Statement of Annual Results

RNS Number : 8301T

Templeton Emerging Markets IT PLC

12 June 2009

 

Statement of Annual Results 

TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC

("TEMIT") (the "Company")

YEAR TO 30 APRIL 2009

The Company today announced its annual results for the year to 30 April 2009.

FINANCIAL SUMMARY

2008-2009

	Ref	Year Ended	Year Ended
		30 April	30 April	Change
		2009	2008	%
Net Assets and Shareholders' Funds (£ million)	a	1,208.3	2,291.4
Net Asset Value (pence per Ordinary Share)		365.65	484.77	-24.6
Net Asset Total Return		-23.5%	35.7%
Benchmark
MSCI Emerging Markets Index		-23.4%	27.0%
Share Price (pence)		340.50	438.00	-22.3
Share Price Total Return		-21.2%	34.6%
Year - High (pence)		467.00	485.50
Year - Low (pence)		207.50	324.75
Ordinary Dividend (pence per Ordinary Share) - proposed		3.75	3.50	7.1
Special Dividend (pence per Ordinary Share) - proposed		2.50	-
Total Dividend (pence per Ordinary Share) - proposed		6.25	3.50	78.6
Revenue Earnings (pence per Ordinary Share)	b	7.69	4.07	88.9
Share Price Discount to Net Asset Value		6.9%	9.6%
Total Expense Ratio	c	1.34%	1.33%
Total Expense Ratio excluding tender offer costs charged to Revenue	d	1.25%	-

Source: Franklin Templeton Investments and Datastream.

The Company has prepared its financial statements in accordance with International Financial Reporting Standards ("IFRS") for the year ended 30 April 2009 and 30 April 2008.

a. £611.2 million of the drop in net assets is in respect of the tender offer in June 2008.

b. The Earnings per Ordinary Share figure is based on the earnings shown in the "Revenue" column in the Income Statement, see Note 5 of the Notes to the Financial Statements.

c. The Total Expense Ratio represents the annualised total expenses of the Company divided by the monthly average trading net assets of the Company for the year.

d. As stated in Note 3, expenses of £1.3 million associated with the tender offer have been charged as a revenue expense in other expenses; and VAT recovered together with associated interest totalling £2.4 million has been credited to revenue.

TEN YEAR RECORD

1999-2009

Year	1999	2000	2001	2002	2003	2004	2005*	2006	2007	2008	2009
Ended
30 April
Net
Assets and
Shareholders'
Funds (£m)	721.6	749.9	619.0	666.2	595.5	778.5	1,066.0	1,866.2	1,925.5	2,291.4	1,208.3
NAV Basic (pence)	153.29	159.25	135.66	146.24	130.82	171.01	198.88	348.18	359.24	484.77	365.65
NAV Diluted (pence)	149.95	154.93	135.21	144.00	N/A	164.58	N/A	N/A	N/A	N/A	N/A
Price - Ordinary (pence)	129.00	116.25	113.50	125.00	107.25	144.00	167.25	310.25	327.25	438.00	340.50
Price - Warrants (pence)	37.00	22.00	17.00	17.50	3.75	13.25	N/A	N/A	N/A	N/A	N/A
Discount (%)	15.8%	27.0%	16.3%	14.5%	18.0%	15.8%	15.9%	10.9%	8.9%	9.6%	6.9%
Revenue Earnings per share
Undiluted (pence)	1.68	1.34	1.36	1.82	1.70	2.89	3.42	3.65	4.16	4.07	7.69
Revenue Earnings per share
Diluted (pence)	1.40	1.12	1.13	1.51	N/A	2.88	N/A	N/A	N/A	N/A	N/A
Ordinary Dividends per
Ordinary Share (pence)	1.10	1.10	1.25	1.25	1.25	2.25	2.25	2.67	3.13	3.50	3.75
Special Dividends per
Ordinary Share (pence)	-	-	-	-	-	-	-	-	-	-	2.50
Total Expense Ratio	1.18%	1.57%	1.61%	1.34%	1.49%	1.48%	1.50%	1.41%	1.32%	1.33%	1.34%

* Prior to April 2005 the results were prepared in accordance with UK GAAP. The results for the year ended 30 April 2005 have been restated in accordance with IFRS.

The main differences as a result of adopting IFRS are:

• 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. A dividend of 3.75p per share and a special dividend of 2.50p per share on the Company's profits of 2009 have been proposed.

CHAIRMAN'S STATEMENT

Background

This year Templeton Emerging Markets Investment Trust PLC ("TEMIT" or the "Company") celebrates the 20th anniversary of its flotation in 1989. These two decades have seen periods of major market volatility, but throughout these cycles, Templeton Asset Management Limited ("the Investment Manager") has remained consistent in its investment approach focused on investing for long-term growth, in good quality, undervalued emerging market companies.

The deepening recession, which started in the US in 2008, rapidly spread across the world and has provided significant challenges for both developed and emerging market investors. The dramatic falls in developed markets resulted in investors becoming much more risk averse and consequently nearly all emerging markets suffered as investors moved their assets to perceived safe havens. Over the Company's financial year the MSCI Emerging Markets Index total return fell (in sterling terms) by 23.4%, while the UK (as measured by the FTSE All-Share Index) fell by 26.9% (in sterling terms) and the US (as measured by the S&P 500 Index) fell by 35.3% (in dollar terms).

However daunting the current environment may seem, market downturns have historically been shorter than the periods of strong capital growth that have followed. Your Board believes that the current market volatility offers exciting opportunities for the Investment Manager to buy into good quality companies at attractive prices, to the long term benefit of shareholders. The Manager's Report and Portfolio Review sets out more detail about the historic performance and future opportunities available.

Performance

Against this background described above, TEMIT's Net Asset Value (NAV) declined in sterling terms from 484.8 pence at 30  April 2008 to 365.7 pence at 30 April 2009, a decrease of 24.6%. The decline took place in the first half of the financial year, with a fall of 42.1% being reported in our interim accounts. The low point was in October and since 31 October 2008 the NAV has risen by 30.3%.

The TEMIT share price at 30 April 2009 was 340.5 pence, compared with 438.0 pence at the beginning of the financial year, a decrease of 22.3%.

The NAV total return for the Company for the financial year, including dividends re-invested, was a decrease of 23.5%. Over the same period, the MSCI Emerging Markets Index fell by 23.4% (in sterling terms). Exchange rates in two of the largest currency exposures, US dollar and Hong Kong dollar, appreciated nearly 30% against sterling over the period which benefited overall performance.

Pleasingly, the portfolio has recovered strongly since the year end and by 5 June 2009, the NAV per share had risen by 15.3% to 421.6 pence and the share price rose by 14.2% to 388.75 pence.

TEMIT's total assets at the year end were £1,208 million compared to £2,291 million at 30 April 2008 a fall of £1,083 million. £611.2 million of the reduction resulted from the return of capital to shareholders during the year through the tender offer.

The Company's discount narrowed during the year, decreasing from 9.6% initially to 6.9% at the end of the year. Since the completion of the tender, the discount has generally been in the range of 3% to 9%.

Even though this has been a very challenging year, I am pleased that TEMIT's record has again been recognised by independent financial publications, winning the Investment Week Investment Trust of the Year Award 2008 in the emerging markets category and being Highly Commended in the emerging markets category for both the Money Observer 2008 and the Moneywise 2009 Investment Trust Awards.

Investment in emerging markets is a long-term financial commitment. Over the five years to 30 April 2009, the total return of the Company, in sterling terms with dividends re-invested, was 146%, compared with a rise in the MSCI Emerging Markets Index of 106% (in sterling terms). Indeed, over the twenty years since launch, in June 1989, the figures are even more impressive with the total return of the Company, in sterling terms with dividends re-invested, being 1,089% compared with a rise of 585% for the MSCI Emerging Markets Index (in sterling terms). The continuing long-term out-performance of your Company is a major reason we believe it remains an attractive vehicle for investment in this asset class.

Asset allocation

At the year end, 98% of the Company's total assets were invested in equities, with the remaining 2% being held in liquid assets. The general policy of the Board is to be fully invested.

Continuation vote

In accordance with the terms of the Company's Articles of Association, every five years your Board must seek shareholders' approval for TEMIT to continue as an investment trust. The continuation vote will take place at the AGM on 17 July 2009.

You can vote for or against the continuation by completing the relevant proxy form, voting on-line or attending the AGM in person. If you are voting by proxy or on-line, your votes must be received by 12.00noon on 15 July 2009 and by 4.00pm on 14 July 2009 (NZ time) for NZ Shareholders.

There are strong reasons for the continuation of your Company:

• TEMIT is the UK's largest emerging markets investment trust, offering shareholders an easy and relatively liquid means of investing in emerging markets.

• Emerging markets still offer investors strong long-term growth potential. Countries like India and China are delivering strong economic growth and new investment opportunities are continually becoming available, as markets expand and new countries open for investment.

• The Company's Investment Manager, Templeton Asset Management Limited, is large and experienced, with an enviable track record of managing emerging market investments for long-term growth. For example, over the five year period to 30 April 2009 TEMIT returned 146% compared to a rise in the MSCI Emerging Markets Index of 106% and the UK FTSE All-Share Index of 15.5% (figures are based in sterling, including dividends reinvested).

• The discount on the Company's shares has stabilised since the tender offer last June, trading generally in a range of 3% to 9%.

Your Board believes that it is in the best interests of shareholders to vote in favour of the continuation of TEMIT for a further five years and recommends all shareholders do so. The Directors intend to vote in favour of continuation in respect of their own shareholdings.

Please see the letter accompanying this Report for more information.

Share buy-backs

During the year, the Board has kept the Company's discount under continual review and exercised its right to buy back shares when it believed that this was in shareholders' best interests. 141.8 million shares were bought back and cancelled through the tender offer (representing 30.0% of the shares in issue at 30 April 2008) for a total cost to the Company of £611.2 million. During the year a further 0.4 million shares were bought back for a total cost to the Company of £1.4 million. Together, these contributed to an uplift to the NAV per share of 1.7%.

VAT

Following the outcome of a recent European Court of Justice case, HM Revenue & Customs accepted that management fees charged to investment trusts should be exempt from VAT. The Company had lodged protective claims to recover VAT historically overcharged, and I am pleased to report that we have now received £2.4 million of VAT and associated interest. This has been credited to Revenue, contributing to an uplift in Revenue profits. The Company may receive some additional repayments but as the amounts and likely repayment dates are currently uncertain, no account of any credit for them has yet been taken.

Dividend

Although TEMIT is primarily a vehicle for capital growth, the Board's policy is to have a relatively full distribution of the Company's revenues. To this end, the Board has proposed an ordinary dividend of 3.75 pence per Ordinary Share (2008: 3.50 pence). This represents an increase of 7.1% on 2008. In addition, the Board proposes to pay a special dividend of 2.50 pence per Ordinary Share. This special dividend includes the income accrued from the start of the period under review up to the tender offer date and attributable to the tendered shares then cancelled through the tender offer.  The special dividend also includes the VAT and related interest recovered in the year, as a result of the European Court of Justice case.

Next Annual General Meeting (AGM)

With a view to providing shareholders with more timely information, your Board has decided to bring forward the date of the Company's AGM to Friday 17  July 2009. This allows the meeting to take place much closer to the publication of the Annual Report and Accounts than in previous years. As in previous years, the meetings will include a presentation by Dr Mark Mobius and team on emerging markets investment and the current outlook.

This year's meeting will be held in the Mountbatten Room, the Royal Automobile Club, 89 Pall Mall, London SW1Y 5HS at 12.00 noon.

The Board

As previously announced, we welcomed Hamish Buchan to the Board on 26 June 2008 with Peter Godsoe retiring as a Director on the same date. I thank Peter for his contribution to the Company over the past five years.

Neil Collins and Gregory Johnson will be recommended to shareholders for re-election at the AGM on 17 July 2009.

The Board continually evaluates its performance and following the annual Directors' appraisal process, and on the recommendation of the Nomination Committee, the Board has approved both of the Directors standing for re-election.

Communication with Shareholders

The Board aims to keep shareholders informed and up to date with information about the Company. We recognise that shareholders, especially those who hold their shares through nominee accounts, can find it difficult to find out the most up-to date news about TEMIT. We send you the annual and half year report and accounts and notices of any significant company events. We also release information to the stock exchanges, such as Interim Management Statements.

Our website (www.temit.co.uk) is updated with all the latest news, price and performance information, portfolio updates and also quarterly webconferences. Last year we also launched a subscribe by email service, enabling you to automatically receive updates when they appear on the website.

I encourage all shareholders to register on our website and make full use of the facilities and materials available to help you keep informed about your Company.

Outlook

In sharp contrast to the developed world, many emerging economies are still growing, albeit at a slower rate than in recent years. In general, they are in a much stronger macroeconomic and financial position than their developed market counterparts. They are frequently resource rich and their citizens are generally enjoying rising per capita incomes, resulting in expanding middle classes and increasing domestic consumption. Currently, equity valuations are far from stretched and good quality companies can be bought at attractive valuations. Your company is extremely well positioned to benefit from these considerations and your Board view the future with some confidence.

I hope that you will be able to attend our AGM at which the Manager will make a short presentation and, with some of my fellow Directors, I look forward to the opportunity of meeting you.

Peter A Smith

12 June 2009

Indices above are shown on a total return basis in GBP. Sources: Franklin Templeton Investments and Standard & Poors.

MANAGER'S REPORT AND PORTFOLIO REVIEW

30 APRIL 2009

MANAGEMENT COMPANY

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

TAML is part of Franklin Templeton Investments, 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 over 20 years ago. Today, the TAML Emerging Markets Team manages US$19  billion in emerging markets assets for retail, institutional and professional investors across the globe.

The TAML Emerging Markets Team, headed by Dr Mark Mobius, is one of the largest of its kind. It includes 39 dedicated emerging markets portfolio managers, analysts and product specialists. Their on-the-ground presence in 15 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, including Allan Lam, Tom Wu, Dennis Lim, Carlos Hardenberg, and Grzegorz Konieczny have worked alongside Mark Mobius for a number of years.

TAML's Emerging Markets Team receives additional support from the professionals of Franklin Resources Inc., its ultimate parent company and its subsidiaries.

MARKET OVERVIEW

Global emerging markets experienced significant volatility in the past 12 months. Having started the period on a positive note, global equities, including emerging market companies, began a downward trend in June. Extreme risk aversion led to a drying up of liquidity, tight credit conditions, problems for highly leveraged companies, and high volatility in global stock markets.

Recognising the severity of the credit crunch, governments globally implemented fiscal stimuli to support their domestic economies and ease liquidity conditions. Markets subsequently started to recover in March 2009, as investors began to focus on the fundamentals and attractive valuations of individual companies, leading to positive inflows into emerging markets. This led markets to recuperate some of the losses recorded in the earlier part of the period. As at the end of April, 2009, the MSCI Emerging Markets Index had risen 32.6% from its low on 3rd March, 2009. For the 12-month period, however, it was still down 23.4% in sterling terms.

Eastern European markets were especially affected as investors became concerned about the financial state of European banks and their Eastern European subsidiaries. Asian markets outperformed their emerging market counterparts as regional economies continued to record relatively higher growth rates. Asia's high foreign reserves, huge consumer base and significant economic presence, provided investors with reasons to remain positive on the region's potential. In Latin America, the Brazilian market was adversely affected by lower commodity prices. However, the country's solid fiscal management policies, high foreign exchange reserves and vast natural resources of oil, iron ore and agricultural products lead us to maintain a positive view on the region's leading economy. Mexico also underperformed, due to its close economic ties with the US economy. South Africa was one of the best performing markets in sterling terms during the reporting period, in large part due to a stronger rand.

  PERFORMANCE ATTRIBUTION ANALYSIS

Year to 30 April 2009

	%
NAV total return for the year	-23.5
MSCI Index total return	-23.4
Relative return	-0.1
Sector allocation	-6.6
Stock selection	3.0
Total Equities	-3.6
Currency	2.1
Buybacks	1.7
Expenses charged to capital	-0.3
Relative performance	-0.1

Source: Factset and Franklin Templeton

PERFORMANCE ATTRIBUTION

The Company's performance, relative to the MSCI Emerging Markets Index, benefited significantly from good stock selection in China. Overweight positions and good stock selection in Turkey and Indonesia further enhanced relative performance. By sector, good stock selection in banks and overweight positions in automobile & components and food & staples retailing companies supported performance.

An overweight exposure to the Brazilian real and Hong Kong dollar contributed significantly to relative performance, due to their appreciation in the latter part of the period.

The largest contributors to performance in Singapore were overweight exposures to Dairy Farm, whose core businesses consist of supermarkets, hypermarkets as well as health & beauty, convenience and home furnishing stores, and in China Vtech Holdings, one of the world's major manufacturers and distributors of cordless telephones and other telecommunication products.

In Turkey, the Company's holdings in Akbank, one of the country's leading banks, and Turkcell, the major provider of mobile communications services, had the largest positive attribution effects.

In Indonesia, overweight positions in Astra, a major car and motorcycle company in the country, and Bank Central Asia, one of the country's biggest banks, as well as our zero exposure to the underperforming Bumi Resources, an energy and mining company, contributed positively to performance. By sector, good stock selection in banks and overweight positions in automobile & components and food, staples and retailing companies supported performance.

Conversely, detractors to relative performance included underweight positions in South Africa and Taiwan, as well as overweight exposures to Pakistan and Thailand. By sector, holdings in materials companies were the largest detractors, while underweight positions in the semiconductors and pharmaceutical sectors also detracted from performance.

The Company's absence from outperforming stocks such as Remgro, an industrial conglomerate, and Anglogold Ashanti, a global gold producer, were the largest detractors in South Africa. TEMIT did not hold these two companies as it has already had exposure to the sector through its holding in Anglo American. While Anglo American was a detractor due to a correction in commodity prices during the period, the manager remained confident of its longer-term prospects. The company is well positioned to benefit from continuing demand for raw materials in emerging markets as well as a recovery in metal prices.

Underweight positions in Taiwan Semiconductor Manufacturing (TSMC), the world's biggest independent integrated circuit foundry, and Novatek Microelectronics, the largest LCD driver integrated circuit supplier in the country, also led to negative attribution effects.

An overweight exposure to the Pakistani Banks, Faysal Bank and MCB Bank, as well as the Thai companies, Land & Houses, a real estate developer in Bangkok and Chiangma, and PTT, Thailand's only fully-integrated gas company, resulted in the largest negative attribution effects in those markets. In Taiwan, the Company increased its holdings in Novatek during the period, while added exposure to Taiwan Semiconductor Manufacturing, because of the improved political situation and the continuing consolidation of the technology sector. Remaining confident of the long-term potential of its holdings in PTT, Land & Houses, Faysal Bank and MCB Bank, the Company increased its holdings in these stocks as recent market corrections providing an attractive buying opportunity.

PORTFOLIO CHANGES & INVESTMENT STRATEGIES

The Company's search for undervalued stocks trading at attractive valuations led to selective investments in the diversified metals & mining, IT consulting, diversified banking and semiconductors sectors.

Despite being hurt by the decline in commodity prices, many raw material companies are still profitable at current price levels. While commodity prices have come down from their peaks, we believe commodities will trend upwards over the long term. This is, in part, because of continued demand from emerging markets (despite slower economic growth) and relatively inelastic supply. We believe that commodity companies should remain profitable and constitute attractive investment opportunities. Taking a long-term view, we continue to like the metals sector. Major purchases included Sesa Goa, a leading Indian iron ore miner and exporter, Anglo American, an international resources group, and Aluminum Corporation of China (Chalco), China's leading producer of alumina and primary aluminium products.

The continued liberalisation of the financial sector in emerging markets could unlock hidden value and allow banks to benefit from the growing financial needs of consumers in the region. Key purchases included Bank Danamon and Bank Central Asia in Indonesia and Faysal Bank and MCB Bank in Pakistan. These emerging markets banks focus mainly on their domestic businesses. While trade finance may be impacted by slower exports, they do not have any significant exposure to the sub-prime or collateralised debt obligation problems in the US. These banks benefit from the rapidly growing consumer credit business especially when their governments initiate efforts to encourage local consumption.

The continued trend of outsourcing of services to Indian consulting companies should lead to higher corporate earnings. Thus, exposure to the sector was increased via the purchase of Tata Consultancy and Infosys Technologies, two major IT consulting companies in India.

Selective additions were also made in consumer-related sectors such as consumer electronics, automobile manufacturing and food retail. In emerging markets the long-term outlook for consumerism remains attractive due to relatively higher per capita income growth and continued demand for consumer goods and services. Key investments included Victory City Industrial Holdings, Vtech Holdings, Denway Motor, which has a joint venture with Honda Motor for the production and selling of Honda Accord sedans, Fit and Odyssey MPV, and Walmex, the largest retailer in Latin America.

The availability of more attractive stocks elsewhere in the investment universe and the attainment of target prices led to selective sales during the reporting period. This reduced the Company's investments in Brazil, the Hong Kong-listed "H" shares and South Korea. These sales reduced the Company's exposure to the electric utilities, coal & consumable fuels, oil & gas refining & marketing and wireless telecommunications services sectors. Major sales included Yanzhou Coal Mining, a major Chinese coal exporter, Copel, an integrated electric utility in Brazil, and Turkcell, a key provider of mobile communications services in Turkey.

On 30 April 2009, the cash component of the portfolio had increased to 2.5% from 1.0% at the beginning of the period. The Company strives to remain virtually fully invested to ensure that it is well positioned to benefit from the developments in emerging markets.

  OUTLOOK

In our opinion, the emerging markets' economies are in a position where economies, companies and individuals are relatively well placed to overcome the global crisis. We also believe that emerging markets will play a much greater role in the global economy going forward. They will emerge as leaders, due to their relatively stronger macroeconomic and financial positions.

Asia is the world's largest emerging market region. Asian countries are also growing relatively fast. They include countries like China and India with very large populations whose per capita income is still growing strongly, and whose capital markets are undergoing rapid development. Economic growth remains relatively high, valuations remain attractive and reforms continue, thus improving the region's business and investment environment.

Valuations in Eastern European markets are also attractive, indeed very attractive in markets such as Hungary and Turkey which are trading at single-digit P/E ratios. Russia, with its huge land mass, large population and abundant natural resources could become one of the world's fastest-developing economies in the longer-term.

Most Latin American economies are faring relatively well, taking into account the current global macroeconomic conditions. There are some countries which are more prone to the global downturn. Mexico, for example is one, but greater intra-regional trade has offset some of the adverse impact of lower export demand from the US. One of the region's main attractions is its huge consumer market with pent-up demand for goods and services and world-class companies that are at the same time under-leveraged and inexpensive. In addition, the region's natural resources are among the largest in the world. Mexico is a net exporter of oil: Brazil is a major exporter of iron ore, and soft commodities such as soybeans and coffee. While commodity stocks have been negatively affected by the recent decline in commodity prices, many companies are still profitable at current price levels.

While overall global growth has slowed, emerging markets are still expected to grow at a much faster rate than developed markets. The accumulation of foreign exchange reserves also puts emerging economies in a much stronger position to weather external shocks with reserves, for example, in China, totalling nearly US$2 trillion. Most importantly of all, for us as value investors, the current valuations of emerging markets are attractive and we continue to be able to identify companies whose share prices do not take full account of their long term potential. We believe the portfolio is extremely well positioned to capitalise on these undervaluations.

J Mark Mobius, Ph.D.

Templeton Asset Management Ltd.

12 June 2009

Emerging markets are still expected to grow at a much faster rate than developed markets.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

"The responsibility statement below has been prepared in connection with the company's full Annual Report for the year ending 30 April 2009. Certain parts of the Annual Report are not included within this announcement.

The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable United Kingdom law and regulations.

Company law requires the Directors to prepare the financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with IFRS as adopted by the EU.

The financial statements are required by law and IFRS as adopted by the EU to present fairly the financial position of the Company and the performance for that period. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

In preparing the financial statements, the Directors are required to:

    •    select suitable accounting policies and then apply them consistently;

    •    make judgments and estimates that are reasonable and prudent;

    •    state whether the financial statements have been prepared in accordance with IFRS, as adopted
          by the EU; and

    •    prepare the financial statements on a going concern basis unless it is inappropriate to presume
          that  the Company will continue in business.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible for the system of internal control, for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and the Corporate Governance Statement that comply with that law and those regulations. The Annual Report is available on the Company's website (www.temit.co.uk).

Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions.

The Directors confirm that to the best of their knowledge:

    •    the financial statements, prepared in accordance with the applicable set of accounting
         standards,  give a true and fair view of the assets, liabilities, financial position and profit or loss of
         the company; and

    •    the Directors' report includes a fair review of the development and performance of the business
        and the position of the Company, together with a description of the principal risks and uncertainties
        that  they face.

Peter Smith

Chairman

12 June 2009

PORTFOLIO HOLDINGS BY GEOGRAPHY

Geographical analysis 

(by country of incorporation)

As at 30 April 2009

		FairValue**
Country	Sector	£'000
AUSTRIA
OMV AG++	Utilities	15,426
		15,426

BRAZIL
Banco Bradesco SA, ADR, pfd.*+	Financial	59,879
Companhia Vale do Rio Doce, ADR, pfd., A*+	Materials	68,249
Itau Unibanco Banco Multiplo SA, ADR*	Financial	72,364
Petroleo Brasileiro SA, ADR, pfd.*+	Energy	61,663
		262,155

CHINA
Aluminum Corp. of China Ltd., H	Materials	39,946
Brilliance China Automotive Holdings Ltd.	Consumer Discretionary	12,477
China International Marine Containers (Group) Co. Ltd.,	Industrials	5,475
China Petroleum and Chemical Corp., H	Energy	26,763
Denway Motors Ltd.	Consumer Discretionary	46,588
PetroChina Co. Ltd., H	Energy	45,273
Victory City International Holdings Ltd.	Consumer Discretionary	4,416
VTech Holdings Ltd.	Telecommunication Services	28,393
		209,331

HUNGARY
MOL Hungarian Oil and Gas Nyrt.	Energy	12,938
		12,938

INDIA
Infosys Technologies Ltd.	Information Technology	6,318
National Aluminium Co. Ltd.	Materials	13,995
Oil and Natural Gas Corp. Ltd.	Energy	23,296
Peninsula Land Ltd.	Consumer Discretionary	3,606
Sesa Goa Ltd.	Materials	31,052
Tata Consultancy Services Ltd.	Information Technology	25,459
		103,726

		Fair Value**
Country	Sector	£'000
INDONESIA
PT Astra International Tbk	Consumer Discretionary	21,647
PT Astra Central Asia Tbk	Financial	17,456
PT Bank Danamon Indonesia Tbk	Financial	23,490
		62,593

MEXICO
Wal-Mart de Mexico SAB de CV, A	Consumer Staples	11,116
		11,116

PAKISTAN
Faysal Bank Ltd.	Financial	2,817
MCB Bank Ltd.	Financial	8,705
		11,522

POLAND
Polnord SA	Industrials	4,594
Polski Koncern Naftowy Orlen SA	Utilities	17,265
		21,859

RUSSIA
Gazprom ADR*	Energy	22,986
LUKOIL Holdings, ADR*	Energy	27,001
Mining and Metallurigical Co. Norilsk Nickel	Materials	4,612
Mining and Metallurigical Co. Norilsk Nickel, ADR*	Materials	15,069
Mobile TeleSystems, ADR*	Telecommunication Services	13,043
OAO TMK	Energy	6,423
		89,134

SINGAPORE
Dairy Farm International Holdings Ltd.	Consumer Staples	45,517
		45,517

SOUTH AFRICA
Anglo American PLC	Materials	24,099
		24,099

SOUTH KOREA
Hyundai Development Co.	Industrials	55,786
SK Energy Co. Ltd	Energy	43,750
		99,536

TAIWAN
Compal Communications Inc.	Telcommunication Services	6,360
MediaTek Inc.	Information Technology	16,015
Taiwan Semiconductor Manufacturing Co. Ltd.	Information Technology	4,470
		26,845

THAILAND
Kasikornbank Public Co. Ltd., fgn.	Financial	17,737
Kiatnakin Bank Public Co. Ltd., fgn.	Financial	5,293
Land and Houses Public Co. Ltd., fgn.	Consumer Discretionary	7,420
PTT Exploration and Production Public Co Ltd., fgn.	Energy	19,190
PTT Public Co. Ltd., fgn.	Utilities	18,988
Siam Cement Public Co. Ltd., fgn.	Materials	11,245
Siam Commercial Bank Public Co. Ltd., fgn.	Financial	29,475
		109,348

TURKEY
Akbank TAS	Financial	58,646
Tupras-Turkiye Petrol Rafineleri AS	Utilities	20,105
		78,751
TOTAL INVESTMENTS		1,183,896
LIQUID ASSETS		24,397
TOTAL EQUITY		1,208,293

* US Listed Stocks

+ pfd: preferred shares

++ These companies have significant exposure to operations in emerging markets.

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

TEN LARGEST INVESTMENTS

IN ORDER OF MARKET VALUE AS AT 30 APRIL 2009

ITAU UNIBANCO
Country	% of Total	Fair Value
	Net Assets	£'000
Brazil	6.0	72,364

One of Brazil's largest commercial banks providing a full range of banking and financial services. This was formed by a recent merger between Banco Itau and Unibanco.

VALE RIO DOCE
Country	% of Total	Fair Value
	Net Assets	£'000
Brazil	5.7	68,249

This Brazilian-based company is one of the world's largest iron ore producers that is also engaged in various mining activities.

PETROBRAS
Country	% of Total	Fair Value
	Net Assets	£'000
Brazil	5.1	61,663

Brazil's national oil and gas company that specialises in off-shore exploration and production and maintains a substantial proven reserve of crude oil and natural gas.

BANCO BRADESCO
Country	% of Total	Fair Value
	Net Assets	£'000
Brazil	5.0	59,879

One of Brazil's largest financial conglomerates, providing a full range of banking and financial services.

AKBANK
Country	% of Total	Fair Value
	Net Assets	£'000
Turkey	4.9	58,646

One of Turkey's largest privately owned commercial banks, providing a full range of banking and financial services.

HYUNDAI DEVELOPMENT
Country	% of Total	Fair Value
	Net Assets	£'000
South Korea	4.6	55,786

One of the leading residential property developers in Korea.

DENWAY MOTORS
Country	% of Total	Fair Value
	Net Assets	£'000
Singapore	3.9	46,588

A major automobile manufacturer and distributor in China which maintains its own trademarks in addition to those franchised by the joint venture with Honda Motor of Japan, such as Accord, Odyssey, City and Fit.

DAIRY FARM INTERNATIONAL
Country	% of Total	Fair Value
	Net Assets	£'000
China	3.8	45,517

Dairy Farm's core businesses consist of supermarkets, hypermarkets as well as health and beauty, convenience and home furnishing stores.

PETROCHINA
Country	% of Total	Fair Value
	Net Assets	£'000
China	3.8	45,273

China's largest oil and gas company in terms of reserves. The company has gradually been diversifying into marketing and downstream activities.

SK ENERGY
Country	% of Total	Fair Value
	Net Assets	£'000
South Korea	3.6	43,750

A major company in South Korea's refining market.

INCOME STATEMENT OF THE COMPANY

For the year ended 30 April 2009

			2009			2008
	Note	Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments
and exchange
Gains/(losses) on investments
at fair value	6	-	(489,246)	(489,246)	-	607,057	607,057
Gains/(losses) on
foreign exchange		-	2,262	2,262	-	(581)	(581)
Revenue
Dividends	1	53,565	-	53,565	57,578	-	57,578
Bank Interest	1	2,453	-	2,453	820	-	820
		56,018	(486,984)	(430,966)	58,398	606,476	664,874
Expenses
Investment Management fee	2	(12,547)	-	(12,547)	(22,602)	-	(22,602)
Other expenses	3	(5,262)	-	(5,262)	(8,228)	-	(8,228)
Profit/(loss) before taxation		38,209	(486,984)	(448,775)	27,568	606,476	634,044
Tax Expense	4	(10,105)	-	(10,105)	(7,728)	-	(7,728)
Profit/(loss) for the period		28,104	(486,984)	(458,880)	19,840	606,476	626,316
Profit/(loss) attributable
to equity holders
of the company		28,104	(486,984)	(458,880)	19,840	606,476	626,316
Basic earnings per Ordinary
Share	5	7.69p	(133.28p)	(125.59p)	4.07p	124.43p	128.50p
Annualised Expense Ratio				1.34%			1.33%
Annualised Expense Ratio
excluding tender costs
charged to revenue				1.25%			-

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.

The accompanying notes are an integral part of this statement.

All items in the above statement derive from continuing operations.

An ordinary dividend of 3.75p per Ordinary Share (2008: 3.50p) and a special dividend of 2.50p per Ordinary Share (2008: nil) are proposed for the year. Further details can be found in Note 12.

BALANCE SHEET    

As at 30 April 2009    

		2009	2008
	Note	£'000	£'000
ASSETS
Non-current assets
Investments	6	1,183,896	2,264,926
Current assets
Trade and other receivables	7	5,394	18,961
Cash		29,671	22,605
		35,065	41,566
LIABILITIES
Current Liabilities
Trade and other payables	8	(3,947)	(11,082)
Current tax payable		(5,865)	(2,778)
		(9,812)	(13,860)
Non-current liabilities
Deferred tax liabilities	9	(856)	(1,237)
NET ASSETS		1,208,293	2,291,395
ISSUED SHARE CAPITAL AND RESERVES
ATTRIBUTABLE TO EQUITY SHAREHOLDERS
Equity Share Capital	10	82,611	118,170
Share Premium Account		-	375,327
Special Distributable Reserve		433,546	-
Capital Redemption Reserve		58	22,718
Capital Reserve		620,245	1,719,870
Revenue Reserve		71,833	55,310
EQUITY SHAREHOLDERS' FUNDS		1,208,293	2,291,395
Net Asset Value per Ordinary Share (in pence)	11	365.65	484.77

These Financial Statements were approved for issue by the Board and signed on 12 June 2009.

STATEMENT OF CHANGES IN EQUITY

For the year ended 30 April 2009

			Capital	Special
	Share	Share	Redemption	Distributable	Capital	Revenue
	Capital	Premium+	Reserve+	Reserve	Reserve*	Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 April 2007	133,995	375,327	6,893	-	1,358,505	50,764	1,925,484
Profit for the period	-	-	-	-	606,476	19,840	626,316
Equity Dividends	-	-	-	-	-	(15,294)	(15,294)
Purchase and cancellation of
own shares	(15,825)	-	15,825	-	(245,111)	-	(245,111)
Balance at 30 April 2008	118,170	375,327	22,718	-	1,719,870	55,310	2,291,395
Profit/(loss) for the period	-	-	-	-	(486,984)	28,104	(458,880)
Equity dividends (Note 12)	-	-	-	-	-	(11,581)	(11,581)
Purchase and cancellation of
own shares (Note 10)	(35,559)	-	35,559	-	(612,641)	-	(612,641)
Transfer to Capital Reserves	-	(375,327)	(58,219)	433,546	-	-	-
Balance at 30 April 2009	82,611	-	58	433,546	620,245	71,833	1,208,293

* With effect from 1 May 2007, the balance on both capital reserves has been merged into one account for Capital Reserve.

+ The balances on the Share Premium Account and the Capital Redemption Reserve as at 25 September 2008, were cancelled on 5 December 2008 and a Special Distributable Reserve set up.

CASH FLOW STATEMENT

For the year ended 30 April 2009

	As at	As at
	30 April	30 April
	2009	2008
	£'000	£'000
Cash flows from operating activities
Profit/(loss) before taxation	(448,775)	634,044
Adjustments for:
Losses /(gains) on investments at fair value	489,246	(607,057)
Realised loss/(gain) on foreign exchange	(2,262)	581
Decrease/(increase) in debtors	4,883	(2,934)
Decrease/(increase) in accrued income	74	20
(Decrease)/increase in creditors	(5,522)	3,827
Cash generated from operations	37,644	28,481
Taxation paid	(7,399)	(8,160)
Net cash inflow from operating activities	30,245	20,321
Cash flows from investing activities
Purchases of non-current financial assets	(225,530)	(146,864)
Sales of non-current financial assets	826,592	383,616
	601,062	236,752
Cash flows from financing activities
Equity dividends paid	(11,581)	(15,294)
Purchase of shares for cancellation*	(612,641)	(245,111)
	(624,222)	(260,405)
Net (decrease)/increase in cash
and cash equivalents	7,085	(3,332)
Cash at start of year	22,605	25,915
Exchange gain/(loss) on cash	(19)	22
Cash and cash equivalents at end of year	29,671	22,605

* Included within this figure are £2.9 million of expenses associated with the tender offer which were charged directly to reserves.

  NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 APRIL 2009

1    Income

	2009	2008
	£'000	£'000
Income from investments
UK dividends	130	482
Other EU dividends	3,959	2,817
Other overseas dividends	49,448	54,279
Scrip dividends	28	-
Other income	53,565	57,578
Deposit interest	2,453	820
Total income	56,018	58,398
Total income comprises:
Dividends	53,565	57,578
Interest	2,453	820
Income from investments	56,018	58,398
Listed overseas	53,435	57,096

2    Investment management fee

	2009	2008
	£'000	£'000
Variable Expense
Invesment management fee	12,547	22,602

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 total net assets of the Company. As at 30 April 2009, £1.5 million (30 April 2008: £3.5 million) in fees were payable and outstanding to TAML. In addition to the investment management fee above, the Company obtains secretarial and administration services from FTIML, at an annual rate of 0.20%, pursuant to a secretarial and administration agreement (which is terminable by either party giving one year's notice to the other). The fee in respect of secretarial and administration services is recorded within other expenses (Note 3).

3    Other expenses

	2009	2009	2008	2008
	£'000	£'000	£'000	£'000
Variable expenses
Secretarial and administration expenses	2,608		4,520
Custody Fees	782		1,688
		3,390		6,208
Fixed expenses
Directors' emoluments	224		254
Auditors' remuneration
Fees payable to the Company's auditor
for the audit of the annual
financial statements	33		28
Fees payable to the Company's auditor
and its associates for other services
-  Other services pursuant to legislation:
half yearly financial report	3		4
- Other services pursuant to legislation:
31 March 2008 Accounts	4		-
- Services relating to corporate finance transactions:
assistance with the capital restructuring proposals	28		31
Registrar Fees	241		169
Tender offer costs	1,279		-
VAT	(981)		80
Bank overdraft interest	24		198
Other administration expenses	1,017		1,256
		1,872		2,020
Total other expenses		5,262		8,228

The costs associated with the tender offer for shares by the Company in June 2008 were borne by exiting shareholders.

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 at 30 April 2009, £0.3 million (30 April 2008: £0.7 million), in fees were payable and outstanding to FTIML.

Following the outcome of a recent European Court of Justice Case, HM Revenue & Customs (HMRC) has accepted that management fees charged to Investment Trusts can be treated as exempt for Value Added Tax (VAT) purposes. The Company had lodged claims with HMRC to recover VAT previously overpaid by it. These claims have largely been resolved with HMRC, with the exception of the period from November 1996 to January 2001. A total of £1.8  million of VAT, plus interest, has been received from HMRC to date. Full credit has been taken by the Company in respect of the claim monies received. The remaining period is currently capped by statutory limitation, but this is subject to an unrelated separate legal challenge. Since the eventual outcome cannot be accurately predicted at this time, no credit has been taken into these accounts for any amounts that may be recoverable for this period.

4    Tax on ordinary activities

	2009	2008
	£'000	£'000
Corporation tax charged at 28%	10,435	7,650
Double taxation relief	(2,800)	(3,791)
Prior year adjustments	-	-
	7,635	3,859
Overseas tax	2,851	5,073
Adjustment in respect of prior periods	-	(55)
Current tax	10,486	8,877
Deferred tax - current year	(381)	(1,149)
	10,105	7,728

Taxation

The current taxation change for the year is different from the standard rate of corporation tax in the UK. With effect from 1 April 2008 the standard rate of corporation tax in the UK became 28%.

	2009	2008
	£'000	£'000
Profit before taxation	(448,775)	634,044
Theoretical tax at UK corporation tax rate	(125,657)	189,198
Effects of:
- Capital Element of Profit	136,356	(180,973)
- Prior year adjustments to irrecoverable overseas tax	-	(55)
- Non taxable income	18	(12)
- Stock dividends	(8)	-
- Non Deductible expenses	358	170
- UK dividends not subject to Corporation Tax	(36)	(144)
- Other EU dividends not subject to Corporation Tax	(1,110)	(840)
- Irrecoverable overseas tax	184	528
- Income taxable in different periods	-	(144)
Actual tax charge	10,105	7,728

As a result of a decision by the European Court of Justice, the UK Government has announced in the 2009 Budget that foreign and UK distributions will be treated in the same way from 1 July 2009. Distributions will now generally be exempt from corporation tax. There has been no ruling relating to the taxation of overseas dividends received before 1 July 2009 and the Company has not, at this stage, recognised the potential refund of UK corporation tax resulting from treating this income as non-taxable.

5    Earnings per Ordinary Share

Earnings per Ordinary Share has been calculated on the following earnings:

	2009	2009	2009	2008	2008	2008
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Basic:	28,104	(486,984)	(458,880)	19,840	606,476	626,316
Basic Earnings per Ordinary Share:
	2009	2009	2009	2008	2008	2008
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Basic:	7.69	(133.28)	(125.59)	4.07	124.43	128.50

The earnings per Ordinary Shares is based on the profit/(loss) on ordinary activities after tax and on the weighted average number of Ordinary Shares in issue during the year 365,378,384 (2008: 487,398,572).

6    Financial Assets - Investments

	2009	2008
	£'000	£'000
Opening investments as at 1 May	2,264,926	1,903,045
Movements in year
Additions	221,178	149,761
Sales	(812,962)	(394,751)
Realised profits on realisations	414,652	192,071
Net (depreciation)/appreciation	(903,898)	414,800
Closing investments	1,183,896	2,264,926

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

Transaction costs for the year on purchases were £571,000 (2008: £594,000) and transaction costs for the year on  sales were £665,000 (2008: £877,000). The aggregate transaction costs for the year were £1,236,000 (2008: £1,471,000).

	2009	2008
	£'000	£'000
Gains/(losses) on investments comprise of:
Profit on realisation based on carrying value at 30 April 2008	414,652	192,071
Investment holding gains/(losses)	(903,898)	414,800
Indian Capital Gains Tax	-	186
Realised and unrealised gains/(losses) on investments	(489,246)	607,057

7    Trade and other receivables

	2009	2008
	£'000	£'000
Dividends receivable	5,277	7,110
Overseas tax recoverable	113	69
Accrued income	4	78
Sale of investments for future settlement	-	11,347
Other debtors	-	357
	5,394	18,961

8    Trade and other payables

	2009	2008
	£'000	£'000
Accrued expenses	2,092	4,875
Purchase of investments for future settlement	1,855	6,207
	3,947	11,082

9    Deferred tax

	2009	2008
	£'000	£'000
Deferred tax provided
Accrued income taxable on receipt	856	1,237
The movement in the provision is as follows:
Provision at start of year	1,237	2,386
Prior year adjustments	-	-
Deferred tax credit in Income Statement	(381)	(1,149)
	856	1,237

Deferred tax has been provided at 28% (2008: 28%) due to uncertainty as to the average rate of tax that will apply when the underlying timing differences will reverse.

Any changes in the provision for deferred tax have been recognised in the Income Statement under Tax Expense (see Note 4).

10    Called-up share capital

	2009		2008
	Alloted, issued &		Alloted, issued &
	fully paid		fully paid
	£'000	Number	£'000	Number
Ordinary Shares of 25p each
Balance as at 1 May 2008	118,170	472,681,216	133,995	535,981,593
Shares repurchased during the year	(35,559)	(142,234,864)	(15,825)	(63,300,377)
Balance as at 30 April 2009	82,611	330,446,352	118,170	472,681,216

The authorised share capital of the Company as at 30 April 2009 and 30 April 2008 was made up of 1,362,619,566 Ordinary Shares of 25 pence each (£340,605,000).

The Company's Ordinary 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, 142,234,864 shares were bought back for cancellation at a cost of £609.7 million (2008: 63,300,377 shares were bought back for cancellation at a cost of £245.1 million). No shares were cancelled between 1 May 2009 and 5 June 2009.

11    Net asset value per share

The net asset value per share and the net asset value attributable to the Ordinary Shares at the year end were as follows:

		Net asset value	Net asset value
		per share	attributable
	2009	2008	2009	2008
	p	p	£'000	£'000
Ordinary Shares	365.65	484.77	1,208,293	2,291,395

12    Dividend

		2009	2008
	Rate (p)	£'000	Rate (p)	£'000
Declared and paid in the year
Equity dividend on Ordinary Shares:
Final dividend for year ended 30 April
2008 (2007: 3.13p)	3.50	11,581	3.13	15,294
		11,581		15,294
Proposed for approval at the Company's AGM
Equity dividend on Ordinary Shares:
Ordinary dividend for year ended 30 April 2009
(2008: 3.50p)	3.75	12,392
Special dividend for year ended 30 April 2009
(2008: nil)	2.50	8,261
		20,653

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

13    Related party transactions

The following are considered to be related parties:

Templeton Asset Management Ltd. ("TAML")

Franklin Templeton Investment Management Limited ("FTIML").

All material related party transactions, as set out in International Accounting Standard 24 Related Party Disclosures, have been disclosed in the Directors' Report, Note 2 and Note 3.

14    Risk management

In pursuing its investment objectives 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), 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.

Market price risk

Market price 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 30 April 2009 are shown below:

2009	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$	4,803	1,775	127	6,452	396,806
Hong Kong $	-	-	-	-	209,330
Thai bhat	474	-	-	474	109,348
Indian Rupee	-	-	-	-	103,726
Korean Won	-	-	-	-	99,536
New Turkish Lira	-	-	-	-	78,752
Other	114	914	1,728	(670)	186,398

2008	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$	5,455	4,758	-	10,213	841,085
Hong Kong $	308	-	-	308	333,831
Indonesia Rupee	-	-	(5,235)	(5,235)	134,963
Korean Won	-	-	-	-	236,801
Thai bhat	1,896	-	-	1,896	204,639
New Turkish Lira	103	-	-	103	178,931
Other	15,020	2,938	(971)	16,987	334,676

Sensitivity

The following table illustrates the sensitivity of the profit/(loss) after taxation for the year in regard to the 

Company's monetary financial assets and liabilities and its equity if the pound had strengthened by 10% relative to all currencies on the reporting date, with all other variables held constant.

	2009		2008*
		Capital		Capital
	Revenue	Return	Revenue	Return
	£'000	£'000	£'000	£'000
Financial Assets and Liabilities
US$	1,444	39,681	2,065	83,087
Hong Kong $	891	20,933	706	33,352
Thai Bhat	485	10,935	657	20,275
Indian Rupee	189	10,373	177	12,926
Korean Won	152	9,954	477	4,154
	3,161	91,876	4,082	153,794

*The comparative figures for 2008 have been restated.

A 10% weakening of the pound 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 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.

In general, if interest rates rise the income potential of the Company also rises, but the value of fixed rate securities will decline. A decline in interest rates will have the opposite effect.

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
	2009	2008
	£'000	£'000
Cash flow interest rate risk
Loans and receivables
Cash	29,671	22,605

Exposures vary throughout the year as a consequence of changes in the make up of the net assets of the Company arising from out of the investment and risk management process.

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

Securities held by the Company are valued 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 company has an ongoing contract with its custodian (JP Morgan Chase Bank) for the provision of custody services. Details of securities held in custody on behalf of the Company are received and reconciled monthly. Cash is held in a floating rate deposit account whose rate is determined by reference to rates supplied by the Custodian. 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.

15    Significant holdings in investee undertakings

As at 30 April 2009 the Company held 3% or more in the issued share capital of the following companies:

Name	% of Issued	Fair	% of Issued	Fair
	share capital	Value	share capital	Value
	2009	£'000	2008	£'000
Victory City International Holdings Ltd.	9.67%	4,416	-	-
Brilliance China Automotive Holdings Ltd.	6.96%	12,477	5.68%	19,489
Faysal Bank Ltd.	4.99%	2,817	4.65%	10,607
Polnord SA	3.81%	4,594	1.02%	4,200
Kiatnakin Bank Public Co. Ltd., fgn.	3.72%	5,293	4.19%	9,904
Hyundai Development Co.	3.50%	55,786	4.92%	119,066
Vtech Holdings Ltd.	3.39%	28,393	-	-

16    Contingent liabilities

No contingent liabilities existed as at 30 April 2009 or 30 April 2008.

17    Financial commitments

There were no financial commitments as at 30 April 2009 or 30 April 2008.

18    Post balance sheet events

The only material post balance sheet event is in respect of the proposed ordinary and special dividends, which have been disclosed in Note 12.

This preliminary statement was approved by the Board on 12 June 2009. The financial information set out above does not constitute the company's statutory accounts. The statutory accounts for the financial year ended 30 April 2008 have been delivered to the Registrar of Companies and 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 237(2) and (3) of the Companies Act 1985.  The statutory accounts for the financial year ended 30 April 2009 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 237(2) and (3) of the Companies Act 1985, and will be delivered to the Registrar of Companies.

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

For information please contact Client Dealer Services on freephone 0800 305 306 or Jane Lewis or Matthew Wilson at Winterflood Investment Trusts (Corporate Broker) on 020 3100 0000. 

 

END

 

 

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