Annual Financial Report

RNS Number : 6736F

Templeton Emerging Markets IT PLC

19 June 2012

Preliminary Statement of Annual Results

TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC

("TEMIT") (the "Company")

FINANCIAL SUMMARY

2011-2012

		Year ended		Year ended
		31 March		31 March		Change
	Ref.	2012		2011		%
Net Assets and Shareholders' Funds (£ million)		2,098.6		2,368.4		-11.4
Net Asset Value (pence)		636.3		718.0		-11.4
Net Asset Total Return	a	-10.8	%	16.5	%
Benchmark
MSCI Emerging Markets Index Total Return		-8.2	%	12.4	%
Share Price (pence per share)		588.5		660.0		-10.8
Share Price Total Return		-10.2	%	15.2	%
Highest Share Price (pence per share)		684.5		685.0
Lowest Share Price (pence per share)		497.0		497.0
Dividend (pence per share)	b	5.75		4.25		35.3
Revenue Earnings (pence per share)	c	7.91		6.14		28.8
Share Price Discount to Net Asset Value at end of the year		7.5	%	8.1	%
Average Share Price Discount to Net Asset Value over the year		6.8	%	6.4	%
Ongoing Charges Ratio	d	1.31	%	1.31	%

Source: Franklin Templeton Investments and Factset.

The Company has prepared its financial statements in accordance with International Financial Reporting Standards ("IFRS") for the years ended 31 March 2012 and 31 March 2011.

^aReturn based on accounting NAV.

^bA dividend of 5.75 pence per share on the Company's profits for the year ended 31 March 2012 has been proposed.

^cThe Earnings per Share figure is based on the earnings shown in the Revenue column in the Income Statement on page 48 and Note 5 of the Notes to the Financial Statements.

^dFrom the year ending 31 March 2012, the Ongoing Charges Ratio ("OCR") replaces the Total Expense Ratio. Prior year numbers have not been restated as the ratios are not materially different. The OCR represents the annualised ongoing charges of the Company divided by the average daily net asset values of the Company for the year, and has been prepared in accordance with the AIC's recommended methodology.

TEN YEAR RECORD

2002-2012

										Total
	Total Net						Earnings			Expense
	Assets and						per			Ratio/
	Shareholders'			Share			share -	Dividend		Ongoing
	Funds		NAV	Price	Discount/		undiluted	per share		Charges
Year ended	(£m)		(pence)	(pence)	(Premium)		(pence)	(pence)		Ratio^f
30 Apr 2002	666.2		146.2	125.0	14.5	%	1.82	1.25		1.34	%
30 Apr 2003	595.5		130.8	107.3	18.0	%	1.70	2.25		1.49	%
30 Apr 2004	778.5		171.0	144.0	15.8	%	2.89	2.25		1.48	%
30 Apr 2005^a	1,066.0		198.9	167.3	15.9	%	3.42	2.67		1.50	%
30 Apr 2006	1,866.2		348.2	310.3	10.9	%	3.65	2.76		1.41	%
30 Apr 2007	1,925.5		359.2	327.3	8.9	%	4.16	3.13		1.32	%
30 Apr 2008	2,291.4		484.8	438.0	9.6	%	4.07	3.50		1.33	%
30 Apr 2009	1,208.3	^b	365.7	340.5	6.9	%	7.69	3.75	^d	1.34	%
31 Mar 2010^c	2,046.4		620.3	577.0	7.0	%	2.88	3.75		1.29	%
31 Mar 2011	2,368.4		718.0	660.0	8.1	%	6.14	4.25		1.31	%
31 Mar 2012	2,098.6		636.3	588.5	7.5	%	7.91	5.75	^e	1.31	%

TEN YEAR GROWTH RECORD

(rebased to 100.0 at 30 April 2002)

2002-2012

							MSCI		Earnings
		NAV			Share		Emerging		per
		total		Share	price		Markets Index		share -	Dividend
Year ended	NAV	return	^g	Price	total return	^g	total return	^g	undiluted	per share
30 Apr 2002	100.0	100.0		100.0	100.0		100.0		100.0	100.0
30 Apr 2003	89.5	90.5		85.8	86.9		78.4		93.4	180.0
30 Apr 2004	116.9	119.5		115.2	117.8		108.5		158.8	180.0
30 Apr 2005^a	136.0	139.5		133.8	139.0		124.9		187.9	213.6
30 Apr 2006	238.1	246.9		248.2	261.1		213.8		200.5	220.8
30 Apr 2007	245.7	256.6		261.8	278.3		229.7		228.6	250.4
30 Apr 2008	331.5	348.5		350.4	375.8		291.6		223.6	280.0
30 Apr 2009^b	250.0	264.6		272.4	294.7		223.3		422.5	300.0	^d
31 Mar 2010^c	424.2	457.1		461.6	508.1		339.5		158.2	300.0
31 Mar 2011	491.0	531.7		528.0	585.1		381.6		337.4	340.0
31 Mar 2012	435.1	474.2		470.8	525.2		350.2		434.6	460.0	^e

^a Prior to April 2005 the results have been prepared in accordance with UK GAAP. The results for the year ended 30 April 2005 and subsequent reporting periods have been prepared in accordance with IFRS. The main differences as a result of adopting IFRS are that investments are valued on a bid basis, as opposed to a mid basis, and only dividends paid during the year are reflected in the Financial Statements.

^b The results for the year ended 30 April 2009 reflect £633m returned to the shareholders as a result of the tender offer in 2008.

^c 11 months to 31 March 2010.

^d Excludes the special dividend of 2.50p per share in 2009.

^e A dividend of 5.75 pence per share on the Company's profits for the year ended 31 March 2012 has been proposed.

^f From the year ending 31 March 2012, the Ongoing Charges Ratio (OCR) replaces the Total Expense Ratio. Prior year numbers have not been restated as the ratios are not materially different.

g Includes dividends re-invested.

CHAIRMAN'S STATEMENT

Key Points

· NAV was 636.3 pence per share, a fall of 10.8% (dividend re-invested) compared to a fall in the Benchmark (MSCI Emerging Markets Index) of 8.2% (total return in sterling).

· Earnings per share of 7.91 pence (up 28.8%) .

· Proposed dividend of 5.75 pence per share, an increase of 35.3% .

· Share price was 588.5 pence, a fall of 10.2% (dividend re-invested).

· TEMIT has won the Investment Week award for Best Emerging Markets Investment Trust for the fourth consecutive year and has also again won the Moneywise award for Best Emerging Markets Trust.

Peter A Smith (Chairman)

Performance and the investment portfolio

In my last annual report to you I cautioned that we would be likely to see continued periods of volatility, in the short to medium term, and this warning proved correct.

Investors reacted to specific events or bad news in both developed and emerging markets. Our interim report for the first six months of the current year showed that your Company's NAV per share fell by 22.9% . In the second half of the year there was a recovery but, nevertheless, the past year saw the NAV per share decrease from 718.0 pence to 636.3 pence, representing a total return (including the re-invested dividend) of -10.8%* compared to the MSCI Emerging Markets Index, which returned -8.2% (in sterling terms).

On 8 June, the latest date for which information was available, the NAV per share had fallen by 9.7% to 574.7 pence since 31 March. The share price had fallen by 10.8% to 525.0 pence.

The Investment Management team continues to focus on long-term value. Since its launch in 1989 the Company has delivered a return of 2,266% (dividends re-invested), which represents a compound growth rate of 15.0% per annum. Over the same period our benchmark, the MSCI Emerging Markets Index, returned 981% (11.1% per annum). The potential of emerging markets remains considerable and we believe that TEMIT is an attractive long term investment proposition.

In terms of share price, TEMIT ended the year at 588.5 pence, representing a 10.8% decrease on the share price of 660.0 pence as at 31 March 2011. Your Board continually monitors the share price discount to net asset value and exercises its right to buy back shares when the Board considers it is in shareholders' interests to do so. During the financial year under review, there was one buy back of 50,000 shares at a cost of £0.3 million. At the end of the year the discount, on a cum-income basis, stood at 7.5% which compares to 8.1% as at 31 March 2011.

During the year shares traded at discounts between 4.7% and 9.1% of NAV with an average of 6.8% .

The Investment Manager continues to run a concentrated portfolio, with a total of 48 equity investments as at 31 March 2012. The portfolio holdings are very stable and our total portfolio turnover during the year was only 4.7% . The investment philosophy is to seek value through a disciplined, yet flexible, long-term approach. This disciplined investment style allows the Investment Manager to look through volatility, short term news, noise and emotion and it is this which has driven the excellent returns which the Manager has generated since 1989. We are not short term traders and our short term performance may diverge from the benchmark index. The Company remains exposed to currency movements and does not hedge this risk.

The Board and Investment Manager are fully aware, however, of the risks inherent in holding a concentrated portfolio of investments and have in place a number of measures for managing these risks. These include limiting the holding in any single security to a maximum of 10% of the market value of the portfolio. Other risk mitigation measures include appropriate asset allocation by company, sector and geography; holding a majority of quoted investments in the portfolio; maintaining an appropriate liquidity profile; and monitoring of the principal service providers to ensure they operate an appropriate framework of governance and controls. As described on page 14, your Company benefits from a large and well-resourced investment management team. The team reviews regularly and thoroughly all of the investments which we hold, to ensure that the investment case for each holding remains valid.

The full report and review of the Investment Manager can be found on pages 13 to 19.

Investment income and the dividend

The investment objective of TEMIT is to seek long-term capital appreciation through investment in companies operating in emerging markets or whose stocks are listed on the stock markets of such countries. Although income accumulation and distribution are not primary objectives, income received from our investment portfolio has continued to grow and I am pleased to report a further substantial increase in revenue earnings per share.

The Income Statement on page 48 reflects total dividend income earned of £58.4 million in the year to 31 March 2012. This represents an increase of 12.1% on the dividend income received for the year to 31 March 2011. This translates into earnings per share of 7.91 pence per share compared with 6.14 pence per share for the year to 31 March 2011.

This year your Board is pleased to propose a further increase in the dividend to 5.75 pence per share which will be fully covered by our earnings per share of 7.91 pence. This represents an increase of 35.3% on last year's dividend.

Regulation

Recent changes to UK taxation and company law now permit investment trusts to distribute realised capital profits as dividends. While we note this change, and welcome the increased flexibility which it provides, the Company has substantial revenue reserves and the Board is not proposing any change to the Company's Articles of Association at this stage.

Asset allocation and gearing

The general policy of the Company is to be fully invested. At 31 March 2012, 99.5% of your Company's net assets were invested in equities (31 March 2011: 99.4%) .

Your Board regularly reviews its policy on gearing and we continue to take a cautious stance. This caution is borne out by the periods of volatility which are a feature of emerging equity markets and are generally unpredictable in both timing and extent. Our policy, therefore, remains that in exceptional circumstances, and for short periods, TEMIT may borrow up to 10% of its net assets. Borrowing facilities were not used during the year to 31 March 2012.

The Board

During the year the Directors reviewed the investment strategy and supporting processes in detail with the Investment Manager. The Directors also subsequently participated in an evaluation of the Board's performance led independently by Trust Associates Limited which specialises in providing advice to investment companies. A number of suggestions for improving the operational effectiveness of the Board and the interface with the Investment Manager were agreed and will be implemented over the coming year.

While matters relating to the Investment Manager and their performance have historically been dealt with by the independent non-executive Directors, it has been decided formally to establish a Management Engagement Committee to oversee the relationship with the Manager. The terms of reference of this Committee have been posted on the Company's website; its members are all independent of the Manager.

In line with the UK Corporate Governance Code issued by the Financial Reporting Council in June 2010, all Directors are required to retire each year. Each member of the Board is standing for re-election. As part of the Board evaluation review, the Remuneration and Nomination Committee considered the skills and contribution of all the Directors and recommends re-election in each case. Full details of each of the Directors can be found starting on page 10.

Investor communications

The Board aims to keep shareholders informed and up to date with information about the Company. We recognise that shareholders, especially those who hold their shares through nominee accounts, can find it difficult to find out the most up-to date news about TEMIT. We send out the annual and half year report and accounts, as well as notices of any significant Company events. We also release information through the stock exchanges, such as Interim Management Statements.

Our website (www.temit.co.uk) displays the latest news, price and performance information, portfolio details and quarterly web updates with the Investment Manager. Via the website you can also ask to have the latest Company information e-mailed directly to you. I encourage all shareholders to register on our website and make full use of the facilities and materials available to help keep you informed about your Company.

I am also pleased to report that TEMIT was awarded the Best Emerging Markets Investment Trust 2011 by Investment Week, for the fourth consecutive year, and Best Emerging Market Trust by Moneywise which it has won in four of the last five years.

Retail Distribution Review

The Board continues to evaluate the objectives of the UK Retail Distribution Review. Investment trusts have, for many years, been regarded as a specialist area of the investment landscape in the UK, supported by a group of investors who understand their special features and attractions. As the Retail Distribution Review seeks to bring a wider range of investment products under consideration by professional financial advisors, we believe that TEMIT is well placed to take advantage. Your Board will work with Franklin Templeton Investments to communicate TEMIT's many attractive features, including its straightforward capital structure and successful investment record to a wider audience.

Scottish independence

Your Company is incorporated in Scotland and the Board has taken note of the plans by the current Scottish Government to hold a referendum on independence from the United Kingdom in 2014. While it is not appropriate for the Board to make political statements, shareholders should be reassured that we will monitor developments and, in particular, any news on the adoption (or otherwise) of current tax and company law which either an independent Scotland, or a Scotland with greater autonomy within the United Kingdom, may pursue and take any appropriate steps to protect shareholders' interests.

Emerging Markets

Throughout the year, investors around the world have been preoccupied with the developing crisis in the eurozone and efforts to contain the problems which this has created. While TEMIT focuses specifically on emerging markets, many emerging markets' companies rely on developed economies for a significant proportion of ultimate demand for their products and financial services, and as such this uncertainty has spilled over into emerging markets.

Outlook

The eurozone crisis has dominated the global economy for the last two years and the emerging markets are not unaffected. Nevertheless, the economic fundamentals and local prospects are such that there is good reason to believe that the markets in which we are invested will produce attractive returns over the longer term, albeit with some uncomfortable volatility on the way. Our investments are in attractive companies and your Board remains confident that the Investment Manager will pursue opportunities for long term growth.

AGM

Finally I would like to take this opportunity to invite all shareholders to attend the AGM to be held at Stationers' Hall, Ave Maria Lane, London EC4M 7DD at 12 noon on Friday 20 July 2012. More details of this meeting can be found on page 66 of this report.

Peter A Smith

18 June 2012

Indices above are shown on a total return basis in sterling. Sources: Franklin Templeton Investments and Factset.

*Return based on accounting NAV

BOARD OF DIRECTORS

PETER A SMITH (CHAIRMAN)

Peter Smith was appointed to the Board on 17 May 2004 and was appointed Chairman of the Board and a member of the Nomination and Remuneration Committee on

12 December 2007. He was appointed Chairman of the Management Engagement Committee on 12 June 2012. He is Chairman of Savills PLC. He is also a non-executive director of Associated British Foods Plc, N M Rothschild & Sons Limited and of Rothschild Bank AG. He was Senior Partner of PricewaterhouseCoopers (''PwC'') in the UK until 2000. Previously, he was a non-executive director of Safeway PLC, The Equitable Life Assurance Society and Chairman of RAC PLC.

He is an independent Director. (Fees for the year £60,000; beneficial interest 10,000 shares).

CHRISTOPHER D BRADY

Christopher Brady was appointed to the Board on 12 December 2007 and the Management Engagement Committee on 12 June 2012. He is the founding partner and Chairman of The Chart Group. With over 30 years' experience in principal investing, corporate finance and capital markets he focuses on identifying and building portfolio companies. Prior to Chart, he spent 14 years in the Corporate Finance and Capital Markets divisions of Lehman Brothers, Lodestar Group and Dillon Read. Mr Brady is a director of Sea Mobile, Miami International Holdings, PacStar Communications, Genesis Today, ATAC, and SCRA. He is an independent Director. (Fees for the year £35,000; beneficial interest nil shares).

HAMISH N BUCHAN

Hamish Buchan was appointed to the Board and the Audit Committee on 26 June 2008 and the Management Engagement Committee on 12 June 2012. He is Chairman of Personal Assets Trust plc. He is also a Director of Aberforth Smaller Companies Trust plc, The Scottish Investment Trust plc and Community Foundation Network. Mr Buchan has been involved in the investment trust sector for over 40 years. He is also an investment trust analyst and past Chairman of the Association of Investment Companies and of JPMorgan American Investment Trust PLC.

He is an independent Director. (Fees for the year £35,000; beneficial interest 15,000 shares).

SIR PETER BURT

Sir Peter Burt was appointed to the Board on 1 October 2004 and has been a member of the Audit Committee since 6 December 2004. He was appointed to the Management Engagement Committee on 12 June 2012. He was appointed the Senior Independent Director and Chairman of the Nomination and Remuneration Committee on 12 December 2007. He is Chairman of Promethean PLC.

Previously, he was Chairman of ITV PLC and a Non-Executive Director of Royal Dutch Shell PLC. He became Group Chief Executive of the Bank of Scotland in 1996. When the Bank merged with the Halifax in 2001, he became Executive Deputy Chairman of HBOS until he retired in 2003.

He is an independent Director. (Fees for the year £35,000; beneficial interest 4,000 shares).

NEIL A COLLINS

Neil Collins was appointed to the Board and the Audit Committee on 28 September 2006, the Nomination and Remuneration Committee on 26 June 2008, and the Management Engagement Committee on 12 June 2012. He has spent most of his career in financial journalism and currently writes a column in the Financial Times. He was City Editor of The Daily Telegraph for nearly 20 years until he retired from the position in 2005. Prior to that he had been City Editor of the London Evening Standard, The Sunday Times and was subsequently a columnist for Reuters. He is a Director of Finsbury Growth and Income Trust Plc.

He is an independent Director. (Fees for the year £35,000; beneficial interest 7,000 shares).

PETER O HARRISON

Peter Harrison was appointed to the Board on 30 November 2007 and became Chairman of the Audit Committee on

12 December 2007. He was appointed to the Management Engagement Committee on 12 June 2012. He was the UK Head of Financial Services at KPMG for three years and a member of the UK Management Team. He retired from full time work with KPMG in 2002 as a Senior Partner in the Financial Services Division having 30 years experience in the profession, 21 of which were at KPMG with 14 years as a partner. He is Chairman of the Saffron Building Society which he joined as a Non Executive Director in November 2003. He is also a Senior Advisor and consultant with KPMG.

He is an independent Director. (Fees for the year £47,000; beneficial interest 2,535 shares).

GREGORY E JOHNSON

Gregory Johnson was appointed to the Board on 12 December 2007. He is President and Chief Executive Officer of Franklin Resources, Inc. and serves on the Board of Directors. He is also President of Templeton Worldwide, Inc., Chief Executive Officer and President of Templeton International, Inc. and serves as a Director for a number of subsidiaries of Franklin Resources, Inc. He is a member of a number of Franklin Templeton's international fund boards. Mr Johnson joined Franklin in 1986 after working as a senior accountant for Coopers & Lybrand. He has served as President and Chairman of the Board for Franklin Templeton Distributors, Inc., President of Franklin Investment Advisory, LCC, President of FT Trust Company, Vice President of Franklin Advisers, Inc., co-portfolio manager of Franklin Income Fund and Franklin Utilities Fund and as an investment analyst. (Fees for the year £nil; beneficial interest nil shares).

MANAGER'S REPORT & PORTFOLIO REVIEW

31 MARCH 2012

Mark Mobius and TAML's Emerging Markets team

INVESTMENT MANAGER

The Directors engage Templeton Asset Management Ltd. (''TAML'') as Investment Manager of the Company.

TAML, part of Franklin Templeton Investments, is one of the world's largest asset management companies. TAML is a pioneer of emerging market investment, having created one of the first dedicated emerging market mutual funds about 25 years ago. As at 31 March 2012, the Templeton Emerging Markets Team managed US$51 billion in emerging markets assets for retail, institutional and professional investors across the globe.

The Templeton Emerging Markets Team, headed by Dr Mark Mobius, is one of the largest of its kind. It includes 51 dedicated emerging markets portfolio managers, analysts and product specialists. Their on-the-ground presence in 17 countries, and years of relevant industry experience, greatly assists their understanding of the companies researched for inclusion in the TEMIT portfolio. Many of the senior members of the TEMIT team, including Allan Lam, Tom Wu and Dennis Lim have worked alongside Mark Mobius for over 20 years.

MARK MOBIUS, PH.D.

Executive Chairman

Dr. Mobius has spent more than 30 years working in emerging markets all over the world. He joined Franklin Templeton Investments in 1987 as president of the Templeton Emerging Markets Fund, Inc. In 1999, he was appointed joint chairman of the Global Corporate Governance Forum Investor Responsibility Taskforce of the World Bank and Organisation for Economic Cooperation and Development.

ALLAN LAM, CPA

Senior Executive Vice President & Senior Managing Director Mr. Lam joined the Templeton organisation in 1987 and his research responsibilities include the real estate and oil & gas sectors as well as analysis of companies in the Philippines. Mr. Lam manages portfolios dedicated to global emerging markets and Asia (ex Japan). Mr. Lam worked for a number of years in the accounting field with Deloitte Touche Tohmatsu CPA and KPMG Peat Marwick CPA. His knowledge of accounting practices became an important tool for his equity analysis.

TOM WU

Senior Executive Vice President & Senior Managing Director Mr. Wu joined the Templeton organisation in 1987 and his research responsibilities include the banking sector. Mr. Wu is also responsible for the financial analysis and research of companies in Hong Kong and the Philippines. He began his career at Vickers da Costa in Hong Kong as an investment analyst and later as an assistant manager before joining the Templeton organisation.

DENNIS LIM

Co-Chief Executive Officer

Mr. Lim joined Templeton in 1990 and has research responsibilities for Southeast Asian markets. Mr. Lim is a specialist on building regulations and urban planning requirements in Singapore and the ASEAN region. He specialises in researching companies in the telecommunications sector. He served as a former engineering service officer for the Ministry of National Development in Singapore.

*Source: Franklin Templeton Investments as at 31 March 2012. CFA^-and Chartered Financial Analysts^- are trademarks owned by CFA Institute.

MARKET OVERVIEW

Emerging market performances for the reporting period can be divided into two distinct periods: a decline in the first half of the year; followed by a recovery, which partially offset earlier losses. For the 12 month period, the MSCI Emerging Markets Index declined 8.2% in sterling total return terms. The Eurozone debt crisis and concerns that the US could slip back into a recession dominated headlines in the earlier part of the reporting period. This led markets globally to fall, as investors shunned equities in favour of less risky assets.

Improved economic data, strong corporate earnings, government and central bank efforts to stimulate growth, in addition to substantial fund flows into emerging markets, led investors to adopt a more positive view on the asset class in the second half of the year. The approval of a second European Union bailout package for Greece further supported markets.

Comments from US Federal Reserve Chairman Ben Bernanke on the need for maintaining and enhancing policies to help lower unemployment in the US, and news that the European Union might increase its bailout fund provided investors with additional reasons to regain confidence. However, following the year end, continued political turmoil in Europe again dented investor confidence and markets recorded sharp falls in value. At the time of writing, we remain in a period of high volatility and past experience has shown that, in such periods, there has tended to be generally a higher degree of correlation between movements in emerging and developed markets than in more settled periods.

Within the emerging markets asset class, Southeast Asian markets were the strongest performers during the reporting period. Strong domestic demand, rising disposable incomes and relatively low unemployment makes these economies more resilient to global uncertainties. Hong Kong/China and India, however, underperformed their regional peers, due to concerns of slowing growth. In Latin America, Argentina and Brazil ended the period with double-digit declines. The weakest performers were generally found in Eastern Europe. These markets suffered as a result of their geographic proximity to their Western European counterparts and the reliance on these economies for trade, rather than a tangible material deterioration in their economic structure.

PERFORMANCE ATTRIBUTION ANALYSIS

Year to 31 March 2012

NAV Total Return	-10.8
MSCI Emerging Markets Index Total Return	-8.2
Relative Return	-2.6
Sector Allocation	-2.4
Stock Selection	-1.1
Total Equities	-3.5
Currency	0.9
Relative performance	-2.6

Source: Factset and Franklin Templeton Investments

Geographically, major contributors to the Company's performance, relative to the MSCI Emerging Markets Index, included superior stock selection in Hong Kong/China. Moreover, overweight positions in Thailand and Indonesia made noteworthy contributions to relative performance. Conversely, holdings in South Korea, India and South Africa detracted from performance.

LARGEST COUNTRY CONTRIBUTORS AND DETRACTORS TO PERFORMANCE (%)

		MSCI Emerging			MSCI Emerging
	Contribution	Markets Index		Contribution	Markets Index
Top Contributors	to Portfolio	Total Return	Top Detractors	to Portfolio	Total Return
Hong Kong/China	2.7	-12.4	South Korea	-1.4	-5.0
Thailand	1.9	13.9	India	-1.3	-20.2
Indonesia	0.7	6.2	South Africa	-1.1	-2.6
Pakistan	0.1	N/A	Brazil	-1.0	-12.7
			Russia	-0.4	-17.4

MANAGER'S REPORT & PORTFOLIO REVIEW

CONTINUED

10 LARGEST COUNTRY WEIGHTINGS VS BENCHMARK (%)

Good stock selection in banks, technology hardware & equipment and food & staples retailing contributed significantly to performance. An overweight position and good stock selection in automobiles & components also had positive attribution effects; the materials sector was the largest detractor during the period. A zero exposure to telecommunications services and underweight exposures to semiconductors and food, beverage & tobacco companies also detracted from relative performance.

LARGEST SECTOR CONTRIBUTORS AND DETRACTORS TO PERFORMANCE (%)

			MSCI Emerging			MSCI Emerging
	Contribution		Markets Index		Contribution	Markets Index
Top Contributors	to Portfolio		Total Return	Top Detractors	to Portfolio	Total Return
Consumer Discretionary	1.5		-0.2	Materials	-2.2	-20.3
Financials	1.4		-12.4	Information Technology	-1.2	4.6
Consumer Staples	0.1		15.4	Telecommunication Services*	-0.7	2.4
Health Care*		0.0	-5.7	Energy	-0.5		-16.6
				Industrials	-0.3		-12.4
				Utilities*	-0.1		-4.3

*No Companies held by TEMIT in these sectors

SECTOR WEIGHTINGS VS BENCHMARK (%)

At the company level, the top three contributors to relative performance were overweight positions in Brilliance China, Astra International and Dairy Farm. Brilliance China is a major automobile manufacturer in China with a joint venture with BMW for the production and sale of BMW 3-series and 5-series vehicles in China. The company is a beneficiary of the growth in demand for automobiles and government stimulus measures in the sector. The long-term growth trend in demand for motor vehicles is expected to continue in China. Astra is Indonesia's leading car and motorcycle company. In addition to its market leadership and extensive distribution network in the automotive sector, Astra has interests in financial services, heavy equipment, agribusiness, information technology and infrastructure. As a result, the company is well positioned to benefit from Indonesia's robust economic growth, higher income levels and the availability of affordable credit. Dairy Farm's core businesses consist of supermarkets, hypermarkets as well as health & beauty, convenience and home furnishing stores. The company remains a favourable investment as it is a beneficiary of Asia's economic recovery and higher consumer demand. The company is also exposed to fast growing markets such as China, Vietnam and India.

Conversely, the three largest detractors against the Index were overweight positions in Sesa Goa and Aluminum Corporation of China (Chalco) and a zero exposure to Samsung Electronics. Sesa Goa is a major iron ore producer and exporter in India. Weakness in the iron ore market and investor concerns surrounding group strategic direction led the stock price of Sesa Goa to fall during the year. However, taking a long-term view, assuming satisfactory resolution of strategy, Sesa Goa should benefit from increases in iron ore prices and the consolidation of the global mining sector.

Chalco is China's leading producer of alumina and primary aluminium products. Chalco's share price recorded a decline during the period due to poor corporate results, lower aluminium prices and concerns of an economic slowdown in China. Taking a long-term view, however, we are of the opinion that Chalco is well positioned to benefit from China's continuing growth. A long-term uptrend in aluminium prices coupled with demand from China's manufacturing, construction and consumer sectors could support the company in the future. TEMIT does not hold Samsung Electronics, one of the world's largest electronics manufacturers. Despite gradual restructuring, cross-holdings within the group remain very complex, while obsolescence levels and falling product prices are also concerns.

TEMIT has exposure to currency risk because investments are made in currencies other than sterling. As a matter of policy, the Board has decided that it is not appropriate to hedge the currency risk - it is an inherent risk from investing in emerging markets. Consequently in any given period, TEMIT will show gains and losses resulting from currencies moving against sterling. In the current period, TEMIT gained from the relative strength of the Chinese renminbi and the US dollar, through ADRs in which the Brazilian investments are held, but lost value on the Turkish lira and Indian rupee (Brazilian investments are held through ADRs because of the greater liquidity which ADRs offer).

LARGEST COMPANY CONTRIBUTORS AND DETRACTORS TO PERFORMANCE (%)

	Contribution	Company		Contribution	Company
Top Contributors	to Portfolio	Total Return	Top Detractors	to Portfolio	Total Return
Brilliance China Automotive Holdings Ltd.	1.3	7.9	Sesa Goa Ltd.	-1.3	-40.0
PT Astra International Tbk	1.1	27.4	Samsung Electronics Co. Ltd. *	-1.1	33.6
Dairy Farm International Holdings Ltd.	1.0	28.7	Aluminum Corp. of China Ltd., H	-0.9	-49.6
Siam Commercial Bank Public Co. Ltd, fgn.	0.9	34.1	PT Bank Danamon Indonesia Tbk	-0.6	-29.6
VTech Holdings Ltd.	0.7	21.4	Mining and Metallurgical Co.
			Norilsk Nickel	-0.5	-29.4

*Company not held by TEMIT

10 LARGEST SECURITY VS BENCHMARK (%)

PORTFOLIO CHANGES & INVESTMENT STRATEGIES

The Company's search for undervalued stocks trading at attractive valuations led to selective further investments in the oil & gas exploration & production, aluminium, diversified banking, precious metals & minerals, agricultural products, and real estate management & development sectors. Geographically, purchases were made in China, via Hong Kong-listed "H" shares, Pakistan, India, Thailand and South Africa. Conversely, holdings in China's automobile manufacturing and Russia's integrated oil & gas sectors were reduced. Seven purchases were made during the year in Peninsula Land, National Aluminium, MCB, Univanich, Corporation of China (Chalco), Gazprom and Impala Platinum. The Company sold part of its investment in Brilliance China to realise gains resulting from strong share price appreciation and also divested its holding in Lukoil.

Peninsula Land is an Indian real estate developer based in Mumbai. The company's developments are expected to be strong beneficiaries because of the scarce supply of commercial space in the Central and Southern Mumbai business districts.

National Aluminium is India's largest alumina manufacturer. The company is amongst the lowest-cost producers of alumina and aluminium in the world.

MCB is the fourth largest bank in Pakistan. The Company increased its exposure to the bank because of its attractive valuation and relatively high return on equity.

Univanich is one of the leading producers of crude palm oil in Thailand. The company is a beneficiary of strong demand growth for crude palm oil and expectations of higher product prices.

Chalco is China's largest producer of aluminium products as well as its only producer of alumina. Its alumina output meets about 70% of the country's alumina demand. The company is well positioned to benefit from China's continuing growth, gradual market consolidation and continued demand for aluminium from economic giants such as China and India.

Gazprom is the largest producer of gas in the world by reserves and production. The Company increased its exposure to Gazprom because of its attractive valuations, huge reserve base and growing energy demand in emerging markets.

Impala Platinum is one of the leading platinum producers in the world and is responsible for approximately a quarter of global platinum production. As one of the most efficient and lowest cost producers in the world, it is also well positioned to benefit from the longer-term up trend in commodity prices.

OUTLOOK

We continue to maintain a positive long-term outlook for emerging market economies. The International Monetary Fund expects much faster growth in these countries than in the developed world, thanks to the impact of rising incomes and the maturing of a young population on domestic demand. While the eurozone crisis will inevitably have an impact across the world, the proportion of exports from developing countries to developed markets is falling as local demand grows. In contrast to the debt-burdened West, emerging markets typically have low sovereign debt and high foreign exchange reserves.

We believe that these fundamental strengths should eventually be reflected in the earnings and share prices of companies in our portfolio. Their domestic stock markets have the potential to grow much larger over time, despite the inevitable risks of inflation, contagion from developed market weakness, and price volatility.

Recently, inflation has fallen back in many developing countries, allowing some central banks to ease monetary policy and thus encourage demand. Volatility is a fact of life in markets, but we continue to invest for the long term in companies we believe are undervalued, fundamentally strong and growing.

PORTFOLIO SUMMARY

PORTFOLIO DISTRIBUTION AS AT 31 MARCH 2012 AND

31 MARCH 2011

All figures are in %

	Austria	Brazil	Hong Kong/China	Hungary	India	Indonesia	Mexico	Pakistan	Poland	Russia	South Africa	South Korea	Taiwan	Thailand	Turkey	Liquid Assets	2012 Total	2011 Total
Consumer Discretionary	-	-	11.7	-	-	4.6	-	-	-	-	-	-	-	-	-	-	16.3	13.9
Consumer Staples	-	-	3.9	-	-	-	2.5	-	-	-	-	-	-	0.5	-	-	6.9	4.7
Energy	0.8	2.6	5.0	1.0	1.2	-	-	-	1.1	3.1	-	2.7	-	3.4	2.3	-	23.2	25.5
Financial	-	9.4	-	-	0.3	4.6	-	2.0	-	-	-	-	-	7.6	3.5	-	27.4	26.0
Industrials	-	-	0.5	-	-	-	-	-	0.2	-	-	1.7	-	-	-	-	2.4	3.1
Information Technology	-	-	3.2	-	4.6	-	-	-	-	-	-	-	0.3	-	-	-	8.1	7.5
Materials	-	5.0	1.5	-	3.1	-	-	-	-	1.7	2.6	-	-	1.3	-	-	15.2	18.7
Total Equities	0.8	17.0	25.8	1.0	9.2	9.2	2.5	2.0	1.3	4.8	2.6	4.4	0.3	12.8	5.8	-	99.5	99.4
Liquid Assets	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	0.5	0.5	0.6
2012 Total	0.8	17.0	25.8	1.0	9.2	9.2	2.5	2.0	1.3	4.8	2.6	4.4	0.3	12.8	5.8	0.5	100.0	100.0
2011 Total	0.9	19.0	23.1	1.3	11.2	7.7	1.9	1.6	1.9	6.6	2.8	5.2	0.3	9.8	6.1	0.6	100.0	100.0

INVESTMENT CHANGES - GEOGRAPHICAL

								Movement in year
	31 Mar 11				Market		31 Mar 12			MSCI Emerging
	Market Value	Additions	Sales		Movement		Market Value	TEMIT		Markets Index
Country	£m's	£m's	£m's		£m's		£m's	%		%
Hong Kong/China	546	8	(4	)	(10	)	540	(1.8	)	(12.4	)
Brazil	451	-	-		(95	)	356	(21.1	)	(12.7	)
Thailand	233	7	-		28		268	11.7		13.9
Indonesia	183	5	-		6		194	3.2		6.2
India	266	3	-		(76	)	193	(28.3	)	(20.2	)
Other	676	37	(42	)	(134	)	537	-		-
Other Assets	13	-	-		(2	)	11	-		-
Total	2,368	60	(46	)	(283	)	2,099

INVESTMENT CHANGES - SECTOR

								Movement in year
	31 Mar 11				Market		31 Mar 12			MSCI Emerging
	Market Value	Additions	Sales		Movement		Market Value	TEMIT		Markets Index
Sector	£m's	£m's	£m's		£m's		£m's	%		%
Financials	616	14	-		(2	)	628	(0.3	)	(12.4	)
Energy	604	22	(34	)	(104	)	488	(17.6	)	(16.6	)
Materials	442	16	(8	)	(132	)	318	(28.8	)	(20.3	)
Consumer Discretionary	330	-	(4	)	(38	)	288	(11.7	)	(0.2	)
Information Technology	178	1	-		(8	)	171	(4.5	)	4.6
Other	185	7	-		3		195	-		-
Other Assets	13	-	-		(2	)	11	-		-
Total	2,368	60	(46	)	(283	)	2,099

PORTFOLIO HOLDINGS BY GEOGRAPHY

Geographical analysis (by country of incorporation)

As at 31 March 2012

		Fair Value	**	% of net
Country	Sector	£' 000		assets
AUSTRIA
OMV AG^‡	Energy	17,577		0.8
		17,577		0.8
BRAZIL
Banco Bradesco SA, ADR, pfd.*†	Financial	95,339		4.5
Itau Unibanco Holding SA, ADR*	Financial	102,733		4.9
Petroleo Brasileiro SA, ADR, pfd.*†	Energy	53,948		2.6
Vale SA, ADR, pfd., A*†	Materials	104,186		5.0
		356,206		17.0
HONG KONG/CHINA
Aluminum Corp. of China Ltd., H	Materials	30,813		1.5
Brilliance China Automotive Holdings Ltd.	Consumer Discretionary	190,949		9.1
China International Marine Containers (Group) Co. Ltd., B	Industrials	11,003		0.5
China Petroleum and Chemical Corp., H	Energy	34,296		1.6
Dairy Farm International Holdings Ltd.	Consumer Staples	82,597		3.9
Guangzhou Automobile Group Co. Ltd., H	Consumer Discretionary	48,116		2.3
PetroChina Co. Ltd., H	Energy	68,913		3.3
Victory City International Holdings Ltd.	Consumer Discretionary	6,379		0.3
VTech Holdings Ltd.	Information Technology	66,825		3.2
		539,891		25.8
HUNGARY
MOL Hungarian Oil and Gas Nyrt.	Energy	20,797		1.0
		20,797		1.0
INDIA
Infosys Technologies Ltd.	Information Technology	10,850		0.5
National Aluminium Co. Ltd.	Materials	14,040		0.7
Oil & Natural Gas Corp. Ltd.	Energy	26,003		1.2
Peninsula Land Ltd.	Financial	6,239		0.3
Sesa Goa Ltd.	Materials	50,119		2.4
Tata Consultancy Services Ltd.	Information Technology	86,213		4.1
		193,464		9.2

^**Fair value represents the bid value of a security as required by International Financial Reporting Standards.

^‡This Austrian company has significant exposure to operations in emerging markets.

^*US Listed Stocks

^†pfd: preferred shares

PORTFOLIO HOLDINGS BY GEOGRAPHY

CONTINUED

		Fair Value	**	% of net
Country	Sector	£' 000		assets
INDONESIA
PT Astra International Tbk	Consumer Discretionary	96,452		4.6
PT Bank Central Asia Tbk	Financial	54,681		2.6
PT Bank Danamon Indonesia Tbk	Financial	42,422		2.0
		193,555		9.2
MEXICO
Wal-Mart de Mexico SAB de CV, V	Consumer Staples	51,654		2.5
		51,654		2.5
PAKISTAN
Faysal Bank Ltd.	Financial	3,718		0.2
MCB Bank Ltd.	Financial	39,007		1.8
		42,725		2.0
POLAND
Polnord SA	Industrials	3,165		0.2
Polski Koncern Naftowy Orlen SA	Energy	24,505		1.1
		27,670		1.3
RUSSIA
Gazprom, ADR*	Energy	56,242		2.7
Mining and Metallurgical Co. Norilsk Nickel	Materials	8,418		0.4
Mining and Metallurgical Co. Norilsk Nickel, ADR*	Materials	27,576		1.3
OAO TMK	Energy	9,290		0.4
		101,526		4.8
SOUTH AFRICA
Anglo American PLC	Materials	37,698		1.8
Impala Platinum Holdings Ltd.	Materials	16,139		0.8
		53,837		2.6
SOUTH KOREA
Hyundai Development Co.	Industrials	36,197		1.7
SK Innovation Co. Ltd.	Energy	56,771		2.7
		92,968		4.4

^**Fair value represents the bid value of a security as required by International Financial Reporting Standards.

^*US Listed Stocks.

		Fair Value	**	% of net
Country	Sector	£' 000		assets
TAIWAN
Taiwan Semiconductor Manufacturing Co. Ltd.	Information Technology	7,150		0.3
		7,150		0.3
THAILAND
Kasikornbank Public Co. Ltd, fgn.	Financial	52,438		2.6
Kiatnakin Bank Public Co. Ltd, fgn.	Financial	16,859		0.8
Land and Houses Public Co. Ltd, fgn.	Financial	13,401		0.7
PTT Exploration and Production Public Co. Ltd, fgn.	Energy	34,228		1.6
PTT Public Co. Ltd, fgn.	Energy	37,525		1.8
Siam Cement Public Co. Ltd, fgn.	Materials	29,365		1.3
Siam Commercial Bank Public Co. Ltd, fgn.	Financial	74,267		3.5
Univanich Palm Oil Public Co. Ltd, fgn.	Consumer Staples	9,666		0.5
		267,749		12.8
TURKEY
Akbank TAS	Financial	73,225		3.5
Tupras-Turkiye Petrol Rafinerileri AS	Energy	47,614		2.3
		120,839		5.8
TOTAL INVESTMENTS		2,087,608		99.5
LIQUID NET ASSETS		11,032		0.5
TOTAL NET ASSETS		2,098,640		100.0

^**Fair value represents the bid value of a security as required by International Financial Reporting Standards.

TEN LARGEST INVESTMENTS

IN ORDER OF MARKET VALUE AS AT 31 MARCH 2012

01 APRIL 2011 - 31 MARCH 2012*

Brilliance China Automotive Holdings Ltd.

	% of Total		Fair Value
Country	Net Assets		£' 000
Hong Kong/China	9.1	%	190,949

A major automobile manufacturer in China with a joint venture with BMW for the production and selling of BMW 3-series and 5-series in China. The joint venture will soon complete its second plant and will significantly expand its production capacity. The long-term growth trend in demand for motor vehicles is expected to continue in China.

Vale SA

	% of Total		Fair Value
Country	Net Assets		£' 000
Brazil	5.0	%	104,186

This Brazilian-based company is one of the world's largest iron ore producers that is also engaged in various mining activities. The company is a beneficiary of the strong demand growth in emerging markets and the long-term uptrend in commodity prices.

Itau Unibanco Holding SA

	% of Total		Fair Value
Country	Net Assets		£' 000
Brazil	4.9	%	102,733

One of Brazil's largest commercial banks providing a full range of banking and financial services. The bank is a strong beneficiary of the growing demand for financial and banking services in Brazil.

PT Astra International Tbk

	% of Total		Fair Value
Country	Net Assets		£' 000
Indonesia	4.6	%	96,452

With extensive distribution and after-sales services networks, Astra is one of the market leaders in Indonesia's motor vehicle industry. In addition, the company maintains a strong market position in heavy equipment distribution of Komatsu products.

Banco Bradesco SA

	% of Total		Fair Value
Country	Net Assets		£' 000
Brazil	4.5	%	95,339

One of Brazil's largest financial conglomerates, providing a full range of banking and financial services. Bradesco is a strong beneficiary of the growing demand for financial and banking services in Brazil due to its extensive coverage of the Brazilian territory and strong retail presence.

* Source: Factset. Prices re-based to 100 as at 1 April 2011.

01 APRIL 2011 - 31 MARCH 2012*

Tata Consultancy Services Ltd.

	% of Total		Fair Value
Country	Net Assets		£' 000
India	4.1	%	86,213

A major IT consulting company in India. Tata is well positioned to benefit from the recent weakness in rupees and the trend of increasing outsourcings by American and European corporations to Indian consulting companies.

Dairy Farm International Holdings Ltd.

	% of Total		Fair Value
Country	Net Assets		£' 000
Hong Kong/China	3.9	%	82,597

Dairy Farm's core businesses consist of supermarkets, hypermarkets as well as health & beauty, convenience and home furnishing stores. The company remains a favorable investment as it is a beneficiary of Asia's economic recovery and higher consumer demand. The company is also exposed to fast growing markets such as China, Vietnam and India.

Siam Commercial Bank Public Co. Ltd.

	% of Total		Fair Value
Country	Net Assets		£' 000
Thailand	3.5	%	74,267

One of Thailand's largest banks. The bank is well positioned to benefit from the more stable political situation, the recovery in the domestic economy and growing demand for financial and banking services.

Akbank TAS

	% of Total		Fair Value
Country	Net Assets		£' 000
Turkey	3.5	%	73,225

One of Turkey's largest privately owned commercial banks, providing a full range of banking and financial services. The bank is well positioned to benefit from strong economic growth and increasing demand for financial and banking services in Turkey.

PetroChina Co. Ltd.

	% of Total		Fair Value
Country	Net Assets		£' 000
Hong Kong/China	3.3	%	68,913

China's largest oil and gas company in terms of domestic and overseas crude oil and natural gas reserves. The company has gradually been diversifying into marketing and downstream activities. There may be favourable tax reforms in the medium term.

* Source: Factset. Prices re-based to 100 as at 1 April 2011.

Auditor

Deloitte LLP audits the Company's annual financial statements.

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 the Company applies the principles identified in the latest UK Corporate Governance Code (2010). It also makes reference to the Company's adherence to the Code of Corporate Governance of the Association of Investment Companies (''AIC'').

Compliance with the UK Corporate Governance Code

The Board considers that the Company has complied with the relevant provisions of the UK Corporate Governance Code issued by the Financial Reporting Council in June 2010 throughout the year ended 31 March 2012.

AIC Code of Corporate Governance (the ''AIC Code'')

The Company is a member of the AIC. The Board considers that the Company adheres to the principles and follows the recommendations of the AIC Code and, where appropriate, it provides explanations why and/or details the steps it intends to take to bring the Company into line in the future. By reporting against the AIC Code and by following the AIC's Corporate Governance Guide for Investment Companies (the ''AIC Guide''), the Company is meeting its obligations under the UK Corporate Governance Code and paragraph 9.8.6 of the Listing Rules and as such the Company is not required to report further on issues contained in the UK Corporate Governance Code which are not relevant to the Company as explained in the AIC Guide.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

IN RESPECT OF THE ANNUAL REPORT

AND THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

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 International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that 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 in IFRSs 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

· make an assessment of 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

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with IFRSs, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

· the management report, which is incorporated into the Directors' report, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.

By Order of the Board

Peter Smith

Chairman

18 June 2012

INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2012

		Year ended						Year ended
		31 March 2012						31 March 2011
		Revenue		Capital		Total		Revenue		Capital		Total
	Note	£'000		£'000		£'000		£'000		£'000		£'000
Gains/(losses) on investments
and exchange
Gains/(losses) on investments at fair value	6	-		(281,275	)	(281,275	)	-		314,573		314,573
Gains/(losses) on foreign exchange		-		(221	)	(221	)	-		(169	)	(169	)
Revenue
Dividends	1	58,366		-		58,366		52,116		-		52,116
Bank Interest	1	57		-		57		15		-		15
		58,423		(281,496	)	(223,073	)	52,131		314,404		366,535
Expenses
Investment management fee	2	(21,237	)	-		(21,237	)	(21,209	)	-		(21,209	)
Other expenses	3	(6,445	)	-		(6,445	)	(6,555	)	-		(6,555	)
Profit/(loss) before taxation		30,741		(281,496	)	(250,755	)	24,367		314,404		338,771
Tax Expense	4	(4,662	)	-		(4,662	)	(4,108	)	-		(4,108	)
Profit/(loss) for the year		26,079		(281,496	)	(255,417	)	20,259		314,404		334,663
Profit/(loss) attributable to equity
holders of the Company		26,079		(281,496	)	(255,417	)	20,259		314,404		334,663
Basic earnings per share	5	7.91p		(85.35	)p	(77.44	)p	6.14p		95.30p		101.44 p
Ongoing Charges Ratio						1.31%						1.31%

The capital element of return is not distributable.

The total column is the Income Statement of the Company.

The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

There is no other income for this year and therefore no separate statement of comprehensive income has been presented.

The Ongoing Charges Ratio (OCR) replaces the Total Expense Ratio. The OCR represents the annualised ongoing charges of the Company divided by the average of the daily net asset values of the Company for the year, and has been prepared in accordance with the AIC's recommended methodology, issued in May 2012.

Dividend Policy

In accordance with the Company's stated policy, no interim dividend is declared for the year.

An ordinary dividend of 5.75 pence per share is proposed at a cost of £18,964,000.

(An ordinary dividend of 4.25 pence per share was paid for the year ended 31 March 2011 at a cost of £14,019,000).

Further details can be found on note 11 on page 60.

BALANCE SHEET

AS AT 31 MARCH 2012

		As at		As at
		31 March 2012		31 March 2011
	Note	£'000		£'000
ASSETS
Non-current assets
Investments at fair value through profit or loss	6	2,087,608		2,354,802
Current assets
Trade and other receivables	7	6,335		5,573
Cash		7,024		11,025
		13,359		16,598
Current liabilities
Trade and other payables	8	(2,327	)	(2,600	)
Current tax payable		-		(408	)
		(2,327	)	(3,008	)
NET ASSETS		2,098,640		2,368,392

ISSUED SHARE CAPITAL AND RESERVES
ATTRIBUTABLE TO EQUITY SHAREHOLDERS
Equity Share Capital	9	82,453		82,466
Special Distributable Reserve		433,546		433,546
Capital Redemption Reserve		216		203
Capital Reserve		1,501,792		1,783,604
Revenue Reserve		80,633		68,573
EQUITY SHAREHOLDERS' FUNDS		2,098,640		2,368,392

Net Asset Value per share (in pence)	10	636.3		718.0

These Financial Statements of Templeton Emerging Markets Investment Trust PLC (company registration number SC118022) were approved for issue by the Board and signed on 18 June 2012.

Peter Smith		Peter Harrison
Chairman		Director

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2012

			Capital	Special
	Share		Redemption	Distributable	Capital		Revenue
	Capital		Reserve	Reserve	Reserve		Reserve		Total
	£'000		£'000	£'000	£'000		£'000		£'000
Balance at 31 March 2010	82,478		191	433,546	1,469,502		60,686		2,046,403
Profit for the year	-		-	-	314,404		20,259		334,663
Equity dividends	-		-	-	-		(12,372	)	(12,372	)
Purchase and cancellation of own
shares (note 9)	(12	)	12	-	(302	)	-		(302	)
Balance at 31 March 2011	82,466		203	433,546	1,783,604		68,573		2,368,392
(Loss)/profit for the year	-		-	-	(281,496	)	26,079		(255,417	)
Equity dividends	-		-	-	-		(14,019	)	(14,019	)
Purchase and cancellation of own
shares (note 9)	(13	)	13	-	(316	)	-		(316	)
Balance at 31 March 2012	82,453		216	433,546	1,501,792		80,633		2,098,640

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 MARCH 2012

	For the year ended		For the year ended
	31 March 2012		31 March 2011
	£'000		£'000
Cash flows from operating activities
(Loss)/profit before taxation	(250,755	)	338,771
Adjustments for:
Losses/(gains) on investments at fair value	281,275		(314,573	)
Realised loss on foreign exchange	221		169
Scrip dividends	(212	)	(837	)
(Increase)/decrease in debtors	(1,153	)	71
Decrease/(increase) in accrued income	1		(1	)
(Decrease)/increase in creditors	(273	)	412
Cash generated from operations	29,104		24,012
Taxation paid	(5,078	)	(4,183	)
Net cash inflow from operating activities	24,026		19,829
Cash flows from investing activities
Purchases of non-current financial assets	(59,208	)	(27,457	)
Sales of non-current financial assets	45,513		22,195
	(13,695	)	(5,262	)
Cash flows from financing activities
Equity dividends paid (note 11)	(14,019	)	(12,372	)
Purchase of shares for cancellation	(316	)	(302	)
	(14,335	)	(12,674	)
Net (decrease)/increase in cash	(4,004	)	1,893
Cash at start of year	11,025		9,309
Exchange gain/(loss) on cash	3		(177	)
Cash at end of year	7,024		11,025

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2012

1 Income	2012	2011
	£'000	£'000
Income from investments
UK Dividends	731	401
Other EU dividends	705	799
Other overseas dividends	56,718	50,079
Scrip dividends	212	837
	58,366	52,116
Other income
Deposit income	57	15
Total income	57	15
Total income comprises:
Dividends	58,366	52,116
Interest	57	15
	58,423	52,131
Income from investments
Listed overseas	57,635	51,458


2 Investment management fee	2012	2011
	£'000	£'000
Variable Expense
Investment management fee	21,237	21,209

The Company's Investment Manager is Templeton Asset Management Ltd. ("TAML").

The contract between the Company and TAML may be terminated at any date by either party giving one year's notice of termination. TAML receives a fee paid monthly in arrears, at an annual rate of 1.00% of the monthly trading total net assets of the Company. As at 31 March 2012, £1,752,000 (31 March 2011: £1,950,000) in fees were payable and outstanding to TAML. In addition to the investment management fee above, the Company obtains secretarial and administration services from Franklin Templeton Investment Management Limited ("FTIML") pursuant to a secretarial and administration agreement (which is terminable by either party giving one year's notice to the other). The fee is respect of secretarial and administration services is recorded within other expenses (note 3).

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

3 Other expenses		2012		2011
		£'000		£'000
Variable expenses
Secretarial and administration expenses		4,247		4,242
Custody fees		1,136		1,213
Fixed expenses
Directors' emoluments		264		237
Auditor's remuneration
	Fees payable to the Company's auditor for the audit of the annual financial statements	26		26
	Fees payable to the Company's auditor and its associates for other services
	- Other services pursuant to legislation: half yearly financial report	4		4
Registrar fees		203		189
VAT		(36	)	58
Bank overdraft interest		-		1
Other administration expenses		601		585
		1,062		1,100
Total other expenses		6,445		6,555

Fees in respect of services as Directors are paid by the Company only to those Directors who are independent of Franklin Templeton Investments. Included within these costs are Employer National Insurance contributions.

As at 31 March 2012, £350,000 (31 March 2011: £390,000), in fees were payable and outstanding to FTIML.

4 Tax on ordinary activities			2012		2011
			£'000		£'000
Overseas tax			5,078		4,108
Adjustment in respect of prior periods			(416	)	-
Current tax			4,662		4,108

Taxation			2012		2011

			£'000		£'000
Profit/(loss) before taxation			(250,755	)	338,771
Theoretical tax at UK corporation tax rate of 26% (2011: 28%)			(65,196	)	94,856
Effects of:
	-	Capital Element of Profit	73,189		(88,033	)
	-	Prior period adjustments to irrecoverable overseas tax	(416	)	-
	-	Non taxable income	39		67
	-	UK dividends not subject to Corporation Tax	(190	)	(184	)
	-	Irrecoverable overseas tax	5,078		4,108
	-	Excess management expenses	2,905		3,981
	-	Dividends not subject to Corporation Tax	(10,523	)	(10,764	)
	-	Income taxable in different periods	(224	)	77
Actual tax charge			4,662		4,108

As at 31 March 2012, the Company had unutilised management expenses of £30.8 million carried forward (2011: £19.6 million). These balances have been generated because a large part of the Company's income is derived from dividends which are no longer taxable. 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.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

5 Earnings per Share
		2012					2011
	Revenue	Capital		Total		Revenue	Capital	Total
	£'000	£'000		£'000		£'000	£'000	£'000
	26,079	(281,496	)	(255,417	)	20,259	314,404	334,663
Earnings per Share
		2012					2011
	Revenue	Capital		Total		Revenue	Capital	Total
	pence	pence		pence		pence	pence	pence
	7.91	(85.35	)	(77.44	)	6.14	95.30	101.44

The earnings per share is based on the profit/(loss) on ordinary activities after tax and on the weighted average number of shares in issue during the year of 329,825,964 (year to 31 March 2011: 329,910,379).

6 Financial assets - investments	2012		2011
	£'000		£'000

Opening investments	2,354,802		2,034,122
Movements in year
Additions	59,819		28,294
Sales	(45,738	)	(22,187	)
Realised profits	10,708		19,915
Net (depreciation)/appreciation	(291,983	)	294,658

Closing investments	2,087,608		2,354,802

All investments have been recognised at fair value through the Income Statement.

Transaction costs for the year on purchases were £120,000 (2011: £98,000) and transaction costs for the year on sales were £63,000 (2011: £111,000). The aggregate transaction costs for the year were £183,000 (2011: £209,000).

Realised and unrealised gains on investments comprise of:
Realised gain based on carrying value at 31 March 2012	10,708		19,915
Net movement in unrealised (depreciation)/appreciation	(291,983	)	294,658
Realised and unrealised (losses)/gains on investments	(281,275	)	314,573

7 Trade and other receivables	2012	2011
	£'000	£'000
Dividends receivable	6,052	5,190
Overseas tax recoverable	257	381
Other debtors	16	-
Corporation tax recoverable	9	-
Accrued income	1	2
	6,335	5,573


8 Trade and other payables	2012	2011
	£'000	£'000
Accrued expenses	2,327	2,600
	2,327	2,600

9 Called-up share capital	2012				2011
	Allotted, issued &				Allotted, issued &
	fully paid				fully paid
	£'000		Number		£'000		Number
Ordinary Shares of 25p each
Opening Balance	82,466		329,864,352		82,478		329,914,352
Shares repurchased during the year	(13	)	(50,000	)	(12	)	(50,000	)
Closing Balance	82,453		329,814,352		82,466		329,864,352

The Company's shares 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, 50,000 shares were bought back for cancellation at a cost of £300,000 (2011: 50,000 shares were bought back for cancellation at a cost of £300,000). No shares were cancelled between 1 April 2012 and 8 June 2012.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

10 Net asset value per share	Net asset value		Net asset value
	per share		attributable
	2012	2011	2012	2011
	pence	pence	£'000	£'000
Shares	636.3	718.0	2,098,640	2,368,392

11 Dividend		2012			2011
	Rate (pence)		£'000	Rate (pence)		£'000
Declared and paid in the year
Dividend on shares:
Final dividend for year	4.25		14,019	3.75		12,372
			14,019			12,372
Proposed for approval at the Company's AGM
Dividend on shares:
Final dividend for year ended 31 March 2012
(31 March 2011: 4.25p)	5.75		18,964
			18,964

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 by shareholders at the Annual General Meeting.

12 Related party transactions

The following are considered to be related parties:

- Templeton Asset Management Ltd. ("TAML")

- Franklin Templeton Investment Management Limited ("FTIML")

- The Directors of the Company

All material related party transactions, as set out in International Accounting Standard 24 Related Party, have been disclosed in the Directors' Report, Note 2 and Note 3. Details of the remuneration of all Directors can be found on page 44.

Other funds managed by TAML may be investors in the same securities as the Company.

13 Risk management

In pursuing the investment objectives set out on page 27 of this 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 of the profits available for dividends.

The main risks arising from the Company's financial instruments are market risk (which comprises market price risk, foreign currency risk and interest rate risk), other price risk, liquidity risk and credit risk.

The objectives, policies and processes for managing these risks, and the methods used to measure the risk, are set out below. These policies have remained unchanged since the beginning of the year to which these financial statements relate.

Investment risk

The Company may invest a greater portion of its assets in the securities of one issuer, securities domiciled in a particular country, or securities within one industry group than other types of fund investments. As a result, there is the potential for 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.

Market price risk

Market risk arises mainly from uncertainties about future prices of financial instruments held. It represents the potential loss 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 in order to minimise the risk associated with particular countries or industry sectors whilst continuing to follow the investment objectives. The Investment Manager has responsibility for monitoring the existing portfolio selected in accordance with the overall asset allocation parameters described above and seeks to ensure that individual stocks also meet the risk/reward profile on an ongoing basis.

The Investment Manager does not use derivative instruments to hedge the investment portfolio against market price risk, as in its opinion, the cost of such a process would result in an unacceptable reduction in the potential for capital growth.

Foreign currency risk

Currency translation movements can significantly affect the income and capital value of the Company's investments as the majority of the Company's assets and income are denominated in currencies other than sterling, which is the Company's functional currency.

The Investment 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 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; it, however, does not hedge or otherwise seek to avoid rate movement risk on income accrued but not received.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

13 Risk management (continued)

The fair value of the Company's monetary items that have foreign currency exposure at 31 March are shown below:

2012	Trade and		Trade and	Total net	Investments at
	other	Cash	other	foreign currency	fair value through
	receivables	at bank	payables	exposure	profit or loss
Currency	£' 000	£' 000	£' 000	£' 000	£' 000
US dollar	1,529	-	-	1,529	540,328
Hong Kong dollar	-	-	-	-	457,295
Thai baht	1,591	-	-	1,591	267,749
Indonesian rupiah	110	-	-	110	193,555
Indian rupee	231	-	-	231	193,464
Turkish lira	-	-	-	-	120,839
Other	2,848	39	-	2,887	314,378

2011	Trade and		Trade and	Total net	Investments at
	other	Cash	other	foreign currency	fair value through
	receivables	at bank	payables	exposure	profit or loss
Currency	£' 000	£' 000	£' 000	£' 000	£' 000
US dollar	1,495	-	-	1,495	673,466
Hong Kong dollar	-	-	-	-	479,832
Indian rupee	-	-	-	-	266,115
Thai baht	1,086	-	-	1,086	232,549
Indonesian rupiah	115	1	-	116	182,667
Turkish lira	-	-	-	-	144,692
Other	2,874	43	-	2,917	375,481

Sensitivity

The following table illustrates the sensitivity of the profit after taxation for the year and the equity in regard to the Company's monetary financial assests and liabilities and its equity if sterling had strengthened by 10% relative to all currencies on the reporting date, with all other variables held constant.

	2012		2011
		Capital		Capital
	Revenue	Return	Revenue	Return
Financial Assets and Liabilities	£' 000	£' 000	£' 000	£' 000
US dollar	2,141	54,033	1,766	67,347
Hong Kong dollar	966	45,729	976	47,983
Indian rupee	454	19,346	466	26,611
Thai baht	855	26,775	690	23,255
Indonesian rupiah	415	19,356	328	18,267
Turkish lira	361	12,084	491	14,469
	5,192	177,323	4,717	197,932

A 10% weakening of sterling against the above currencies would have resulted in an equal and opposite effect on the above amounts.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

13 Risk management (continued)

Interest rate risk

The Company is permitted to invest in fixed rate securities. Any change to the interest rates relevant to particular securities may result in either income 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.

Interest rate risk profile

The majority of the Company's financial assets are non-interest bearing equity investments.

The carrying amount, by the earlier of contractual re-pricing or maturity date, of the Company's financial instruments was as follows:

	Within	Within
	one year	one year
	2012	2011
	£' 000	£' 000
Cash flow interest rate risk
Cash	7,024	11,025

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.

There were no exposure to fixed interest investment securities during the year or at the year end.

Liquidity risk

The Company's assets comprise mainly of securities listed on the stock exchanges of emerging economies. Liquidity can vary from market to market and some securities may take longer 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.

Investments held by the Company are valued in accordance with the accounting policies at bid price. Other financial assets and liabilities of the Company are included in the balance sheet at fair value.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

13 Risk management (continued)

Credit risk

Certain transactions in securities that the Company enters into expose it to the risk that the counter-party 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 counter-party. 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 amount of credit risk that the Company is exposed to is disclosed under interest rate risk profile and represents the maximum credit risk at the Balance Sheet date.

The Company has an ongoing contract with its custodian (JPMorgan Chase Bank) for the provision of custody services. During the year the Company reviewed the custody services provided by JPMorgan Chase Bank. While there are inherent custody risks in investing in emerging markets, the review concluded that 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 either held in a floating rate deposit account whose rate is determined by reference to rates supplied by the custodian or is placed on deposit in the name of TEMIT. There is no significant risk on debtors and accrued income (or tax) at the year end.

Fair value

Fair values are derived as follows:

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

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

- Cash - at the face value of the account.

The tables below analyse financial instruments carried at fair value by valuation method. The different levels have been defined as follows: Level 1 Quoted prices (unadjusted) in active markets for identical assets and liabilities.

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

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

Valuation hierarchy fair value through profit or loss

		31 March 2012				31 March 2011
£'000	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Listed investments	2,087,608	-	-	2,087,608	2,354,802	-	-	2,354,802

14 Significant holdings in investee undertakings

As at 31 March 2012 the Company held 3% or more in the issued share capital of the following companies:

	% of issued		Fair	% of issued		Fair
	share capital	*	value	share capital	*	value
Name	2012		£' 000	2011		£' 000
Victory City International Holdings Ltd.	6.9		6,379	8.5		12,775
Brilliance China Automotive Holdings Ltd.	5.6		190,949	5.8		180,704
Peninsula Land Ltd.	5.6		6,239	4.4		10,024
Univanich Palm Oil PCL, fgn.	5.0		9,666	N/A		N/A
Faysal Bank Ltd.	5.0		3,718	5.0		2,876
Polnord SA	4.4		3,165	4.7		7,087
Kiatnakin Bank PCL, fgn.	3.5		16,859	3.5		16,317
Guangzhou Automobile Group Co. Ltd., H	3.5		48,116	3.5		58,892
MCB Bank Ltd.	3.5		39,007	2.6		35,677
Hyundai Development Co.	3.5		36,197	3.5		47,694
VTech Holdings Ltd.	3.3		66,825	3.4		58,488

* This is the percentage of the class of security held by TEMIT.

15 Contingent liabilities

No contingent liabilities existed as at 31 March 2012 or 31 March 2011.

16 Financial commitments

There are no financial commitments at 31 March 2012 or 31 March 2011.

17 Post Balance Sheet events

The only material post balance sheet event is in respect of the proposed dividend, which has been disclosed in Note 11.

This preliminary statement, which has been agreed with the Auditors, was approved by the Board on 18 June 2012. The financial information set out above does not constitute the Company's statutory accounts. This Preliminary Statement has been prepared on the basis of the accounting policies as set out in the most recently published set of annual financial statements.

The statutory accounts for the financial period ended 31^st March 2011 have been delivered to the Registrar of Companies, received an audit report which was unqualified, did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section 498(2) and (3) of the Companies Act 2006.

The statutory accounts for the period ended 31 March 2012 received an audit report which was unqualified, did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section section 498(2) and (3) of the Companies Act 2006, and will be delivered to the Registrar of Companies.

The Annual Report and Accounts will be mailed to Shareholders shortly. Copies will be posted to the website www.temit.co.uk and may also be requested during normal business hours from Client Dealer Services at Franklin Templeton Investment Management Limited on freephone 0800 305 306.

For information please contact Client Dealer Services on freephone 0800 305 306 or Jane Lewis or Matthew Wilson at Winterflood Investment Trusts (Corporate Broker) on 020 3100 0000.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR BKCDDKBKDQAD

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Templeton Emerging Markets Inv Trust (TEM)

Thursday, 23rd May 2024

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