Interim Results

Templeton Emerging Markets IT PLC 11 December 2002 PRELIMINARY ANNOUNCEMENT TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC ("TEMIT") ("the Company") Interim Results for the six months to 31 October 2002 The Company today announced its interim results for the period to 31 October 2002. CHAIRMAN'S STATEMENT To Shareholders: At 31 October 2002, your Company had net assets of £522.4 million, compared with £666.2 million at 30 April 2002. Undiluted net asset value per share at the half-year stage was 114.76 pence, a decrease of 21.5% for the six months under review. The share price at 31 October 2002 was 92.25 pence, compared with 125.0 pence at the beginning of the period, a decrease of 26.2%. Over the same period, the MSCI Emerging Markets Free Index, on a total return basis, declined 18.9%, and the S&P/IFCI Composite Index decreased by 18.1%. The Manager's Report and Portfolio Review (pages 10 to 12) give a detailed analysis of the Company's performance over the period. At period-end, 95.9% of the Company's net assets were invested in equities, with the remaining 4.1% being held in liquid assets. The general policy of the Board is to be fully invested. Global economic uncertainty contributed to increased investor risk aversion during the reporting period. Thus, many equity markets worldwide experienced considerable volatility and performed poorly. Emerging markets' positive performance in the first four months of 2002 were substantially reversed during the six-month period as financial markets reflected concerns over the sustainability of an economic recovery combined with increased uncertainty stemming from political volatility in certain countries. However, the economic fundamentals continued to benefit from low global interest rates and access to international capital markets. Additionally, commodity prices remained relatively strong, particularly oil, despite weaker-than-expected economic data from neighbouring developed economies. Last year, the Directors renewed the authority from Shareholders to buy back shares early in the six-month period, resulting in 388,215 shares being bought back at a cost of £442,565. The mathematical effect of such action has been modestly positive on net asset value. Since the period reported on, the Board has appointed Sir Brian Williamson CBE as a UK based independent Director. The Honourable Nicholas F Brady 11 December 2002 STATEMENT OF TOTAL RETURN For the six months to 31 October 2002 Revenue Capital Total £000 £000 £000 (unaudited) (unaudited) (unaudited) Income (Losses)/gains on investments - (147,368) (147,368) Investment income 9,555 - 9,555 Interest income 435 - 435 -- -- -- 9,990 (147,368) (137,378) -- -- -- Expenses Administrative expenses (4,335) - (4,335) -- -- -- Profit before taxation 5,655 (147,368) (141,713) Taxation (1,687) - (1,687) -- -- -- Profit after taxation 3,968 (147,368) (143,400) -- -- -- Dividend in respect of equity - - - shares -- -- -- Total return for the period 3,968 (147,368) (143,400) -- -- -- Return per Ordinary Share 0.87p (32.38p) (31.51p) Note: The capital element of returns is not distributable. The revenue column of this statement is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. STATEMENT OF TOTAL RETURN (continued) For the six months to 31 October 2001 Year to 30 April 2002 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 (unaudited) (unaudited) (unaudited) (audited) (audited) (audited) - (77,469) (77,469) - 45,497 45,497 7,440 - 7,440 16,498 - 16,498 3,215 - 3,215 4,331 - 4,331 -- -- -- -- -- -- 10,655 (77,469) (66,814) 20,829 45,497 66,326 -- -- -- -- -- -- (4,407) - (4,407) (8,872) - (8,872) -- -- -- -- -- -- 6,248 (77,469) (71,221) 11,957 45,497 57,454 (1,946) - (1,946) (3,676) - (3,676) -- -- -- -- -- -- 4,302 (77,469) (73,167) 8,281 45,497 53,778 -- -- -- -- -- -- - - - (5,695) - (5,695) -- -- -- -- -- -- 4,302 (77,469) (73,167) 2,586 45,497 48,083 -- -- -- -- -- -- 0.94p (16.98p) (16.04p) 1.82p 9.97p 11.79p Dividend Policy In accordance with the Company's stated policy, no interim dividend is declared for the period. (A dividend of 1.25 pence per Ordinary Share was paid for the year ended 30 April 2002.) BALANCE SHEET As at 31 As at 31 As at 30 October 2002 October 2001 April 2002 Restated £000 £000 £000 (unaudited) (unaudited) (audited) Fixed assets Investments 501,164 551,922 669,877 -- -- -- Current assets Debtors 1,214 17,654 9,109 Cash 22,549 2,195 - -- -- -- 23,763 19,849 9,109 Creditors: amounts falling due (2,458) (25,884) (12,449) within one year -- -- -- Net current assets/(liabilities) 21,305 (6,035) (3,340) Total assets less current 522,469 545,887 666,537 liabilities Provision for liabilities and (97) (21) (320) charges -- -- -- Net assets 522,372 545,866 666,217 -- -- -- Capital and reserves Called-up share capital 113,796 114,081 113,893 Share premium account 275,307 275,308 275,307 Capital redemption reserve 3,940 3,655 3,843 Capital reserve - realised 189,074 205,128 199,848 Capital reserve - unrealised (79,579) (69,888) 57,460 Revenue reserve 19,834 17,582 15,866 -- -- -- Shareholders' funds (all equity) 522,372 545,866 666,217 -- -- -- Net asset value per ordinary share (in pence) - Basic 114.76 119.62 146.24 - Diluted n/a n/a 144.00 Restated Figures for the six months to 31 October 2001 To conform with general market practice fixed income investments were reclassified from current asset investments and included within fixed asset investments at year end 30 April 2002. The net assets and shareholders' funds were unaffected. The impact of the reclassification on the Balance Sheet as at 31 October 2001 was as follows: £000 -Increase in fixed asset investments 200,774 -Decrease in current asset investments 200,774 CASH FLOW STATEMENT For the six For the six For the months to months to year to 31 October 2002 31 October 2001 30 April 2002 Restated £000 £000 £000 (unaudited) (unaudited) (audited) Reconciliation of operating profit to net cash inflow from operating activities Net return on ordinary activities before taxation 5,655 6,248 11,957 (Increase)/decrease in debtors (48) 17 15 Decrease/(increase) in accrued 2,331 (3,309) 1,119 income (Decrease) in creditors (292) (262) (29) -- -- -- Net cash inflow from operating 7,646 2,694 13,062 activities -- -- -- Cash flow statement Net cash inflow from operating 7,646 2,694 13,062 activities Taxation (2,227) (692) (2,778) Financial investments 24,364 (10,312) (20,984) -- -- -- 29,783 (8,310) (10,700) Equity dividends paid (5,695) (5,704) (5,704) -- -- -- 24,088 (14,014) (16,404) Financing (445) 2 (897) -- -- -- Increase/(decrease) in cash 23,643 (14,012) (17,301) -- -- -- Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash in 23,643 (14,012) (17,301) the period Opening net funds (1,094) 16,207 16,207 -- -- -- Closing net funds 22,549 2,195 (1,094) -- -- -- The unaudited interim financial information, which does not comprise full statutory accounts in terms of the Companies Act 1985, has been prepared on the basis of the accounting policies in the statutory accounts for the year ended 30 April 2002. The statutory accounts, which have been filed with the Registrar of Companies, received an unqualified audit report and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. Restated figures for the six months to 31 October 2001 To conform with general market practice fixed income investments were reclassified from current asset investments and included within fixed asset investments at year end 30 April 2002. The net assets and shareholders' funds were unaffected. The impact of the reclassification on the Cash Flow Statement for the six months to 31 October 2001 was as follows: £000 -Decrease in net cash inflow from operating activities 63 -Decrease in Financial investments 155,174 -Decrease in Opening net funds 45,429 -Decrease in Foreign exchange translation and other 108 differences -Decrease in Closing net funds 200,774 GEOGRAPHIC ASSET DISTRIBUTION Country As at 31 October 2002 As at 30 April 2002 China 12.04% 8.37% South Africa 11.15% 10.20% Korea (South) 9.72% 10.39% Thailand 7.89% 6.18% Taiwan 6.61% 7.00% Mexico 6.18% 7.88% Turkey 5.53% 5.22% India 5.43% 4.36% Hungary 4.94% 4.02% Brazil 4.36% 4.70% Hong Kong 3.34% 7.89% Russia 3.26% 3.80% Poland 2.52% 1.75% Austria 1.69% 0.61% Philippines 1.60% 1.33% Argentina 1.47% 2.47% Czech Republic 1.28% 0.55% Portugal 1.09% 0.90% Singapore 1.07% 1.02% Croatia 0.93% 0.72% Greece 0.89% 1.55% Indonesia 0.88% 4.31% Israel 0.84% 0.00% Estonia 0.55% 0.58% Egypt 0.51% 0.56% Malaysia 0.17% 1.07% United Kingdom 0.00% 3.12% Liquid Assets 4.06% -0.55% TOP TWENTY HOLDINGS As at 31 October 2002 Market Value Company Country Industry £000 SAB Miller Plc South Africa Brewers 19,989 China Petroleum & Chemical China Integrated Oil & Gas 19,698 Corp. Nedcor Ltd South Africa Banks 16,083 Siam Commercial Bank Public Co. Thailand Banks 13,896 Ltd Polski Koncern Naftowy Orlen SA Poland Oil & Gas Refining & 13,143 Marketing Akbank Turkey Banks 12,677 Tupras-Turkiye Petrol Turkey Oil & Gas Refining & 11,894 Rafineleri AS Marketing MOL Magyar Olaj-Es Gazipari Rt. Hungary Integrated Oil & Gas 11,688 KT Corp. South Korea Integrated 11,015 Telecommunication Services Gedeon Richter Ltd Hungary Pharmaceuticals 10,923 Cemex SA Mexico Construction Materials 10,763 Korea Electric Power Corp. South Korea Electric Utilities 10,224 Dairy Farm International Hong Kong Food Retail 9,125 Holdings Ltd Kimberly Clark de Mexico SA Mexico Household Products 8,558 China Merchants Holdings China Industrial Conglomerates 8,552 International Co. Ltd San Miguel Corp., B Philippines Brewers 8,357 Siam Cement Public Co. Ltd Thailand Construction Materials 8,273 Cosco Pacific Ltd Hong Kong Marine Ports & Services 8,223 OMV AG Austria Integrated Oil & Gas 8,216 ITC Ltd India Tobacco 8,023 -- Top 20 Holdings - 43.90% of Net 229,320 Assets -- INVESTMENT REVIEW This is the semi-annual report for the Templeton Emerging Markets Investment Trust Plc covering the six-month period ending 31 October 2002. Overview Just a year after the terrorist attacks in the US, the world was once again visibly shaken by terrorist bomb blasts. These events once again heightened the awareness of terrorism and is resulting in greater cooperation across nations in the battle against it. Inevitably emerging markets have experienced great volatility over the past six months. Political uncertainty as a result of elections in Brazil and Turkey also led investors to adopt a more cautious approach. Asia During the past six months most Asian countries, and for that matter other emerging markets, saw their stock market and economic performances disconnect. While weak global sentiment took its toll on Asian markets, macroeconomic data continued to support the recovery of many economies. Strengthening fundamentals as well as a stable political arena have accelerated Thailand's economic recovery. Lower interest rates, firmer currencies, rising exports, a construction boom and strong domestic consumer markets have all played their part. The economy expanded 5.1% year on year and 1.5% during the second quarter, the strongest expansion since the second quarter of 2000. South Korea continued to record strong growth rates and attract foreign capital inflows. Second quarter GDP grew 6.3% on a comparable basis. Thus Foreign Direct Investment into the country was up 17.9% in the first eight months of the year with the US being the largest investor accounting for about 60% of the total. Discussions between South Korea and Chile were completed in October as both countries consented to a free-trade agreement which would eliminate tariffs on the trade of major agricultural and industrial products. After the parliamentary elections in August, attention has now shifted to the upcoming presidential elections in December 2002. China continued to be the fastest growing economy globally as its third quarter GDP rose 8.1% on an annual basis mainly due to strengthening export growth, high government expenditure and strong consumer demand. China's attraction to multinational companies also stimulated Foreign Direct Investment into the mainland to increase substantially. These inflows increased 22.6% year on year to US$39.6 billion in the first nine months of the year. The United Nations expects China to overtake the US as the largest recipient of Foreign Direct Investment in the world. In addition, President Jiang Zemin's visit to the US led to the establishment of business agreements worth US$4.7 billion. On the political front, the 16th Communist Party Congress was held in November 2002. Going forward, President Jiang Zemin emphasized the need for continued political reforms, government accountability, efforts on combating corruption and the continued reform of state-owned enterprises. Economic policy for the next five years was also discussed. As widely expected, Vice-President Hu Jintao succeeded President Jiang Zemin as the head of Communist Party. Latin America Months of political uncertainty in Brazil finally came to an end with the victory of opposition party candidate, Luiz Inacio Lula da Silva over government candidate Jose Serra in the second round elections on 27 October. Expectations of such a result had already led the stock market to recover during October. Lula's new government is expected to take office in January 2003. We expect the market to continue its recovery as investor sentiment improves and market relief allows the currency to strengthen over the next few months. The International Monetary Fund (IMF) concluded its consultation on Mexico's economy during October. The IMF supported the country's prudent fiscal and monetary policies but cautioned against the possible impact of slowing growth in the US. We believe that Mexico's efforts to improve corporate governance and protection of minority rights should lead to great foreign investment into Mexico. The decline in the US stock markets may prove beneficial for Mexico as its proximity provides a means of diversification for US investors. In Argentina, concerns continued to focus on the country's shattered financial system. The IMF once again delayed its third payment by deferring the US$2.7 billion due in September 2002 for twelve months. Southern/Eastern Europe EU convergence continued to push most economies towards implementing reforms and attaining fiscal and economic goals. Improving corporate governance in countries such as Russia as well as its continued economic recovery continues to provide attractive investment opportunities. In Turkey, numerous resignations from the ruling government led coalition leaders to call for early elections in November 2002. Results showed the Justice & Development Party (AKP) with 34% of the votes and the Republic People's Party (CHP) with 19%. Since none of the other parties obtained the minimum 10% to gain seats in parliament, Turkey will be ruled by a two-party parliament. On the EU accession front, while the EU Commission has yet to issue Turkey with a specific date for accession, its government continues to work towards the accomplishing EU goals. A major step was that parliament's vote in favor of abolishing the death penalty. South Africa The World Summit on Sustainable Development was held in Johannesburg, South Africa during August. Increased exposure of the country to the press as a consequence of the Summit could result in greater tourism, which would lead to increased fund inflows. Second quarter GDP grew 3.1%, compared to 2.2% in the first quarter. The government forecasts 2002 GDP growth to be 2.3%. Latest data showed inflation persisted in South Africa, increasing the likelihood of another interest rate hike. The South Africa Reserve Bank has already increased rates by four percentage points this year in an attempt to reduce inflation. September CPIX (inflation excluding mortgage bond rates) increased to 11.8% from 10.8% in August. Portfolio Changes & Investment Strategies As a result of political uncertainty in Brazil and Turkey, stock prices corrected due to weak investor confidence rather than poor fundamentals. Within such an environment, we took the opportunity to increase our holdings in both countries. We expect market performances to improve in the future as concerns subside. In fact, both markets already began recovering during October with the MSCI Brazil and Turkey indices returning 23.5% and 14.6%, respectively, in US dollar terms. In Asia, the Company locked in profits on Korea's Samsung SDI after its substantial price appreciation early this year. We also realised our holdings in Hong Kong's Cheung Kong reflecting the city's weak property market prospects. In addition we undertook selective sales of stocks we deemed fully valued in Malaysia, Russia and Mexico. The Company's investments in Indonesia were adversely impacted by the bomb blast in Bali, but valuations of selective stocks remained attractive. We have maintained some investments there and will monitor the situation closely. The Company's exposure to India increased mainly due to its purchase of ITC Limited. The company has a market share of about 70% of the country's cigarette industry and a leaf trading division that exports leaf tobacco and a very strong sales distribution network. Additionally, ITC operates a chain of hotels, many of them leased and owned through subsidiaries and affiliates. The company is also diversifying into the area of information technology. We favour this company due to its near monopoly position and strong brand names. EU aspirations continued to push many European countries towards implementing key reforms and recording positive macroeconomic performances. As a result we have been searching the region for value stocks. During the period, we made selective purchases in Hungary, Austria, the Czech Republic, Croatia and Poland. A sharp correction in the technology sector provided us with an attractive entry point into Israel as the company purchased Checkpoint Software, a company that was trading at attractive valuations and was, in our opinion, oversold. As of end-October, the top three sectors were Banks, Oil & Gas interests and Brewers. Within the top 10 holdings, Nedcor (South Africa), PKN (Poland), MOL (Hungary) and Turkish companies, Akbank and Tupras replaced Telekomunikasi (Indonesia), Cemex (Mexico), Goldfields (South Africa) and Korean companies, Samsung SDI and KEPCO. Outlook With concerns over Latin American markets subsiding, we expect investor attitudes towards emerging markets in general to improve in the future. While economic performances in many emerging markets have continued positively over the year, weak investor sentiment has led market performance to dissociate from economic performances. We believe that this may not be the case in the future and over the longer-term, expect investors to appreciate the benefits of investing in emerging markets. Thus, we will continue to position the Company to benefit from the expected recovery ahead. Thank you for your continued interest and support. Dr. Mark Mobius, Ph.D. Fund Manager 11 December 2002 Copies of the Interim Report will shortly be sent to shareholders. For information please contact David Bliss/Will Rogers at UBS Warburg Ltd (0207 567 8000). No representation or warranty is made by UBS Warburg Ltd as to the accuracy or completeness of the information contained in this announcement and no liability will be accepted for any loss arising from its use. These figures have been prepared by Franklin Templeton Investments and are their sole responsibility. End of Announcement. This information is provided by RNS The company news service from the London Stock Exchange

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