TIDMTEM
RNS Number : 0826W
Templeton Emerging Markets IT PLC
07 December 2023
Templeton Emerging Markets Investment Trust PLC ("TEMIT" or "the
Company")
Half Yearly Report to 30 September 2023
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 net assets of GBP1.9 billion as at 30 September 2023. From
its launch to 30 September 2023, TEMIT's net asset value ("NAV")
total return was +3,832.7% compared to the benchmark total return
of +1,698.1%.
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 2023
Net asset value total Share price total return(a) MSCI Emerging Markets Interim dividend for
return -1.6% Index total return(a)(b) the financial year 2024
(cum-income)(a) (2022: -8.5%) -0.5% 2.00p
-0.3% (2022: -7.4%) (Interim dividend for the
(2022: -8.3%) financial year 2023: 2.00p)
--------------------------- --------------------------- ------------------------- ---------------------------
(a) A glossary of alternative performance measures is included
in 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
Over the six months to 30 September 2023, TEMIT produced a small
negative total return of -0.3%(a) which was marginally better than
the benchmark index's return of -0.5%(a) . In aggregate, emerging
markets as measured by the index have been less volatile than they
were in our last financial year but have not shown any meaningful
progress, moving ahead for short periods only to fall back again,
particularly towards the end of the six-month period.
(a) A glossary of alternative performance measures is included
in the full Half Yearly Report.
Revenue and dividend
Net revenue earnings for the six months to 30 September 2023
amounted to 3.34 pence per share. It is too early to predict
earnings for the full financial year but, noting that TEMIT usually
earns the majority of its revenue in the first six months of its
financial year, an unchanged interim dividend of 2.00 pence per
share will be paid on 26 January 2024.
Share rating
The Board continues to encourage and support our managers in
their active programme of promoting TEMIT's shares to existing and
potential investors via a variety of traditional and online
channels. We have long held the view that marketing and promotion
is an area to which a company should commit over the long term. The
Board was therefore very pleased to be the inaugural recipient of
the AIC's Consistent Communications Award. The award panel
recognised that TEMIT "has delivered a comprehensive strategy
including advertising, PR and social media to win over current and
potential shareholders."
The discount remained under pressure during the period under
review and we were regularly active in buying back shares. A total
of 23.9 million shares were bought back at an average discount of
13.9%. This increased the NAV per share by 0.3% for continuing
shareholders.
The Board
We recently announced that Angus Macpherson had joined the Board
as a non-executive Director of the Company, with effect from 6
October 2023. Angus is chief executive of Noble and Company (UK)
Limited, an independent boutique Scottish corporate finance
business. He was based in Singapore and Hong Kong between 1995 and
2004, latterly as head of capital markets and financing for Merrill
Lynch in Asia. He is currently Chairman of Pacific Horizon
Investment Trust, Henderson Diversified Income and a director of
Schroder Japan Trust and Hampden & Co. As a consequence of his
appointment he intends to step down from the Chair of Pacific
Horizon as soon as a suitable successor can be appointed.
The Board's intention is that Angus will take on the role of
Chairman of the Company on 1 January 2024. In the meantime, I will
work closely with him to ensure an effective handover of the role.
As this will be my last formal report, I would like to thank
shareholders for their support and particularly those shareholders
who I have spoken to for their invaluable insights. I would also
like to thank the team at Franklin Templeton and all of the
suppliers to TEMIT for their considerable efforts over the last
eight and a half years.
Annual General Meeting
The Board was pleased to welcome shareholders to the AGM in
July. 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.
Continuation vote and the Conditional Tender Offer
At next year's AGM, TEMIT will hold its five yearly continuation
vote. The 31 March 2024 financial year-end will also be the end of
the five-year measurement period for our Conditional Tender Offer,
under which the Board has undertaken to arrange a tender offer for
up to 25% of the Company's shares if the NAV total return
underperforms that of the benchmark index over the five-year
period. For the four years and six months to the end of September,
the NAV total return was +14.0%, some 4.2 percentage points higher
than that of the comparator benchmark.
Outlook
The geopolitical and macroeconomic outlook remains difficult and
investors are clearly facing a number of headwinds. Managing
investments for the long term relies on an ability to see beyond
the issues posed by wars in Ukraine and Gaza, along with high
inflation, and to focus on the long-term trends. Notwithstanding
the immediate challenges, with their extensive resources on the
ground and around the world, our managers are well equipped to deal
with this environment as they continue to focus on some of the
world's most interesting and dynamic companies.
The prospects for emerging markets remain compelling, with
relatively high levels of economic growth, young populations and
increasing wealth. As I step down from the Board I look to the
future with optimism and I know that I leave the Company in very
capable hands.
Paul Manduca
Chairman
7 December 2023
Interim Management Report
Principal risks
The Company invests predominantly 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;
-- Geopolitical;
-- Technology;
-- Portfolio concentration;
-- Sustainability and climate change;
-- Foreign currency;
-- Discount;
-- 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 Board and
Investment Manager are aware that the economic challenges continue
to be the key issue affecting investment markets around the world,
as well as the tensions between the United States and China over
trade and the Taiwan Strait. The ongoing Israel-Hamas conflict also
adds to existing geopolitical uncertainties, as do the continuing
ramifications of the Russian invasion of Ukraine. While pandemic
risk is no longer considered a top risk the Board remains mindful
of the possibility of a future pandemic and its potential impacts
on the Company. There have been no further changes to the principal
and emerging risks reported in the Annual Report and, in the
Board's view, these 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, the Directors are satisfied that, assuming that
there will be a successful continuation vote at the 2024 AGM, the
Company has adequate resources to continue to operate as a going
concern for the period to 31 March 2025, 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 in 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 2023, 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 fair 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 7 December
2023 and the above Statement of Directors' Responsibilities was
signed on its behalf by
Paul Manduca
Chairman
7 December 2023
Investment Manager's Report
Review of performance
Emerging markets declined over the six months under review. The
period started positively, expectations of a turnaround for the
technology sector and signs of receding inflation in several
countries were optimistic developments, but this was somewhat
affected by China's slow demand recovery and uncertainty over US
interest rates. A risk-off environment sparked by the US Federal
Reserve's forecast of higher-for-longer interest rate policy
through 2024 affected market sentiment towards the end of the
period. The MSCI Emerging Markets Index returned -0.5% in the
6--month period under review, whilst TEMIT delivered a net asset
value total return of -0.3% (all figures are total return measured
in sterling). Full details of TEMIT's performance can be found in
the full Half Yearly Report.
By region, Latin America saw an improvement in its general
macroeconomic environment. Equities in the EMEA region also rose.
Volatility in energy prices drove a mixed result for Middle Eastern
equities, which were also weighed down by a higher-for-longer
interest rate environment in the US. Emerging Asia declined. Stocks
in China were amongst detractors as a slower-than-expected recovery
weighed. The technology-heavy countries of South Korea and Taiwan
grappled with slumping exports due to a slower recovery of the
semiconductor industry than investors had expected. However, an
improving long-term outlook for semiconductor stocks helped to
limit losses for both countries. India logged gains on improving
macroeconomic indicators and robust corporate earnings.
China was TEMIT's largest market exposure, although the
portfolio remained underweight relative to the benchmark. Chinese
equities fell by more than 10% in sterling terms over the six-month
period. Concerns about the country's slow consumption recovery and
geopolitical tensions between China and the West impacted investor
sentiment. Its property sector woes, plagued by liquidity worries
and lack of demand, also continued into the reporting period, with
the weakness spreading to consumption-related stocks over worries
about the impact of weak property prices on consumer sentiment.
These overshadowed early signals of China's recovery from the
release of better-than-expected inflationary, credit and
manufacturing data after some stimulus packages. We do still see
some upside in China; in particular the internet sector, to which
the portfolio has sizeable exposure, has adjusted to the new
operating environment as China eased its regulatory crackdown on
the sector.
TEMIT's second-largest market position was in South Korea, where
the portfolio was overweight versus the benchmark. South Korean
equities declined by more than 1% during the reporting period, as
the technology-heavy market continued to struggle throughout the
year on weakening demand for technology products, including
consumer electronics. However, an improving outlook for
semiconductor stocks, partially from increasing interest and
ensuing optimism around artificial intelligence ("AI") limited
losses. South Korea is less exposed to geopolitical risks as
compared to China, and the country is home to several companies
which are expected to benefit from the secular trends of
digitalisation and decarbonisation, such as technology-related
companies, and firms in the value chain of electric vehicle ("EV")
production.
The Taiwanese market also fell marginally, ending the reporting
period with a loss of more than 1%. The technology-heavy and
export-oriented country experienced a lower demand for its
technology exports, which we view to be a cyclical occurrence, but
a demand uplift from AI benefitted Taiwanese equities. TEMIT's
allocation is slightly lower than the benchmark, with the
portfolio's exposure to the country largely attributable to the
island's semiconductor industry and TEMIT's largest portfolio
holding which is Taiwan Semiconductor Manufacturing Company
("TSMC"). Besides being an essential component of electronic
devices used in various industries spanning health care, military
systems and clean energy, the emergence of AI will drive further
demand for TSMC's advanced chips. We maintain a positive long-term
view on Taiwan's semiconductor industry.
India was TEMIT's fourth largest exposure at the end of
September 2023. Indian equities rose by 17% over the six-month
period, benefitting from a moderating inflationary environment,
improving macroeconomic indicators and strong corporate earnings.
India has two growth drivers: strong domestic consumption and
infrastructure investments. Whilst higher energy prices remain a
risk to India's near-term outlook, the diversification of its power
sources should eventually ease pressure from imported energy and
inflation in the long term. We also believe that there are still
pockets of reasonable and compelling valuations, and there is still
room for Indian equities to post further gains based on improving
earnings.
Equities in Brazil experienced some volatility in the beginning
of the period, but recovered strongly and ended the reporting
period with double-digit gains. Brazilian equities reacted
favourably to improvements in its macroeconomic environment,
inflation reached a new 12-month low whilst a
stronger-than-expected GDP gave rise to an upward forecast of its
full-year GDP. The approval of its new fiscal framework and the
subsequent commencement of its rate-easing cycle overcame some
negativity from concerns on changes to its taxation regulations,
which could potentially impact corporate earnings.
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 that our
investment process 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 is centred on finding companies with
long-term earnings power and whose shares trade at a discount
relative to our estimates of their intrinsic worth and to other
investment opportunities in the market. We also pay close attention
to risks.
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.
All of these factors require us to conduct detailed analyses of
potential returns versus risks with a time horizon of typically
five years or more.
Our well-resourced, locally based teams remain a key competitive
advantage and it has certainly been helpful being on the ground in
the benchmark heavyweights of China and India. This local presence
allows us to understand business models, competitive dynamics, and
supply chain issues. We have also managed to get insights into
regulatory conversations and management capabilities which are
factored into our analysis. We view our locally based teams, which
are armed with vast knowledge of a country's macroeconomic issues
and views on-the-ground, as vital sources of input into the
investment process.
In the portfolio, we remain positioned in long-term themes
including consumption premiumisation, digitalisation, health care
and technology. We focus on companies reflecting our philosophy of
owning good quality businesses, with long-term repeatable earnings
power and share prices at a discount to intrinsic worth. We see
high levels of leverage as a risk and continue to avoid companies
with weak balance sheets. 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.
Performance attribution analysis %
Six months to 30 September 2023 2022 2021 2020 2019
---------------------------------- ----- ------ ------ ---- -----
Net asset value total return(a) (0.3) (8.3) (7.5) 31.3 6.3
---------------------------------- ----- ------ ------ ---- -----
Expenses incurred(b) 0.5 0.5 0.5 0.5 0.5
---------------------------------- ----- ------ ------ ---- -----
Gross total return(a) 0.2 (7.8) (7.0) 31.8 6.8
---------------------------------- ----- ------ ------ ---- -----
Benchmark total return(a) (0.5) (7.4) (1.0) 24.4 2.2
---------------------------------- ----- ------ ------ ---- -----
Excess return(a) 0.7 (0.4) (6.0) 7.4 4.6
---------------------------------- ----- ------ ------ ---- -----
Stock selection 0.1 2.9 (4.3) 2.5 2.6
---------------------------------- ----- ------ ------ ---- -----
Sector allocation 0.4 (2.2) (1.4) 4.0 1.6
---------------------------------- ----- ------ ------ ---- -----
Currency (0.1) (1.1) (0.5) 0.5 0.4
---------------------------------- ----- ------ ------ ---- -----
Share buyback impact 0.3 0.1 0.0 0.3 0.2
---------------------------------- ----- ------ ------ ---- -----
Residual return(a) 0.0 (0.1) 0.2 0.1 (0.2)
---------------------------------- ----- ------ ------ ---- -----
Total contribution 0.7 (0.4 ) (6.0 ) 7.4 4.6
---------------------------------- ----- ------ ------ ---- -----
Source: FactSet and Franklin Templeton.
(a) A glossary of alternative performance measures is included
in the full Half Yearly Report.
(b) Represents expenses incurred for the six months to 30
September 2023. Details of the annualised ongoing charges ratio are
included in the glossary of alternative performance measures in the
full Half Yearly Report.
Top 10 contributors to relative performance by security
(%)(a)
Contribution to
portfolio relative
Share price to MSCI Emerging
Top contributors Country Sector total return Markets Index
---------------------------- ---------------- ----------------------- ------------- -------------------
Petroleo Brasileiro Brazil Energy 86.2 1.1
----------------------------- ----------------- ---------------------- ------------- -------------------
POSCO(b) South Korea Materials 66.5 0.6
----------------------------- ----------------- ---------------------- ------------- -------------------
Brilliance China
Automotive(c) China/Hong Kong Consumer Discretionary 50.3 0.5
----------------------------- ----------------- ---------------------- ------------- -------------------
Zomato India Consumer Discretionary 99.1 0.5
----------------------------- ----------------- ---------------------- ------------- -------------------
ICICI Bank India Financials 9.5 0.5
----------------------------- ----------------- ---------------------- ------------- -------------------
Yandex(b)(c) Russia Communication Services - 0.4
----------------------------- ----------------- ---------------------- ------------- -------------------
Itaú Unibanco Brazil Financials 13.5 0.2
----------------------------- ----------------- ---------------------- ------------- -------------------
One 97 Communications(c) India Financials 34.8 0.2
----------------------------- ----------------- ---------------------- ------------- -------------------
Samsung Life Insurance South Korea Financials 9.4 0.2
----------------------------- ----------------- ---------------------- ------------- -------------------
Cognizant Technology
Solutions(c)(d) United States Information Technology 13.4 0.2
----------------------------- ----------------- ---------------------- ------------- -------------------
(a) For the period 31 March 2023 to 30 September 2023.
(b) Security not held by TEMIT as at 30 September 2023.
(c) Security not included in the MSCI Emerging Markets Index as
at 30 September 2023.
(d) This security, listed on a stock exchange in a developed
market, has significant exposure to operations from emerging
markets.
Finishing higher over the six-month period were shares of
Petroleo Brasileiro ("Petrobras"), a Brazilian energy company
engaged in the exploration, production, and distribution of oil and
gas which was a strong contributor. Its share price remained
resilient throughout the period. The company announced a new
shareholder return policy and raised gasoline and diesel prices,
which alleviated some concerns regarding capital allocation and
pricing policy. An increase in oil prices towards the end of the
quarter also supported its share price.
POSCO, a South Korea-based steel product manufacturer with a
diversified line of steel products (including cold and hot rolled
products) was also a strong contributor. Its shares rallied in the
later part of the period on optimism around its battery materials
business, where the company has materially raised its longer-term
targets. Whilst POSCO is one of the most efficient and cost
competitive steel makers globally, we observed that POSCO's strong
stock performance rose to a level above our assessment of its
intrinsic value and therefore sold our remaining holding in the
period.
Brilliance China Automotive is a Chinese automotive manufacturer
noted for its association with German luxury car maker BMW. The
company announced a special dividend in the second quarter of 2023,
which was a key driver of returns.
Top 10 detractors to relative performance by security (%)(a)
Contribution
to portfolio
relative
to MSCI
Share price Emerging
Top detractors Country Sector total return Markets Index
--------------------------------- ---------------- ----------------------- ------------- --------------
Guangzhou Tinci Materials
Technology China/Hong Kong Materials (37.9) (0.8)
---------------------------------- ----------------- ---------------------- ------------- --------------
Prosus(b) China/Hong Kong Consumer Discretionary (16.6) (0.5)
---------------------------------- ----------------- ---------------------- ------------- --------------
Alibaba China/Hong Kong Consumer Discretionary (13.6) (0.4)
---------------------------------- ----------------- ---------------------- ------------- --------------
Samsung SDI South Korea Information Technology (32.0) (0.4)
---------------------------------- ----------------- ---------------------- ------------- --------------
Daqo New Energy China/Hong Kong Information Technology (34.7) (0.3)
---------------------------------- ----------------- ---------------------- ------------- --------------
China Resources Cement China/Hong Kong Materials (45.9) (0.3)
---------------------------------- ----------------- ---------------------- ------------- --------------
Genpact(b)(c) United States Industrials (20.2) (0.3)
---------------------------------- ----------------- ---------------------- ------------- --------------
Uni-President China China/Hong Kong Consumer Staples (25.7) (0.3)
---------------------------------- ----------------- ---------------------- ------------- --------------
TSMC Taiwan Information Technology (5.1) (0.2)
---------------------------------- ----------------- ---------------------- ------------- --------------
Quanta Computer(d) Taiwan Information Technology 175.7 (0.2)
---------------------------------- ----------------- ---------------------- ------------- --------------
(a) For the period 31 March 2023 to 30 September 2023.
(b) Security not included in the MSCI Emerging Markets Index as
at 30 September 2023.
(c) This security, listed on a stock exchange in a developed
market, has significant exposure to operations from emerging
markets.
(d) Security not held by TEMIT as at 30 September 2023.
Guangzhou Tinci Materials Technology is a China-based producer
of electrolytes for EV batteries. Slower growth in EV demand as
well as higher competition driven by an increase in industry
capacity for electrolytes and declining lithium prices have
impacted the company's near-term performance. We remain positive
about the company's prospects as the robust demand for batteries
needed for EVs and energy storage-two of the fastest growing parts
of the global economy-should allow it to deliver strong earnings
over the medium term. The company is vertically integrated, and we
believe it is cost competitive.
An off-benchmark holding in Prosus, a leading global investment
company and the largest shareholder of Tencent, a Chinese
technology company, was a key detractor. Its share price tracked
Tencent's, which declined in the period alongside broader Chinese
equities despite reporting resilient results. Concerns over China's
weak economic recovery also weighed on Tencent. However, an
announcement that Prosus will remove the cross-holding structure
with technology company Naspers (not a portfolio holding) managed
to limit losses.
Another portfolio holding that detracted was Alibaba, a Chinese
e-commerce company providing brands and merchants the
infrastructure to acquire and sell to customers online. Its share
price had been volatile over the period, erasing gains from March
from its organisational revamp. Its share price ended lower on
concerns of slower demand recovery, China's weak economic recovery
and uncertainty around the potential impact of a complete spin-off
of its cloud business. However, there were several uplifts to the
stock price within the period from better-than-expected quarterly
results and policy support from the Chinese government. We remain
positive on the strength of its e-commerce ecosystem and its
ability to generate strong cash flows. The business has adjusted to
the new environment in China, and we expect the e-commerce
businesses of Alibaba to deliver steady growth.
Top contributors and detractors to relative performance by
sector (%)(a)
Contribution Contribution
MSCI to portfolio MSCI to portfolio
Emerging relative Emerging relative
Markets Index to MSCI Markets Index to MSCI
sector total Emerging sector total Emerging
Top contributors return Markets Index Top detractors return Markets Index
--------------------- -------------- -------------- -------------------- -------------- --------------
Information
Communication Services (11.0) 0.8 Technology (0.5) (0.8)
---------------------- -------------- -------------- -------------------- -------------- --------------
Financials 5.6 0.5 Consumer Staples (3.1) (0.2)
---------------------- -------------- -------------- -------------------- -------------- --------------
Energy 21.3 0.5 Industrials (0.1) (0.2)
---------------------- -------------- -------------- -------------------- -------------- --------------
Consumer
Health Care (2.0) 0.3 Discretionary (4.4) (0.2)
---------------------- -------------- -------------- -------------------- -------------- --------------
Materials (6.4) (0.2)
--------------------- -------------- -------------- -------------------- -------------- --------------
(a) For the period 31 March 2023 to 30 September 2023.
Favourable stock selection in the communication services,
financials and energy sectors added to TEMIT's performance relative
to the benchmark index in the period under review. Within the
communication services sector, an underweight allocation to
Tencent, and an overweight allocation to NetEase, one of the
largest online games companies in China, helped to support returns.
The strong performance in the financials sector was led by an
overweight holding in India-based ICICI Bank, and Brazil-based Itaú
Unibanco (a Brazilian retail-focused bank providing a broad range
of services such as cards, loans and insurance). Our off-benchmark
holding in One 97 Communications, a payment solutions and financial
services provider in India, also supported results within the
financials sector. Petrobras was a key contributor in the energy
sector.
In contrast, stock selection in the information technology,
consumer staples and industrials sectors detracted relatively.
Within the information technology sector, the portfolio's positions
in Samsung SDI (a South Korea-based leading manufacturer of
lithium-ion batteries), Daqo New Energy (a China-based polysilicon
manufacturer) and TSMC weighed on performance. The detraction in
the consumer staples sector was led by China-based instant noodle
and beverage manufacturer Uni-President China. In the industrials
sector, Genpact, a US-listed technology services company with
significant exposure to India, pressured returns.
Top contributors and detractors to relative performance by
country (%)(a)
Contribution Contribution
MSCI to portfolio MSCI to portfolio
Emerging relative Emerging relative
Markets Index to MSCI Markets Index to MSCI
country total Emerging country total Emerging
Top contributors return Markets Index Top detractors return Markets Index
----------------- -------------- -------------- --------------- -------------- --------------
Brazil 18.1 1.1 China/Hong Kong (10.2) (0.6)
------------------ -------------- -------------- --------------- -------------- --------------
South Korea (1.1) 0.7 India 17.1 (0.5)
------------------ -------------- -------------- --------------- -------------- --------------
Russia(b)(c) - 0.4 Taiwan (1.1) (0.4)
------------------ -------------- -------------- --------------- -------------- --------------
South Africa (6.8) 0.1 Turkey(d) 20.3 (0.1)
------------------ -------------- -------------- --------------- -------------- --------------
Chile (4.7) 0.1 Saudi Arabia(d) 3.0 (0.1)
------------------ -------------- -------------- --------------- -------------- --------------
(a) For the period 31 March 2023 to 30 September 2023.
(b) All companies held by TEMIT in this country are fair valued
at zero as at 30 September 2023.
(c) No companies included in the MSCI Emerging Markets Index in
this country as at 30 September 2023.
(d) No companies held by TEMIT in this country as at 30
September 2023.
By markets, Brazil, South Korea, and South Africa were amongst
contributors. Besides Petrobras, several holdings in Brazil such as
Itaú Unibanco and Banco Bradesco helped relative returns. Brazilian
equities benefitted from a broad recovery, partially from positive
sentiment from its new fiscal framework. South Korea's contribution
was led by POSCO, whilst South Africa's performance was due to an
underweight allocation.
Russia also contributed to relative returns. All Russian
securities have been valued at zero since 4 March 2022. However,
during the first six months of the financial year, an opportunity
arose to dispose of TEMIT's holding in Yandex (Russia's largest
search engine, which also offers a wide range of other online
services in areas such as e-commerce) via an over-the-counter
trade, which led to Russia being a top contributor to relative
performance. The two remaining Russian securities, LUKOIL and
Sberbank of Russia, continue to be fair valued at zero at the
period end.
Due to stock selection, China was the top detractor at a country
level. Several holdings in China such as Guangzhou Tinci Materials
Technology and Daqo New Energy pressured relative returns. India
was the second-largest detractor, as both stock selection and an
underweight allocation to the country dragged returns. Taiwan also
detracted, largely due to stock selection-TSMC led detractions in
Taiwan.
Largest holdings
The largest portfolio holding is TSMC. The share price suffered
in the last few quarters due to demand weakness of some of its end
customers. Better-than-expected sales from AI-induced demand
propped the share price up at the beginning of the third quarter of
2023, but momentum declined after the release of second-quarter
results. A downward revision to its revenue forecast for 2023 and a
cautious near-term outlook weighed on the stock. News that TSMC
asked its major suppliers to delay high-end chipmaking equipment
deliveries also pressured the share price. Driven by structural
growth in demand for computing and its technology leadership, we
remain confident in the resilience of the TSMC business model.
The second largest portfolio holding is ICICI Bank, which rose
on the back of positive results for several quarters. The bank
delivered strong profit growth driven by loan growth, expansion in
net interest income and continued low credit costs. An uptick in
the broader Indian equity market also helped. The bank remains well
positioned with its healthy capital adequacy ratios and strong
franchise.
Global semiconductor manufacturer Samsung Electronics was the
third-largest holding in the portfolio. Samsung Electronics also
manufactures a wide range of consumer and industrial electronics
and equipment. Its share price has seen some recovery after
declining in 2022 on optimism around bottoming of the memory cycle
supported by supply cuts. An improvement in the outlook for
semiconductor stocks due to robust AI-driven demand for advanced
chips also fuelled the upward momentum of the stock.
Portfolio changes by sector
Total return in sterling
30 September MSCI
31 March 2023 Market 2023 market Emerging
market value Purchases Sales movement value TEMIT Markets Index
Sector GBPm GBPm GBPm GBPm GBPm % %
----------------- ------------- --------- ----- --------- ------------ -------- ----------------
Information
Technology(a) 517 70 (65) (28) 494 (3.7) (0.5)
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Financials(a) 484 92 (116) 25 485 7.3 5.6
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Consumer
Discretionary(a) 272 17 (23) (24) 242 (5.5) (4.4)
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Communication
Services 198 7 (12) (10) 183 (4.5) (11.0)
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Industrials(a) 153 42 (24) (5) 166 (2.4) (0.1)
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Materials 169 20 (58) (13) 118 (10.0) (6.4)
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Health Care 60 18 - 2 80 5.4 (2.0)
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Energy 49 - - 20 69 67.4 21.3
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Consumer Staples 73 2 (7) (12) 56 (12.2) (3.1)
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Utilities 9 - (1) 2 10 13.8 3.0
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Real Estate 9 - - (2) 7 (15.8) (4.1)
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
Total investments 1,993 268 (306) (45 ) 1,910
------------------ ------------- --------- ----- --------- ------------ -------- ----------------
(a) One 97 Communications and Genpact were previously included
within Information Technology but have been reallocated to
Financials and Industrials, respectively. Astra International was
previously included within Consumer Discretionary and has been
reallocated to Industrials. The reallocations have been performed
as a result of a change in the Global Industry Classification
Standard ("GICS") structure.
Portfolio changes by country
Total return in sterling
30 September MSCI
31 March 2023 Market 2023 market Emerging
market value Purchases Sales movement value TEMIT Markets Index
Country GBPm GBPm GBPm GBPm GBPm % %
------------------ ------------- --------- ------ --------- ------------ -------- ----------------
China/Hong Kong 616 89 (68) (93) 544 (12.7) (10.2)
------------------- ------------- --------- ------ --------- ------------ -------- ----------------
South Korea 398 46 (71) 10 383 2.4 (1.1)
------------------- ------------- --------- ------ --------- ------------ -------- ----------------
Taiwan 316 17 (37) (20) 276 (3.7) (1.1)
------------------- ------------- --------- ------ --------- ------------ -------- ----------------
India 226 45 (50) 33 254 15.6 17.1
------------------- ------------- --------- ------ --------- ------------ -------- ----------------
Brazil 155 6 (17) 26 170 27.1 18.1
------------------- ------------- --------- ------ --------- ------------ -------- ----------------
Other 282 65 (63) (1) 283 - -
------------------- ------------- --------- ------ --------- ------------ -------- ----------------
Total investments 1,993 268 (306 ) (45 ) 1,910
------------------- ------------- --------- ------ --------- ------------ -------- ----------------
Portfolio investments by fair value
As at 30 September 2023
Fair value % of net
Holding Country Sector Trading(a) GBP'000 assets
---------------------- --------------------- ---------------------- ----------- ---------- --------
TSMC Taiwan Information Technology PS 197,753 10.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
ICICI Bank India Financials PS 107,486 5.6
----------------------- ---------------------- ----------------------- --------- ---------- --------
Samsung Electronics South Korea Information Technology PS 107,078 5.5
----------------------- ---------------------- ----------------------- --------- ---------- --------
Alibaba(b) China/Hong Kong Consumer Discretionary NT 98,656 5.1
----------------------- ---------------------- ----------------------- --------- ---------- --------
NAVER South Korea Communication Services IH 62,957 3.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
Petrobras(c) Brazil Energy NT 62,039 3.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
Tencent China/Hong Kong Communication Services NT 59,544 3.1
----------------------- ---------------------- ----------------------- --------- ---------- --------
Prosus(d) China/Hong Kong Consumer Discretionary IH 52,341 2.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
LG South Korea Industrials PS 50,828 2.6
----------------------- ---------------------- ----------------------- --------- ---------- --------
Samsung Life Insurance South Korea Financials IH 50,688 2.6
----------------------- ---------------------- ----------------------- --------- ---------- --------
TOP 10 LARGEST INVESTMENTS 849,370 43.9
-------------------------------------------------------------------------------------- ---------- --------
MediaTek Taiwan Information Technology PS 45,006 2.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
Itaú
Unibanco(c)(e) Brazil Financials PS 37,731 1.9
----------------------- ---------------------- ----------------------- --------- ---------- --------
HDFC Bank India Financials IH 36,554 1.9
----------------------- ---------------------- ----------------------- --------- ---------- --------
Techtronic Industries China/Hong Kong Industrials IH 34,581 1.8
----------------------- ---------------------- ----------------------- --------- ---------- --------
Grupo Financiero
Banorte Mexico Financials NH 34,537 1.8
----------------------- ---------------------- ----------------------- --------- ---------- --------
Banco Bradesco(c)(e) Brazil Financials PS 34,445 1.8
----------------------- ---------------------- ----------------------- --------- ---------- --------
China Merchants Bank China/Hong Kong Financials PS 33,752 1.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
Genpact(f) United States Industrials IH 33,597 1.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
Baidu China/Hong Kong Communication Services IH 32,941 1.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
WuXi Biologics China/Hong Kong Health Care IH 32,110 1.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
TOP 20 LARGEST INVESTMENTS 1,204,624 62.2
-------------------------------------------------------------------------------------- ---------- --------
Samsung SDI South Korea Information Technology IH 31,470 1.6
----------------------- ---------------------- ----------------------- --------- ---------- --------
Cognizant Technology
Solutions(f) United States Information Technology PS 30,367 1.6
----------------------- ---------------------- ----------------------- --------- ---------- --------
Vale Brazil Materials NT 29,662 1.5
----------------------- ---------------------- ----------------------- --------- ---------- --------
Infosys Technologies India Information Technology IH 25,853 1.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
Guangzhou Tinci
Materials Technology China/Hong Kong Materials PS 25,730 1.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
Kasikornbank Thailand Financials IH 24,573 1.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
Unilever(f) United Kingdom Consumer Staples PS 23,828 1.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
Gedeon Richter Hungary Health Care IH 22,864 1.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
Soulbrain South Korea Materials PS 22,832 1.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
Brilliance China
Automotive China/Hong Kong Consumer Discretionary PS 22,370 1.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
TOP 30 LARGEST INVESTMENTS 1,464,173 75.6
-------------------------------------------------------------------------------------- ---------- --------
Ping An Insurance China/Hong Kong Financials NT 22,207 1.1
----------------------- ---------------------- ----------------------- --------- ---------- --------
NetEase China/Hong Kong Communication Services PS 19,738 1.0
----------------------- ---------------------- ----------------------- --------- ---------- --------
Hon Hai Precision
Industry Taiwan Information Technology IH 19,517 1.0
----------------------- ---------------------- ----------------------- --------- ---------- --------
Doosan Bobcat South Korea Industrials PS 17,874 0.9
----------------------- ---------------------- ----------------------- --------- ---------- --------
Banco Santander
Chile(e) Chile Financials NT 17,319 0.9
----------------------- ---------------------- ----------------------- --------- ---------- --------
One 97 Communications India Financials NT 16,859 0.9
----------------------- ---------------------- ----------------------- --------- ---------- --------
Meituan China/Hong Kong Consumer Discretionary NT 15,362 0.8
----------------------- ---------------------- ----------------------- --------- ---------- --------
Bajaj Holdings &
Investments India Financials PS 15,192 0.8
----------------------- ---------------------- ----------------------- --------- ---------- --------
Federal Bank India Financials NH 15,010 0.8
----------------------- ---------------------- ----------------------- --------- ---------- --------
Uni-President China China/Hong Kong Consumer Staples NT 14,877 0.8
----------------------- ---------------------- ----------------------- --------- ---------- --------
TOP 40 LARGEST INVESTMENTS 1,638,128 84.6
-------------------------------------------------------------------------------------- ---------- --------
Astra International Indonesia Industrials PS 14,513 0.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
Netcare South Africa Health Care IH 13,906 0.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
Yageo Taiwan Information Technology IH 13,380 0.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
Daqo New Energy(e) China/Hong Kong Information Technology NT 13,332 0.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
Zomato India Consumer Discretionary PS 13,226 0.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
ACC India Materials NH 12,635 0.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
Fila South Korea Consumer Discretionary PS 12,497 0.7
----------------------- ---------------------- ----------------------- --------- ---------- --------
LegoChem Biosciences South Korea Health Care IH 11,350 0.6
----------------------- ---------------------- ----------------------- --------- ---------- --------
Emirates Central
Cooling Systems United Arab Emirates Utilities NT 10,116 0.5
----------------------- ---------------------- ----------------------- --------- ---------- --------
Intercorp Financial
Services Peru Financials NT 9,515 0.5
----------------------- ---------------------- ----------------------- --------- ---------- --------
TOP 50 LARGEST INVESTMENTS 1,762,598 91.1
-------------------------------------------------------------------------------------- ---------- --------
Thai Beverage Thailand Consumer Staples IH 9,015 0.5
----------------------- ---------------------- ----------------------- --------- ---------- --------
Ping An Bank China/Hong Kong Financials NT 9,004 0.5
----------------------- ---------------------- ----------------------- --------- ---------- --------
Wizz Air Holdings Hungary Industrials NH 8,984 0.5
----------------------- ---------------------- ----------------------- --------- ---------- --------
BDO Unibank Philippines Financials NT 8,534 0.4
----------------------- ---------------------- ----------------------- --------- ---------- --------
Haier Smart Home China/Hong Kong Consumer Discretionary NH 7,919 0.4
----------------------- ---------------------- ----------------------- --------- ---------- --------
H&H Group China/Hong Kong Consumer Staples IH 7,905 0.4
----------------------- ---------------------- ----------------------- --------- ---------- --------
Beijing Oriental Yuhong
Waterproof Technology China/Hong Kong Materials NT 7,780 0.4
----------------------- ---------------------- ----------------------- --------- ---------- --------
Kiatnakin Phatra Bank Thailand Financials NT 6,833 0.4
----------------------- ---------------------- ----------------------- --------- ---------- --------
Star Petroleum Refining Thailand Energy NT 6,593 0.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
Hindalco Industries India Materials NH 6,496 0.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
TOP 60 LARGEST INVESTMENTS 1,841,661 95.2
-------------------------------------------------------------------------------------- ---------- --------
Tencent Music
Entertainment(e) China/Hong Kong Communication Services NT 6,324 0.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
China Resources Cement China/Hong Kong Materials NT 6,276 0.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
LG Chem South Korea Materials NT 6,139 0.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
TOTVS Brazil Information Technology IH 6,073 0.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
COSCO SHIPPING Ports China/Hong Kong Industrials PS 5,521 0.3
----------------------- ---------------------- ----------------------- --------- ---------- --------
PB Fintech India Financials PS 4,745 0.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
China Resources Land China/Hong Kong Real Estate NT 4,439 0.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
NagaCorp Cambodia Consumer Discretionary IH 4,309 0.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
L&F South Korea Information Technology NH 3,739 0.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
Hankook Tire South Korea Consumer Discretionary NT 3,659 0.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
TOP 70 LARGEST INVESTMENTS 1,892,885 97.7
-------------------------------------------------------------------------------------- ---------- --------
Nemak Mexico Consumer Discretionary NT 3,545 0.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
Chervon Holdings China/Hong Kong Consumer Discretionary IH 3,139 0.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
Greentown Service Group China/Hong Kong Real Estate NT 2,928 0.2
----------------------- ---------------------- ----------------------- --------- ---------- --------
BAIC Motor China/Hong Kong Consumer Discretionary NT 2,371 0.1
----------------------- ---------------------- ----------------------- --------- ---------- --------
Weifu High-Technology China/Hong Kong Consumer Discretionary NT 1,634 0.1
----------------------- ---------------------- ----------------------- --------- ---------- --------
KT Skylife South Korea Communication Services NT 1,584 0.1
----------------------- ---------------------- ----------------------- --------- ---------- --------
JD.com China/Hong Kong Consumer Discretionary NT 1,384 0.1
----------------------- ---------------------- ----------------------- --------- ---------- --------
East African Breweries Kenya Consumer Staples NT 552 0.0
----------------------- ---------------------- ----------------------- --------- ---------- --------
LUKOIL(g) Russia Energy NT 0.0 0.0
----------------------- ---------------------- ----------------------- --------- ---------- --------
Sberbank of Russia(g) Russia Financials NT 0.0 0.0
----------------------- ---------------------- ----------------------- --------- ---------- --------
TOP 80 LARGEST INVESTMENTS 1,910,022 98.7
-------------------------------------------------------------------------------------- ---------- --------
TOTAL INVESTMENTS 1,910,022 98.7
-------------------------------------------------------------------------------------- ---------- --------
NET ASSETS 25,544 1.3
-------------------------------------------------------------------------------------- ---------- --------
TOTAL NET ASSETS 1,935,566 100.0
-------------------------------------------------------------------------------------- ---------- --------
(a) Trading activity during the year: (NH) New Holding, (IH)
Increased Holding, (PS) Partial Sale and (NT) No Trading.
(b) TEMIT holds in this company shares listed on the Hong Kong
stock exchange and American Depository Receipts listed on the New
York stock exchange.
(c) Preferred shareholders are entitled to dividends before
ordinary shareholders.
(d) 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.
(e) US listed American Depository Receipt.
(f) This company, listed on a stock exchange in a developed
market, has significant exposure to operations from emerging
markets.
(g) This company is fair valued at zero as a result of its
trading being suspended on international stock exchanges.
Portfolio summary
As at 30 September 2023
All figures are a % of the net assets
30
September 31
March
Communication Consumer Consumer Health Information Real Total Net 2023 2023
Services Discretionary Staples Energy Financials Care Industrials Technology Materials Estate Utilities Equities assets(a) Total Total
------------ ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Brazil - - - 3.2 3.7 - - 0.3 1.5 - - 8.7 - 8.7 7.6
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Cambodia - 0.2 - - - - - - - - - 0.2 - 0.2 0.3
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Chile - - - - 0.9 - - - - - - 0.9 - 0.9 0.8
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
China/Hong
Kong 6.1 10.7 1.2 - 3.3 1.7 2.1 0.7 2.0 0.4 - 28.2 - 28.2 30.3
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Hungary - - - - - 1.2 0.5 - - - - 1.7 - 1.7 1.0
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
India - 0.7 - - 10.2 - - 1.3 1.0 - - 13.2 - 13.2 11.2
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Indonesia - - - - - - 0.7 - - - - 0.7 - 0.7 0.9
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Kenya - - 0.0 - - - - - - - - 0.0 - 0.0 0.1
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Mexico - 0.2 - - 1.8 - - - - - - 2.0 - 2.0 1.5
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Pakistan - - - - - - - - - - - - - - 0.1
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Peru - - - - 0.5 - - - - - - 0.5 - 0.5 0.5
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Philippines - - - - 0.4 - - - - - - 0.4 - 0.4 0.4
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Russia(b) - - - 0.0 0.0 - - - - - - 0.0 - 0.0 0.0
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
South Africa - - - - - 0.7 - - - - - 0.7 - 0.7 0.6
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
South Korea 3.4 0.9 - - 2.6 0.6 3.5 7.3 1.5 - - 19.8 - 19.8 19.8
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Taiwan - - - - - - - 14.2 - - - 14.2 - 14.2 15.8
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Thailand - - 0.5 0.3 1.7 - - - - - - 2.5 - 2.5 2.4
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
United Arab
Emirates - - - - - - - - - - 0.5 0.5 - 0.5 0.5
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
United
Kingdom - - 1.2 - - - - - - - - 1.2 - 1.2 1.6
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
United States - - - - - - 1.7 1.6 - - - 3.3 - 3.3 3.4
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
Net assets(a) - - - - - - - - - - - - 1.3 1.3 1.2
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
30 September
2023 Total 9.5 12.7 2.9 3.5 25.1 4.2 8.5 25.4 6.0 0.4 0.5 98.7 1.3 100.0 -
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
31 March 2023
Total(c) 9.8 13.3 3.6 2.4 23.8 3.0 7.7 25.8 8.5 0.4 0.5 98.8 1.2 - 100.0
------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ --------- -------- --------- --------- -----
(a) The Company's net assets are the total of net current assets
plus non-current liabilities per the Statement of Financial
Position in the full Half Yearly Report.
(b) All companies held by TEMIT in this country are fair valued at zero.
(c) One 97 Communications and Genpact were previously included
within Information Technology but have been reallocated to
Financials and Industrials, respectively. Astra International was
previously included within Consumer Discretionary and has been
reallocated to Industrials. The reallocations have been performed
as a result of a change in the GICS structure.
Less than GBP1.5bn to GBP5bn to Greater than
Market capitalisation breakdown (%) GBP1.5bn GBP5bn GBP25bn GBP25bn Net assets(a)
------------------------------------ --------- ----------- --------- ------------ -------------
30 September 2023 5.2 9.3 29.5 54.7 1.3
------------------------------------- --------- ----------- --------- ------------ -------------
31 March 2023 5.1 11.2 22.9 59.6 1.2
------------------------------------- --------- ----------- --------- ------------ -------------
30 September 31 March
Split between markets(b) (%) 2023 2023
------------------------------------ --------- ----------- --------- ------------ -------------
Emerging markets 94.0 93.3
------------------------------------- --------- ----------- --------- ------------ -------------
Developed markets(c) 4.5 5.0
------------------------------------- --------- ----------- --------- ------------ -------------
Frontier markets 0.2 0.5
------------------------------------- --------- ----------- --------- ------------ -------------
Net assets(a) 1.3 1.2
------------------------------------- --------- ----------- --------- ------------ -------------
Source: FactSet Research System, Inc.
(a) The Company's net assets are the total of net current assets
plus non-current liabilities per the Statement of Financial
Position in 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 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 characteristics 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
A case study example of integrating ESG factors is Federal Bank,
whose shares were purchased during the six months under review.
Federal Bank is a mid-sized regional private sector bank in India.
The company has amongst the strongest liability franchises within
mid-sized banks due to its strong presence in Kerala and aided by
traction amongst the non-resident Kerala population working in the
Middle East. Looking at the ESG practices of the company, we first
highlight that despite it being a mid-sized bank, the company is
board driven, and has a management team that is well respected. We
noted no material past controversies and business practices focused
on risk management and disciplined capital management. The company
has board approved environment and social management systems
("ESMS") in place to incorporate environmental and social risk
considerations into financing activities as part of its credit risk
governance. Finally, the company has a stated framework around
cybersecurity, compliant with external certifications/standards
(e.g., ISO 27001 certificate for critical IT areas) and no reported
instances of cybersecurity breaches over the past few years. We
believe the company is well positioned to manage its exposure to
material operational ESG issues.
Climate change
Note we prefer to commentate around the WACI metric as it
provides a measurement of the carbon intensity of businesses,
normalises for company size and allows us to compare companies
against each other, helping to determine the portfolio's exposure
to potential carbon related risks.
The TEMIT Portfolio Carbon Emissions are 30% lower (31 March
2023: 23% lower) than the MSCI Emerging Markets benchmark, Carbon
Intensity is 20% lower (31 March 2023: 10% lower) and Weighted
Average Carbon Intensity is 31% lower (31 March 2023: 38% lower).
The portfolio carbon exposure is concentrated amongst a small
number of companies, with the top five companies in terms of carbon
intensity representing 2.7% of the portfolio by value and
accounting for 62.4% of the total portfolio WACI.
Over the six-month period, the portfolio's carbon footprint
remained stable with some changes in both positioning as well as
updates in emissions data for a few companies contributing to this.
The purchase of ACC, an update by MSCI to estimated emissions data
(previously not covered) for Emirates Central Cooling Systems and a
change from estimated to reported emissions data for Daqo New
Energy by MSCI, added to the portfolio WACI. The reduction in
ending weight for China Resources Cement, and sale of POSCO helped
offset some of the impact on the portfolio WACI.
As at 30 September 2023, China Resources Cement is the company
with the largest carbon intensity, contributing 16.7% to the total
portfolio WACI. We believe that the company is managing its
emissions profile well and, looking forward, the company is seeking
to improve its carbon emissions management further through the use
of solar, carbon capture, usage and storage ("CCUS"), and
alternative fuels. They have also set 2025 targets around their
absolute carbon emissions and carbon intensity, with the long-term
aim to achieve carbon neutrality by 2060. We are willing to invest
in companies in carbon-intensive sectors, such as cement, steel and
extractive industries. Our engagement with these companies focuses
on their intention to decarbonise and any incremental improvements
they are making to reach these goals. These views are integrated
into our investment views.
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 select investee companies on material governance
and sustainability issues, as well as executing on our proxy voting
policy on behalf of our shareholders. For example, in April 2023,
we spoke to the CEO of Gedeon Richter regarding their capital
allocation activities, new board structure, and how they expect to
improve disclosure on specific areas within their remuneration
policy such as key KPIs. The CEO was very transparent regarding the
higher capital return in 2023, rationale behind first ever share
buyback and their intentions. The company is in contact with key
shareholders on best practice and we believe the company's
intentions to improve corporate governance are promising.
We also voted against a proposal to approve the remuneration
report at Unilever. We voted against this proposal as the incoming
CEO's salary has been set higher than his predecessor's and is
significantly higher than his current salary and those at UK market
peers. The company has not provided a compelling justification for
this remuneration package. We continue to use our voting power as a
signal to management on important issues raised through voting
ballots. We believe that our engagement and proxy voting efforts
are key in understanding our companies better and improving
outcomes for shareholders as well as stakeholders more broadly.
We will be sharing a more detailed account of our stewardship
practices in the next Annual Report and dedicated Stewardship
Report.
Outlook for emerging markets
Emerging markets have been volatile due to fears of higher
interest rates lasting for longer. Long-term yields have now
started to come off, which should be positive for the emerging
markets asset class. A few emerging markets economics, such as
Brazil, have already started to cut their interest rates. The onset
of an easing cycle in selected countries tilts the balancing act of
tackling inflation yet pursuing economic growth. The impact of a
rate cut is positive for overall consumption as well as for
financing costs for companies which should also spur
investments.
Besides rate cuts, other long-term opportunities abound in
emerging markets. The increasingly popular China+1 strategy, where
global manufacturers establish an additional overseas production
base in China plus one other country, stands to benefit India,
Mexico and several other Association of Southeast Asian Nations
("ASEAN") economies.
Another longstanding theme is the transition to a greener
future. Asia is home to well-run companies in the electric vehicle
and solar equipment segment. The structural theme of electrical
vehicles has seen a short-term slowdown impacted by slower growth
and concerns of oversupply. We believe that the long-term
structural growth opportunities for these sectors remain intact
supported by national commitments underpinning energy transition to
a cleaner environment.
The recovery of demand in China has been tepid and low birth
rates and difficulties in the property sector pose further
long-term challenges to its growth trajectory. Whilst government
policy has become more supportive, we are cognisant that more
substantive policies and a rebound in consumer activity is a
prerequisite for a recovery in Chinese equities. We remain watchful
for such developments. China's internet sector, which forms a large
part of the index, has already adjusted to the new policy and
demand environment. We expect future returns for the sector to be
driven more by steady cash flow generation and corporate
actions.
The semiconductor cycle has remained weak due to slower demand.
With the emerging popularity of AI, there has been a demand uplift
that primarily benefits companies within the value chain. In the
portfolio, our holdings in TSMC and Samsung Electronics are direct
beneficiaries of AI-driven demand. In India, information technology
services have been impacted by a slowdown in discretionary
spending. Nevertheless, cost takeout deals-deals aimed at saving
costs-have been strong.
Amidst an uncertain macroeconomic environment, we continue to
retain a bottom-up focus on research. We believe that the long-term
fundamentals for emerging markets remain attractive despite near
term headwinds, and that equities offer good potential for
investors. We believe that breadth of opportunities, growth,
innovation and stronger institutional resilience together create an
attractive future for emerging markets.
Chetan Sehgal
Lead Portfolio Manager
7 December 2023
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 2023 which comprises the Statement of Comprehensive
Income, Statement of Financial Position, Statement of Changes in
Equity, Statement of Cash Flows, and related notes 1-9. 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
2023 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 for
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
London
7 December 2023
Financial Statements
Statement of Comprehensive Income
For the six months to 30 September 2023
For the six months to For the six months to Year ended
30 September 2023 30 September 2022 31 March 2023
(unaudited) (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 - (44,956) (44,956) - (215,485) (215,485) - (54,645) (54,645)
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Net losses on
foreign exchange - (649) (649) - (69) (69) - (442) (442)
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Income
Dividends 2 42,180 6,560 48,740 55,693 - 55,693 77,463 8,431 85,894
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Other income 3,278 - 3,278 877 - 877 3,088 - 3,088
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
45,458 (39,045 ) 6,413 56,570 (215,554 ) (158,984 ) 80,551 (46,656 ) 33,895
----------------- ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Expenses
AIFM fee(a) (2,580) (6,019) (8,599) (2,674) (6,239) (8,913) (5,232) (12,209) (17,441)
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Other expenses (821) - (821) (985) - (985) (1,979) - (1,979)
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
(3,401 ) (6,019 ) (9,420 ) (3,659 ) (6,239 ) (9,898 ) (7,211 ) (12,209 ) (19,420 )
----------------- ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Profit/(loss)
before finance
costs and
taxation 42,057 (45,064 ) (3,007 ) 52,911 (221,793 ) (168,882 ) 73,340 (58,865 ) 14,475
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Finance costs(a) (389) (909) (1,298) (550) (1,285) (1,835) (962) (2,239) (3,201)
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Profit/(loss)
before taxation 41,668 (45,973 ) (4,305 ) 52,361 (223,078 ) (170,717 ) 72,378 (61,104 ) 11,274
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Tax expense 6 (3,338) (4,291) (7,629) (3,448) (3,130) (6,578) (5,520) (3,232) (8,752)
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Profit/(loss) for
the period 38,330 (50,264 ) (11,934 ) 48,913 (226,208 ) (177,295 ) 66,858 (64,336 ) 2,522
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Profit/(loss)
attributable to
equity holders of
the Company 38,330 (50,264 ) (11,934 ) 48,913 (226,208 ) (177,295 ) 66,858 (64,336 ) 2,522
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
Earnings per share 3 3.34p (4.37 )p (1.03 )p 4.16p (19.25)p (15.09 )p 5.72 p (5.50 )p 0.22p
------------------ ---- -------- --------- --------- -------- ---------- ---------- -------- --------- ---------
(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 2023
As at As at As at
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
-------------------------------------------------- ----- -------------- -------------- -----------
Non-current assets
Investments at fair value through profit or loss 1,910,022 1,860,514 1,992,775
------------------------------------------------------ ----- -------------- -------------- -----------
Current assets
Trade and other receivables 10,622 8,190 7,886
------------------------------------------------------ ----- -------------- -------------- -----------
Cash and cash equivalents 130,722 167,115 132,988
------------------------------------------------------ ----- -------------- -------------- -----------
Total current assets 141,344 175,305 140,874
------------------------------------------------------ ----- -------------- -------------- -----------
Current liabilities
Other payables (3,902) (53,875) (6,402)
------------------------------------------------------ ----- -------------- -------------- -----------
Total current liabilities (3,902 ) (53,875 ) (6,402 )
------------------------------------------------------ ----- -------------- -------------- -----------
Net current assets 137,442 121,430 134,472
------------------------------------------------------ ----- -------------- -------------- -----------
Non-current liabilities
Capital gains tax provision (11,898) (10,183) (9,744)
------------------------------------------------------ ----- -------------- -------------- -----------
Other payables falling due after more than one year (100,000) (100,000) (100,000)
------------------------------------------------------ ----- -------------- -------------- -----------
Total assets less liabilities 1,935,566 1,871,761 2,017,503
------------------------------------------------------ ----- -------------- -------------- -----------
Share capital and reserves
Equity Share Capital 4 61,955 63,515 63,148
------------------------------------------------------ ----- -------------- -------------- -----------
Capital Redemption Reserve 20,714 19,154 19,521
------------------------------------------------------ ----- -------------- -------------- -----------
Capital Reserve 1,286,949 1,221,595 1,372,654
------------------------------------------------------ ----- -------------- -------------- -----------
Special Distributable Reserve 433,546 433,546 433,546
------------------------------------------------------ ----- -------------- -------------- -----------
Revenue Reserve 132,402 133,951 128,634
------------------------------------------------------ ----- -------------- -------------- -----------
Equity Shareholders' Funds 1,935,566 1,871,761 2,017,503
------------------------------------------------------ ----- -------------- -------------- -----------
Net asset value pence per share(a) 170.5 160.5 174.1
------------------------------------------------------ ----- -------------- -------------- -----------
(a) Based on shares in issue excluding shares held in
treasury.
Statement of Changes in Equity
For the six months to 30 September 2023 (unaudited)
Capital Special
Equity Share Redemption Capital Distributable Revenue
Capital Reserve Reserve Reserve Reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---- ------------ ----------- --------- -------------- -------- ---------
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 5 - - - - (32,940) (32,940)
----------------------- ---- ------------ ----------- --------- -------------- -------- ---------
Purchase and
cancellation of own
shares 4 (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
----------------------- ---- ------------ ----------- --------- -------------- -------- ---------
Profit for the period - - 161,872 - 17,945 179,817
----------------------- ---- ------------ ----------- --------- -------------- -------- ---------
Equity dividends 5 - - - - (23,262) (23,262)
----------------------- ---- ------------ ----------- --------- -------------- -------- ---------
Purchase and
cancellation of own
shares 4 (367) 367 (10,813) - - (10,813)
----------------------- ---- ------------ ----------- --------- -------------- -------- ---------
Balance at 31 March
2023 63,148 19,521 1,372,654 433,546 128,634 2,017,503
----------------------- ---- ------------ ----------- --------- -------------- -------- ---------
(Loss)/profit for the
period - - (50,264) - 38,330 (11,934)
----------------------- ---- ------------ ----------- --------- -------------- -------- ---------
Equity dividends 5 - - - - (34,562) (34,562)
----------------------- ---- ------------ ----------- --------- -------------- -------- ---------
Purchase and
cancellation of own
shares 4 (1,193) 1,193 (35,441) - - (35,441)
----------------------- ---- ------------ ----------- --------- -------------- -------- ---------
Balance at 30 September
2023 61,955 20,714 1,286,949 433,546 132,402 1,935,566
----------------------- ---- ------------ ----------- --------- -------------- -------- ---------
Statement of Cash Flows
For the six months to 30 September 2023
For the For the For the
six months to six months to year to
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------------------------------------- -------------- -------------- ----------
Cash flows from operating activities
(Loss)/profit before taxation (4,305) (170,717) 11,274
-------------------------------------------------------------------- -------------- -------------- ----------
Adjustments to reconcile (loss)/profit before taxation to cash used
in operations:
Bank and deposit interest income recognised (3,266) (873) (3,082)
-------------------------------------------------------------------- -------------- -------------- ----------
Dividend income recognised (48,740) (55,693) (85,894)
-------------------------------------------------------------------- -------------- -------------- ----------
Finance costs 1,298 1,835 3,201
-------------------------------------------------------------------- -------------- -------------- ----------
Net losses on investments at fair value 44,956 215,485 54,645
-------------------------------------------------------------------- -------------- -------------- ----------
Net losses on foreign exchange 649 69 442
-------------------------------------------------------------------- -------------- -------------- ----------
Decrease/(increase) in debtors 13 (52) 12
-------------------------------------------------------------------- -------------- -------------- ----------
Decrease in creditors (4) (210) (310)
-------------------------------------------------------------------- -------------- -------------- ----------
Cash used in operations (9,399 ) (10,156 ) (19,712 )
-------------------------------------------------------------------- -------------- -------------- ----------
Bank and deposit interest received 3,266 873 3,082
-------------------------------------------------------------------- -------------- -------------- ----------
Dividends received 49,274 59,855 86,727
-------------------------------------------------------------------- -------------- -------------- ----------
Bank overdraft interest paid - - (2)
-------------------------------------------------------------------- -------------- -------------- ----------
Tax paid (5,457) (3,244) (5,971)
-------------------------------------------------------------------- -------------- -------------- ----------
Net realised (losses)/gains on foreign currency cash and cash
equivalents(a) (355) 548 179
-------------------------------------------------------------------- -------------- -------------- ----------
Net cash inflow from operating activities(a) 37,329 47,876 64,303
-------------------------------------------------------------------- -------------- -------------- ----------
Cash flows from investing activities
Purchases of non-current financial assets (271,085) (214,314) (465,539)
-------------------------------------------------------------------- -------------- -------------- ----------
Sales of non-current financial assets(a) 302,151 262,009 548,504
-------------------------------------------------------------------- -------------- -------------- ----------
Net cash inflow from investing activities(a) 31,066 47,695 82,965
-------------------------------------------------------------------- -------------- -------------- ----------
Cash flows from financing activities
Equity dividends paid (34,562) (32,940) (56,202)
-------------------------------------------------------------------- -------------- -------------- ----------
Purchase and cancellation of own shares (34,831) (19,677) (30,453)
-------------------------------------------------------------------- -------------- -------------- ----------
Repayment of revolving credit facility - - (50,000)
-------------------------------------------------------------------- -------------- -------------- ----------
Interest and fees paid on bank loans (1,276) (1,687) (3,457)
-------------------------------------------------------------------- -------------- -------------- ----------
Net cash outflow from financing activities (70,669 ) (54,304 ) (140,112 )
-------------------------------------------------------------------- -------------- -------------- ----------
Net (decrease)/increase in cash(a) (2,274 ) 41,267 7,156
-------------------------------------------------------------------- -------------- -------------- ----------
Cash at the start of the period 132,988 125,855 125,855
-------------------------------------------------------------------- -------------- -------------- ----------
Net unrealised gains/(losses) on foreign currency cash and cash
equivalents(a) 8 (7) (23)
-------------------------------------------------------------------- -------------- -------------- ----------
Cash at the end of the period 130,722 167,115 132,988
-------------------------------------------------------------------- -------------- -------------- ----------
(a) Net unrealised gains/(losses) on cash and cash equivalents
have been shown separately as part of the reconciliation of cash
and cash equivalents. Net realised losses arising from cash and
cash equivalents have been allocated to the corresponding cash flow
activities to which they relate. Comparative figures for the period
ended 30 September 2022 have been updated for the consistency of
the presentation in line with IAS 8 requirements.
Reconciliation of liabilities arising from bank loans
Liabilities Liabilities
as at as at
31 March 30 September
2023 Cash flows Profit & Loss 2023
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ---------- ------------- -------------
Revolving credit facility - - - -
---------------------------------- ----------- ---------- ------------- -------------
Interest and fees payable - (241) 241 -
----------------------------------- ----------- ---------- ------------- -------------
Fixed term loan 100,000 - - 100,000
----------------------------------- ----------- ---------- ------------- -------------
Interest and fees payable 343 (1,035) 1,057 365
----------------------------------- ----------- ---------- ------------- -------------
Total liabilities from bank loans 100,343 (1,276) 1,298 100,365
----------------------------------- ----------- ---------- ------------- -------------
Liabilities Liabilities
as at as at
31 March 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 Liabilities
as at as at
31 March 31 March
2022 Cash flows Profit & Loss 2023
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ---------- ------------- -------------
Revolving credit facility 50,000 (50,000) - -
----------------------------------- ----------- ---------- ------------- -------------
Interest and fees payable 249 (1,351) 1,102 -
----------------------------------- ----------- ---------- ------------- -------------
Fixed term loan 100,000 - - 100,000
----------------------------------- ----------- ---------- ------------- -------------
Interest and fees payable 352 (2,106) 2,097 343
----------------------------------- ----------- ---------- ------------- -------------
Total liabilities from bank loans 150,601 (53,457) 3,199 100,343
----------------------------------- ----------- ---------- ------------- -------------
Notes to the Financial Statements
For the six months to 30 September 2023
1 Basis of preparation
The Half Yearly Report for the six months to 30 September 2023
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") and updated 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 2023 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 2023 and 30 September 2022 has not been
audited. The figures and financial information for the year ended
31 March 2023 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 2023, the Company had net current assets of
GBP137,442,000 (31 March 2023: net current assets GBP134,472,000).
The Directors have a reasonable expectation that the Company has
sufficient resources to continue in operational existence for the
period to 31 March 2025, which is at least 12 months from the date
of approval of these Financial Statements. Accordingly the
Financial Statements have been prepared on a going concern
basis.
2 Income
The Company received special dividends amounting to GBP7.7
million (30 September 2022: GBP1.6 million) of which GBP6.6 million
was classified as capital, representing a second pay out of net
proceeds from the disposal of a 25% equity interest in Brilliance
China Automotive's joint venture with BMW, and GBP1.1 million was
classified as revenue (30 September 2022: GBPnil and GBP1.6 million
respectively).
3 Earnings per share
For the For the For the
six months to six months to year to
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
------------------------------------------- -------------- -------------- -------------
Revenue profit 38,330 48,913 66,858
-------------------------------------------- -------------- -------------- -------------
Capital loss (50,264) (226,208) (64,336)
-------------------------------------------- -------------- -------------- -------------
Total (11,934 ) (177,295 ) 2,522
-------------------------------------------- -------------- -------------- -------------
Weighted average number of shares in issue 1,149,158,447 1,175,330,868 1,169,095,903
-------------------------------------------- -------------- -------------- -------------
Revenue profit per share 3.34p 4.16p 5.72p
-------------------------------------------- -------------- -------------- -------------
Capital loss per share (4.37)p (19.25)p (5.50)p
-------------------------------------------- -------------- -------------- -------------
Total (loss)/profit per share (1.03 )p (15.09 )p 0.22p
-------------------------------------------- -------------- -------------- -------------
4 Equity share capital
For the six months to For the six months to For the year to
30 September 2023 30 September 2022 31 March 2023
Ordinary shares in issue GBP'000 Number GBP'000 Number GBP'000 Number
------------------------------- -------- ------------- -------- ------------- ------- -------------
Opening ordinary shares of 5
pence 57,957 1,159,138,372 58,945 1,178,896,985 58,945 1,178,896,985
-------------------------------- -------- ------------- -------- ------------- ------- -------------
Purchase and cancellation of own
shares (1,193) (23,862,295) (621) (12,413,292) (988) (19,758,613)
-------------------------------- -------- ------------- -------- ------------- ------- -------------
Closing ordinary shares of 5
pence 56,764 1,135,276,077 58,324 1,166,483,693 57,957 1,159,138,372
-------------------------------- -------- ------------- -------- ------------- ------- -------------
For the six months to For the six months to For the year to
30 September 2023 30 September 2022 31 March 2023
Ordinary shares held in
treasury GBP'000 Number GBP'000 Number GBP'000 Number
------------------------------- -------- ------------- -------- ------------- ------- -------------
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 period 61,955 1,239,101,972 63,515 1,270,309,588 63,148 1,262,964,267
-------------------------------- -------- ------------- -------- ------------- ------- -------------
In the six months to 30 September 2023, 23,862,295 shares were
bought back for cancellation for a total consideration of
GBP35,441,000 (30 September 2022: 12,413,292 shares were bought
back for cancellation for a total consideration of GBP18,394,000).
All shares bought back in the period were cancelled, with none
being placed in treasury (30 September 2022: no shares were placed
into treasury).
5 Dividends
For the six months For the six months For the year
to 30 September to 30 September to 31 March
2023 2022 2023
Rate Rate Rate
(pence) GBP'000 (pence) GBP'000 (pence) GBP'000
------------------------------------------ ---------- -------- ---------- -------- -------- -------
Declared and paid during the period:
Dividend on shares:
------------------------------------------ ---------- -------- ---------- -------- -------- -------
Final dividends for the years ended 31
March 2023 and 31 March 2022 3.00 34,562 2.80 32,940 2.80 32,940
------------------------------------------- ---------- -------- ---------- -------- -------- -------
Interim dividend for the six months ended
30 September 2022 - - - - 2.00 23,262
------------------------------------------- ---------- -------- ---------- -------- -------- -------
Total 3.00 34,562 2.80 32,940 4.80 56,202
------------------------------------------- ---------- -------- ---------- -------- -------- -------
On 7 December 2023 the Board declared an interim dividend of
2.00 pence per share for the financial year 2024 (financial year
2023: 2.00 pence per share interim dividend). This dividend has not
been accrued in the Financial Statements for the six months ended
30 September 2023 as dividends are recognised when the
shareholders' right to receive the payment is established. For the
2024 interim dividend this would be the ex-dividend date of 14
December 2023.
6 Taxation
The total tax expense of GBP7.63 million (30 September 2022:
GBP6.58 million) consists of a revenue tax expense of GBP3.34
million (30 September 2022: GBP3.45 million) and a capital tax
expense of GBP4.29 million (30 September 2022: GBP3.13 million).
The revenue tax expense relates to irrecoverable overseas tax on
dividends. The capital tax expense consists of GBP2.22 million (30
September 2022: GBP0.91 million) expense arising from an increase
in the provision for deferred tax on unrealised gains on holdings
in India and a GBP2.07 million expense (30 September 2022: GBP2.22
million) arising from tax on realised gains on holdings in
India.
7 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 For the For the
six months to six months to year to
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
------------------ -------------- -------------- ---------
Purchase expenses 320 282 638
------------------- -------------- -------------- ---------
Sales expenses 657 528 1,068
------------------- -------------- -------------- ---------
Total 977 810 1,706
------------------- -------------- -------------- ---------
8 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 is shown below:
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
-------- ------------ --- ------------ ------ ---------
Level 1 1,910,022 1,842,148 1,992,775
--------- ------------ --- ------------ ------ ---------
Level 2 - - -
-------- ------------ --- ------------ ------ ---------
Level 3 - (a) 18,366 (a)(b) -(a)
-------- ------------ --- ------------ ------ ---------
Total 1,910,022 1,860,514 1,992,775
--------- ------------ --- ------------ ------ ---------
(a) As at 30 September 2023 Russian investments in LUKOIL and
Sberbank of Russia continue to be fair valued at zero and
classified as Level 3 as a result of trading being suspended on
international stock exchanges in February 2022. These investments
were transferred from Level 1 to Level 3 during the financial year
ended 31 March 2022.
(b) As at 30 September 2022 the fair value of the Company's
holding in Brilliance China Automotive was GBP18,366,000 classified
as Level 3. The stock was fair valued using a beta model (which
applied an index movement to observed trade prices) until 5 October
2022 when trading resumed and the stock was transferred from Level
3 to Level 1.
Given the current market conditions and the inability of the
Company to access the local Moscow equity markets and the very
limited access to the over-the-counter market, the Russian
investments are valued based on a current liquidity discount of
100% to the last traded price for an exit price of zero.
The following table presents the movement in Level 3 investments
for the period:
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
------------------------------------------------ ------------ --- ------------ --- ----------
Opening balance - 20,803 20,803
------------------------------------------------- ------------ --- ------------ --- ----------
Transfers from Level 3 into Level 1 - - (17,734)
------------------------------------------------- ------------ --- ------------ --- ----------
Disposal proceeds - sale of Level 3 assets (7,766) (a) (617) (b) (1,613)(b)
------------------------------------------------- ------------ --- ------------ --- ----------
Net gains/(losses) on investments at fair value 7,766 (1,820) (1,456)
------------------------------------------------- ------------ --- ------------ --- ----------
Level 3 closing balance - 18,366 -
------------------------------------------------- ------------ --- ------------ --- ----------
(a) Represents the sale of the holding in Yandex on 23 May 2023 for GBP7,766,000.
(b) Represents the sale of the holdings in Gazprom on 25 April
2022 for GBP617,000, and the sale of VK on 9 March 2023 for
GBP996,000.
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 31 March
2023 2022 2023
GBP000 GBP000 GBP000
---------------------------------- ------------ ------------ --------
Fixed term loan at amortised cost 100,000 100,000 100,000
----------------------------------- ------------ ------------ --------
Fixed term loan at fair value 94,800 97,100 94,470
----------------------------------- ------------ ------------ --------
Increase in net assets 5,200 2,900 5,530
----------------------------------- ------------ ------------ --------
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 spread. The fixed term loan at fair value is classed as
Level 2.
9 Events after the reporting period
On 7 December 2023 the Board declared an interim dividend of
2.00 pence per share for the financial year 2024 (financial year
2023: 2.00 pence per share interim dividend). Please see Note 5 in
the full Half Yearly Report for more information.
The Half Yearly Report for the six months to 30 September 2023
was approved by the Board on 7 December 2023. 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 .
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END
IR EDLFBXLLEFBF
(END) Dow Jones Newswires
December 07, 2023 10:55 ET (15:55 GMT)
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