for the year is charged to the revenue account and the other half is charged to capital reserves, net of incremental corporation tax relief.
N o t e s t o t h e a c c o u n t s
1 COMPANY REVENUE ACCOUNT
The Company has taken advantage of the exemption from presenting its own revenue account provided by section 230 of the Companies Act 1985.
2 INCOME
2001 2000
£’000 £’000
Income from investments
UK dividends 14,723 13,774
Income from UK fixed interest securities 1,698 2,003
Scrip dividends 289 459 –––––––––––– –––––––––––– 16,710 16,236 –––––––––––– –––––––––––– Other income Bank interest 1,383 955 Underwriting commission – 15
Dealing profit in subsidiary company 47 151
–––––––––––– –––––––––––– 1,430 1,121 –––––––––––– –––––––––––– Total income 18,140 17,357 –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Income from investments:
Listed UK 16,409 15,932 Unlisted UK 301 304 –––––––––––– –––––––––––– 16,710 16,236 –––––––––––– –––––––––––– –––––––––––– ––––––––––––
3 INVESTMENT MANAGEMENT FEE
2001 2000
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 740 740 1,480 585 585 1,170
Irrecoverable VAT thereon 129 129 258 102 102 204
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
869 869 1,738 687 687 1,374
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Notes to the accounts continued
4 OTHER EXPENSES 2001 2000
£’000 £’000
Administration charge – 115
Auditors’ remuneration – audit 18 17
Directors’ fees – see note 5 below 82 68
AITC marketing contribution 3 102
Other expenses 275 272
–––––––––––– ––––––––––––
378 574
–––––––––––– ––––––––––––
Auditors’ remuneration in relation to the audit of the parent company totalled £14,400 (2000, £14,400).The expenses disclosed include VAT where applicable.
5 DIRECTORS’ REMUNERATION £’000 £’000
Fees paid to the directors 70 56
Fees paid to third parties 12 12
–––––––––––– ––––––––––––
82 68
–––––––––––– ––––––––––––
Three directors (2000, four), excluding the Chairman, each received emoluments of £12,250 (2000, £11,900). The Chairman was the highest paid director and received emoluments of £17,475 (2000, £16,975). In addition, a retiring director received emoluments of £3,062, and two directors appointed during the year received £7,501 and £9,188 respectively. No director received any pension contributions (2000, Nil). The fees disclosed above include National Insurance Contributions and VAT where applicable.
6 INTEREST PAYABLE 2001 2000
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000 On 9⅞% debenture stock 2017 1,234 1,235 2,469 1,234 1,235 2,469 On 5.5% debenture stock 2021 1,045 1,045 2,090 1,045 1,045 2,090 –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– 2,279 2,280 4,559 2,279 2,280 4,559 –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Notes to the accounts continued
7 TAXATION 2001 2000
Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000
Tax relief on expenses charged to capital 416 (416) – 383 (383) –
Irrecoverable tax – – – 6 – 6
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
416 (416) – 389 (383) 6
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
8 REVENUE ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
The revenue attributable to ordinary shareholders includes £14,151,000 (2000, £13,277,000) which has been dealt with in the accounts of the Company.
9 DIVIDENDS ON ORDINARY SHARES
2001 2000
£’000 £’000
Interim 7.98p per share paid 28 September 2001 (2000, 7.53p) 4,612 4,352
Proposed final of 16.86p per share to be paid 28 March 2002 (2000, 15.90p) 9,761 9,189
–––––––––––– ––––––––––––
14,373 13,541
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
10 GROUP RETURN PER ORDINARY SHARE
2001 2000
Revenue Capital Total Revenue Capital Total
24.56p (57.21)p (32.65)p 23.24p 33.98p 57.22p
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– Revenue return per ordinary share is based on the revenue return on ordinary activities after taxation of £14,198,000 (2000, £13,428,000) and on a weighted average number of ordinary shares in issue during the year of 57,806,776 (2000, 57,793,214).
Capital return per ordinary share is based on the capital loss on ordinary activities after taxation of £33,074,000 (2000, capital gain of £19,639,000) and on 57,806,776 (2000, 57,793,214) ordinary shares, being the weighted average number of ordinary shares in issue during the year.