TIDMTEM
RNS Number : 5721U
Templeton Emerging Markets IT PLC
25 November 2019
Markets Investment Trust PLC ("TEMIT" or "the Company")
Unaudited Half Yearly Report to 30 September 2019
Legal Entity Identifier 5493002NMTB70RZBXO96
Company Overview
Launched in 1989, Templeton Emerging Markets Investment Trust
PLC ("TEMIT" or the "Company") is an investment company 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 quoted on both the London and New Zealand Stock
Exchanges.
The Company is governed by a Board of Directors who are
committed to ensuring that shareholders' best interests 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. Only one member of the
Board has a connection with Franklin Templeton Investments, with
all others being independent.
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 GBP2.2
billion as at 30 September 2019.
TEMIT at a glance
For the six months to 30 September 2019
Net asset value total return Share price total return(a) MSCI Emerging Markets
(cum-income)(a) 4.4% Index total return(a)(b)
6.3% (2018: -2.2%) 2.2%
(2018: -1.5%) (2018: -1.8%)
---------------------------- --------------------------- --------------------------
Interim dividend for the Special dividend
financial year 2020 2.60p
5.00p
(Interim dividend for the
financial year 2019: 5.00p)
---------------------------- ----------------
Cumulative Total Return to 30 September 2019 (%)
6 Months 1 Year 3 Year 5 Year 10 Year
Net asset value (cum-income) 6.3 9.8 38.7 51.0 101.2
----------- ------ ------- ------- --------
Share Price 4.4 13.1 44.6 47.9 95.7
----------- ------ ------- ------- --------
MSCI Emerging Markets Index 2.2 4.1 26.9 50.4 87.1
----------- ------ ------- ------- --------
(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
Markets continued to be volatile in the period under review,
with the continuing trade war between the US and China regularly
creating news headlines. Tension between the US and China
repeatedly escalates and then is partially defused, a situation
which is not conducive to economic growth or investment returns.
There is increasing evidence that this is affecting economic growth
in both countries and around the world. Reflecting difficult
economic circumstances, the US Federal Reserve cut key interest
rates twice. This should help alleviate the recent strength of the
US dollar, which has been a headwind for emerging markets, and
reduce the cost of debt in some countries.
Against this background I am again pleased to be able to report
both a positive Net Asset Value Total Return and a return in excess
of that of our benchmark for the six months under review. I do
recognise, however, that this positive return shows a snapshot of
values at two dates and must be viewed against the background of
volatile markets.
Revenue, Earnings and Dividend
An interim dividend of 5.00 pence per share will be paid on 15
January 2020. TEMIT generally receives most of its income in the
first half of its accounting year and the interim dividend is fully
covered by net income over the six months under review. Revenues
for the period included a special dividend amounting to GBP6.4
million from Brilliance China Automotive. The Board has elected to
pay an additional special dividend of 2.60 pence per share (being
the amount received from Brilliance China Automotive) also on 15
January 2020, making total dividends to be paid on that date 7.60
pence per share.
While the Board recognises that dividends are appreciated by
many shareholders, the Company's investment strategy and the
Investment Manager's approach to investment is focused on
generating capital returns and we do not target a particular level
of income.
Asset Allocation and Borrowing
As at 30 September 2019, the current bank debt facility was
partly drawn down and the level of gearing(a) (net of cash in the
portfolio) was 0.8%. If no cash had been held in the portfolio,
based on the net asset value as at close of business on 30
September 2019, gearing would have been 5.4%.
The current bank facility will expire on 31 January 2020 and the
Board is currently reviewing options for continued gearing. A
further announcement will be made in due course.
The Discount
During the half year to 30 September 2019, TEMIT's shares traded
at discounts of between 8.8% and 11.7% and as at the end of
September the discount stood at 10.9%.
The Board exercises its powers to buy back shares when it
believes this to be in shareholders' interests and with the aim of
reducing volatility in the discount. The Company continues to be
active in buying back shares, with shares bought back on the
majority of business days and a total of 5,851,774 shares being
bought back over the six months under review at a cost of GBP45.8
million. As the share buybacks were carried out at discounts to the
prevailing net asset value, this was beneficial to continuing
shareholders and improved the NAV(a) per share by 0.2%.
(a) A glossary of alternative performance measures is included
in the full half-yearly report.
The Board and Franklin Templeton remain committed to seeking to
stimulate demand for TEMIT's shares. In recent years we have
enhanced our marketing and media relations programme and this has
helped to generate renewed interest in the shares.
Continuation Vote and Conditional Tender Offer
The continuation vote at this year's Annual General Meeting was
passed by a large majority and the Board and Franklin Templeton are
grateful for shareholders' continuing support.
As set out in the most recent Annual Report, as shareholders
voted in favour of continuation at this year's Annual General
Meeting, the Board has introduced a five-year performance-related
conditional tender offer. There will be no tender offer in the
event that the Company's net asset value total return continues to
exceed the benchmark total return. However, if, over the five-year
period to 31 March 2024, the Company's net asset value total return
fails to exceed the benchmark total return, the Board will put
forward proposals to shareholders to undertake a tender offer for
up to 25 per cent of the issued share capital of the Company at the
discretion of the Board. Any such tender offer will be at a price
equal to the then prevailing net asset value less two per cent
(less the costs of the tender offer). Any tender offer will also be
conditional on shareholders approving the continuation vote in 2024
and would take place following the Company's 2024 Annual General
Meeting.
The introduction of any conditional tender offer will not affect
the Board's current approach to discount management.
Further details of the conditional tender offer will be provided
to shareholders in 2024 and in the meantime no action is
necessary.
Outlook
Given the current political background, equity markets are
likely to remain volatile. It is, however, important to recognise
that many of the countries in which TEMIT invests are generating a
good level of economic growth and higher rates of growth than
developed markets. Economic growth does not necessarily lead
directly to investment returns and this is why our Investment
Manager maintains a large team which is focused on analysing the
prospects of individual companies. As a Board, we remain of the
view that effective stock picking is the key to success in our
investment mandate, and that our Investment Manager is well
equipped to deliver positive returns.
Paul Manduca
Chairman
25 November 2019
Interim Management Report
Principal risks
The Company predominantly invests directly in the stock markets
of emerging markets. The principal risks facing the Company, as
determined by your Board, are:
-- Investment and concentration;
-- Market;
-- Geopolitical;
-- Foreign currency;
-- Portfolio liquidity;
-- Counterparty and credit;
-- Operations and custody;
-- Key personnel;
-- Regulation; and
-- Cyber security.
The Board has provided the Investment Manager with guidelines
and limits for the management of these principal risks. Further
information on risks is given in the Strategic Report within the
Annual Report and Audited Accounts, which is available on the
Company's website (www.temit.co.uk). There have been no changes to
the principal risks reported in the Annual Report and, in the
Board's view, these principal risks are equally applicable to the
remaining six months of the financial year as they were to the six
months under review.
Brexit
TEMIT is a company registered in Scotland. At the time of
writing, the timing and terms of the United Kingdom's exit from the
European Union ("Brexit") are unclear.
TEMIT is regulated as an AIF under UK law, with its AIFM being
FTIS, a Luxembourg company. In light of the UK's Temporary
Permissions Regime that would allow up to a three-year extension of
current "passporting" for the AIFM into the UK in the event of a
'No Deal' Brexit, we expect that the UK FCA will continue to
recognise FTIS as TEMIT's AIFM for the foreseeable future and,
certainly, for a sufficient period to make alternative plans if
future events require it.
TEMIT invests the majority of its assets outside the EU and the
vast majority of shareholders are based in the UK, New Zealand and
the United States. The only material adverse effect of the Brexit
process on TEMIT to date has been the increase in volatility of the
value of the British pound, which affects the value of TEMIT's
assets in the hands of UK-based shareholders.
While Brexit has created a degree of uncertainty, in light of
the nature of TEMIT's business and the regulatory arrangements
described above, the Board has decided that Brexit is not one of
the principal risks facing the Company. Nevertheless, the Board and
AIFM continue to monitor developments closely.
Related party transactions
There were no transactions with related parties during the six
months ended 30 September 2019. Under the Statement of Recommended
Practice for investment trusts issued by the Association of
Investment Companies in November 2014 and updated in October 2019,
the Franklin Templeton entities are not classified as related
parties under IAS 24 (as adopted by the EU).
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 considerations of the Company's investment
objective, the nature of the portfolio, expenditure forecasts and
the principal risks and uncertainties, the Directors are satisfied
that the Company has adequate resources to continue to operate as a
going concern for the foreseeable future, being a period of at
least 12 months, and as such, a going concern basis is appropriate
in preparing the Financial Statements.
Statement of Directors' Responsibilities
The Disclosure 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 2019, have been prepared in accordance with the
applicable International Accounting Standard (IAS) 34 "Interim
Financial Reporting" as adopted by the EU; and
(b) the Half Yearly Report includes a fair review of the
information required by:
(i) DTR 4.2.7R of the Disclosure 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 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 25 November
2019 and the above responsibility statement was signed on its
behalf by
Paul Manduca
Chairman
25 November 2019
Portfolio Report
Market Overview
Emerging markets weathered increased volatility over the 6-month
period driven primarily by ongoing US-China trade-related events,
central bank monetary policies and concerns of slowing global
economic growth. Against this backdrop, the MSCI Emerging Markets
Index produced a total return of 2.2% in the period under review,
while TEMIT delivered a net asset value total return (cum-income)
of 6.3% (all figures in sterling). Full details of TEMIT's
performance can be found in the full half-yearly report.
US-China trade tensions escalated in May with the two countries
increasing tariffs on imports of each other's goods. Market hopes
of an agreement in the near future, following a truce in the
summer, were short-lived with several rounds of retaliatory actions
following in the latter part of the reporting period. The United
States also formally labelled China as a currency manipulator in
August after the Chinese renminbi depreciated to above a symbolic
Yen7 per US dollar for the first time since 2009. These events
sparked a broad sell-off in Chinese equities as well as global
stock markets. Conciliatory moves, however, were made in September
along with a decision to resume trade talks in October. The US and
China reached a partial agreement on the first phase of a deal
between the two countries, which included the US suspending the
scheduled October tariff increase and China increasing agricultural
purchases. The agreement is also believed to cover intellectual
property, financial services and currency measures.
Emerging markets received some good news in July when the US
Federal Reserve ("Fed") cut its key interest rate for the first
time since 2008. A second interest rate cut was subsequently made
in September and another after our reporting period in late
October. The rate cuts should alleviate upward pressure on US
dollar exchange rates, helping emerging market currencies while
also facilitating greater flexibility in emerging market monetary
policy with several markets including South Korea, Brazil,
Indonesia, and Thailand already reducing interest rates. History
has shown that over the last four Fed rate cycles, emerging markets
have tended to outperform the US market in the 2-3 year period
following the first rate cut. The only exception to this was in the
run up to the Asian financial crisis in the late 1990s.
Chinese stocks fell over the reporting period as investors
focused on the US-China trade conflict and slowing growth in China.
However, we believe that China's economy may be better able to
absorb the trade issues than the market fears. It is important to
note that China's growth is now less dependent on exports than it
was a decade ago. China's trade balance with the United States has
also narrowed. China's economy has been re-balancing with domestic
consumption the key driver of economic growth. In addition to
targeted stimulus measures, the government lifted restrictions on
foreign investment in China as part of efforts to increase access
to its financial markets. The People's Bank of China also
implemented an interest-rate reform in August, designating the loan
prime rate as the new benchmark for household and business loans,
effectively lowering interest rates in August and September.
China's second-quarter gross domestic product ("GDP") growth slowed
to 6.2%, although the figure was in line with market expectations.
We expect the government to continue to focus on economic
restructuring and sustainable long-term growth. Although China was
TEMIT's largest market position at the end of the reporting period,
it remained underweight relative to the benchmark.
South Korea was TEMIT's second-largest market position at the
end of September and overweight versus the benchmark. The South
Korean market started the period on a positive note on
better-than-expected first-quarter earnings results and a change in
the Bank of Korea's monetary policy guidance from a defensively
hawkish to a more neutral monetary policy. Escalation in the
US-China trade dispute, growing trade tensions between South Korea
and Japan, and North Korea's missile launches fuelled investor
caution. South Korea's trade feud with Japan heightened as both
countries decided to end preferential trade treatment for each
other, driving the market down. The central bank cut its key
interest rate in July, reversing the rate hike from November 2018
in view of raising growth concerns and a downward inflation
outlook. Markets staged a recovery late in the period on the back
of the government's record expansionary 2020 budget which was
intended to stimulate the economy and cushion the impact of the
trade feud with Japan. Improving sentiment in the computer memory
sector further supported market sentiment and resulted in equity
prices ending the reporting period virtually unchanged. While
domestic economic indicators have been weak, expectations for a
recovery in the Korean economy are rising on encouraging signs in
major industries including semiconductors, shipbuilding and
automobile.
TEMIT maintained an underweight exposure to Taiwan, where a
significant position in Taiwan Semiconductor Manufacturing Company
("TSMC"), one of the portfolio's largest holdings, made up a large
portion of the exposure. Recovery in the technology sector favoured
the Taiwanese market where technology-related stocks account for a
substantial portion. TSMC is one of the world's leading
semiconductor makers and counts major global technology companies
amongst its clients. While Huawei's addition to the US Entity
List(1) raised concerns, the stock performed well over the period,
ending September at a record high share price, supported by strong
smartphone sales and its high-performance computing business. A
strong 2020 outlook driven by accelerating 5G development demand
further supported the shares. We favour TSMC's technological lead
in producing cutting-edge chips that could see more demand from
mobile devices and advanced applications such as high-performance
computing.
Optimism surrounding the government's economic agenda, including
the key social security reform, has resulted in a more favourable
climate in Brazil. While the country's economic recovery has been
slower than expected, with the government forecasting the GDP to
grow by only 0.85% in 2019, government and central bank efforts
could improve the country's longer-term GDP growth potential.
Inflation has also remained under control, allowing the central
bank to lower interest rates to record-low levels to stimulate the
economy. We believe that the approval of pension system reform is
key to stimulating investment and credit, which should help improve
economic activity, as well as helping significantly to reduce
Brazil's fiscal deficit. A major privatisation plan has also been
announced, and we expect tax and other reforms that could improve
the ease of doing business to follow. Despite the strong market
performance over the last 12 months, we remain positive on the
outlook for Brazil's market, adding to our exposure, which remained
overweight compared to the benchmark index, during the reporting
period.
(1) Those included in the Entity List are subject to specific
licensing requirements to export to the US. The Entity List is seen
as a "red flag" by the US government, meaning that the transaction
is likely to face much more scrutiny.
Russia was the best performing market in the MSCI Emerging
Markets Index over the six-month period and remains one of the most
undervalued markets globally, despite its strong performance. Our
overweight position relative to the benchmark had a positive impact
on relative performance. Many international investors have avoided
this market because of economic sanctions against the country.
However, we believe that Russia's fairly self-sustained economy has
limited the impact of sanctions. While the economy has proven to be
resilient, we have seen many companies take steps to adapt and
flourish in the current environment. Moreover, corporate governance
in many Russian companies has improved significantly. For example,
many companies including Sberbank and Gazprom have increased
dividend pay-outs, while others like Lukoil have undertaken share
buybacks to improve shareholder value. Overall, we believe that
Russia continues to offer interesting opportunities and that
exposure to select well-established companies in the financials,
energy, materials and communication services sectors should
continue to serve TEMIT well.
Indian equity markets experienced some volatility in the earlier
part of the reporting period, impacted by uncertainty around the
outcome of the national elections, weaker economic growth and
global macro uncertainty. While sentiment did turn positive
following Prime Minister Narendra Modi's victory with an outright
majority for his party, weaker economic growth this year has
continued to impact overall investor sentiment. The government
surprised investors with a meaningful reduction in India's
corporate tax rates to spur investment and boost economic growth.
Overall this is positive, with the level of impact differing from
sector to sector. For instance, banking would be a key beneficiary
as it is a full-tax paying industry. Most consumer companies also
benefit from the corporate tax cuts. A key holding in India is one
of the country's largest private-sector banks, ICICI Bank. We
believe that ICICI Bank's strong retail franchise and extensive
network make it well positioned to benefit from India's rapidly
growing banking system. Overall, the case for investing in India
remains strong as fundamentals remain intact. Indian equities are
also expected to show resilience to global trade concerns due to
less export dependence. We continue to favour companies that can
benefit from secular growth drivers such as favourable
demographics, infrastructure investment, urban and rural
consumption growth and increasing income levels.
The Argentine market tumbled during the reporting period amidst
increased political and economic uncertainty as the government
imposed capital controls and extended the maturities of its debt.
We note, however, that market volatility has been largely contained
within the country. Argentina remains one of TEMIT's smallest
market exposures and underweight relative to the benchmark.
Investment Strategy, Portfolio Changes and Performance
The following sections show how different investment factors
(stocks, sectors and geographies) accounted for TEMIT's performance
over the period. We continue to emphasise our investment process
that selects companies based on their individual attributes and
ability to generate risk-adjusted returns for investors, rather
than taking a high-level view of sectors, countries or geographic
regions to determine our investment allocations.
While we do consider macroeconomic and political events, our
fundamental focus is on individual companies and their earnings is
our major focus in achieving our stated objectives.
Our investment style is centred on finding companies with
sustainable earnings power and whose shares trade at a discount
relative to their intrinsic worth and to other investment
opportunities in the market. We also pay close attention to risks.
Our portfolio remains broad-based including what we view to be the
best opportunities within any sector or market.
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 these factors require us to conduct detailed analyses of
potential returns versus risks with a time horizon of typically
five years or more.
Performance Attribution Analysis %
Six months to 30 September 2019 2018 2017 2016 2015
------------------------------------- ---- ---- ---- ---- -----
Net asset value total return(a) 6.3 (1.5) 11.4 29.6 (28.0)
------------------------------------- ---- ---- ---- ---- -----
Expenses incurred 0.5 0.6 0.6 0.6 0.6
------------------------------------- ---- ---- ---- ---- -----
Gross total return(a) 6.8 (0.9) 12.0 30.2 (27.4)
------------------------------------- ---- ---- ---- ---- -----
Benchmark total return(a) 2.2 (1.8) 7.1 21.7 (18.8)
------------------------------------- ---- ---- ---- ---- -----
Excess return(a) 4.6 0.9 4.9 8.5 (8.6)
------------------------------------- ---- ---- ---- ---- -----
Stock selection 2.6 (0.2) 1.8 0.2 1.2
------------------------------------- ---- ---- ---- ---- -----
Sector allocation 1.6 (0.5) 2.7 7.9 (12.7)
------------------------------------- ---- ---- ---- ---- -----
Currency 0.4 1.1 0.1 0.4 2.6
------------------------------------- ---- ---- ---- ---- -----
Residual(a) - 0.5 0.3 - 0.3
------------------------------------- ---- ---- ---- ---- -----
Total Portfolio Manager Contribution 4.6 0.9 4.9 8.5 (8.6)
------------------------------------- ---- ---- ---- ---- -----
Source: FactSet and Franklin Templeton Investments.
(a) A glossary of alternative performance measures is included
in the full half-yearly report.
Contributors and Detractors by Security
Top Contributors to Relative Performance by Security (%)(a)
Relative
Share Price Contribution to
Top Contributors Total Return Portfolio
----------------------------------- ------------- ----------------
Brilliance China Automotive 28.5 0.8
----------------------------------- ------------- ----------------
Gazprom, ADR 71.7 0.6
----------------------------------- ------------- ----------------
Sunny Optical Technology 76.8 0.6
----------------------------------- ------------- ----------------
Taiwan Semiconductor Manufacturing 21.4 0.5
----------------------------------- ------------- ----------------
NAVER 27.0 0.5
----------------------------------- ------------- ----------------
Naspers 4.4 0.4
----------------------------------- ------------- ----------------
ICICI Bank 12.2 0.4
----------------------------------- ------------- ----------------
Unilever(b) 13.0 0.4
----------------------------------- ------------- ----------------
Samsung Electronics 11.9 0.3
----------------------------------- ------------- ----------------
Sberbank of Russia, ADR 19.7 0.3
----------------------------------- ------------- ----------------
(a) For the period 31 March 2019 to 30 September 2019.
(b) Security not included in the MSCI Emerging Markets
Index.
Brilliance China Automotive manufactures and sells automobiles
for China's domestic market, predominantly through its joint
venture ("JV") with German luxury car maker BMW. Shares partially
recovered, as investors saw value emerge following a sharp fall in
the share price in the latter part of 2018 after investors reacted
negatively to BMW's plans to increase its investment in the JV to a
majority share. Although the company reported weak results for the
first half of 2019, the announcement of a special dividend provided
investors with some comfort. Sentiment in the stock also benefited
from government measures to support car sales. While the stock
remains a significant holding, we decreased our position to reduce
portfolio risk.
Based in Russia, Gazprom is the largest producer of gas in the
world, in terms of reserves and production. Well positioned to
benefit from the growing global energy demand, the stock also
trades at attractive valuations in terms of metrics such as
price-to-earnings and price-to-book. Shares surged following the
announcement of a sharply higher dividend for 2018. Management also
disclosed a new dividend policy, which included plans gradually to
move towards increasing its dividend pay-out ratio to 50%. We
reduced our holdings in the company following the price increase to
rebalance the portfolio.
Sunny Optical Technology designs and manufactures optical and
optical-related products. It is the world's largest supplier of
automotive lenses and China's largest maker of smartphone camera
modules and lenses. Shares in Sunny Optical Technology recorded a
notable fall in May, on concerns about its customer Huawei being
added to the US Entity List(1) and as a result of a general decline
in the share prices of technology companies as investors grew
concerned about the escalating US-China trade conflict. The sharp
fall in the share price provided us with an attractive opportunity
to add the shares to the portfolio, as we started to see value
emerge and believe that the company is well-positioned to capture
growing demand for high-specification smartphone lens sets. Shares
subsequently rose in the later part of the period, supported by
resilient monthly shipment data and better-than-expected first-half
2019 revenue and net income on the back of strong sales. We trimmed
our position following the sharp price rise.
(1) Those included in the Entity List are subject to specific
licensing requirements to export to the US. The Entity List is seen
as a "red flag" by the US government, meaning that the transaction
is likely to face much more scrutiny.
Top Detractors to Relative Performance by Security (%)(a)
Relative
Share Price Contribution to
Top Detractors Total Return Portfolio
---------------------------------- ------------- ----------------
Massmart(b) (44.4) (0.4)
---------------------------------- ------------- ----------------
Glenmark Pharmaceuticals (47.8) (0.4)
---------------------------------- ------------- ----------------
HDC Hyundai Development (35.0) (0.3)
---------------------------------- ------------- ----------------
Cognizant Technology Solutions(b) (11.2) (0.2)
---------------------------------- ------------- ----------------
H&H Group(b) (27.8) (0.2)
---------------------------------- ------------- ----------------
LG (9.4) (0.2)
---------------------------------- ------------- ----------------
Bank Danamon Indonesia (5.6) (0.2)
---------------------------------- ------------- ----------------
MGM China(b) (20.1) (0.1)
---------------------------------- ------------- ----------------
Prosus(c) (9.8) (0.1)
---------------------------------- ------------- ----------------
MCB Bank (13.4) (0.1)
---------------------------------- ------------- ----------------
(a) For the period 31 March 2019 to 30 September 2019.
(b) Security not included in the MSCI Emerging Markets
Index.
Massmart is a leading South African distributor and retailer of
food products, general merchandise, alcohol, home improvement
equipment and supplies as well as a wholesaler. US-based Walmart,
the world's largest retailer, owns a controlling stake in Massmart.
Our initial thesis on this stock was based on expectations of a
meaningful turn-around in the group's retail discount stores
segment, which could have driven the overall group margin. However,
weak merchandising, online competition and slowing revenue growth
amidst a weak macroeconomic environment have delayed a turnaround.
Depreciation in regional currencies further pressured the business.
The business also struggled to sell inventory accumulated in the
previous trading season - these were marked down and affected
margin. Following the release of a profit decline warning, the
company reported a loss for the first half of 2019 and did not pay
out any dividends. The resignation of the CEO and CFO further
impacted sentiment. A new CEO was transferred from Walmart. He has
been brought in to turn around the business and we have already
seen some management changes aimed at driving sales and margins. We
expect greater Walmart involvement that would include leveraging
the Walmart supply chain and technology to drive Massmart's online
business. We continued to use the price fall gradually to add to
our existing position in this stock, as we maintain a positive
long-term view on the company's prospects.
Glenmark Pharmaceuticals is a mid-size Indian pharmaceutical
company with a presence in both generics and product innovation.
The company reported weak second-quarter results with
lower-than-expected revenue and earnings driven by lower US
revenues and higher research and development costs. Sales in India,
however, were a bright spot, recording healthy growth. Delays in US
approvals and the launch of a new product for the treatment of
seasonal allergic rhinitis, along with regulatory concerns at one
of its formulation facilities led shares to fall sharply in June,
ending September at a multi-year low. We believe that there is a
revenue-cost mismatch in the near term given the investment in
innovation research and development (R&D). The company is,
however, working towards a spin-off of its innovation R&D
business, which could normalise margins and drive stronger free
cash flow generation. The company is also planning to divest
non-core assets to reduce debt. Given the near-term catalysts and
strong Indian business, we used the fall in the share price to add
to our position in the stock.
HDC Hyundai Development is one of the leading residential
property developers in South Korea. With a strong brand name -
"I-Park", the company is estimated to have the largest market share
in the residential construction business. Although the company
reported better-than-expected first quarter corporate results and
higher revenues and net profit in the second quarter, government
regulations aimed at curbing housing prices and household debt
weighed on profitability. Although HDC has some exposure to hotels
and duty-free stores, the company's decision to participate in a
bid to acquire Asiana Airlines was viewed unfavourably by investors
who found the industry to be unrelated to HDC's main residential
business. We are of the opinion that a low interest rate
environment, however, is expected to continue to drive housing
demand, with the Bank of Korea lowering rates for the first time in
three years in July as part of efforts to boost economic growth. We
also believe that the group is well placed to benefit from
increased fiscal spending to boost infrastructure development in
non-metropolitan areas.
Top Contributors and Detractors to Relative Performance by
Sector (%)(a)
MSCI MSCI
Emerging Emerging
Markets Index Relative Markets Index Relative
Sector Total Contribution Sector Total Contribution
Top Contributors Return to Portfolio Top Detractors Return to Portfolio
------------------ -------------- ------------- ---------------- -------------- -------------
Information
Technology 12.2 1.4 Consumer Staples 8.5 (0.6)
------------------- -------------- ------------- ---------------- -------------- -------------
Financials 1.5 1.3 Industrials 0.3 (0.4)
------------------- -------------- ------------- ---------------- -------------- -------------
Consumer
Discretionary 1.7 1.2 Health Care (7.7) (0.3)
------------------- -------------- ------------- ---------------- -------------- -------------
Materials (6.4) 0.6 Utilities(b) 4.8 (0.1)
------------------- -------------- ------------- ---------------- -------------- -------------
Communication
Services (2.0) 0.6
------------------- -------------- ------------- ---------------- -------------- -------------
Energy 3.4 0.5
------------------- -------------- ------------- ---------------- -------------- -------------
Real Estate (3.5) 0.2
------------------- -------------- ------------- ---------------- -------------- -------------
(a) For the period 31 March 2019 to 30 September 2019.
(b) No companies held by TEMIT in this sector.
Favourable stock selection in the information technology,
financials and consumer discretionary sectors added to TEMIT's
performance relative to the benchmark index in the review period.
An overweight exposure relative to the benchmark in the information
technology sector further added to relative returns. Asian
technology companies were among the top performance contributors as
they continue to evolve into global leaders. Although we maintain a
positive outlook on the sector, we reduced our holdings in
information technology companies during the period to realise gains
and rebalance the portfolio following the sector's outperformance.
Holdings in the financial and consumer discretionary sectors were
also reduced to raise funds for other attractive investment
opportunities. Conversely, the consumer staples, industrials and
health care sectors mildly detracted from relative returns largely
due to the top three detracting securities discussed above. We will
continue to monitor the developments at these companies and act
accordingly.
Top Contributors and Detractors to Relative Performance by
Country (%)(a)
MSCI MSCI
Emerging Emerging
Markets Index Relative Markets Index Relative
Country Total Contribution Country Total Contribution
Top Contributors Return to Portfolio Top Detractors Return to Portfolio
------------------ -------------- ------------- ---------------- -------------- -------------
China/Hong Kong (3.2) 2.3 United States(b) - (0.3))
------------------- -------------- ------------- ---------------- -------------- -------------
South Korea 0.2 1.0 Indonesia 3.9 (0.3))
------------------- -------------- ------------- ---------------- -------------- -------------
Russia 22.9 0.6 Mexico 5.3 (0.1))
------------------- -------------- ------------- ---------------- -------------- -------------
United Kingdom(b) - 0.4 Pakistan (14.9) (0.1))
------------------- -------------- ------------- ---------------- -------------- -------------
Saudi Arabia(c) (4.6) 0.3 Turkey(c) 21.7 (0.1))
------------------- -------------- ------------- ---------------- -------------- -------------
Cambodia(b) - 0.2 Hungary (2.5) (0.1))
------------------- -------------- ------------- ---------------- -------------- -------------
South Africa (1.4) 0.2 Thailand 8.9 (0.1))
------------------- -------------- ------------- ---------------- -------------- -------------
Taiwan 13.2 0.2 Greece(c) 19.8 (0.0))
------------------- -------------- ------------- ---------------- -------------- -------------
Brazil 7.2 0.1 Qatar(c) 6.2 (0.0))
------------------- -------------- ------------- ---------------- -------------- -------------
Chile(c) (6.8) 0.1 Kenya(b) - (0.0))
------------------- -------------- ------------- ---------------- -------------- -------------
(a) For the period 31 March 2019 to 30 September 2019.
(b) No companies included in the MSCI Emerging Markets Index in
this country.
(c) No companies held by TEMIT in this country.
China/Hong Kong was the largest contributor to TEMIT's returns
relative to the benchmark index. Both stock selection and an
underweight exposure to the underperforming Chinese market had a
positive impact. Our selection of stocks in South Korea and
overweight exposure to Russia were also among the major
contributors to relative returns. NAVER, the dominant search engine
in South Korea, and Samsung Electronics, one of the world's largest
electronic manufacturers, were key performance drivers in South
Korea. We increased our investments in China/Hong Kong and South
Korea as we continued to find attractive investment opportunities.
Holdings in Russia were, however, reduced as we sold some shares in
Gazprom to rebalance the portfolio. In contrast, relative
performance was hurt by stock selection in the United States,
Indonesia and Mexico. TEMIT's holding in Cognizant Technology
Solutions, a US-listed technology services provider that derives
most of its earnings from services produced in India, was the key
detractor in the United States. We believe that the company remains
a strong industry player, especially as it pursues growth in
higher-margin digital services, has good cash flow generation and
trades at what we consider to be attractive valuations; we see the
potential for a turnaround. The share price fall provided us with
an opportunity to increase our holdings at attractive prices. We
maintain underweight exposures to Indonesia and Mexico relative to
the benchmark and remain comfortable with our position.
Portfolio changes by Sector
Total Return in
sterling
31 30
March September MSCI
2019 2019 Emerging
Market Market Market Markets
Value Purchases Sales Movement Value TEMIT Index
Sector GBPm GBPm GBPm GBPm GBPm % %
--------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Financials 585 3 (80 ) 24 532 6.4 1.5
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Information
Technology 419 43 (42 ) 58 478 16.0 12.2
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Consumer
Discretionary 448 25 (104 ) 21 390 6.5 1.7
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Communication
Services 227 96 (16 ) 5 312 3.1 (2.0 )
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Energy 163 17 (28 ) 9 161 8.9 3.4
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Consumer Staples 152 17 (35 ) (3 ) 131 (2.1) 8.5
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Materials 66 47 (22 ) (2 ) 89 0.6 (6.4 )
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Industrials 52 18 (1 ) (10 ) 59 (16.9) 0.3
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Health Care 42 2 - (11 ) 33 (26.9) (7.7 )
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Real Estate 8 - (8 ) - - 6.6 (3.5 )
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Net current
liabilities(a) (44) - - 30 (b) (14 ) - -
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Total 2,118 268 (336 ) 121 2,171
---------------- ------ ----------- --- ------ --- --------- --- --- ---------- --- ----- --------
Sector Asset Allocation
As at 30 September 2019
Sector weightings vs benchmark (%)
TEMIT MSCI Emerging Markets
Index
----------------------- ----- ---------------------
Financials 24.7 24.6
----------------------- ----- ---------------------
Information Technology 22.0 15.0
----------------------- ----- ---------------------
Consumer Discretionary 17.8 13.1
----------------------- ----- ---------------------
Communication Services 14.4 11.6
----------------------- ----- ---------------------
Energy 7.4 7.7
----------------------- ----- ---------------------
Consumer Staples 6.0 6.9
----------------------- ----- ---------------------
Materials 4.1 7.4
----------------------- ----- ---------------------
Industrials 2.7 5.4
----------------------- ----- ---------------------
Health Care 1.5 2.6
----------------------- ----- ---------------------
Real Estate - 2.9
----------------------- ----- ---------------------
Utilities - 2.8
----------------------- ----- ---------------------
(a) The Company's net current liabilities per the Statement of
Financial Position in the full half-yearly report.
(b) The movement relates to changes in cash, receivables,
payables, the loan facility and capital gains tax provision.
Portfolio changes by Country
Total Return in
sterling
30
31 March September MSCI
2019 2019 Emerging
Market Market Market Markets
Value Purchases Sales Movement Value TEMIT Index
Country GBPm GBPm GBPm GBPm GBPm % %
--------------- --------- --------- ----- --------- --- --------- ------- ---------
China/Hong Kong 512 136 (95) 48 601 4.0 (3.2)
---------------- --------- --------- ----- --------- --- --------- ------- ---------
South Korea 289 45 (18) 19 335 7.1 0.2
---------------- --------- --------- ----- --------- --- --------- ------- ---------
Taiwan 206 - (8) 26 224 17.2 13.2
---------------- --------- --------- ----- --------- --- --------- ------- ---------
Brazil 181 49 (26) 11 215 7.0 7.2
---------------- --------- --------- ----- --------- --- --------- ------- ---------
Russia 189 - (16) 24 197 15.9 22.9
---------------- --------- --------- ----- --------- --- --------- ------- ---------
India 162 2 (7) 2 159 2.0 0.8
---------------- --------- --------- ----- --------- --- --------- ------- ---------
Other 623 36 (166) (39) 454 - -
---------------- --------- --------- ----- --------- --------- ------- ---------
Net current
liabilities(a) (44) - - 30 (b) (14)
---------------- --------- --------- ----- --------- --- --------- ------- ---------
Total 2,118 268 (336) 121 2,171
---------------- --------- --------- ----- --------- --- --------- ------- ---------
Geographic Asset Allocation
As at 30 September 2019
Country weightings vs benchmark (%)(c)
TEMIT MSCI Emerging Markets
Index
------------------ ----- ---------------------
China/Hong Kong 27.5 31.9
------------------ ----- ---------------------
South Korea 15.4 12.2
------------------ ----- ---------------------
Taiwan 10.3 11.5
------------------ ----- ---------------------
Brazil 9.9 7.4
------------------ ----- ---------------------
Russia 9.1 4.0
------------------ ----- ---------------------
India 7.2 8.9
------------------ ----- ---------------------
United Kingdom(d) 3.2 -
------------------ ----- ---------------------
Thailand 3.2 2.9
------------------ ----- ---------------------
United States(d) 3.2 -
------------------ ----- ---------------------
South Africa 3.1 4.6
------------------ ----- ---------------------
Mexico 2.1 2.5
------------------ ----- ---------------------
Indonesia 1.2 2.1
------------------ ----- ---------------------
Cambodia(d) 1.2 -
------------------ ----- ---------------------
Hungary 0.9 0.3
------------------ ----- ---------------------
Kenya(d) 0.8 -
------------------ ----- ---------------------
Pakistan 0.7 -
------------------ ----- ---------------------
Philippines 0.6 1.1
------------------ ----- ---------------------
Czech Republic 0.5 0.1
------------------ ----- ---------------------
Peru 0.4 0.4
------------------ ----- ---------------------
Argentina 0.1 0.2
------------------ ----- ---------------------
Nigeria(d) -0.0 -
------------------ ----- ---------------------
(a) The Company's net current liabilities per the Statement of
Financial Position on in the full half-yearly report.
(b) The movement relates to changes in cash, receivables,
payables, the loan facility and capital gains tax provision.
(c) Other countries included in the benchmark are Chile,
Colombia, Egypt, Greece, Malaysia, Poland, Qatar, Turkey, Saudi
Arabia and the United Arab Emirates.
(d) Countries not included in the MSCI Emerging Markets
Index.
Portfolio Investments by Fair Value
As at 30 September 2019
Fair Value % of Net
Holding Country Sector Trading(a) GBP'000 Assets
-------------------------- ---------------- ----------------------- ----------- ---------- --------
Samsung Electronics South Korea Information Technology PS 168,315 7.8
--------------------------- ----------------- ------------------------ --------- ---------- --------
Taiwan Semiconductor
Manufacturing Taiwan Information Technology NT 163,225 7.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
Tencent China/Hong Kong Communication Services IH 132,977 6.1
--------------------------- ----------------- ------------------------ --------- ---------- --------
Alibaba, ADR(b) China/Hong Kong Consumer Discretionary IH 119,732 5.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
ICICI Bank India Financials NT 85,042 3.9
--------------------------- ----------------- ------------------------ --------- ---------- --------
Unilever(c) United Kingdom Consumer Staples PS 68,538 3.2
--------------------------- ----------------- ------------------------ --------- ---------- --------
Brilliance China Automotive China/Hong Kong Consumer Discretionary PS 67,825 3.1
--------------------------- ----------------- ------------------------ --------- ---------- --------
NAVER South Korea Communication Services IH 59,698 2.7
--------------------------- ----------------- ------------------------ --------- ---------- --------
LUKOIL, ADR(b) Russia Energy NT 57,579 2.7
--------------------------- ----------------- ------------------------ --------- ---------- --------
Naspers South Africa Consumer Discretionary PS 53,430 2.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
TOP 10 LARGEST INVESTMENTS 976,361 45.0
-------------------------------------------------------------------------------------- ---------- --------
Banco Bradesco, ADR(b)(d) Brazil Financials IH 51,123 2.4
--------------------------- ----------------- ------------------------ --------- ---------- --------
Sberbank of Russia, ADR(b) Russia Financials NT 50,208 2.3
--------------------------- ----------------- ------------------------ --------- ---------- --------
Cognizant Technology
Solutions(c) United States Information Technology IH 49,657 2.3
--------------------------- ----------------- ------------------------ --------- ---------- --------
Itaú Unibanco, ADR(b) Brazil Financials NT 49,280 2.3
--------------------------- ----------------- ------------------------ --------- ---------- --------
LG South Korea Industrials IH 43,594 2.0
--------------------------- ----------------- ------------------------ --------- ---------- --------
China Construction Bank China/Hong Kong Financials NT 37,975 1.7
--------------------------- ----------------- ------------------------ --------- ---------- --------
Banco Santander Mexico,
ADR(b) Mexico Financials NT 37,638 1.7
--------------------------- ----------------- ------------------------ --------- ---------- --------
Yandex Russia Communication Services NT 32,496 1.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
CNOOC China/Hong Kong Energy NT 29,102 1.3
--------------------------- ----------------- ------------------------ --------- ---------- --------
Ping An Bank China/Hong Kong Financials PS 27,584 1.3
--------------------------- ----------------- ------------------------ --------- ---------- --------
TOP 20 LARGEST INVESTMENTS 1,385,018 63.8
-------------------------------------------------------------------------------------- ---------- --------
Gazprom, ADR(b) Russia Energy PS 27,465 1.3
--------------------------- ----------------- ------------------------ --------- ---------- --------
Astra International Indonesia Consumer Discretionary NT 26,424 1.2
--------------------------- ----------------- ------------------------ --------- ---------- --------
China Mobile China/Hong Kong Communication Services NT 26,190 1.2
--------------------------- ----------------- ------------------------ --------- ---------- --------
Vale Brazil Materials NH 25,785 1.2
--------------------------- ----------------- ------------------------ --------- ---------- --------
Kasikornbank Thailand Financials IH 25,515 1.2
--------------------------- ----------------- ------------------------ --------- ---------- --------
NagaCorp Cambodia Consumer Discretionary PS 25,083 1.2
--------------------------- ----------------- ------------------------ --------- ---------- --------
Infosys Technologies India Information Technology NT 24,781 1.1
--------------------------- ----------------- ------------------------ --------- ---------- --------
China Resources Cement
Holdings China/Hong Kong Materials IH 23,931 1.1
--------------------------- ----------------- ------------------------ --------- ---------- --------
Kiatnakin Bank Thailand Financials NT 23,003 1.1
--------------------------- ----------------- ------------------------ --------- ---------- --------
Lojas Americanas Brazil Consumer Discretionary NT 22,592 1.0
--------------------------- ----------------- ------------------------ --------- ---------- --------
TOP 30 LARGEST INVESTMENTS 1,635,787 75.4
-------------------------------------------------------------------------------------- ---------- --------
(a) Trading activity during the year: (NH) New Holding, (IH)
Increased Holding, (PS) Partial Sale and (NT) No Trading.
(b) US listed American Depositary Receipt.
(c) This company, listed on a stock exchange in a developed
market, has significant exposure to operations from emerging
markets.
(d) Preferred Shares.
Fair Value % of Net
Holding Country Sector Trading(a) GBP'000 Assets
-------------------------- ---------------- ----------------------- ----------- ---------- --------
Sunny Optical Technology China/Hong Kong Information Technology NH 21,402 1.0
--------------------------- ----------------- ------------------------ --------- ---------- --------
POSCO South Korea Materials IH 21,178 1.0
--------------------------- ----------------- ------------------------ --------- ---------- --------
Ping An Insurance Group China/Hong Kong Financials PS 20,045 0.9
--------------------------- ----------------- ------------------------ --------- ---------- --------
Gedeon Richter Hungary Health Care IH 19,552 0.9
--------------------------- ----------------- ------------------------ --------- ---------- --------
IMAX(c) United States Communication Services NT 19,369 0.9
--------------------------- ----------------- ------------------------ --------- ---------- --------
Bajaj Holdings &
Investments India Financials PS 18,338 0.8
--------------------------- ----------------- ------------------------ --------- ---------- --------
Petroleo Brasileiro, ADR(b) Brazil Energy NH 17,575 0.8
--------------------------- ----------------- ------------------------ --------- ---------- --------
Mail.Ru, GDR(e) Russia Communication Services NT 17,141 0.8
--------------------------- ----------------- ------------------------ --------- ---------- --------
Hon Hai Precision Industry Taiwan Information Technology NT 14,999 0.7
--------------------------- ----------------- ------------------------ --------- ---------- --------
Catcher Technology Taiwan Information Technology PS 12,917 0.6
--------------------------- ----------------- ------------------------ --------- ---------- --------
TOP 40 LARGEST INVESTMENTS 1,818,303 83.8
-------------------------------------------------------------------------------------- ---------- --------
H&H Group China/Hong Kong Consumer Staples IH 12,891 0.6
--------------------------- ----------------- ------------------------ --------- ---------- --------
Massmart South Africa Consumer Staples IH 12,778 0.6
--------------------------- ----------------- ------------------------ --------- ---------- --------
B3(f) Brazil Financials PS 12,539 0.6
--------------------------- ----------------- ------------------------ --------- ---------- --------
MCB Bank Pakistan Financials NT 12,030 0.6
--------------------------- ----------------- ------------------------ --------- ---------- --------
CTBC Financial Holding Taiwan Financials NT 11,615 0.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
Tata Chemicals India Materials IH 11,473 0.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
China Merchants Bank China/Hong Kong Financials NT 11,319 0.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
HDC Hyundai Development South Korea Industrials NT 10,901 0.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
Baidu, ADR(b) China/Hong Kong Communication Services IH 10,586 0.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
Thai Beverages Thailand Consumer Staples PS 10,571 0.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
TOP 50 LARGEST INVESTMENTS 1,935,006 89.2
-------------------------------------------------------------------------------------- ---------- --------
China Petroleum and
Chemical China/Hong Kong Energy PS 10,326 0.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
Glenmark Pharmaceuticals India Health Care IH 10,207 0.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
Moneta Money Bank Czech Republic Financials NT 10,047 0.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
NetEase, ADR(b) China/Hong Kong Communication Services PS 9,897 0.5
--------------------------- ----------------- ------------------------ --------- ---------- --------
B2W Digital Brazil Consumer Discretionary NT 9,427 0.4
--------------------------- ----------------- ------------------------ --------- ---------- --------
MGM China China/Hong Kong Consumer Discretionary NT 9,340 0.4
--------------------------- ----------------- ------------------------ --------- ---------- --------
Fila Korea South Korea Consumer Discretionary NH 8,884 0.4
--------------------------- ----------------- ------------------------ --------- ---------- --------
TOTVS Brazil Information Technology PS 8,817 0.4
--------------------------- ----------------- ------------------------ --------- ---------- --------
Nemak Mexico Consumer Discretionary IH 8,572 0.4
--------------------------- ----------------- ------------------------ --------- ---------- --------
Siam Commercial Bank Thailand Financials NT 8,501 0.4
--------------------------- ----------------- ------------------------ --------- ---------- --------
TOP 60 LARGEST INVESTMENTS 2,029,024 93.6
-------------------------------------------------------------------------------------- ---------- --------
(a) Trading activity during the year: (NH) New Holding, (IH)
Increased Holding, (PS) Partial Sale and (NT) No Trading.
(b) US listed American Depositary Receipt.
(c) This company, listed on a stock exchange in a developed
market, has significant exposure to operations from emerging
markets.
(e) UK listed Global Depositary Receipt.
(f) Holding changed its name from BM&F Bovespa during the
period.
Fair
Value % of Net
Holding Country Sector Trading(a) GBP'000 Assets
------------------- ------------ -------------- ----------- --------- --------
Intercorp Financial
Services Peru Financials NT 8,359 0.4
-------------------- ------------- --------------- --------- --------- --------
China/Hong Consumer
Uni-President China Kong Staples PS 8,358 0.4
-------------------- ------------- --------------- --------- --------- --------
BDO Unibank Philippines Financials NT 7,773 0.4
-------------------- ------------- --------------- --------- --------- --------
Consumer
PChome Online Taiwan Discretionary NT 7,668 0.4
-------------------- ------------- --------------- --------- --------- --------
Information
Largan Precision Taiwan Technology NT 7,352 0.3
-------------------- ------------- --------------- --------- --------- --------
SK Innovation South Korea Energy NT 7,238 0.3
-------------------- ------------- --------------- --------- --------- --------
Consumer
M. Dias Branco Brazil Staples NT 7,213 0.3
-------------------- ------------- --------------- --------- --------- --------
East African Consumer
Breweries Kenya Staples NT 7,102 0.3
-------------------- ------------- --------------- --------- --------- --------
Norilsk Nickel,
ADR(b) Russia Materials NT 6,795 0.3
-------------------- ------------- --------------- --------- --------- --------
China/Hong Consumer
Prosus Kong Discretionary PS 6,760 0.3
-------------------- ------------- --------------- --------- --------- --------
TOP 70 LARGEST INVESTMENTS 2,103,642 97.0
------------------------------------------------------------------ --------- --------
Consumer
Hanon Systems South Korea Discretionary NT 6,622 0.3
-------------------- ------------- --------------- --------- --------- --------
Information
FIT Hon Teng Taiwan Technology NT 6,437 0.3
-------------------- ------------- --------------- --------- --------- --------
Coal India India Energy IH 6,282 0.3
-------------------- ------------- --------------- --------- --------- --------
Wiz
Soluções
e Corretagem Brazil Financials NT 5,812 0.3
-------------------- ------------- --------------- --------- --------- --------
Equity Group Kenya Financials NT 5,696 0.3
-------------------- ------------- --------------- --------- --------- --------
TMK, GDR(e) Russia Energy NT 5,256 0.2
-------------------- ------------- --------------- --------- --------- --------
China/Hong Consumer
BAIC Motor Kong Discretionary NT 5,129 0.2
-------------------- ------------- --------------- --------- --------- --------
KCB Group Kenya Financials PS 4,938 0.2
-------------------- ------------- --------------- --------- --------- --------
Consumer
Hankook Tire South Korea Discretionary NT 4,935 0.2
-------------------- ------------- --------------- --------- --------- --------
Security Bank Philippines Financials PS 4,911 0.2
-------------------- ------------- --------------- --------- --------- --------
TOP 80 LARGEST INVESTMENTS 2,159,660 99.5
------------------------------------------------------------------ --------- --------
Consumer
MAHLE Metal Leve Brazil Discretionary NT 4,892 0.2
-------------------- ------------- --------------- --------- --------- --------
China/Hong
COSCO Pacific Kong Industrials NT 4,324 0.2
-------------------- ------------- --------------- --------- --------- --------
Communication
KT Skylife South Korea Services NT 3,447 0.2
-------------------- ------------- --------------- --------- --------- --------
China/Hong Consumer
Dairy Farm Kong Staples PS 2,848 0.1
-------------------- ------------- --------------- --------- --------- --------
Biocon India Health Care NT 2,822 0.1
-------------------- ------------- --------------- --------- --------- --------
Weifu China/Hong Consumer
High-Technology Kong Discretionary NT 2,269 0.1
-------------------- ------------- --------------- --------- --------- --------
BBVA Banco
Francés,
ADR(b) Argentina Financials NT 1,789 0.1
-------------------- ------------- --------------- --------- --------- --------
United Bank Pakistan Financials NT 1,391 0.1
-------------------- ------------- --------------- --------- --------- --------
Consumer
Univanich Palm Oil Thailand Staples PS 612 0.0
-------------------- ------------- --------------- --------- --------- --------
Consumer
Interpark South Korea Discretionary PS 530 0.0
-------------------- ------------- --------------- --------- --------- --------
TOP 90 LARGEST INVESTMENTS 2,184,584 100.6
------------------------------------------------------------------ --------- --------
Consumer
Nigerian Breweries Nigeria Staples NT 183 0.0
-------------------- ------------- --------------- --------- --------- -------- --------
TOTAL INVESTMENTS 2,184,767 100.6
------------------------------------------------------------------ --------- -------- -----
NET CURRENT LIABILITIES (13,831) (0.6)
------------------------------------------------------------------ --------- ------- -----
TOTAL NET ASSETS 2,170,936 100.0
------------------------------------------------------------------ --------- -------- -----
(a) Trading activity during the year: (NH) New Holding, (IH)
Increased Holding, (PS) Partial Sale and (NT) No Trading.
(b) US listed American Depositary Receipt.
(c) Prosus is a Company listed in the Netherlands. The
classification of China/Hong Kong is due to a significant
proportion of its revenue coming from its holding in Tencent.
(d) UK listed Global Depositary Receipt.
Portfolio Summary
As at 30 September 2019
All figures are in %
30 31
September March
Communication Consumer Consumer Health Information Real Total Net current 2019 2019
Services Discretionary Staples Energy Financials Care Industrials Technology Materials Estate Equities liabilities(a) Total Total
--------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Argentina - - - - 0.1 - - - - - 0.1 - 0.1 0.2
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Brazil - 1.6 0.3 0.8 5.6 - - 0.4 1.2 - 9.9 - 9.9 8.6
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Cambodia - 1.2 - - - - - - - - 1.2 - 1.2 1.3
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
China/Hong Kong 8.3 9.6 1.1 1.8 4.4 - 0.2 1.0 1.1 - 27.5 - 27.5 24.3
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Czech Republic - - - - 0.5 - - - - - 0.5 - 0.5 0.5
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Hungary - - - - - 0.9 - - - - 0.9 - 0.9 0.9
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
India - - - 0.3 4.7 0.6 - 1.1 0.5 - 7.2 - 7.2 7.7
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Indonesia - 1.2 - - - - - - - - 1.2 - 1.2 3.5
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Kenya - - 0.3 - 0.5 - - - - - 0.8 - 0.8 0.9
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Mexico - 0.4 - - 1.7 - - - - - 2.1 - 2.1 2.4
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Nigeria - 0.0 - - - - - - - - 0.0 - 0.0 0.0
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Pakistan - - - - 0.7 - - - - - 0.7 - 0.7 0.8
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Peru - - - - 0.4 - - - - - 0.4 - 0.4 1.2
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Philippines - - - - 0.6 - - - - - 0.6 - 0.6 0.5
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Russia 2.3 - - 4.2 2.3 - - - 0.3 - 9.1 - 9.1 8.9
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
South Africa - 2.5 0.6 - - - - - - - 3.1 - 3.1 7.0
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
South Korea 2.9 0.9 - 0.3 - - 2.5 7.8 1.0 - 15.4 - 15.4 13.7
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Taiwan - 0.4 - - 0.5 - - 9.4 - - 10.3 - 10.3 9.6
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Thailand - - 0.5 - 2.7 - - - - - 3.2 - 3.2 4.2
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
United Kingdom - - 3.2 - - - - - - - 3.2 - 3.2 3.2
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
United States 0.9 - - - - - - 2.3 - - 3.2 - 3.2 2.7
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
Net current
liabilities(a) - - - - - - - - - - - (0.6) (0.6) (2.1)
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
30 September
2019 Total 14.4 17.8 6.0 7.4 24.7 1.5 2.7 22.0 4.1 - 100.6 (0.6) 100.0 -
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
31 March 2019
Total 10.6 21.1 7.3 7.7 27.6 2.0 2.5 19.8 3.1 0.4 102.1 (2.1) - 100.0
---------------- ------------- ------------- -------- ------ ---------- ------ ----------- ----------- --------- ------ -------- -------------- --------- -----
(a) The Company's net current liabilities per the Statement of
Financial Position in the full half-yearly report.
Less than GBP1.5bn to Greater than Net current
Market Capitalisation Breakdown(a) (%) GBP1.5bn GBP5bn GBP5bn liabilities(b)
--------------------------------------- --------- ----------- ----------------- ---------------
30 September 2019 7.4 11.6 81.6 (0.6)
---------------------------------------- --------- ----------- ----------------- ---------------
31 March 2019 8.2 19.1 74.8 (2.1)
---------------------------------------- --------- ----------- ----------------- ---------------
Split Between Markets(c) (%) 30 September 2019 31 March 2019
--------------------------------------- --------- ----------- ----------------- ---------------
Emerging Markets 92.2 93.8
---------------------------------------- --------- ----------- ----------------- ---------------
Developed Markets(d) 6.4 5.9
---------------------------------------- --------- ----------- ----------------- ---------------
Frontier Markets 2.0 2.4
---------------------------------------- --------- ----------- ----------------- ---------------
Net current liabilities(b) (0.6) (2.1)
---------------------------------------- --------- ----------- ----------------- ---------------
(a) A glossary of alternative performance measure is included in
the full half-yearly report.
(b) The Company's net current liabilities per the Statement of
Financial Position in the full half-yearly report.
(c) Geographic split between "Emerging Markets", "Frontier
Markets" and "Developed Markets" are as per MSCI index
classifications.
(d) Developed markets exposure represented by companies listed
in the United Kingdom and United States.
Source: FactSet Research System, Inc.
Market Outlook
Emerging markets have been resilient in the face of negative
macro events over the last six months but continue to trade at a
wide discount to developed markets. We are of the opinion that the
underlying fundamentals in emerging markets do not justify these
valuations over the longer term, especially since we believe that
the long-term structural drivers of emerging markets remain
intact.
Emerging markets continue to demonstrate strong economic
potential, with undervalued currencies, high foreign exchange
reserves and more favourable debt levels than their
developed-market peers. Emerging market fundamentals and corporate
governance have also been improving. Emerging market cash flows
have increased significantly, especially in the last three years,
allowing companies to reduce debt ratios, making more yield
available to shareholders.
We believe that 2020 could be another strong year for earnings
in emerging markets because, based on what we are seeing, a lot of
cyclical recoveries have started to emerge, and they should fully
materialise in 2020. These conditions, when paired with improving
corporate governance that includes dividend pay-outs and buybacks,
present an increasingly attractive long-term buying opportunity for
investors and contribute to our optimism in the asset class.
Although the US-China trade conflict has been dominating
headlines, it should be stressed that the impact of the conflict
has not been limited to China; rather we have seen global
implications. While the United States and China reached a verbal
agreement in October, de-escalating tensions in the short term, we
remain cautious and expect continued market volatility until a more
comprehensive deal is finalised.
Slowing economic growth expectations, declining inflationary
pressures and easing monetary policies in developed markets have
generally led emerging market central banks to turn to more
expansionary monetary policies to stimulate their economies. In
addition to providing a more conducive operating environment for
companies, we expect a low-interest rate environment to lead to
greater inflows into higher-yielding assets including emerging
market equities.
In this environment, we continue to seek companies that
demonstrate sustainable earnings power and potential resilience
against market uncertainty. Amongst the portfolio's top holdings
are technology and consumer-related companies that are highly
competitive and appear well-positioned to gain market share even in
the face of macroeconomic challenges.
Many emerging market companies are world leaders in the areas of
financials, technology and in the production of consumer goods. We
are confident that technology will remain a primary driver in
emerging markets, whether manifested through world-leading
semiconductor manufacturing, e-commerce or other areas. The growing
adoption of technology and growth of digital platforms have also
helped to create new goods and services for consumers across
emerging markets, while at the same time creating growth
opportunities for many emerging market companies and investors.
We are of the opinion that consumerism in emerging markets
should help to drive growth in many regions. Growing middle-class
populations and increasing affluence continue to spur demand for
high-end products in emerging markets. In our view, companies with
superior products and services should experience sustainable growth
in the years to come.
We will continue to use our experience, expertise and proven
investment philosophy to find the companies we believe are best
positioned to capitalise on the growth in emerging markets and seek
to manage risk - increasing the value of investment over time for
our shareholders.
Chetan Sehgal
Lead Portfolio Manager
25 November 2019
Statement of Comprehensive Income
For the six months to 30 September 2019
For the six months to
30 September 2019 (unaudited)
Revenue Capital Total
Note GBP'000 GBP'000 GBP'000
------------------------------------------------------------ ---- --------- -------- --------
Gains/(losses) on investments and foreign exchange
Gains/(losses) on investments at fair value - 90,470 90,470
------------------------------------------------------------- ---- --------- -------- --------
Gains/(losses) on foreign exchange - (1,251) (1,251)
------------------------------------------------------------- ---- --------- -------- --------
Revenue
Dividends 52,549 - 52,549
------------------------------------------------------------- ---- --------- -------- --------
Bank and deposit interest 307 - 307
------------------------------------------------------------- ---- --------- -------- --------
52,856 89,219 142,075
------------------------------------------------------------ ---- --------- -------- --------
Expenses
AIFM fee (2,996) (6,990) (9,986)
------------------------------------------------------------- ---- --------- -------- --------
Other expenses (1,080) - (1,080)
------------------------------------------------------------- ---- --------- -------- --------
(4,076) (6,990) (11,066)
------------------------------------------------------------ ---- --------- -------- --------
Profit/(loss) before finance costs and taxation 48,780 82,229 131,009
------------------------------------------------------------- ---- --------- -------- --------
Finance costs (437) (1,021) (1,458)
------------------------------------------------------------- ---- --------- -------- --------
Profit/(loss) before taxation 48,343 81,208 129,551
------------------------------------------------------------- ---- --------- -------- --------
Tax (expense)/income 5 (3,815) 256 (3,559)
------------------------------------------------------------- ---- --------- -------- --------
Profit/(loss) for the period 44,528 81,464 125,992
------------------------------------------------------------- ---- --------- -------- --------
Profit/(loss) attributable to equity holders of the Company 44,528 81,464 125,992
------------------------------------------------------------- ---- --------- -------- --------
Earnings per share 2 17.90p 32.74p 50.64p
------------------------------------------------------------- ---- --------- -------- --------
Ongoing charges ratio(a) 1.02%
------------------------------------------------------------- ---- --------- -------- --------
(a) A glossary of alternative performance measures is included
in Shareholder Information in the full half-yearly report.
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.
70% of the annual Alternative Investment Fund Manager ("AIFM")
fee and 70% of the finance costs have been allocated to the capital
account.
From 1 July 2018, the annual AIFM fee was reduced from 1% of net
assets up to GBP2 billion and 0.85% of net assets above that level
to 1% of net assets up to GBP1 billion and 0.85% above that
level.
For the six months to Year ended
30 September 2018 (unaudited) 31 March 2019 (audited)
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- -------- -------- -------- -------- --------
- (60,271) (60,271) - (3,892) (3,892)
--------- -------- -------- -------- -------- --------
- (5,994) (5,994) - (6,184) (6,184)
--------- -------- -------- -------- -------- --------
43,136 - 43,136 59,230 - 59,230
--------- -------- -------- -------- -------- --------
157 - 157 439 - 439
--------- -------- -------- -------- -------- --------
43,293 (66,265) (22,972) 59,669 (10,076) 49,593
--------- -------- -------- -------- -------- --------
(3,133) (7,311) (10,444) (5,954) (13,892) (19,846)
--------- -------- -------- -------- -------- --------
(986) - (986) (1,935) - (1,935)
--------- -------- -------- -------- -------- --------
(4,119) (7,311) (11,430) (7,889) (13,892) (21,781)
--------- -------- -------- -------- -------- --------
39,174 (73,576) (34,402) 51,780 (23,968) 27,812
--------- -------- -------- -------- -------- --------
(636) (1,488) (2,124) (1,111) (2,603) (3,714)
--------- -------- -------- -------- -------- --------
38,538 (75,064) (36,526) 50,669 (26,571) 24,098
--------- -------- -------- -------- -------- --------
(4,777) (507) (5,284) (5,798) (692) (6,490)
--------- -------- -------- -------- -------- --------
33,761 (75,571) (41,810) 44,871 (27,263) 17,608
--------- -------- -------- -------- -------- --------
33,761 (75,571) (41,810) 44,871 (27,263) 17,608
--------- -------- -------- -------- -------- --------
12.73p (28.50 )p (15.77 )p 17.26p (10.48 )p 6.78p
--------- -------- -------- -------- -------- --------
0.98% 1.02%
--------- -------- -------- -------- -------- --------
Statement of Financial Position
As at 30 September 2019
As at As at As at
30 September 30 September 31 March
2019 2018 2019
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
------------------------------------ ------- -------------- ------ -------------- ------ -----------
Non-current assets
Investments at fair value through profit or
loss 2,184,767 2,200,145 2,162,435
--------------------------------------------- -------------- ------ -------------- ------ -----------
Current assets
Trade and other receivables 8,811 7,299 11,612
--------------------------------------------- -------------- ------ -------------- ------ -----------
Cash and cash equivalents 100,287 41,213 73,213
--------------------------------------------- -------------- ------ -------------- ------ -----------
Total assets 109,098 48,512 84,825
--------------------------------------------- -------------- ------ -------------- ------ -----------
Current liabilities
Bank loans (117,132) (124,769) (124,844)
--------------------------------------------- -------------- ------ -------------- ------ -----------
Trade and other payables (4,703) (3,488) (2,654)
--------------------------------------------- -------------- ------ -------------- ------ -----------
Capital gains tax provision (1,094) (1,434) (1,578)
--------------------------------------------- -------------- ------ -------------- ------ -----------
Total current liabilities (122,929) (129,691) (129,076)
--------------------------------------------- -------------- ------ -------------- ------ -----------
Net current liabilities (13,831) (81,179) (44,251)
--------------------------------------------- -------------- ------ -------------- ------ -----------
Total assets less current liabilities 2,170,936 2,118,966 2,118,184
--------------------------------------------- -------------- ------ -------------- ------ -----------
Share capital and reserves
Equity Share Capital 66,582 69,480 68,045
--------------------------------------------- -------------- ------ -------------- ------ -----------
Capital Redemption Reserve 16,087 13,189 14,624
--------------------------------------------- -------------- ------ -------------- ------ -----------
Capital Reserve 1,528,489 1,491,983 1,492,845
--------------------------------------------- -------------- ------ -------------- ------ -----------
Special Distributable Reserve 433,546 433,546 433,546
--------------------------------------------- -------------- ------ -------------- ------ -----------
Revenue Reserve 126,232 110,768 109,124
--------------------------------------------- -------------- ------ -------------- ------ -----------
Equity Shareholders' Funds 2,170,936 2,118,966 2,118,184
--------------------------------------------- -------------- ------ -------------- ------ -----------
Net Asset Value pence per share(a) 884.1 821.1 842.5
--------------------------------------------- -------------- ------ -------------- ------ -----------
(a) Based on shares in issue excluding shares held in
Treasury.
Statement of Changes in Equity
For the six months to 30 September 2019 (unaudited)
Capital Special
Equity Share Redemption Capital Distributable Revenue
Capital Reserve Reserve Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------------ ----------- --------- -------------- -------- ---------
Balance at 31 March
2018 69,480 13,189 1,667,608 433,546 116,989 2,300,812
------------------- ------------ ----------- --------- -------------- -------- ---------
Profit for the
period - - (75,571) - 33,761 (41,810)
------------------- ------------ ----------- --------- -------------- -------- ---------
Equity dividends - - - - (39,982) (39,982)
------------------- ------------ ----------- --------- -------------- -------- ---------
Purchase and
cancellation of
own shares - - - - - -
------------------ ------------ ----------- --------- -------------- -------- ---------
Purchase of shares
into Treasury - - (100,054) - - (100,054)
------------------- ------------ ----------- --------- -------------- -------- ---------
Balance at 30
September 2018 69,480 13,189 1,491,983 433,546 110,768 2,118,966
------------------- ------------ ----------- --------- -------------- -------- ---------
Profit for the
period - - 48,308 - 11,110 59,418
------------------- ------------ ----------- --------- -------------- -------- ---------
Equity dividends - - - - (12,754) (12,754)
------------------- ------------ ----------- --------- -------------- -------- ---------
Purchase and
cancellation of
own shares (1,435) 1,435 (41,386) - - (41,386)
------------------- ------------ ----------- --------- -------------- -------- ---------
Purchase of shares
into Treasury - - (6,060) - - (6,060)
------------------- ------------ ----------- --------- -------------- -------- ---------
Balance at 31 March
2019 68,045 14,624 1,492,845 433,546 109,124 2,118,184
------------------- ------------ ----------- --------- -------------- -------- ---------
Profit for the
period - - 81,464 - 44,528 125,992
------------------- ------------ ----------- --------- -------------- -------- ---------
Equity dividends - - - - (27,420) (27,420)
------------------- ------------ ----------- --------- -------------- -------- ---------
Purchase and
cancellation of
own shares (1,463) 1,463 (45,820) - - (45,820)
------------------- ------------ ----------- --------- -------------- -------- ---------
Balance at 30
September 2019 66,582 16,087 1,528,489 433,546 126,232 2,170,936
------------------- ------------ ----------- --------- -------------- -------- ---------
Cash Flow Statement
For the six months to 30 September 2019
For the For the For the
six months to six months to year to
30 September 30 September 31 March
2019 2018 2019
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
-------------------------------------------- -------------- -------------- ----------
Cash flows from operating activities
Profit before finance costs and taxation 131,009 (34,402) 27,812
--------------------------------------------- -------------- -------------- ----------
Adjustments for:
-------------------------------------------- -------------- -------------- ----------
(Gains)/losses on investments at fair value (90,470) 60,271 3,892
--------------------------------------------- -------------- -------------- ----------
(Gains)/losses on foreign exchange 1,251 5,994 6,184
--------------------------------------------- -------------- -------------- ----------
Stock dividends received in period (103) - (511)
--------------------------------------------- -------------- -------------- ----------
(Increase)/decrease in receivables (202) 1,897 287
--------------------------------------------- -------------- -------------- ----------
Increase/(decrease) in payables 152 1,694 1,670
--------------------------------------------- -------------- -------------- ----------
Cash generated from operations 41,637 35,454 39,334
--------------------------------------------- -------------- -------------- ----------
Tax paid (4,043) (4,777) (5,839)
--------------------------------------------- -------------- -------------- ----------
Net cash inflow from operating activities 37,594 30,677 33,495
--------------------------------------------- -------------- -------------- ----------
Cash flows from investing activities
Purchases of non-current financial assets (266,769) (94,577) (262,622)
--------------------------------------------- -------------- -------------- ----------
Sales of non-current financial assets 337,897 198,319 458,308
--------------------------------------------- -------------- -------------- ----------
Net cash inflow from investing activities 71,128 103,742 195,686
--------------------------------------------- -------------- -------------- ----------
Cash flows from financing activities
Equity dividends paid (27,420) (39,982) (52,736)
--------------------------------------------- -------------- -------------- ----------
Purchase and cancellation of own shares (45,058) - (40,972)
--------------------------------------------- -------------- -------------- ----------
Repurchase of shares into treasury - (99,022) (106,543)
--------------------------------------------- -------------- -------------- ----------
Movement in bank loans outstanding (7,677) (19,878) (19,872)
--------------------------------------------- -------------- -------------- ----------
Bank loans interest and fees paid (1,493) (2,167) (3,688)
--------------------------------------------- -------------- -------------- ----------
Net cash outflow from financing activities (81,648) (161,049) (223,811)
--------------------------------------------- -------------- -------------- ----------
Net increase/(decrease) in cash 27,074 (26,630) 5,370
--------------------------------------------- -------------- -------------- ----------
Cash at the start of the period 73,213 67,843 67,843
--------------------------------------------- -------------- -------------- ----------
Cash at the end of the period 100,287 41,213 73,213
--------------------------------------------- -------------- -------------- ----------
Reconciliation of Liabilities Arising from Bank Loans
Non-cash movements
--------- ---------- -------------
Liability Liability
as at as at
31 March FX Profit & 30 September
2019 Cash flows movement Loss 2019
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- --------- ---------- ---------- -------- -------------
Bank loans 124,679 (7,677) - - 117,002
------------------------------ --------- ---------- ---------- -------- -------------
Interest and fees 165 (1,493) - 1,458 130
------------------------------ --------- ---------- ---------- -------- -------------
Total bank loans liabilities 124,844 (9,170) - 1,458 117,132
------------------------------ --------- ---------- ---------- -------- -------------
Notes to the Financial Statements
For the six months to 30 September 2019
1 Basis of preparation
The Half Yearly Report for the period ended 30 September 2019
has been prepared in accordance with International Financial
Reporting Standards ('IFRS') as adopted by the European Union and
applied in accordance with 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") issued in November 2014 and updated in
October 2019 insofar as the SORP is compatible with IFRS. The
accounting policies applied in these half yearly accounts are
consistent with those applied in the accounts for the twelve months
ended 31 March 2019.
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 2019 and 30 September 2018 has not been
audited. The figures and financial information for the year ended
31 March 2019 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 2019, the Company had net current liabilities
of GBP13,831,000 (31 March 2019: GBP44,251,000). The Directors have
a reasonable expectation that the Company has sufficient resources
to continue in operational existence for the foreseeable future.
Accordingly, the financial statements have been prepared on a going
concern basis.
2 Earnings per share
For the six For the six
months to months to For the year to
30 September 30 September 31 March
2019 2018 2019
GBP000 GBP000 GBP000
------------------------------------------- ------------- ------------- ---------------
Revenue profit 44,528 33,761 44,871
-------------------------------------------- ------------- ------------- ---------------
Capital profit/(loss) 81,464 (75,571) (27,263)
-------------------------------------------- ------------- ------------- ---------------
Total 125,992 (41,810) 17,608
-------------------------------------------- ------------- ------------- ---------------
Weighted average number of shares in issue 248,756,861 265,126,333 259,970,471
-------------------------------------------- ------------- ------------- ---------------
Revenue profit per share 17.90 p 12.73p 17.26p
-------------------------------------------- ------------- ------------- ---------------
Capital profit/(loss) per share 32.74 p (28.50 p) (10.48 p)
-------------------------------------------- ------------- ------------- ---------------
Total profit/(loss) per share 50.64 p (15.77 p) 6.78p
-------------------------------------------- ------------- ------------- ---------------
3 Equity share capital
In the six months to 30 September 2019, the Company bought back
5,851,774 shares for cancellation for a total consideration of
GBP45,820,000.
In the six months to 30 September 2018, the Company bought back
13,913,569 shares and placed them in Treasury for a total
consideration of GBP100,054,000.
For the six For the six
months to months to For the year to
30 September 30 September 31 March
Shares of 25p each 2019 2018 2019
---------------------------------------- ------------- ------------- ---------------
Opening shares balance 251,416,170 271,962,342 271,962,342
----------------------------------------- ------------- ------------- ---------------
Purchase and cancellation of own shares (5,851,774) - (5,737,604)
----------------------------------------- ------------- ------------- ---------------
Purchase of shares into Treasury - (13,913,569) (14,808,568)
----------------------------------------- ------------- ------------- ---------------
Closing shares balance 245,564,396 258,048,773 251,416,170
----------------------------------------- ------------- ------------- ---------------
As at 30 September 2019 the Company held 20,765,179 shares in
treasury (31 March 2019: 20,765,179 shares).
4 Dividends
On 25 November 2019 the Board declared an interim dividend of
5.00 pence per share for the financial year 2020 (interim dividend
for the financial year 2019: 5.00 pence per share) and a special
dividend of 2.60 pence per share. The total of 7.60 pence per share
is payable on 15 January 2020 to shareholders on the register on 6
December 2019. These dividends have not been accrued in the
financial statements for the six months ended 30 September 2019, as
under IFRS dividends are not recognised until paid. Dividends are
debited directly from reserves.
5 Taxation
The total tax expense of GBP3.56m consists of a revenue tax
expense of GBP3.82m and a capital tax income of GBP0.26m. The
revenue tax expense relates to irrecoverable overseas tax on
dividends. The capital tax income consists of GBP0.48m arising from
a decrease in the provision for deferred tax on unrealised gains on
Indian holdings offset by a GBP0.22m expense arising from tax on
realised gains on Indian and Indonesian holdings.
6 Costs of Investment Transactions
During the period, expenses were incurred in acquiring or
disposing of investments. The following costs of transactions are
included in the gains/(losses) on investments at fair value:
For the six For the six
months to months to For the year to
30 September 30 September 31 March
2019 2018 2019
GBP000 GBP000 GBP000
------------------ ------------- ------------- ---------------
Purchase expenses 384 245 478
------------------- ------------- ------------- ---------------
Sales expenses 363 515 999
------------------- ------------- ------------- ---------------
747 760 1,477
------------------ ------------- ------------- ---------------
7 Fair Value
Fair values are derived as follows:
- Where assets are denominated in a foreign currency, they are
converted into the sterling amount using period end rates of
exchange;
- Non-current financial assets on the basis set out in the
accounting policies; and
- Cash at the denominated currency of the account.
The tables below analyse financial instruments carried at fair
value by valuation method. The different levels have been defined
as follows:
Level 1 Quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2 Inputs other than quoted prices included with level 1
that are observable for the asset or liability, either directly
(prices) or indirectly (derived from prices); and
Level 3 Inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The hierarchy valuation of listed investments through profit and
loss are shown below:
30 September 2019 30 September 2018 31 March 2019
GBP000 GBP000 GBP000
-------- ----------------- ----------------- ------------- ---
Level 1 2,184,767 2,200,145 2,115,417
--------- ----------------- ----------------- ------------- ---
Level 2 - - -
-------- ----------------- ----------------- ------------- ---
Level 3 - - 47,018 (a)
-------- ----------------- ----------------- ------------- ---
Total 2,184,767 2,200,145 2,162,435
--------- ----------------- ----------------- ------------- ---
(a) The fair value of the Company's holding in Bank Danamon
Indonesia as at 31 March 2019 was GBP47,018,000. Prior to year-end,
the Company accepted a tender offer from MUFG for the entire
holding. Due to the tender offer, the market price was not deemed
representative of fair value and, in accordance with the Company's
accounting policy, the company valued the investment using the
income approach. The year-end balance comprises of GBP45,556,000
transferred out of level 1 into level 3 and an unrealised gain of
GBP1,462,000 resulting from the valuation technique applied.
The unobservable inputs used in this technique were the stated
offer price and payment date as per the tender document and the
Company's weighted average cost of capital applied as the discount
rate. The valuation is not considered sensitive to these inputs as
the Company received full payment of the tender offer on 29 April
2019.
8 General
The Half Yearly Report for the six months to 30 September 2019
was approved by the Board on 25 November 2019. A copy of the report
is available on our website www.temit.co.uk.
Copies will be uploaded and available for viewing on the
National Storage Mechanism, copies will also be posted to the
website www.temit.co.uk and may also be requested during normal
business hours from Client Dealer Services at Franklin Templeton
Investment Management Limited on freephone 0800 305 306. A pdf
version of the full Half Yearly Report to 30(th) September 2019
will be available by accessing the following hyperlink
http://www.temit.co.uk/content-common/semi-annual-report/en_GB/local-GB/TEMIT-semi-annual-report.pdf
For further information please e-mail
CompanySecretarialEdinburgh@franklintempleton.com or contact Client
Dealer Services at Franklin Templeton on free phone 0800 305 306,
+44 (0) 20 7073 8690 for overseas investors, or e-mail
enquiries@franklintempleton.co.uk.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR ZELFLKFFBFBD
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