Semi
Annual
Report
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FEBRUARY 28, 2003
TEMPLETON EMERGING
MARKETS FUND
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FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
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MARK MOBIUS
PRESIDENT AND CHIEF EXECUTIVE
OFFICER - INVESTMENT MANAGEMENT
TEMPLETON EMERGING
MARKETS FUND
Mark Mobius has been living in emerging market countries since earning his Ph.D.
in economics and political science at Massachusetts Institute of Technology in
1964. During his extensive travels, he has acquired a thorough knowledge of
business practices and customs unique to developing nations.
CONTENTS
Shareholder Letter ........ 1
Performance Summary ....... 9
Important Notice
to Shareholders ........... 10
Financial Highlights &
Statement of Investments .. 11
Financial Statements ...... 18
Notes to
Financial Statements ...... 21
SHAREHOLDER LETTER
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YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: TEMPLETON EMERGING MARKETS FUND SEEKS
LONG-TERM CAPITAL APPRECIATION BY INVESTING, UNDER NORMAL MARKET CONDITIONS, AT
LEAST 80% OF ITS NET ASSETS IN EMERGING COUNTRY EQUITY SECURITIES.
--------------------------------------------------------------------------------
Dear Shareholder:
This semiannual report for Templeton Emerging Markets Fund covers the period
ended February 28, 2003. During the six months under review, the U.S. seemed to
lead a general global growth slowdown; however, many emerging markets posted
encouraging growth rates, some more than doubling those recorded in developed
markets. China continued to be the most vibrant and fastest-growing Asian
economy, reporting gross domestic product (GDP) growth of about 8% in 2002. 1
China experienced strong export growth, industrial production, consumer demand
and foreign direct investment in 2002. South Korea expected 2002 GDP growth of
about 6.1%, after recording an annualized growth rate of 5.8% in 2002's third
quarter. 2 Turkey's economy grew 7.9% annualized in 2002's third quarter, while
South African GDP grew 3.1%. 3 These growth rates indicate
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF TEXT IN PYRAMID GRAPHIC AS FOLLOWS:
FUND CATEGORY
Global
Growth
Growth & Income
Income
Tax-Free Income
1. Source: National Bureau of Statistics, People's Republic of China, 12/31/02.
2. Source: Bank of Korea, 11/21/02.
3. Sources: The State Institute of Statistics, Republic of Turkey, 12/31/02;
Statistics South Africa, 12/31/02.
The dollar value, number of shares or principal amount, and complete legal
titles of all portfolio holdings are listed in the Fund's Statement of
Investments (SOI). The SOI begins on page 12.
the rapid development of many emerging market economies, which if continued,
could benefit such countries' financial markets over the longer term.
In a landmark decision, the European Union (EU) formally agreed upon enlarging
the bloc to include 10 additional countries in May 2004. These included Cyprus,
the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia
and Slovenia. These countries' economies benefit to some extent from their
movement toward EU standards. Many analysts expect companies exposed to the
ongoing EU convergence to undergo consolidation and merger and acquisition
activity which could, in our opinion, generate greater investor interest. In
many eastern European markets, we saw valuations at what we viewed as attractive
levels during the six months under review. We believe a stable economic and
political environment could generally support the region's investment climate.
The Latin American region seemed to begin recovering from the aftermath of
Argentina's and Brazil's negative economic events. The conclusion of Brazilian
elections ended months of political uncertainty there. Brazil has been plagued
by high interest rates and debt levels, as well as increased capital outflows by
investors. Furthermore, Brazil's currency, the real, depreciated about 16%
during the reporting period. However, we believe that President-elect Luis
Inacio Lula da Silva could restore confidence in the economy. We believe the
Brazilian market could improve if investors there regain confidence. In
Argentina, focus is still on obtaining debt support from the International
Monetary Fund, which may foster the country's efforts toward implementation of
key reforms to improve its fiscal position. However, uncertainty surrounding
presidential elections in
GEOGRAPHIC DISTRIBUTION
BASED ON TOTAL NET ASSETS
2/28/03
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS:
Asia 50.1%
Europe 18.8%
Middle East & Africa 15.0%
Latin America 12.5%
Australia & New Zealand 0.1%
Short-Term Investments & Other Net Assets 3.5%
2
Argentina later this year could lead to some volatility. Mexico's economy
produced weak GDP growth of 0.9% for 2002, below government expectations and
reflecting the country's susceptibility to sluggish U.S. economic conditions. 4
Political changes that occurred in some emerging markets during the period may
help lead to more efficient and stronger central governments, which could in
turn attract foreign investment. In Turkey, Justice & Development Party (AKP)
leader Tayyip Erdogan was re-elected as party chairman. Political continuity
could result in greater stability going forward. Mexico's President Vicente Fox
named Economy Minister Luis Ernesto Derbez as the new foreign minister. Derbez
is known for his negotiations with the North American Free Trade Agreement
(NAFTA) and is expected to revive talks with the U.S. on immigration reforms.
Governor Fernando Canales Clariond, a member of the Partido Accion Nacional
(PAN), will take over as the new economy minister. In China, Vice President Hu
Jintao succeeded President Jiang Zemin as the head of the Communist Party.
President Jiang Zemin emphasized the need for continued political reforms,
government accountability, efforts on combating corruption and ongoing reform of
state-owned enterprises. In South Korea's December 2002 presidential elections,
Millennium Democratic party candidate Roh Moo-hyun declared victory over Lee
Hoi-chang of the opposition Grand National Party. President Roh took office in
February 2003 and is embarking on efforts to reform the chaebol conglomerates
that have dominated the Korean business scene and are accused of many corporate
governance violations.
Within this environment, the Morgan Stanley Capital International (MSCI)
Emerging Markets Free Index returned -4.90%
4. Source: THE DISMAL SCIENTIST (www.economy.com), GDP - Mexico, 2/14/03.
3
in U.S. dollar terms for the six months ended February 28, 2003. 5 During the
same period, Templeton Emerging Markets Fund posted cumulative total returns of
+1.66% in market-price terms and -0.88% in net asset value terms, as shown in
the Performance Summary on page 9. We attribute the Fund's relatively good
performance largely to our fundamental investment approach, focusing on
companies and not on top-down analyses of economies or sectors.
During the six-month period, we reduced the Fund's investments in South Africa
as some portfolio holdings reached our price targets. South African stock sales
included Tiger Brands, Liberty Group and Standard Bank Group. We continued to
purchase shares of Anglo American, a U.K.-based mining company with significant
operations in South Africa and one of the world's leading producers of gold,
diamonds, base metals, coal and industrial minerals.
In Asia, Fund holdings in South Korea, Singapore and India increased during the
reporting period. Concerns over non-performing loans led us to reduce our
exposure to Thailand's banking sector. Another key sale was Siam Cement, one of
Thailand's biggest industrial conglomerates. We also reduced the Fund's exposure
to Malaysia mainly due to the sale of Genting as its valuation became rich, in
our opinion. The Fund's exposure to China Red Chips (Hong Kong listed companies
with significant exposure to China) also decreased mainly due to the sale of
China Unicom and a decreased position in Cosco Pacific.
5. Source: Standard & Poor's Micropal. The unmanaged MSCI Emerging Markets Free
Index is market capitalization-weighted and measures the total returns of equity
securities available to foreign (non-local) investors in emerging markets
globally. The index includes reinvested dividends. One cannot invest directly in
an index, nor is an index representative of the Fund's portfolio.
4
In Latin America, we believe market performance may improve if investors
reevaluate Brazilian assets now that Brazil's political environment appears to
be stabilizing. We took the opportunity during the period to increase our
exposure to stocks we deemed to be attractively valued. Key purchases included
Petrobras, Brazil's oil and gas company with activities in exploration,
production, refining, transportation and distribution of oil and related
byproducts. In addition, we initiated some exposure to Chile through investment
in COPEC, a company that operates Chile's leading fuel distribution franchise
and possesses about 50% market share. COPEC also holds a portfolio of assets
that includes forestry, oil and gas, fishing, electricity and services.
In Europe, we increased exposure to Croatia by purchasing the stock of Pliva,
central and eastern Europe's largest pharmaceutical company. The Fund also added
exposure to Portugal through BPI, the country's fourth-largest private financial
group. In Hungary, we purchased shares of Gedeon Richter, the country's largest
pharmaceutical producer, while reducing holdings in telecommunications service
provider Matav. Elsewhere in Europe, we maintained our holdings in Greece via
Coca-Cola Hellenic Bottling, Coca-Cola's second-largest bottler in the world. We
also undertook selective sales in Russia. Key Russian sales included oil company
Tatneft and electric utility UES due to rich valuations, in our opinion.
At period-end, our top three sectors were oil and gas interests, banks and
industrial conglomerates. Due to portfolio activity and changes in individual
stocks during the reporting period, South Korea's Samsung Electronics,
Thailand's Siam Cement and Hong Kong's Citic Pacific were no longer among the
Fund's top 10 holdings. South Korea's Hyundai Motor, Austria's OMV and South
Africa's Remgro replaced them as of February 28, 2003.
TOP 10 COUNTRIES
Based on Equity Investments
2/28/03
% OF TOTAL
NET ASSETS
------------------------------
South Korea 16.3%
South Africa 14.4%
Hong Kong 7.6%
Brazil 6.4%
Turkey 5.9%
Mexico 5.1%
Singapore 4.7%
India 4.7%
China 4.5%
Indonesia 3.8%
5
As we write this report, the threat of war has become more apparent with the
build-up of U.S. and British troops in the Middle East. Although it was still
unclear at period-end whether a war with Iraq would eventually result, continued
dialogue and United Nations involvement helped delay and perhaps reduce the risk
of military conflict over the short term. However, should war transpire, we
believe that if there is a quick resolution, that could have positive effects on
global stock markets over the longer term. Middle Eastern markets such as Turkey
and Israel, in particular, could benefit if the region settles down. U.S oil
prices hit a 12-year high toward the end of the reporting period; in the event
of war, we believe oil prices are apt to continue rising, potentially setting a
profitable trend for oil-producing companies globally. If this occurs, Russian
oil companies held by the Fund, such as Lukoil Holdings, could benefit and are
already doing so to some degree as the U.S. and other nations try to diversify
their oil resources' countries of origin. Since many emerging markets are oil
exporters, we could see a number of companies benefiting from firmer oil prices.
Uncertainty in North Korea has also created some short-term volatility in Asian
markets, especially South Korea. However, over the longer term we believe it
will not stop the region's economic development or its capital markets. As a
result, we view this as an opportunity to accumulate value stocks at what we
believe are attractive prices. In our opinion, emerging markets in general have
some potential for strong performance, as many of these markets are still
suffering a country-risk discount while their economic growth has been
substantially outpacing that of developed countries. We do not expect this
situation to continue indefinitely and thus will seek to position the Fund to
benefit over the long term.
TOP 10 EQUITY HOLDINGS
2/28/03
COMPANY
SECTOR/INDUSTRY, % OF TOTAL
COUNTRY NET ASSETS
---------------------------------
Anglo American PLC 3.2%
METALS & MINING,
SOUTH AFRICA
SABMiller PLC 2.7%
BEVERAGES, SOUTH AFRICA
Akbank 2.6%
BANKS, TURKEY
PT Telekomunikasi
Indonesia TBK, B 2.2%
DIVERSIFIED TELECOM-
MUNICATION SERVICES,
INDONESIA
Kimberly Clark de
Mexico SA de CV, A 2.0%
HOUSEHOLD PRODUCTS,
MEXICO
Korea Electric Power Corp. 2.0%
ELECTRIC UTILITIES,
SOUTH KOREA
OMV AG 1.9%
OIL & GAS, AUSTRIA
Hyundai Motor Co. Ltd. 1.8%
AUTOMOBILES, SOUTH KOREA
Lukoil Holdings, ADR 1.8%
OIL & GAS, RUSSIA
Remgro Ltd. 1.8%
INDUSTRIAL CONGLOMERATES,
SOUTH AFRICA
6
Looking forward, we are optimistic about long-term prospects for emerging
markets in general and for Templeton Emerging Markets Fund. Thus far in 2003, we
have seen weak market sentiment due to impending war in Iraq, uncertainty in
North Korea and a deterioration of corporate earnings in major markets. Despite
these concerns, U.S. securities recently traded at relatively high multiples on
a historical basis. Investors' widespread pessimism and negative reaction toward
poor earnings reports, coupled with mistrust in the U.S. accounting system and
corporate governance, altogether substantially undermined confidence. As a
result, many investors seemed to find comfort in emerging markets, where stocks
traded at attractive valuations, in our view, and many economies are recording
stronger growth than developed markets.
It is important to note that investing in foreign securities involves special
risks, such as adverse economic, social and political developments in the
countries where the Fund invests, as well as market and currency volatility.
Emerging markets securities involve heightened risks related to the same factors
in addition to those associated with their relatively small size and lesser
liquidity. Investing in any emerging market means accepting a certain amount of
volatility and, in some cases, the consequences of severe market corrections.
For example, the MSCI Hong Kong Index has increased 411% in the past 15 calendar
years, but has suffered 7 quarterly declines of more than 15% each during that
time. 6 While short-term volatility can be disconcerting, declines in excess of
50% are not unusual in emerging markets.
6. Source: Standard & Poor's Micropal. Based on quarterly total return change
over 15 years ended 12/31/02. Market return is measured in U.S. dollars and
includes reinvested dividends. The MSCI Hong Kong Index is market
capitalization-weighted and measures the total returns of equity securities in
Hong Kong.
7
Thank you for your continued participation in Templeton Emerging Markets Fund.
We welcome your comments and suggestions.
Sincerely,
/S/ MARK MOBIUS
Mark Mobius
President and Chief Executive Officer -
Investment Management
Templeton Emerging Markets Fund
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This discussion reflects our analysis, opinions and portfolio holdings as of
February 28, 2003, the end of the reporting period. Our strategies and the
Fund's portfolio composition will change depending on market and economic
conditions. These opinions may not be relied upon as investment advice or an
offer for a particular security. The information is not a complete analysis of
every aspect of any market, country, industry, security or the Fund. Statements
of fact are from sources considered reliable but the Investment Manager makes no
representation or warranty as to their completeness or accuracy. Although
historical performance is no guarantee of future results, these insights may
help you understand our investment management philosophy.
--------------------------------------------------------------------------------
8
PERFORMANCE SUMMARY AS OF 2/28/03
DISTRIBUTIONS WILL VARY BASED ON EARNINGS OF THE FUND'S PORTFOLIO AND ANY
PROFITS REALIZED FROM THE SALE OF THE PORTFOLIO'S SECURITIES, AS WELL AS THE
LEVEL OF THE FUND'S OPERATING EXPENSES. ALL TOTAL RETURNS INCLUDE REINVESTED
DISTRIBUTIONS ACCORDING TO THE TERMS SPECIFIED IN THE FUND'S DIVIDEND
REINVESTMENT AND CASH PURCHASE PLAN AND DO NOT REFLECT ANY SALES CHARGES PAID AT
INCEPTION OR BROKERAGE COMMISSIONS PAID ON SECONDARY MARKET PURCHASES.
PRICE AND DISTRIBUTION INFORMATION
CHANGE 2/28/03 8/31/02
-----------------------------------------------------------------
Net Asset Value (NAV) -$0.24 $8.52 $8.76
Market Price (NYSE) -$0.02 $7.98 $8.00
DISTRIBUTIONS (9/1/02-2/28/03)
Dividend Income $0.1499
PERFORMANCE
6-MONTH 1-YEAR 5-YEAR 10-YEAR
----------------------------------------------------------------------
Cumulative Total Return 1
Based on change in NAV -0.88% -4.90% -13.28% +65.91%
Based on change in market price +1.66% -14.30% -27.11% +31.87%
Average Annual Total Return 1
Based on change in NAV -0.88% -4.90% -2.81% +5.19%
Based on change in market price +1.66% -14.30% -6.13% +2.81%
1. Total return calculations represent the cumulative and average annual changes
in value of an investment over the periods indicated. Six-month return has not
been annualized.
--------------------------------------------------------------------------------
Ongoing market volatility can significantly affect short-term performance; more
recent returns may differ from those shown. Since markets can go down as well as
up, investment return and principal value will fluctuate with market conditions,
currency volatility, economic instability and social and political developments
of countries where the Fund invests. Emerging markets involve heightened risks
related to the same factors, in addition to those associated with their
relatively small size and lesser liquidity. You may have a gain or loss when you
sell your shares.
--------------------------------------------------------------------------------
For more current performance, please call Franklin Templeton Investments at
1-800/342-5236.
Past performance does not guarantee future results.
9
IMPORTANT NOTICE TO SHAREHOLDERS
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SHARE REPURCHASE PROGRAM. On November 28, 2000, the Board of Directors of the
Fund authorized management to implement an open-market share repurchase program
pursuant to which the Fund may purchase, from time to time, shares of the Fund's
common stock in open-market transactions, at the discretion of management. This
authorization remains in effect.
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10
TEMPLETON EMERGING MARKETS FUND
Financial Highlights
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 2003 -----------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
-----------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ......... $8.76 $8.86 $11.44 $11.60 $10.85 $20.67
--------------------------------------------------------------
Income from investment operations:
Net investment income a ..................... .03 .15 .12 .13 .13 .26
Net realized and unrealized gains (losses) .. (.12) (.14) (2.60) (.16) 5.17 (7.64)
--------------------------------------------------------------
Total from investment operations ............. (.09) .01 (2.48) (.03) 5.30 (7.38)
--------------------------------------------------------------
Less distributions from:
Net investment income ....................... (.15) (.11) (.10) (.10) (.29) (.26)
Net realized gains .......................... -- -- -- (.03) (4.26) (2.18)
--------------------------------------------------------------
Total distributions .......................... (.15) (.11) (.10) (.13) (4.55) (2.44)
--------------------------------------------------------------
Net asset value, end of period ............... $8.52 $8.76 $8.86 $11.44 $11.60 $10.85
--------------------------------------------------------------
Market value, end of period b ................ $7.980 $8.000 $8.350 $9.313 $12.250 $9.188
--------------------------------------------------------------
Total return (based on market value per share) c (.88)% (2.82)% (9.17)% (23.10)% 99.91% (54.35)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............ $150,453 $154,640 $156,378 $201,965 $204,804 $182,352
Ratios to average net assets:
Expenses .................................... 2.03% d 1.64% 1.67% 1.68% 1.63% 1.70%
Net investment income ....................... .66% d 1.67% 1.28% 1.09% 1.18% 1.58%
Portfolio turnover rate ...................... 23.30% 65.13% 63.64% 81.66% 45.00% 40.51%
a Based on average weighted shares outstanding effective year ended August 31, 1999.
b Based on the last sale on the New York Stock Exchange.
c Total return is not annualized for periods less than one year.
d Annualized.
See notes to financial statements.
11
TEMPLETON EMERGING MARKETS FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2003 (UNAUDITED)
INDUSTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 92.2%
ARGENTINA .6%
aMolinos Rio de la Plata SA, B ................. Food Products 166,259 $ 250,811
aQuilmes Industrial SA, ADR .................... Beverages 78,635 609,421
------------
860,232
------------
AUSTRALIA .1%
BHP Billiton PLC .............................. Metals & Mining 29,800 154,263
------------
AUSTRIA 3.2%
BBAG Oesterreichische Brau-Beteiligungs AG .... Beverages 4,127 337,385
Erste Bank der Oester Sparkassen AG ........... Banks 8,612 576,411
Mayr-Melnhof Karton AG ........................ Containers & Packaging 5,460 427,351
OMV AG ........................................ Oil & Gas 26,708 2,885,772
Wienerberger AG ............................... Building Products 33,484 570,566
------------
4,797,485
------------
BRAZIL 2.3%
Centrais Eletricas Brasileiras SA (Electrobras) Electric Utilities 76,318,000 359,244
Cia Vale do Rio Doce, ADR ..................... Metals & Mining 21,049 610,421
Embraer-Empresa Brasileira de Aeronautica SA .. Aerospace & Defense 21,800 47,583
Embraer-Empresa Brasileira de Aeronautica SA, ADR Aerospace & Defense 72,641 748,929
Souza Cruz SA (Non-Taxable) ................... Tobacco 154,100 860,525
Souza Cruz SA (Taxable) ....................... Tobacco 2,000 11,168
Ultrapar Particpacoes SA, ADR ................. Gas Utilities 11,300 75,258
Unibanco Uniao de Bancos Brasileiros SA, GDR .. Banks 64,752 734,935
------------
3,448,063
------------
CHILE .4%
Cia de Petroleos de Chile SA (COPEC) .......... Industrial Conglomerates 176,530 645,635
------------
CHINA 4.5%
Beijing Datang Power Generation Co. Ltd., H ... Electric Utilities 454,000 154,261
aChina Mobile (Hong Kong) Ltd. ................. Wireless Telecommunication Services 401,500 864,869
China Petroleum & Chemical Corp., H ........... Oil & Gas 11,200,000 2,111,013
China Resources Enterprise Ltd. ............... Distributors 1,436,000 1,288,867
China Shipping Development Co. Ltd., H ........ Marine 618,000 152,933
Guangdong Electric Power Development Co Ltd., B Electric Utilities 95,000 54,936
Guangshen Railway Co. Ltd., H ................. Road & Rail 329,762 60,463
People's Food Holdings Ltd. ................... Food & Drug Retailing 973,000 500,724
PetroChina Co. Ltd., H ........................ Oil & Gas 4,904,000 1,024,929
Qingling Motors Co. Ltd., H ................... Automobiles 1,440,000 227,103
Travelsky Technology Ltd., H .................. Commercial Services & Supplies 433,000 322,012
------------
6,762,110
------------
CROATIA .8%
Pliva D D, GDR, Reg S ......................... Pharmaceuticals 95,400 1,195,362
------------
12
TEMPLETON EMERGING MARKETS FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2003 (UNAUDITED) (CONT.)
INDUSTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
CZECH REPUBLIC .4%
aCEZ AS ........................................ Electric Utilities 82,019 $ 256,030
Philip Morris CR AS ........................... Tobacco 580 216,869
aUnipetrol ..................................... Chemicals 54,529 74,563
------------
547,462
------------
EGYPT .3%
Commercial International Bank Ltd. ............ Banks 74,688 468,893
------------
GREECE 1.0%
Coca-Cola Hellenic Bottling Company SA ........ Beverages 59,300 835,985
Hellenic Telecommunications Organization SA ... Diversified Telecommunication Services 60,800 661,853
------------
1,497,838
------------
HONG KONG 7.6%
Beijing Enterprises Holdings Ltd. ............. Industrial Conglomerates 576,000 564,988
Cheung Kong Holdings Ltd. ..................... Real Estate 195,000 1,225,141
Cheung Kong Infrastructure Holdings Ltd. ...... Construction Materials 288,000 524,368
China Merchants Holdings International Co. Ltd. Industrial Conglomerates 1,647,000 1,277,628
China Travel International Investment
Hong Kong Ltd. ............................. Hotels Restaurants & Leisure 2,220,000 384,275
Citic Pacific Ltd. ............................ Industrial Conglomerates 1,131,000 2,197,004
Cosco Pacific Ltd. ............................ Transportation Infrastructure 1,238,000 1,119,091
Dairy Farm International Holdings Ltd. ........ Food & Drug Retailing 319,300 335,265
Giordano International Ltd. ................... Specialty Retail 936,000 282,033
Hang Lung Group Ltd. .......................... Real Estate 799,000 676,155
Henderson Investment Ltd. ..................... Real Estate 1,463,000 1,181,790
Henderson Land Development Company Ltd ........ Real Estate 99,000 281,167
MTR Corp. Ltd. ................................ Road & Rail 657,091 728,781
Shanghai Industrial Holdings Ltd. ............. Industrial Conglomerates 416,000 645,408
------------
11,423,094
------------
HUNGARY 2.6%
Egis Rt. ...................................... Pharmaceuticals 8,879 272,565
Gedeon Richter Ltd. ........................... Pharmaceuticals 25,820 1,581,807
Matav RT ...................................... Diversified Telecommunication Services 58,739 191,228
MOL Magyar Olaj-Es Gazipari RT ................ Oil & Gas 86,530 1,865,902
------------
3,911,502
------------
INDIA 4.7%
Bharat Heavy Electricals Ltd. ................. Electrical Equipment 283,104 1,247,582
Bharat Petroleum Corp. Ltd. ................... Oil & Gas 92,954 436,737
Container Corp. of India Ltd. ................. Road & Rail 28,975 144,069
Dr. Reddy's Laboratories Ltd. ................. Pharmaceuticals 24,900 458,089
Grasim Industries Ltd. ........................ Industrial Conglomerates 183,703 1,347,374
Hero Honda Motors Ltd. ........................ Automobiles 44,500 208,379
Hindalco Industries Inc. ...................... Metals & Mining 25,133 309,674
Hindustan Petroleum Corporation Ltd. .......... Oil & Gas 15,511 102,051
Indian Oil Corp. Ltd. ......................... Oil & Gas 30,076 152,068
ITC Ltd. ...................................... Tobacco 90,001 1,226,291
13
TEMPLETON EMERGING MARKETS FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2003 (UNAUDITED) (CONT.)
INDUSTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
INDIA (CONT.)
Mahanagar Telephone Nigam Ltd. ................ Diversified Telecommunication Services 648,800 $ 1,370,014
Zee Telefilms Ltd. ............................ Media 11,000 19,385
------------
7,021,713
------------
INDONESIA 3.8%
PT Gudang Garam TBK ........................... Tobacco 1,056,000 897,484
PT Indofoods Sukses Makmur TBK ................ Food Products 5,294,250 342,680
PT Indosat (Persero) TBK ...................... Diversified Telecommunication Services 1,440,500 1,272,913
PT Telekomunikasi Indonesia TBK, B ............ Diversified Telecommunication Services 8,093,460 3,257,063
------------
5,770,140
------------
ISRAEL .3%
Elbit Systems Ltd. ............................ Aerospace & Defense 24,552 387,288
------------
LUXEMBOURG .7%
aTenaris SA, ADR ............................... Energy Equipment & Services 47,449 1,062,383
------------
MALAYSIA .4%
Petronas Dagangan Bhd. ........................ Oil & Gas 85,000 120,790
SIME Darby Bhd. ............................... Industrial Conglomerates 390,000 523,421
------------
644,211
------------
MEXICO 5.1%
Cemex SA ...................................... Construction Materials 292,508 1,051,792
Coca Cola Femsa SA de CV, L, ADR .............. Beverages 5,000 90,450
Fomento Economico Mexicano SA de CV Femsa ..... Beverages 29,220 942,345
aGrupo Carso SA de CV .......................... Industrial Conglomerates 354,000 811,195
aGrupo Televisa SA de CV, ADR .................. Media 10,200 246,636
Kimberly Clark de Mexico SA de CV, A .......... Household Products 1,413,200 3,046,365
Telefonos de Mexico SA de CV (Telmex), L, ADR . Diversified Telecommunication Services 51,052 1,484,082
------------
7,672,865
------------
PHILIPPINES 1.4%
San Miguel Corp., B ........................... Beverages 1,766,090 2,170,161
------------
POLAND 1.7%
Polski Koncern Naftowy Orlen SA ............... Oil & Gas 596,450 2,614,103
------------
PORTUGAL .1%
BPI Socieda de Gestora de Participacoes Socias SA Diversified Financials 37,000 85,739
------------
RUSSIA 2.4%
aCherepovets Mk Severstal ...................... Metals & Mining 1,300 75,335
GUM Trade House ............................... Multiline Retail 27,000 43,335
Lukoil Holdings, ADR .......................... Oil & Gas 45,399 2,711,228
Mosenergo, ADR ................................ Electric Utilities 90,160 360,640
Sberbank RF ................................... Banks 1,440 304,848
aYuzhnaya Telecommunication Co. ................ Communications Equipment 1,245,000 97,733
------------
3,593,119
------------
14
TEMPLETON EMERGING MARKETS FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2003 (UNAUDITED) (CONT.)
INDUSTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
SINGAPORE 4.7%
Cycle & Carriage Ltd. ......................... Distributors 94,073 $ 195,811
DBS Group Holdings Ltd. ....................... Banks 35,000 193,198
Fraser & Neave Ltd. ........................... Beverages 512,630 2,358,071
Keppel Corp., Ltd. ............................ Diversified Financials 937,000 2,230,503
aMobileOne Ltd. ................................ Wireless Telecommunication Services 318,000 224,903
Singapore Airlines Ltd. ....................... Airlines 245,000 1,331,254
Singapore Telecommunications Ltd. ............. Diversified Telecommunication Services 802,000 599,488
------------
7,133,228
------------
SOUTH AFRICA 14.4%
Alexander Forbes Ltd. ......................... Diversified Financials 89,000 122,491
Anglo American PLC ............................ Metals & Mining 330,820 4,801,240
Barloworld Ltd. ............................... Industrial Conglomerates 348,344 2,233,002
Bidvest Group Ltd. ............................ Industrial Conglomerates 7,600 38,023
aImperial Holdings Ltd. ........................ Air Freight & Couriers 158,833 974,846
Investec Ltd. ................................. Diversified Financials 9,636 101,676
Investec PLC. ................................. Diversified Financials 12,183 129,125
Nampak Ltd. ................................... Containers & Packaging 146,300 225,842
Old Mutual PLC ................................ Insurance 1,421,960 1,858,976
Remgro Ltd. ................................... Industrial Conglomerates 364,700 2,645,342
Reunert Ltd. .................................. Electronic Equipment & Instruments 98,000 210,943
SABMiller PLC ................................. Beverages 648,548 4,039,202
Sanlam Ltd. ................................... Insurance 1,647,100 1,450,002
Sasol Ltd. .................................... Chemicals 179,300 2,110,889
Tiger Brands Ltd. ............................. Food Products 49,021 384,748
Tongaat-Hulett Group Ltd. ..................... Food Products 65,970 302,648
------------
21,628,995
------------
SOUTH KOREA 16.3%
Cheil Communications Inc. ..................... Media 2,010 168,391
aChohung Bank Co. Ltd. ......................... Banks 232,190 714,865
CJ Corp. ...................................... Food Products 26,220 891,829
Daelim Industrial Co. ......................... Construction & Engineering 69,980 984,932
Dongkuk Steel Mill Co. Ltd. ................... Metals & Mining 121,700 429,745
Hanjin Heavy Industries Co. Ltd. .............. Machinery 60,690 144,143
Hankook Tire Co. Ltd. ......................... Auto Components 240,110 524,012
Hankuk Electric Glass Co. Ltd. ................ Electronic Equipment & Instruments 2,250 97,453
aHite Brewery Co., Ltd. ........................ Beverages 7,910 346,578
Hyundai Development Co. ....................... Construction & Engineering 153,590 855,673
Hyundai Motor Co. Ltd. ........................ Automobiles 132,000 2,775,688
Kangwon Land Inc. ............................. Hotels Restaurants & Leisure 19,063 2,052,189
Kookmin Bank .................................. Banks 26,290 803,908
aKookmin Credit Card Co. Ltd. .................. Diversified Financials 19,335 288,328
Korea Electric Power Corp. .................... Electric Utilities 197,662 2,972,423
Korea Gas Corp. ............................... Gas Utilities 71,160 1,490,387
KT Corp. ...................................... Diversified Telecommunication Services 29,000 1,060,487
LG Card Co. Ltd. .............................. Diversified Financials 14,650 405,018
15
TEMPLETON EMERGING MARKETS FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2003 (UNAUDITED) (CONT.)
INDUSTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
SOUTH KOREA (CONT.)
LG Chem Ltd. .................................. Chemicals 10,510 $ 325,782
LG Household & Health Care Ltd ................ Household Products 32,280 689,599
LG Petrochemical Co. Ltd. ..................... Chemicals 62,050 808,342
POSCO ......................................... Metals & Mining 11,950 1,106,250
Samsung Electronics Co. Ltd. .................. Semiconductor Equipment & Products 1,549 362,707
Samsung Fine Chemicals ........................ Chemicals 88,100 1,022,230
Samsung Heavy Industries Co. Ltd. ............. Machinery 369,240 1,285,295
aSamsung Securities Co. Ltd. ................... Diversified Financials 14,930 342,715
SK Corp. ...................................... Oil & Gas 149,510 1,578,207
------------
24,527,176
------------
TAIWAN 3.8%
Advantech Co. Ltd. ............................ Computers & Peripherals 185,000 356,691
Asustek Computer Inc. ......................... Computers & Peripherals 808,000 1,371,856
Avision Inc. .................................. Computers & Peripherals 315,000 183,108
Chunghwa Telcom Co. Ltd. ...................... Diversified Telecommunication Services 203,000 306,691
Delta Electronics Inc. ........................ Electronic Equipment & Instruments 330,050 345,721
International Bank of Taipei .................. Banks 16,000 6,906
Kinpo Electronics, Inc. ....................... Office Electronics 543,000 256,265
aMega Financial Holdings Co. Ltd. .............. Banks 443,521 215,698
Phoenixtec Power Co. Ltd. ..................... Electrical Equipment 598,000 383,753
aSinopac Holdings Co. .......................... Banks 3,071,302 1,175,491
Sunplus Technology Co. Ltd. ................... Semiconductor Equipment & Products 474,000 673,830
Taiwan Cellular Corp. ......................... Wireless Telecommunication Services 351,050 249,523
UNI-President Enterprises Corp. ............... Food Products 350 109
Yuanta Core Pacific Securities Co. ............ Diversified Financials 318,000 152,823
------------
5,678,465
------------
THAILAND 2.7%
Advanced Info Service Public Co. Ltd., fgn. ... Wireless Telecommunication Services 192,200 175,197
Electricity Generating Public Co. Ltd., fgn. .. Electric Utilities 176,800 165,291
Hana Microelectronics Co. Ltd., fgn. .......... Electronic Equipment & Instruments 113,300 184,045
PTT Exploration & Production Public Co. Ltd., fgn. Oil & Gas 586,100 1,767,136
Shin Corporation Public Co. Ltd., fgn. ........ Wireless Telecommunication Services 3,032,300 815,039
Siam Cement Public Co. Ltd., fgn. ............. Construction Materials 29,615 890,146
aTotal Access Communication Public Co. Ltd. .... Diversified Telecommunication Services 242,900 138,453
------------
4,135,307
------------
TURKEY 5.9%
Akbank ........................................ Banks 1,007,758,730 3,850,505
aArcelik AS, Br. ............................... Household Durables 173,389,600 1,574,789
aKOC Holding AS ................................ Diversified Financials 118,862,664 1,340,136
Migros Turk T.A.S. ............................ Food & Drug Retailing 29,604,000 254,967
Tupras-Turkiye Petrol Rafineleri AS ........... Oil & Gas 332,281,470 1,810,741
------------
8,831,138
------------
TOTAL COMMON STOCKS (COST $143,948,402) ....... 138,667,970
------------
16
TEMPLETON EMERGING MARKETS FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2003 (UNAUDITED) (CONT.)
INDUSTRY SHARES VALUE
---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
PREFERRED STOCKS 4.3%
BRAZIL 4.1%
Banco Bradesco SA, pfd. ...................... Banks 137,007 $ 1,959,200
Cia de Bebidas Das Americas (Ambev), pfd. .... Beverages 21,950 305,105
Cia Vale do Rio Doce, A, ADR, pfd. ............ Metals & Mining 44,550 1,213,988
Companhia Paranaense de Energia-Copel, B, pfd. Electric Utilities 207,656 465,149
Duratex SA, pfd. .............................. Building Products 6,206,910 94,765
Petroleo Brasileiro SA, pfd. .................. Oil & Gas 179,458 2,153,496
------------
6,191,703
------------
THAILAND .2%
aSiam Commercial Bank, 5.25%, fgn., cvt. pfd. .. Banks 322,200 242,863
------------
TOTAL PREFERRED STOCKS (COST $9,136,542) ...... 6,434,566
------------
SHORT TERM INVESTMENTS (COST $4,099,082) 2.7%
bFranklin Institutional Fiduciary Trust Money Market Portfolio 4,099,082 4,099,082
------------
TOTAL INVESTMENTS (COST $157,184,026) 99.2% ... 149,201,618
OTHER ASSETS, LESS LIABILITIES .8% ............ 1,251,545
------------
NET ASSETS 100.0% ............................. $150,453,163
------------
a Non-income producing.
b See Note 6 regarding investments in the "Sweep Money Fund."
See notes to financial statements.
17
TEMPLETON EMERGING MARKETS FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 2003 (UNAUDITED)
Assets:
Investments in securities:
Cost ................................................................................... $157,184,026
------------
Value .................................................................................. 149,201,618
Cash .................................................................................... 801
Foreign currency, at value (cost $ 91,980 ) ............................................. 92,486
Receivables:
Investment securities sold ............................................................. 1,193,800
Dividends and interest ................................................................. 845,013
------------
Total assets ....................................................................... 151,333,718
------------
Liabilities:
Payables:
Investment securities purchased ........................................................ 603,424
Affiliates ............................................................................. 161,274
Other Liabilities ....................................................................... 115,857
------------
Total liabilities .................................................................. 880,555
------------
Net assets, at value ..................................................................... $150,453,163
------------
Net assets consist of:
Undistributed net investment income ..................................................... $ (45,020)
Net unrealized appreciation (depreciation) .............................................. (7,982,650)
Accumulated net realized gain (loss) .................................................... (46,312,978)
Capital shares .......................................................................... 204,793,811
------------
Net assets, at value ..................................................................... $150,453,163
------------
Net asset value per share ($150,453,163 (DIVIDE) 17,656,437 shares outstanding) .......... $8.52
------------
See notes to financial statements.
18
TEMPLETON EMERGING MARKETS FUND
Financial Statements (CONTINUED)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 2003 (UNAUDITED)
Investment Income:
(net of foreign taxes of $267,654)
Dividends ................................................................................ $ 2,010,527
Interest ................................................................................. 1,124
-----------
Total investment income ............................................................. $ 2,011,651
Expenses:
Management fees (Note 3) ................................................................. 923,943
Administrative fees (Note 3) ............................................................. 112,055
Transfer agent fees ...................................................................... 145,700
Custodian fees ........................................................................... 65,800
Reports to shareholders .................................................................. 10,800
Registration and filing fees ............................................................. 38,800
Professional fees ........................................................................ 194,500
Directors' fees and expenses ............................................................. 20,000
Other .................................................................................... 3,900
-----------
Total expenses ...................................................................... 1,515,498
-----------
Net investment income .......................................................... 496,153
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................................. (3,860,595)
Foreign currency transactions ........................................................... (176,710)
-----------
Net realized gain (loss) ............................................................ (4,037,305)
Net unrealized appreciation (depreciation) on:
Investments ............................................................................. 1,921,037
Translation of assets and liabilities denominated in foreign currencies ................. 79,596
-----------
Net unrealized appreciation (depreciation) .......................................... 2,000,633
-----------
Net realized and unrealized gain (loss) ................................................... (2,036,672)
-----------
Net increase (decrease) in net assets resulting from operations ........................... $(1,540,519)
-----------
See notes to financial statements.
19
TEMPLETON EMERGING MARKETS FUND
Financial Statements (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 2003(UNAUDITED)
AND THE YEAR ENDED AUGUST 31, 2002
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2003 AUGUST 31, 2002
-----------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................... $ 496,153 $ 2,665,289
Net realized gain (loss) from investments and foreign currency transactions (4,037,305) (9,790,317)
Net unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies ............... 2,000,633 7,282,087
-----------------------------------
Net increase (decrease) in net assets resulting from operations ..... (1,540,519) 157,059
Distributions to shareholders from net investment income .................. (2,646,700) (1,894,536)
-----------------------------------
Net increase (decrease) in net assets ............................... (4,187,219) (1,737,477)
Net assets:
Beginning of period ...................................................... 154,640,382 156,377,859
-----------------------------------
End of period ............................................................ $150,453,163 $154,640,382
-----------------------------------
Undistributed net investment income included in net assets:
End of period ............................................................ $ (45,020) $ 2,105,527
-----------------------------------
See notes to financial statements.
20
TEMPLETON EMERGING MARKETS FUND
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Emerging Markets Fund (the Fund, formerly Templeton Emerging Markets
Fund, Inc.) is registered under the Investment Company Act of 1940 as a
closed-end, diversified investment company. Effective June 14, 2002, the Fund
was reorganized from a Maryland corporation into a Delaware statutory trust. The
reorganization had no effect on shares of the Fund or its investment portfolio.
The Fund seeks long-term capital appreciation by investing mainly in emerging
country equity securities. The following summarizes the Fund's significant
accounting policies.
A. SECURITY VALUATION
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
B. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, and the difference between the recorded
amounts of dividends, interest, and foreign withholding taxes and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in foreign exchange rates
on foreign denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
C. FOREIGN CURRENCY CONTRACTS
When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified date. Realized and unrealized gains and losses are included
in the Statement of Operations.
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts.
D. INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
21
TEMPLETON EMERGING MARKETS FUND
Notes to Financial Statements (unaudited) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expense during the reporting period.
Actual results could differ from those estimates.
2. CAPITAL SHARES
On November 29, 2000, the Board of Directors of the Fund authorized management
to implement an open-market share repurchase program pursuant to which the Fund
may purchase, from time to time, shares of the Fund's common stock in
open-market transactions, at the discretion of management.
At February 28, 2003, there were 30 million shares authorized ($0.01 par value).
During the period ended February 28, 2003 and the year ended August 31, 2002,
there were no share repurchase transactions.
3. TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also officers or directors of Templeton Asset
Management Ltd. (TAML) and Franklin Templeton Services, LLC (FT Services), the
Fund's investment manager and administrative manager, respectively.
The Fund pays an investment management fee to TAML of 1.25% per year of the
Fund's average daily net assets. The Fund pays an administrative fee monthly to
FT Services at an annual rate of 0.15% per year of the Fund's average daily net
assets.
4. INCOME TAXES
At February 28, 2003, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments ....................... $158,552,574
------------
Unrealized appreciation ................... 14,044,990
Unrealized depreciation ................... (23,395,946)
------------
Net unrealized appreciation (depreciation) $ (9,350,956)
------------
22
TEMPLETON EMERGING MARKETS FUND
Notes to Financial Statements (unaudited) (CONTINUED)
4. INCOME TAXES (CONT.)
Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatments of passive
foreign investment companies, wash sales and losses realized subsequent to
October 31 on the sale of securities and foreign currencies.
At August 31, 2002, the Fund had deferred capital and currency losses occurring
subsequent to October 31, 2001 of $6,700,971 and $325,833 respectively. For tax
purposes, such losses will be reflected in the year ending August 31, 2003.
At August 31, 2002, the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2008 ............................. $ 1,056,614
2009 ............................. 2,373,131
2010 ............................. 30,608,800
-----------
$34,038,545
-----------
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended February 28, 2003 aggregated $33,777,357 and $34,831,359,
respectively.
6. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Franklin Advisers Inc. (an affiliate of the advisor). Management fees paid by
the Fund are reduced on assets invested in the Sweep Money Fund in an amount not
to exceed the management fees paid by the Sweep Money Fund. The Fund earned
$38,400 of dividend income from investment in the Sweep Money Fund.
23
TEMPLETON EMERGING MARKETS FUND
Annual Meeting of Shareholders, February 28, 2003
An Annual Meeting of Shareholders of the Trust was held at the Trust's offices,
500 E. Broward Blvd., Fort Lauderdale, Florida, on February 28, 2003. The
purpose of the meeting was to elect three Trustees of the Trust, and to
authorize the proxyholders, in their discretion, to vote upon such other matters
that may properly come before the meeting or any adjournments of the meeting. At
the meeting, the following persons were elected by the shareholders to serve as
Trustees of the Trust: Betty P. Krahmer, Gordon S. Macklin and Fred R.
Millsaps.* No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
The election of three (3) Trustees:
% OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING VOTED
TERM EXPIRING 2006: FOR SHARES SHARES WITHHELD SHARES SHARES
----------------------------------------------------------------------------------------------------------
Betty P. Krahmer ........ 14,764,434 83.62% 96.87% 476,722 2.70% 3.13%
Gordon S. Macklin ....... 14,748,640 83.53% 96.77% 492,516 2.79% 3.23%
Fred R. Millsaps ........ 14,749,862 83.54% 96.78% 491,294 2.78% 3.22%
* HARRIS J. ASHTON, FRANK J. CROTHERS, S. JOSEPH FORTUNATO, EDITH E. HOLIDAY,
ANDREW H. HINES, JR. AND CONSTANTINE D. TSERETOPOULOS CURRENTLY SERVE AS
INDEPENDENT TRUSTEES. NICHOLAS F. BRADY, HARMON E. BURNS AND CHARLES B.
JOHNSON CURRENTLY SERVE AS INTERESTED TRUSTEES. THEIR TERMS OF OFFICE
CONTINUED AFTER THE ANNUAL MEETING OF SHAREHOLDERS
24
TEMPLETON EMERGING MARKETS FUND
Dividend Reinvestment and Cash Purchase Plan
The Fund offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") with
the following features:
Shareholders must affirmatively elect to participate in the Plan; Stock
dividends and capital gains distributions will be reinvested automatically;
Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938, will
provide additional Plan information upon request.
Whenever the Fund declares dividends in either cash or common stock of the Fund,
if the market price is equal to or exceeds net asset value at the valuation
date, the participant will receive the dividends entirely in stock at a price
equal to the net asset value, but not less than 95% of the then current market
price of the Fund's shares. If the market price is lower than net asset value or
if dividends and/or capital gains distributions are payable only in cash, the
participant will receive shares purchased on the New York Stock Exchange or
otherwise on the open market.
A participant has the option of submitting additional payments to Mellon
Securities Trust Company (the "Plan Agent"), in any amounts of at least $100, up
to a maximum of $5,000 per month, for the purchase of Fund shares for his or her
account. These payments shall be made by check or money order payable to "Mellon
Securities Trust Co." and sent to Mellon Investor Services, P.O. Box 382009,
Pittsburgh, PA 15250-8009, Attn: Templeton Emerging Markets Fund. The Plan Agent
shall apply such payments (less a $5.00 service charge and less a pro rata share
of trading fees) to purchases of Fund shares on the open market.
The automatic reinvestment of dividends and/or capital gains does not relieve
the participant of any income tax that may be payable on dividends or
distributions.
The participant may withdraw from the Plan without penalty at any time by
written notice to the Plan Agent sent to Mellon Investor Services, P.O. Box
3338, South Hackensack, NJ 07606-1938. Upon withdrawal, the participant will
receive, without charge, stock certificates issued in the participant's name for
all full shares held by the Plan Agent; or, if the participant wishes, the Plan
Agent will sell the participant's shares and send the proceeds, less a service
charge of $5.00 and less trading fees.
Whenever shares are purchased on the New York Stock Exchange or otherwise on the
open market, each participant will pay a pro rata portion of trading fees.
Trading fees will be deducted from amounts to be invested.
25
TEMPLETON EMERGING MARKETS FUND
TRANSFER AGENT
Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, NJ 07660
1-800-416-5585
www.melloninvestor.com
SHAREHOLDER INFORMATION
Shares of Templeton Emerging Markets Fund are traded on the New York Stock
Exchange under the symbol "EMF." The Fund's shares are also listed and traded on
the Pacific Exchange. Information about the net asset value and the market price
is published each Monday in the WALL STREET JOURNAL, weekly in BARRON'S and each
Saturday in THE NEW YORK TIMES and other newspapers. Daily market prices for the
Fund's shares are published in the New York Stock Exchange Composite
Transactions section of newspapers.
For current information about distributions and shareholder accounts, call
1-800-416-5585. Registered shareholders can now access their Fund account
on-line with INVESTOR SERVICEDIRECTSM. For information go to Mellon Investor
Services' web site at https://www.melloninvestor.com and follow the
instructions.
The daily closing net asset value as of the previous business day may be
obtained when available by calling Franklin Templeton Fund Information after 7
a.m. pacific time any business day at 1-800/DIAL BEN (R) (1-800/342-5236). The
Fund's net asset value and dividends are also listed on the NASDAQ Stock Market,
Inc.'s Mutual Fund Quotation Service ("NASDAQ MFQS").
Shareholders not receiving copies of the reports to shareholders because their
shares are registered in the name of a broker or a custodian can request that
they be added to the Fund's mailing list by writing Templeton Emerging Markets
Fund, 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030.
26
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This page intentionally left blank.
LITERATURE REQUEST
For a brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, telephone
calls to or from our service departments may be monitored, recorded and
accessed. These calls can be determined by the presence of a regular beeping
tone.
FRANKLIN TEMPLETON INVESTMENTS
GLOBAL GROWTH
Franklin Global Aggressive
Growth Fund
Franklin Global Growth Fund
Franklin Global Health Care Fund
Mutual Discovery Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global Opportunities Trust
Templeton Global Smaller
Companies Fund
Templeton Growth Fund
Templeton International (Ex EM) Fund
Templeton World Fund
GLOBAL GROWTH & INCOME
Franklin Global Communications Fund
Mutual European Fund
Templeton Global Bond Fund
GLOBAL INCOME
Franklin Templeton Hard
Currency Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin Capital Growth Fund 1
Franklin DynaTech Fund
Franklin Flex Cap Growth Fund 2
Franklin Gold and Precious
Metals Fund
Franklin Growth Fund
Franklin Large Cap Growth Fund
Franklin Small-Mid Cap
Growth Fund
Franklin Technology Fund
Franklin U.S. Long-Short Fund 3
GROWTH & INCOME
Franklin Balance Sheet Investment Fund 4
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 4
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Small Cap Value Fund
Franklin Utilities Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
FUND ALLOCATOR SERIES
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth
Target Fund
Franklin Templeton Moderate
Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Floating Rate Daily
Access Fund
Franklin Floating Rate Trust 6
Franklin Short-Intermediate
U.S. Government Securities Fund 5
Franklin Strategic Income Fund
Franklin Total Return Fund
Franklin U.S. Government
Securities Fund5
Franklin Federal Money Fund 5,7
Franklin Money Fund 5,7
TAX-FREE INCOME 8
Double Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free
Income Fund
Insured Tax-Free Income Fund 9
Tax-Exempt Money Fund 5,7
STATE-SPECIFIC
TAX-FREE INCOME 8
Alabama
Arizona
California 10
Colorado
Connecticut
Florida 10
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 9
Michigan 9
Minnesota 9
Missouri
New Jersey
New York 10
North Carolina
Ohio 9
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust 11
1. Formerly Franklin Growth and Income Fund. Effective 5/1/02, the fund's name
changed; investment goal and strategy remained the same.
2. Formerly Franklin California Growth Fund. Effective 9/1/02, the fund's name
changed and its investment criteria was modified to invest a majority of its net
assets in California companies, as opposed to at least 80% of net assets.
3. Upon reaching approximately $350 million in assets, the fund will close to
all investors.
4. The fund is only open to existing shareholders as well as select retirement
plans.
5. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
6. The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.
7. No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
8. For investors subject to the alternative minimum tax, a small portion of
these dividends may be taxable. Distributions of capital gains are generally
taxable.
9. Portfolio of insured municipal securities.
10. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
intermediate-term and money market portfolios (CA and NY).
11. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally only available as investment options in variable annuity or variable
life insurance contracts.
12/02
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FRANKLIN(R) TEMPLETON(R) 100 Fountain Parkway
INVESTMENTS P.O. Box 33030
St. Petersburg, FL 33733-8030
SEMIANNUAL REPORT
TEMPLETON EMERGING MARKETS FUND
TRANSFER AGENT
Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, NJ 07660
1-800/416-5585
www.melloninvestor.com
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political and other factors. The Fund and its investors are not protected from
such losses by the Investment Manager. Therefore, investors who cannot accept
this risk should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
TLEMF S2003 04/03 [GRAPHIC OMITTED] Printed on recycled paper