TIDMTEM
RNS Number : 1262J
Templeton Emerging Markets IT PLC
08 December 2022
Templeton Emerging Markets Investment Trust PLC ("TEMIT" or "the
Company")
Unaudited Half Yearly Report to 30 September 2022
Legal Entity Identifier 5493002NMTB70RZBXO96
Company Overview
Launched in June 1989, Templeton Emerging Markets Investment
Trust plc ("TEMIT" or the "Company") is an investment trust that
invests principally in emerging markets companies with the aim of
delivering capital growth to shareholders over the long term. While
the majority of the Company's shareholders are based in the UK,
shares are traded on both the London and New Zealand stock
exchanges.
TEMIT has a diversified portfolio of around 80 high quality
companies, actively selected for their long-term growth potential
and sustainable earnings, and with due regard to Environmental,
Social and Governance ("ESG") attributes. TEMIT's research-driven
investment approach and strong long-term performance has helped it
to grow to be the largest emerging markets investment trust in the
UK, with assets of GBP1.9 billion as at 30 September 2022. From its
launch to 30 September 2022, TEMIT's net asset value ("NAV") total
return was +3,481.8% compared to the benchmark total return of
+1,652.7%.
The Company is governed by a Board of Directors who are
committed to ensuring that shareholders' best interests,
considering the wider community of stakeholders, are at the
forefront of all decisions. Under the guidance of the Chairman, the
Board of Directors is responsible for the overall strategy of the
Company and monitoring its performance.
TEMIT at a glance
For the six months to 30 September 2022
Net asset value total Share price total MSCI Emerging Markets Interim dividend for
return (cum-income) (a) return(a) Index total return(a)(b) the financial year 2023
-8.3% -8.5% -7.4% 2.00p
(2021: -7.5%) (2021: -9.8%) (2021: -1.0%) (Interim dividend for
the financial year 2022:
1.00p)
------------------------ ----------------- ------------------------- -------------------------
Cumulative total return to 30 September 2022 (%)(a)
6 Months 1 Year 3 Years 5 Years 10 Years
Net asset value (cum-income) -8.3 -18.0 -2.4 6.6 58.3
-------- ------ ------- ------- --------
Share price -8.5 -20.1 -3.3 6.3 53.7
-------- ------ ------- ------- --------
MSCI Emerging Markets Index -7.4 -12.8 4.8 11.8 66.5
-------- ------ ------- ------- --------
(a) A glossary of alternative performance measures is included
on pages 37 and 38 of the full Half Yearly Report.
(b) Source: MSCI. The Company's benchmark is the MSCI Emerging
Markets Index, with net dividends reinvested.
Chairman's Statement
Market overview and investment performance
The difficult market conditions that I described in the most
recent Annual Report continued during the six-month period under
review. The news continues to be dominated by the Russian invasion
of Ukraine and its ramifications, particularly the impact on
commodity prices. While governments around the world have sought to
contain the effect, particularly on fuel and food prices, there is
a risk that inflation will become entrenched as workers naturally
seek to counterbalance the effects of price rises with wage rises,
which can form an inflationary spiral. In the developed world,
central banks have sought to counter inflation expectations with
increased interest rates but controlling demand while not stifling
growth is very difficult to achieve. While events in Ukraine have
overshadowed commodity and equity markets, there were also concerns
over Chinese growth in light of the government's interventions in
private companies and continued pursuit of lockdowns to control the
spread of COVID-19.
The Net Asset Value ("NAV") of TEMIT's shares was volatile over
the period. While by the end of August the shares had recorded a
small positive return, a very difficult September followed. This
resulted in a net asset value total return of -8.3%, compared with
-7.4% for the benchmark index for the six months to 30 September
2022. From 30 September 2022 to 6 December 2022, it has been
heartening to see a small recovery in markets. TEMIT's NAV total
return over this period was 6.0% compared with 1.7% for the
benchmark index.
Revenue and dividend
Net revenue earnings for the period under review amounted to
4.16 pence per share. As I have noted in the past, it is too early
to predict revenues for the full year but the majority of TEMIT's
earnings are typically received in the first half of the accounting
year. Brazil's national oil and gas company Petroleo Brasileiro, in
which the Investment Manager invested in January, rose on the back
of surging oil prices, which led to strong results for the second
quarter of 2022 and a dividend yield of around 20% in the same
quarter. Petroleo Brasileiro's long-life oil reserves, together
with its strategy of deleveraging its balance sheet and exiting
non-core assets allow for a particularly strong dividend
payout.
An interim dividend of 2.00 pence per share will be paid by
TEMIT on 27 January 2023 to shareholders on the register on 16
December 2022. This is an increase of 1.00 pence per share compared
with last year's interim dividend. This increase in the interim
dividend recognises that there was a large imbalance between the
interim and final dividend in recent years and shareholders should
note that this increase in the interim dividend does not imply any
intention to change the final dividend.
Borrowing
TEMIT has fixed borrowing of GBP100 million, and a revolving
credit facility under which up to GBP120 million in flexible debt
may be drawn down. As well as the fixed borrowing, throughout the
period GBP50 million was drawn under the revolving credit facility
which was subsequently repaid in October. The Investment Manager
continues to take a cautious view on the deployment of borrowing in
light of market circumstances. As at 30 September 2022, there was
significant cash in the portfolio and, net of this cash, the
portfolio was not geared. I would once again remind shareholders
that the level of debt deployed is not a result of views on market
direction but driven by investment opportunities presented by
individual companies.
Share rating
Our managers remain very active in promoting TEMIT's shares to a
wide variety of existing and potential investors and have continued
with their efforts to promote the Company despite the turbulent
markets. The Board was delighted that TEMIT won the award in the
"Emerging Markets Equity - Active" category in the prestigious AJ
Bell Fund and Investment Trust Awards in September 2022. This was
the third consecutive year that we have won this award. The award
is made on the basis of voting by private investors from a
shortlist of open-ended funds, ETFs and investment trusts drawn up
by investment experts.
The market conditions that I describe above naturally led to
pressure on the discount as investors sought safe havens. The Board
remains consistent in its view that share buybacks are a key tool
in managing the balance between supply and demand for the shares.
As set out in the most recent Annual Report, selling pressure
changed dramatically following the Russian invasion of Ukraine and
this has subsequently continued. In total over the six months to 30
September 2022, GBP18.4 million was spent on share buybacks and, as
all buybacks were at a discount to the prevailing NAV, this
resulted in an increase in the NAV of 0.15% to the benefit of
remaining shareholders.
First Stewardship Report launched
I set out in the most recent Annual Report that effective
stewardship of the Company's assets is a key element of the Board's
strategy for the Company. Consideration of governance and
sustainability issues has long been an integral part of our
Investment Manager's approach. In order to explain in more detail
their approach to this important topic, our inaugural Stewardship
Report for TEMIT was published in June and is available on our
website at www.temit.co.uk. This Report sets out in detail the
approach to investing your Company's assets sustainably and
includes TEMIT-specific case studies as well as data highlighting
the depth of engagement with companies. I encourage you to download
a copy if you have not already done so. The Investment Manager has
also provided a brief update of its stewardship activities as part
of the Investment Manager's Report.
The Board
As previously announced, Beatrice Hollond retired from the Board
at this year's Annual General Meeting and Simon Jeffreys assumed
the position of Senior Independent Director.
On 17 October 2022 we announced the appointment of Abigail
Rotheroe as a director effective 1 November 2022. Abigail has over
20 years of investment experience, most recently as the Investment
Director at Snowball Impact Management, a sustainable and
impact-focused asset manager. Previously Abigail has managed retail
and institutional Asia Pacific portfolios in Hong Kong and London
for Schroders, HSBC Asset Management Hong Kong and Columbia
Threadneedle Investments. She is a CFA Charterholder and has
experience in manager selection, sustainability, and impact
measurement.
Management fee reduction
As previously announced, with effect from 1 July 2022 the fee
paid to Franklin Templeton was reduced to:
-- 1.0% of the first GBP1 billion of net assets;
-- 0.75% of net assets between GBP1 billion and GBP2 billion; and
-- 0.5% of net assets over GBP2 billion.
Annual General Meeting
The Board was pleased to welcome shareholders to the AGM again
in July, having been obliged to hold the previous two years' AGMs
behind closed doors. All resolutions at the AGM were duly carried
by a large majority and I would like to thank shareholders for
their continuing support. I recognise that some shareholders are
unable to attend meetings in person and if you have any questions,
please send these by email to temitcosec@franklintempleton.com or
via www.temit.co.uk./investor/contact-us.
Outlook
It is likely that economic and market turbulence will continue
for some time and the risk of further political and economic shocks
remains elevated, not least as Russia's war on Ukraine continues.
The effects of high inflation, the resulting increases in interest
rates and strains on currency exchange rates are foremost in many
investors' minds. Uncertainties also continue in China where growth
and sentiment are being impacted by the continued zero-COVID policy
of the government which is currently resulting in widespread social
unrest. We will continue to focus on the Chinese government's
"common prosperity" agenda which has potential effects on the
profitability of some companies and on overall economic growth.
Geopolitical concerns, and particularly relations between China and
United States, also remain a key issue.
At the time of writing the value of the US dollar against a
basket of other currencies has moved down from the high levels
reached in September and equity markets are showing some signs of
recovery. Commentators often say that markets attempt to look 12-18
months into the future and it is possible that they are beginning
to reflect an eventual economic recovery. Our aim is to produce
attractive returns over the long term. Countries making up the
emerging markets currently contribute a large proportion of the
world's economic growth, and this appears likely to continue. The
markets in which our Investment Manager seeks opportunities have
many advantages, including relatively young and growing
populations, growing wealth and expanding economies. Further, many
of the companies in which we are able to invest are highly
innovative, and in some cases have world leading products and are
able to leapfrog their competitors in developed markets. As I said
in the recent Annual Report, your Board remains optimistic for
emerging market equities over the long term, and this view is based
on both the opportunities presented and the resources which our
Investment Manager deploys on shareholders' behalf.
Paul Manduca
Chairman
8 December 2022
Interim Management Report
Principal risks
The Company predominantly invests directly in the stock markets
of emerging markets. The principal categories of risks facing the
Company, determined by the Board and described in detail in the
Strategic Report within the Annual Report and Audited Accounts,
are:
-- Market and geo-political;
-- Pandemic;
-- Cyber;
-- Concentration;
-- Sustainability and climate change;
-- Foreign currency;
-- Portfolio liquidity;
-- Counterparty and credit;
-- Operational and custody;
-- Key personnel; and
-- Regulatory.
The Board has provided the Investment Manager with guidelines
and limits for the management of principal risks. The key emerging
risk faced by the Company during the year to 31 March 2022 was the
Russian invasion of Ukraine, and this was highlighted under
geo-political and liquidity risks. The Board and Investment Manager
are aware that the economic challenges continue to be the key issue
affecting investment markets around the world, including the
ongoing zero-COVID policy in China and its impact on economic
growth as well as the continued tensions between United States and
China over trade and Taiwan. There have been no further changes to
the principal and emerging risks reported in the Annual Report and,
in the Board's view, these principal and emerging risks are equally
applicable to the remaining six months of the financial year as
they were to the six months under review.
Related party transactions
There were no transactions with related parties during the
period other than the fees paid to the Directors and the AIFM.
Going concern
The Company's assets consist of equity shares in companies
listed on recognised stock exchanges and in most circumstances are
realisable within a short timescale. Having made suitable
enquiries, including consideration of the Company's objective, the
nature of the portfolio, net current assets, expenditure forecasts,
the principal and emerging risks and uncertainties described within
the Annual Report and with due consideration to the continuing
ramifications of the Russian invasion of Ukraine, the impact of the
ongoing zero-COVID policy in China and the potential impact of the
growing United States-China tensions around trade and Taiwan, the
Directors are satisfied that the Company has adequate resources to
continue to operate as a going concern for the period to 31 March
2024, which is at least 12 months from the date of approval of
these Financial Statements, and are satisfied that the going
concern basis is appropriate in preparing the Financial
Statements.
Statement of Directors' Responsibilities
The Disclosure Guidance and Transparency Rules of the UK Listing
Authority require the Directors to confirm their responsibilities
in relation to the preparation and publication of the Interim
Management Report and Financial Statements.
Each of the Directors, who are listed on page 35 of the full
Half Yearly Report, confirms that to the best of their
knowledge:
(a) the condensed set of Financial Statements, for the period
ended 30 September 2022, have been prepared in accordance with the
UK adopted International Accounting Standard (IAS) 34 "Interim
Financial Reporting"; and
(b) the Half Yearly Report includes a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and a review of the information required by:
(i) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and 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
(ii) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period, and any changes in the related party
transactions described in the last annual report that could do
so.
The Half Yearly Report was approved by the Board on 8 December
2022 and the above Statement of Directors' Responsibilities was
signed on its behalf by
Paul Manduca
Chairman
8 December 2022
Investment Manager's Report
Review of performance
Emerging markets collectively declined over the six months under
review as market sentiment remained weak. Rising inflation rates
and the continuation of central bank interest rate increases
depressed consumer and investor sentiment, although Asian emerging
markets experienced lower rates of increases than elsewhere. The
MSCI Emerging Markets Index returned -7.4% for the six-month period
under review, whilst TEMIT delivered a net asset value total return
of -8.3% (all figures are total return in sterling). Full details
of TEMIT's performance are on page 1 of the full Half Yearly
Report.
All regions declined during the period but Latin America was the
best relative performer, as positive performance in Chile limited
the region's decline. Asia was the worst performing region during
the six-month period despite strong returns in India, as tech-heavy
South Korea and Taiwan, as well as China, were largely responsible
for the region's lagging performance.
China was TEMIT's largest market exposure, although the
portfolio remained underweight relative to the benchmark. China was
amongst the region's strongest markets during the first three
months of the period, but regional lockdowns related to the
country's zero-COVID policy, continued regulatory uncertainty and a
reeling real estate market weighed on equity performance in the
second three months of the period. For the six months, Chinese
equities declined significantly as it dealt with a slowing economy
and weak investor sentiment. However, we believe that China's
government remains committed to fostering innovation as an economic
growth engine, and that we will see more regulatory clarity towards
the end of the year and hope that the government will also look to
plan an exit from the current zero-COVID policy.
TEMIT's second-largest market position was in South Korea, where
the portfolio was significantly overweight versus the benchmark.
South Korea experienced the largest emerging market decline, as its
technology-heavy market continued to struggle throughout the
period. An export powerhouse, several South Korean exporters are of
global importance, supplying vital hardware. World-leading
semiconductor and battery makers are benefitting from the secular
trends of increased computing power and greener mobility-some of
which have accelerated as we emerge from the COVID-19 pandemic.
South Korea's advantages in innovation and intellectual property
are also evident, whilst the country's internet sector has also
been thriving. However, the downtrend in the global technology
sector continues to weigh and an accompanying de-rating of sector
valuations affected South Korea in the third quarter of 2022.
The Taiwanese market also depressed the relative performance of
TEMIT as its technology sector experienced lower demand and higher
costs. TEMIT's overweight allocation to Taiwan is largely
attributable to exposure to the island's semiconductor industry,
chief amongst which was Taiwan Semiconductor Manufacturing
("TSMC"), which is also the portfolio's largest holding.
Technology's role as a key economic engine has only strengthened
during the pandemic. As technology has advanced, semiconductor
chips have become a growing part of almost all consumer goods with
the semiconductor industry experiencing a cyclical and secular boom
as growing digitalisation powers a surge in demand. Historically,
many chip designers outsourced manufacturing to key Taiwanese
companies such as TSMC with specialised manufacturing prowess and
lower costs. Some of these manufacturers are now counted amongst
the largest foundries globally and can partner with, and produce
chips for, clients anywhere in the world. This collaboration,
rather than direct competition, is a key advantage of their
business model. Over time, their advantage has shifted from
primarily cost-based to one of intellectual property, with fewer
competitors able to progress to the next level of technology.
Although we see a promising long term for the sector, a confluence
of factors makes the short term less certain. At the start of the
period, concerns around component shortages and the durability of a
price and demand recovery gave way to reduced demand, triggered in
part by higher global interest rates and inflation. However, we
maintain a positive long-term view on Taiwan's semiconductor
industry. Despite growing geopolitical concerns around China's
stated desire to absorb Taiwan, we expect the current status quo to
remain for the time being.
Although underweight relative to the benchmark, India was
TEMIT's fourth largest exposure at the end of September 2022. India
was also a relative outperformer, benefitting from a decline in oil
prices in the third quarter of the year. Over the longer-term, we
expect to see continued growth in Indian earnings due to positive
demographics for higher consumption, rising penetration in segments
like finance and health care, and growth in digitalisation. India
is also benefitting from the "China+1" strategy amongst
manufacturers. This strategy sees companies establish an additional
manufacturing base outside China to mitigate some of the supply
chain risks encountered during COVID-19. We remain focused on being
selective and identify bottom-up opportunities based on our
assessment of a company's growth, quality and earnings
sustainability.
Investment strategy, portfolio changes and performance
attribution
The following sections show how different investment factors
(stocks, sectors and geographies) accounted for the Company's
performance over the period.
We continue to emphasise our investment process that selects
companies based on their individual attributes and ability to
generate risk-adjusted returns for investors, rather than taking a
high-level view of sectors, countries or geographic regions to
determine our investment allocations.
Our investment style remains resolutely centred on finding good
quality companies with sustainable earnings power and whose shares
trade at a discount relative to their intrinsic worth. We see high
levels of leverage as a risk and we seek to avoid companies with
weak balance sheets.
We continue to utilise our research-based, active approach to
help us to find companies which have high standards of corporate
governance, respect their shareholder base and understand the local
intricacies that may determine consumer trends and habits.
Utilising our large team of analysts, we aim to maintain close
contact with the board and senior management of existing and
potential investments and believe in engaging constructively with
our investee companies.
Whilst the immediate outlook is uncertain, this approach should
help us best navigate the challenging market and economic backdrop.
Over time, we expect the long-term fundamentals of our holdings to
remain intact.
Performance attribution analysis %
Six months to 30 September 2022 2021 2020 2019 2018
--------------------------------------- ----- ----- ---- ----- -----
Net asset value total return(a) (8.3) (7.5) 31.3 6.3 (1.5)
--------------------------------------- ----- ----- ---- ----- -----
Expenses incurred 0.5 0.5 0.5 0.5 0.6
--------------------------------------- ----- ----- ---- ----- -----
Gross total return(a) (7.8) (7.0) 31.8 6.8 (0.9)
--------------------------------------- ----- ----- ---- ----- -----
Benchmark total return(a) (7.4) (1.0) 24.4 2.2 (1.8)
--------------------------------------- ----- ----- ---- ----- -----
Excess return(a) (0.4) (6.0) 7.4 4.6 0.9
--------------------------------------- ----- ----- ---- ----- -----
Stock selection 2.9 (4.3) 2.5 2.6 (0.2)
--------------------------------------- ----- ----- ---- ----- -----
Sector allocation (2.2) (1.4) 4.0 1.6 (0.5)
--------------------------------------- ----- ----- ---- ----- -----
Currency (1.1) (0.5) 0.5 0.4 1.1
--------------------------------------- ----- ----- ---- ----- -----
Share buyback impact 0.1 0.0 0.3 0.2 0.7
--------------------------------------- ----- ----- ---- ----- -----
Residual return(a) (0.1) 0.2 0.1 (0.2) (0.2)
--------------------------------------- ----- ----- ---- ----- -----
Total Investment Manager contribution (0.4) (6.0) 7.4 4.6 0.9
--------------------------------------- ----- ----- ---- ----- -----
Source: FactSet and Franklin Templeton.
(a) A glossary of alternative performance measures is included
on pages 37 and 38 of the full Half Yearly Report.
Top 10 contributors to relative performance by security
(%)(a)
Contribution to
portfolio relative
to MSCI
Share price Emerging
Top contributors Country Sector total return Markets Index
---------------------------- ---------------- ----------------------- ------------- -------------------
ICICI Bank India Financials 30.1 1.8
----------------------------- ----------------- ---------------------- ------------- -------------------
Daqo New Energy China/Hong Kong Information Technology 51.2 0.8
----------------------------- ----------------- ---------------------- ------------- -------------------
Petroleo Brasileiro Brazil Energy 37.3 0.7
----------------------------- ----------------- ---------------------- ------------- -------------------
Bajaj Holdings &
Investments(b) India Financials 42.8 0.5
----------------------------- ----------------- ---------------------- ------------- -------------------
Genpact(b)(c) United States Information Technology 19.0 0.5
----------------------------- ----------------- ---------------------- ------------- -------------------
Banco Santander Mexico(b) Mexico Financials 26.7 0.5
----------------------------- ----------------- ---------------------- ------------- -------------------
Prosus(b) China/Hong Kong Consumer Discretionary 16.1 0.4
----------------------------- ----------------- ---------------------- ------------- -------------------
Unilever(b)(c) United Kingdom Consumer Staples 17.1 0.3
----------------------------- ----------------- ---------------------- ------------- -------------------
Itaú Unibanco Brazil Financials 7.9 0.3
----------------------------- ----------------- ---------------------- ------------- -------------------
Guangzhou Tinci Materials
Technology China/Hong Kong Materials (1.1) 0.3
----------------------------- ----------------- ---------------------- ------------- -------------------
(a) For the period 31 March 2022 to 30 September 2022.
(b) Security not included in the MSCI Emerging Markets Index as
at 30 September 2022.
(c) This security, listed on a stock exchange in a developed
market, has significant exposure to operations from emerging
markets.
ICICI Bank is an Indian bank engaged in retail, corporate and
treasury services. The bank reported first quarter fiscal 2023
earnings which were ahead of expectations, led by a sharp increase
in non-interest income and an increase in net interest margins.
Momentum from a favourable quarterly report announced in late July
and good economic datapoints boosted returns. The bank's healthy
capital adequacy ratios and strong franchise place it in a good
position to capitalise on the growth opportunity in the Indian
economy.
Daqo New Energy , the Chinese producer of polysilicon for the
solar industry, experienced a sharp increase in its share price
during the period. The company raised its annual production volume
target and is positive on the outlook for polysilicon prices.
Investors are attracted to the company given its focus on renewable
energy which is forecast to continue growing significantly in the
coming years.
Brazil's national oil and gas company Petroleo Brasileiro
("Petrobras") rose on the back of surging oil prices, which led to
strong results for the second quarter of 2022 and a dividend yield
of around 20% in the same quarter. Petrobras' long-life oil
reserves, together with its strategy of deleveraging its balance
sheet and exiting non-core assets allow for a strong dividend
payout.
Top 10 detractors to relative performance by security (%)(a)
Contribution to
portfolio relative to
MSCI Emerging
Top detractors Country Sector Share price total return Markets Index
------------------------ ---------------- ----------------------- ------------------------ -----------------------
NAVER South Korea Communication Services (43.7) (1.2)
------------------------ ---------------- ----------------------- ------------------------ -----------------------
Taiwan Semiconductor
Manufacturing Taiwan Information Technology (24.3) (1.0)
------------------------ ---------------- ----------------------- ------------------------ -----------------------
Samsung Electronics South Korea Information Technology (23.4) (0.8)
------------------------ ---------------- ----------------------- ------------------------ -----------------------
MediaTek Taiwan Information Technology (28.7) (0.7)
------------------------ ---------------- ----------------------- ------------------------ -----------------------
Meituan(b) China/Hong Kong Consumer Discretionary 25.2 (0.4)
------------------------ ---------------- ----------------------- ------------------------ -----------------------
China Merchants Bank China/Hong Kong Financials (21.3) (0.3)
------------------------ ---------------- ----------------------- ------------------------ -----------------------
Cognizant Technology
Solutions(c)(d) United States Information Technology (24.0) (0.3)
------------------------ ---------------- ----------------------- ------------------------ -----------------------
Soulbrain(c) South Korea Materials (28.0) (0.3)
------------------------ ---------------- ----------------------- ------------------------ -----------------------
Americanas Brazil Consumer Discretionary (45.8) (0.3)
------------------------ ---------------- ----------------------- ------------------------ -----------------------
Alibaba China/Hong Kong Consumer Discretionary (18.2) (0.2)
------------------------ ---------------- ----------------------- ------------------------ -----------------------
(a) For the period 31 March 2022 to 30 September 2022.
(b) Security not held by TEMIT as at 30 September 2022.
(c) Security not included in the MSCI Emerging Markets Index as at 30 September 2022.
(d) This security, listed on a stock exchange in a developed
market, has significant exposure to operations from emerging
markets.
NAVER declined in the third quarter after it fell short of
consensus second quarter earnings estimates. The company operates
South Korea's largest search engine, and offers e-commerce, fintech
and digital content services. Its share price has been on a
declining trend due to slower growth in the post-COVID environment.
Concerns that expansion into unprofitable new businesses with lower
margins also negatively impacted market sentiment. However, we
believe that NAVER is in a good position to build a thriving
ecosystem integrating e-commerce, payments and digital content
based on its solid foundation in search and advertising.
After losing ground in August due to lower chip demand
throughout the industry, TSMC shares took another hit in late
September when Apple reported lower demand for its new iPhone 14.
TSMC is the world's largest foundry semiconductor manufacturer. The
company's share price has been under pressure, despite solid second
quarter results which saw management increase third quarter sales
guidance. The company is a beneficiary of the digitisation trend,
and of increased penetration of semiconductors in consumer goods
ranging from cars to domestic appliances. Nevertheless, it cannot
escape the short-term downtrend in the global technology sector and
the accompanying de-rating of sector valuations.
Samsung Electronics is one of the largest memory semiconductor
manufacturers in the world. The company experienced downward
pressure in its share price in the period under review as rising
inventory levels have converged with increased global economic
uncertainty, resulting in an inventory adjustment amongst
customers. In addition to the already weakening demand in PC and
mobile segments, there are concerns over the outlook for server
demand. Consensus estimates amongst analysts for sales in 2023
peaked in May and have been trending lower since then. We partially
reduced our overweight exposure during the period.
Top contributors and detractors to relative performance by
sector (%)(a)
Contribution to Contribution to
MSCI portfolio MSCI Emerging portfolio
Emerging Markets relative to MSCI Markets Index relative to MSCI
Index sector total Emerging Markets sector total Emerging Markets
Top contributors return Index Top detractors return Index
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
Consumer
Financials (3.5) 2.4 Discretionary 1.9 (1.1)
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
Communication
Energy 8.6 0.3 Services (14.6) (0.8)
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
Information
Real Estate (10.5) 0.1 Technology (20.7) (0.5)
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
Utilities 8.0 (0.3)
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
Industrials (3.3) (0.3)
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
(a) For the period 31 March 2022 to 30 September 2022.
Favourable stock selection and a significant overweight position
in the financial sector added to TEMIT's performance relative to
the benchmark. ICICI Bank, mentioned above, was the primary
contributor to the sector. The energy sector also contributed to
relative results, despite an underweight that detracted, thanks to
strong performance from Petrobras (discussed above). Real estate
was the only other sector in the portfolio to post a positive
result during the period, thanks to modest contributions from both
an underweight position and stock selection.
Stock selection in the consumer discretionary sector weighed on
relative performance, where Americanas, Alibaba, and a lack of
exposure to benchmark holding Meituan were all amongst the top 10
detractors in the portfolio. The communication services sector,
where stock selection weighed on results, also had a negative
impact. NAVER (discussed above) was the key detractor in the
communication services sector. A significant overweight position in
information technology hindered relative returns, although stock
selection helped mitigate some of the negative effect. TSMC and
Samsung Electronics (discussed above) were the heaviest decliners
relative to the benchmark in the information technology sector.
Top contributors and detractors to relative performance by
country (%)(a)
MSCI Contribution to Contribution to
Emerging Markets portfolio MSCI portfolio
Index sector relative to MSCI Emerging Markets relative to MSCI
total Emerging Markets Index sector total Emerging Markets
Top contributors return Index Top detractors return Index
------------------ ------------------ ----------------- ------------------ ------------------ -----------------
Brazil (2.6) 0.9 South Korea (21.9) (1.4)
------------------ ------------------ ----------------- ------------------ ------------------ -----------------
India 8.9 0.7 Taiwan (18.0) (1.1)
------------------ ------------------ ----------------- ------------------ ------------------ -----------------
South Africa (19.9) 0.7 Saudi Arabia(c) 3.2 (0.5)
------------------ ------------------ ----------------- ------------------ ------------------ -----------------
Mexico (6.1) 0.4 China/Hong Kong (5.6) (0.4)
------------------ ------------------ ----------------- ------------------ ------------------ -----------------
United Kingdom(b) - 0.3 Indonesia 15.9 (0.2)
------------------ ------------------ ----------------- ------------------ ------------------ -----------------
(a) For the period 31 March 2022 to 30 September 2022.
(b) No companies included in the MSCI Emerging Markets Index in
this country as at 30 September 2022.
(c) No companies held by TEMIT in this country as at 30
September 2022.
A significant overweight position in the underperforming South
Korean market hurt relative results. Key stocks included NAVER and
Samsung Electronics, discussed earlier. In Taiwan, selections
including the portfolio's largest holding, TSMC, hindered
performance, while MediaTek had a lesser negative effect. A slight
overweight in the market also hurt relative returns. China, as
discussed above, also detracted, although a slight underweight
helped mute underperformance. Lack of exposure to Meituan, a
food-delivery platform, and an overweight in China Merchants Bank
were the top detractors.
Brazil was the major positive contributor to relative
performance. An overweight exposure and favourable stock selection
had a positive impact, and Petrobras (discussed above and also
overweighted) contributed significantly. An overweight in
top-performing ICICI Bank (discussed above) led India to an
outsized positive result during the period, as did off-benchmark
exposure to Bajaj Holdings & Investments. Stock selection and
an underweight in South Africa also delivered positive results led
by an off-benchmark investment in Massmart.
Portfolio changes by sector
Total return in
sterling
30 September
31 March 2022 2022 market MSCI
market value Market value TEMIT Emerging
Sector GBPm Purchases GBPm Sales GBPm movement GBPm GBPm % Markets Index %
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Information
Technology 737 27 (102) (137) 525 (17.4) (20.7)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Financials 473 51 (46) 24 502 6.3 (3.5)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Consumer
Discretionary 266 30 (30) (22) 244 (7.8) 1.9
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Communication
Services 212 18 (11) (47) 172 (23.3) (14.6)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Materials 208 10 (34) (31) 153 (13.8) (12.8)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Industrials 62 28 (1) (7) 82 (7.9) (3.3)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Consumer Staples 82 5 (16) 10 81 14.4 7.7
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Energy 36 25 (1) (2) 58 33.7 8.6
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Health Care 33 7 (2) (5) 33 (11.4) (7.2)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Real Estate 16 - (6) - 10 (8.8) (10.5)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Utilities - 10 (11) 2 1 17.6 8.0
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Total
Investments 2,125 211 (260) (215) 1,861
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Sector asset allocation
As at 30 September 2022
Sector weightings vs benchmark (%)
TEMIT MSCI Emerging Markets Index
----------------------- ----- ---------------------------
Information Technology 28.2 18.2
----------------------- ----- ---------------------------
Financials 26.9 22.6
----------------------- ----- ---------------------------
Consumer Discretionary 13.1 14.0
----------------------- ----- ---------------------------
Communication Services 9.3 9.7
----------------------- ----- ---------------------------
Materials 8.2 8.7
----------------------- ----- ---------------------------
Industrials 4.4 5.8
----------------------- ----- ---------------------------
Consumer Staples 4.3 6.6
----------------------- ----- ---------------------------
Energy 3.2 5.3
----------------------- ----- ---------------------------
Health Care 1.8 3.9
----------------------- ----- ---------------------------
Real Estate 0.5 2.0
----------------------- ----- ---------------------------
Utilities 0.1 3.2
----------------------- ----- ---------------------------
Portfolio changes by country
Total return in
sterling
30 September
31 March 2022 2022 market MSCI
market value Market movement value TEMIT Emerging
Country GBPm Purchases GBPm Sales GBPm GBPm GBPm % Markets Index %
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
China/Hong Kong 605 63 (74) (50) 544 (7.7) (5.6)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
South Korea 487 11 (67) (107) 324 (22.4) (21.9)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Taiwan 363 19 (15) (93) 274 (23.8) (18.0)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
India 188 44 (47) 46 231 22.0 8.9
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Brazil 210 29 (18) (15) 206 2.2 (2.6)
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Other 272 45 (39) 4 282 - -
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Total
Investments 2,125 211 (260) (215) 1,861
---------------- -------------- -------------- ---------- --------------- -------------- ------ ---------------
Geographic asset allocation
As at 30 September 2022
Country weightings vs benchmark (%)(a)
TEMIT MSCI Emerging Markets Index
--------------------- ----- ---------------------------
China/Hong Kong 29.2 31.4
--------------------- ----- ---------------------------
South Korea 17.4 10.7
--------------------- ----- ---------------------------
Taiwan 14.7 13.7
--------------------- ----- ---------------------------
India 12.4 15.3
--------------------- ----- ---------------------------
Brazil 11.1 5.7
--------------------- ----- ---------------------------
United States(b) 3.9 -
--------------------- ----- ---------------------------
Thailand 2.6 2.1
--------------------- ----- ---------------------------
Mexico 2.0 2.3
--------------------- ----- ---------------------------
United Kingdom(b) 1.8 -
--------------------- ----- ---------------------------
Indonesia 1.0 2.2
--------------------- ----- ---------------------------
Hungary 0.8 0.2
--------------------- ----- ---------------------------
South Africa 0.7 3.4
--------------------- ----- ---------------------------
Chile 0.6 0.6
--------------------- ----- ---------------------------
Peru 0.5 0.2
--------------------- ----- ---------------------------
Cambodia(b) 0.4 -
--------------------- ----- ---------------------------
Philippines 0.3 0.7
--------------------- ----- ---------------------------
Pakistan(b) 0.3 -
--------------------- ----- ---------------------------
Kenya(b) 0.3 -
--------------------- ----- ---------------------------
United Arab Emirates 0.0 1.4
--------------------- ----- ---------------------------
Russia(b)(c) 0.0 -
--------------------- ----- ---------------------------
(a) Other countries included in the benchmark are Colombia,
Czech Republic, Greece, Kuwait, Malaysia, Poland, Qatar, Romania,
Saudi Arabia, Singapore and Turkey.
(b) Countries not included in the MSCI Emerging Markets Index.
(c) All companies held by TEMIT in this country are valued at
zero.
Portfolio investments by fair value
As at 30 September 2022
Fair value
Holding Country Sector Trading(a) GBP'000 % of net assets
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Taiwan Semiconductor Information
Manufacturing Taiwan Technology NT 194,259 10.4
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
ICICI Bank India Financials PS 128,805 6.9
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Information
Samsung Electronics South Korea Technology PS 108,780 5.8
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Consumer
Alibaba(b) China/Hong Kong Discretionary PS 102,744 5.5
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Communication
Tencent China/Hong Kong Services IH 74,610 4.0
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Information
MediaTek Taiwan Technology IH 63,147 3.4
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Petroleo Brasileiro(c) Brazil Energy IH 53,242 2.9
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Banco Bradesco(c)(d) Brazil Financials IH 51,332 2.7
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Communication
NAVER South Korea Services IH 50,508 2.7
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
China Merchants Bank China/Hong Kong Financials IH 49,044 2.6
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
TOP 10 LARGEST
INVESTMENTS 876,471 46.9
------------------------ ------------------ ----------------------------- ----------------- ---------------
LG South Korea Industrials NT 48,944 2.6
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Itaú Unibanco(c)(d) Brazil Financials IH 48,233 2.6
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Information
Genpact(e) United States Technology IH 44,124 2.4
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Guangzhou Tinci
Materials Technology China/Hong Kong Materials PS 43,740 2.3
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Consumer
Prosus(f) China/Hong Kong Discretionary PS 40,017 2.1
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Vale Brazil Materials IH 38,604 2.1
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Samsung Life Insurance South Korea Financials NT 36,388 2.0
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Banco Santander
Mexico(d) Mexico Financials NH 33,549 1.8
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Unilever(e) United Kingdom Consumer Staples PS 33,048 1.8
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Information
Daqo New Energy(d) China/Hong Kong Technology PS 30,710 1.6
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
TOP 20 LARGEST
INVESTMENTS 1,273,828 68.2
------------------------ ------------------ ----------------------------- ----------------- ---------------
Cognizant Technology Information
Solutions(e) United States Technology NT 28,641 1.5
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Techtronic Industries China/Hong Kong Industrials IH 28,245 1.5
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
HDFC Bank India Financials NH 27,945 1.5
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Kasikornbank Thailand Financials NT 25,329 1.3
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Bajaj Holdings &
Investments India Financials PS 23,088 1.2
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Soulbrain South Korea Materials IH 21,627 1.2
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
POSCO South Korea Materials NT 21,153 1.1
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Uni-President China China/Hong Kong Consumer Staples IH 20,378 1.1
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Ping An Insurance China/Hong Kong Financials IH 19,475 1.0
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
Tata Consultancy Information
Services India Technology PS 18,687 1.0
------------------------ ------------------ ----------------- ----------- ----------------- ---------------
TOP 30 LARGEST
INVESTMENTS 1,508,396 80.6
------------------------ ------------------ ----------------------------- ----------------- ---------------
Consumer
Astra International Indonesia Discretionary PS 18,465 1.0
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Brilliance China Consumer
Automotive(g) China/Hong Kong Discretionary NT 18,366 1.0
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Consumer
Zomato India Discretionary NH 17,069 0.9
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Consumer
Fila South Korea Discretionary NT 16,633 0.9
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Communication
Baidu China/Hong Kong Services IH 16,293 0.9
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Hon Hai Precision Information
Industry Taiwan Technology PS 16,093 0.8
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Information
Infosys Technologies India Technology IH 15,463 0.8
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Gedeon Richter Hungary Health Care NT 14,495 0.8
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Tencent Music Communication
Entertainment(d) China/Hong Kong Services PS 14,269 0.8
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Communication
NetEase China/Hong Kong Services PS 14,252 0.8
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
TOP 40 LARGEST
INVESTMENTS 1,669,794 89.3
----------------------- ------------------- ----------------------------- ----------------- ---------------
China Resources Cement China/Hong Kong Materials PS 12,451 0.7
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Ping An Bank China/Hong Kong Financials NT 12,340 0.6
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Banco Santander
Chile(d) Chile Financials NH 10,700 0.5
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Intercorp Financial
Services Peru Financials IH 9,253 0.5
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Consumer
Americanas Brazil Discretionary IH 9,183 0.5
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Kiatnakin Phatra Bank Thailand Financials NT 8,952 0.5
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Keshun Waterproof
Technologies China/Hong Kong Materials PS 8,900 0.5
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
LegoChem Biosciences South Korea Health Care IH 8,122 0.4
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Massmart South Africa Consumer Staples PS 8,016 0.4
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Thai Beverage Thailand Consumer Staples NT 7,639 0.4
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
TOP 50 LARGEST
INVESTMENTS 1,765,350 94.3
----------------------- ------------------- ----------------------------- ----------------- ---------------
Consumer
NagaCorp Cambodia Discretionary PS 6,873 0.4
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
LG Chem South Korea Materials PS 6,793 0.4
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
H&H Group China/Hong Kong Consumer Staples IH 6,409 0.3
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Star Petroleum Refining Thailand Energy NH 6,145 0.3
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
BDO Unibank Philippines Financials NT 5,885 0.3
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Netcare South Africa Health Care IH 5,740 0.3
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
MCB Bank Pakistan Financials NT 4,993 0.3
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
COSCO SHIPPING Ports China/Hong Kong Industrials IH 4,939 0.3
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
East African Breweries Kenya Consumer Staples NT 4,913 0.3
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
Wuxi Biologics China/Hong Kong Health Care PS 4,899 0.3
----------------------- ------------------- ----------------- ----------- ----------------- ---------------
TOP 60 LARGEST
INVESTMENTS 1,822,939 97.5
----------------------- ------------------- ----------------------------- ----------------- ---------------
China Resources Land China/Hong Kong Real Estate PS 4,793 0.3
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Longshine Technology Information
Group China/Hong Kong Technology PS 4,781 0.3
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Greentown Service Group China/Hong Kong Real Estate PS 4,760 0.2
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Consumer
Nemak Mexico Discretionary NT 4,417 0.2
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
XP Inc Brazil Financials NT 4,384 0.2
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Consumer
Hankook Tire South Korea Discretionary NT 3,338 0.2
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Consumer
JD.com China/Hong Kong Discretionary NT 2,605 0.1
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Consumer
Weifu High-Technology China/Hong Kong Discretionary NT 2,461 0.1
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Communication
KT Skylife South Korea Services NT 2,179 0.1
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Consumer
BAIC Motor China/Hong Kong Discretionary NT 1,876 0.1
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
TOP 70 LARGEST
INVESTMENTS 1,858,533 99.3
------------------------ ----------------------------------------------- ----------------- ---------------
Information
TOTVS Brazil Technology PS 885 0.1
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Dubai Electricity and United Arab
Water Authority Emirates Utilities NH 817 0.0
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Consumer
Chervon Holdings China/Hong Kong Discretionary PS 279 0.0
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Yandex(h) Russia Communication NT - -
Services
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
LUKOIL(h) Russia Energy NT - -
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
VK(h)(i) Russia Communication NT - -
Services
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
Sberbank of Russia(h) Russia Financials NT - -
------------------------ ----------------- ----------------- ----------- ----------------- ---------------
TOTAL INVESTMENTS 1,860,514 99.4
------------------------ ----------------------------------------------- ----------------- ---------------
NET ASSETS 11,247 0.6
------------------------ ----------------------------------------------- ----------------- ---------------
TOTAL NET ASSETS 1,871,761 100.0
------------------------ ----------------------------------------------- ----------------- ---------------
(a) Trading activity during the year: (NH) New Holding, (IH)
Increased Holding, (PS) Partial Sale and (NT) No Trading.
(b) Company is listed on the Hong Kong and New York stock
exchanges.
(c) Preferred shareholders are entitled to dividends before ordinary shareholders.
(d) US listed American Depository Receipt.
(e) This company, listed on a stock exchange in a developed
market, has significant exposure to operations from emerging
markets.
(f) This company is listed in the Netherlands. The
classification of China/Hong Kong is due to most of its revenue
coming from its holding in Tencent.
(g) Trading of this company's shares on the Hong Kong stock
exchange has been suspended since 31 March 2021. Shares resumed
trading on 5 October 2022.
(h) This company is fair valued at zero as a result of its
trading being suspended on international stock exchanges.
(i) UK listed Global Depository Receipt.
Portfolio summary
As at 30 September 2022
All figures are a % of the net assets
30 31
September March
Communication Consumer Consumer Health Information Real Total Net 2022 2022
Services Discretionary Staples Energy Financials Care Industrials Technology Materials Estate Utilities Equities assets/(liabilities)(a) Total Total
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Brazil - 0.5 - 2.9 5.5 - - - 2.1 - - 11.0 - 11.0 10.0
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Cambodia - 0.4 - - - - - - - - - 0.4 - 0.4 0.4
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Chile - - - - 0.5 - - - - - - 0.5 - 0.5 -
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
China/Hong Kong 6.5 8.9 1.4 - 4.3 0.3 1.8 1.9 3.4 0.5 - 29.0 - 29.0 28.8
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Egypt - - - - - - - - - - - - - - 0.1
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Germany - - - - - - - - - - - - - - 0.1
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Hungary - - - - - 0.8 - - - - - 0.8 - 0.8 0.7
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
India - 0.9 - - 9.6 - - 1.8 - - - 12.3 - 12.3 9.1
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Indonesia - 1.0 - - - - - - - - - 1.0 - 1.0 0.9
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Kenya - - 0.3 - - - - - - - - 0.3 - 0.3 0.2
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Mexico - 0.2 - - 1.8 - - - - - - 2.0 - 2.0 1.6
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Pakistan - - - - 0.3 - - - - - - 0.3 - 0.3 0.4
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Peru - - - - 0.5 - - - - - - 0.5 - 0.5 0.5
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Philippines - - - - 0.3 - - - - - - 0.3 - 0.3 0.3
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Russia(b) - - - - - - - - - - - 0.0 - 0.0 0.0
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
South Africa - - 0.4 - - 0.3 - - - - - 0.7 - 0.7 0.6
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
South Korea 2.8 1.1 - - 2.0 0.4 2.6 5.8 2.7 - - 17.4 - 17.4 23.2
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Taiwan - - - - - - - 14.6 - - - 14.6 - 14.6 17.3
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Thailand - - 0.4 0.3 1.8 - - - - - - 2.5 - 2.5 2.1
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
United Arab Emirates - - - - - - - - - - 0.1 0.1 - 0.1 -
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
United Kingdom - - 1.8 - - - - - - - - 1.8 - 1.8 1.4
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
United States - - - - - - - 3.9 - - - 3.9 - 3.9 3.4
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
Net
assets/(liabilities)(a) - - - - - - - - - - - - 0.6 0.6 (1.1)
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
30 September 2022 Total 9.3 13.0 4.3 3.2 26.6 1.8 4.4 28.0 8.2 0.5 0.1 99.4 0.6 100.0 -
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
31 March 2022 Total 10.2 12.7 3.8 1.7 22.6 1.5 2.9 35.1 9.9 0.7 - 101.1 (1.1) - 100.0
------------------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- --------- ----------------------- --------- -----
(a) The Company's net assets/(liabilities) are the total of net
current assets plus non-current liabilities per the Statement of
Financial Position on page 25 of the full Half Yearly Report.
(b) All companies held by TEMIT in this country are valued at
zero.
Less than GBP1.5bn to GBP5bn to Greater than Net assets/ (liabilities)(a)
Market capitalisation breakdown (%) GBP1.5bn GBP5bn GBP25bn GBP25bn
------------------------------------ --------- ----------- --------- ------------ ----------------------------
30 September 2022 5.7 9.5 25.4 58.8 0.6
------------------------------------ --------- ----------- --------- ------------ ----------------------------
31 March 2022 7.7 8.0 16.5 68.9 (1.1)
------------------------------------ --------- ----------- --------- ------------ ----------------------------
30 September 31 March
Split between markets(b) (%) 2022 2022
------------------------------- ------------ --------
Emerging markets 93.0 95.6
------------------------------- ------------ --------
Developed markets(c) 5.7 4.9
------------------------------- ------------ --------
Frontier markets 0.7 0.6
------------------------------- ------------ --------
Net assets/(liabilities)(a) 0.6 (1.1)
------------------------------- ------------ --------
Source: FactSet Research System, Inc.
(a) The Company's net assets/(liabilities) are the total of net
current assets plus non-current liabilities per the Statement of
Financial Position on page 25 of the full Half Yearly Report.
(b) Geographic split between "Emerging markets", "Frontier
markets", "Developed markets" are as per MSCI index
classifications.
(c) Developed market exposure represented by companies listed in
United Kingdom and United States which have significant exposure to
operations from emerging markets.
Environmental, Social and Governance
We continue to embed governance and sustainability factors into
our fundamental bottom-up research and remain active owners across
our holdings. This involves integrating Environmental, Social and
Governance ("ESG") factors into our stock thesis, engaging with
investee companies on material ESG issues and actively voting on
behalf of our investors. In addition, we monitor the potential ESG
externalities that may be exhibited by our investee companies,
including TEMIT's portfolio carbon footprint where our portfolio
managers seek to understand the carbon risk profile. We provide
below a short summary of our process over the six-month period
under review.
Integrating ESG factors
During the six months, we purchased shares in HDFC Bank. HDFC
Bank is India's largest private sector bank by advances and remains
one of the fastest growing banks with consistent market share gains
while also maintaining high profitability and strong asset quality.
Considering its ESG practices, the bank remains one of the best
governed banks in India. The senior management team are well
respected within the industry, remuneration is in line with
industry best practices, and the bank's Employee Stock Option Plan
("ESOP") ensures alignment with shareholders. Post the CEO change,
governance and control mechanisms remain a critical focus to us. In
addition, the bank's internal policies and outcomes on
environmental and social issues are strong with no material red
flags. The bank has policies in place to consider environmental and
social impacts in its underwriting process. For large long-term
loans, the bank has put in place a Social and Environmental
Management System ("SEMS") framework that assesses and considers
numerous parameters such as social impact and emissions. We believe
the bank is well positioned to manage its operational ESG
footprint.
Climate change
TEMIT Carbon Footprint vs. MSCI EM Index - 30 September
2022(a)
Carbon Emissions Carbon Intensity Weighted Average Carbon
(tCO2e/$M invested) (tCO2e/$M sales) Intensity (tCO2e/$M sales)
Portfolio 269.2 369.3 216.1
-------------------- ----------------- ---------------------------
Benchmark 296.6 384.8 345.1
-------------------- ----------------- ---------------------------
(a) Source: MSCI ESG as at 11 October 2022, portfolio coverage
94% (79% reported, 15% estimated); MSCI EM coverage 100% (77%
reported, 23% estimated). Carbon emissions include scope 1 and
2.
Carbon Emissions - Measures the portfolio's normalised carbon
footprint per $1 million invested.
Carbon Intensity - Measures the portfolio's efficiency in terms
of the level of carbon emissions per dollar of sales generated by a
company.
Weighted Average Carbon Intensity - Measures the portfolio's
exposure to carbon-intensive companies.
The TEMIT Portfolio Carbon Emissions are 9.2% lower than the
MSCI Emerging Markets benchmark, Carbon Intensity is 4.0% lower and
Weighted Average Carbon Intensity ("WACI") is 37.4% lower. TEMIT's
portfolio carbon risk is concentrated amongst a small number of
companies, with the top five companies in terms of carbon intensity
representing 7.6% of the portfolio and accounting for 71.5% of the
total portfolio WACI.
Active ownership
As investors with a significant presence in emerging markets,
our investment team's active ownership efforts are a key part of
the overall approach to stewardship. Over the six-month period, we
have engaged with several of our investee companies on material
governance and sustainability issues. For example we (i) reached
out to KT Skylife to recommend that the company adopts a more
transparent and attractive dividend payout policy; (ii) had an
in-depth dialogue with Genpact where the conversation was focused
on learning more around the company's ESG strategy, its alignment
with UN Sustainable Development Goals ("SDGs") from a
product/services perspective, its thoughts on net-zero commitment
and its management of human capital; and (iii) engaged Soulbrain
across multiple areas to request clarification on topics such as
executive remuneration, whilst also encouraging improved disclosure
on ESG issues. These discussions help us to gain a number of
fundamental and sustainability insights. We believe that our
engagement efforts are key to developing both a detailed
understanding of companies and improving outcomes for shareholders
as well as stakeholders more broadly.
We look forward to sharing a more detailed account of our
stewardship practices in the next Annual Report and dedicated
Stewardship Report.
Outlook for markets
Inflation remains a multi-layered challenge for policymakers.
Whilst the shift from easier policies during the pandemic to
tighter policies in a supply chain-constrained world may previously
have taken place at a slower pace than required, there is no doubt
that central banks have fully reasserted their inflation fighting
credentials. By mid-November 2022, the US Federal Reserve had
raised interest rates six times this year, by a cumulative 3.75% to
4.00%, the highest level since January 2008. Inflation in the euro
area meanwhile rose to a record 10.6% in October 2022, which is
likely to lead to further interest rate increases by the European
Central Bank.
Interest rate increases in emerging markets ("EMs") have been
less than developed markets ("DMs"), reflecting more subdued
inflationary pressures, helped largely by significantly less fiscal
expansion during lockdowns. Using real interest rates as a proxy
for the monetary policy stance, markets such as Brazil are
experiencing tight monetary policy, whereas policy in the US and
Euro Area remain loose. This has implications for the timing of
eventual interest rate cuts, with Brazil likely to join China in
cutting rates in 2023. In isolation, this would be positive for
investors. However, we acknowledge the challenging global backdrop
and the need to see an improvement in global growth and/or a weaker
US dollar to enable the positive impact of lower interest rates to
filter through to the market in these countries.
The Chinese property market continues to struggle, which is
impacting domestic growth as well as demand for key commodities
involved in construction, including cement and steel. A 40% decline
in new real estate construction starts as well as single-digit
growth in infrastructure investment have contributed to the
weakness in growth.
Slower global growth, a strong US dollar, global supply chain
woes as well as domestic economic factors have created headwinds
for EMs. Nevertheless, we believe in their long-term growth
potential, as economic growth in EMs has continued to outpace that
in DMs. EMs are home to companies with exposure to new technologies
driving future sustainable economic growth. From solar and electric
vehicle battery producers to semiconductor designers and
manufacturers, the acceleration of innovation in EM is driving our
confidence in the asset class. Despite the current challenges, we
continue to see opportunities to invest in companies with a
technological edge which are investing to drive growth.
Chetan Sehgal
Lead Portfolio Manager
8 December 2022
Independent Review Report
to the members of Templeton Emerging Markets Investment Trust
plc
Conclusion
We have been engaged by Templeton Emerging Markets Investment
Trust plc ('the Company') to review the condensed set of Financial
Statements in the Half Yearly Report for the six months ended 30
September 2022 which comprise the Statement of Comprehensive
Income, Statement of Financial Position, Statement of Changes in
Equity, Statement of Cash Flows, and related notes 1 to 8. We have
read the other information contained in the Half Yearly Report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of Financial Statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of Financial Statements
in the Half Yearly Report for the six months ended 30 September
2022 is not prepared, in all material respects, in accordance with
UK adopted International Accounting Standard 34 and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual Financial Statements of the
Company are prepared in accordance with UK adopted international
accounting standards. The condensed set of Financial Statements
included in this Half Yearly Report has been prepared in accordance
with UK adopted International Accounting Standard 34, "Interim
Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the Half Yearly
Report in accordance with the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
In preparing the Half Yearly Report, the directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the Half Yearly Report, we are responsible for
expressing to the Company a conclusion on the condensed set of
Financial Statements in the Half Yearly Report. Our conclusion,
including our Conclusions Relating to Going Concern, are based on
procedures that are less extensive than audit procedures, as
described in the Basis for Conclusion paragraph of this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
Edinburgh
8 December 2022
Statement of Comprehensive Income
For the six months to 30 September 2022
For the six months to For the six months to 30 September 2021 Year ended
30 September 2022 (unaudited) 31 March 2022
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Net losses on
investments
and foreign
exchange
Net losses on
investments at
fair value - (215,485) (215,485) - (204,001) (204,001) - (460,585) (460,585)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Net losses on
foreign
exchange - (69) (69) - (25) (25) - (168) (168)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Income
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Dividends 55,693 - 55,693 32,203 - 32,203 54,020 - 54,020
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Other income 877 - 877 127 - 127 250 - 250
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
56,570 (215,554) (158,984) 32,330 (204,026) (171,696) 54,270 (460,753) (406,483)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Expenses
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
AIFM fee(a) (2,674) (6,239) (8,913) (3,312) (7,727) (11,039) (6,316) (14,738) (21,054)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Other expenses (985) - (985) (1,144) - (1,144) (2,338) - (2,338)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
(3,659) (6,239) (9,898) (4,456) (7,727) (12,183) (8,654) (14,738) (23,392)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Profit/(loss)
before finance
costs and
taxation 52,911 (221,793) (168,882) 27,874 (211,753) (183,879) 45,616 (475,491) (429,875)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Finance
costs(a) (550) (1,285) (1,835) (388) (904) (1,292) (858) (1,998) (2,856)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Profit/(loss)
before
taxation 52,361 (223,078) (170,717) 27,486 (212,657) (185,171) 44,758 (477,489) (432,731)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Tax expense 5 (3,448) (3,130) (6,578) (1,984) (4,695) (6,679) (4,081) (5,596) (9,677)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Profit/(loss)
for the period 48,913 (226,208) (177,295) 25,502 (217,352) (191,850) 40,677 (483,085) (442,408)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Profit/(loss)
attributable
to equity
holders of the
Company 48,913 (226,208) (177,295) 25,502 (217,352) (191,850) 40,677 (483,085) (442,408)
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
Earnings per
share 2 4.16p (19.25)p (15.09)p 2.16p (18.40)p (16.24)p 3.44p (40.90)p (37.46)p
--------------- ---- ------- --------- --------- ---------- ------------ ------------------ ------- --------- ---------
(a) 70% of the annual Alternative Investment Fund Manager
("AIFM") fee and 70% of the finance costs have been allocated to
the capital account.
Under the Company's Articles of Association the capital element
of return is not distributable.
The total column of this statement represents the profit and
loss account of the Company.
The accompanying notes are an integral part of the Financial
Statements.
Statement of Financial Position
As at 30 September 2022
As at As at As at
30 September 30 September 31 March
2022 2021 2022
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
---------------------------------------------------- ----- -------------- -------------- -----------
Non-current assets
Investments at fair value through profit or loss 1,860,514 2,440,769 2,124,530
---------------------------------------------------- ----- -------------- -------------- -----------
Current assets
Trade and other receivables 8,190 7,852 16,928
---------------------------------------------------- ----- -------------- -------------- -----------
Cash and cash equivalents 167,115 40,748 125,855
---------------------------------------------------- ----- -------------- -------------- -----------
Total current assets 175,305 48,600 142,783
---------------------------------------------------- ----- -------------- -------------- -----------
Current liabilities
Other payables (53,875) (14,506) (57,718)
---------------------------------------------------- ----- -------------- -------------- -----------
Total current liabilities (53,875) (14,506) (57,718)
---------------------------------------------------- ----- -------------- -------------- -----------
Net current assets 121,430 34,094 85,065
---------------------------------------------------- ----- -------------- -------------- -----------
Non-current liabilities
Capital gains tax provision (10,183) (8,814) (9,205)
---------------------------------------------------- ----- -------------- -------------- -----------
Other payables falling due after more than one year (100,000) (100,000) (100,000)
---------------------------------------------------- ----- -------------- -------------- -----------
Total assets less liabilities 1,871,761 2,366,049 2,100,390
---------------------------------------------------- ----- -------------- -------------- -----------
Share capital and reserves
Equity Share Capital 3 63,515 64,244 64,136
---------------------------------------------------- ----- -------------- -------------- -----------
Capital Redemption Reserve 19,154 18,425 18,533
---------------------------------------------------- ----- -------------- -------------- -----------
Capital Reserve 1,221,595 1,735,220 1,466,197
---------------------------------------------------- ----- -------------- -------------- -----------
Special Distributable Reserve 433,546 433,546 433,546
---------------------------------------------------- ----- -------------- -------------- -----------
Revenue Reserve 133,951 114,614 117,978
---------------------------------------------------- ----- -------------- -------------- -----------
Equity Shareholders' Funds 1,871,761 2,366,049 2,100,390
---------------------------------------------------- ----- -------------- -------------- -----------
Net Asset Value pence per share(a) 160.5 200.3 178.2
---------------------------------------------------- ----- -------------- -------------- -----------
(a) Based on shares in issue excluding shares held in treasury.
Statement of Changes in Equity
For the six months to 30 September 2022 (unaudited)
Capital Special
Equity Share Redemption Distributable
Capital Reserve Capital Reserve Reserve Revenue Reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Balance at 31
March 2021 64,253 18,416 1,952,886 433,546 122,186 2,591,287
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
(Loss)/profit for
the period - - (217,352) - 25,502 (191,850)
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Equity dividends 4 - - - - (33,074) (33,074)
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Purchase and
cancellation of
own shares 3 (9) 9 (314) - - (314)
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Balance at 30
September 2021 64,244 18,425 1,735,220 433,546 114,614 2,366,049
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
(Loss)/profit for
the period - - (265,733) - 15,175 (250,558)
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Equity dividends 4 - - - - (11,811) (11,811)
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Purchase and
cancellation of
own shares (108) 108 (3,290) - - (3,290)
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Balance at 31
March 2022 64,136 18,533 1,466,197 433,546 117,978 2,100,390
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
(Loss)/profit for
the period - - (226,208) - 48,913 (177,295)
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Equity dividends 4 - - - - (32,940) (32,940)
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Purchase and
cancellation of
own shares 3 (621) 621 (18,394) - - (18,394)
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Balance at 30
September 2022 63,515 19,154 1,221,595 433,546 133,951 1,871,761
----------------- ---- ------------ ---------------- --------------- ---------------- --------------- ---------
Statement of Cash Flows
For the six months to 30 September 2022
For the For the
six months to For the year to
30 September six months to 30 September 31 March
2022 2021 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------------------------------- -------------- --------------------------- ----------
Cash flows from operating activities
Loss before taxation(a) (170,717) (185,171) (432,731)
------------------------------------------------------------- -------------- --------------------------- ----------
Adjustments to reconcile loss before taxation to cash
generated from operations:
Bank and deposit interest income recognised (873) (14) (130)
------------------------------------------------------------- -------------- --------------------------- ----------
Dividend income recognised (55,693) (32,203) (54,020)
------------------------------------------------------------- -------------- --------------------------- ----------
Finance costs(a) 1,835 1,292 2,856
------------------------------------------------------------- -------------- --------------------------- ----------
Net losses on investments at fair value 215,485 204,001 460,585
------------------------------------------------------------- -------------- --------------------------- ----------
Net losses on foreign exchange(b)(c) 69 25 168
------------------------------------------------------------- -------------- --------------------------- ----------
(Increase)/decrease in debtors(a) (52) 38 16
------------------------------------------------------------- -------------- --------------------------- ----------
Decrease in creditors(a) (210) (185) (614)
------------------------------------------------------------- -------------- --------------------------- ----------
Cash generated from operations(a)(b) (10,156) (12,217) (23,870)
------------------------------------------------------------- -------------- --------------------------- ----------
Bank and deposit interest received 873 14 130
------------------------------------------------------------- -------------- --------------------------- ----------
Dividends received 59,855 39,129 57,522
------------------------------------------------------------- -------------- --------------------------- ----------
Bank overdraft interest paid - - (2)
------------------------------------------------------------- -------------- --------------------------- ----------
Tax paid(a) (3,244) (3,548) (6,250)
------------------------------------------------------------- -------------- --------------------------- ----------
Net cash inflow from operating activities (b) 47,328 23,378 27,530
------------------------------------------------------------- -------------- --------------------------- ----------
Cash flows from investing activities
Purchases of non-current financial assets (214,314) (349,022) (600,482)
------------------------------------------------------------- -------------- --------------------------- ----------
Sales of non-current financial assets(b) 262,619 315,873 613,417
------------------------------------------------------------- -------------- --------------------------- ----------
Net cash inflow/(outflow) from investing activities (b) 48,305 (33,149) 12,935
------------------------------------------------------------- -------------- --------------------------- ----------
Cash flows from financing activities
Equity dividends paid (32,940) (33,074) (44,885)
------------------------------------------------------------- -------------- --------------------------- ----------
Purchase and cancellation of own shares (19,677) (314) (2,041)
------------------------------------------------------------- -------------- --------------------------- ----------
Draw down from revolving credit facility - - 50,000
------------------------------------------------------------- -------------- --------------------------- ----------
Bank loans interest and fees paid (1,687) (1,280) (2,728)
------------------------------------------------------------- -------------- --------------------------- ----------
Net cash (outflow)/inflow from financing activities (54,304) (34,668) 346
------------------------------------------------------------- -------------- --------------------------- ----------
Net increase/(decrease) in cash 41,329 (44,439) 40,811
------------------------------------------------------------- -------------- --------------------------- ----------
Cash at the start of the period 125,855 85,212 85,212
------------------------------------------------------------- -------------- --------------------------- ----------
Net losses on foreign exchange(c) (69) (25) (168)
------------------------------------------------------------- -------------- --------------------------- ----------
Cash at the end of the period 167,115 40,748 125,855
------------------------------------------------------------- -------------- --------------------------- ----------
(a) The Company has used the Loss before taxation as a starting
point in the Statement of Cash Flows for the period ended 30
September 2022 and year ended 31 March 2022. Comparative figures
for the period ended 30 September 2021 have been updated to adjust
the presentation in line with IAS 8.
(b) Net losses on foreign exchange related to the Sales of
non-current financial assets for the comparative figures have been
reclassified for the consistency of the presentation.
(c) Net losses on foreign exchange related to cash and cash
equivalents have been shown separately as part of the
reconciliation of the cash and cash equivalents in line with IAS 8
requirements.
Reconciliation of liabilities arising from bank loans
Liabilities
as at Liabilities
31 March as at 30 September
2022 Cash flows Profit & Loss 2022
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- -------------- -------------------
Revolving credit facility 50,000 - - 50,000
---------------------------------- ----------- ----------- -------------- -------------------
Interest and fees payable 249 (662) 794 381
---------------------------------- ----------- ----------- -------------- -------------------
Fixed term loan 100,000 - - 100,000
---------------------------------- ----------- ----------- -------------- -------------------
Interest and fees payable 352 (1,025) 1,041 368
---------------------------------- ----------- ----------- -------------- -------------------
Total liabilities from bank loans 150,601 (1,687) 1,835 150,749
---------------------------------- ----------- ----------- -------------- -------------------
Liabilities
as at Liabilities
31 March as at 30 September
2021 Cash flows Profit & Loss 2021
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- -------------- -------------------
Revolving credit facility - - - -
---------------------------------- ----------- ----------- -------------- -------------------
Interest and fees payable 120 (239) 243 124
---------------------------------- ----------- ----------- -------------- -------------------
Fixed term loan 100,000 - - 100,000
---------------------------------- ----------- ----------- -------------- -------------------
Interest and fees payable 355 (1,041) 1,049 363
---------------------------------- ----------- ----------- -------------- -------------------
Total liabilities from bank loans 100,475 (1,280) 1,292 100,487
---------------------------------- ----------- ----------- -------------- -------------------
Liabilities Liabilities
as at as at
31 March 31 March
2021 Cash flows Profit & Loss 2022
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- -------------- -----------
Revolving credit facility - 50,000 - 50,000
---------------------------------- ----------- ----------- -------------- -----------
Interest and fees payable 120 (628) 757 249
---------------------------------- ----------- ----------- -------------- -----------
Fixed term loan 100,000 - - 100,000
---------------------------------- ----------- ----------- -------------- -----------
Interest and fees payable 355 (2,100) 2,097 352
---------------------------------- ----------- ----------- -------------- -----------
Total liabilities from bank loans 100,475 47,272 2,854 150,601
---------------------------------- ----------- ----------- -------------- -----------
Notes to the Financial Statements
For the six months to 30 September 2022
1 Basis of preparation
The Half Yearly Report for the six months to 30 September 2022
has been prepared in accordance with the UK adopted International
Accounting Standard ("IAS") 34, "Interim Financial Reporting".
The Company has adopted the Statement of Recommended Practice
("SORP") for investment trusts issued by the Association of
Investment Companies ("AIC") in July 2022 insofar as the SORP is
compatible with UK adopted International Accounting Standards. The
accounting policies applied in these half yearly Financial
Statements are consistent with those applied in the Company's
Financial Statements for the year ended 31 March 2022 and have been
applied consistently to all periods presented in these interim
Financial Statements.
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 2022 and 30 September 2021 has not been
audited. The figures and financial information for the year ended
31 March 2022 are extracted from the 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.
As at 30 September 2022, the Company had net current assets of
GBP121,430,000 (31 March 2022: net current assets GBP85,065,000).
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 for the period to 31 March 2024,
which is at least 12 months from the date of approval of these
Financial Statements.
2 Earnings per share
For the For the For the
six months to six months to year to
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
------------------------------------------- -------------- -------------- -------------
Revenue profit 48,913 25,502 40,677
------------------------------------------- -------------- -------------- -------------
Capital loss (226,208) (217,352) (483,085)
------------------------------------------- -------------- -------------- -------------
Total (177,295) (191,850) (442,408)
------------------------------------------- -------------- -------------- -------------
Weighted average number of shares in issue 1,175,330,868 1,181,225,786 1,181,093,110
------------------------------------------- -------------- -------------- -------------
Revenue profit per share 4.16p 2.16p 3.44p
------------------------------------------- -------------- -------------- -------------
Capital loss per share (19.25)p (18.40)p (40.90)p
------------------------------------------- -------------- -------------- -------------
Total loss per share (15.09)p (16.24)p (37.46)p
------------------------------------------- -------------- -------------- -------------
3 Equity share capital
For the six months to For the six months to For the year
30 September 2022 30 September 2021 31 March 2022
Ordinary shares in issue GBP'000 Number GBP'000 Number(a) GBP'000 Number(a)
---------------------------------------- -------- ------------- -------- ------------- ------- -------------
Opening ordinary shares of 5 pence 58,945 1,178,896,985 59,062 1,181,228,655 59,062 1,181,228,655
---------------------------------------- -------- ------------- -------- ------------- ------- -------------
Purchase and cancellation of own shares (621) (12,413,292) (9) (175,000) (117) (2,331,670)
---------------------------------------- -------- ------------- -------- ------------- ------- -------------
Closing ordinary shares of 5 pence 58,324 1,166,483,693 59,053 1,181,053,655 58,945 1,178,896,985
---------------------------------------- -------- ------------- -------- ------------- ------- -------------
For the six months to For the six months to For the year
30 September 2022 30 September 2021 31 March 2022
Ordinary shares held in treasury GBP'000 Number GBP'000 Number(a) GBP'000 Number(a)
-------------------------------------------- -------- ------------- -------- ------------- ------- -------------
Opening ordinary shares of 5 pence 5,191 103,825,895 5,191 103,825,895 5,191 103,825,895
-------------------------------------------- -------- ------------- -------- ------------- ------- -------------
Closing ordinary shares of 5 pence 5,191 103,825,895 5,191 103,825,895 5,191 103,825,895
-------------------------------------------- -------- ------------- -------- ------------- ------- -------------
Total ordinary shares in issue and held in
treasury at the end of the year 63,515 1,270,309,588 64,244 1,284,879,550 64,136 1,282,722,880
-------------------------------------------- -------- ------------- -------- ------------- ------- -------------
(a) Comparative figures for the year ended 31 March 2021 (i.e.
number of ordinary shares in issue and number of ordinary shares
held in treasury as at 31 March 2021) have been retrospectively
adjusted following the sub-division of each existing ordinary share
of 25 pence into five ordinary shares of 5 pence each on 26 July
2021.
In the six months to 30 September 2022, 12,413,292 shares were
bought back for cancellation for a total consideration of
GBP18,394,000 (30 September 2021: 175,000 shares were bought back
for cancellation for a total consideration of GBP314,000). All
shares bought back in the period were cancelled, with none being
placed in treasury (30 September 2021: no shares were placed into
treasury).
4 Dividends
For the six For the six
months to months to For the year
30 September 30 September 31 March
2022 2021 2022
Rate Rate(a)
(pence) GBP'000 (pence) GBP'000 Rate(a) (pence) GBP'000
------------------------------------------------ --------- -------- --------- -------- ---------------- --------
Declared and paid during the period:
Dividend on shares:
------------------------------------------------ ------------------- ------------------- --------------------------
Final dividends for the years ended 31 March
2022 and 31 March 2021 2.80 32,940 2.80 33,074 2.80 33,074
------------------------------------------------ --------- -------- --------- -------- ---------------- --------
Interim dividend for the six months ended 30
September 2021 - - - - 1.00 11,811
------------------------------------------------ --------- -------- --------- -------- ---------------- --------
Total 2.80 32,940 2.80 33,074 3.80 44,885
------------------------------------------------ --------- -------- --------- -------- ---------------- --------
(a) Comparative figures for the year ended 31 March 2021 (i.e.
final dividend per share declared and paid for the year ended 31
March 2021) have been retrospectively adjusted following the
sub-division of each existing ordinary share of 25 pence into five
ordinary shares of 5 pence each on 26 July 2021.
On 8 December 2022 the Board declared an interim dividend of
2.00 pence per share for the financial year 2023 (financial year
2022: 1.00 pence per share interim dividend). This dividend has not
been accrued in the Financial Statements for the six months ended
30 September 2022 as dividends are recognised when the
shareholder's right to receive the payment is established. For the
2023 interim dividend this would be the ex-dividend date of 15
December 2022.
5 Taxation
The total tax expense of GBP6.58 million (30 September 2021:
GBP6.68 million) consists of a revenue tax expense of GBP3.45
million (30 September 2021: GBP1.98 million) and a capital tax
expense of GBP3.13 million (30 September 2021: GBP4.70 million).
The revenue tax expense relates to irrecoverable overseas tax on
dividends. The capital tax expense consists of GBP0.91 million (30
September 2021:
GBP3.94 million) expense arising from an increase in the
provision for deferred tax on unrealised gains on holdings in India
and a GBP2.22 million expense arising from tax on realised gains on
holdings in India (30 September 2021: GBP0.76 million tax on
realised gains on holdings in India and Pakistan).
6 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 at fair value:
For the six months to For the six
30 September months to For the year to
2022 30 September 31 March
GBP'000 2021 2022
GBP'000 GBP'000
------------------ --------------------- ------------- ----------------
Purchase expenses 282 452 749
------------------ --------------------- ------------- ----------------
Sales expenses 528 534 1,209
------------------ --------------------- ------------- ----------------
Total 810 986 1,958
------------------ --------------------- ------------- ----------------
7 Fair value
Fair values are derived as follows:
- Where assets are denominated in a foreign currency, they are
converted into the sterling amount using period-end rates of
exchange;
- Investments held by the Company on the basis set out in the annual accounting policies;
- Cash at the denominated currency of the account; and
- Other financial assets and liabilities at the carrying value
which is a reasonable approximation of the fair value.
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); and
Level 3 Inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The hierarchy valuation of listed investments through profit and
loss are shown below:
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
-------- ------------ ------------ ------------
Level 1 1,842,148 2,414,193 2,103,727
-------- ------------ ------------ ------------
Level 2 - - -
-------- ------------ ------------ ------------
Level 3 18,366(a)(b) 26,576(a) 20,803(a)(b)
-------- ------------ ------------ ------------
Total 1,860,514 2,440,769 2,124,530
-------- ------------ ------------ ------------
(a) Trading of Brilliance China Automotive shares on the stock
exchange has been suspended since 31 March 2021, and as a result,
the stock was fair valued using a beta model (which applies an
index movement to observed trade prices) with unobservable inputs
shown in the table below. As of 30 September 2021, this holding was
disclosed as Level 3 and continues to be classified as Level 3 at
30 September 2022.
(b) Russian investments in Gazprom, LUKOIL, Sberbank of Russia,
VK, and Yandex were fair valued at zero as at 31 March 2022 as a
result of trading being suspended on international stock exchanges.
These investments were transferred from Level 1 to Level 3 during
the financial year ending 31 March 2022. As at 30 September 2022
these investments, except Gazprom which was sold in April 2022,
continue to be fair valued at zero and classified as Level 3.
The following table presents the key unobservable inputs for
Brilliance China Automotive's beta model as at 30 September
2022:
Reasonable Reasonable
Reasonable possible possible
Fair value Unobservable Weighted average possible shift shift + shift -
Description GBP'000 input input +/- GBP'000 GBP'000
------------ ---------- ---------------- ----------------- ----------------- ----------------- -----------------
Equities 18,366 Index movement -4% 4% 599 (671)
------------ ---------- ---------------- ----------------- ----------------- ----------------- -----------------
Unleveraged beta 0.88 0.5 (338) 338
------------ ---------- ---------------- ----------------- ----------------- ----------------- -----------------
Shares of Brilliance China Automotive resumed trading on 5
October 2022 (see Note 8 for more details).
The following table presents the movement in Level 3 investments
for the period:
30 September 30 September
2022 2021 31 March 2022
GBP'000 GBP'000 GBP'000
--------------------------------------------- ------------ ------------ --------------
Opening balance 20,803 - -
--------------------------------------------- ------------ ------------ --------------
Transfers from Level 1 into Level 3 - - 149,593
--------------------------------------------- ------------ ------------ --------------
Transfers from Level 2 into Level 3 - 50,954 50,954
--------------------------------------------- ------------ ------------ --------------
Disposal proceeds - sale of Level 3 asset(a) (617) - -
--------------------------------------------- ------------ ------------ --------------
Net losses on investments at fair value (1,820) (24,378) (179,744)
--------------------------------------------- ------------ ------------ --------------
Level 3 closing balance 18,366 26,576 20,803
--------------------------------------------- ------------ ------------ --------------
(a) Represents the sale of the holding in Gazprom on 25 April
2022.
The fixed term loan is shown at amortised cost within the
Statement of Financial Position. If the fixed term loan was shown
at fair value the impact would be:
30 September 30 September
2022 2021 31 March 2022
GBP'000 GBP'000 GBP'000
---------------------------------- ------------ ------------ --------------
Fixed term loan at amortised cost 100,000 100,000 100,000
---------------------------------- ------------ ------------ --------------
Fixed term loan at fair value 97,100 102,280 100,390
---------------------------------- ------------ ------------ --------------
Increase/(decrease) in net assets 2,900 (2,280) (390)
---------------------------------- ------------ ------------ --------------
The fair value of the fixed term loan included in the table
above is calculated by aggregating the expected future cash flows
which are discounted at a rate comprising the sum of SONIA rate
plus a static spread.
The fixed term loan has been transferred by novation from
Scotiabank Europe plc to The Bank of Nova Scotia, London Branch
with effective date 28 September 2022. All other contractual terms
and conditions remained the same.
8 Events after the reporting period
Revolving credit facility
On 19 October 2022, the Company fully repaid the GBP50 million
revolving facility drawdown included under the current liabilities
in the Statement of Financial Position.
Brilliance China Automotive trading
Trading in Brilliance China Automotive shares on the stock
exchange has been suspended since 31 March 2021, and as a result,
the stock was fair valued using a beta model. The fair value as at
30 September 2022 was GBP18.4 million. The company announced it has
fulfilled all the resumption recommendations set out by the Hong
Kong stock exchange and therefore shares resumed trading on 5
October 2022. As at 5 December 2022, the market value was GBP42.9
million.
The Half Yearly Report for the six months to 30 September 2022
was approved by the Board on 8 December 2022. A copy of the report
is available on our website www.temit.co.uk.
The PDF of the Half Yearly Report will be uploaded and available
for viewing on the National Storage Mechanism, posted to the
website www.temit.co.uk/resources/literature 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 further information please e-mail
temitcosec@franklintempleton.com or contact Client Dealer Services
at Franklin Templeton on free phone 0800 305 306, +44 (0) 20 7073
8690 for overseas investors, or e-mail
enquiries@franklintempleton.co.uk .
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END
IR QVLFBLLLZFBV
(END) Dow Jones Newswires
December 08, 2022 11:52 ET (16:52 GMT)
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