Half Yearly Report

RNS Number : 8275S

Templeton Emerging Markets IT PLC

25 November 2011

 

TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC

("TEMIT") ("the Company")

UNAUDITED HALF YEARLY REPORT

30 SEPTEMBER 2011

CHAIRMAN'S STATEMENT

In my last report to you I ended on a note of caution by warning of continued periods of volatility in the short to medium term in global markets. The six months to September 2011 have seen this play out with the majority of markets experiencing considerable downturns. TEMIT's net asset value per share fell by 22.9%* and ended the period at 550.4 pence.

A number of factors impacted investor confidence in the global economy. Continued concerns over debt levels in many developed countries, including peripheral Eurozone nations and tensions created by the downgrade of the US Government's credit rating by Standard & Poors caused markets to fall sharply. Disappointing macro-economic data in western economies propagated ongoing fears of a double-dip recession within Europe and North America, fuelling pessimism as markets struggled to recover from the sharp falls experienced during August.

Emerging markets were not immune, with investors wary of the potential impact that a recession in developed countries might have on export levels of the emerging market economies as well as worries over rising commodity costs and capital inflows causing overheating in the Chinese economy. Your Board however continues to believe that emerging markets offer positive long-term prospects despite this recent fall.

The report of the Investment Manager gives further commentary on the prevailing economic and market conditions and the Company's performance in the period.

Performance

Investment performance in the period from 31 March 2011 to 30 September 2011 can be summarised as follows:

	30 September	31 March
	2011	2011	Total return
Net asset value
(cum income)	550.4 pence	718.0 pence	-22.9%*
Share price	516.0 pence	660.0 pence	-21.3%

Over the same period TEMIT's benchmark, the MSCI Emerging Markets index recorded a fall of 21.0% (total return in Sterling terms).

*Return based on accounting NAV with dividend reinvested.

TEMIT's total assets at the period end were £1,815 million compared to £2,368 million at 31 March 2011, a fall of £553 million.

As at 21 November the net asset value per share stood at 572.0 pence, an increase of 3.9% since 30 September. The share price had risen to 525.0 pence over the same period representing a rise of 1.7%.

The primary objective of the Investment Manager, in line with the objectives of the Company, is to seek long-term capital appreciation. Over the last 10 years TEMIT's net asset value has produced a total return of 417.6%, outperforming the benchmark which returned 331.3% over the same period.

Asset allocation

At the period end, 98.3% of your Company's total assets were invested in equities, with the remaining 1.7% being held in liquid assets. The general policy of the Board is to be fully invested.

Dividend

A dividend of 4.25 pence per share (2010: 3.75 pence) was declared on 22 June 2011 for the year ended

31 March 2011. This was paid on 27 July 2011. The Company does not pay an interim dividend.

Discount and share buy-backs

The closing share price of 516.0 pence per share represented a discount of 6.2% on the cum income net asset value per share as at 30 September 2011. This compares favourably to a discount of 8.1% as at 31 March 2011. Your Board actively monitors the discount and retains the right to buy back shares when it believes it is in shareholders' best interests to do so. During the period there was one buy back of 50,000 shares at a cost of £0.3 million.

Annual General Meeting

I am pleased to report that shareholders voted in favour of all proposals at this year's Annual General Meeting held in July.

Investor communications

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. As well as sending out the annual and half year report and accounts and notices of any significant Company events, we also release information, such as Interim Management Statements, through the stock exchanges.

Our website (www.temit.co.uk) displays the latest news, price and performance information, portfolio details and quarterly web updates with the Investment Manager. On 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.

Board diversity

I would also like to take the opportunity to comment on diversity and the recommendations of the Davies Report entitled "Women on Boards". Your Board strongly supports the principle of boardroom diversity, of which gender is an important component. Our selection policy is to make Board appointments based on merit, and overall suitability for the role. We believe it is important to consider factors such as diversity of thought, experience, qualification and approach with each new appointment complementing the existing mix within the Board. Subject to this principle, and to the availability of appropriate candidates, we will primarily appoint on merit but welcome other objective criteria including diversity. We do not believe it is appropriate either to expand the size of our Board at this time or to ask existing members to stand down before their expected term of service concludes, as we believe our current mix of skills and experience is appropriate. However, when Board members are replaced in the future we will look to keep to this principle and would actively encourage applications from female candidates as part of the process.

Outlook

The Investment Manager employs a consistent investment approach that focuses on finding good quality, attractively valued emerging market companies and investing for long-term growth. Whilst we anticipate volatility to continue in the short to medium term we continue to believe in the long-term growth opportunities in emerging markets.

Peter A Smith

Chairman

25 November 2011

INTERIM MANAGEMENT REPORT

Principal risks and uncertainties

The Company's main risk is investment risk. This is the risk that the value of the investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency movements. Many of the companies in which TEMIT does or may invest are, by reason of the locations in which they operate, exposed to the risk of political or economic change. In addition, exchange control, tax or other regulations introduced in any country in which TEMIT invests may affect its income and the value and marketability of its investments.

Other key risks affecting the Company are currency risk, regulatory risk and counterparty risk. Currency fluctuations may affect the value of its investments and the income derived therefrom. While the company's reporting currency is Sterling, virtually all of its investments are held in foreign currency. As a matter of policy, the company does not hedge its foreign currency exposures. Investors in emerging markets can face settlement and custodial problems. Furthermore, companies in emerging markets are not always subject to accounting, auditing and financial standards which are equivalent to those applicable in the United Kingdom and there may also be less government supervision and regulation. These risks can increase the potential for losses in the Company and affect its share price.

The Board has provided the Manager with guidelines and limits for the management of these principal risks and uncertainties. Further information on these is given in the Business Review within the Report and Accounts for the year ended 31 March 2011 which is available on the Company's website (www.temit.co.uk). In the view of the Board these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review.

Related party transactions

The following principal service providers to the Company are considered to be related parties:

•       Templeton Asset Management Limited ("TAML") who act as Investment Manager.

•       Franklin Templeton Investment Management Limited ("FTIML") who act as Secretary and Administrator.

During the first six months of the current financial year, there have been no significant changes in the terms and conditions of the related party agreements which have materially affected the financial position or performance of the Company.

Going concern

The Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and, as such, a going concern basis is appropriate in preparing the financial statements.

Statement of Directors' Responsibilities

The Directors confirm that to the best of their knowledge;

(a)   the condensed set of financial statements, for the period ended 30 September 2011, has been prepared in accordance with the International Accounting Standard 34 ''Interim Financial Reporting'' as adopted by the EU;

(b)   the Half Yearly Report includes a fair review of the information required by the FSA's Disclosure and Transparency Rules 4.2.7R being disclosure of important events that have occurred during the first six months of the financial year, their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the year; and

(c)   the Half Yearly Report includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.8R being disclosure of related party transactions during the first six months of the financial year, how they have materially affected the financial position of the Company during the period and any changes therein.

The Half Year Report was approved by the Board on 25 November 2011 and the above Statement of Directors' Responsibilities was signed on its behalf by

Peter A Smith

Chairman

25 November 2011

MANAGER'S REPORT & PORTFOLIO REVIEW

30 September 2011

Market Overview

The fundamental strength of emerging economies was evident during the reporting period as they continued to report strong macroeconomic data, albeit slowing down from 2010. This strength was not reflected in equity prices as Europe's sovereign debt crisis and fiscal concerns in the US led investors to head for cash and government bonds, shying away from equity investments in both developed and emerging markets.

Stock prices in emerging markets remained largely unchanged in the first four months of the reporting period. Markets, however, fell heavily in the last two months as the prolonged debt crisis in the Eurozone and the lack of a comprehensive solution continued to weigh heavily on markets globally. Renewed worries that the US could slip back into an economic recession further accelerated market declines.

High volatility and increased uncertainty also provided investors with reasons to realise gains from 2009 and 2010, a period when emerging markets nearly doubled in Sterling terms. However, subsequently, as represented by the MSCI Emerging Markets Index, emerging markets declined 21.0% in Sterling total return terms during the reporting period.

Within the emerging markets' sector, Southeast Asian markets were the strongest performers during the reporting period. Strong domestic demand, rising disposable incomes and relatively low unemployment make these economies more resilient to global uncertainties. However, relatively more export dependent markets, such as Hong Kong/China and South Korea, underperformed their regional peers. Weaker emerging market currencies and a decline in commodity prices also hurt markets in Latin America.

The worst performers were found in Eastern Europe. These markets suffered as a result of their proximity to their Western counterparts, rather than from any significant deterioration in their economies. Although significantly outperforming their emerging market counterparts in local currency terms, weaker domestic currencies led Turkey to end the period with double-digit declines in Sterling terms. It was also a similar situation in South Africa over the period.

Performance
Performance Attribution Analysis
Six months to 30 September 2011	%
NAV total return for the period	-22.9
MSCI Emerging Markets Index total return	-21.0
Relative return	-1.9
Sector allocation	-1.5
Stock selection	-2.6
Total equities	-4.1
Currency	2.2
Relative performance	-1.9
Largest country contributors and detractors
to performance	%
Indonesia	1.4
Thailand	1.4
Hong Kong/China	1.3
Russia	0.6
Turkey	0.2
Brazil	-0.6
India	-0.6
South Africa	-0.7
Taiwan	-0.7
South Korea	-1.3

Geographically, the major contributors to the Company's performance, relative to the MSCI Emerging Markets Index, included good stock selection and overweight positions in both Indonesia and Thailand and an underweight position in Russia, where stock selection also had a positive contribution. Superior stock selection in Hong Kong/China made noteworthy contribution to relative performance. Conversely, holdings in South Korea and underweight positions in Taiwan and South Africa detracted from performance.

Largest sector contributors and detractors
to performance	%
Financials	2.7
Consumer Discretionary	0.2
Utilities*	0.0
Information Technology	0.0
Energy	-0.1
Consumer Staples	-0.2
Materials	-0.6
Industrials	-0.6
Telecommunication Services*	-1.3
*No companies held by TEMIT in these sectors.

By sector, stock selection in financials contributed significantly to performance. An overweight position and good stock selection in consumer discretionary also had a positive effect. On the other hand, an overweight exposure to materials and holdings in industrials detracted from relative performance during the reporting period while a zero exposure to telecommunication services was the largest detractor during the period because of this sector's defensive strength in a falling market.

Largest company contributors and detractors to
performance	%
PT Astra International Tbk	1.2
Siam Commercial Bank Public Co. Ltd., fgn.	0.8
Dairy Farm International Holdings Ltd.	0.8
PT Bank Central Asia Tbk	0.7
China Petroleum & Chemical Corp.	0.3
Itau Unibanco Holding SA, ADR	-0.5
SK Innovation Co.Ltd.	-0.5
Sesa Goa Ltd.	-0.6
Aluminum Corp. of China Ltd.	-0.6
Hyundai Development Co.	-0.7

At a company level, the top three contributors to relative performance were overweight positions in

Astra International, Siam Commercial Bank and Dairy Farm. Astra International is Indonesia's leading car and motorcycle company. In addition to its market leadership and extensive distribution network in the automotive sector, it has interests in financial services, heavy equipment, agribusiness, information technology and infrastructure. These ensure that Astra International is well positioned to benefit from Indonesia's robust economic growth, higher income levels and the availability of affordable credit.

Siam Commercial Bank is one of the largest banks in Thailand and is a beneficiary of a strong economic recovery and rising consumer demand in the country. Shares of the bank also rose on positive sentiment in the Southeast Asian banking industry.

Dairy Farm's core businesses consist of supermarkets, hypermarkets as well as health & beauty, convenience and home furnishing stores. Dairy Farm remains an attractive investment as it is a beneficiary of Asia's economic recovery and higher consumer demand. It is also involved in fast growing markets such as China, Vietnam and India.

Conversely, the three largest detractors were Hyundai Development, one of South Korea's leading residential property developers Aluminum Corporation of China (Chalco), China's leading producer of alumina and primary aluminium products, and Sesa Goa which is one of the biggest exporters of iron ore in India.

Hyundai Development's share price lagged due to concerns of bankruptcies of small construction companies. Hyundai Development's strong brand recognition coupled with relatively low interest rates should support Hyundai Development going forward. Chalco's share price recorded a decline during the six-month period due to poor corporate results, lower aluminium prices and concerns of an economic slowdown in China. Taking a long-term view, however, we are of the opinion that Chalco is well positioned to benefit from China's continuing growth. A long-term uptrend in aluminium prices coupled with demand from China's manufacturing, construction and consumer sectors should support the company in the future. Lower iron ore prices and a general weakness in the iron ore market led the stock price of Sesa Goa to fall during the period. Taking a long-term view however, Sesa Goa is well positioned to benefit from a long-term uptrend in iron ore prices and the ongoing consolidation of the global mining sector.

Largest currency contributors and detractors to
performance
Currency	%
US Dollar	1.5
Brazilian Real	0.7
Thai Baht	0.4
South African Rand	0.4
Indonesian Rupiah	0.4
Hungarian Forint	-0.1
Indian Rupee	-0.1
Malaysian Ringgit*	-0.1
Turkish Lira	-0.4
Taiwanese Dollar	-0.4

*No securities held by TEMIT in this currency.

In terms of currencies, a major performance contributor during the period was the investments in Brazilian ADRs (American Depositary Receipts) listings where the decline in stock prices in the Brazilian market was largely compensated by the US Dollar which strengthened against Sterling. TEMIT continues to hold ADRs as opposed to the underlying ordinary shares because of liquidity considerations. The Thai Baht, South African Rand, Indonesian Rupiah and Hong Kong Dollar, also supported performance since these currencies appreciated against Sterling during the reporting period. Conversely, overweight exposure to the Turkish Lira and an underweight exposure to the Taiwanese Dollar detracted from performance.

Portfolio Changes & Investment Strategies

In line with TEMIT's long-term view, the Company's positions remained largely unchanged in the six month period, underlining our confidence in the portfolio. It is the Investment Manager's philosophy to invest or to remain invested in out of favour stocks if they believe these companies offer long term growth opportunities, which can include companies facing difficulties such as political changes, unfavourable economic or business conditions, or even internal management problems.

Geographically, Hong Kong/China, Brazil, Thailand, India and Indonesia remain among the largest exposures. These economies continue to record encouraging growth rates, have large populations, which means a strong consumer base and labour force, rising income levels and living standards, and high foreign reserves, allowing them to weather external shocks. Many of these countries also have large stocks of natural resources including soft commodities.

By sector, financials, energy, materials and consumer discretionary accounted for significant positions, highlighting our belief in consumer and commodity related companies. Rising per capita incomes and increasing consumption in emerging markets continues to drive our focus in these areas. The valuations of a number of commodity companies have become more attractive after recent commodity price declines, but we continue to be very selective in terms of the investment opportunities we choose, as not all companies will benefit equally from higher commodity prices.

The Company's top three positions were Brilliance China Automotive (China), Vale (Brazil) and Astra International (Indonesia). Brilliance China's position as a leading automobile manufacturer in China, commitment from its foreign partner, BMW, rapidly increasing brand recognition and strong demand for automobiles makes it a very attractive company. Vale is one of the world's largest iron ore and nickel producers. It also is engaged in various mining activities and is a beneficiary of the long-term uptrend in commodity prices and strong demand for raw materials in emerging markets. As a result of Astra International's diverse business interests, we believe the company is well positioned to benefit from the country's strong growth, rising consumption and relatively lower interest rates.

The Company's search for undervalued stocks trading at attractive valuations led to selective investments in the agricultural products, diversified banking and precious metals and minerals sectors. Geographically, this increased the Company's investments in Thailand, Pakistan, South Africa and China, via the Hong Kong-listed "H" shares. A sale was made of Lukoil in Russia's integrated oil and gas sector during the reporting period, although TEMIT subsequently added to its investments in Russia's oil and gas exploration and production sector through its purchase of Gazprom.

Purchases included MCB Bank, Gazprom, Impala Platinum, Aluminum Corporation of China (Chalco), and Univanich Palm Oil. MCB Bank is the fourth largest bank in Pakistan. TEMIT increased its holding in MCB Bank because of the attractive valuation and relatively high return on equity. Gazprom is the largest producer of gas in the world by reserves and production with attractive valuations, a huge reserve base and a growing energy demand in Russia as well as the rest of the Commonwealth of Independent States (CIS) and Europe. Impala Platinum is one of the leading platinum producers in the world and is responsible for approximately a quarter of the global platinum production. As one of the most efficient and lowest cost producers in the world, Impala Platinum is well positioned to benefit from the longer-term up trend in commodity prices. Chalco is China's only producer of alumina and is well positioned to benefit from China's continuing growth, gradual market consolidation and continued demand for aluminium from economic giants such as China and India. Univanich Palm Oil is one of the leading producers of crude palm oil in Thailand. The company is a beneficiary of strong demand growth for crude palm oil and expectations of higher product prices.

Outlook

Emerging economies continue to record relatively strong growth, and are able to compensate somewhat for the slower growth in developed markets. Intra emerging country trade has been growing rapidly and reliance on traditional markets like the US and Europe has declined over the years. Emerging markets are clearly in a much better position than their Western counterparts with their higher reserves and lower debt levels. This is visible in Credit Default Swap spreads where many emerging markets enjoy much lower spreads than those of Portugal, Greece or Ireland. In fact, the debt problems of the US and Europe could be said to have emphasised emerging markets' current fiscal and fundamental economic strength.

In terms of our investment strategy, we continue to invest with a long-term horizon in companies that we believe are undervalued, fundamentally strong and growing. We are positive on our key investment themes in consumer and commodity investments and we remain diligent and disciplined in our stock selection around these themes.

J Mark Mobius, Ph.D.

Templeton Asset Management Ltd.

25 November 2011

TWENTY LARGEST INVESTMENTS

As at 30 September 2011

			% of			% of
			Total	MSCI		Issued	Market
			Net	Index		Shared	Value
Company	Country	Industry	Assets		Weighting	Capital	£000
Brilliance China Automotive Holdings Ltd.	Hong Kong/	Automobile Manufacturers	7.9	0.1		5.8	143,070
	China
Vale SA, ADR, pfd., A	Brazil	Steel	5.4	2.5		0.4	98,898
PT Astra International Tbk	Indonesia	Automobile Manufacturers	4.8	0.4		0.5	87,463
Itau Unibanco Holding SA, ADR	Brazil	Diversified Banks	4.7	1.2		0.6	85,293
Banco Bradesco SA, ADR, pfd.	Brazil	Diversified Banks	4.6	0.9		0.6	82,661
Tata Consultancy Services Ltd.	India	IT Consulting & Other Services	4.4	0.3		0.3	79,610
Akbank TAS	Turkey	Diversified Banks	4.1	0.1		0.8	74,456
Dairy Farm International Holdings Ltd.	Hong Kong/	Food Retail	3.8	0.0		0.9	69,230
	China
PetroChina Co. Ltd., H	Hong Kong/	Integrated Oil & Gas	3.3	0.8		0.4	60,711
	China
Siam Commercial Bank Public Co. Ltd., fgn.	Thailand	Diversified Banks	3.0	0.2		0.8	55,127
PT Bank Central Asia Tbk	Indonesia	Diversified Banks	3.0	0.3		0.4	54,894
Sesa Goa Ltd.	India	Steel	3.0	0.1		2.4	54,270
VTech Holdings Ltd.	Hong Kong/	Communications Equipment	2.7	0.0		3.3	49,219
	China
Guangzhou Automobile Group Co. Ltd., H	Hong Kong/	Automobile Manufacturers	2.6	0.1		1.3	47,977
	China
SK Innovation Co.Ltd.	South Korea	Oil & Gas Refining & Marketing	2.6	0.3		0.7	46,497
Petroleo Brasileiro SA, ADR, pfd.	Brazil	Integrated Oil & Gas	2.5	2.8		0.2	44,935
PT Bank Danamon Indonesia Tbk	Indonesia	Diversified Banks	2.5	0.1		1.4	44,625
Kasikornbank Public Co. Ltd., fgn.	Thailand	Diversified Banks	2.2	0.2		0.7	40,113
Tupras-Turkiye Petrol Rafinerileri AS	Turkey	Oil & Gas Refining & Marketing	2.2	0.1		1.2	39,345
Mining and Metallurgical Co. Norilsk	Russia	Diversified Metals & Mining	2.1	0.4		1.4	37,250
Nickel, ADR
Total Top 20 Holdings			71.4				1,295,644

Since 1 April 2011, changes in the structure of the portfolio have resulted in Kasikornbank Public Co. and Mining and Metallurgical Co. Norilsk Nickel, ADR being included in the top 20 holdings whereas Anglo American Plc and Hyundai Development Co. have dropped out of the top 20 holdings.

GEOGRAPHIC ASSET ALLOCATION

As at 30 September 2011

			Performance*
COUNTRY	TEMIT	MSCI Emerging Markets Index	MSCI Emerging Markets Index Local	MSCI Emerging Markets Index GBP
Hong Kong/China	24.0%	16.8%	(28.3)	(26.3)
Brazil	17.2%	14.6%	(21.9)	(29.5)
Thailand	11.3%	1.8%	(15.9)	(15.8)
India	10.7%	7.6%	(16.1)	(21.4)
Indonesia	10.3%	2.9%	(4.8)	(3.0)
Turkey	6.3%	1.5%	(4.4)	(18.3)
Russia	4.6%	6.4%	(28.6)	(34.1)
South Korea	3.9%	14.7%	(17.0)	(20.5)
South Africa	2.5%	7.8%	(4.6)	(17.4)
Mexico	2.0%	4.6%	(8.3)	(18.7)
Pakistan	2.0%	0.0%	-	-
Poland	1.4%	1.5%	(22.3)	(31.0)
Hungary	1.0%	0.3%	(35.0)	(42.8)
Austria	0.8%	0.0%	-	-
Taiwan	0.3%	11.5%	(16.7)	(17.2)
Other Assets	1.7%	0.0%

						Movement in period*
						MSCI Emerging
	31 Mar 11			Market	30 Sep 11		Markets Index
Country	Market Value	Purchases	Sales	Movement	Market Value	TEMIT	GBP
	£m's	£m's	£m's	£m's	£m's	%	%
Hong Kong/China	546	-	-	(111)	435	(20.3)	(26.3)
Brazil	451	-	-	(139)	312	(30.8)	(29.5)
Thailand	233	7	-	(34)	206	(14.2)	(15.8)
India	266	-	-	(72)	194	(27.1)	(21.4)
Indonesia	183	5	-	(1)	187	(0.5)	(3.0)
Other	676	12	(34)	(203)	451
Other Assets	13			17	30
Total	2,368	24	(34)	(543)	1,815
*Figures based on a share price return.

SECTOR ASSET ALLOCATION As at 30 September 2011
SECTOR	TEMIT	MSCI Emerging Markets Index	Performance* MSCI Emerging Markets Index GBP
Financials	27.9%	23.9%	(26.3)
Energy	21.9%	13.8%	(30.7)
Materials	16.9%	13.9%	(29.0)
Consumer Discretionary	15.5%	8.1%	(11.0)
Information Technology	8.0%	12.7%	(19.0)
Consumer Staples	6.2%	7.5%	(5.6)
Industrials	1.9%	6.7%	(27.1)
Other Assets	1.7%	0.0%

						Movement in period*
						MSCI Emerging
	31 Mar 11			Market	30 Sep 11		Markets Index
Sector	Market Value	Purchases	Sales	Movement	Market Value	TEMIT	GBP
	£m's	£m's	£m's	£m's	£m's	%	%
Financials	616	8	-	(118)	506	(18.9)	(26.3)
Energy	604	7	(34)	(179)	398	(31.0)	(30.7)
Materials	442	2	-	(137)	307	(30.9)	(29.0)
Consumer Discretionary	330	-	-	(47)	283	(14.2)	(11.0)
Information Technology	178	-	-	(34)	144	(19.1)	(19.0)
Other	185	7	-	(45)	147
Other Assets	13	-	-	17	30
Total	2,368	24	(34)	(543)	1,815

The Investment Manager uses a value style of investing and the constituents of the portfolio may not match those of the index.

*Figures based on a share price return.

INCOME STATEMENT

For the six months to 30 September 2011

	For the six months to
	30 September 2011 (unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains/(Losses) on investments and exchange
Gains/(Losses) on investments at fair value	-	(559,980)	(559,980)
Gains/(Losses) on foreign exchange	-	(123)	(123)
Revenue
Dividends	38,829	-	38,829
Bank interest	48	-	48
	38,877	(560,103)	(521,226)
Expenses
Investment management fee	(10,961)	-	(10,961)
Other expenses	(3,374)	-	(3,374)
Profit/(Loss) before taxation	24,542	(560,103)	(535,561)
Tax expense	(3,189)	-	(3,189)
Profit/(Loss) for the period	21,353	(560,103)	(538,750)
Profit/(Loss) attributable to equity holders of the Company	21,353	(560,103)	(538,750)
Basic earnings per share	6.5p	(169.8p)	(163.3p)
Annualised Expense Ratio			1.31%

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 period, and therefore no separate statement of comprehensive income has been presented.

Dividend Policy

In accordance with the Company's stated policy, no interim dividend is declared for the period. (An ordinary dividend of 4.25 pence per share was paid for the year ended 31 March 2011.) The Capital element of Total Return is not distributable.

For the six months to			For the year ended
30 September 2010 (unaudited)			31 March 2011 (audited)
Revenue	Capital	Total	Revenue	Capital	Total
£'000	£'000	£'000	£'000	£'000	£'000
-	147,933	147,933	-	314,573	314,573
-	(254)	(254)	-	(169)	(169)
33,588	-	33,588	52,116	-	52,116
6	-	6	15	-	15
33,594	147,679	181,273	52,131	314,404	366,535
(9,872)	-	(9,872)	(21,209)	-	(21,209)
(3,068)	-	(3,068)	(6,555)	-	(6,555)
20,654	147,679	168,333	24,367	314,404	338,771
(2,304)	-	(2,304)	(4,108)	-	(4,108)
18,350	147,679	166,029	20,259	314,404	334,663
18,350	147,679	166,029	20,259	314,404	334,663
5.6p	44.8p	50.4p	6.1p	95.3p	101.4p
		1.31%			1.31%

BALANCE SHEET

As at 30 September 2011

	As at	As at	As at
	30 September	30 September	31 March
	2011	2010	2011
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Assets
Non-current assets
Investments at fair value through profit or loss	1,785,130	2,195,150	2,354,802
Current Assets
Trade and other receivables	2,931	5,023	5,573
Cash	32,351	2,266	11,025
	35,282	7,289	16,598
Current Liabilities
Trade and other payables	(5,103)	(2,203)	(2,600)
Current tax payable	-	(176)	(408)
	(5,103)	(2,379)	(3,008)
Net assets	1,815,309	2,200,060	2,368,392
Issued share capital and reserves attributable to
equity shareholders
Called-up Share Capital	82,453	82,478	82,466
Special Distributable Reserve	433,546	433,546	433,546
Capital Redemption Reserve	216	191	203
Capital Reserve	1,223,187	1,617,181	1,783,604
Revenue Reserve	75,907	66,664	68,573
Equity shareholders' funds	1,815,309	2,200,060	2,368,392
Net Asset Value per Share (in pence)	550.4	666.9	718.0

STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

For the six months to 30 September 2011

			Capital			Special
		Share	Redemption			Distributable	Capital		Revenue
		Capital	Reserve			Reserve	Reserve		Reserve		Total
		£'000	£'000			£'000	£'000		£'000		£'000
Balance at 31 March 2010		82,478	191			433,546	1,469,502		60,686		2,046,403
Profit for the period		-	-			-	147,679		18,350		166,029
Equity dividends		-	-			-	-		(12,372)		(12,372)
Balance at 30 September 2010		82,478	191			433,546	1,617,181		66,664		2,200,060
Profit for the period		-	-			-	166,725		1,909		168,634
Purchase and cancellation of
own shares		(12)	12			-	(302)		-		(302)
Balance at 31 March 2011		82,466	203			433,546	1,783,604		68,573		2,368,392
Profit/(Loss) for the period		-	-			-	(560,103)		21,353		(538,750)
Equity dividends		-	-			-	-		(14,019)		(14,019)
Purchase and cancellation of own shares
		(13)		13	-			(314)	-	(314)
Balance at 30 September 2011		82,453	216			433,546	1,223,187		75,907		1,815,309

CASH FLOW STATEMENT

For the six months to 30 September 2011

	For the six	For the six	For the
	months to	months to	year to
	30 September	30 September	31 March
	2011	2010	2011
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Cash flows from operating activities
(Loss)/profit before taxation	(535,561)	168,333	338,771
Adjustments for:
Losses/(gains) on investments at fair value	559,980	(147,933)	(314,573)
Realised loss on foreign exchange	123	254	169
Scrip dividends received in period	(401)	-	(837)
Decrease in debtors	2,648	619	71
(Increase)/decrease in accrued income	(6)	1	(1)
Increase in creditors	2,503	15	412
Cash generated from operations	29,286	21,289	24,012
Taxation paid	(3,597)	(2,611)	(4,183)
Net cash inflow from operating activities	25,689	18,678	19,829
Cash flows from investing activities
Purchases of non-current financial assets	(24,110)	(13,095)	(27,457)
Sales of non-current financial assets	34,075	-	22,195
	9,965	(13,095)	(5,262)
Cash flows from financing activities
Equity dividends paid	(14,019)	(12,372)	(12,372)
Purchase and cancellation of own shares	(314)	-	(302)
	(14,333)	(12,372)	(12,674)
Net increase/(decrease) in cash	21,321	(6,789)	1,893
Cash at start of period	11,025	9,309	9,309
Exchange gain/(loss) on cash	5	(254)	(177)
Cash at end of period	32,351	2,266	11,025

NOTES TO THE FINANCIAL STATEMENTS

For the six months to 30 September 2011

1. Basis of preparation

The Half Yearly Report for the period ended 30 September 2011 has been prepared in accordance with International Accounting Standards ("IAS") 34 "Interim Financial Reporting"

The accounting policies applied to these half yearly accounts are consistent with those applied in the accounts for the year ended 31 March 2011.

The financial information contained in this interim statement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 30 September 2010 and 30 September 2011 has not been audited. The figures and financial information for the year ended 31 March 2011 are extracted from the latest published accounts and do not constitute the statutory accounts for that period. Those accounts have been delivered to the Registrar of Companies and included the Report of the Independent Auditors, which was unqualified and did not include a statement under sections 498(2) or 498(3) of the Companies Act 2006.

2. Earnings per share
	For the six	For the six	For the
	months to	months to	year to
	30 September	30 September	31 March
	2011	2010	2011
	£'000	£'000	£'000
Revenue return	21,353	18,350	20,259
Capital return/(loss)	(560,103)	147,679	314,404
Total	(538,750)	166,029	334,663
Weighted average number of shares in issue	329,837,576	329,914,352	329,910,379
Revenue return per share	6.5p	5.6p	6.1p
Capital return per share	(169.8p)	44.8p	95.3p
Total return per share	(163.3p)	50.4p	101.4p

3. Shares Repurchased

During the period to 30 September 2011 the Company bought back 50,000 shares for cancellation for a total consideration of £0.3 million. In the six months to 30 September 2010 no shares were repurchased. For the year to 31 March 2011 a total of 50,000 shares were bought back for cancellation at a cost of £0.3 million.

4. Taxation

The tax expense of £3.2 million relates to irrecoverable overseas tax on dividends received.

5. Costs of Investment Transactions

During the period, expenses were incurred in acquiring or disposing of investments. The following costs of transactions are included in the gains/(losses) on investments

	For the six	For the six	For the
	months to	months to	year to
	30 September	30 September	31 March
	2011	2010	2011
	£'000	£'000	£'000
Purchases	33	24	98
Sales	51	-	111
	84	24	209

A pdf version of the full Half Yearly Report to 30 September 2011 will be available by accessing the following hyperlink

http://www.franklintempleton.co.uk/documents/en/UK/pdf/Temit/temit_interim.pdf.

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

 

END

 

 

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