Statement of Annual Results to 31 March 2024
CORPORATE
Stock Exchange Announcement
Statement of Annual Results
TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC
("TEMIT" or "the Company")
Legal Entity Identifier 5493002NMTB70RZBXO96
Templeton Emerging Markets Investment Trust plc
Annual Report and Accounts to 31 March 2024
Introducing TEMIT
Launched in June 1989, Templeton Emerging Markets Investment Trust plc ('TEMIT' or the 'Company') is an
investment trust that invests principally in emerging markets companies with the aim of delivering capital growth to
shareholders over the long term. While the majority of the Company's shareholders are based in the UK, shares are
traded on both the London and New Zealand stock exchanges. From its launch to 31 March 2024, TEMIT's net asset
value ('NAV') total return was +4,155.4% compared to the benchmark total return of +1,752.0%.
The Company is governed by a Board of Directors who are committed to ensuring that shareholders' best interests,
considering the wider community of stakeholders, are at the forefront of all decisions. Under the guidance of the
Chairman, the Board of Directors is responsible for the overall strategy of the Company and monitoring its
performance.
Financial highlights
2024 2023 3 Years Cumulative 5 Years Cumulative
10 Years
Cumulative
Net Assets Value
Total Return
(cum-income)
(a)
7.9% 0.8% (10.0)% 23.4% 89.5%
Share Price
Total Return
(a)
4.9% 0.5% (16.9)% 16.5% 84.7%
MSCI
Emerging Markets
Index
(a)(b)
5.9% (4.9)% (6.5)% 15.1% 76.5%
Proposed Total
Ordinary Dividend
(c)
5.00p 5.00p
(a) A glossary of alternative performance measures is included in the full Annual Report.
(b) Source: MSCI. The Company's benchmark is the MSCI Emerging Markets (Net Dividends) Index.
(c) An annual ordinary dividend of 5.00 pence per share for the year ended 31 March 2024 has been proposed. This
comprises the interim dividend of 2.00 pence per share paid by the Company on 26 January 2024 and the
proposed final dividend of 3.00 pence per share.
Strategic report
The Directors present the Strategic Report for the year ended 31 March 2024, which incorporates the Chairman's
Statement, and has been prepared in accordance with the Companies Act 2006.
The aim of the Strategic Report is to provide shareholders with the ability to assess how the Directors have
performed in their duty to promote the success of the Company for shareholders' collective benefit, and having
regard for the interests of all stakeholders, by bringing together in one place key information about the Company's
strategy, the risks it faces, how it is performing and the outlook.
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Financial Summary
2023-2024
Year Ended
31 March 2024
Year Ended
31 March 2023 Change
Net Asset Value Total Return (Cum-Income)
(a)
7.9% 0.8%
Share Price Total Return
(a)
4.9% 0.5%
MSCI Emerging Markets (Net Dividends) Index Total Return
(a)
5.9% (4.9)%
Total Net Assets (£ millions) 2,034.9 2,017.5 0.9%
Net Asset Value (Pence per Share) 182.5 174.1 4.8%
Share Price (Pence per Share) 154.4 152.2 1.4%
Share Price Discount to Net Asset Value at Year End
(a)
15.4% 12.6%
Average Share Price Discount to Net Asset Value Over the Year
(a)
13.9% 13.0%
Ordinary Dividend
(b)
(Pence per Share) 5.00 5.00
Revenue Earnings
(c)
(Pence per Share) 5.18 5.72
Net Gearing
(a)
0.0% 0.0%
Ongoing Charges Ratio
(a)
0.97% 0.98%
Source: Franklin Templeton and FactSet.
(a) A glossary of alternative performance measures is included in the full Annual Report.
(b) An annual ordinary dividend of 5.00 pence per share for the year ended 31 March 2024 has been proposed. This
comprises the interim dividend of 2.00 pence per share (2023: 2.00 pence per share) paid by the Company on 26
January 2024 and a proposed final dividend of 3.00 pence per share (2023: 3.00 pence per share).
(c) The revenue earnings per share figures are shown in the Statement of Comprehensive Income in the full Annual
Report and Note 7 of the Notes to the Financial Statements.
10 year record
2014-2024
Year Ended
Total Net
Assets
(£m)
NAV
(a)
(Pence
per Share)
Share
Price
(a)
(Pence
per Share)
Year-End
Discount
(b)
(%)
Revenue
Earnings
(a)
(Pence
per Share)
Annual
Dividend
(a)
(Pence
per Share)
Ongoing
Charges
Ratio
(b)
(%)
31 March
2014 1,913.6 118.4 105.4 10.9 1.83 1.45 1.30
31 March
2015
2,045.0 128.2 111.2 13.3 1.86 1.65 1.20
31 March
2016 1,562.3 104.8 90.8 13.4 1.41 1.65 1.22
31 March
2017 2,148.1 152.6 132.3 13.3 1.32 1.65 1.20
31 March
2018
2,300.8 169.2 148.6 12.2 3.18 3.00 1.12
31 March
2019 2,118.2 168.5 153.2 9.1 3.45 3.20 1.02
31 March
2020 1,775.7 146.5 131.4 10.3 4.88 3.80
(c)
1.02
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31 March
2021 2,591.3 219.4 202.4 7.7 5.73 3.80
(c)
0.97
31 March
2022
2,100.4 178.2 156.4 12.2 3.44 3.80 0.97
31 March
2023 2,017.5 174.1 152.2 12.6 5.72 5.00 0.98
31 March
2024 2,034.9 182.5 154.4 15.4 5.18 5.00
(d)
0.97
Source: Franklin Templeton and FactSet.
(a) Comparative figures for financial years 2014 to 2021 have been retrospectively adjusted following the sub-
division of each existing ordinary share of 25 pence into five ordinary shares of 5 pence each on 26 July 2021.
(b) A glossary of alternative performance measures is included in the full Annual Report.
(c) Excludes the special dividend of 0.52 pence per share for the year ended 31 March 2020 and the special
dividend of 2.00 pence per share for the year ended 31 March 2021.
(d) An annual ordinary dividend of 5.00 pence per share for the year ended 31 March 2024 has been proposed. This
comprises the interim dividend of 2.00 pence per share paid by the Company on 26 January 2024 and a
proposed final dividend of 3.00 pence per share.
Chairman's statement
'Over the year under review, our Investment Managers produced a commendable +7.9% NAV total return,
which was 2.0 percentage points higher than the benchmark index.'
Angus Macpherson
Chairman
It is a great pleasure to deliver to you my first statement since assuming the role of Chairman in January. All of the
Board members would like to thank my predecessor Paul Manduca for his excellent contribution in leading the
Board and steering the Company over the last nine years. We wish Paul well in his current and future endeavours.
I have been involved with emerging markets for most of my career. During that time, I have considered Templeton
Emerging Markets Investment Trust, your Company, as a pioneer of the asset class and the most widely recognised
and admired investment vehicle of its type. Its achievements speak for themselves: from its launch 35 years ago, it
has provided a NAV total return of +4,155.4% compared to a benchmark total return over the same period of only
+1,752.0%.
At the moment, some of the forces that drove this performance - globalisation, free trade and geopolitical stability
following the fall of the Berlin wall - are under threat. China, the largest and most successful emerging market, is a
cause of increasing alarm to western governments. This has translated into less compelling returns for the asset
class. Since 2000 emerging market equities have returned more to shareholders than world stock markets overall,
but most of that outperformance occurred in the first decade of the 21
st
century and in the most recent ten years this
trend has reversed.
Your Manager and Board are optimistic about emerging markets in the longer term but acknowledge that significant
challenges are adversely impacting the appetite of investors for emerging market equities as an asset class at this
time.
Performance
(a)
Over the year under review, our Investment Managers produced a commendable +7.9% NAV total return, which
was 2.0 percentage points higher than the benchmark index.
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The share price performance of the Company did not reflect this positive performance, delivering a total return of
only +4.9%, as the discount the shares trade to their underlying net asset value widened from 12.6% to 15.4%. We
believe that this mainly reflects investor appetite for emerging markets.
(a) See Glossary of Alternative Performance Measures in the full Annual Report.
Share price rating
This discount is extremely unsatisfactory and of considerable concern to the Board. Your Company is not alone in
experiencing such a discount: at the end of March 2024 the average investment trust discount was 15.6%, compared
with 3.2% three years previously
(b)
. This does not alter the fact that investors have recently only been willing to buy
£1 of emerging market equities for around 85p. While the cause is evidently a lack of buyers for the Company's
shares, the solution is harder to achieve.
(b) Source: Winterflood (data provided by Refinitiv).
The Board believes that there are three important factors which can narrow the discount: renewed investor
enthusiasm for emerging market equities after a period in the doldrums (investor psychology is notoriously cyclical);
a company structure with investment performance that makes it attractive relative to other investment vehicles; and
an enhanced profile through marketing that increases awareness amongst new investors.
Two of these three factors, the performance of the Company and its marketing efforts, have been strong. The
Portfolio Managers, Chetan Sehgal and Andrew Ness, have delivered outperformance. This year, the Company
received an Income and Growth award rating from Kepler Investment Trust Intelligence. Kepler's annual ratings are
intended to highlight investment trusts that have demonstrated attractive and consistent performance over the long
term, using the unique advantages of the investment trust structure to benefit shareholders.
Our Manager has also been active in promoting TEMIT's shares to existing and potential investors via a variety of
traditional and online channels. In recent years they have made great advances particularly in digital marketing.
Additionally, our Portfolio Managers participate in a range of activities, including presentations to investor groups
and meetings with key journalists. The Board was pleased again to be recognised by the AIC in its awards for
shareholder communication in September 2023, for the second consecutive year.
So the missing factor to a natural and positive re-rating for our shares is a return to favour for emerging markets
more generally. We cannot influence this but our objective is to continue to lay the foundations through appropriate
structural mechanisms, strong performance and ongoing marketing, so that the Company can enjoy the benefit of
buying interest when sentiment towards emerging markets improves.
Shareholder returns
There are a number of levers at the disposal of the Board which have been put in place to make the shares of the
Company relatively more attractive: a commitment to at least maintain the dividend; a share buyback programme for
up to £200.0 million; a further conditional tender offer; and amendments to the Company's management fee
arrangements.
Dividends
An interim dividend of 2.00 pence per share was paid at the half year stage and the Board is proposing an unchanged
final dividend of 3.00 pence per share, taking the total for the year to 5.00 pence per share. The proposed full year
dividend yield will amount to 3.2%, based on the share price as at 31 March 2024. This compares with net revenue
earnings for the year under review of 5.18 pence per share, which was a little lower than the preceding year.
Over the course of the last five years, including this year's proposed final dividend, the Company has paid
aggregated dividends
(a)
of £249.0 million or 23.92 pence per share to shareholders. Over five years, we will then
have returned circa 15.6% of the share price on 31 March 2019 to shareholders in dividends.
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(a) Includes special dividends of 0.52 pence per share for the year ended 31 March 2020 and 2.00 pence per share
for the year ended 31 March 2021 which related respectively to an extraordinary distribution from Brilliance
China Automotive and a tax reclaim.
The Company has accumulated significant distributable reserves over the years and the Board intends to at least
maintain the dividend at the current level of 5.00 pence per share for next five years and will, if necessary, use
reserves to do so. This equates to a total minimum distribution over the next five years of £278.7 million on the basis
of the number of shares in issue as at 31 March 2024, and equivalent to 16.2% of the Company's market
capitalisation as at 31 March 2024.
Share buybacks
The Board does not believe that share buybacks narrow the discount to NAV in anything other than the short term.
However, the Board remains steadfast in its view that share buybacks are important in providing liquidity to
shareholders and enhancing returns. In the Board's view an investment manager needs a very high level of
conviction to purchase a new holding when shares of the Company can be purchased at a wide discount to NAV. In
total over the last year, £65.9 million was allocated to share buybacks, representing 3.8% of the outstanding share
capital. All buybacks were executed at a discount to the prevailing NAV and this resulted in an increase in the NAV
of 0.54% to the benefit of continuing shareholders.
Over the past five years, the Company has purchased 142.3 million
(a)
shares for £218.2 million. In aggregate these
share buybacks resulted in an increase in the NAV of 1.5% to the benefit of continuing shareholders.
(a) Adjusted for the sub-division of each share into five shares on 26 July 2021.
In view of the wide discount that the shares are trading to their underlying NAV the Board has decided that it will
substantially increase the rate of share buybacks and, if the discount persists, intends to repurchase up to £200.0
million of shares at open market value over the next 12 to 24 months and continue at a suitable rate as required
thereafter. This should enhance returns for continuing shareholders and provide improved liquidity for those wishing
to realise their investment.
Conditional tender offer
31 March 2024 also marked the point at which we measured performance over five years for our conditional tender
offer. In 2019, the Board announced that if the NAV total return over five years did not exceed that of the
benchmark index, then the Company would implement a conditional tender offer for up to 25% of the issued share
capital at a price equal to the net asset value less two per cent (less the costs of the tender offer). The Board is
pleased to report that the NAV total return over the period was +23.4%, which was 8.3 percentage points higher than
that of the benchmark index, representing annualised outperformance of over 1.6% per annum. As a result, the
conditions for triggering the tender offer were not met.
The Board and Manager believe in active management to generate excess return. As a consequence, we have
decided to offer a new conditional tender. If over the five-year period from 31 March 2024 to 31 March 2029 the
Company's net asset value total return fails to exceed the benchmark total return then the Board will put forward
proposals to shareholders to undertake a tender offer for up to 25 per cent of the outstanding share capital 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). As with the previous conditional tender offer, any tender offer will also
be conditional on shareholders approving the continuation vote in 2029 and would take place following the
Company's 2029 annual general meeting ('AGM').
Fees
The Board recognises the commitment of its Manager to provide on-the-ground presence across global emerging
markets. It also recognises the industry-wide pressure on management fees. The Board's measured response is a
phased change in fees between now and mid-2026.
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Current fee rates:
• 1% of the first £1 billion of net assets;
• 0.75% of net assets between £1 billion and £2 billion; and
• 0.5% of net assets over £2 billion.
With effect from 1 July 2024 and 1 July 2025, the middle rate band for net assets between £1 billion and £2 billion
will reduce to 0.7% and then 0.6% respectively.
With effect from 1 July 2026:
• 1% of the first £1 billion of net assets;
• 0.5% of net assets over £1 billion.
Based on the current net asset value of approximately £2 billion, this will result in the blended fee rate reducing
from approximately 0.875% today to 0.75% in 2026.
Over the last five years in aggregate £467.2 million has been returned to shareholders through dividends and share
buybacks, some 22.1% of net assets at the start of the five-year period. If the tender offer had been triggered and
taken up this would have risen to £965.7 million or the equivalent of some 45.6% of net assets at the start of the
period.
Going forward, we believe that the Investment Managers are well positioned to deploy capital in emerging market
equities to the benefit of Company shareholders. The Board believes that the measures announced above represent
an even greater commitment over the next five years to underpin the returns to shareholders through dividends, a
more aggressive buyback programme, a new conditional tender offer, and lower fees.
Gearing
The Board believes that gearing is one of tools that closed ended investment vehicles like TEMIT can use to
differentiate themselves from open ended vehicles. At times of high conviction market exposure can be increased
through increasing gearing. The Board is currently reviewing our approach to gearing with Franklin Templeton.
Historically, TEMIT had two facilities: a fixed rate loan of £100.0 million at an attractive rate of interest which is set
to mature in January 2025 and a £120.0 million revolving credit facility. When the latter facility matured in January
2024 the Board opted not to renew it because at the time the Investment Managers were not using the facility and
interest rates had risen substantially since the facility was first set up. The Board and Investment Managers are
exploring alternative forms of gearing such as Contracts for Difference and other derivatives. We will communicate
with shareholders when this review is concluded.
Stewardship
Since TEMIT was launched in the late 1980s, our Investment Managers have had a strong focus on the corporate
governance of investee companies, which we believe has helped many companies to understand and attract
international investors. Details of the Investment Managers' process are included in the full Annual Report, along
with a summary of the approach to Environmental, Social and Governance ('ESG') considerations. While
sustainability has garnered increasing attention in recent years, it has always represented one element of a multi-
faceted investment process. To comprehensively illustrate the wide range of analysis and activities undertaken, two
years ago the Investment Managers started to produce an annual dedicated Stewardship Report for TEMIT, and this
initiative continues to receive a favourable response from shareholders and industry experts. This year's report was
published simultaneously with this Annual Report and is available to download at www.temit.co.uk.
The Board
Following my appointment the Board comprises four men and two women, a composition that we recognise falls
below best practice in gender diversity. We intend to address this as Directors retire in due course, prioritising the
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enhancement of the Board's diversity while remaining attentive to the best interests of our shareholders. Our aim is
to ensure that the Board maintains a robust blend of skills, knowledge, and experience.
Annual General Meeting and continuation vote
I am pleased to extend an invitation to all shareholders to join us for our AGM on 11 July 2024 at Stationers' Hall in
London. We look forward to welcoming those shareholders who are able to come to the meeting.
The Company's Articles of Association stipulate that the Board must seek shareholders' approval every five years for
its continuation, and a continuation vote is scheduled for this year's AGM. This vote coincides with the
35
th
anniversary of TEMIT's launch. As mentioned in the discussion of the conditional tender offer above,
performance over the last five-yearly cycle has been strong. Furthermore, over the 35 years since TEMIT's inception
returns have been exceptional. The NAV total return has been over 40-fold, compared with a 17-fold return for our
benchmark index. In light of the long-term track record and the strength of the investment management team, the
Board unanimously recommends that shareholders vote in favour of continuation.
Whether you intend to attend the meeting in person or not, you are strongly encouraged to submit your votes on the
AGM resolutions in advance of the meeting. Submitting votes by proxy does not preclude you attending the meeting
or changing your vote if you do subsequently decide to attend the AGM. If you have any questions, please send
these by email to temitcosec@franklintempleton.com or via www.temit.co.uk./investor/contact-us in advance of the
meeting. You are also welcome to use these contact details should you have a question at any other time. Any
questions that we receive will be considered and, if appropriate, responses will be provided on our website
www.temit.co.uk.
Outlook - risks and opportunities
While there has been a significant deterioration in the geopolitical environment, the Board considers that the equity
markets in which TEMIT invests are less expensive than those of developed markets, while the prospects for
economic growth in emerging markets are superior. Those two factors should make emerging market equities very
appealing for long-term investment.
The most immediate challenge is China, which is around 25% of our benchmark index. The combination of
increasing tensions with the US, changes in domestic policy and the poor performance of the Chinese economy are
together causing concerns about the wisdom of investment in China.
Given the significant exposure of our portfolio to China the Board met in China and Hong Kong in March 2024 with
some of the analysts who assist our Portfolio Managers. Franklin Templeton has extensive and impressive research
resources in the region and provided the Board with deep insights into the range of investment opportunities that
they are considering. The Investment Managers' view, which we share, is that while these risks are very real, asset
prices are substantially discounted for them.
Additionally, the Board and Investment Managers believe that China is probably too integrated into the global
economy for economic sanctions to profit any party. However, the risks, while remote, are large and it would be
imprudent to ignore them.
At the point investors perceive these risks to have moderated, it is reasonable to assume that shareholders will once
again be rewarded with the returns they used to earn from investing in the most exciting, fastest growing economies
in the world.
Angus Macpherson
Chairman
7 June 2024
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The investment managers
TEMIT's Investment Management is delegated to Franklin Templeton Investment Management Limited ('FTIML')
and Templeton Asset Management Ltd ('TAML') (together, the 'Investment Managers'). Portfolio Managers from
FTIML and TAML form part of the wider Franklin Templeton Emerging Markets Equity group ('FTEME'). FTEME
have managed the portfolio since TEMIT's inception and are pioneers in emerging markets equity investing. They
bring more than 35 years of experience and local knowledge from over 70 investment professionals, based in
14 countries around the world.
The team has a collaborative investment process where all analysts and portfolio managers work together to
contribute to investment returns. They meet regularly, both formally and informally, to debate and exchange ideas,
investment themes and enrich their understanding of the markets by drawing on local insights to build a global
perspective and context to their thinking. They also benefit from the broader resources available throughout Franklin
Templeton.
The Portfolio Managers for TEMIT, Chetan Sehgal (lead) and Andrew Ness, are senior executives in FTEME.
Portfolio Managers
Chetan Sehgal
CFA
Chetan is the lead Portfolio Manager of TEMIT and is based in Singapore.
As part of his broader responsibilities within FTEME, Chetan is also the director of portfolio management. In this
capacity, he is responsible for the overall Global Emerging Markets strategies, providing guidance and thought
leadership, co-ordinating appropriate resources and coverage, and leveraging the group's expertise to add value across
products within the strategies.
Chetan joined Franklin Templeton in 1995 from Credit Rating Information Services of India Ltd, where he was a
senior analyst.
Chetan holds a B.E. Mechanical (Hons) from the University of Bombay and a postgraduate diploma in Management
from the Indian Institute of Management in Bangalore, where he specialised in finance and business policy and
graduated as an institute scholar. Chetan speaks English and Hindi and is a Chartered Financial Analyst ('CFA')
Charterholder.
Andrew Ness
ASIP
Andrew Ness is a Portfolio Manager of TEMIT and is based in Edinburgh.
Prior to joining Franklin Templeton in September 2018, Andrew was a Portfolio Manager at Martin Currie. He began
his career at Murray Johnstone in 1994 and worked with Deutsche Asset Management in both London and New York
before joining Scottish Widows Investment Partnership in 2007.
Andrew holds a B.A. (Hons) in Economics and an MSc in Business Economics from the University of Strathclyde in
the UK. He is an Associate Member of the UK Society of Investment Professionals and a member of the CFA Institute.
The investment managers' report
Review of performance
(a)
Emerging markets advanced over the 12 months ended 31 March 2024. The macroeconomic environment, however,
has been challenging, given ongoing geopolitical conflicts and high interest rates. The information technology sector
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was one of the key drivers of returns during the period, led by expectations of a recovery in demand. The emergence
of widely-available artificial intelligence ('AI') has been a catalyst for growth in certain segments of the emerging
markets economies such as South Korea and Taiwan. The MSCI Emerging Markets Index returned +5.9% for the
12-month period under review, while TEMIT delivered a net asset value total return of +7.9% (all figures are net
total return in pounds sterling)
(b)
. Full details of TEMIT's performance can be found in the full Annual Report.
(a) All benchmark performance as per the MSCI Emerging Markets (Net Dividends) Index.
(b) See Glossary of Alternative Performance Measures in the full Annual Report.
By region, emerging markets in Latin America produced positive returns and, overall, fared better than markets in
Asia and EMEA (Europe, the Middle East and Africa). Latin America saw an improvement in its general economic
environment, giving rise to interest-rate cuts by central banks. Equities in the EMEA region also rose. While higher
oil prices, driven by supply concerns, provided some support to Middle Eastern equities, concerns about the Israel-
Hamas conflict and a higher-for-longer interest-rate environment in the United States limited gains. Emerging
market Asia also advanced, but at a much slower pace than its above-mentioned peers. A slower-than-expected
recovery in the information technology sector featured for most of 2023, impacting the technology-heavy countries
of South Korea and Taiwan, but optimistic growth projections due to AI spurred investor interest. India logged gains
amid improving macroeconomic indicators and robust corporate earnings, but concerns over China's recovery
continued to weigh on the region.
China/Hong Kong
TEMIT's largest allocation by country was in stocks listed in China or Hong Kong, although the allocation was
lower than the proportion of China/Hong Kong in the benchmark index. Chinese equities fell by almost 19% in
sterling terms over the 12-month period. Concerns about the country's slow consumption recovery and geopolitical
tensions between China and the West impacted investor sentiment. Its property sector woes, plagued by liquidity
worries and a lack of demand, also featured heavily during the reporting period. A downgrade of China's credit
outlook and lack of strong stimulus from the China Economic Work Conference and National People's Congress
pressured Chinese equities further. Government efforts to stabilise the equity markets and regulatory intervention to
shore up investor sentiment were insufficient to reverse the losses that the Chinese equity market had suffered.
While being alert to the risks of investing in China we do, however still see the potential for positive returns in
China and opportunities in Chinese equities. In particular the internet industry, to which the portfolio has sizeable
exposure, has adjusted to the new operating environment as China eased its regulatory crackdown on the industry.
The potential for the Chinese government's policies to support their economy is now more evident, and we believe
that this may be a driver of performance.
South Korea
TEMIT's second-largest market position was South Korea, where the portfolio had a higher allocation than the
benchmark. South Korean equities rose by more than 11% during the reporting period, as the technology-heavy
market's earlier struggles due to weakening demand for technology products were quickly overturned by a rally in
the information technology sector. Expectations of a recovery in the semiconductor cycle and an improving outlook
for technology stocks, particularly from increased interest and enduring optimism around AI, propelled gains. A
short-selling ban and the country's Corporate Value-Up Programme, which plans to encourage and support
companies to return more capital to shareholders and improve governance to reduce the valuation discount for South
Korean companies, also supported the outperformance of the country's equity market. South Korea is less exposed to
geopolitical risks as compared to China, and the country is home to several companies that are broadly expected to
benefit from the secular trends of digitalisation and decarbonisation, such as technology-related companies, and
firms in the value chain of electric vehicle ('EV') production.
Taiwan
The Taiwanese market also performed well, ending the reporting period with a gain of more than 25%. The
technology-heavy and export-oriented country experienced a recovery in its technology exports, which lifted
performance together with AI-induced growth expectations. However, Taiwan's central bank went against global
trends and raised benchmark interest rates in March 2024. TEMIT's allocation to Taiwan is marginally higher than
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the benchmark, with a difference of less than 1%. The portfolio's exposure to the country is largely attributable to its
semiconductor industry and TEMIT's largest portfolio holding, Taiwan Semiconductor Manufacturing Company
('TSMC'). Besides being an essential component of electronic devices used in various sectors and industries, the
emergence of AI should drive further demand for TSMC's advanced chips. We maintain a positive long-term view
on Taiwan's semiconductor industry.
India
India was TEMIT's fourth-largest exposure at the end of March 2024. Indian equities rose by nearly 34% over the
12-month period, benefitting from reducing inflation, improving economic indicators and strong corporate earnings.
Favourable results for the incumbent government in state elections and expectations of relatively high gross
domestic product ('GDP') and corporate earnings growth also boosted the country's equity market. India has two
growth drivers: strong domestic consumption and infrastructure investments. While higher energy prices remain a
risk to India's near-term outlook, the diversification of its power sources should eventually ease pressure from
imported energy and inflation in the long term. India also stands to benefit from rising geopolitical tensions, where
the United States, the European Union and Japan are adopting a 'derisking' strategy by realigning their supply chains
and strengthening bilateral relations with their allies. India is itself a solution to manufacturers in developed markets
seeking to diversify their supply chains, underpinned by its sizeable and youthful population and positive
government policies leading to infrastructure investments (thus attracting more foreign direct investments).
Brazil
Equities in Brazil experienced some volatility within the 12 months under review but ultimately finished the
reporting period with gains of more than 24%. For the first six months of the period, Brazilian equities reacted
favourably to improvements in the country's macroeconomic environment, where inflation reached a new 12-month
low and the country experienced stronger-than-expected GDP growth. While these two datapoints continued to
improve thereafter, the country's inflation rose slightly more than consensus expectations in February 2024, and
sequential GDP growth in the last quarter for 2023 stagnated. However, the Brazilian government displayed
confidence in the country's macroeconomic outlook, expecting economic growth to exceed 2% in 2024 with
inflation moderating to the midpoint of the central bank's target range. The approval of the country's new fiscal
framework and the subsequent commencement of the central bank's interest rate easing cycle overcame some
negativity stemming from concerns about changes to the country's taxation regulations, which could potentially
impact corporate earnings. Interest-rate cuts also helped to drive the performance of the country's equity market.
Investment strategy, portfolio changes and performance attribution
The following sections show how TEMIT's exposure to individual stocks, to regions and to countries accounted for
its investment performance over the period. We continue to emphasise that our investment process selects companies
based on their individual attributes and ability to generate risk-adjusted returns for investors, rather than taking a high-
level view of sectors, countries, or geographic regions to determine our investment allocations.
Our investment style is centred on finding companies with 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.
We continue to utilise our research-based and active approach to help us to find companies that have high standards
of corporate governance, respect their shareholders and also allow us to understand the local intricacies that may
determine consumer trends and habits. Utilising our large team of analysts, we aim to maintain close contact with the
board and senior management of existing and potential investments and believe in engaging constructively with our
investee companies.
All of these factors require us to conduct detailed analyses of potential returns versus risks with a time horizon of
typically five years or more.
Our well-resourced, locally based teams remain a key competitive advantage. This local presence allows us to
understand business models, competitive dynamics, and supply chain issues. We have also managed to get insights
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into regulatory conversations and management capabilities, which are factored into our analysis. We view our
locally based teams, which are armed with vast knowledge of the respective countries' macroeconomic issues and
views on the ground as vital sources of input into the investment process. This complements our global presence,
which allows us to analyse short-term uncertainties and determine if these are reflective of cyclical or structural
trends.
In the portfolio, we remain positioned in long-term growth themes including consumption of premium goods and
services and the use of digital devices, health care and technology. We focus on companies reflecting our philosophy
of owning good quality businesses, with long-term sustainable earnings power and share prices at a discount to
intrinsic worth. We see high levels of leverage as a risk and continue to avoid companies with weak balance sheets.
Performance Attribution Analysis %
Year to 31 March
2024 2023 2022 2021 2020
Net Asset Value Total Return
(a)
7.9 0.8 (17.3) 54.5 (11.2)
Expenses Incurred 1.0 1.0 1.0 1.0 1.0
Gross Total Return
(a)
8.9 1.8 (16.3) 55.5 (10.2)
Benchmark Total Return
(a)
5.9 (4.9) (7.1) 42.3 (13.5)
Excess return
(a)
3.0 6.7 (9.2) 13.2 3.3
Stock Selection 0.3 7.3 (10.2) 6.0 (2.0)
Sector Allocation 2.1 (0.4) 0.8 6.5 3.3
Currency 0.3 (0.2) 0.2 0.6 1.8
Share Buyback Impact 0.5 0.2 0.0 0.3 0.4
Residual Return
(a)
(0.2) (0.2) - (0.2) (0.2)
Total Contribution 3.0 6.7 (9.2) 13.2 3.3
Source: FactSet and Franklin Templeton.
(a) A glossary of alternative performance measures is included in the full Annual Report.
This table sets out the results of a detailed analysis of the returns produced by the TEMIT portfolio, how this
compares with the theoretical returns available from the benchmark index and factors affecting the comparison with
the returns of the benchmark index.
Top 10 Contributors and Detractors to Relative Performance by Security (%)
(a)
Top Contributors
Contribution to
portfolio relative
to MSCI Emerging
Markets Index Top Detractors
Contribution to
portfolio relative
to MSCI Emerging
Markets Index
Overweight
(TEMIT holds more
than the index
weight)
TSMC 1.3
Guangzhou Tinci
Materials Technology
(1.2)
Petroleo Brasileiro 1.3 Alibaba (1.0)
Samsung Life Insurance 1.1 WuXi Biologics (0.8)
MediaTek 0.8 Samsung SDI (0.7)
Brilliance China
Automotive 0.8 Genpact (0.6)
Zomato 0.7 Prosus (0.6)
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Itaú Unibanco 0.6 One97 Communications (0.5)
ICICI Bank 0.6 Baidu (0.5)
Techtronic Industries 0.5 Daqo New Energy (0.5)
NAVER (0.4)
Underweight POSCO 0.8
(TEMIT has no holding or
a holding smaller than the index weight)
(a) For the period 31 March 2023 to 31 March 2024.
This table sets out the results of a detailed analysis of the returns produced by individual securities in the TEMIT
portfolio, and how this has affected the overall returns produced by the portfolio compared with theoretical returns
available from the benchmark index.
TSMC is the world's largest semiconductor foundry company. Its chips are used in a wide variety of solutions
including personal computers, automotive and industrial equipment, and smartphones. An optimistic outlook
coupled with in-line or better-than-expected sales and earnings data released during the period supported TSMC's
share price. Expectations of healthy revenue growth driven by demand from AI applications, as well as recovery in
the demand for smartphones and personal computers, further supported sentiment in the stock.
Finishing higher over the 12-month period were the shares of Petroleo Brasileiro ('Petrobras'). Its shares generally
remained on an upward trend over most of the period. The company announced a new shareholder return policy and
raised gasoline and diesel prices, which alleviated some investor concerns regarding its capital allocation and pricing
policy. An increase in crude oil prices and improving investor confidence regarding policy risks continued to
support its share price well. However, dividends in March 2024 missed consensus expectations, which led to a
moderate fall in the share price. We continue to favour Petrobras in the oil and gas industry, given its large cash
generation and high dividend yields.
The shares of Samsung Life Insurance also performed well over the period, logging most of its gains in the first
quarter of 2024. Samsung Life Insurance is the leading life insurance company in South Korea and owns a
meaningful stake in Samsung Electronics. Its share price rallied in the latest quarter amid the country's Corporate
Value-Up Programme and hopes that this would lead to better shareholder return policy.
Guangzhou Tinci Materials Technology, a China-based producer of electrolytes for EV batteries, saw its stock
price fall over the period. Earnings for the company have been impacted due to an oversupply in the industry and
declining lithium prices. Slower growth in EV demand as well as an increase in industry capacity for electrolytes
have led to higher competition for the company. The company remains among the lowest cost producers in the
industry.
The shares of Alibaba, a Chinese e-commerce company, also declined and rendered it a key detractor. Investor
concerns about a slower demand recovery, higher competition, and the lack of strategic clarity after the company
cancelled and/or delayed plans for a spinoff and initial public offering ('IPO') of some of its key businesses drove its
share price lower. While the stock has seen significant derating over the past couple of years, the company continues
to generate significant cash flows. The company has a strong buyback policy and we expect returns from here to be
supported by such corporate actions.
WuXi Biologics is a Chinese specialist biotechnology contract development and manufacturing organisation. The
share price declined in the later part of last year after the company made a downward revision to its guidance. The
release of a draft US Senate bill, which aims to sanction WuXi AppTec (not a portfolio holding) and related
companies led to a further decline in the share price. The company has denied the allegations and is engaging with
various stakeholders. While there is uncertainty, we believe there is a pathway to avoid sanctions and are engaged
with the company.
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Contributors and Detractors to Relative Performance by Sector (%)
(a)
Top Contributors
Contribution to
portfolio relative
to MSCI
Emerging
Markets Index
Top
Detractors
Contribution to
portfolio relative
to MSCI
Emerging
Markets Index
Overweight
(TEMIT holds more than the index
weight)
Information
Technology
1.5 Health Care (0.4)
Communication
Services
0.4
Financials 0.3
Industrials 0.1
Underweight
(TEMIT has no holding or
a holding smaller than the index
weight)
Energy 0.6 Utilities (0.3)
Real Estate 0.2 Materials (0.1)
Consumer
Discretionary
0.1
Consumer Staples 0.0
(a) For the period 31 March 2023 to 31 March 2024.
This table sets out the results of a detailed analysis of the returns produced by the industrial sectors of the holdings
in the TEMIT portfolio, and how this has affected the overall returns produced by the portfolio compared with
theoretical returns available from the benchmark index.
A favourable overweight allocation in the information technology sector added to TEMIT's performance relative to
its benchmark index during the 12-month period under review. TSMC (described above) and MediaTek (a Taiwan-
based chip designer for smartphones and other technology devices) are examples of companies that aided relative
returns. Holdings in the energy sector were also a source of TEMIT's outperformance of its benchmark, with
Petrobras providing notable strength within the sector. Stock selection in the communication services sector also
contributed to relative results.
In contrast, holdings in the materials, health care and utilities sectors detracted from relative performance,
alongside an underweight allocation in utilities and materials. While the weakness in the materials sector was largely
due to an overweight allocation in Guangzhou Tinci (described above), a weak property market in China also
affected several related China-based portfolio holdings such as Beijing Oriental Yuhong Waterproof Technology, a
producer of waterproof materials and engineering solutions used in real estate and China Resources Building
Materials Technology, which is engaged in the production and sales of cement and aggregates. In the health care
sector, WuXi Biologics was a key laggard (described above).
Contributors and Detractors to Relative Performance by Country (%)
(a)
Top Contributors
Contribution to
portfolio relative
to MSCI
Emerging
Markets Index Top Detractors
Contribution to
portfolio relative
to MSCI
Emerging
Markets Index
Overweight
(TEMIT holds more than the index
weight)
Taiwan 2.2 United States (0.4)
South Korea 1.8 Cambodia (0.2)
Brazil 1.4
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Russia 0.4
Underweight
(TEMIT has no holding or
a holding smaller than the index
weight)
South Africa 0.2 India (2.4)
Poland (0.3)
China/Hong
Kong (0.2)
(a) For the period 31 March 2023 to 31 March 2024.
This table sets out the results of a detailed analysis of the returns produced by the country of risk of the holdings in
the TEMIT portfolio, and how this has affected the overall returns produced by the portfolio compared with
theoretical returns available from the benchmark index.
By markets, holdings in Taiwan, South Korea and Brazil were beneficial, adding on to the positive contribution
from overweight allocations. Once again, TSMC and MediaTek aided relative returns in Taiwan. While Samsung
Life Insurance provided great support to South Korea's relative performance, steel product manufacturer POSCO
played a supporting role. POSCO's share price rallied amid investor optimism about the company's increased longer-
term targets for its battery materials business. In Brazil, besides Petrobras, retail-focused bank Itaú Unibanco also
helped relative performance due to financial results that were generally in-line or exceeded consensus expectations
for its first to third fiscal quarters of 2023.
Russia also contributed to relative returns. All Russian securities have been valued at zero since 4 March 2022.
However, during the first six months of the financial year, an opportunity arose to dispose of TEMIT's holding in
Yandex (Russia's largest search engine, which also offers a wide range of other online services in areas such as e-
commerce) via an over-the-counter trade, which led to Russia being a top contributor to relative performance. The
two remaining Russian securities, LUKOIL and Sberbank of Russia, continue to be fair valued at zero throughout
the year.
Conversely, India was the top detractor from relative returns due to a combination of stock selection and an
underweight exposure. Financial companies such as One97 Communications and HDFC Bank were among reasons
for the relative underperformance. Guangzhou Tinci, Alibaba, and WuXi Biologics (all discussed above) were large
drags on returns in China. An off-benchmark allocation in the United States dragged performance lower by a
decline in the share price of Genpact, a US-listed technology services company that derives much of its earnings
from services provided from India.
Top 10 Holdings
As at 31 March 2024
Portfolio
Benchmark
%
Over/(Under)
weight % Holding £'000 %
TSMC
(a)
252,050 12.6 8.3 4.3
TSMC is the world's largest semiconductor foundry
company based in Taiwan. The emergence of AI and
expectations of a recovery in the demand for technology
products contributed to a turnaround in TSMC's stock
price. Driven by structural growth in demand
for computing and the company's technology leadership,
we remain confident in the resilience of the TSMC
business model.
Samsung Electronics 133,737 6.7 4.6 2.1
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Samsung Electronics is one of the largest memory
semiconductor manufacturers in the world. It also
manufactures a wide range of consumer and industrial
electronics and equipment. The memory sector is currently
seeing an upturn in its fortunes driven by the rapid increase
in demand for high bandwidth memory which is used in AI
applications. With the migration to more complex
technologies required for the more advanced products, the
industry has also seen supply curtailment which augurs
well for the prospects of commodity memory products as
well. We continue to believe that memory companies will
be a significant beneficiary of the AI revolution and that
Samsung Electronics will remain a leader in this industry.
ICICI Bank 102,879 5.2 0.9 4.3
ICICI Bank is a leading India-based private sector bank, it
was the portfolio's third largest holding. The share price
has seen sustained appreciation over the past years and the
bank has been a key contributor to overall fund
performance. This highlights the value of our longer-term,
fundamentally driven investment process, which we
continue to employ. The bank with its strong franchise
remains well positioned to benefit from the India growth
story.
Alibaba 78,403 3.9 2.0 1.9
Alibaba is the leading e-commerce company in China.
While intensified competition and weak macroeconomic
performance in China has impacted the growth outlook for
its e-commerce business, its other businesses such as
cloud, fintech, local commerce and international e-
commerce have significant potential. These could offer
either growth opportunities or the possibility for
improvement in profitability. While the stock
has experienced a significant derating over the past couple
of years, the company continues to generate significant
cash flows. The company has a strong buyback policy and
we expect returns from here to be supported by corporate
actions.
Tencent 76,441 3.8 3.6 0.2
Tencent is the largest gaming, communication, and social
entertainment platform in China. It has a major presence in
online games, digital advertising, video, music and live-
streaming, fintech and other businesses such as cloud
computing. The company should be a key beneficiary of
AI across its business segments. The company seems to
have adjusted well to the changing regulatory environment
and slowing Chinese economy and continues to
deliver strong cash flows, albeit at a much slower rate of
growth. Tencent has also significant public and private
investments in China and globally. Trading at attractive
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valuations, the company has been proactively undertaking
share buybacks, which further enhances earnings per share.
Prosus 63,881 3.2 - 3.2
Prosus is a leading global investment company and the
largest shareholder of Tencent, a Chinese technology
company. We see Prosus as a good proxy for Tencent
exposure and is available at a discount to its net asset value
('NAV'). The company also has holdings in leading food
delivery platforms globally. Management's effort to narrow
the share price discount to NAV via buybacks should also
support returns.
Samsung Life Insurance 59,216 3.0 0.1 2.9
Samsung Life Insurance is the largest life insurance
company in South Korea and is growing in the field of
health insurance. With the increase in interest rates in the
recent past and the steady move to more health-related
products the company has been able to improve
its profitability. It also owns a majority stake in the credit
card business of the Samsung Group and has smaller stakes
in the securities and the fire and marine businesses. Most
notably it has a significant stake in Samsung Electronics, a
world leading company which is currently benefitting from
an upswing in the prospects of its main memory business.
The Corporate Value-Up programme initiated by the South
Korean government should provide incentives to improve
distributions to shareholders.
Petrobras 59,136 3.0 0.9 2.1
Petrobras is a leading oil and gas company in Brazil,
recognised worldwide for its oil exploration in ultra-deep
waters. It is a low-cost producer and has long life oil
reserves. It remains our preferred pick in the oil and gas
industry globally, given its large cash generation and high
dividend yield.
NAVER 53,165 2.7 0.3 2.4
NAVER is a South Korean internet search and advertising
company. It also has business interests in e-commerce,
financial services, and entertainment content. We believe
that NAVER is in a good position to build a thriving
ecosystem integrating e-commerce, payments and digital
content based on its solid foundation in search and
advertising. Its leadership position in AI solutions in South
Korea should also provide the company with additional
cost efficiencies and growth opportunities.
MediaTek 51,090 2.6 0.8 1.8
MediaTek, listed in Taiwan, is a world-leading chip
designer for smartphones and other technology devices. It
should be a key beneficiary from growth in demand for
chips from IoT ('Internet of Things'), automotive,
industrial, and wi-fi applications. It should also be
a beneficiary of the proliferation of new AI applications in
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various technology devices, which could require on-device
AI computing.
(a) At time of investment this holding was less than 12% of the Company's assets.
Portfolio Changes by Country
Total Return in Sterling
Country
31 March 2023
Market Value
£m Purchase £m Sales £m
Market
Movement £m
31 March 2024
Market Value
£m
TEMIT
%
MSCI
Emerging
Markets Index
%
China/Hong
Kong 616 148 (126) (148) 490 (21.0)
(18.8)
South Korea 398 107 (140) 61 426 18.2 11.8
Taiwan 316 32 (91) 101 358 41.7 25.6
India 226 66 (87) 42 247 17.3 33.9
Brazil 155 24 (26) 33 186 36.8 24.3
United States 67 15 (16) (4) 62 (5.8) -
Thailand 49 10 - (10) 49 (16.7) (18.2)
Mexico 30 34 (25) 9 48 17.5 16.2
Hungary 20 11 (3) 2 30 20.7 44.2
South Africa 13 12 - (5) 20 (24.6) (7.6)
Other 103 5 (42) 13 79 - -
Total
Investments 1,993 464 (556) 94 1,995
Portfolio by Fair Value
Holding Sector Fair Value £'000
% of
Portfolio
Brazil
Petrobras
(a)
Energy 59,136 3.0
Itaú Unibanco
(a)(b)
Financials 44,608 2.2
Banco Bradesco
(a)(b)
Financials 33,418 1.7
Vale Materials 25,890 1.3
Oncoclinicas do Brasil Servicos Medicos Health Care 8,132 0.4
Hypera Health Care 8,122 0.4
TOTVS Information Technology 7,032 0.3
186,338 9.3
Cambodia
NagaCorp Consumer Discretionary 3,772 0.2
3,772 0.2
Chile
Banco Santander Chile
(b)
Financials 18,105 0.9
18,105 0.9
China/Hong Kong
Alibaba
(c)
Consumer Discretionary 78,403 3.9
Tencent Communication Services 76,441 3.8
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Prosus
(d)
Consumer Discretionary 63,881 3.2
Techtronic Industries Industrials 39,071 2.0
China Merchants Bank Financials 37,137 1.9
Baidu Communication Services 28,067 1.4
Guangzhou Tinci Materials Technology Materials 20,220 1.0
Ping An Insurance Financials 16,424 0.8
Uni-President China Consumer Staples 15,115 0.8
Brilliance China Automotive Consumer Discretionary 14,774 0.7
NetEase Communication Services 14,749 0.7
Meituan Consumer Discretionary 12,547 0.6
Daqo New Energy
(b)
Information Technology 11,999 0.6
Wuxi Biologics Health Care 11,254 0.6
Haier Smart Home Consumer Discretionary 9,072 0.5
Ping An Bank Financials 8,259 0.4
H&H Group Consumer Staples 6,979 0.3
Beijing Oriental Yuhong Waterproof Technology Materials 4,507 0.2
COSCO SHIPPING Ports Industrials 4,453 0.2
China Resources Building Materials Technology
(e)
Materials 3,582 0.2
China Resources Land Real Estate 3,412 0.2
Chervon Holdings Consumer Discretionary 2,526 0.1
Greentown Service Group Real Estate 2,390 0.1
BAIC Motor Consumer Discretionary 2,072 0.1
Weifu High-Technology Consumer Discretionary 1,684 0.1
JD.com Consumer Discretionary 1,255 0.1
490,273 24.5
Hungary
Gedeon Richter Health Care 21,486 1.1
Wizz Air Holdings Industrials 8,979 0.5
30,465 1.6
India
ICICI Bank Financials 102,879 5.2
HDFC Bank Financials 44,499 2.2
Infosys Technologies Information Technology 21,760 1.1
Bajaj Holdings & Investments Financials 17,004 0.8
Federal Bank Financials 15,183 0.8
ACC Materials 14,455 0.7
Zomato Consumer Discretionary 13,450 0.7
One97 Communications Financials 12,376 0.6
Hindalco Industries Materials 4,981 0.2
246,587 12.3
Indonesia
Astra International Industrials 10,459 0.5
10,459 0.5
Kenya
East African Breweries Consumer Staples 592 0.0
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592 0.0
Mexico
Grupo Financiero Banorte Financials 44,681 2.2
Nemak Consumer Discretionary 3,541 0.2
Grupo Aeroportuario del Centro Industrials 0.0 0.0
48,222 2.4
Peru
Intercorp Financial Services Financials 8,150 0.4
8,150 0.4
Philippines
BDO Unibank Financials 10,247 0.5
10,247 0.5
Russia
LUKOIL
(f)
Energy 0.0 0.0
Sberbank of Russia
(f)
Financials 0.0 0.0
0.0 0.0
South Africa
Netcare Health Care 13,324 0.7
Discovery Financials 6,774 0.3
20,098 1.0
South Korea
Samsung Electronics Information Technology 133,737 6.7
Samsung Life Insurance Financials 59,216 3.0
NAVER
Communication
Services 53,165 2.7
LG Industrials 43,201 2.2
Samsung SDI Information Technology 38,948 2.0
SK Hynix Information Technology 33,054 1.7
Doosan Bobcat Industrials 22,419 1.1
Soulbrain Materials 17,790 0.9
Fila Consumer Discretionary 11,068 0.6
LegoChem Biosciences Health Care 7,500 0.4
Hankook Tire Consumer Discretionary 4,865 0.2
KT Skylife
Communication
Services 1,444 0.1
426,407 21.6
Taiwan
TSMC Information Technology 252,050 12.6
MediaTek Information Technology 51,090 2.6
Hon Hai Precision Industry Information Technology 42,316 2.1
Yageo Information Technology 12,789 0.6
358,245 17.9
Thailand
Kasikornbank Financials 23,534 1.2
Thai Beverage Consumer Staples 7,514 0.4
Star Petroleum Refining Energy 6,346 0.3
Kiatnakin Phatra Bank Financials 6,319 0.3
Minor International Consumer Discretionary 5,062 0.3
48,775 2.5
United Arab Emirates
Emirates Central Cooling Systems Utilities 8,577 0.4
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8,577 0.4
United Kingdom
Unilever
(g)
Consumer Staples 17,821 0.9
17,821 0.9
United States
Genpact
(g)
Industrials 31,600 1.6
Cognizant Technology Solutions
(g)
Information Technology 30,499 1.5
62,099 3.1
Total Investments 1,995,232 100.0
(a) Preferred shareholders are entitled to dividends before ordinary shareholders.
(b) US listed American Depository Receipt.
(c) TEMIT holds shares in this company listed on the Hong Kong stock exchange and American Depository
Receipts listed on the New York stock exchange.
(d) This company is listed in the Netherlands. The classification of China/Hong Kong is due to most of its revenue
coming from its holding in Tencent.
(e) 'China Resources Cement' was renamed to 'China Resources Building Materials Technology'.
(f) This company is fair valued at zero as a result of its trading being suspended on international stock exchanges.
(g) This company, listed on a stock exchange in a developed market, has significant exposure to operations from
emerging markets.
Market Capitalisation Breakdown %
Less than
£1.5bn
£1.5bn to
£5bn
£5bn to
£25bn
Greater than
£25bn
31 March 2024 4.6 12.6 23.3 59.5
31 March 2023 5.2 11.3 23.1 60.4
Split Between Markets %
(a)
31 March 2024 31 March 2023
Emerging Markets 95.8 94.5
Developed Markets
(b)
4.0 5.0
Frontier Markets 0.2 0.5
Source: FactSet Research System, Inc.
(a) Geographic split between 'Emerging markets', 'Frontier markets', 'Developed markets' are as per MSCI index
classifications.
(b) Developed market exposure represented by companies listed in United Kingdom and United States which have
significant exposure to operations in emerging markets.
In investing, a developed market is a country that is most developed in terms of its economy and capital markets. To
be classified as a developed market, the country must be high income, but this also includes openness to foreign
ownership, ease of capital movement, and efficiency of market institutions. An emerging market is a market that has
some characteristics of a developed market, but does not fully meet its standards. This includes markets that may
become developed markets in the future or were in the past. The term 'frontier market' is used for developing
countries with smaller, riskier, or more illiquid capital markets than 'emerging'.
Outlook for emerging markets
The first quarter of 2024 has seen a recovery after a period of volatility. We believe that the current investment
backdrop is conducive for emerging market equities. Potential interest rate cuts and better earnings growth for 2024
are expected to be tailwinds for emerging markets when they are implemented.
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While interest rates are expected to be higher for longer, we believe that they will eventually moderate as goods
inflation has started declining in most markets. Our overweight positions in Latin America-especially Brazil, where
real rates remain high-reflect our view on interest rates.
AI has seen a boom led by the development of large language models. This has been facilitated by the advancement
in semiconductor chips. New applications have emerged. We expect growth in this sector to be structural, driven by
the adoption of Al solutions in both enterprise and consumer applications. This should benefit the Al supply chain.
Many of the semiconductor and hardware companies catering to the Al industry are based in emerging markets and
we remain overweight in that sector. We also remain overweight in South Korea and are well-invested in Taiwan to
play these megatrends.
Meanwhile, the EV supply chain is currently experiencing a material slowdown in growth expectations as many
consumers and governments have yet to fully embrace the advantages of their deployment. Although we remain
aligned with the longer-term growth outlook for EVs, we have lowered our exposure to the EV value chain.
India and Middle Eastern countries have continued to see good economic growth. India is holding General Elections
this year, and we expect political stability to continue. Valuations in many of the sectors in India remain elevated
and we are currently underweight in that market, with most of our exposure being to the private sector banks. We
remain opportunistic in our deployment of capital to the Middle East region, taking advantage of the boom in the
IPO market in many of those countries.
The Chinese economy seems to have stabilised with signs of policy support, even though the property sector and
government finances are still very feeble. In addition, we continue to see the western countries reduce their
dependence on Chinese supply chains. All these factors continue to impinge on valuations in the China equity
market and we remain underweight in China. Most of our exposure is to the internet-related names in China where
companies continue to generate cash and have elevated shareholder return policies.
It is an interesting time to look at emerging markets. Despite the dynamic nature of emerging markets, we believe
that several enduring themes persist. First, we believe their structural growth potential remains superior, driven by
an expanding and diverse investment universe with appealing valuations. Second, while navigating challenges such
as the COVID-19 pandemic and geopolitical risks, emerging economies have demonstrated remarkable resilience,
emphasising the potential for robust growth. Finally, strategic policy decisions, ongoing reforms, and innovation
will shape the future of these markets, offering what we believe are significant opportunities for economic progress
and investment gains in the years ahead. In summary, emerging markets have evolved, embracing innovation,
technology, and diversification. As pivotal players in the global trade map, their adaptability and growth trajectory
position them as key drivers of the world economy, making them, in our opinion compelling investment
opportunities for investors globally.
Chetan Sehgal
Lead Portfolio Manager
7 June 2024
The investment managers' process
Investment philosophy and approach
FTEME's long-term approach is driven by the 3 S's, seeking Structural growth opportunities in emerging markets,
investing in businesses with Sustainable earnings power at a discount to intrinsic worth, and believing in
responsible Stewardship of client capital. FTEME seeks to capture the growth potential of emerging market
companies and believes that this is best achieved by employing a bottom-up and fundamental security selection
process. FTEME conducts in-depth proprietary company research with a long-term and independent perspective.
FTEME believes in the responsible stewardship of clients' capital and that governance and sustainability issues
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create risks and opportunities for companies. ESG analysis is therefore integrated as a key element of fundamental
bottom-up analysis.
TEMIT's performance in different market environments
FTEME's approach aims for outperformance over the long term. The investment strategy tends to produce stronger
performance when company fundamentals are the primary driver for stock returns, where a focus on stock selection
should produce superior results. Performance may be less strong in highly sentiment-driven market environments,
when investors focus more on the overall economic picture rather than company fundamentals.
This can also be the case when the market is overly short-term oriented, and rewards companies driven by what
FTEME views as unsustainable factors such as short-term demand/supply imbalances or inorganic growth.
Investment process
The three broad stages of FTEME's investment process comprise: idea generation, stock research, and portfolio
construction and management; with governance and sustainability considerations and risk management fully
integrated at all stages.
1 Idea generation
The key source of idea generation is FTEME's team of over 70 analysts and portfolio managers located around the
globe. Their experience and expertise allow them to identify trends which they may want to explore further through
company research. In addition, FTEME's local presence, network and understanding of local dynamics may help to
identify trends and opportunities that other market participants may filter out through standard quantitative screens.
FTEME analysts speak the local language and are part of the local culture and fabric of the countries where they
conduct research.
2 Stock research
FTEME analysts conduct rigorous analysis to assess whether a company has sustainable earnings power, and to
establish a proprietary estimate of its intrinsic worth. By integrating ESG analysis with traditional business and
financial analysis, FTEME seeks to gain insights into the quality and risks of companies. FTEME's research
platform currently has coverage of over 700 companies across emerging markets using a proprietary and rigorous
bottom-up research approach, along with extensive knowledge of the wider investment universe.
FTEME's research analysts form detailed views of companies by collecting and analysing a variety of information.
The team conducts detailed quantitative financial analysis by building in-depth company models to evaluate
financial strength and profitability, and to project future earnings and cash flow. Industry demand and supply models
are incorporated in the analysis, as well as country and currency macro considerations. FTEME has a strong
emphasis on qualitative assessment.
The assessment of ability to sustain stable or growing economic profits over time is typically driven by a
combination of factors, including (i) sound business models; (ii) sustainable competitive advantages; (iii)
management foresight; and (iv) low debt levels. Earnings power is the demonstrable ability to generate sustainable
economic profit into the future in areas which could be beyond the current scope of operations. The analysts look for
real earnings growth by focusing on economic earnings and cash flows rather than reported earnings, and
differentiating between operational earnings and financial earnings. They evaluate internal versus external drivers to
earnings and prefer companies with earnings which can be affected through management action.
A key element of earnings power is therefore quality, as signified by (i) products and services with low regulatory
and macro risk; (ii) financial strength; and (iii) management strength.
Each research recommendation may incorporate several valuation methods extending typically over a three to five-
year horizon. FTEME aims to clarify the risk/reward balance of a company by conducting sensitivity analysis,
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stress-testing, and scenario analysis. It seeks to identify what the market consensus expectations are for a stock and
how the team's fundamental views may differ.
3 Portfolio construction
FTEME seeks to build a high-conviction stock-centric portfolio that is primarily driven by company-specific factors
and focused on the long term. A bottom-up approach to stock selection is used, with country and sector allocations a
residual of this process.
Portfolio style and characteristics
The strategy typically displays the following characteristics:
Core style
The strategy aims to deliver outperformance irrespective of market direction. The portfolio construction process
leads to the majority of active risk being focused.
Quality and growth but not at excessive valuation levels
The philosophy typically leads to a portfolio with higher quality and growth than the aggregate of the benchmark
index.
High conviction portfolio
The top-10 holdings typically account for over 40% of the portfolio which overall is well-diversified across the
market cap spectrum.
Low turnover
FTEME's high conviction and long-term approach means that the typical annual portfolio turnover is less than 20%.
Buy and sell discipline
FTEME's buy discipline is primarily designed to ensure that the portfolio managers buy when they have both
conviction in a business and it is trading below its intrinsic value; FTEME's sell discipline is designed to capture the
opposite. All holdings are regularly reviewed to ensure that analyst recommendations are up to date and accurately
reflect any changes in company fundamentals. In this way, ongoing fundamental research drives all buy and sell
decisions.
Investment risk management
Investment in emerging markets equities inevitably involves risk in a volatile asset class. Franklin Templeton uses a
comprehensive approach to managing risks within its portfolios and this approach is inherent in all aspects of the
investment process. Investment risks are to be identified and intentional, not minimised. Risk management is
embedded through all stages of the investment process, in collaboration with dedicated resources from Franklin
Templeton's Investment Risk Management Group of over 80 risk management professionals, which is independent
from the portfolio management team. Various risk management tools are used to predict and decompose the
portfolio's active risk in order to understand and manage the portfolio's active risk profile.
For additional information with respect to the AIFM risk management framework, please read the Investor
Disclosure Document on our website (www.temit.co.uk.)
TEMIT's approach to stewardship
TEMIT's research process includes a structured analysis of governance and sustainability issues.
TEMIT seeks to capture growth potential of emerging markets companies by employing a bottom-up security
selection process with a long-term perspective. We aim to be a responsible steward of our clients' capital-that is why
we integrate Environmental, Social and Governance ('ESG') factors into our investment research process, as a key
element of fundamental, bottom-up analysis, to understand the risks and opportunities that stem from governance
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and sustainability issues. Responsible stewardship is not a single act but a continuous process that includes
engagement and voting.
Whilst governance and sustainability issues are analysed in our research, the findings are not binding on the stock
selection process. TEMIT does not pursue any sustainable targets (e.g., carbon reduction) or objectives.
Being responsible stewards of our clients' capital is reflected in:
How we act as investors
• ESG research integration
• Company engagement and proxy voting
• Policy advocacy
How we treat our clients
• Putting clients first
• Being responsible fiduciaries of our clients' capital
How we behave as a business
• Building relationships
• Working with integrity
Integrating ESG factors
Analyses of governance and sustainability issues are embedded components of our rigorous fundamental bottom-up
research. This allows us to identify those business models most likely to resist competitive pressure and understand
management's ability to generate sustainable returns.
Our proprietary three-pillar ESG research framework is an assessment tool that has further enhanced our approach to
sustainability and is codified within our analytical database.
Intentionality
Assessing companies' intentionality toward managing material ESG factors with our proprietary scoring system and
linking ESG factors into our valuation models.
Alignment
Mapping the alignment of companies' products and services to positive social and environmental outcomes and UN
Sustainable Development Goals ('SDGs').
Transition
Identifying companies' transition potential and monitoring their incremental progress, using our on-the-ground
capabilities and experience as active owners to foster positive change.
Please find below a case study of a company's intentionality to manage the ESG footprint of its operating model
from the full Stewardship Report for TEMIT to give shareholders a snapshot of the typical intentionality analysis
undertaken. Case studies of alignment and transition can also be found in the full Stewardship Report for TEMIT.
Grupo Financiero Banorte
Offers financial services to individuals and corporates in Mexico.
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ESG Topic Cybersecurity
Materiality and Risk
The safeguarding of personal customer data is a critical aspect of digital banking activities. Data breach and
cyberattacks may disrupt operations and impact customer loyalty, affecting market share and long-term growth.
Cybersecurity issues may also incur penalties, liabilities and compliance costs. Amid a rapidly expanding digital
ecosystem, the protection of customers' personal identifiable information is a key ESG factor for the banking sector.
Analysis
• Banorte created a dedicated cyber-crisis management team.
• Integrity Committee and the Cyber Risk Subcommittee meet regularly to monitor the central mitigation systems.
• The company has formed a strategic alliance with Google Cloud to strengthen its cybersecurity ecosystem.
• Regular employee training and system drills are conducted to raise awareness and address audit requirements.
• Reflecting its efforts, the company has earned various certifications, such as the Normalización y Certificación
('NYCE') personal data protection certification and the International Organization for Standardization and the
International Electrotechnical Commission ('ISO' and 'IEC') 27001:2013 standard.
ESG Thesis
Amid a push for digital transformation, Banorte has established procedures and policies for cybersecurity and other
key ESG issues--such as climate change, human capital, and corporate governance--that are overseen by the board
and executive team, ensuring effective integration into its core business strategy (2023-2025 priority plan in place).
Banorte is also aligned with national and international sustainability initiatives, such as the Equator Principles and
Principles for Responsible Investment
(a)
.
(a) Banorte: https://investors.banorte.com/en/sustainability/sustainability-strategy/sustainable-finances
TEMIT's research process includes a structured analysis of governance and sustainability issues. Whilst governance
and sustainability issues are analysed in our research, the findings are not binding on the stock selection process.
TEMIT does not pursue any sustainable targets (e.g., carbon reduction) or objectives.
Nature and biodiversity
In 2023, the threat of 'biodiversity loss and ecosystem collapse' continued to rise up the economic agenda and was
identified as the third most severe perceived risk to economies and societies over the next 10 years by the World
Economic Forum
(a)
.
(a) World Economic Forum Global Risks Perception Survey 2023-2024
Global risks ranked by severity over the long term (10 years):
1 Extreme weather events
6 Adverse outcomes of AI technologies
2 Critical change to Earth systems
7 Involuntary migration
3 Biodiversity loss and ecosystem collapse
8 Cyber insecurity
4 Natural resource shortages
9 Societal polarisation
5 Misinformation and disinformation
10 Pollution
As nature loss presents a significant risk to corporate and financial stability, it is a key area for us as active managers
to promote a direct dialogue with those businesses materially exposed.
We view the biodiversity challenge as a natural extension of our climate efforts. A deep understanding of the rapid
changes taking place in the Earth's physical systems, and the impact these changes will have on the economy, will
prove vital to the successful allocation of capital today and into the future. Since last year's report, we have
developed a framework to formalise the integration of nature and biodiversity-related considerations into our
investment process. This will help us to deepen our research, learn more about our investee companies most exposed
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to nature and biodiversity loss, and be additive to our engagement process. More details on this can be found in the
full Stewardship Report for TEMIT.
Climate change
Within emerging markets, the landscape varies considerably, ranging from countries that have announced
meaningful carbon targets to those that have yet to declare any significant policies. TEMIT does not pursue a
climate change objective. Structured analysis of ESG factors, including climate considerations, are part of TEMIT's
research process but are not binding on stock selection. Our objective is to understand the climate commitments of
investee companies incorporating both local and global perspectives, recognising that the pace of decarbonisation
and the associated strategies will differ across countries and cultures.
Where material, TEMIT integrates climate change/carbon analysis into its bottom-up research process, focusing on
assessing the impact on long-term business values. This is part of the holistic approach of integrating ESG analysis
with traditional financial analysis so that we can gain valuable insights into the quality and risks of businesses in
which TEMIT invests.
The investment team looks at climate risks and opportunities closely for relevant sectors and geographies where
climate change plays an important role. This includes integrating climate related factors into estimates, models and
valuations for those businesses materially exposed to the issue.
In the full Stewardship Report for TEMIT available on our website (www. temit.co.uk) we profile companies
exposed to climate opportunities and climate risks.
Climate opportunities
The transportation sector is still a major contributor to greenhouse gas (GHG) emissions, accounting for 20% of
global CO2 emissions in 2023
(a)
. Electric Vehicles (EV) offer a cleaner alternative, and their batteries rely heavily on
electrolytes. Battery electric passenger vehicles (BEV) sales continue to grow and are on track to post 13.3 million
units worldwide in 2024, compared with an estimated 9.6 million in 2023
(b)
.
• Guangzhou Tinci Materials Technology manufactures fine chemicals and new materials, including Li-ion
battery materials. It is the world's largest electrolyte supplier for EV batteries, with over 40% market share in
China in 2022.
• Guangzhou Tinci has made great advances in developing independent new additives and formulations. These
products are widely used in new energy vehicles to solve key battery problems such as achieving a longer
range, and the ability to withstand high and low temperatures. Guangzhou Tinci also has a battery-recycling
business, focusing on the recovery of lithium iron phosphate batteries.
• As a result, the company has built a circular production model. By-products in one process are reused as raw
materials in another. This not only solves the environmental problem of hazardous chemicals and by-products,
but also greatly reduces the cost of procuring and disposing of raw materials.
(a) Statista, 18/12/23 - https://www.statista.com/topics/7476/transportation-emissions-worldwide/#topicOverview
(b) SPGlobal, 20/12/23 - https://www.spglobal.com/mobility/en/research-analysis/2024-ev-forecast-the-supply-
chain-charging-network-and-
battery.html#:~:text=S%26P%20Global%2Mobility's%202024%20global,%2C%20for%2012%25%20market%
20share.
Climate risks
We do not rule out investing in companies in carbon-intensive sectors, such as the metals and mining industry.
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Focus on metals and mining: Clean energy infrastructure requires substantial material inputs. Demand for each of
the five key critical minerals-lithium, cobalt, nickel, copper and neodymium-is expected to increase 1.5 to 7 times by
2030 in the Net Zero Emissions by 2050 Scenario ('NZE') as clean technology deployment soars
(a)
. While energy
transition minerals have relatively high emission intensities, there are ways to minimise these emissions through
switching fuel sources, using low-carbon electricity and making efficiency improvements. Integrating environmental
concerns in the early stages of project planning can help ensure sustainable practices throughout the project life
cycle.
• Hindalco Industries, one of India's largest non-ferrous metals companies, and an industry leader in aluminium
and copper, has adopted Internal Carbon Pricing ('ICP') to monitor the cost of carbon, in preparation for
regulations, emissions trading, and low-carbon growth initiatives.
• The company aims to reduce specific energy consumption and GHG emissions by 25% by 2025, as part of its
target to achieve carbon neutrality by 2050
(b)
.
• Coal is one of its primary energy sources for its Indian operations. Replacing that with a renewable energy source
is difficult due to the challenges in reliability. While challenges persist, we recognise Hindalco's efforts to address
climate-related risks and move towards its carbon net neutral goal. The company has set up interim targets and
provides regular disclosures through periodic reports and quarterly conference calls.
Our portfolio managers also seek to understand the carbon risk profile at a portfolio level to understand its carbon
risk exposures. This includes carbon exposure broken down by sector and stock. The data helps with the engagement
agenda.
(a) IEA: https://www.iea.org/reports/energy-technology-perspectives-2023/mining-and-materials-production
(b) Hindalco, Natural Capital: https://www.hindalco.com/integrated-annual-report2022-23/pdf/natural-capital.pdf
To determine the portfolio's exposure to carbon related risks, we assess the WACI metric-which measures carbon
intensity on a normalised basis for better comparison among companies. With that, we observe the following:
• TEMIT's portfolio carbon risk is concentrated among a small number of companies, with the top five companies
in terms of carbon intensity representing 2.0% of the portfolio and accounting for 59.2% of the portfolio WACI.
• In sector terms, 47.7% of the portfolio WACI contribution comes from the materials sector; on a relative basis,
the effect is neutral. The utilities sector is the largest positive contributor to WACI relative to the benchmark, as
TEMIT is underweight in this high emitting sector.
• China Resources Building Materials Technology and ACC have the largest carbon intensities in TEMIT's
portfolio, representing 0.9% of the portfolio but accounting for 43.4% of the portfolio WACI.
• TSMC's carbon intensity is low. However, since it represents 12.6% of the portfolio, it is the second highest in
terms of contribution to the portfolio WACI, after ACC.
Over the 1-year period, the portfolio's carbon footprint remained stable and specifically WACI has been consistently
below the benchmark. The interim variability is caused by changes in both positioning as well as updates in
emissions data.
The reduction in ending weight for China Resources Building Materials Technology, the sale of POSCO and a
change in methodology in emissions calculation for LG Corp led to a decline in the portfolio WACI. The purchase
of ACC, the purchase of and subsequent update by MSCI to estimated emissions data (previously not covered) for
Emirates Central Cooling Systems and a change from estimated to reported emissions data for Daqo New Energy by
MSCI offset some of the decline in the portfolio WACI.
Active ownership
As investors with a significant presence in emerging markets, our active ownership efforts are a key part of our
overall approach to stewardship. Our analysts conduct almost 2,000 company meetings a year, and this year 377
with TEMIT holdings, using our industry-leading research footprint across emerging markets, where we seek to gain
a number of fundamental and sustainability insights. We believe that our engagement efforts are key to developing a
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detailed understanding of companies and improving outcomes for shareholders as well as stakeholders more
broadly.
Engagement statistics
Our analysts are in continual dialogue with companies on a range of topics, ranging from operational performance,
competition landscape, business outlook, company financials, to name a few. There are also companies we identify
where dedicated discussion on ESG topics is necessary and we report the nature and outcome of these meetings. For
the 12 months ended 31 March 2024, there were 34 tagged ESG interactions by type where detailed discussions
were conducted with an investee company. These are summarised below:
ESG Issue Objectives and Process Outcome
Identify material ESG issues and
rationale for engagement
Set goal and/or rationale for the
engagement and approach
Review outcomes, next steps and
investment thesis
ESG Discussion by Engagement Type
Number of
Interactions
Percentage of
Interactions
Environmental 7 20.6%
Carbon Risk and Climate Change
4
11.8%
Environmental Consideration
3
8.8%
Social 6 17.6%
Human and Social Capital
6
17.6%
Governance 21 61.8%
Corporate Governance
11
32.4%
Strategic Risk and Communication
10
29.4%
Total 34 100%
Note: Engagement statistics refer to 12 months ended 31 March 2024.
ESG Discussion Outcome
Number of
Interactions
Percentage of
Interactions
Contact made by FTEME 5 15%
Contact acknowledged by entity 8 23%
Dialogue taking place between FTEME and entity 10 29%
Plan formulated 6 18%
Plan implemented by entity 3 9%
Measured and validated outcome 2 6%
No progress 0 0%
Total 34 100%
Below is an ESG engagement example with an investee company in China.
Ping An Insurance
A financial conglomerate offering insurance, banking, brokerage and other financial services.
ESG Engagement Social - human and social capital
Topic
Objectives
• We were concerned that Ping An's staff turnover rate was high, at28%. A stable and competent workforce is
key to sustaining strategic growth, service quality, innovations and customer loyalty.
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• Therefore, we engaged with Ping An to better understand the reasons behind the turnover, and to discuss ways
to improve turnover stability over time.
Outcome
• Ping An explained that the turnover rate was relatively high in the telesales team. Excluding this factor, the
overall turnover would be more normal, at 10-15%.
• Technology is a major differentiator for Ping An versus industry peers, but it also means Ping An faces tough
competition for tech talent, resulting in higher turnover.
• We discussed with the company how to improve its turnover rate with better hiring practices and staff training.
We will continue to monitor for improvements.
Proxy voting
In the year ended 31 March 2024, we voted on over 870 management proposals at annual and special general
meetings for TEMIT.
Of the voteable management proposals, we voted 'For' proposals 85% of the time and 'Against' in another 14%. By
proposal category, as a percentage of votes within each category and where we had a total of 10 votes or more, our
votes against were largely concentrated on management compensation, capital structure, strategic transactions and
director-related proposals.
We view votes against proposals as a formal way to communicate our views to management, and we undertake them
based on our investment team's assessment of each motion in line with clients' best interests.
'Other' votes were cast on proposals such as say-on-pay frequency. Additionally, we have abstained or withheld a
vote due to a lack of company disclosure.
The number of resolutions proposed by shareholders is increasing around the world, particularly on environmental
and social issues, although they remain relatively uncommon in emerging markets. We will continue to closely
examine the merits of views raised by fellow shareholders and vote accordingly.
Effective engagement for the year ahead
As we strive for continuous improvement in our investment process, we have been improving our platform for more
effective engagement, seeking to: enhance our practice and outcomes; build more consistency and transparency; and
improve reporting to our clients.
Looking ahead, we are enhancing our existing engagement recording infrastructure, focusing on our proprietary
Emerging Markets Research Database ('EMDB'), which houses our research and the three-pillar framework. Given
our longstanding heritage and local presence across emerging markets, our engagement efforts extend beyond
companies to policymakers-we are enhancing EMDB to capture these interactions as well. To coordinate and
oversee the engagement efforts of our broader platform of 70+ investment professionals across 14 countries, we also
created an FTEME Engagement Group comprising 7 regional coordinators from the research analyst team. This
group includes a representative from each key region that will bring cross-border perspectives and provide guidance
on best practices.
We encourage you to download the full Stewardship Report for TEMIT from www.temit.co.uk for further, detailed
information.
Business review
Strategy and business model
Company purpose and objective
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TEMIT's purpose is to provide both private and institutional investors with the opportunity for capital appreciation
via a professionally managed vehicle focused on listed equity investments in emerging markets.
The objective of TEMIT is to provide long-term capital appreciation via exposure to global emerging markets,
supported by a culture of both strong customer service and corporate governance.
Investment policy
The Company seeks long-term capital appreciation through investment in companies listed in emerging markets or
companies which earn a significant amount of their revenues in emerging markets but are domiciled in, or listed on,
stock exchanges in developed countries ('Emerging Markets Companies').
It is expected that the majority of investments will be in listed equities. However, up to 10% of the Company's assets
may be invested in unlisted securities. In addition, while it is intended that the Company will normally invest in
equity instruments, the Investment Managers may invest in equity-related investments (such as convertibles or
derivatives) where they believe that it is advantageous to do so.
The portfolio may frequently be overweight or underweight in certain investments compared with the MSCI
Emerging Markets (Net Dividends) Index (the 'Benchmark') and may be concentrated in a more limited number of
sectors or geographical areas than the Benchmark. Investments may be made in Emerging Markets Companies
outside the Benchmark that meet the investment criteria.
Whilst there are no specific restrictions on investment in any one sector or geographic area, the portfolio will be
managed in a way which aims to spread investment risk. The portfolio may contain between 50 and 100 individual
stocks but may, at times, contain fewer or more than this range. No more than 12% of the Company's assets will be
invested in the securities of any one issuer at the time of investment, save that any investment in unlisted securities
of any one issuer will be limited to no more than 2% of the Company's assets, measured at the time of investment.
The maximum borrowing will be limited to 20% of the Company's net assets, measured at the time of borrowing.
No more than 10%, in aggregate, of the value of the Company's assets will be invested in other listed closed-ended
investment funds.
In accordance with the Listing Rules, the Company will not make any material change to its published investment
policy without the prior approval of the UK's Financial Conduct Authority ('FCA') and the approval of its
shareholders by ordinary resolution. Any material change would be announced by the Company through the London
Stock Exchange.
Distribution policy
The Company will ensure that its total annual dividends will be paid out of the profits available for distribution
under the provisions of the relevant laws and regulations and will be at least sufficient to enable it to qualify as an
investment trust under the Corporation Tax Act 2010 and the ongoing requirements of The Investment Trust
(Approved Company) (Tax) Regulations 2011. If the Company has received an exceptional level of income in any
accounting year, the Board may elect to pay a special dividend. The primary focus of the investment policy is on
generating capital returns, the Company does not target a particular level of income and there is no guarantee that
dividend levels will be maintained from one year to the next.
The Company will normally pay two dividends per year, an interim dividend declared at the time when the half
yearly results are announced, and a final dividend proposed at the time when the annual results are announced. The
final dividend will be subject to shareholder approval at the AGM each year.
The Company may also distribute capital by means of share buybacks when the Board believes that it is in the best
interests of shareholders to do so. The share buyback programme will be subject to shareholder approval at each
AGM.
Business model
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The Company has no employees and all of its Directors are non-executive. The Company delegates its day-to-day
activities to third parties.
Since 1 October 2021, Franklin Templeton Investment Trust Management Limited ('FTITML', 'AIFM' or the
'Manager') has been the Company's AIFM and Company Secretary.
The Board is responsible for all aspects of the Company's affairs, including the setting of parameters for the
monitoring of the investment strategy and the review of investment performance and policy. It also has
responsibility for overseeing all strategic policy issues, namely dividend, gearing, share issuance and buybacks,
share price and discount/premium monitoring, corporate governance matters and engagement with all the
Company's stakeholders.
Strategy
The Company seeks to achieve its objective by following a strategy focused on the following:
Performance
At the heart of the strategy is the appointment and retention of capable investment management professionals, whose
aim is to identify value and achieve superior long-term growth for shareholders. FTEME, under the leadership of
Chetan Sehgal, continues to apply the same core investment philosophy that has driven TEMIT's performance since
the Company's launch. The investment team aims to achieve long-term capital appreciation for shareholders seeking
exposure to global emerging markets by investing in companies that they believe offer long-term sustainable growth
and good value, combined with strong management and sound governance.
Investment Process and Environmental, Social and Governance ('ESG') Considerations
As part of TEMIT's stock research process, ESG factors are researched alongside other important factors, such as
company earnings power, competitive positioning and management quality. These factors are likely to materially
impact the operating performance or financial conditions of a company. This deepens our understanding of the
companies we research; it also guides us in our engagement activities over a range of issues, better informing our
research insights, as we strive to protect shareholder value.
As TEMIT is an investment trust, the key ESG consideration is the stewardship of its portfolio of investments. The
Board has reviewed and fully supports FTEME's approach to stewardship, which is described under 'TEMIT's
approach to stewardship' in the full Annual Report. It receives regular reports on Franklin Templeton's policies and
controls.
TEMIT has no greenhouse gas emissions to report from the operations of the Company, as all of its activities are
outsourced to third parties. While as an investment trust TEMIT is exempt from disclosures recommended by the
Task Force on Climate-related Financial Disclosures ('TCFD'), Franklin Templeton continues to develop metrics for
our carbon footprint. Further information on our approach to climate change can be found under 'TEMIT's approach
to stewardship' above and in more detail in the full Stewardship Report, available on our website (www.temit.co.uk).
TEMIT has no employees and is not an organisation that provides goods or services as defined in the Modern
Slavery Act 2015 and thus the Company considers that the Act does not apply. The Company's own supply chain
consists predominantly of professional services advisers.
Culture and Values
The Board believes in a culture of openness and constructive challenge in its interactions with the Manager and
other service providers. The Board aims to maintain open and regular communication with shareholders, as set out
under Communication in the full Annual Report.
The Company is committed to acting professionally, fairly and with integrity in all of its business dealings and
relationships. The Board has a zero-tolerance policy towards bribery and looks to ensure that its service providers
and associated persons have effective policies and procedures designed to actively prevent bribery which are
proportionate, and risk based. In relation to the corporate offence of failing to prevent tax evasion, it is the
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Company's policy to conduct all business in an honest and ethical manner. The Company takes a zero-tolerance
approach to any facilitation of tax evasion whether under UK law or under the law of any foreign country. The
Board notes that the Manager has a robust whistleblowing policy in place.
Information on the Company's approach to Diversity is set out in the Directors' Report in the full Annual Report.
Liquidity
The shares issued by the Company are traded on the London and New Zealand stock exchanges. The Company has
engaged Winterflood Securities as financial adviser and stockbroker, and to act as a market maker in the shares of
the Company.
Gearing
Fixed Term Loan
On 31 January 2020, the Company entered into a five-year £100 million loan at a fixed rate of 2.089% with
Scotiabank Europe plc. The fixed term loan is denominated in pounds sterling and will remain in place until 31
January 2025. Full details of the loan are set out in Note 10 of the Notes to the Financial Statements.
Revolving Credit Facility
On 31 January 2020, the Company entered into a three-year £120 million unsecured multi-currency revolving loan
facility with The Bank of Nova Scotia, London Branch. Drawings may be in sterling, US dollars or Chinese
renminbi ('CNH'). The facility matured on 30 January 2024 and the undrawn commitment was not renewed. Further
details of the facility are set out in Note 10 of the Notes to the Financial Statements.
The Company has no other debt as at 31 March 2024 except for the £100 million fixed term loan. The net gearing
position was 0.0% (net of cash in the portfolio) at the year-end (2023: 0.0%) which means that the cash held by the
Company is equal to or higher than the total bank loans.
The Board continues to monitor the level of gearing and currently considers borrowing of up to 20% of net assets to
be appropriate, measured at the time of borrowing.
Affirmation of Shareholder Mandate
In accordance with the Company's Articles of Association, the Board must seek shareholders' approval every five
years for TEMIT to continue as an investment trust. This allows shareholders the opportunity to decide on the long-
term future of the Company. The last continuation vote took place at the 2019 AGM, when 99.95% of the votes cast
were registered as votes in favour. The next continuation vote will take place at this year's AGM on Thursday 11
July 2024 and the Board unanimously recommends that shareholders vote in favour of continuation.
Stability - Share Buybacks and Conditional Tender Offer
The Company has powers to buy back its shares as a discount control mechanism and when this is in the best
interests of the Company's shareholders and in 2019 introduced a Conditional Tender Offer. The share price
discount to net asset value is discussed under Key Performance Indicators in the full Annual Report.
Under the Conditional Tender Offer, if over the five-year period from 31 March 2019 to 31 March 2024 the
Company's net asset value total return had failed to exceed the benchmark total return, the Board would have 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. The net asset value total return over the five years to 31 March 2024
exceeded that of the benchmark and so the Conditional Tender Offer introduced in 2019 was not triggered.
The Board has agreed to run a further Conditional Tender Offer such that if over the five-year period from 31 March
2024 to 31 March 2029 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.
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Any such tender offer will be at a price equal to the then prevailing net asset value less two per cent (and less the
costs of the tender offer). There will be no tender offer if the Company's net asset value total return exceeds the
benchmark total return (MSCI Emerging Markets (Net Dividends) Index) over the five-year period. Any tender offer
would take place following the Company's 2029 AGM and will also be conditional on shareholders approving the
continuation vote in 2029 which is described under 'Affirmation of Shareholder Mandate' above.
A key point in the Investment Managers' mandate is to take a long-term view of investments and one of the
advantages of a closed-end fund is that the portfolio structure is not disrupted by large inflows or outflows of cash.
However, the Board and the Investment Managers recognise that the returns experienced by shareholders are in the
form of movements in the share price, which are not directly linked to NAV movements, and the shares may trade at
varying discounts or premiums to NAV. Many shareholders, both professional and private investors, have expressed
a view that a high level of volatility in the discount is undesirable and that the Company should continue its active
share buyback programme. A less volatile discount, and hence share price, is seen as important to investors. For this
reason, TEMIT uses share buybacks selectively with the intention of limiting volatility in the share price and where
buybacks are in the best interests of shareholders. Details of the share buybacks are included in the following table.
All shares bought back in the year were cancelled, with none being placed in treasury. As at 31 March 2024, the
Company held 103,825,895 shares in treasury (2023: 103,825,895 shares in treasury).
Discount management is reviewed regularly by the Board to ensure that it remains effective in the light of prevailing
market conditions. The Conditional Tender Offer will not affect the Board's current approach to discount
management. The Board will continue to exercise the Company's right to buy back shares when it believes this to be
in shareholders' interests and with the aim of reducing volatility in the discount.
2024
2023
Shares Bought Back and Cancelled During the Year
44,319,755
19,758,613
Proportion of Share Capital Bought Back and
Cancelled
3.8%
1.7%
Total Cost of Share Buybacks
£65.9m
£29.2m
The Benefit to NAV
£10.6m
£4.6m
The Percentage Benefit to NAV
0.54%
0.23%
Communication
The Board and Manager aim to ensure that investors are kept updated regularly about the performance of TEMIT
and of emerging markets through clear communication and updates as detailed in this section. The Board is fully
committed to TEMIT's marketing programme. There is a substantial annual marketing and communication budget,
and expenditure by TEMIT is matched by a contribution to costs from the Manager.
TEMIT has received AIC Shareholder Communication awards for its 'Your Future is Emerging' campaigns in both
2022 and 2023. Through innovative use of broadcast media, TEMIT's profile has been elevated, showcasing the
Company's benefits and conveying the dynamic growth story of emerging markets to a wider audience.
Additionally, in January 2022, TEMIT unveiled a fresh corporate identity, establishing a unique brand for the
Company for the first time.
TEMIT seeks to keep shareholders updated on performance and investment strategy through its Annual and Half
Yearly Reports, along with monthly factsheets and manager commentaries, which are available on the Company's
website - temit.co.uk - offering a wealth of updates, stock story videos, articles, portfolio details, and essential
documents. Connect with @TEMIT on Twitter / X for ongoing updates and announcements as we expand our social
media presence.
The Board encourages registration to our monthly email that keeps subscribers appraised of the latest performance,
insights and announcements.
TEMIT has an active public relations programme. Our Investment Managers provide comments to journalists, host
media briefings and publish articles on issues relevant to investing in emerging markets. The Investment Managers
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meet regularly with professional investors and analysts and host interactive webinars. At each AGM the Investment
Managers make a presentation with the opportunity for all shareholders to ask questions.
The Chairman regularly meets major shareholders to discuss investment performance and developments in corporate
governance. We try to engage with a wide spectrum of our shareholders and aim to address their concerns as far as
practically possible. Shareholders are welcome to contact the Chairman or the Senior Independent Director at any
time via temitcosec@franklintempleton.com.
Section 172 Report - Promoting the success of the Company
The Companies (Miscellaneous Reporting) Regulations 2018 require directors to explain how they have discharged
their duties under Section 172(1) of the Companies Act 2006 in promoting the success of their companies for the
benefit of 'members as a whole' and having regard for all stakeholders.
Section 172 Matter
1. The likely consequences of any decision in the long term.
2. The interests of the Company's employees.
3. The need to foster the Company's business relationships with suppliers, customers and
others.
4. The impact of the Company's operations on the community and the environment.
5. The desirability of the Company maintaining a reputation for high standards of business
conduct.
6. The need to act fairly between members of the Company.
Board's Statement
1. The Board is focused on promoting the long-term success of the Company and regularly
reviews the Company's long-term strategic objectives, including consideration of the
impact of the Investment Managers' actions on the marketability and reputation of the
Company and the likely impact on the Company's stakeholders of the Company's strategy.
2. The Company has no direct employees.
3. The Board's approach to its key stakeholders is set out below.
4. The Board's approach is set out in the section on Investment Process and ESG
Considerations under Strategy and Business Model in the full Annual Report.
5. The Board's approach is set out in 'Culture and Values' in the full Annual Report.
6. The Board's approach to its key stakeholders is set out below.
In addition to the primary focus of the Board, and with due regard to its obligations under Section 172 of the
Companies Act 2006, the following important matters were considered at Board meetings during the year:
• Recruitment of Angus Macpherson as a non-executive Director and Chairman;
• Changes to the risk matrix, monitoring such changes carefully and introducing alternative mitigating controls
where necessary and practicable to support the operation of an effective control environment;
• Review of the marketing plan with the Manager;
• Review of the share buyback programme;
• Review of the dividend policy; and
• Review of the gearing facility and in particular the decision not to renew the revolving credit facility.
The Board considers the main stakeholders in the Company to be its shareholders and its service providers, the
principal one of which is its Manager, along with its investee companies. A summary of the key areas of
engagement undertaken by the Board with its main stakeholders in the year under review and how Directors have
acted upon this to promote the long-term success of the Company are set out in the following table.
Stakeholders
Area of Engagement
Consideration
Engagement
Outcome
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Shareholders and
Potential Investors
Company Objective
Delivering on
the Company's
objective
to shareholders
over the long
term.
The Company's
objective
and investment policy
are set out in the full
Annual Report.
The Company's
performance against
its objective
is regularly reviewed
by the Board, taking
account of
views expressed by
shareholders. The
Company holds a
continuation vote
every five years to
allow shareholders
to decide on the long-
term future of the
Company.
The Investment
Managers' commenta
ry in the full Annual
Report gives a full
commentary on the
Company's portfolio
as well as on the
approach
and considerations
undertaken by
the Investment
Managers for
stock selection within
the portfolio.
A continuation vote
took place at the
2019 AGM, with
99.95% of votes cast
in favour. The
next continuation
vote is taking place at
this year's AGM.
Shareholders and
Potential Investors
Dividend
The objective of
the Company is to
provide long term
capital appreciatio
n, however, the
Board recognises
the importance of
dividend income
to
many shareholders
.
The Board reviews
regularly the level of
dividends,
taking account of the
income generated by
the
Company's portfolio
and the availability of
reserves.
In considering
the sustainability of
the dividend and of the
Company, the Board
reviews the
models supporting the
going concern
assessment
and viability
statement.
Dividend payments
are discussed in the
Chairman's Statemen
t in the full Annual
Report.
Shareholders and
Potential Investors
Communication
with Shareholders
The Board
understands the
importance
of communication
with
its shareholders
and maintains
Working closely with
the Manager, the
Board ensures that
there is a variety
of regular
communication with
shareholders.
Full details of all
Board and Manager
communication
are included in the
full Annual Report.
Shareholders are
invited to submit
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open channels of
communication
with shareholders.
questions for the
Board to address at
the Company's AGM.
Shareholders and
Potential Investors
Discount Management
To smooth the
volatility in the
discount.
The Board monitors
the discount closely
and discusses discount
strategy with
the Investment
Managers and
the Company's
stockbroker at every
regular Board
meeting. The
stockbroker provides a
summary of the
discount and market
conditions to the
Board and Investment
Managers at the close
of each trading day in
London. The Board
also meets with the
Investment Managers
to discuss
the Company's
marketing strategy to
ensure
effective communicati
on with existing
shareholders and
to consider strategies
to create additional
demand for
the Company's shares.
TEMIT continues to
adopt an active buy
back policy and has a
Conditional Tender
Offer. Details of
these can be
found under 'Stability
- Share Buybacks and
Conditional Tender
Offer' in the full
Annual Report.
Further details of the
current discount and
discount management
are detailed in the
Chairman's
Statement under
'Share price rating' in
the full Annual
Report.
Manager
Communication Betwe
en the Board and the
Manager
The Board's
oversight of the
Manager is
very important.
The Manager attends
all Board meetings
where it reviews
and discusses
performance reports,
changes in
the portfolio
composition and
risk matrix. The Board
receives timely and
accurate information
from the Manager and
engages with
the Investment
Managers and
The Board operates
in a supportive and
open
manner, challenging
the activity of
the Manager and its
results. The Board
believes that the
Company is well
managed and the
Board places great
value on
the experience of the
Investment Managers
to deliver
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the Company
Secretary
between meetings as
well as with
other representatives
of the Manager as and
when it is deemed
necessary.
superior long-term
returns
from investments and
on the other functions
of the Manager to
fulfil their roles
effectively.
Third-
party Service Provide
rs
Engagement
with Service Providers
The Board
acknowledges the
importance
of ensuring that
the Company's
service providers
are delivering a
suitable level of
service, that the
service level
is sustainable and
that they are fairly
remunerated
for their service.
As an investment
company all services
are outsourced to
third-party
providers. The Board
considers the support
delivered by
service providers
including the
quality of the service,
succession planning
and any
potential interruption
of service or other
potential risks.
The Manager
maintains the overall
day-to-day
relationship with the
service providers
and the Board
undertakes an
annual review of the
performance of
the Company's
service
providers. This
review also includes
the level of fees paid.
The Board
meets with service
providers as
and when considered
necessary.
Investee Companies
Engagement with
Investee Companies
The relationship
between the
Company and
the investee
companies is very
important.
On behalf of the
Company the
Investment
Managers engage with
investee companies
implementing corporat
e
governance principles
and discuss
the portfolio with the
Board on a quarterly
basis.
The Investment
Managers have a
dedicated research
team that is
employed in
making investment
decisions and
when voting at
shareholder meetings
of investee
companies.
Key performance indicators
The Board considers the following to be the key performance indicators ('KPIs') for the Company:
• Net asset value and share price total return over various periods, compared to its benchmark;
• Share price discount to net asset value;
• Dividend and revenue earnings; and
• Ongoing charges ratio.
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The 10 Year Record of the KPIs is shown in the full Annual Report.
Net asset value and share price total return
(a)
Net asset value and share price total return data is presented within the Financial Highlights in the full Annual
Report along with the 10 Year Record in the full Annual Report.
The Chairman's Statement and the Investment Managers' Report in the full Annual Report include further
commentary on the Company's performance.
Performance of the Company's portfolio is measured in pounds sterling (GBP) against the MSCI Emerging Markets
(Net Dividends) Index. In previous Annual and Half Yearly Reports, performance data has been presented using the
version of the MSCI Emerging Markets Index calculated on the basis that gross dividends (that is, without assuming
the deduction of any local taxes) were reinvested. In this Annual Report, performance data is presented using the
version of the MSCI Emerging Markets Index which assumes that dividends net of local taxes are reinvested and we
will use that version of the index, which we refer to as the MSCI Emerging Markets (Net Dividends) Index, in all
publications from now on. We believe that this change will make the performance of TEMIT more comparable with
similar investment trusts that use a 'Net Dividend' benchmark. This also better reflects the potential tax treatment of
TEMIT as the MSCI Emerging Markets (Net Dividends) Index takes account of the local taxes that are charged on
dividends included in the index. For the avoidance of doubt, the change in benchmark described above will not
affect the investment decision-making process of the Investment Managers.
Share price discount to net asset value
(a)
Details of the Company's share price discount to net asset value are presented within the Financial Summary in the
full Annual Report. On 23 May 2024, the latest practicable date for which information was available, the discount
was 14.3%.
The Company has powers to buy back its shares as a discount control mechanism when it is in the best interests of
the Company's shareholders and has a Conditional Tender Offer mechanism. These are described under 'Stability -
Share Buybacks and Conditional Tender Offer' in the full Annual Report.
Dividend and revenue earnings
Total income earned in the year was £71.9 million (2023: £80.6 million) which translates into net revenue earnings
of 5.18 pence per share (2023: 5.72 pence per share), a decrease of 10.8% over the prior year.
The Company paid an interim dividend of 2.00 pence per share on 26 January 2024. The Board is proposing a final
dividend of 3.00 pence per share, making total ordinary dividends for the year of 5.00 pence per share.
Ongoing charges ratio
(a)
('OCR')
The OCR reduced to 0.97% for the year ended 31 March 2024, compared to 0.98% in the prior year. The OCR has
been calculated in line with the Association of Investment Companies ('AIC') recommended methodology.
Costs associated with the purchase and sale of investments are taken to capital and are not included in the OCR.
Transaction costs are disclosed in Note 8 of the Notes to the Financial Statements.
(a) A glossary of alternative performance measures is included in the full Annual Report.
Principal and emerging risks
At least quarterly, the Board reviews with the AIFM and the Investment Managers a wide range of risk factors that
may impact the Company. A full review of risks and internal controls is held every September by the Audit and Risk
Committee. These reviews include a robust assessment of the principal and emerging risks facing the Company,
including those that would threaten its business model, future performance, solvency or liquidity. These are
summarised in the table below.
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Further explanation of the monitoring of risk and uncertainties is covered within the Report of the Audit and Risk
Committee in the full Annual Report. Information on the risks that TEMIT is subject to, including additional
financial and valuation risks, are also detailed in Note 14 of the Notes to the Financial Statements.
Due to the nature of the Company's business, investment risk is a key focus and is reviewed on an ongoing basis by
the Investment Managers as part of every investment decision. Further information on this process is detailed in the
full Annual Report.
Principal Risk
Mitigation
Market
and Geopolitical
Market risk arises from volatility in the prices
of the Company's investments, from the risk
of volatility in global markets arising from
macroeconomic and geopolitical
circumstances and conditions. Many of the
companies in which TEMIT invests are, by
reason of the locations in which they operate,
exposed to the risk of political or economic
change. In addition, sanctions, exchange
controls, tax or other regulations introduced
in any country in which TEMIT invests
may affect its income and the value and the
marketability of its investments. Emerging
markets can be subject to greater price
volatility than developed markets.
Geopolitical risk was highlighted by the
Russian war on Ukraine, the escalating trade
war between the United States and China and
military tensions over the Taiwan Strait, and
the conflict between Israel and Hamas which
broke out in October 2023. All of these
factors have depressed investor sentiment
and the Russian invasion of Ukraine has
impacted global trade posed by supply
shocks, sanctions, higher levels of
inflation and volatility in asset prices.
The Board reviews regularly and discusses
with the Investment Managers the portfolio,
the Company's investment performance and
the execution of the investment policy against
the long-term objectives of the Company.
The Manager's independent risk
team performs systematic risk analysis,
including country and industry specific risk
monitoring, as well as stress testing of the
portfolio's resilience to geopolitical shocks.
The Manager's legal and compliance
team monitors sanctions. Where TEMIT is
affected, adherence to all sanctions and
restrictions is ensured by this team. The
Board also regularly reviews reports from the
Manager's risk, legal and compliance teams.
Technology
Failure or breach of the security of
information technology systems of the
Company's service providers may entail risk
of financial loss, disruption to operations or
damage to the reputation of the Company.
The Company benefits from Franklin
Templeton's technology framework designed
to mitigate the risk of a cyber security breach.
For key third-party providers, the Audit and
Risk Committee receives regular independent
reports on their technology control
environment.
Concentration
Concentration risk arises from investing in
relatively few holdings, few sectors or a
restricted geographic area. Performance may
be more volatile than with a greater number
of securities.
The Board reviews regularly the portfolio
composition/ asset allocation and discusses
related developments with the Investment
Managers and the independent risk
management team. The Investment
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Compliance team of the Investment
Managers monitors concentration limits and
highlights any concerns to portfolio
management for remedial action.
Sustainability
and Climate
Change
The Company's portfolio, and also the
Company's service providers and the
Investment Managers, are exposed to risks
arising from governance and sustainability
issues, including climate change. To
the extent that such a risk occurs, or occurs in
a manner that is not anticipated by the
Investment Managers, there may be a
sudden, material negative impact on the
value of an investment, and the operations
or reputation of the Investment Managers.
The Investment Managers consider that
sustainability risks are relevant to the returns
of the Company. The Manager has
implemented a policy in respect of the
integration of sustainability and climate
change risks in its investment decision
making process. The Board receives regular
reports on the policies and controls in place
on ESG considerations. The Board
has reviewed and fully supports the Franklin
Templeton Stewardship Statement and its
Sustainable Investing Principles and Policies.
Foreign Currency
Currency exchange rate movements may
affect TEMIT's performance. In general, if
the value of sterling increases compared with
a foreign currency, an investment traded in
that foreign currency will be worth less in
sterling terms. This can have a
negative effect on the Company's
performance.
The Board monitors currency risk as part of
the regular portfolio and risk management
oversight. TEMIT does not hedge currency
risk.
Discount Risk
The discount/premium at which the
Company's shares trade relative to its net
asset value can change. The risk of a
widening discount, and/or related
volatility, could reduce shareholder returns
and confidence in the Company.
The Board monitors the level of
discount/premium at which the shares trade
and has an active investor relations
programme. The Company has authority
to buy back its existing shares when deemed
by the Board to be in the best interests of the
Company and its shareholders.
Operational and
Custody
Like many other investment trust companies,
TEMIT has no employees. The Company
therefore relies upon the services provided by
third parties and is dependent upon the
control systems of the Investment Managers
and of the Company's other service
providers. The security, for example, of
the Company's assets, dealing procedures,
accounting records and maintenance of
regulatory and legal requirements depends on
the effective operation of these systems.
The Manager's systems are regularly tested
and monitored and an internal controls report,
which includes an assessment of risks
together with an overview of procedures to
mitigate such risks, is prepared by the
Manager and reviewed by the Audit and Risk
Committee.
J.P. Morgan Europe Limited is the
Company's depositary. Its responsibilities
include cash monitoring, safe keeping of the
Company's financial instruments, verifying
ownership and maintaining a record of
other assets and monitoring the Company's
compliance with investment limits and
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borrowing requirements. The depositary is
liable for any loss of financial
instruments held in custody and will ensure
that the custodian and any sub-custodians
segregate the assets of the Company. The
depositary oversees the custody function
performed by JPMorgan Chase Bank.
The custodian provides a report on its key
controls and safeguards (SOC 1/ SSAE
16/ISAE 3402) that is independently reported
on by its auditor, PwC.
The Board reviews regular operational risk
management reporting provided by the
Investment Managers.
Key Personnel
The ability of the Company to achieve its
objective is significantly dependent upon the
expertise of the Investment Managers and
their ability to attract and retain suitable staff.
The Manager endeavours to ensure that the
principal members of its management teams
are suitably incentivised, participate in
strategic leader programmes and monitor key
succession planning metrics. The Board
discusses this risk regularly with the
Manager.
Regulatory
The Company is an Alternative Investment
Fund ('AIF') and is listed on both the London
and New Zealand stock exchanges. The
Company operates in an increasingly
complex regulatory environment and faces
numerous regulatory risks. Breaches
of regulations could lead to a number of
detrimental outcomes and reputational
damage.
The Board, with the assistance of the
Manager, ensures that the Company complies
with all applicable laws and regulation and its
internal risk and control framework reduces
the likelihood of breaches happening.
Emerging risks
The key emerging risk faced by the Company during the year under review was the possible effects of the conflict
between Israel and Hamas on stability in the Middle East and wider world. The Board and Investment Managers
continue to monitor the investment strategy response, along with the continuing ramifications of the Russian
invasion of Ukraine, and tensions between the United States and China, as noted under the market and geopolitical
risk above. The Board also continues to monitor the potential risks on the portfolio and investee companies posed by
the dramatic progress of Artificial Intelligence ('AI').
Viability statement
The Board considers viability as part of its continuing programme of monitoring risk. In preparing the Viability
Statement, in accordance with the UK Corporate Governance Code and the AIC Corporate Governance Code, the
Directors have assessed the prospects of the Company over a longer period than the 12 months required by the
'Going Concern' provision.
The Board has considered the Company's business and investment cycles and is of the view that five years is a
suitable time horizon to consider the continuing viability of the Company, balancing the uncertainties of investing in
emerging markets securities against having due regard to viability over the longer term.
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In assessing the Company's viability, the Board has performed a robust assessment of controls over the principal
risks. The Board considers, on an ongoing basis, each of the principal and emerging risks as noted above and set out
in Note 14 of the Notes to the Financial Statements. The Board evaluated various scenarios of possible future
circumstances including a material increase in expenses and a continued significant and prolonged fall in emerging
equity markets. The Board also considered the latest assessment of the portfolio's liquidity. The Board monitors
income and expense projections for the Company, with the majority of the expenses being predictable and modest in
comparison with the assets of the Company.
The Company foresees no issues with meeting interest payments and current liabilities relating to the £100 million
fixed term loan which matures on 31 January 2025. A significant proportion of the Company's expenses is the ad
valorem AIFM fee, which would naturally reduce if the market value of the Company's assets were to fall.
Considering the above, and with careful consideration given to the current market situation, the ramifications of
continuing geopolitical tensions and the challenges posed by climate change, the Board has concluded that there is a
reasonable expectation that, assuming that there will be a successful continuation vote at the 2024 AGM in July, the
Company will be able to continue to operate and meet its liabilities as they fall due over the next five years.
Future strategy
The Company was founded, and continues to be managed, based on a long-term investment strategy that seeks to
generate superior returns from investments, principally in the shares of carefully selected companies in emerging
markets.
The Company's results will be affected by many factors including political decisions, economic factors, the
performance of investee companies and the ability of the Investment Managers to choose investments successfully
as well as the current challenges.
The Board and the Investment Managers continue to believe in investment with a long-term horizon in companies
that are undervalued by stock markets, but which are fundamentally strong and growing. It is recognised that, at
times, extraneous political, economic and company-specific and other factors will affect the performance of
investments, but the Company will continue to take a long-term view in the belief that patience will be rewarded.
By order of the Board
Angus Macpherson
7 June 2024
Statement of directors' responsibilities
In respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with
applicable law and regulations. Details of the Directors and members of the committees are reported in the full
Annual Report.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the
Directors are required to prepare the Financial Statements in accordance with UK adopted International Accounting
Standards.
Under company law the Directors must be satisfied that the Financial Statements give a true and fair view of the
state of affairs of the Company and of the profit or loss of the Company for the period.
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In preparing these Financial Statements, International Accounting Standard 1 requires that Directors:
• Properly select and apply accounting policies;
• Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
• Provide additional disclosures when compliance with the specific requirements of UK adopted International
Accounting Standards are insufficient to enable users to understand the impact of particular transactions, other
events and conditions on the entity's financial position and financial performance; and
• Assess the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible
for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company's website (www.temit.co.uk). Legislation in the United Kingdom governing the preparation and
dissemination of Financial Statements may differ from legislation in other jurisdictions.
Responsibility statement
Each of the Directors, who are listed in the full Annual Report, confirms that to the best of their knowledge:
• The Financial Statements, which have been prepared in accordance with UK adopted International Accounting
Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company
for the year ended 31 March 2024; and
• The Chairman's Statement, Strategic Report and the Report of the Directors include a fair review of the
information required by 4.1.8R to 4.1.11R of the FCA's Disclosure Guidance and Transparency Rules; and
• The Annual Report and Audited Financial Statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess the Company's position and performance,
business model and strategy, and include a description of the principal risks and uncertainties.
By order of the Board
Angus Macpherson
7 June 2024
Financial Statements
Statement of comprehensive income
For the year ended 31 March 2024
Year Ended 31 March 2024 Year Ended 31 March 2023
Note
Revenue
£'000
Capital
£'000
Total
£'000
Revenue
£'000
Capital
£'000
Total
£'000
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Net Gains/(Losses) on Investments and
Foreign Exchange
Net Gains/(Losses) on Investments at Fair
Value 8 - 94,636 94,636
- (54,645) (54,645)
Net Losses on Foreign Exchange
- (817) (817)
- (442) (442)
Income
Dividends 2 65,350 6,560 71,910
77,463 8,431 85,894
Other Income 2 6,536 - 6,536
3,088 - 3,088
71,886 100,379 172,265 80,551 (46,656) 33,895
Expenses
AIFM Fee 3 (5,130) (11,970) (17,100)
(5,232) (12,209) (17,441)
Other Expenses 4 (1,774) - (1,774)
(1,979) - (1,979)
(6,904) (11,970) (18,874) (7,211) (12,209) (19,420)
Profit/(Loss) Before Finance Costs and
Taxation 64,982 88,409 153,391
73,340 (58,865) 14,475
Finance Costs 5 (751) (1,747) (2,498)
(962) (2,239) (3,201)
Profit/(Loss) Before Taxation 64,231 86,662 150,893 72,378 (61,104) 11,274
Tax Expense 6 (5,366) (5,201) (10,567)
(5,520) (3,232) (8,752)
Profit/(Loss) for the Year 58,865 81,461 140,326 66,858 (64,336) 2,522
Profit/(Loss) Attributable to Equity Holders
of the Company 58,865 81,461 140,326
66,858 (64,336) 2,522
Earnings per Share 7 5.18p 7.17p 12.35p 5.72p (5.50)p 0.22p
• Under the Company's Articles of Association, the capital element of return is not distributable.
• The total column of this statement represents the profit and loss account of the Company.
• The accompanying notes are an integral part of the Financial Statements.
Statement of financial position
As at 31 March 2024
Note
As at 31 March 2024
£'000
As at 31 March 2023
£'000
Non-Current Assets
Investments at Fair Value Through Profit or Loss 8 1,995,232 1,992,775
Current Assets
Trade and Other Receivables 9 10,759 7,886
Cash and Cash Equivalents
145,736 132,988
Total Current Assets 156,495 140,874
Current Liabilities
Bank Loan
(100,000) -
Other Payables
(6,401) (6,402)
Total Current Liabilities 10 (106,401) (6,402)
Net Current Assets 50,094 134,472
Non-Current Liabilities
Capital Gains Tax Provision 6 (10,463) (9,744)
Other Payables Falling Due After More than One Year
- (100,000)
Total Assets Less Liabilities 2,034,863 2,017,503
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Share Capital and Reserves
Equity Share Capital 11 60,932 63,148
Capital Redemption Reserve 1(j) 21,737 19,521
Capital Reserve 1(j) 1,388,186 1,372,654
Special Distributable Reserve 1(j) 433,546 433,546
Revenue Reserve 1(j) 130,462 128,634
Equity Shareholders' Funds 2,034,863 2,017,503
Net Asset Value Pence per Share
(a)
182.5 174.1
(a) Based on shares in issue excluding shares held in treasury.
The Financial Statements of Templeton Emerging Markets Investment Trust plc (company registration number
SC118022) were approved for issue by the Board and signed on 7 June 2024.
Angus Macpherson Simon Jeffreys
Chairman Director
(b)
Statement of changes in equity
For the year ended 31 March 2024
Note
Equity Share
Capital
£'000
Capital
Redemption
Reserve
£'000
Capital
Reserve
£'000
Special
Distributable
Revenue
£'000
Revenue
Reserve
£'000
Total
£'000
Balance at 31 March 2022 64,136 18,533 1,466,197 433,546 117,978 2,100,390
(Loss)/Profit for the Year
- - (64,336) - 66,858 2,522
Equity Dividends 12 - - - - (56,202) (56,202)
Purchase and Cancellation of Own Shares 11 (988) 988 (29,207) - - (29,207)
Balance at 31 March 2023 63,148 19,521 1,372,654 433,546 128,634 2,017,503
Profit for the Year
- - 81,461 - 58,865 140,326
Equity Dividends 12 - - - - (57,037) (57,037)
Purchase and Cancellation of Own Shares 11 (2,216) 2,216 (65,929) - - (65,929)
Balance at 31 March 2024 60,932 21,737 1,388,186 433,546 130,462 2,034,863
The accompanying notes are an integral part of the Financial Statements.
Statement of cash flows
For the year ended 31 March 2024
Note
For the Year to
31 March 2024
£'000
For the Year to
31 March 2023
£'000
Cash Flows From Operating Activities
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Profit Before Taxation
150,893 11,274
Adjustments to Reconcile Profit Before Taxation to Cash Used in Operations:
Bank and Deposit Interest Income Recognised
(6,518) (3,082)
Dividend Income Recognised
(71,910) (85,894)
Finance Costs
2,498 3,201
Net (Gains)/Losses on Investments at Fair Value 8 (94,636) 54,645
Net Losses on Foreign Exchange
817 442
(Increase)/Decrease in Debtors
(23) 12
Decrease in Creditors
(29) (310)
Cash Used in Operations (18,908) (19,712)
Bank and Deposit Interest Received
6,434 3,082
Dividends Received
71,024 86,727
Bank Overdraft Interest Paid
(2) (2)
Tax Paid
(9,945) (5,971)
Net Realised (Losses)/Gains on Foreign Currency Cash and Cash Equivalents
(435) 179
Net Cash Inflow From Operating Activities 48,168 64,303
Cash Flows From Investing Activities
Purchases of Non-Current Financial Assets
(463,750) (465,539)
Sales of Non-Current Financial Assets
553,641 548,504
Net Cash Inflow From Investing Activities 89,891 82,965
Cash Flows From Financing Activities
Equity Dividends Paid 12 (57,037) (56,202)
Purchase and Cancellation of Own Shares
(65,784) (30,453)
Repayment of Revolving Credit Facility
- (50,000)
Interest and Fees Paid on Bank Loans
(2,490) (3,457)
Net Cash Outflow From Financing Activities (125,311) (140,112)
Net Increase in Cash 12,748 7,156
Cash at the Start of the Year
132,988 125,855
Net Unrealised Losses on Foreign Currency Cash and Cash Equivalents
0 (23)
Cash at the End of the Year 145,736 132,988
The accompanying notes are an integral part of the Financial Statements.
Reconciliation of Liabilities Arising From Bank Loans
Liabilities as
at 31 March 2023
£'000
Cash Flows
£'000
Profit & Loss
£'000
Liabilities as
at 31 March
2024
£'000
Revolving Credit Facility - - - -
- Fees Payable - (401) 401 -
Fixed Term Loan 100,000 - - 100,000
- Interest and Fees Payable 343 (2,089) 2,095 349
Total Liabilities From Bank Loans 100,343 (2,490) 2,496 100,349
Liabilities as
at 31 March 2022
£'000
Cash Flows
£'000
Profit & Loss
£'000
Liabilities as
at 31 March
2023
£'000
Revolving Credit Facility 50,000 (50,000) - -
- Interest and Fees Payable 249 (1,351) 1,102 -
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Fixed Term Loan 100,000 - - 100,000
- Interest and Fees Payable 352 (2,106) 2,097 343
Total Liabilities From Bank Loans 150,601 (53,457) 3,199 100,343
Notes to the financial statements
As at 31 March 2024
1 Accounting Policies
(a) Basis of preparation
The Financial Statements of the Company have been prepared in accordance with UK adopted International
Accounting Standards. The Financial Statements have also been prepared in accordance with the Statement of
Recommended Practice ('SORP') for investment trusts issued by the Association of Investment Companies ('AIC')
and updated in July 2022 insofar as the SORP is compatible with International Accounting Standards.
The Financial Statements have been prepared on the historical cost basis, except for the measurement at fair value of
certain financial instruments. All financial assets and financial liabilities are recognised (or derecognised) on the
date of the transaction using 'trade date accounting'. The principal accounting policies adopted are set out below.
Adoption of new and revised Accounting Standards
At the date of authorisation of these Financial Statements, the following standards were assessed to be relevant and
are effective for annual periods beginning on or after 1 January 2023:
• IAS 1 Amendments: Disclosure of Accounting Policies. This amendment is to help preparers decide which
accounting policies to disclose in their Financial Statements.
• IAS 8 Amendments: Definition of Accounting Estimates. This amendment is designed to clarify the distinction
between changes in accounting estimates and changes in accounting policies and the correction of errors.
The amendments listed above did not have any impact on the amounts recognised in the current reporting period.
At the date of authorisation of these Financial Statements, the following standards and interpretations which have
not been applied in these Financial Statements were in issue but not yet applicable:
Accounting Standards
Effective Date for Annual Periods Beginning On or
After
IAS 1 Amendments: Non-current Liabilities with
Covenants 1 January 2024
The Directors expect that the amendments listed above will have either no impact or that any impact will not be
material to the Financial Statements of the Company in the next reporting periods.
Going concern
The Directors have a reasonable expectation that, assuming that there will be a successful continuation vote at the
AGM in July 2024, the Company has sufficient resources to continue in operational existence for the period to 31
March 2026, which is at least 12 months from the date of the approval of these Financial Statements. The Directors
reviewed income forecasts covering the next two financial years, including interest and fees arising from the debt
CORPORATE
facility. The Directors considered the principal and emerging risks and uncertainties disclosed in the full Annual
Report.
At 31 March 2024, the Company had net current assets of £50,094,000 (31 March 2023: net current assets of
£134,472,000). In addition, the Company holds a portfolio of largely liquid assets that, if required, can be sold to
maintain adequate cash balances to meet its expected cash flows, including current liabilities relating to the £100
million fixed term loan which matures 31 January 2025. The Directors also reviewed scenarios of a significant drop
in value of the assets and noted that in those scenarios they would still be significantly higher than the Company's
liabilities. They have also confirmed the resiliency of the Company's key service providers and are satisfied that
their contingency plans and working arrangements are sustainable.
The Board has established a framework of prudent and effective controls performed periodically by the Audit and
Risk Committee, which enable risks to be assessed and managed. Therefore, the going concern basis has been
adopted in preparing the Company's Financial Statements. The Going Concern statement is set out in the full Annual
Report.
Functional currency
As the Company is a UK investment trust, whose share capital is issued in the UK and denominated in sterling, the
Directors consider that the functional currency of the Company is sterling.
Estimates, assumptions and judgements
There have been no significant estimates, assumptions or judgements for the year.
In preparing these Financial Statements, the Directors have considered the impact of climate change as a principal
risk as set out in the full Annual Report and have concluded that there was no further impact of climate change to be
considered as the investments are valued based on market pricing. In line with UK adopted International Accounting
Standards the investments are valued at fair value, which for the Company are the bid prices quoted on the relevant
stock exchange at the date of the Statement of Financial Position and therefore reflect market participants' views of
climate change risk on the investments held.
(b) Presentation of statement of comprehensive income
To reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and
capital nature has been presented within the Statement of Comprehensive Income. In accordance with the
Company's Articles of Association, net capital profits may not be distributed by way of dividend. Additionally, the
net revenue is the measure that the Directors believe appropriate in assessing the Company's compliance with certain
requirements set out in Section 1158 of the Corporation Tax Act 2010.
(c) Income
Dividends receivable on equity shares are treated as revenue for the year on an ex-dividend basis. Where no ex-
dividend date is available, dividends are recognised on their due date. Provision is made for any dividends not
expected to be received.
Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the
amount of the cash dividend is recognised in the revenue column of the Statement of Comprehensive Income. Any
excess in the value of the shares received over the amount of the cash dividend forgone is recognised in the capital
column of the Statement of Comprehensive Income.
Special dividends receivable are treated as repayment of capital or as revenue depending on the facts of each
particular case. Interest on bank deposits is recognised on an accrual basis.
Stock lending income is shown gross of associated costs and recognised in revenue as earned.
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(d) Expenses
All expenses are accounted for on an accrual basis and are charged through the revenue and capital sections of the
Statement of Comprehensive Income according to the Directors' expectation of future returns except as follows:
• Expenses relating to the purchase or disposal of an investment are treated as capital. Details of transaction costs
on purchases and sales of investments are disclosed in Note 8; and
• Expenses are treated as capital where a connection with the maintenance or enhancement of the value of the
investments can be demonstrated. 70% of the annual AIFM fee has been allocated to the capital account.
(e) Finance costs
Finance costs relating to bank loans are accounted for on an accrual basis using the effective interest method in the
Statement of Comprehensive Income according to the Directors' expectations of future returns. Finance costs relate
to interest and fees on bank loans and overdrafts. 70% of the finance costs, except for interest and fees on overdrafts,
have been allocated to the capital account.
(f) Taxation
The tax expense represents the sum of current and deferred tax. Tax receivables will be recognised when it is
probable that the benefit will flow to the entity and the benefit can be reliably measured. In line with the
recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against
capital returns in the supplementary information in the Statement of Comprehensive Income is the 'marginal basis'.
Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return
column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.
Deferred taxation is recognised in respect of all taxable temporary differences that have originated but not reversed
at the year-end date, where transactions or events that result in an obligation to pay more tax in the future or rights to
pay less tax in the future have occurred at the year-end date.
This is subject to deferred tax assets only being recognised to the extent that it is probable that taxable profit will be
available against which the deductible temporary difference can be utilised. Deferred tax assets and liabilities are
measured at the rates applicable to the legal jurisdictions in which they arise.
Due to the Company's status as an investment trust company, and its intention to continue to meet the eligibility
conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of The Investment Trust
(Approved Company) (Tax) Regulations 2011, the Company has not provided deferred tax in respect of UK
corporation tax on any capital gains and losses arising on the revaluation or disposal of investments. Where
appropriate, the Company provides for deferred tax in respect of overseas taxes on any capital gains arising on the
revaluation of investments.
The carrying amount of deferred tax assets is reviewed at each year-end date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
(g) Investments held at fair value through profit or loss
The Company classifies its equity investments based on their contractual cash flow characteristics and the
Company's business model for managing the assets. The Company's business is investing in financial assets with a
view to profiting from their total return in the form of revenue and capital growth. This portfolio of financial assets
is managed, and its performance evaluated on a fair value basis, in accordance with a documented investment
strategy, and information about the portfolio is provided internally on that basis to the Company's Directors and
other key management personnel. Equity investments do not meet the contractual cash flows test so are measured at
fair value. Accordingly, upon initial recognition, all the Company's non-current asset investments are held at 'fair
CORPORATE
value through profit or loss'. They are included initially at fair value, which is taken to be their cost excluding
expenses incidental to the acquisition.
Subsequently, the investments are valued at 'fair value', which is measured as follows:
The fair value of financial instruments at the year-end date is, ordinarily, based on the latest quoted bid price at, or
before, the US market close (without deduction for any of the estimated future selling costs), if the instrument is
held in active markets. This represents a Level 1 classification under IFRS 13. For all financial instruments not
traded in an active market or where market price is not deemed representative of fair value, valuation techniques are
employed to determine fair value. Valuation techniques include the market approach (i.e. using recent arm's length
market transactions adjusted as necessary and reference to the market value of another instrument that is
substantially the same) and the income approach (i.e., discounted cash flow analysis making use of available and
supportable market data as possible).
Gains and losses arising from changes in fair value are included in the net profit or loss for the period as a capital
item in the Statement of Comprehensive Income.
(h) Foreign currencies
Transactions involving foreign currencies are translated to sterling (the Company's functional currency) at the spot
exchange rates ruling on the date of the transactions. Assets and liabilities in foreign currencies are translated at the
rates of exchange at the year-end date. Foreign currency gains and losses are included in the Statement of
Comprehensive Income and allocated as capital or income depending on the nature of the transaction giving rise to
the gain or loss.
(i) Financial instruments
Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that
are readily convertible to known amounts of cash that are subject to an insignificant risk of changes in value.
Bank loans are classified as financial liabilities at amortised cost. They are initially measured as the proceeds net of
direct issue costs and subsequently measured at amortised cost. Interest payable on the bank loan is accounted for on
an accrual basis in the Statement of Comprehensive Income. The amortisation of direct issue costs is accounted for
on an accrual basis in the Statement of Comprehensive Income using the effective interest method.
(j) Share capital and reserves
Equity Share Capital - represents the nominal value of the issued share capital. This reserve is undistributable.
Capital Redemption Reserve - represents the nominal value of shares repurchased and cancelled. This reserve is
undistributable.
Capital Reserve - gains and losses on realisation of investments; changes in fair value of investments which are
readily convertible to cash, without accepting adverse terms; realised exchange differences of a capital nature;
changes in the fair value of investments that are not readily convertible to cash, without accepting adverse terms;
and the amounts by which other assets and liabilities valued at fair value differ from their book value are within this
reserve.
Additionally, 70% of the annual AIFM fee and finance costs are charged to this reserve in accordance with
accounting policies 1(d) and 1(e).
Purchases of the Company's own shares are funded from the realised component of the Capital Reserve. The
Company's Articles of Association preclude it from making any distribution of capital profits by way of dividend.
If treasury shares are subsequently cancelled, the nominal value is transferred out of Equity Share Capital and into
the Capital Redemption Reserve.
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Special Distributable Reserve - reserve created upon the balance transfer of the Share Premium Account and Capital
Redemption Reserve in December 2008. This reserve is fully distributable.
Revenue Reserve - represents net income earned that has not been distributed to shareholders. This reserve is fully
distributable.
Income recognised in the Statement of Comprehensive Income is allocated to applicable reserves in the Statement of
Changes in Equity.
2 Income
2024 2023
Revenue
£'000
Capital
£'000
Total
£'000
Revenue
£'000
Capital
£'000
Total
£'000
Dividends
(a)
International Dividends 64,489 6,560 71,049
76,287 8,431 84,718
UK Dividends 861 - 861
1,176 - 1,176
65,350 6,560 71,910 77,463 8,431 85,894
Other Income
Bank and Deposit Interest 6,518 - 6,518
3,082 - 3,082
Stock Lending Income 18 - 18
6 - 6
6,536 - 6,536 3,088 - 3,088
Total 71,886 6,560 78,446 80,551 8,431 88,982
(a) The Company received special dividends amounting to £8.2 million (2023: £11.0 million) of which £6.6 million
(2023: £8.4 million) was classified as capital and £1.6 million (2023: £2.6 million) was classified as revenue.
3 AIFM Fee
2024 2023
Revenue
£'000
Capital
£'000
Total
£'000
Revenue
£'000
Capital
£'000
Total
£'000
AIFM Fee 5,130 11,970 17,100 5,232 12,209 17,441
The AIFM fee is paid monthly and based on the month end total net assets of the Company. From 1 July 2022, the
AIFM fee was reduced to 1% of the first £1 billion of net assets, 0.75% of net assets between £1 billion and £2
billion, and 0.50% of net assets over £2 billion. The previous fee structure was 1% of net assets up to £1 billion and
0.80% of net assets above £1 billion.
70% of the annual AIFM fee has been allocated to the capital account.
4 Other Expenses
2024
£'000
2023
£'000
Custody Fees 432 526
Marketing Fees 344 321
Directors' Remuneration 333 303
Membership Fees 171 180
Depository Fees 166 148
Registrar Fees 117 86
Auditor's Remuneration
- Audit of the Annual Financial Statements 55 52
- Review of the Half Yearly Report 10 10
Broker Fees 40 36
CORPORATE
Printing and Postage Fees 17 13
(Tax Advisory Fees Net of Refund)/Tax Advisory
Fees (98) 187
Other Expenses 187 117
Total 1,774 1,979
5 Finance Costs
2024 2023
Revenue
£'000
Capital
£'000
Total
£'000
Revenue
£'000
Capital
£'000
Total
£'000
Fixed Term Loan 629 1,466 2,095
629 1,468 2,097
Revolving Credit Facility 120 281 401
331 771 1,102
Bank Overdraft Interest 2 - 2
2 - 2
Total 751 1,747 2,498 962 2,239 3,201
6 Tax on Ordinary Activities
2024 2023
Revenue
£'000
Capital
£'000
Total
£'000
Revenue
£'000
Capital
£'000
Total
£'000
Irrecoverable Overseas Withholding Tax 5,366 - 5,366
5,520 - 5,520
Capital Gains Tax Paid - 4,482 4,482
- 2,693 2,693
Total Current Tax 5,366 4,482 9,848 5,520 2,693 8,213
Capital Gains Tax Provision - 719 719
- 539 539
Total 5,366 5,201 10,567 5,520 3,232 8,752
2024
£'000
2023
£'000
Profit Before Taxation 150,893 11,274
Theoretical Tax at UK Corporation Tax Rate of 25% (2023: 19%) 37,723 2,142
Effects of:
- Capital Element of (Profit)/Loss (25,095) 8,865
- Irrecoverable Overseas Withholding Tax 5,366 5,520
- Excess Management Expenses 2,224 2,539
- Overseas Capital Gains Tax Paid 4,482 2,693
- Dividends Not Subject to Corporation Tax (14,421) (13,152)
- Movement in Overseas Capital Gains Tax Liability 719 539
- UK Dividends (215) (224)
- Overseas Tax Expensed (216) (170)
Actual Tax Charge 10,567 8,752
As at 31 March 2024 the Company had unutilised management expenses and non-trade deficits of £304.4 million
carried forward (2023: £295.5 million). These balances have been generated because a large part of the Company's
income is derived from dividends which are not taxed. Based on current UK tax law, the Company is not expected
to generate taxable income in a future period in excess of deductible expenses for that period and, accordingly, is
unlikely to be able to reduce future tax liabilities by offsetting these excess management expenses. These excess
management expenses are therefore not recognised as a deferred tax asset of £76.1 million (2023: £73.9 million)
based on a prospective corporation tax rate of 25% (2023: 25%). The UK corporation tax rate is currently 25% with
effect from 1 April 2023.
Movement in Provision for Capital Gains Tax
(a)
CORPORATE
2024
£'000
2023
£'000
Balance Brought Forward 9,744 9,205
Charge For the Year 5,201 3,232
Capital Gains Tax Paid (4,482) (2,693)
Balance Carried Forward 10,463 9,744
(a) A provision for deferred capital gains tax has been recognised in relation to unrealised gains for holdings in
India.
7 Earnings per Share
2024 2023
Revenue
£'000
Capital
£'000
Total
£'000
Revenue
£'000
Capital
£'000
Total
£'000
Earnings 58,865 81,461 140,326
66,858 (64,336) 2,522
2024 2023
Revenue
pence
Capital
pence
Total
pence
Revenue
pence
Capital
pence
Total
pence
Earnings per Share 5.18 7.17 12.35
5.72 (5.50) 0.22
The earnings per share is based on the profit attributable to equity holders and on the weighted average number of
shares in issue, excluding shares held in treasury, during the year of 1,136,517,365 (year to 31 March 2023:
1,169,095,903).
8 Financial Assets - Investments
2024
£'000
2023
£'000
Opening Investments
Book Cost 1,705,635 1,732,693
Net Unrealised Gains 287,140 391,837
Opening Fair Value 1,992,775 2,124,530
Movements In the Year
Additions at Cost 463,628 466,037
Disposals Proceeds (555,807) (543,147)
Net Gains/(Losses) on Investments at Fair Value 94,636 (54,645)
1,995,232 1,992,775
Closing Investments
Book Cost 1,740,112 1,705,635
Net Unrealised Gains 255,120 287,140
Closing Investments 1,995,232 1,992,775
All investments have been recognised at fair value with gains and losses recorded through the Statement of
Comprehensive Income. Transaction costs for the year on purchases were £546,000 (2023: £638,000) and
transaction costs for the year on sales were £1,210,000 (2023: £1,068,000). The aggregate transaction costs for the
year were £1,756,000 (2023: £1,706,000).
CORPORATE
2024
£'000
2023
£'000
Net Gains/(Losses) on Investments at Fair Value Comprise:
Net Realised Gains on Sale of Investments at Fair Value 126,656 50,052
Net Movement in Unrealised Losses (32,020) (104,697)
Net Gains/(Losses) on Investments at Fair Value 94,636 (54,645)
9 Trade and Other Receivables
2024
£'000
2023
£'000
Dividends Receivable 8,277 7,391
Sales Awaiting Settlement 1,783 -
Overseas Tax Recoverable 516 419
Other Debtors 183 76
Total 10,759 7,886
10 Current Payables
2024
£'000
2023
£'000
Bank Loan 100,000 -
Purchase of Investments for Future Settlement 3,667 3,790
AIFM Fee 1,369 1,396
Accrued Expenses 554 556
Amounts Owed for Share Buybacks 462 317
Interest and Fees on Fixed Term Loan 349 343
Total 106,401 6,402
Fixed term loan
On 31 January 2020, the Company entered into a term loan (the 'term loan') for a period of five years with
Scotiabank Europe plc for £100 million. With effect from 28 September 2022, the term loan was transferred by
novation from Scotiabank Europe plc to The Bank of Nova Scotia, London Branch. All other contractual terms and
conditions remain the same.
The term loan bears interest at the fixed rate of 2.089%. Under the conditions of the term loan, the net assets shall
not be less than £1,015 million and the adjusted net asset coverage to all borrowings shall not be less than 3.5:1.
The facility is shown at amortised cost. Interest costs are charged to capital (70%) and revenue (30%) in accordance
with the Company's accounting policies.
Revolving credit facility
On 31 January 2020, the Company entered into a £120 million multi-currency unsecured revolving credit facility
(the 'facility') for an initial period of three years with The Bank of Nova Scotia, London Branch, subsequently this
was extended for one year to 30 January 2024. The undrawn commitment was not renewed and expired on 30
January 2024.
From 31 January 2023, the commitment fee on unutilised commitments was a flat fee of 0.40% per annum. The
previous fee structure was 0.40% per annum charged on undrawn balances in excess of £60 million and 0.35% per
annum on any undrawn portion below £60 million.
Under the facility balances could be drawn down in GBP, USD or CNH. From 31 January 2023, the interest margin
was 1.20% as follows: USD drawdowns bore interest at 1.20% per annum over the daily secured overnight financing
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rate ('SOFR') administered by the Federal Reserve Bank of New York, while any GBP drawdowns bore interest at
1.20% per annum over the daily sterling overnight index average ('SONIA') published by the Bank of England. The
rate for any CNH drawdowns was 1.20% per annum over the Hong Kong Interbank Offered Rate. The previous fee
structure was 1.125% per annum over the daily SOFR for USD drawdowns, 1.125% per annum over the daily
SONIA for GBP drawdowns and 1.125% per annum over the Hong Kong Interbank Offered Rate for CNH
drawdowns. GBP drawdowns were also charged a credit adjustment spread, which was removed following the
amendment of the agreement on 31 January 2023.
Under the terms of the facility, the net assets would not be less than £1,015 million and the adjusted net asset
coverage to all borrowings would not be less than 3.5:1.
There were no drawdowns on the revolving credit facility during the year (2023: £50 million was repaid). Any
facility drawdown was shown at amortised cost and revalued for exchange rate movements. Any gain or loss arising
from changes in exchange rates was included in the capital reserves and shown in the capital column of the
Statement of Comprehensive Income. Interest costs were charged to capital (70%) and revenue (30%) in accordance
with the Company's accounting policies.
11 Equity Share Capital
2024 2023
Ordinary Shares In Issue £'000 Number £'000 Number
Opening Ordinary Shares of 5 Pence 57,957 1,159,138,372
58,945 1,178,896,985
Purchase and Cancellation of Own Shares (2,216) (44,319,755)
(988) (19,758,613)
Closing Ordinary Shares of 5 Pence 55,741 1,114,818,617 57,957 1,159,138,372
2024 2023
Ordinary Shares Held In Treasury £'000 Number £'000 Number
Opening Ordinary Shares of 5 Pence 5,191 103,825,895
5,191 103,825,895
Closing Ordinary Shares of 5 Pence 5,191 103,825,895
5,191 103,825,895
Total Ordinary Shares In Issue and Held In
Treasury at the End of the Year
60,932 1,218,644,512 63,148 1,262,964,267
The Company's shares (except those held in treasury) have unrestricted voting rights at all general meetings, are
entitled to all of the profits available for distribution by way of dividend and are entitled to repayment of all of the
Company's capital on winding up.
During the year, 44,319,755 shares were bought back for cancellation at a cost of £65,929,000 (2023: 19,758,613
shares were bought back for cancellation at a cost of £29,207,000). All shares bought back in the year were
cancelled, with none being placed in treasury (2023: no shares were placed into treasury).
12 Dividends
2024 2023
Rate (pence) £'000 Rate (pence) £'000
Declared and Paid in the Financial Year
Dividend on Shares:
Final Dividends for the Years Ended 31 March 2023 and 31
March 2022
3.00 34,562
2.80
32,941
Interim Dividends for the Six-Month Periods Ended 30
September 2023 and 30 September 2022
2.00
22,475
2.00
23,261
Total 5.00 57,037 4.80 56,202
Proposed for Approval at the Company's AGM
Dividend on Shares:
Final Dividend for the Year Ended 31 March 2024 3.00 33,138
CORPORATE
Dividends are recognised when the shareholders' right to receive the payment is established. In the case of the final
dividend, this means that it is not recognised until approval is received from shareholders at the AGM. The proposed
final dividend of 3.00 pence per share will be funded from the revenue reserve and the payment of this dividend will
not threaten the going concern or viability of the Company.
13 Related Party Transactions
There were no transactions with related parties, other than the fees paid to the Directors and the AIFM during the
financial years ended 31 March 2024 and 31 March 2023 respectively, which have a material effect on the results or
the financial position of the Company. Details of fees paid to the Directors and details of the fee paid to the AIFM
are included in the full Annual Report.
14 Risk Management
In pursuing the Company's objective, as set out in the full Annual Report, the Company holds a number of financial
instruments which are exposed to a variety of risks that could result in either a reduction in the Company's net assets
or a reduction in the profits available for dividends.
The main risks arising from the Company's financial instruments are investment and concentration risk, market risk
(which comprises market price risk, foreign currency risk and interest rate risk), liquidity risk and counterparty and
credit risk.
The objectives, policies and processes for managing these risks, and the methods used to measure the risks, are set
out below. These policies have remained unchanged since the beginning of the year to which these Financial
Statements relate.
Investment and concentration risk
The Company may invest a greater portion of its assets than the benchmark in the securities of one issuer, securities
of a particular country, or securities within one sector. As a result, there is the potential for an increased
concentration of exposure to economic, business, political or other changes affecting similar issues or securities,
which may result in greater fluctuation in the value of the portfolio. Investment risk and a certain degree of
concentration risk is a known and necessary effect of the stated investment approach in line with the investment
policy. The Directors regularly review the portfolio composition and asset allocation and discuss related
developments with the Investment Managers. Security, country, and sector concentrations are monitored by the
Manager's risk and compliance teams on a regular basis and any concerns are highlighted to the Investment
Managers for remedial action and brought to the attention of the Directors.
Market price risk
Market risk arises mainly from uncertainties about future prices of financial instruments held. It represents the
potential loss that the Company might suffer through holding market positions in the face of price movements.
The Directors meet quarterly to consider the asset allocation of the portfolio and to discuss the risks associated with
particular securities, countries or sectors. The Investment Managers select securities in the portfolio in accordance
with the investment policy, and the overall asset allocation parameters described above, and seek to ensure that
individual stocks also meet the intended risk/reward profile.
The Company does not use derivative instruments to hedge the investment portfolio against market price risk.
100% (2023: 100%) of the Company's investment portfolio is listed on stock exchanges. If share prices as at 31
March 2024 had decreased by 30% (2023: 30% decrease) with all other variables remaining constant, the Statement
of Comprehensive Income capital return and the net assets attributable to equity shareholders would have decreased
by £598,570,000 (2023: £597,833,000). A 30% increase (2023: 30% increase) in share prices would have resulted in
a proportionate equal and opposite effect on the above amounts, on the basis that all other variables remain constant.
CORPORATE
Foreign currency risk
Currency translation movements can significantly affect the income and capital value of the Company's investments,
as the majority of the Company's assets and income are denominated in currencies other than sterling, which is the
Company's functional currency.
The Investment Managers have identified three principal areas where foreign currency risk could affect the
Company:
• Movements in rates affect the value of investments;
• Movements in rates affect short-term timing differences; and
• Movements in rates affect the income received.
The Company does not hedge the sterling value of investments that are priced in other currencies. The Company
may be subject to short-term exposure to exchange rate movements, for instance where there is a difference between
the date on which an investment purchase or sale is entered into and the date on which it is settled.
The Company receives income in currencies other than sterling and the sterling values of this income can be
affected by movements in exchange rates. The Company converts all receipts of income into sterling on or near the
date of receipt. However, it does not hedge or otherwise seek to avoid rate movement risk on income accrued but not
received.
The fair value of the Company's items denominated in a foreign currency as at 31 March are shown below:
2024
Currency
Trade and
Other Receivables
£'000
Cash at Bank
£'000
Trade, Bank Loans,
and Other Payables
£'000
Total Net Foreign
Currency Exposure
£'000
Investments at
Fair Value Through
Profit or Loss
£'000
Korean Won - - - - 426,407
Hong Kong Dollar 1,783 1 - 1,784 371,454
Taiwan Dollar 516 - - 516 358,245
Indian Rupee - - - - 246,587
US Dollar - - - - 183,034
Other - 99 (3,667) (3,568) 382,705
2023
Currency
Trade and
Other Receivables
£'000
Cash at Bank
£'000
Trade, Bank Loans,
and Other Payables
£'000
Total Net Foreign
Currency Exposure
£'000
Investments at
Fair Value Through
Profit or Loss
£'000
Hong Kong Dollar - - (1,786) (1,786) 421,688
Korean Won 5,561 - (1,834) 3,727 397,800
Taiwan Dollar 1,494 98 - 1,592 316,317
US Dollar 420 - - 420 232,164
Indian Rupee - - - - 226,039
Other 320 4,680 (72) 4,928 366,798
The above tables are based on the currencies of the country where shares are listed rather than the underlying
currencies of the countries where the companies earn revenue.
As at 31 March 2024, 69.3% (2023: 68.8%) of the investments shown as US dollar and Hong Kong dollar are
Chinese companies with exposure to the Chinese yuan. The total exposure to Chinese yuan was £490.3 million
(2023: £616.3 million), out of which £33.0 million (2023: £109.4 million) were investments denominated in Chinese
yuan.
CORPORATE
Foreign currency sensitivity
The following table illustrates the foreign currency sensitivity on the revenue and capital return. The revenue return
impact represents the impact on total income (which is mainly comprised of dividend income) had sterling
strengthened relative to all currencies by 10% throughout the year.
The capital return impact represents the impact of the financial assets and liabilities of the Company if sterling had
strengthened by 10% relative to all currencies on the reporting date. With all other variables held constant, the
revenue and capital return would have decreased by the below amounts.
2024 2023
Revenue Return
£'000
Capital Return
£'000
Revenue Return
£'000
Capital
Return
£'000
Korean Won 853 42,641
1,008 40,153
Hong Kong Dollar 655 37,324
657 41,990
Taiwan Dollar 1,253 35,876
1,226 31,791
Indian Rupee 237 24,659
241 22,604
US Dollar 789 18,303
917 23,258
Other 2,663 37,914
3,580 37,173
Total 6,450 196,717 7,629 196,969
A 10% weakening of sterling against all currencies would have resulted in an equal and opposite effect on the above
amounts.
Interest rate risk
The Company is permitted to invest in interest bearing securities. Any change to the interest rates relevant to
particular securities may result in income either increasing or decreasing, or the Investment Managers being unable
to secure similar returns on the expiry of contracts or the sale of securities. In addition, changes to prevailing rates or
changes in expectations of future rates may result in an increase or decrease in the value of the securities held and
the interest payable on bank loans when interest rates are reset.
The fixed term loan incurs a fixed rate of interest and is carried at amortised cost rather than fair value. Hence,
movements in interest rates will not affect net asset values, as reported under the Company's accounting policies.
Interest rate risk profile
The exposure of the financial assets and liabilities to floating interest rate risks at 31 March is shown below:
2024
£'000
2023
£'000
Cash 145,736 132,988
Net Exposure at Year End 145,736 132,988
Exposures vary throughout the year as a consequence of changes in the make-up of the net assets of the Company.
Cash balances are held on call deposit and earn interest at the bank's daily rate. The Company's net assets are
sensitive to changes in interest rates on borrowings. There was no exposure to fixed interest investment securities
during the year or at the year end.
Interest rate sensitivity
If the above level of cash was maintained for a year and interest rates were 100 basis points higher or lower, the net
profit after taxation would be impacted by the following amounts:
CORPORATE
2024 2023
100 Basis Points
Increase in Rate
£'000
100 Basis Points
Decrease in Rate
£'000
100 Basis
Points
Increase in
Rate
£'000
100 Basis Points
Decrease in Rate
£'000
Revenue 1,457 (1,457)
1,330 (1,330)
Total 1,457 (1,457) 1,330 (1,330)
Liquidity risk
The Company's assets comprise mainly securities listed on the stock exchanges of emerging economies. Liquidity
can vary from market to market and some securities may take a significant period to sell. As a closed ended
investment trust, liquidity risks attributable to the Company are less significant than for an open-ended fund.
The risk of the Company not having sufficient liquidity at any time to meet its obligations associated with financial
liabilities is not considered by the Board to be significant, given the large number of quoted investments held in the
portfolio and the liquid nature of the portfolio of investments.
The Investment Managers review liquidity at the time of making each investment decision and monitor the evolving
liquidity profile of the portfolio regularly.
The below table details the maturity profile of the Company's financial liabilities as at 31 March 2024, based on the
earliest date on which payment can be required and current exchange rates as at the balance sheet date:
As at 31 March 2024
In One Year
or Less
£'000
More Than One
Year
and Not Later Than
Two Years £'000
More Than Two
Years
and Not Later Than
Three Years £'000
More Than
Three Years
£'000 Total £'000
Fixed Term Loan 102,095 - - - 102,095
Revolving Credit
Facility - - - - -
Other Payables 6,052 - - - 6,052
Total 108,147 - - - 108,147
As at 31 March 2023
In One Year
or Less
£'000
More Than One
Year
and Not Later Than
Two Years £'000
More Than Two
Years
and Not Later Than
Three Years £'000
More Than
Three Years
£'000 Total £'000
Fixed Term Loan 2,089 102,095 - - 104,184
Revolving Credit
Facility 401 - - - 401
Other Payables 6,059 - - - 6,059
Total 8,549 102,095 - - 110,644
Counterparty and credit risk
Certain transactions in securities that the Company enters into expose it to the risk that the counterparty will not
deliver the investment (purchase) or cash (in relation to sale or declared dividend) after the Company has fulfilled its
responsibilities. The Company only buys and sells through brokers which have been approved by the Investment
Managers as an acceptable counterparty. Limits are set as to the maximum exposure to any individual broker that
may exist at any time. Total exposure is compared to monetary limits that vary based on the size and
creditworthiness of the counterparty. Counterparty spreads and capital ratios are reviewed periodically. The amounts
under trade and other receivables and cash and cash equivalents shown in the Statement of Financial Position
represent the maximum credit risk exposure at the year end.
CORPORATE
The Company has an ongoing contract with its custodian (JPMorgan Chase Bank) for the provision of custody
services.
As part of the annual risk and custody review, the Company reviewed the custody services provided by JPMorgan
Chase Bank and concluded that, while there are inherent custody risks in investing in emerging markets, the custody
network employed by TEMIT has appropriate controls in place to mitigate those risks, and that these controls are
consistent with recommended industry practices and standards.
Securities held in custody are held in the Company's name or to its accounts. Details of holdings are received and
reconciled monthly. Cash is actively managed by Franklin Templeton and is typically invested in overnight time
deposits in the name of TEMIT with an approved list of counterparties. Any excess cash not invested will remain in
a JPMorgan Chase interest bearing account. There is no significant risk on debtors and accrued income or tax at the
year end.
During the year, the Company participated in a securities lending programme through JPMorgan as the lending
agents. All securities on loan are Level 1 financial instruments, and their value is determined by reference to the
trading prices on the stock market. As at 31 March 2024, the market value of the securities on loan and the
corresponding collateral received were as follows:
31 March 2024 31 March 2023
Counterparty
Market Value of
Securities on
Loan £'000
Market Value of
Collateral
Received £'000
Market Value of
Securities on
Loan £'000
Market Value of
Collateral
Received £'000
Merrill Lynch International 3,831 5,082
543 739
UBS 211 276
- -
Citigroup - -
17 22
Total 4,042 5,358 560 761
The maximum aggregate value of securities on loan at any time during the year was £5,892,895 (2013: £9,470,125).
Full details of the collateral received is noted in the full Annual Report.
Fair value
Fair values are derived as follows:
• Where assets are denominated in a foreign currency, they are converted into the sterling amount using period-
end rates of exchange;
• Investments held by the Company on the basis set out in the accounting policies included in Note 1; and
• Other financial assets and liabilities at the carrying value which is a reasonable approximation of the fair value.
The tables below analyse financial instruments carried at fair value by valuation method. The different levels have
been defined as follows:
Level 1. Quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2. Inputs other than quoted prices included with level 1 that are observable for the asset or liability, either
directly (prices) or indirectly (derived from prices); and
Level 3. Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The hierarchy valuation of listed investments through profit and loss is shown below:
CORPORATE
31 March 2024 31 March 2023
Level 1
£'000
Level 2
£'000
Level 3
£'000
Total
£'000
Level 1
£'000
Level 2
£'000
Level 3
£'000
Total
£'000
Listed Investments 1,995,232 - -
(a)
1,995,232
1,992,775 - -
(a)
1,992,775
(a) As at 31 March 2024 investments in Russian securities, LUKOIL and Sberbank of Russia, continue to be fair
valued at zero and classified as Level 3 due to the inability of the Company to access the local Moscow equity
markets and the very limited access to the over-the-counter market. The fair value of these investments is based
on a liquidity discount of 100% to the last traded price for an exit price of zero. As at 31 March 2023, the
Company's holding in Yandex was also fair valued at zero and subsequently sold on 23 May 2023.
The following table presents the movement in Level 3 investments for the year ended:
31 March 2024
£'000
31 March 2023
£'000
Opening Balance - 20,803
Transfers From Level 3 Into Level 1 - (17,734)
Disposal Proceeds - Sale of Level 3 Assets (7,766)
(a)
(1,613)
(b)
Net Gains/(Losses) on Investments at Fair Value 7,766 (1,456)
Level 3 Closing Balance - -
(a) Represents the sale of the holding in Yandex on 23 May 2023 for £7,766,000.
(b) Represents the sale of the holdings in Gazprom on 25 April 2022 for £617,000, and the sale of VK on 9 March
2023 for £996,000.
The fixed term loan is shown at amortised cost within the Statement of Financial Position. If the fixed term loan was
shown at fair value the impact would be:
31 March 2024
£'000
31 March 2023
£'000
Fixed Term Loan at Amortised Cost 100,000 100,000
Fixed Term Loan at Fair Value 96,770 94,470
Increase in Net Assets 3,230 5,530
The fair value of the fixed term loan included in the table above is calculated by aggregating the expected future
cash flows which are discounted at a rate comprising the sum of the SONIA rate plus a spread. The fixed term loan
at fair value is classed as Level 2.
15 Significant Holdings in Investee Undertakings
As at 31 March 2024, TEMIT held 3% or more of the issued class of security in the following portfolio holding
whose shares are admitted to trading:
31 March 2024 31 March 2023
Holding
% of Issued
Security Class
Held by TEMIT
Fair Value
£'000
% of Issued
Security Class
Held by TEMIT
Fair Value
£'000
Haier Smart Home 3.0 9,072
- -
16 Contingent Liabilities
No contingent liabilities existed as at 31 March 2024 or 31 March 2023.
CORPORATE
17 Contingent Assets
No contingent assets existed as at 31 March 2024 or 31 March 2023.
18 Financial Commitments
No financial commitments existed as at 31 March 2024 or 31 March 2023.
19 Capital Management Policies and Procedures
The Company's objective is to provide long-term capital appreciation for private and institutional investors
seeking exposure to global emerging markets, supported by a culture of both strong customer service and
corporate governance.
The Board monitors and regularly reviews the structure of the Company's capital on an ongoing basis. This
review includes the investment performance and outlook, discount management mechanisms including share
buybacks, gearing and the extent to which revenue in excess of that which is required to be distributed under the
investment trust rules should be retained.
The Company's investment policy allows borrowing of up to 20% of net assets, measured at the time of
borrowing.
As at 31 March 2024, the Company had share capital and reserves of £2,034,863,000 (31 March 2023:
£2,017,503,000). The Company's policies and procedures for managing capital are consistent with the previous
year.
20 Events After the Reporting Period
The only material post balance sheet event is in respect of the proposed final dividend, which is disclosed in Note
12.
The statutory accounts for the period ended 31 March 2024 received an audit report which was unqualified, did not
include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying the
report, and did not contain statements under section 498(2) and (3) of the Companies Act 2006, and will be
delivered to the Registrar of Companies.
The Annual Report and Accounts will be sent to Shareholders shortly. 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.
For further information please e-mail temitcosec@franklintempleton.com.
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.