Half-year Report

RNS Number : 4955I

Templeton Emerging Markets IT PLC

26 November 2018

 

Stock Exchange Announcement

Templeton Emerging Markets Investment Trust PLC ("TEMIT" or "the Company")

Unaudited Half Yearly Report to 30 September 2018

Legal Entity Identifier 5493002NMTB70RZBXO96

Company Overview

Launched in 1989, Templeton Emerging Markets Investment Trust PLC ("TEMIT" or the "Company") is an investment company that invests principally in emerging markets companies with the aim of delivering capital growth to shareholders over the long term. While the majority of the Company's shareholders are based in the UK, shares are quoted on both the London and New Zealand Stock Exchanges.

The Company is governed by a Board of Directors who are committed to ensuring that shareholders' best interests are at the forefront of all decisions. Under the guidance of the Chairman, the Board of Directors is responsible for the overall strategy of the Company and monitoring its performance. Only one member of the Board has a connection with Franklin Templeton Investments, with all others being independent.

TEMIT's research-driven investment approach and strong long-term performance has helped it to grow to be the largest emerging markets investment trust in the UK, with net assets of £2.1 billion as at 30 September 2018.

TEMIT at a glance

For the six months to 30 September 2018
Net asset value total return (cum-income)(a)(b)		Share price total return(a)(b)
-1.5%		-2.2%
(2017: 11.4%)		(2017: 14.5%)
MSCI Emerging Markets Index total return(a)(b)(c)		Interim dividend for the financial year 2019
-1.8%		5.00p
(2017: 7.1%)		(2018: n/a)(d)

^(a)     A glossary of alternative performance measures is included on page 30 of the half-yearly report.

^(b)     For the 6 months ended 30 September 2018 and 2017.

^(c)     Source: MSCI. The Company's benchmark is the MSCI Emerging Markets Index, with net dividends reinvested.

^(d)     The 2019 financial year (1 April 2018 to 31 March 2019) interim dividend is the first interim dividend for the Company).

Chairman's Statement

Market Overview and Investment Performance

In the six months under review investors in emerging markets were confronted with geopolitical uncertainty, particularly in the trading relationship between China and the USA. This uncertainty led many investors to seek the relative safety of developed markets, and particularly the USA where rising interest rates and a strengthening currency attracted capital flows. As a result, your Company's benchmark MSCI Emerging Markets Index recorded a small decline over the six-month period. Against this difficult background, I am able to report a further marginal NAV outperformance of the benchmark by the Investment Manager, as set out in the table on page 1 of the half-yearly report.

Revenue Earnings and Dividend

Our reported revenue earnings are set out in the table on page 27 in the half yearly report.

In the Annual Report for the year to 31 March 2018, I announced that the Company will pay two dividends per accounting year, commencing with the current year. I am pleased to announce the Company's inaugural interim dividend of 5.0 pence per share, for the six months to 30 September 2018. This dividend was fully covered by net revenues earned over the six-month period.

Following feedback received from shareholders, for those shareholders in the UK who are direct holders of registered shares in the Company, we have introduced a Dividend Reinvestment Plan, which provides a means of reinvesting dividends in the Company's shares at low cost. Further details of this Plan will be sent direct to registered shareholders by the Registrars. Investors who hold shares via online dealing services should be aware that most such services offer a similar feature to their clients.

The Investment Manager

Andrew Ness joined Franklin Templeton on 17 September 2018. He will work alongside TEMIT's lead portfolio manager Chetan Sehgal. Andrew Ness brings a wealth of investment experience, and the Board believes that his appointment as a portfolio manager, together with Chetan Sehgal's strong leadership, will further strengthen the team's investment resources and capabilities and thus position the Company well for the future.

The portfolio managers of TEMIT are further supported by an experienced team of over 90 dedicated emerging markets investment professionals located in 22 offices around the world. The Board believes that the breadth and depth of Franklin Templeton's in-house resources will be important in a period when there is significant cost pressure on the provision of investment research by third parties.

Managing the Discount

During the half year under review, TEMIT's shares traded at discounts^(a) of between 12.0% and 15.5%, and on 30 September 2018 the discount stood at 13.3%.

We have continued to be active in buying back shares and bought back a total of 13,913,569 shares in the six-month period at an average discount of 13.4%, all of which were placed into Treasury.

^(a)     A glossary of alternative performance measures is included on page 30 of the half-yearly report.

Franklin Templeton continues in its efforts to promote TEMIT shares, with active advertising, media relations and an award-winning online presence. The Board and Investment Manager will continue in our joint efforts to bear down on the discount by focusing on both demand for and supply of shares.

Asset Allocation and Borrowing

On 31 August 2018, the Company entered into an amendment of the 3-year unsecured multi-currency revolving loan facility with The Bank of Nova Scotia, London Branch. Under the amended facility, up to £220 million total (previously £150 million) may be borrowed, with drawings available in pounds sterling, US dollars and Chinese renminbi (CNH). The maximum amount of CNH which may be drawn down is the equivalent of £44 million (previously £30 million). The Company has no other debt. Based on the asset value as at 30 September 2018, this facility allows gearing of up to 10%, which is the maximum gearing allowed under the Company's investment policy.

The Board has continued to review the merits of the Company borrowing with the aim of increasing investment returns. While the Board and the Investment Manager recognise that gearing increases volatility, after careful consideration we concluded that it may be in shareholders' interests to increase the Company's borrowing facility at a time when the long-term outlook for emerging markets remains positive and interest rates are low. The Manager has been granted discretion by the Board to draw down the debt as investment opportunities arise, subject to overall supervision by the Board.

As at 30 September 2018 gearing^(a), net of cash in the portfolio, was 4.0% (31 March 2018: 3.3%).

The Board

As set out in the Annual Report, Hamish Buchan retired from the Board at this year's AGM and was succeeded by Beatrice Hollond as Senior Independent Director. I would like to repeat my thanks to Hamish for his contribution to TEMIT since 2008.

Charlie Ricketts was duly elected and joined the Board at the conclusion of this year's AGM.

Outlook

It is unlikely that the trade dispute between the USA and China will dissipate quickly and there are headline-grabbing issues in some emerging markets such as Turkey, Pakistan and Argentina, all of which are serving to unsettle markets. Nevertheless, there are many reasons to be positive about the long-term outlook. Emerging markets are diverse with different economic and political drivers. As a general comment, and notwithstanding the market volatility in October and November, your Board believes that emerging markets are in good health and issues in countries such as Turkey, Pakistan and Argentina do not reflect the asset class as a whole, and furthermore those countries are small in comparison with the rest of the emerging markets universe.

Investment in emerging markets is no longer based on the availability of commodities or cheap labour to supply developed markets. Growing GDPs and individual wealth have led to growth in intra-regional trade, while technology and high-quality manufacturing have become key drivers of economic growth and hence investment opportunities.

Paul Manduca

Chairman

26 November 2018

^(a)     A glossary of alternative performance measures is included on page 30 of the half-yearly report.

Interim Management Report

Principal risks

The Company invests, where possible, directly in the stock markets of emerging markets. The principal risks facing the Company, as determined by your Board, are:

•      Investment and concentration;

•      Market;

•      Foreign currency;

•      Portfolio liquidity;

•      Credit;

•      Operational and custody;

•      Key personnel;

•      Regulatory; and

•      Cyber security.

The Board has provided the Investment Manager with guidelines and limits for the management of these principal risks. Further information on risks is given in the Strategic Report within the Annual Report and Audited Accounts, which is available on the Company's website (www.temit.co.uk). There have been no changes to the principal risks reported in the Annual Report, and in the Board's view, these principal risks are equally applicable to the remaining six months of the financial year as they were to the six months under review. Although not judged a principal risk for the Company, the Board continues to monitor developments around Brexit. Additionally, the Manager has a dedicated working group assessing the potential impact of Brexit.

Related party transactions

There were no transactions with related parties during the six months ended 30 September 2018, other than the fees paid to the Directors. These fees do not have a material effect on the results or the financial position of the Company. Under the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies ("AIC") in November 2014 and updated in February 2018, the Franklin Templeton entities are not classified as related parties under IAS 24 (as adopted by the EU).

Going concern

The Company's assets consist of equity shares in companies listed on recognised stock exchanges and in most circumstances are realisable within a short timescale. Having made suitable enquiries, including considerations of the Company's investment objective, the nature of the portfolio, expenditure forecasts and the principal risks and uncertainties, the Directors are satisfied that the Company has adequate resources to continue to operate as a going concern for the foreseeable future, being a period of at least 12 months, and as such, a going concern basis is appropriate in preparing the Financial Statements.

Statement of Directors' Responsibilities

The Disclosure and Transparency Rules of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.

The Directors each confirm that to the best of their knowledge:

(a)   the condensed set of financial statements for the period ended 30 September 2018 has been prepared in accordance with the applicable International Accounting Standard (IAS) 34 ''Interim Financial Reporting'' as adopted by the EU; and

(b)   the Half Yearly Report includes a fair review of the information required by:

(i)    DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

(ii)   DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

The Half Yearly Report was approved by the Board on 26 November 2018 and the above responsibility statement was signed on its behalf by

Paul Manduca

Chairman

26 November 2018

Portfolio Report

Market Overview

Emerging markets equities fell over the six months to 30 September 2018, ceding some ground after a strong run in 2017. The MSCI Emerging Markets Index fell by 1.8% in the half year under review, while TEMIT's net asset value total return was marginally ahead of this, falling by 1.5% (all figures in sterling). Full details of TEMIT's performance can be found on page 1 of the half-yearly report.

A combination of rising US interest rates, global trade tensions and issues in some individual countries curbed investor sentiment towards emerging markets throughout the period. Market caution further heightened in August as currency crises in Turkey and Argentina triggered fears that other countries could be affected. However, we saw limited risk of a broader crisis developing during that spell of market volatility. Turkey's small representation in the emerging markets equity universe, plus Argentina's absence from it, meant that both countries' travails were not representative of the health of the asset class as a whole. Collectively, emerging markets continued to post strong economic growth, surpassing that of developed countries^(a).

We also found a disconnect between downbeat perceptions among international investors and robust equity fundamentals for companies in emerging markets, demonstrated by higher earnings, rising cash flows, improving capital-allocation discipline (such as buy-backs and dividend payments), reduction of debt levels by companies and lower valuations (compared with developed-market stocks), even though the sharp decline in currencies has meant that in US dollar terms the earnings appear less attractive. Numerous emerging markets companies were able to achieve impressive growth in the period under review. Energy producers, for example, benefitted from rising oil prices. Many other businesses continued to ride on the back of strong structural trends such as technological innovation and increased consumption. In technology, promising fields such as artificial intelligence, autonomous driving and the Internet of Things continued to attract huge investments, signalling strong prospects for the makers of cutting-edge computer chips that drive such applications. Meanwhile, rising incomes continued to lead to increases in consumer spending, not just on basic goods, but also on premium items such as leisure and entertainment.

Nevertheless, trade tensions (especially between the US and China) dominated markets' attention. Against this backdrop, Chinese stocks declined in value and the yuan fell against the US dollar. By the end of September, the US had imposed tariffs on USD 250 billion worth of Chinese goods, prompting China to respond with tariffs on USD 110 billion of US imports. The trade row coincided with China's efforts to rein in debt and raised concerns about a slowdown in its economy. Economic indicators were mixed. China's GDP growth of an annualised 6.7% in the quarter to end-June met market expectations, and industrial output and retail sales rose in August. However, fixed-asset investment increased at a slower pace in the first eight months of 2018. To cushion its economy, China eased monetary conditions and introduced modest fiscal stimulus measures. China was TEMIT's largest market position at the end of the reporting period and we remain comfortable with the exposure which is a result of our view on the prospects for individual companies rather than a regional allocation. In terms of its outlook, we believe that China has the policy tools to manage economic challenges as it continues with structural reforms. Moreover, it offers an unparalleled range of investment opportunities as rapid digitalisation and growing consumption support growth for companies across different industries, ranging from e-commerce to premium cars.

^(a)     Source: Developed countries (advanced economies) as classified by the International Monetary Fund, World Economic Outlook Database, October 2018 Edition. ©2018 International Monetary Fund. All rights Reserved.

South Korea's stock market was also dampened by trade conflict with the US, although both countries agreed on a revised free-trade deal in September. There was additional good news on the geopolitical front as South Korea made strides in reducing tensions with North Korea. Peace talks, including an historic meeting between the leaders of the US and North Korea, raised hopes for a denuclearisation of the Korean peninsula. Domestically, South Korea's economy was largely stable. Corporate governance improvements remained on the agenda, with the country's national pension fund adopting a stewardship code in July. Better corporate governance could help to enhance the appeal to international investors of South Korean companies, many of which are global leaders in the technology industries. South Korea accounted for the second-largest market position in TEMIT's portfolio at the end of September.

Some of the world's leading technology companies can also be found in Taiwan. Taiwan's stock market delivered strong equity returns in the period under review, helped by a rally in index heavyweight Taiwan Semiconductor Manufacturing Company (TSMC). This chip maker is one of TEMIT's largest holdings and benefitted from strong demand for its latest high-performance chips. TSMC and several electronic component makers in combination form a substantial part of TEMIT's overall exposure to Taiwan. Structural trends in advancing technology are supportive of their continued growth.

India's stock market was another outperformer in Asia. Global trade uncertainty weighed less on the country than on others thanks to its more domestically-oriented economy. Its GDP grew by an annualised 8.2% in the quarter to end-June on the back of stronger manufacturing and consumption, recording its fastest pace of quarterly expansion in more than two years. The ascent of Indian equities was capped, though, by concerns over the country's increased current account deficit, due in part to higher crude oil prices for a country which is a net importer of oil. The rupee also depreciated against the US dollar. Equity valuations in India are amongst the highest in emerging markets, often meaning that we find better investment cases elsewhere, even though we are quite confident of the long-term prospects of the economy. We are also discerning in identifying companies which show good potential for sustainable earnings growth.

In Latin America, Brazilian stocks retreated amidst economic and political challenges. A nationwide truckers' strike hit businesses and consumers, leading to subdued GDP growth in the quarter to end-June. Political uncertainty also heightened ahead of a presidential election in October 2018, although the growing popularity of the more market-friendly candidate Bolsonaro in electoral polls provided markets with a dose of relief. Now confirmed as the winner in October, Bolsonaro faces the task of turning Brazil's economy around and restoring confidence. TEMIT had a considerable position in Brazil during the period under review, underpinned by our positive long-term outlook for the country. We remain optimistic about Brazil's prospects post-election but will be watching whether market-friendly campaign promises can become policy.

Mexican equities rebounded from initial weakness to close higher. Caution reigned as Mexico and the US discussed revisions to the North American Free Trade Agreement (NAFTA). The two countries eventually arrived at a new trade deal. Meanwhile, uncertainty around the election of a new president in Mexico gave way to greater confidence as his administration vowed to uphold fiscal discipline and maintain an independent central bank. It also indicated that already implemented reforms, including the privatisation of the energy sector, would not be reversed. TEMIT remained selective about its exposure to Mexico in the period under review.

Elsewhere, Russia's stock market advanced, showing resilience in the face of fresh US sanctions against the country. Rising oil prices were a tailwind for energy companies. Brent crude oil touched USD 80 per barrel amidst concerns that US sanctions on Iran would cut the latter's oil supplies to global markets. TEMIT's exposure to Russia reflected our conviction in select companies with strong fundamentals. Equity valuations in Russia were also amongst the lowest in emerging markets.

Investment Strategy, Portfolio Changes and Performance

The following sections show how different investment factors (stocks, sectors and geographies) accounted for the Company's performance over the period. We continue to emphasise our investment process that selects companies based on their individual attributes and ability to generate risk-adjusted returns for investors, rather than taking a high-level view of sectors, countries or geographic regions to determine our investment allocations.

While we do consider macroeconomic and political events, a fundamental focus on individual companies and their earnings can often play the major role in achieving our stated objectives.

Our investment style is centred on finding good value. We see long-term value in companies which have sustainable earnings power and whose shares trade at a discount relative to their prospects and to other investment opportunities in the market. We also pay close attention to risks.

We continue to utilise our research-based, active approach to help us to find companies with high standards of corporate governance, which respect their shareholder base and which understand the local intricacies that may determine consumer trends and habits. Utilising our large team of analysts, we aim to maintain close contact with the board and senior management of existing and potential investments and believe in engaging constructively with our investee companies.

All of these factors require us to look beyond traditional measures of value such as price-earnings ratio and to conduct detailed analyses of potential returns versus risks with a time horizon of typically five years or more.

Performance Attribution Analysis %

6 Months to 30 September	2018		2017		2016		2015		2014
Net asset value total return(a)	(1.5	)	11.4		29.6		(28.0	)	8.2
Expenses incurred	0.6		0.6		0.6		0.6		0.6
Gross total return(a)	(0.9	)	12.0		30.2		(27.4	)	8.8
Benchmark Total return(a)	(1.8	)	7.1		21.7		(18.8	)	6.1
Excess return(a)	0.9		4.9		8.5		(8.6	)	2.7
Stock selection	(0.2	)	1.8		0.2		1.2		(1.3	)
Sector allocation	(0.5	)	2.7		7.9		(12.7	)	3.0
Currency	1.1		0.1		0.4		2.6		1.2
Residual(a)	0.5		0.3		-		0.3		(0.2	)
Total Portfolio Manager Contribution	0.9		4.9		8.5		(8.6)		2.7

Source: FactSet and Franklin Templeton Investments.

^(a)     A glossary of alternative performance measures is included on page 30 of the half-yearly report.

Portfolio Report (continued)

Contributors and Detractors by Security

Top Contributors to Relative Performance by Security (%)^(a)

Top Contributors	Share Price Total Return		Relative Contribution to Portfolio
CNOOC	51.2		0.5
LUKOIL, ADR	23.0		0.4
IMAX(b)	44.6		0.4
Banco Santander Mexico, ADR(b)	18.9		0.4
Taiwan Semiconductor Manufacturing	13.2		0.3
Unilever(b)	8.3		0.3
China Petroleum and Chemical	34.2		0.3
Uni-President China	35.4		0.3
Tencent	(14.7)		0.2
Cia De Bebidas Das Americas (AMBEV)(c)	(31.2)		0.2

^(a)     For the period 31 March 2018 to 30 September 2018.

^(b)     Security not included in the MSCI Emerging Markets Index.

^(c)     Security not held by TEMIT.

CNOOC is a leading offshore oil and gas producer in China. The group mainly engages in the exploration, development, production and sale of crude oil and natural gas. CNOOC reported a sharp increase in earnings in the first half of 2018 compared to a year earlier, as robust oil prices provided a positive backdrop for its businesses. Successful cost-cutting measures further supported CNOOC's profitability. The company also announced a long-term strategic plan to increase its gas reserves by 50% by 2025, as it renewed efforts to focus on gas, given the demand in China. A significant increase in dividends and new discoveries in offshore China further supported sentiment.

LUKOIL is one of Russia's largest vertically integrated (where the supply chain is owned by the company) energy companies, as well as one of the biggest globally, in terms of reserves. The company is engaged in exploration, development, production and refining of crude oil, as well as the marketing and distribution of crude oil and products. A rebound in oil prices benefited the company, which reported significantly higher first- and second-quarter sales and earnings compared to a year earlier. LUKOIL also announced a USD 3 billion share buyback programme and the cancellation of 100 million of its treasury shares, as it looked to improve shareholder value and corporate governance. The firm's progressive dividend policy further drove investor confidence in the stock.

IMAX, which is listed in the US but has significant exposure to emerging markets, is one of the world's leading entertainment technology companies, specialising in immersive motion picture technologies. The company's principal businesses are the design and manufacture of premium theatre systems and the digital re-mastering and showing of films in the IMAX format. IMAX theatre systems are in over 1300 theatres globally with most growth in its majority-held IMAX China Holdings. The company's first-quarter corporate results exceeded market expectations on higher than expected system sales, strong box office revenue growth, as well as lower than expected operating expenses. Good second-quarter results further supported the upward trend in the share price.

Top Detractors to Relative Performance by Security (%)^(a)

Top Detractors	Share Price Total Return		Relative Contribution to Portfolio
Brilliance China Automotive	(16.6)		(0.8	)
Massmart(b)	(42.2)		(0.4	)
Banco Bradesco, ADR	(28.8)		(0.3	)
Hyundai Development	(32.7)		(0.3	)
Itaú Unibanco, ADR	(22.9)		(0.3	)
Sberbank Of Russia, ADR	(23.2)		(0.3	)
Vale(c)	30.5		(0.2	)
Lojas Americanas	(25.1)		(0.2	)
Reliance Industries	37.4		(0.2	)
MGM China(b)	(33.3)		(0.2	)

^(a)     For the period 31 March 2018 to 30 September 2018.

^(b)     Security not included in the MSCI Emerging Markets Index.

^(c)     Security not held by TEMIT.

Portfolio Report (continued)

Brilliance China Automotive manufactures and sells automobiles for the Chinese market, predominantly through its joint venture with German luxury car maker BMW. Shares of Brilliance China were held back by China's plans to open-up its auto industry further by removing foreign ownership limits and reducing import tariffs. The potential changes raised questions around the future of Brilliance China's partnership with BMW. Nevertheless, Brilliance China's business remained strong. First-half net profit rose sharply as growth in sales volume and cost controls together led to higher margins. In October, after the end of the reporting period, the share price declined again after BMW announced that they would increase their stake to 75%. We are closely monitoring the situation and will act in the best interests of our shareholders.

Massmart is a leading South African distributor and retailer of consumer goods, general merchandise, alcohol, home improvement equipment and supplies as well as a wholesaler of basic foods. US-based Walmart, the world's largest retailer, owns a controlling stake in Massmart. A disappointing trading update and profit warning from the company resulted in a sharp fall in the share price. First-half earnings declined substantially largely due to weak sales growth and a contraction in operating margin, primarily due to trading losses in two divisions. An increase in petrol prices and VAT coupled with high unemployment and weak economic growth weighed on consumer demand. Taking a longer-term view, however, we believe that Massmart is well-placed to benefit from a recovery in the domestic economy and consumer demand.

Banco Bradesco is one of Brazil's largest financial conglomerates. It operates in a wide range of segments, including asset management, insurance, wholesale banking, retail operations, credit card and general corporate and personal lending. Shares declined largely due to weak sentiment in the Brazilian market in general, driven by volatility ahead of the forthcoming presidential elections, weakness in the real, as well as concerns that labour strikes could impact economic activity. The bank, however, continued to report solid operating results, with an acceleration in loan growth, improvement in asset quality, and decline in provisioning and non-performing loans in the second quarter. We believe that the bank's extensive retail presence, strong insurance franchise and solid balance sheet put it in a favourable position to benefit from the country's longer-term economic recovery and easing of the political uncertainty surrounding the presidential elections.

Top Contributors and Detractors to Relative Performance by Sector (%)^(a)(b)

	MSCI					MSCI
	Emerging					Emerging
	Markets Index		Relative			Markets Index		Relative
	Sector Total		Contribution			Sector Total		Contribution
Top Contributors	Return		to Portfolio		Top Detractors	Return		to Portfolio
Energy	17.5		0.7		Materials	6.4		(0.8	)
Communication Services	(6.4)		0.4		Consumer Discretionary	(9.2)		(0.5	)
Real Estate	(9.6)		0.3		Financials	(4.5)		(0.2	)
Information Technology	2.0		0.3		Consumer Staples	(1.7)		(0.2	)
Health Care	(5.1)		0.3		Utilities	(2.9)		(0.0	)
Industrials	(1.7)		0.0

^(a)     For the period 31 March 2018 to 30 September 2018.

^(b)     The sectors reflect changes in the Global Industry Classification Standard ('GICS') as at 28 September 2018.

Favourable stock selection in the energy, communication services and real estate sectors added to TEMIT's performance relative to the benchmark index in the review period. Higher oil prices proved favourable for the portfolio's marginal overweight position in energy companies. We reduced investments in some energy companies to lock in gains and raise funds for other attractive investment opportunities. During the period we added to our holdings in the communication services sector, which is a significant theme in the portfolio. We continue to maintain an underweight position in real estate relative to the benchmark index. We preferred to invest elsewhere as we saw risks of over-borrowing and regulation in this area. Conversely, the materials, consumer discretionary and financials sectors pressured relative returns. Investments in the financial sector were increased, while those in the consumer discretionary and materials sectors were reduced during the period.

Portfolio Report (continued)

Top Contributors and Detractors to Relative Performance by Country (%)^(a)

	MSCI					MSCI
	Emerging					Emerging
	Markets Index	Relative				Markets Index	Relative
	Country Total	Contribution				Country Total	Contribution
Top Contributors	Return	to Portfolio			Top Detractors	Return	to Portfolio
China/Hong Kong	(3.9)		1.1		Brazil	(15.9)		(1.0	)
Thailand	4.1		0.4		Russia	8.0		(0.3	)
United States(c)	(9.7)		0.4		Taiwan	8.3		(0.3	)
Turkey(b)	(36.5)		0.3		Kenya(c)	-		(0.2	)
United Kingdom(c)	16.4		0.3		South Korea	(1.5)		(0.2	)
Indonesia	(3.7)		0.2		Qatar(b)	25.7		(0.2	)
Cambodia(c)	-		0.2		Philippines	(3.4)		(0.1	)
South Africa	(12.4)		0.1		Poland(b)	5.6		(0.1	)
Saudi Arabia(c)	-		0.1		Argentina(c)	-		(0.1	)
Chile(b)	(6.1)		0.0		Peru	1.9		(0.1	)

^(a)     For the period 31 March 2018 to 30 September 2018.

^(b)     No companies held by TEMIT in this country.

^(c)     No companies included in the MSCI Emerging Markets Index in this country.

Our selection of stocks in China/Hong Kong and Thailand were among the major contributors to TEMIT's returns relative to the benchmark index. An underweight exposure to China/Hong Kong further strengthened the relative contribution from that market, as it underperformed its emerging markets peers over the period. China's efforts to reduce debt and the deepening trade row with the United States weighed on the outlook for its economy. We increased our exposure to China/Hong Kong during the reporting period. The passage of two key laws required for the 2019 general elections and a solid macroeconomic environment drove investment sentiment in Thailand. While we reduced our holdings in Thailand, allowing us to realise gains, we continue to maintain an overweight exposure to the market. In contrast, relative performance was hurt by stock selection in Brazil, Russia and Taiwan. An overweight position in Russia, however, offset some of the detraction from that market. We trimmed our investments in Russia during the reporting period.

Our resulting portfolio is listed by size of holding on pages 15 to 18 of the half-yearly report.

Portfolio changes by Sector^(a)

									Total Return in sterling
	31 March 2018				Market		30 September 2018			MSCI Emerging
	Market Value(a)		Purchases	Sales	Movement		Market Value		TEMIT		Markets Index
Sector	£m		£m	£m	£m		£m		%		%
Financials	529		56	32	(43)		510		(5.8)		(4.5)
Information Technology	442		4	27	6		425		2.5		2.0
Communication Services	384		17	27	(16)		358		(3.7)		(6.4)
Consumer Discretionary	402		16	28	(38)		352		(9.0)		(9.2)
Energy	184		-	22	35		197		25.3		17.5
Consumer Staples	167		-	21	(7)		139		(3.9)		(1.7)
Materials	139		-	13	(6)		120		(4.1)		6.4
Industrials	67		-	23	6		50		(1.1)		(1.7)
Health Care	38		2	1	1		40		6.2		(5.1)
Real Estate	14		-	7	2		9		20.4		(9.6)
Utilities	5		-	4	(1)		-		(7.2)		(2.9)
Net current liabilities(b)	(70)		-	-	(11)		(81)		-		-
Total	2,301		95	205	(72)		2,119

Sector Asset Allocation

As at 30 September 2018

Sector weightings vs benchmark (%)^(a)

^(a)     The sectors reflect changes in the Global Industry Classification Standard ('GICS') as at 28 September 2018. The 31 March 2018 figures have been reclassified according to these changes.

^(b)     The Company's net current liabilities per the Balance Sheet on page 24 of the half-yearly report.

Portfolio Report (continued)

Portfolio changes by Country

									Total Return in sterling
	31 March 2018				Market		30 September 2018			MSCI Emerging
	Market Value		Purchases	Sales	Movement		Market Value		TEMIT		Markets Index
Country	£m		£m	£m	£m		£m		%		%
China/Hong Kong	506		46	21	(8)		523		(0.4)		(3.9)
South Korea	353		19	57	(3)		312		(3.1)		(1.5)
Taiwan	231		16	11	9		245		(24.2)		8.3
Russia	213		5	18	(10)		190		5.9		8.0
Brazil	212		-	-	(54)		158		(1.6)		(15.9)
South Africa	160		4	-	(17)		147		(10.1)		(12.4)
India	117		2	2	9		126		6.9		4.5
Thailand	116		-	24	6		98		11.5		4.1
Other	463		3	72	7		401		-		-
Net current liabilities(a)	(70)		-	-	(11)		(81)
Total	2,301		95	205	(72)		2,119

Geographic Asset Allocation

As at 30 September 2018

Country weightings vs benchmark (%)^(b)

^(a)     The Company's net current liabilities per Balance Sheet on page 24 of the half-yearly report.

^(b)     Other countries included in the benchmark are Chile, Colombia, Egypt, Greece, Malaysia, Poland, Qatar, Turkey and the United Arab Emirates.

^(c)     Countries not included in the MSCI Emerging Markets Index.

Portfolio Investments by Fair Value
As at 30 September 2018

				Fair Value	% of net
Holding	Country	Sector(a)	Trading(b)	£'000	assets
Samsung Electronics	South Korea	Information Technology	PS	175,112	8.3
Naspers	South Africa	Communication Services	IH	133,843	6.3
Taiwan Semiconductor Manufacturing	Taiwan	Information Technology	IH	131,948	6.2
Brilliance China Automotive	China/Hong Kong	Consumer Discretionary	IH	99,009	4.7
Alibaba, ADR(c)	China/Hong Kong	Consumer Discretionary	NT	97,235	4.6
Buenaventura, ADR(c)	Peru	Materials	PS	66,072	3.1
Unilever(d)	United Kingdom	Consumer Staples	PS	63,955	3.0
Tencent	China/Hong Kong	Communication Services	NT	63,776	3.0
LUKOIL, ADR(c)	Russia	Energy	NT	58,266	2.7
ICICI Bank	India	Financials	NT	55,099	2.6
TOP 10 LARGEST INVESTMENTS				944,315	44.5
Banco Santander Mexico, ADR(c)	Mexico	Financials	IH	43,442	2.0
CNOOC	China/Hong Kong	Energy	NT	41,312	1.9
Hon Hai Precision Industry	Taiwan	Information Technology	NT	40,638	1.9
Itaú Unibanco, ADR(c)	Brazil	Financials	NT	40,453	1.9
Sberbank Of Russia, ADR(c)	Russia	Financials	IH	37,111	1.8
Astra International	Indonesia	Consumer Discretionary	PS	35,070	1.7
Gazprom, ADR(c)	Russia	Energy	NT	34,442	1.6
Bank Danamon Indonesia	Indonesia	Financials	PS	33,920	1.6
Banco Bradesco, ADR(c)(e)	Brazil	Financials	NT	32,977	1.6
Kasikornbank	Thailand	Financials	NT	30,961	1.5
TOP 20 LARGEST INVESTMENTS				1,314,641	62.0

^(a)     The sectors reflect changes in the Global Industry Classification Standard ('GICS') as at 28 September 2018.

^(b)     Trading activity during the year: (NH) New Holding, (IH) Increased Holding, (PS) Partial Sale and (NT) No Trading.

^(c)     US listed American Depositary Receipt.

^(d)     This company, listed on a stock exchange in a developed market, has significant exposure to operations from emerging markets.

^(e)     Preferred Shares.

Portfolio Report (continued)

				Fair Value	% of net
Holding	Country	Sector(a)	Trading(b)	£'000	assets
China Mobile	China/Hong Kong	Communication Services	NT	30,580	1.4
NAVER	South Korea	Communication Services	IH	30,503	1.4
China Construction Bank	China/Hong Kong	Financials	NH	30,489	1.4
Ping An Insurance Group	China/Hong Kong	Financials	NT	29,449	1.4
Yandex	Russia	Communication Services	NT	28,791	1.4
China Petroleum and Chemical	China/Hong Kong	Energy	PS	28,351	1.3
Ping An Bank	China/Hong Kong	Financials	IH	25,935	1.2
POSCO	South Korea	Materials	NT	25,594	1.2
Kiatnakin Bank	Thailand	Financials	PS	23,348	1.1
NagaCorp	Cambodia	Consumer Discretionary	NT	23,264	1.1
TOP 30 LARGEST INVESTMENTS				1,590,945	74.9
Catcher Technology	Taiwan	Information Technology	NT	21,706	1.0
Mail.Ru, GDR(f)	Russia	Communication Services	PS	20,628	1.0
BM&F Bovespa	Brazil	Financials	NT	20,211	1.0
MCB Bank	Pakistan	Financials	PS	19,364	0.9
IMAX(d)	United States	Communication Services	PS	19,048	0.9
Gedeon Richter	Hungary	Health Care	PS	18,842	0.9
Glenmark Pharmaceuticals	India	Health Care	IH	17,458	0.8
Lojas Americanas	Brazil	Consumer Discretionary	NT	17,386	0.8
Daelim Industrial	South Korea	Industrials	PS	17,168	0.8
Infosys Technologies	India	Information Technology	NT	15,619	0.7
TOP 40 LARGEST INVESTMENTS				1,778,375	83.7
Thai Beverages	Thailand	Consumer Staples	NT	15,594	0.7
Uni-President China	China/Hong Kong	Consumer Staples	PS	15,515	0.7
Hyundai Development	South Korea	Industrials	PS	14,387	0.7
Baidu, ADR(c)	China/Hong Kong	Communication Services	NT	14,357	0.7
Cia.Hering	Brazil	Consumer Discretionary	NT	13,526	0.6
Massmart	South Africa	Consumer Staples	NT	13,195	0.6
CTBC Financial Holding	Taiwan	Financials	NH	12,435	0.6
Siam Commercial Bank	Thailand	Financials	PS	12,216	0.6
SABIC, Participatory Note	Saudi Arabia	Materials	PS	12,036	0.6
Moneta Money Bank	Czech Republic	Financials	NT	11,284	0.5
TOP 50 LARGEST INVESTMENTS				1,912,920	90.0

^(a)   The sectors reflect changes in the Global Industry Classification Standard ('GICS') as at 28 September 2018.

^(b)     Trading activity during the year: (NH) New Holding, (IH) Increased Holding, (PS) Partial Sale and (NT) No Trading.

^(c)     US listed American Depositary Receipt.

^(d)     This company, listed on a stock exchange in a developed market, has significant exposure to operations from emerging markets.

^(f)    UK listed Global Depositary Receipt.

Portfolio Report (continued)

				Fair Value	% of net
Holding	Country	Sector(a)	Trading(b)	£'000	assets
NetEase, ADR(c)	China/Hong Kong	Communication Services	PS	11,197	0.5
LG	South Korea	Industrials	NT	10,434	0.5
TOTVS	Brazil	Information Technology	NT	10,221	0.5
Largan Precision	Taiwan	Information Technology	PS	10,085	0.5
Tata Chemicals	India	Materials	NT	10,016	0.5
SK Innovation	South Korea	Energy	PS	9,558	0.5
MGM China	China/Hong Kong	Consumer Discretionary	NT	8,935	0.4
Bajaj Holdings & Investments	India	Financials	NT	8,857	0.4
Land and Houses	Thailand	Real Estate	PS	8,754	0.4
Dairy Farm	China/Hong Kong	Consumer Staples	NT	8,305	0.4
TOP 60 LARGEST INVESTMENTS				2,009,282	94.6
Nemak	Mexico	Consumer Discretionary	PS	8,012	0.4
PChome Online	Taiwan	Consumer Discretionary	NT	7,880	0.4
M. Dias Branco	Brazil	Consumer Staples	NT	7,843	0.4
Hankook Tire	South Korea	Consumer Discretionary	NH	7,811	0.4
Intercorp Financial Services	Peru	Financials	NT	7,725	0.4
Pegatron	Taiwan	Information Technology	NT	7,626	0.4
Hanon Systems	South Korea	Consumer Discretionary	PS	7,461	0.4
FIT Hon Teng	Taiwan	Information Technology	NT	7,305	0.3
COSCO Pacific	China/Hong Kong	Industrials	NT	7,046	0.3
East African Breweries	Kenya	Consumer Staples	NT	6,829	0.3
TOP 70 LARGEST INVESTMENTS				2,084,820	98.3
B2W Digital	Brazil	Consumer Discretionary	NT	6,553	0.3
KCB Group	Kenya	Financials	PS	6,352	0.3
BAIC Motor	China/Hong Kong	Consumer Discretionary	NH	6,253	0.3
TMK, GDR(f)	Russia	Energy	NT	6,033	0.3
Coal India	India	Energy	NT	5,980	0.3
Equity Group	Kenya	Financials	PS	5,945	0.3
PTT Exploration and Production	Thailand	Energy	PS	5,932	0.3
BDO Unibank	Philippines	Financials	NT	5,857	0.3
Hite Jinro	South Korea	Consumer Staples	NT	5,646	0.3
KT Skylife	South Korea	Communication Services	NT	5,414	0.3
TOP 80 LARGEST INVESTMENTS				2,144,785	101.3

^(a)     The sectors reflect changes in the Global Industry Classification Standard ('GICS') as at 28 September 2018.

^(b)     Trading activity during the year: (NH) New Holding, (IH) Increased Holding, (PS) Partial Sale and (NT) No Trading.

^(c)     US listed American Depositary Receipt.

^(f)      UK listed Global Depositary Receipt.

Portfolio Report (continued)

				Fair Value	% of net
Holding	Country	Sector(a)	Trading(b)	£'000	assets
Crédit Real	Mexico	Financials	NT	5,380	0.3
Primax Electronics	Taiwan	Information Technology	NT	4,895	0.2
MAHLE Metal Leve	Brazil	Consumer Discretionary	NT	4,822	0.2
Reliance Industries	India	Energy	PS	4,597	0.2
Norilsk Nickel, ADR(c)	Russia	Materials	PS	4,330	0.2
Tata Motors	India	Consumer Discretionary	NT	4,008	0.2
Biocon	India	Health Care	NT	3,994	0.2
Wiz Soluções e Corretagem	Brazil	Financials	NT	3,933	0.2
Security Bank	Philippines	Financials	NT	3,504	0.1
Weifu High-Technology	China/Hong Kong	Consumer Discretionary	NT	2,670	0.1
TOP 90 LARGEST INVESTMENTS				2,186,918	103.2
BBVA Banco Francés, ADR(c)	Argentina	Financials	NT	2,454	0.1
Industrias Peñoles	Mexico	Materials	NT	2,307	0.1
Inner Mongolia Yitai Coal	China/Hong Kong	Energy	PS	2,115	0.1
Interpark	South Korea	Consumer Discretionary	NT	1,885	0.1
United Bank	Pakistan	Financials	NT	1,848	0.1
Univanich Palm Oil	Thailand	Consumer Staples	NT	1,397	0.1
iMarketKorea	South Korea	Industrials	PS	898	0.0
Nigerian Breweries	Nigeria	Consumer Staples	NT	323	0.0
TOTAL INVESTMENTS				2,200,145	103.8
Net current liabilities(d)				(81,179)	(3.8)
TOTAL NET ASSETS				2,118,966	100.0

^(a)     The sectors reflect changes in the Global Industry Classification Standard ('GICS') as at 28 September 2018.

^(b)     Trading activity during the year: (NH) New Holding, (IH) Increased Holding, (PS) Partial Sale and (NT) No Trading.

^(c)     US listed American Depositary Receipt.

^(d)     The Company's net current liabilities per Balance Sheet on page 24 of the half-yearly report.

Portfolio Report (continued)

Portfolio Summary

As at 30 September 2018^(a)

All figures are in %

	Communication Services	Consumer Discretionary	Consumer Staples	Energy	Financials	Health Care	Industrials	Information Technology	Materials	Real Estate	Utilities	Total Equities	Net current liabilities(b)	30 September 2018 Total	31 March 2018 Total(a)
Argentina	-	-	-	-	0.1	-	-	-	-	-	-	0.1	-	0.1	0.2
Brazil	-	1.9	0.4	-	4.7	-	-	0.5	-	-	-	7.5	-	7.5	9.2
Cambodia	-	1.1	-	-	-	-	-	-	-	-	-	1.1	-	1.1	0.9
China/Hong Kong	5.6	10.1	1.1	3.3	4.0	-	0.3	-	-	-	-	24.4	-	24.6	22.0
Czech Republic	-	-	-	-	0.5	-	-	-	-	-	-	0.5	-	0.5	0.5
Hungary	-	-	-	-	-	0.9	-	-	-	-	-	0.9	-	0.9	0.9
India	-	0.2	-	0.5	3.0	1.0	-	0.7	0.5	-	-	5.9	-	5.9	5.1
Indonesia	-	1.7	-	-	1.6	-	-	-	-	-	-	3.3	-	3.3	3.8
Kenya	-	-	0.3	-	0.6	-	-	-	-	-	-	0.9	-	0.9	1.7
Mexico	-	0.4	-	-	2.3	-	-	-	0.1	-	-	2.8	-	2.8	2.2
Nigeria	-	0.0	-	-	-	-	-	-	-	-	-	0.0	-	0.0	0.0
Pakistan	-	-	-	-	1.0	-	-	-	-	-	-	1.0	-	1.0	1.2
Peru	-	-	-	-	0.4	-	-	-	3.1	-	-	3.5	-	3.5	3.5
Philippines	-	-	-	-	0.4	-	-	-	-	-	-	0.4	-	0.4	0.5
Russia	2.4	-	-	4.6	1.8	-	-	-	0.2	-	-	9.0	-	9.0	9.3
Saudi Arabia	-	-	-	-	-	-	-	-	0.6	-	-	0.6	-	0.6	0.5
South Africa	6.3	-	0.6	-	-	-	-	-	-	-	-	6.9	-	6.9	7.0
South Korea	1.7	0.9	0.3	0.5	-	-	2.0	8.3	1.2	-	-	14.9	-	14.7	15.3
Taiwan	-	0.4	-	-	0.6	-	-	10.5	-	-	-	11.5	-	11.5	10.1
Thailand	-	-	0.8	0.3	3.2	-	-	-	-	0.4	-	4.7	-	4.7	5.1
United Kingdom	-	-	3.0	-	-	-	-	-	-	-	-	3.0	-	3.0	3.2
United States	0.9	-	-	-	-	-	-	-	-	-	-	0.9	-	0.9	0.9
Net current liabilities	-	-	-	-	-	-	-	-	-	-	-	-	(3.8)	(3.8)	(3.1)
30 September 2018 Total	16.9	16.7	6.5	9.2	24.2	1.9	2.3	20.0	5.7	0.4	-	103.8	(3.8)	100.0	-
31 March 2018 Total(a)	16.7	17.5	7.3	8.0	23.0	1.7	2.9	19.2	6.0	0.6	0.2	103.1	(3.1)	-	100.0

^(a)     The sectors reflect changes in the Global Industry Classification Standard ('GICS') as at 28 September 2018. The 31 March 2018 figures have been reclassified according to these changes.

^(b)     The Company's net current liabilities per the Balance Sheet on page 24 of the half-yearly report.

Market Capitalisation Breakdown(a) (%)	Less than £1.5bn	£1.5bn to £5bn	Greater than £5bn	Net current liabilities(b)
30 September 2018	7.4	18.6	77.8	(3.8)
31 March 2018	8.0	15.4	79.7	(3.1)
Split Between Markets(c) (%)			30 September 2018	31 March 2018
Emerging Markets			97.8	96.2
Frontier Markets			2.1	2.8
Developed Markets(d)			3.9	4.1
Net current liabilities(b)			(3.8)	(3.1)

^(a)     A glossary of alternative performance measures is included on page 30 of the half-yearly report.

^(b)     The Company's net current liabilities per the Balance Sheet on page 24 of the half-yearly report.

^(c)     Geographic split between "Emerging Markets", "Frontier Markets" and "Developed Markets" are as per MSCI index classifications.

^(d)     Developed markets exposure represented by companies listed in the United Kingdom and United States.

Source: FactSet Research System, Inc.

Market Outlook

While investor sentiment and markets continued to be volatile after the reporting period, with further declines in October and into November, our view is that valuations reflect a more pessimistic scenario than we currently envisage for emerging markets over the medium-term. We remain positive on emerging markets, even as challenges in some countries dominate the headlines. The asset class is broad and diverse, comprising countries with differing economic drivers and levels of political risk. We believe that weaknesses in markets such as Turkey and Argentina are not likely to result in macroeconomic contagion, and we think that contagion fears should be seen in the perspective of the overall health of emerging markets.

Collectively, emerging markets show stable fundamentals. They are still widely expected to achieve faster economic growth than developed markets in the years ahead, extending a trend that has been evident for some time. Within emerging markets, new areas of growth are driving economies.

The much-vaunted demographics of emerging countries are at play too. Numerous companies are poised to benefit from increased market penetration as a young and growing middle class spends more on goods and services. Rising affluence should also continue to drive the "premiumisation" trend that is spurring demand for high-end products.

We still see many investment opportunities in Asia, including China. US trade tariffs on China have come at a challenging time, when its labour-cost advantage is fading, and it is embarking on the process of reducing debt. However, we believe reducing debt and supply-side reforms could help to ease structural risks. Meanwhile, China's shift towards innovation, technology and consumption as new drivers of growth supports more sustainable corporate earnings.

In the last decade, China has outgrown the United States to become a more important export market for most large emerging economies-not least due to its burgeoning consumer market-and, accordingly, trade growth now predominantly comes from rising demand from other emerging markets. Rising protectionism in the West may further pivot the focus towards regional agreements.

Latin America also offers interesting investment opportunities. We believe that Brazil's new president is likely to press on with reforms, and this should bolster the country's long-term prospects. Corporate earnings have also been resilient, as many companies underwent adjustments and reduced costs to weather the previous recession. In Mexico, if the new administration can deliver on its promises and preserve solid economic fundamentals, we could see healthy growth this year and in 2019.

Meanwhile, Russia remains home to companies that have fared well despite macroeconomic and geopolitical challenges. The country's energy producers are some of the largest in the world and enjoy cost advantages in an environment of robust oil prices. Rapid growth in e-commerce and other internet services has turned local internet firms into global leaders. We are also seeing signs of an increased focus on corporate governance in the country.

As value-oriented and long-term investors, we continue to seek companies that demonstrate sustainable earnings power and trade at a discount relative to their potential and to other investments available in the market. With our rigorous research and investment processes, we believe that TEMIT is well-positioned to benefit from the continued dynamism of emerging markets, notwithstanding the bouts of market volatility.

Chetan Sehgal

Lead Portfolio Manager

26 November 2018

Income Statement

For the six months to 30 September 2018

		For the six months to 30 September 2018 (unaudited)
			Note			Revenue £'000			Capital £'000			Total £'000
Gains/(losses) on investments and foreign exchange
Gains/(losses) on investments at fair value			6			-			(60,271	)		(60,271	)
Gains/(losses) on foreign exchange						-			(5,994	)		(5,994	)
Revenue
Dividends						43,136			-			43,136
Bank and deposit interest						157			-			157
						43,293			(66,265	)		(22,972	)
Expenses
AIFM fee						(3,133	)		(7,311	)		(10,444	)
Other expenses						(986	)		-			(986	)
						(4,119	)		(7,311	)		(11,430	)
Profit/(loss) before finance costs and taxation						39,174	)		(73,576	)		(34,402	)
Finance costs						(636	)		(1,488	)		(2,124	)
Profit/(loss) before taxation						38,538			(75,064	)		(36,526	)
Tax expense			5			(4,777	)		(507	)		(5,284	)
Profit/(loss) for the period						33,761			(75,571	)		(41,810	)
Profit/(loss) attributable to equity holders of the Company						33,761			(75,571	)		(41,810	)
Earnings per share			2			12.73	p		(28.50	)p		(15.77	)p
Ongoing charges ratio(a)												0.98	%

^(a) A glossary of alternative performance measures is included in Shareholder Information on page 30 of the half-yearly report.

Under the Company's Articles of Association the capital element of return is not distributable.

The total column of this statement represents the profit and loss account of the Company.

70% of the annual Alternative Investment Fund Manager ("AIFM") fee and 70% of the finance costs have been allocated to the capital account.

From 1 July 2018, the annual AIFM fee was reduced from 1% of net assets up to £2 billion and 0.85% of net assets above that level to 1% of net assets up to £1 billion and 0.85% above that level.

For the six months to 30 September 2017 (unaudited)									Year ended 31 March 2018 (audited)
Revenue £'000			Capital £'000			Total £'000			Revenue £'000			Capital £'000			Total £'000
-			210,139			210,139			-			213,924			213,924
-			6,646			6,646			-			10,220			10,220
40,680			-			40,680			60,319			-			60,319
40			-			40			168			-			168
40,720			216,785			257,505			60,487			224,144			284,631
(3,730	)		(8,702	)		(12,432	)		(7,049	)		(16,449	)		(23,498	)
(1,113	)		-			(1,113	)		(2,087	)		-			(2,087	)
(4,843	)		(8,702	)		(13,545	)		(9,136	)		(16,449	)		(25,585	)
35,877			208,083			243,960			51,351			207,695			259,046
(591	)		(1,380	)		(1,971	)		(1,161	)		(2,703	)		(3,864	)
35,286			206,703			241,989			50,190			204,992			255,182
(3,963	)		(596	)		(4,559	)		(6,047	)		(770	)		(6,817	)
31,323			206,107			237,430			44,143			204,222			248,365
31,323			206,107			237,430			44,143			204,222			248,365
11.19	p		73.67	p		84.86	p		15.90	p		73.56	p		89.46	p
						1.12	%								1.12	%

Balance Sheet

As at 30 September 2018

				As at			As at			As at
				30 September			30 September			31 March
				2018			2017			2018
				£'000			£'000			£'000
		Note		(unaudited)			(unaudited)			(audited)
Non-current assets
Investments at fair value through profit or loss		7			2,200,145			2,356,353			2,370,346
Current assets
Trade and other receivables					7,299			5,466			9,002
Cash and cash equivalents					41,213			99,165			67,843
Total current assets					48,512			104,631			76,845
Current liabilities
Bank loans					(124,769	)		(123,799	)		(144,690	)
Trade and other payables					(3,488	)		(2,741	)		(762	)
Capital gains tax provision					(1,434	)		(753	)		(927	)
Total current liabilities					(129,691	)		(127,293	)		(146,379	)
Net current liabilities					(81,179	)		(22,662	)		(69,534	)
Total assets less current liabilities					2,118,966			2,333,691			2,300,812
Share capital and reserves
Equity Share Capital					69,480			69,480			69,480
Capital Redemption Reserve					13,189			13,189			13,189
Capital Reserve					1,491,983			1,713,307			1,667,608
Special Distributable Reserve					433,546			433,546			433,546
Revenue Reserve					110,768			104,169			116,989
Equity Shareholders' Funds					2,118,966			2,333,691			2,300,812
Net Asset Value pence per share(a)					821.1			840.7			846.0

^(a)  Based on shares in issue excluding shares held in Treasury.

Statement of Changes in Equity

For the six months to 30 September 2018 (unaudited)

					Capital						Special
		Equity Share			Redemption			Capital			Distributable			Revenue
		Capital			Reserve			Reserve			Reserve			Reserve			Total
		£'000			£'000			£'000			£'000			£'000			£'000
Balance at 31 March 2017			70,406			12,263			1,535,899			433,546			95,983			2,148,097
Profit for the year			-			-			204,222			-			44,143			248,365
Equity dividends			-			-			-			-			(23,137	)		(23,137	)
Purchase and cancellation of own shares			(926	)		926			(26,198	)		-			-			(26,198	)
Purchase of shares into Treasury			-			-			(46,315	)		-			-			(46,315	)
Balance at 31 March 2018			69,480			13,189			1,667,608			433,546			116,989			2,300,812
Profit/(loss) for the period			-			-			(75,571	)		-			33,761			(41,810	)
Equity dividends			-			-			-			-			(39,982	)		(39,982	)
Purchase and cancellation of own shares			-			-			-			-			-			-
Purchase of shares into Treasury			-			-			(100,054	)		-			-			(100,054	)
Balance at 30 September 2018			69,480			13,189			1,491,983			433,546			110,768			2,118,966

Cash Flow Statement

For the six months to 30 September 2018

		For the			For the			For the
		six months to			six months to			year to
		30 September			30 September			31 March
		2018			2017			2018
		£'000			£'000			£'000
		(unaudited)			(unaudited)			(audited)
Cash flows from operating activities
Profit/(loss) before finance costs and taxation			(34,402	)		243,960			259,046
Adjustments for:
(Gains)/losses on investments at fair value			60,271			(210,139	)		(213,924	)
Realised (gains)/losses on foreign exchange			5,994			(6,646	)		(10,220	)
Stock dividends received in period			-			(74	)		(157	)
Increase/(decrease) in debtors			1,897			571			(2,737	)
(Increase)/decrease in creditors			1,694			382			(2,017	)
Cash generated from operations			35,454			28,054			29,991
Tax paid			(4,777	)		(4,296	)		(6,380	)
Net cash inflow from operating activities			30,677			23,758			23,611
Cash flows from investing activities
Purchases of non-current financial assets			(94,577	)		(221,207	)		(381,286	)
Sales of non-current financial assets			198,319			245,525			398,826
Net cash inflow from investing activities			103,742			24,318			17,540
Cash flows from financing activities
Purchase and cancellation of own shares			-			(26,644	)		(26,644	)
Repurchase of shares into treasury			(99,022	)		(2,491	)		(45,886	)
Equity dividends paid			(39,982	)		(23,137	)		(23,137	)
Movement in bank loans outstanding			(19,878	)		40,145			61,161
Bank loan interest and fees paid			(2,167	)		(2,049	)		(4,067	)
Net cash outflow from financing activities			(161,049	)		(14,176	)		(38,573	)
Net increase/(decrease) in cash			(26,630	)		33,900			2,578
Cash at the start of the period			67,843			65,265			65,265
Cash at the end of the year			41,213			99,165			67,843

Reconciliation of Liabilities Arising from Financing Activities

		Non-cash movements
		Liability												Liability
		as at												as at
		31 March						FX			Profit &			30 September
		2018			Cash flows			movement			Loss			2018
		£'000			£'000			£'000			£'000			£'000
Bank Loan			144,551			(25,963	)		6,085			-			124,673
Interest and fees			139			(2,167	)		-			2,124			96
Cash generated from operations			144,690			(28,130	)		6,085			2,124			124,769

Copies will be uploaded and available for viewing on the National Storage Mechanism, copies will also be posted to the website www.temit.co.uk and may also be requested during normal business hours from Client Dealer Services at Franklin Templeton Investment Management Limited on freephone 0800 305 306. A pdf version of the full Half Yearly Report to 30^th September 2018 will be available by accessing the following hyperlink http://www.temit.co.uk/content-common/semi-annual-report/en_GB/local-GB/TEMIT-semi-annual-report.pdf

Stephen Westwood (Investor Relations) + 44 (0) 7533 178 381, Client Dealer Services at Franklin Templeton International Services S.à r.l. on free phone [phone] or [phone] for overseas investors or Joe Winkley at Winterflood (Corporate Broker) on + 44 (0) 20 3100 0301.

 

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