REG-Temple Bar Inv.Tst: Change of investment manager and dividend outlook

Temple Bar Investment TrustAnnouncement

23/09/2020 07:05

This announcement contains inside information as defined under the Market
Abuse Regulations (EU) No 596/2014. This announcement has been approved for
issue by Temple Bar’s board of directors (the “Board”).

23 September 2020

Temple Bar Investment Trust PLC (“Temple Bar” or the “Trust”)

Change of investment manager and dividend outlook

Change of investment manager

Further to the announcement made on 2 September 2020, the Board is pleased to
announce the proposed change of the Trust’s investment manager to RWC Asset
Management LLP (“RWC”). Temple Bar has today entered into heads of terms
with RWC (the “Heads of Terms”) under which, subject to the satisfaction
of conditions detailed below, RWC will become the Trust’s investment
manager. It is currently anticipated that the appointment of RWC will become
effective on or around the end of October 2020 at which time a further
announcement will be made.

Background

Following the disappointing performance of the Trust in 2020 and the departure
due to ill health of the named fund manager, the Board announced that it would
conduct a review of its management arrangements. The Board chose the services
of Stanhope Consulting (“Stanhope”), initially to conduct an independent
analysis of the performance of the value style both internationally and in the
context of the UK equity market. It is apparent that this style can be
characterised by quite long periods of relative weakness followed by sharp
periods of strong outperformance. The Board concluded that this is not a time
in the cycle of returns to abandon this value style bias. The Board, advised
by Stanhope, then invited investment management proposals from providers
internationally. These were all examined in great detail and after an
exhaustive, multi-stage process, the Board concluded that the investment
proposition from RWC, offering a sustainable value investment style, was in
the current circumstances by far the strongest that they had received.

Investment objective, investment policy, strategy and style

The Trust’s investment objective will remain unchanged; to provide growth in
income and capital to achieve a long-term return greater than the benchmark
FTSE All-Share Index, through investment primarily in UK securities. Likewise,
the investment policy (including investment restrictions) will remain
unchanged.

Temple Bar has for many years had a value investment approach and the Board
has selected RWC for its proven expertise and excellent long-term track record
in this investment discipline, thereby ensuring continuity in the investment
approach for Shareholders.

About the new investment management team

The Trust’s portfolio will be managed by the long-term partnership of Nick
Purves and Ian Lance, each of whom has around 30 years investment experience.
They employ a long-term, value-oriented approach, which takes advantage of
stock market over-reaction to enable them to purchase shares in sound
businesses at a significant discount to their intrinsic value. They have
applied this tried and tested approach in a disciplined manner over many
years, and this has resulted in creating significant added value for their
clients.

Benefits of the proposals

The Board believes that the change in investment manager will provide the
following benefits to Shareholders:
* Added value of two highly experienced fund managers, backed by a proven long
term track record: 20 year fund total return of 234 per cent. vs. 122 per
cent. for FTSE All-Share.
* Exposure to UK equities which are trading at their greatest discount to
World equities for fifty years and in particular to UK value stocks which are
trading at their greatest ever discount to growth stocks.
* Future capital appreciation alongside attractive dividends and steady income
growth, to be delivered by investing in a focused list of sustainable
companies which can grow profits over time, whose finances are strong and
which the new managers believe are significantly under-valued.
* Maintained management fee of 0.35 per cent of total assets and competitive
fixed costs mean that the total expense ratio will continue to be one of the
lowest in the sector.
* Material contribution, by fee waiver to 30 June 2021, by the incoming
investment manager to offset transition costs.
About RWC

RWC is a specialist, independent investment manager established in 2000 with
circa £13.4 billion (as at 31 August 2020) under management.

The organisation focuses on building strong teams of people who have clear and
disciplined investment processes. RWC further believes in ensuring that its
investment teams have the resources and autonomy that enable them to focus on
the long-term returns for its clients. This is underpinned by the majority of
the organisation being owned by the people who work at RWC.

The RWC UK income and value team have been at RWC for over a decade having
over 60 years experience between the two lead managers. They are market
leading UK value investors and are responsible for over £3 billion of client
assets.  

The Heads of Terms

Under the Heads of Terms the formal appointment of RWC as the Trust’s
investment manager is conditional upon the satisfaction of a number of
conditions, including: (i) the negotiation and entering into a form of
Alternative Investment Fund Manager’s Agreement (the “AIFM Agreement”)
with an independent Alternative Investment Fund Manager (“AIFM”) under the
terms of which (and pursuant to a portfolio management agreement to which
Temple Bar will also be a party (the “Portfolio Management Agreement”) the
AIFM will delegate portfolio management to RWC; (ii) all necessary regulatory
approvals; and (iii) the Trust concluding arrangements with Ninety One Fund
Managers UK Limited (“Ninety One”) for the termination of the existing
investment management arrangements.

Under the terms of the proposed Portfolio Management Agreement RWC will be
paid a management fee equal to 0.35 per cent. per annum of the Trust’s total
assets. Furthermore, as Ninety One is contractually entitled to receive the
management fee for the remainder of the notice period which it is currently
serving, RWC has agreed that it will forgo the management fee to which it
would otherwise be entitled to 30 June 2021 in order largely to defray the
fixed costs and expenses incurred by Temple Bar in connection with the
appointment of RWC. It is proposed that RWC’s appointment will be for an
initial term if 18 months and may thereafter be terminated by either party
giving 6 months’ notice. It is proposed that the Portfolio Management
Agreement is capable of summary termination in certain usual circumstances
including in the event that both Nick Purves and Ian Lance cease to be
responsible for the management of the Trust’s assets or otherwise become
incapacitated. 

Dividend outlook

Having reviewed the Trust’s income position with RWC, the Board intends to
recommend a total dividend for the current year of 38.5 pence per ordinary
share, with both the third interim dividend and the final dividend recommended
to be 8.25p. This new total dividend, unfortunately, represents a cut of 25
per cent. from the previous level. From this base level, however, the Board
believes that it will be possible to renew dividend growth going forward.
Current projections suggest that there will have to be transfers from reserves
to enable the 2020 and the 2021 dividend to be paid, but thereafter the
dividend should be covered by earnings.

Comments from the Chairman and named fund managers

Arthur Copple, Chairman of Temple Bar, commented “Up until recently Temple
Bar had a long history of providing attractive investment returns. In
selecting RWC as investment manager we aim to reinvigorate the Trust and
return it to its former position as one of the market leaders in the sector.

It is obviously very disappointing for us to announce a fall in the dividend
for the first time in many years, but this has been an especially challenging
year for many dividend paying companies and unfortunately the portfolio of the
Trust has been particularly adversely impacted. We understand how important
dividends are to our Shareholders and this played a large part in our
rationale in selecting RWC as manager. We strongly believe they are well
placed to put Temple Bar back on the path to provide not only a high but
growing dividend over the medium to longer term”.

Nick Purves and Ian Lance, proposed fund managers of Temple Bar, commented
“In our long investing career, we have seen three occasions when dislocation
in the stock market has created the most exceptional opportunities for long
term, value investors; post the technology bubble of the late nineties, coming
out of the global financial crisis and today. We very much look forward to
harnessing these opportunities for the benefit of the Temple Bar
Shareholders.”

Dan Mannix, CEO of RWC Partners, commented “It’s a real privilege to have
been appointed as only the third portfolio manager of Temple Bar in its 94
year history. Our appointment comes at an interesting moment as investors
consider whether there will be a change of leadership in equity markets, and
where to allocate capital in a world of low interest rates and high
valuations. Nick and Ian’s track record of over twenty years is steeped in
sustainable value; they are arguably one of the most experienced portfolio
management partnerships in the industry and have always run money consistently
to this ethos, regardless of wider market sentiment. We are honoured to now
have the opportunity to start building a track record with Temple Bar, at what
feels like a very exciting juncture in the world of true value investing.”

For further information please contact:

Temple Bar Investment Trust PLC via J.P. Morgan Cazenove

Arthur Copple (Chairman)

J.P. Morgan Cazenove                            

William
Simmonds                                    
+44 (0)20 7742 4000

Monfort Communciations                       
RWC@montfort.london   

Gay
Collins                                               
+44 (0) 7798 626282

Toto Reissland-Burghart                           
+44 (0) 7976 098139 

LEI: 213800O8EAP4SG5JD323

Appendix

Further details of the key individuals

Nick Purves and Ian Lance joined RWC in August 2010 and together manage over
£3 billion of client assets, including the TM RWC Equity Income Fund. After
qualifying as a Chartered Accountant, Nick worked at Schroders for over 16
years. Ian has been working with Nick since 2007, initially at Schroders and
then at RWC. Prior to joining Schroders, Ian was Head of European Equities and
Director of Research at Citigroup and Head of Global Research at Gartmore.

Appointment of AIFM

The Board is also announcing that Link Fund Solutions Limited is expected to
be appointed as the AIFM. They believe that this enhances the trust’s
long-term governance structure and independence.

Re-statement of buyback authorities

Temple Bar is amending its disclosure policy to include on a regulatory
information service (“RIS”) details of its share buyback powers which it
renews annually. It is expected that similar announcements will be made every
time the share buyback authority is renewed.

Temple Bar re-confirms that it has authority to repurchase a maximum of
10,024,227 of its ordinary shares (being its outstanding Shareholder
authority). Such authority lasts until the next Shareholder authority is
granted, or where expressly revoked by Shareholders. Any buyback may be funded
from the Trust’s resources (including redemptions on funds that the Trust
has invested in and debt facilities). No maximum consideration payable has
been determined by the Trust, but the Trust will not pay a price for any
ordinary shares pursuant to any buy-back which would equate to a premium to
the net asset value per ordinary share.

The Trust has appointed J.P. Morgan Securities plc to act as its broker in
respect of any buy-back. Any buy-back will be undertaken pursuant the
Trust’s discount management programme. This arrangement is in accordance
with Chapter 12 of the UKLA Listing Rules and the Trust’s general authority
to repurchase shares.



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