Interim Management Statement

RNS Number : 5456X

Templeton Emerging Markets IT PLC

16 February 2012

 

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

Interim Management Statement

For the three months ended 31 December 2011

This interim management statement relates to the period 1 October 2011 to 31 December 2011 and is the Company's second interim management statement for the financial year ending 31 March 2012, as required by the UK Listing Authority's Disclosure and Transparency Rule 4.3.

OBJECTIVE

The Company's investment objective is to provide long term capital appreciation for its investors through investment in companies operating in emerging markets or whose stocks are listed on the stock markets of such countries.

FINANCIAL POSITION

	As at 31 Dec 2011 (unaudited)	As at 30 Sep 2011 (unaudited)
Total assets (Cum-income)	£1,926.0m	£1,815.3m
Total assets (Ex-income)	£1,902.4m	£1,794.0m
Net asset value (Cum-income)	584.0p	550.4p
Net asset value (Ex-income)	576.8p	544.0p
Share price	549.8p	516.0p
Discount (Cum-income)	5.9%	6.2%
Discount (Ex-income)	4.7%	5.1%

Share price is at the UK market closing mid price.

Net asset value is at closing bid prices. Assets are priced at local close or adjusted for fair value at US market close.

Further information can be found at www.temit.co.uk.

FINANCIAL PERFORMANCE

Performance to 31 December 2011 Share price Net asset value MSCI Emerging Market Index

3 Months % +6.5 +6.1 +4.7

1 Year % -17.8 -17.3 -17.6

3 Years* % +27.8 +25.9 +17.4

5 Years* % +13.5 +12.2 +7.6

10 Years* % +19.2 +17.5 +13.5

Share price Net asset value MSCI Emerging Market Index

Year to 31 Dec 2011 % -17.8 -17.3 -17.6

Year to 31 Dec 2010 % +29.4 +28.2 +22.9

Year to 31 Dec 2009 % +96.0 +88.1 +59.4

Year to 31 Dec 2008 % -40.6 -42.9 -35.2

Year to 31 Dec 2007 % +51.8 +55.8 +37.4

* Annualised rate of return

All figures are calculated in Sterling on a total return basis i.e. with net dividends reinvested

Source: Franklin Templeton Investments / Copyright - © 2011 Morningstar, Inc.  All rights reserved.

           MARKET VOLATILITY AND OUTLOOK

Market Volatility

Emerging markets experienced some volatility in the final three months of 2011. Strong corporate earnings, optimism surrounding the European Union summit towards the end of the month and the release of positive U.S. economic data led investors to return to the equity market in October. However, slow progress by European leaders to resolve the Eurozone debt crisis led markets to decline in following months. A subsequent reduction in the Reserve Requirement Ratio by the People's Bank of China, as well as a coordinated effort by the Federal Reserve and several European Central Banks to lower the cost of US dollar funding led markets to rebound, allowing them to end the quarter with positive returns. While growth in some emerging economies eased in 2011, most continued to record relatively strong GDP growth. Between 30 September 2011 and 31 December 2011, the net asset value of the Company increased by 6.1% to 584.0 pence. The Investment Manager (Templeton Asset Management Limited/ the "Manager" ) continues to see emerging markets benefiting from relatively good growth prospects, attractive valuations and solid fundamentals and will continue to monitor the markets for favourable investment opportunities.

Brilliance China returned 38% in Sterling terms in the final quarter of 2011, significantly outperforming the wider MSCI Emerging Markets index which returned 4.7%.. The company continues to benefit from higher living standards and disposable incomes in China which has resulted in greater demand for luxury cars by Chinese consumers. As the only listed luxury car manufacturer in China, Brilliance China has strong growth potential. As a result of Brilliant China's share price appreciation alone, the company's portfolio weighting increased from 7.9% at the end of September 2011 to 10.4% at the end of December 2011. Post the period under review, TEMIT has trimmed some of its holdings in February to lock in gains.

Outlook

Taking a long-term view, the Manager remains bullish on emerging market equities. Emerging market economies continue to grow much faster than those of developed economies and this should, over time, be reflected in the earnings of emerging market companies as well as the prices of those companies. The Manager believes that, as a result of considerable reform in European countries, such as cuts in government spending and measures taken to stimulate business by lowering taxes and reducing bureaucratic burdens, the situation in Europe will improve and become clearer. Developed markets are now realising that one way to stimulate growth is to allow business and private enterprise to grow, particularly small and medium size businesses. Although the move to these policies will probably take some time, he already sees the signs of potential change.

Of course, there will be periods of over and under performance in the movement of markets, but it is the Manager's expectation that, over the longer term, emerging markets should outperform developed countries. In fact, emerging markets have outperformed developed markets in eight of the last ten years. He is of the belief that there is no reason to think that this trend cannot continue in the future and remains positive on both our key investment themes and in taking a long term view of fundamental value in the companies in which the Company invests, using a disciplined and diligent stock selection approach.

MATERIAL EVENTS AND TRANSACTIONS

There are no material events to report from the period 1 October 2011 to the date of this statement.

SHARE BUY BACKS

There were no share buy backs during the three month period to 31 December 2011.

INVESTMENT PORTFOLIO UPDATES AND OTHER COMPANY NEWS

The Company has continued its efforts to keep shareholders informed about their investments in TEMIT.  The Investment Manager held its quarterly portfolio web conference on 27 October 2011. Recordings and written transcripts of these calls are available from the Company's website - www.temit.co.uk.

Stock exchange announcements, quarterly Manager's reports, factsheets and Investment Manager's commentaries are sent to subscribers to the email service on the Company website.  The website is also updated daily with the latest prices and Company news.

The half-year results for the six months to 30 September 2011 were released on 25 November 2011 and the quarterly portfolio insight report for the three months to 30 September 2011 was released on 17 November 2011. 

The quarterly portfolio insight report for the three months to 31 December 2011 was released on 25 January 2012. The Investment Manager held its latest quarterly portfolio web conference on 30 January 2012. Recordings and written transcripts will be available shortly.

In November 2011 TEMIT won the Investment Week award for Best Emerging Markets Investment Trust for the fourth consecutive year. In addition, TEMIT also won the Moneywise Investment Trust award for Best Emerging Markets Investment Trust for the fourth consecutive year.

 PORTFOLIO CHANGES

The Investment Manager reports the following principal changes in the portfolio:

Purchases (total value £27.0m)

Gazprom (Existing holding)

Gazprom is the largest producer of gas in the world by reserves and production. TEMIT increased its exposure to the company because of its attractive valuations, huge reserve base and growing energy demand in emerging markets.

Impala Platinum holdings Ltd (Existing holding)

Impala Platinum is one of the leading platinum producers in the world and is responsible for approximately a quarter of the global platinum production. As one of the most efficient and lowest cost producers in the world, it is also well positioned to benefit from the longer-term up trend in commodity prices.

MCB Bank Ltd (Existing holding)

MCB is the fourth largest bank in Pakistan. TEMIT increased its exposure to the bank because of its attractive valuation and relatively high return on equity.

Peninsula Land Ltd (Existing holding)

Peninsula Land is an Indian real estate developer based in the major city of Mumbai. The company's developments are expected to be strong beneficiaries given the scarce supply of commercial space in the Central and Southern Mumbai business districts.

Sales

There were no sales from the portfolio during the three month period to 31 December 2011.

Geographic Allocation

	% of net assets as at 31 Dec 2011	% of net assets as at 30 Sep 2011
LATIN AMERICA
Brazil	17.9	17.2
Mexico	2.3	2.0
ASIA
Hong Kong/China	26.6	24.0
Thailand	11.9	11.3
Indonesia	10.2	10.3
India	9.3	10.7
South Korea	3.8	3.9
Pakistan	1.5	2.0
Taiwan	0.3	0.3
EUROPE
Turkey	5.3	6.3
Russia	4.4	4.6
Poland	1.2	1.4
Hungary	0.9	1.0
Austria	0.8	0.8
AFRICA
South Africa	2.9	2.5
TEMIT's other current assets	0.7	1.7
	100.0	100.0

Sector Allocation

	% of net assets as at 31 Dec 2011	% of net assets as at 30 Sep 2011
Financials	26.8	27.9
Energy	22.7	21.9
Consumer Discretionary	18.1	15.5
Materials	15.1	16.9
Information Technology	8.1	8.0
Consumer Staples	6.6	6.2
Industrials	1.9	1.9
TEMIT's other current assets	0.7	1.7
	100.0	100.0

Top Ten Holdings

Country	Security	Sector	% of net assets as at  31 Dec 2011	% of net assets as at  30 Sep 2011
Hong Kong / China	Brilliance China Automotive Holdings Ltd.	Consumer Discretionary	10.4	7.9
Brazil	Itau Unibanco Holding SA, ADR	Financials	5.3	4.7
Indonesia	PT Astra International Tbk	Consumer Discretionary	5.2	4.8
Brazil	Vale SA, ADR, pfd., A	Materials	5.1	5.4
Brazil	Banco Bradesco SA, ADR, pfd	Financials	4.9	4.6
India	Tata Consultancy Services Ltd.	Information Technology	4.4	4.4
Hong Kong / China	Dairy Farm International Holdings Ltd.	Consumer Staples	4.0	3.8
Hong Kong / China	Petro China Co. Ltd	Energy	3.3	3.3
Turkey	Akbank T.A.S	Financials	3.2	4.1
Thailand	Siam Commercial Bank PCL, fgn.	Financials	3.1	3.0

The securities used to calculate the above NAV and industry percentages have been valued on a bid basis. The valuation of the assets is as at each local market close or, where appropriate, adjusted for changes in the fair value of these assets at US close.

This Interim Management Statement has been produced solely to provide additional information to shareholders of the Company to meet the relevant requirements of the UK Listing Authority's Disclosure and Transparency Rules. It should not be relied upon by any other party or for any other purposes. In addition, the views, information and data in this publication should not be deemed as a financial promotion or recommendation.

Other than described above, the Board is not aware of any events during the period from 1 October 2011 to the date of this statement which would have had a material impact on the financial position of the Company.

Issued on behalf of the Board
Sara A MacIntosh
for and behalf of Franklin Templeton Investment Management Limited
Secretary

Date: 16^th February 2012

End of interim management statement

For further information please contact Client Dealer Services at Franklin Templeton Investment Management Limited on UK freephone 0800 305 306 or [phone] for overseas investors.

 

END

 

 

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