templeton emerging markets investment …...templeton emerging markets investment trust plc agm...

The value of investments and any income from them can go down as well as up. You may get back less than invested.

TEMPLETON EMERGING MARKETS INVESTMENT TRUST PLCAGM UPDATE FOR YEAR TO 31 MARCH 201911 July 2019



TEMIT – PERFORMANCE


TEMIT PerformanceAs at 31 March 2019

2

Past performance is not an indicator or a guarantee of future performance. Emerging markets can carry a higher degree of risk than developed markets.Source for NAV Performance is Franklin Templeton Investments. Source for share price and index is © 2019 Morningstar Inc. All rights reserved. Performance is calculated in GBP net of UK basic rate tax. Indices are unmanaged and one cannot invest directly in an index. Please visit www.temit.co.uk for current performance.

Cumulative Performance (%)3 Mths 6 Mths 1 Yr 3 Yrs 5 Yrs 10 Yrs

TEMIT (Share Price) 13.15 8.38 6.01 78.78 58.56 200.70

TEMIT (NAV) 10.28 3.26 1.76 68.96 53.62 203.64

MSCI Emerging Markets Index 7.48 1.90 0.05 51.21 56.10 167.95

Annualised Total Performance (%)3 Yrs 5 Yrs 10 Yrs

TEMIT (Share Price) 21.39 9.66 11.64TEMIT (NAV) 19.12 8.97 11.75MSCI Emerging Markets Index 14.79 9.32 10.36

Discrete Performance to31 March 2019

Year to31/03/19 (%)

Year to31/03/18 (%)

Year to31/03/17 (%)

Year to31/03/16 (%)

Year to31/03/15 (%)

TEMIT (Share Price) 6.01 13.69 48.33 -17.04 6.88TEMIT (NAV) 1.76 12.39 47.78 -17.07 9.63MSCI Emerging Markets Index 0.05 11.76 35.23 -8.80 13.19

The value of investments and any income from them can go down as well as up. You may get back less than invested. 3

TEMIT PerformanceAs at 30 June 2019

Past performance is not an indicator or a guarantee of future performance. Emerging markets can carry a higher degree of risk than developed markets.Source for NAV Performance is Franklin Templeton Investments. Source for share price and index is © 2019 Morningstar Inc. All rights reserved. Performance is calculated in GBP net of UK basic rate tax. Indices are unmanaged and one cannot invest directly in an index. Please visit www.temit.co.uk for current performance.

Cumulative Performance (%)3 Mths 6 Mths 1 Yr 3 Yrs 5 Yrs 10 Yrs

TEMIT (Share Price) 4.37 18.09 14.89 64.44 53.44 145.62TEMIT (NAV) 4.87 15.65 10.15 55.84 51.89 152.47MSCI Emerging Markets Index 3.14 10.84 5.40 43.90 54.74 135.48

Annualised Total Performance (%)3 Yrs 5 Yrs 10 Yrs

TEMIT (Share Price) 18.05 8.94 9.40TEMIT (NAV) 15.95 8.72 9.71MSCI Emerging Markets Index 12.91 9.13 8.94

Discrete Performance to30 June 2019

Year to30/06/19 (%)

Year to30/06/18 (%)

Year to30/06/17 (%)

Year to30/06/16 (%)

Year to30/06/15 (%)

TEMIT (Share Price) 14.89 6.08 34.92 -0.08 -6.61TEMIT (NAV) 10.15 5.90 33.60 2.98 -5.35MSCI Emerging Markets Index 5.40 6.84 27.79 3.86 3.53


Emerging Markets: Long Term PerformanceTEMIT NAV vs MSCI Emerging Markets Index vs FTSE 100 Index

0

500

1000

1500

2000

2500

3000

3500

4000

07/89 07/91 07/93 07/95 07/97 07/99 07/01 07/03 07/05 07/07 07/09 07/11 07/13 07/15 07/17

TEMIT NAV MSCI Emerging Markets Index FTSE 100 - Total Return Index

Since Inception to End March 2019

Past performance is not an indicator or a guarantee of future performance. Emerging markets can carry a higher degree of risk than developed markets.Source for NAV Performance is Franklin Templeton Investments. Source for MSCI EM Index performance is ©Morningstar. Source for FTSE Index performance is FactSet. Performance is calculated in GBP. NAV Performance is calculated in GBP, net of management fees. NAV Performance is calculated from 31/07/89 (the first available date).. Please visit temit.co.uk for current performance. Indices are unmanaged and one cannot invest directly in an index.


TEMIT’S INVESTMENT MANAGER –FRANKLIN TEMPLETON EMERGING MARKETS EQUITY


Franklin Templeton Emerging Markets EquityTenured Team with In-Depth Local Knowledge

6

As of 30 June 2019.CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.1. Investment professionals include research analysts, portfolio managers, directors and CIO.

Seasoned Team with Diverse Background

SEOULJay Choi, CFAJay JungJin Soo YookJung Ku KangMoo Il JungSo Hyun LeeSteve ChaeSung Sik Oh

BUENOS AIRESClaus Born, CFASantiago Petri

CAPE TOWNDanesh Ranchhod, CFA

BUCHARESTAdrian CighiCalin Metes, CFADan GheorgheDaniel NaftaliJohan Meyer

RIO DE JANEIROGustavo Stenzel, CFAMarcos Mundim, CFA

WARSAWKrzysztof Musialik, CFA

SAO PAULOAndre BanksEduardo BoppEduardo CotrimFrederico Sampaio, CFAGuilherme SansivieroVitor Perito, CFA

NEW YORKGregory Van Beek, CFA

VIENNAMatjaz Schroll

EDINBURGHAndrew Ness

ISTANBULCan OzdogarCan OzguzelDamla YildizDeger AtayErman KalkandelenErsan AkgulMustafa Aydemir

DUBAIAhmed Awny, CFAAlexey Ilin, CFA Bassel KhatounDavid HaglundKapil ChadhaKarim Abbas, CFANikhil Arora, CFASalah Shamma

HYDERABADJagadishwar Pasunoori

CHENNAIAkhil KalluriAnand Radhakrishnan, CFAHari Shyamsunder, CFAJanakiraman Rengaraju, CFAKiran SebastianKrishna Prasad, CFALakshmikanth ReddyMurali YerramRajasa K.Roshi Jain, CFASandeep ManamSaurabh Das, CFASrikesh NairSwagato Ghosh Varun SharmaVinod Bansal, CFA

HONG KONGBryan Wong, CFAChris LeungClaudius Tsang, CFAEddie Chow, CFAEric Mok, CFAJordan Pong, CFALeslie ChowMichael Chu, CFATom WuVictor Lee, ACCA

SINGAPOREChetan Sehgal, CFAChuan Wei OngGervin YangManish AgarwalManraj Sekhon, CFARichard PilieroSukumar RajahTek Khoan Ong, CFAYi Ping LiaoYu-Jen Shih, CFAVikas Chiranewal, CFA

KUALA LUMPUREdward Pang, CFAIsmar Izhar

MUMBAIAbhishek SahooKeyur Vora

HO CHI MINH CITYMike Nguyen, CFAThi Thu Lam Nguyen

SHANGHAIJason ZhuTony SunVivian ChenSealand J.V.

16countries

80+Investment Professionals¹

15years average industry experience

9years average with FT


Consistent Templeton Investment Philosophy

“The best bargains are not stocks whose prices are down most, but rather those stocks having the lowest prices in relation to possible earning power of future years.”

-Sir John Templeton, October 1957

We believe strong returns are generated by:

through an investment approach that is:

Earnings powerEvaluation of economic profit potential based on fundamental analysis

At a discount to intrinsic worthBased on a holistic definition of value

SustainableCompetitive advantage and resilience across different business environments over long time periods

Bottom up Valuation awareLong-term oriented

investing in stocks with the following characteristics:


Relationship-driven Engagement and Advocacy

Company Engagement ESG Integration Policy Advocacy

• Advocating ways to improve operational, financial or ESG performance

• Engaging companies on international investor expectations

• Supported by active proxy voting

• Embedded in investment process• Focused on long-term economic impact on

securities• Seeking to enhance return and mitigate risk• Supported by dedicated ESG team and risk

team

• Participating in regulatory and policy discussions with government agencies/regulators

• Seeking to improve investor access and participation

Leveraging deep relationships and cross-border expertise to create value through constructive engagement

ESG = Environmental, Social and Governance


Principals For Responsible InvestingIndustry Recognition

PRI Report Card

Franklin Templeton has been a signatory of the PRI since April 2013, ranking ahead of the peer median score in all categories in 2018

A+ A+A

A+A AA

B B B B B

Strategy & Governance Listed Equity –Incorporation

Listed Equity – Active Ownership

Fixed Income – Sovereign Fixed Income – Corporate Financial

Fixed Income – Corporate Non Financial

Franklin Templeton 2018 Peer average 2018

Franklin Templeton makes no representation or warranty regarding the reliability of the UNPRI’s Assessment Methodology or the accuracy of the assessment ratings provided by the UNPRI. For a detailed explanation of the scoring methodology for each indicator in the PRI Reporting Framework, please see the PRI Assessment Methodology, which can be found here: https://www.unpri.org/signatories/about-pri-assessment

https://www.unpri.org/signatories/about-pri-assessment


EMERGING MARKETS EQUITY OUTLOOK


Emerging MarketsCurrent OutlookFundamentals remain robust• We believe long-term Emerging Markets (EM) fundamentals remain robust. In our view, we see:

– Economies less indebted than Developed Markets (DM)

– Robust banking systems, barring a few exceptions in smaller markets

– GDP (Gross Domestic Product) growth continues to outpace DM as export dependency has reduced

– Economies have diversified with consumption and technology offering new drivers of growth

– EM companies are leapfrogging established models through innovation and technology

– Improving cash flows & capital allocation; corporate debt reduction

– Attractive valuations

– Fed rates are now a tailwind for EM

Key Risks

• US-China trade tensions still remain. Resumption of talks between US and China is positive

• China’s economic restructuring

• Pace of recovery of the tech cycle

• Political events (US-Russia, US-Iran)


Emerging Markets: Lower DebtEconomies less levered than Developed Markets

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.Source: BIS; December 2018, Credit to non-financial sector* from All sectors at Market value - Percentage of GDP; *non-financial corporations (both private-owned and public-owned)

0

20

40

60

80

100

120

01 02 04 05 06 08 09 11 12 13 15 16 18

Cred

it to

non

-fina

ncial

sect

or/G

DP

Emerging Markets Developed MarketsEmerging Markets ex China

0

20

40

60

80

100

120

01 02 04 05 06 08 09 11 12 13 15 16 18

Gove

rnm

ent D

ebt/G

DP

Emerging Markets Developed Markets

0

10

20

30

40

50

60

70

80

90

01 02 04 05 06 08 09 11 12 13 15 16 18

Hous

ehol

d De

bt/G

DP

Emerging Markets Developed Markets

Government DebtQ1 2001 – Q4 2018

Corporate Debt Q1 2001 – Q4 2018

Household DebtQ1 2001 – Q4 2018


China’s Foreign Trade and Current Account BalanceChina is Turning Less Dependent on Foreign Trade

Dependence On Foreign Trade (% of GDP)January 2003 – December 2018

For illustrative and discussion purposes only.Source: National Bureau of Statistics of China. CLSA; US Census bureau. See www.franklintempletondatasources.com for additional data provider information.

China’s Overall Current Account & With The USJanuary 2003 – December 2018

0%

2%

4%

6%

8%

10%

12%

03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

% G

DP

Current Account Current Account With U.S.

34.1%

30%

35%

40%

45%

50%

55%

60%

65%

70%

03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

% G

DP

Total Value of imports and exports/GDP


The New Emerging Market LandscapeNew Reality

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.Source: Franklin Templeton Capital Market Insights Group, MSCI, Factset, as at 30 June 20191. Since Dec 2008, as of 30 June 2019. Old Economy – Materials/Energy/Industrial Sector, New Economy – Consumer Discretionary, Consumer Staples, IT & Communication Services

EM Countries Draw on Both Domestic and Foreign RevenuesMSCI EM Domestic vs Foreign Revenue by Country

Shrinking Old Economy, Growing New EconomyMSCI EM select sector change1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Egyp

tPa

kistan

Indon

esia

China

Thail

and

Czec

h Rep

ublic

Turke

yU.

A.E.

Philip

pines

Polan

dBr

azil

Gree

cePe

ruMa

laysia

India

Qatar

Mexic

oCh

ileCo

lombia

Russ

iaSo

uth A

frica

Kore

aTa

iwan

Hung

ary

Domestic (%) Foreign (%)

15%

20%

25%

30%

35%

40%

45%

50%

55%

12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 12/18

Old Economy New Economy


Emerging Markets: Technological InnovationHuge Acceleration In Innovation And Leading Edge Of Adopting Technology

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.LHS-Source: WIPO, Total patent applications (direct and PCT national phase entries). As of December 2018. RHS- Source: Fourth Industrial Revolution: Beacons of Technology and Innovation in Manufacturing, *-The World Economic Forum, in collaboration with McKinsey & Company, scanned more than 1,000 leading manufacturers. Subsequent outreach enabled visits to the most advanced sites and identification of the few factories that are true guiding lights in the context of Fourth Industrial Revolution production: lighthouses.

Intellectual Property Patent Applications1997–2017

Fourth Industrial Revolution Technologies World Economic Forum Lighthouse Network*:Factories by Countries

0 1 2 3 4 5 6 7

Czech RepublicFinland

IndiaIrelandKorea

NetherlandsRomania

Saudi ArabiaSweden

TurkeyFrance

GermanyIndonesia

ItalyUnited States

China

DM EM

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Emerging Markets United States Japan


Emerging Markets: FundamentalsValuation Discount

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.Source: MSCI, Factset, as at 30 June 2019

EM Free Cash FlowDecember 2007 – June 2019

0%

2%

4%

6%

8%

10%

12%

14%

07 08 09 10 11 12 13 14 15 16 17 18 19e

EM / D

M F

ree C

ash

Flow

EM % of DM Free Cash Flow

0

10

20

30

40

50

60

70

80

07 08 09 10 11 12 13 14 15 16 17 18 19

Net D

ebt t

o Equ

ity R

atio (

%)

MSCI EM MSCI World

0

50

100

150

200

250

07 08 09 10 11 12 13 14 15 16 17 18 19e

USD

bn

EM Free Cash Flow

EM % of DM Free Cash FlowDecember 2007 – June 2019

EM Net Debt to Equity RatioDecember 2007 – June 2019


Emerging Markets: FundamentalsValuation Discount

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.Source: MSCI, I/B/E/S, Factset, as at 30 June 2019

EM Earnings Expectations Vs. DMJanuary 2012 –June 2019

P/E & P/BV: MSCI EM Premium/Discount to MSCI WorldJanuary 2012 –June 2019

0%

5%

10%

15%

20%

2012 2013 2014 2015 2016 2017 2018 2019

MSCI EM MSCI World

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

2012 2013 2014 2015 2016 2017 2018 2019

P/E Ratio P/BV Ratio


TEMIT – COUNTRY VIEWS & PORTFOLIO


Investment Themes

For illustrative and discussion purposes only.

Technology EM Consumer All-Cap Opportunities Corporate Governance

Re-shaping the global economy:• Ecommerce• Disruption• Data

EM Consumer Transformation:• Under-penetration• Premiumisation

Strong All-Cap Research Capability:• Opportunities across the market

cap spectrum

Improving CG

Current Investment Themes


TEMIT: Top Markets

Top 4 Markets as of 31 March 2019

China

TEMIT: 24.3% Benchmark: 33.0%Investment opportunities in technology companies ranging from e-commerce to gaming. Strong consumer preference for premium consumer goods. Improving banking system.

South Korea

TEMIT: 13.7% Benchmark: 13.0%Improving corporate governance and dominant position of some companies in the technology sector.

Taiwan

TEMIT: 9.6%Benchmark: 11.3%Investment opportunities in technology sector and supply chain. TEMIT’s exposure to Taiwan was largely attributable to TSMC

Russia

TEMIT: 8.9%Benchmark: 3.8%Investment opportunities in Oil sector and companies with greater exposure to domestic economy. Corporate governance in Russia continues to improve and valuations are attractive.

As at 31/03/19. Weightings as percent of total including cash. TEMIT Cash & Equivalents is -2.0876%. Percentage may not equal 100% due to rounding. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change. Indices are unmanaged and one cannot invest directly in an index.


TEMIT: Sector Allocation

Sector Positioning Vs Benchmark

As at 31 March 2019

2.5

3.2

2.6

5.4

7.4

6.4

8.1

12.3

14.6

13.4

24.2

0

0.4

2

2.5

3.1

7.3

7.7

10.6

19.8

21.1

27.6

0 5 10 15 20 25 30

Utilities

Real Estate

Health Care

Industrials

Materials

Consumer Staples

Energy

Communication Services

Information Technology

Consumer Discretionary

Financials

Templeton Emerging Markets Investment Trust MSCI Emerging Markets

As at 31/03/19. Weightings as percent of total including cash. TEMIT Cash & Equivalents is -2.0876%. Percentage may not equal 100% due to rounding. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change. Indices are unmanaged and one cannot invest directly in an index.

21


TEMIT: Geographic Asset AllocationMarket Positioning Vs Benchmark (b)

As at 31 March 2019

1.6

0.4

0.0

2.7

0.1

0.0

2.2

2.3

5.7

9.2

7.2

3.8

11.3

13.0

33.0

3.8

1.2

1.3

2.4

2.7

3.2

3.5

4.2

7.0

7.7

8.6

8.9

9.6

13.7

24.3

0 5 10 15 20 25 30 35

Others*

Peru

Cambodia(c)

Mexico

United States

United Kingdom

Indonesia

Thailand

South Africa

India

Brazil

Russia

Taiwan

South Korea

China/Hong Kong

Templeton Emerging Markets Investment TrustMSCI Emerging Markets

As at 31/03/19. Weightings as percent of total including cash. TEMIT Cash & Equivalents is -2.0876%. Percentage may not equal 100% due to rounding. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change. Indices are unmanaged and one cannot invest directly in an index.*Others: include Hungary, Kenya(c), Pakistan, Czech Republic, Philippines, Argentina(c), Saudi Arabia(c), Nigeria(c).(b) Other countries held by the benchmark are Chile, Colombia, Egypt, Greece, Malaysia, Poland, Qatar, Turkey and the United Arab Emirates.(c) Countries not held in the MSCI Emerging Markets Index.

22


TEMIT Portfolio

Top 10 Holdings

As at 31 March 2019

Issuer Sector Country % of TotalSAMSUNG ELECTRONICS Technology Hardware & Equipment South Korea 7.3

TSMC Semiconductors & Semiconductor Equipment Taiwan 6.6

NASPERS LTD Retailing South Africa 6.1

ALIBABA GROUP Retailing China 5.1

ICICI BANK LTD Banks India 3.6

BRILLIANCE CHINA Automobiles & Components China 3.4

UNILEVER Household & Personal Products United Kingdom 3.2

TENCENT HOLDINGS Media & Entertainment China 2.9

LUKOIL Energy Russia 2.8

BANCO BRADESCO Banks Brazil 2.4

Total 43.4

The Ten Largest Holdings represent the ten largest holdings of the fund as at the date indicated. These securities do not represent all of the securities purchased, sold or recommended for clients, and the reader should not assume that investment in the securities listed was or will be profitable. All portfolio holdings are subject to change. Holdings of the same issuer have been combined.

23


Samsung Electronics Korea

One of the largest electronics manufacturers globally

• Technology leader with significant market shares (#1 in DRAM with ~45% market share; ~40% in NAND; ~20% in mobile phones)

• Growth in AI, robotics, autonomous driving etc. to drive long term memory demand growth

• Bottoming out of memory industry

• Market share gains in foundry & 5G equipment businesses

• Improving shareholder return policy: higher dividend payoutand share buyback/cancellation

• Attractive valuations at significant discount to intrinsic worth

Risks• Extended period of trade disputes are negative to overall IT

demand

• Slower than expected memory cycle recovery to limit valuation re-rating

• Slower than expected pace of reforms in corporate governance

GEM Strategy FundamentalsInvestment Thesis/Risks

Current FY

Price-to-Earnings P/E (x) 13.9

Dividend YieldD/Y (%) 3.2

Price-to-Book ValueP/BV (x) 1.2

Return on Equity ROE (%) 8.6

Source: Bloomberg

Past performance is not an indicator or a guarantee of future performance.This is an example of an investment purchased pursuant to investment advice of Franklin Templeton Emerging Markets Equity; the investment may or may not be currently held by TEMIT. This is not a complete analysis of every material fact regarding an industry, security or investment and should not be viewed as an investment recommendation. The actions taken with respect to this investment, and its performance, may not be representative of other advice or investments. Factual statements are taken from sources considered reliable, but have not been independently verified for completeness or accuracy by the fund’s managers or its affiliates. These opinions may not be relied upon as investment advice or an offer for a particular security or as an indication of trading intent for any Franklin Templeton fund.

Source : ©FactSet Research Systems, Last Updated: 06/28/2019

'14 '15 '16 '17 '18£10

£15

£20

£25

£30

£35

£40

£45

31.98

06/30/2014 - 06/28/2019

Samsung Electronics Co., Ltd. - Price

SUSTAINABILITY

• Leadership in memory technology

• Strong brand positioning in global markets

EARNINGS POWER

• Strong cash flow from memory business

• Dominant player in small OLED display market

• Market share gains in foundry, 5G equipment and smart phone

VALUE• Discount to intrinsic value given recovery of earnings

onwards and improvement of shareholder return policy expected

Source: ©FactSet Research Systems. Last Updated 28/06/2019

30/06/2014 – 28/06/2019


TSMCTaiwan

Biggest foundry in the world with over 50% market shareGEM Strategy FundamentalsInvestment Thesis/Risks

Source: Bloomberg


SUSTAINABILITY

• Leadership in technology

• Partner of choice

EARNINGS POWER

• Strong cash flow from foundry process

• Historically has consistently high return on capital

VALUE• At a discount to the intrinsic value given growth dynamics


'14 '15 '16 '17 '18£1

£2

£3

£4

£5

£6

£7

6.05

06/30/2014 - 06/28/2019

Taiwan Semiconductor Manufacturing Co., Ltd. - Price

• Leader in technology and a partner of choice

• Strong semiconductor demand driven by mobile devices, high performance computing applications such as AI, data server, networking etc

• Consistent production yield; superior and sustainable margins

• Consistently high return on capital

• Strong cash flow from legacy foundry process to support R&D in technology

• Maintains strong lead in technological advancement that should secure future market position and earnings growth

Risks• Weaker demand growth for electronics including mobile

devices

• Disruption leading to obsolescence of silicon

• Trade war and the Huawei ban

Current FY






30/06/2014 – 28/06/2019


NaspersSouth Africa

A leading media conglomerate invested in multiple emerging-market internet businessesGEM Strategy FundamentalsInvestment Thesis/Risks

Source: Bloomberg


SUSTAINABILITY

• Tencent is a leader in China Internet

• Other portfolio companies are also leaders in their respective verticals

EARNINGS POWER

• Early signs of profitability from portfolio companies are materialising, demonstrating their networking effects

• Tencent remains a dominant player in Chinese internet

VALUE• Trading at a significant discount to its net asset value


'14 '15 '16 '17 '18£40£60£80

£100£120£140£160£180£200£220£240

190.54

06/30/2014 - 06/28/2019

Naspers Limited Class N - Price

• 31% stake in Tencent - a leader in China Internet

• Other investments are also leaders in their verticals -clearer path to profitability for many of them

• Valuation at steep discount to the value of holdings. Listing of the new entity, Prosus, holding international internet assets could help reduce discount

Risks• Higher discount for Naspers’ shares post listing of Prosus

• Although unbundling of Multichoice is positive, management might not do it for other holdings

• Further regulatory risk in China’s media industry impacting Tencent’s game business

• Slower ramp-up to profitability for the newer internet investments

Current FY






30/06/2014 – 28/06/2019


Alibaba Group Holding LtdChina

The leading e-commerce website in China, with a growing cloud services business

• Alibaba remains as the dominant e-commerce platform in China and should benefit as online shopping penetration continues to rise

• Strong growth potential in the multiple newer businesses in fintech, digital media & entertainment and cloud

• Cloud business is close to break even and should provide another leg of growth in the near future

• Alibaba Group also has investments in other e-commerce websites outside China, which should give them access to these markets

Risks• Slowdown in Chinese economy could impact consumption

growth

• Increase in competition from newer e-commerce companies could impact market share and margins


Source: Bloomberg


SUSTAINABILITY

• Strong e-commerce growth potential in China to be driven by penetration. Alibaba is the dominant e-commerce company in China

• Ability to leverage strong technology platform and large user base to launch and scale up new businesses

EARNINGS POWER

• Growth in e-commerce business to continue to drive earnings growth. There are drivers to accelerate growth in the e-commerce business

• Path to profitability for the newer businesses. Cloud business is close to breakeven

VALUE• Potential of the Alibaba ecosystem to monetise newer

businesses is under-appreciated


'14 '15 '16 '17 '18£20

£40

£60

£80

£100

£120

£140

£160

£180

133.14

06/30/2014 - 06/28/2019

Alibaba Group Holding Ltd. Sponsored ADR - Price

Current FY






30/06/2014 – 28/06/2019


ICICI Bank India

One of India’s largest private-sector banks

• Strong growth potential in India – high economic growth & under penetrated market. ICICI, one of the leading private sector banks, to benefit from this growth

• New leadership driving a culture of positive change around decentralisation, digitisation and risk culture enhancing the sustainability aspect of the franchise

• Strong retail franchise with low cost deposit base (50% low cost deposits), high quality retail assets and a large network

• Corporate portfolio has faced pressure over the past few years; however they are now likely priced in; pace of resolution and recovery is key

• Subsidiaries are market leaders in their respective segments - capital markets, asset management and insurance)

• The bank is well-capitalised (14.4% Tier I) for future growth

Risks• Deeper-than-expected asset quality issues and resolution

taking longer than expectations

• Loss of competitive advantage in retail banking to newer private banks or fintech players


Source: Internal Estimates


SUSTAINABILITY

• Improving risk culture and digital leadership making the organisation future ready

• High-quality retail liability franchise with improving retail asset mix

• Well-diversified financial leader across banking/insurance, leading to better customer value capture

EARNINGS POWER

• Corporate Asset cycle improvement in the near term should lead to sharp normalisation of credit cost boosting Return on Equities (RoEs)

• Cross sell led retail market share gain and risk-adjusted profitability improvement in the medium term

VALUE• At a discount to intrinsic value presumed, on better cross

cycle RoEs, driven by better liability mix and risk management than history


'14 '15 '16 '17 '18£1.5

£2.0

£2.5

£3.0

£3.5

£4.0

£4.5

£5.0

£5.5

4.98

06/30/2014 - 06/28/2019

ICICI Bank Limited - Price

Current FY






30/06/2014 – 28/06/2019


The value of shares in the Templeton Emerging Markets Investment Trust (TEMIT) and any income received from it can go down as well as up and investors may not get back the full amount invested. There is no guarantee that TEMIT will meet its objective.

TEMIT invests in the equity securities of emerging markets companies. Emerging markets have historically been subject to significant price movements, often to a greater extent than more established equity markets. As a result, the share price and net asset value of TEMIT can fluctuate significantly over relatively short time periods.

Other significant risks include borrowing risk and share price discount to NAV risk. For more details of all the risks applicable to TEMIT, please refer to the Key Information Document, Investor Disclosure Document and the risk section in TEMIT’s Annual Report, which can be downloaded from our website – www.temit.co.uk

TEMIT – What are the Key Risks?


This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares of Templeton Emerging Markets Investment Trust (“TEMIT”). Nothing in this document should be construed as investment advice. Opinions expressed are the author’s at publication date and they are subject to change without prior notice. Subscriptions to shares in TEMIT can only be made on the basis of the Key Information Document, accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter. The value of shares in, or the income received from, TEMIT can go down as well as up, and investors may not get back the full amount invested. Past performance is not an indicator or a guarantee of future performance. Currency fluctuations may affect the value of overseas investments. An investment in TEMIT entails risks. For more details of all the risks applicable to TEMIT, please refer to the Key Information Document, Investor Disclosure Document and the risk section in TEMIT’s Annual Report. In emerging markets, the risks can be greater than in developed markets. US Persons are not eligible to invest in TEMIT. Shares of TEMIT are available for sale on the London and New Zealand stock exchanges. Any research and analysis contained in this document has been procured by Franklin Templeton Investments for its own purposes and is provided to you only incidentally. References to particular industries, sectors or companies are for general information and are not necessarily indicative of a fund’s holding at any one time.References to indices are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. An index is unmanaged and one cannot invest directly in an index. The performance of the index does not include the deduction of expenses and does not represent the performance of any Franklin Templeton Investments fund. All MSCI data is provided “as is.” The portfolio described herein is not sponsored or endorsed by MSCI. In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind in connection with the MSCI data or the portfolio described herein. Copying or redistributing the MSCI data is strictly prohibited.© 2019 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.There is no guarantee that TEMIT will achieve its objective. A copy of the latest TEMIT annual report and semi-annual report, if published thereafter can be found on our website: www.temit.co.uk or can be obtained, free of charge, from Franklin Templeton Investments, Cannon Place, 78 Cannon Street, London EC4N 6HL.

Important Information


APPENDIX


Portfolio Manager

Chetan Sehgal, CFASenior Managing DirectorDirector of Portfolio ManagementFranklin Templeton Emerging Markets EquityTempleton Asset Management Ltd.Singapore

Chetan is the lead portfolio manager of TEMIT and is also senior managing director and the director of portfolio management for the Franklin Templeton Emerging Markets Equity group. In this capacity, he is responsible for strengthening the overall Global Emerging Markets and Small Cap strategies, providing guidance and thought leadership, coordinating appropriate resources and coverage, and leveraging the group’s expertise to add value across products within the strategies.

He joined Franklin Templeton in 1995 from the Credit Rating Information Services of India, Ltd where he was a senior analyst.

Chetan holds a B.E. mechanical (hons) from the University of Bombay and a post-graduate diploma in management from the Indian Institute of Management in Bangalore, where he specialised in finance and business policy and graduated as an institute scholar. Chetan speaks English and Hindi and is a Chartered Financial Analyst (CFA) charterholder.


Portfolio Manager

Andrew Ness, ASIPPortfolio ManagerFranklin Templeton Emerging Markets EquityFranklin Templeton Investments LtdEdinburgh, United Kingdoms

Based in Edinburgh, UK, Andrew Ness is co-portfolio manager of TEMIT.Prior to joining Franklin Templeton in September 2018, Andrew was a PortfolioManager at Martin Currie, an Edinburgh based asset manager.

He began his career at Murray Johnstone in 1994 and worked with Deutsche Asset Management in both London and New York before joining Scottish Widows Investment Partnership in 2007.

Andrew holds a B.A. (Hons) in Economics and an MSc in business economics from theUniversity of Strathclyde in the UK. He is an Associate Member of the UK Society ofInvestment Professionals and a member of the CFA Institute.

The value of investments and any income from them can go down as well as up. You may get back less than invested. © 2019 Franklin Templeton Investments. All rights reserved.

Franklin Templeton InvestmentsCannon Place, 78 Cannon PlaceLondon, EC4N 6HL0800 305 [email protected]

TEM AGM 07/19

Issued by Franklin Templeton Investment Management Limited, Cannon Place, 78 Cannon Street, London EC4N 6HL. Authorised and regulated by the Financial Conduct Authority.

Telephone: 0800 305 306, Email: [email protected].

templeton emerging markets investment …...templeton emerging markets investment trust plc agm...

Documents