Final Results

Templeton Emerging Markets IT PLC 4 July 2001 Preliminary Announcement - 4 July 2001 TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC ('TEMIT') ('the Company') YEAR TO 30 APRIL 2001 The Company today announced its annual results for the year to 30 April 2001. CHAIRMAN'S STATEMENT At 30 April 2001, your Company had total assets of £618.4 million, compared with £749.9 million at 30 April 2000. The reduction in the Company's assets is partly due to the programme of buying back shares. Last year, the Directors obtained authority to buy back shares and during the year 14,620,000 shares were bought back at a cost of £17,985,061. The decision to initiate a programme of buying back shares was influenced by the high level of discount which existed last year. At 30 April 2001 the discount was 16.3%, compared with 27.0% at the previous year-end. Undiluted net asset value per share at year-end was 135.5 pence, a decrease of 14.9% over the year. The share price at 30 April 2001 was 113.5 pence, compared with 116.2 pence at the end of last year, a decrease of 2.3%. Over the same period the MSCI Emerging Markets Free Index, on a total return basis, fell by 14.7% and the S&P/IFCI Composite Index decreased by 19.3%. The Manager's Report and Portfolio Review gives a detailed analysis of the Fund's performance over the year. Last year has been a difficult one for emerging markets which were affected by a number of negative factors, including concern about the impact of the slowdown in the United States economy. Volatility in the price of oil and concerns over Argentina's debt and Turkey's abandonment of the peg between the Lira and the U.S. Dollar were other significant features. Emerging markets were also subject to the continuing fall in the price of once highly rated technology companies, which has been a feature of developed markets in the year. At the year-end, 90.2% of the Company's total assets were invested in equities with the remaining 9.8% being held in fixed income securities and liquid assets. The general policy of the Manager is to be fully invested. The Board of Directors has proposed a cash dividend of 1.25 pence per Ordinary Share. The dividend will be paid on 21 September 2001 to Shareholders on the register at the close of business on 17 August 2001, subject to the approval of Shareholders at the Annual General Meeting which will be held on 20 September 2001. The portfolio is managed using the value style of investing. This requires a detailed research of stocks and only those which are trading at less than their assessed value are purchased. This style has been criticised in some quarters as the prices of technology, media and telecommunications stocks were driven up by momentum investors. The Manager avoided these highly valued stocks and his assessment has proved correct. The corollary to avoiding over valued stocks is to buy those which are under valued and the current state of many of the emerging markets provides that opportunity. Since inception, the net asset value of Templeton Emerging Markets Investment Trust PLC has risen by 319.2% in sterling terms compared with a comparable rise of 154.5% in the S &P/IFCI Composite Index and 170.1% in the MSCI Emerging Markets Free Index. The Honourable Nicholas F Brady 4 July 2001 Indices above are shown on a total return basis. Sources: Franklin Templeton Investments and Standard & Poor's Micropal. MANAGER'S REPORT AND PORTFOLIO REVIEW DR J MARK MOBIUS 30 APRIL 2001 Manager Templeton Asset Management Ltd, part of Franklin Templeton Investments (with over US$269 billion in assets under management as of end-April 2001), has over 14 years of investment experience in emerging markets and approximately US$7.5 billion (as of end-April 2001) in assets under management. TAML currently has 23 portfolio managers/analysts located in 11 emerging markets, Moscow (Russia),Warsaw (Poland), Istanbul (Turkey), Johannesburg (South Africa), Hong Kong, Singapore, Shanghai (China), Seoul (Korea), Mumbai (India), Rio de Janeiro (Brazil) and Buenos Aires (Argentina). Moreover, TAML's Emerging Markets Team receives support from approximately 7,100 employees of Franklin Resources Inc, its ultimate parent company, which operates globally as Franklin Templeton Investments. Performance Attribution Explanation The Company outperformed the IFCI Composite Index by 4.4%, as the table below illustrates: Country Asset Allocation % Stock Selection % Currency Effect % Total % Argentina - (0.2) - (0.2) Brazil 0.2 0.2 - 0.4 Chile (0.6) (0.1) - (0.7) China (0.3) - - (0.3) Colombia - - - - Croatia 0.1 - - 0.1 Czech Republic - 0.1 - 0.1 Egypt - 0.1 - 0.1 Estonia - - - - Finland - - - - Greece 0.1 - - 0.1 Hong Kong 0.9 0.1 - 1.0 Hungary (0.2) 0.9 - 0.7 India - 0.1 - 0.1 Indonesia (0.6) (0.6) 0.1 (1.1) Israel (0.2) (0.8) - (1.0) Jordan - - - - Korea 0.4 (0.3) - 0.1 Malaysia 1.1 - - 1.1 Mexico (0.6) 0.9 0.1 0.4 Morocco (0.1) - - (0.1) Pakistan (0.1) - - (0.1) Peru - - - - Philippines - - - - Poland 0.3 (0.2) (0.1) - Russia - (0.2) - (0.2) Singapore 0.7 0.2 - 0.9 Slovak Republic - - - - South Africa 0.6 (1.9) 0.1 (1.2) Spain - - - - Sri Lanka - - - - Taiwan 1.9 0.8 - 2.7 Thailand (0.7) (0.4) - (1.1) Turkey (1.6) 2.7 (1.1) - Venezuela 0.8 (0.7) - 0.1 Cash 1.8 Effect of Buy-Ins 0.7 Total 4.4 The Company outperformed the IFCI Composite Index by 4.4% mainly due to underweight positions in Taiwan and Malaysia. The Taiwan and Malaysia markets fell 37.0% and 33.0%, respectively, while the S&P/IFCI Composite index declined 19.3%. In Taiwan, political instabilities resulting from friction with mainland China as well as domestic issues such as the construction of the island's fourth nuclear power plant exerted pressure on the capital markets. We will continue to underweight Malaysia until we see substantial improvements in corporate governance and the implementation of solid economic policies. Overweight positions in Hong Kong and Singapore also supported performance as both markets outperformed the benchmark index during the past 12 months. Portfolio Changes In line with our value-investing strategy, we reduced our exposure to the telecommunications sector as some companies in that sector became expensive as a result of increased competition and expected high capital investment demands. The Company's holdings in Brazil also decreased in part due to the Company's sale of expensive telecoms. Exposure to the banking and multi-industry sectors increased as the Company continued to find value stocks trading at attractive multiples. During the year, holdings in Korea were increased, as we believed that the market was oversold. Thus we were able to invest in stocks, which were trading below their intrinsic value. The short-term crisis in Turkey also provided the Company with a window of opportunity. We believe that in the long term, these investments will prove beneficial. In fact, during April the Turkish market rebounded some 50.0% in U.S. Dollar terms. The Company also expanded its geographical exposure to include Greece, Finland and the China 'H' market. The Company's exposure to South Africa also enlarged as a result of price appreciation as well as additional investment. Holdings in the China (Shanghai) 'B' market were sold, eliminating the Company's exposure to that market. The opening up of the market to (previously restricted) domestic investors led the market to rally. Such high levels of performance were considered not sustainable without the backing of strong fundamentals. Divestment in Peru was also completed. Of the Company's top 10 holdings at the beginning of the period, five companies are no longer in the list. South African companies, Sasol, Anglo American Corp., South African Breweries, Banco Bradesco (Brazil) and Samsung Electronics (Korea) replaced Turkish companies, Akbank and Arcelik, Korea Electric Power (Korea), Telmex (Mexico) and Telekomunikasi Indonesia (Indonesia). As of end-April, the largest portion of the Company's holdings could be found in South Africa (15.1%), followed by Mexico (13.6%), South Korea (8.0%) and Turkey (6.9%). Political Climate In Indonesia, President Abdurrahman Wahid faced the possibility of impeachment hearings due to his alleged connection to two financial scandals. Unsatisfied with his response to the first censure, the Parliament voted to censure Wahid for a second time on 30 April 2001, thereby raising the likelihood of impeachment proceedings. In the case of Wahid's departure, Vice-President Megawati Sukarnoputri is expected to take over. Moving to Thailand, the Ministry of Finance closed the investigation into Prime Minister Thaksin Shinawatra and his wife's tax records after finding no evidence of tax evasion. This could boost the Prime Minister's defence on the corruption charges before the Constitutional Court. The final court hearing, on June 18, saw Dr Thaksin give an emotional statement. A verdict is expected within a month. Coming into power in January 2001 after the removal of Joseph Estrada, Philippine President Gloria Macapagal - Arroys has clearly had to fight an uphill battle to regain investor confidence. The Senate elections, held in May, provided Macapagal-Arroys with a majority in the legislative upper house, which should enable her to pass key economic reforms swiftly in the future. Moving to Hong Kong, Chief Secretary for Administration Anson Chan resigned less than 18 months before her term was due to end. She cited personal reasons for her decision. Financial Secretary Donald Tsang succeeded her. Antony Leung, Asia-Pacific chairman of JP Morgan Chase, replaced Tsang as Financial Secretary. Election talks for the next Chief Executive also surfaced with Chinese leaders expressing support for Tung Chee-Hwa's re-election. In Eastern Europe, as widely expected, Polish President Aleksander Kwasniewski was re-elected; political continuity should allow the government to concentrate on reforms. In addition, Treasury Minister Andrzej Chronowski resigned allowing the government to continue with its privatisation program. Chronowski was accused of mishandling the privatisation of state assets and harming foreign investment. Aldona Kamela-Sowinska, his chief deputy for privatisation in the financial services sector, replaced him. Hungarian President-elect Ferenc Madl began his five-year term in August. However, no change in government policy took place, as a Hungarian president has no executive powers. Russian President Putin visited South Korea where both he and President Kim Dae-jung reaffirmed their commitment to work together for peace and strengthen economic co-operation. Putin continued his efforts to expand relations in Asia with a visit to Vietnam. Signalling a return of economic co-operation, a series of commercial and trade agreements were signed. In March 2001, the Communists and their allies failed to secure the 226 votes needed in the 450-seat Duma to pass a motion of no confidence in the government. In Latin America, Mexican President Vincente Fox took office and vowed to promote stability, fight poverty and promote growth. The first budget under the new administration is focused on improving the government's fiscal position by boosting tax revenues. Fox announced that tax reform would be a major component of his administration. The appointment of Domingo Cavallo as Argentina's new Economy Minister was also well received by both the market and the local public. His appointment followed the resignation of Ricardo Lopez Murphy, after just 16 days in the post. Economic Conditions Concerns over Argentina's high debt position combined with a brief period of political instability led to indiscriminate selling across the market. Investor concerns eased when respected banker, Roque Maccarone, replaced Central Bank Governor Pedro Pou, after a series of high-profile disagreements between Pou and Economy Minister Cavallo. In addition, the Lower House approved a plan to peg the local currency, the peso, against the average value of the U.S. Dollar and the Euro though the Senate has yet to vote on the issue. However, it has been said that the change would not be implemented until the Euro reaches parity with the U.S. Dollar. In Brazil, foreign direct investment (FDI) in 2000 registered a record US$33.5 billion, surpassing 1999's US$31.4 billion. Moreover, unemployment in January fell to 6.3%, compared to 8.4% recorded in January 2000. Brazil registered a trade surplus of US$80 million in February, an improvement from the US$479 million deficit registered in January though the 12-month trade deficit through March reached US$1.4 billion. The Mexican government lowered its growth forecast to between 2.5% and 3.0% due to slowing exports to its largest trading partner, the U.S. In 2000, gross fixed investment rose 10.0% compared to 1999 mainly due to a 14.4% increase in investment in machinery and imported capital goods. After nine years, Manuel Robleda, the president of Mexico's Stock Exchange stepped down. Despite initiating a plan to transform the exchange into a series of business units, he was widely blamed for a lack of new listings and investment. While Congress debated over President Fox's fiscal reform bill, which incorporated a 15.0% VAT on food and medicines, the centre-left Partido de la Revolucion Democratica (PRD) submitted an alternative reform proposal with no VAT. Despite an indefinite delay in the implementation of new stock exchange rules, Liberty Group Ltd, South Africa's third-largest insurance company by market value, voluntarily disclosed the earnings of top management. Good corporate governance actions such as this continue to draw our attention to companies in South Africa. The budget deficit for the fiscal year 2000/01 was 1.9% of GDP, lower than forecasts of 2.4%. This was mainly due to a US$550 million rise in tax revenue and a US$200 million fall in government expenditure. Manufacturing output also rose 4.4% in 2000, further supporting the country's economic recovery. Moreover, an unexpected trade surplus of US$1.2 billion in December 2000 resulted in a US$2.8 billion surplus for the entire year. After surviving a mini-crisis in 2000, renewed political turmoil filtered into Turkey's financial markets. In an attempt to support the markets, the government finally abandoned the lira's peg to the U.S. Dollar in February 2001. It has been reported that the IMF and the World Bank would provide US$11 billion and US$4 billion, respectively, in loans to the country. Economy Minister Kemal Dervis also revealed a new economic program including structural and fiscal reforms. At the time of writing, all key bills required by the IMF for disbursement of the loan were awaiting parliamentary approval. Dervis pledged to resign if these reforms were not carried out. On the EU front, the bloc formally approved its accession partnership with Turkey. This should lead to further acceleration of key economic and political reforms. In an attempt to hasten its accession into the EU, Poland's council of ministers began debates on softening the country's position in the areas of energy, transportation, corporate law and competition. This came amidst concerns that Poland's progress was falling behind its counterparts, having only completed 14 out of the 29 negotiating chapters. Economically, February's unemployment rate jumped to 15.8%, a six-year high. Responding to the country's monetary policies, inflation fell to a 17-month low in January. The CPI rose 7.4% year on year compared to 8.5% in December, bringing January's rate in line with the government's year-end target of 6-8%. In an attempt to protect minority shareholders, the Budapest Stock Exchange tightened regulations for delisting companies. However, another proposal which would in effect govern the classification of share options and thus share ownership was rejected. Moreover, as the government continued its battle against inflation, the country also expressed plans to liberalise the local currency, the forint, next year. The Central Bank forecasts inflation at 8.8% for 2001, compared to an average rate of 9.8% in 2000. Russian President Vladimir Putin, in his annual state speech to the parliament, said that 2000's 7.7% growth rate was unsustainable unless tax and customs reforms were implemented, protection for minority investors improved and capital flight reduced. Finance Minister Alexei Kudrin also said that a restructuring agreement with Germany had been reached with regard to part of the US$19 billion due in 2003. In order to raise cash and reduce management expenditure, Russia also announced plans to sell its stakes in about 700 companies. In Hong Kong, growth is expected to decelerate to 4.0% this year, compared to 10.5% in 2000. The budget deficit for the fiscal year ended March 2001 amounted to US$1.5 billion, though this figure is expected to decline over the next three years and a surplus is expected in 2004-5. Interest-rate deregulation will also commence on 3 July, whereby all banks will be free to set their own interest rates for depositors. South Korea's economy is expected to grow 4.3% in the first quarter compared with 8.8% in 2000, according to the Korea Development Institute. Slowing domestic demand and deteriorating exports were to blame. Moreover, inflation is also expected to accelerate to 4.2% this year, compared with 2.3% in 2000. March exports fell 0.6% year on year to US$14.3 billion, whereas imports dropped 8.8% year on year to US$13 billion. In line with slowing global growth, the Bank of Thailand once again lowered its 2001 GDP forecast by half a percentage point to a range of 2.5% to 4.0%. In an effort to attract investment, Prime Minister Thaksin Shinawatra announced an ambitious plan of privatising state enterprises, which would result in a 50.0% growth in the market capitalisation of the stock exchange over the next three years. Outlook Despite short-term volatility, we continue to find bargains in most emerging markets. Asia, Thailand and Indonesia have been pushed down to very low levels, providing good upside potential. Latin America, Brazil and Mexico recorded strong growth rates last year and continue to attract foreign interest. South Africa is highly regarded because of its sound judicial and regulatory structures, as well as the adherence of the companies to accepted codes of corporate governance. In Eastern Europe, we like Poland due to its relatively stable political and economic environment. We have also found that Polish legislation provides us with the best protection for minority investors in the region. The key, of course, is good valuations. Thank you for your continued interest and support. Dr Mark Mobius 4 July 2001 PORTFOLIO ANALYSIS by geography Geographical analysis (by country of incorporation) As at 30 April 2001 Country Cost Market Value £'000 South Africa* 83,171 93,625 Mexico+ 51,782 84,018 Korea (South) 53,273 49,256 Turkey 65,889 42,794 Brazil+ 43,867 41,131 Thailand++ 54,790 39,200 Hong Kong++ 28,261 35,303 Poland 34,109 31,454 Singapore 16,976 17,101 Indonesia+ 26,482 14,901 Argentina+ 17,952 14,682 Russia+ 11,466 9,808 Egypt 12,291 9,213 Taiwan 9,171 8,824 India* 10,325 8,553 Czech Republic 10,456 7,960 Philippines+ 14,814 7,429 Hungary 8,741 7,422 Pakistan 9,908 6,158 China+ ++ 5,506 5,865 Venezuela+ 3,486 4,540 Greece 5,548 4,161 Malaysia 5,834 3,574 Croatia* 3,155 3,280 Colombia 8,662 2,309 Estonia*^ 2,181 2,267 Israel+ 2,138 1,337 Finland 1,112 1,056 Chile+ 758 465 Slovak Republic** 220 88 TOTAL EQUITY INVESTMENTS 602,324 557,774 OTHER NET ASSETS 60,659 TOTAL SHAREHOLDERS' FUNDS 618,433 *Includes U.K. listed stocks ++Includes Hong Kong listed stocks +Includes U.S. listed stocks ^Includes Turkish listed stocks ++Includes Singapore listed stocks **Includes Czech Republic listed stocks PORTFOLIO ANALYSIS BY GEOGRAPHY GEOGRAPHICAL ASSET DISTRIBUTION Country As At 30 April 2001 As At 30 April 2000 South Africa (15.14%) (9.98%) Mexico (13.59%) (7.31%) Korea (South) (7.96%) (5.40%) Turkey (6.92%) (8.09%) Brazil (6.65%) (9.45%) Thailand (6.34%) (6.76%) Hong Kong (5.71%) (5.75%) Poland (5.09%) (3.17%) Singapore (2.77%) (4.05%) Indonesia (2.41%) (4.28%) Argentina (2.37%) (2.98%) Russia (1.59%) (1.82%) Egypt (1.49%) (0.31%) Taiwan (1.43%) (0.02%) India (1.38%) (0.82%) Czech Republic (1.29%) (1.57%) Philippines (1.20%) (1.81%) Hungary (1.20%) (2.31%) Pakistan (0.99%) (0.99%) China (0.95%) (0.45%) Venezuela (0.73%) (2.31%) Greece (0.67%) (0.00%) Malaysia (0.58%) (0.31%) Croatia (0.53%) (0.03%) Colombia (0.37%) (0.48%) Estonia (0.37%) (0.22%) Israel (0.22%) (0.26%) Finland (0.17%) (0.00%) Chile (0.07%) (0.51%) Slovak Republic (0.01%) (0.04%) Peru (0.00%) (0.01%) Liquid Assets (9.81%) (18.51%) PORTFOLIO ANALYSIS by industry Industrial analysis As at 30 April 2001 Industry Classification % of Total Net Assets % of Total Net Assets 2001 2000 CAPITAL EQUIPMENT Aerospace & Military Technology 0.16 0.37 Construction & Housing - 0.03 Electrical & Electronics 3.95 3.04 Electronic Components & 0.97 0.11 Instruments Industrial Components 0.08 0.02 Machinery & Engineering 1.54 0.54 6.70 4.11 CONSUMER GOODS Appliances & Household Durables 0.53 2.14 Automobiles 1.44 0.01 Beverages & Tobacco 5.40 2.59 Food & Household Products 4.39 3.20 Health & Personal Care 1.10 0.64 12.86 8.58 ENERGY Energy Sources 9.26 7.10 Utilities - Electricity & Gas 6.81 7.83 16.07 14.93 FINANCE Banking 15.78 12.89 Financial Services 2.23 1.07 Insurance 0.83 1.14 Real Estate 0.68 0.49 19.52 15.59 MATERIALS Building Materials & Components 5.58 4.06 Chemicals 0.24 1.94 Forest Products & Paper 1.59 2.12 Metals & Mining 2.98 3.17 Miscellaneous Materials & 0.10 0.42 Commodities 10.49 11.71 MULTI-INDUSTRIES 10.89 9.50 SERVICE Data Processing & Reproduction 0.56 1.21 Leisure & Tourism 0.82 0.39 Merchandising 0.61 0.57 Telecommunications 10.37 14.02 Transportation 1.30 0.88 13.66 17.07 OTHER NET ASSETS 9.81 18.51 100.00 100.00 The above groupings are based on the Morgan Stanley International Perspective Directory of Industry Classification. PORTFOLIO ANALYSIS by rank Twenty largest equity holdings As at 30 April 2001 Issuer Principal % of % of Cost Market Issued Value Number Country Share Total £'000 of of Issue/ Capital £'000 Shares Listing Net Held Assets 21,366,385 Grupo Financiero Banamex Mexico 0.45 4.52 9,259 27,932 Accival SA De CV One of the largest financial services companies in Mexico 7,997,423 Cemex SA Mexico 0.56 4.17 19,945 25,805 A Mexican company which is the world's third largest cement producer and the most important producer on the American continent 2,907,000 Cheung Kong Holdings Ltd Hong Kong 0.13 3.66 13,359 22,665 A Hong Kong based property development company with holdings in wholesale, import and export, shipping terminal operations, electricity generation, hotels and manufacturing. 3,627,635 South Africa Breweries Plc South 0.47 2.80 18,684 17,303 Africa Emerging markets brewer with operations in Eastern Europe, Africa, China and India. 2,471,952 Sasol Ltd South 0.37 2.51 9,469 15,520 Africa Conversion of coal into oil and chemicals, and oil refining. 126,873 Samsung Electronics Co. Ltd Korea 0.08 2.49 12,316 15,418 (South) Samsung Electronics is the world's largest DRAM manufacturer. In addition to semiconductors, the company is a leading manufacturer of consumer electronics, displays and telecommunications equipment. 3,635,523,216 Banco Bradesco Brazil 0.53 2.35 13,875 14,561 Bradesco is one of the largest private banks in Brazil. The company offers a full range of financial services. 975,621,330 Centrais Eletricas Brasileiras SA Brazil 1.15 1.74 11,624 10,761 (Eletrobras) The Brazilian Federal Government's holding company for the electricity sector. It is the largest power generation in Brazil. 463,772,000 Turpas - Turkiye Petrol Rafineleri Turkey 0.62 1.73 14,747 10,700 AS Country's largest industrial company , has an 86% share in the total oil produced in Turkey, with an annual capacity of 27.6 million tonnes. 222,115 Anglo-American PLC South 0.05 1.60 6,093 9,866 Africa Involved in the financial industry , precious metals mining, base metals mining, other mining and industrial interests. Top 10 Holdings - 27.6% of Total 129,371 170,531 Assets Number Issuer Principal % of % of Cost Market of Issued Value Shares Country Share Total £'000 of Issue/ Capital £'000 Listing Net Held Assets 2,898,688,168 Akbank Turkey 0.58 1.47 11,881 9,095 One of the largest banks in Turkey. 1,802,936 Barloworld Ltd South 0.84 1.41 6,534 8,726 Africa Barlow is a diversified industrial company that was established in 1902. The focus on opportunities arising from infrastructural development. 2,621,100 Polski Koncern Naftowy Orlen SA Poland 0.62 1.39 8,598 8,599 Polski Koncern refines and distributes petroleum products. 24,425,500 Siam Commercial Bank Public Co Ltd Thailand 1.02 1.38 11,679 8,516 One of Thailand's largest commercial banks. 2,193,500 Telekomunikacja Polska SA Poland 0.16 1.34 8,959 8,279 Telekomunikacja Polska owns, operates and leases telecommunications networks throughout Poland. 2,774,473 Samsung Heavy Industries Co Ltd Korea 1.20 1.30 10,144 8,024 (South) Samsung Heavy Industries is a large Korean shipbuilder and construction equipment manufacturer. 688,450 Hyundai Motor Co Ltd Korea 0.30 1.22 6,063 7,526 (South) Hyundai Motor manufactures and sells passenger cars, trucks, commercial vehicles and auto parts. The company also sells heavy equipment and petroleum. 5,044,220 Old Mutual PLC* South 0.14 1.21 7,750 7,491 Africa Old Mutual is one of the largest financial services companies in South Africa. 3,884,600 Kimberly Clark de Mexico SA De CV, Mexico 0.60 1.17 6,600 7,251 A One of the largest manufacturers and distributors of paper and paper products in Mexico. It is a 43% owned subsidiary of Kimberly-Clark in the U.S. 3,749,842 CEZ AS Czech 0.63 1.13 8,893 7,002 Republic The largest power generator in the Czech Republic with a control over the national grid. CEZ owns thermal and nuclear power plants. Top 20 Holdings - 40.6% of Total 216,472 251,040 Assets * UK Listed ANALYSIS OF PORTFOLIO TOTAL VALUE OF EQUITY PORTFOLIO 557,774 (90.19%) TOTAL VALUE OF FIXED INCOME 45,429 PORTFOLIO (7.35%) OTHER NET ASSETS (2.46%) 15,230 618,433 STATEMENT OF TOTAL RETURN OF THE COMPANY (INCORPORATING THE REVENUE ACCOUNT) For the year ended 30 April 2001 2001 Total Revenue 2000 Total Revenue Capital £'000 £0'000 Capital £'000 £'000 £'000 £'000 (Losses)/gains - (115,562) (115,562) - 26,988 26,988 on investments Income 20,946 - 20,946 20,356 - 20,356 Investment (6,754) - (6,754) (7,568) - (7,568) management fee Other (3,253) - (3,253) (4,196) - (4,196) expenses Net return 10,939 (115,562) (104,623) 8,592 26,988 35,580 on ordinary activities before taxation Tax on (3,290) - (3,290) (2,.303) - (2,303) ordinary activities Return on ordinary 7,649 (115,562) (107,913) 6,289 26,988 33,277 activities after taxation for the financial year Dividend in (5,628) - (5.628) (5,180) - (5,180) respect of equity shares Transfer to reserves 2,021 (115,562) (113,541) 1,109 26,988 28,097 (after aggregate dividends paid and proposed) Return per 1.66p (25.07p) (23.41p) 1.34p 5.73p 7.07p Ordinary Share (before dividend) Notes: The capital element is not distributable. The revenue column of this statement is the profit and loss account of the Company. The accompanying notes are an integral part of this statement. All revenue and capital items in the above statement derive from continuing operations. BALANCE SHEET As at 30 April 2001 2001 2000 £'000 £'000 FIXED ASSETS Equity Investments 557,774 611,071 CURRENT ASSETS Debtors 10,550 39,275 Current Asset Investments 45,429 29,869 Cash 16,207 96,258 72,186 165,402 CREDITORS: amounts falling due within one year (11,071) (25,455) NET CURRENT ASSETS 61,115 139,947 TOTAL ASSETS LESS CURRENT LIABILITIES 618,889 751,018 PROVISION FOR LIABILITIES AND CHARGES (456) (1,112) 618,433 749,906 CAPITAL AND RESERVES Called-up Share Capital 114,081 117,726 Share Premium Account 275,306 275,264 Capital Redemption Reserve 3,655 - Capital Reserve - Realised 255,184 272,007 Capital Reserve - Unrealised (44,467) 72,256 Revenue Reserve 14,674 12,653 SHAREHOLDERS' FUNDS (all equity) 618,433 749,906 Net Asset Value Per Ordinary Share (in pence) 159.25 - Basic 135.53 154.93 - Diluted 135.10 These financial statements were approved by the Board on 4 July 2001. The Honourable Nicholas F Brady Sir John Shaw Chairman Director CASH FLOW STATEMENT For the year ended 30 April 2001 2001 2000 £'000 £'000 Reconciliation of operating profit to net cash inflow from operating activities Operating profit 10,939 8,592 Decrease/(increase) in debtors 22 (38) Decrease/(increase) in accrued income 259 (2,252) Decrease/increase in creditors (125) 193 (Decrease in provisions) (36) (110) Net cash inflow from operating activities 11,059 6,385 Cash flow statement Net cash inflow from operating activities 11,059 6,385 Taxation (1,739) 2,363 Financial investments (48,794) 98,065 (39,474) 106,813 Equity dividends paid (5,104) (5,178) (44,578) 101,635 Management of liquid resources (17,623) (22,931) Financing (17,932) 238 (Decrease)/Increase in cash (80,133) 78,942 Reconciliation of net cash flow to movement in net funds Increase in the cash year (80,133) 78,942 Cash outflow from increase in liquid resources 17,623 22,931 Movement in net funds (62,510) 101,873 Foreign exchange translation and other differences (1,981) 1,921 Opening net funds 126,127 22,333 Closing net funds 61,636 126,127 This Preliminary Announcement is not the Company's statutory accounts for the year ended 30 April 2001. The Statement of Total Return, Balance Sheet and Cash Flow Statement are extracted from these accounts which have not yet been delivered to the Registrar of Companies. Copies of the Annual Report will shortly be sent to shareholders. The Company's Statutory Accounts for the year ended 30 April 2000, which included an unqualified Audit Report and did not contain statements under s237 (2) and s237(3) of the Companies Act 1985, have been filed with the Registrar of Companies. For further information, please contact:- Jim Sharp Richard Locke Franklin Templeton Investments Cazenove & Co Tel: 0131 469 4000 0207 588 2828 End of Announcement.

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