Statement of Annual Results

RNS Number : 4332I

Templeton Emerging Markets IT PLC

14 June 2011

 

Preliminary Statement of Annual Results

TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC

("TEMIT") (the "Company")

FINANCIAL SUMMARY

2010-2011

			Year ended		11 months ended
			31 March		31 March		Change
	Ref.		2011		2010		%
Net Assets and Shareholders' Funds (£ million)			2,368.4		2,046.4		15.7
Net Asset Value (pence per share)			718.0		620.3		15.8
Net Asset Total Return	a		16.5	%	72.8	%
Benchmark
MSCI Emerging Markets Index Total Return			12.4	%	52.0	%
Share Price (pence per share)			660.0		577.0		14.4
Share Price Total Return			15.2	%	72.4	%
Highest Share Price (pence per share)			685.0		582.5
Lowest Share Price (pence per share)			497.0		337.2
Dividend (pence per share)			4.25		3.75		13.3	d
Revenue Earnings (pence per share)	b		6.14		2.88		113.2
Share Price Discount to Net Asset Value at end of the period			8.1	%	7.0	%
Average Share Price Discount to Net Asset Value over the period			6.4	%	6.8	%
Total Expense Ratio	c		1.31	%	1.29	%

Source: Franklin Templeton Investments and Factset.

The Company has prepared its financial statements in accordance with International Financial Reporting Standards ("IFRS") for the year ended 31 March 2011 and the eleven month period ended 31 March 2010.

^a    Return based on accounting NAV.

^b    The Earnings per Share figure is based on the earnings shown in the "Revenue" column in the Income Statement and 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 period.

^d   3.9% on an annualised basis.

TEN YEAR RECORD

2001-2011

		Total Net									Earnings
		Assets and									per
		Shareholders'				Share					share -		Dividend		Total
		Funds		NAV		Price		Discount/			undiluted		per share		Expense
Year ended		(£m)		(pence)		(pence)		(Premium)			(pence)		(pence)		Ratio
30 Apr 2001		619.0		135.7		113.5		16.3	%		1.36		1.25		1.61	%
30 Apr 2002		666.2		146.2		125.0		14.5	%		1.82		1.25		1.34	%
30 Apr 2003		595.5		130.8		107.3		18.0	%		1.70		2.25		1.49	%
30 Apr 2004		778.5		171.0		144.0		15.8	%		2.89		2.25		1.48	%
30 Apr 2005a		1,066.0		198.9		167.3		15.9	%		3.42		2.67		1.50	%
30 Apr 2006		1,866.2		348.2		310.3		10.9	%		3.65		2.76		1.41	%
30 Apr 2007		1,925.5		359.2		327.3		8.9	%		4.16		3.13		1.32	%
30 Apr 2008		2,291.4		484.8		438.0		9.6	%		4.07		3.50		1.33	%
30 Apr 2009		1,208.3 b	b	365.7		340.5		6.9	%		7.69		3.75	d	1.34	%
31 Mar 2010c		2,046.4		620.3		577.0		7.0	%		2.88		3.75		1.29	%
31 Mar 2011		2,368.4		718.0		660.0		8.1	%		6.14		4.25	e	1.31	%

TEN YEAR GROWTH RECORD
(rebased to 100.0 at 30 April 2001)
2001-2011

												Earnings
				NAV				Share				per
				total		Share		price		MSCI		share -		Dividend
Year ended		NAV		returnf		Price		total returnf		total returnf		undiluted		per share
30 Apr 2001		100.0		100.0		100.0		100.0		100.0		100.0		100.0
30 Apr 2002		107.8		108.9		110.1		111.4		108.3		133.8		100.0
30 Apr 2003		96.4		98.5		94.5		96.8		84.9		125.0		180.0
30 Apr 2004		126.1		130.1		126.9		131.2		117.5		212.5		180.0
30 Apr 2005a		146.6		151.9		147.4		154.9		135.3		251.5		213.6
30 Apr 2006		256.7		268.9		273.3		290.9		231.6		268.4		220.8
30 Apr 2007		264.8		279.5		288.3		310.1		248.8		305.9		250.4
30 Apr 2008		357.3		379.6		385.9		418.7		315.8		299.3		280.0
30 Apr 2009		269.5		288.1		300.0		328.4		241.8		565.4		300.0	d
31 Mar 2010c		457.2		497.8		508.4		566.1		367.6		211.8		300.0
31 Mar 2011		529.3		579.0		581.5		652.0		413.2		451.5		340.0	e

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

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

c  11 months to 31 March 2010.

d Excludes the special dividend of 2.50 pence per share in 2009.

e  A dividend of 4.25 pence per share on the Company's profits for the year ended 31 March 2011 has been proposed.

f  Includes dividends re-invested.

CHAIRMAN'S STATEMENT

Highlights

·   Continued recovery in global markets resulting in an increase in total net assets of 15.7% to £2,368 million

·   16.5%* net asset value total return (dividend reinvested) versus Benchmark return of 12.4%

·   15.2% share price total return (dividend re-invested)

·   Proposed dividend of 4.25 pence per share, an increase of 13.3% on prior period.

·   TEMIT is the third largest Investment Trust in the UK by market capitalisation.

·   TEMIT has won the Investment Week award for Best Emerging Markets Investment Trust for the third consecutive year and also the Moneywise award for Best Emerging Markets Trust.

Peter A Smith (Chairman)

I am pleased to report on TEMIT's positive performance during the past 12 months. Global markets have generally continued on an upward trend over the year despite experiencing periods of volatility along the way.

Performance

The past year saw the total assets held by your Company increase from £2,046 million as at 31 March 2010 to £2,368 million as at 31 March 2011. This has resulted in the Net Asset Value per share increasing from 620.3 pence to 718.0 pence, representing a total return (including the re-invested dividend) of 16.5%* compared to the MSCI Emerging Markets Index, which returned 12.4% (in sterling terms).

The Investment Management team continues to focus on long-term value. Since its launch in 1989 the Company has delivered a return of 2,553% (dividends re-invested), which represents a compound growth rate of 16.3% per annum. Over the same period our benchmark, the MSCI Emerging Markets Index, returned 1,078% (12.1% per annum).

The share price ended the year at 660.0 pence representing a 14.4% increase on the share price of 577.0 pence as at
31 March 2010. Your Board continually monitors the share price discount to net asset value and exercises its right to buy back shares when the Board considers it is in shareholders' interests to do so. During the financial year in question, there was one buy back of 50,000 shares at a cost of £0.3 million. At the end of the year the discount stood at 8.1% which compares to 7.0% as at 31 March 2010.

During the year the discount traded between 3.4% and 9.2% with an average of 6.4% .

On 3 June, the NAV per share had fallen by 5.7% to 676.8 pence since 31 March. The share price had fallen by 3.0% to 640.0 pence.

Investment income and the dividend

The Income Statement reflects total dividend income earned of £52.1 million in the year to 31 March 2011. This represents an increase of 74% on the dividend income received for the eleven month period to 31 March 2010. This translates into earnings per share of 6.14 pence per share compared with 2.88 pence per share for the period to 31 March 2010.

*Return based on accounting NAV

The lower amount earned in 2010 can be explained partly by the effect of the financial crisis of late 2008, when many companies experienced sharp decline in profitability, resulting in a number of them reducing their 2009 dividend in order to strengthen their balance sheets. Another factor is that last year's income to the 31 March 2010 was earned in an eleven month period due to the change in the Company's accounting year end. As I noted in the Chairman's Statement last year when explaining the income for the period to 31 March 2010, April is traditionally a strong month for dividend income and, with the change in accounting year end, dividends paid in April 2010 were excluded from the prior period total.

The investment objective of TEMIT is to seek long-term capital appreciation through investment in companies operating in emerging markets or whose stocks are listed on the stock markets of such countries. Although income accumulation and distribution are not primary objectives, the dividend last year of 3.75 pence was maintained by drawing on the revenue reserves.

This year your Board is pleased to propose an increase in the dividend to 4.25 pence per share which will be fully covered by our earnings per share of 6.14 pence. This represents an increase of  13.3% on last period's dividend (3.9% annualised).

Asset allocation

The general policy of the Board is to be fully invested. At 31 March 2011, 99.4% of your Company's net assets were invested in equities (31 March 2010: 99.4%) .

The Board

In line with the new UK Code of Corporate Governance issued by the Financial Reporting Council in June 2010, all Directors are required to retire each year. It is the intention of each member of the Board to stand for re-election.

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

Our website (www.temit.co.uk) displays the latest news, price and performance information, portfolio details and quarterly web updates with the Investment Manager. Via the website you can also ask to have the latest Company information e-mailed directly to you. I encourage all shareholders to register on our website and make full use of the facilities and materials available to help keep you informed about your Company.

Finally, I am pleased to report that TEMIT was awarded the Best emerging Markets Investment Trust 2010 by Investment Week, for the third consecutive year, and Best Emerging Market Trust by Moneywise which it has won in three of the last four years.

Outlook

In the short to medium term there are likely to be continued periods of volatility as nervous investors react to specific events or bad news in both developed and emerging markets.

We remain optimistic about the long-term prospects for emerging markets in view of their strong economic fundamentals and sustainable growth potential and are confident that our Investment Manager will still find companies that are attractively valued and offer investors long-term growth opportunities.

AGM

Finally I would like to take this opportunity to invite all shareholders to attend the AGM to be held at Stationers' Hall, Ave Maria Lane. London EC4M 7DD at 12 noon on Friday 22 July 2011.

Peter A Smith

14 June 2011

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

MANAGER'S REPORT & PORTFOLIO REVIEW
31 MARCH 2011

MANAGEMENT COMPANY

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

TAML, part of Franklin Templeton Investments, is one of the world's largest asset management companies. TAML created one of the first dedicated emerging market mutual funds over 20 years ago. As at 31 March 2011, TAML's Emerging Markets Team managed US$56 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 49 dedicated emerging markets portfolio managers, analysts and product specialists. Their on-the-ground presence in 17 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 and Dennis Lim have worked alongside Mark Mobius for over twenty years.

MARK MOBIUS, PH.D.

Executive Chairman

Dr. Mobius has spent more than 30 years working in emerging markets all over the world. He joined Franklin Templeton Investments in 1987 as president of the Templeton Emerging Markets Fund, Inc. In 1999, he was appointed joint chairman of the Global Corporate Governance Forum Investor Responsibility Taskforce of the World Bank and Organisation for Economic Cooperation and Development.

ALLAN LAM, CPA

Senior Executive Vice President & Senior Managing Director

Mr. Lam joined the Templeton organisation in 1987 and his research responsibilities include the real estate and oil & gas sectors as well as analysis of companies in the Philippines. Mr. Lam manages portfolios dedicated to global emerging markets and Asia (ex Japan). Mr. Lam worked for a number of years in the accounting field with Deloitte Touche Tohmatsu CPA and KPMG Peat Marwick CPA. His knowledge of accounting practices became an important tool for his equity analysis.

TOM WU

Senior Executive Vice President & Senior Managing Director

Mr. Wu joined the Templeton organisation in 1987 and his research responsibilities include the banking sector. Mr. Wu is also responsible for the financial analysis and research of companies in Hong Kong and the Philippines. He began his career at Vickers da Costa in Hong Kong as an investment analyst and later as an assistant manager before joining the Templeton organisation.

DENNIS LIM
Co-Chief Executive Officer

Mr. Lim joined Templeton in 1990 and has research responsibilities for Southeast Asian markets. Mr. Lim is a specialist on building regulations and urban planning requirements in Singapore and the ASEAN region. He specialises in researching companies in the telecommunications sector. He served as a former engineering service officer for the Ministry of National Development in Singapore.

*Source: Franklin Templeton Investments as at 31 March 2011. CFA^-and Chartered Financial Analysts^- are trademarks owned by CFA Institute.

MARKET OVERVIEW

Global markets started the year on a bullish note but quickly turned down. Greece's financial woes and worries that other countries in the EU may have similar problems triggered a sell off in May. The sinking of a South Korean naval ship, allegedly by a North Korean torpedo and rioting by political protestors in the Thailand capital of Bangkok only added to the negative sentiment.

Strong macroeconomic data from emerging market economies and better than expected corporate results led investors to adopt a more positive view, resulting in significant fund inflows. Higher commodity prices further supported equity prices in many emerging markets. This uptrend continued until November 2010 when concerns of a wider debt crisis in the eurozone resurfaced after Ireland became the second European Union country to accept emergency financial aid. Expectations that Portugal and Spain could also require financial support grew, leading investors to adopt a more cautious view.

The fall in equity prices was, however, short-lived as investors focused on the long-term opportunities and prospects of the wider emerging market asset class. Unrest in the Middle East and North Africa in 2011 disrupted market recovery after protests in Tunisia and Egypt unseated the governments of Ben Ali and Hosni Mubarak, respectively. Investors grew increasingly worried that contagion from the Middle East could spread further and subsequently derail the global economic recovery.

Concerns of an interruption in oil supplies due to turmoil in major oil producing countries such as Libya led to a sharp upward spike in oil prices. High oil prices, along with increasing food prices in many markets, further fuelled slower global economic growth and inflation concerns towards the end of the year. Investors also became concerned about the wider impact of Japan's largest ever earthquake, tsunami and radiation worries from damage to their nuclear plants.

Despite these disruptions, the emerging markets asset class as measured by the MSCI Emerging Markets Index returned 12.4% in sterling terms for the 12-month period. Markets in Eastern Europe were the best performing region in the reporting period, as bargain hunters returned to the region in search of undervalued stocks trading at attractive valuations. Moreover, companies were hardly affected by the turmoil in the Middle East region.

PERFORMANCE ATTRIBUTION ANALYSIS

Year to 31 March 2011		%
NAV total return		16.5
MSCI Index total return		12.4
Relative return		4.1
Sector allocation		1.1
Stock selection		5.4
Total equities		6.5
Currency		(2.4	)
Relative performance		4.1

Source: Factset and Franklin Templeton

Geographically, the largest contributor to the Company's performance, relative to the MSCI Emerging Markets Index, was superior stock selection in Hong Kong/China. In addition, overweight exposures to Thailand and Indonesia, with good stock selection in the latter, made noteworthy contributions to relative performance. Conversely, holdings in India, South Africa and an underweight position in South Korea detracted from performance.

LARGEST COUNTRY CONTRIBUTORS AND DETRACTORS TO PERFORMANCE (%)

Top Contributors	Contribution		Top Detractors		Contribution
Hong Kong/China	7.5		India		-2.6
Thailand	1.7		South Africa		-0.7
Indonesia	1.3		South Korea		-0.4
Egypt*	0.2		Malaysia*		-0.3
Hungary	0.2		Chile*		-0.3

*No Companies held by TEMIT in these countries 

MANAGER'S REPORT & PORTFOLIO REVIEW
CONTINUED

10 LARGEST COUNTRY WEIGHTINGS VS BENCHMARK (%)

By sector, good stock selection and overweight positions in the consumer discretionary, financials and energy sectors contributed significantly to performance. An underweight position in information technology also had a positive attribution effect, although underweight positions in the consumer staples and industrials sectors had a negative attribution effect. An overweight exposure to the materials sector was the largest detractor.

LARGEST SECTOR CONTRIBUTORS AND DETRACTORS TO PERFORMANCE (%)

Top Contributors		Contribution		Top Detractors		Contribution
Consumer Discretionary		5.6		Materials		-4.9
Financials		2.0		Industrials		-0.5
Information Technology		1.8		Consumer Staples		-0.2
Energy		1.7
Utilities*		0.3

*No Companies held by TEMIT in this sector

SECTOR WEIGHTINGS VS BENCHMARK (%)

At the company level, the top three contributors to relative performance were overweight positions in Brilliance China, SK Innovation and Tata Consultancy. Brilliance China is a major automobile manufacturer in China with a joint venture with BMW for the production and selling of BMW 3-series and 5-series in China. The company is a beneficiary of the growth in demand for automobiles and government stimulus measures in the sector. The long-term growth trend in demand for motor vehicles is expected to continue in China. SK Innovation is a major oil refinery and service stations operator in South Korea which diversifies into upstream activities and chemical products. The company benefited from firm refining margins especially since part of its crude oil requirement is hedged by its ownership of crude oil reserves. Tata Consultancy is a major IT consulting company in India. Its share price was buoyed by improving global market conditions and sound fundamentals. Moreover, we believe that it is well positioned to benefit from the outsourcing trend of services to Indian consulting companies.

Conversely, the three largest detractors were overweight positions in Sesa Goa, Aluminum Corporation of China (Chalco) and a zero exposure to HTC Corporation. Sesa Goa is one of the biggest exporters of iron ore in India. Despite higher iron ore and steel prices, the share price of Sesa Goa suffered as a result of the threat of an increase in export taxes. Taking a long-term view however, we remain positive on the company due to its undemanding valuations, strong balance sheet and high profitability. Sesa Goa is also a beneficiary of firm iron ore prices and the ongoing consolidation of the global mining sector.

Aluminum Corporation of China (Chalco) is China's leading producer of alumina and primary aluminium products. Chalco's share price declined due to bearish market sentiment on the stock and a short-term oversupply of primary aluminium in the domestic market. However, gradual market consolidation and vertical integration should be beneficial to the company. Moreover, Chalco is well positioned to benefit from China's continuing growth. HTC is a market leader in the converged mobile device industry. TEMIT does not hold this company as we believe it is expensive and exposed to obsolescence risk.

In terms of currencies, a major performance detractor during the period was exposure to a weaker US dollar (down 5.6%) through investments in Brazilian ADR (American Depositary Receipt) listings. Superior stock selection in that market was largely overshadowed by the weak US dollar. The Company held ADRs as opposed to the underlying ordinary shares due to their superior liquidity.

We believe the long-term prospects remain positive.

LARGEST COMPANY CONTRIBUTORS AND DETRACTORS TO PERFORMANCE (%)

Top Contributors	Contribution	Top Detractors	Contribution
Brilliance China Automotive Holdings Ltd.	6.0	Sesa Goa Ltd.	-3.8
SK Innovation Co. Ltd.	1.3	Aluminum Corp. of China Ltd., H	-0.7
Tata Consultancy Services Ltd.	1.1	HTC Corporation*	-0.5
PT Astra International Tbk	0.8	Hyundai Development Co.	-0.5
Siam Commercial Bank Public Co. Ltd., fgn.	0.5	Akbank TAS	-0.4

*Company not held by TEMIT

10 LARGEST SECURITY VS BENCHMARK (%)

PORTFOLIO CHANGES & INVESTMENT STRATEGIES

The Company's search for undervalued stocks, trading at attractive valuations led to selective investments in the diversified banking, precious metals & minerals, real estate management & development and diversified metals & mining sectors. Geographically, purchases were made in Pakistan, Indonesia, India and South Africa. Conversely, holdings in South Korea's oil & gas refining sector were reduced.

Five additions and one partial sale were made during the year. The additions were Bank Central Asia, Impala Platinum, MCB, Peninsula Land and Sesa Goa, and the partial sale was SK Innovation. The holding of Lukoil was sold after the year end.

Bank Central Asia is one of the largest banks in Indonesia and is well positioned to benefit from the strong economic growth in that country. Its strong deposit franchise and huge distribution network lead us to remain positive. 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, it should also benefit from the longer-term upward trend in commodity prices. MCB is the fourth largest bank in Pakistan. We increased our exposure because of its attractive valuation and relatively high return on equity. Peninsula Land is an Indian real estate developer based in the major city of Mumbai. The company's developments are expected to be strong beneficiaries of the scarce supply of commercial space in the Central and Southern Mumbai business districts. Sesa Goa should benefit from the demand from emerging markets as well as the positive long-term trend in commodity prices.

OUTLOOK

Emerging markets continue to be in a secular bull phase so the trend is towards higher equity prices. We are of the opinion that the economic recovery in emerging markets is sustainable in view of their strong fundamentals. In addition to the strong reported macroeconomic data, financial and fiscal indicators also remain positive.

Emerging markets, like most other global equity markets, have experienced short-term falls recently as a result of events such as the unrest seen in the Middle East and natural disasters in Japan. Although the share prices of emerging markets companies may continue to be volatile, we believe that the long-term prospects for the sector remain positive and we continue to seek the best value for our shareholders to preserve capital and to maximise long-term total return. In fact, we view these short-term periods of volatility as an opportunity to invest in undervalued stocks at more attractive prices. Consumer and commodity related companies look especially attractive. We expect commodity prices to continue an upward trend over the long term because of continued demand from emerging markets and a relatively inelastic supply. Higher disposable incomes, a huge consumer base and strong demand for goods and services, present a positive outlook for earnings growth on many of these stocks.

Overall, emerging markets' growth rates and per capita income are increasing at a rapid pace. We believe that as foreign reserves in these countries grow and their safety profiles improve, perceptions about emerging markets will also continue to improve. Moreover, with earnings growth maintaining momentum it is still possible to find value and interesting investment opportunities in emerging markets.

PORTFOLIO HOLDINGS BY GEOGRAPHY

Geographical analysis (by country of incorporation)
As at 31 March 2011

			Fair Value**		% of net
Country		Sector	£'000		assets
AUSTRIA
OMV AG‡		Energy	20,420		0.9
			20,420		0.9
BRAZIL
Banco Bradesco SA, ADR, pfd.*†		Financial	112,820		4.7
Itau Unibanco Holding SA, ADR*		Financial	128,489		5.4
Petroleo Brasileiro SA, ADR, pfd.*†		Energy	74,858		3.2
Vale SA, ADR, pfd., A*†		Materials	135,137		5.7
			451,304		19.0
HONG KONG/CHINA
Aluminum Corp. of China Ltd., H		Materials	45,891		1.9
Brilliance China Automotive Holdings Ltd.		Consumer Discretionary	180,704		7.6
China International Marine Containers (Group) Co. Ltd., B		Industrials	17,748		0.8
China Petroleum and Chemical Corp., H		Energy	31,443		1.3
Dairy Farm International Holdings Ltd.		Consumer Staples	65,687		2.8
Guangzhou Automobile Group Co. Ltd., H		Consumer Discretionary	58,892		2.5
PetroChina Co. Ltd., H		Energy	73,891		3.2
Victory City International Holdings Ltd.		Consumer Discretionary	12,775		0.5
VTech Holdings Ltd.		Information Technology	58,488		2.5
			545,519		23.1
HUNGARY
MOL Hungarian Oil and Gas Nyrt.		Energy	31,801		1.3
			31,801		1.3
INDIA
Infosys Technologies Ltd.		Information Technology	13,956		0.6
National Aluminium Co. Ltd.		Materials	26,016		1.1
Oil & Natural Gas Corp. Ltd.		Energy	32,008		1.3
Peninsula Land Ltd.		Financial	10,024		0.4
Sesa Goa Ltd.		Materials	84,893		3.7
Tata Consultancy Services Ltd.		Information Technology	99,218		4.1
			266,115		11.2

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

^‡This Austrian company has significant exposure to operations in emerging markets.

*US Listed Stocks

^†pfd: preferred shares

PORTFOLIO HOLDINGS BY GEOGRAPHY

CONTINUED

			Fair Value**		% of net
Country		Sector	£' 000		assets
INDONESIA
PT Astra International Tbk		Consumer Discretionary	77,735		3.3
PT Bank Central Asia Tbk		Financial	49,758		2.1
PT Bank Danamon Indonesia Tbk		Financial	55,174		2.3
			182,667		7.7
MEXICO
Wal-Mart de Mexico SAB de CV, V		Consumer Staples	46,019		1.9
			46,019		1.9
PAKISTAN
Faysal Bank Ltd.		Financial	2,876		0.1
MCB Bank Ltd.		Financial	35,677		1.5
			38,553		1.6
POLAND
Polnord SA		Industrials	7,087		0.3
Polski Koncern Naftowy Orlen SA		Energy	37,747		1.6
			44,834		1.9
RUSSIA
Gazprom, ADR*		Energy	43,184		1.8
LUKOIL Holdings, ADR*		Energy	40,040		1.7
Mining and Metallurgical Co. Norilsk Nickel		Materials	13,439		0.6
Mining and Metallurgical Co. Norilsk Nickel, ADR*		Materials	44,234		1.8
OAO TMK		Energy	15,578		0.7
			156,475		6.6
SOUTH AFRICA
Anglo American PLC		Materials	52,114		2.2
Impala Platinum Holdings Ltd.		Materials	13,524		0.6
			65,638		2.8
SOUTH KOREA
Hyundai Development Co.		Industrials	47,694		2.0
SK Innovation Co. Ltd.		Energy	74,572		3.2
			122,266		5.2

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

*US listed stocks

			Fair Value**		% of net
Country		Sector	£' 000		assets
TAIWAN
Taiwan Semiconductor Manufacturing Co. Ltd.		Information Technology	5,950		0.3
			5,950		0.3
THAILAND
Kasikornbank Public Co. Ltd., fgn.		Financial	44,763		1.9
Kiatnakin Bank Public Co. Ltd., fgn.		Financial	16,317		0.7
Land and Houses Public Co. Ltd., fgn.		Financial	13,517		0.6
PTT Exploration and Production Public Co. Ltd., fgn.		Energy	35,868		1.5
PTT Public Co. Ltd., fgn.		Energy	38,122		1.6
Siam Cement Public Co. Ltd., fgn.		Materials	27,179		1.1
Siam Commercial Bank Public Co. Ltd., fgn.		Financial	56,783		2.4
			232,549		9.8
TURKEY
Akbank TAS		Financial	90,270		3.9
Tupras-Turkiye Petrol Rafinerileri AS		Energy	54,422		2.2
			144,692		6.1
TOTAL INVESTMENTS			2,354,802		99.4
LIQUID NET ASSETS			13,590		0.6
TOTAL NET ASSETS			2,368,392		100.0

**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 31 MARCH 2011

01 APRIL 2010 - 31 MARCH 2011*

Brilliance China Automotive Holdings Ltd.

		% of Total		Fair Value
Country		Net Assets		£'000
Hong Kong / China		7.6	%	180,704

A major automobile manufacturer in China with a joint venture with BMW for the production and selling of BMW 3-series and 5-series. The company should continue to benefit from the growth in demand in China for automobiles and government stimulus measures in the sector.

Vale SA

		% of Total		Fair Value
Country		Net Assets		£' 000
Brazil		5.7	%	135,137

This Brazilian-based company is one of the world's largest iron ore producers that is also engaged in various mining activities. The company is a beneficiary of the long-term uptrend in commodity prices.

Itau Unibanco Holding SA

		% of Total		Fair Value
Country		Net Assets		£' 000
Brazil		5.4	%	128,489

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. The bank is a strong beneficiary of the growing demand for financial and banking services in Brazil.

Banco Bradesco SA

		% of Total		Fair Value
Country		Net Assets		£' 000
Brazil		4.7	%	112,820

One of Brazil's largest financial conglomerates, providing a full range of banking and financial services. Bradesco is a strong beneficiary of the growing demand for financial and banking services in Brazil due to its extensive coverage of the Brazilian territory and strong retail presence.

Tata Consultancy Services Ltd.

		% of Total		Fair Value
Country		Net Assets		£'000
India		4.1	%	99,218

A major IT consulting company in India. Tata is well positioned to benefit from the trend of outsourcing of services to Indian consulting companies.

*Source: Factset. Prices re-based to 100 as at 1 April 2010

01 APRIL 2010 - 31 MARCH 2011*

Akbank TAS

		% of Total		Fair Value
Country		Net Assets		£'000
Turkey		3.9	%	90,270

One of Turkey's largest privately owned commercial banks, providing a full range of banking and financial services. The bank is well positioned to benefit from strong economic growth and a growing demand for financial and banking services in Turkey. The bank, with superior asset quality and capital adequacy, is also a beneficiary from strong loan growth as well as higher fee income derived from increased financial services.

Sesa Goa Ltd.

		% of Total		Fair Value
Country		Net Assets		£' 000
India		3.7	%	84,893

One of the biggest exporters of iron ore in India. The company is a beneficiary of firm iron ore prices and the ongoing consolidation of the global mining sector. The company is well positioned to benefit from the demand from emerging markets as well as the positive long-term trend in commodity prices.

PT Astra International Tbk

		% of Total		Fair Value
Country		Net Assets		£' 000
Indonesia		3.3	%	77,735

One of the market leaders in Indonesia's automotive industry which also benefits from an extensive distribution network. The company is well supported by its financial services interests as it owns one of the largest auto financing companies and one of the largest motorcycle financing companies.

Petroleo Brasileiro SA

		% of Total		Fair Value
Country		Net Assets		£' 000
Brazil		3.2	%	74,858

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

SK Innovation Co. Ltd.

		% of Total		Fair Value
Country		Net Assets		£'000
South Korea		3.2	%	74,572

A major company in South Korea's refining market. The company should benefit from firm refining margins especially since part of its crude oil requirement is hedged by its ownership of crude oil reserves.

*Source: Factset. Prices re-based to 100 as at 1 April 2010

STATEMENT OF DIRECTORS' RESPONSIBILITIES
IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

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.

By Order of the Board
Peter Smith
Chairman
14 June 2011

INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2011

			Year ended  31 March 2011						11 months ended  31 March 2010
			Revenue		Capital		Total		Revenue		Capital		Total
	Note		£'000		£'000		£'000		£'000		£'000		£'000
Gains/(losses) on investments and exchange
Gains/(losses) on investments at fair value	6		-		314,573		314,573		-		851,388		851,388
Gains/(losses) on foreign exchange			-		(169	)	(169	)	-		60		60
Revenue
Dividends	1		52,116		-		52,116		29,988		-		29,988
Bank interest	1		15		-		15		19		-		19
			52,131		314,404		366,535		30,007		851,448		881,455
Expenses
Investment management fee	2		(21,209	)	-		(21,209	)	(15,219	)	-		(15,219	)
Other expenses	3		(6,555	)	-		(6,555	)	(4,224	)	-		(4,224	)
Profit before taxation			24,367		314,404		338,771		10,564		851,448		862,012
Tax expense	4		(4,108	)	-		(4,108	)	(1,058	)	-		(1,058	)
Profit for the period			20,259		314,404		334,663		9,506		851,448		860,954
Profit attributable to equity
holders of the Company			20,259		314,404		334,663		9,506		851,448		860,954
Basic earnings per share	5		6.14	p	95.30	p	101.44	p	2.88	p	257.94	p	260.82	p
Annualised Expense Ratio							1.31	%					1.29	%

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.

Dividend Policy

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

An ordinary dividend of 4.25 pence per share is proposed at a cost of £14,019,000.

(An ordinary dividend of 3.75 pence per share was paid for the eleven months ended 31 March 2010 at a cost of £12,372,000). The capital element of return is not distributable.

BALANCE SHEET

AS AT 31 MARCH 2011

			As at		As at
			31 March 2011		31 March 2010
	Note		£'000		£'000
ASSETS
Non-current assets
Investments at fair value through profit or loss	6		2,354,802		2,034,122
Current assets
Trade and other receivables	7		5,573		5,643
Cash			11,025		9,309
			16,598		14,952
Current liabilities
Trade and other payables	8		(2,600	)	(2,188	)
Current tax payable			(408	)	(483	)
			(3,008	)	(2,671	)
NET ASSETS			2,368,392		2,046,403
ISSUED SHARE CAPITAL AND RESERVES
ATTRIBUTABLE TO EQUITY SHAREHOLDERS
Called-up Share Capital	10		82,466		82,478
Special Distributable Reserve			433,546		433,546
Capital Redemption Reserve			203		191
Capital Reserve			1,783,604		1,469,502
Revenue Reserve			68,573		60,686
EQUITY SHAREHOLDERS' FUNDS			2,368,392		2,046,403
Net Asset Value per share (in pence)	11		718.0		620.3

The Financial Statements of Templeton Emerging Markets Investment Trust PLC (company registration number SC118022) were approved for issue by the Board and signed on 14 June 2011.

Peter Smith		Peter Harrison
Chairman		Director

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2011

			Capital		Special
	Share		Redemption		Distributable		Capital		Revenue
	Capital		Reserve		Reserve		Reserve		Reserve		Total
	£'000		£'000		£'000		£'000		£'000		£'000
Balance at 30 April 2009	82,611		58		433,546		620,245		71,833		1,208,293
Profit for the period	-		-		-		851,448		9,506		860,954
Equity dividends	-		-		-		-		(20,653	)	(20,653	)
Purchase and cancellation of own
shares (note 10)	(133	)	133		-		(2,191	)	-		(2,191	)
Balance at 31 March 2010	82,478		191		433,546		1,469,502		60,686		2,046,403
Profit for the year	-		-		-		314,404		20,259		334,663
Equity dividends	-		-		-		-		(12,372	)	(12,372	)
Purchase and cancellation of own
shares (note 10)	(12	)	12		-		(302	)	-		(302	)
Balance at 31 March 2011	82,466		203		433,546		1,783,604		68,573		2,368,392

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 MARCH 2011

	Year ended		11 months ended
	31 March 2011		31 March 2010
	£'000		£'000
Cash flows from operating activities
Profit before taxation	338,771		862,012
Adjustments for:
Gains on investments at fair value	(314,573	)	(851,388	)
Realised loss/(gain) on foreign exchange	169		(60	)
Scrip dividends	(837	)	(3	)
Decrease in debtors	71		590
(Increase)/decrease in accrued income	(1	)	3
Increase/(decrease) in creditors	412		(742	)
Cash generated from operations	24,012		10,412
Taxation paid	(4,183	)	(7,297	)
Net cash inflow from operating activities	19,829		3,115
Cash flows from investing activities
Purchases of non-current financial assets	(27,457	)	(44,901	)
Sales of non-current financial assets	22,195		44,091
	(5,262	)	(810	)
Cash flows from financing activities
Equity dividends paid (note 12)
- ordinary dividend	(12,372	)	(12,392	)
- special dividend	-		(8,261	)
Purchase of shares for cancellation	(302	)	(2,191	)
	(12,674	)	(22,844	)
Net increase/(decrease) in cash	1,893		(20,539	)
Cash at start of period	9,309		29,671
Exchange (loss)/gain on cash	(177	)	177
Cash at end of period	11,025		9,309

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2011

1    Income

	2011		2010	*
	£'000		£'000
Income from investments
UK Dividends	401		-
Other EU dividends	799		645
Other overseas dividends	50,079		29,340
Scrip dividends	837		3
	52,116		29,988
Other income
Deposit income	15		19
Total income	15		19
Total income comprises:
Dividends	52,116		29,988
Interest	15		19
	52,131		30,007
Income from investments
Listed overseas	51,458		29,988

2    Investment management fee

	2011		2010	*
	£'000		£'000
Variable Expense
Investment management fee	21,209		15,219

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

The contract between the Company and TAML may be terminated at any date by either party giving one year's notice of termination. TAML receives a fee paid monthly in arrears, at an annual rate of 1.00% of the monthly trading total net assets of the Company. As at 31 March 2011, £1.9 million (31 March 2010: £1.6 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 Franklin Templeton Investment Mangement Limited. ("FTIML") 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).

*For the 11 month period to 31 March 2010.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

3    Other expenses

		2011		2010	*
		£'000		£'000
Variable expenses
Secretarial and administration expenses		4,242		3,044
Custody fees		1,213		939
Fixed expenses
Directors' emoluments		237		212
Auditors' remuneration
	Fees payable to the Company's auditor for the audit of the annual financial statements	26		24
	Fees payable to the Company's auditor and its associates for other services
	- Other services: half yearly financial report	4		4
Registrar fees		189		192
VAT		58		(617	)
Bank overdraft interest		1		1
Other administration expenses		585		425
		1,100		241
Total other expenses		6,555		4,224

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 31 March 2011, £0.4 million (31 March 2010: £0.3 million), in fees were payable and outstanding to FTIML. The figure of £617,000 for VAT in 2010 includes a £482,000 repayment for timing differences in relation to expenses paid on the June 2008 tender offer that were processed after the 30 April 2009 year end. Also included is a one off repayment of £147,000 received in 2010 which represented VAT charged by FTIML on management fees in a prior period at the point when those fees became exempt.

*For the 11 month period to 31 March 2010.

4    Tax on ordinary activities

			2011		2010	*
			£'000		£'000
Overseas tax			4,108		1,914
Current tax			4,108		1,914
Deferred tax - current period			-		(856	)
			4,108		1,058
Taxation			2011		2010
			£'000		£'000
Profit before taxation			338,771		862,012
Theoretical tax at UK Corporation Tax rate of 28% (2010: 28%)			94,856		241,363
Effects of:
-		Capital Element of Profit	(88,033	)	(238,405	)
-		Non taxable income	67		15
-		Stock dividends	-		(1	)
-		UK dividends not subject to Corporation Tax	(184	)	-
-		Irrecoverable overseas tax	4,108		1,914
-		Excess management expenses	3,981		1,513
-		Dividends not subject to Corporation Tax	(10,764	)	(4,433	)
-		Income taxable in different periods	77		(908	)
Actual tax charge			4,108		1,058

As at 31 March 2011, the Company had unutilised management expenses of £19.6 million carried forward (2010: £5.4 million). These balances have been generated because a large part of the Company's income is derived from dividends which are no longer taxable. Based on current UK tax law, the Company is not expected to generate taxable income in a future period in excess of deductible expenses for that period and, accordingly, is unlikely to be able to reduce future tax liabilities by offsetting these excess management expenses. These excess management expenses are therefore not recognised as a deferred tax asset.

*For the 11 month period to 31 March 2010.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

5    Earnings per share

2011

2010

*

Revenue

Capital

Total

Revenue

Capital

Total

£'000

£'000

£'000

£'000

£'000

£'000

20,259

314,404

334,663

9,506

851,448

860,954

Earnings per share

2011

2010

*

Revenue

Capital

Total

Revenue

Capital

Total

pence

pence

pence

pence

pence

pence

6.14

95.30

101.44

2.88

257.94

260.82

The earnings per share is based on the profit on ordinary activities after tax and on the weighted average number of shares in issue during the year of 329,910,379 (period to 31 March 2010: 330,099,504).

6    Financial assets - investments

	2011		2010	*
	£'000		£'000
Opening investments	2,034,122		1,183,896
Movements in period
Additions*	28,294		43,046
Sales*	(22,187	)	(44,208	)
Realised profits	19,915		10,244
Net appreciation	294,658		841,144
Closing investments	2,354,802		2,034,122

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

The additions and sales proceeds include transaction costs for the period on additions of £98,000 (2010: £118,000) and transaction costs for the period on sales of £111,000 (2010: £147,000). The aggregate transaction costs for the period were £209,000 (2010: £265,000).

Realised and unrealised gains on investments comprise of:

Realised gain based on carrying value	19,915		10,244
Net movement in unrealised appreciation	294,658		841,144
Realised and unrealised gains on investments	314,573		851,388

*For the 11 month period to 31 March 2010.

7    Trade and other receivables

	2011		2010
	£'000		£'000
Dividends receivable	5,190		5,464
Overseas tax recoverable	381		178
Accrued income	2		1
	5,573		5,643

8    Trade and other payables

	2011		2010
	£'000		£'000
Accrued expenses	2,600		2,188
	2,600		2,188

9    Deferred tax

	2011		2010
	£'000		£'000
Deferred tax provided
Accrued income taxable on receipt	-		-
The movement in the provision is as follows:
Provision at start of period	-		856
Deferred tax credit in Income Statement	-		(856	)
	-		-

10  Called-up share capital

	2011 Allotted, issued &  fully paid				2010 Allotted, issued &  fully paid
	£'000		Number		£'000		Number
Shares of 25p each
Opening balance	82,478		329,914,352		82,611		330,446,352
Shares repurchased during the period	(12	)	(50,000	)	(133	)	(532,000	)
Closing balance	82,466		329,864,352		82,478		329,914,352

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

During the year, 50,000 shares were bought back for cancellation at a cost of £0.3 million (2010: 532,000 shares were bought back for cancellation at a cost of £2.2 million). No shares were cancelled between 1 April 2011 and 3 June 2011.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

11  Net asset value per share

	Net asset value				Net asset value
	per share				attributable
	2011		2010		2011		2010
	pence		pence		£'000		£'000
	718.0		620.3		2,368,392		2,046,403

12  Dividend

	2011				2010
	Rate  (pence)		£'000		Rate (pence)		000
Declared and paid in the period
Dividend on shares:
Final dividend for period	3.75		12,372		3.75		12,392
Special dividend for the period	-		-		2.50		8,261
			12,372				20,653
Proposed for approval at the Company's AGM
Dividend on shares:
Final dividend for year ended 31 March 2011
(31 March 2010: 3.75 pence)	4.25		14,019
			14,019

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

13  Related party transactions

The following are considered to be related parties:

-      Templeton Asset Management Ltd. ("TAML")

-      Franklin Templeton Investment Management Limited ("FTIML")

-      The Directors of the Company's Board

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

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

14  Risk management

In pursuing the 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 investment risk, market risk, foreign currency risk, 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.

Investment risk

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

Market price risk

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

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

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

Foreign currency risk

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

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

-       movements in rates affect the value of investments;

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

-       movements in rates affect the income received.

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

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

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

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

14  Risk management (continued)

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

2011	Trade and				Trade and		Total net		Investments at
	other		Cash		other		foreign currency		fair value through
	receivables		at bank		payables		exposure		profit or loss
Currency	£'000		£'000		£'000		£'000		£'000
US Dollar	1,495		-		-		1,495		673,466
Hong Kong Dollar	-		-		-		-		479,832
Indian Rupee	-		-		-		-		266,115
Thai Baht	1,086		-		-		1,086		232,549
Indonesian Rupiah	115		1		-		116		182,667
Turkish Lira	-		-		-		-		144,692
Other	2,874		43		-		2,917		375,481
2010	Trade and				Trade and		Total net		Investments at
	other		Cash		other		foreign currency		fair value through
	receivables		at bank		payables		exposure		profit or loss
Currency	£'000		£'000		£'000		£'000		£'000
US Dollar	1,041		3,903		-		4,944		622,511
Hong Kong Dollar	-		-		-		-		338,422
Indian Rupee	-		-		-		-		294,589
Thai Baht	715		-		-		715		182,805
Turkish Lira	1,748		-		-		1,748		139,302
Indonesian Rupiah	-		-		-		-		134,626
Other	2,137		891		-		3,028		321,867

Sensitivity

The following table illustrates the sensitivity of the profit after taxation for the year and the equity in regard to the Company's monetary financial assets and liabilities and its equity if sterling had weakened by 10% relative to all currencies constant.

Financial Assets and Liabilities

	2011				2010
	Revenue		Capital		Revenue		Capital
	£'000		£'000		£'000		£'000
US Dollar	1,766		67,347		1,169		62,251
Hong Kong Dollar	976		47,983		662		33,842
Indian Rupee	466		26,611		248		29,459
Thai Bhat	690		23,255		257		18,281
Indonesian Rupiah	328		18,267		217		13,463
	4,226		183,463		2,553		157,296

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

14  Risk management (continued)

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
	2011		2010
	£'000		£'000
Cash flow interest rate risk
Cash	11,025		9,309

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

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

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

14  Risk management (continued)

Credit risk

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

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

The Company has an ongoing contract with its custodian (JP Morgan Chase Bank) for the provision of custody services. Securities held in custody are held in the Company's name or to its accounts. Details of holdings are received and reconciled monthly. Cash is either held in a floating rate deposit account whose rate is determined by reference to rates supplied by the custodian or is placed on deposit in the name of JP Morgan Chase Bank Cash Trade Executive Product. Cash is held with these counter-parties as monies belonging to clients of JP Morgan Chase Bank, and so ring-fenced from any JP Morgan Chase Bank default. There is no significant risk on debtors and accrued income (or tax) at the year end.

Fair value

Fair values are derived as follows:

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

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

-    Cash - at the face value of the account.

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

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

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

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

Valuation hierarchy fair value through profit or loss

	31 March 2011								31 March 2010
£'000	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Listed investments	2,354,802		-		-		2,354,802		2,034,122		-		-		2,034,122

15  Significant holdings in investee undertakings

As at 31 March 2011 the Company held 3% or more of the shares in issue of the following securities:

	% of issued		Fair		% of issued		Fair
	share capital*		value		share capital*		value
Name	2011		£'000		2010		£'000
Victory City International Holdings Ltd.	8.5	%	12,775		9.3	%	16,240
Brilliance China Automotive Holdings Ltd.	5.8	%	180,704		5.8	%	54,021
Faysal Bank Ltd.	5.0	%	2,876		5.0	%	4,065
Polnord SA	4.7	%	7,087		4.7	%	8,965
Peninsula Land Ltd.	4.4	%	10,024		3.9	%	11,714
Kiatnakin Bank Public Co. Ltd., fgn.	3.5	%	16,317		4.1	%	12,585
Guangzhou Automobile Group Co. Ltd., H	3.5	%	58,892		2.8	%	57,397
Hyundai Development Co.	3.5	%	47,694		3.5	%	50,678
VTech Holdings Ltd.	3.4	%	58,488		3.4	%	59,187

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

16  Contingent liabilities

No contingent liabilities existed as at 31 March 2011 or 31 March 2010.

17  Financial commitments

There are no financial commitments at 31 March 2011 or 31 March 2010.

18  Post Balance Sheet events

The only material post Balance Sheet event is in respect of the proposed dividend, which has been disclosed in Note 12.

This preliminary statement, which has been agreed with the Auditors, was approved by the Board on 14 June 2011. The financial information set out above does not constitute the Company's statutory accounts.   

The statutory accounts for the financial period ended 31^st March 2010 have been delivered to the Registrar of Companies, received an audit report which was unqualified, did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section 498(2) and (3) of the Companies Act 2006.   

The statutory accounts for the period ended 31 March 2011 received an audit report which was unqualified, did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section section 498(2) and (3) of the Companies Act 2006, and will be delivered to the Registrar of Companies.

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