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Half-year Report

25 Nov 2019 14:10

RNS Number : 5721U
Templeton Emerging Markets IT PLC
25 November 2019
 

Markets Investment Trust PLC ("TEMIT" or "the Company")

Unaudited Half Yearly Report to 30 September 2019

Legal Entity Identifier 5493002NMTB70RZBXO96

 

 

Company Overview

 

Launched in 1989, Templeton Emerging Markets Investment Trust PLC ("TEMIT" or the "Company") is an investment company that invests principally in emerging markets companies with the aim of delivering capital growth to shareholders over the long term. While the majority of the Company's shareholders are based in the UK, shares are quoted on both the London and New Zealand Stock Exchanges.

The Company is governed by a Board of Directors who are committed to ensuring that shareholders' best interests are at the forefront of all decisions. Under the guidance of the Chairman, the Board of Directors is responsible for the overall strategy of the Company and monitoring its performance. Only one member of the Board has a connection with Franklin Templeton Investments, with all others being independent.

TEMIT's research-driven investment approach and strong long-term performance has helped it to grow to be the largest emerging markets investment trust in the UK, with net assets of £2.2 billion as at 30 September 2019.

TEMIT at a glance

For the six months to 30 September 2019

Net asset value total return(cum-income)(a)

6.3%

(2018: -1.5%)

 

Share price total return(a)

4.4%

(2018: -2.2%)

 

MSCI Emerging MarketsIndex total return(a)(b)

2.2%

(2018: -1.8%)

 

Interim dividend for thefinancial year 2020

5.00p

(Interim dividend for thefinancial year 2019: 5.00p)

Special dividend

2.60p

 

Cumulative Total Return to 30 September 2019 (%)

 

6 Months

1 Year

3 Year

5 Year

10 Year

Net asset value (cum-income)

6.3

9.8

 

38.7

51.0

101.2

Share Price

4.4

13.1

 

44.6

47.9

95.7

MSCI Emerging Markets Index

2.2

4.1

 

26.9

50.4

87.1

 

(a) A glossary of alternative performance measures is included in the full half-yearly report.

(b) Source: MSCI. The Company's benchmark is the MSCI Emerging Markets Index, with net dividends reinvested.

 

 

Chairman's Statement

 

Market Overview and Investment Performance

Markets continued to be volatile in the period under review, with the continuing trade war between the US and China regularly creating news headlines. Tension between the US and China repeatedly escalates and then is partially defused, a situation which is not conducive to economic growth or investment returns. There is increasing evidence that this is affecting economic growth in both countries and around the world. Reflecting difficult economic circumstances, the US Federal Reserve cut key interest rates twice. This should help alleviate the recent strength of the US dollar, which has been a headwind for emerging markets, and reduce the cost of debt in some countries.

Against this background I am again pleased to be able to report both a positive Net Asset Value Total Return and a return in excess of that of our benchmark for the six months under review. I do recognise, however, that this positive return shows a snapshot of values at two dates and must be viewed against the background of volatile markets.

Revenue, Earnings and Dividend

An interim dividend of 5.00 pence per share will be paid on 15 January 2020. TEMIT generally receives most of its income in the first half of its accounting year and the interim dividend is fully covered by net income over the six months under review. Revenues for the period included a special dividend amounting to £6.4 million from Brilliance China Automotive. The Board has elected to pay an additional special dividend of 2.60 pence per share (being the amount received from Brilliance China Automotive) also on 15 January 2020, making total dividends to be paid on that date 7.60 pence per share.

While the Board recognises that dividends are appreciated by many shareholders, the Company's investment strategy and the Investment Manager's approach to investment is focused on generating capital returns and we do not target a particular level of income.

Asset Allocation and Borrowing

As at 30 September 2019, the current bank debt facility was partly drawn down and the level of gearing(a) (net of cash in the portfolio) was 0.8%. If no cash had been held in the portfolio, based on the net asset value as at close of business on 30 September 2019, gearing would have been 5.4%.

The current bank facility will expire on 31 January 2020 and the Board is currently reviewing options for continued gearing. A further announcement will be made in due course.

The Discount

During the half year to 30 September 2019, TEMIT's shares traded at discounts of between 8.8% and 11.7% and as at the end of September the discount stood at 10.9%.

The Board exercises its powers to buy back shares when it believes this to be in shareholders' interests and with the aim of reducing volatility in the discount. The Company continues to be active in buying back shares, with shares bought back on the majority of business days and a total of 5,851,774 shares being bought back over the six months under review at a cost of £45.8 million. As the share buybacks were carried out at discounts to the prevailing net asset value, this was beneficial to continuing shareholders and improved the NAV(a) per share by 0.2%.

(a) A glossary of alternative performance measures is included in the full half-yearly report.

 

The Board and Franklin Templeton remain committed to seeking to stimulate demand for TEMIT's shares. In recent years we have enhanced our marketing and media relations programme and this has helped to generate renewed interest in the shares.

Continuation Vote and Conditional Tender Offer

The continuation vote at this year's Annual General Meeting was passed by a large majority and the Board and Franklin Templeton are grateful for shareholders' continuing support.

As set out in the most recent Annual Report, as shareholders voted in favour of continuation at this year's Annual General Meeting, the Board has introduced a five-year performance-related conditional tender offer. There will be no tender offer in the event that the Company's net asset value total return continues to exceed the benchmark total return. However, if, over the five-year period to 31 March 2024, the Company's net asset value total return fails to exceed the benchmark total return, the Board will put forward proposals to shareholders to undertake a tender offer for up to 25 per cent of the issued share capital of the Company at the discretion of the Board. Any such tender offer will be at a price equal to the then prevailing net asset value less two per cent (less the costs of the tender offer). Any tender offer will also be conditional on shareholders approving the continuation vote in 2024 and would take place following the Company's 2024 Annual General Meeting.

The introduction of any conditional tender offer will not affect the Board's current approach to discount management.

Further details of the conditional tender offer will be provided to shareholders in 2024 and in the meantime no action is necessary.

Outlook

Given the current political background, equity markets are likely to remain volatile. It is, however, important to recognise that many of the countries in which TEMIT invests are generating a good level of economic growth and higher rates of growth than developed markets. Economic growth does not necessarily lead directly to investment returns and this is why our Investment Manager maintains a large team which is focused on analysing the prospects of individual companies. As a Board, we remain of the view that effective stock picking is the key to success in our investment mandate, and that our Investment Manager is well equipped to deliver positive returns.

Paul ManducaChairman25 November 2019

 

 

Interim Management Report

 

Principal risks

The Company predominantly invests directly in the stock markets of emerging markets. The principal risks facing the Company, as determined by your Board, are:

·; Investment and concentration;

·; Market;

·; Geopolitical;

·; Foreign currency;

·; Portfolio liquidity;

·; Counterparty and credit;

·; Operations and custody;

·; Key personnel;

·; Regulation; and

·; Cyber security.

The Board has provided the Investment Manager with guidelines and limits for the management of these principal risks. Further information on risks is given in the Strategic Report within the Annual Report and Audited Accounts, which is available on the Company's website (www.temit.co.uk). There have been no changes to the principal risks reported in the Annual Report and, in the Board's view, these principal risks are equally applicable to the remaining six months of the financial year as they were to the six months under review.

Brexit

TEMIT is a company registered in Scotland. At the time of writing, the timing and terms of the United Kingdom's exit from the European Union ("Brexit") are unclear.

TEMIT is regulated as an AIF under UK law, with its AIFM being FTIS, a Luxembourg company. In light of the UK's Temporary Permissions Regime that would allow up to a three-year extension of current "passporting" for the AIFM into the UK in the event of a 'No Deal' Brexit, we expect that the UK FCA will continue to recognise FTIS as TEMIT's AIFM for the foreseeable future and, certainly, for a sufficient period to make alternative plans if future events require it.

TEMIT invests the majority of its assets outside the EU and the vast majority of shareholders are based in the UK, New Zealand and the United States. The only material adverse effect of the Brexit process on TEMIT to date has been the increase in volatility of the value of the British pound, which affects the value of TEMIT's assets in the hands of UK-based shareholders.

While Brexit has created a degree of uncertainty, in light of the nature of TEMIT's business and the regulatory arrangements described above, the Board has decided that Brexit is not one of the principal risks facing the Company. Nevertheless, the Board and AIFM continue to monitor developments closely.

Related party transactions

There were no transactions with related parties during the six months ended 30 September 2019. Under the Statement of Recommended Practice for investment trusts issued by the Association of Investment Companies in November 2014 and updated in October 2019, the Franklin Templeton entities are not classified as related parties under IAS 24 (as adopted by the EU).

Going concern

The Company's assets consist of equity shares in companies listed on recognised stock exchanges and in most circumstances are realisable within a short timescale. Having made suitable enquiries, including considerations of the Company's investment objective, the nature of the portfolio, expenditure forecasts and the principal risks and uncertainties, the Directors are satisfied that the Company has adequate resources to continue to operate as a going concern for the foreseeable future, being a period of at least 12 months, and as such, a going concern basis is appropriate in preparing the Financial Statements.

Statement of Directors' Responsibilities

The Disclosure and Transparency Rules of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.

Each of the Directors, who are listed in the full half-yearly report, confirms that to the best of their knowledge:

(a) the condensed set of financial statements, for the period ended 30 September 2019, have been prepared in accordance with the applicable International Accounting Standard (IAS) 34 "Interim Financial Reporting" as adopted by the EU; and

(b) the Half Yearly Report includes a fair review of the information required by:

(i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

(ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

The Half Yearly Report was approved by the Board on 25 November 2019 and the above responsibility statement was signed on its behalf by

Paul ManducaChairman25 November 2019

 

 

 

Portfolio Report

 

Market Overview

Emerging markets weathered increased volatility over the 6-month period driven primarily by ongoing US-China trade-related events, central bank monetary policies and concerns of slowing global economic growth. Against this backdrop, the MSCI Emerging Markets Index produced a total return of 2.2% in the period under review, while TEMIT delivered a net asset value total return (cum-income) of 6.3% (all figures in sterling). Full details of TEMIT's performance can be found in the full half-yearly report.

US-China trade tensions escalated in May with the two countries increasing tariffs on imports of each other's goods. Market hopes of an agreement in the near future, following a truce in the summer, were short-lived with several rounds of retaliatory actions following in the latter part of the reporting period. The United States also formally labelled China as a currency manipulator in August after the Chinese renminbi depreciated to above a symbolic ¥7 per US dollar for the first time since 2009. These events sparked a broad sell-off in Chinese equities as well as global stock markets. Conciliatory moves, however, were made in September along with a decision to resume trade talks in October. The US and China reached a partial agreement on the first phase of a deal between the two countries, which included the US suspending the scheduled October tariff increase and China increasing agricultural purchases. The agreement is also believed to cover intellectual property, financial services and currency measures.

Emerging markets received some good news in July when the US Federal Reserve ("Fed") cut its key interest rate for the first time since 2008. A second interest rate cut was subsequently made in September and another after our reporting period in late October. The rate cuts should alleviate upward pressure on US dollar exchange rates, helping emerging market currencies while also facilitating greater flexibility in emerging market monetary policy with several markets including South Korea, Brazil, Indonesia, and Thailand already reducing interest rates. History has shown that over the last four Fed rate cycles, emerging markets have tended to outperform the US market in the 2-3 year period following the first rate cut. The only exception to this was in the run up to the Asian financial crisis in the late 1990s.

Chinese stocks fell over the reporting period as investors focused on the US-China trade conflict and slowing growth in China. However, we believe that China's economy may be better able to absorb the trade issues than the market fears. It is important to note that China's growth is now less dependent on exports than it was a decade ago. China's trade balance with the United States has also narrowed. China's economy has been re-balancing with domestic consumption the key driver of economic growth. In addition to targeted stimulus measures, the government lifted restrictions on foreign investment in China as part of efforts to increase access to its financial markets. The People's Bank of China also implemented an interest-rate reform in August, designating the loan prime rate as the new benchmark for household and business loans, effectively lowering interest rates in August and September. China's second-quarter gross domestic product ("GDP") growth slowed to 6.2%, although the figure was in line with market expectations. We expect the government to continue to focus on economic restructuring and sustainable long-term growth. Although China was TEMIT's largest market position at the end of the reporting period, it remained underweight relative to the benchmark.

South Korea was TEMIT's second-largest market position at the end of September and overweight versus the benchmark. The South Korean market started the period on a positive note on better-than-expected first-quarter earnings results and a change in the Bank of Korea's monetary policy guidance from a defensively hawkish to a more neutral monetary policy. Escalation in the US-China trade dispute, growing trade tensions between South Korea and Japan, and North Korea's missile launches fuelled investor caution. South Korea's trade feud with Japan heightened as both countries decided to end preferential trade treatment for each other, driving the market down. The central bank cut its key interest rate in July, reversing the rate hike from November 2018 in view of raising growth concerns and a downward inflation outlook. Markets staged a recovery late in the period on the back of the government's record expansionary 2020 budget which was intended to stimulate the economy and cushion the impact of the trade feud with Japan. Improving sentiment in the computer memory sector further supported market sentiment and resulted in equity prices ending the reporting period virtually unchanged. While domestic economic indicators have been weak, expectations for a recovery in the Korean economy are rising on encouraging signs in major industries including semiconductors, shipbuilding and automobile.

TEMIT maintained an underweight exposure to Taiwan, where a significant position in Taiwan Semiconductor Manufacturing Company ("TSMC"), one of the portfolio's largest holdings, made up a large portion of the exposure. Recovery in the technology sector favoured the Taiwanese market where technology-related stocks account for a substantial portion. TSMC is one of the world's leading semiconductor makers and counts major global technology companies amongst its clients. While Huawei's addition to the US Entity List1 raised concerns, the stock performed well over the period, ending September at a record high share price, supported by strong smartphone sales and its high-performance computing business. A strong 2020 outlook driven by accelerating 5G development demand further supported the shares. We favour TSMC's technological lead in producing cutting-edge chips that could see more demand from mobile devices and advanced applications such as high-performance computing.

Optimism surrounding the government's economic agenda, including the key social security reform, has resulted in a more favourable climate in Brazil. While the country's economic recovery has been slower than expected, with the government forecasting the GDP to grow by only 0.85% in 2019, government and central bank efforts could improve the country's longer-term GDP growth potential. Inflation has also remained under control, allowing the central bank to lower interest rates to record-low levels to stimulate the economy. We believe that the approval of pension system reform is key to stimulating investment and credit, which should help improve economic activity, as well as helping significantly to reduce Brazil's fiscal deficit. A major privatisation plan has also been announced, and we expect tax and other reforms that could improve the ease of doing business to follow. Despite the strong market performance over the last 12 months, we remain positive on the outlook for Brazil's market, adding to our exposure, which remained overweight compared to the benchmark index, during the reporting period.

1 Those included in the Entity List are subject to specific licensing requirements to export to the US. The Entity List is seen as a "red flag" by the US government, meaning that the transaction is likely to face much more scrutiny.

Russia was the best performing market in the MSCI Emerging Markets Index over the six-month period and remains one of the most undervalued markets globally, despite its strong performance. Our overweight position relative to the benchmark had a positive impact on relative performance. Many international investors have avoided this market because of economic sanctions against the country. However, we believe that Russia's fairly self-sustained economy has limited the impact of sanctions. While the economy has proven to be resilient, we have seen many companies take steps to adapt and flourish in the current environment. Moreover, corporate governance in many Russian companies has improved significantly. For example, many companies including Sberbank and Gazprom have increased dividend pay-outs, while others like Lukoil have undertaken share buybacks to improve shareholder value. Overall, we believe that Russia continues to offer interesting opportunities and that exposure to select well-established companies in the financials, energy, materials and communication services sectors should continue to serve TEMIT well.

Indian equity markets experienced some volatility in the earlier part of the reporting period, impacted by uncertainty around the outcome of the national elections, weaker economic growth and global macro uncertainty. While sentiment did turn positive following Prime Minister Narendra Modi's victory with an outright majority for his party, weaker economic growth this year has continued to impact overall investor sentiment. The government surprised investors with a meaningful reduction in India's corporate tax rates to spur investment and boost economic growth. Overall this is positive, with the level of impact differing from sector to sector. For instance, banking would be a key beneficiary as it is a full-tax paying industry. Most consumer companies also benefit from the corporate tax cuts. A key holding in India is one of the country's largest private-sector banks, ICICI Bank. We believe that ICICI Bank's strong retail franchise and extensive network make it well positioned to benefit from India's rapidly growing banking system. Overall, the case for investing in India remains strong as fundamentals remain intact. Indian equities are also expected to show resilience to global trade concerns due to less export dependence. We continue to favour companies that can benefit from secular growth drivers such as favourable demographics, infrastructure investment, urban and rural consumption growth and increasing income levels.

The Argentine market tumbled during the reporting period amidst increased political and economic uncertainty as the government imposed capital controls and extended the maturities of its debt. We note, however, that market volatility has been largely contained within the country. Argentina remains one of TEMIT's smallest market exposures and underweight relative to the benchmark.

Investment Strategy, Portfolio Changes and Performance

The following sections show how different investment factors (stocks, sectors and geographies) accounted for TEMIT's performance over the period. We continue to emphasise our investment process that selects companies based on their individual attributes and ability to generate risk-adjusted returns for investors, rather than taking a high-level view of sectors, countries or geographic regions to determine our investment allocations.

While we do consider macroeconomic and political events, our fundamental focus is on individual companies and their earnings is our major focus in achieving our stated objectives.

Our investment style is centred on finding companies with sustainable earnings power and whose shares trade at a discount relative to their intrinsic worth and to other investment opportunities in the market. We also pay close attention to risks. Our portfolio remains broad-based including what we view to be the best opportunities within any sector or market.

We continue to utilise our research-based, active approach to help us to find companies which have high standards of corporate governance, respect their shareholder base and understand the local intricacies that may determine consumer trends and habits. Utilising our large team of analysts, we aim to maintain close contact with the board and senior management of existing and potential investments and believe in engaging constructively with our investee companies.

 

 

 

All these factors require us to conduct detailed analyses of potential returns versus risks with a time horizon of typically five years or more.

Performance Attribution Analysis %

Six months to 30 September

2019

2018

 

2017

2016

2015

 

Net asset value total return(a)

6.3

 

(1.5

)

 

11.4

 

29.6

 

(28.0

)

Expenses incurred

0.5

 

0.6

 

 

0.6

 

0.6

 

0.6

 

Gross total return(a)

6.8

 

(0.9

)

 

12.0

 

30.2

 

(27.4

)

Benchmark total return(a)

2.2

 

(1.8

)

 

7.1

 

21.7

 

(18.8

)

Excess return(a)

4.6

 

0.9

 

 

4.9

 

8.5

 

(8.6

)

Stock selection

2.6

 

(0.2

)

 

1.8

 

0.2

 

1.2

 

Sector allocation

1.6

 

(0.5

)

 

2.7

 

7.9

 

(12.7

)

Currency

0.4

 

1.1

 

 

0.1

 

0.4

 

2.6

 

Residual(a)

-

 

0.5

 

 

0.3

 

-

 

0.3

 

Total Portfolio Manager Contribution

4.6

 

0.9

 

 

4.9

 

8.5

 

(8.6

)

Source: FactSet and Franklin Templeton Investments.

(a) A glossary of alternative performance measures is included in the full half-yearly report.

 

Contributors and Detractors by Security

Top Contributors to Relative Performance by Security (%)(a)

Top Contributors

Share PriceTotal Return

RelativeContribution toPortfolio

Brilliance China Automotive

28.5

 

0.8

Gazprom, ADR

71.7

 

0.6

Sunny Optical Technology

76.8

 

0.6

Taiwan Semiconductor Manufacturing

21.4

 

0.5

NAVER

27.0

 

0.5

Naspers

4.4

 

0.4

ICICI Bank

12.2

 

0.4

Unilever(b)

13.0

 

0.4

Samsung Electronics

11.9

 

0.3

Sberbank of Russia, ADR

19.7

 

0.3

(a) For the period 31 March 2019 to 30 September 2019.

(b) Security not included in the MSCI Emerging Markets Index.

Brilliance China Automotive manufactures and sells automobiles for China's domestic market, predominantly through its joint venture ("JV") with German luxury car maker BMW. Shares partially recovered, as investors saw value emerge following a sharp fall in the share price in the latter part of 2018 after investors reacted negatively to BMW's plans to increase its investment in the JV to a majority share. Although the company reported weak results for the first half of 2019, the announcement of a special dividend provided investors with some comfort. Sentiment in the stock also benefited from government measures to support car sales. While the stock remains a significant holding, we decreased our position to reduce portfolio risk.

Based in Russia, Gazprom is the largest producer of gas in the world, in terms of reserves and production. Well positioned to benefit from the growing global energy demand, the stock also trades at attractive valuations in terms of metrics such as price-to-earnings and price-to-book. Shares surged following the announcement of a sharply higher dividend for 2018. Management also disclosed a new dividend policy, which included plans gradually to move towards increasing its dividend pay-out ratio to 50%. We reduced our holdings in the company following the price increase to rebalance the portfolio.

Sunny Optical Technology designs and manufactures optical and optical-related products. It is the world's largest supplier of automotive lenses and China's largest maker of smartphone camera modules and lenses. Shares in Sunny Optical Technology recorded a notable fall in May, on concerns about its customer Huawei being added to the US Entity List1 and as a result of a general decline in the share prices of technology companies as investors grew concerned about the escalating US-China trade conflict. The sharp fall in the share price provided us with an attractive opportunity to add the shares to the portfolio, as we started to see value emerge and believe that the company is well-positioned to capture growing demand for high-specification smartphone lens sets. Shares subsequently rose in the later part of the period, supported by resilient monthly shipment data and better-than-expected first-half 2019 revenue and net income on the back of strong sales. We trimmed our position following the sharp price rise.

1 Those included in the Entity List are subject to specific licensing requirements to export to the US. The Entity List is seen as a "red flag" by the US government, meaning that the transaction is likely to face much more scrutiny. 

Top Detractors to Relative Performance by Security (%)(a)

Top Detractors

Share PriceTotal Return

 

RelativeContribution toPortfolio

 

Massmart(b)

(44.4

)

 

(0.4

)

Glenmark Pharmaceuticals

(47.8

)

 

(0.4

)

HDC Hyundai Development

(35.0

)

 

(0.3

)

Cognizant Technology Solutions(b)

(11.2

)

 

(0.2

)

H&H Group(b)

(27.8

)

 

(0.2

)

LG

(9.4

)

 

(0.2

)

Bank Danamon Indonesia

(5.6

)

 

(0.2

)

MGM China(b)

(20.1

)

 

(0.1

)

Prosus(c)

(9.8

)

 

(0.1

)

MCB Bank

(13.4

)

 

(0.1

)

(a) For the period 31 March 2019 to 30 September 2019.

(b) Security not included in the MSCI Emerging Markets Index.

Massmart is a leading South African distributor and retailer of food products, general merchandise, alcohol, home improvement equipment and supplies as well as a wholesaler. US-based Walmart, the world's largest retailer, owns a controlling stake in Massmart. Our initial thesis on this stock was based on expectations of a meaningful turn-around in the group's retail discount stores segment, which could have driven the overall group margin. However, weak merchandising, online competition and slowing revenue growth amidst a weak macroeconomic environment have delayed a turnaround. Depreciation in regional currencies further pressured the business. The business also struggled to sell inventory accumulated in the previous trading season - these were marked down and affected margin. Following the release of a profit decline warning, the company reported a loss for the first half of 2019 and did not pay out any dividends. The resignation of the CEO and CFO further impacted sentiment. A new CEO was transferred from Walmart. He has been brought in to turn around the business and we have already seen some management changes aimed at driving sales and margins. We expect greater Walmart involvement that would include leveraging the Walmart supply chain and technology to drive Massmart's online business. We continued to use the price fall gradually to add to our existing position in this stock, as we maintain a positive long-term view on the company's prospects.

Glenmark Pharmaceuticals is a mid-size Indian pharmaceutical company with a presence in both generics and product innovation. The company reported weak second-quarter results with lower-than-expected revenue and earnings driven by lower US revenues and higher research and development costs. Sales in India, however, were a bright spot, recording healthy growth. Delays in US approvals and the launch of a new product for the treatment of seasonal allergic rhinitis, along with regulatory concerns at one of its formulation facilities led shares to fall sharply in June, ending September at a multi-year low. We believe that there is a revenue-cost mismatch in the near term given the investment in innovation research and development (R&D). The company is, however, working towards a spin-off of its innovation R&D business, which could normalise margins and drive stronger free cash flow generation. The company is also planning to divest non-core assets to reduce debt. Given the near-term catalysts and strong Indian business, we used the fall in the share price to add to our position in the stock.

HDC Hyundai Development is one of the leading residential property developers in South Korea. With a strong brand name - "I-Park", the company is estimated to have the largest market share in the residential construction business. Although the company reported better-than-expected first quarter corporate results and higher revenues and net profit in the second quarter, government regulations aimed at curbing housing prices and household debt weighed on profitability. Although HDC has some exposure to hotels and duty-free stores, the company's decision to participate in a bid to acquire Asiana Airlines was viewed unfavourably by investors who found the industry to be unrelated to HDC's main residential business. We are of the opinion that a low interest rate environment, however, is expected to continue to drive housing demand, with the Bank of Korea lowering rates for the first time in three years in July as part of efforts to boost economic growth. We also believe that the group is well placed to benefit from increased fiscal spending to boost infrastructure development in non-metropolitan areas.

 

 

Top Contributors and Detractors to Relative Performance by Sector (%)(a)

Top Contributors

MSCIEmergingMarkets IndexSector TotalReturn

 

RelativeContributionto Portfolio

Top Detractors

MSCIEmergingMarkets IndexSector TotalReturn

 

RelativeContributionto Portfolio

 

Information Technology

 

12.2

 

 

1.4

 

Consumer Staples

 

8.5

 

 

(0.6

)

Financials

 

1.5

 

 

1.3

 

Industrials

 

0.3

 

 

(0.4

)

Consumer Discretionary

 

1.7

 

 

1.2

 

Health Care

 

(7.7

)

 

(0.3

)

Materials

 

(6.4

)

 

0.6

 

Utilities(b)

 

4.8

 

 

(0.1

)

Communication Services

 

(2.0

)

 

0.6

 

 

 

 

 

 

 

 

Energy

 

3.4

 

 

0.5

 

 

 

 

 

 

 

 

Real Estate

 

(3.5

)

 

0.2

 

 

 

 

 

 

 

 

(a) For the period 31 March 2019 to 30 September 2019.

(b) No companies held by TEMIT in this sector.

Favourable stock selection in the information technology, financials and consumer discretionary sectors added to TEMIT's performance relative to the benchmark index in the review period. An overweight exposure relative to the benchmark in the information technology sector further added to relative returns. Asian technology companies were among the top performance contributors as they continue to evolve into global leaders. Although we maintain a positive outlook on the sector, we reduced our holdings in information technology companies during the period to realise gains and rebalance the portfolio following the sector's outperformance. Holdings in the financial and consumer discretionary sectors were also reduced to raise funds for other attractive investment opportunities. Conversely, the consumer staples, industrials and health care sectors mildly detracted from relative returns largely due to the top three detracting securities discussed above. We will continue to monitor the developments at these companies and act accordingly.

Top Contributors and Detractors to Relative Performance by Country (%)(a)

Top Contributors

MSCIEmergingMarkets IndexCountry TotalReturn

 

RelativeContributionto Portfolio

Top Detractors

MSCIEmergingMarkets IndexCountry TotalReturn

 

RelativeContributionto Portfolio

 

China/Hong Kong

 

(3.2

)

 

2.3

 

United States(b)

 

-

 

 

(0.3)

)

South Korea

 

0.2

 

 

1.0

 

Indonesia

 

3.9

 

 

(0.3)

)

Russia

 

22.9

 

 

0.6

 

Mexico

 

5.3

 

 

(0.1)

)

United Kingdom(b)

 

-

 

 

0.4

 

Pakistan

 

(14.9

)

 

(0.1)

)

Saudi Arabia(c)

 

(4.6

)

 

0.3

 

Turkey(c)

 

21.7

 

 

(0.1)

)

Cambodia(b)

 

-

 

 

0.2

 

Hungary

 

(2.5

)

 

(0.1)

)

South Africa

 

(1.4

)

 

0.2

 

Thailand

 

8.9

 

 

(0.1)

)

Taiwan

 

13.2

 

 

0.2

 

Greece(c)

 

19.8

 

 

(0.0)

)

Brazil

 

7.2

 

 

0.1

 

Qatar(c)

 

6.2

 

 

(0.0)

)

Chile(c)

 

(6.8

)

 

0.1

 

Kenya(b)

 

-

 

 

(0.0)

)

(a) For the period 31 March 2019 to 30 September 2019.

(b) No companies included in the MSCI Emerging Markets Index in this country.

(c) No companies held by TEMIT in this country.

China/Hong Kong was the largest contributor to TEMIT's returns relative to the benchmark index. Both stock selection and an underweight exposure to the underperforming Chinese market had a positive impact. Our selection of stocks in South Korea and overweight exposure to Russia were also among the major contributors to relative returns. NAVER, the dominant search engine in South Korea, and Samsung Electronics, one of the world's largest electronic manufacturers, were key performance drivers in South Korea. We increased our investments in China/Hong Kong and South Korea as we continued to find attractive investment opportunities. Holdings in Russia were, however, reduced as we sold some shares in Gazprom to rebalance the portfolio. In contrast, relative performance was hurt by stock selection in the United States, Indonesia and Mexico. TEMIT's holding in Cognizant Technology Solutions, a US-listed technology services provider that derives most of its earnings from services produced in India, was the key detractor in the United States. We believe that the company remains a strong industry player, especially as it pursues growth in higher-margin digital services, has good cash flow generation and trades at what we consider to be attractive valuations; we see the potential for a turnaround. The share price fall provided us with an opportunity to increase our holdings at attractive prices. We maintain underweight exposures to Indonesia and Mexico relative to the benchmark and remain comfortable with our position.

Portfolio changes by Sector

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return in sterling

 

Sector

31 March 2019Market Value£m

 

Purchases£m

Sales£m

 

MarketMovement£m

 

30 September 2019Market Value£m

 

TEMIT%

 

MSCI EmergingMarkets Index%

 

Financials

 

585

 

 

3

 

(80

)

 

24

 

 

532

 

 

6.4

 

 

1.5

 

Information Technology

 

419

 

 

43

 

(42

)

 

58

 

 

478

 

 

16.0

 

 

12.2

 

Consumer Discretionary

 

448

 

 

25

 

(104

)

 

21

 

 

390

 

 

6.5

 

 

1.7

 

Communication Services

 

227

 

 

96

 

(16

)

 

5

 

 

312

 

 

3.1

 

 

(2.0

)

Energy

 

163

 

 

17

 

(28

)

 

9

 

 

161

 

 

8.9

 

 

3.4

 

Consumer Staples

 

152

 

 

17

 

(35

)

 

(3

)

 

131

 

 

(2.1

)

 

8.5

 

Materials

 

66

 

 

47

 

(22

)

 

(2

)

 

89

 

 

0.6

 

 

(6.4

)

Industrials

 

52

 

 

18

 

(1

)

 

(10

)

 

59

 

 

(16.9

)

 

0.3

 

Health Care

 

42

 

 

2

 

-

 

 

(11

)

 

33

 

 

(26.9

)

 

(7.7

)

Real Estate

 

8

 

 

-

 

(8

)

 

-

 

 

-

 

 

6.6

 

 

(3.5

)

Net current liabilities(a)

 

(44

)

 

-

 

-

 

 

30

(b)

 

(14

)

 

-

 

 

-

 

Total

 

2,118

 

 

268

 

(336

)

 

121

 

 

2,171

 

 

 

 

 

 

 

                                 

Sector Asset AllocationAs at 30 September 2019Sector weightings vs benchmark (%)

 

TEMIT

MSCI Emerging Markets Index

Financials

24.7

 

24.6

Information Technology

22.0

 

15.0

Consumer Discretionary

17.8

 

13.1

Communication Services

14.4

 

11.6

Energy

7.4

 

7.7

Consumer Staples

6.0

 

6.9

Materials

4.1

 

7.4

Industrials

2.7

 

5.4

Health Care

1.5

 

2.6

Real Estate

-

 

2.9

Utilities

-

 

2.8

(a) The Company's net current liabilities per the Statement of Financial Position in the full half-yearly report.

(b) The movement relates to changes in cash, receivables, payables, the loan facility and capital gains tax provision.

 

 

 

Portfolio changes by Country

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return in sterling

 

Country

31 March 2019Market Value£m

 

Purchases£m

Sales£m

 

MarketMovement£m

 

30 September 2019Market Value£m

 

TEMIT%

MSCI EmergingMarkets Index%

 

China/Hong Kong

 

512

 

 

136

 

(95

)

 

48

 

 

601

 

 

4.0

 

(3.2

)

South Korea

 

289

 

 

45

 

(18

)

 

19

 

 

335

 

 

7.1

 

0.2

 

Taiwan

 

206

 

 

-

 

(8

)

 

26

 

 

224

 

 

17.2

 

13.2

 

Brazil

 

181

 

 

49

 

(26

)

 

11

 

 

215

 

 

7.0

 

7.2

 

Russia

 

189

 

 

-

 

(16

)

 

24

 

 

197

 

 

15.9

 

22.9

 

India

 

162

 

 

2

 

(7

)

 

2

 

 

159

 

 

2.0

 

0.8

 

Other

 

623

 

 

36

 

(166

)

 

(39

)

 

454

 

 

-

 

-

 

Net current liabilities(a)

 

(44

)

 

-

 

-

 

 

30

(b)

 

(14

)

 

 

 

 

 

Total

 

2,118

 

 

268

 

(336

)

 

121

 

 

2,171

 

 

 

 

 

 

Geographic Asset AllocationAs at 30 September 2019Country weightings vs benchmark (%)(c)

 

TEMIT

MSCI Emerging Markets Index

China/Hong Kong

27.5

 

31.9

South Korea

15.4

 

12.2

Taiwan

10.3

 

11.5

Brazil

9.9

 

7.4

Russia

9.1

 

4.0

India

7.2

 

8.9

United Kingdom(d)

3.2

 

-

Thailand

3.2

 

2.9

United States(d)

3.2

 

-

South Africa

3.1

 

4.6

Mexico

2.1

 

2.5

Indonesia

1.2

 

2.1

Cambodia(d)

1.2

 

-

Hungary

0.9

 

0.3

Kenya(d)

0.8

 

-

Pakistan

0.7

 

-

Philippines

0.6

 

1.1

Czech Republic

0.5

 

0.1

Peru

0.4

 

0.4

Argentina

0.1

 

0.2

Nigeria(d)

-0.0

 

-

(a) The Company's net current liabilities per the Statement of Financial Position on in the full half-yearly report.

(b) The movement relates to changes in cash, receivables, payables, the loan facility and capital gains tax provision.

(c) Other countries included in the benchmark are Chile, Colombia, Egypt, Greece, Malaysia, Poland, Qatar, Turkey, Saudi Arabia and the United Arab Emirates.

(d) Countries not included in the MSCI Emerging Markets Index.

 

 

 

Portfolio Investments by Fair ValueAs at 30 September 2019

Holding

Country

Sector

Trading(a)

Fair Value£'000

% of NetAssets

Samsung Electronics

 

South Korea

 

Information Technology

 

PS

 

168,315

 

7.8

Taiwan Semiconductor Manufacturing

 

Taiwan

 

Information Technology

 

NT

 

163,225

 

7.5

Tencent

 

China/Hong Kong

 

Communication Services

 

IH

 

132,977

 

6.1

Alibaba, ADR(b)

 

China/Hong Kong

 

Consumer Discretionary

 

IH

 

119,732

 

5.5

ICICI Bank

 

India

 

Financials

 

NT

 

85,042

 

3.9

Unilever(c)

 

United Kingdom

 

Consumer Staples

 

PS

 

68,538

 

3.2

Brilliance China Automotive

 

China/Hong Kong

 

Consumer Discretionary

 

PS

 

67,825

 

3.1

NAVER

 

South Korea

 

Communication Services

 

IH

 

59,698

 

2.7

LUKOIL, ADR(b)

 

Russia

 

Energy

 

NT

 

57,579

 

2.7

Naspers

 

South Africa

 

Consumer Discretionary

 

PS

 

53,430

 

2.5

TOP 10 LARGEST INVESTMENTS

 

 

 

 

 

 

 

976,361

 

45.0

Banco Bradesco, ADR(b)(d)

 

Brazil

 

Financials

 

IH

 

51,123

 

2.4

Sberbank of Russia, ADR(b)

 

Russia

 

Financials

 

NT

 

50,208

 

2.3

Cognizant Technology Solutions(c)

 

United States

 

Information Technology

 

IH

 

49,657

 

2.3

Itaú Unibanco, ADR(b)

 

Brazil

 

Financials

 

NT

 

49,280

 

2.3

LG

 

South Korea

 

Industrials

 

IH

 

43,594

 

2.0

China Construction Bank

 

China/Hong Kong

 

Financials

 

NT

 

37,975

 

1.7

Banco Santander Mexico, ADR(b)

 

Mexico

 

Financials

 

NT

 

37,638

 

1.7

Yandex

 

Russia

 

Communication Services

 

NT

 

32,496

 

1.5

CNOOC

 

China/Hong Kong

 

Energy

 

NT

 

29,102

 

1.3

Ping An Bank

 

China/Hong Kong

 

Financials

 

PS

 

27,584

 

1.3

TOP 20 LARGEST INVESTMENTS

 

 

 

 

 

 

 

1,385,018

 

63.8

Gazprom, ADR(b)

 

Russia

 

Energy

 

PS

 

27,465

 

1.3

Astra International

 

Indonesia

 

Consumer Discretionary

 

NT

 

26,424

 

1.2

China Mobile

 

China/Hong Kong

 

Communication Services

 

NT

 

26,190

 

1.2

Vale

 

Brazil

 

Materials

 

NH

 

25,785

 

1.2

Kasikornbank

 

Thailand

 

Financials

 

IH

 

25,515

 

1.2

NagaCorp

 

Cambodia

 

Consumer Discretionary

 

PS

 

25,083

 

1.2

Infosys Technologies

 

India

 

Information Technology

 

NT

 

24,781

 

1.1

China Resources Cement Holdings

 

China/Hong Kong

 

Materials

 

IH

 

23,931

 

1.1

Kiatnakin Bank

 

Thailand

 

Financials

 

NT

 

23,003

 

1.1

Lojas Americanas

 

Brazil

 

Consumer Discretionary

 

NT

 

22,592

 

1.0

TOP 30 LARGEST INVESTMENTS

 

 

 

 

 

 

 

1,635,787

 

75.4

(a) Trading activity during the year: (NH) New Holding, (IH) Increased Holding, (PS) Partial Sale and (NT) No Trading.

(b) US listed American Depositary Receipt.

(c) This company, listed on a stock exchange in a developed market, has significant exposure to operations from emerging markets.

(d) Preferred Shares.

 

 

 

 

Holding

Country

Sector

Trading(a)

Fair Value£'000

% of NetAssets

Sunny Optical Technology

 

China/Hong Kong

 

Information Technology

 

NH

 

21,402

 

1.0

POSCO

 

South Korea

 

Materials

 

IH

 

21,178

 

1.0

Ping An Insurance Group

 

China/Hong Kong

 

Financials

 

PS

 

20,045

 

0.9

Gedeon Richter

 

Hungary

 

Health Care

 

IH

 

19,552

 

0.9

IMAX(c)

 

United States

 

Communication Services

 

NT

 

19,369

 

0.9

Bajaj Holdings & Investments

 

India

 

Financials

 

PS

 

18,338

 

0.8

Petroleo Brasileiro, ADR(b)

 

Brazil

 

Energy

 

NH

 

17,575

 

0.8

Mail.Ru, GDR(e)

 

Russia

 

Communication Services

 

NT

 

17,141

 

0.8

Hon Hai Precision Industry

 

Taiwan

 

Information Technology

 

NT

 

14,999

 

0.7

Catcher Technology

 

Taiwan

 

Information Technology

 

PS

 

12,917

 

0.6

TOP 40 LARGEST INVESTMENTS

 

 

 

 

 

 

 

1,818,303

 

83.8

H&H Group

 

China/Hong Kong

 

Consumer Staples

 

IH

 

12,891

 

0.6

Massmart

 

South Africa

 

Consumer Staples

 

IH

 

12,778

 

0.6

B3(f)

 

Brazil

 

Financials

 

PS

 

12,539

 

0.6

MCB Bank

 

Pakistan

 

Financials

 

NT

 

12,030

 

0.6

CTBC Financial Holding

 

Taiwan

 

Financials

 

NT

 

11,615

 

0.5

Tata Chemicals

 

India

 

Materials

 

IH

 

11,473

 

0.5

China Merchants Bank

 

China/Hong Kong

 

Financials

 

NT

 

11,319

 

0.5

HDC Hyundai Development

 

South Korea

 

Industrials

 

NT

 

10,901

 

0.5

Baidu, ADR(b)

 

China/Hong Kong

 

Communication Services

 

IH

 

10,586

 

0.5

Thai Beverages

 

Thailand

 

Consumer Staples

 

PS

 

10,571

 

0.5

TOP 50 LARGEST INVESTMENTS

 

 

 

 

 

 

 

1,935,006

 

89.2

China Petroleum and Chemical

 

China/Hong Kong

 

Energy

 

PS

 

10,326

 

0.5

Glenmark Pharmaceuticals

 

India

 

Health Care

 

IH

 

10,207

 

0.5

Moneta Money Bank

 

Czech Republic

 

Financials

 

NT

 

10,047

 

0.5

NetEase, ADR(b)

 

China/Hong Kong

 

Communication Services

 

PS

 

9,897

 

0.5

B2W Digital

 

Brazil

 

Consumer Discretionary

 

NT

 

9,427

 

0.4

MGM China

 

China/Hong Kong

 

Consumer Discretionary

 

NT

 

9,340

 

0.4

Fila Korea

 

South Korea

 

Consumer Discretionary

 

NH

 

8,884

 

0.4

TOTVS

 

Brazil

 

Information Technology

 

PS

 

8,817

 

0.4

Nemak

 

Mexico

 

Consumer Discretionary

 

IH

 

8,572

 

0.4

Siam Commercial Bank

 

Thailand

 

Financials

 

NT

 

8,501

 

0.4

TOP 60 LARGEST INVESTMENTS

 

 

 

 

 

 

 

2,029,024

 

93.6

(a) Trading activity during the year: (NH) New Holding, (IH) Increased Holding, (PS) Partial Sale and (NT) No Trading.

(b) US listed American Depositary Receipt.

(c) This company, listed on a stock exchange in a developed market, has significant exposure to operations from emerging markets.

(e) UK listed Global Depositary Receipt.

(f) Holding changed its name from BM&F Bovespa during the period.

 

 

 

 

Holding

Country

Sector

Trading(a)

Fair Value£'000

 

% of NetAssets

 

 

Intercorp Financial Services

 

Peru

 

Financials

 

NT

 

8,359

 

 

0.4

 

 

Uni-President China

 

China/Hong Kong

 

Consumer Staples

 

PS

 

8,358

 

 

0.4

 

 

BDO Unibank

 

Philippines

 

Financials

 

NT

 

7,773

 

 

0.4

 

 

PChome Online

 

Taiwan

 

Consumer Discretionary

 

NT

 

7,668

 

 

0.4

 

 

Largan Precision

 

Taiwan

 

Information Technology

 

NT

 

7,352

 

 

0.3

 

 

SK Innovation

 

South Korea

 

Energy

 

NT

 

7,238

 

 

0.3

 

 

M. Dias Branco

 

Brazil

 

Consumer Staples

 

NT

 

7,213

 

 

0.3

 

 

East African Breweries

 

Kenya

 

Consumer Staples

 

NT

 

7,102

 

 

0.3

 

 

Norilsk Nickel, ADR(b)

 

Russia

 

Materials

 

NT

 

6,795

 

 

0.3

 

 

Prosus

 

China/Hong Kong

 

Consumer Discretionary

 

PS

 

6,760

 

 

0.3

 

 

TOP 70 LARGEST INVESTMENTS

 

 

 

 

 

 

 

2,103,642

 

 

97.0

 

 

Hanon Systems

 

South Korea

 

Consumer Discretionary

 

NT

 

6,622

 

 

0.3

 

 

FIT Hon Teng

 

Taiwan

 

Information Technology

 

NT

 

6,437

 

 

0.3

 

 

Coal India

 

India

 

Energy

 

IH

 

6,282

 

 

0.3

 

 

Wiz Soluções e Corretagem

 

Brazil

 

Financials

 

NT

 

5,812

 

 

0.3

 

 

Equity Group

 

Kenya

 

Financials

 

NT

 

5,696

 

 

0.3

 

 

TMK, GDR(e)

 

Russia

 

Energy

 

NT

 

5,256

 

 

0.2

 

 

BAIC Motor

 

China/Hong Kong

 

Consumer Discretionary

 

NT

 

5,129

 

 

0.2

 

 

KCB Group

 

Kenya

 

Financials

 

PS

 

4,938

 

 

0.2

 

 

Hankook Tire

 

South Korea

 

Consumer Discretionary

 

NT

 

4,935

 

 

0.2

 

 

Security Bank

 

Philippines

 

Financials

 

PS

 

4,911

 

 

0.2

 

 

TOP 80 LARGEST INVESTMENTS

 

 

 

 

 

 

 

2,159,660

 

 

99.5

 

 

MAHLE Metal Leve

 

Brazil

 

Consumer Discretionary

 

NT

 

4,892

 

 

0.2

 

 

COSCO Pacific

 

China/Hong Kong

 

Industrials

 

NT

 

4,324

 

 

0.2

 

 

KT Skylife

 

South Korea

 

Communication Services

 

NT

 

3,447

 

 

0.2

 

 

Dairy Farm

 

China/Hong Kong

 

Consumer Staples

 

PS

 

2,848

 

 

0.1

 

 

Biocon

 

India

 

Health Care

 

NT

 

2,822

 

 

0.1

 

 

Weifu High-Technology

 

China/Hong Kong

 

Consumer Discretionary

 

NT

 

2,269

 

 

0.1

 

 

BBVA Banco Francés, ADR(b)

 

Argentina

 

Financials

 

NT

 

1,789

 

 

0.1

 

 

United Bank

 

Pakistan

 

Financials

 

NT

 

1,391

 

 

0.1

 

 

Univanich Palm Oil

 

Thailand

 

Consumer Staples

 

PS

 

612

 

 

0.0

 

 

Interpark

 

South Korea

 

Consumer Discretionary

 

PS

 

530

 

 

0.0

 

 

TOP 90 LARGEST INVESTMENTS

 

 

 

 

 

 

 

2,184,584

 

 

100.6

 

 

Nigerian Breweries

 

Nigeria

 

Consumer Staples

 

NT

 

183

 

 

0.0

 

 

TOTAL INVESTMENTS

 

 

 

 

 

 

 

2,184,767

 

 

100.6

 

NET CURRENT LIABILITIES

 

 

 

 

 

 

 

(13,831

)

 

(0.6

)

TOTAL NET ASSETS

 

 

 

 

 

 

 

2,170,936

 

 

100.0

 

                   

(a) Trading activity during the year: (NH) New Holding, (IH) Increased Holding, (PS) Partial Sale and (NT) No Trading.

(b) US listed American Depositary Receipt.

(c) Prosus is a Company listed in the Netherlands. The classification of China/Hong Kong is due to a significant proportion of its revenue coming from its holding in Tencent.

(d) UK listed Global Depositary Receipt.

 

 

 

Portfolio Summary

As at 30 September 2019

All figures are in %

 

CommunicationServices

ConsumerDiscretionary

Consumer Staples

Energy

Financials

Health Care

Industrials

InformationTechnology

Materials

Real Estate

Total Equities

Net currentliabilities(a)

 

30 September 2019Total

 

31 March 2019Total

 

Argentina

 

-

 

-

 

-

 

-

 

0.1

 

-

 

-

 

-

 

-

 

-

 

0.1

 

-

 

 

0.1

 

 

0.2

 

Brazil

 

-

 

1.6

 

0.3

 

0.8

 

5.6

 

-

 

-

 

0.4

 

1.2

 

-

 

9.9

 

-

 

 

9.9

 

 

8.6

 

Cambodia

 

-

 

1.2

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1.2

 

-

 

 

1.2

 

 

1.3

 

China/Hong Kong

 

8.3

 

9.6

 

1.1

 

1.8

 

4.4

 

-

 

0.2

 

1.0

 

1.1

 

-

 

27.5

 

-

 

 

27.5

 

 

24.3

 

Czech Republic

 

-

 

-

 

-

 

-

 

0.5

 

-

 

-

 

-

 

-

 

-

 

0.5

 

-

 

 

0.5

 

 

0.5

 

Hungary

 

-

 

-

 

-

 

-

 

-

 

0.9

 

-

 

-

 

-

 

-

 

0.9

 

-

 

 

0.9

 

 

0.9

 

India

 

-

 

-

 

-

 

0.3

 

4.7

 

0.6

 

-

 

1.1

 

0.5

 

-

 

7.2

 

-

 

 

7.2

 

 

7.7

 

Indonesia

 

-

 

1.2

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1.2

 

-

 

 

1.2

 

 

3.5

 

Kenya

 

-

 

-

 

0.3

 

-

 

0.5

 

-

 

-

 

-

 

-

 

-

 

0.8

 

-

 

 

0.8

 

 

0.9

 

Mexico

 

-

 

0.4

 

-

 

-

 

1.7

 

-

 

-

 

-

 

-

 

-

 

2.1

 

-

 

 

2.1

 

 

2.4

 

Nigeria

 

-

 

0.0

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

0.0

 

-

 

 

0.0

 

 

0.0

 

Pakistan

 

-

 

-

 

-

 

-

 

0.7

 

-

 

-

 

-

 

-

 

-

 

0.7

 

-

 

 

0.7

 

 

0.8

 

Peru

 

-

 

-

 

-

 

-

 

0.4

 

-

 

-

 

-

 

-

 

-

 

0.4

 

-

 

 

0.4

 

 

1.2

 

Philippines

 

-

 

-

 

-

 

-

 

0.6

 

-

 

-

 

-

 

-

 

-

 

0.6

 

-

 

 

0.6

 

 

0.5

 

Russia

 

2.3

 

-

 

-

 

4.2

 

2.3

 

-

 

-

 

-

 

0.3

 

-

 

9.1

 

-

 

 

9.1

 

 

8.9

 

South Africa

 

-

 

2.5

 

0.6

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

3.1

 

-

 

 

3.1

 

 

7.0

 

South Korea

 

2.9

 

0.9

 

-

 

0.3

 

-

 

-

 

2.5

 

7.8

 

1.0

 

-

 

15.4

 

-

 

 

15.4

 

 

13.7

 

Taiwan

 

-

 

0.4

 

-

 

-

 

0.5

 

-

 

-

 

9.4

 

-

 

-

 

10.3

 

-

 

 

10.3

 

 

9.6

 

Thailand

 

-

 

-

 

0.5

 

-

 

2.7

 

-

 

-

 

-

 

-

 

-

 

3.2

 

-

 

 

3.2

 

 

4.2

 

United Kingdom

 

-

 

-

 

3.2

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

3.2

 

-

 

 

3.2

 

 

3.2

 

United States

 

0.9

 

-

 

-

 

-

 

-

 

-

 

-

 

2.3

 

-

 

-

 

3.2

 

-

 

 

3.2

 

 

2.7

 

Net current liabilities(a)

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(0.6

)

 

(0.6

)

 

(2.1

)

30 September 2019 Total

 

14.4

 

17.8

 

6.0

 

7.4

 

24.7

 

1.5

 

2.7

 

22.0

 

4.1

 

-

 

100.6

 

(0.6

)

 

100.0

 

 

-

 

31 March 2019 Total

 

10.6

 

21.1

 

7.3

 

7.7

 

27.6

 

2.0

 

2.5

 

19.8

 

3.1

 

0.4

 

102.1

 

(2.1

)

 

-

 

 

100.0

 

(a) The Company's net current liabilities per the Statement of Financial Position in the full half-yearly report.

 

 

 

 

Market Capitalisation Breakdown(a) (%)

Less than£1.5bn

£1.5bn to£5bn

Greater than£5bn

Net currentliabilities(b)

 

30 September 2019

 

7.4

 

11.6

 

81.6

 

(0.6

)

31 March 2019

 

8.2

 

19.1

 

74.8

 

(2.1

)

 

Split Between Markets(c) (%)

 

 

 

 

 

30 September 2019

 

31 March 2019

 

Emerging Markets

 

 

 

 

 

92.2

 

93.8

 

Developed Markets(d)

 

 

 

 

 

6.4

 

5.9

 

Frontier Markets

 

 

 

 

 

2.0

 

2.4

 

Net current liabilities(b)

 

 

 

 

 

(0.6

)

(2.1

)

(a) A glossary of alternative performance measure is included in the full half-yearly report.

(b) The Company's net current liabilities per the Statement of Financial Position in the full half-yearly report.

(c) Geographic split between "Emerging Markets", "Frontier Markets" and "Developed Markets" are as per MSCI index classifications.

(d) Developed markets exposure represented by companies listed in the United Kingdom and United States.

Source: FactSet Research System, Inc.

Market Outlook

Emerging markets have been resilient in the face of negative macro events over the last six months but continue to trade at a wide discount to developed markets. We are of the opinion that the underlying fundamentals in emerging markets do not justify these valuations over the longer term, especially since we believe that the long-term structural drivers of emerging markets remain intact.

Emerging markets continue to demonstrate strong economic potential, with undervalued currencies, high foreign exchange reserves and more favourable debt levels than their developed-market peers. Emerging market fundamentals and corporate governance have also been improving. Emerging market cash flows have increased significantly, especially in the last three years, allowing companies to reduce debt ratios, making more yield available to shareholders.

We believe that 2020 could be another strong year for earnings in emerging markets because, based on what we are seeing, a lot of cyclical recoveries have started to emerge, and they should fully materialise in 2020. These conditions, when paired with improving corporate governance that includes dividend pay-outs and buybacks, present an increasingly attractive long-term buying opportunity for investors and contribute to our optimism in the asset class.

Although the US-China trade conflict has been dominating headlines, it should be stressed that the impact of the conflict has not been limited to China; rather we have seen global implications. While the United States and China reached a verbal agreement in October, de-escalating tensions in the short term, we remain cautious and expect continued market volatility until a more comprehensive deal is finalised.

Slowing economic growth expectations, declining inflationary pressures and easing monetary policies in developed markets have generally led emerging market central banks to turn to more expansionary monetary policies to stimulate their economies. In addition to providing a more conducive operating environment for companies, we expect a low-interest rate environment to lead to greater inflows into higher-yielding assets including emerging market equities.

In this environment, we continue to seek companies that demonstrate sustainable earnings power and potential resilience against market uncertainty. Amongst the portfolio's top holdings are technology and consumer-related companies that are highly competitive and appear well-positioned to gain market share even in the face of macroeconomic challenges.

Many emerging market companies are world leaders in the areas of financials, technology and in the production of consumer goods. We are confident that technology will remain a primary driver in emerging markets, whether manifested through world-leading semiconductor manufacturing, e-commerce or other areas. The growing adoption of technology and growth of digital platforms have also helped to create new goods and services for consumers across emerging markets, while at the same time creating growth opportunities for many emerging market companies and investors.

We are of the opinion that consumerism in emerging markets should help to drive growth in many regions. Growing middle-class populations and increasing affluence continue to spur demand for high-end products in emerging markets. In our view, companies with superior products and services should experience sustainable growth in the years to come.

We will continue to use our experience, expertise and proven investment philosophy to find the companies we believe are best positioned to capitalise on the growth in emerging markets and seek to manage risk - increasing the value of investment over time for our shareholders.

Chetan Sehgal

Lead Portfolio Manager

25 November 2019

 

 

Statement of Comprehensive Income

For the six months to 30 September 2019

 

 

 

 

 

 

For the six months to30 September 2019 (unaudited)

 

Note

Revenue£'000

 

Capital£'000

 

Total£'000

 

Gains/(losses) on investments and foreign exchange

 

 

 

 

 

 

 

 

 

 

 

Gains/(losses) on investments at fair value

 

 

 

-

 

 

90,470

 

 

90,470

 

Gains/(losses) on foreign exchange

 

 

 

-

 

 

(1,251

)

 

(1,251

)

Revenue

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

52,549

 

 

-

 

 

52,549

 

Bank and deposit interest

 

 

 

307

 

 

-

 

 

307

 

 

 

 

 

52,856

 

 

89,219

 

 

142,075

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

AIFM fee

 

 

 

(2,996

)

 

(6,990

)

 

(9,986

)

Other expenses

 

 

 

(1,080

)

 

-

 

 

(1,080

)

 

 

 

 

(4,076

)

 

(6,990

)

 

(11,066

)

Profit/(loss) before finance costs and taxation

 

 

 

48,780

 

 

82,229

 

 

131,009

 

Finance costs

 

 

 

(437

)

 

(1,021

)

 

(1,458

)

Profit/(loss) before taxation

 

 

 

48,343

 

 

81,208

 

 

129,551

 

Tax (expense)/income

 

5

 

(3,815

)

 

256

 

 

(3,559

)

Profit/(loss) for the period

 

 

 

44,528

 

 

81,464

 

 

125,992

 

Profit/(loss) attributable to equity holders of the Company

 

 

 

44,528

 

 

81,464

 

 

125,992

 

Earnings per share

 

2

 

17.90

p

 

32.74

p

 

50.64

p

Ongoing charges ratio(a)

 

 

 

 

 

 

 

 

 

1.02

%

(a) A glossary of alternative performance measures is included in Shareholder Information in the full half-yearly report.

Under the Company's Articles of Association the capital element of return is not distributable. The total column of this statement represents the profit and loss account of the Company.

70% of the annual Alternative Investment Fund Manager ("AIFM") fee and 70% of the finance costs have been allocated to the capital account.

 

 

 

 

 

From 1 July 2018, the annual AIFM fee was reduced from 1% of net assets up to £2 billion and 0.85% of net assets above that level to 1% of net assets up to £1 billion and 0.85% above that level.

 

For the six months to30 September 2018 (unaudited)

 

 

 

Year ended31 March 2019 (audited)

Revenue£'000

 

Capital£'000

 

Total£'000

 

Revenue£'000

 

Capital£'000

 

Total£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

(60,271

)

 

(60,271

)

 

 

 

-

 

 

(3,892

)

 

(3,892

)

-

 

 

(5,994

)

 

(5,994

)

 

 

 

-

 

 

(6,184

)

 

(6,184

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,136

 

 

-

 

 

43,136

 

 

 

 

59,230

 

 

-

 

 

59,230

 

157

 

 

-

 

 

157

 

 

 

 

439

 

 

-

 

 

439

 

43,293

 

 

(66,265

)

 

(22,972

)

 

 

 

59,669

 

 

(10,076

)

 

49,593

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,133

)

 

(7,311

)

 

(10,444

)

 

 

 

(5,954

)

 

(13,892

)

 

(19,846

)

(986

)

 

-

 

 

(986

)

 

 

 

(1,935

)

 

-

 

 

(1,935

)

(4,119

)

 

(7,311

)

 

(11,430

)

 

 

 

(7,889

)

 

(13,892

)

 

(21,781

)

39,174

 

 

(73,576

)

 

(34,402

)

 

 

 

51,780

 

 

(23,968

)

 

27,812

 

(636

)

 

(1,488

)

 

(2,124

)

 

 

 

(1,111

)

 

(2,603

)

 

(3,714

)

38,538

 

 

(75,064

)

 

(36,526

)

 

 

 

50,669

 

 

(26,571

)

 

24,098

 

(4,777

)

 

(507

)

 

(5,284

)

 

 

 

(5,798

)

 

(692

)

 

(6,490

)

33,761

 

 

(75,571

)

 

(41,810

)

 

 

 

44,871

 

 

(27,263

)

 

17,608

 

33,761

 

 

(75,571

)

 

(41,810

)

 

 

 

44,871

 

 

(27,263

)

 

17,608

 

12.73

p

 

(28.50

)p

 

(15.77

)p

 

 

 

17.26

p

 

(10.48

)p

 

6.78

p

 

 

 

 

 

 

0.98

%

 

 

 

 

 

 

 

 

 

1.02

%

 

 

 

 

Statement of Financial Position

As at 30 September 2019

 

 

 

As at30 September2019£'000(unaudited)

 

As at30 September2018£'000(unaudited)

 

As at31 March2019£'000(audited)

 

Non-current assets

 

 

 

 

 

 

 

 

 

Investments at fair value through profit or loss

 

2,184,767

 

 

2,200,145

 

 

2,162,435

 

Current assets

 

 

 

 

 

 

 

 

 

Trade and other receivables

 

8,811

 

 

7,299

 

 

11,612

 

Cash and cash equivalents

 

100,287

 

 

41,213

 

 

73,213

 

Total assets

 

109,098

 

 

48,512

 

 

84,825

 

Current liabilities

 

 

 

 

 

 

 

 

 

Bank loans

 

(117,132

)

 

(124,769

)

 

(124,844

)

Trade and other payables

 

(4,703

)

 

(3,488

)

 

(2,654

)

Capital gains tax provision

 

(1,094

)

 

(1,434

)

 

(1,578

)

Total current liabilities

 

(122,929

)

 

(129,691

)

 

(129,076

)

Net current liabilities

 

(13,831

)

 

(81,179

)

 

(44,251

)

Total assets less current liabilities

 

2,170,936

 

 

2,118,966

 

 

2,118,184

 

Share capital and reserves

 

 

 

 

 

 

 

 

 

Equity Share Capital

 

66,582

 

 

69,480

 

 

68,045

 

Capital Redemption Reserve

 

16,087

 

 

13,189

 

 

14,624

 

Capital Reserve

 

1,528,489

 

 

1,491,983

 

 

1,492,845

 

Special Distributable Reserve

 

433,546

 

 

433,546

 

 

433,546

 

Revenue Reserve

 

126,232

 

 

110,768

 

 

109,124

 

Equity Shareholders' Funds

 

2,170,936

 

 

2,118,966

 

 

2,118,184

 

Net Asset Value pence per share(a)

 

884.1

 

 

821.1

 

 

842.5

 

(a) Based on shares in issue excluding shares held in Treasury.

 

 

Statement of Changes in Equity

For the six months to 30 September 2019 (unaudited)

 

 

 

 

Equity ShareCapital£'000

 

 

CapitalRedemptionReserve£'000

 

CapitalReserve£'000

 

 

SpecialDistributableReserve£'000

 

RevenueReserve£'000

 

 

Total£'000

 

Balance at 31 March 2018

69,480

 

13,189

1,667,608

 

433,546

116,989

 

2,300,812

 

Profit for the period

 

-

 

 

-

 

(75,571

)

 

-

 

33,761

 

 

(41,810

)

Equity dividends

 

-

 

 

-

 

-

 

 

-

 

(39,982

)

 

(39,982

)

Purchase and cancellation of own shares

 

-

 

 

-

 

-

 

 

-

 

-

 

 

-

 

Purchase of shares into Treasury

 

-

 

 

-

 

(100,054

)

 

-

 

-

 

 

(100,054

)

Balance at 30 September 2018

 

69,480

 

 

13,189

 

1,491,983

 

 

433,546

 

110,768

 

 

2,118,966

 

Profit for the period

 

-

 

 

-

 

48,308

 

 

-

 

11,110

 

 

59,418

 

Equity dividends

 

-

 

 

-

 

-

 

 

-

 

(12,754

)

 

(12,754

)

Purchase and cancellation of own shares

 

(1,435

)

 

1,435

 

(41,386

)

 

-

 

-

 

 

(41,386

)

Purchase of shares into Treasury

 

-

 

 

-

 

(6,060

)

 

-

 

-

 

 

(6,060

)

Balance at 31 March 2019

 

68,045

 

 

14,624

 

1,492,845

 

 

433,546

 

109,124

 

 

2,118,184

 

Profit for the period

 

-

 

 

-

 

81,464

 

 

-

 

44,528

 

 

125,992

 

Equity dividends

 

-

 

 

-

 

-

 

 

-

 

(27,420

)

 

(27,420

)

Purchase and cancellation of own shares

 

(1,463

)

 

1,463

 

(45,820

)

 

-

 

-

 

 

(45,820

)

Balance at 30 September 2019

 

66,582

 

 

16,087

 

1,528,489

 

 

433,546

 

126,232

 

 

2,170,936

 

 

 

 

Cash Flow Statement

For the six months to 30 September 2019

 

 

 

For thesix months to30 September2019£000(unaudited)

 

For thesix months to30 September2018£000(unaudited)

 

For theyear to31 March2019£000(audited)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Profit before finance costs and taxation

 

131,009

 

 

(34,402

)

 

27,812

 

Adjustments for:

 

 

 

 

 

 

 

 

 

(Gains)/losses on investments at fair value

 

(90,470

)

 

60,271

 

 

3,892

 

(Gains)/losses on foreign exchange

 

1,251

 

 

5,994

 

 

6,184

 

Stock dividends received in period

 

(103

)

 

-

 

 

(511

)

(Increase)/decrease in receivables

 

(202

)

 

1,897

 

 

287

 

Increase/(decrease) in payables

 

152

 

 

1,694

 

 

1,670

 

Cash generated from operations

 

41,637

 

 

35,454

 

 

39,334

 

Tax paid

 

(4,043

)

 

(4,777

)

 

(5,839

)

Net cash inflow from operating activities

 

37,594

 

 

30,677

 

 

33,495

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

Purchases of non-current financial assets

 

(266,769

)

 

(94,577

)

 

(262,622

)

Sales of non-current financial assets

 

337,897

 

 

198,319

 

 

458,308

 

Net cash inflow from investing activities

 

71,128

 

 

103,742

 

 

195,686

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

Equity dividends paid

 

(27,420

)

 

(39,982

)

 

(52,736

)

Purchase and cancellation of own shares

 

(45,058

)

 

-

 

 

(40,972

)

Repurchase of shares into treasury

 

-

 

 

(99,022

)

 

(106,543

)

Movement in bank loans outstanding

 

(7,677

)

 

(19,878

)

 

(19,872

)

Bank loans interest and fees paid

 

(1,493

)

 

(2,167

)

 

(3,688

)

Net cash outflow from financing activities

 

(81,648

)

 

(161,049

)

 

(223,811

)

Net increase/(decrease) in cash

 

27,074

 

 

(26,630

)

 

5,370

 

Cash at the start of the period

 

73,213

 

 

67,843

 

 

67,843

 

Cash at the end of the period

 

100,287

 

 

41,213

 

 

73,213

 

Reconciliation of Liabilities Arising from Bank Loans

 

 

Liabilityas at31 March2019£000

 

Cash flows£000

 

 

Non-cash movements

 

Liabilityas at30 September2019£000

 

 

FXmovement£000

Profit &Loss£000

Bank loans

 

124,679

 

(7,677

)

 

-

 

-

 

117,002

Interest and fees

 

165

 

(1,493

)

 

-

 

1,458

 

130

Total bank loans liabilities

 

124,844

 

(9,170

)

 

-

 

1,458

 

117,132

 

 

 

Notes to the Financial Statements

For the six months to 30 September 2019

 

 

1 Basis of preparation

The Half Yearly Report for the period ended 30 September 2019 has been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and applied in accordance with International Accounting Standard ("IAS") 34, "Interim Financial Reporting".

The Company has adopted the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies ("AIC") issued in November 2014 and updated in October 2019 insofar as the SORP is compatible with IFRS. The accounting policies applied in these half yearly accounts are consistent with those applied in the accounts for the twelve months ended 31 March 2019.

The financial information contained in this interim statement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 30 September 2019 and 30 September 2018 has not been audited. The figures and financial information for the year ended 31 March 2019 are extracted from the published accounts and do not constitute the statutory accounts for that period. Those accounts have been delivered to the Registrar of Companies and included the Report of the Independent Auditors, which was unqualified and did not include a statement under sections 498(2) or 498(3) of the Companies Act 2006.

As at 30 September 2019, the Company had net current liabilities of £13,831,000 (31 March 2019: £44,251,000). The Directors have a reasonable expectation that the Company has sufficient resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.

2 Earnings per share

 

For the sixmonths to30 September2019£000

 

For the sixmonths to30 September2018£000

 

For the year to31 March2019£000

 

Revenue profit

 

44,528

 

 

33,761

 

 

44,871

 

Capital profit/(loss)

 

81,464

 

 

(75,571

)

 

(27,263

)

Total

 

125,992

 

 

(41,810

)

 

17,608

 

Weighted average number of shares in issue

 

248,756,861

 

 

265,126,333

 

 

259,970,471

 

Revenue profit per share

 

17.90

p

 

12.73

p

 

17.26

p

Capital profit/(loss) per share

 

32.74

p

 

(28.50

p)

 

(10.48

p)

Total profit/(loss) per share

 

50.64

p

 

(15.77

p)

 

6.78

p

 

3 Equity share capital

In the six months to 30 September 2019, the Company bought back 5,851,774 shares for cancellation for a total consideration of £45,820,000.

In the six months to 30 September 2018, the Company bought back 13,913,569 shares and placed them in Treasury for a total consideration of £100,054,000.

Shares of 25p each

For the sixmonths to30 September2019

 

For the sixmonths to30 September2018

 

For the year to31 March2019

 

Opening shares balance

 

251,416,170

 

 

271,962,342

 

 

271,962,342

 

Purchase and cancellation of own shares

 

(5,851,774

)

 

-

 

 

(5,737,604

)

Purchase of shares into Treasury

 

-

 

 

(13,913,569

)

 

(14,808,568

)

Closing shares balance

 

245,564,396

 

 

258,048,773

 

 

251,416,170

 

As at 30 September 2019 the Company held 20,765,179 shares in treasury (31 March 2019: 20,765,179 shares).

 

4 Dividends

On 25 November 2019 the Board declared an interim dividend of 5.00 pence per share for the financial year 2020 (interim dividend for the financial year 2019: 5.00 pence per share) and a special dividend of 2.60 pence per share. The total of 7.60 pence per share is payable on 15 January 2020 to shareholders on the register on 6 December 2019. These dividends have not been accrued in the financial statements for the six months ended 30 September 2019, as under IFRS dividends are not recognised until paid. Dividends are debited directly from reserves.

5 Taxation

The total tax expense of £3.56m consists of a revenue tax expense of £3.82m and a capital tax income of £0.26m. The revenue tax expense relates to irrecoverable overseas tax on dividends. The capital tax income consists of £0.48m arising from a decrease in the provision for deferred tax on unrealised gains on Indian holdings offset by a £0.22m expense arising from tax on realised gains on Indian and Indonesian holdings.

6 Costs of Investment Transactions

During the period, expenses were incurred in acquiring or disposing of investments. The following costs of transactions are included in the gains/(losses) on investments at fair value:

 

For the sixmonths to30 September2019£000

For the sixmonths to30 September2018£000

For the year to31 March2019£000

Purchase expenses

 

384

 

245

 

478

Sales expenses

 

363

 

515

 

999

 

 

747

 

760

 

1,477

 

7 Fair Value

Fair values are derived as follows:

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

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

- Cash at the denominated currency of the account.

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

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

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

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

The hierarchy valuation of listed investments through profit and loss are shown below:

 

 

30 September 2019

 

30 September 2018

 

31 March 2019

 

 

£000

£000

£000

 

Level 1

 

2,184,767

 

2,200,145

 

2,115,417

 

Level 2

 

-

 

-

 

-

 

Level 3

 

-

 

-

 

47,018

(a)

Total

 

2,184,767

 

2,200,145

 

2,162,435

 

(a) The fair value of the Company's holding in Bank Danamon Indonesia as at 31 March 2019 was £47,018,000. Prior to year-end, the Company accepted a tender offer from MUFG for the entire holding. Due to the tender offer, the market price was not deemed representative of fair value and, in accordance with the Company's accounting policy, the company valued the investment using the income approach. The year-end balance comprises of £45,556,000 transferred out of level 1 into level 3 and an unrealised gain of £1,462,000 resulting from the valuation technique applied.

The unobservable inputs used in this technique were the stated offer price and payment date as per the tender document and the Company's weighted average cost of capital applied as the discount rate. The valuation is not considered sensitive to these inputs as the Company received full payment of the tender offer on 29 April 2019.

8 General

The Half Yearly Report for the six months to 30 September 2019 was approved by the Board on 25 November 2019. A copy of the report is available on our website www.temit.co.uk.

 

Copies will be uploaded and available for viewing on the National Storage Mechanism, copies will also be posted to the website www.temit.co.uk and may also be requested during normal business hours from Client Dealer Services at Franklin Templeton Investment Management Limited on freephone 0800 305 306. A pdf version of the full Half Yearly Report to 30th September 2019 will be available by accessing the following hyperlink http://www.temit.co.uk/content-common/semi-annual-report/en_GB/local-GB/TEMIT-semi-annual-report.pdf

 

For further information please e-mail CompanySecretarialEdinburgh@franklintempleton.com or contact Client Dealer Services at Franklin Templeton on free phone 0800 305 306, +44 (0) 20 7073 8690 for overseas investors, or e-mail enquiries@franklintempleton.co.uk.

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
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