Preliminary Statement of Annual Results

RNS Number : 5821J

Templeton Emerging Markets IT PLC

13 June 2014

TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC ("TEMIT or "the Company")

STRATEGIC REPORT

FINANCIAL SUMMARY

2013-2014

This is the first time that the Annual Report has been written under the newly introduced "narrative reporting" framework in the UK, which includes a new requirement to provide a Strategic Report. The Strategic Report is designed to replace and enhance reporting previously included within the Business Review section of the Directors' Report. The aim of the Strategic Report is to provide shareholders with the ability to assess how the Directors have performed in their duty to promote the success of the Company for shareholders' collective benefit by bringing together into one place all the information about the Company's strategy, the risks it faces, how it is performing and the direction in which it is heading.

		Year ended	Year ended
		31 March	31 March	Change
	Ref	2014	2013	%
Net Assets and Shareholders' Funds (£ million)		1,913.6	2,302.7	-16.9
Net Asset Value (pence per share)		591.8	702.3	-15.7
Net Asset Total Return	a	-14.6%	11.1%
Highest Net Asset Value (pence per share)		716.8	743.2
Lowest Net Asset Value (pence per share)		553.1	556.2
Benchmark
MSCI Emerging Markets Index Total Return		-9.9%	7.7%
Share Price (pence per share)		527.0	640.5	-17.7
Share Price Total Return		-16.8%	10.0%
Highest Share Price (pence per share)		651.5	678.0
Lowest Share Price (pence per share)		493.5	505.0
Dividend (pence per share)	b	7.25	6.25	16.0
Revenue Earnings (pence per share)	c	9.14	8.45	8.2
Capital Earnings (pence per share)	c	-114.65	62.67	-282.9
Total Earnings (pence per share)	c	-105.51	71.12	-248.4
Share Price Discount to Net Asset Value at end of the year		10.9%	8.8%
Average Share Price Discount to Net Asset Value over the year		9.6%	8.3%
Ongoing Charges Ratio	d	1.30%	1.30%

Source: Franklin Templeton Investments and FactSet.

^aReturn based on NAV.

^bA dividend of 7.25 pence per share for the year ended 31 March 2014 has been proposed.

^cThe Revenue, Capital and Total earnings per share figure are based on the earnings per share row in the Income Statement and Note 4 of the Notes to the Financial Statements.

^dAs at 31 March 2014 the OCR was 1.30%. From 1 July 2014. Franklin Templeton has agreed a reduction of 0.10% per annum to its fees.


TEN YEAR RECORD
2004-2014


						Revenue
	Total Net					Earnings
	Assets and					per			Ongoing
	Shareholders'			Share		share -	Dividend		Charges
	Funds		NAV	Price	Discount	undiluted	per share		Ratio^f
Year ended	(£m)		(pence)	(pence)	(%)	(pence)	(pence)		(%)
30 Apr 2004	778.5		171.0	144.0	15.8	2.89	2.25		1.48
30 Apr 2005^a	1,066.0		198.9	167.3	15.9	3.42	2.67		1.50
30 Apr 2006	1,866.2		348.2	310.3	10.9	3.65	2.76		1.41
30 Apr 2007	1,925.5		359.2	327.3	8.9	4.16	3.13		1.32
30 Apr 2008	2,291.4		484.8	438.0	9.6	4.07	3.50		1.33
30 Apr 2009	1,208.3	^b	365.7	340.5	6.9	7.69	3.75	^d	1.34
31 Mar 2010^c	2,046.4		620.3	577.0	7.0	2.88	3.75		1.29
31 Mar 2011	2,368.4		718.0	660.0	8.1	6.14	4.25		1.31
31 Mar 2012	2,098.6		636.3	588.5	7.5	7.91	5.75		1.31
31 Mar 2013	2,302.7		702.3	640.5	8.2	8.45	6.25	^e	1.30
31 Mar 2014	1,913.6		591.8	527.0	10.9	9.14	7.25		1.30

TEN YEAR GROWTH RECORD

(rebased to 100.0 at 30 April 2004)

2004-2014

									Revenue
							MSCI		Earnings
		NAV			Share		Emerging		per
		total		Share	price		Markets Index		share -	Dividend
Year ended	NAV	return	^g	Price	total return	^g	total return	^g	undiluted	per share
30 Apr 2004	100.0	100.0		100.0	100.0		100.0		100.0	100.0
30 Apr 2005^a	116.3	116.7		116.2	118.0		115.2		118.3	118.7
30 Apr 2006	203.6	206.6		215.5	221.7		197.1		126.3	122.7
30 Apr 2007	210.1	214.8		227.3	236.3		211.8		143.9	139.1
30 Apr 2008	283.5	291.7		304.2	319.1		268.8		140.8	155.6
30 Apr 2009^b	213.9	221.4		236.5	250.3		205.8		266.1	166.7^c
31 Mar 2010^d	362.7	444.4		400.7	501.4		353.1		99.7	166.7
31 Mar 2011	419.9	517.0		458.3	577.4		369.9		212.5	188.9
31 Mar 2012	372.1	461.1		408.7	518.4		364.3		273.7	255.6
31 Mar 2013	410.7	512.4		444.8	570.4		392.2		292.4	277.8
31 Mar 2014	346.1	437.6		366.0	474.6		353.3		316.3	322.2^e

^a Prior to April 2005 the results have been prepared in accordance with UK GAAP. The results for the year ended 30 April 2005 and subsequent reporting periods have been prepared in accordance with IFRS. The main differences as a result of adopting IFRS are that investments are valued on a bid basis, as opposed to a mid basis, and only dividends paid during the year are reflected in the financial statements.

^b The results for the year ended 30 April 2009 reflect £633m returned to the shareholders as a result of the tender offer in 2008.

^c Excludes the special dividend of 2.50p per share in 2009.

^d 11 months to 31 March 2010.

^e A dividend of 7.25 pence per share for the year ended 31 March 2014 has been proposed.

^f From the year ending 31 March 2012, the Ongoing Charges Ratio (OCR) replaces the Total Expense Ratio. Prior year numbers have not been restated as the ratios are not materially different.

^g Includes dividends re-invested.

CHAIRMAN'S STATEMENT

Key Points

· NAV was 591.8 pence per share, a decrease of 14.6%* compared to the benchmark (MSCI Emerging Markets Index) which decreased by 9.9%*. On a five year basis the NAV has increased by 97.7%* while the benchmark has increased by 71.7%*.

· Share price was 527.0 pence per share, a decrease of 17.7%, giving a total return of -16.8%*. On a five year basis the share price has increased by 89.6%*.

· Revenue earnings per share of 9.14 pence, up 8.2%.

· Proposed dividend per share of 7.25 pence, an increase of 16.0%.

· Franklin Templeton fee reduced from 1.20% to 1.10% from 1 July 2014.

* total return in sterling.

Overview and Investment Performance

The year to 31 March 2014 was difficult for emerging markets equities, as valuations were heavily impacted by macroeconomic and, in later months, geopolitical events. As has been the case since the credit crisis, international cash flows were a key driver of market values. The United States' quantitative easing program in prior years had led to large amounts of cash being available for investment which previously had the effect of driving up the value of emerging markets equities as international investors with excess cash sought attractive returns. During the year under review, discussion of "tapering" the US asset purchasing program led, particularly in the first quarter of our financial year (April to June 2013), to large amounts of money being withdrawn from emerging markets with an inevitable negative effect on share prices. Subsequently, announcements by the US Federal Reserve that it would delay tapering, coupled with reforms announced by the Chinese government, led to some recovery in prices later in 2013.

Tapering did, however, commence in January 2014 and this, combined with the political crisis in Ukraine, and continued political disruption in Thailand and Turkey led to further falls in prices.

A further factor affecting TEMIT's performance was the relative strength of sterling. In local currency terms, the constituents of the MSCI Emerging Markets Index made a small gain over the year, but when translated into sterling, the Index fell by 9.9% on a total return basis.

It is disappointing to report that our net asset value underperformed our benchmark during the year under review. The Investment Manager's report provides further information which for the 12 months to 31 March 2014 is summarised in the table below:

	31 March	31 March	Capital	Total
	2014	2013	Return	Return
Net asset value
(cum income)	591.8	702.3	-16.0%	-14.6%
Share price	527.0	640.5	-17.7%	-16.8%
MSCI Emerging
Markets Index (£)	-	-	-12.5%	-9.9%

Indices above are shown on a total return basis in sterling.

Sources: Franklin Templeton Investments and FactSet.

On 27 May, the latest date for which information was available, the NAV per share had risen by 3.4% to 612.1 pence and the share price by 5.3% to 555.0 pence.

TEMIT holds a continuation vote every five years. Over the last five financial years, the NAV total return has outperformed in three years and underperformed in two, including the current year. However, we have experienced periods of relative under performance before and the five year returns in the table below show that the net asset value on a total return basis has almost doubled over those five years and has produced superior returns. Further, this year TEMIT celebrates its silver jubilee and it is very gratifying to examine the long-term numbers. The benchmark index has done well, producing an almost tenfold return, but TEMIT's NAV total return is up over twenty times.

	5 Years since	Since Launch
	31 March 2009	in 1989
	(annualised)	(annualised)
Net asset value	+97.7% (14.6%)	+2,145.4% (13.4%)
(cum income)
Share price	+89.6% (13.7%)	+1,916.0% (12.9%)
MSCI Emerging	+71.7% (11.4%)	+948.7% (10.0%)
Markets Index (£)

Indices above are shown on a total return basis in sterling.

Sources: Franklin Templeton Investments and FactSet.

TEMIT has performed very well over the long-term. The Investment Manager has consistently taken the view that, in volatile markets, it is important to "see through the noise" and focus on the longer term potential of companies. The Investment Manager continually monitors and reassesses our investments but a key feature of the approach to investment is a relatively low level of portfolio turnover, which this year was 15.5%.

Into the foreseeable future, economic growth in emerging markets is forecast to be at a significantly higher rate than that in developed markets and it is this overall theme which the Investment Manager seeks to capture by focussing on investing in companies with the potential to benefit from such growth. In particular, a rapidly growing middle class in developing economies, with increasing demand for commodities and consumer goods, underlie the case for investing in TEMIT's portfolio of companies.

Investment income and the dividend

Income received from our investment portfolio has continued to grow and I am pleased to report a further increase in revenue earnings per share. The Income Statement shows total dividend income earned of £61.6 million in the year to 31 March 2014. This represents an increase of 3.5% over the prior year. This translates into net earnings of 9.14 pence per share, an increase of 8.2% over the prior year.

This year your Board is pleased to propose a further increase in the dividend to 7.25 pence per share, an increase of 16.0% on last year.

Shareholders should bear in mind that the Company's primary objective is capital growth and income distribution is not a prime investment objective. The flow of dividends from emerging market companies is not always consistent and the increases in dividend income seen in recent years may not be repeated in the future.

Discount and Share Buy Backs

During the year shares traded at discounts between 7.4% and 12.3% of NAV with an average of 9.6% and at the end of the year the discount stood at 10.9%. As explained above, demand for emerging markets shares has weakened and, inevitably, this has had an effect on the Company's rating. During the financial year under review the Company bought back 4,525,000 shares, at a total cost of £24.9 million and at an average discount of 9.8% resulting in a small benefit of £2.7 million to continuing shareholders.

Your Board continually monitors the share price discount to net asset value and exercises its right to buy back shares when the Board considers that it is in shareholders' interests to do so. Several shareholders questioned the need for, and effect of, share buybacks at last year's Annual General Meeting ("AGM") and we have set out a further explanation in the Directors' Report.

Franklin Templeton Fees

Your Board is pleased that Franklin Templeton has proposed a reduction in its fees, from 1.20% to 1.10% per annum with effect from 1 July 2014. Your Board will continue to monitor any further developments in the market as regards both structure and quantum of charges, but believe that this lower level of fee, together with the liquidity of the Company's shares and the relatively stable discount, maintains the overall attractiveness of TEMIT as an emerging markets investment.

Regulation

Many shareholders may be aware that the European Union's Alternative Investment Fund Managers Directive ("AIFMD") came into force on 22 July 2013 and that companies such as TEMIT have a transition period until 22 July 2014, to comply with the Directive. The main thrust of the Directive is one of protecting investors from undue or unexpected risk.

Implementation of the Directive has necessitated a number of changes to our formal investment management and administration agreements with Franklin Templeton and will require the appointment of J.P. Morgan Europe Limited as our depositary. The new contracts will be put into place ahead of the Company's AGM and will mean that the Company will be in compliance with the relevant AIFMD requirements. We have taken the opportunity to refresh, clarify and modernise certain sections of the contract, so shareholders should note that, while AIFMD requires substantial changes to legal agreements, the same individuals in terms of investment managers, company secretary and administration will continue to provide these services.

In addition to some increased protection afforded to investors from depositary oversight, the Directive places additional responsibilities on the Alternative Investment Fund Manager regarding risk management and delegation oversight. Further details of the new arrangements are set out in the Directors' Report.

Asset allocation and gearing

The general policy of the Company is to be fully invested. As at 31 March 2014, 96.9% of TEMIT's net assets were invested in equities (31 March 2013: 98.8%) . The Investment Managers normally run the portfolio with only a small cash balance and the unusually high level of cash at the year-end was due to some assets having been sold and the resultant cash held pending reinvestment.

Your Board regularly reviews its policy on gearing and we continue to take a cautious stance. This caution is borne out by the periods of volatility which are a feature of emerging equity markets and are generally unpredictable in both timing and extent. Our policy, therefore, remains that in exceptional circumstances, and for short periods, TEMIT may borrow up to 10% of its net assets. Borrowing facilities were not used during the three years to 31 March 2014.

The Board

Sir Peter Burt will retire at this year's AGM after 10 years as a Director. Peter has brought his considerable experience to bear in his role as a Director and, on behalf of my fellow Directors and the team at Franklin Templeton, I would like to thank him for his strong insights, advice and support over the last 10 years.

Following Sir Peter's retirement, the Nomination and Remuneration Committee proposes that Neil Collins will assume the role of Senior Independent Director and Chairman of the Nomination and Remuneration Committee. Hamish Buchan will also join the Nomination and Remuneration Committee.

Beatrice Hollond was appointed as a Director on 1 April 2014. Beatrice has had a long career in the investment industry, working initially with Morgan Grenfell Asset Management as a UK equity analyst and with Credit Suisse Asset Management for 16 years where her final role was as a Managing Director in their Global Fixed Income business. Her deep experience in portfolio and investment management and her knowledge of the investment company sector will be invaluable to TEMIT.

In line with the UK Corporate Governance Code issued by the Financial Reporting Council in September 2012, all Directors are required to retire each year. With the exception of Sir Peter Burt who will retire, each member of the Board will stand for election. As part of the annual Board evaluation review, the Remuneration and Nomination Committee considered the skills and contribution of all the Directors and this year recommends their election in each case.

Investor communications

The Board and Investment Manager aim to keep shareholders informed and up to date with information about the Company as well as seeking feedback and comment from investors. We hold investor briefings and discussions. We send out the Annual and Half Yearly Report, as well as notices of any significant Company events to registered shareholders. We also release information through the stock exchanges, where we are listed, such as the Interim Management Statements. Our website (www.temit.co.uk) displays the latest news, price and performance information, portfolio details, quarterly web updates from the Investment Manager and a blog dealing with topical issues in emerging markets. Via the website you can also ask to have the latest Company information e-mailed directly to you. I encourage all shareholders to register on our website and make full use of the facilities and materials available to help keep you informed about your Company.

Scottish referendum

Your Company is incorporated in Scotland and the current Scottish Government will hold a referendum on independence from the United Kingdom on 18 September 2014. We will continue to monitor developments and, in particular, any change to current tax, regulation and company law which either an independent Scotland, or a Scotland with greater autonomy within the United Kingdom, may pursue and take any appropriate steps to protect shareholders' interests. The Board has noted that some Scottish companies have taken precautionary steps to facilitate a migration to England. At this stage, it is not clear whether the taxation and regulatory regime would be better or worse for shareholders than that in Scotland and, therefore, because all the commentators suggest there will be a lengthy period of transition if there were to be a Yes vote, we have elected not to incur unnecessary expense at this time.

Outlook

TEMIT will continue to be managed in a way which is consistent with its established long-term, patient approach and with substantially all of its assets invested in emerging markets equities. The focus remains on companies which are expected to be best able to ride out the short-term political and economic storms and benefit from the effects of strongly growing economies and the growing spending power of increasingly wealthy populations.

AGM and Continuation Vote

I would like to take this opportunity to invite all shareholders to attend the AGM to be held at Stationers' Hall, Ave Maria Lane, London EC4M 7DD at 12 noon on Friday 18 July 2014 where there will be an opportunity to meet the Board and the Investment Manager and hear the latest news on your Company, its investments and the markets, as well as taking part in the formal annual meeting of the Company.

This year's AGM is particularly important as we are holding a Continuation vote. Given the strong long-term performance record of TEMIT and the Board's and Investment Manager's view that emerging markets are likely to produce superior returns over the long-term, I and my fellow directors urge you to vote in favour of Continuation.

Peter Smith
13 June 2014

PORTFOLIO HOLDINGS BY GEOGRAPHY

Geographical analysis (by country of incorporation)

As at 31 March 2014

		Fair value	**	MSCI Index	^#	% of issued	% of net
Country	Sector	£'000		weighting		share class	assets
AUSTRIA
OMV^‡	Energy	21,549		N/A		0.2	1.1
		21,549					1.1
BRAZIL
Banco Bradesco, ADR*^{† (a)}	Financials	78,671		N/A		0.5	4.1
Itau Unibanco , ADR*^(a)	Financials	84,032		N/A		0.7	4.4
Petroleo Brasileiro, ADR*^†(a)	Energy	28,099		N/A		0.1	1.5
Vale, ADR*^†(a)	Materials	63,616		N/A		0.4	3.3
		254,418					13.3
HONG KONG/CHINA
Aluminum Corp. of China, H^(b)	Materials	21,013		-		2.6	1.0
Brilliance China Automotive	Consumer Discretionary	173,601		0.1		3.8	9.1
China International Marine Containers, B^(c)	Industrials	17,760		-		0.9	1.0
China Petroleum and Chemical, H^(b)	Energy	35,186		0.6		0.3	1.8
Dairy Farm	Consumer Staples	74,096		N/A		0.9	3.9
Guangzhou Automobile Group, H^(b)	Consumer Discretionary	48,945		0.1		3.5	2.6
PetroChina, H^(b)	Energy	51,087		0.6		0.4	2.7
Victory City International	Consumer Discretionary	10,193		N/A		6.7	0.5
VTech	Information Technology	64,181		N/A		3.3	3.4
		496,062					26.0
INDIA
Infosys Technologies	Information Technology	23,549		0.7		0.1	1.2
National Aluminium	Materials	6,981		N/A		0.7	0.4
Oil & Natural Gas	Energy	33,275		0.1		0.1	1.7
Peninsula Land	Financials	4,995		N/A		5.6	0.3
Sesa Sterlite W	Materials	39,431		0.1		0.7	2.1
Tata Consultancy Services	Information Technology	119,354		0.4		0.3	6.2
		227.585					11.9

^*US Listed Securities.

^**Fair value represents the bid value of a security as required by International Financial Reporting Standards (IFRS).

^‡These companies have significant exposure to operations in emerging markets.

^†pfd: preferred shares.

^#N/A: These stocks are not held by the MSCI Emerging Markets Index.

^W Sesa Goa Ltd. changed name to Sesa Sterlite Ltd. on 18 September 2013.

^(a)American Depositary Receipt.
^(b)Shares eligible for foreign investment on Chinese stock exchange.
^(c) Shares eligible for foreign investment on Hong Kong stock exchange

(a)

		Fair value	**	MSCI Index	^#	% of issued	% of net
Country	Sector	£'000		weighting		share class	assets
INDONESIA
Astra International	Consumer Discretionary	77,248		0.3		0.5	4.0
Bank Central Asia	Financials	18,112		0.3		0.1	1.0
Bank Danamon Indonesia	Financials	30,884		-		1.4	1.6
		126,244					6.6
JORDAN
Arab Potash	Materials	1,091		N/A		0.1	0.1
		1,091					0.1
MEXICO
Wal-Mart de Mexico	Consumer Staples	35,180		0.3		0.1	1.8
		35,180					1.8
PAKISTAN
MCB Bank	Financials	59,893		N/A		3.5	3.1
Oil & Gas Development	Energy	25,623		N/A		0.4	1.4
		85,516					4.5
PERU
Buenaventura ADR*^(a)	Materials	44,881		0.1		2.2	2.3
		44,881					2.3
RUSSIA
Gazprom, ADR*^(a)	Energy	41,631		N/A		0.0	2.2
Norilsk Nickel	Materials	7,339		0.2		0.0	0.4
Norilsk Nickel, ADR*^(a)	Materials	25,743		N/A		1.4	1.3
OAO TMK	Energy	8,458		N/A		0.2	0.4
		83,171					4.3

^*US Listed Securities.

^**Fair value represents the bid value of a security as required by International Financial Reporting Standards (IFRS).

^#N/A: These stocks are not held by the MSCI Emerging Markets Index.

^(a)American Depositary Receipt.


			Fair value	**	MSCI Index		^#	% of issued			% of net
Country	Sector		£'000		weighting			share class			assets
SOUTH AFRICA
Anglo American	Materials		29,328		N/A			0.1			1.5
Impala Platinum	Materials		22,232		0.2			0.5			1.2
			51,560								2.7
SOUTH KOREA
Hyundai Development	Industrials		44,506		-			3.5			2.3
SK Innovation	Energy		42,822		0.2			0.7			2.3
			87,328								4.6
THAILAND
Kasikornbank	Financials		56,541		0.2					0.7		2.9
Kiatnakin Bank	Financials		17,663		N/A					2.7		0.9
Land and Houses	Financials		16,938		N/A					0.9		0.9
PTT Exploration and Production	Energy		33,588		N/A					0.3		1.8
PTT	Energy		28,910		N/A					0.2		1.5
Siam Cement	Materials		3,251		0.1					0.0		0.2
Siam Commercial Bank	Financials		74,349		N/A					0.8		3.9
Univanich Palm Oil	Consumer Staples		9,340		N/A					5.0		0.5
			240,580									12.6
TURKEY
Akbank	Financials		56,630		0.2				0.7		3.0
Tupras-Turkiye Petrol	Energy		37,949		0.1				1.2		1.9
			94,579								4.9
UNITED KINGDOM
Unilever‡		Consumer Staples	3,810			N/A				0.0		0.2
			3,810									0.2
TOTAL INVESTMENTS			1,853,554									96.9
OTHER NET ASSETS			60,011									3.1
TOTAL NET ASSETS			1,913,565									100.0

^**Fair value represents the bid value of a security as required by International Financial Reporting Standards (IFRS).

^‡These companies have significant exposure to operations in emerging markets.

^#N/A: These stocks are not held by the MSCI Emerging Markets Index.

INVESTMENT MANAGER

The Directors engage Templeton Asset Management Ltd. ("TAML") as the Investment Manager of the Company.

TAML, a subsidiary of Franklin Resources, is one of the world's largest asset management companies. TAML is a pioneer of emerging market investment, having created one of the first dedicated emerging market mutual funds more than 25 years ago. As of 31 March 2014, the Templeton Emerging Markets Team managed US$43.8 billion in emerging markets assets for retail, institutional and professional investors across the globe.

The Templeton Emerging Markets Team, headed by Dr. Mark Mobius, is one of the largest of its kind. It includes 52 dedicated emerging markets portfolio managers, analysts and product specialists. Their on-the-ground presence in 18 countries, and years of relevant industry experience, greatly assists their understanding of the companies researched for inclusion in the TEMIT portfolio. Many of the senior members of the TEMIT team, such as Allan Lam, Chetan Sehgal and Carlos Hardenberg have worked alongside Mark Mobius for many years.

MARK MOBIUS, PH.D.

Executive Chairman

Dr. Mobius has spent more than 40 years working in emerging markets all over the world. He joined Franklin Templeton in 1987 as the president of Templeton Emerging Markets Fund, Inc. In 1999, he was appointed joint chairman of the Global Corporate Governance Forum Investor Responsibility Taskforce of the World Bank and Organization for Economic Cooperation and Development.

ALLAN LAM, CPA

Senior Executive Vice President & Senior Managing Director Allan Lam joined Franklin Templeton in 1987. Mr. Lam manages investment portfolios dedicated to global emerging markets and Asia (ex Japan). He has research responsibilities for companies in the real estate and the oil & gas sector, and also specialises in analysing companies listed in the Philippines. Mr. Lam worked for a number of years in the accounting field with Deloitte Touche Tohmatsu CPA and KPMG Peat Marwick CPA. His knowledge of accounting practices became an important tool for his equity analysis.

CHETAN SEHGAL, CFA

Executive Vice President & Managing Director

Chetan Sehgal joined Franklin Templeton in 1995. His main research responsibilities include the Indian and Israeli markets and the software and IT services industries. Prior to joining Franklin Templeton, Mr. Sehgal was a senior ratings analyst for the Credit Rating Information Services of India, Ltd. Mr. Sehgal earned a B.E. mechanical (honours) from the University of Bombay and a post-graduate diploma in management from the Indian Institute of Management in Bangalore, where he specialized in finance and business policy and graduated as an institute scholar. Mr. Sehgal is a Chartered Financial Analyst (CFA) Charterholder.

CARLOS HARDENBERG

Senior Vice President & Senior Executive Director

Carlos Hardenberg is a senior vice president, senior executive director, primarily responsible for the Turkish market and coverage of the central and eastern European, Middle East and North Africa regions. Prior to joining Franklin Templeton in 2002, Mr. Hardenberg was an analyst in the Corporate Finance Department for Bear Stearns International in London. He entered the financial services industry in 2000.

Mr. Hardenberg holds a M.Sc., with distinction, in investment management from London City University Business School (UK) and a B.Sc., with honours, in business studies from the University of Buckingham (UK).

*Source: Franklin Templeton Investments as at 31 March 2014. CFA® and Chartered Financial Analysts® are trademarks owned by CFA Institute.

INVESTMENT MANAGER'S PROCESS

31 MARCH 2014

Investment Philosophy

TAML employs a time-tested investment philosophy built upon a disciplined, yet flexible, long-term approach to value-oriented emerging markets investing which allows the portfolio managers to look beyond short-term news, noise, and emotion.

Value

Our goal is to identify those companies that appear to be trading at a discount to what our estimates indicate to be their projected future intrinsic value which, over time, should produce a strong share price return.

Patience

On a short-term basis, stocks may overreact to news and noise. On a long-term basis, we believe that markets are efficient and patience will reward those who have identified undervalued stocks.

Bottom-up

We identify value through rigorous fundamental analysis, proprietary screens and a worldwide network of experienced research resources. Research is carried out on a company by company basis - in different countries and industries - to determine what we consider the economic worth of a company to be, based on many factors including projected future earnings, cash flow or asset value potential as well as management capability and governance.

The Investment Manager follows a rigorous five step process:


1. Identify Potential Bargains		All portfolio managers are also research analysts,
Does this stock meet TAML's criteria of valuation, size and		resulting in a deep and experienced research team.
liquidity?		While our philosophy remains unchanged, continual
Is it a potential bargain within the global universe, its sector		refinement and improvement is part of the TAML
and on a historical basis?		culture.
		TAML is able to leverage 60+ years of global investing
		by Franklin Templeton Investments to build an
		extensive network of local contacts around the world.
2. In Depth Fundamental Analysis		Within the framework of a disciplined, long-term
Is this stock a candidate for the TAML Action List?		approach, analysts look beyond short-term noise to
Is the stock trading at a substantial discount to what our		estimate long-term economic worth.
research indicates the company may be worth over the		Bottom up fundamental analysis, industry knowledge
long-term?		and access to company management drive original
		research.
3. Review Team Evaluation		A collaborative team culture that leverages the
Has analysis met TAML standards?		experience of the entire TAML Group produces
Does the recommendation pass TAML's Review Team's		comprehensive research insights.
approval?
4. Allocate Portfolio		The Action List is reviewed weekly.
What do we consider to represent the best combination		Taking into account the investment objective and
of stocks for creating a diversified fund with the greatest		guidelines, the portfolio is constructed with attention to
potential for appreciation?		diversification and risk levels.
		The process seeks to reduce portfolio turnover.
		The fund combines the potential of our best ideas with
		the risk benefits of diversification.
5. Portfolio Evaluation and Attribution Analysis		Portfolios are subject to weekly review, while a semi-
What are the performance contributors/detractors?		annual review evaluates methodology, resources,
		themes, country level issues and global trends.
		TAML's investment process combines the benefits of
		individual and team portfolio management.

RISK MANAGEMENT

31 MARCH 2014

Investment in emerging markets equities inevitably involves risk in a volatile asset class, and portfolios constructed from the "bottom up" may be exposed to risks that become evident when viewed from the "top down". Franklin Templeton Investments uses a comprehensive approach to managing risks within our portfolios. The goal of our investment risk management process is not to avoid risk, but to ensure that risks are "understood, intended and compensated". This philosophy is integrated into each step of the investment process:

Risk management is led first and foremost by experienced portfolio managers. It is integrated within each step of our fundamental, research-driven process, and includes regular interaction with our independent Portfolio Analysis and Investment Risk (PAIR) team. The PAIR team consists of over 90 investment risk and performance professionals located in 15 different countries around the world. PAIR's mission is to integrate investment risk insight and information into each step of the investment process. This is accomplished via regular meetings with the Emerging Markets investment team:

Weekly engagement in the weekly call, and weekly performance & risk summary sent out to TAML

Monthly summary of latest TEMIT performance and risk profile sent to portfolio and senior management

Quarterly in-depth review meetings on the performance of TEMIT, Index and Peers

Risk Management

Recognised

· Identify and understand risk at the security, portfolio and operational level

Rational

· Affirm that identified risks are an intended and rational part of each portfolio's strategy

Rewarded

· Verify that every risk provides the potential for a commensurate long-term reward

PORTFOLIO MANAGERS

Our approach

Dedicated Risk Management Specialists

· Provides robust analytics and critical, unbiased insight

· Locally positioned to work consultatively with portfolio teams around the globe

Oversight Committees

Focuses on most complex risk factors:

· Counterparty Risk

· Pricing and Liquidity

· Complex Securities

· Global Products

Tools and Platforms

Centrally supported, best-in-class platforms for:

· Data Analytics and Modelling

· Portfolio Compliance

· Trade Monitoring and Execution

INVESTMENT MANAGER'S REPORT

31 MARCH 2014

MARKET OVERVIEW

Emerging market equities experienced significant volatility in the 12 month period under review. The period began with a sharp decrease due to a number of factors including concerns that the US would reduce ("taper") its quantitative easing program, an increase in bond market volatility and fears about the stability of China's banking sector all of which prompted profit taking in emerging market stocks, bonds and currencies. India, Indonesia and Turkey, among others, were perceived to be higher risk due to factors such as slowing growth, current account deficits and lack of reform.

Emerging markets subsequently recovered some of their loss as the US Federal Reserve Board (the "Fed") delayed reducing its asset purchase program, and the Chinese government announced social, economic and financial reforms. However, emerging markets again experienced heightened volatility later in the period as investors grew concerned about the Fed's decision to reduce its monthly asset purchases from January 2014, China's slowing economic growth, sharp devaluations of several emerging market currencies, and political unrest in Thailand, Turkey and the Ukraine. Further pressuring emerging market stocks was the effect of tightening liquidity by the People's Bank of China, to curb lending by banks and non-banking institutions; although the Bank did provide temporarily increased liquidity at times. The central banks of several emerging market countries, including Brazil, India, South Africa and Turkey, raised interest rates in response to rising inflation and weakening currencies. Despite mixed economic data globally and geopolitical risk in the Ukraine, emerging market stocks rallied in the last two months of TEMIT's accounting year as many investors believed that the recent sell-off provided buying opportunities.

For the 12 months ended March 31, 2014, emerging market stocks, as measured by the MSCI Emerging Markets Index, posted a decline of 9.9% in sterling terms on a total return basis, mainly due to weakness in emerging market currencies. The Index returned a positive 3.8% return in local currency terms, but this was more than offset by the relative strength of sterling, our base currency.

Speculation of policy tightening to address an overheating property market, worries about volatility in interbank lending markets, and signs that economic growth momentum was easing exerted pressure on China's equity markets. The announcement of major reform proposals following the government's November plenary session, however, provided some relief. For some time, market sentiment was driven by speculation about possible defaults in some shadow banking vehicles and reports of weaker than expected macroeconomic data, including sluggish industrial survey data. In addition to the implementation of reform in the petrochemical sector, the People's Bank of China doubled the trading band of the renminbi, as efforts to accelerate financial reforms continued. While the Chinese market produced a negative return over the accounting year, good stock selection led to this country being the best relative contributor to TEMIT's performance over the period.

TEMIT Portfolio Total Return	+1.7%
MSCI China Total Return	-6.6%
Relative Contribution	+2.4%

Total return in sterling.

Brazil lost ground, due to market unease about the potential reduction of US quantitative easing, some uncertainty about the direction of government economic policies and a depreciation in the real. Civil disturbances and populist government measures implemented earlier in the period added to the sense of nervousness. Brazilian commodity shares also struggled to overcome a weak global commodity market. The Central Bank raised interest rates to support the real. In the final months of the reporting period however, equity prices increased on better than expected fourth quarter gross domestic product data, improving commodity prices and signs of a more prudent fiscal policy boosting overall sentiment in Brazil.

TEMIT Portfolio Total Return	-22.7%
MSCI Brazil Total Return	-20.5%
Relative Contribution	-0.5%

Total return in sterling.

Thailand's subdued local economic data and concerns about the possible impact of any "tapering" of US quantitative easing prompted foreign selling of the Thai market and the baht. An interest rate cut by the Bank of Thailand earlier in the period had limited impact as investors worried that a period of very benign economic conditions might be ending. In September, the US Federal reserve shelved its tapering proposals, prompting a strong rally in Thailand and other markets. A political crisis, however, led foreign selling of the Thai equity market as well as the Thai baht to resume. Declines were concentrated among domestic businesses and those with substantial foreign shareholdings. Some export businesses and companies influenced by global economic conditions held up better as benefits from currency weakness earlier in the year began to flow through to operating results. Economic data mirrored the market, with export related statistics firming, whereas domestic confidence appeared to wane as political uncertainty impacted sentiment. The market revived in February and March as the global situation improved and some easing of political tensions brought investors back into the market in spite of somewhat subdued economic data and mixed corporate results.

TEMIT Portfolio Total Return	-25.4%
MSCI Thailand Total Return	-23.8%
Relative Contribution	-2.0%

Total return in sterling.

Despite a weak start, the Indian market was also among the strongest performers in the portfolio. Issues such as currency weakness, worries about financing the country's current account deficit and unease that approaching elections were driving fiscally unwise populist measures sent the market sharply lower. However, the appointment of a new governor of the Reserve Bank of India was warmly received by investors. Policy actions such as raising interest rates proved effective, leading the rupee to stablise and equity prices to rebound. Sentiment in India also increased due to strong corporate results, a satisfactory interim budget, a narrowing current account deficit and local elections that suggested a change of government at the general election scheduled for May 2014. Expectations of a more business friendly government driving a programme of economic stabilisation could, in our opinion, continue to support growth in Indian equities going forward.

TEMIT Portfolio Total Return	+5.2%
MSCI India Total Return	-2.8%
Relative Contribution	+1.4%

Total return in sterling.

Indonesia was notably weak in the period with concerns about its balance of payments causing an exodus of foreign investors that sent the market and currency sharply lower and prompted significant monetary tightening measures. In the first quarter of 2014 however, stock prices moved higher as a positive trade balance and news of strengthening foreign currency reserves relieved pressure on the rupiah. With fears of interest rate rises receding, an improving economic background and attractive valuations brought foreign investors back into the market. This improved confidence sent both equities and the rupiah higher, reducing declines recorded in the earlier part of the period.

TEMIT Portfolio Total Return	-31.5%
MSCI Indonesia Total Return	-25.1%
Relative Contribution	-1.5%

Total return in sterling.

Political instability and US "tapering" concerns and its impact on the country's substantial current account deficit led to poor performance by Turkey's equity market. Turkish equities however rallied in March 2014 on the victory of Prime Minister Recep Tayyip Erdogan's Justice and Development party in the municipal elections.

TEMIT Portfolio Total Return	-39.3%
MSCI Turkey Total Return	-35.1%
Relative Contribution	-1.6%

Total return in sterling.

Elsewhere, Pakistan was a further contributor to performance, as general elections resulted in a decisive mandate for veteran opposition leader Nawaz Sharif, leading stocks to rally. An improving economic outlook, support from the International Monetary Fund (IMF) and new government reforms drove investor confidence.

TEMIT Portfolio Total Return	+35.1%
Pakistan is not in the Benchmark index	-
Relative Contribution	+0.8%

Total return in sterling.

Russia, accounting for a relatively small proportion of the portfolio, struggled in the period due to weak commodity prices, sustained pressure on the ruble and weaker GDP growth. The Central Bank of Russia also raised interest rates to curb inflationary pressures and to stabilise the ruble, which reached a record low against the US dollar in March 2014. In the first quarter of 2014, the Russian market fell on precautionary selling in response to the crisis in the Ukraine, which saw Crimea separate from the Ukraine and become part of Russia by the end of the reporting period. These events were denounced by the countries of the G7, the North Atlantic Treaty Organization (NATO), and the European Union (EU), leading to the US and EU imposing economic sanctions on selected Russian interests.

TEMIT Portfolio Total Return	-10.9%
MSCI Russia Total Return	-18.4%
Relative Contribution	+0.6%

Total return in sterling.

Among other markets, South Korea, South Africa and Hong Kong, outperformed many of their emerging market counterparts despite recording declines, during the reporting period

PERFORMANCE ATTRIBUTION ANALYSIS

Performance Attributions %

Year to 31 March 2014		%
Total Return (Net)¹		-14.6
Expenses²		1.3
Total Return (Gross)³		-13.3
Benchmark Total Return⁴		-9.9
Excess Return⁵		-3.4
Sector Allocation		-0.5
Stock Selection		-4.6
Currency		1.4
Residual⁶		0.3
Total Portfolio Manager Contribution		-3.4

Notes

¹Total Return (Net) is the NAV return inclusive of dividends reinvested.

² Expenses incurred by the fund for the year to 31 March 2014.

³ Gross return is Total Return (Net) plus Expenses. Gross of fee performance is preferable for attribution and other value-added reporting as it evaluates the contribution of the manager.

⁴ MSCI Emerging Markets (Total Return) Index, inclusive of gross dividends reinvested. Indices are comparable to gross returns as they include no expenses.

⁵ Excess return is the difference between the gross return of the portfolio and the return of the benchmark.

⁶ The "Residual" represents the difference between the actual excess return and the excess return explained by the attribution model. This amount results from several factors, most significantly the difference between the actual trade price of securities included in actual performance and the end of day price used to calculate the attribution.

Above numbers may not add up exactly due to rounding.

Source: FactSet and Franklin Templeton Investments.

TEMIT's portfolio is managed with a strategy which is built on the belief that superior investment returns can be achieved by investing in companies which the Investment Manager believes are undervalued by the market, fundamentally strong and growing. Our stock selection is based on companies, not market indices and so both TEMIT's portfolio and its performance are likely to vary significantly from the index. As described further under "Outlook" below, our analysis and selection of companies has led us to two key themes: the growth of the middle class and increasing demand for commodities over the long-term.

At the company level, the top three contributors to relative performance were overweight positions in Brilliance China Automotive, Tata Consultancy Services and MCB Bank.

Brilliance China Automotive (9.1% of the portfolio) is a major automobile manufacturer in China with a joint venture with German luxury car maker BMW for the production and sale of BMW 3-series and 5-series vehicles in China. The company started manufacturing the X1 in 2012 and is expected to launch the 5-series hybrid, front-wheel drive 2-series and new generation of X1 and 5-series in the coming years. The company also plans to expand total capacity from the current 300,000 units to 600,000 units by 2016.The company has consistently delivered strong growth and earnings, and remains a beneficiary of the robust growth in China's luxury automobile market, driven by China's growing middle class. We believe that Brilliance China's capacity expansion plans coupled with its strong brand recognition and execution could allow the company to continue enjoying growing demand and increasing market share.

Share Price Total Return	+19.8%
Relative contribution to portfolio	+3.1%

Total return in sterling.

One of India's largest and oldest IT consulting companies, Tata Consultancy Services (6.2%) continues to be a beneficiary of global IT outsourcing. Additionally, weakness in the rupee during the year was potentially advantageous for the company whose costs are mainly in rupees, while its revenues arise primarily in foreign currency. Strength in the Indian market as a whole further supported the company's share price performance. We believe that IT outsourcing is a growing business, and Tata is well placed to benefit from this growth due to its extensive global exposure and comprehensive range of services.

Share Price Total Return	+13.3%
Relative contribution to portfolio	+1.3%

Total return in sterling.

In addition to being one of the five largest banks in Pakistan in terms of assets and of deposits,MCB Bank (3.1%) is the most profitable due to deriving 90% of its funding from low cost deposits (Current and Savings Accounts which are traditionally paid 0%) and mandatory minimum interest rates on lending. MCB is therefore able to earn higher margins than those generally achieved by the larger banks in Pakistan. MCB Bank benefited from positive investor sentiment in the country following the victory of opposition leader Nawaz Sharif as prime minister. The new government is much more open to attempts by MCB Bank and others to expand overseas or acquire domestic players to consolidate the sector. The bank has surplus equity capital available, which puts it in a good position for potential expansion. We believe that higher lending rates/investment yields and loan growth coupled with the low cost of credit for the bank could boost earnings going forward. The bank's superior asset quality, improving local business confidence and international expansion, as well as increased focus on branchless and Islamic banking, could further support the bank's performance.

Share Price Total Return	+38.7%
Relative contribution to portfolio	+0.8%

Total return in sterling.

In terms of individual companies, TEMIT's positions in Akbank, Buenaventura and Bank Danamon Indonesia were among the largest detractors. All three stocks ended the reporting period with double-digit declines.

Tapering of the US quantitative easing programme and its impact on the country's substantial current account deficit, along with a corruption investigation implicating figures close to the government, prompted a sell-off in the Turkish market. Banks including Akbank (3.0%), one of Turkey's largest privately owned banks, came under particular pressure, especially after the chief executive of a leading competitor bank was arrested. We are of the opinion however that Akbank is well positioned to benefit from growing demand for financial and banking services in Turkey. The bank's prudent and experienced management, high asset quality, and strong equity and deposit base lead us to maintain a positive view. Moreover, the bank's valuation remains attractive at current levels.

Share Price Total Return	-43.9%
Relative contribution to portfolio	-1.6%

Total return in sterling.

With gold and silver prices falling during the year, the share price of Buenaventura (2.3%) fell sharply. Indications of rising costs and lower production output also had an impact. A low-cost producer and one of the 10 largest gold mining companies globally, we believe that the company should be able to withstand short-term pressure on commodity prices. Buenaventura's extensive exploration portfolio, strong balance sheet, good profit margins and undemanding valuations also increase the company's attractiveness and we took advantage of the weak share price to increase our investment.

Share Price Total Return	-55.3%
Relative contribution to portfolio	-1.0%

Total return in sterling.

Bank Danamon Indonesia (1.6%) is a commercial bank operating in the Indonesian market. We believe that it will benefit from economic growth and rising demand for financial products from the growing Indonesian middle class. The share price was affected by general weakness in the local market due to fears that US "tapering" could lead to further deterioration in Indonesia's current account position. This was exacerbated by news that a bid for the bank from the Singaporean lender DBS had been abandoned. However, we believe that this bank remains well positioned to benefit from Indonesia's growing economy and under-penetrated banking sector. The share price enjoyed gains in the final quarter of the reporting period, offsetting some of the year's earlier declines, as improving economic data flow and optimism that elections would produce a reformist government, boosted investor sentiment sending both equity prices and the rupiah ahead.

Share Price Total Return	-46.5%
Relative contribution to portfolio	-1.0%

Total return in sterling.

PORTFOLIO CHANGES & INVESTMENT STRATEGIES

New Holding
Security	Country	Amount
		(£m)
Oil & Gas Development	Pakistan	27
Unilever	United Kingdom	4


Increased Holding
Security	Country	Amount
		(£m)
Buenaventura, ADR	Peru	48
Impala Platinum	South Africa	12
Infosys Technologies	India	11
Vale, ADR	Brazil	10
Gazprom, ADR	Russia	9
Oil & Natural Gas	India	7
Anglo American	South Africa	4
Astra International Tbk	Indonesia	3
OAO TMK	Russia	3
Norilsk Nickel, ADR	Russia	2
Polnord*	Poland	1

Partial Sale
Security	Country	Amount
		(£m)
National Aluminium	India	(1)
Tata Consultancy Services	India	(8)
Bank Central Asia	Indonesia	(43)
Brilliance China Automotive	Hong Kong/	(80)
	China

Total Sale
Security	Country	Amount
		(£m)
Faysal Bank	Pakistan	(4)
Polnord*	Poland	(6)
MOL Hungarian Oil and	Hungary	(18)
Gas
Polski Koncern Naftowy	Poland	(33)
Orlen

* Holdings in Polnord were increased in the year and fully sold off at the end of the year.

During the reporting period, TEMIT added two new companies to the portfolio: Oil & Gas Development (OGDC) in Pakistan and Unilever, a UK-listed company which derives a substantial portion of its revenues from emerging markets.

Pakistan's dominant oil and gas exploration and production company, OGDC is also the largest listed company in the country. The company accounts for approximately 60% and 30%, of Pakistan's oil and gas production, respectively. All of the company's fields are on-shore and well established, resulting in a low cost structure when compared to peers elsewhere. An extensive and established gas transmission pipeline also provides a ready market for OGDC's gas. Gas is currently the main source of energy in Pakistan, accounting for about 50% of the country's energy needs, as the government continues to promote its use given its indigenous nature and relatively lower cost. Conditions for an International Monetary Fund loan to Pakistan included a requirement for cash to be raised from sales of state holdings in major companies. Anticipation of a substantial share sale led investors to take profits in the company providing an attractive entry point for TEMIT. Trading at attractive valuations, with high profit margins and return on equity, OGDC is well positioned to benefit from the growing energy needs of the country and reform of regulation of the oil and gas industry.

Unilever is a global consumer products company with operations in foods, refreshments, home care and personal care. Some of the company's leading brands are Knorr, Hellman's, Lipton, Magnum, Surf, Dove, Lux, Axe and Pond's. Emerging markets account for approximately 40% of Unilever's total turnover. The company has also made some meaningful acquisitions in the personal care sector in recent years, while disposing of some assets in the foods division. Reasons supporting our positive view on the company include its large exposure to emerging markets, which has been driving growth in sales and earnings, ownership of top brands with dominant market shares in various businesses, and established network and partnerships with distributors in markets where logistics can be difficult.

An evaluation of existing holdings in the portfolio led to additional purchases in ten companies as price falls during the period provided TEMIT with an opportunity to increase positions in companies that remained attractive. Purchases were made in four key sectors: materials, consumer staples, energy, and information technology.

Companies in the energy and materials sectors generally fell in the past year as weaker commodity prices and concerns of slowing demand in emerging markets, especially China, led investors to shy away from these sectors, leading to indiscriminate selling across the board. We are of the opinion, however, that many companies are now undervalued and could be strong beneficiaries of improving developments in the global economy. Furthermore, and taking a longer view, energy reforms in markets such as China, India, Pakistan and other countries could further support earnings growth in these companies.

Additions in the materials sector included Buenaventura, Impala Platinum, a leading global platinum producer, Vale, one of the world's largest iron ore producers, Anglo American, one of the largest diversified mining companies in the world, and Norilsk Nickel, the world's largest producer of nickel and palladium and one of the largest producers of platinum.

Gazprom, the largest producer of gas in the world by reserves and production, Oil & Natural Gas, India's dominant player in the Indian upstream sector, with leading market shares in the country's oil and gas production, and OAO TMK, a global leading manufacturer of value-added pipe products for the oil and gas industry, were purchases in the energy industry.

We increased our investments in Infosys Technologies in the IT sector, and Astra International in consumer staples.

Infosys Technologies is among India's leading IT consulting companies and enjoys a strong market position with relationships with major global companies such as British Telecom, Visa International, Goldman Sachs, Levi Strauss, Reebok, Apple, Amazon and Gap. The company has a strong track record of repeat business and has been investing in IT platforms and products businesses which would drive productivity over the long-term. Infosys also benefits from India's competitive advantage in software and favourable regulations. Economic recovery in the US and Europe is expected to result in a growth in business. While the departure of some senior employees raised concerns, the return of the former chairman as executive chairman bolstered confidence. We believe that IT outsourcing is an attractive and growing industry and that the company is well placed to benefit from this growth.

Astra International is a diversified Indonesian conglomerate, with four main businesses: automotive, financial services, heavy equipment and agribusiness. Its automotive business, which accounts for about half of its earnings, can be further broken down into motorcycles, cars and auto parts. Astra is also the principal distributor for Toyota, Daihatsu, Isuzu, BMW and Peugeot cars as well as Nissan trucks in Indonesia. The company provides diversified exposure to the growing Indonesian economy. Moreover, we expect a rapidly growing middle-upper income population with stronger purchasing power to continue to drive growth in the automotive industry.

Sales were concentrated in the consumer discretionary and financials sectors to raise funds for more attractive investment opportunities.

TEMIT trimmed its holdings in Brilliance China Automotive and in Tata Consultancy Services in order to take profits and reduce concentration in these stocks. These two companies remain TEMIT's top two holdings, signalling our continued confidence in them. Holdings in Indian alumina manufacturer, National Aluminium, and Indonesia's Bank Central Asia were also reduced.

Positions in two energy companies, MOL Hungarian Oil and Gas and Polski Koncern Naftowy Orlen, were sold at a profit, allowing TEMIT to realise gains, along with full disposals of Faysal Bank in Pakistan and Polnord in Poland which were sold at a loss.

TOP SECURITY CONTRIBUTORS AND DETRACTORS TO RELATIVE PERFORMANCE (%)*

	Contribution	Share Price		Contribution	Share Price
	to Relative	Total		to Relative	Total
Top Contributors	Performance	Return	Top Detractors	Performance	Return
Brilliance China Automotive	3.1	19.8	Akbank	(1.6)	(43.9)
Tata Consultancy Services	1.3	13.3	Tencent Holdings.^{^}	(1.0)	99.9
MCB Bank^†	0.8	38.7	Buenaventura	(1.0)	(55.3)
Hyundai Development	0.5	15.8	Bank Danamon Indonesia	(1.0)	(46.5)
Guangzhou Automobile Group, H	0.4	13.7	Dairy Farm.^†	(0.9)	(24.9)

t For the period 31 March 2013 to 31 March 2014.

^ Company not held by TEMIT.

† Company not held by the MSCI Emerging Markets Index.

TOP 10 PORTFOLIO WEIGHTS (%)*

TEMIT MSCI Emerging Markets Index

Brilliance China Automotive 9.1 0.1

Tata Consultancy Services 6.2 0.4

Itau Unibanco, ADR* 4.4 1.0

Banco Bradesco, ADR*^† 4.1 1.0

Astra International 4.0 0.4

Siam Commercial Bank 3.9 0.2

Dairy Farm 3.9 -

VTech 3.4 -

Vale, ADR *^† 3.3 1.1

MCB Bank 3.1 -

* As at 31 March 2014

TOP SECTOR CONTRIBUTORS AND DETRACTORS TO RELATIVE
PERFORMANCE (%)*

MSCI

Emerging

Markets

Contribution

Index Total

Contribution

Index Total

to Relative

Sector

Factors affecting

to Relative

Sector

Factors affecting

Top Contributors

Performance

Return

performance

Top Detractors

Performance

Return

performance

Consumer

1.9

2.6

Strong stock selection

Financials

(3.8)

(14.0

)

Stock selection

Discretionary

and overweight

Industrials

0.9

(8.8

)

Strong stock selection

Energy

(1.2)

(17.2

)

Stock selection and

overweight

Telecommunication

0.1

(10.8

)

Sector not held by

Consumer Staples

(0.9)

(15.2

)

Stock selection

Services^{^}

TEMIT

Utilities^{^}

0.0

(10.9

)

Sector not held by

Information

(0.7)

6.9

Underweight exposure

TEMIT

Technology

Materials

(0.4)

(18.8

)

Overweight exposure

t For the period 31 March 2013 to 31 March 2014.

^ No companies held by TEMIT in these sectors.

SECTOR WEIGHTINGS vs BENCHMARK (%)*

TEMIT MSCI Emerging Markets Index

Financials 26.1 27.0

Energy 20.3 10.8

Consumer Discretionary 16.2 9.2

Materials 13.8 9.4

Information Technology 10.8 16.4

Consumer Staples 6.4 8.5

Industrials 3.3 6.5

* As at 31 March 2014

TOP COUNTRY CONTRIBUTORS AND DETRACTORS TO RELATIVE PERFORMANCE (%)*

		MSCI						MSCI
		Emerging						Emerging
		Markets						Markets
	Contribution	Index Total				Contribution		Index Total
	to Relative	Country		Factors affecting		to Relative		Country		Factors affecting
Top Contributors	Performance	Return		performance	Top Detractors	Performance		Return		performance
Hong Kong/China	2.4	(6.6	)	Strong stock selection	Thailand	(2.0	)	(23.8	)	Overweight exposure
				and overweight
India	1.4	(2.8	)	Strong stock selection	Turkey	(1.6	)	(35.1	)	Overweight exposure
				and overweight
Pakistan^†	0.8	-		Overweight exposure	Indonesia	(1.5	)	(25.1	)	Stock selection and
										overweight
Russia	0.6	(18.4	)	Strong stock selection	Taiwan^{^}	(1.2	)	1.3		Country not held by
										TEMIT
Chile^{^}	0.5	(33.0	)	Country not held by	South Korea	(0.9	)	(3.9	)	Underweight exposure
				TEMIT

t For the period 31 March 2013 to 31 March 2014.

^ No companies held by TEMIT in these countries.

† Country not held by the MSCI Emerging Markets Index.

COUNTRY WEIGHTINGS vs BENCHMARK (%)*

TEMIT MSCI Emerging Markets Index

Hong Kong/China 26.0 18.9

Brazil 13.3 11.0

Thailand 12.6 2.2

India 11.9 6.7

Indonesia 6.6 2.7

Turkey 4.9 1.6

South Korea 4.6 15.8

Pakistan 4.5 -

Russia 4.3 5.3

South Africa 2.7 7.8

Peru 2.3 0.4

Mexico 1.8 5.1

Austria 1.1 -

United Kingdom 0.2 -

Jordan 0.1 -

* As at 31 March 2014

OUTLOOK

Emerging markets have been turbulent in recent months and it is acknowledged that, in the short-term, investors have made greater returns in developed markets. However, as we look to the future, we believe that our approach and the TEMIT portfolio should serve investors well.

As long-term investors, we aim to look through short-term market turbulence to identify long-term value in emerging market equities. We place little weight on transient news flow, unless we believe that developments could have long-term consequences. We focus on factors such as demographic changes, development in technology and infrastructure, and improvements in education that can boost the growth potential of emerging markets. Further, economic growth itself has an important secondary effect in creating a growing number of middle class consumers who can create domestic demand to augment growth from investment and exports. We continue to seek to invest in companies with strong management and transparent financial information. We also believe that countries that move to root out corruption, and protect investors can create conditions for stronger economic growth and improved corporate profitability.

In the short-term, political difficulties in Russia, Thailand and Turkey may dominate news media, while month by month analysis of Chinese economic data produces volatile swings in investor sentiment. However, the major economic restructuring underway in China, South Korea and Mexico, and the rising focus on reducing corruption in many countries and the emergence of market-friendly economic policies and investment across much of South and Southeast Asia, could all create opportunities over time. Our high conviction, long-term approach to investing in emerging markets has contributed to outperformance over the last five years and in the 25 years since TEMIT was launched. Despite weakness in the last 12 months, we believe that emerging markets in general and our stock holdings in particular stand to benefit from attractively low valuations, improving global growth prospects, and we continue to maintain faith in our positioning. We believe that if shareholders vote for continuation they will be well rewarded over the long-term.

Mark Mobius, PhD

PORTFOLIO SUMMARY

PORTFOLIO DISTRIBUTION AS AT 31 MARCH 2014 AND

31 MARCH 2013

All figures are in %

	Austria	Brazil	Hong Kong/China	Hungary	India	Indonesia	Jordan	Mexico	Pakistan	Peru	Poland	Russia	South Africa	South Korea	Thailand	Turkey	United Kingdom	Other Net Assets	2014 Total	2013 Total
Consumer Discretionary	-	-	12.2	-	-	4.0	-	-	-	-	-	-	-	-	-	-	-	-	16.2	15.7
Consumer Staples	-	-	3.9	-	-	-	-	1.8	-	-	-	-	-	-	0.5	-	0.2	-	6.4	7.2
Energy	1.1	1.5	4.5	-	1.7	-	-	-	1.4	-	-	2.6	-	2.3	3.3	1.9	-	-	20.3	21.6
Financial	-	8.5	-	-	0.3	2.6	-	-	3.1	-	-	-	-	-	8.6	3.0	-	-	26.1	32.2
Industrials	-	-	1.0	-	-	-	-	-	-	-	-	-	-	2.3	-	-	-	-	3.3	2.4
Information Technology	-	-	3.4	-	7.4	-	-	-	-	-	-	-	-	-	-	-	-	-	10.8	8.3
Materials	-	3.3	1.0	-	2.5	-	0.1	-	-	2.3	-	1.7	2.7	-	0.2	-	-	-	13.8	11.4
Total Equities	1.1	13.3	26.0	-	11.9	6.6	0.1	1.8	4.5	2.3	-	4.3	2.7	4.6	12.6	4.9	0.2	-	96.9	98.8
Other Net Assets	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	3.1	3.1	1.2
2014 Total	1.1	13.3	26.0	-	11.9	6.6	0.1	1.8	4.5	2.3	-	4.3	2.7	4.6	12.6	4.9	0.2	3.1	100.0	100.0
2013 Total	1.0	14.3	24.9	0.8	9.1	10.3	0.1	2.3	2.1	1.1	1.6	3.7	1.8	4.3	14.4	7.0	-	1.2	100.0	100.0

INVESTMENT CHANGES - GEOGRAPHICAL

						Movement in year
	31 Mar 2013			Market	31 Mar 2014		MSCI Emerging
	Market Value	Purchases	Sales	Movement	Market Value	TEMIT	Markets Index
Country	£m's	£m's	£m's	£m's	£m's	%	%
Hong Kong/China	574	-	(80)	2	496	0.4	(6.6)
Brazil	329	10	-	(85)	254	(25.1)	(20.5)
Thailand	338	-	-	(97)	241	(28.7)	(23.8)
India	210	11	(9)	16	228	7.5	(2.8)
Indonesia	235	3	(43)	(69)	126	(35.4)	(25.1)
Other	592	117	(61)	(139)	509	-	-
Other Net Assets	25	-	-	35	60	-	-
Total	2,303	141	(193)	(337)	1,914

INVESTMENT CHANGES - SECTOR

						Movement in year
	31 Mar 2013			Market	31 Mar 2014		MSCI Emerging
	Market Value	Purchases	Sales	Movement	Market Value	TEMIT	Markets Index
Sector	£m's	£m's	£m's	£m's	£m's	%	%
Financials	742	-	(47)	(196)	499	(28.2)	(14.0)
Energy	497	46	(51)	(104)	388	(21.1)	(17.2)
Materials	361	76	(1)	(171)	265	(39.2)	(18.8)
Consumer Discretionary	262	3	(80)	125	310	67.6	2.6
Information Technology	192	11	(8)	12	207	6.2	6.9
Other	224	5	(6)	(38)	185	-	-
Other Net Assets	25	-	-	35	60	-	-
Total	2,303	141	(193)	(337)	1,914

TEN LARGEST INVESTMENTS

IN ORDER OF PORTFOLIO MARKET VALUE AS AT 31 MARCH 2014

	% of	Fair value
Country	net assets	£'000
Hong Kong/China	9.1%	173,601

Brilliance China Automotive is a major automobile manufacturer in China with a joint venture with German luxury car maker BMW, which celebrated its tenth anniversary in 2013. Via this joint venture, China has now surpassed the United States as BMW's largest single market and the company plans to be able to produce 400,000 vehicles in the medium term as it also develops local engine assembly capacity. As at June 2013, the number of dealerships had increased to 380. The company has consistently delivered strong growth and earnings, and remains a beneficiary of the robust growth in China's luxury automobile market, driven by China's growing middle class. We believe that Brilliance China's capacity expansion plans coupled with its strong brand recognition and execution could allow the company to continue enjoying growing demand and increasing market share.

Web site: www.brillianceauto.com

	% of	Fair value
Country	net assets	£'000
India	6.2%	119,354

Tata Consultancy Services is one of India's largest and oldest IT consulting companies and it continues to benefit from global IT outsourcing. Additionally, weakness in the rupee during the year was potentially advantageous for the company whose costs are mainly in rupees, while its revenues arise primarily in foreign currency. Strength in the Indian market as a whole further supported the company's share price performance. We believe that IT outsourcing is a growing business, and Tata is well placed to benefit from this growth due to its extensive global exposure and comprehensive range of services.

Web site: www.tcs.com

Source: FactSet. Prices rebased to 100 as at 1 April 2009.

* Capital return expressed in sterling.

	% of	Fair value
Country	net assets	£'000
Brazil	4.4%	84,032

Itau Unibanco is the largest Latin American bank and one of the largest banks in the world, with approximately 100,000 employees and operations in 20 countries throughout the Americas, Asia and Europe. It is a universal bank with a range of services and products serving a varied client profile - both individuals and companies of all sizes, from major transnational groups to local micro-entrepreneurs. In Brazil, Itau has nearly 5,000 full-service branches and 28,000 ATMs. For the tenth consecutive year, Itau was named Brazil's most valuable brand in 2013. In 2013, the bank's recurring net income increased by 12.8% and total assets by 9% over the previous year. The bank has invested heavily in technology for its retail operations. It claims a higher number of Facebook fans than any other bank in the world, at 6.5 million.

Web site: www.itau.com

	% of	Fair value
Country	net assets	£'000
Brazil	4.1%	78,671

Banco Bradesco is one of Brazil's largest private sector banks in terms of total assets. It provides a wide range of banking and financial products and services in Brazil and abroad to individuals, small to mid-sized companies and major local and international corporations and institutions. It has the most extensive private-sector branch and service network in Brazil, which permits it to reach a diverse customer base. As at December 2013 it served over 74 million customers, had over 4,600 branches and over 46,000 "Bradesco Expresso" units through partnerships with supermarkets, drugstores, department stores and other retail chains. Services and products encompass banking operations such as lending and deposit-taking, credit card issuance, consortiums, leasing, payment collection and processing, pension plans, asset management and brokerage services. It is the largest insurance company in Latin America.

Web site: www.bradesco.com.br

Source: FactSet. Prices rebased to 100 as at 1 April 2009.

* Capital return expressed in sterling.

	% of	Fair value
Country	net assets	£'000
Indonesia	4.0%	77,248

Astra International is a diversified Indonesian conglomerate, with four main businesses: automotive, financial services, heavy equipment and agribusiness. Its automotive business, which accounts for about half of its earnings, can be further broken down into motorcycles, cars and auto parts. Astra is the principal distributor for Toyota, Daihatsu, Isuzu, BMW and Peugeot cars as well as Nissan trucks in Indonesia. The company provides diversified exposure to the growing Indonesian economy. We expect a rapidly growing middle-upper income population with stronger purchasing power to continue to drive the automotive industry growth.

Web site: www.astra.co.id

	% of	Fair value
Country	net assets	£'000
Thailand	3.9%	74,349

Siam Commercial Bank was Thailand's first indigenous bank, established in 1906 under Royal Charter. According to unconsolidated financial information filed with the Bank of Thailand, the Bank was Thailand's second largest commercial bank in terms of total assets, deposits and loans as at 31 December 2013. Its 2013 net profits of Baht 50.2 billion increased by 28% year on year and were a new record for the bank.

The Bank provides a full range of financial services, including corporate and personal lending, retail and wholesale banking, foreign currency operations, international trade financing, cash management, custodial services, credit and charge card services and investment banking services, through its extensive branch network.

Web site: www.scb.co.th

Source: FactSet. Prices rebased to 100 as at 1 April 2009.

*Capital return expressed in sterling.

	% of	Fair value
Country	net assets	£'000
Hong Kong/China	3.9%	74,096

Dairy Farm is a leading pan-Asian retailer which processes food, wholesales food and personal hygiene products in the Pacific region and in China. At the end of 2013, the Group had over 5,800 outlets; employed over 100,000 people and had total annual sales exceeding US$12 billion.

The company describes its mission as "bringing to Asian consumers the benefits of modern retailing" and its strategy as offering "consumers value-for-money through efficient, low-cost distribution of high-quality fresh foods as well as consumer and durable goods in our supermarkets, hypermarkets, health and beauty stores, convenience stores and home furnishings stores".

Web site: www.dairyfarmgroup.com

	% of	Fair value
Country	net assets	£'000
Hong Kong/China	3.4%	64,181

VTech is the world's largest manufacturer of cordless telephones, and the largest supplier of electronic learning products from infancy to preschool in the US and Western Europe. It also provides highly sought-after contract manufacturing services. Founded in 1976, VTech's mission is to be the most cost effective designer and manufacturer of innovative, high quality consumer electronics products and to distribute them to markets worldwide in the most efficient manner. With headquarters in the Hong Kong Special Administrative Region and state-of-the-art manufacturing facilities in China, VTech currently has operations in 11 countries and regions and approximately 37,000 employees, including around 1,500 R&D professionals in R&D centres in Canada, Hong Kong and China. This network allows VTech to stay abreast of the latest technology and market trends throughout the world, while maintaining a highly competitive cost structure.

The Group invests significantly in R&D and launches numerous new products each year. VTech sells its products via a strong brand platform supported by an extensive distribution network of leading retailers in North America, Europe and Asia Pacific. Apart from the well-known VTech brand, the Group is licensed to design, manufacture and distribute AT&T branded wireline telephones and accessories in North America and China, as well as Telstra branded fixed-line telephones in Australia.

Web site: www.vtech.com

Source: FactSet. Prices rebased to 100 as at 1 April 2009.

* Capital return expressed in sterling.

	% of	Fair value
Country	net assets	£'000
Brazil	3.3%	63,616

Vale is one of the three largest metals and mining companies and one of the largest publicly traded companies in the world. It is the world's largest producer of iron ore and iron ore pellets, key raw materials for steelmaking, and the world's second largest producer of nickel, which is used to produce stainless steel and metal alloys employed in the production of aircraft, autos, mining and energy equipment, mobile phones, batteries, special batteries for hybrid electric vehicles and several other products.

The company also produces manganese, ferroalloys, thermal and coking coal, copper, cobalt, platinum group metals, and fertiliser nutrients, which are important raw materials for the global industrial and food production industries. Vale has a global presence, with locations in South America, North America, Europe, Africa, Asia and Oceania.

The share price appears to have declined disproportionately given the price of iron ore. Vale stands to gain from economic recovery in Europe, as well as continued weakness in the Brazilian real. Increased production with a focus on lowest cost mines may improve the competitiveness of iron ore experts.

Web site: www.vale.com

	% of	Fair value
Country	net assets	£'000
Pakistan	3.1%	59,893

MCB Bank is the most profitable bank in Pakistan, with 90% of its funding derived from low cost deposits. In 2013, MCB Bank benefited from positive investor sentiment in the country following the victory of opposition leader Nawaz Sharif as prime minister. The new government is much more open to attempts by MCB Bank and others to expand overseas or acquire domestic players to consolidate the sector. The bank has surplus equity capital available, which puts it in a good position for potential expansion. We are of the opinion that higher lending rates/investment yields and loan growth coupled with the low cost of credit for the bank could boost earnings going forward. The bank's superior asset quality, improving local business confidence and international expansion, as well as increased focus on branchless and Islamic banking, could further support the bank's performance.

Web site: www.mcb-bank.com

STATEMENT OF DIRECTORS' RESPONSIBILITIES

IN RESPECT OF THE ANNUAL REPORT

AND THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, International Accounting Standard 1 requires that Directors:

· properly select and apply accounting policies;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

· make an assessment of the Company's ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website (www.temit.co.uk). Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

· the financial statements, within this Annual Report, which have been prepared in accordance with IFRS give a fair, balanced and understandable view of the assets, liabilities, financial position and profit or loss of the Company for the year ended 31 March 2014; and

· the Chairman's Statement, Strategic Report and the Report of the Directors include a fair review of the information required by 4.1.8R to 4.1.11R of the FCA's Disclosure and Transparency Rules; and

· the Annual Report and Financial Statements taken as a whole are fair, balanced and understandable and provide the information necessary to assess the Company's performance, business model and strategy principal risks and uncertainties.

By Order of the Board

Peter Smith

Chairman

13 June 2014

INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2014

		Year ended						Year ended
		31 March 2014						31 March 2013
		Revenue		Capital		Total		Revenue		Capital	Total
	Note	£'000		£'000		£'000		£'000		£'000	£'000
Gains/(losses) on investments
and foreign exchange
Gains/(losses) on investments at fair value	5	-		(372,663	)	(372,663	)	-		206,127	206,127
Gains/(losses) on foreign exchange		-		(202	)	(202	)	-		155	155
Revenue
Dividends	1	60,227		-		60,227		59,546		-	59,546
Bank and deposit interest	1	141		-		141		67		-	67
		60,368		(372,865	)	(312,497	)	59,613		206,282	265,895
Expenses
Investment management fee	2	(19,870	)	-		(19,870	)	(20,796	)	-	(20,796	)
Other expenses	2	(6,068	)	-		(6,068	)	(6,043	)	-	(6,043	)
Profit/(loss) before taxation		34,430		(372,865	)	(338,435	)	32,774		206,282	239,056

Tax expense	3	(4,660	)	(721	)	(5,381	)	(4,949	)	-	(4,949	)
Profit/(loss) for the year		29,770		(373,586	)	(343,816	)	27,825		206,282	234,107
Profit/(loss) attributable to equity
holders of the Company		29,770		(373,586	)	(343,816	)	27,825		206,282	234,107
Earnings per share	4	9.14p		(114.65	)p	(105.51	)p	8.45p		62.67p	71.12p

Ongoing Charges Ratio						1.30%					1.30%

The capital element of return is not distributable.

The total column is the Income Statement of the Company.

The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

There is no other income for this year and therefore no separate statement of comprehensive income has been presented.

The Ongoing Charges Ratio (OCR) represents the annualised ongoing charges of the Company divided by the average of the daily net assets of the Company for the year, and has been prepared in accordance with the AIC's recommended methodology. From 1 July 2014 the Board has agreed reduction of 0.10% per annum in Franklin Templeton Investments fees.

Dividend Policy

In accordance with the Company's stated policy, no interim dividend is declared for the year.

An ordinary dividend of 7.25 pence per share is proposed at a cost of £23,381,000.

(An ordinary dividend of 6.25 pence per share was paid for the year ended 31 March 2013 at a cost of £20,456,000).

Further details can be found in Note 10.

BALANCE SHEET

AS AT 31 MARCH 2014

		As at		As at
		31 March 2014		31 March 2013
	Note	£'000		£'000
ASSETS
Non-current assets
Investments at fair value through profit or loss	5	1,853,554		2,277,465
Current Assets
Trade and other receivables	6	7,421		8,807
Cash		56,281		20,255
		63,702		29,062
Current Liabilities
Trade and other payables	7	(2,970	)	(3,807	)
Capital gains tax provision	3	(721	)	-
		(3,691	)	(3,807	)
NET ASSETS		1,913,565		2,302,720

ISSUED SHARE CAPITAL AND RESERVES
ATTRIBUTABLE TO EQUITY SHAREHOLDERS
Equity Share Capital	8	80,837		81,969
Capital Redemption Reserve		1,832		700
Special Distributable Reserve		433,546		433,546
Capital Reserve		1,298,542		1,697,011
Revenue Reserve		98,808		89,494
EQUITY SHAREHOLDERS' FUNDS		1,913,565		2,302,720

Net Asset Value per share (in pence)	9	591.8		702.3

These Financial Statements of Templeton Emerging Markets Investment Trust PLC (company registration number SC118022) were approved for issue by the Board and signed on 13 June 2014.

Peter Smith		Peter Harrison
Chairman		Director

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2014

	Equity		Capital	Special
	Share		Redemption	Distributable	Capital		Revenue
	Capital		Reserve	Reserve	Reserve		Reserve		Total
	£'000		£'000	£'000	£'000		£'000		£'000
Balance at 31 March 2012	82,453		216	433,546	1,501,792		80,633		2,098,640
Profit/(loss) for the year	-		-	-	206,282		27,825		234,107
Equity dividends	-		-	-	-		(18,964	)	(18,964	)
Purchase and cancellation of own shares	(484	)	484	-	(11,063	)	-		(11,063	)
Balance at 31 March 2013	81,969		700	433,546	1,697,011		89,494		2,302,720
Profit/(loss) for the year	-		-	-	(373,585	)	29,770		(343,815	)
Equity dividends	-		-	-	-		(20,456	)	(20,456	)
Purchase and cancellation of own shares	(1,132	)	1,132	-	(24,884	)	-		(24,884	)
Balance at 31 March 2014	80,837		1,832	433,546	1,298,542		98,808		1,913,565

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 MARCH 2014

	For the year to		For the year to
	31 March 2014		31 March 2013
	£'000		£'000
	(audited)		(audited)
Cash flows from operating activities
Profit/(loss) before taxation	(338,435	)	239,056
Adjustments for:
(Gains)/losses on investments at fair value	372,663		(206,127	)
Realised (Gains)/losses on foreign exchange	202		(155	)
Stock dividends received in year	(704	)	(393	)
Increase/(decrease) in debtors	1,871		(2,515	)
(Increase)/decrease in accrued income	-		1
Increase/(decrease) in creditors	(365	)	1,513
Cash generated from operations	35,232		31,380
Taxation paid	(4,660	)	(4,940	)
Net cash inflow from operating activities	30,572		26,440

Cash flows from investing activities
Purchases of non-current financial assets	(142,342	)	(46,729	)
Sales of non-current financial assets	192,614		63,547
	50,272		16,818
Cash flows from financing activities
Equity dividends paid (Note 10)	(20,456	)	(18,964	)
Purchase and cancellation of own shares	(24,362	)	(11,063	)
	(44,818	)	(30,027	)

Net increase in cash	36,026		13,231

Cash at the start of year	20,255		7,024
Cash at the end of year	56,281		20,255

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2014

1 Income	2014	2013
	£'000	£'000
Income from investments
Other overseas dividends	58,636	57,969
Other EU dividends	1,354	1,184
Stock dividends	237	393
	60,227	59,546
Other income
Deposit income	141	67
Total other income	141	67
Total income comprises:
Dividends	60,227	59,546
Interest	141	67
	60,368	59,613
Income from investments
Listed overseas	60,227	59,546

2 Expenses	2014	2013
	£'000	£'000
Investment management fee	19,870	20,796

Other Expenses
Secretarial and administration expenses	4,096	4,160
Custody fees	891	1,017
Directors' emoluments	271	271
Registrar fees	182	182
Auditors' remuneration
Audit of the annual financial statements	28	26
Other services pursuant to legislation:
- Half yearly financial report	5	5
- Non-audit work*	10	14
Legal fees**	148	18
Printing and postage costs	121	122
Membership fees	116	117
Other expenses	200	111
Total other expenses	6,068	6,043

* Fee in respect of advice in relation to the Alternative Investment Fund Managers Directive. The prior year amount was for expenses in respect of advice in relation to the New Zealand Dual Listed Issuers Exemption.

**Including professional fees relating to AIFMD amounting to £109,000 (2013: none).

The Company's Investment Manager is Templeton Asset Management Ltd. ("TAML").

The contract between the Company and TAML may be terminated at any date by either party giving one year's notice of termination. TAML receives a fee paid monthly in arrears, at an annual rate of 1.00% of the monthly trading total net assets of the Company. As at 31 March 2014, £1,584,000 (31 March 2013: £1,940,000) in fees were payable and outstanding to TAML.

The Company obtains secretarial and administration services from Franklin Templeton Investment Management Limited ("FTIML") pursuant to a secretarial and administration agreement (which is terminable by either party giving one year's notice to the other). As at 31 March 2014, £317,000 (31 March 2013 : £388,000), in fees were payable and outstanding to FTIML.

Management fees and secretarial and administration fees outstanding relate to the fees payable for the month to 31 March 2014. These were paid in full in April 2014.

Fees in respect of services as Directors are paid by the Company only to those Directors who are independent of Franklin Templeton Investments. Included within these costs are Employer National Insurance contributions.

As described in the Directors' Report, the Company intends to replace TAML and FTIML with FTIS S.à r.l. who will act as the Alternative Investment Fund Manager, and Secretary and Administrator.

3 Tax on ordinary activities	2014		2013
	£'000		£'000
Overseas tax	5,208		4,940
Deferred tax	721		-
Adjustment in respect of prior periods	(548	)	9
Current tax	5,381		4,949

Taxation	2014		2013
	£'000		£'000
Profit/(loss) before taxation	(338,435	)	239,056
Theoretical tax at UK corporation tax rate of 23% (2013: 24%)	(77,840	)	57,373
Effects of:
- Capital element of profit	85,759		(49,508	)
- Irrecoverable overseas tax	5,208		4,940
- Excess management expenses	3,137		3,386
- Movement in overseas capital gains tax liability	721		-
- Non deductible expenses	19		-
- Dividends not subject to corporation tax	(10,453	)	(10,531	)
- Prior period adjustments to tax	(548	)	9
- Overseas tax expensed	(507	)	-
- Income taxable in different periods	(115	)	(729	)
- Non taxable revenue	-		9
Actual tax charge	5,381		4,949

As at 31 March 2014, the Company had management expenses of £58.6 million which can be utilised against future taxable income (2013: £44.9 million). These balances have been generated because a large part of the Company's income is derived from dividends which are no longer taxable. Based on current UK tax law, the Company is not expected to generate taxable income in a future period in excess of deductible expenses for that period and, accordingly, is unlikely to be able to reduce future tax liabilities by offsetting these excess management expenses. These excess management expenses are therefore not recognised as a deferred tax asset.

Movement in provision for deferred tax	2014	2013
	£'000	£'000
Balance brought forward	-	-
Charge for the year	721	-
Balance carried forward	721	-
Provision consists of:
- Overseas capital gains tax liability	721	-
	721	-

A provision for deferred capital gains tax has been recognised in relation to short-term unrealised gains on Indian holdings.

4 Earnings per share

		2014					2013
	Revenue	Capital		Total		Revenue	Capital	Total
	£'000	£'000		£'000		£'000	£'000	£'000
	29,770	(373,586	)	(343,816	)	27,825	206,282	234,107

Earnings per share
		2014					2013
	Revenue	Capital		Total		Revenue	Capital	Total
	pence	pence		pence		pence	pence	pence
	9.14	(114.65	)	(105.51	)	8.45	62.67	71.12

The earnings per share is based on the profit/(loss) on ordinary activities after tax and on the weighted average number of shares in issue during the year of 325,840,591 (year to 31 March 2013: 329,135,381).

5 Financial Assets - Investments	2014		2013
	£'000		£'000
Opening investments	2,277,465		2,087,608
Movements in year:
Purchases	142,053		47,122
Sales	(193,301	)	(63,392	)
Realised profits	128,664		47,593
Net (depreciation)/appreciation	(501,327	)	158,534
Closing investments	1,853,554		2,277,465

All investments have been recognised at fair value through the Income Statement.

Transaction costs for the year on purchases were £347,000 (2013: £71,000) and transaction costs for the year on sales were £583,000 (2013: £183,000). The aggregate transaction costs for the year were £930,000 (2013: £254,000).

Realised and unrealised gains on investments comprise of:
Realised gain based on carrying value at 31 March 2014	128,664		47,593
Net movement in unrealised (depreciation)/appreciation	(501,327	)	158,534
Realised and unrealised (losses)/gains on investments	(372,663	)	206,127

6 Trade and other receivables	2014	2013
	£'000	£'000
Dividends receivable	6,507	8,619
Sales awaiting settlement	485	-
Overseas tax recoverable	415	179
Other debtors	14	9
	7,421	8,807


7 Trade and other payables	2014	2013
	£'000	£'000
Accrued expenses	2,448	2,813
Other creditors	522	-
Purchase of investments awaiting settlement	-	994
	2,970	3,807

8 Called-up share capital	2014				2013
	Allotted, issued &				Allotted, issued &
	fully paid				fully paid
	£'000		Number		£'000		Number
Shares of 25p each
Opening balance	81,969		327,874,892		82,453		329,814,352
Shares repurchased during the year	(1,132	)	(4,525,000	)	(484	)	(1,939,460	)
Closing balance	80,837		323,349,892		81,969		327,874,892

The Company's shares have unrestricted voting rights at all general meetings, are entitled to all of the profits available for distribution by way of dividend, and are entitled to repayment of all of the Company's capital on winding up.

During the year, 4,525,000 shares were bought back for cancellation at a cost of £24,884,000 (2012: 1,939,460 shares were bought back for cancellation at a cost of £11,100,000).

9 Net asset value per share	Net asset value		Net asset value
	per share		attributable
	2014	2013	2014	2013
	pence	pence	£'000	£'000
Shares	591.8	702.3	1,913,565	2,302,720

10 Dividend	2014		2013
	Rate (pence)	£'000	Rate (pence)	£'000
Declared and paid in the year
Dividend on shares:
Final dividend for year	6.25	20,456	5.75	18,964
		20,456		18,964
Proposed for approval at the Company's AGM
Dividend on shares:
Final dividend for the year ended 31 March 2014
(31 March 2013: 6.25p)	7.25	23,381
		23,381

Dividends are recognised when the shareholders right to receive the payment is established. In the case of the final dividend, this means that it is not recognised until approval is received by shareholders at the Annual General Meeting.

11 Related party transactions

The following are considered to be related parties:

- Templeton Asset Management Ltd. ("TAML")

- Franklin Templeton Investment Management Limited ("FTIML")

- The Directors of the Company

All material related party transactions, as set out in International Accounting Standard 24 Related Party, have been disclosed in the Directors' Report and Note 2.

Other funds managed by TAML may be investors in the same securities as the Company.

12 Risk Management

In pursuing the Company objective of this Report the Company holds a number of financial instruments which are exposed to a variety of risks that could result in either a reduction in the Company's net assets or a reduction of the profits available for dividends.

The main risks arising from the Company's financial instruments are market risk (which comprises market price risk, foreign currency risk and interest rate risk), other price risk, liquidity risk and credit risk.

The objectives, policies and processes for managing these risks, and the methods used to measure the risk, are set out below. These policies have remained unchanged since the beginning of the year to which these financial statements relate.

Investment and concentration risk

The Company may invest a greater portion of its assets in the securities of one issuer, securities domiciled in a particular country, or securities within one industry group than other types of fund investments. As a result, there is the potential for increased concentration of exposure to economic, business, political or other changes affecting similar issues or securities, which may result in greater fluctuation in the value of the portfolio.

Market price risk

Market risk arises mainly from uncertainties about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements.

The Directors meet quarterly to consider the asset allocation of the portfolio in order to minimise the risk associated with particular countries or industry sectors whilst continuing to follow the investment objectives. The Investment Manager has responsibility for monitoring the existing portfolio selected in accordance with the overall asset allocation parameters described above and seeks to ensure that individual stocks also meet the risk/reward profile on an ongoing basis.

The Investment Manager does not use derivative instruments to hedge the investment portfolio against market price risk, as in its opinion, the cost of such a process would result in an unacceptable reduction in the potential for capital growth.

Foreign currency risk

Currency translation movements can significantly affect the income and capital value of the Company's investments as the majority of the Company's assets and income are denominated in currencies other than sterling, which is the Company's functional currency.

The Investment Manager has identified three principal areas where foreign currency risk could affect the Company:

- movements in rates affect the value of investments;

- movements in rates affect short-term timing differences; and

- movements in rates affect the income received.

The Company does not hedge the sterling value of investments that are priced in other currencies.

The Company may be subject to short-term exposure to exchange rate movements, for instance where there is a difference between the date an investment purchase or sale is entered into and the date on which it is settled.

The Company receives income in currencies other than sterling and the sterling values of this income can be affected by movements in exchange rates. The Company converts all receipts of income into sterling on or near the date of receipt; it, however, does not hedge or otherwise seek to avoid rate movement risk on income accrued but not received.

The fair value of the Company's monetary items that have foreign currency exposure at 31 March are shown below:

2014	Trade and			Trade and		Total net		Investments at
	other	Cash		other		foreign currency		fair value through
	receivables	at bank		payables		exposure		profit or loss
Currency	£'000	£'000		£'000		£'000		£'000
US dollar	1,343	-		-		1,343		449,227
Hong Kong dollar	-	-		-		-		421,966
Thai baht	1,549	-		-		1,549		240,580
Indian rupee	444	-		(721	)	(277	)	227,585
Indonesian rupiah	203	-		-		203		126,244
Turkish lira	830	-		-		830		94,579
Other	3,038	(485	)	-		2,553		289,563

2013	Trade and			Trade and		Total net		Investments at
	other	Cash		other		foreign currency		fair value through
	receivables	at bank		payables		exposure		profit or loss
Currency	£'000	£'000		£'000		£'000		£'000
US dollar	2,311	957		(994	)	2,274		539,341
Hong Kong dollar	-	-		-		-		472,492
Thai baht	2,024	-		-		2,024		337,620
Indonesian rupiah	43	-		-		43		234,552
Indian rupee	574	-		-		574		209,708
Turkish lira	1,314	-		-		1,314		162,180
Other	2,533	-		-		2,533		321,572

Sensitivity

The following table illustrates the sensitivity of the profit after taxation for the year and the equity in regard to the Company's monetary financial assets and liabilities and its equity if sterling had strengthened by 10% relative to all currencies on the reporting date, with all other variables held constant.

		2014			2013
			Capital			Capital
	Revenue		Return	Revenue		Return
Financial Assets and Liabilities	£'000		£'000	£'000		£'000
US dollar	1,935		44,923	1,785		53,934
Hong Kong dollar	1,198		42,197	1,115		47,249
Thai bhat	907		24,058	903		33,762
Indian rupee	382		22,759	383		20,971
Indonesian rupiah	417		12,624	434		23,455
Turkish lira	516		9,458	679		16,218
	5,355		156,019	5,299		195,589

A 10% weakening of the sterling against the above currencies would have resulted in an equal and opposite effect on the above amounts.

Interest rate risk

The Company is permitted to invest in fixed rate securities. Any change to the interest rates relevant to particular securities may result in either income increasing or decreasing, or the Investment Manager being unable to secure similar returns on the expiry of contracts or the sale of securities. In addition, changes to prevailing rates or changes in expectations of future rates may result in an increase or decrease in the value of the securities held.

Interest rate risk profile

The majority of the Company's financial assets are non-interest bearing equity investments.

The carrying amount, by the earlier of contractual re-pricing or maturity date, of the Company's financial instruments was as follows:

	Within	Within
	one year	one year
	2014	2013
	£'000	£'000
Cash flow interest rate risk
Cash	56,281	20,255

Exposures vary throughout the year as a consequence of changes in the make up of the net assets of the Company.

Cash balances are held on call deposit and earn interest at the bank's daily rate.

There were no exposure to fixed interest investment securities during the year or at the year end.

Liquidity risk

The Company's assets comprise mainly of securities listed on the stock exchanges of emerging economies. Liquidity can vary from market to market and some securities may take longer to sell. As a closed ended investment trust, liquidity risks attributable to the Company are less significant than for an open ended fund.

The risk of the Company not having sufficient liquidity at any time is not considered by the Board to be significant, given the large number of quoted investments held in the portfolio and the liquid nature of the portfolio of investments.

The Investment Manager reviews liquidity at the time of making each investment decision and monitors the evolving liquidity profile of the portfolio regularly.

Investments held by the Company are valued in accordance with the accounting policies at bid price. Other financial assets and liabilities of the Company are included in the balance sheet at fair value.

Credit risk

Certain transactions in securities that the Company enters into expose it to the risk that the counter-party will not deliver the investment (purchase) or cash (in relation to sale or declared dividend) after the Company has fulfilled its responsibilities. The Company only buys and sells through brokers which have been approved by the Investment Manager as an acceptable counter-party. In addition, limits are set as to the maximum exposure to any individual broker that may exist at any time. These limits are reviewed regularly.

The amount of credit risk that the Company is exposed to is disclosed under interest rate risk profile and represents the maximum credit risk at the Balance Sheet date.

The Company has an ongoing contract with its custodian (JPMorgan Chase Bank) for the provision of custody services.

As part of the annual risk and custody review, the Company reviewed the custody services provided by JPMorgan Chase Bank and concluded that while there are inherent custody risks in investing in emerging markets, the custody network employed by TEMIT has appropriate controls in place to mitigate those risks, and that these controls are consistent with recommended industry practices and standards.

Securities held in custody are held in the Company's name or to its accounts. Details of holdings are received and reconciled monthly. Cash is actively managed by Franklin Templeton Investment's Trading Desk in Edinburgh and is typically invested in overnight time deposits in the name of TEMIT with an approved list of counterparties. Any excess cash not invested by the Trading Desk will remain in a JPMorgan Chase interest bearing account. There is no significant risk on debtors and accrued income (or tax) at the year end.

Fair Value

Fair values are derived as follows:

- Where assets are denominated in a foreign currency, they are converted into the sterling amount using year-end rates of exchange.

- Non-current financial assets - on the basis set out in the accounting policies.

- Cash - at the face value of the account.

The tables below analyse financial instruments carried at fair value by valuation method. The different levels have been defined as follows:

Level 1 Quoted prices (unadjusted) in active markets for identical assets and liabilities.

Level 2 Inputs other than quoted prices included with level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices).

Level 3 Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Valuation hierarchy fair value through profit and loss

		31 March 2014				31 March 2013
£'000	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Listed investments	1,853,554	-	-	1,853,554	2,277,465	-	-	2,277,465

13 Significant Holdings in investee undertakings

As at 31 March 2014 the Company held 3% or more in the issued share capital of the following companies:

	% of issued	Fair	% of issued	Fair
	share capital*	value	share capital*	value
Name	2014	£'000	2013	£'000
Brilliance China Automotive	3.8	173,601	5.3	205,849
VTech	3.5	64,181	3.3	66,923
MCB Bank	6.7	59,893	3.5	44,785
Guangzhou Automobile Group, H	3.3	48,945	3.5	43,554
Hyundai Development	5.6	44,506	3.5	39,992
Victory City International	3.5	10,193	6.9	9,745
Univanich Palm Oil	3.5	9,340	5.0	11,662
Peninsula Land	5.0	4,995	5.6	6,901

* This is the percentage of the class of security held by TEMIT.

14 Contingent Assets and Liabilities

No contingent assets or liabilities existed as at 31 March 2014 or 31 March 2013.

15 Financial Commitments

There were no financial commitments at 31 March 2014 or 31 March 2013.

16 Post Balance Sheet events

The only material post balance sheet event is in respect of the proposed dividend, which has been disclosed in Note 10.

This preliminary statement was approved by the Board on 13 June 2014. The financial information set out above does not constitute the Company's statutory accounts. This Preliminary Statement has been prepared on the basis of the accounting policies as set out in the most recently published set of annual financial statements.

The statutory accounts for the financial period ended 31^st March 2013 have been delivered to the Registrar of Companies, received an audit report which was unqualified, did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section 498(2) and (3) of the Companies Act 2006.

The statutory accounts for the period ended 31 March 2014 received an audit report which was unqualified, did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section section 498(2) and (3) of the Companies Act 2006, and will be delivered to the Registrar of Companies.

The Annual Report and Accounts will be mailed to Shareholders shortly. 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.

Stephen Westwood (Investor Relations) +44 (0) 7533 178 381 or Joe Winkley at Winterflood (Corporate Broker) on + 44 (0) 20 3100 0301.

This information is provided by RNS

The company news service from the London Stock Exchange

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