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Long-term record of outperformance

Templeton Emerging Markets IT 18 June 2020 Review
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Templeton Emerging Markets IT

Long-term record of outperformance

Investment trusts
Emerging market equities

18 June 2020

Price

758.0p

Market cap

£1,821m

AUM

£2,177m

NAV*

844.0p

Discount to NAV

10.2%

NAV**

857.8p

Discount to NAV

11.6%

*Excluding income. **Including income. As at 16 June 2020.

Yield

2.5%

Ordinary shares in issue

240.3m

Code

TEM

Primary exchange

LSE

AIC sector

Global Emerging Markets

Benchmark

MSCI Emerging Markets

Share price/discount performance

Three-year performance vs index

52-week high/low

876.0p

578.0p

971.4p

705.6p

**Including income.

Gearing

Net cash*

1.7%

*As at 31 May 2020.

Analysts

Mel Jenner

+44 (0)20 3077 5720

Sarah Godfrey

+44 (0)20 3681 2519

Templeton Emerging Markets Investment Trust is a research client of Edison Investment Research Limited

Templeton Emerging Markets Investment Trust’s (TEMIT’s) two managers have more than 50 years’ combined investment experience. Chetan Sehgal is based in Singapore and Andrew Ness is based in Edinburgh; they are part of a more than 80-strong team of portfolio managers and analysts across 16 countries around the globe. The trust’s relative performance was negatively affected during the coronavirus-led market sell-off earlier in 2020 but has since bounced back strongly. TEMIT has outperformed its benchmark, the MSCI Emerging Markets index, over the last one, three, five and 10 years in both NAV and share price terms.

Navigating the market volatility in 2020 – NAV outperformed the benchmark over 12 months to end-May

Source: Refinitiv, Edison Investment Research

The market opportunity

The COVID-19 outbreak has brought significant equity market volatility in 2020, and its ultimate economic effects will take time to unfold. In such an uncertain environment, a focus on high-quality, well-financed businesses with strong management teams may help steer investors through what are likely to be continued choppy waters.

Why consider investing in TEMIT?

Well-established emerging market equity fund, diversified by sector, geography and market cap.

Highly experienced managers, supported by a very well-resourced investment team.

Outperformance of the market over one, three, five and 10 years, and of the peer group average over one, three and five years.

High level of revenue reserves, an important consideration when corporate dividends are under pressure.

Discount broadly in line with historical averages

TEMIT’s current 11.6% discount to cum-income NAV is broadly in line with the 10.3% to 12.1% range of average discounts over the last one, three, five and 10 years. Over the last 12 months the trust has traded in a range of discounts from 8.7% to a decade-wide 19.9%. TEMIT has meaningfully grown its annual dividends in recent years and currently offers a 2.5% yield.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

Launched in June 1989, TEMIT was one of the first emerging markets funds in the UK. The trust seeks long-term capital appreciation through investment in companies operating in emerging markets, or listed on the stock markets of such countries. This may include companies that have a significant amount of their revenues in emerging markets, but which are listed on stock exchanges in developed countries. Performance is benchmarked against the MSCI Emerging Markets Index.

4 June 2020: Annual report to 31 March 2020. NAV TR -11.2% versus benchmark TR -13.2%. Share price TR -12.1%. Announcement of 14.0p final dividend (+27.3% year-on-year).

28 May 2020: Announcement of £26.5m tax refund from HMRC (equivalent to 1.37% of NAV).

31 January 2020: Announcement of amended debt facility (see page 8).

Forthcoming

Capital structure

Fund details

AGM

July 2020

Ongoing charges

1.02%

Group

Templeton Asset Management

Interim results

November 2020

Net cash

1.7%

Managers

Chetan Sehgal and Andrew Ness

Year end

31 March

Annual mgmt fee

Tiered (see page 8)

Address

5 Morrison Street, Edinburgh,
EH3 8BH, UK

Dividend paid

July and January

Performance fee

None

Launch date

12 June 1989

Trust life

Indefinite (subject to vote)

Phone

+44 (0)871 384 2505

Continuation vote

Five yearly (next in 2024)

Loan facilities

£220m

Website

www.temit.co.uk

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

FY18 dividend was boosted by a change in fee allocations. Dividends were historically paid annually in July, but starting in FY19, are paid twice a year in July and January.

Subject to annual renewal, TEMIT is authorised to repurchase up to 14.99% and allot up to 5% of its issued ordinary shares.

Shareholder base (as at 21 May 2020)

Portfolio exposure by geography (as at 31 May 2020)

Top 10 holdings (as at 31 May 2020)

Portfolio weight %

Company

Country

Sector

31 May 2020

31 May 2019*

Taiwan Semiconductor Manufacturing

Taiwan

Information technology

8.9

6.5

Samsung Electronics

South Korea

Information technology

8.7

6.9

Tencent

China/Hong Kong

Communication services

8.5

2.8

Alibaba (ADR)

China/Hong Kong

Consumer discretionary

7.7

4.5

NAVER

South Korea

Communication services

4.5

N/A

Unilever

UK

Consumer staples

3.1

3.5

ICICI Bank

India

Financials

3.0

4.0

Brilliance China Automotive

China/Hong Kong

Consumer discretionary

2.9

3.2

Naspers

South Africa

Communication services

2.8

5.9

LUKOIL (ADR)

Russia

Energy

2.6

2.6

Top 10 (% of portfolio)

52.7

42.5

Source: Templeton Emerging Markets Investment Trust, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in end-May 2019 top 10.

Market outlook: Focus on quality warranted

The performance of indices (in sterling) over the last five years is shown in Exhibit 2 (LHS). Emerging market equities have outperformed UK shares over the period but have been unable to keep up with global indices, which are dominated by the US, a market that has been relatively strong over the last few years.

Long-term structural growth trends in emerging markets remain intact, including an expanding educated middle class with higher levels of disposable income, and robust infrastructure spending. However, the coronavirus pandemic has seriously affected recent economic activity across the globe, despite supportive monetary and fiscal policies aiming to mitigate the negative effects of the virus outbreak.

In the chart below (RHS), we show a range of valuation multiples; emerging market equities look relatively attractive on these measures, although investors should remain wary about the absolute figures as corporate earnings estimates are in a state of flux and some dividend payments are under threat. Given the uncertain backdrop and the fact that some businesses will be permanently impaired by the effects of COVID-19, investors are likely to be well served by focusing on high-quality businesses, with strong balance sheets and competent management teams, that will be able to come out the other side of the current crisis.

Exhibit 2: Market performance and valuation

Performance of indices in £ (last five years)

Valuation metrics (as at 31 May 2020)

Source: Refinitiv, Edison Investment Research, MSCI

Fund profile: Broad exposure to emerging markets

TEMIT was launched in June 1989 and is the UK’s largest emerging markets trust. While most of its shareholders are based in this country, TEMIT’s shares are quoted on both the London and New Zealand stock exchanges. It is managed by Franklin Templeton Emerging Markets Equity (FTEME), which has c $23bn of assets under management.

The trust’s managers are Chetan Sehgal (lead manager since 1 February 2018, 27 years’ investment experience, based in Singapore) and Andrew Ness (joined FTEME in September 2018, 25 years’ investment experience, based in Edinburgh). They aim to generate long-term capital growth by investing in companies listed in emerging markets or those listed in developed markets that earn a significant amount of their revenues in emerging markets. TEMIT’s performance is measured against the MSCI Emerging Markets Index. In order to mitigate risk, at the time of investment, a maximum 10% of assets may be invested in a single issuer. Gearing of up to 10% of NAV is permitted; at the end of May 2020, the trust had a 1.7% net cash position.

Data from FTEME show that since launch to end-FY20 (31 March), TEMIT's NAV total return was +2,963.9% compared to the benchmark’s +1,308.7% total return.

The fund managers: Chetan Sehgal and Andrew Ness

The manager’s view: Part of a strong investment team

Sehgal highlights the strength of the FTEME team, saying that while COVID-19 has been a test of remote working, things are going well. Team members are undertaking many company and industry meetings and ‘engagement is at an all-time high’. The manager says that companies appear comfortable with remote meetings, which have proved ‘equally good’ as face-to-face interactions. Sehgal notes that there were significant changes to the FTEME investment team following the departure of TEMIT’s prior manager in early 2018; however, there have been a series of new hires to fill the available roles, including increased resources covering China, and ‘we now have a very strong team on the research side’, he adds.

The manager’s philosophy is that economic earnings, rather than dividends, valuation or currencies, are the primary driver of share prices in emerging markets. He believes that mispriced quality companies can be identified via thorough fundamental analysis. Comparing TEMIT with some of its peers, Sehgal says its portfolio is very valuation oriented and ‘well rounded’, and he is not prepared to chase stocks with strong share price momentum. He says that over time, companies generating higher-than-average returns on invested capital tend to outperform the broader market, hence it is important to monitor companies continuously to ensure that they are not ‘losing their edge’. The manager highlights TEMIT’s top two holdings in Taiwan Semiconductor Manufacturing (TSMC) and Samsung Electronics, suggesting that ‘they have maintained their leadership and are reasonably immune to the US-China trade conflict’.

Commenting on the current investment backdrop, Sehgal says the outlook for the global economy is highly uncertain, and it is difficult to assess the negative impact of the COVID-19 pandemic on growth and corporate earnings in the short term. However, he argues that TEMIT’s focus on long-term sustainable earnings power should help the fund navigate the coming months, and that over time, he expects the fundamentals of the trust’s holdings to remain intact. The manager comments that the FTEME team are ‘no strangers to crisis and are experienced in investing through highly volatile periods, including the Asian and global financial crises’. He adds that ‘this period will pass; history has shown us that economies and markets will eventually stabilise and recover’.

Asset allocation

Investment process: Bottom-up stock selection

Sehgal and Ness are able to draw on the considerable resources of FTEME’s investment team, which includes more than 80 analysts and portfolio managers in 16 offices around the globe, providing very good access to company managements and other important contacts. They are keen to stress that in recent years the levels of collaboration and communication within the team have been improved. There are regular meetings, both formal and informal, and all analysts and portfolio managers are expected to contribute to investment returns.

The managers aim to achieve long-term capital growth by investing in companies with sustainable growth, strong management teams and sound governance, which are trading at a discount to their intrinsic value. Sehgal believes that given the wide dispersion of returns between companies in emerging markets, the managers can ‘add alpha via stock selection, which trumps sector and geographic selection’.

There is a three-stage investment process of idea generation, stock research and portfolio construction, and consideration of a company’s environmental, social and governance (ESG) track record is a very important element of stock selection. FTEME’s investment team undertakes around 2,000 to 2,500 company interactions each year, meeting with management teams, touring facilities, and meeting suppliers, clients and competitors, to help determine a company’s intrinsic value. Risk management is embedded across all three stages of the process and includes an independent risk review. TEMIT’s portfolio is diversified by geography, sector and market cap, and has 70 to 100 holdings selected from an investible universe of more than 750 companies. Its active share typically ranges from 70% to 85% (this is a measure of how a fund differs from its benchmark, with 0% representing full index replication and 100% indicating no commonality).

While the managers invest on a bottom-up basis, a series of themes is represented in the portfolio: technology – opportunities in the areas of e-commerce, disruption and data; emerging market consumers – under-penetration of products and services, and demand for higher-end products; all-cap opportunities – more than 15% of the portfolio is invested in companies with market caps of less than $5bn; and corporate governance – companies are adopting better standards, including higher levels of reporting and engagement with shareholders, and improving capital allocation which, over time, should make emerging market equities more attractive to international investors.

Current portfolio positioning

At end-May 2020, TEMIT’s top 10 holdings made up 52.7% of the portfolio, which was a higher concentration compared with 42.5% a year earlier; nine positions were common to both periods.

The trust’s sector breakdown is shown in Exhibit 3. The most significant weighting changes over the 12 months to the end of May were a higher exposure to communication services (+9.1pp) and a lower exposure to financials (-8.2pp). Compared with the benchmark, the largest deviations are overweight positions in communication services (+7.0pp) and technology (+6.2pp).

Exhibit 3: Portfolio sector exposure vs benchmark (% unless stated)

Portfolio end-May 2020

Portfolio end-May 2019

Change
(pp)

Index
weight

Active weight
vs index (pp)

Trust weight/
index weight (x)

Information technology

22.9

20.2

2.7

16.7

6.2

1.4

Communication services

20.0

10.9

9.1

13.0

7.0

1.5

Consumer discretionary

19.3

19.8

(0.5)

15.9

3.4

1.2

Financials

18.4

26.6

(8.2)

20.2

(1.8)

0.9

Consumer staples

5.4

7.8

(2.4)

6.7

(1.3)

0.8

Energy

4.8

8.7

(3.9)

6.4

(1.6)

0.8

Materials

3.7

3.1

0.6

7.1

(3.4)

0.5

Industrials

2.0

2.8

(0.8)

5.0

(3.0)

0.4

Healthcare

1.8

1.9

(0.1)

3.8

(2.0)

0.5

Utilities

0.0

0.0

0.0

2.5

(2.5)

0.0

Real estate

0.0

0.0

0.0

2.7

(2.7)

0.0

Other net assets

1.7

(1.8)

3.5

0.0

1.7

N/A

100.0

100.0

100.0

Source: Templeton Emerging Markets Investment Trust, Edison Investment Research

In terms of TEMIT’s geographic exposure (Exhibit 4), the largest changes to the end of May are higher weightings to China/Hong Kong (+8.3pp) and South Korea (+4.8pp), with a lower weighting to South Africa (-4.0pp).

Exhibit 4: Portfolio geographic exposure (% unless stated)

Portfolio end-May 2020

Portfolio end-May 2019

Change (pp)

China/Hong Kong

32.1

23.8

8.3

South Korea

18.1

13.3

4.8

Taiwan

11.4

9.2

2.2

Russia

7.8

9.9

(2.1)

Brazil

6.9

9.9

(3.0)

India

5.8

8.1

(2.3)

South Africa

3.0

7.0

(4.0)

UK

3.0

3.5

(0.5)

Thailand

2.1

4.0

(1.9)

US

1.9

3.3

(1.4)

Other

7.9

8.0

(0.1)

100.0

100.0

Source: Templeton Emerging Markets Investment Trust, Edison Investment Research

A recent addition to the portfolio is Tencent Music Entertainment, which is a leader in online music streaming in China. The managers believe that this company benefits from the extensive platform of its parent, internet giant Tencent Holdings. Tencent Music has a large user base and there is the potential for the firm to monetise its business.

Looking back at some of the less recent purchases and sales, the managers initiated positions in Prosus (a spin-off from Naspers), Samsung Life Insurance (attractive valuation) and Vale (resilient iron ore price, and ‘compelling value’). Three positions sold were PT Bank Danamon Indonesia, China Construction Bank Corporation and Compañia de Minas Buenaventura.

Performance: Outperformance in FY20

Exhibit 5: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

MSCI Emerging
Markets (%)

MSCI World
(%)

CBOE UK All Companies (%)

31/05/16

(16.2)

(14.5)

(13.3)

1.3

(5.8)

31/05/17

56.0

54.8

44.2

32.0

24.4

31/05/18

6.4

7.8

11.0

8.8

6.6

31/05/19

6.7

1.0

(3.2)

5.9

(3.4)

31/05/20

(1.1)

1.8

(2.2)

9.5

(12.0)

Source: Refinitiv. Note: All % on a total return basis in pounds sterling.

Exhibit 6: Investment trust performance to 31 May 2020

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised.

Having been in positive territory for the first nine months of FY20, following the coronavirus-led market weakness, TEMIT ended the financial year to 31 March with NAV and share price total returns of -11.2% and -12.1% respectively, which were ahead of the benchmark’s -13.2% total return. The top three contributors to relative returns were TSMC (+1.1pp), NAVER (+1.0pp) and Tencent (0.9pp). TSMC is one of the world's leading semiconductor makers and posted solid revenue and earnings growth in Q319 and Q419. It benefited from better-than-expected sales of Apple’s latest iPhone, and in the future there are growth opportunities from the roll-out of 5G networks. NAVER is South Korea's largest internet search engine. Its shares rallied following the announced merger of its subsidiary Line Corporation, the largest messenger app in Japan, with Yahoo! Japan. The company also plans to spin off its digital payments unit, NAVER Pay, to form a financial services company and a roadmap for the monetisation of the NAVER Webtoon (digital comic) publishing portal was also viewed favourably by investors. Tencent is one of the largest internet services companies in China, providing online gaming, social network, fintech, cloud and other entertainment-related services. The company reported solid Q420 corporate results, with double-digit revenue and earnings growth driven by strong performances in its online gaming, advertising, fintech and cloud operations. The three largest detractors to TEMIT’s relative performance in FY20 were all banks, due to concerns about the COVID-19 pandemic: Banco Bradesco (-0.7pp); Banco Santander Mexico (-0.7pp); and Itaú Unibanco (-0.6pp).

Exhibit 7: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to MSCI Emerging Markets

0.3

0.3

(2.8)

1.1

6.8

11.7

1.3

NAV relative to MSCI Emerging Markets

2.3

(1.3)

(0.5)

4.0

5.3

11.6

6.3

Price relative to MSCI World

(3.6)

(7.6)

(7.4)

(9.7)

(11.0)

(13.0)

(47.9)

NAV relative to MSCI World

(1.7)

(9.0)

(5.1)

(7.0)

(12.2)

(13.1)

(45.3)

Price relative to CBOE UK All Companies

0.1

5.2

10.7

12.4

23.9

38.2

(12.5)

NAV relative to CBOE UK All Companies

2.1

3.5

13.4

15.7

22.2

38.0

(8.2)

Source: Refinitiv, Edison Investment Research. Note: Data to end-May 2020. Geometric calculation.

TEMIT’s relative returns are shown in Exhibit 7; it has outperformed its benchmark over the last one, three, five and 10 years in both NAV and share price terms. The trust has also meaningfully outperformed the broad UK market over the last one, three and five years. Commenting on recent portfolio performance, Sehgal says that TEMIT had a ‘terrible March, but bounced back in April and May’. During the market sell-off, the trust’s performance was particularly negatively affected by an increased exposure to Brazil, a collapse in the oil price, and its holdings in banks.

Exhibit 8: NAV total return performance relative to benchmark over three years

Source: Refinitiv, Edison Investment Research

Discount: Ongoing share repurchases

TEMIT’s board actively repurchases shares, aiming to reduce the volatility of the discount. In FY20, shares were bought back on most trading days – a total of 8.9m (3.6% of the share base) at a cost of £69.9m, which added 0.4% to NAV.

The trust is currently trading at a 11.6% discount to cum-income NAV, which compares to a range of discounts over the last 12 months from 8.7% to a decade-wide, coronavirus-led 19.9%. Over the last one, three, five and 10 years TEMIT has traded at average discounts of 11.1%, 11.6%, 12.1% and 10.3% respectively.

Exhibit 9: Share price discount to NAV (including income) over three years (%)

Source: Refinitiv, Edison Investment Research

Capital structure and fees

TEMIT is a conventional investment trust with one class of share; there are currently 240.3m ordinary shares in issue. Prior to 31 January 2020, it had a £220m three-year unsecured multicurrency (sterling, US dollars and Chinese renminbi) revolving credit facility (RCF) with Scotiabank; on that date, the terms were amended and restated. TEMIT now has two debt facilities, both with the existing lender – a £120m three-year multi-currency RCF expiring on 31 January 2023 and a £100m, 2.089%, sterling fixed-rate term loan maturing on 31 January 2025. Interest on the RCF will be based on market rates at the time of drawdown and may be in sterling, US dollars or Chinese renminbi; the maximum amount of renminbi that may be drawn down is 45% of the £220m total debt facility. The board believes that it is an opportune time to extend TEMIT’s debt facilities given its positive view on the long-term outlook for emerging markets and current low interest rates. At end-May 2020, the trust had a net cash position of 1.7%. Gearing is used tactically, and Sehgal says that he ‘wants enough ammunition available if markets are volatile’.

FTEME is currently paid an annual management fee of 1.0% of net assets up to £1bn and 0.85% of net assets above this level; no performance fee is payable. From 1 July 2020, the rate on net assets above £1bn will be reduced from 0.85% to 0.80%. In FY20, TEMIT’s ongoing charges were 1.02%, which was in line with FY19.

TEMIT is subject to a five-yearly continuation vote, with the next due at the July 2024 AGM (the July 2019 vote was passed by a 99.95% majority). In May 2019, the board announced a five-year, performance-related conditional tender offer, subject to the next continuation vote being passed. If the trust’s NAV performance lags its benchmark in the five years ending 31 March 2024, the board, at its discretion, will undertake a tender offer for up to 25% of TEMIT’s shares in issue, at a price equivalent to the prevailing NAV minus 2% and the costs of the offer.

Dividend policy and record

In FY20, TEMIT received revenue earnings of 21.80p per share, which was 26.3% higher than 17.26p per share in FY19. This excludes 2.60p per share received as a special dividend in H120 from Brilliance China Automotive, which was distributed to the trust’s shareholders with the interim dividend in January 2020. TEMIT’s total ordinary dividends of 19.00p per share in FY20 were 18.8% higher year-on-year.

It should be noted that the vast majority of the trust’s revenue earnings were received before the full effects of the COVID-19 pandemic became apparent. However, while TEMIT focuses on capital growth rather than targeting a particular level of income, the board notes that the trust’s substantial revenue reserves (equivalent to more than 2.5x the last annual dividend payment) will enable the level of ordinary dividends at least to be maintained for the foreseeable future. Based on its current share price, TEMIT offers a 2.5% dividend yield.

Peer group comparison

TEMIT is the largest of the 15 funds in AIC Global Emerging Markets sector by quite some margin. In Exhibit 10 we show the largest eight, with market caps greater than £200m. TEMIT’s NAV total returns are above average over one, three and five years, ranking first, second and second respectively. Indeed, it is one of only two funds to have generated a positive total return over the last 12 months. Over the last decade, TEMIT ranks third out of five funds. Its discount on the date shown in the table is modestly wider than average, in a group where none of the funds is trading at a premium. The trust has a competitive ongoing charge, is currently ungeared, and has a dividend yield that is modestly below the mean.

Exhibit 10: Selected global emerging markets peer group as at 17 June 2020*

% unless stated

Market cap (£m)

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount (cum fair)

Ongoing charge

Perf.
fee

Net gearing

Dividend yield

Templeton Emerging Markets IT

1,821.4

4.3

16.6

65.1

70.4

(12.4)

1.0

No

100

2.5

Aberdeen Emerging Markets

239.0

(1.9)

3.2

40.3

50.1

(17.4)

1.1

No

100

0.0

BlackRock Frontiers

232.6

(21.1)

(19.1)

12.7

(5.6)

1.4

Yes

112

5.4

Fundsmith Emerging Equities Trust

284.4

(4.1)

6.3

27.3

(12.4)

1.4

No

100

0.3

Genesis Emerging Markets Fund

857.6

(2.5)

5.9

39.1

59.9

(11.8)

1.1

No

100

2.1

JPMorgan Emerging Markets

1,160.3

2.7

22.3

73.2

105.7

(8.5)

1.0

No

100

1.4

JPMorgan Global EM Income

326.2

(6.8)

4.5

37.4

(9.7)

1.3

No

107

4.6

Utilico Emerging Markets

401.4

(17.8)

(6.6)

18.1

85.6

(14.5)

1.1

Yes

101

4.2

Average (8 trusts)

665.4

(5.9)

4.1

39.1

74.3

(11.5)

1.2

103

2.6

TEM rank in peer group

1

1

2

2

3

5

8

4=

4

Source: Morningstar, Edison Investment Research. Note: *Performance as at 16 June 2020 based on ex-par NAVs. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

The board

There are currently six directors on TEMIT’s board, five of whom are independent. Chairman Paul Manduca joined the board on 1 August 2015 and assumed his current role on 20 November 2015. The other four independent directors and their dates of appointment are: Beatrice Hollond (senior independent director, 1 April 2014); Simon Jeffreys (15 July 2016); David Graham (1 September 2016); and Charlie Ricketts (12 July 2018). Gregory Johnson is TEMIT’s non-independent director; he is chairman and CEO of Franklin Resources (FTEME’s parent) and joined the board on 12 December 2007. Johnson has announced his intention to stand down at the July 2020 AGM, which will mean TEMIT’s board is fully independent.

General disclaimer and copyright

This report has been commissioned by Templeton Emerging Markets Investment Trust and prepared and issued by Edison, in consideration of a fee payable by Templeton Emerging Markets Investment Trust. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Templeton Emerging Markets Investment Trust and prepared and issued by Edison, in consideration of a fee payable by Templeton Emerging Markets Investment Trust. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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