Preliminary Announcement
Templeton Emerging Markets IT PLC
02 July 2004
TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLC
("TEMIT") ("the Company")
YEAR TO 30 APRIL 2004
The Company today announced its annual results for the year to 30 April 2004.
CHAIRMAN'S STATEMENT
At 30 April 2004, your Company had net assets of £778.46 million, compared with
£595.49 million at 30 April 2003.
At year-end, 98.7% of the Company's net assets were invested in equities, with
the remaining 1.3% being held in liquid assets. The general policy of the
Investment Manager is to be fully invested.
Undiluted net asset value per share at 30 April 2004 was 171.01 pence, an
increase of 30.7% from 30 April 2003. The share price at 30 April 2004 was
144.00 pence, compared with 107.25 pence at the beginning of the fiscal year, an
increase of 34.3%. Over the same period, the MSCI Emerging Markets Index, on a
total return basis, rose 38.4%, and the S&P/IFCI Composite Index increased
40.2%. The Manager's Report and Portfolio Review gives a detailed analysis of
the Company's performance over the year.
It is with great satisfaction that we have received the news that TEMIT was
chosen as the Best Large Trust 2003 by Investment Trust Magazine and tipped as
one of the "15 to win in 2004". It confirms TEMIT's position as the 10th largest
Investment Trust in the UK and maintains its position as the UK's largest
Emerging Markets Trust. Our congratulations go to Mark Mobius and his team for
this achievement.
Most emerging markets recorded strong stock market performances during the year
under review as investors regained confidence. Of the four primary emerging
markets regions, Latin America performed best as political and financial issues
that engulfed the region during 2003 subsided. Brazil and Argentina experienced
renewed investor interest as their governments strived to implement key
structural reforms and sealed agreements with the International Monetary Fund.
Asian markets benefited from strong macroeconomic data and diminished investor
concerns over the avian flu outbreak. The US dollar's decline contributed to the
South African rand's strength, which helped contain inflation. Eastern European
markets continued an upward trend as European Union candidates within the region
worked toward the fulfilment of accession goals. To the south, investor
confidence in Turkey seemed to remain unshaken despite November 2003's terrorist
attacks. In fact, Turkey was the top-performing emerging market during the year
under review.
Last year, the Directors renewed the authority to buy back shares. During the
year no shares were bought back. At 30 April 2004, the discount was 15.8% of
TEMIT's quoted share price to its underlying net asset value compared with 18.0%
at 30 April 2003. The Board of Directors wish to be in a position to repurchase
shares should this be in the best interests of the Company and are seeking to
renew the authority to buy back up to 15.0% of the issued share capital.
Profit after tax was £13.16 million, an increase of 70.0% over the year. The
Board of Directors have proposed a cash dividend of 2.25 pence per Ordinary
Share. The dividend will be paid on 22 September 2004 to shareholders on the
register at the close of business on 27 August 2004, subject to the approval of
shareholders at the Annual General Meeting, which will be held on 21 September
2004.
The portfolio is managed using the value style of investing. This requires a
detailed research of stocks, and we purchase only those trading at less than
their assessed value. Since inception, the net asset value of TEMIT has risen by
393.8% in sterling terms compared with a comparable rise of 203.4% for the S&P/
IFCI Composite Index and 231.0% for the MSCI Emerging Markets Index.
Aside from the very favourable results achieved by the portfolio managers of the
Company during the year under review, this has been a significant period for
TEMIT. This is due to a combination of new regulations, guidelines on corporate
governance and the steps the Board and management have taken to make sure that
the Company complies with them. In addition, the Company has also made
preparations for the capital increase which is expected from the exercise of the
warrants outstanding, the final date for which is 30 September 2004.
Shareholders will be invited to vote at the Annual General Meeting to take place
on 21 September 2004 on the continuation of the Company as an investment trust.
The Directors are delighted to recommend that you vote in favour of such
continutation.
New rules on corporate governance have meant that substantial alterations were
seen fit by us to be made in the composition of the Board of Directors, bearing
in mind such factors as time of service, and the requirement that at least half
of the Board (excluding the Chairman) should be independent and that no more
than one current or recent employee of or professional advisor to the Investment
Manager should serve on the Board of Directors and any such Director should
offer himself for re-election annually. On 15 December 2003, Sir Richard Brooke,
Martin Flanagan, Richard Frank, Sir John Shaw and Sir Robert Brian Williamson
resigned from the Board.
On 15 December 2003, I was appointed to replace Sir Richard Brooke as Chairman
of the Company until the next Annual General Meeting, which is scheduled to take
place on the 21 September 2004. The Nomination and Remuneration Committee met on
15 December 2003 to recommend for election the following new Board members: Sam
L Ginn, Peter C Godsoe, Sir Ronald Hampel and Andrew S B Knight and these
appointments were approved by the Board on 15 December 2003. Subsequently, on 21
April 2004, the Committee nominated Peter A Smith for election to the Board.
This nomination was approved by written resolution of the full Board on 26 April
2004.
Following the conclusion of the Annual General Meeting, I shall step down as
Chairman and it is the Board's intention to elect Sir Ronald Hampel to succeed
me. I shall remain on the Board as a Non-Executive Director. As indicated in the
Directors' Report, it is proposed that Sir Peter Burt be elected as a director
with effect from 1 October 2004.
I would like to take this opportunity to thank our departing colleagues for
their friendship, loyalty and dedication to the Company, as well as their
important contribution to its success, and their defence of the shareholders'
interest at all times. I am also confident that the new directors, whose very
distinguished resumes are included in this Annual Report, will continue in this
work, and help to maintain TEMIT's excellent reputation in the marketplace.
In reconstituting the Board, we have been mindful of expanding the amount of
detail in the biographical synopses of all directors so that you, the
shareholders can feel reassured that your best interests are being preserved. We
have already put in place and intend to perfect mechanisms for formally
assessing Board members on a yearly basis, also identifying any training that
may be required. Initially Board members will participate in training on the
latest corporate governance rules and guidelines, with particular reference to
investment trusts.
Geoffrey A Langlands
2 July 2004
Indices above are shown on a total return basis in GBP. Sources: Franklin
Templeton Investments and Standard & Poor's.
MANAGER'S REPORT & PORTFOLIO REVIEW
DR J B MARK MOBIUS 30 APRIL 2004
This is the Annual Report for the Templeton Emerging Markets Investment Trust
PLC for the year ended 30 April 2004.
Performance Attribution Explanation
Since inception, the Company has outperformed the MSCI Emerging Markets Index.
Over the period the Company returned 393.8%, compared to MSCI's 231.0% return.
During the year ended 30 April 2004, the Company returned 30.7%, while the MSCI
Emerging Markets Index and S&P/IFCI Composite Index gained 38.4% and 40.2%,
respectively. The Company's performance was enhanced mainly by its overweight
position in China, Singapore, Thailand and Hong Kong. Positive attribution was
also derived from stock selection in Israel, China and Hong Kong. However, the
positions in South Korea, Hungary and the Philippines did not perform
satisfactorily and hurt performance. Going forward, we believe that our
disciplined, value-orientated approach will continue to generate superior
returns for our shareholders.
Difference between NAV performance and benchmark performance
Country Asset Stock Selection Currency Effect Total
Allocation
----------- --------- --------- --------- --------
% % % %
Cash -0.75 - - -0.75
Unassigned 0.09 - - 0.09
Argentina -0.05 0.08 0.01 0.04
Austria -0.23 - - -0.23
Bermuda -0.01 - - -0.01
Brazil -0.10 -1.08 -0.13 -1.31
Chile 0.12 - - 0.12
China 0.86 0.46 0.91 2.23
Columbia -0.07 - - -0.07
Croatia -0.31 - - -0.31
Czech Republic -0.01 0.05 0.04 0.08
Denmark 0.20 - - 0.20
Egypt 0.23 -0.14 -0.30 -0.21
Greece 0.55 - - 0.55
Hong Kong -0.32 0.47 0.61 0.76
Hungary -0.26 -0.05 -0.25 -0.56
India -0.22 0.24 -0.42 -0.40
Indonesia -0.30 0.46 -0.41 -0.25
Israel 0.25 0.34 -0.32 0.27
Israel -
Domestic -0.01 - - -0.01
Japan 0.02 - - 0.02
Korea -0.02 - - -0.02
Malaysia 0.64 0.08 -0.11 0.61
Mexico 0.19 -0.85 0.32 -0.34
Morocco 0.01 - - 0.01
Pakistan -0.01 - - -0.01
Peru -0.01 0.06 -0.08 -0.03
Philippines -0.02 -0.16 -0.24 -0.42
Poland -0.03 0.05 - 0.02
Portugal -0.13 - - -0.13
Russia -0.26 0.22 -0.27 -0.31
Singapore 0.97 - - 0.97
South Africa 0.83 -2.19 1.45 0.09
South Korea -0.32 -3.02 0.86 -2.48
Taiwan 0.05 -0.57 0.32 -0.20
Thailand 1.38 -0.16 -0.43 0.79
Turkey 1.39 -0.33 -1.15 -0.09
United Kingdom 7.16 -0.02 -9.57 -2.43
United States 1.10 -0.06 -2.11 -1.07
Venezuela -0.03 - - -0.03
Total 12.57 -6.12 -11.27 -4.82
Portfolio Changes
During the year under review, investments were mainly undertaken in Asia, Europe
and Africa as the Company continued to find value stocks trading at attractive
valuations. In Asia, key purchases included South Korean companies, CJ Corp.,
the country's largest integrated food producer, SK Corp., a major player in
South Korea's refining industry, and POSCO, one of the world's largest steel
producers. Net sales were undertaken in India and Taiwan, as some valuations
grew expensive.
European additions were seen mainly in Denmark, Greece, Croatia and Turkey,
while sales were undertaken in Austria and Russia as sale targets were reached.
Major buys included Carlsberg; a major brewing group with significant exposure
to Eastern Europe and Asia; OTE Hellenic Telecom, the principal integrated
telecommunication services provider in Greece; Pliva, the largest pharmaceutical
company in Central and Eastern Europe; and Koc Holdings, one of Turkey's leading
diversified conglomerates. In South Africa, the Company invested in Nedcor, one
of the four major banks in South Africa.
In Latin America, the Company increased its holdings in Brazil, while
undertaking selective sales in Mexico and Argentina. Investments in the region
included integrated electric utilities, Copel and Eletrobras, while the Company
divested its interests in Cemex, allowing it to realise gains. As of 30 April,
the largest portion of the Company's holdings could be found in China-Hong Kong,
followed by South Korea, Thailand and Brazil. The Company's top three sectors
were oil & gas, commercial banks and electric utilities.
Overview
Emerging markets recorded good stock market performances for the most part of
the year, as investors regained confidence and Asian markets recovered from the
aftermath of the avian flu. However, concerns about an overheating economy in
China, rising interest rates in the US and the worsening situation in Iraq
combined to drive emerging markets lower in April. Despite these issues, over
the longer term we believe that emerging markets will continue to command
greater attention due to (1) an improved outlook for global economic growth, (2)
good growth prospects in the emerging markets, (3) the undervaluation of
emerging markets companies versus developed markets companies, (4) improving
outlook for the emerging markets as a result of continued reforms being
implemented, (5) undervalued currencies vis-a-vis the US Dollar and the Euro,
(6) changed differential perceptions of emerging market risk in the wake of the
Enron and Worldcom scandals in the US, and (7) increased dividends being paid by
emerging market companies.
Asia
China's economy continues to record very high growth, growing 9.7% year-on-year
in the first quarter of 2004 and 9.1% in 2003. China attracted record Foreign
Direct Investment inflows of US$53.5 billion in 2003, up 1.4% year-on-year, as
the economy continued to interest foreign investors. The trend continued this
year with inflows registering US$14.1 billion in the first quarter of 2004, an
increase of 7.5% year-on-year. Significant investments were made in factories,
real estate and other fixed assets. Growing consumer and corporate demand
resulted in increased imports, which led to a US$8.4 billion trade deficit in
the first three months of the year. Exports were up 34.2% year-on-year to
US$115.7 billion, while imports rose 42.3% to US$124.1 billion. In an effort to
prevent overheating, measures were implemented to cool down the economy in April
2004. These included raising the reserve requirements at some commercial banks,
(mainly those with low capital adequacy ratios and high non-performing loans),
from 7% to 7.5% and capping bank lending for the funding of steel, aluminium and
cement projects. The introduction of a more flexible exchange rate was also
discussed where the currency would be allowed to trade in a wider range against
a basket of currencies.
In South Korea, President Roh Moo-hyun's impeachment, the first in the country's
history, in March, pushed the country into turmoil. Roh's presidential powers
were immediately suspended, with the Constitutional Court now reviewing whether
the impeachment should be voided or Roh dismissed. In the interim, Prime
Minister Koh Gun took over as acting president. Soon after, the parliamentary
elections saw the Uri Party, a progressive liberal party backed by the suspended
President Roh Moo-- hyun, win a majority in parliament with 152 seats in the
299-seat National Assembly. The party's policies include promoting free market
economic policies, maintaining a strong relationship with the US and "cleaning
up" politics. Uri's victory will likely influence the impeachment hearing
against Roh and likely result in his reinstatement according to market
commentators. Economically, South Korea continued to release positive
macroeconomic data, with the central bank expecting 2004 GDP to grow by up to 6%
mainly due to strengthening exports. However, weak domestic demand continues to
be a concern.
In India contrary to market expectations, the Congress Party and its allies will
form the next government, as voters ousted the BJP Party in the 2004 General
Elections in April-May. The unexpected scale of their victory has to an extent
surprised this new political alliance, which has beaten the BJP/NDA alliance by
a wide margin. Dr. Manmoham Singh was formally sworn in as India's 13th prime
minister in May as Congress Party leader, Sonia Gandhi announced that she would
not accept the position. Conservative projections from the Finance Ministry
indicate a GDP growth of 8.1% for the fiscal year 2003-2004, more than double
the 4% recorded the previous year. Strong agriculture output, which showed a
9.1% increase, compared to a 5.2% decline in the previous year, and an improving
manufacturing sector supported growth. The external sector also recovered with
exports and imports up 13.5% and 24.9%, respectively, in the first nine months
of the fiscal year 2003-2004.
Thailand's economic growth has continued to strengthen year after year since the
crisis in 1997/8 with this year expected to be even stronger. The World Bank
expects 2004 GDP to grow 7.2%, with government expectations for first quarter
GDP to surpass 7%, while 2003 GDP grew 6.7%, due to strong exports and consumer
spending. Citing the country's improved external position and public finances as
well as strong economic growth, Fitch Ratings raised its outlook on Thailand's
long-term foreign and local currency sovereign ratings to positive from stable.
Six Asian countries, Thailand, India, Myanmar, Sri Lanka, Bhutan and Nepal all
agreed to create a free trade zone by 2017. The trade bloc would allow regional
economies to better their trade relations and lead to greater cooperation
between the nations.
Latin America
Brazil, the region's top performer in 2003, due to President Luiz Inacio Lula da
Silva's commitment to reforms and improving macroeconomic fundamentals, took a
breather in 2004 with investors locking in gains. A 0.2% contraction in 2003 GDP
resulting from a 3.3% fall in household consumption dampened confidence in the
country's recovery. However, the country's trade sector continued to provide
good news with first quarter exports growing 29.3% to US$19.5 billion and
imports increasing 18.1%.
Lagging the region in 2003, Mexico's stock market outperformed in the first four
months of 2004. Supported by an improvement in the US economy, Mexico benefited
from greater external demand, higher exports and strong retail sales. Mexico's
trade balance improved in 2003, as the trade deficit fell 29% year-on-year to
US$5.9 billion. Exports rose 2.8% year-on-year to US$160.5 billion, while
imports rose 1.3% to US$171.0 billion. For the first quarter, exports were up
10.6% year-on-year while imports rose 11.5%. Exceeding market expectations,
fourth quarter GDP rose 2% year-on-year, resulting in full year growth of 1.3%
year-on-year.
Eastern Europe
Eastern European stock markets recorded strong performances as Central and
Eastern European economies (CEE) implemented structural reforms to align their
economies with their western counterparts. On 1 May 2004, Cyprus, the Czech
Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and
Slovenia joined the European Union (EU), expanding the bloc to include 25 states
and a population of 450 million. The countries offer attractive investment
opportunities when comparing them to "old Europe". Two most important factors
differentiating them from current EU members (apart from obvious facts such as
lower GDP/capita and living standards) are cheap well-educated labour and much
lower corporate taxes. Average labour costs are at least 50% below the lowest EU
levels in Portugal or Greece and around 80% lower than in Germany or the
Netherlands. Also there are significant differences in corporate tax levels that
benefit the new accession countries and companies incorporated there. With no
trade barriers, borders or customs with the EU from 1 May, CEE companies will
enjoy lower export related costs and better margins on their EU exports.
Moreover, exports to the EU from almost all accession countries have been
growing strongly over the last two years despite the slowdown in the EU. As a
result we have seen much faster GDP growth in CEE than in the Eurozone.
South Africa
In South Africa, general elections were held on 14 April 2004, where as widely
expected, the African National Congress (ANC) emerged victorious taking 70% of
the votes, giving it 279 seats in the 400-seat Parliament. The opposition
Democratic Alliance (DA) won 50 seats, while the Inkatha Freedom Party (IFP)
will have 28 seats. In line with his party's overwhelming victory, President
Thabo Mbeki was formally re-elected for a second term in office. Aimed at
uniting emerging markets in trade talks and international forums, South Africa,
India and Brazil signed a "framework agreement". The 2003 GDP growth slowed to
1.9%, compared to 3.6% in 2002 as a 28% appreciation in the Rand during the year
took a toll on exports. On an annualised basis, fourth quarter GDP figures did
show an improvement, growing 1.1% quarter-on-quarter compared to 0.5% in the
preceding quarter, indicating a bottoming out of the economy.
Outlook
Visible with the expansion of the EU trade bloc, emerging markets continue to
benefit from greater globalisation. We expect companies with attractive
valuations, improved corporate transparency and good management, to do well
going forward. Countries with governments who are friendly to businesses,
particularly foreign investors who encourage such investments with preferential
taxation as well as good infrastructure will attract the lion's share of foreign
capital. As such we will continue to build positions in stocks we deem to be
attractively valued and stand to benefit from the global recovery ahead.
Manager
Templeton Asset Management Ltd. ("TAML"), part of the Franklin Templeton Group
(with US$343.8 billion in assets under management as of 30 April 2004), has over
17 years of investment experience in emerging markets and approximately US$11.6
billion (as of 30 April 2004) in assets under management. TAML currently has 23
portfolio managers and analysts located in 11 emerging markets, Moscow (Russia),
Warsaw (Poland), Istanbul (Turkey), Johannesburg (South Africa), Hong Kong,
Singapore, Shanghai (China), Seoul (South Korea), Mumbai (India), Rio de Janeiro
(Brazil), and Buenos Aires (Argentina). Moreover, TAML's Emerging Markets Team
receives support from approximately 6,500 employees of Franklin Resources Inc.,
its ultimate parent company.
Thank you for your continued interest and support.
J Mark Mobius, Ph.D.
2 July 2004
PORTFOLIO ANALYSIS by geography
Geographical analysis
(by country of incorporation)
As at 30 April 2004
------------------------------- -------- ----------
Country Cost Market Value
£'000 £'000
------------------------------- -------- ----------
China-Hong Kong
China Petroleum & Chemical Corp., H 25,663 41,546
PetroChina Co., Ltd., H 8,453 15,010
Huaneng Power International Inc., H 5,660 14,418
China Merchants Holdings (International) Co., Ltd. 8,902 12,852
Datang International Power Generation Co., Ltd. 6,205 11,785
Cosco Pacific Ltd. 5,698 8,738
China Mobile (Hong Kong) Ltd., fgn. 9,133 7,095
Citic Pacific Ltd. 9,266 5,645
Guangdong Electric Power Development Co., Ltd., B 4,011 3,694
China Oriental Group Co., Ltd. 313 188
-------- ----------
83,304 120,971
-------- ----------
Korea (South)
SK Corp. 9,111 33,245
Hyundai Development Co. 11,703 19,477
POSCO 13,180 14,583
KT Corp. 17,481 11,385
CJ Corp. 9,283 9,756
Korea Electric Power Corp. 13,556 9,747
LG Petrochemical Co., Ltd. 2,599 4,194
Hite Brewery Co., Ltd. 3,957 3,927
Daewoo Shipbuilding & Marine Engineering Co., Ltd 3,876 3,477
Kookmin Bank 5,805 3,205
Kangwon Land Inc. 2,552 3,127
Samsung Fine Chemicals 1,997 1,958
Samsung Heavy Industries Co., Ltd 2,449 1,953
-------- ----------
97,549 120,034
-------- ----------
Thailand
Siam Commercial Bank, cvt., pfd. 12,913 23,363
Siam Cement Public Co., Ltd., fgn. 6,108 15,586
PTT Exploration & Production Public Co., Ltd., fgn 4,319 10,338
Shin Corp. Public Co., Ltd., fgn. 4,006 8,597
Kasikornbank Public Co., Ltd., fgn. 4,588 8,040
Bangkok Bank Public Co., Ltd., fgn. 4,092 6,783
Land and House Public Co., Ltd., fgn. 778 2,154
National Finance Public Co., Ltd., fgn. 164 207
-------- ----------
36,968 75,068
-------- ----------
Brazil*
Unibanco Uniao de Bancos Brasileiros SA, GDR 13,998 21,034
Banco Bradesco SA, ADR, pfd. 12,817 16,497
Eletrobras-Centrais Eletricas Brasileiras SA 18,008 16,247
Companhia Paranaense de Energia-Copel, ADR, pfd. 18,426 14,447
Cia Vale do Rio Doce, ADR, pfd., A 2,227 2,894
Souza Cruz SA 1,388 1,508
-------- ----------
66,864 72,627
-------- ----------
Turkey
Akbank 15,838 27,271
Tupras-Turkiye Petrol Rafineleri AS 23,326 13,660
Arcelik AS, Br. 4,785 5,638
KOC Holding AS 4,010 3,299
Migros Turk T.A.S. 2,338 1,886
-------- ----------
50,297 51,754
-------- ----------
Hungary
Gedeon Richter Ltd. 15,476 23,733
MOL Magyar Olaj-Es Gazipari RT 10,196 18,808
Matav RT 5,827 6,327
-------- ----------
31,499 48,868
-------- ----------
South Africa
Nedcor Ltd. 16,719 13,024
SABMiller plc 7,955 9,702
Remgro Ltd. 4,982 8,014
Nampak Ltd. 2,932 3,835
Tiger Brands Ltd. 1,603 2,056
Liberty Group Ltd. 1,669 1,611
-------- ----------
35,860 38,242
-------- ----------
Taiwan
Chunghwa Telecom Co., Ltd 6,988 6,474
UNI-President Enterprises Corp. 4,363 4,284
Tainan Enterprises Co., Ltd. 3,984 4,042
Delta Electronics Inc. 4,339 3,654
Elan Microelectronics Corp. 2,977 3,055
Ritek Corp. 4,520 2,697
Procomp Informatics Co., Ltd. 7,004 2,229
Taiwan Cellular Corp. 2,214 2,076
Sinopac Holdings 794 890
-------- ----------
37,183 29,401
-------- ----------
Greece
Coca-Cola Hellenic Bottling Co., SA 8,461 14,869
Hellenic Telecommunications Organization SA (OTE) 13,476 14,288
-------- ----------
21,937 29,157
-------- ----------
Singapore*
Dairy Farm International Holdings Ltd. 9,187 19,162
Fraser & Neave Ltd. 3,979 7,961
-------- ----------
13,166 27,123
-------- ----------
Mexico*
Kimberly Clark de Mexico SA de CV, A 10,411 9,356
Grupo Carso SA de CV 4,784 5,466
Fomento Economico Mexicano SA de CV Femsa, ADR 5,214 5,433
Telfonos de Mexico SA de CV (Telmex), L, ADR 2,983 2,825
-------- ----------
23,392 23,080
-------- ----------
Poland
Polski Koncern Naftowy Orlen SA 13,098 17,447
-------- ----------
13,098 17,447
-------- ----------
Austria
OMV AG 9,931 16,936
-------- ----------
9,931 16,936
-------- ----------
India
ITC Ltd. 3,980 5,899
Mahanagar Telephone Nigam Ltd. 4,912 4,693
Gail India Ltd. 1,225 1,558
Indian Petrochemicals Corp. Ltd. 1,081 1,288
Oil & Natural Gas Corp., Ltd. 571 667
-------- ----------
11,769 14,105
-------- ----------
Denmark
Carlsberg AS, B 11,974 14,100
-------- ----------
11,974 14,100
-------- ----------
Croatia*
Pilva D D, GDR, Reg S 13,205 14,098
-------- ----------
13,205 14,098
-------- ----------
Czech Republic
Philip Morris CR AS 3,205 8,004
Unipetrol 2,796 5,624
-------- ----------
6,001 13,628
-------- ----------
Portugal
Banco Bpi SA 7,725 10,955
-------- ----------
7,725 10,955
-------- ----------
Philippines
San Miguel Corp., B 9,804 8,473
-------- ----------
9,804 8,473
-------- ----------
Egypt
Commercial International Bank Ltd. 9,397 7,767
-------- ----------
9,397 7,767
-------- ----------
Malaysia
Tanjong PLC 1,770 1,755
SIME Darby Bhd. 1,660 1,632
Petronas Dagangan Bhd. 735 729
Southern Bank Bhd. fgn. 112 112
-------- ----------
4,277 4,228
-------- ----------
Russia*
Lukoil Holdings, ADR 2,203 4,183
-------- ----------
2,203 4,183
-------- ----------
Indonesia
PT Indosat (Persero) TBK 624 973
PT Telekomunikasi Indonesia TBK, B 321 867
-------- ----------
945 1,840
-------- ----------
Japan
Yokowo Co., Ltd. 1,207 1,503
-------- ----------
1,207 1,503
-------- ----------
Argentina*
Tenaris SA, ADR 875 1,312
-------- ----------
875 1,312
-------- ----------
Peru*
Credicorp Ltd. 1,134 1,220
-------- ----------
1,134 1,220
-------- ----------
-------- ----------
TOTAL INVESTMENTS 601,564 768,120
--------
OTHER NET ASSETS 10,337
----------
TOTAL SHAREHOLDERS' FUNDS 778,457
----------
* Includes US listed stocks
PORTFOLIO ANALYSIS by industry
Industrial analysis
As at 30 April 2004
-------------------- --------- ----------
% of % of
Total Net Total Net
Assets Assets
Industry Classification 2004 2003
-------------------- --------- ----------
CONSUMER DISCRETIONARY
Automobiles - 1.18
Hotels, Restaurants & Leisure 0.63 0.25
Household Durables 1.20 0.69
Textiles, Apparel & Luxury Goods 0.52 -
--------- ----------
2.35 2.12
--------- ----------
CONSUMER STAPLES
Beverages 8.28 5.92
Food & Staples Retailing 2.70 2.28
Food Products 2.06 1.92
Household Products 1.20 -
Tobacco 1.98 3.67
--------- ----------
16.22 13.79
--------- ----------
ENERGY
Energy Equipment & Services 0.17 0.20
Oil & Gas 22.19 17.72
--------- ----------
22.36 17.92
--------- ----------
FINANCIALS
Commercial Banks 16.59 18.02
Consumer Finance 0.03 1.68
Diversified Financial Services 1.83 0.76
Insurance 0.22 -
Real Estate - 0.47
--------- ----------
18.67 20.93
--------- ----------
HEALTH CARE
Pharmaceuticals 4.86 4.57
--------- ----------
4.86 4.57
--------- ----------
INDUSTRIALS
Construction & Engineering 2.50 2.07
Industrial Conglomerates 4.32 2.38
Machinery 0.70 -
Transport Infrastructure 1.12 2.69
--------- ----------
8.64 7.14
--------- ----------
INFORMATION TECHNOLOGY
Computers & Peripherals 0.64 3.09
Electronic Equipment & Instruments 0.47 -
IT Services - 1.49
Semiconductors & Equipment 0.39 -
Software - 0.82
--------- ----------
1.50 5.40
--------- ----------
MATERIALS
Chemicals 1.68 1.31
Construction Materials 2.00 3.57
Containers & Packaging 0.49 0.54
Metals & Mining 2.25 2.28
Paper & Forest Products - 1.61
--------- ----------
6.42 9.31
--------- ----------
TELECOMMUNICATION SERVICES
Diversified Telecommunication Services 6.13 7.94
Wireless Telecommunication Services 2.28 2.43
--------- ----------
8.41 10.37
--------- ----------
UTILITIES
Electric Utilities 9.04 7.77
Gas Utilities 0.20 -
--------- ----------
9.24 7.77
--------- ----------
OTHER NET ASSETS 1.33 0.68
--------- ----------
100.00 100.00
--------- ----------
The above groupings are based on the Morgan Stanley International Perspective
Directory of Industry Classification.
PORTFOLIO ANALYSIS by value
Twenty largest portfolio holdings
As at 30 April 2004
--------- ----------------- ------- ------- ------ ------ ------
Principal % of
Country Issued % of Market
Number of of Issue/ Share Total Cost Value
Shares Issuer Listing Capital Net £'000 £'000
Held Assets
--------- ----------------- ------- ------- ------ ------ -----
EQUITY
INVESTMENTS
212,836,000 China Petroleum &
Chemical Corp. China- 1.27 5.34 25,663 41,546
The second-largest Hong Kong
integrated
energy company in
China.
1,405,990 SK Corp.
A major player in Korea 1.11 4.27 9,111 33,245
South Korea's (South)
refining
industry.
10,393,916,853 Akbank Turkey 0.87 3.50 15,838 27,271
One of Turkey's
largest privately
owned
commercial banks,
providing
a full range of
banking and
financial
services.
413,818 Gedeon Richter Hungary 2.22 3.05 15,476 23,733
Ltd.
Gedeon Richter
Limited
manufactures
pharmaceuticals.
35,840,300 Siam Commercial
Bank
Public Co. Ltd. Thailand 2.03 3.00 12,913 23,363
One of Thailand's
largest
commercial
banks.
1,903,100 Unibanco Uniao de
Bancos
Brasileiros SA
One of Brazil's Brazil 0.12 2.70 13,998 21,034
largest
financial
conglomerates,
providing a full
range of banking
and financial
services.
3,070,290 Hyundai Korea 4.07 2.50 11,703 19,477
Development Co. (South)
One of the
leading
residential
property
developers
in Korea.
17,516,151 Dairy Farm
International
Holdings Ltd. Singapore 1.30 2.46 9,187 19,162
Dairy Farm
International
and
its subsidiaries
operate retail
stores such as
supermarkets,
drugstores and
convenience
stores.
883,642 MOL Magyar
Olaj-Es
Gazipari Rt. Hungary 0.82 2.42 10,196 18,808
A major integrated
petroleum
Company in Central
Europe.
4,316,933 Polski Koncern
Naftowy
Orlen SA Poland 1.01 2.24 13,098 17,447
PKN Orlen is the
overwhelming
market leader in
refining and
marketing of oil
products as
well as
petrochemicals in
Poland.
------ ------
Top 10 Holdings - 137,183 245,086
31.48% of Total ------ ------
Assets
PORTFOLIO ANALYSIS by value (continued)
--------- ---------------- ------- ------- ------ ------ -----
Principal % of
Country Issued % of Market
Number of of Issue/ Share Total Cost Value
Shares Issuer Listing Capital Net £'000 £'000
Held Assets
--------- ---------------- ------- ------- ------ ------ -----
164,290 OMV AG Austria 0.61 2.17 9,931 16,936
The largest
Austrian
industrial
company and one of
the
leading oil and gas
groups in
Central and Eastern
Europe.
719,673 Banco Bradesco SA, Brazil 0.91 2.12 12,817 6,497
ADR, pfd.
One of Brazil's
largest financial
conglomerates,
providing a
full range of
banking and
financial
services.
2,793,119,000 Eletrobras-Centrais Brazil 0.62 2.09 18,008 16,247
Eletricas
Brasileiras SA
The company is
involved in
electricity
generating,
providing
long-term financing
to the
Brazilian
electricity sector,
and
owns and operates
the
country's nuclear
generating
plants and
transmission
network.
5,119,850 Siam Cement Public Thailand 0.43 2.00 6,108 15,586
Co., Ltd., fgn.
The largest
industrial
Conglomerate in
Thailand.
61,066,000 PetroChina Co., China- 0.35 1.93 8,453 15,010
Ltd., H Hong Kong
One of the largest
integrated
energy companies in
China.
994,410 Coca-Cola Hellenic Greece 0.42 1.91 8,461 14,869
Bottling Co., SA
The world's second
largest Coca-Cola
bottler.
211,450 POSCO Korea 0.24 1.87 13,180 14,583
One of the worlds's (South)
largest
steel producers.
7,580,029 Companhia Brazil 0.01 1.86 18,426 14,447
Paranaense de
Energia-Copel, ADR
pfd.
Generates,
transmits,
transforms and
distributes
electric power to
the entire
Brazilian State of
Parana.
27,320,000 Huaneng Power China- 0.89 1.85 5,660 14,418
International Inc., Hong-Kong
H
China's largest
independent power
provider.
1,741,050 Hellenic Greece 0.35 1.84 13,476 14,288
Telecommunications
Organization SA
(OTE)
Principal
integrated
telecommunication
provider in
Greece.
-------
Top 20 Holdings - 51.12% of Total Assets 251,703 397,967
-------- -------
ANALYSIS OF PORTFOLIO
TOTAL VALUE OF INVESTMENT PORTFOLIO (98.67%) 768,120
OTHER NET ASSETS (1.33%) 10,337
-------------
778,457
-------------
STATEMENT OF TOTAL RETURN OF THE COMPANY
(INCORPORATING THE REVENUE ACCOUNT)
For the year ended 30 April 2004
-------------- ------- ------ ------ ------- ------ ------
2004 2003
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
-------------- ------- ------ ------ ------- ------ ------
Gains/(losses) on
investments - 179,999 179,999 - (72,344) (72,344)
Income* 29,282 - 29,282 19,455 - 19,455
Investment
management (7,469) - (7,469) (5,616) - (5,616)
fee
Other expenses (3,509) - (3,509) (2,786) - (2,786)
--------- ------ --------- --------- ------ ---------
Net return on
ordinary
activities before
taxation 18,304 179,999 198,303 11,053 (72,344) (61,291)
Tax on ordinary
activities (5,144) - (5,144) (3,310) - (3,310)
--------- ------ --------- --------- ------ ---------
Return on ordinary
activities after
taxation
for the financial 13,160 179,999 193,159 7,743 (72,344) (64,601)
year
Dividend in respect
of
equity shares (10,242) - (10,242) (5,685) - (5,685)
------- ------ ------ ------- ------ ------
Transfer to/(from)
reserves
(after aggregate
dividends
paid and proposed) 2,918 179,999 182,917 2,058 (72,344) (70,286)
------- ------ ------ ------- ------ ------
Basic return per
Ordinary Share
(before dividend) 2.89p 39.54p 42.43p 1.70p (15.89p) (14.19p)
------- ------ ------ ------- ------ ------
Diluted return per
Ordinary Share
(before dividend) 2.40p 32.86p 35.26p N/A N/A N/A
------- ------ ------ ------- ------ ------
Annualised Expenses
Ratio - - 1.48% - - 1.49%
------- ------ ------ ------- ------ ------
Total recognised gains and losses since the last annual report:
----------------- ------- ------- ------- ------- ------- -------
2004 2003
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
----------------- ------- ------- ------- ------- ------- -------
Return on ordinary
activities after
taxation for the
financial year 13,160 179,999 193,159 7,743 (72,344) (64,601)
-------- --------- --------- ------- ---------- ----------
Total recognised
gains and losses
since last annual
report 13,160 179,999 193,159 7,743 (72,344) (64,601)
-------- --------- --------- ------- ---------- ----------
Notes:
The revenue column of this statement is the profit and loss account of the
Company.
The accompany notes are an integral part of this statement.
All revenue and capital items in the above statement derive from continuing
operations.
--------------------------- ---------- -----------
*Income
2004 2003
£'000 £'000
--------------------------- ---------- -----------
Income from investments
Overseas dividends 28,257 17,955
Fixed interest - 478
Scrip dividends 563 580
---------- -----------
28,820 19,013
Other income
Deposit interest 462 442
---------- -----------
Total income 29,282 19,455
---------- -----------
Total income comprises:
Dividends 28,820 18,535
Interest 462 920
---------- -----------
29,282 19,455
---------- -----------
Income from investments
Listed overseas 28,820 18,535
---------- -----------
BALANCE SHEET
As at 30 April 2004
----------------- ---------- -----------
2004 2003
£'000 £'000
----------------- ---------- -----------
FIXED ASSETS
Investments 768,120 591,452
---------- -----------
CURRENT ASSETS
Debtors 15,322 19,444
Cash 17,977 6,807
---------- -----------
33,299 26,251
CREDITORS: amounts falling due within one year (22,062) (21,342)
---------- -----------
NET CURRENT ASSETS 11,237 4,909
---------- -----------
TOTAL ASSETS LESS CURRENT LIABILITIES 779,357 596,361
PROVISION FOR LIABILITIES AND CHARGES (900) (875)
---------- -----------
778,457 595,486
---------- -----------
CAPITAL AND RESERVES
Called-up Share Capital 113,806 113,796
Share Premium Account 275,351 275,307
Capital Redemption Reserve 3,940 3,940
Capital Reserve - Realised 197,761 194,356
Capital Reserve - Unrealised 166,757 (9,837)
Revenue Reserve 20,842 17,924
---------- -----------
SHAREHOLDERS' FUNDS (all equity) 778,457 595,486
---------- -----------
Net Asset Value per Ordinary Share (in pence)
- Basic 171.01 130.82
- Diluted 164.58 N/A
CASH FLOW STATEMENT
For the year ended 30 April 2004
-------------------- ----------- -----------
2004 2003
£'000 £'000
-------------------- ----------- -----------
Reconciliation of operating profit to net cash inflow
from operating activities
Net return on ordinary activities before taxation 18,304 11,053
(Increase) in debtors (25) (39)
(Increase)/decrease in accrued income (2,574) 398
Increase/(decrease) in creditors 323 (69)
----------- -----------
Net cash inflow from operating activities 16,028 11,343
----------- -----------
Cash flow statement
Net cash inflow from operating activities 16,028 11,343
Taxation (3,768) (3,876)
Net financial investments 4,546 6,569
----------- -----------
16,806 14,036
Equity dividends paid (5,690) (5,690)
----------- -----------
11,116 8,346
Financing 54 (445)
----------- -----------
Increase in cash 11,170 7,901
----------- -----------
Reconciliation of net cash flow to movement
in net funds
Increase in cash in the year 11,170 7,901
Opening net funds/(debt) 6,807 (1,094)
----------- -----------
Closing net funds 17,977 6,807
----------- -----------
This preliminary statement, which has been agreed with the auditors, was
approved by the Board on 2 July 2004. It is not the company's statutory
accounts. The statutory accounts for the year ended 30 April 2003 have been
delivered to the Registrar of Companies and received an audit report which was
unqualified and did not contain statements under s237(2) or (3) of the Companies
Act 1985. The statutory accounts for the year ended 30 April 2004 have been
approved and audited and are due to be filed. They have been prepared using the
same accounting policies set out in the financial statements for the year ended
30 April 2003.
For information please contact David Bliss/Will Rogers at UBS Limited (0207 567
8000), Client Dealer Services on freephone 0800 305 306 or Sara MacIntosh at
Franklin Templeton Investment Management Limited (the Company Secretary) (0207
208 7000). No representation or warranty is made by UBS Limited 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.
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