Templeton Emerging Markets Investment Trust plc
Annual Report and Accounts to 31 March 2023
This report does not constitute or form part of any offer for shares or an invitation to apply for shares. The price of shares and income from them can go down as well as up and you may not get
back the full amount that you invested. Past performance is no guarantee of future performance. Currency fluctuations will affect the value of overseas investments. Emerging markets can be
riskier than developed markets. Please consult your professional adviser before deciding to invest.
Company Overview 1
Strategic Report 2
Financial Summary 2
Ten Year Record 3
Chairman’s Statement 5
The Investment Manager 8
The Investment Manager’s Report 9
The Investment Manager’s Process 23
Business Review 32
Report of the Directors and
Governance 46
Directors’ Report 46
Directors’ Remuneration
Report 60
Report of the Audit and Risk
Committee 64
Statement of Directors’
Responsibilities 70
Independent Auditor’s Report 71
Financial Statements 80
Statement of Comprehensive
Income 80
Statement of Financial Position 81
Statement of Changes in Equity 82
Statement of Cash Flows 83
Notes to the Financial Statements 85
Securities Financing Transactions 103
Investor Information 105
Notice of Meeting 105
Investor Communications 110
General Information
111
Shareholder Information 112
Glossary of Alternative
Performance Measures
114
Contents
Company Overview
Launched in June 1989, Templeton Emerging Markets Investment Trust plc (“TEMIT” or the
“Company”) is an investment trust that invests principally in emerging markets companies with
the aim of delivering capital growth to shareholders over the long term. While the majority of
the Company’s shareholders are based in the UK, shares are traded on both the London and
New Zealand stock exchanges.
TEMIT has a diversified portfolio of around 80 high quality companies, actively selected for their
long-term growth potential and sustainable earnings, and with due regard to Environmental, Social
and Governance (“ESG”) attributes. TEMIT’s research-driven investment approach and strong
long-term performance has helped it to grow to be the largest emerging markets investment trust in
the UK, with assets of £2.0 billion as at 31 March 2023. From its launch to 31 March 2023, TEMIT’s net
asset value (“NAV”) total return was +3,845.7% compared to the benchmark total return of +1,707.2%.
The Company is governed by a Board of Directors who are committed to ensuring that shareholders’
best interests, considering the wider community of stakeholders, are at the forefront of all decisions.
Under the guidance of the Chairman, the Board of Directors is responsible for the overall strategy of
the Company and monitoring its performance.
TEMIT at a glance
For the year to 31 March 2023
Net asset value total
return (cum-income)
(a)
0.8%
(2022: -17.3%)
Share price total
return
(a)
0.5%
(2022: -21.2%)
MSCI Emerging Markets
Index total return
(a)(b)
-4.5%
(2022: -6.8%)
Proposed total
ordinary dividend
(c)
5.00p
(2022: 3.80p)
Cumulative total return to 31 March 2023 (%)
(a)
0.8
28.8
16.4
50.1
0.5
26.3
17.7
46.4
-4.5
27.1
10.5
55.3
-20
0
20
40
60
80
1 Year 3 Years 5 Years 10 Years
NAV total return
Share price total return
MSCI Emerging Markets Index
(a)
A glossary of alternative performance measures is included on pages 114 and 115.
(b)
Source: MSCI. The Company’s benchmark is the MSCI Emerging Markets Index, with net dividends reinvested.
(c)
An annual ordinary dividend of 5.00 pence per share for the year ended 31 March 2023 has been proposed. This
comprises the interim dividend of 2.00 pence per share paid by the Company on 27 January 2023 and the proposed
final dividend of 3.00 pence per share.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 1
Strategic Report
The Directors present the Strategic Report for the year ended 31 March 2023, 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.
Financial Summary
2022–2023
Notes
Year ended
31 March
2023
Year ended
31 March
2022
Capital
return
%
Total
return
%
Total net assets (£ millions) 2,017.5 2,100.4
Net asset value (pence per share)
(a)
174.1 178.2 (3.7) 0.8
Highest net asset value (pence per share) 185.1 223.9
Lowest net asset value (pence per share) 150.3 161.0
Share price (pence per share)
(a)
152.2 156.4 (4.2) 0.5
Highest end of the day share price (pence per share) 164.6 208.0
Lowest end of the day share price (pence per share) 130.6 140.6
MSCI Emerging Markets Index
(a)
(7.6) (4.5)
Share price discount to net asset value at year end
(a)
12.6% 12.2%
Average share price discount to net asset value over the year 13.0% 9.5%
Ordinary dividend (pence per share)
(b)
5.00 3.80
Revenue earnings (pence per share)
(c)
5.72 3.44
Capital earnings (pence per share)
(c)
(5.50) (40.90)
Total earnings (pence per share)
(c)
0.22 (37.46)
Net gearing
(a)(d)
0.0% 1.1%
Ongoing charges ratio
(a)
0.98% 0.97%
Source: Franklin Templeton and FactSet.
(a)
A glossary of alternative performance measures is included on pages 114 and 115.
(b)
An annual ordinary dividend of 5.00 pence per share for the year ended 31 March 2023 has been proposed. This
comprises the interim dividend of 2.00 pence per share (2022: 1.00 pence per share) paid by the Company on 27 January
2023 and a proposed final dividend of 3.00 pence per share (2022: 2.80 pence per share).
(c)
The revenue, capital and total earnings per share figures are shown in the Statement of Comprehensive Income on
page 80 and Note 7 of the Notes to the Financial Statements.
(d)
A net gearing figure of 0% means that the cash held in the Company is equal to or higher than the total bank loans.
2 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
2013–2023
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 2013 2,302.7 140.5 128.1 8.2 1.69 1.25 1.30
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
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
(d)
0.98
Ten year growth record
(e)
2013-2023
Year ended NAV
NAV total
return
(b)
Share
price
Share
price total
return
(b)
MSCI
Emerging
Market
Index total
return
(b)
Revenue
earnings
per share-
undiluted
Ordinary
dividend
per share
31 March 2013 100.0 100.0 100.0 100.0 100.0 100.0 100.0
31 March 2014 84.3 85.4 82.3 83.2 90.1 108.3 116.0
31 March 2015 91.2 93.6 86.8 88.9 102.0 110.1 132.0
31 March 2016 74.6 77.6 70.9 73.8 93.0 83.4 132.0
31 March 2017 108.6 114.7 103.3 109.5 125.8 78.1 132.0
31 March 2018 120.4 128.9 116.0 124.5 140.6 188.2 240.0
31 March 2019 119.9 131.2 119.6 131.9 140.6 204.1 256.0
31 March 2020 104.3 116.5 102.6 115.9 122.1 288.8 304.0
31 March 2021 156.2 179.8 158.0 184.9 174.4 339.1 304.0
31 March 2022 126.8 148.8 122.1 145.7 162.5 203.6 304.0
31 March 2023 123.9 150.1 118.8 146.4 155.3 338.5 400.0
Source: Franklin Templeton and FactSet.
(a)
Comparative figures for financial years 2013 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 on pages 114 and 115.
(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 2023 has been proposed. This
comprises the interim dividend of 2.00 pence per share paid by the Company on 27 January 2023 and a proposed final
dividend of 3.00 pence per share.
(e)
Rebased to 100 at 31 March 2013.
Ten Year Record
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 3
2013/14 2021/22 2022/232020/212019/202018/192017/182016/172015/162014/15
TEMIT share price relative returnTEMIT NAV relative return
-20
-10
-15
-5
0
5
10
15
20
-4.7
-3.6
-8.3
12.6
0.6
1.7
2.0
11.6
-10.5
-6.9
-6.3
-8.2
13.1
1.9
5.9
1.1
5.3
5.0
-14.4
16.7
Ten Year Record (continued)
2013–2023 NAV, share price and benchmark total return
(a)
(a)
Rebased to 100 at 31 March 2013.
(b)
TEMIT reporting periods to 31 March.
Annual NAV and share price total return relative to the benchmark total
return (%)
(b)
150
Mar-22 Mar-23Mar-21Mar-20Mar-19Mar-18Mar-17Mar-15 Mar-16Mar-13 Mar-14
50
150
100
200
MSCI Emerging
Markets Index
Share price
total return
NAV total
return
155
146
4 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Chairman’s Statement
Market overview and investment performance
Our financial year started shortly after the Russian invasion of Ukraine and I would like to repeat the
sympathy of the Board and of all of those involved with the management of TEMIT for all victims
of the Russian invasion of Ukraine. Market conditions were challenging throughout the year. The
war caused a surge in commodity prices. Rapid increases in prices generally result in pressure from
individuals to increase their pay, with a risk that inflation then becomes entrenched. Governments
and central banks around the world have sought to contain inflation by raising interest rates but
need simultaneously to avoid choking economic growth. This is a difficult balance to achieve and
only time will tell whether their actions have been successful.
In recent years China has become an important engine for world economic growth as well as a key
element of the emerging markets investment universe. For a large part of our financial year there
were concerns over the Chinese economy due to the government’s continued pursuit of lockdowns
to control the spread of COVID-19 as well as its interventions in private companies and political
tension with the rest of the world, particularly the United States. The approach to COVID-19 was
suddenly and unexpectedly reversed and this, along with more positive regulatory developments,
helped to spur the recovery in the country and in other emerging markets. In other countries the
higher level of inflation has caused a variety of issues, although some companies have benefited from
higher commodity prices, most notably in the energy sector.
The year under review was a volatile period for TEMIT’s shares. The second half of our financial
year was better than the first; at the half year stage we reported a decline of -8.3% whereas in the
second half returns turned around and we ended the financial year with a small positive return over
12 months of +0.8%
(a)
, outperforming the benchmark index which produced a total return of -4.5%
(a)
.
Revenue and dividend
Net revenue earnings increased markedly to 5.72 pence per share. At the half year stage we
announced an increase in the interim dividend from 1.00 pence to 2.00 pence per share. The Board
is proposing a final dividend of 3.00 pence per share which, if approved by shareholders at the
Annual General Meeting (“AGM”) will result in a total dividend for the year of 5.00 pence per share.
This will be an increase in the total dividend of 32% compared with the previous financial year. I
have regularly emphasised that the primary focus of our Investment Manager is on capital growth.
Nevertheless, it is encouraging to see such a strong increase in revenues.
Borrowing
TEMIT has fixed borrowing of £100 million, and a revolving credit facility under which up to
£120 million in flexible debt may be drawn down. The revolving facility matured on 31 January 2023
and was extended for a further year. The Investment Manager continues to take a cautious view on
borrowing in difficult markets. As at the financial year end, net of cash in the portfolio, TEMIT was
not geared.
Share rating
Our managers remain very active in promoting TEMIT’s shares to existing and potential investors
via a variety of traditional and online channels. As I mentioned in the half yearly report, the Board
was delighted that TEMIT won the award in the “Emerging Markets Equity – Active” category in the
prestigious AJ Bell Fund and Investment Trust Awards in September 2022 for the third consecutive
year. The award is made on the basis of voting by private investors from a shortlist of open-ended
funds, ETFs and investment trusts drawn up by investment experts.
(a)
See Glossary of Alternative Performance Measures on pages 114 and 115.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 5
The challenging market conditions naturally led to pressure on the discount. The Board remains
consistent in its view that share buybacks are a key tool in managing the balance between supply and
demand for the shares. In total over the year, £29.2 million was spent on share buybacks and, as all
buybacks were at a discount to the prevailing NAV, this resulted in an increase in the NAV of 0.23%
to the benefit of remaining shareholders.
31 March 2023 marked the end of the fourth year of the assessment period for the Conditional Tender
Offer, under which the Board undertook to arrange a tender for up to 25% of the Company’s shares
if the NAV total return underperforms that of the benchmark index over the five years to 31 March
2024. After four years, the return was ahead of the benchmark index over the measurement period by
approximately 4 percentage points, but we are aware that returns, both absolute and relative to the
benchmark, can be volatile. The Conditional Tender Offer is described in detail on page 35.
Environmental, Social and Governance
Throughout TEMIT’s history, governance of investee companies has been a key part of the investment
process and in recent years there has been a growing focus on sustainability. A description of the
Investment Manager’s process is included in this report starting on page 23, along with a summary
of the approach to Environmental, Social and Governance matters. Last year the Investment Manager
published the first dedicated Stewardship Report for TEMIT and this received favourable comments
from shareholders and industry experts. The second report was published simultaneously with this
Annual Report and is available to download at www.temit.co.uk.
The Board
As previously announced, Beatrice Hollond retired from the Board at last year’s AGM in July 2022
and Simon Jeffreys assumed the position of Senior Independent Director.
Abigail Rotheroe was appointed as a Director with effect from 1 November 2022. Abigail has over
20 years of investment experience, most recently as the Investment Director at Snowball Impact
Management, a sustainable and impact-focused asset manager. Previously Abigail managed retail
and institutional Asia Pacific portfolios in Hong Kong and London for Schroders, HSBC Asset
Management and Columbia Threadneedle Investments. She is a CFA Charterholder and has
experience in manager selection, sustainability, and impact measurement.
I will complete nine years as a director on 1 August 2024, shortly after next year’s AGM. My
colleagues have started the process of identifying the next Chairman of the Company and expect to
make an announcement later this year.
Annual General Meeting
I am pleased to be able to invite all shareholders to attend our AGM on 14 July 2023 at Barber-
Surgeons’ Hall in London. We look forward to welcoming shareholders at the meeting.
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 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 can also use these
contact details should you have a question at any other time. Any questions that we receive will be
considered and responses will be provided on our website www.temit.co.uk.
Chairman’s Statement (continued)
6 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Outlook
Recent evidence suggests that the problems stemming from the pandemic and then the Russian
invasion of Ukraine have started to abate and attention has returned to the prospects for growth.
Nevertheless, difficulties remain particularly in the developed world which is challenged by high
levels of inflation and debt. The re-opening of the Chinese economy is a positive development but
equally important are efforts to stimulate growth in several parts of the emerging world.
Our Investment Manager expects a recovery in earnings in the second half of 2023 and this is likely to
be helped by efforts by governments to stimulate demand. The long-term case for investing in emerging
markets is founded on a higher level of economic growth supported by young populations, increasing
domestic consumption as the middle-class population expands rapidly and some world-leading
companies. Key to investment performance will be identifying the companies best able to capitalise on
these factors. Our Investment Manager points to a wide variety of opportunities around the world and,
despite the obvious challenges, we continue to look to the long term with some optimism.
Paul Manduca
Chairman
9 June 2023
Chairman’s Statement (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 7
The Investment Manager
TEMIT’s Investment Management is delegated to Templeton Asset Management Ltd (“TAML”)
and Franklin Templeton Investment Management Limited (“FTIML”). Portfolio managers from
TAML and FTIML 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 30 years of experience and local
knowledge from over 70 investment professionals, based in 13 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
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.
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, coordinating 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.
8 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
The Investment Manager’s Report
Review of performance
Emerging markets (“EMs”) as measured by our benchmark index declined over the 12 months
under review. For a large part of the year, rising inflationary pressures and resultant rate hikes,
the ongoing Russian invasion of Ukraine and supply chain challenges depressed consumer and
investor sentiment. However, several bright spots emerged towards the end of the year under
review—signs of receding inflation, policy support to spur domestic consumption and China’s
pivot away from zero-COVID restored investor confidence and helped to cap losses. The MSCI
Emerging Markets Index returned -4.5% in the 12-month period under review, whilst TEMIT
delivered a net asset value total return of +0.8% (all figures are total return in sterling). Full details
of TEMIT’s performance can be found on page 1.
By region, EMs in Asia fared relatively better than their peers in Latin America and Europe, Middle
East and Africa. However, all three regions witnessed declines in some of their underlying markets.
Stocks in China contributed to regional gains after the dismantling of the country’s zero-COVID
policy and measures to spur the economy, such as support for the property sector. Weakening
global demand for consumer electronics weighed on technology-heavy markets in South Korea and
Taiwan, and the Indian market corrected from its strong performance previously. China’s gains
at the end of 2022, together with tourism-reliant Thailand (which benefited from optimism from
a rebound in tourism), helped to support the emerging Asia region. Latin America was dragged
down by the emergence of political concerns which weighed on equity prices. Emerging Europe
lost ground due to the fallout from Russia’s invasion of Ukraine and the dislocations in regional
energy markets. Towards the end of the year, share prices in the Middle East—which had been
through a boom—declined as oil prices moderated and liquidity conditions tightened in some of
the markets. As at 31 March 2023 TEMIT held three Russian securities which remained fair-valued
at zero in view of restrictions around trading these shares and a lack of any price discovery
mechanism to provide indications of residual value. We continue to monitor the developments and
will look to realise value in the best interests of shareholders, whenever possible.
China was TEMIT’s largest market exposure, although the portfolio remained underweight
relative to the benchmark. China gained almost 2% in sterling terms over the 12-month period.
Regional lockdowns related to the country’s zero-COVID policy, prolonged regulatory uncertainty
and a reeling real estate market dominated headlines for a large part of the year and capped gains.
However, Chinese equities rebounded sharply near the end of the period as the country reopened,
and the government reiterated its growth priorities. The Chinese government has clearly defined
its agenda in terms of support of common prosperity and the curtailment of monopolies. With
this, we see the internet sector now adjusting to the new normal. China's pursuit of higher quality
growth with a focus on technology advancement and self-sufficiency will likely shift investment
and growth to newer emerging technologies. We expect the opening up of the Chinese economy
to spur local and overseas demand as there has been a significant increase in household savings
accumulated during the pandemic.
TEMIT’s second-largest market position was in South Korea, where the portfolio was overweight
versus the benchmark. South Korean equities declined by more than 8% during the reporting
period, as the technology-heavy market continued to struggle throughout the year on weakening
demand for technology products, including consumer electronics which had seen excess demand
during the pandemic. Although a downtrend in the global technology sector weighed heavily,
expectations of a trough and hopes of a visible end in the destocking cycle started to manifest
in March 2023. South Korea has some of the most competitive and innovative companies which
span several sectors including semiconductors, electric battery, automobile and renewable energy
industries which augur well for future growth.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 9
The Taiwanese market ended the reporting period with a loss of more than 7%. The technology-heavy
and export-oriented market experienced a lower demand for its technology exports and a fallout from
the demand shortfall in many consumer electronic industries. TEMIT’s slight overweight allocation
to Taiwan was largely attributable to exposure to the island’s semiconductor industry and TEMIT’s
largest portfolio holding, which is in Taiwan Semiconductor Manufacturing (“TSMC”), the world’s
leading manufacturer of advanced chips.
India was TEMIT’s fourth-largest exposure at the end of March 2023. Indian equities fell by 6%
over the 12-month period as global volatility, rising inflation and soaring energy prices diminished
investor sentiment for most of 2022. India also had a weak start to 2023 over concerns of a
consumption slowdown and the impact of the decline in the share prices of different companies
in the Adani Group following a negative research report; none of these were held in TEMIT.
However, India has the ability to rely on domestic consumption and its massive increase in
infrastructure capital expenditure bodes well for further development of the economy. It has also
benefited from the diversification of global supply chains away from China alongside a pick-up
in manufacturing investments. In the long-term, the diversification of India’s power sources into
renewables should eventually ease pressure from imported energy and inflation.
Equities in Brazil fell 13% over the reporting period. Brazilian equities were volatile due to political
and economic uncertainty after its presidential elections in October 2022. Former president Luiz
Inacio Lula da Silva won the election by a narrow margin, beating the incumbent president Jair
Bolsonaro. In the immediate aftermath of the election, widespread protests that lasted for more
than two months plagued the country. A delay in announcing the composition of the new cabinet
also caused uncertainty. This backdrop of domestic unrest and post-election uncertainty on future
government policy hung over positive developments such as an improvement in economic growth
and softening inflation.
Investment strategy, portfolio changes and performance attribution
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.
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 which
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 and it has certainly
been helpful having teams on the ground particularly in the benchmark heavyweight countries of
Brazil, China and India. This local presence allows us to understand business models, competitive
dynamics and supply chain issues. We also obtain insights into regulatory conversations and
The Investment Manager’s Report (continued)
10 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
The Investment Manager’s Report (continued)
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.
In the portfolio, we remain positioned in long-term themes including consumption premiumisation,
digitalisation, health care and technology. We focus on companies reflecting our philosophy of
owning good quality businesses, with long-term 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 2023 2022 2021 2020 2019
Net asset value total return
(a)
0.8 (17.3) 54.5 (11.2
)
1.8
Expenses incurred 1.0 1.0 1.0 1.0 1.0
Gross total return
(a)
1.8 (16.3) 55.5 (10.2
)
2.8
Benchmark total return
(a)
(4.5) (6.8) 42.8 (13.2
)
0.1
Excess return
(a)
6.3 (9.5) 12.7 3.0 2.7
Stock selection 6.9 (10.0) 6.0 (2.1
)
1.8
Sector allocation (0.4) 0.3 6.8 3.1 (0.6
)
Currency (0.2) 0.2 (0.3
)
1.6 1.0
Share buyback impact 0.2 0.0 0.3 0.4 1.0
Residual return
(a)
(0.2) (0.0
)
(0.1) – (0.5
)
Total contribution 6.3 (9.5) 12.7 3.0 2.7
Source: FactSet and Franklin Templeton.
(a)
A glossary of alternative performance measures is included on pages 114 and 115.
Top 10 contributors to relative performance by security (%)
(a)
Top contributors Country Sector
Share price
total return
Contribution to
portfolio relative
to MSCI Emerging
Markets Index
ICICI Bank India Financials 18.9 1.3
Prosus
(b)(c)
China/Hong Kong Consumer Discretionary 55.0 1.1
Brilliance China Automotive
(b)
China/Hong Kong Consumer Discretionary 78.2 0.9
Banco Santander Mexico
(b)
Mexico Financials 52.2 0.7
Daqo New Energy China/Hong Kong Information Technology 20.7 0.5
Tencent Music Entertainment China/Hong Kong Communication Services 81.1 0.5
Unilever
(b)(c)
United Kingdom Consumer Staples 25.9 0.4
Genpact
(b)(c)
United States Information Technology 14.4 0.4
LG South Korea Industrials 11.3 0.4
Petroleo Brasileiro Brazil Energy 19.0 0.4
(a)
For the period 31 March 2022 to 31 March 2023.
(b)
Security not included in the MSCI Emerging Markets Index as at 31 March 2023.
(c)
This security, listed on a stock exchange in a developed market, has significant exposure to operations from
emerging markets.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 11
ICICI Bank, India’s second largest private sector bank, gained during the period following
several consistently strong quarters of loan growth, net interest margins and non-interest income.
The bank remains well positioned with its healthy capital adequacy ratios and strong franchise.
Prosus is a leading global investment company and the largest shareholder of Tencent, a
Chinese technology company. Its share price tracked Tencent’s, which ended the period higher
on hopes of China’s reopening, better-than-expected third quarter results for 2022 and easing of
restrictions for the Chinese internet industry.
Shares of Brilliance China Automotive, a Chinese car maker noted for its association with
German luxury car maker BMW, moved higher after trading resumed in October 2022 following a
suspension of one-and-a-half years. It also paid out a special dividend of the proceeds from a stake
sale in its affiliate BMW Brilliance Automotive, but uncertainties over further dividends weighed
on the stock price in the later part of the period.
Top 10 detractors to relative performance by security (%)
(a)
Top detractors Country Sector
Share price
total return
Contribution to
portfolio relative
to MSCI
Emerging
Markets Index
NAVER South Korea Communication Services (41.0) (1.1)
Americanas
(b)
Brazil Consumer Discretionary (94.1) (0.7)
Banco Bradesco Brazil Financials (30.7) (0.5)
Samsung Electronics South Korea Information Technology (6.6) (0.4)
Cognizant Technology
Solutions
(c)(d)
United States Information Technology (26.4) (0.4)
China Merchants Bank China/Hong Kong Financials (19.4) (0.3)
Naspers
(b)
South Africa Consumer Discretionary 74.0 (0.3)
PDD
(b)
China/Hong Kong Consumer Discretionary 101.5 (0.3)
China Resources Cement China/Hong Kong Materials (32.3) (0.3)
TSMC Taiwan Information Technology (8.8) (0.2)
(a)
For the period 31 March 2022 to 31 March 2023.
(b)
Security not held by TEMIT as at 31 March 2023.
(c)
Security not included in the MSCI Emerging Markets Index as at 31 March 2023.
(d)
This security, listed on a stock exchange in a developed market, has significant exposure to operations from
emerging markets.
NAVER is the leading internet search and advertising company in South Korea. The share
price was negatively impacted by slower growth in a post-COVID environment. Concerns over
expansion into unprofitable new businesses in uncertain macroeconomic conditions and weak
earnings (which fell short of consensus estimates) pressured the share price. However, we believe
that NAVER is in a good position to build a thriving ecosystem integrating search, e-commerce,
payments and digital content based on its solid foundation in search and advertising.
Americanas is a Brazilian e-commerce company and operator of convenience stores. Disappointing
results for the third quarter of 2022, news of accounting inconsistencies and the departure of its
new leadership team pressured its share price. High inflation and elevated interest rates also made
for a difficult environment. We divested our position in the stock in January 2023.
Banco Bradesco is Brazil’s leading private sector bank. Weak fourth quarter results and exposure
to Americanas weighed on stock prices.
The Investment Manager’s Report (continued)
12 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Top contributors and detractors to relative performance by sector (%)
(a)
Top contributors
MSCI
Emerging
Markets Index
sector total
return
Contribution
to portfolio
relative
to MSCI
Emerging
Markets Index Top detractors
MSCI
Emerging
Markets Index
sector total
return
Contribution
to portfolio
relative
to MSCI
Emerging
Markets Index
Financials (7.4) 2.3 Information Technology (7.8) (0.0)
Materials (9.5) 1.0
Consumer Discretionary 2.2 0.8
Industrials 0.4 0.5
Consumer Staples 6.6 0.5
(a)
For the period 31 March 2022 to 31 March 2023.
Favourable stock selection in the financials sector added to TEMIT’s performance relative to the
benchmark index in the period of review. ICICI Bank (described above) and Banco Santander
Mexico were both examples of financial companies which aided relative returns. In addition,
Banco Santander Mexico is an off-benchmark holding, which is testament to the investment team’s
knowledge of local companies stemming from our experience and on-the-ground presence. Stock
selection in the materials sector also aided relative performance. Contribution within this sector
was led by South Korea-based steel product manufacturer POSCO. Stock selection in the consumer
discretionary sector was also another contributor to relative returns.
In contrast, only one sector, information technology detracted (marginally) primarily due to an
overweight allocation. Semiconductor firms TSMC and Samsung Electronics were key detractors,
as they suffered from a cyclical downturn in demand for semiconductors.
Top contributors and detractors to relative performance by country (%)
(a)
Top contributors
MSCI
Emerging
Markets Index
sector total
return
Contribution
to portfolio
relative
to MSCI
Emerging
Markets Index Top detractors
MSCI
Emerging
Markets Index
sector total
return
Contribution
to portfolio
relative
to MSCI
Emerging
Markets Index
China/Hong Kong 1.5 2.2 Brazil (13.1) (0.4)
India (6.0) 2.1 Thailand 5.8 (0.3)
South Africa (15.0) 0.6 Turkey 63.2 (0.2)
United Arab Emirates (23.8) 0.6 Indonesia 7.5 (0.2)
United Kingdom 2.5 0.4 Pakistan
(b)
— (0.1)
(a)
For the period 31 March 2022 to 31 March 2023.
(b)
No companies included in the MSCI Emerging Markets Index in this country as at 31 March 2023.
By markets, stock selection in China, India and South Africa were key contributors. Several
holdings in China such as Brilliance China Automotive and polysilicon manufacturer Daqo New
Energy helped relative returns. In India, ICICI Bank was a key contributor to TEMIT’s returns
relative to the index. South Africa’s contribution was led by general merchandise retailer Massmart.
Brazil was the top detractor from relative performance. The detraction was caused by stock selection
with Americanas and Banco Bradesco leading the declines. An overweight position in Thailand was
a positive contributor to performance but this was negated by poor stock performance. A lack of
exposure to Turkey also detracted as Turkish equities rallied in 2022. Investors increased their equity
allocation within the country to hedge against inflation and a low-yield environment. Turkey has
since given up some of its gains in the first quarter of 2023.
The Investment Manager’s Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 13
Largest holdings
The largest portfolio holding is in computer chip maker TSMC. After rising in 2021 on the
basis of a positive outlook for the semiconductor industry, TSMC suffered with a weakness in
demand at some of its end customers. Although its profits for 2022 were ahead of initial estimates,
the slowdown in demand meant that estimates for 2023 profit growth are much more muted.
However, we are confident on the resilience of the business model of TSMC as it continues to lead
on its business model of being “everyone’s foundry”.
The second largest portfolio holding is in Alibaba, a Chinese e-commerce company. Most recently,
Alibaba announced an organisational revamp, resulting in a split into six units. Alibaba has seen
a slowdown in growth in the past couple of years due to increased regulations, competition and
prolonged COVID-19 lockdowns. With China’s economic reopening and the industry’s adjustment
to the new regulatory environment, we expect growth to resume, albeit at a slower pace. Whilst
the e-commerce businesses of Alibaba should deliver steady growth, its other businesses such
as cloud, fintech, local commerce and content have significant potential. This could either offer
growth opportunities or the possibility of an improvement in profitability. We remain positive on
the strength of the e-commerce ecosystem of Alibaba and its ability to generate strong cash flows.
In addition, Alibaba’s strong buyback policy is another driver of earnings growth.
Global semiconductor manufacturer Samsung Electronics was the third-largest holding in the
portfolio. Although TEMIT has reduced its holdings in the company due to a cyclical fall in
earnings, we continue to believe that Samsung Electronics will be at the forefront of the industry
and will benefit from any subsequent revival in demand.
The Investment Manager’s Report (continued)
14 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Portfolio changes by sector
Total return in sterling
Sector
31 March 2022
market value
£m
Purchases
£m
Sales
£m
Market
movement
£m
31 March 2023
market value
£m
TEMIT
%
MSCI
Emerging
Markets Index
%
Information Technology 737 57 (168) (61) 565 (5.8) (7.8)
Financials 473 141 (139) (4) 471 2.3 (7.4)
Consumer Discretionary 266 52 (43) 14 289 6.7 2.2
Communication Services 212 46 (58) (2) 198 (1.8) (1.2)
Materials 208 25 (56) (8) 169 1.3 (9.5)
Industrials 62 51 (16) 4 101 8.6 0.4
Consumer Staples 82 14 (42) 19 73 28.8 6.6
Health Care 33 33 (2) (4) 60 (7.2) (9.5)
Energy 36 29 (1) (15) 49 18.4 2.1
Utilities – 18 (12) 3 9 45.7 (8.6)
Real Estate 16 – (6) (1) 9 (13.2) (13.2)
Total investments 2,125 466 (543) (55) 1,993
Sector asset allocation
As at 31 March 2023
Sector weightings vs benchmark (%)
TEMIT
Information Technology
Financials
Utilities
MSCI Emerging Markets Index
0 5 10 15 20 3025
Communication Services
Consumer Staples
Consumer Discretionary
Materials
Energy
Health Care
Real Estate
Industrials
28.3
23.6
14.5
9.9
8.5
5.1
3.7
3.0
2.4
0.5
0.5
20.5
21.0
13.8
10.6
8.6
6.0
6.5
3.8
4.7
2.6
1.9
The Investment Manager’s Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 15
Portfolio changes by country
Total return in sterling
Country
31 March 2022
market value
£m
Purchases
£m
Sales
£m
Market
movement
£m
31 March 2023
market value
£m
TEMIT
%
MSCI
Emerging
Markets Index
%
China/Hong Kong 605 191 (219) 39 616 9.1 1.5
South Korea 487 60 (107) (42) 398 (5.8) (8.4)
Taiwan 363 22 (32) (37) 316 (6.5) (7.1)
India 188 73 (65) 30 226 14.5 (6.0)
Brazil 210 33 (29) (59) 155 (16.6) (13.1)
Other 272 87 (91) 14 282 – –
Total investments 2,125 466 (543) (55) 1,993
Geographic asset allocation
As at 31 March 2023
Country weightings vs benchmark (%)
(a)
South Korea
China/Hong Kong
India
Taiwan
Thailand
Brazil
United Kingdom
(b)
Peru
Chile
United Arab Emirates
Philippines
Cambodia
(b)
Kenya
(b)
Russia
(b)(c)
South Africa
Indonesia
Hungary
Mexico
United States
(b)
0 5 10 15 20 353025
15.9
15.1
7.8
4.9
3.4
11.3
13.0
1.6
2.4
2.1
—
—
—
—
—
—
1.5
2.7
1.9
0.2
0.9
3.4
0.6
0.6
0.5
0.2
0.5
1.2
0.7
0.4
0.3
0.1
0.0
0.0
1.0
0.9
30.9
32.8
20.0
11.9
Pakistan
(b)
TEMIT
MSCI Emerging Markets Index
(a)
Other countries included in the benchmark are Colombia, Czech Republic, Egypt, Greece, Kuwait, Malaysia, Poland,
Qatar, Romania, Saudi Arabia and Turkey.
(b)
Countries not included in the MSCI Emerging Markets Index.
(c)
All companies held by TEMIT in this country are valued at zero.
The Investment Manager’s Report (continued)
16 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Portfolio investments by fair value
As at 31 March 2023
Holding Country Sector Trading
(a)
Fair value
£'000
% of net
assets
TSMC Taiwan Information Technology NT 231,444 11.5
Alibaba
(b)
China/Hong Kong Consumer Discretionary PS 114,084 5.6
Samsung Electronics South Korea Information Technology PS 113,781 5.6
ICICI Bank India Financials PS 112,103 5.6
Tencent China/Hong Kong Communication Services PS 74,008 3.7
MediaTek Taiwan Information Technology IH 69,319 3.5
NAVER South Korea Communication Services IH 61,205 3.0
Prosus
(c)
China/Hong Kong Consumer Discretionary IH 56,774 2.8
LG South Korea Industrials PS 52,065 2.6
China Merchants Bank China/Hong Kong Financials IH 45,150 2.2
TOP 10 LARGEST INVESTMENTS 929,933 46.1
Guangzhou Tinci Materials
Technology
China/Hong Kong Materials PS 43,448 2.2
Samsung Life Insurance South Korea Financials IH 42,935 2.1
Petroleo Brasileiro
(d)
Brazil Energy IH 41,238 2.0
Itaú Unibanco
(d)(e)
Brazil Financials IH 40,867 2.0
HDFC Bank India Financials NH 38,345 1.9
Genpact
(f)
United States Information Technology PS 35,216 1.8
Banco Bradesco
(d)(e)
Brazil Financials IH 34,687 1.7
Vale Brazil Materials PS 34,589 1.7
Baidu China/Hong Kong Communication Services IH 32,193 1.6
Unilever
(f)
United Kingdom Consumer Staples PS 31,968 1.6
TOP 20 LARGEST INVESTMENTS 1,305,419 64.7
Cognizant Technology Solutions
(f)
United States Information Technology IH 31,915 1.6
POSCO South Korea Materials PS 31,627 1.6
Brilliance China Automotive China/Hong Kong Consumer Discretionary NT 29,606 1.5
Soulbrain South Korea Materials IH 28,414 1.4
Banco Santander Mexico
(e)
Mexico Financials PS 25,627 1.3
Ping An Insurance China/Hong Kong Financials IH 24,963 1.2
Techtronic Industries China/Hong Kong Industrials IH 24,812 1.2
Kasikornbank Thailand Financials NT 23,425 1.2
Uni-President China China/Hong Kong Consumer Staples IH 21,144 1.0
NetEase China/Hong Kong Communication Services IH 20,515 1.0
TOP 30 LARGEST INVESTMENTS 1,567,467 77.7
The Investment Manager’s Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 17
Holding Country Sector Trading
(a)
Fair value
£'000
% of net
assets
Daqo New Energy
(e)
China/Hong Kong Information Technology PS 20,392 1.0
Gedeon Richter Hungary Health Care IH 19,603 1.0
Meituan China/Hong Kong Consumer Discretionary NH 18,962 0.9
Doosan Bobcat South Korea Industrials NH 17,977 0.9
Bajaj Holdings & Investments India Financials PS 17,872 0.9
Astra International Indonesia Consumer Discretionary PS 17,313 0.9
WuXi Biologics China/Hong Kong Health Care IH 17,250 0.9
Banco Santander Chile
(e)
Chile Financials NH 16,659 0.8
Fila South Korea Consumer Discretionary PS 15,867 0.8
Zomato India Consumer Discretionary NH 14,093 0.7
TOP 40 LARGEST INVESTMENTS 1,743,455 86.5
Infosys Technologies India Information Technology IH 14,015 0.7
Netcare South Africa Health Care IH 12,735 0.6
One 97 Communications India Information Technology NH 12,481 0.6
China Resources Cement China/Hong Kong Materials PS 11,887 0.6
Hon Hai Precision Industry Taiwan Information Technology PS 11,824 0.6
Ping An Bank China/Hong Kong Financials PS 10,588 0.5
Beijing Oriental Yuhong Waterproof
Technology
China/Hong Kong Materials NH 10,262 0.5
Tata Consultancy Services India Information Technology PS 10,201 0.5
H&H Group China/Hong Kong Consumer Staples IH 10,150 0.5
LegoChem Biosciences South Korea Health Care IH 9,885 0.5
TOP 50 LARGEST INVESTMENTS 1,857,483 92.1
Samsung SDI South Korea Information Technology NH 9,627 0.5
Intercorp Financial Services Peru Financials IH 9,501 0.5
Emirates Central Cooling Systems United Arab
Emirates
Utilities NH 9,416 0.5
LG Chem South Korea Materials PS 9,012 0.5
Thai Beverage Thailand Consumer Staples IH 8,680 0.4
Kiatnakin Phatra Bank Thailand Financials NT 8,279 0.4
Star Petroleum Refining Thailand Energy NH 8,251 0.4
Tencent Music Entertainment
(e)
China/Hong Kong Communication Services PS 8,107 0.4
BDO Unibank Philippines Financials NT 7,931 0.4
PB Fintech India Financials NH 6,930 0.3
TOP 60 LARGEST INVESTMENTS 1,943,217 96.4
The Investment Manager’s Report (continued)
18 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Holding Country Sector Trading
(a)
Fair value
£'000
% of net
assets
NagaCorp Cambodia Consumer Discretionary PS 6,819 0.3
COSCO SHIPPING Ports China/Hong Kong Industrials IH 5,961 0.3
China Resources Land China/Hong Kong Real Estate PS 5,033 0.2
Nemak Mexico Consumer Discretionary PS 4,689 0.2
Greentown Service Group China/Hong Kong Real Estate PS 4,070 0.2
Yageo Taiwan Information Technology NH 3,730 0.2
Hankook Tire South Korea Consumer Discretionary NT 3,292 0.2
MCB Bank Pakistan Financials PS 2,807 0.1
XP Inc Brazil Financials NT 2,473 0.1
Weifu High-Technology China/Hong Kong Consumer Discretionary NT 2,410 0.1
TOP 70 LARGEST INVESTMENTS 1,984,501 98.3
BAIC Motor China/Hong Kong Consumer Discretionary NT 2,152 0.1
KT Skylife South Korea Communication Services NT 2,114 0.1
JD.com China/Hong Kong Consumer Discretionary NT 2,042 0.1
TOTVS Brazil Information Technology PS 817 0.1
East African Breweries Kenya Consumer Staples PS 801 0.1
Chervon Holdings China/Hong Kong Consumer Discretionary PS 348 –
Yandex
(g)
Russia Communication Services NT – –
LUKOIL
(g)
Russia Energy NT – –
Sberbank of Russia
(g)
Russia Financials NT – –
TOTAL INVESTMENTS 1,992,775 98.8
NET ASSETS 24,728 1.2
TOTAL NET ASSETS 2,017,503 100.0
(a)
Trading activity during the year: (NH) New Holdings, (IH) Increased Holdings, (PS) Partial Sale and (NT) No Trading.
(b)
TEMIT holds in this company shares listed on the Hong Kong stock exchange and American Depository Receipts
listed on the New York stock exchange.
(c)
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.
(d)
Preferred shareholders are entitled to dividends before ordinary shareholders.
(e)
US listed American Depository Receipt.
(f)
This company, listed on a stock exchange in a developed market, has significant exposure to operations from
emerging markets.
(g)
This company is fair valued at zero as a result of its trading being suspended on international stock exchanges.
The Investment Manager’s Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 19
Portfolio summary
As at 31 March 2023
All figures are a % of the net assets
Communication
Services
Consumer
Discretionary
Consumer
Staples
Energy
Financials
Health Care
Industrials
Information
Technology
Materials
Real Estate
Utilities
Total Equities
Net assets/
(liabilities)
(a)
31 March 2023
Total
31 March 2022
Total
Brazil – – – 2.0 3.8 – – 0.1 1.7 – – 7.6 – 7.6 10.0
Cambodia – 0.3 – – – – – – – – – 0.3 – 0.3 0.4
Chile – – – – 0.8 – – – – – – 0.8 – 0.8 –
China/Hong Kong 6.7 11.1 1.5 – 3.9 0.9 1.5 1.0 3.3 0.4 – 30.3 – 30.3 28.8
Egypt – – – – – – – – – – – – – – 0.1
Germany – – – – – – – – – – – – – – 0.1
Hungary – – – – – 1.0 – – – – – 1.0 – 1.0 0.7
India – 0.7 – – 8.7 – – 1.8 – – – 11.2 – 11.2 9.1
Indonesia – 0.9 – – – – – – – – – 0.9 – 0.9 0.9
Kenya – – 0.1 – – – – – – – – 0.1 – 0.1 0.2
Mexico – 0.2 – – 1.3 – – – – – – 1.5 – 1.5 1.6
Pakistan – – – – 0.1 – – – – – – 0.1 – 0.1 0.4
Peru – – – – 0.5 – – – – – – 0.5 – 0.5 0.5
Philippines – – – – 0.4 – – –
–
– – 0.4 – 0.4 0.3
Russia
(b)
0.0 – – 0.0 0.0 – – – – – – 0.0 – 0.0 0.0
South Africa – – – – – 0.6 – – – – – 0.6 – 0.6 0.6
South Korea 3.1 1.0 – – 2.1 0.5 3.5 6.1 3.5 – – 19.8 – 19.8 23.2
Taiwan – – – – – – – 15.8 – – – 15.8 – 15.8 17.3
Thailand – – 0.4 0.4 1.6 – – – – – – 2.4 – 2.4 2.1
United Arab Emirates – – – – – – – – – – 0.5 0.5 – 0.5 –
United Kingdom – – 1.6 – – – – – – – – 1.6 – 1.6 1.4
United States – – – – – – – 3.4 – – – 3.4 – 3.4 3.4
Net assets/(liabilities)
(a)
– – – – – – – – – – – – 1.2 1.2 (1.1)
31 March 2023 Total 9.8 14.2 3.6 2.4 23.2 3.0 5.0 28.2 8.5 0.4 0.5 98.8 1.2 100.0 –
31 March 2022 Total
10.2 12.7 3.8 1.7 22.6 1.5 2.9 35.1 9.9 0.7 – 101.1 (1.1) – 100.0
(a)
The Company’s net assets/(liabilities) are the total of net current assets plus non-current liabilities per the Statement
of Financial Position on page 81.
(b)
All companies held by TEMIT in this country are valued at zero.
The Investment Manager’s Report (continued)
20 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Market capitalisation breakdown (%)
Less than
£1.5bn
£1.5bn to
£5bn
£5bn to
£25bn
Greater than
£25bn
Net assets/
(liabilities)
(a)
31 March 2023 5.1 11.2 22.9 59.6 1.2
31 March 2022 7.7 8.0 16.5 68.9 (1.1)
Split between markets
(b)
(%)
31 March
2023
31 March
2022
Emerging markets 93.3 95.6
Developed markets
(c)
5.0 4.9
Frontier markets 0.5 0.6
Net assets/(liabilities)
(a)
1.2 (1.1)
Source: FactSet Research System, Inc.
(a)
The Company’s net assets/(liabilities) are the total of net current assets plus non-current liabilities per the Statement
of Financial Position on page 81.
(b)
Geographic split between "Emerging markets", "Frontier markets", "Developed markets" are as per MSCI index classifications.
(c)
Developed market exposure represented by companies listed in United Kingdom and United States which have
significant exposure to operations in emerging markets.
Outlook for emerging markets
Heading into 2023, while we remain watchful for developments that could change our overall
outlook, including China’s relationship with Taiwan and the United States, we find many reasons
to be positive about EMs. Many countries are towards the end of the rate tightening cycle. Most
markets in Latin America have traditionally had a significant real interest rate and their economic
potential has been curtailed because of the need for macroeconomic stability.
We expect any policy pivot in EMs to revive consumption and spur economic growth as inflation
slows. In addition, after a slowdown in earnings in 2022, there is the prospect of a recovery in
earnings growth in 2023, with China being the last major country to emerge from the pandemic.
However, in the short-term, earnings are likely to remain weak with subdued consumption and
inventory digestion and a recovery is expected more towards the second half of 2023. A pickup in
earnings revisions in EMs would signify better times ahead for equity markets.
Although the current global outlook remains weak, economies with a greater focus on domestic
demand are better placed to weather this in the near term. Many emerging markets such as China,
India, Indonesia and Brazil have huge domestic consumption bases and are well-positioned to
remain resilient from external demand shortfalls. In addition, policy makers in several markets are
providing incentives to manufacturing companies to expand operations in order to remain self-
sufficient and competitive. For example, India is driving investments through its Production Linked
Incentive program. South Korea plans to offer tax breaks to semiconductor and other technology
companies investing within the country whilst reforming stock market regulations. Thailand has also
approved a budget to boost tourism in the country, one of its biggest growth drivers.
The long-term structural tailwind of consumption growth in EMs via expansion of the middle class
and premiumisation of buying patterns is now more significant than ever. Some US$2.6 trillion in
Chinese bank deposits were amassed in 2022
(a)
and middle-class households are looking to spend
on experiences, products and services. In our view, China’s reopening could benefit many markets
as the country has strong trade links with many EMs. Chinese tourism has also been a vital source
of revenue for many countries.
(a)
Source: People’s Bank of China
The Investment Manager’s Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 21
After the removal of most COVID-related constraints, we have seen economic activity in China
starting to recover in the first quarter of 2023, where retail sales, industrial production and
investment in fixed assets increased. More importantly, companies are now able to operate their
businesses without COVID protocols which removes the pressure of unplanned outages and
improves overall efficiency.
Markets in Eastern Europe will benefit from the normalisation of energy dislocations, although the
conflict in Ukraine will continue to be an overhang. Markets in the Middle East continue to see a
boom in initial public offering activity which bodes well for future capital market developments in
the region.
These uncorrelated drivers of returns in EM economies present an investment opportunity which
our team’s deep experience, local expertise and a bottom-up investment approach can uncover.
EMs also continue to make strides towards climate goals and with the cost of renewable energy
expected to fall in 2023, we might well see EMs make further climate commitments.
It is an interesting time to be looking at the emerging world today. We believe that the breadth
of opportunity, growth, innovation, sustainability of business models and the much stronger
institutional resilience compared to decades past when considered together create an attractive
future for EMs.
Chetan Sehgal
Lead Portfolio Manager
9 June 2023
The Investment Manager’s Report (continued)
22 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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 factors create risks and
opportunities for companies. ESG analysis is therefore integrated alongside 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 Investment Manager’s Process
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 23
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, 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.
The Investment Manager’s Process (continued)
24 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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 managed 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).
FTEME’s approach to stewardship
FTEME’s focus is on a total sustainability approach including business, economic, environmental
and social sustainability. How FTEME monitors and manages client assets is not just about focusing
on governance and sustainability factors. It demands a holistic approach incorporating proactive
long-term engagement with the managers of the companies which FTEME invests in, on behalf of
TEMIT and its other clients.
Part of being a responsible steward of clients’ assets is acknowledging that governance and
sustainability factors create risks and opportunities for companies. It therefore makes sense to
integrate these factors alongside fundamental bottom-up analysis and engage with companies as
active owners on behalf of clients. Responsible stewardship is not a single act but a continuous
process that includes engagement and voting. Being responsible stewards of our clients’ capital is
reflected in:
How we act as investors
- ESG integration
- Company engagement
- 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
- Achieving quality results
- Working with integrity
Integrating ESG factors
Analyses of governance and sustainability factors are embedded components of our rigorous
fundamental bottom-up research. The driving factors of the decision to purchase or sell a stock centre
on the following:
• Its sustainable earnings power and whether its price is at a discount to intrinsic worth; and
• The sustainability of its business model, which is critical to maintaining its competitive positioning.
The Investment Manager’s Process (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 25
Our proprietary three-pillar ESG
framework is a key component of
how we aim to achieve our goal
of being an emerging market leader in
sustainable investing.
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 linked to their incremental
progress, using our on-the-ground
capabilities and experience as active
owners to foster positive change.
We have summarised one of our case studies
from the full Stewardship Report to give
TEMIT shareholders a snapshot of the typical
analysis undertaken.
Soulbrain – a prominent South Korean player in
the electronic materials and chemicals industry.
ESG Topic: Environmental Footprint
Materiality and Risk: Companies operating in the
materials processing sector have the potential to
cause significant environmental damage if they are
not managed properly. The reliability of service
and safe operation of company assets is key.
Analysis:
To minimise leaks of hazardous materials in the
event of disasters such as fires, earthquakes, or
floods, measures such as explosion-proofing
equipment, negative pressure equipment, and
ventilation have been implemented to standards
exceeding those required by South Korea’s
Ministry of Environment.
Wastewater and sewage from plants are pooled
in collecting wells and processed at an on-site
treatment facility operated by the government.
Soulbrain not only complies with legal water
quality standards, but also treats water pollutants
as much as possible and sends the remaining
wastewater for further treatment at an industrial
complex that is operated by the government.
ESG Thesis: As a chemical product manufacturer,
Soulbrain focuses on the management of
environmental issues, whilst also contributing to
nearby communities. The company has expressed
active commitment to the protection of the
environment through the establishment of its
own Environmental Health, Safety and Energy
Management Policy. We note that the company
has been exposed to fires in the past. Post
these incidents the company has implemented
an Emergency Response System and other
prevention measures such as regular monthly
prevention exercises. The CEO has since been
replaced with one who is specialised in health and
safety of factory operations. With some history of
disruption and environmental impact in the past,
we have applied a discount to our valuation but
are confident in the new management’s ability to
manage future fire risk in its operations.
The Investment Manager’s Process (continued)
26 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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.
FTEME’s 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, FTEME 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 FTEME can gain
valuable insights into the quality and risks of businesses which FTEME invests in.
FTEME’s analysts and portfolio managers look at climate risks and opportunities closely for relevant
sectors and geographies where climate change plays an important role. FTEME closely tracks climate
related factors into estimates, models and valuations for those businesses materially exposed to the
issue.
Our portfolio managers also seek to understand the carbon risk profile at a portfolio level to
understand its carbon risk exposures. The data helps with the engagement agenda.
TEMIT Carbon Footprint vs. MSCI EM Index – 31 March 2023
(a)
Portfolio Carbon Emissions are 23% lower (31 March 2022: 6% lower) than the benchmark, Carbon Intensity is 10%
lower (31 March 2022: 7% lower) and Weighted Average Carbon Intensity is 38% lower (31 March 2022: 16% lower).
219
347
197
285
385
321
0
50
100
150
200
250
300
450
400
350
Carbon Emissions
(tons CO2e/US$M invested)
Carbon Intensity
(tons CO2e/US$M sales)
Weighted Average Carbon Intensity
(tons CO2e/US$M sales)
Portfolio
Benchmark
tons CO2e
(a)
Source: MSCI ESG as at 5 April 2023, portfolio coverage 97% (86% reported, 11% estimated); MSCI EM coverage 100%
(84% reported, 16% estimated). Carbon emissions include scope 1 and 2.
Carbon Emissions – Measures the portfolio’s normalised carbon footprint per $1 million invested.
Carbon Intensity – Measures the portfolio’s efficiency in terms of the level of carbon emissions per dollar of sales
generated by a company.
Weighted Average Carbon Intensity (“WACI”) – Measures the portfolio’s exposure to carbon-intensive companies.
The Investment Manager’s Process (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 27
TEMIT’s portfolio carbon risk is concentrated amongst a small number of companies, with the top 5
companies in terms of carbon intensity representing 7.2% of the portfolio and accounting for 69.0% of
the portfolio WACI. From a sector perspective, 48.2% of the portfolio WACI contributions come from
the materials sector. On a relative basis, portfolio selection in materials contributes positively, whilst
the utilities sector also contributes positively to WACI, as TEMIT is underweight in this sector. China
Resources Cement and LG, exhibit the largest carbon intensities in TEMIT’s portfolio, representing
3.2% of the portfolio and accounting for 48.8% of the portfolio WACI. TSMC’s carbon intensity is
low, however due to it representing 11.6% of the portfolio, it is third in terms of contribution to the
portfolio WACI.
We emphasise that the data does not always fully represent the actual carbon risk of the portfolio.
We remain willing to invest in companies in carbon-intensive sectors, such as cement, steel and
extractive industries. This is because we are pragmatic investors who understand that not every
company can have a perfect sustainability profile today.
In the full Stewardship Report, available on our website (www.temit.co.uk), we spotlight and focus
this year on the steel industry. The transition to a low-carbon economy will require a change in the
way we manufacture steel. Accounting for nearly 8% of global emissions from the energy sector, the
steel industry will play an important role in mitigating climate change by reducing the CO2 emissions
in the production process.
As investors in the steel industry in TEMIT, we profile our observations with POSCO, one of the
largest steel producers in the world, headquartered in South Korea.
POSCO
ESG observations and analysis:
• POSCO is one of the most efficient and cost competitive steel makers globally, but it has
recognised that the “survival” of steel companies depends on net-zero carbon.
• In order to achieve their net-zero by 2050 target, the company plans to optimise low-carbon
solutions that are already in use such as hydrogen reduction steelmaking, expansion of
renewable energy and carbon capture and storage.
• POSCO has a clear timeline in place for the commercialisation of their hydrogen reduction
steelmaking technology. Clear progress has been made over recent years, but the technology
in its current state is not sufficient to enable fast enough progress for low-carbon steelmaking.
Our thesis:
POSCO is a market leader in terms of ESG disclosures and efforts to move towards net-
zero steel production. We acknowledge the significant steps that POSCO’s management has
undertaken to improve the company’s environmental initiatives with the implementation of
clear disclosures, documentation, and establishment of timelines.
There are several steps that the company will have to take to fully utilise its hydrogen-reduction
technology. POSCO is supported by a strong financial position and has committed a substantial
capital investment, which has been factored into our valuation.
The Investment Manager’s Process (continued)
28 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Active ownership
As investors with a significant presence in emerging markets, FTEME’s active ownership efforts are
a key part of the overall approach to stewardship. FTEME analysts conduct almost 2,000 company
meetings a year across the investment platform using its industry-leading research footprint across
emerging markets, where FTEME seek to gain a number of fundamental and sustainability insights.
We believe that our engagement efforts are key to developing a detailed understanding of companies
and improving outcomes for shareholders as well as stakeholders more broadly.
Engagement statistics
FTEME’s analysts are in a continual dialogue with companies on a range of topics including
sustainability and governance. There are also companies that FTEME identify where dedicated
discussion on ESG topics are necessary. Active engagements with companies in the TEMIT portfolio
for the year ended 31 March 2023 are summarised below:
ESG Issue
Identify material ESG issues and
rationale for engagement
Objectives and Process
Set goal and/or rationale for the
engagement and approach
Outcome
Review outcomes, next steps and
investment thesis
ESG discussion by engagement type
Number of
interactions
% of
interactions
• Environmental 12 34
• Carbon risk and climate change 6 17
• Environmental consideration 6 17
• Social 4 11
• Human and social capital 4 11
• Governance 20 55
• Corporate governance 14 39
• Strategic risk and communication 6 16
Total 36 100
ESG discussion outcome
Number of
interactions
% of
interactions
No progress 1 3
Feedback noted by company 17 47
Company plans to make changes 7 19
Company has made changes 11 31
Total 36 100
The Investment Manager’s Process (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 29
Below is an ESG engagement example with an investee company headquartered in South Korea.
KT Skylife
ESG engagement topic: Governance – to recommend a more transparent and attractive payout policy.
Objectives:
• Pay-tv is a mature market in South Korea and the business generates significant cash. Thus,
we continue to engage with the company on their shareholder return policy, encouraging
management to align its policy with minority shareholder interests.
Outcome: Company plans to make changes
• We engaged with the management to highlight that, despite previous engagements, KT
Skylife’s dividend distribution remained low despite cash levels matching the company’s
market capitalisation at one point in time.
• We also noted that in 2021, the company acquired a cable TV operator, a low growth business,
at a valuation that was at a significant premium to its own valuation. However, we believed
that a share buyback would have added more value than the acquisition.
• The company responded with confirmation that they would actively consider a new dividend
policy, and that while share buybacks may be considered, they preferred to prioritise
strengthening their dividend payout.
• Management confirmed that, once finalised, they would share the company’s strategy and
vision for the year ahead with us.
Proxy voting
In the year ended 31 March 2023, FTEME voted on over 900 management proposals at annual and
special general meetings for TEMIT.
Most of the proposals which FTEME voted on related to companies’ director appointments, routine
business proposals and capital structures. Of the voteable management proposals, FTEME voted
“For” proposals 84% of the time.
FTEME voted “Against” management proposals in 13% of cases. By proposal category, as a
percentage of votes within each category, votes against were largely concentrated on capital
structure, non-salary compensation and management-related proposals.
FTEME views votes against proposals as a formal way to communicate our views to management,
and FTEME undertakes them based on the investment team’s assessment of each motion in line with
clients’ best interests.
For..............84%
Against.......13%
Other............3%
The Investment Manager’s Process (continued)
30 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
The Investment Manager’s Process (continued)
“Other” votes were cast in 3% of cases. These were mainly related to director votes in Brazil, where
FTEME abstained from voting when they did not support the candidates put forward for election, or
where the company bundled several proposals into one, preventing voting on individual items.
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.
FTEME will continue to closely examine the merits of views raised by fellow shareholders.
We encourage you to download the full TEMIT Stewardship Report from www.temit.co.uk for
further, detailed information.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 31
Business Review
Strategy and Business Model
Company purpose and objective
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 Manager may invest
in equity-related investments (such as convertibles or derivatives) where it believes that it is
advantageous to do so.
The portfolio may frequently be overweight or underweight in certain investments compared with
the MSCI Emerging Markets 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 will typically
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.
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 UK Income and Corporation Taxes Act. 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.
32 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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 declared 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
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. The Investment Manager, 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.
See pages 23 to 31 for details of the investment process.
Environmental, Social and Governance (“ESG”) matters
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 the Investment Manager’s approach to
stewardship, which is described under “FTEME’s approach to stewardship” starting on page 25 of
this 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 “FTEME’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.
Business Review (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 33
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 on page 36.
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 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 on
pages 49 to 51.
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 11 of the Notes to the
Financial Statements on page 94.
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 total amount which may be drawn down in CNH is
45% of the combined limit of the fixed rate loan and of the revolving loan facility. On 31 January 2023
the agreement was amended to extend the maturity date to 30 January 2024. Further details of the
facility are set out in Note 10 of the Notes to the Financial Statements on pages 93 and 94.
The Investment Manager has been granted discretion by the Board to draw down the revolving loan
facility as investment opportunities arise, subject to overall supervision by the Board, and subject to
the overall gearing limit in TEMIT’s investment policy.
The Company has no other debt. The net gearing position was 0.0% (net of cash in the portfolio) at the
year-end (2022
:
1.1%) 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 gearing of up to 20% to
be appropriate, measured at the time of borrowing.
Business Review (continued)
34 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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 the 2024 AGM.
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 on
pages 40 and 41.
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 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 (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 Index) over the five-year period. Any tender offer
would take place following the Company’s 2024 AGM and will also be conditional on shareholders
approving the continuation vote in 2024 which is described under “Affirmation of shareholder
mandate” above.
A key point in the Investment Manager’s 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 Manager 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 2023, the Company held 103,825,895
shares in treasury (2022: 103,825,895 shares in treasury).
2023 2022
Shares bought back and cancelled during the year 19,758,613 2,331,670
Proportion of share capital bought back and cancelled 1.7% 0.2%
Total cost of share buybacks £29.2m £3.6m
The benefit to NAV £4.6m £0.5m
The percentage benefit to NAV 0.23% 0.03%
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.
Business Review (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 35
Share price discount to NAV
-20
-22
-18
-16
-4
-2
0
-6
-8
-10
-12
-14
-20
-22
-18
-16
-4
-2
0
-6
-8
-10
-12
-14
Mar-18 Mar-23Mar-22Mar-21Mar-20Mar-19
TEMIT share price discount, based on a 7 day moving average
Communication
The Bo
ard works to ensure that investors are informed regularly about the performance of TEMIT
and of emerging markets through clear communication and updates. 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 won the prestigious Best Campaign Award at the AIC Shareholder Awards 2022 in recognition
of the quality of the “Your future is emerging” campaign undertaken to attract new shareholders. The
innovative use of broadcast media has helped to increase TEMIT’s profile, advertise the benefits of the
Company and communicate the growth story of emerging markets to a wider audience.
A new corporate identity was launched in January 2022 providing TEMIT with a unique brand for
the first time.
TEMIT seeks to keep shareholders updated on performance and investment strategy through its
regular annual and half yearly reports, along with monthly factsheets and commentaries. These
are available on the TEMIT website (www.temit.co.uk) which also contains portfolio holdings
information, updates from the Investment Manager and other important documents that will help
shareholders to understand how their investment is managed. We also communicate via @TEMIT
on Twitter and continue to develop the Company’s presence across social media platforms. 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 Manager provides comments to
journalists, hosts media briefings and publishes articles on issues relevant to investing in emerging
markets.
The Investment Manager meets regularly with professional investors and analysts and hosts
interactive webinars. At each AGM the Investment Manager makes 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.
Business Review (continued)
36 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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 Board’s Statement
The likely consequences of any decision in the long term. 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 Manager’s actions on
the marketability and reputation of the Company and
the likely impact on the Company’s stakeholders of the
Company’s strategy.
The interests of the Company’s employees. The Company has no direct employees.
The need to foster the Company’s business relationships
with suppliers, customers and others.
The Board’s approach to its key stakeholders is set out
below.
The impact of the Company’s operations on the community
and the environment.
The Board’s approach is set out in the section on ESG
under Strategy and Business Model on page 33.
The desirability of the Company maintaining a reputation
for high standards of business conduct.
The Board’s approach is set out in “Culture and values”
on page 34.
The need to act fairly between members of the Company. 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 and non-routine matters were
considered at Board meetings during the year:
• Recruitment of Abigail Rotheroe as a non-executive Director;
• 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;
• Pandemic risks affecting the Company’s investments and business operations;
• Risks resulting from the Russian invasion of Ukraine and the valuation of Russian assets;
• Rebalancing dividend payments by increasing the interim dividend;
• Review of the marketing plan with the Manager;
• Review of the share buyback programme; and
• Review of the gearing 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.
Business Review (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 37
Stakeholders Area of Engagement Consideration Engagement Outcome
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 on page 32.
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
Manager’s
commentary
commencing on
page 8 gives a full
commentary on
the Company’s
portfolio as well as
on the approach
and considerations
undertaken by the
Investment Manager
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 scheduled to
take place at the AGM
in 2024.
Shareholders and
potential investors
Dividend The objective of the
Company is to provide
long term capital
appreciation, however
the Board recognises
the importance of
regular 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 Statement
on page 5.
Shareholders and
potential investors
Communication with
shareholders
The Board
understands the
importance of
communication with
its shareholders
and maintains
open channels of
communication with
shareholders.
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 on page 110.
Shareholders are
invited to submit
questions for the
Board to address at the
Company’s Annual
General Meeting.
Business Review (continued)
38 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Stakeholders Area of Engagement Consideration Engagement Outcome
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 Manager
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 Manager
at the close of each
trading day in
London.
The Board also meets
with the Investment
Manager to discuss the
Company’s
marketing strategy
to ensure effective
communication 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” on pages 35
and 36.
Further details of the
current discount and
discount management
are detailed in the
Chairman’s Statement
under “Share rating”
on pages 5 and 6.
Manager Communication
between the Board
and the Manager
The relationship of
the Board with 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
Manager and the
Company Secretary
between meetings
as well with other
representatives of the
Manager as and when
it is deemed necessary.
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 Manager
to deliver superior
long-term returns
from investments and
on the other functions
of the Manager to fulfil
their roles effectively.
Business Review (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 39
Stakeholders Area of Engagement Consideration Engagement Outcome
Third-party service
providers
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 Manager
engages with
investee companies
implementing
corporate governance
principles and
discusses the portfolio
with the Board on a
quarterly basis.
The Investment
Manager has 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.
The Ten Year Record of the KPIs is shown on pages 3 and 4.
Net asset value and share price total return
(a)
Net asset value and share price total return data is presented within the Company Overview on
page 1 along with the Ten Year Record on pages 3 and 4.
The Chairman’s Statement on pages 5 to 7 and the Investment Manager’s Report on pages 9 to 22
i
nclude further commentary on the Company’s performance.
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 on page 2. On 24 May 2023, the latest practicable date for which information was
available, the discount was 14.8%.
Business Review (continued)
(a)
A glossary of alternative performance measures is included on pages 114 and 115.
40 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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” on pages 35 and 36.
Dividend and revenue earnings
Total income earned in the year was £80.6 million (2022: £54.3 million) which translates into net
revenue earnings of 5.72 pence per share (2022: 3.44 pence per share), an increase of 66.3% over
the prior year. The increase in revenue earnings per share was attributable to the increase in
underlying revenues, mainly dividends earned from Petroleo Brasileiro.
The Company paid an interim dividend of 2.00 pence per share on 27 January 2023. 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 rose to 0.98% for the year ended 31 March 2023, compared to 0.97% in the prior year. This
was driven by the reduction in average net assets during the year, offsetting the AIFM fee reduction
effective from 1 July 2022. 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 on
pages 92 and 93.
Principal and emerging risks
At least quarterly, the Board reviews with the AIFM and the Investment Manager 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.
Further explanation of the monitoring of risk and uncertainties is covered within the Report of the
Audit and Risk Committee on page 69. Information on the risks that TEMIT is subject to, including
additional financial and valuation risks, are also detailed in Note 15 of the Notes to the Financial
Statements.
Business Review (continued)
(a)
A glossary of alternative performance measures is included on pages 114 and 115.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 41
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 Manager as part of every investment decision. Further information
on this process is detailed on page 25.
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 invasion
of Ukraine in February 2022 and the escalating trade
war between the United States and China and military
tensions over the Taiwan Strait. All 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 Manager 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.
Pandemic
The spread of infectious illnesses or other public health
issues and their aftermaths, such as the outbreak of
COVID-19, first detected in China in December 2019
and later spreading globally, could have a significant
adverse impact on the Company’s operations (including
the ability to find and execute suitable investments) and
therefore, the Company’s potential returns.
Restrictive measures implemented to control such
outbreaks could adversely affect the economies of
individual nations or the entire global economy, the
financial condition of individual issuers or companies
(including those that are held by, or are counterparties or
service providers to, the Company) and capital markets
in ways that cannot necessarily be foreseen, and such
impact could be significant and long term.
The Board has regularly reviewed and discussed the
situation with the Investment Manager, including a
review of the portfolio, risk management and business
continuity.
The risks associated with a pandemic affect all areas
of the Company’s investments as well as operations.
Mitigation strategies apply as detailed within the specific
areas of risk.
A global network of analysts and operations and a
flexible technology setup (including the ability to
“work from home”) at the Investment Manager ensure
operational business continuity and continuous analyst
coverage. The Board has also received updates on its key
service providers’ business continuity plans.
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 certifications of
their technology control environment.
Business Review (continued)
42 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Principal risk Mitigation
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 Manager and the independent risk
management team. The Investment Compliance team of
the Investment Manager 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 Manager, are exposed to
risks arising from governance and sustainability factors,
including climate change. To the extent that such a risk
occurs, or occurs in a manner that is not anticipated by
the Investment Manager, there may be a sudden, material
negative impact on the value of an investment, and the
operations or reputation of the Investment Manager.
The Investment Manager considers 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 matters. 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 Manager 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 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 Manager.
Business Review (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 43
Principal risk Mitigation
Key personnel
The ability of the Company to achieve its objective
is significantly dependent upon the expertise of the
Investment Manager and its 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 continuing
ramifications of the Russian invasion of Ukraine, discussed under market and geopolitical risk above.
The extent of this risk will depend on the length of the conflict, impacts on commodity prices and
associated inflationary pressure. In addition, the Board and Investment Manager discussed the growing
tensions between the United States and China. The Board is also monitoring 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.
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 15 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 other principal obligations of the borrowing facilities. 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 continuing ramifications of the Russian invasion of Ukraine, growing tensions between the
United States and China over trade and the Taiwan Strait 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, the Company will be able to continue to operate
and meet its liabilities as they fall due over the next five years.
Business Review (continued)
44 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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 Manager to choose
investments successfully as well as the current challenges.
The Board and the Investment Manager 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
Paul Manduca
9 June 2023
Business Review (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 45
Report of the Directors and Governance
Directors’ Report
The Board is responsible for framing and executing the Company’s strategy and for monitoring
risks closely. The Board endeavours to run the Company in a manner which is responsible, honest,
transparent and fully accountable. In the Board’s view, good governance means managing the
Company’s business well and engaging effectively with investors and other stakeholders. The
Board considers the practice of good governance to be an integral part of the way that it manages
the Company and it is committed to maintaining the highest standards of financial reporting,
transparency and business integrity.
The Directors submit their Annual Report, together with the Financial Statements of the Company,
for the year ended 31 March 2023.
Board of Directors
Paul Manduca
(Chairman of Board &
Chairman of Management
Engagement Committee: 20
November 2015, Chairman of
Nomination and Remuneration
Committee: 22 February 2016)
Date of appointment: 1 August 2015
Paul has had a long and successful career in asset
management, both as a fund manager and as chief
executive of fund management groups. Paul will
continue to draw on his extensive experience in
leadership roles and his knowledge of the international
markets and industry sectors, and his technical
knowledge.
Other Current Appointments:
• St. James’s Place plc (Chairman)
• W.A.G Payment Solutions plc (Chairman)
Paul is an independent Director.
Simon Jeffreys
(Chairman of the Audit and Risk
Committee: 13 July 2017,
Senior Independent Director:
14 July 2022)
Date of appointment: 15 July 2016
Simon has extensive experience in audit and he has
a wide-ranging understanding of the business. He
draws on previous experience across internal audit,
finance and compliance, as well as technical knowledge,
relevant to his role. He was a senior audit partner in
PricewaterhouseCoopers for most of his professional
career, where he was the global leader of the firm’s
investment management and real estate practice.
Simon was the Chief Administrative Officer for Fidelity
International, and then the Chief Operating Officer
of The Wellcome Trust. Simon was Chair of the Audit
Committee and a member of the Remuneration and Risk
Committees of St James’s Place plc until 18 May 2023.
Other Current Appointments:
• SimCorp A/S (Chair of Audit and Risk
Committee)
• Crown Prosecution Service (Chair of Audit and
Risk Committee)
• Post Office Limited (Chair of Audit, Risk and
Compliance Committee)
Simon is an independent Director.
46 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
David Graham
Date of appointment:
1 September 2016
David is a Chartered Accountant whose career was
in investment management, firstly as an Asian fund
manager with Lazard and then building businesses
across Asia Pacific, Europe, Middle East and Africa
for BlackRock and predecessor firms (Merrill Lynch
Investment Managers and Mercury Asset Management).
David has worked in Hong Kong, Tokyo and Sydney
and has been a Representative Director in domestic, joint
venture, fund management companies in India, China,
Thailand and Taiwan. David contributes extensive
experience of Asia and other emerging markets.
Other Current Appointments:
• Fidelity Japan Trust (Chairman)
• JPMorgan China Growth & Income plc (Chair of
the Audit Committee)
• DSP India Investment Fund (Non-Executive
Director)
• DSP India Fund (Non-Executive Director)
David is an independent Director.
Magdalene Miller
Date of appointment: 10 May 2021
Magdalene is a former investment director who specialised
in investments in global emerging markets. Based in
London and Edinburgh, she spent 32 years managing
listed equity portfolios, investing in Japanese, Asian Pacific
and UK markets. Born in Hong Kong, Magdalene is fluent
in Cantonese and Mandarin and has travelled extensively
in China and Asia over the course of her career. She
currently serves as a trustee for an educational endowment
fund and participates in volunteering work.
Other Current Appointments:
• Baillie Gifford China Growth Trust
(Non-Executive Director)
Magdalene is an independent director.
Directors’ Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 47
Charlie Ricketts
Date of appointment: 12 July 2018
With over 30 years’ experience in the investment trust
sector, Charlie brings a wealth of experience to the Board.
He was Head of Investment Funds at Cenkos Securities
for 8 years and prior to that was Managing Director,
Head of Investment Companies at UBS Investment
Bank. Since stepping down from Cenkos in 2014 he has
pursued several business and charitable interests. Charlie
has a wide-ranging understanding of the business and
draws on previous experience across finance, corporate
communication and risk management, as well as
technical knowledge.
Other Current Appointments:
• Asia Dragon Trust plc (Non-Executive Director)
Charlie is an independent Director.
Abigail Rotheroe
Date of appointment: 1 November
2022
Abigail has over 20 years of investment experience, most
recently as the Investment Director at Snowball Impact
Management, a sustainable and impact-focused asset
manager. Previously Abigail has managed retail and
institutional Asia Pacific portfolios in Hong Kong and
London for Schroders, HSBC Asset Management Hong
Kong and Colombia Threadneedle Investments. She is
a CFA Charterholder and has experience in manager
selection, sustainability, and impact measurement.
Other Current Appointments:
• Baillie Gifford Shin Nippon plc (Non-Executive
Director)
• HydrogenOne Capital Growth plc (Non-Executive
Director)
Abigail is an independent director.
Details of the fees earned by each Director can be found on page 61. The Directors’ interests in the
Company’s shares are noted on page 63.
Appointment and re-election of Directors
Directors are initially appointed by the Board after a rigorous selection process and each Director
is then subject to annual re-election by the shareholders. At the first AGM following appointment a
Director is subject to election by the shareholders. Thereafter, a Director’s appointment is subject to
a performance evaluation carried out each year and the approval of shareholders at each AGM, in
accordance with corporate governance best practice. When making a recommendation, the Board
considers the ongoing requirements of the UK Corporate Governance Code, including the need to
refresh the Board and its Committees.
The terms and conditions of the Directors’ appointments are set out in their Letters of Appointment,
which are available for inspection on request at the registered office of the Company and at the
AGM. The terms of appointment provide that a Director will be subject to re-election at each AGM.
A Director may be removed from office following three months’ notice. The Board has agreed that
the independent Directors should stand down after nine years from their initial appointment other
Directors’ Report (continued)
48 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Directors’ Report (continued)
than in exceptional circumstances. Directors are prepared to resign or take steps that could lead to
a loss of office at any time in the interests of long-term shareholder value. The continuation of an
appointment is contingent on satisfactory annual performance evaluation. A director may resign by
notice in writing to the Board at any time and there is no notice period for resignation.
The Board
The primary focus of the Directors at regular Board meetings is the consideration of investment
performance and outlook, market activity, discount management mechanisms including share
buybacks, gearing, marketing, shareholder register analysis, investor relations, peer group
information, top risks and investment risk management, regulatory updates, corporate governance
and industry issues.
The Board has reviewed the effectiveness of the Company’s system of internal controls for the
year ended 31 March 2023. During its review the Board has not identified or been advised of any
significant failings or weaknesses relating to the Company.
Further details of the Directors’ responsibilities can be found in the Statement of Directors’
Responsibilities on page 70.
Board Evaluation
The Board undertakes an annual evaluation of its own performance and that of its Committees and
individual Directors including the Chairman. The Board has also considered the independence of
each Director, including the Chairman.
The independence of each Director was checked considering the provisions of the Corporate
Governance Code. The experience, balance of skills, diversity, time commitment, tenure of each
Director, openness, spirit of debate and knowledge of the Board were considered as well as
Board effectiveness, role and structure. The Board notes that where cross-directorships exist the
Board has discussed and is satisfied that these are not material and do not impair the Directors’
independence. Regular reviews of the Directors’ training needs are carried out by the Chairman
by means of the evaluation process described above. An evaluation of the Chairman by his fellow
Directors was facilitated by Simon Jeffreys, the Senior Independent Director, who met with the
Chairman to discuss how the Chairman leads the Board. The Directors consider that the Chairman
facilitates constructive Board relations and the effective contribution of all Directors, ensures that
Directors receive accurate, timely and clear information and is responsible for the Board’s overall
effectiveness in directing the Company.
The Chairman confirms that, following the annual performance evaluation, each Director’s
performance continues to be effective, demonstrating commitment to their role and each
independent Director is recommended for re-election at the AGM. Abigail Rotheroe is subject
to election by shareholders as this is the first AGM of the Company since her appointment on
1 November 2022. The Chairman also confirms that each Committee’s performance continues to be
effective in fulfilling its responsibilities and duties. Formal performance evaluations will continue
to take place at least annually with the appointment of an external facilitator every three years.
Lintstock Ltd undertook a formal performance evaluation of the Board, its Committees and
individual directors in the financial year ended 31 March 2021.
Diversity
TEMIT’s aim is to have an appropriate level of diversity in the boardroom.
The Board acknowledges and welcomes the recommendations from the Hampton-Alexander
Review on gender diversity and the Parker Review on ethnic representation. The Nomination
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 49
and Remuneration Committee considers diversity generally when making recommendations
for appointments to the Board, considering gender, social and ethnic backgrounds, thought,
experience and qualification. The prime responsibility, however, is the strength of the Board and
the overriding aim in making any new appointments is always to select the best candidate based
on objective criteria and merit.
In all of the Board’s activities, there has been and will be no discrimination on the grounds of
gender, race, ethnicity, religion, sexual orientation, age or physical ability.
The Board has made a commitment to consider diversity when reviewing the composition of
the Board and notes the new Listing Rules requirements (LR9.8.7 R) regarding the targets on
board diversity:
• at least 40% of individuals on the Board are women;
• at least one senior Board position (chairman, chief executive officer (“CEO”), senior
independent director or chief financial officer (“CFO”)) is held by a woman; and
• at least one individual on the Board is from a minority ethnic background, defined to include
those from an ethnic group other than a white ethnic group, as specified in categories
recommended by the Office for National Statistics.
As required by the Listing Rules the reporting for TEMIT against these targets is set out in the tables
below in the prescribed format. The data was collected on a self-identifying basis. The Board notes
that as at 31 March 2023 it does not currently meet the targets in relation to the number of women
on the Board or the number of senior Board positions which should be held by a woman and will
be considering the targets when future Board appointments are made. The Board confirms it has
not met these targets but for continuity and succession planning the Directors will always select the
best candidate based on objective criteria and merit. The Board notes that as an externally managed
investment trust there is no CEO or CFO and the Board considers the Chairman of the Company,
the Chairman of any of the Company’s Committees and the Senior Independent Director to be
senior positions.
Sex
Number of
Board members
Percentage of
the Board
Number of senior
positions on the
Board
Men 4 67% 2
Women 2 33% 0
Not specified/prefer not to say 0 0% 0
Ethnic background
Number of
Board members
Percentage of
the Board
Number of senior
positions on the
Board
White British or other White (including minority white groups) 5 83% 2
Mixed/Multiple Ethnic Groups 0 0% 0
Asian/Asian British 1 17% 0
Black/African/Caribbean/Black British 0 0% 0
Other ethnic group, including Arab 0 0% 0
Not specified/prefer not to say 0 0% 0
Directors’ Report (continued)
50 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Diversity at the Manager
The Board also takes a close interest in diversity at the Manager. Franklin Templeton has a culture
which embraces individual differences and the wealth of perspectives brought by diversity. As a
global company, Franklin Templeton believes that it benefits from the unique skills and experiences of
an inclusive workforce made up of employees who span different generations, genders, preferences,
capabilities and cultural identification. It also believes that an inclusive culture can drive innovation
and allows the firm to deliver better client outcomes. In 2022, Franklin Templeton was pleased
to earn a top score of 100 percent on the Human Rights Campaign (“HRC”) Foundation’s 2023
Corporate Equality Index (“CEI”) which measures corporate policies and practices related to LGBTQ+
workplace equality, for the seventh consecutive year. Franklin Templeton was also awarded a bronze
achievement award in Stonewall’s 2022 Workplace Equality Index. Franklin Templeton sponsors
thousands of volunteer activities each year through its global Involved programme which helps to
provide better outcomes for local communities. In the UK, it is an active partner and supporter of
several organisations that promote inclusion and social mobility such as the Diversity Project, 10,000
Black Interns, the Robertson Trust, Leonard Cheshire and Career Ready.
Succession planning and recruitment
When considering succession planning, the Nomination and Remuneration Committee bears in
mind the tenure, balance of skills, knowledge, experience and diversity existing on the Board.
The recruitment process which led to the appointment of Abigail Rotheroe commenced in
March 2022 and was facilitated by Trust Associates as the appointed external agency. Trust
Associates does not undertake any other services for TEMIT and has no connection with any of the
Directors. The list of candidates identified was discussed by the Nomination and Remuneration
Committee and the preferred candidates were invited for interviews. The Nomination and
Remuneration Committee recommended that the Board appoint Abigail Rotheroe after assessing
the candidates against objective criteria and with due regard to the benefits of diversity (including
gender, social, ethnic backgrounds) as well as cognitive and personal strengths and time available
to discharge her responsibilities fully and effectively. Abigail Rotheroe was appointed as a
non-executive Director of the Company, with effect from 1 November 2022.
As set out in the Chairman’s Statement on page 6, Simon Jeffreys is leading a process to identify a
successor for Paul Manduca. A search company has been appointed and further announcements
will be made in due course. Paul Manduca will not take part in the process to identify his successor.
The succession plan agreed by the Nomination and Remuneration Committee includes an
emergency succession plan identifying contingency arrangements.
The Nomination and Remuneration Committee also reviews and recommends to the Board the
reappointment of the Directors. The recommendation is not automatic and will follow a process of
evaluation of each Director’s performance and consideration of the Director’s independence. The
Nomination and Remuneration Committee also considers the mix of skills and experience of the
current Board members.
Meetings and committees
The Board delegates certain responsibilities and functions to committees. Five Directors are
members of all committees. The Chairman is not a member of the Audit and Risk Committee,
but he attends the Audit and Risk Committee meetings by invitation.
Directors’ Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 51
The table below details the number of Board and Committee meetings attended by each Director.
During the year, there were five Board meetings, three Audit and Risk Committee meetings,
one Management Engagement Committee meeting, and two Nomination and Remuneration
Committee meetings.
Board
Audit and
Risk
Committee
Management
Engagement
Committee
Nomination
and
Remuneration
Committee
Paul Manduca 5/5 3/3
(a)
1/1 2/2
Simon Jeffreys 5/5 3/3 1/1 2/2
David Graham 5/5 3/3 1/1 2/2
Beatrice Hollond
(b)
1/1 1/1 — —
Magdalene Miller 5/5 3/3 1/1 2/2
Charlie Ricketts 5/5 3/3 1/1 2/2
Abigail Rotheroe
(c)
3/3 1/1 1/1 1/1
(a)
Attended three out of three meetings of the Audit and Risk Committee by invitation including when the Annual
Report and Half Yearly Report were being drafted and the Company’s risk matrix was being reviewed.
(b)
Stepped down from the Board at the conclusion of the AGM on 14 July 2022.
(c)
Appointed on 1 November 2022.
The Audit and Risk Committee is chaired by Simon Jeffreys. The formal Report of the Audit and
Risk Committee is on pages 64 to 69.
The Management Engagement Committee is chaired by the Chairman of the Board and
all Directors are members of the committee. The primary role of the committee is to review
the performance of, and the contractual arrangements with, the Manager. The Management
Engagement Committee held one meeting during the year and undertook a formal review of the
Manager and of the Investment Manager.
The review considered investment strategy, investment process, performance and risk, and was
carried out through meetings between the Management Engagement Committee and members of
the investment and risk management teams of the Manager. When assessing the performance of
the Manager and of the Investment Manager, the committee believes that it is appropriate to make
this assessment over a medium to long-term timeframe, which is in accordance with the long-term
approach taken to investment. As a result of the evaluation process performed by the Management
Engagement Committee, the Board confirms that it is satisfied that the continuing appointment of
the Manager is in the interests of shareholders as a whole.
The Nomination and Remuneration Committee is chaired by the Chairman of the Board and
all Directors are members of the committee. The Nomination and Remuneration Committee
held three formal meetings during the year and discussed the annual evaluation process for
the Board, the individual Directors and the Chairman and succession planning. The role of the
Nomination and Remuneration Committee is to regularly review the Board structure, size and
composition and make recommendations to the Board with regard to any adjustments that seem
appropriate, to consider the rotation and renewal of the Board, approve the candidate specification
for all Board appointments, approve the process by which suitable candidates are identified and
short-listed, and to nominate candidates for consideration by the full Board, whose responsibility
it is to make appointments. The Nomination and Remuneration Committee also considers the
effectiveness of individual Directors and makes recommendations to the Board in respect of
re-elections. The Nomination and Remuneration Committee keeps under review the balance of
Directors’ Report (continued)
52 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
skills, independence, knowledge of the Company and experience and length of service of the
Directors. During the year under review, the Nomination and Remuneration Committee managed
the recruitment process which led to the appointment of Abigail Rotheroe.
The Nomination and Remuneration Committee annually reviews the level of fees paid to the
Chairman, the Chairman of the Audit and Risk Committee, the Senior Independent Director
and other Directors relative to other comparable companies and in the light of the Directors’
responsibilities. The Committee may engage independent external advisors if it considers this to
be necessary.
The terms of reference for the Audit and Risk Committee, Management Engagement Committee
and Nomination and Remuneration Committee are available to shareholders on the TEMIT
website (www.temit.co.uk) or upon request via Client Dealer Services using the contact details
provided on the inside back cover of this report.
Conflicts of interest
The Company maintains a register of Directors’ interests which has been disclosed to, and
approved by, the Board. The list of interests of each Director is reviewed at every Board meeting.
Directors who have potential conflicts of interest will not take part in any discussions which relate
to that particular conflict. The Board confirms that at 31 March 2023 and the date of this report
there were no conflicts of interest.
Indemnification and insurance
The Company has entered into deeds of indemnity with each of the Directors. These are qualifying
third-party indemnity provisions and are in force as at the date of this report. This information is
disclosed in accordance with Sections 236(2) and 236(3) of the Companies Act 2006. The Company
maintains appropriate insurance cover in respect of legal action against the Directors.
The Company
Principal activity and investment company status in the UK
The Company is a public limited company in terms of the Companies Act 2006 and is an
investment company under Section 833 of the Companies Act 2006.
The Company has been accepted as an approved investment trust by HM Revenue & Customs for
accounting periods commencing on or after 1 April 2012, subject to continuing 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 Directors are satisfied that the
Company intends to direct its affairs to ensure its continued approval as an investment trust.
Results and Dividends
The capital loss for the year was £64.3 million (2022: loss of £483.1 million) and the revenue profit
was £66.9 million (2022: £40.7 million).
The full results for the Company are disclosed in the Statement of Comprehensive Income on
page 80.
The Directors propose a final ordinary dividend of 3.00 pence per share. Including the interim
dividend of 2.00 pence per share, which was paid by the Company on 27 January 2023, this
represents an annual ordinary dividend of 5.00 pence per share (2022: 3.80 pence per share) and,
if approved by shareholders at the AGM on 14 July 2023, the final dividend will be payable on
28 July 2023 to shareholders on the register at close of business on 23 June 2023.
Directors’ Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 53
Financial
Share capital and gearing
Changes in the share capital of the Company are set out in Note 12 of the Notes to the Financial
Statements.
As part of the Company’s objective and current investment policy, the Company may borrow up
to 20% of its net assets. The current gearing is discussed in the Business Review on page 34.
Share buybacks
The Board is again seeking shareholder permission to continue its programme of share buybacks as
outlined under “Stability – Share buybacks and Conditional Tender Offer” on pages 35 and 36.
Auditor
Ernst & Young LLP was appointed in 2019 as the Company’s auditor. Ernst & Young LLP
has expressed a willingness to continue in office as auditor and a resolution proposing its
reappointment will be submitted at the AGM. Further details on the assessment of the auditor can
be found within the Report of the Audit and Risk Committee on pages 67 and 68.
The Directors who held office at the date of approval of this Directors’ Report confirm that, so
far as they are each aware, there is no relevant information of which the Company’s auditor was
unaware and that each Director had taken all steps that they ought to have taken as a Director to
make themselves apprised of any relevant audit information and to establish that the Company’s
auditor was notified of that information. This confirmation is given, and should be interpreted in
accordance with, the provisions of Section 418 of the Companies Act 2006.
Substantial shareholdings
As at 24 May 2023, 31 March 2023 and 31 March 2022, the Company had been notified that the
following were interested in 3% or more of the issued share capital of the Company.
24 May 2023 31 March 2023 31 March 2022
Name Number of
shares
% Number of
shares
% Number of
shares
%
City of London Investment Management
Company Limited 279,045,828 24.20 278,947,968 24.07 238,591,539 20.24
Lazard Asset Management LLC Group
108,523,992
(a)
9.41 108,822,695 9.39 108,822,695 9.23
Allspring Global Investments, LLC
79,262,342 6.87 63,527,818 5.48 63,527,818 5.39
Investec Wealth & Investment Limited
(b)
61,700,274 5.35 74,370,335 6.42 74,370,335 6.31
Brewin Dolphin
49,814,378 4.32 35,371,979 3.05 n/a n/a
Quilter Cheviot Investment Management
41,942,497 3.64 55,516,380 4.79 55,516,380 4.71
Rathbone Brothers PLC
(b)
35,111,413 3.04 53,807,350 4.64 53,807,350 4.56
(a)
Number of shares held as at 2 June 2023.
(b)
As at 4 April 2023 Investec Wealth & Investment Limited and Rathbone Brothers PLC announced an intention
to merge.
Directors’ Report (continued)
54 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Principal service providers
Alternative Investment Fund Manager, Secretary and Administrator
FTITML is the Alternative Investment Fund Manager, Secretary and Administrator with the role
of investment management delegated to TAML and FTIML. Portfolio managers from TAML and
FTIML form part of the wider FTEME as mentioned on page 8.
The main secretarial duties involve compliance with statutory and regulatory obligations which
the Company must observe. All Directors have access to the advice of the Company Secretary, who
is responsible for advising the Board on all governance matters. The appointment of the Company
Secretary was discussed and approved by the Board and the secretarial activity is reviewed on an
annual basis.
With effect from 1 July 2022 the annual fee rate for the services provided by FTITML, including
investment management, risk management, secretarial and administration services, was reduced to:
• 1% of the first £1 billion of net assets;
• 0.75% of net assets between £1 billion and £2 billion; and
• 0.5% 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.
The agreement between the Company and FTITML may be terminated by either party giving one
year’s notice, but in certain circumstances the Company may be required to pay compensation to
FTITML of an amount up to one year’s fee in lieu of notice. No compensation is payable if at least
one year’s notice of termination is given.
Details of the remuneration policy of the AIFM and amounts attributable to the Company are
available to existing shareholders upon request at the registered office of the Company.
The Board considers the arrangements for the provision of investment management services to the
Company on an ongoing basis, and a formal review is conducted annually by the Management
Engagement Committee. In the opinion of the Directors, the continuing appointment of FTITML
is in the best interests of the shareholders as a whole.
Depositary and Custodian
J.P. Morgan Europe Limited performs the role of depositary and JPMorgan Chase Bank performs
the role of custodian. The agreements in place may be terminated by either party giving the other
90 days’ notice.
A detailed list of service providers, along with addresses, can be found in the General Information
section on page 111.
Corporate Governance
The Company is committed to high standards of corporate governance. The Board is accountable
to the shareholders for good governance and this statement describes how governance principles
have been applied.
Directors’ Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 55
Association of Investment Companies Code of Corporate Governance
The Board has considered the Principles and Provisions of the 2019 AIC Code of Corporate
Governance (“AIC Code”). The AIC Code addresses the Principles and Provisions set out in the
2018 UK Corporate Governance Code (the UK Code), as well as setting out additional provisions
on issues that are of specific relevance to the Company as an investment company.
The Board considers that reporting against the Principles and Provisions of the AIC Code, which
has been endorsed by the FRC, provides the relevant information to shareholders.
The Company has complied with the Principles and Provisions of the AIC Code which also meets
the obligations under the UK Code (and associated disclosure requirements under paragraph 9.8.6
of the Listing Rules). The AIC Code is available on the AIC website (www.theaic.co.uk). It includes
an explanation of how the AIC Code adapts the Principles and Provisions set out in the UK Code
to make them relevant for investment companies.
A statement explaining TEMIT’s compliance with the AIC Code principles can be found at
www.temit.co.uk.
Additional Information for New Zealand Shareholders
As a result of a requirement for Overseas Issuers listed on the New Zealand Stock Exchange, the
following should be noted by New Zealand shareholders:
• The corporate governance rules and principles in TEMIT’s home exchange jurisdiction of the
United Kingdom may materially differ from the New Zealand Stock Exchange (“NZX”) corporate
governance rules and the principles of the NZX Corporate Governance Code;
• Investors may find more information about the corporate governance and principles of TEMIT’s
home exchange in the United Kingdom in the above Corporate Governance statement and
online at www.frc.org.uk/corporate/ukcgcode.cfm; and
• The Company relies on the Financial Markets Conduct (Overseas FMC Reporting Entities)
Exemption Notice 2021, issued by the New Zealand Financial Markets Authority, which exempts
it from certain financial reporting obligations under the Financial Markets Conduct Act 2013.
Schedule of Reserved Matters
The Board has formally adopted a Schedule of Reserved Matters, which details the matters which
the Board has agreed are specifically reserved for its collective decision. These matters include,
inter alia, approval of the Half Yearly and Annual Financial Statements, the approval of interim
and special dividends, recommendation of the final dividend, approval of any preliminary results
announcements of the Company, approval of any proposed changes to the Company’s objective
and/or investment policy, appointment or removal of the Company’s Manager or Investment
Manager, gearing, Board membership and Board committee membership and any major changes
to the objective, philosophy or investment policy of the Company, other than any such changes
delegated to the Investment Manager under the Investment Management Agreement.
The day to day investment management of the portfolio of the Company is delegated to the
Investment Manager, which manages the portfolio in accordance with the objectives of the
Company as set by the Board.
Activities in the Field of Research and Development
The Company does not undertake activities in the field of research and development.
Directors’ Report (continued)
56 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Disclosures in Strategic Report
The Company has chosen, in accordance with Section 414C(11) of the Companies Act 2006, to
include in the Strategic Report likely future developments in the Company’s business as well as
any important events affecting the Company which have occurred since the end of the financial
year, an indication of the financial risk management objectives and policies information relating to
the Company’s greenhouse gas emissions, diversity, and the Modern Slavery Act 2015.
Articles of Association
The Company may change its Articles of Association by special resolution of its shareholders.
Internal control
Details of the Company’s system of internal controls can be found on page 69.
Annual General Meeting
The AGM will be held on Friday 14 July 2023 at Barber-Surgeons’ Hall, Monkwell Square, Wood St,
Barbican, London EC2Y 5BL. Further details regarding the AGM are set out in the Notice of Meeting
on page 105.
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 attend the AGM but your votes
will be counted if restrictions preventing attendance at the AGM are introduced at short notice.
Ordinary business
The formal business of the Meeting will begin with resolution 1 which seeks shareholders’
approval to receive and adopt the Directors’ and Auditor’s Reports and Financial Statements for
the year ended 31 March 2023.
Resolution 2 seeks approval of the Directors’ Remuneration Policy at this year’s AGM.
Shareholders are invited to approve the Directors’ Remuneration Policy as set out on page 60,
which sets the Company’s forward-looking policy on Directors’ Remuneration. This policy was
last approved by shareholders at the AGM in 2020.
Resolution 3 seeks shareholders’ approval of the Directors’ Remuneration Report for the year
ended 31 March 2023. Approval of the Directors’ Remuneration Report is sought at each AGM and
this year’s report is set out in full on pages 60 to 63 of the 2023 Annual Report.
Resolution 4 seeks shareholders’ approval to declare a final ordinary dividend of 3.00 pence per
share, payable on 28 July 2023 to shareholders on the register as at close of business on 23 June 2023.
Resolutions 5.1 to 5.5 seek shareholders’ approval to re-elect Paul Manduca, Charlie Ricketts,
David Graham, Simon Jeffreys and Magdalene Miller as Directors.
The Board recommends that each director is re-elected, as set out under Board Evaluation on page 49.
Resolution 5.6 seeks shareholders’ approval to elect Abigail Rotheroe as a Director. In accordance
with the provisions of the UK Corporate Governance Code, all independent Directors will offer
themselves for election at the first AGM following their appointment and for re-election at each
subsequent AGM.
Resolutions 6 and 7 seek shareholders’ approval to re-appoint Ernst & Young LLP as auditor of
the Company, and to authorise the Directors to determine the auditor’s remuneration. Following
Directors’ Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 57
the recommendation of the Company’s Audit and Risk Committee, shareholders will be asked to
approve the re-appointment of Ernst & Young LLP as the Company’s auditor, to hold office until
the conclusion of the Company’s 2024 Annual General Meeting. Shareholders will be asked to
grant authority to the Board to determine the remuneration of the auditor.
Special business
The Special Business to be dealt with at the AGM is:
(i) Authority for the Allotment of New Shares
The resolutions to allot shares are set out in resolutions 8 (ordinary resolution) and 9 (special
resolution) in the Notice of Annual General Meeting. These resolutions, if passed, will give your
Directors power to allot for cash equity securities of the Company and/or to sell equity securities
held as treasury shares up to a maximum aggregate nominal amount of £2,883,000 (being an
amount equal to 5% of the issued share capital of the Company as at 24 May 2023) as if Section 561
of the Companies Act 2006 (“the 2006 Act”) did not apply (this section requires, when shares are
to be allotted for cash or shares held as treasury shares are sold, that such shares first be offered
to existing shareholders in proportion to their existing holdings of shares, this entitlement being
known as “pre-emption rights”). The authorities contained in resolutions 8 and 9 will continue
until the AGM of the Company in 2024 and your Directors envisage seeking the renewal of this
authority in 2024 and in each succeeding year. Such authorities will only be used when your
Directors believe that it would be in the best interests of the Company to do so and only at a price
which is at or above the prevailing NAV per share at the time of issue.
(ii) Authority to Purchase Own Shares
At the AGM of the Company held on 14 July 2022, a Special Resolution was passed authorising
the Company to purchase its shares in the market, limited to a maximum of 14.99% of the shares
in issue on 14 July 2022 equivalent to 176,454,456 shares. The present authority expires at the
conclusion of the AGM on 14 July 2023.
Under Resolution 10, the Directors are seeking renewal of the authority to purchase the Company’s
shares in the market, limited to a maximum of 14.99% of the Company’s issued ordinary share capital,
excluding treasury shares, at the date of the passing of this resolution (equivalent to 172,879,887
ordinary shares of 5 pence per share each as at 24 May 2023). This is set out in resolution 10 of the
notice of the AGM.
Any shares purchased pursuant to this authority may be cancelled or held in treasury pursuant to
the Companies (Acquisition of own shares) (Treasury Shares) Regulations 2003. Purchases will only
be made for cash, provided that:
(a) the maximum price which may be paid is the higher of:
• 5% above the average market value of the shares for the five business days before the
purchase is made;
• the higher of the last independent trade price and the highest current independent bid price
on the London Stock Exchange;
(b) the minimum price payable for the shares will be the nominal value of 5 pence per share; and
(c) shares will only be purchased at a price which is at a discount to the prevailing net asset value
per share at the time of purchase.
The authority to purchase shares (whether for cancellation or to be held in treasury) will only be
exercised if to do so would be in the best interests of shareholders generally and would result in an
increase in net asset value per share for the remaining shareholders. The purpose of holding some
Directors’ Report (continued)
58 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
shares in treasury is to allow the Company to re-issue those shares quickly and cost-effectively,
thus providing the Company with flexibility in the management of its capital base. Whilst in
treasury, no dividends are payable on, or voting rights attach to, these shares. No shares will be
purchased by the Company during periods when the Company would be prohibited from making
such purchases by the rules of the FCA. As at the date of this report, there are no warrants or
options outstanding to subscribe for equity shares in the Company.
The Directors envisage seeking the renewal of the relevant authority in 2024 and in each
succeeding year.
(iii) Notice period for general meetings
At the AGM of the Company held on 14 July 2022, a Special Resolution was passed authorising the
Company to call general meetings (other than Annual General Meetings) on 14 days’ clear notice, up
to the conclusion of the AGM in 2023. The Directors are seeking renewal under Resolution 10 of the
authority to call general meetings (other than Annual General Meetings) on 14 days’ clear notice.
This resolution is required to reflect the 2006 Act which requires that all general meetings must be
held with at least 21 days’ notice, unless shareholders agree to a shorter notice period.
The Directors only intend to call a general meeting on less than 21 days’ notice where the
proposals are time sensitive and the short notice would clearly be in the best interests of the
shareholders as a whole.
The approval will be effective until the Company’s AGM in 2024, when it is intended that a similar
resolution will be proposed. The Company will also be required to meet the requirements for
electronic voting under the Directive before it can call a general meeting on 14 clear days’ notice.
Recommendation
The Directors believe that all of the resolutions proposed are in the best interests of the Company
and the shareholders as a whole and recommend that all shareholders vote in favour of all of
the resolutions.
The results of the votes on the resolutions at the AGM will be published on the Company’s website
(www.temit.co.uk).
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 objective, the nature of the portfolio, net current assets,
expenditure forecasts, the compliance with loan covenants, the principal and emerging risks and
uncertainties described within the Annual Report, and with due consideration to the continuing
ramifications of the Russian invasion of Ukraine and growing tensions between the United States and
China over trade and the Taiwan Strait, the Directors are satisfied that the Company has adequate
resources to continue to operate as a going concern for the period to 31 March 2025, which is at least
12 months from the date of approval of the Financial Statements, and are satisfied that the going
concern basis is appropriate in preparing the Financial Statements.
By order of the Board
Paul Manduca
9 June 2023
Directors’ Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 59
This report has been prepared in accordance with the requirements of Section 420-422 of the
Companies Act 2006, with subsequent amendments. The Directors’ Remuneration Policy is subject
to a triennial binding shareholder vote and the Directors’ Remuneration Report is subject to an
annual shareholder vote, both as ordinary resolutions.
The law requires the Company’s auditor to audit certain of the disclosures provided. Where
disclosures have been audited, they are indicated as such. The auditor’s opinion is included in its
report on pages 71 to 79.
All Directors are non-executive, appointed under the terms of Letters of Appointment, and none
has a service contract. These letters are available for inspection by shareholders at the Company’s
registered address or at the AGM. The Directors’ Report includes, on pages 48 and 49, details of
the Directors’ terms of appointment.
The Company has no employees.
Details of the Nomination and Remuneration Committee can be found on pages 52 and 53 within
the Directors’ Report.
Directors’ Remuneration Policy
This Policy provides details of the remuneration policy for the Directors of the Company.
A resolution proposing the approval of the Directors’ Remuneration Policy was put to the
shareholders at the 2020 AGM and passed by 156,547,651 (99.88%) of shareholders voting in favour
of the resolution, 192,243 (0.12%) voting against and 104,588 abstaining from voting.
The Policy as set out below has not changed and will be subject to shareholder approval at the AGM on
14 July 2023.
The Board’s policy, which has been designed to support the Company’s strategy and promote
long-term sustainable success, is that the remuneration of non-executive Directors should reflect
the responsibilities of the Board, Directors’ time spent on the Company’s business, the experience
of the Board as a whole, and be fair and comparable to that of other investment trusts similar in
size, capital structure and objective.
The review process involves an analysis of fees paid to Directors of other companies having similar
profiles to that of the Company. This review is submitted to the Nomination and Remuneration
Committee and the Directors’ fees are agreed for the next year. The Company has no Chief
Executive Officer and no employees and therefore there was no consultation of employees and
there is no employee comparative data to provide, in relation to the setting of the remuneration
policy for Directors.
Directors’ and Officers’ liability insurance cover is maintained by the Company, at its expense.
Directors’ remuneration is not linked to the performance of the Company and Directors are not
eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits.
The independent non-executive Directors are entitled to reclaim reasonable expenses incurred
in order to perform their duties as non-executive Directors for the Company. Directors are not
entitled to payment for loss of office and may be removed from office by the Company on three
months’ notice.
The Nomination and Remuneration Committee considers any comments received from
shareholders on remuneration policy on an ongoing basis and takes account of those views.
Directors’ Remuneration Report
60 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Directors’ Remuneration Implementation Report
The Directors’ Remuneration Report, which includes details of the Directors’ Remuneration Policy
and its implementation, is subject to an annual shareholders’ vote and an ordinary resolution to
approve the Remuneration Policy will be put to shareholders at the forthcoming AGM. A review was
carried out during the financial year to 31 March 2023 and this review recommended increases in fees
as set out in the table below for the forthcoming financial year. These changes to remuneration are
in line with the Directors’ Remuneration Policy as set out above. The involvement of remuneration
consultants has not been deemed necessary as part of this year’s review.
Role
Current
annual fee
Proposed
annual fee
Chairman £71,000 £73,000
Chairman of the Audit and Risk Committee and Senior Independent Director £56,000 £58,500
Independent Directors £40,000 £41,000
The Chairman of the Board, Chairman of the Audit and Risk Committee (who is also the Senior
Independent Director) are paid higher fees than the other Directors, reflecting the greater amount
of time spent on the Company’s business.
Directors’ Fees for the Year
Fees paid to each Director for the financial year to 31 March 2023 are set out below. A non-binding
ordinary resolution proposing adoption of the Directors’ Remuneration Report was put to
shareholders at the Company’s AGM held on 14 July 2022 and was passed by 749,695,535 (99.86%)
of shareholders voting in favour of the resolution, 1,056,931 (0.14%) voting against and 218,284
abstaining from voting.
The Directors who served during the year received the following fees, which represented their
total remuneration from the Company:
2023 2022
(audited information)
Annual
fee
£
Taxable
benefits
(a)
£
Total
£
Annual fee
£
Taxable
benefits
(a)
£
Total
£
2023 total
remuneration
change
%
2022 total
remuneration
change
%
Paul Manduca
(b)
71,000 229 71,229 69,000 119 69,119 3.1 3.2
Simon Jeffreys
(c)
55,287 679 55,966 52,000 397 52,397 6.8 3.8
Charlie Ricketts 40,000 3,952 43,952 39,000 752 39,752 10.6 (3.8)
Magdalene Miller
(d)
40,000 1,751 41,751 34,807 461 35,268 18.4 100
David Graham 40,000 – 40,000 39,000 252 39,252 1.9 3.3
Abigail Rotheroe
(e)
16,667 – 16,667 – – – 100 –
Beatrice Hollond
(f)
12,242 194 12,436 41,500 132 41,632 (70.1) 9.6
Medha Samant
(g)
– – – 1,978 – 1,978 (100) (89.6)
Total 275,196 6,805 282,001 277,285 2,113 279,398
(a)
Taxable benefits relate to the reimbursement of expenses incurred in connection with the performance of the Directors’
duties and attendance at Board and Committee meetings.
(b)
Chairman of the Board.
(c)
Chairman of the Audit and Risk Committee and appointed Senior Independent Director effective 14 July 2022.
(d)
Joined the Board on 10 May 2021.
(e)
Joined the Board on 1 November 2022.
(f)
Retired from the Board on 14 July 2022. Senior Independent Director up to date of retirement.
(g)
Joined the Board on 1 October 2020 and resigned on 19 April 2021.
Directors’ Remuneration Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 61
Performance graph
(a)
The line graph below details TEMIT’s share price total return against TEMIT’s benchmark, the
MSCI Emerging Markets Index total return over the past 10 years.
TEMIT share price
Mar-13 Mar-14 Mar-15 Mar-16 Mar-23Mar-22Mar-21Mar-20Mar-19Mar-18Mar-17
200
150
100
50
200
100
50
MSCI Emerging Markets Index
150
(a)
Figures rebased to 100 at 31 March 2013.
Relative cost of Directors’ fees
The table below shows the Company’s expenditure on Directors’ fees compared to distributions to
shareholders:
2023
£’000
2022
£’000
Directors’ Remuneration
(a)
303 304
Distribution to shareholders:
Dividends 57,860
(b)
44,751
Share buybacks 29,207 3,604
(a)
Directors’ Remuneration comprises Directors’ fees of £275,196 and Employer National Insurance Contributions of
£27,594 for the financial year 2023 (2022: £277,285 and £26,767 respectively).
(b)
Based on a proposed final dividend of 3.00 pence per share calculated using shares in issue as at 24 May 2023 and the
interim dividend of 2.00 pence per share paid 27 January 2023.
The items detailed in the above table are as required by the Large and Medium-size Companies
and Groups (Accounts and Reports) 2013.
Five year change comparison
Over the last five years, Directors’ pay has increased as set out in the table below:
Role
Current annual
fee
31 March 2018
annual fee Change
Chairman £71,000 £63,000 +12.7%
Chairman of the Audit and Risk Committee and
Senior Independent Director
£56,000 £48,000
(a)
+16.7%
Independent Directors £40,000 £36,000 +11.1%
(a)
Annual fee received by the Chairman of the Audit and Risk Committee. Simon Jeffreys is Chairman of the Audit and
Risk Committee and was appointed Senior Independent Director on 14 July 2022. The Senior Independent Director
position was held by a different director during the year ended 31 March 2018.
Directors’ Remuneration Report (continued)
62 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Statement of Directors’ shareholdings
The Directors’ interests (including any family interests) existing as at 31 March in the Company’s
shares were as follows:
(audited information)
2023
Number of shares
2022
Number of shares
David Graham 107,755 106,452
Abigail Rotheroe 27,110 –
Simon Jeffreys 26,960 26,960
Paul Manduca 25,000 25,000
Charlie Ricketts 25,000 25,000
Magdalene Miller 7,000 –
The Company has not received any notifications of changes in the above interests as at 24 May 2023.
Approval
The Directors’ Remuneration Report was approved by the Board of Directors on 9 June 2023.
Paul Manduca
9 June 2023
Directors’ Remuneration Report (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 63
Report of the Audit and Risk Committee
As Chairman of the Audit and Risk Committee, I am pleased to present this report to shareholders. The
report contains details of the Audit and Risk Committee’s activities and responsibilities along with the
evaluation of effectiveness of the external and internal audit process for the year ended 31 March 2023.
Composition
As of 31 March 2023, the Audit and Risk Committee comprised Simon Jeffreys (Chairman),
David Graham, Magdalene Miller, Charlie Ricketts and Abigail Rotheroe, all independent
non-executive Directors.
The Board considers that the members of the Audit and Risk Committee have sufficient recent and
relevant financial experience in order for it to perform its functions effectively, noting in particular
that the Audit and Risk Committee Chairman is a Chartered Accountant and former senior audit
partner. David Graham is also a Chartered Accountant. The Directors’ biographies are given on
pages 46 to 48.
Role and responsibilities
The Audit and Risk Committee plays an important role in the appraisal and supervision of key
aspects of the Company’s business. The Committee carried out the following activities to accomplish
its principal objectives and reported to the Board on how it discharged its responsibilities:
• Provided advice to the Board on whether the Annual Report and 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;
• Monitored the integrity of the Financial Statements including the review of and agreeing the
appropriateness of the Company’s accounting policies, accounting estimates and judgements,
alternative performance measures and compliance with the appropriate reporting requirements;
• Oversaw the relationship with the external auditor, including monitoring of any non-audit
services in accordance with the policy;
• Reviewed and monitored the external auditor’s effectiveness, objectivity and independence, and
the effectiveness of the audit process, taking into consideration relevant UK professional and
regulatory requirements;
• Monitored, reviewed and confirmed the effectiveness of the internal financial controls and
internal controls and risk management systems on which the Company is reliant;
• Reviewed the effectiveness of the internal audit function of Franklin Templeton and its reports,
and was satisfied with the results;
• Reviewed the internal and external audit plans and the findings of the audits, including the
external Auditor’s Report;
• Reviewed and confirmed that the value and quality of services provided to the Company by
third parties were satisfactory;
• Reviewed in detail the contents of the Company’s risk matrix; and
• Reviewed other ad hoc items referred to the Audit and Risk Committee by the Board.
64 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Activities during the year
The Committee met formally three times during the year. In addition some members of the
Committee members visited Edinburgh twice in the year to meet with the external auditor and
representatives of the Manager’s internal audit, financial reporting, taxation and risk departments.
Also, while in Singapore separately on other business, the Chairman and other members of the
committee visited Franklin Templeton’s office and met with representatives of the portfolio,
research and risk teams.
The Chairman and other members of the Committee, also:
• Reviewed and challenged the scenarios presented by the Manager to support the use of the
going concern basis and the ongoing viability assessment. Upon review and discussion with the
Manager the Committee concluded that the scenarios were appropriate to support the use of the
going concern basis and the ongoing viability statement;
• Reviewed the effects of the AIFM fee change;
• Met with the Manager to discuss its approach to ESG matters including the implementation of the
Stewardship Report;
• Held meetings with the Manager to discuss with those responsible all relevant matters relating to
financial reporting, company secretarial, taxation, internal audit and risk and control framework;
• Received regular updates on the ongoing Russian invasion of Ukraine and the resulting portfolio
valuation impacts;
• Discussed with the investment and risk teams the potential ramifications of the growing tensions
between the United States and China over trade and sovereignty of Taiwan. This includes the
impact of sanctions on certain companies as well as potential restrictions on the ability to invest in
certain companies;
• Challenged the Manager on the valuation basis for the Russian securities and Brilliance China
Automotive which suspended trading on 31 March 2021 and resumed on 5 October 2022.
Following discussions with the Manager, the Committee concluded that the valuations applied are
reasonable and appropriate given the circumstances and information available;
• Discussed with the Manager the classification of the special dividend of £8.4 million received
from Brilliance China Automotive as a revenue or capital item in the Statement of Comprehensive
Income. Considering that the special dividend was paid out of the net proceeds from the disposal
of a 25% equity interest in Brilliance China Automotive’s joint venture with BMW, the Committee
concluded that the treatment as a capital item in the Statement of Comprehensive Income is
appropriate and therefore no significant judgement was required;
• Challenged the Manager on the appropriate recognition of recoverable taxes and concluded that
the accounting treatment was appropriate; and
• Reviewed options and selected the new Senior Statutory Auditor from Ernst & Young LLP.
The Committee maintains a programme of agenda items to ensure that its workload is balanced
across the year and that matters are addressed at appropriate times.
Performance evaluation
The Board undertakes an annual evaluation of performance of the Audit and Risk Committee and of its
individual Directors, further details of this review can be found on page 49. The Board is satisfied with
the performance and effectiveness of the Audit and Risk Committee.
Report of the Audit and Risk Committee (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 65
Report of the Audit and Risk Committee (continued)
Annual Report and Financial Statements
A primary responsibility of the Audit and Risk Committee is to review the appropriateness of the
Annual and Half Yearly Reports.
During the year, the work of the Committee included the following significant activities in relation
to the Financial Statements:
Portfolio valuation The Directors receive regular portfolio reports, liquidity information
and presentations from the Manager and the Investment Manager. The
Committee reviews valuation reports from the Manager and is satisfied
that valuations are compliant with the accounting policies commencing on
page 85. In particular the Committee challenged the Manager on the basis of
valuation, and the assumptions made, for the valuation of Russian securities
and of Brilliance China Automotive. Trading in shares of Brilliance China
Automotive on the Hong Kong stock exchange was suspended on 31 March
2021 and resumed on 5 October 2022.
Misappropriation of assets and
counterparty risk
The Committee considers the risk of counterparty failure. The Company
has appointed an independent custodian (JPMorgan Chase Bank) to hold
its investments. The Manager reconciles the investment portfolio to the
custodian’s records on a regular basis and any material variances are
reported to the Committee. In addition, the Committee receives from the
Manager an annual review evaluating JPMorgan Chase Bank’s global custody
and sub-custody network including the results of an ISAE 3402 report by
PricewaterhouseCoopers. The results were satisfactory.
Going concern and viability The Committee considers that the Company’s assets consist of equity shares in
companies listed on recognised stock exchanges which in most circumstances
are realisable within a short timescale. Having made suitable enquiries,
including consideration of the Company’s objective, the nature of the portfolio,
net current assets, expenditure forecasts, the compliance with loan covenants,
the principal and emerging risks and uncertainties described within the
Annual Report, and with due consideration to the continuing ramifications
of the Russian invasion of Ukraine and growing tensions between the United
States and China over trade and the Taiwan Strait, the Committee is satisfied
that the Company has adequate resources to continue to operate as a going
concern for the period to 31 March 2025, which is at least 12 months from
the date of approval of the Financial Statements. The Committee therefore
concludes that it is appropriate to prepare the Financial Statements on a going
concern basis, and makes its recommendations to the Board.
The scenarios considered include the liquidity of the portfolio, a sustained
increase in the value of the portfolio (which would result in an increase in
running costs, particularly the AIFM fee), a significant drop in value of the
assets and a similar decrease in dividend income, and confirms that the
Company could continue as a going concern.
The Committee also considers such scenarios over a five-year period to
support the Company’s ongoing viability as noted in the Viability Statement
on page 44.
Recognition of investment income Each quarter the Committee receives and reviews annual income forecast
reports which detail the income received and the estimated income due to
be received in the financial year. These forecasts included details of material
variances compared with prior forecasts. The Committee is satisfied with
these analyses.
Compliance with Section 1158 of
the Corporation Tax Act 2010
The Company has been accepted as an approved investment trust by HM
Revenue & Customs for accounting periods commencing on or after 1 April
2012, subject to continuing 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 Committee is
satisfied that the Company complies with these conditions and intends to
direct its affairs to ensure its continued approval as an investment trust.
66 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Areas of audit focus
The Committee reviewed and agreed the external audit plan including the level of audit
materiality which it challenged and concluded was appropriate. The external auditor determined
the scope of their work and the Committee also discussed with them key matters which they
wanted to be covered and which included the following:
• Ownership and valuation of the portfolio given that the majority of the Company’s assets are
invested in its portfolio companies. The external auditor validated the ownership and valuations
to its independent sources and concluded that the results of their procedures did not identify any
material misstatements;
• Income recognition to confirm that income has been correctly recorded and received. The external
auditor recalculated all dividend income from independent sources and tested a sample to bank
statements and concluded that the results of their procedures did not identify any material
misstatements; and
• Although not a key audit matter as determined by the external auditor the Committee focused
on Compliance with S1158 regulations in order to ensure that the Company is meeting its
minimum distribution obligations. The external auditor concluded that the Company was in
compliance with S1158 regulations as at the balance sheet date.
Significant estimates and assumptions were used for the valuation of the Level 3 Russian
investments. As noted above the Committee challenged the Manager on the basis of the valuation
and were satisfied that this was appropriate. The Committee notes that there was no significant
accounting judgement required in relation to the classification of special dividends received.
Further information on these key audit matters and the external auditor’s observations reported to
the Committee are detailed within their audit report on pages 73 to 75. The Committee reviewed
and were satisfied with the conclusions presented by the external auditor for each of these matters.
Conclusion
As a result of the work undertaken by the Committee as noted on page 66 and from the
conclusions presented by the external auditor, the Committee has concluded that the Financial
Statements for the year ended 31 March 2023, 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 has reported on these findings
to the Board. The Board’s conclusions in this respect are set out in the Statement of Directors’
Responsibilities on page 70.
External Auditor
Assessment of effectiveness and independence of the external audit process
To assess the effectiveness and independence of the external audit process, the auditor is asked, on
an annual basis, to set out the steps that it has taken to ensure objectivity and independence. The
auditor’s performance, behaviour and effectiveness during the exercise of its duties are monitored
during the year by the Audit and Risk Committee. The Audit and Risk Committee considered an
annual independent Audit Quality Review report by the FRC, that monitors audit quality of the
major audit firms in the UK and discussed with the external auditor the results of its own quality
control review and 2022 Transparency Report. Ernst & Young LLP presented its detailed audit plan
for the 2023 financial year end at the December 2022 Audit and Risk Committee meeting. The Audit
and Risk Committee also reviewed Ernst & Young LLP’s policies and procedures including quality
assurance procedures and independence and concluded that they were satisfactory.
Report of the Audit and Risk Committee (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 67
The outcome of these reviews and discussions with the Senior Statutory Auditor were that the
Committee is satisfied that Ernst & Young LLP has a suitable culture, control environment and risk
framework to enable it to deliver a high-quality audit.
In assessing the quality of the audit the Committee considered areas where the auditor had
demonstrated professional scepticism and challenged management’s assumptions. They noted that
this had been demonstrated around the valuation of the Russian assets and how the auditor had
challenged management on their assumptions with the Committee noting these discussions and
concluding that a zero valuation was appropriate. In addition, the Committee held meetings with
the external auditor in private and worked closely with the Manager during the audit process.
Taking into consideration all of the above and its review and discussions with the key parties the
Committee concluded that the external auditor had delivered a quality audit for the financial year
ended 31 March 2023.
Auditor rotation
The regulations on mandatory auditor rotation require an audit tender to take place every
ten years. An audit tender took place during 2019 and shareholders approved the appointment of
Ernst & Young LLP as the Company’s external auditor at the Annual General Meeting held on 11 July
2019. During the year, Sue Dawe, who pursued a career development opportunity, was replaced by
Ashley Coups, who was selected from a short list of candidates by the Committee, as Senior Statutory
Auditor. The year ended 31 March 2023 was the first year for which Ashley Coups (Senior Statutory
Auditor) has served. Sue Dawe previously occupied this role for three financial years.
Non-audit services
Performance of any non-audit services by the external auditor must be approved in advance by
the Committee and must comply with the guidelines set out in the FRC’s Revised Ethical Standard
2019. The Committee concluded that the non-audit service fees were appropriate relative to fees
paid for audit services. An engagement letter is issued for all non-audit work and is reviewed by
the Committee to ensure that the independence and objectivity of the auditor is safeguarded.
During the year, Ernst & Young LLP was engaged to perform a review of the Half Yearly Report.
This is assurance related and the Committee believes that Ernst & Young LLP is best placed to
provide this service for the shareholders.
After expiry of a three-year fee agreement following the Auditor’s initial appointment, audit fees
were renegotiated during the year. The fees paid to the Auditor in the year were as follows:
2023 2022
Audit Services £52,000 £34,000
Non-Audit Services:
Review of Half Yearly Report £10,000 £8,000
Percentage of Audit Services 19.2% 23.5%
The Committee therefore confirms that the non-audit work undertaken by the auditor satisfies and
does not compromise the tests of the auditor’s independence, objectivity, effectiveness, resources
and qualification.
Report of the Audit and Risk Committee (continued)
68 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Report of the Audit and Risk Committee (continued)
Internal control
Internal audit is carried out by the internal audit department of Franklin Templeton.
The Committee monitors the risk management and system of internal controls on an ongoing basis
and engages Franklin Templeton’s internal audit function to carry out a review of specific areas
that the Audit and Risk Committee considers appropriate.
The Committee met representatives of the Manager and Investment Manager, including its
internal auditor, risk manager and its compliance officer, who reported as to the proper conduct
of business in accordance with the regulatory environment in which both the Company and the
Manager operate. Certain meetings held with the internal auditors are conducted on a private
basis, with no representation from the Manager.
The Committee reviewed the Company’s risk matrix that explains in detail the key risks identified
by the Company, assessing the likelihood of each risk materialising and the impact that this would
have on the Company. The Committee also confirmed the effectiveness of the key operational
procedures and oversight by the Manager and the Board.
Other areas
TEMIT is able to rely on the Financial Markets Conduct (Overseas FMC Reporting Entities)
Exemption Notice 2021, that exempts it from requirements to prepare audited financial statements in
accordance with the New Zealand Financial Market Conduct Act 2013. This exemption recognises
that companies with a primary listing in the United Kingdom prepare Financial Statements and are
audited in accordance with UK requirements. This exempts TEMIT from the New Zealand
requirement that firms be audited by a New Zealand unlimited liability entity.
TEMIT is in compliance with the provisions of “The Statutory Audit Services for Large Companies
Market Investigation” (Mandatory Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 as issued by the Competition & Markets Authority.
Simon Jeffreys
Audit and Risk Committee Chairman
9 June 2023
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 69
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 on pages 46 to 53.
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.
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 on pages 46 to 48, 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 2023; 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
Paul Manduca
9 June 2023
Statement of Directors’ Responsibilities
70 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Independent Auditor’s Report
to the members of Templeton Emerging Markets Investment Trust plc
Opinion
We have audited the financial statements of Templeton Emerging Markets Investment Trust
plc (the “Company”) for the year ended 31 March 2023 which comprise the Statement of
Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity,
Statement of Cash Flows and the related notes 1 to 21, including a summary of significant
accounting policies. The financial reporting framework that has been applied in their preparation
is applicable law and UK adopted International Accounting Standards.
In our opinion, the financial statements:
• give a true and fair view of the Company’s affairs as at 31 March 2023 and of its profit for the
year then ended;
• have been properly prepared in accordance with UK adopted International Accounting
Standards; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the
Company and we remain independent of the Company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate. Our
evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going
concern basis of accounting included:
• Confirming our understanding of the Company’s going concern assessment process by
engaging with the Directors and the Company Secretary to determine if all key factors were
considered in their assessment.
• Inspecting the Directors’ assessment of going concern, including the revenue forecast, for the
period to 31 March 2025 which is at least 12 months from the date the financial statements were
authorised for issue. In preparing the revenue forecast, the Company has concluded that it is
able to continue to meet its ongoing costs as they fall due.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 71
Independent Auditor’s Report (continued)
• Reviewing the factors and assumptions, including the impact of the current economic
environment, as applied to the revenue forecast and the liquidity assessment of the investments.
We considered the appropriateness of the methods used to calculate the revenue forecast and
the liquidity assessment and determined, through testing of the methodology and calculations,
that the methods, inputs and assumptions utilised were appropriate to be able to make an
assessment for the Company.
• In relation to the Company’s borrowing arrangements, we inspected the Directors’ assessment of
the risk of breaching the debt covenants as a result of a reduction in the value of the Company’s
portfolio. We recalculated the Company’s compliance with debt covenants in the scenarios
assessed by the Directors and reviewed the Directors’ reverse stress testing in order to identify
and challenge the factors which would lead to the Company breaching the financial covenants.
• We considered the mitigating factors included in the revenue forecasts that are within the
control of the Company. We reviewed the Company’s assessment of the liquidity of investments
held and evaluated the Company’s ability to sell those investments to cover the working capital
requirements should revenue decline significantly.
• Reviewing the Company’s going concern disclosures included in the Annual Report in order to
assess that the disclosures were appropriate and in conformity with the reporting standards.
Based on the work we have performed, we have not identified any material uncertainties relating
to events or conditions that, individually or collectively, may cast significant doubt on the
Company’s ability to continue as a going concern for a period assessed by the Directors, being
the period to 31 March 2025 which is at least twelve months from when the financial statements
are authorised for issue.
In relation to the Company’s reporting on how they have applied the UK Corporate Governance
Code, we have nothing material to add or draw attention to in relation to the Directors’ statement
in the financial statements about whether the Directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern
are described in the relevant sections of this report. However, because not all future events or
conditions can be predicted, this statement is not a guarantee as to the Company’s ability to
continue as a going concern.
Overview of our audit approach
Key audit
matters
• Risk of incomplete or inaccurate revenue recognition, including the classification of special
dividends as revenue or capital items in the Statement of Comprehensive Income.
• Risk of incorrect valuation or ownership of the investment portfolio.
Materiality • Overall materiality of £20.18m (2022: £21.00m) which represents 1% (2022: 1%) of
shareholders’ funds.
72 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Independent Auditor’s Report (continued)
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance
materiality determine our audit scope for the Company. This enables us to form an opinion on
the financial statements. We take into account size, risk profile, the organisation of the Company
and effectiveness of controls, including controls and changes in the business environment when
assessing the level of work to be performed. All audit work was performed directly by the audit
engagement team.
Climate change
Stakeholders are increasingly interested as to how climate change will impact companies.
The Company has determined that the impact of climate change could affect the Company’s
investments, and potentially shareholder returns. This is explained in the principal and emerging
risks section on page 43, which forms part of the “Other information,” rather than the audited
financial statements. Our procedures on these disclosures therefore consisted solely of considering
whether they are materially inconsistent with the financial statements or our knowledge obtained in
the course of the audit or otherwise appear to be materially misstated.
Our audit effort in considering climate change was focused on the adequacy of the Company’s
disclosures in the financial statements as set out in note 1(a) and conclusion that there was no
further impact of climate change to be taken into account as the investments are valued based
on market pricing as required by UK adopted International Accounting Standards. In line with
UK adopted International Accounting Standards, investments are valued at fair value, which for
the Company are quoted bid prices for investments in active markets. Investments which are
designated at level 3 are priced using market-based valuation approaches. All investments therefore
reflect the market participants’ view of climate change on risk on the investments held by the
Company. We also challenged the Directors’ considerations of climate change in their assessment of
viability and associated disclosures.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance
in our audit of the financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in our opinion
thereon, and we do not provide a separate opinion on these matters.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 73
Independent Auditor’s Report (continued)
Risk Our response to the risk Key observations communicated to
the Audit and Risk Committee
Incomplete or inaccurate
revenue recognition, including
classification of special dividends
as revenue or capital items in
the Statement of Comprehensive
Income (as described on page 67
in the Report of the Audit and
Risk Committee and as per the
accounting policy set out on
page 86).
The total revenue for the year
to 31 March 2023 was £88.98m
(2022: £54.27m), consisting
primarily of dividend income
from listed investments.
The Company received special
dividends amounting to £14.00m
(2022: £3.85m) of which £8.44m
(2022: £nil) was classified as capital
and £5.56m (2022: £3.85m) was
classified as revenue.
There is a risk of incomplete or
inaccurate revenue recognition
through the failure to recognise
proper income entitlements
or to apply an appropriate
accounting treatment.
The directors may be required to
exercise judgement in determining
whether income receivable in
the form of special dividends
should be classified as ‘revenue’
or ‘capital’ in the Statement of
Comprehensive Income.
We have performed the following
procedures:
We obtained an understanding of the
processes and controls surrounding
revenue recognition and classification
of special dividends by performing
walkthrough procedures.
For all dividends received and
accrued we recalculated the dividend
income by multiplying the investment
holdings at the ex-dividend date,
traced from the accounting records,
by the dividend per share, which
was agreed to an independent data
vendor. We also agreed all exchange
rates to an external source and, for
a sample of dividends received
and dividends accrued, we agreed
amounts to bank statements.
For all accrued dividends, we assessed
whether the dividend obligations
arose prior to 31 March 2023 with
reference to an external source.
To test completeness of recorded
income, we verified that all expected
dividends for each investee company
had been recorded as income with
reference to investee company
announcements obtained from an
independent data vendor.
For all investments held during
the year, we reviewed the type of
dividends paid with reference to an
external data source to identify those
which were special dividends. We
confirmed seven special dividends
were received during the year,
consistent with the dividends
recognised by the Administrator.
For one revenue dividend and
one capital dividend above our
testing threshold, we assessed the
appropriateness of management’s
classification as revenue or capital by
reviewing the underlying rationale
for the distributions.
The results of our procedures
identified no material misstatement
in relation to the risk of incomplete
or inaccurate revenue recognition,
including incorrect classification
of special dividends as revenue or
capital items in the Statement of
Comprehensive Income.
74 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Independent Auditor’s Report (continued)
Risk Our response to the risk Key observations communicated to
the Audit and Risk Committee
Incorrect valuation or ownership
of the investment portfolio (as
described on page 67 in the Report
of the Audit and Risk Committee
and as per the accounting policy set
out on page 88).
The valuation of the portfolio at 31
March 2023 was £1,992.78m (2022:
£2,124.53m) consisting of £1,992.78m
(2022: £2,103.73m) of level 1 listed
investments, and three nil valued
Russian securities designated as
level 3 investments (2022: five nil
valued Russian securities plus one
suspended investment valued at
£20.80m).
The valuation of the assets held in
the investment portfolio is the key
driver of the Company’s net asset
value and total return. Incorrect
investment pricing, or a failure to
maintain proper legal title of the
investments held by the Company
could have a significant impact
on the portfolio valuation and the
return generated for shareholders.
The fair value of listed investments
is determined using quoted market
bid prices at close of business on the
reporting date.
We performed the following
procedures:
We obtained an understanding of the
Administrator’s process surrounding
the existence and pricing of securities
by performing walkthrough
procedures.
For all listed investments in the
portfolio, we compared the market
prices and exchange rates applied to
an independent pricing vendor and
recalculated the valuations as at the
year-end.
We inspected the security price
movement reports produced by the
Administrator to identify prices that
have not changed within five days
from year end and verified whether
the listed price is a valid fair value
through review of trading activity.
Our testing identified no prices which
had not changed within five days of
the year end.
We compared the Company’s
investment holdings at 31 March
2023 to independent confirmations
received directly from the Company’s
Depositary and Custodian.
For each of the level 3 investments,
we assessed the reasonableness and
appropriateness of the valuation
method used by the Manager
with reference to the Company’s
accounting policies, UK adopted
International Accounting Standards
and the International Private Equity
and Venture Capital Valuation (IPEV)
Guidelines and assessed whether the
assumptions used to estimate fair
value were appropriate.
The results of our procedures
identified no material misstatement
in relation to the risk of incorrect
valuation or ownership of the
investment portfolio.
There have been no changes to the areas of audit focus raised in the above risk table from prior year.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could
reasonably be expected to influence the economic decisions of the users of the financial statements.
Materiality provides a basis for determining the nature and extent of our audit procedures.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 75
Independent Auditor’s Report (continued)
We determined materiality for the company to be £20.18m (2022: £21.00m), which is 1% (2022: 1%)
of shareholders’ funds. We believe that shareholders’ funds provides us with materiality aligned to
the key measurement of the Company’s performance.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount
to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Company’s overall
control environment, our judgement was that performance materiality was 75% (2022: 75%) of our
planning materiality, namely £15.13m (2022: £15.75m). We have set performance materiality at this
percentage due to our past experience of the audit that indicates a lower risk of misstatements,
both corrected and uncorrected.
Given the importance of the distinction between revenue and capital for investment trusts we also
applied a separate testing threshold for the revenue column of the Statement of Comprehensive
Income of £3.62m (2022: £2.24m) being 5% of profit before tax.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit and Risk Committee that we would report to them all uncorrected audit
differences in excess of £1.01m (2022: £1.05m), which is set at 5% of planning materiality, as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the Annual Report, other than the
financial statements and our auditor’s report thereon. The Directors are responsible for the other
information contained within the Annual Report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in
the course of the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we
have performed, we conclude that there is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
76 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Independent Auditor’s Report (continued)
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the Directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
• the strategic report and Directors’ report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained
in the course of the audit, we have not identified material misstatements in the strategic report or
Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies
Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept, or returns adequate for our audit have not
been received from branches not visited by us; or
• the financial statements and the part of the Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and
that part of the Corporate Governance Statement relating to the Company’s compliance with the
provisions of the UK Corporate Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the Corporate Governance Statement is materially consistent with the financial
statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set out on page 59;
• Directors’ explanation as to its assessment of the Company’s prospects, the period this
assessment covers and why the period is appropriate set out on page 44;
• Director’s statement on whether it has a reasonable expectation that the group will be able to
continue in operation and meets its liabilities set out on page 59;
• Directors’ statement on fair, balanced and understandable set out on page 70;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on pages 41 to 44;
• The section of the annual report that describes the review of effectiveness of risk management
and internal control systems set out on page 69; and
• The section describing the work of the audit committee set out on pages 64 and 65.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 77
Independent Auditor’s Report (continued)
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 70, the Directors
are responsible for the preparation of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations.
We design procedures in line with our responsibilities, outlined above, to detect irregularities,
including fraud. The risk of not detecting a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both
those charged with governance of the Company and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the
Company and determined that the most significant are UK Adopted International Accounting
Standards, the Companies Act 2006, the Listing Rules, the UK Corporate Governance Code,
the Statement of Recommended Practice for the Financial Statements of Investment Trust
Companies as issued by the Association of Investment Companies, Section 1158 of the
Corporation Tax Act 2010, and The Companies (Miscellaneous Reporting) Regulations 2018.
• We understood how the Company is complying with those frameworks through discussions
with the Audit and Risk Committee and Company Secretary, review of the board and
committee minutes and review of papers provided to the Audit and Risk Committee.
• We assessed the susceptibility of the Company’s financial statements to material misstatement,
including how fraud might occur by considering the key risks impacting the financial
statements. We identified a fraud risk with respect to the incomplete or inaccurate revenue
recognition through incorrect classification of special dividends as revenue or capital items in
the Statement of Comprehensive Income. Further discussion of our approach is set out in the
section on key audit matters above.
78 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Independent Auditor’s Report (continued)
• Based on this understanding we designed our audit procedures to identify non-compliance
with such laws and regulations. Our procedures involved review of the reporting to the
directors with respect to the application of the documented policies and procedures and
review of the financial statements to ensure compliance with the reporting requirements of the
Company.
A further description of our responsibilities for the audit of the financial statements is located on
the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Other matters we are required to address
• Following the recommendation from the Audit and Risk Committee, we were appointed by the
Company on 11 July 2019 to audit the financial statements for the year ending 31 March 2020
and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments
is four years, covering the years ending 31 March 2020 to 31 March 2023.
• The audit opinion is consistent with the additional report to the Audit and Risk Committee.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
to the Company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Ashley Coups (Senior Statutory Auditor)
for and on behalf of
Ernst & Young LLP, Statutory Auditor
London
9 June 2023
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 79
Financial Statements
Statement of Comprehensive Income
For the Year Ended 31 March 2023
Year ended
31 March 2023
Year ended
31 March 2022
Note
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Net losses on investments and
foreign exchange
Net losses on investments at fair
value 8
– (54,645) (54,645)
– (460,585) (460,585)
Net losses on foreign exchange – (442) (442) – (168) (168)
Income
Dividends 2 77,463 8,431 85,894 54,020 – 54,020
Other income 2 3,088 – 3,088 250 – 250
80,551 (46,656) 33,895 54,270 (460,753) (406,483)
Expenses
AIFM fee 3 (5,232) (12,209) (17,441) (6,316) (14,738) (21,054)
Other expenses 4 (1,979) – (1,979) (2,338) – (2,338)
(7,211) (12,209) (19,420) (8,654) (14,738) (23,392)
Profit/(loss) before finance costs
and taxation
73,340 (58,865) 14,475 45,616 (475,491) (429,875)
Finance costs 5 (962) (2,239) (3,201) (858) (1,998) (2,856)
Profit/(loss) before taxation 72,378 (61,104) 11,274 44,758 (477,489) (432,731)
Tax expense 6 (5,520) (3,232) (8,752) (4,081) (5,596) (9,677)
Profit/(loss) for the year 66,858 (64,336) 2,522 40,677 (483,085) (442,408)
Profit/(loss) attributable to
equity holders of the Company
66,858 (64,336) 2,522 40,677 (483,085) (442,408)
Earnings per share 7 5.72p (5.50)p 0.22p 3.44p (40.90)p (37.46)p
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 on pages 85 to 102 are an integral part of the Financial Statements.
80 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Statement of Financial Position
As at 31 March 2023
Note
As at
31 March 2023
£’000
As at
31 March 2022
£’000
Non-current assets
Investments at fair value through profit or loss 8 1,992,775 2,124,530
Current assets
Trade and other receivables 9 7,886 16,928
Cash and cash equivalents 132,988 125,855
Total current assets 140,874 142,783
Current liabilities
Other payables 10 (6,402) (57,718)
Total current liabilities (6,402) (57,718)
Net current assets 134,472 85,065
Non-current liabilities
Capital gains tax provision 6 (9,744) (9,205)
Other payables falling due after more than one year 11 (100,000) (100,000)
Total assets less liabilities 2,017,503 2,100,390
Share capital and reserves
Equity Share Capital 12 63,148 64,136
Capital Redemption Reserve 1(j) 19,521 18,533
Capital Reserve 1(j) 1,372,654 1,466,197
Special Distributable Reserve 1(j) 433,546 433,546
Revenue Reserve 1(j) 128,634 117,978
Equity Shareholders’ Funds 2,017,503 2,100,390
Net asset value pence per share
(a)
174.1 178.2
(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) on pages 80 to 102 were approved for issue by the Board and signed
on 9 June 2023.
Paul Manduca Simon Jeffreys
Chairman Director
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 81
Statement of Changes in Equity
For the Year Ended 31 March 2023
Equity Share
Capital
Capital
Redemption
Reserve
Capital
Reserve
Special
Distributable
Reserve
Revenue
Reserve Total
Note £’000 £’000 £’000 £’000 £’000 £’000
Balance at 31 March 2021 64,253 18,416 1,952,886 433,546 122,186 2,591,287
(Loss)/profit for the year – – (483,085) – 40,677 (442,408)
Equity dividends 13 – – – – (44,885) (44,885)
Purchase and cancellation
of own shares 12 (117) 117 (3,604) – – (3,604)
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 13 – – – – (56,202) (56,202)
Purchase and cancellation
of own shares 12 (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
The accompanying notes on pages 85 to 102 are an integral part of the Financial Statements.
82 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Statement of Cash Flows
For the Year Ended 31 March 2023
Note
For the year to
31 March 2023
£’000
For the year to
31 March 2022
£’000
Cash flows from operating activities
Profit/(Loss) before taxation 11,274 (432,731)
Adjustments to reconcile Profit/(Loss) before taxation to cash used
in operations:
Bank and deposit interest income recognised (3,082) (130)
Dividend income recognised (85,894) (54,020)
Finance costs 3,201 2,856
Net losses on investments at fair value 8 54,645 460,585
Net losses on foreign exchange 442 168
Decrease in debtors 12 16
Decrease in creditors (310) (614)
Cash used in operations (19,712) (23,870)
Bank and deposit interest received 3,082 130
Dividends received 86,727 57,522
Bank overdraft interest paid (2) (2)
Tax paid (5,971) (6,250)
Realised gains on foreign currency cash and cash equivalents
(a)
179 377
Net cash inflow from operating activities
(a)
64,303 27,907
Cash flows from investing activities
Purchases of non-current financial assets (465,539) (600,482)
Sales of non-current financial assets
(a)
548,504 612,872
Net cash inflow from investing activities
(a)
82,965 12,390
Cash flows from financing activities
Equity dividends paid 13 (56,202) (44,885)
Purchase and cancellation of own shares (30,453) (2,041)
(Repayment)/draw down from revolving credit facility (50,000) 50,000
Interest and fees paid on bank loans (3,457) (2,728)
Net cash (outflow)/inflow from financing activities (140,112) 346
Net increase in cash
(a)
7,156 40,643
Cash at the start of the year 125,855 85,212
Unrealised losses on foreign currency cash and cash equivalents
(a)
(23) 0
Cash at the end of the year 132,988 125,855
(a)
Net unrealised losses on cash and cash equivalents have been shown separately as part of the reconciliation of cash and
cash equivalents. Net realised gains arising from cash and cash equivalents have been allocated to the corresponding
cash flow activities to which they relate. Comparative figures have been updated for the consistency of the presentation
in line with IAS 8 requirements.
The accompanying notes on pages 85 to 102 are an integral part of the Financial Statements.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 83
Statement of Cash Flows (continued)
Reconciliation of liabilities arising from bank loans
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 –
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
Liabilities
as at
31 March 2021
£’000
Cash flows
£’000
Profit & Loss
£’000
Liabilities
as at
31 March 2022
£’000
Revolving credit facility – 50,000 – 50,000
Interest and fees payable 120 (628) 757 249
Fixed term loan 100,000 – – 100,000
Interest and fees payable 355 (2,100) 2,097 352
Total liabilities from bank loans 100,475 47,272 2,854 150,601
84 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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”) 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 by the use of “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 standard was assessed to
be relevant and is effective for annual periods beginning on or after 1 January 2022:
• Annual Improvements to IFRS Standards 2018 – 2020: IFRS 9 Amendment. This amendment
relates to situations where there is a substantial change in the terms of a financial liability.
The amendment 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: Disclosure of Accounting Policies 1 January 2023
IAS 8 Amendments: Definition of Accounting Estimates 1 January 2023
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 the Company has sufficient resources to continue
in operational existence for the period to 31 March 2025, which is at least 12 months from the date
of the approval of the Financial Statements. The Directors reviewed income forecasts covering the
next two financial years, including interest and fees arising from the debt facility. The Directors
considered the principal and emerging risks and uncertainties disclosed on pages 41 to 44 in
particular those relating to the continuing ramifications of the Russian invasion of Ukraine.
At 31 March 2023, the Company had net current assets of £134,472,000 (31 March 2022: net current
assets of £85,065,000). 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
debt servicing. The repayment of the principal balance of the Company’s £100 million fixed term loan
Notes to the Financial Statements
As at 31 March 2023
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 85
does not fall due until 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 on page 59.
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
Significant estimates and assumptions have been used to fair value the Level 3 Russian
investments held by the Company. Further details are given in the fair value section of Note 15 and
in the Report of the Audit and Risk Committee. There have been no other significant judgements,
estimates or assumptions for the year.
In preparing these Financial Statements, the Directors have considered the impact of climate change as
a principal risk as set out on page 43 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
In order 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.
Notes to the Financial Statements (continued)
86 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
(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.
Notes to the Financial Statements (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 87
(g) Investmentsheldatfairvaluethroughprofitorloss
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 of the Company’s non-current asset investments
are held at “fair 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.
Notes to the Financial Statements (continued)
88 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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.
Special Distributable Reserve – reserve created upon the cancellation of the Share Premium
Account and Capital Redemption Reserve. 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.
Notes to the Financial Statements (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 89
2 Income
2023 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Dividends
(a)
International dividends 76,287 8,431 84,718 52,714 – 52,714
UK dividends 1,176 – 1,176 1,306 – 1,306
77,463 8,431 85,894 54,020 – 54,020
Other income
Bank and deposit interest 3,082 – 3,082 130 – 130
Stock lending income 6 – 6 120 – 120
3,088 – 3,088 250 – 250
Total 80,551 8,431 88,982 54,270 – 54,270
(a)
The Company received special dividends amounting to £14.0 million (2022: £3.9 million) of which £8.4 million
(2022: £nil) was classified as capital and £5.6 million (2022: £3.9 million) was classified as revenue.
3 AIFM fee
2023 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
AIFM fee 5,232 12,209 17,441 6,316 14,738 21,054
On 1 October 2021, FTITML replaced Franklin Templeton International Services S.à r.l as the
Company’s AIFM and Company Secretary. The contract with FTITML may be terminated at any
date by either party giving one year’s notice of termination.
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
2023
£’000
2022
£’000
Custody fees 526 775
Marketing fees 321 362
Directors' remuneration 303 304
Membership fees 180 176
Depository fees 148 207
Registrar fees 86 132
Auditor’s remuneration
Audit of the annual financial statements 52 34
Review of the Half Yearly Report 10 8
Broker fees 36 33
Printing and postage fees 13 21
Other expenses 304 286
Total 1,979 2,338
Notes to the Financial Statements (continued)
90 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Notes to the Financial Statements (continued)
5 Finance costs
2023 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Fixed term loan 629 1,468 2,097 629 1,468 2,097
Revolving credit facility 331 771 1,102 227 530 757
Bank overdraft interest 2 – 2 2 – 2
Total 962 2,239 3,201 858 1,998 2,856
6 Tax on ordinary activities
2023 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Irrecoverable overseas
withholding tax 5,520 – 5,520 4,081 – 4,081
Capital gains tax paid – 2,693 2,693 – 1,352 1,352
Total current tax 5,520 2,693 8,213 4,081 1,352 5,433
Capital gains tax provision – 539 539 – 4,244 4,244
Total tax 5,520 3,232 8,752 4,081 5,596 9,677
2023
£’000
2022
£’000
Profit/(loss) before taxation 11,274 (432,731)
Theoretical tax at UK corporation tax rate of 19% (2022: 19%) 2,142 (82,219)
Effects of:
- Capital element of loss 8,865 87,543
- Irrecoverable overseas withholding tax 5,520 4,081
- Excess management expenses 2,539 3,101
- Overseas capital gains tax paid 2,693 1,352
- Dividends not subject to corporation tax (13,152) (7,924)
- Movement in overseas capital gains tax liability 539 4,244
- UK dividends (224) (248)
- Overseas tax expensed (170) (253)
Actual tax charge 8,752 9,677
As at 31 March 2023 the Company had unutilised management expenses and non-trade deficits of
£295.5 million carried forward (2022: £284.4 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 £73.9 million (2022: £54.0 million)
based on a prospective corporation tax rate of 25% (2022: 19%). The UK corporation tax rate is
currently 25% with effect from 1 April 2023.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 91
Notes to the Financial Statements (continued)
Movement in provision for capital gains tax
(a)
2023
£’000
2022
£’000
Balance brought forward 9,205 4,961
Charge for the year 3,232 5,596
Capital gains tax paid (2,693) (1,352)
Balance carried forward 9,744 9,205
(a)
A provision for deferred capital gains tax has been recognised in relation to unrealised gains for holdings in India
and Pakistan.
7 Earnings per share
2023 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Earnings 66,858 (64,336) 2,522 40,677 (483,085) (442,408)
2023 2022
Revenue
pence
Capital
pence
Total
pence
Revenue
pence
Capital
pence
Total
pence
Earnings per share 5.72 (5.50) 0.22 3.44 (40.90) (37.46)
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
1,169,095,903 (year to 31 March 2022: 1,181,093,110).
8 Financial assets - investments
2023
£’000
2022
£’000
Opening investments
Book cost 1,732,693 1,553,330
Net unrealised gains 391,837 1,045,745
Opening fair value 2,124,530 2,599,075
Movements in the year:
Additions at cost 466,037 603,763
Disposals proceeds (543,147) (617,723)
Net losses on investments at fair value (54,645) (460,585)
1,992,775 2,124,530
Closing investments
Book cost 1,705,635 1,732,693
Net unrealised gains 287,140 391,837
Closing investments 1,992,775 2,124,530
All investments have been recognised at fair value with gains and losses recorded through the
Statement of Comprehensive Income.
92 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Transaction costs for the year on purchases were £638,000 (2022: £749,000) and transaction costs
for the year on sales were £1,068,000 (2022: £1,209,000). The aggregate transaction costs for the year
were £1,706,000 (2022: £1,958,000).
2023
£’000
2022
£’000
Net losses on investments at fair value comprise:
Net realised gains based on carrying value at 31 March 50,052 193,323
Net movement in unrealised depreciation (104,697) (653,908)
Net losses on investments at fair value (54,645) (460,585)
9 Trade and other receivables
2023
£’000
2022
£’000
Dividends receivable 7,391 8,224
Overseas tax recoverable 419 2,661
Other debtors 76 88
Sales awaiting settlement – 5,955
Total 7,886 16,928
10 Other payables
2023
£’000
2022
£’000
Purchase of investments for future settlement 3,790 3,292
AIFM fee 1,396 1,515
Accrued expenses 556 747
Interest and fees on borrowings 343 601
Amounts owed for share buybacks 317 1,563
Revolving credit facility payable – 50,000
Total 6,402 57,718
Interest and fees on borrowings consist of:
2023
£’000
2022
£’000
Fixed term loan 343 352
Revolving credit facility – 249
Total 343 601
Revolving credit facility
On 31 January 2020, the Company entered into a £120 million multi-currency unsecured
revolving credit facility (the “facility”) for a period of three years with The Bank of Nova Scotia,
London Branch. The agreement was amended on 31 January 2023 extending the maturity date to
30 January 2024. The commitment fee on unutilised commitments was also amended to 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.
Notes to the Financial Statements (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 93
Notes to the Financial Statements (continued)
Under the facility balances can be drawn down in GBP, USD or CNH. The interest margin was
increased to 1.20% from 1.125% following the amendment of the agreement as follows: USD
drawdowns bear interest at 1.20% per annum over the daily secured overnight financing rate
(“SOFR”) administered by the Federal Reserve Bank of New York, while any GBP drawdowns
bear 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 is 1.20% per annum over
the Hong Kong Interbank Offered Rate. GBP drawdowns were also charged a credit adjustment
spread, but this has been removed following the amendment of the agreement on 31 January 2023.
Under the terms of the facility, 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.
On 19 October 2022, the Company fully repaid the £50 million revolving facility drawdown (2022:
£50 million was outstanding under the revolving credit facility).
Any facility drawdown is shown at amortised cost and revalued for exchange rate movements.
Any gain or loss arising from changes in exchange rates is included in the capital reserves and
shown in the capital column of the Statement of Comprehensive Income. Interest costs are charged
to capital (70%) and revenue (30%) in accordance with the Company’s accounting policies.
11 Other payables falling due after more than one year
2023
Book value
£’000
2022
Book value
£’000
Fixed term loan 100,000 100,000
100,000 100,000
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.
12 Equity share capital
2023 2022
Ordinary shares in issue £’000 Number £’000 Number
Opening ordinary shares of 5 pence 58,945 1,178,896,985 59,062 1,181,228,655
(a)
Purchase and cancellation of own shares (988) (19,758,613) (117) (2,331,670)
Closing ordinary shares of 5 pence 57,957 1,159,138,372 58,945 1,178,896,985
2023 2022
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
(a)
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 63,148 1,262,964,267 64,136 1,282,722,880
(a)
Comparative figures for the year ended 31 March 2022 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.
94 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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, 19,758,613 shares were bought back for cancellation at a cost of £29,207,000
(2022: 2,331,670 shares were bought back for cancellation at a cost of £3,604,000). All shares bought
back in the year were cancelled, with none being placed in treasury (2022: no shares were placed
into treasury).
13 Dividends
2023 2022
Rate
(pence) £’000
Rate
(pence) £’000
Declared and paid in the financial year
Dividend on shares:
Final dividends for the years ended
31 March 2022 and 31 March 2021 2.80 32,941 2.80
(a)
33,074
Interim dividends for the six-month
periods ended 30 September 2022 and
30 September 2021 2.00 23,261 1.00 11,811
Total 4.80 56,202 3.80 44,885
Proposed for approval at the Company's AGM
Dividend on shares:
Final dividend for the year ended
31 March 2023 3.00 34,599
(a)
Comparative figures for the year ended 31 March 2022 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.
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.
14 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 2023 and 31 March 2022 respectively, which have
a material effect on the results or the financial position of the Company. Details of fees paid to the
Directors are included on page 61 and details of the fee paid to the AIFM are included on page 90.
15 Risk management
In pursuing the Company’s objective, as set out on page 32 of this 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.
Notes to the Financial Statements (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 95
Notes to the Financial Statements (continued)
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 Manager. 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
Manager 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 Manager selects
securities in the portfolio in accordance with the investment policy, and the overall asset allocation
parameters described above, and seeks 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 as, in the Investment Manager’s opinion, such a process could result in an
unacceptable level of cost and/or a reduction in the potential for capital growth.
100% (2022: 100%) of the Company’s investment portfolio is listed on stock exchanges. If share
prices as at 31 March 2023 had decreased by 30% (2022: 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 £597,833,000 (2022: £637,359,000).
A 30% increase (2022: 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.
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.
96 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
The Investment Manager has 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 that have foreign currency exposure at 31 March are shown
below:
2023
Currency
Trade and
other
receivables
£’000
Cash at
bank
£’000
Trade, bank
loans, and
other
payables
£’000
Total net
foreign
currency
exposure
£’000
Investment
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
2022
Currency
Trade and
other
receivables
£’000
Cash at
bank
£’000
Trade, bank
loans, and
other
payables
£’000
Total net
foreign
currency
exposure
£’000
Investment
at fair
value through
profit or loss
£’000
Korean won 6,523 – – 6,523 486,879
Hong Kong dollar 19 – (219) (200) 376,797
Taiwan dollar 3,791 2,069 (2,069) 3,791 363,488
US dollar 53 – (1,000) (947) 252,082
Indian rupee – 323 – 323 188,326
Other 6,473 116 (23) 6,566 427,793
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 2023, 68.8% (2022: 65.4%) 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 £616.3 million (2022: £604.9 million), out of which £109.4 million (2022: £158.5 million)
were investments denominated in Chinese yuan.
Notes to the Financial Statements (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 97
Notes to the Financial Statements (continued)
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 the top 5 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 the top 5 currencies on the reporting
date. With all other variables held constant, the revenue and capital return would have decreased
by the below amounts.
2023 2022
Revenue
Return
£’000
Capital
Return
£’000
Revenue
Return
£’000
Capital
Return
£’000
Hong Kong dollar 657 41,990 482 37,660
Korean won 1,008 40,153 1,083 48,688
Taiwan dollar 1,226 31,791 955 36,349
US dollar 917 23,258 994 25,108
Indian rupee 241 22,604 169 18,865
Total 4,049 159,796 3,683 166,670
A 10% weakening of sterling against the above 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 Manager 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:
2023
£’000
2022
£’000
Cash 132,988 125,855
Revolving credit facility – (50,000)
Net exposure at year end 132,988 75,855
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.
98 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Interest rate sensitivity
If the above level of cash was maintained for a year (2022: level of cash and revolving credit facility
were 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:
2023 2022
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 1,330 (1,330) 1,109 (1,109)
Capital – – (350) 350
Total 1,330 (1,330) 759 (759)
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 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 Manager reviews liquidity at the time of making each investment decision and
monitors 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
2023, 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 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
As at 31 March 2022
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 2,089 102,095 – 106,273
Revolving credit facility 51,117 – – – 51,117
Other payables 7,117 – – – 7,117
Total 60,323 2,089 102,095 – 164,507
Notes to the Financial Statements (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 99
Notes to the Financial Statements (continued)
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 Manager as an acceptable
counterparty. In addition, limits are set as to the maximum exposure to any individual broker that
may exist at any time. These limits are reviewed regularly. 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.
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 2023, the market
value of the securities on loan and the corresponding collateral received were as follows:
31 March 2023 31 March 2022
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 543 739 2,908 4,047
Citigroup 17 22 382 558
Total 560 761 3,290 4,605
The maximum aggregate value of securities on loan at any time during the year was £9,470,125.
Full details of the collateral received is noted on page 103.
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;
• Cash at the denominated currency of the account; and
• Other financial assets and liabilities at the carrying value which is a reasonable approximation
of the fair value.
100 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
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:
31 March 2023 31 March 2022
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Listed investments 1,992,775 – –
(a)
1,992,775 2,103,727 – 20,803
(a)(b)
2,124,530
(a)
Russian investments in LUKOIL, Sberbank of Russia, and Yandex continue to be fair valued at zero as at 31 March
2023 as a result of trading being suspended on international stock exchanges in February 2022. These investments
were transferred from Level 1 to Level 3 during the financial year ended 31 March 2022.
(b)
Trading in Brilliance China Automotive shares on the Hong Kong stock exchange was suspended from 31 March 2021
and, as a result, the stock was fair valued using a beta model (which applied an index movement to observed trade
prices) until 5 October 2022 when trading resumed. The fair value as at 31 March 2022 was £20,803,000 and the stock
was disclosed as Level 3. After the shares resumed trading, the stock has been transferred from Level 3 to Level 1.
Given the current market conditions and the inability of the Company to access the local Moscow equity
markets and the very limited access to the over-the-counter market, the Russian investments continued
to be valued based on a liquidity discount of 100% to the last traded price for an exit price of zero.
The following table presents the movement in Level 3 investments for the year ended:
31 March 2023
£000
31 March 2022
£000
Opening balance 20,803 –
Transfers from Level 1 into Level 3 – 149,593
Transfers from Level 2 into Level 3 – 50,954
Transfers from Level 3 into Level 1 (17,734) –
Disposal proceeds – sale of Level 3 assets
(a)
(1,613) –
Net losses on investments at fair value (1,456) (179,744)
Level 3 closing balance – 20,803
(a)
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 2023
£000
31 March 2022
£000
Fixed term loan at amortised cost 100,000 100,000
Fixed term loan at fair value 94,470 100,390
Increase/(decrease) in net assets 5,530 (390)
The fair value of the fixed term loan included in the table above is calculated by aggregating the
expected future cash flows which are discounted at a rate comprising the sum of SONIA rate plus
a static spread. The fixed term loan at fair value is considered to be classed as Level 2.
Notes to the Financial Statements (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 101
Notes to the Financial Statements (continued)
16 Significant holdings in investee undertakings
As at 31 March 2023 and 2022, TEMIT had no significant holdings of 3% or more of any issued
class of security within the portfolio whose shares are admitted to trading.
17 Contingent liabilities
No contingent liabilities existed as at 31 March 2023 or 31 March 2022.
18 Contingent assets
No contingent assets existed as at 31 March 2023 or 31 March 2022.
19 Financial commitments
No financial commitments existed as at 31 March 2023 or 31 March 2022.
20 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 2023, the Company had share capital and reserves of £2,017,503,000 (31 March 2022:
£2,100,390,000). The Company’s policies and procedures for managing capital are consistent with
the previous year.
21 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 13.
102 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Securities Financing Transactions – Unaudited
The Company engages in Securities Financing Transactions (as defined in Article 3 of Regulation
(EU) 2015/2365) as a result of its stock lending programme. In accordance with Article 13 of the
Regulation, the Company’s involvement in and exposures related to SFT for the accounting period
ended 31 March 2023 are detailed below.
Amount of securities on loan
The total value of securities on loan as a proportion of the Company’s total lendable assets, as
at the balance sheet date, is 0.03%. Total lendable assets represent the aggregate value of assets
forming part of the Company’s securities lending programme.
Collateral
The following table sets out details of the non-cash collateral received by the Company by way of
title transfer collateral arrangements in securities lending transactions as at the balance sheet date:
Issuer
Type and
quality of
collateral
(a)
Currency Maturity Tenor
31 March
2023
£000
31 March
2022
£000
Commonwealth of Australia Sovereigns Australian dollar More than 1 year 739 –
Federal Republic of Germany Sovereigns Euro More than 1 year – 8
Federal Republic of Germany Sovereigns Euro Less than 1 year – 24
French Republic Government Sovereigns Euro More than 1 year – 865
French Republic Government Sovereigns Euro Less than 1 year – 38
Kingdom of Belgium Government Sovereigns Euro More than 1 year – 14
Kingdom of The Netherlands
Government
Sovereigns Euro More than 1 year – 612
Republic of Austria Government Sovereigns Euro More than 1 year – 85
Republic of Austria Government Sovereigns Euro Less than 1 year – 20
Republic of Finland Government Sovereigns Euro More than 1 year – 1
Republic of Finland Government Sovereigns Euro Less than 1 year – 15
Republic of Switzerland Government Sovereigns Euro More than 1 year – 29
United States Treasury Treasury bonds US dollar More than 1 year 22 1,170
United States Treasury Treasury notes US dollar More than 1 year – 1,232
United States Treasury Treasury notes US dollar Less than 1 year – 390
United Kingdom Government Sovereigns Sterling More than 1 year – 102
Total non-cash collateral received 761 4,605
(a)
Quality of collateral pertaining to bond instruments has been assessed and reported in accordance with whether they
are considered investment grade or below investment grade. Investment grade securities are those issued by an entity
with a minimum investment grade credit rating from at least one globally recognised credit rating agency.
Re-use of collateral
Non-cash collateral received by way of title transfer collateral arrangements in relation to securities
lending transactions cannot be sold, re-invested or pledged. The Company has the right to sell or
re-pledge non-cash collateral received in circumstances such as default.
Collateral received
All collateral received by the Company in respect of securities lending transactions is held at the
Company’s custodian, JPMorgan Chase Bank.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 103
Counterparties
The following table provides details of the counterparties (based on gross volume of outstanding
transactions) in respect of securities lending transactions as at the balance sheet date and their
country of incorporation.
Counterparty
Country of
incorporation
31 March 2023
£000
31 March 2022
£000
Merrill Lynch International United Kingdom 543 2,908
Citigroup United States of America 17 382
Total gross volume of outstanding transactions 560 3,290
Maturity tenor of securities on loan
The following table provides an analysis of the maturity tenor of securities on loan outstanding as
at the balance sheet date.
Maturity tenor of securities on loan
31 March 2023
£000
31 March 2022
£000
Open maturity 560 3,290
Total securities on loan 560 3,290
The above maturity tenor analysis has been based on the respective transaction contractual
maturity date. Open maturity transactions are those transactions that are recallable or terminable
on a daily basis.
Securities Financing Transactions – Unaudited (continued)
104 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Investor Information
Notice of Meeting
Notice is hereby given that the Annual General Meeting (“AGM”) will be held on Friday 14 July 2023
at 12 noon at Barber-Surgeons’ Hall, Monkwell Square, Wood St, Barbican, London EC2Y 5BL.
The AGM will transact the following business:
To consider and, if thought fit, to pass the following resolutions. Resolutions 1 to 8 will be
proposed as ordinary resolutions and resolutions 9 to 11 will be proposed as special resolutions.
Ordinary Business
1. To receive and adopt the Directors’ and Auditor’s Reports and Financial Statements for the year
ended 31 March 2023.
2. To approve the Directors’ Remuneration Policy.
3. To approve the Directors’ Remuneration Report for the year ended 31 March 2023.
4. To declare a final dividend of 3.00 pence per share for the year ended 31 March 2023.
5. To appoint the Directors:
5.1. To re-elect Paul Manduca as a Director.
5.2. To re-elect Charlie Ricketts as a Director.
5.3. To re-elect David Graham as a Director.
5.4. To re-elect Simon Jeffreys as a Director.
5.5. To re-elect Magdalene Miller as a Director.
5.6. To elect Abigail Rotheroe as a Director.
6. To re-appoint Ernst & Young LLP as auditor of the Company, to act until the conclusion of the
next general meeting of the Company at which audited accounts are laid before the members.
7. To authorise the Directors to determine the auditor’s remuneration.
Special Business
As an Ordinary Resolution
8. That, in substitution for any existing authority, the Directors be generally and unconditionally
authorised to allot equity securities (as defined in Section 560 of the Companies Act 2006
(the “Act”)) pursuant to Section 551 of the Act, up to an aggregate nominal amount of £2,883,000
(being an amount equal to 5% of the existing issued share capital of the Company as at
24 May 2023, being the latest practicable date before the date of this notice), provided that this
authority shall, unless renewed, varied or revoked by the Company, expire on 30 September
2024 or, if earlier, the conclusion of the Company’s AGM to be held in 2024 save that the
Company may, before such expiry, make offers or agreements which would or might require
equity securities to be allotted and the Directors may allot equity securities in pursuance of such
offer or agreement notwithstanding that the authority conferred by this resolution has expired.
As a Special Resolution
9. That, in substitution for any existing authority, subject to the passing of resolution 8, the
Directors be given the general power pursuant to sections 570 and 573 of the Act to allot equity
securities (as defined by Section 560 of the Act) for cash pursuant to the authority conferred
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 105
Notice of Meeting (continued)
by resolution 8, and/or to sell equity securities held as treasury shares for cash pursuant to
Section 727 of the Act, in each case as if Section 561(1) of the Act did not apply to any such
allotment or sale, provided that this power shall be limited to:
(a) any such allotment and/or sale of equity securities in connection with an offer or issue by
way of rights or other pre-emptive offer or issue, open for acceptance for a period fixed by the
directors, to holders of ordinary shares (other than the Company) on the register on any record
date fixed by the directors in proportion (as nearly as may be) to the respective number of
ordinary shares deemed to be held by them, subject to such exclusions or other arrangements
as the directors may deem necessary or expedient in relation to fractional entitlements, legal or
practical problems arising in any overseas territory, the requirements of any regulatory body or
stock exchange or any other matter whatsoever;
(b) any such allotment and/or sale, otherwise than pursuant to sub paragraph (a) above, of
ordinary shares having an aggregate nominal value, not exceeding the sum of £2,883,000 (being
an amount equal to 5% of the existing issued share capital of the Company as at 24 May 2023,
being the latest practicable date before the date of this notice); and
(c) any allotment pursuant to sub-paragraph (b) above being at a price which is at or above
the prevailing NAV per share at the time of issue.
The power granted by this resolution will expire on 30 September 2024 or, if earlier, at the
conclusion of the Company’s AGM to be held in 2024 (unless renewed, varied or revoked by the
Company prior to or on such date) save that the Company may, before such expiry, make offers
or agreements which would or might require equity securities to be allotted or equity securities
held as treasury shares to be sold after such expiry and the Directors may allot and/or sell equity
securities held as treasury shares in pursuance of any such offer or agreement notwithstanding
that the power conferred by this resolution has expired.
10. That in substitution for any existing authority, the Company be and is hereby authorised in
accordance with Section 701 of the Companies Act 2006 to make market purchases (within
the meaning of Section 693(4) of the Companies Act 2006), of its ordinary shares in issue,
provided that:
(i) the maximum number of ordinary shares hereby authorised to be purchased shall not
exceed 14.99% of the Company’s issued ordinary share capital, excluding treasury shares,
at the date of the passing of this resolution;
(ii) the minimum price which may be paid for a share shall be the nominal value of an ordinary
share (excluding expenses);
(iii) the maximum price which may be paid (excluding expenses) for a share shall not be
more than the higher of: (a) an amount equal to 105 per cent of the average of the closing
mid-market price for the ordinary shares (as derived from the Daily Official List of the
London Stock Exchange) for the five business days immediately preceding the date of
purchase; and (b) the higher of the last independent trade price and the highest current
independent purchase bid price on the trading venue where the purchase is carried out;
(iv) unless renewed, the authority hereby conferred shall expire 15 months after the date of
passing of this resolution or, if earlier, at the conclusion of the Company’s AGM to be
held in 2024, save that the Company may, and prior to such expiry, enter into a contract to
purchase shares which will or may be completed wholly or partly after such expiry; and
(v) shares will only be purchased at a price which is at a discount to the prevailing NAV per
share at the time of purchase.
106 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
11. That a general meeting, other than an AGM, may be called on not less than 14 clear days’ notice,
such authority to expire at the conclusion of the AGM in 2024.
By order of the Board
Paul Manduca
9 June 2023
Registered Office: 5 Morrison Street, Edinburgh, EH3 8BH
Notes:
1. THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any
doubt as to what action you should take, you are recommended to seek your own financial advice from your
stockbroker or other independent financial adviser authorised under the Financial Services and Markets Act 2000.
2. If you have sold or transferred all of your shares in the Company, please forward this document, together with
the accompanying documents, as soon as possible either to the purchaser or transferee or to the person who
arranged the sale or transfer so that they can pass these documents to the person who now holds the shares.
3. The Company specifies that only those members registered on the Company’s register of members at 6.30 pm
on 12 July 2023 shall be entitled to vote at the annual general meeting (the “Meeting”).
4. A member of the Company entitled to vote at the Meeting may appoint a proxy or proxies to vote thereat
instead of him. A proxy need not be a member of the Company.
5. A member may appoint more than one proxy provided that each proxy is appointed to exercise rights
attached to different shares held by that member. A member may not appoint more than one proxy to exercise
rights attached to one share. Please contact the Company’s registrar Equiniti, at Aspect House, Lancing,
West Sussex BN99 6DA to appoint more than one proxy. In the case of joint holders, the vote of the senior
holder who tenders a vote shall be accepted to the exclusion of the votes of the other joint holders. Seniority is
determined by the order in which the names of the joint holders appear in the Company’s register of members
in respect of the joint holding (the first named being the most senior).
6. The right to appoint a proxy does not apply to persons whose shares are held on their behalf by another
person and who have been nominated to receive communications from the Company in accordance with
Section 146 of the Companies Act 2006 (“nominated persons”). Nominated persons may have a right under an
agreement with the registered shareholder who holds the shares on their behalf to be appointed (or to have
someone else appointed) as a proxy. Alternatively, if nominated persons do not have such a right, or do not
wish to exercise it, they may have a right under such an agreement to give instructions to the person holding
the shares as to the exercise of voting rights.
7. A proxy form is enclosed with copies of this Report which are sent to registered shareholders. A member can
only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.
8. A proxy form must be returned to the Company’s registrar, Equiniti, Aspect House, Lancing, West Sussex
BN99 6DA to arrive not later than 12 noon on 12 July 2023. New Zealand registered shareholders must return
a proxy form to Computershare, Private Bag 92119, Victoria Street West, Auckland 1142, New Zealand (if
sent by post) or to Computershare, Level 2, 159 Hurstmere Road, Takapuna, Auckland 0622, New Zealand (if
delivered in person or by courier) to arrive not later than 5.00pm on 11 July 2023 (New Zealand time).
9. A corporation which is a member can appoint one or more corporate representatives who may exercise, on
its behalf, all of its powers as a member provided that no more than one corporate representative exercises
powers over the same share.
10. As at 24 May 2023, the Company’s issued share capital was 1,153,301,453 shares of 5 pence each. Each share
carries the right to vote at an annual general meeting of the Company and, therefore, the total number of
voting rights in the Company as at 24 May 2023 was 1,153,301,453.
11. Copies of the letters of appointment of the Directors of the Company and the Articles of Association are
available for inspection at the Company’s registered office at 5 Morrison Street, Edinburgh, EH3 8BH, and
online at www.temit.co.uk until the close of the meeting and at the Meeting (for 15 minutes prior to the
Meeting and during the Meeting).
Notice of Meeting (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 107
12. Electronic proxy appointment for CREST members (for UK only). CREST members who wish to appoint a
proxy or proxies through the CREST electronic proxy appointment service may do so for the Meeting and
any adjournment(s) thereof by using the procedures described in the CREST Manual which can be viewed
at www.euroclear.com. CREST Personal Members or other CREST sponsored members, and those CREST
members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting
service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy
appointment or instruction made using the CREST service to be valid, the appropriate CREST message
(a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland
Limited’s (“EUI”) specifications and must contain the information required for such instructions, as described
in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or an
amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted
so as to be received by the issuer’s agent (RA19) by the latest time(s) for receipt of appointments specified
in the Notice of Meeting or, in the event of an adjournment of the Meeting, 48 hours before the adjourned
meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp
applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions
to proxies appointed through CREST should be communicated to the appointee through other means. CREST
members and, where applicable, their CREST sponsors or voting service providers should note that EUI does
not make available special procedures in CREST for any particular messages. Normal system timings and
limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of
the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored
member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of
the CREST system by any particular time. In this connection, CREST members and, where applicable, their
CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings. The Company may treat as invalid a
CREST Proxy Instruction in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securities
Regulations 2001.
13. Electronic proxy appointment for non-CREST members (for UK only). Shareholders who prefer to register
the appointment of their proxy electronically via the Internet can do so through the Equiniti website at
www.sharevote.co.uk where full instructions on the procedure are given. The personal Voting ID, Task
ID and Shareholder Reference Number printed in the voting pack will be required to use this electronic
proxy appointment system. Alternatively, shareholders who have already registered with Equiniti’s
on-line portfolio service, Shareview, can appoint their proxy electronically by logging on to their portfolio
at www.shareview. co.uk using their user ID and password. Once logged in, click “View” on the
“My Investments” page, click on the link to vote then follow the on screen instructions. A proxy appointment
made electronically will not be valid if sent to any address other than those provided or if received after
12 noon on 12 July 2023. Please note that any electronic communication found to contain a computer virus
will not be accepted.
14. Electronic proxy appointment for New Zealand registered shareholders. New Zealand registered investors
who prefer to register the appointment of their proxy electronically via the Internet can do so through
the Computershare website at www.investorvote.co.nz, and enter the Control Number to be provided
by Computershare, where full instructions on the procedure are given. Your CSN (Common Shareholder
Number) and postal code will be required to use this electronic proxy appointment system. A proxy
appointment made electronically will not be valid if sent to any address other than that provided or if received
after 5.00pm (New Zealand time) on 11 July 2023. Please note that any electronic communication found to
contain a computer virus will not be accepted. New Zealand registered investors cannot appoint more than
one proxy when registering the appointment of their proxy electronically.
Notice of Meeting (continued)
108 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Notice of Meeting (continued)
15. A member of the Company may make a request in accordance with Section 527 of the Companies Act
2006 to have a statement published on the Company’s website setting out an audit concern. This allows a
member or members having a right to vote at the Meeting and holding at least 5% of the total voting rights
of the Company, or at least 100 members having a right to vote at the Meeting and holding, on average, at
least £100 of the paid up share capital, to make a request so that the Company must publish on its website a
statement setting out any matter that such members propose to raise at the Meeting relating to the audit of the
Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the
Meeting. Where the Company is required to publish such a statement on its website: (i) it may not require the
members making the request to pay any expenses incurred by the Company in complying with the request;
(ii) it must forward the statement to the Company’s auditor no later than the time at which the statement is
made available on the Company’s website; and (iii) the statement may be dealt with as part of the business of
the Meeting. A member wishing to request publication of such a statement on the Company’s website must
send the request to the Company in hard copy form to the Company Secretary or by email to enquiries@
franklintempleton.co.uk. The request must either set out the statement in full or, if supporting a statement sent
by another member, clearly identify the statement which is being supported and be received by the Company
at least one week before the Meeting. Please note that any electronic communication found to contain a
computer virus will not be accepted.
16. Any member has the right to ask questions. Pursuant to Section 319A of the Companies Act 2006, the
Company must provide an answer to any question which is put by a member relating to the business being
considered, except if a response would not be in the interests of the Company or for the good order of the
Meeting or if to do so would involve the disclosure of confidential information. The Company may, however,
elect to provide an answer to a question within a reasonable period of days after the conclusion of the
Meeting. The answers to questions raised by shareholders will be provided on our website.
17. In accordance with Section 311A of the Companies Act 2006, the contents of this Notice of Meeting, details of
the total number of shares in respect of which members are entitled to exercise voting rights at the Meeting
and, if applicable, any members’ statements, members’ resolutions or members’ matters of business received
by the Company after the date of this notice will be available on the Company’s website, www.temit. co.uk.
18. You may not use any electronic address provided either in this Notice of Meeting or any related documents
(including the Form of Proxy) to communicate with the Company for any purposes other than those
expressly stated.
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 109
The Board and Manager aim to keep shareholders informed and release the following information
on the Company’s website:
Daily
• Daily net asset value
Monthly
• Factsheet
• Investment Manager commentary
• Portfolio breakdowns
• Portfolio holdings
• Performance details
Quarterly
• Portfolio report released on quarter ends out-with financial reporting cycles
Ad hoc
• Emerging markets updates
• PRIIPS Key Information Document (“KID”)
(a)
• Stock exchange announcements
You can also download important documents such as the latest Investor Disclosure Document and
Company Policies from our website www.temit.co.uk.
You can also subscribe to have the latest updates sent directly to your email account.
(a)
Packaged Retail and Insurance-based Investment Products Regulation (the “PRIIPs Regulation”) require that the
Manager prepare a Key Information Document (“KID”) in respect of the Company. Investors should note that the
basis for calculating potential returns, costs and risks are prescribed by the law and the Board is not responsible
for the information contained in the KID. Investment returns stated in the KID may not be those expected of the
Company and are not guaranteed.
Investor Communications
110 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
General Information
REGISTERED OFFICE
5 Morrison Street
Edinburgh
EH3 8BH UK
(Registered No. SC118022)
www.temit.co.uk
REGISTRAR – UK
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
UK
www.equiniti.com
Tel (UK) 0371 384 2505
Tel (overseas) +44 121 415 7047
REGISTRAR – NEW ZEALAND
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna Auckland 0622
NEW ZEALAND
enquiry@computershare.co.nz
Tel +649 488 8777
ALTERNATIVE INVESTMENT FUND
MANAGER AND COMPANY SECRETARY
Franklin Templeton Investment
Trust Management Limited
5 Morrison Street
Edinburgh
EH3 8BH
UK
FINANCIAL ADVISER AND STOCKBROKER
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House
25 Dowgate Hill London EC4R 2GA
UK
SOLICITOR
CMS Cameron McKenna Nabarro Olswang LLP
Saltire Court
20 Castle Terrace
Edinburgh
EH1 2EN UK
SOLICITOR
Buddle Findlay
HSBC Tower
Level 18, 188 Quay Street
PO Box 1433
Auckland 1140
New Zealand
CUSTODIAN
JPMorgan Chase Bank
25 Bank Street
London
E14 5JP
UK
DEPOSITARY
J.P. Morgan Europe Limited
25 Bank Street
London
E14 5JP UK
AUDITOR
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London
E14 5EY
UK
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 111
How to invest
There are three main ways to invest in TEMIT:
1. Through an investment platform. A number of fund supermarkets or investment platforms allow
you to buy, hold and sell shares in investment trusts such as TEMIT quickly and easily at a low
cost. Many have no minimum investment requirements. There are a number of companies that
offer these services and may also allow you to include TEMIT as an investment in an Individual
Savings Account (“ISA”) or Self-Invested Pension Plan (“SIPP”). Some of the most popular include
Hargreaves Lansdown, Interactive Investor, Fidelity, Charles Stanley Direct and AJ Bell.
Please note that this is not a complete list of ISA or SIPP providers and you should not consider
this list to be a recommendation of the services which these providers offer.
The Association of Investment Companies (“AIC”) provides an independent analysis of
platform costs and charges on their website in the ‘Ready to Invest’ section.
2. Directly through the stock market. You can invest directly in TEMIT by purchasing shares in
the stock market through a stockbroker or authorised Financial Adviser.
3. Through Equiniti, the Registrar, which offers an online or telephone service where you can buy
shares in TEMIT as part of an Investment Account or an ISA.
Financial advice
We strongly recommend that you take independent financial advice before making any
investment. If you have a financial adviser then they will advise you on the best way to invest
in TEMIT. If you currently do not have a financial adviser, there are a number of resources
online to help you. For investors based in the UK, websites such as www.unbiased.co.uk or
www.vouchedfor.co.uk will provide you with details of financial advisers in your area.
NAV publication and reference codes
The NAV is released every London Stock Exchange business day through the London and New
Zealand stock exchanges. It is also published on our website: www.temit.co.uk and published in
the Financial Times.
Codes:
Ticker TEM
ISIN GB00BKPG0S09
SEDOL BKPG0S0
Shareholder Information
112 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Dividend Reinvestment Plan (“DRIP”)
If you are a UK shareholder and your shares are held in your own name on the Company’s share
register, you can request that any dividend payments are used to purchase further shares in the
Company. You can download and complete the relevant application forms through Equiniti’s
secure website www.shareview. co.uk/info.drip or you can contact Equiniti by phone on 0371 384
2505. If you are calling from outside the UK, please ring +44 121 415 7047.
If you invest through a nominee or investment platform and wish to reinvest dividends you will
need to contact them directly to find out what arrangements they offer.
Financial calendar
Final Dividend Ex-Date 22 June 2023
Final Dividend Record Date 23 June 2023
AGM 14 July 2023
Final Dividend Payment Date 28 July 2023
Half Year End 30 September 2023
Half Yearly Report Published December 2023
Interim Dividend Record Date December 2023
Year End 31 March 2024
Shareholder Information (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 113
Glossary of Alternative Performance Measures
Net asset value total return
A measure showing how the net asset value
(“NAV”) per share has performed over a
period of time, considering both capital
returns and dividends paid to shareholders
in sterling terms. Total return measures allow
shareholders to compare performance between
investment trusts where the dividend yield
may differ.
To calculate total return, it is assumed that
dividends are reinvested into the assets of the
Company at the prevailing NAV on the day
that the shares first trade ex-dividend (see
page 1). The NAVs include income for the
current period (“cum-income”) and the debt
at fair value to be consistent with the daily
NAV released to the stock exchange and with
common market practice and the requirements
of statistics agencies.
To calculate capital return, revenue earnings
are excluded (see page 2).
Total return calculation 2023 2022
a) Opening (as at 31 March 2022/2021)
(see following table) 178.1 219.2
b) Closing (as at 31 March 2023/2022)
(see following table) 174.5 178.1
c) Effect of dividend reinvestment
(a)
5.1 3.2
d) Adjusted closing (b+c) 179.6 181.3
NAV total return {(d-a)/a} 0.8% (17.3)%
(a)
Dividends assumed to be reinvested on ex-date.
Final dividend of 2.80p relating to financial year
2022 first traded ex-dividend on 30 June 2022 (2022:
final dividend of 2.80p related to financial year 2021
first traded ex-dividend on 17 June 2021). Interim
dividend of 2.00p for financial year 2023 first traded
ex-dividend 15 December 2022 (2022: interim
dividend of 1.00p for financial year 2022 first traded
ex-dividend 2 December 2021).
The following table sets out the difference
between NAV with debt at cost and NAV
with debt at fair value:
2023
£’000
2022
£’000
2021
£’000
a) Net assets per
the Statement
of Financial
Position 2,017,503 2,100,390 2,591,287
b) Difference
between debt
at cost and debt
at fair value
(Note 15) (5,530) 390 2,560
c) Number of
ordinary shares
in issue 1,159,138,372 1,178,896,985 1,181,228,655
NAV pence per
share with debt at
fair value {(a-b)/c} 174.5 178.1 219.2
Share price total return
A measure showing how the share price has
performed over a period of time, considering
both capital returns and dividends paid to
shareholders in sterling terms. Total return
measures allow shareholders to compare
performance between investment trusts where
the dividend yield may differ.
To calculate total return, it is assumed that
dividends are reinvested into the shares of the
Company at the prevailing share price on the
day that the shares first trade ex-dividend
(see page 1).
To calculate capital return, revenue earnings
are excluded (see page 2).
Total return calculation 2023 2022
a) Opening (as at 31 March 2022/2021) 156.4 202.4
b) Closing (as at 31 March 2023/2022) 152.2
156.4
c) Effect of dividend reinvestment
(a)
5.0 3.1
d) Adjusted closing (b+c) 157.2 159.5
Share price total return {(d-a)/a} 0.5% (21.2)%
(a)
Dividends assumed to be reinvested on ex-date.
Final dividend of 2.80p relating to financial year
2022 first traded ex-dividend on 30 June 2022 (2022:
final dividend of 2.80p related to financial year 2021
first traded ex-dividend on 17 June 2021). Interim
dividend of 2.00p for financial year 2023 first traded
ex-dividend 15 December 2022 (2022: interim
dividend of 1.00p for financial year 2022 first traded
ex-dividend 2 December 2021).
114 Templeton Emerging Markets Investment Trust plc www.temit.co.uk
Share price discount to net asset value (“NAV”)
A measure showing the relationship between
the share price and the NAV, which is
expressed as a percentage of the NAV per
share (see page 2). As at 31 March 2023 the
Company’s share price was 152.2 pence and
the NAV per share was 174.1 pence, therefore
the discount was (152.2 – 174.1)/174.1 = 12.6%
(31 March 2022: 12.2%).
If the share price is lower than the NAV per share,
the shares are said to be trading at a discount. If
the share price is higher than the NAV per share,
the shares are said to be trading at a premium.
Gearing/net gearing
A term used to describe the process of
borrowing money for investment purposes
in the expectation that the returns on the
investments purchased using the borrowings
will exceed the costs of those borrowings.
For example, a figure of 5% means that the
shareholder funds are exposed to NAV returns
by an additional 5%, positive or negative, as a
result of borrowings (see page 2).
Net gearing calculation
2023
£’000
2022
£’000
a) Bank loans 100,000 150,000
b) Cash held 132,988 125,855
c) Net assets (excluding loans) 2,117,503 2,250,390
Total gearing = {(a-b)/c}
(a)
0.0% 1.1%
(a)
A net gearing figure of 0% means that the cash held
in the Company is equal to or higher than the total
bank loans.
Ongoing charges ratio
The OCR represents the annualised ongoing
charges (excluding finance costs, transaction
costs and taxation) divided by the average
daily net asset values of the Company for the
period and has been prepared in accordance
with the AIC’s recommended methodology.
Ongoing charges reflect expenses likely to recur
in the foreseeable future. As at 31 March 2023
the OCR was 0.98% (31 March 2022: 0.97%).
Ongoing charges calculation
2023
£’000
2022
£’000
a) Total AIFM fee and other expenses 19,420 23,392
b) Average net assets 1,991,068 2,399,592
Ongoing charges (a/b) 0.98% 0.97%
Gross total return
Gross total return is net asset value total return
before the deduction of expenses (see page 11).
Excess return
The difference between the gross total return
of TEMIT and the benchmark total return
(see page 11).
Residual return
A measure representing the difference between
the actual excess return and the excess return
explained by the attribution model. This
amount results from several factors, most
significantly the difference between the actual
trade price of securities included in actual
performance and the end of day price used by
the benchmark indices and hence to calculate
attribution (see page 11).
Benchmark return
The Company’s benchmark is the MSCI
Emerging Markets Index.
The benchmark is a recognised index of
stocks which should not be taken as wholly
representative of the Company’s investment
universe. The Company’s investment strategy
does not track this index and, consequently,
there may be material divergence between
the Company’s performance and that of the
benchmark.
Although not an alternative performance
measure, total return of the benchmark is
calculated on a closing market value to closing
market value basis, assuming that all dividends
received were reinvested into the shares of the
relevant companies at the time at which the
shares were quoted ex-dividend (see page 1).
Returns are converted by the index provider
into sterling at prevailing exchange rates.
Capital return of the benchmark is calculated
the same way as total return, but with no
dividend reinvestment assumed (see page 2).
Benchmark performance source: MSCI.
Glossary of Alternative Performance Measures (continued)
www.temit.co.uk Templeton Emerging Markets Investment Trust plc 115
Client Dealer Services
freephone 0800 305 306
tel +44 (0)20 7073-8690
fax +44 (0)20 7073-8701
enquiries@franklintempleton.co.uk
www.temit.co.uk
© 2023 Franklin Templeton Investments. All rights reserved. TEMIT ANNRP 03/23