Should I accept Templeton trust offer?

 

I am completely unsure what to do about the Templeton tender offer to shareholders and I have so far been unable to find any opinion on the internet. Can you help? K.M., Redhill, Surrey

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Under scrutiny: Should I keep investing in Templeton?

As an investor with Templeton Emerging Markets Investment Trust for several years I have received proposals for a tender offer giving me the opportunity to realise a proportion of my shares.

Bearing in mind that I have invested for the long term and wish to continue doing so, how will this offer affect my existing shares? Should I continue to invest or would it be more prudent to realise part or all of my investment? P.M., Morecambe, Lancashire

Danny Cox, Head of Financial Planning Strategy at independent financial adviser Hargreaves Lansdown, replies: My understanding is that Templeton is offering investors a part exit from the trust at a price of 4% under the net asset value.

The published discount on the 30th September was over 14%, so a 4% discount on surrender seems like a good price.

You need to be careful of any tax due if you decide to cash in and if you cash in more than the proportion offered, you will get a different discount on the excess.

I would also be asking a couple of questions here:

Are you happy with the amount of risk you are taking? Emerging markets are among the higher stock market risks. This provides the potential for good returns at the expense of volatile prices. If this holding is a high percentage of your overall portfolio you should consider whether decreasing your exposure to emerging markets is a good idea.

Are you happy with the holding itself? If you decide to change your exposure to emerging markets, it might be better to diversify your investments and perhaps split you holdings between funds. I like the First State Global Emerging Market Leaders fund as an alternative.

The fact sheet from Templeton shows the investment trust has had good and bad years, but the longer-term performance is above index.

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