TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC
("TEMIT") ("the Company")
UNAUDITED HALF YEARLY REPORT TO 30 SEPTEMBER 2014
CHAIRMAN'S STATEMENT
Continuation Vote
I would like to start the half year review by thanking shareholders for their overwhelming vote in favour of continuation at the Annual General Meeting in July. The next continuation vote is due in 2019. All other proposals were also approved at the AGM.
Overview
The markets in which TEMIT invests continue to be dominated by economic and geopolitical events.
While investors have had some time to come to terms with the ending of the quantitative easing programme in the US, it remains apparent that markets as a whole have become quite dependent on an excess of cash available for investment. Further complicating this picture are moves by Japan to inject cash into the system and, more recently, an increased likelihood that Europe will be required to maintain an easy money policy for some considerable time.
There are several causes for concern in the political arena. The growth of IS in Syria and Iraq, Russia's annexation of the Crimea and continuing activity in the rest of the Ukraine are sources of instability and distraction for politicians. Russia falls into TEMIT's investment universe and we have a thorough process for reviewing investments in that country to ensure that we do not fall foul of sanctions. Currently, continuing protests in Hong Kong are causing difficulties for a Chinese government that, with the rise of the internet, is gradually losing its ability to control all internal messages. In Thailand, we have a military government which ironically is seen in some quarters as good for stability. Against this, and more positively, India has elected a more business-friendly government, as has Indonesia. Brazil's President Dilma Rousseff has recently won a further period in office by a narrow margin. Markets initially reacted badly to the news, with a sharp fall in Brazilian shares.
Quantitative easing is partly a reaction to poor economic growth in developed economies and in the meantime our Investment Manager is seeking to take advantage of the superior growth being experienced by emerging economies. Furthermore, our Investment Manager invests in companies, not economies per se, and continues to seek sound businesses with the prospect of exceptional growth. The Investment Manager invests for the long term and portfolio turnover is generally low compared with other investment companies. Good companies can still take advantage of the positive demographic and consumer trends and there has been a little more activity this half year as opportunities became available. These are explained more fully in the Investment Manager's Review.
Investment Performance
The half year to 30 September 2014 started well for TEMIT and our net asset value per share increased in each of the first five months April to August. However, September was more difficult with both the market (as measured by the MSCI Emerging Markets Index) and our Net Asset Value falling by circa 5% but still leaving us in positive territory for the half year. The overall result was good and TEMIT's NAV increased over the six months by 8.2%, out-performing the MSCI Emerging Markets Index return of 6.1% (both on a total return basis in sterling terms). Our discount reduced in September, cushioning some of the fall in NAV, with the result that the share price total return performance over the half year was even stronger than the NAV total return. Returns are summarised in the table below:-
|
30 September |
|
31 March |
|
Capital |
|
Total |
|
|
2014 |
|
2014 |
|
Return |
|
return |
|
NAV |
|
|
|
|
|
|
|
|
(cum income) |
632.8 |
|
591.8 |
|
+ 6.9 |
% |
+8.2 |
% |
Share Price |
582.0 |
|
527.0 |
|
+10.4 |
% |
+11.9 |
% |
MSCI Emerging |
|
|
|
|
|
|
|
|
Markets Index |
- |
|
- |
|
+3.9 |
% |
+6.1 |
% |
The Company's primary objective is to seek long-term capital appreciation. The long term performance to 30 September 2014 is summarised in the table below (figures in brackets are annualised):-
|
|
|
|
|
Since |
|||
|
5 Years |
|
10 Years |
|
launch |
|||
|
% |
|
% |
|
% |
|||
Net asset value |
|
|
|
|
|
|
|
|
(cum income)* |
33 |
(5.9) |
|
273 |
(11.7) |
|
2,329 |
(13.5) |
Share price* |
32 |
(5.8) |
|
340 |
(12.6) |
|
2,156 |
(13.1) |
MSCI Emerging |
|
|
|
|
|
|
|
|
Markets Index* |
24 |
(4.5) |
|
218 |
(9.5) |
|
1,012 |
(10.0) |
*Total return in Sterling terms
On 14th November 2014, the latest date for which information was available, the NAV per share had fallen by 0.4% to 630.1 pence and the share price by 1.5% to 573.0 pence.
Asset allocation and gearing
The general policy of the Company is to be fully invested and the Investment Manager normally runs the portfolio with only a small cash balance. As at 30 September 2014, 93.1% of TEMIT's net assets were invested in equities (31 March 2014: 96.9%) with a larger cash balance arising from realisations awaiting re-investment.
Your Board regularly reviews its policy on gearing and we continue to take a cautious stance, reflecting the periods of volatility that are a feature of emerging equity markets and are generally unpredictable in both timing and extent. Our policy remains that in exceptional circumstances, and for short periods, TEMIT may borrow up to 10% of its net assets. Borrowing facilities were not used during the six months to 30 September 2014, nor in the previous two financial years.
Dividend
A dividend of 7.25 pence per share for the year ended 31 March 2014 was paid on 23 July 2014. The Company does not pay an interim dividend.
Discount and Share Buy Backs
During the half year to 30 September 2014, the Company's shares traded at discounts between 7.9% and 12.0% of NAV with an average of 10.1% and at the end of the period the discount stood at 8.0%.
Your Board monitors the share price discount to net asset value and exercises its right to buy back shares when the Board considers that it is in shareholders' interests to do so. Our brokers continue to monitor the discount every working day and we use share buy backs actively but selectively. In consequence, during the half year, some 1,730,500 shares were bought back at a total cost of £9.6 million.
Regulation
I reported in the last annual report on the implementation of the European Union's Alternative Investment Fund Managers Directive ("AIFMD"), which came into force on 22 July 2013 with a transition period to 22 July 2014. I am pleased to report that all of the necessary changes were in place by the due date and that the new arrangements are working well. I would like to thank the team at Franklin Templeton for their commitment and diligence in what has been a long process.
The ever-changing regulatory environment will inevitably produce further challenges and costs. In particular, we are aware that some proposals for the implementation of the European Union's MiFID 2 regulations would make it very difficult for investment trusts to operate in their current form but we remain hopeful that common sense will prevail.
The Board
As indicated in the last Annual Report, Sir Peter Burt retired at this year's AGM in July after 10 years as a Director. I would like once again to thank him for his contribution.
In line with the UK Corporate Governance Code issued by the Financial Reporting Council in September 2012, all Directors are required to retire each year and may then stand for re-election. Beatrice Hollond was appointed as a Director on 1 April 2014 and was elected as a Director at the AGM. With the exception of Sir Peter Burt, all of the other Directors were re-elected at the AGM for a further year.
Neil Collins has become our Senior Independent Director.
Investor communications
The Board and Manager aim to keep shareholders informed about the Company as well as seeking feedback and comment from investors. We hold investor briefings and discussions. We send out the Annual and Half Yearly Report, as well as notices of any significant Company events to registered shareholders. We also release information through the stock exchanges on which we are listed. Our website (www.temit.co.uk) displays the latest news, price and performance information, portfolio details, quarterly web updates from the Investment Manager and a blog dealing with topical issues in emerging markets. You can also ask to have the latest Company information e-mailed direct to you via the website. 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.
Day to day contact is best handled through our Manager as set out above. If, however, shareholders wish to contact me, the Senior Independent Director Neil Collins or any other Director in private, our brokers Winterflood Securities will also be pleased to help.
Interim Management Statements
Following changes in UK regulatory requirements, the Company will now no longer release to the stock exchanges Interim Management Statements (IMS) as at the end of the first and third quarters of the Company's financial year.
The quarterly Manager Commentary, containing the information that was previously included with the IMS, will continue to be available on the Company's website during the month after each quarter end.
Scottish Independence Referendum
Your Company is incorporated in Scotland. Shareholders will be aware that the referendum on Scottish independence from the United Kingdom resulted in a vote against full independence but that the UK Government committed to devolve substantial further powers to the Scottish Government. Your Board will continue to monitor the situation closely.
Outlook
As set out in the Investment Manager's Review, emerging market economies in general have continued to grow at a faster rate than their developed counterparts. For the global economy, the effects of quantitative easing by various governments around the world are likely to be a dominant factor both with the provision of exceptional levels of liquidity by governments and the largely unknown effects of the ending of this experiment. Emerging markets were not as significantly affected by the financial crisis and have continued to perform relatively well. As set out in the Investment Manager's Review, China has been an engine of growth and, while this has slowed somewhat, it is encouraging to see government policy stimulating domestic demand. We see the growth of such demand as the key to the future in many countries. As investors adjust to continuing difficulties in parts of the world and to the eventual end of quantitative easing, your Board and Investment Manager believe that a focused portfolio of emerging markets companies which are fundamentally strong and growing and that are undervalued by stock markets should serve shareholders well.
Peter Smith
Chairman
21st November 2014
INTERIM MANAGEMENT REPORT
Principal risks and uncertainties
The Company invests, where possible, directly in the stock markets of emerging countries. Its principal risks and uncertainties are therefore:
• Investment and concentration risk
• Market risk
• Foreign currency risk
• Credit risk
• Operational and custody risk
• Key personnel
• Diversity
• Regulatory risk
The Board has provided the Investment Manager with guidelines and limits for the management of these principal risks and uncertainties. Further information on these is given in the Strategic Report within the Report and Accounts for the year ended 31 March 2014 which is available on the Company's website (www.temit.co.uk). In the Board's view, 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 Ltd. ("TAML") who acted as Investment Manager until 1 July 2014.
- Franklin Templeton Investment Management Limited ("FTIML") who acted as Secretary and Administrator until 1 July 2014.
- Franklin Templeton International Services S.à r.l. (FTIS) who has acted as the Alternative Investment Fund Manager from 1 July 2014.
During the first six months of the current financial year, there were no significant changes, other than those detailed above in the terms and conditions of the related party agreements, that 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 2014, 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 FCA'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 21 November 2014 and the above responsibility statement was signed on its behalf by
Peter Smith
Chairman
21 November 2014
INVESTMENT MANAGER'S REPORT & PORTFOLIO REVIEW
30 September 2014
Market Overview
The global economy grew moderately during the six months under review as many emerging markets continued to grow and many developed markets continued to recover. Although several emerging market countries faced headwinds such as soft domestic demand, weak exports and geopolitical crises, emerging market economies overall continued to grow faster than developed market economies. China's economic growth stabilised in the second half of the period as the government's stimulus measures gained traction. Domestic demand accounted for a greater portion of gross domestic product, indicating progress in policymakers' efforts to make China's economy more consumer driven. China's manufacturing sector improved during the period, suggesting that the country's economy remained in an expansionary mode. India's and Thailand's economies were also among those with indications of strengthening economic recovery, while others - including Turkey, South Africa, South Korea, Russia and Mexico - showed signs of slowing. Following contraction in the second quarter, there was evidence of improvement in the Brazilian economy at the period end as services sector strength offset manufacturing weakness.
Central bank actions varied across emerging markets. Several, including those of Brazil, South Africa and Russia, raised interest rates in response to rising inflation and weakening currencies. In contrast, several others, including those of Turkey and South Korea, lowered interest rates in an effort to promote economic growth. The People's Bank of China implemented monetary stimulus measures and reduced the cash reserve requirement ratio for banks serving rural borrowers and smaller companies in order to stimulate lending to targeted sectors and support economic expansion.
For the six months ended 30 September, 2014, emerging market stocks, as measured by the MSCI Emerging Markets Index, posted a 6.1% total return in sterling terms.
Emerging market stocks outperformed their developed market counterparts during the six-month period, as many investors were encouraged by generally positive global economic data and they seemed to focus on the relatively attractive valuations of many emerging market stocks. Emerging markets performed well during most of the period as countries such as India and Indonesia were buoyed by investors' optimism for potential economic reforms suggested by national election outcomes.
Further support for emerging market stocks came in the form of China's implementation of additional stimulus measures, the European Central Bank's monetary easing and investors' fading concerns about the impact of the end of US quantitative easing on emerging markets. However, renewed concerns about the future course of US monetary policy, uncertainty about the presidential election in Brazil (which was ultimately won by the incumbent Dilma Rousseff in October), less robust Chinese economic data, continued geopolitical tensions in Ukraine and the Middle East, and pro-democracy protests in Hong Kong weighed on emerging markets toward the end of the six month period.
Performance Attribution
Performance
Performance Attribution Analysis % |
|
|
Six months to 30 September 2014 |
|
|
Total Return (Net)1 |
8.2 |
|
Expenses2 |
0.6 |
|
Total Return (Gross)3 |
8.8 |
|
Benchmark Total Return4 |
6.1 |
|
Excess Return5 |
2.7 |
|
Sector Allocation |
(1.3 |
) |
Stock Selection |
3.0 |
|
Currency |
1.2 |
|
Residual6 |
(0.2 |
) |
Total Portfolio Manager Contribution |
2.7 |
|
Notes
1 Total Return (Net) is the NAV return inclusive of dividends reinvested.
2 Expenses incurred by the Company for the six months to 30 September 2014.
3 Gross return is Total Return (Net) plus Expenses. Gross of fee performance is preferable for attribution and other value-added reporting as it evaluates the contribution of the Investment Manager.
4 MSCI Emerging Markets (Total Return) Index, inclusive of dividends reinvested. Indices are comparable to gross returns as they include no expenses.
5 Excess return is the difference between the gross return of the portfolio and the return of benchmark.
6 The "Residual" represents the difference between the actual excess return and the excess return explained by the attribution model. This amount results from several factors, most significantly the difference between the actual trade price of securities included in actual performance and the end of day price used to calculate attribution.
Source: FactSet and Franklin Templeton Investments.
Largest company relative contributors and detractors to performance (%)
|
|
Contribution |
|
|
|
|
|||
|
|
to Relative |
|
Share Price |
|
|
|||
Top Contributors |
|
Performance |
|
Total Return |
|
|
|||
Tata Consultancy Services |
|
1.2 |
|
31.0 |
|
|
|||
Brilliance China Automotive |
|
1.0 |
|
17.5 |
|
|
|||
Hyundai Development |
|
0.9 |
|
47.7 |
|
|
|||
Kasikornbank |
|
0.6 |
|
34.7 |
|
|
|||
Samsung Electronics* |
|
0.6 |
|
(8.9 |
) |
|
|||
|
|
|
|
|
|
|
|||
|
|
Contribution |
|
|
|
||||
|
|
to Relative |
|
Share Price |
|
||||
Top Detractors |
|
Performance |
|
Total Return |
|
||||
SK Innovation |
|
(0.7 |
) |
(31.0 |
) |
|
|||
Vale |
|
(0.5 |
) |
(17.4 |
) |
|
|||
Astra International |
|
(0.4 |
) |
(6.5 |
) |
|
|||
China Mobile* |
|
(0.4 |
) |
34.7 |
|
|
|||
Impala Platinum |
|
(0.3 |
) |
(30.6 |
) |
|
|||
For the period 1 April 2014 to 30 September 2014.
* Company not held by TEMIT
At the company level, the top three contributors to relative performance were overweight positions in Tata Consultancy Services in India, Brilliance China Automotive in China, and Hyundai Development in South Korea.
One of India's largest and oldest IT consulting companies, Tata Consultancy Services, remains a beneficiary of improving trends in global IT outsourcing. We believe that IT outsourcing is a growing business, and Tata is well placed to benefit from this growth due to its extensive global exposure and comprehensive range of services. In addition to benefiting from the strong performance of the Indian market as a whole, strong second quarter results and indications of growth in both demand from international customers and Tata's market share further supported the share price. We are of the opinion that India has a major competitive advantage in the provision of outsourcing services due to a combination of available technological expertise and relatively low labour costs.
Brilliance China Automotive is a Chinese car maker noted for its joint venture with German luxury car maker BMW. Resilient sales of luxury cars in China drove strong earnings with BMW cars taking an increasing share of the market segment. News of an extension of the joint venture agreement between Brilliance China and BMW to 2026 also buoyed the share price. We believe that Brilliance China's capacity expansion plans coupled with its strong brand recognition and execution could allow the company to continue enjoying growing demand and rising market share. We remain confident in the superior engineering of the German partner, BMW, as well as the brand's increasing popularity in China. Of the approximately 18 million private cars sold in 2013 in China, less than 2% of them were BMW. We believe that the long-term demand growth is intact and the management of Brilliance and its joint venture company are capable of executing their business plans to gain further market share.
Hyundai Development is one of the leading residential property developers in Korea. With a strong brand name - "I-Park" the company is estimated to have the largest market share in the residential construction business. Measures taken by the South Korean authorities to stimulate the housing market by easing mortgage lending regulations, encouraging the redevelopment of older apartment complexes and reducing the role of the state housing company in favour of private developers, all boosted investor sentiment during the reporting period. We believe that the residential property market has strong long-term prospects as consumer wealth in South Korea grows, and residents look to upgrade their accommodation.
In terms of individual companies, the Company's positions in SK Innovation in South Korea, Vale in Brazil and Astra International in Indonesia were among the largest detractors.
South Korea's largest oil refiner, SK Innovation, reported disappointing second quarter results due to a decline in refining margins resulting from lower oil prices and demand, the shutdown of one of its gasoline-making residue fluidised catalytic crackers for maintenance, foreign exchange losses due to a stronger won, and lower profits from the petrochemical division as a result of weak paraxylene prices. Taking a longer term view, the company is trading at attractive valuations, and is well positioned to benefit from a recovery in product prices as well as product demand due to its dominant market position. An expansion of petrochemical and lubricant capacity could also result in better earnings in the longer term. SK Innovation is ahead of regional competitors in the conversion capacity of its refineries and is able to derive better refining margins than those competitors. As the demand for high grade and environmentally friendly products increases, SK Innovation is well positioned to meet that demand.
Vale is a major mining company based in Brazil with ownership of very large reserves of iron ore and nickel as well as transport and logistics assets. We believe that demand for steel, and as a consequence iron ore, is on a long term uptrend and that companies such as Vale with abundant, low cost assets represent an attractive investment opportunity. However, a decline in iron ore prices during the period impacted Vale's share price, as increased supply - notably from Australian producers - failed to be absorbed fully by the somewhat subdued steel industry demand. As Vale is one of the world's lowest-cost producers, we expect it to be competitive in the medium to long term.
Astra International is one of the market leaders in Indonesia's motor vehicle industry, and has alliances with manufacturers such as Toyota, Honda, Peugeot, BMW, Isuzu and Daihatsu. It also maintains a strong market position in heavy equipment in the distribution of Komatsu products. Indonesian stocks including Astra performed very well in the first quarter of 2014 in anticipation of political change, and experienced some profit-taking in subsequent months. The victory of reformist candidate, Joko Widodo as President, however, was cheered by investors, and supported equity prices. In our opinion, the company's dominant position, and extensive distribution and service networks in the local market put it in an attractive position to benefit from the growth of the Indonesian economy and in particular, the consumer sector.
Largest sector relative contributors and detractors to performance (%)
Top Contributors |
|
Contribution |
|
MSCI |
|
Factors |
Financials |
|
1.5 |
|
7.2 |
|
Stock selection |
Information Technology |
|
1.0 |
|
7.4 |
|
Stock selection |
Consumer Discretionary |
|
0.9 |
|
0.3 |
|
Stock selection |
Industrials |
|
0.9 |
|
4.6 |
|
Stock selection |
Energy |
|
0.1 |
|
4.8 |
|
Overweight |
Top Detractors |
|
Contribution |
|
MSCI |
|
Factors |
Telecommunication Services* |
|
(0.6 |
) |
15.4 |
|
Sector not held by TEMIT |
Materials |
|
(0.3 |
) |
(1.9 |
) |
Stock selection |
Heath Care* |
|
(0.3 |
) |
22.1 |
|
Sector not held by TEMIT |
Utilities* |
|
(0.1 |
) |
9.5 |
|
Sector not held by TEMIT |
Consumer Staples |
|
(0.1 |
) |
4.5 |
|
Stock selection |
*No companies held by TEMIT in this sector.
The MSCI Emerging Markets Index Total Return shows the total return of the sector within the Index in sterling terms.
Largest country relative contributors and detractors to performance (%)
Top Contributors |
|
Contribution |
|
MSCI |
|
Factors |
Thailand |
|
1.5 |
|
19.4 |
|
Strong stock selection and Overweight |
India |
|
1.1 |
|
18.6 |
|
Strong stock selection and Overweight |
South Korea |
|
0.8 |
|
1.5 |
|
Strong stock selection and Underweight |
Russia |
|
0.5 |
|
(3.2 |
) |
Strong stock selection and Underweight |
Hong Kong / China |
|
0.4 |
|
10.4 |
|
Strong stock selection and Underweight |
Top Detractors |
|
Contribution |
|
MSCI |
|
Factors |
Indonesia |
|
(0.6 |
) |
7.2 |
|
Stock selection |
Taiwan= |
|
(0.4 |
) |
10.1 |
|
Country not held by TEMIT |
Peru |
|
(0.3 |
) |
9.8 |
|
Stock selection |
Austria+ |
|
(0.3 |
) |
- |
|
Overweight |
Mexico |
|
(0.2 |
) |
11.9 |
|
Underweight |
= No companies held by TEMIT in this country.
+ No companies held by the MSCI Emerging Markets Index in these countries.
The MSCI Emerging Markets Index Total Return shows the total return of the country within the Index in sterling terms.
Portfolio Changes & Investment Strategies
New Holding |
|
|
|
|
Security |
|
Country |
|
Amount |
Kumba Iron Ore |
|
South Africa |
|
19 |
Industries Qatar |
|
Qatar |
|
16 |
Inner Mongolia Yitai Coal |
|
Hong Kong/China |
|
2 |
Total |
|
37 |
Increased Holding |
|
|
|
|
Security |
|
Country |
|
Amount |
Unilever |
|
United Kingdom |
|
61 |
Petroleo Brasileiro, ADR |
|
Brazil |
|
17 |
Impala Platinum |
|
South Africa |
|
3 |
Total |
|
|
|
81 |
Partial Sale |
|
|
|
|
Security |
|
Country |
|
Amount |
Tata Consultancy Services |
|
India |
|
25 |
Norilsk Nickel, ADR |
|
Russia |
|
23 |
Tupras-Turkiye Petrol |
|
Turkey |
|
9 |
Oil & Natural Gas |
|
India |
|
7 |
Brilliance China Automotive |
|
Hong Kong/China |
|
5 |
Total |
|
|
|
69 |
Total Sale |
|
|
|
|
Security |
|
Country |
|
Amount |
Sesa Sterlite |
|
India |
|
39 |
Wal-Mart de Mexico |
|
Mexico |
|
37 |
Anglo American |
|
South Africa |
|
29 |
Industries Qatar |
|
Qatar |
|
17 |
Norilsk Nickel* |
|
Russia |
|
9 |
National Aluminium |
|
India |
|
8 |
Total |
|
|
|
139 |
*Ordinary shares
During the reporting period, TEMIT added two new companies to the portfolio: Kumba Iron Ore in South Africa and Inner Mongolia Yitai Coal in China, while it purchased and subsequently sold shares in a third company, Industries Qatar.
Kumba Iron Ore is a South Africa based iron ore mining company, majority owned by Anglo American. The company runs the port operations at Saldanha Bay, from where its iron ore is shipped to various destinations. The stock was added to the portfolio due to its attractive valuations, strong balance sheet and high profit margins along with a high dividend pay-out ratio. While some investors may be concerned about a prolonged slowdown in China's economy and its impact on iron ore demand and iron ore prices, China's GDP growth rate remains robust at above 7% and we believe that part of that relatively strong economic growth is derived from investment and infrastructure development. The long-term demand for steel is thus expected to remain robust with ongoing project development in the cities across China requiring steel products. Over the long term, access to abundant minable resources with stable grades, and stable government policies should allow some iron ore producers to continue to generate superior returns on capital.
Inner Mongolia Yitai Coal is one the largest coal producers in China. The company produces high quality thermal coal, and also has coal-to-oil technology, railway transportation, pharmaceuticals and solar power generation businesses. High quality coal reserves, high profit margins and a strong balance sheet bode well for the company. As well as moves to reduce CO2 emissions, coal is currently the main source of energy for China, accounting for about 70% of the country's energy needs. Economic growth and the growing need for energy in the country lead us to believe that demand for good quality coal will remain high for some years.
Additional purchases were made in three companies that remained relatively attractive to us. These were Unilever - a UK listed company which derives a substantial portion of its revenues from emerging markets, Petroleo Brasileiro (Petrobras) - Brazil's national oil and gas company, and Impala Platinum - a leading global platinum producer.
Industries Qatar, an industrial company with interests in petrochemicals, fertilisers and steel, was added to the portfolio and subsequently sold during the reporting period for a small profit. While we do not typically hold shares for such a short period of time, we take a flexible approach.
Holdings in Tata Consultancy Services and Brilliance China Automotive were trimmed as part of efforts to reduce concentration in these stocks. The two companies remain the Company's top two holdings, signalling our continued confidence in them. Holdings in Norilsk Nickel, Tupras-Turkiye Petrol, and Oil & Natural Gas (ONGC) were also reduced.
Our holdings in Wal-Mart de Mexico, Sesa Sterlite and National Aluminum were sold.
The above purchase and sale transactions in aggregate resulted in an increase in the Company's positions in the materials, information technology and consumer discretionary sectors.
Some of the cash raised from sales was also used to repurchase a number of TEMIT's own shares for cancellation during the reporting period.
Outlook
A number of weaker than expected monthly indicators such as retail sales and industrial production from China, lower commodity prices and speculative flows into US dollar assets caused nervousness and volatility in emerging markets towards the end of the reporting period. However, we believe that a growing US economy, substantial monetary easing in Europe and Japan, and strengthening domestic factors in many emerging markets could present an attractive opportunity for investors. We remain of the opinion that longer term trends in emerging markets such as investor-friendly reforms in a number of countries (including China, India, South Korea and Mexico), moves to reduce trade barriers, major strides in technological expertise within emerging market economies, and the rapid growth in the numbers and spending power of middle class consumers all provide the basis for sustained economic growth and rising corporate profitability across many emerging markets. Meanwhile, we continue to identify individual emerging market companies that we believe trade at relatively attractive valuations.
Moreover, it is important to remember that emerging market countries now represent a large share of world economic activity and equity market capitalisation. The news that a BRICS development bank is being established is a demonstration of the increasing economic strength of emerging market nations. Many investors are underweight in emerging markets and are realising that this could represent a risk. As a result, emerging markets reported significant fund inflows during the second half of the period. The long-term investment case for emerging markets has not changed. Three key themes remain in place: emerging markets' economic growth rates in general continue to be markedly faster than those of developed markets; emerging markets have much greater foreign reserves than developed markets; and the debt-to-GDP ratios of emerging market countries generally remain much lower than those of developed markets.
J Mark Mobius, Ph.D.
Templeton Asset Management Ltd.
21 November 2014
PORTFOLIO HOLDINGS
As at 30 September 2014
Geographical analysis (by country of incorporation)
|
|
|
|
|
|
|
% of |
|
|
|
|
|
Fair |
|
MSCI |
|
Issued |
|
|
|
|
|
Value |
(a) |
Index |
|
Share |
|
% of |
Country |
Sector |
|
£'000 |
|
Weighting |
(b) |
Class |
|
net assets |
|
|
|
|
|
|
|
|
|
|
AUSTRIA |
|
|
|
|
|
|
|
|
|
OMV(c) |
Energy |
|
16,353 |
|
N/A |
|
0.2 |
|
0.8 |
|
|
|
16,353 |
|
|
|
|
|
0.8 |
BRAZIL |
|
|
|
|
|
|
|
|
|
Banco Bradesco ADR(d)(e)(f) |
Financials |
|
84,328 |
|
1.0 |
|
0.5 |
|
4.1 |
Itau Unibanco, ADR(e)(f) |
Financials |
|
88,653 |
|
1.0 |
|
0.4 |
|
4.4 |
Petroleo Brasileiro, ADR(d)(e)(f) |
Energy |
|
48,207 |
|
1.3 |
|
0.1 |
|
2.4 |
Vale, ADR(d)(e)(f) |
Materials |
|
50,955 |
|
0.8 |
|
0.4 |
|
2.5 |
|
|
|
272,143 |
|
|
|
|
|
13.4 |
HONG KONG/CHINA |
|
|
|
|
|
|
|
|
|
Aluminum Corp. of China, H(g) |
Materials |
|
25,835 |
|
- |
|
2.6 |
|
1.3 |
Brilliance China Automotive |
Consumer Discretionary |
|
198,804 |
|
0.1 |
|
3.7 |
|
9.8 |
China International Marine Containers, B(h) |
Industrials |
|
16,270 |
|
- |
|
0.9 |
|
0.8 |
China Petroleum and Chemical, H(g) |
Energy |
|
35,362 |
|
0.6 |
|
0.3 |
|
1.7 |
Dairy Farm |
Consumer Staples |
|
74,391 |
|
N/A |
|
0.9 |
|
3.7 |
Guangzhou Automobile, H(g) |
Consumer Discretionary |
|
46,441 |
|
0.1 |
|
3.5 |
|
2.3 |
Inner Mongolia Yitai Coal |
Energy |
|
2,487 |
|
- |
|
0.1 |
|
0.1 |
PetroChina, H(g) |
Energy |
|
61,803 |
|
0.7 |
|
0.4 |
|
3.0 |
Victory City International |
Consumer Discretionary |
|
10,748 |
|
N/A |
|
6.7 |
|
0.5 |
VTech |
Information Technology |
|
63,209 |
|
N/A |
|
3.3 |
|
3.1 |
|
|
|
535,350 |
|
|
|
|
|
26.3 |
INDIA |
|
|
|
|
|
|
|
|
|
Infosys Technologies |
Information Technology |
|
26,817 |
|
0.7 |
|
0.1 |
|
1.3 |
Oil & Natural Gas |
Energy |
|
35,201 |
|
0.1 |
|
0.1 |
|
1.7 |
Peninsula Land |
Financials |
|
5,195 |
|
N/A |
|
5.6 |
|
0.3 |
Tata Consultancy Services |
Information Technology |
|
125,819 |
|
0.5 |
|
0.2 |
|
6.2 |
|
|
|
193,032 |
|
|
|
|
|
9.5 |
INDONESIA |
|
|
|
|
|
|
|
|
|
Astra International |
Consumer Discretionary |
|
71,040 |
|
0.3 |
|
0.5 |
|
3.5 |
Bank Central Asia |
Financials |
|
21,553 |
|
0.3 |
|
0.1 |
|
1.1 |
Bank Danamon Indonesia |
Financials |
|
26,672 |
|
- |
|
1.4 |
|
1.3 |
|
|
|
119,265 |
|
|
|
|
|
5.9 |
(a) Fair value represents the bid value of a security as required by International Financial Reporting Standards (IFRS).
(b) N/A: These stocks are not held by the MSCI Emerging Markets Index.
(c) These companies have significant exposure to operations in emerging markets.
(d) pfd: preferred shares.
(e) US Listed Stocks.
(f) American Depositary Receipt.
(g) Shares eligible for foreign investment on Chinese stock exchange.
(h) Shares eligible for foreign investment on Hong Kong stock exchange.
|
|
|
|
|
|
|
% of |
|
|
|
|
|
Fair |
|
MSCI |
|
Issued |
|
|
|
|
|
Value |
(a) |
Index |
|
Share |
|
% of |
Country |
Sector |
|
£'000 |
|
Weighting |
(b) |
Class |
|
net assets |
|
|
|
|
|
|
|
|
|
|
JORDAN |
|
|
|
|
|
|
|
|
|
Arab Potash |
Materials |
|
941 |
|
N/A |
|
0.1 |
|
- |
|
|
|
941 |
|
|
|
|
|
- |
PAKISTAN |
|
|
|
|
|
|
|
|
|
MCB Bank |
Financials |
|
66,047 |
|
N/A |
|
3.5 |
|
3.2 |
Oil & Gas Development |
Energy |
|
25,877 |
|
N/A |
|
0.4 |
|
1.3 |
|
|
|
91,924 |
|
|
|
|
|
4.5 |
PERU |
|
|
|
|
|
|
|
|
|
Buenaventura ADR(e)(f) |
Materials |
|
42,550 |
|
0.1 |
|
2.2 |
|
2.1 |
|
|
|
42,550 |
|
|
|
|
|
2.1 |
RUSSIA |
|
|
|
|
|
|
|
|
|
Gazprom, ADR(e)(f) |
Energy |
|
39,131 |
|
1.0 |
|
0.0 |
|
2.0 |
Norilsk Nickel, ADR(e)(f) |
Materials |
|
7,896 |
|
0.3 |
|
0.4 |
|
0.4 |
OAO TMK |
Energy |
|
9,045 |
|
N/A |
|
0.2 |
|
0.4 |
|
|
|
56,072 |
|
|
|
|
|
2.8 |
SOUTH AFRICA |
|
|
|
|
|
|
|
|
|
Impala Platinum |
Materials |
|
17,816 |
|
0.1 |
|
0.6 |
|
0.9 |
Kumba Iron Ore |
Materials |
|
15,347 |
|
- |
|
0.3 |
|
0.7 |
|
|
|
33,163 |
|
|
|
|
|
1.6 |
SOUTH KOREA |
|
|
|
|
|
|
|
|
|
Hyundai Development |
Industrials |
|
65,862 |
|
0.1 |
|
3.5 |
|
3.2 |
SK Innovation |
Energy |
|
29,511 |
|
0.1 |
|
0.7 |
|
1.5 |
|
|
|
95,373 |
|
|
|
|
|
4.7 |
THAILAND |
|
|
|
|
|
|
|
|
|
Kasikornbank |
Financials |
|
73,516 |
|
0.3 |
|
0.7 |
|
3.6 |
Kiatnakin Bank |
Financials |
|
18,050 |
|
N/A |
|
2.7 |
|
0.9 |
Land and Houses |
Financials |
|
18,668 |
|
N/A |
|
0.9 |
|
0.9 |
Land and Houses (warrants) |
Financials |
|
2,405 |
|
N/A |
|
0.9 |
|
0.1 |
PTT |
Energy |
|
35,781 |
|
0.2 |
|
0.2 |
|
1.8 |
PTT Exploration and Production |
Energy |
|
35,187 |
|
0.2 |
|
0.3 |
|
1.7 |
Siam Cement |
Materials |
|
3,615 |
|
0.1 |
|
0.0 |
|
0.2 |
Siam Commercial Bank |
Financials |
|
88,317 |
|
0.2 |
|
0.8 |
|
4.3 |
Univanich Palm Oil |
Consumer Staples |
|
9,332 |
|
N/A |
|
5.0 |
|
0.5 |
|
|
|
284,871 |
|
|
|
|
|
14.0 |
(a) Fair value represents the bid value of a security as required by International Financial Reporting Standards (IFRS).
(b) N/A: These stocks are not held by the MSCI Emerging Markets Index.
(e) US Listed Stocks.
(f) American Depositary Receipt.
|
|
|
|
|
|
|
% of |
|
|
|
|
|
Fair |
|
MSCI |
|
Issued |
|
|
|
|
|
Value |
(a) |
Index |
|
Share |
|
% of |
Country |
Sector |
|
£'000 |
|
Weighting |
(b) |
Class |
|
net assets |
|
|
|
|
|
|
|
|
|
|
TURKEY |
|
|
|
|
|
|
|
|
|
Akbank |
Financials |
|
59,970 |
|
0.1 |
|
0.7 |
|
3.0 |
Tupras-Turkiye Petrol |
Energy |
|
28,610 |
|
0.1 |
|
0.9 |
|
1.4 |
|
|
|
88,580 |
|
|
|
|
|
4.4 |
|
|
|
|
|
|
|
|
|
|
UNITED KINGDOM |
|
|
|
|
|
|
|
|
|
Unilever(c) |
Consumer Staples |
|
63,892 |
|
N/A |
|
0.2 |
|
3.1 |
|
|
|
63,892 |
|
|
|
|
|
3.1 |
TOTAL INVESTMENTS |
|
|
1,893,509 |
|
|
|
|
|
93.1 |
OTHER NET ASSETS |
|
|
141,677 |
|
|
|
|
|
6.9 |
TOTAL NET ASSETS |
|
|
2,035,186 |
|
|
|
|
|
100.0 |
(a) Fair value represents the bid value of a security as required by International Financial Reporting Standards (IFRS).
(b) N/A: These stocks are not held by the MSCI Emerging Markets Index.
(c) These companies have significant exposure to operations in emerging markets.
GEOGRAPHIC ASSET ALLOCATION
As at 30 September 2014
|
|
|
Performance* |
|
|||
COUNTRY |
TEMIT |
MSCI Emerging |
MSCI |
|
MSCI |
|
|
Hong Kong/China |
26.3% |
19.2% |
10.4 |
|
7.4 |
|
|
Thailand |
14.0% |
2.4% |
19.4 |
|
16.0 |
|
|
Brazil |
13.4% |
10.3% |
1.2 |
|
6.8 |
|
|
India |
9.5% |
7.1% |
18.6 |
|
19.2 |
|
|
Indonesia |
5.9% |
2.7% |
7.2 |
|
11.8 |
|
|
South Korea |
4.7% |
15.0% |
1.5 |
|
(2.2 |
) |
|
Pakistan |
4.5% |
0.0% |
- |
|
- |
|
|
Turkey |
4.4% |
1.6% |
4.7 |
|
8.5 |
|
|
United Kingdom |
3.1% |
0.0% |
- |
|
- |
|
|
Russia |
2.8% |
4.7% |
(3.2 |
) |
3.4 |
|
|
Peru |
2.1% |
0.4% |
9.8 |
|
6.8 |
|
|
South Africa |
1.6% |
7.4% |
0.6 |
|
5.1 |
|
|
Austria |
0.8% |
0.0% |
- |
|
- |
|
|
Other Assets |
6.9% |
0.0% |
- |
|
- |
|
|
|
|
|
- |
|
- |
|
|
|
|
Movement in period |
* |
||||||||||||||
Country |
31 Mar 14 |
|
Additions |
|
Sales |
|
Market |
|
30 Sep 14 |
|
TEMIT GBP |
|
MSCI Markets Index |
|
|||
|
£m's |
|
£m's |
|
£m's |
|
£m's |
|
£m's |
|
% |
|
% |
|
|||
Hong Kong/China |
496 |
|
2 |
|
(5 |
) |
42 |
|
535 |
|
8.5 |
|
7.4 |
|
|||
Thailand |
241 |
|
- |
|
- |
|
44 |
|
285 |
|
18.3 |
|
16.0 |
|
|||
Brazil |
254 |
|
17 |
|
- |
|
1 |
|
272 |
|
0.4 |
|
6.8 |
|
|||
India |
228 |
|
- |
|
(79 |
) |
44 |
|
193 |
|
29.5 |
|
11.8 |
|
|||
Indonesia |
126 |
|
- |
|
- |
|
(7 |
) |
119 |
|
(5.6 |
) |
(2.2 |
) |
|||
Other |
509 |
|
99 |
|
(124 |
) |
5 |
|
489 |
|
- |
|
- |
|
|||
Other Assets |
60 |
|
- |
|
- |
|
82 |
|
142 |
|
- |
|
- |
|
|||
Total |
1,914 |
|
118 |
|
(208 |
) |
211 |
|
2,035 |
|
|
|
|
|
|||
* Figures based on total return.
SECTOR ASSET ALLOCATION
As at 30 September 2014
|
|
|
Performance* |
|
SECTOR |
TEMIT |
MSCI Index |
GBP |
|
Financials |
27.2% |
27.8% |
7.2 |
|
Energy |
19.8% |
10.2% |
4.8 |
|
Consumer Discretionary |
16.1% |
9.0% |
0.3 |
|
Information Technology |
10.6% |
16.4% |
7.4 |
|
Materials |
8.1% |
8.3% |
(1.9 |
) |
Consumer Staples |
7.3% |
8.3% |
4.5 |
|
Industrials |
4.0% |
6.6% |
4.6 |
|
Other Assets |
6.9% |
0.0% |
- |
|
|
|
Movement in period |
* |
||||||||||||
Sector |
|
31 Mar 14 Market Value |
|
Additions |
|
Sales |
|
Market Movement |
30 Sep 14 |
|
TEMIT GBP |
|
MSCI Emerging Markets Index |
|
|
|
|
£m's |
|
£m's |
|
£m's |
|
£m's |
|
£m's |
|
% |
|
% |
|
Financials |
|
499 |
|
- |
|
- |
|
54 |
|
553 |
|
10.8 |
|
7.2 |
|
Energy |
|
388 |
|
19 |
|
(16 |
) |
12 |
|
403 |
|
3.2 |
|
4.8 |
|
Consumer Discretionary |
310 |
|
- |
|
(5 |
) |
22 |
|
327 |
|
7.1 |
|
0.32 |
|
|
Information Technology |
207 |
|
- |
|
(25 |
) |
34 |
|
216 |
|
18.5 |
|
7.43 |
|
|
Materials |
|
265 |
|
22 |
|
(108 |
) |
(14 |
) |
165 |
|
(6.7 |
) |
(1.9 |
) |
Other |
|
185 |
|
77 |
|
(54 |
) |
21 |
|
229 |
|
- |
|
- |
|
Other Assets |
|
60 |
|
- |
|
- |
|
82 |
|
142 |
|
- |
|
- |
|
Total |
|
1,914 |
|
118 |
|
(208 |
) |
211 |
|
2,035 |
|
|
|
|
|
* Figures based on total return with in the Index and TEMIT in sterling terms.
INCOME STATEMENT
For the six months to 30 September 2014
|
|
For the six months to |
|
||||||
|
|
30 September 2014 (unaudited) |
|
||||||
|
|
Revenue |
|
|
Capital |
|
|
Total |
|
|
£'000 |
|
|
£'000 |
|
|
£'000 |
|
|
Gains/(losses) on investments and foreign exchange |
|
|
|
|
|
|
|
|
|
Gains/(losses) on investments at fair value |
|
- |
|
|
131,122 |
|
|
131,122 |
|
Gains/(losses) on foreign exchange |
|
- |
|
|
614 |
|
|
614 |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
Dividends |
|
37,973 |
|
|
- |
|
|
37,973 |
|
Bank and deposit interest |
|
144 |
|
|
- |
|
|
144 |
|
|
|
38,117 |
|
|
131,736 |
|
|
169,853 |
|
Expenses |
|
|
|
|
|
|
|
|
|
AIFM fee |
|
(5,748 |
) |
|
- |
|
|
(5,748 |
) |
Investment management fee |
|
(4,944 |
) |
|
- |
|
|
(4,944 |
) |
Other expenses |
|
(1,915 |
) |
|
- |
|
|
(1,915 |
) |
Profit/(loss) before taxation |
|
25,510 |
|
|
131,736 |
|
|
157,246 |
|
|
|
|
|
|
|
|
|
|
|
Tax expense |
|
(3,086 |
) |
|
417 |
|
|
(2,669 |
) |
Profit/(loss) for the period |
|
22,424 |
|
|
132,153 |
|
|
154,577 |
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) attributable to equity holders of the Company |
|
22,424 |
|
|
132,153 |
|
|
154,577 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
6.96 |
p |
|
41.02 |
p |
|
47.98 |
p |
|
|
|
|
|
|
|
|
|
|
Ongoing Charges Ratio |
|
|
1.20 |
% |
|||||
|
|
|
|
|
The capital element of return is not distributable.
The total column is the Income Statement of the Company.
The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
There is no other income for this year and therefore no separate statement of comprehensive income has been presented.
The Ongoing Charges Ratio (OCR) represents the annualised ongoing charges of the Company divided by the average of the daily net assets of the Company for the year, and has been prepared in accordance with the AIC's recommended methodology. From 1 July 2014, Franklin Templeton's fees have been reduced by 0.10% per annum.
Dividend Policy
In accordance with the Company's stated policy, no interim dividend is declared for the year.
An ordinary dividend of 7.25 pence per share for the year ended 31 March 2014, was paid on 23 July 2014.
For the six months to |
|
|
Year ended |
|
||||||||
30 September 2013 (unaudited) |
|
|
31 March 2014 (audited) |
|
||||||||
Revenue |
|
Capital |
|
Total |
|
|
Revenue |
|
Capital |
|
Total |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
(353,459 |
) |
(353,459 |
) |
|
- |
|
(372,663 |
) |
(372,663 |
) |
- |
|
(192 |
) |
(192 |
) |
|
- |
|
(202 |
) |
(202 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
39,744 |
|
- |
|
39,744 |
|
|
60,227 |
|
- |
|
60,227 |
|
39 |
|
- |
|
39 |
|
|
141 |
|
- |
|
141 |
|
39,783 |
|
(353,651 |
) |
(313,868 |
) |
|
60,368 |
|
(372,865 |
) |
(312,497 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
- |
|
- |
|
|
- |
|
- |
|
- |
|
(10,310 |
) |
- |
|
(10,310 |
) |
|
(19,870 |
) |
- |
|
(19,870 |
) |
(3,044 |
) |
- |
|
(3,044 |
) |
|
(6,068 |
) |
- |
|
(6,068 |
) |
26,429 |
|
(353,651 |
) |
(327,222 |
) |
|
34,430 |
|
(372,865 |
) |
(338,435 |
) |
(2,964 |
) |
(527 |
) |
(3,491 |
) |
|
(4,660 |
) |
(721 |
) |
(5,381 |
) |
23,465 |
|
(354,178 |
) |
(330,713 |
) |
|
29,770 |
|
(373,586 |
) |
(343,816 |
) |
23,465 |
|
(354,178 |
) |
(330,713 |
) |
|
29,770 |
|
(373,586 |
|
(343,816 |
) |
7.18 |
p |
(108.36 |
)p |
(101.18 |
)p |
|
9.14 |
p |
(114.65 |
)p |
(105.51 |
)p |
|
|
|
|
1.30 |
% |
|
|
|
|
|
1.30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET
As at 30 September 2014
|
|
As at |
|
|
As at |
|
|
As at |
|
|
|
30 September |
|
|
30 September |
|
|
31 March |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
|
£'000 |
|
|
£'000 |
|
|
£'000 |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
|
(audited) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
Investments at fair value through profit or loss |
|
1,893,509 |
|
|
1,913,798 |
|
|
1,853,554 |
|
Current Assets |
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
16,148 |
|
|
6,574 |
|
|
7,421 |
|
Cash |
|
127,923 |
|
|
24,428 |
|
|
56,281 |
|
Current tax recoverable |
|
- |
|
|
- |
|
|
- |
|
|
|
144,071 |
|
|
31,002 |
|
|
63,702 |
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
(2,090 |
) |
|
(3,736 |
) |
|
(2,970 |
) |
Capital gains tax provision |
|
(304 |
) |
|
(527 |
) |
|
(721 |
) |
|
|
(2,394 |
) |
|
(4,263 |
) |
|
(3,691 |
) |
NET ASSETS |
|
2,035,186 |
|
|
1,940,537 |
|
|
1,913,565 |
|
ISSUED SHARE CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY SHAREHOLDERS |
|
|
|
|
|
|
|
|
|
Equity Share Capital |
|
80,405 |
|
|
81,494 |
|
|
80,837 |
|
Capital Redemption Reserve |
|
2,264 |
|
|
1,175 |
|
|
1,832 |
|
Special Distributable Reserve |
|
433,546 |
|
|
433,546 |
|
|
433,546 |
|
Capital Reserve |
|
1,421,045 |
|
|
1,331,819 |
|
|
1,298,542 |
|
Revenue Reserve |
|
97,926 |
|
|
92,503 |
|
|
98,808 |
|
EQUITY SHAREHOLDERS' FUNDS |
|
2,035,186 |
|
|
1,940,537 |
|
|
1,913,565 |
|
Net Asset Value per share (in pence) |
|
632.8 |
|
|
595.3 |
|
|
591.8 |
|
|
|
|
|
|
|
|
|
|
|
STATEMENT OF CHANGES IN EQUITY
For the six months to 30 September 2014 (unaudited)
|
|
Equity |
|
Capital |
|
Special |
|
|
|
|
|
|
|
|
|
Share |
|
Redemption |
|
Distributable |
|
Capital |
|
Revenue |
|
|
|
|
|
Capital |
|
Reserve |
|
Reserve |
|
Reserve |
|
Reserve |
|
Total |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Balance at 31 March 2013 |
|
81,969 |
|
700 |
|
433,546 |
|
1,697,011 |
|
89,494 |
|
2,302,720 |
|
Profit/(Loss) for the period |
|
- |
|
- |
|
- |
|
(354,178 |
) |
23,465 |
|
(330,713 |
) |
Equity dividends |
|
- |
|
- |
|
- |
|
- |
|
(20,456 |
) |
(20,456 |
) |
Purchase and cancellation of |
|
|
|
|
|
|
|
|
|
|
|
|
|
own shares |
|
(475 |
) |
475 |
|
- |
|
(11,014 |
) |
- |
|
(11,014 |
) |
Balance at 30 September 2013 |
|
81,494 |
|
1,175 |
|
433,546 |
|
1,331,819 |
|
92,503 |
|
1,940,537 |
|
Profit/(Loss) for the period |
|
- |
|
- |
|
- |
|
(33,277 |
) |
6,305 |
|
(26,972 |
) |
Purchase and cancellation of |
|
|
|
|
|
|
|
|
|
|
|
|
|
own shares |
|
(657 |
) |
657 |
|
- |
|
- |
|
- |
|
- |
|
Balance at 31 March 2014 |
|
80,837 |
|
1,832 |
|
433,546 |
|
1,298,542 |
|
98,808 |
|
1,913,565 |
|
Profit/(Loss) for the period |
|
- |
|
- |
|
- |
|
132,153 |
|
22,424 |
|
154,577 |
|
Equity dividends |
|
- |
|
- |
|
- |
|
- |
|
(23,373 |
) |
(23,373 |
) |
Unclaimed Distributions |
|
- |
|
- |
|
- |
|
- |
|
67 |
|
67 |
|
Purchase and cancellation of |
|
|
|
|
|
|
|
|
|
|
|
|
|
own shares |
|
(432 |
) |
432 |
|
- |
|
(9,650 |
) |
- |
|
(9,650 |
) |
Balance at 30 September 2014 |
|
80,405 |
|
2,264 |
|
433,546 |
|
1,421,045 |
|
97,926 |
|
2,035,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW STATEMENT
For the six months to 30 September 2014
|
|
For the six |
|
For the six |
|
For the |
|
|
|
months to |
|
months to |
|
year to |
|
|
|
30 September |
|
30 September |
|
31 March |
|
|
|
2014 |
|
2013 |
|
2014 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
(unaudited) |
|
(unaudited) |
|
(audited) |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
Profit/(loss) before taxation |
|
157,246 |
|
(327,222 |
) |
(338,435 |
) |
Adjustments for: |
|
|
|
|
|
|
|
(Gains)/losses on investments at fair value |
|
(131,122 |
) |
353,459 |
|
372,663 |
|
Realised (Gains)/losses on foreign exchange |
|
(614 |
) |
192 |
|
202 |
|
Stock dividends received in year/period |
|
- |
|
(469 |
) |
(704 |
) |
Increase/(decrease) in debtors |
|
3,407 |
|
2,940 |
|
1,871 |
|
Increase/(decrease) in creditors |
|
(358 |
) |
1,718 |
|
(365 |
) |
Cash generated from operations |
|
28,559 |
|
30,618 |
|
35,232 |
|
Taxation paid |
|
(3,086 |
) |
(2,964 |
) |
(4,660 |
) |
Net cash inflow from operating activities |
|
25,473 |
|
27,654 |
|
30,572 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Purchases of non-current financial assets |
|
(117,953 |
) |
(81,051 |
) |
(142,342 |
) |
Sales of non-current financial assets |
|
197,600 |
|
89,040 |
|
192,614 |
|
|
|
79,647 |
|
7,989 |
|
50,272 |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Equity dividends paid |
|
(23,373 |
) |
(20,456 |
) |
(20,456 |
) |
Unclaimed Distribution |
|
67 |
|
- |
|
- |
|
Purchase and cancellation of own shares |
|
(10,172 |
) |
(11,014 |
) |
(24,362 |
) |
|
|
(33,478 |
) |
(31,470 |
) |
(44,818 |
) |
Net increase in cash |
|
71,642 |
|
4,173 |
|
36,026 |
|
Cash at the start of year/period |
|
56,281 |
|
20,255 |
|
20,255 |
|
Cash at the end of year/period |
|
127,923 |
|
24,428 |
|
56,281 |
|
|
|
|
|
|
|
|
|
NOTES TO THE FINANCIAL STATEMENTS
For the six months to 30 September 2014
1. Basis of preparation
The Half Yearly Report for the period ended 30 September 2014 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 twelve months ended 31 March 2014.
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 2014 and 30 September 2013 has not been audited. The figures and financial information for the year ended 31 March 2014 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.
The Directors have a reasonable expectation that the Company has sufficient resources to continue in operational existence for the foreseeable future. Accordingly the financial statements have been prepared on a going concern basis.
2. Earnings per share
|
|
For the six |
|
For the six |
|
For the twelve |
|
|
|
months to |
|
months to |
|
months to |
|
|
|
30 September |
|
30 September |
|
31 March |
|
|
|
2014 |
|
2013 |
|
2014 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Revenue return |
|
22,424 |
|
23,465 |
|
29,770 |
|
Capital return/(loss) |
|
132,153 |
|
(354,178 |
) |
(373,586 |
) |
Total |
|
154,577 |
|
(330,713 |
) |
(343,816 |
) |
|
|
|
|
|
|
|
|
Weighted average number of shares in issue |
|
322,181,862 |
|
326,841,479 |
|
325,840,591 |
|
|
|
|
|
|
|
|
|
Revenue return per share |
|
6.96 |
p |
7.18 |
p |
9.14 |
p |
Capital Return per share |
|
41.02 |
p |
(108.36 |
)p |
(114.65 |
p) |
Total return per share |
|
47.98 |
p |
(101.18 |
)p |
(105.51 |
p) |
|
|
|
|
|
|
|
|
3. Shares repurchased
During the period to 30 September 2014 the Company bought back 1,730,500 shares for cancellation for a total consideration of £9,650,000. In the six months to 30 September 2013 the Company bought back 1,899,000 shares for cancellation for a total consideration of £11,014,000. For the twelve months to 31 March 2014 a total of 4,525,000 shares were bought back for cancellation at a cost of £24,884,000.
4. Taxation
The total tax expense of £2.6m consists of a revenue tax expense of £3m relating to irrecoverable overseas tax on dividends and a capital tax credit of £0.4m arising from the decrease in the provision for deferred tax on capital gains recognised in relation to short-term unrealised gains on Indian holdings.
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 twelve |
|
|
|
months to |
|
months to |
|
months to |
|
|
|
30 September |
|
30 September |
|
31 March |
|
|
|
2014 |
|
2013 |
|
2014 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Purchase expenses |
|
592 |
|
198 |
|
347 |
|
Sales expenses |
|
521 |
|
308 |
|
583 |
|
|
|
1,113 |
|
506 |
|
930 |
|
|
|
|
|
|
|
|
|
A pdf version of the fully Half Yearly Report to 30th September 2014 will be available by accessing the following hyperlink http://www.franklintempleton.co.uk/content-common/miscellaneous/fund-information/en_GB/local-GB/TEMIT/temit_interim.pdf
For information, please contact Client Dealer Services on Freephone 0800 305 306.