Interim Results

Templeton Emerging Markets IT PLC 12 December 2005 PRELIMINARY ANNOUNCEMENT TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC ("TEMIT") ("the Company") Interim Results for the six months to 31 October 2005 The Company today announced its interim results for the period to 31 October 2005. Chairman's Statement I am pleased to report strong performance by the Company over the period. Net asset value per share at period-end was 257.25 pence, an increase of 29.3% for the six months. The share price at 31 October 2005 was 226.00 pence, compared with 167.25 pence at the beginning of the financial year, an increase of 35.1%. Over the same period, the MSCI Emerging Markets Index and the S&P/IFC Investable Composite Index both increased 27.3%. Since inception, the net asset value of the Company has risen by 700.5% in sterling terms compared with a rise of 391.9% for the MSCI Emerging Markets Index and 377.3% for the S&P/IFC Investable Composite Index. The Manager's Report and Portfolio Review give a detailed analysis of the Company's performance over the period. The portfolio is managed using the value style of investing. This requires a detailed research of stocks, and the Manager purchases only those trading at less than their assessed value. At period-end, 99.9% of the Company's total assets were invested in equities, with the remaining 0.1% being held in liquid assets. The general policy of the Board is to be fully invested. At 31 October 2005, your Company had total assets of £1,378.83 million, compared with £1,065.96 million at 30 April 2005. Comparative figures for the six months to 31 October 2004 and the year ended 30 April 2005 have been restated to be in accordance with International Financial Reporting Standards (''IFRS''). Whilst the Company is not technically required to adopt IFRS, the Board felt as a leading Trust in its sector and one of the largest in the UK, it would lead the way by fully adopting IFRS now. An ordinary dividend of 2.67 pence per Ordinary Share was declared for the year ended 30 April 2005, resulting in a total dividend of £14.31 million. This was paid on 3 October 2005. Sir Ronald Hampel 12 December 2005 Indices above are shown on a total return basis in GBP. Sources: Franklin Templeton Investments and Standard & Poor's Micropal. INCOME STATEMENT For the six months to 31 October 2005 (unaudited) Revenue Capital Total Note £000 £000 £000 Gains/(losses) on investments and exchange Gains on investments at fair a - 316,407 316,407 value Losses on foreign exchange a - (212) (212) Revenue Dividends 24,581 - 24,581 Bank interest 419 - 419 ------------------------------------------- 25,000 316,195 341,195 ------------------------------------------- Expenses Investment management fee (6,625) - (6,625) Other expenses (2,780) - (2,780) ------------------------------------------- Profit before taxation 15,595 316,195 331,790 Tax expense (4,603) - (4,603) ------------------------------------------- Profit for the period 10,992 316,195 327,187 ------------------------------------------- Profit attributable to equity holders of the 10,992 316,195 327,187 Company ------------------------------------------- Basic Earnings per Ordinary Share 61.04p Diluted Earnings per Ordinary b N/A Share Annualised Expense Ratio 1.43% Notes: a. These figures have been restated for the six months to 31 October 2004 and the year to 30 April 2005 following the adoption of International Financial Reporting Standards ("IFRS"). b. Final warrant exercise took place on 30 September 2004, resulting in the Diluted Earnings per Ordinary Share no longer being applicable. The capital element of returns is not distributable. The total column is the Income Statement of the Company. All revenue and capital items in the above statement derive from continuing operations. Dividend Policy In accordance with the Company's stated policy, no interim dividend is declared for the period. (A dividend of 2.67 pence per Ordinary Share was paid for the year ended 30 April 2005) INCOME STATEMENT (CONTINUED) For the six months to Year to 31 October 2004 (unaudited and restated) 30 April 2005 (audited and restated) Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 - 75,658 75,658 - 168,968 168,968 - (212) (212) - (512) (512) 13,748 - 13,748 36,015 - 36,015 556 - 556 1,200 - 1,200 ---------- --------------- ---------- --------- -------------- ----------- 14,304 75,446 89,750 37,215 168,456 205,671 -------- -------- -------- -------- --------- --------- (3,959) - (3,959) (9,487) - (9,487) (2,072) - (2,072) (4,863) - (4,863) --------- -------------- --------- --------- -------------- --------- 8,273 75,446 83,719 22,865 168,456 191,321 (2,996) - (2,996) (5,718) - (5,718) --------- ------------- --------- --------- --------------- ---------- 5,277 75,446 80,723 17,147 168,456 185,603 --------- -------- -------- -------- --------- --------- 5,277 75,446 80,723 17,147 168,456 185,603 --------- -------- -------- -------- --------- --------- 17.22p 36.97p 17.16p N/A 1.51% 1.50% BALANCE SHEET As at As at As at 31 October 31 October 30 April 2005 2004 2005 £000 £000 £000 (unaudited) (unaudited and (audited and Note restated) restated) Assets Non-current assets Investments a 1,376,779 905,606 1,038,882 ----------- --------- ----------- Current assets Trade and other receivables 2,970 5,450 8,985 Cash 8,494 56,658 24,294 ---------- -------- -------- 11,464 62,108 33,279 Liabilities Current Liabilities Trade and other payables a (4,473) (3,778) (2,862) Current tax payable (4,573) (2,726) (1,371) ---------- -------- -------- (9,046) (6,504) (4,233) Non-current liabilities Deferred tax liabilities (364) (132) (1,971) ---------- -------- -------- Net assets 1,378,833 961,078 1,065,957 ---------- -------- -------- Issued share capital and reserves attributable to equity shareholders Called-up Share Capital 133,995 133,995 133,995 Share Premium Account 375,327 375,327 375,327 Capital Redemption Reserve 6,893 6,893 6,893 Capital Reserves Realised a 192,842 162,783 183,656 Capital Reserves Unrealised a 635,106 255,961 328,097 Revenue Reserves a 34,670 26,119 37,989 ---------- -------- -------- Shareholders' funds 1,378,833 961,078 1,065,957 ---------- -------- -------- Net Asset Value per Ordinary Share (in pence) - Basic a 257.25 179.31 198.88 a. These figures have been restated at 31 October 2004 and at 30 April 2005 following the adoption of International Financial Reporting Standards ("IFRS"). STATEMENT OF CHANGES IN EQUITY (UNAUDITED) Capital Capital Capital Share Share Redemption Reserve - Reserve - Revenue Capital Premium Reserve Realised Unrealised Reserve Total Note £000 £000 £000 £000 £000 £000 £000 Balance at 1 May 2004 a 113,806 275,351 3,940 197,761 166,757 20,842 778,457 Effect of changes in accounting policy arising from the introduction of International Financial Reporting Standards Equity Dividend b - - - - - 10,242 10,242 Bid valuation adjustment c - - - - (3,947) - (3,947) Transaction Costs d - - - (2,039) 2,039 - - ----------- ------------- ----------- --------- ----------- ----------- ------------ Balance at 1 May 2004 e 113,806 275,351 3,940 195,722 164,849 31,084 784,752 ----------- ------------- ----------- --------- ----------- ----------- ------------ Profit for the period - - - - - 80,723 80,723 Equity Dividends - - - - - (10,242) (10,242) Issue of shares on warrants exercised 23,142 99,976 - - - - 123,118 Purchase of shares for cancellation (2,953) - - (14,320) - - (17,273) Transfer to capital redemption reserve - - 2,953 (2,953) - - - Transfer to capital reserves - - - (15,666) 91,112 (75,446) - ----------- ------------- ----------- --------- ----------- ----------- ------------ Balance at 31 October 2004 e 133,995 375,327 6,893 162,783 255,961 26,119 961,078 ----------- ------------- ----------- --------- ----------- ----------- ------------ Profit for the period - - - - - 104,879 104,879 Transfer to capital reserves - - - 20,873 72,136 (93,009) - ----------- ------------- ----------- --------- ----------- ----------- ------------ Balance at 30 April 2005 e 133,995 375,327 6,893 183,656 328,097 37,989 1,065,957 ----------- ------------- ----------- --------- ----------- ----------- ------------ Profit for the period - - - - - 327,187 327,187 Equity dividends f - - - - - (14,311) (14,311) Transfer to capital reserves - - - 9,186 307,009 (316,195) - ----------- ------------- ----------- --------- ----------- ----------- ------------ Balance at 31 October 2005 133,995 375,327 6,893 192,842 635,106 34,670 1,378,833 ----------- ------------- ----------- --------- ----------- ----------- ------------ (a) As previously reported. (b) Equity dividend adjustment is due to the change whereby only dividends paid during the year are reflected in the financial statements. Previously, proposed dividends were shown as a creditor in the financial statements. The 2004 dividend is therefore added back and subsequently reflected in the year ended 30 April 2005 results. (c) All investments are now valued on a bid basis. Previously they were valued on a mid market basis. (d) Previously transaction costs were included within cost of security when purchased. They are now treated as a capital expense. This results in a movement between realised and unrealised capital reserves. (e) Restated for IFRS. (f) The Equity dividend in respect of the year ended 30 April 2005 was paid on 3 October 2005. CASH FLOW STATEMENT For the six For the six For the year months to months to ended 30 April 31 October 2005 31 October 2004 2005 £000 £000 £000 (unaudited) (unaudited (audited and restated) and restated) Cash flows from operating activities Profit before taxation 331,790 83,719 191,321 Adjustments for: Gains on investments at fair (316,407) (75,658) (168,968) value Realised loss on foreign 212 212 512 exchange Decrease/(increase) in debtors 135 (408) (526) Decrease/(increase) in accrued income 5,789 5,011 (2,512) Increase/(decrease) in 1,004 (73) 1,443 creditors ----------- ------------ ------------ Cash generated from operations 22,523 12,803 21,270 Taxation paid (2,847) (3,706) (5,777) ---------- --------- ----------- Net cash inflow from operating activities 19,676 9,097 15,493 ---------- --------- ---------- Cash flows from investing activities Purchase of non-current financial (64,268) (171,839) (273,417) assets Net proceeds from the sale of non-current financial assets 43,103 105,929 168,638 ------------ -------------- -------------- ( 21,165) (65,910) (104,779) ------------ -------------- ------------- Cash flows from financing activities Equity dividend paid (14,311) (10,242) (10,242) Proceeds of issue of shares - 122,985 123,118 Purchase of shares for - (17,249) (17,273) cancellation ----------------- ------------ ------------ (14,311) 95,494 95,603 ----------- ------------ ------------ Net (decrease)/increase in (15,800) 38,681 6,317 cash Cash at start of period 24,294 17,977 17,977 ---------- -------- -------- Cash at end of period 8,494 56,658 24,294 ---------- -------- -------- The figures and financial information for the year ended 30 April 2005 have been based upon the latest published financial statements restated for International Financial Reporting Standards ("IFRS"), and do not constitute statutory financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included a report of the auditors which was unqualified and did not contain a statement under section 237(2) and 237(3) of the Companies Act 1985. The interim report has not been audited by the Company's auditors. The interim report has been prepared using accounting policies, following adoption of IFRS. The figures for the year to 30 April 2005 and the six months to 31 October 2004 have been restated to reflect the adoption of IFRS. ACCOUNTING POLICIES (a) Basis of preparation The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (''IFRS'') and where appropriate International Accounting Standards (''IAS''), which comprise standards and interpretations approved by the International Accounting Standards Board (''IASB''), and International Accounting Standards and Steering Committee (''IASC'') that remain in effect, and to the extent that they have been adopted by the European Union. The disclosures required by IFRS 1 ''First-time Adoption of International Financial Reporting Standards'' (''IFRS 1'') concerning the transition from UK GAAP to IFRS are given in the "Reconciliation of UK GAAP to IFRS". The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice (''SORP'') for investment trusts issued by the Association of Investment Trusts (''AITC'') in January 2003 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. All financial assets and financial liabilities are recognised (or de-recognised) on the date of the transaction by the use of ''trade date accounting''. The Net Asset Value (''NAV'') prepared under IFRS produces different results than those shown for the trading NAV, which is released on a monthly basis to the market. The differences between the two NAVs are due to: - Investments under IFRS are valued on a bid basis, not mid basis as used for the trading NAV. Security prices are quoted on a bid and offer basis. Under the previous accounting policy TEMIT valued investments on a mid market basis. - The current year's proposed dividend is not recognised in the current year's financial statements under IFRS. The dividend that was paid in the current year to shareholders is recognised in the Statement of Changes in Equity. The interim financial statements have been prepared in full compliance with IAS (''International Accounting Standard'') 34 ''Interim Financial Reporting''. (b) Revenue Dividends on equity investments are credited to the revenue section of the Income Statement when they are quoted ex-dividend or as soon as entitlement has been established, if later. Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the amount of the cash dividend is recognised in the income section of the Income Statement. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital section of the Income Statement. Interest receivable on bank deposits is recognised on an accruals basis. (c) Expenses Transaction costs arising on the purchase of investments are included in the capital section of the Income Statement. They are also included in the transfer to ''Capital Reserve - Realised'', in the Statement of Changes in Equity. All other operating expenses are accounted for on an accruals basis and are charged through the revenue section of the Income Statement. Expenses relating to the disposal of an investment, are deducted from the sales proceeds. (d) Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Balance Sheet date. In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Income Statement is the ''marginal basis''. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Income Statement, then no tax relief is transferred to the capital return column. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the Balance Sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Investment Trusts which have approval under Section 842 Income and Corporation Taxes Act 1988 are currently not liable for taxation on capital gains. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period where the liability is settled or the asset is realised. Deferred tax is charged or credited in the Income Statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. (e) Non-current asset investments All of the Company's non-current asset investments are designated on initial recognition as being ''at fair value through profit or loss''. They are included initially at fair value, which is taken to be their cost (excluding expenses incidental to the acquisition which are written off in the capital section of the Income Statement at the time of acquisition). Subsequently, the investments are valued at ''fair value'', which is measured as follows: (i) Securities which are listed on a stock exchange or traded on any other organised market are valued at the last bid price on such exchange or market which is normally the principal market for each security, and those securities dealt in on an over-the-counter market are valued in a manner as near as possible to that for quoted securities. (ii) Unquoted investments where there is not an active market are valued using an appropriate valuation technique so as to establish what the transaction price would have been at the balance sheet date. Gains and losses on non-current asset investments are included in the Income Statement as capital. (f) Foreign currencies Transactions involving foreign currencies are translated to Sterling (the Company's functional currency) at the spot exchange rate ruling on the date of the transaction. Assets and liabilities in foreign currencies are translated at the rate of exchange at the balance sheet date. Foreign currency gains and losses are included in the Income Statement and allocated as capital or income dependent on the nature of the transaction giving rise to the gain or loss. Foreign currency gains and losses allocated as capital are included in the transfer to ''Capital Reserve - Realised'' or ''Capital Reserve - Unrealised'' (as appropriate) in the Statement of Changes in Equity. (g) Cash Cash comprises cash at bank and in hand. (h) Reserves Share Premium Account - represents the amount paid on the share capital in excess of the shares' nominal value. Capital Redemption Reserve - represents the nominal value of shares repurchased. Capital Reserves - the Company's Articles of Association preclude it from making any distribution of capital profits. Income recognised in the Income Statement is allocated to applicable reserves in the Statement of Changes in Equity. Revenue Reserve - represents net revenue income earned during the period that has not been distributed to shareholders remains in Revenue Reserves. (i) Earnings per share For the six months For the six months For the year ended to 31 October 2005 to 31 October 2004 30 April 2005 (unaudited) (unaudited and restated) (unaudited and restated) Revenue Capital Total Revenue Capital Total Revenue Capital Total Profit attributable to equity holders of Company (£000) 10,992 316,195 327,187 5,277 75,446 80,723 17,147 168,456 185,603 Basic earnings per ordinary share (p) 2.05 58.99 61.04 1.13 16.09 17.22 3.42 33.55 36.97 Diluted earnings per Ordinary share (p)* N/A N/A N/A 1.12 16.04 17.16 N/A N/A N/A ----- ----- ----- ------ ------- ------- ----- ----- ----- *Final warrant exercise took place on 30 September 2004, resulting in the Diluted Earnings per Ordinary Share no longer being applicable. RECONCILIATION OF IFRS TO UK GAAP (a) Income Statement Following the adoption of IFRS the gains/(losses) on investments have been restated for the comparative periods as follows:- For the six months to Year to 31 October 30 April 2004 2005 £000 £000 Gains/(losses) on investments at fair value As originally stated 76,265 169,027 Losses on foreign exchange now disclosed separately 212 512 Bid valuation adjustment (819) (571) --------- ----------- Restated under IFRS 75,658 168,968 -------- ----------- Gains/(losses) on foreign exchange Under International Accounting Standards ("IAS") 1, "Presentation of Financial Statements", gains/(losses) on foreign exchange are disclosed separately from gains/(losses) on investments at fair value. Dividend in respect of equity shares Dividends paid during the year are reflected in the Statement of Changes in Equity. In previous years, proposed dividends were shown in the Statement of Total Return and shown as a creditor in the Balance Sheet until paid. In restating the comparative periods following the adoption of IAS 10, "Events after the balance sheet date", the following adjustments were made to the retained returns for the periods: Six months to Year to 31 October 30 April 2004 2005 £000 £000 Retained return for the period under UK GAAP 81,542 171,863 Effect of transition to IFRS Dividends proposed no longer recognised in the financial statements - 14,311 Revaluation of securities from mid to bid basis (819) (571) --------- ------------ Total return for the period under IFRS 80,723 185,603 -------- --------- Earnings per share In restating the comparative periods following the adoption of IFRS, the adjustments had the following impact on earnings per share: Six months to Year to 31 October 30 April 2004 2005 p p Earnings per share UK GAAP 17.40 37.09 Effect of transition to IFRS Revaluation of securities from mid to bid basis (0.18) (0.12) -------- -------- Earnings per share under IFRS 17.22 36.97 ------- ------- RECONCILIATION OF IFRS TO UK GAAP (CONTINUED) (b) Balance Sheet In restating the comparative periods following the application of IFRS, the following adjustments were made: As at As at 31 October 30 April 2004 2005 £000 £000 Investments Original Balance 910,372 1,043,400 Bid valuation adjustment (4,766) (4,518) ---------- ------------- Restated balance under IFRS 905,606 1,038,882 --------- ----------- Trade and other payables Balance per prior published financial statements (6,504) (18,544) Dividend proposed (to be recognised once paid to shareholders) - 14,311 Current tax payable now shown separately 2,726 1,371 --------- --------- Restated balance under IFRS (3,778) (2,862) --------- --------- Capital Reserves - Realised Balance per prior published financial statements 164,958 186,280 Transaction costs of investment purchases previously capitalised within investments are now treated as realised capital (2,175) (2,624) expenses ---------- ---------- Restated balance under IFRS 162,783 183,656 --------- --------- Capital Reserves - Unrealised Balance per prior published financial statements 258,552 329,991 Adjustment to unrealised reserves for transaction costs now 2,175 2,624 treated as realised Bid valuation adjustment (4,766) (4,518) --------- --------- Restated balance under IFRS 255,961 328,097 --------- --------- Revenue Reserves Balance per prior published financial statements 26,119 23,678 Dividend proposed (now not recognised until paid) - 14,311 ------------- -------- Restated balance under IFRS 26,119 37,989 -------- -------- p p Net Asset Value per Ordinary Share Net Asset Value per prior published financial 180.20 197.05 statements Dividend proposed (to be recognised once paid to shareholders) - 2.67 Bid valuation adjustment (0.89) (0.84) --------- --------- Restated Net Asset Value under IFRS 179.31 198.88 -------- -------- GEOGRAPHIC ASSET ALLOCATION AS AT 31 OCTOBER 2005 AS AT 30 APRIL 2005 (restated) + COUNTRY % COUNTRY % Korea (South) 18.31 Korea (South) 17.82 Brazil 17.35 Brazil 12.87 China 15.45 China 14.55 Turkey 7.81 Turkey 6.67 Thailand 6.80 Thailand 7.82 Hungary 5.52 Hungary 5.40 South Africa 5.11 South Africa 5.58 Taiwan 4.15 Taiwan 5.82 Poland 3.16 Poland 2.97 India 2.54 India 3.03 Austria 2.15 Austria 1.47 Mexico 1.84 Mexico 1.79 Russia 1.53 Russia 0.46 Croatia 1.26 Croatia 1.17 Greece 1.23 Greece 1.46 Malaysia 1.15 Malaysia 0.83 Egypt 1.10 Egypt 1.10 Philippines 0.82 Philippines 0.93 Singapore 0.73 Singapore 3.70 Czech Republic 0.63 Czech Republic 0.73 United Kingdom 0.53 United Kingdom 0.54 Indonesia 0.28 Indonesia 0.40 Peru 0.22 Peru 0.17 Sweden 0.18 Sweden 0.18 Liquid Assets 0.15 Liquid Assets 2.54 +These percentages have been restated following the application of International Financial Reporting Standards ("IFRS") which resulted in a change to the assets per the Balance Sheet. TOP TWENTY HOLDINGS As at 31 October 2005 Market Value Company Country Industry £000 Hyundai Development Co. Korea (South) Construction & Engineering 76,173 Banco Bradesco SA, ADR, pfd. Brazil Commercial Banks 63,141 Unibanco Uniao de Bancos Brasileiros SA, GDR Brazil Commercial Banks 56,087 Akbank TAS Turkey Commercial Banks 54,405 PetroChina Co., Ltd., H China Oil & Gas 45,782 Polski Koncern Naftowy Orlen SA Poland Oil & Gas 43,552 SK Corp. Korea (South) Oil & Gas 40,618 Gedeon Richter Ltd. Hungary Pharmaceuticals 39,604 Tupras-Turkiye Petrol Rafineleri AS Turkey Oil & Gas 36,698 MOL Magyar Olaj-es Gazipari Rt. Hungary Oil & Gas 35,407 China Petroleum & Chemical Corp., H China Oil & Gas 34,184 Dairy Farm International Holdings Ltd. Singapore Food & Staples Retailing 33,834 Companhia Paranaense de Energia-Copel, ADR, pfd. Brazil Electric Utilities 31,467 OMV AG Austria Oil & Gas 29,623 Centrais Eletricas Brasileiras SA Brazil Electric Utilities 27,603 Siam Commercial Bank Public Co., Ltd., fgn. Thailand Commercial Banks 23,330 China Merchants Holdings (International) Co., Ltd. China Transportation Infrastructure 21,560 Kangwon Land Inc. Korea (South) Hotels, Restaurants & Leisure 21,408 Nedbank Group Ltd. South Africa Commercial Banks 19,676 Petroleo Brasileiro SA, ADR, pfd. Brazil Oil & Gas 18,132 --------- Top 20 Holdings - 54.56% of Net Assets 752,284 --------- INVESTMENT REVIEW This is the semi-annual report for the Templeton Emerging Markets Investment Trust PLC covering the six-month period ended 31 October 2005. Overview Emerging markets recorded strong performances for most of the six-month period as good economic fundamentals combined with attractive stock valuations and greater investor confidence propelled stock prices. However, concerns over the bird flu virus and further interest rates hikes in the US led most markets to correct in October. A healthy correction after a good run, the MSCI Emerging Markets index still ended the reporting period up 27.3% in sterling terms. Eastern European and Latin American markets outperformed their emerging market peers as both regions continued to attract greater foreign investment inflows. Asian markets lagged in performance as concerns about high oil prices and their impact on their economies surfaced. Almost all of Asia's major economies are net oil importers. Interest rate increases in the region also dampened investor activity. Portfolio Changes and Investment Strategies In Asia, the Company increased its exposure to Malaysia, China and Thailand. Key investments included Maxis Communications, Malaysia's principal telecommunications service provider, Brilliance China, which has a joint venture with BMW for the production and sales of BMW 3-series and 5-series cars in China, and Land & Houses, a leading property developer in Thailand. Elsewhere in the region, the Company repositioned its holdings in South Korea to ensure that the portfolio benefits from Korea's economic recovery. This resulted in the purchase of LG Card and LG Corporation and the sale of POSCO and LG Household and Healthcare. The Company also undertook selective sales in Taiwan, Singapore and India as sale targets were reached. European additions were largely made in Russia, UK and Hungary. Purchases included Mobile Telesystems, a dominant wireless telecommunications services provider in Russia, Provident Financial, a London-listed consumer finance company with exposure to Central & Eastern European markets as well as Latin America, and Borsodchem Rt., a leading European producer of both commodity and specialty chemicals. Few investments were made in Latin America with the largest purchase made in Brazil's Vale Do Rio Doce. The company is one of the world's largest producers of iron ore and pellets. Asia China's economy grew 9.4% in the third quarter, in line with the 9.5% recorded in the second quarter as cooling efforts in overheated sectors, such as property and steel, did not hinder economic growth. In July, China replaced the Yuan's peg to the United States Dollar with a basket of currencies. Thus far the Yuan has seen an approximately 2% appreciation against the United States Dollar. While export growth remained robust, September's 26% increase was lower than the 32% year-on-year growth in August. This coupled with strong imports led the trade surplus to fall to USD7.6 billion in September, the smallest since April 2005. Inflation remained under control with the Consumer Price Index (''CPI'') rising 0.9% year-on-year in September, compared to a 1.3% increase in August. In South Korea, third quarter real GDP rose 4.4%, higher than the 3.3% and 2.7% growth in the second and first quarters, respectively. Key drivers included stronger private consumption and exports. The Bank of Korea expects the economy to grow 3.8% in 2005. In a precautionary measure against rising inflation, the central bank raised interest rates by 25 basis points for the first time in more than three years. September's CPI increased 2.7% year-on-year in September, compared to 2.0% in August. Fitch Ratings upgraded South Korea's sovereign rating by one level to A+ from A mainly due to North Korea's decision to abandon its nuclear weapons programme. Latin America Economic growth in Brazil accelerated in the second quarter driven by the industrial and especially mining sector which benefited from high global commodity prices. GDP grew 3.9% year-on-year, bringing growth for the first half of the year to 3.4%. The trade sector in Brazil continued to record strong growth with the country recording a trade surplus of USD4.3 billion in September. This brought the 12-month surplus to USD41.3 billion as export growth remained strong despite a Real appreciation of over 20% during the period. The Central Bank cut interest rates for the second time in the last 18 months in October, as it remained confident that inflation was under control. Southern/Eastern Europe Hungary's real GDP grew 4.1% in the second quarter, bringing the growth rate to 3.5% for the first half of the year. GDP was driven by strengthening exports and domestic demand. The central bank continued to reduce interest rates as inflation remained benign. The Bank Governor Jarai also said that it would be impossible for Hungary to meet the Maastricht criteria and adopt the Euro by 2010 as higher current account and budget deficits for 2005 and 2006 were forecasted. In politics, the presidential election was decided at the third and final vote. Laszlo Solyom from the opposition party Fidesz emerged victorious. Turkey's second quarter real GDP increased by 4.2% in the second quarter bringing the growth rate to 4.5% for the first six months of the year. Overcoming an objection from Austria, the European Union officially began full membership talks with Turkey in October 2005. While the IMF formally approved a new 3-year USD10 billion standby loan for Turkey earlier during the period, a delay in the implementation of the banking and social security reforms resulted in a delay in payments. However, in October, overcoming a presidential veto, the parliament passed the final sections of the banking legislation. Moreover, accepting Turkey's 2006 budget, the IMF agreed to release up to USD1.6 billion, conceding that the social security bill will be reviewed in 2006. South Africa Finance Minister Trevor Manuel raised the country's real GDP growth forecast to 4.4% for 2005 from 4.3% previously, as the country continues to maintain a stable financial environment and low interest rates. Real GDP expanded by 4.4% in the first half of 2005 driven mainly by the manufacturing, retail, finance and business sectors. The government is also expected to increase infrastructure spending over the next three years. As a result of the country's robust GDP growth, Fitch upgraded its credit rating to BBB+ from BBB. South Africa's budget deficit is expected to account for about 1% of GDP in the current fiscal year, significantly lower than the 3.1% forecast as strengthening consumer spending and a weaker Rand supported corporate earnings and tax revenues. This will be the smallest deficit since the end of the apartheid in 1994. Outlook The general outlook for emerging markets economies remains positive. Economic growth continues at a robust level in many regions, per capita incomes have been rising and the reform processes started in the late 1990s continue to take place, improving the operational landscape for businesses and investing environment for shareholders. Nevertheless, it is important to remember that stock markets do not always follow macroeconomic developments on a day-today, week-to-week, or month-to-month basis. We should therefore always be prepared for downward or upward surprises. Moreover, such volatility should not detract us from our long term goals or our disciplined value-oriented approach in stock selection and we could use market downturns to build positions in stocks cheaply. Thank you for your continued interest and support. Dr. Mark Mobius, Ph.D. Fund Manager 12 December 2005 Copies of the Interim Report will shortly be sent to shareholders. For information please contact David Bliss/Will Rogers at UBS Limited (0207 567 8000) or David Smart at Franklin Templeton Investment Management Limited (0207 073 8500). No representation or warranty is made by UBS Limited as to the accuracy or completeness of the information contained in this announcement and no liability will be accepted for any loss arising from its use. These figures have been prepared by Franklin Templeton Investments and are their sole responsibility. End of Announcement. This information is provided by RNS The company news service from the London Stock Exchange TLFLIE

Companies

Templeton Emerging Markets Inv Trust (TEM)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today