Annual Report [PHOTO OMITTED] AUGUST 31, 2002 TEMPLETON EMERGING MARKETS FUND, INC. [LOGO OMITTED] FRANKLIN[R] TEMPLETON[R] INVESTMENTS [PHOTO OMITTED] MARK MOBIUS PRESIDENT TEMPLETON EMERGING MARKETS FUND, INC. 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 ........ 8 Important Notice to Shareholders ............ 9 Financial Highlights & Statement of Investments ... 10 Financial Statements ....... 17 Notes to Financial Statements ....... 20 Independent Auditors' Report ........... 23 Tax Designation ............ 24 Board Members and Officers ............... 30 [GRAPHIC OMITTED] FUND CATEGORY Global Growth Growth & Income Income Tax-Free Income SHAREHOLDER LETTER -------------------------------------------------------------------------------- YOUR FUND'S GOAL: 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 annual report for Templeton Emerging Markets Fund covers the fiscal year ended August 31, 2002. During the year under review, Asian economies such as South Korea and China continued to record higher growth rates than most other countries, which appeared to attract investors. China's commitment toward liberalizing its economy contributed to a 22% jump in foreign direct investment versus a year earlier, to US$29.5 billion in the first seven months of 2002.(1) We believe China's accession into the World Trade Organization (WTO) and its robust economy should continue to attract investment. As more and more developed market companies strived to cut costs, Taiwanese companies benefited from the outsourcing trend as well as from developments in China where an increasing number of Taiwanese companies moved their production bases. Faster-than-expected economic growth and other favorable macroeconomic indicators helped make South Korea an attractive investment location. South Korea's central bank also increased its gross 1. Source: South China Morning Post. 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 11. domestic product growth forecast to an annualized 6.5%, mainly due to an expected increase in exports and investment.(1) Expressing confidence in South Korea's recovery and economic policies, Moody's Investors Service raised the country's sovereign rating two notches to A3.(2) Latin American countries struggled during the past 12 months. In Argentina, debt defaults, record-high unemployment and a devalued currency contributed to the country's fourth consecutive year of recession. A change of government and support from the International Monetary Fund (IMF) in the form of payment delays began to bear some fruit. A study undertaken by the Bank of the Province of Buenos Aires reported that banks actually experienced net deposits of US$58.3 million in the three-week period between July 14 and August 6, after months of withdrawals. Elsewhere in the region, contagion from Argentina, political uncertainty as a result of upcoming presidential elections in October 2002 and a currency devaluation led to significant volatility in Brazil's financial markets. While investor sentiment toward Latin America as a region was negative during the period, economic growth improved to some extent and inflation was relatively low. Aimed at improving minority shareholder rights protection, Mexico revealed a new takeover code. The new rules are expected to give all shareholders equal rights compared with the past when rules worked in favor of majority shareholders. Further boosting investor confidence, international ratings agency Standard & Poor's upgraded the country's sovereign debt to investment grade. We believe that over the long term, Mexico's proximity to the U.S. and the North American Free Trade Agreement could enable it to benefit from any U.S. 2. Source: AFX News Limited. GEOGRAPHIC DISTRIBUTION BASED ON TOTAL NET ASSETS 8/31/02 [PIE CHART OMITTED] ASIA 56.1% MID-EAST/AFRICA 16.9% EUROPE 11.5% LATIN AMERICA 11.3% SHORT-TERM INVESTMENTS & OTHER NET ASSETS 4.2% 2 economic recovery, and in our opinion Mexico's strengthening economy could continue to attract investors wishing to maintain exposure to the emerging markets asset class. Elsewhere, we believe continued support in the form of additional loans from the IMF and the World Bank could allow Turkey to work toward the implementation of key reforms. In our opinion, Turkey's increasing global importance could provide it with the much-needed support to pull itself out of an economic crisis. As a result of resignations from Turkey's ruling government, coalition leaders agreed to hold early elections in November 2002. We believe the election of a new government could help reduce some of the political uncertainty that plagued the country in the recent past. In South Africa, the government's inquiry into the rapid devaluation of the rand in the last quarter of 2001 concluded with no significant explanations. Higher commodity prices and some weakness in the U.S. dollar allowed the currency to rebound from its low earlier this year. According to recent purchasing parity studies, the rand was still significantly undervalued. After a 12-month delay, South Africa invited foreign investors to bid for 51% of a second fixed-line telephone license. Moreover, the government sold its 20% stake in MCell for US$475 million. These acts continued to signal the nation's commitment to privatization. Within this environment, the Morgan Stanley Capital International (MSCI) Emerging Markets Free Index returned 2.47% in U.S. dollar terms for the year ended August 31, 2002.(3) During the same time, Templeton Emerging Markets Fund posted a -2.82% cumulative total return in market-price 3. 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. One cannot invest directly in an index, nor is an index representative of the Fund's portfolio. TOP 10 COUNTRIES Based on Equity Investments 8/31/02 % OF TOTAL NET ASSETS ----------------------------- South Africa 15.8% South Korea 15.3% Hong Kong 7.7% Mexico 5.9% Taiwan 5.0% China 4.9% Brazil 4.7% Turkey 4.7% Indonesia 4.5% Thailand 4.3% 3 terms and +0.29% return in net asset value terms, as shown in the Performance Summary on page 8. We attribute the Fund's performance largely to our fundamental investment approach, focusing on companies and not on top-down analyses of economies or sectors. During the 12-month reporting period, we increased our exposure to Asia, particularly South Korea and Taiwan. In South Korea, we increased the Fund's exposure to the telecommunications and utilities sectors by purchasing shares in SK Telecom because we considered the company's valuations attractive, and added KT Corp. due, in part, to its near monopoly position and strong cash flows. We also increased our holdings in Korea Electric Power Corp. as we believe privatization plans could unlock value and create investor interest. We also made two new purchases in the South Korean banking and finance sectors, including Kookmin Credit Card and Cho Hung Bank, due largely to their appealing valuations and strong market positions. In Taiwan, we increased our positions in existing holdings such as Yageo Corp. and Ritek Corp. due largely to their strong market positions and future growth potential. We also saw value in Taiwan's banking and finance sectors and added International Commercial Bank of China and Sinopac Holdings to the portfolio. The Fund's exposure to India also increased during the period. Key purchases included ITC Ltd. and Satyam Computers Ltd. We favor ITC largely due to its near-monopoly position and strong brand names. In our view, Satyam's attractiveness stems from its healthy relationships with large multinational organizations, as well as its competitive advantage and favorable software industry regulations. We increased our holdings in China Red Chip (Hong Kong-registered firms with significant exposure to China) companies, as we believe that many of these companies are well-positioned to benefit from China's accession 4 into the WTO, strong domestic growth, low-cost manufacturing ability and cheap resources. Our exit from markets such as Estonia, Finland, Slovak Republic, Colombia and Chile allowed us to increase our exposure to Asia. As of period-end, 56.1% of the Fund's total net assets were in Asia compared with 35.2% a year earlier. The Fund's exposure to Mexico fell as we locked in profits from the strong market performance of Cemex, the world's third-largest cement company. We also took profits on selective shares in Thailand. In addition, we reduced our exposure to the Czech Republic through the sale of CEZ due to an anticipated deterioration of margins that might result from the country's liberalization of the electricity market. Exposure to Poland also fell with the sale of Telekomunikacja Polska due, in part, to our concerns over debt financing. During the year under review, we increased our investment in selective holdings in South Africa. These investments included Anglo American, due to its dominant market position, sound balance sheet and positive cash flows, and Old Mutual because of its international exposure and our assessment of its excellent management team and solid track record. Following market corrections resulting from political instability and currency devaluation, we were able to invest in Brazil at what we considered attractive valuations. As of August 31, 2002, our top three sectors were banks, diversified financials and integrated oil and gas. With regard to the top 10 holdings, South Korea's Korea Electric Power Corp., Turkey's Akbank, Thailand's Siam Cement, Hong Kong's Citic Pacific and Russia's Lukoil replaced Mexico's Cemex and Telmex, South Africa's Remgro and Barloworld, Hong Kong's Cheung Kong Holdings and Brazil's Banco Bradesco. TOP 10 EQUITY HOLDINGS 8/31/02 COMPANY SECTOR/INDUSTRY, % OF TOTAL COUNTRY NET ASSETS ---------------------------------- SABMiller PLC 2.9% BEVERAGES, SOUTH AFRICA PT Telekomunikasi Indonesia TBK, B 2.5% DIVERSIFIED TELECOMMUNICATION SERVICES, INDONESIA Kimberly Clark de Mexico SA de CV, A 2.0% HOUSEHOLD PRODUCTS, MEXICO Anglo American PLC 2.0% METALS & MINING, SOUTH AFRICA Korea Electric Power Corp. 1.9% ELECTRIC UTILITIES, SOUTH KOREA Samsung Electronics Co. Ltd. 1.9% SEMICONDUCTOR EQUIPMENT & PRODUCTS, SOUTH KOREA Akbank 1.8% BANKS, TURKEY Siam Cement Public Co. Ltd., ord. & fgn. 1.8% CONSTRUCTION MATERIALS, THAILAND Citic Pacific Ltd. 1.7% INDUSTRIAL CONGLOMERATES, HONG KONG Lukoil Holdings, ADR 1.6% OIL & GAS, RUSSIA 5 Despite the recent volatility, we are still optimistic about the potential of emerging markets over the long term because they have been driven down to very low price-to-earnings and price-to-book ratios relative to the U.S. markets. It appears that value investors may have begun to realize this. Recent allegations of accounting irregularities demonstrated that developed markets are not necessarily safer than emerging markets. As a result, investors seem to have begun reevaluating their portfolios and developing more open minds toward investing in emerging markets. Over the long term, we expect emerging markets to improve economic performances if they continue to reform and liberalize their economies. 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 337% in the past 15 years, but has suffered seven quarterly declines of more than 15% each during that time.(4) While short-term volatility can be disconcerting, declines in excess of 50% are not unusual in emerging markets. 4. Source: Standard & Poor's Micropal. Based on quarterly percentage total return change over 15 years ended 6/30/02. 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. 6 Thank you for your continued participation in Templeton Emerging Markets Fund. We welcome your comments and suggestions. Sincerely, /s/MARK MOBIUS Mark Mobius President Templeton Emerging Markets Fund, Inc. -------------------------------------------------------------------------------- This discussion reflects our views, opinions and portfolio holdings as of August 31, 2002, the end of the reporting period. The information provided is not a complete analysis of every aspect of any country, industry, security or the Fund. Our strategies and the Fund's portfolio composition will change depending on market and economic conditions. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. -------------------------------------------------------------------------------- 7 PERFORMANCE SUMMARY AS OF 8/31/02 DISTRIBUTIONS AND RETURNS 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. THE PERFORMANCE TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE SALE OF FUND SHARES. PRICE AND DISTRIBUTION INFORMATION CHANGE 8/31/02 8/31/01 ---------------------------------------------------------------------- Net Asset Value (NAV) -$0.10 $8.76 $8.86 Market Price (NYSE) -$0.35 $8.00 $8.35 DISTRIBUTIONS (9/1/01-8/31/02) Dividend Income $0.1073 PERFORMANCE 1-YEAR 5-YEAR 10-YEAR ---------------------------------------------------------------------- Cumulative Total Return(1) Based on change in net asset value +0.29% -22.81% +78.84% Based on change in market price -2.82% -36.99% +39.50% Average Annual Total Return(1) Based on change in net asset value +0.29% -5.05% +5.99% Based on change in market price -2.82% -8.83% +3.39% 1. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. -------------------------------------------------------------------------------- Ongoing stock market volatility can dramatically change the Fund's short-term performance; current results may differ. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, currency volatility, and the economic, social and political climates 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 updated performance figures, please call Franklin Templeton Investments at 1-800/342-5236. Past performance does not guarantee future results. 8 IMPORTANT NOTICE TO SHAREHOLDERS -------------------------------------------------------------------------------- CHANGE TO NON-FUNDAMENTAL INVESTMENT POLICY. In May 2002, the Fund's Board of Directors approved the elimination of the Fund's non-fundamental operating policy limiting the Fund's investment in Russian securities to no more than 5% of the Fund's total assets. The Board's recent action provides the Fund's investment manager with the ability to take advantage of additional attractive investment opportunities in Russia. The Fund's goal of seeking long-term capital appreciation by investing primarily in emerging country equity securities, as well as its other investment policies, restrictions and diversification requirements, remains the same. NAMES RULE. The U.S. Securities and Exchange Commission adopted new Rule 35d-1 under the Investment Company Act of 1940, as amended (the "Names Rule"), requiring a fund with a name suggesting a focus in a particular type of investment, in a particular industry, or in a particular geographic region, to invest, under normal circumstances, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in the type of investment, industry or geographic region suggested by its name. Consistent with the Names Rule, the Fund's Board of Directors adopted a non-fundamental investment policy to invest, under normal circumstances, at least 80% of the Fund's net assets in "emerging country equity securities." In accordance with the Names Rule, the Fund has also adopted a non-fundamental policy to provide shareholders with 60 days' advance notice of any change to the foregoing 80% investment policy. The Fund's current non-fundamental investment policy is to invest at least 75% of its total assets in "emerging country equity securities." 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. -------------------------------------------------------------------------------- 9 TEMPLETON EMERGING MARKETS FUND, INC. Financial Highlights YEAR ENDED AUGUST 31, -------------------------------------------------- 2002 2001 2000 1999 1998 -------------------------------------------------- PER SHARE OPERATING PERFORMANCE+ (for a share outstanding throughout the year) Net asset value, beginning of year ..................... $8.86 $11.44 $11.60 $10.85 $20.67 -------------------------------------------------- Income from investment operations: Net investment income ................................. .15 .12 .13 .13 .26 Net realized and unrealized gains (losses) ............ (.14) (2.60) (.16) 5.17 (7.64) -------------------------------------------------- Total from investment operations ....................... .01 (2.48) (.03) 5.30 (7.38) -------------------------------------------------- Less distributions from: Net investment income ................................. (.11) (.10) (.10) (.29) (.26) Net realized gains .................................... -- -- (.03) (4.26) (2.18) -------------------------------------------------- Total distributions .................................... (.11) (.10) (.13) (4.55) (2.44) -------------------------------------------------- Net asset value, end of year ........................... $8.76 $8.86 $11.44 $11.60 $10.85 ================================================== Market value, end of year(a) ........................... $8.0000 $8.3500 $9.3125 $12.2500 $9.1875 ================================================== Total return (based on market value per share) ......... (2.82)% (9.17)% (23.10)% 99.91% (54.35)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) ........................ $154,640 $156,378 $201,965 $204,804 $182,352 Ratios to average net assets: Expenses .............................................. 1.64% 1.67% 1.68% 1.63% 1.70% Net investment income ................................. 1.67% 1.28% 1.09% 1.18% 1.58% Portfolio turnover rate ................................ 65.13% 63.64% 81.66% 45.00% 40.51%+ Based on average weighted shares outstanding effective year ended August 31, 1999. a Based on the last sale on the New York Stock Exchange. See notes to financial statements. 10 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2002 INDUSTRY SHARES VALUE --------------------------------------------------------------------------------------------------------------------- COMMON STOCKS 92.2% *ARGENTINA .6% Molinos Rio de la Plata SA, B ................. Food Products 170,259 $ 286,505 Quilmes Industrial SA, B, ADR ................. Beverages 78,635 574,035 ---------- 860,540 ---------- AUSTRIA 2.7% BBAG Oesterreichische Brau-Beteiligungs AG .... Beverages 7,577 391,601 Erste Bank der Oester Sparkassen AG ........... Banks 8,612 577,016 Mayr-Melnhof Karton AG ........................ Containers & Packaging 6,360 396,066 OMV AG ........................................ Oil & Gas 26,708 2,383,520 Wienerberger AG ............................... Building Products 33,484 503,731 ---------- 4,251,934 ---------- BRAZIL 1.7% Centrais Eletricas Brasileiras SA (Electrobras) Electric Utilities 85,318,000 627,090 Cia Vale do Rio Doce, ADR ..................... Metals & Mining 21,049 538,854 Embraer-Empresa Brasileira de Aeronautica SA .. Aerospace & Defense 25,800 103,744 Embraer-Empresa Brasileira de Aeronautica SA, ADR ...................................... Aerospace & Defense 40,787 712,957 Souza Cruz SA ................................. Tobacco 115,400 562,927 Unibanco Uniao de Bancos Brasileiros SA, GDR .. Banks 11,100 141,303 ---------- 2,686,875 ---------- CHINA 4.9% China Everbright Ltd. ......................... Diversified Financials 728,000 277,668 *China Mobile (Hong Kong) Ltd. ................. Wireless Telecommunication Services 401,500 1,109,279 China Petroleum & Chemical Corp., H ........... Oil & Gas 11,200,000 1,694,370 China Resources Enterprise Ltd. ............... Distributors 1,436,000 1,629,318 China Shipping Development Co. Ltd., H ........ Marine 968,000 196,083 *China Unicom Ltd. ............................. Wireless Telecommunication Services 1,216,000 896,416 Guangshen Railway Co. Ltd., H ................. Road & Rail 2,614,000 482,588 PetroChina Co. Ltd., H ........................ Oil & Gas 3,922,000 799,490 Qingling Motors Co. Ltd., H ................... Automobiles 1,158,000 123,224 TCL International Holdings Inc. ............... Household Durables 680,000 183,078 Travelsky Technology Ltd., H .................. IT Consulting & Services 319,000 191,197 ---------- 7,582,711 ---------- CROATIA .6% Pliva D D, GDR, Reg S ......................... Pharmaceuticals 71,900 918,882 ---------- CZECH REPUBLIC .2% Philip Morris CR AS ........................... Tobacco 580 212,681 *Unipetrol ..................................... Chemicals 70,000 71,239 ---------- 283,920 ---------- EGYPT .6% *Al Ahram Beverages Co., GDR ................... Beverages 34,147 256,102 Commercial International Bank Ltd. ............ Banks 100,474 600,133 ---------- 856,235 ---------- 11 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.) INDUSTRY SHARES VALUE --------------------------------------------------------------------------------------------------------------------- COMMON STOCKS (CONT.) GREECE 1.0% Coca-Cola Hellenic Bottling Company SA ........ Beverages 59,300 $ 960,729 Hellenic Telecommunications Organization SA ... Diversified Telecommunication Services 41,340 587,050 ------------ 1,547,779 ------------ HONG KONG 7.7% Beijing Enterprises Holdings Ltd. ............. Industrial Conglomerates 576,000 583,388 Cheung Kong Holdings Ltd. ..................... Real Estate 195,000 1,393,759 Cheung Kong Infrastructure Holdings Ltd. ...... Construction Materials 288,000 502,157 China Merchants Holdings International Co. Ltd. Industrial Conglomerates 1,867,000 1,316,483 China Travel International Investment Hong Kong Ltd. .................................... Hotels Restaurants & Leisure 2,006,000 339,479 Citic Pacific Ltd. ............................ Industrial Conglomerates 1,131,000 2,588,266 Cosco Pacific Ltd. ............................ Transportation Infrastructure 2,406,000 1,650,280 Dairy Farm International Holdings Ltd. ........ Food & Drug Retailing 81,600 69,360 Giordano International Ltd. ................... Specialty Retail 936,000 414,003 Hang Lung Group Ltd. .......................... Real Estate 796,000 719,466 Henderson Investment Ltd. ..................... Real Estate 663,000 561,004 Hutchison Whampoa Ltd. ........................ Industrial Conglomerates 39,000 263,752 MTR Corp. Ltd. ................................ Road & Rail 648,010 818,325 Shanghai Industrial Holdings Ltd. ............. Industrial Conglomerates 456,000 724,928 *Smartone Telecommunications Holdings Ltd. ..... Wireless Telecommunication Services 32,000 33,026 ------------ 11,977,676 ------------ HUNGARY 2.4% Egis RT ....................................... Pharmaceuticals 4,279 215,770 Gedeon Richter Ltd. ........................... Pharmaceuticals 21,230 1,144,020 Matav RT ...................................... Diversified Telecommunication Services 231,639 769,426 MOL Magyar Olaj-Es Gazipari RT ................ Oil & Gas 77,030 1,640,018 ------------ 3,769,234 ------------ INDIA 3.7% Bharat Heavy Electricals Ltd. ................. Electrical Equipment 187,218 684,445 Grasim Industries Ltd. ........................ Industrial Conglomerates 178,903 1,159,529 Hindalco Industries Inc. ...................... Metals & Mining 7,449 91,295 Hughes Software Systems Ltd. .................. IT Consulting & Services 21,840 77,411 ITC Ltd. ...................................... Tobacco 87,551 1,263,502 Mahanagar Telephone Nigam Ltd. ................ Diversified Telecommunication Services 231,400 624,212 *Reliance Industries Ltd. ...................... Chemicals 82,700 435,595 Satyam Computers Services Ltd. ................ IT Consulting & Services 267,432 1,326,953 ------------ 5,662,942 ------------ INDONESIA 4.5% PT Gudang Garam TBK ........................... Tobacco 748,500 714,266 PT Indofoods Sukses Makmur TBK ................ Food Products 9,352,750 976,995 PT Indosat (Persero) TBK ...................... Diversified Telecommunication Services 1,440,500 1,488,490 PT Telekomunikasi Indonesia TBK, B ............ Diversified Telecommunication Services 9,315,460 3,813,500 ------------ 6,993,251 ------------ 12 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.) INDUSTRY SHARES VALUE --------------------------------------------------------------------------------------------------------------------- COMMON STOCKS (CONT.) *ISRAEL .5% Check Point Software Technologies Ltd. ........ Internet Software & Services 48,300 $ 809,073 ------------ MALAYSIA 1.1% Genting Bhd. .................................. Hotels Restaurants & Leisure 304,093 1,136,347 Petronas Dagangan Bhd. ........................ Oil & Gas 13,000 19,158 SIME Darby Bhd. ............................... Industrial Conglomerates 390,000 523,421 ------------ 1,678,926 ------------ MEXICO 5.9% Cemex SA ...................................... Construction Materials 292,508 1,394,865 Fomento Economico Mexicano SA de CV Femsa ..... Beverages 28,820 1,085,649 *Grupo Carso SA de CV .......................... Industrial Conglomerates 413,000 1,143,282 Kimberly Clark de Mexico SA de CV, A .......... Household Products 1,305,200 3,138,388 Telefonos de Mexico SA de CV (Telmex), L, ADR . Diversified Telecommunication Services 51,052 1,512,671 Tubos de Acero de Mexico SA, ADR .............. Energy Equipment & Services 89,140 803,151 ------------ 9,078,006 ------------ PERU .2% Credicorp Ltd. ................................ Banks 34,500 241,500 ------------ PHILIPPINES 1.1% San Miguel Corp., B ........................... Beverages 1,766,090 1,771,370 ------------ POLAND 1.5% Polski Koncern Naftowy Orlen SA ............... Oil & Gas 551,850 2,288,976 ------------ RUSSIA 3.0% GUM Trade House ............................... Multiline Retail 27,000 37,395 Lukoil Holdings, ADR .......................... Oil & Gas 38,649 2,442,617 Mosenergo, ADR ................................ Electric Utilities 90,160 225,400 Rostelecom, ADR ............................... Diversified Telecommunication Services 5,975 39,076 Sberbank RF ................................... Banks 1,000 152,000 *Tatneft ....................................... Oil & Gas 840,050 564,514 Unified Energy Systems ........................ Electric Utilities 13,286,200 1,179,814 ------------ 4,640,816 ------------ SINGAPORE 3.7% Cycle & Carriage Ltd. ......................... Distributors 138,870 341,253 Fraser & Neave Ltd. ........................... Beverages 512,630 2,255,765 Keppel Corp. Ltd. ............................. Diversified Financials 937,000 2,366,797 Singapore Airlines Ltd. ....................... Airlines 67,000 444,152 Singapore Telecommunications Ltd. ............. Diversified Telecommunication Services 400,000 336,029 ------------ 5,743,996 ------------ SOUTH AFRICA 15.8% ABSA Group Ltd. ............................... Banks 26,400 69,067 Anglo American PLC ............................ Metals & Mining 245,700 3,108,795 Barloworld Ltd. ............................... Industrial Conglomerates 366,044 2,037,157 Bidvest Group Ltd. ............................ Industrial Conglomerates 7,600 32,536 13 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.) INDUSTRY SHARES VALUE --------------------------------------------------------------------------------------------------------------------- COMMON STOCKS (CONT.) SOUTH AFRICA (CONT.) *Datatec Ltd. .................................. IT Consulting & Services 111,300 $ 74,119 Firstrand Ltd. ................................ Banks 646,000 397,624 Imperial Holdings Ltd. ........................ Specialty Retail 158,833 759,298 Investec Ltd. ................................. Diversified Financials 9,637 108,183 *Investec PLC .................................. Diversified Financials 12,183 136,764 *Johnnic Holdings Ltd. ......................... Wireless Telecommunication Services 64,202 208,886 Liberty Group Ltd. ............................ Insurance 147,759 749,232 Nampak Ltd. ................................... Containers & Packaging 359,100 447,530 Nedcor Ltd. ................................... Banks 24,600 245,263 Old Mutual PLC ................................ Insurance 1,559,010 1,989,610 Remgro Ltd. ................................... Industrial Conglomerates 338,000 2,245,723 Reunert Ltd. .................................. Electronic Equipment & Instruments 222,500 400,062 SABMiller PLC ................................. Beverages 648,548 4,473,170 Sanlam Ltd. ................................... Insurance 1,968,900 1,539,681 Sasol Ltd. .................................... Oil & Gas 219,500 2,422,299 Shoprite Holdings Ltd. ........................ Food & Drug Retailing 95,000 60,462 Standard Bank Group Ltd. ...................... Banks 227,850 618,857 Tiger Brands Ltd. ............................. Food Products 258,014 1,688,757 Tongaat-Hulett Group Ltd. ..................... Food Products 77,781 361,101 *Venfin Ltd. ................................... Wireless Telecommunication Services 105,447 174,550 Woolworths Holdings Ltd. ...................... Multiline Retail 129,500 51,743 ------------ 24,400,469 ------------ SOUTH KOREA 15.3% Cheil Jedang Corp. ............................ Food Products 26,220 1,210,708 *Cho Hung Bank Co. Ltd. ........................ Banks 303,700 1,430,128 Daelim Industrial Co. ......................... Construction & Engineering 69,980 887,886 Dongkuk Steel Mill Co. Ltd. ................... Metals & Mining 43,570 177,622 Hanjin Heavy Industries Co. Ltd. .............. Machinery 62,040 154,848 Hankook Tire Co. Ltd. ......................... Auto Components 240,110 483,436 Hankuk Electric Glass Co. Ltd. ................ Electronic Equipment & Instruments 5,640 304,066 *Hyundai Development Co. ....................... Construction & Engineering 77,180 517,551 Hyundai Motor Co. Ltd. ........................ Automobiles 43,010 1,216,640 Jungsoft Co. Ltd. ............................. Computers & Peripherals 10,394 92,097 Kangwon Land Inc. ............................. Hotels Restaurants & Leisure 15,339 1,863,217 Kookmin Credit Card Co. Ltd. .................. Diversified Financials 21,182 719,020 Korea Electric Power Corp. .................... Electric Utilities 168,392 2,949,084 Korea Gas Corp. ............................... Gas Utilities 35,450 597,248 KT Corp. ...................................... Diversified Telecommunication Services 29,000 1,319,772 *KT Freetel .................................... Wireless Telecommunication Services 17,771 510,087 *LG Card Co. Ltd. .............................. Diversified Financials 6,600 295,420 *LG Chem Investment Ltd. ....................... Industrial Conglomerates 125,685 920,195 LG Household & Health Care Ltd. ............... Household Products 9,950 339,407 *LG Life Sciences Ltd. ......................... Pharmaceuticals 13,965 334,616 Nong Shim Co. Ltd. ............................ Food Products 2,550 165,057 POSCO ......................................... Metals & Mining 2,700 242,606 Samsung Electronics Co. Ltd. .................. Semiconductor Equipment & Products 10,589 2,916,061 14 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.) INDUSTRY SHARES VALUE --------------------------------------------------------------------------------------------------------------------- COMMON STOCKS (CONT.) SOUTH KOREA (CONT.) Samsung Fine Chemicals ........................ Chemicals 55,790 $ 805,322 *Samsung Heavy Industries Co. Ltd. ............. Machinery 369,240 1,420,804 *Samsung Securities Co. Ltd. ................... Diversified Financials 14,930 437,236 SK Corp. ...................................... Oil & Gas 20,400 280,045 SK Telecom Co. Ltd. ........................... Wireless Telecommunication Services 5,426 1,067,639 ------------ 23,657,818 ------------ TAIWAN 5.0% Asustek Computer Inc. ......................... Computers & Peripherals 204,000 491,459 Avision Inc. .................................. Computers & Peripherals 315,000 273,193 China Airlines ................................ Airlines 587,290 199,793 China Motor Co. Ltd. .......................... Automobiles 22,625 29,070 China Steel Corp. ............................. Metals & Mining 306,000 142,076 *Chinatrust Financial Holding Co. .............. Banks 29,000 22,611 Chunghwa Telcom Co. Ltd. ...................... Diversified Telecommunication Services 29,000 37,261 CMC Magnetics Corp. ........................... Computers & Peripherals 1,294,800 535,010 *Compeq Manufacturing Co. Ltd. ................. Computers & Peripherals 37,200 33,566 Delta Electronics Inc. ........................ Electronic Equipment & Instruments 330,050 456,837 Elan Microelectronics Corp. ................... Software 125,707 106,454 Giant Manufacturing Co. ....................... Leisure Equipment & Products 255,420 302,819 International Commercial Bank of China ........ Banks 1,360,680 762,887 Phoenixtec Power Co. Ltd. ..................... Electrical Equipment 598,000 415,605 *Procomp Informatics Co. Ltd. .................. Machinery 781,250 588,590 Ritek Corp. ................................... Computers & Peripherals 664,250 316,171 *Sinopac Holdings Co. .......................... Banks 2,458,302 1,076,786 Taiwan Cellular Corp. ......................... Communications Equipment 295,000 327,347 UNI-President Enterprises Corp. ............... Food Products 2,006,350 638,610 *Yageo Corp. ................................... Electronic Equipment & Instruments 1,824,120 644,528 Yuanta Core Pacific Securities Co. ............ Diversified Financials 601,000 315,885 ------------ 7,716,558 ------------ THAILAND 3.8% *Bangkok Bank Public Co. Ltd., fgn. ............ Banks 353,431 527,759 Electricity Generating Public Co. Ltd., fgn. .. Electric Utilities 92,100 81,316 Hana Microelectronics Co. Ltd., fgn. .......... Electronic Equipment & Instruments 69,200 125,147 PTT Exploration & Production Public Co. Ltd., fgn. ................................... Oil & Gas 397,800 1,150,310 *Shin Corporation Public Co. Ltd., fgn. ........ Wireless Telecommunication Services 3,232,300 796,775 Siam Cement Public Co. Ltd. ................... Construction Materials 25,615 551,278 Siam Cement Public Co. Ltd., fgn. ............. Construction Materials 90,865 2,226,936 *Thai Farmers Bank Public Co. Ltd., fgn. ....... Banks 517,300 355,575 ------------ 5,815,096 ------------ TURKEY 4.7% *Akbank ........................................ Banks 987,998,755 2,845,338 *Arcelik AS, Br. ............................... Household Durables 173,389,600 1,088,998 *Enka Insaat ve Sanayi AS ...................... Industrial Conglomerates 3,202,983 180,560 15 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.) INDUSTRY SHARES VALUE -------------------------------------------------------------------------------------------------------------------- COMMON STOCKS (CONT.) TURKEY (CONT.) *KOC Holding AS ...................................... Diversified Financials 118,862,664 $ 1,183,529 Tupras-Turkiye Petrol Rafineleri AS ................. Oil & Gas 332,281,470 1,527,029 *Vestel Electronik Sanayi ve Ticaret AS .............. Household Durables 104,320,000 191,765 *Yapi ve Kredi Bankasi AS ............................ Banks 402,000,000 301,745 ------------ 7,318,964 ------------ TOTAL COMMON STOCKS (COST $150,095,515) ............. 142,553,547 ------------ PREFERRED STOCKS 3.6% Banco Bradesco SA, pfd. ............................. Banks 503,720,001 1,693,456 Cia de Bebidas Das Americas (Ambev), pfd. ........... Beverages 905,000 127,070 Cia Vale do Rio Doce, A, pfd. ....................... Metals & Mining 44,550 1,013,168 Companhia Paranaense de Energia-Copel, B, pfd. ...... Electric Utilities 100,356,000 356,902 Duratex SA, pfd. .................................... Building Products 6,606,910 88,847 Petroleo Brasileiro SA, pfd. ........................ Oil & Gas 95,000 1,377,719 *Siam Commercial Bank, 5.25%, fgn., cvt. pfd. ........ Banks 1,407,300 883,941 ------------ TOTAL PREFERRED STOCKS (COST $7,902,580) ............ 5,541,103 ------------ aSHORT TERM INVESTMENTS (COST $6,493,993) 4.2% Franklin Institutional Fiduciary Trust Money Market Portfolio ................................... 6,493,993 6,493,993 ------------ TOTAL INVESTMENTS (COST $164,492,088) 100.0% ........ 154,588,643 OTHER ASSETS, LESS LIABILITIES ...................... 51,739 ------------ TOTAL NET ASSETS 100.0% ............................. $154,640,382 ============* Non-income producing. a The Franklin Institutional Fiduciary Trust Money Market Portfolio is managed by Franklin Advisers Inc., an affiliate of Franklin Resources Inc. See notes to financial statements. 16 TEMPLETON EMERGING MARKETS FUND, INC. Financial Statements STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2002 Assets: Investments in securities, at value (cost $164,492,088) ................................ $154,588,643 Foreign currency, at value (cost $ 487,443) ............................................ 469,004 Receivables: Investment securities sold ............................................................ 952,770 Dividends and interest ................................................................ 447,127 ------------- Total assets ...................................................................... 156,457,544 ------------- Liabilities: Payables: Investment securities purchased ....................................................... 1,313,689 To affiliates ......................................................................... 181,410 Funds advanced by custodian ............................................................ 150,842 Accrued expenses ....................................................................... 171,221 ------------- Total liabilities ................................................................. 1,817,162 ------------- Net assets, at value .................................................................... $154,640,382 ============= Net assets consist of: Undistributed net investment income .................................................... $ 2,105,527 Net unrealized depreciation ............................................................ (9,983,283) Accumulated net realized loss .......................................................... (42,275,673) Capital shares ......................................................................... 204,793,811 ------------- Net assets, at value .................................................................... $154,640,382 ============= Net asset value per share ($154,640,382 / 17,656,437 shares outstanding) ................ $8.76 ============= See notes to financial statements. 17 TEMPLETON EMERGING MARKETS FUND, INC. Financial Statements (CONTINUED) STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2002 Investment Income: (net of foreign taxes of $486,720) Dividends ................................................................... $ 5,261,150 Interest .................................................................... 16,749 ----------- Total investment income ................................................ $ 5,277,899 Expenses: Management fees (Note 3) .................................................... 1,950,962 Administrative fees (Note 3) ................................................ 238,698 Transfer agent fees ......................................................... 93,000 Custodian fees .............................................................. 195,900 Reports to shareholders ..................................................... 13,500 Registration and filing fees ................................................ 34,050 Professional fees ........................................................... 36,300 Directors' fees and expenses ................................................ 43,000 Other ....................................................................... 7,200 ----------- Total expenses ......................................................... 2,612,610 ------------ Net investment income ............................................. 2,665,289 ------------ Realized and unrealized gains (losses): Net realized loss from: Investments ................................................................ (9,421,469) Foreign currency transactions .............................................. (368,848) ----------- Net realized loss ...................................................... (9,790,317) Net unrealized appreciation (depreciation) on: Investments ................................................................ 7,291,192 Translation of assets and liabilities denominated in foreign currencies .... (9,105) ----------- Net unrealized appreciation ............................................ 7,282,087 ------------ Net realized and unrealized loss ............................................. (2,508,230) ------------ Net increase in net assets resulting from operations ......................... $ 157,059 ============ See notes to financial statements. 18 TEMPLETON EMERGING MARKETS FUND, INC. Financial Statements (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED AUGUST 31, 2002 AND 2001 2002 2001 --------------------------- Increase (decrease) in net assets: Operations: Net investment income ..................................................... $ 2,665,289 $ 2,150,761 Net realized loss from investments and foreign currency transactions ...... (9,790,317) (28,591,908) Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies .............. 7,282,087 (17,329,118) --------------------------- Net increase (decrease) in net assets resulting from operations ....... 157,059 (43,770,265) Distributions to shareholders from net investment income .................... (1,894,536) (1,816,847) --------------------------- Net decrease in net assets ............................................ (1,737,477) (45,587,112) Net assets: Beginning of year .......................................................... 156,377,859 201,964,971 --------------------------- End of year ................................................................ $154,640,382 $156,377,859 =========================== Undistributed net investment income included in net assets: End of year ................................................................ $ 2,105,527 $ 1,668,883 =========================== See notes to financial statements. 19 TEMPLETON EMERGING MARKETS FUND, INC. Notes to Financial Statements 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Templeton Emerging Markets Fund, Inc. (the Fund) is registered under the Investment Company Act of 1940 as a closed-end, diversified investment company. 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. 20 TEMPLETON EMERGING MARKETS FUND, INC. Notes to Financial Statements (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 August 31, 2002, there were 30 million shares authorized ($0.01 par value). During the year ended August 31, 2002 and the year ended August 31, 2001, there were no share transactions. 3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES 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. Management fees were reduced on assets invested in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund) in an amount not to exceed the management fees paid by the Sweep Money Fund. 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. 21 TEMPLETON EMERGING MARKETS FUND, INC. Notes to Financial Statements (CONTINUED) 4. INCOME TAXES At August 31, 2002, the cost of investments, net unrealized depreciation, and undistributed ordinary income for income tax purposes were as follows: Cost of investments ....................... $166,240,842 ------------- Unrealized appreciation ................... 12,932,872 Unrealized depreciation ................... (24,585,071) ------------- Net unrealized depreciation ............... $(11,652,199) ============= Distributable earnings - ordinary income .. $ 2,645,717 ============= The tax character of distributions paid during the year ended August 31, 2002, was the same for financial statements and tax purposes. 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 year ended August 31, 2002 aggregated $121,314,541 and $94,805,744, respectively. 22 TEMPLETON EMERGING MARKETS FUND, INC. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Templeton Emerging Markets Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Templeton Emerging Markets Fund, Inc. (the "Fund") at August 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights for the year ended August 31, 1998 were audited by other independent accountants whose report dated September 29, 1998 expressed an unqualified opinion on those financial statements. PricewaterhouseCoopers LLP San Francisco, California September 25, 2002 23 TEMPLETON EMERGING MARKETS FUND, INC. Tax Designation (unaudited) At August 31, 2002, more than 50% of the Fund's total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from dividends paid to the fund on these investments. The Fund intends to make an election under Section 853 of the Internal Revenue Code. This election will allow shareholders to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The following table provides a breakdown by country of foreign source income and foreign taxes paid, as designated by the Fund to shareholders in November 2002. FOREIGN TAX FOREIGN SOURCE COUNTRY PAID PER SHARE INCOME PER SHARE ------------------------------------------------------------------------------------------------ Austria .................................................... $0.0014 $0.0051 Brazil ..................................................... 0.0049 0.0195 Chile ...................................................... 0.0001 0.0001 China ...................................................... 0.0000 0.0090 Colombia ................................................... 0.0000 0.0005 Croatia .................................................... 0.0000 0.0015 Czech Republic ............................................. 0.0007 0.0025 Egypt ...................................................... 0.0000 0.0029 Estonia .................................................... 0.0001 0.0004 Greece ..................................................... 0.0000 0.0009 Hong Kong .................................................. 0.0000 0.0118 Hungary .................................................... 0.0008 0.0016 India ...................................................... 0.0008 0.0064 Indonesia .................................................. 0.0038 0.0136 Malaysia ................................................... 0.0003 0.0006 Mexico ..................................................... 0.0007 0.0164 Peru ....................................................... 0.0000 0.0003 Philippines ................................................ 0.0006 0.0013 Poland ..................................................... 0.0001 0.0005 Russia ..................................................... 0.0008 0.0029 Singapore .................................................. 0.0038 0.0233 South Africa ............................................... 0.0005 0.0260 South Korea ................................................ 0.0013 0.0042 Slovak Republic ............................................ 0.0001 0.0002 Taiwan ..................................................... 0.0048 0.0084 Thailand ................................................... 0.0003 0.0033 Turkey ..................................................... 0.0000 0.0043 ---------------------------------- TOTAL ...................................................... $0.0259 $0.1675 ================================== In January 2003, shareholders will receive Form 1099-DIV which will include their share of taxes withheld and foreign source income distributed during the calendar year 2002. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns. 24 TEMPLETON EMERGING MARKETS FUND, INC. Annual Meeting of Shareholders, August 26, 2002 The Annual Meeting of Shareholders of the Fund was held at the Fund's offices, 500 E. Broward Blvd., Ft. Lauderdale, Florida, on August 26, 2002. The purpose of the meeting was to elect five Directors of the Fund, to approve an Agreement and Plan of Reorganization that provides for the reorganization of the Fund from a Maryland corporation to a Delaware business trust, to approve amendments to certain of the Fund's fundamental investment restrictions (including five Sub-Proposals), and to approve the elimination of certain of the Fund's fundamental investment restrictions. At the meeting, the following persons were elected by the shareholders to serve as Directors of the Fund: Harris J. Ashton, Nicholas F. Brady, Frank J. Crothers, S. Joseph Fortunato and Edith E. Holiday.* In addition, Shareholders approved an Agreement and Plan of Reorganization that provides for the reorganization of the Fund from a Maryland corporation to a Delaware business trust, amendments to certain of the Fund's fundamental investment restrictions (including five Sub-Proposals), and the elimination of certain of the Fund's fundamental investment restrictions. No other business was transacted at the meeting. The results of the voting at the Annual Meeting are as follows: Proposal 1. The election of five (5) Directors: % OF % OF % OF % OF OUTSTANDING VOTED OUTSTANDING VOTED TERM EXPIRING 2005: FOR SHARES SHARES WITHHELD SHARES SHARES ----------------------------------------------------------------------------------------------------------- Harris J. Ashton ....... 11,282,342 63.90% 95.49% 533,170 3.02% 4.51% Nicholas F. Brady ...... 11,293,274 63.96% 95.58% 522,238 2.96% 4.42% Frank J. Crothers 11,275,422 63.86% 95.43% 540,090 3.06% 4.57% S. Joseph Fortunato .... 11,269,220 63.83% 95.38% 546,292 3.09% 4.62% Edith E. Holiday ....... 11,289,426 63.94% 95.55% 526,086 2.98% 4.45% * ANDREW H. HINES, JR., BETTY P. KRAHMER, GORDON S. MACKLIN, FRED R. MILLSAPS AND CONSTANTINE D. TSERETOPOULOS CURRENTLY SERVE AS INDEPENDENT DIRECTORS. HARMON E. BURNS AND CHARLES B. JOHNSON CURRENTLY SERVE AS INTERESTED DIRECTORS. THEIR TERMS OF OFFICE CONTINUED AFTER THE ANNUAL MEETING OF SHAREHOLDERS. Proposal 2. The approval of an Agreement and Plan of Reorganization that provides for the reorganization of the Fund from a Maryland corporation to a Delaware business trust: % OF % OF OUTSTANDING VOTED SHARES VOTED SHARES SHARES ------------------------------------------------------------------ For ................... 9,128,876 51.70% 93.94% Against ............... 285,408 1.62% 2.94% Abstain ............... 303,519 1.72% 3.12% Broker Non-Votes ...... 2,097,709 11.88% -- ------------------------------------------------------------------ TOTAL ................. 11,815,512 66.92% 100.00% 25 TEMPLETON EMERGING MARKETS FUND, INC. Annual Meeting of Shareholders, August 26, 2002 (CONTINUED) Proposal 3. The approval of amendments to certain of the Fund's fundamental investment restrictions (includes five (5) Sub-Proposals): Proposal 3a: To amend the Fund's fundamental investment restriction regarding borrowing and issuing senior securities: % OF % OF OUTSTANDING VOTED SHARES VOTED SHARES SHARES -------------------------------------------------------------------- For ................... 8,447,118 47.84% 86.92% Against ............... 997,215 5.65% 10.26% Abstain ............... 273,469 1.55% 2.82% Broker Non-Votes ...... 2,097,710 11.88% -- -------------------------------------------------------------------- TOTAL ................. 11,815,512 66.92% 100.00% Proposal 3b: To amend the Fund's fundamental investment restriction regarding industry concentration: % OF % OF OUTSTANDING VOTED SHARES VOTED SHARES SHARES -------------------------------------------------------------------- For ................... 8,683,774 49.18% 89.36% Against ............... 748,773 4.24% 7.70% Abstain ............... 285,253 1.62% 2.94% Broker Non-Votes ...... 2,097,712 11.88% -- -------------------------------------------------------------------- TOTAL ................. 11,815,512 66.92% 100.00% Proposal 3c: To amend the Fund's fundamental investment restriction regarding investments in commodities: % OF % OF OUTSTANDING VOTED SHARES VOTED SHARES SHARES -------------------------------------------------------------------- For ................... 8,412,685 47.65% 86.57% Against ............... 1,016,546 5.76% 10.46% Abstain ............... 288,571 1.63% 2.97% Broker Non-Votes ...... 2,097,710 11.88% -- -------------------------------------------------------------------- TOTAL ................. 11,815,512 66.92% 100.00% Proposal 3d: To amend the Fund's fundamental investment restriction regarding investments in real estate: % OF % OF OUTSTANDING VOTED SHARES VOTED SHARES SHARES -------------------------------------------------------------------- For ................... 8,741,547 49.51% 89.95% Against ............... 697,424 3.95% 7.18% Abstain ............... 278,833 1.58% 2.87% Broker Non-Votes ...... 2,097,708 11.88% -- -------------------------------------------------------------------- TOTAL ................. 11,815,512 66.92% 100.00% 26 TEMPLETON EMERGING MARKETS FUND, INC. Annual Meeting of Shareholders, August 26, 2002 (CONTINUED) Proposal 3e: To amend the Fund's fundamental investment restriction regarding lending: % OF % OF OUTSTANDING VOTED SHARES VOTED SHARES SHARES -------------------------------------------------------------------- For ................... 8,469,967 47.97% 87.16% Against ............... 915,510 5.19% 9.42% Abstain ............... 332,327 1.88% 3.42% Broker Non-Votes ...... 2,097,708 11.88% -- -------------------------------------------------------------------- TOTAL ................. 11,815,512 66.92% 100.00% Proposal 4: The approval of the elimination of certain of the Fund's fundamental investment restrictions: % OF % OF OUTSTANDING VOTED SHARES VOTED SHARES SHARES -------------------------------------------------------------------- For ................... 8,545,821 48.40% 87.94% Against ............... 855,909 4.85% 8.81% Abstain ............... 316,073 1.79% 3.25% Broker Non-Votes ...... 2,097,709 11.88% -- -------------------------------------------------------------------- TOTAL ................. 11,815,512 66.92% 100.00% 27 TEMPLETON EMERGING MARKETS FUND, INC. 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, Inc. 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. 28 TEMPLETON EMERGING MARKETS FUND, INC. TRANSFER AGENT Mellon Investor Services LLC 85 Challenger Road Overpeck Centre Ridgefield Park, NJ 07660 1-800-416-5585 www.melloninvestor.com SHAREHOLDER INFORMATION Shares of Templeton Emerging Markets Fund, Inc. 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, Inc., 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030. 29 BOARD MEMBERS AND OFFICERS The name, age and address of the officers and board members, as well as their affiliation, positions held with the Fund, principal occupations during the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Each board member will serve until that person's successor is elected and qualified. INDEPENDENT BOARD MEMBERS NUMBER OF PORTFOLIOS IN FUND LENGTH OF COMPLEX OVERSEEN NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD ----------------------------------------------------------------------------------------------------------------------------------- HARRIS J. ASHTON (70) Director Since 1992 132 Director, Bar-S Foods (meat packing 500 East Broward Blvd. company). Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998). ----------------------------------------------------------------------------------------------------------------------------------- FRANK J. CROTHERS (58) Director Since 1999 16 None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Chairman, Caribbean Electric Utility Services Corporation and Atlantic Equipment & Power Ltd.; Vice Chairman, Caribbean Utilities Co. Ltd.; Director and President, Provo Power Company Ltd.; and director of various other business and nonprofit organizations. ----------------------------------------------------------------------------------------------------------------------------------- S. JOSEPH FORTUNATO (70) Director Since 1992 133 None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Member of the law firm of Pitney, Hardin, Kipp & Szuch. ----------------------------------------------------------------------------------------------------------------------------------- ANDREW H. HINES, JR. (79) Director Since 1990 27 None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Consultant, Triangle Consulting Group; and Executive-in-Residence, Eckerd College (1991-present); and FORMERLY, Chairman and Director, Precise Power Corporation (1990-1997); Director, Checkers Drive-In Restaurant, Inc. (1994-1997); and Chairman of the Board and Chief Executive Officer, Florida Progress Corporation (holding company in the energy area) (1982-1990) and director of various of its subsidiaries. ----------------------------------------------------------------------------------------------------------------------------------- 30 NUMBER OF PORTFOLIOS IN FUND LENGTH OF COMPLEX OVERSEEN NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD ----------------------------------------------------------------------------------------------------------------------------------- EDITH E. HOLIDAY (50) Director Since 1996 81 Director, Amerada Hess Corporation 500 East Broward Blvd. (exploration and refining of oil Suite 2100 and gas); Hercules Incorporated Ft. Lauderdale, FL 33394-3091 (chemicals, fibers and resins); Beverly Enterprises, Inc. (health care); H.J. Heinz Company (processed foods and allied products); RTI International Metals, Inc. (manufacture and distribution of titanium); and Canadian National Railway (railroad). PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Director of various companies; and FORMERLY, Assistant to the President of the United States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison - United States Treasury Department (1988-1989). ----------------------------------------------------------------------------------------------------------------------------------- BETTY P. KRAHMER (73) Director Since 1990 21 None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Director or trustee of various civic associations; and FORMERLY, Economic Analyst, U.S. government. ----------------------------------------------------------------------------------------------------------------------------------- GORDON S. MACKLIN (74) Director Since 1993 132 Director, White Mountains Insurance 500 East Broward Blvd. Group, Ltd. (holding company); Suite 2100 Martek Biosciences Corporation; Ft. Lauderdale, FL 33394-3091 WorldCom, Inc. (communications services); MedImmune, Inc. (biotechnology); Overstock.com (Internet services); and Spacehab, Inc. (aerospace services). PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation (financial services) (until 1998) and Hambrecht & Quist Group (investment banking) (until 1992); and President, National Association of Securities Dealers, Inc. (until 1987). ----------------------------------------------------------------------------------------------------------------------------------- FRED R. MILLSAPS (73) Director Since 1990 27 None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Director of various business and nonprofit organizations; and manager of personal investments (1978-present); and FORMERLY, Chairman and Chief Executive Officer, Landmark Banking Corporation (1969-1978); Financial Vice President, Florida Power and Light (1965-1969); and Vice President, Federal Reserve Bank of Atlanta (1958-1965). ----------------------------------------------------------------------------------------------------------------------------------- CONSTANTINE D. Director Since 1999 17 None TSERETOPOULOS (48) 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Physician, Lyford Cay Hospital (1987-present); and director of various nonprofit organizations; and FORMERLY, Cardiology Fellow, University of Maryland (1985-1987) and Internal Medicine Resident, Greater Baltimore Medical Center (1982-1985). ----------------------------------------------------------------------------------------------------------------------------------- 31 INTERESTED BOARD MEMBERS AND OFFICERS NUMBER OF PORTFOLIOS IN FUND LENGTH OF COMPLEX OVERSEEN NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD ----------------------------------------------------------------------------------------------------------------------------------- **NICHOLAS F. BRADY (72) Director Since 1993 62 Director, Amerada Hess Corporation 500 East Broward Blvd. (exploration and refining of oil Suite 2100 and gas); C2, Inc. (operating and Ft. Lauderdale, FL 33394-3091 investment business); and H.J. Heinz Company (processed foods and allied products). PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Chairman, Templeton Emerging Markets Investment Trust PLC, Darby Overseas Investments, Ltd. and Darby Emerging Markets Investments LDC (investment firms) (1994-present); Director, Templeton Capital Advisors Ltd. and Franklin Templeton Investment Fund; and formerly, Secretary of the United States Department of the Treasury (1988-1993); Chairman of the Board, Dillon, Read & Co., Inc. (investment banking) (until 1988); and U.S. Senator, New Jersey (April 1982-December 1982). ----------------------------------------------------------------------------------------------------------------------------------- **HARMON E. BURNS (57) Director and Director since 33 None One Franklin Parkway Vice President 1992 and San Mateo, CA 94403-1906 Vice President since 1996 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc.; and officer of 50 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- **CHARLES B. JOHNSON (69) Director, Director and 132 None One Franklin Parkway Chairman of Chairman of San Mateo, CA 94403-1906 the Board and the Board since Vice President 1995 and Vice President since 1992 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Chairman of the Board, Chief Executive Officer, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton Distributors, Inc.; Director, Fiduciary Trust Company International; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc.; and officer of 47 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- JEFFERY A. EVERETT (38) Vice President Since 2001 Not Applicable None PO Box N-7759 Lyford Cay, Nassau, Bahamas PRINCIPAL OCCUPATION DURING PAST 5 YEARS: President and Director, Templeton Global Advisors Limited; officer of 17 of the investment companies in Franklin Templeton Investments; and FORMERLY, Investment Officer, First Pennsylvania Investment Research (until 1989). ----------------------------------------------------------------------------------------------------------------------------------- MARTIN L. FLANAGAN (42) Vice President Since 1989 Not Applicable None One Franklin Parkway San Mateo, CA 94403-1906 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: President, Member - Office of the President, Chief Financial Officer and Chief Operating Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice President and Chief Operating Officer, Templeton Investment Counsel, LLC; Executive Vice President and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief Financial Officer, Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- 32 NUMBER OF PORTFOLIOS IN FUND LENGTH OF COMPLEX OVERSEEN NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD ----------------------------------------------------------------------------------------------------------------------------------- DAVID P. GOSS (55) Vice President Since 2000 Not Applicable None One Franklin Parkway and Assistant San Mateo, CA 94403-1906 Secretary PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Associate General Counsel, Franklin Resources, Inc.; President, Chief Executive Officer and Director, Property Resources, Inc. and Franklin Properties, Inc.; officer and/or director of some of the other subsidiaries of Franklin Resources, Inc.; officer of 52 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000). ----------------------------------------------------------------------------------------------------------------------------------- BARBARA J. GREEN (54) Vice President Vice President Not Applicable None One Franklin Parkway and Secretary since 2000 San Mateo, CA 94403-1906 and Secretary since 1996 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice President and Deputy General Counsel, Franklin Resources, Inc.; and Senior Vice President, Templeton Worldwide, Inc. and officer of one of the other subsidiaries of Franklin Resources, Inc., and of 52 of the investment companies in Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, Securities and Exchange Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until 1979). ----------------------------------------------------------------------------------------------------------------------------------- CHARLES E. JOHNSON (46) Vice President Since 1996 Not Applicable None One Franklin Parkway San Mateo, CA 94403-1906 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: President, Member - Office of the President and Director, Franklin Resources, Inc.; Senior Vice President, Franklin Templeton Distributors, Inc.; President and Director, Templeton Worldwide, Inc. and Franklin Advisers, Inc.; Chairman of the Board, President and Director, Franklin Investment Advisory Services, Inc.; and officer and/or director of some of the other subsidiaries of Franklin Resources, Inc. and of 33 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- RUPERT H. JOHNSON, JR. (62) Vice President Since 1996 Not Applicable None One Franklin Parkway San Mateo, CA 94403-1906 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 50 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- JOHN R. KAY (62) Vice President Since 1994 Not Applicable None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice President, Templeton Worldwide, Inc.; Assistant Vice President, Franklin Templeton Distributors, Inc.; Senior Vice President, Franklin Templeton Services, LLC; and officer of one of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments; and FORMERLY, Vice President and Controller, Keystone Group, Inc. ----------------------------------------------------------------------------------------------------------------------------------- 33 NUMBER OF PORTFOLIOS IN FUND LENGTH OF COMPLEX OVERSEEN NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD ----------------------------------------------------------------------------------------------------------------------------------- MICHAEL O. MAGDOL (65) Vice President Since Not Applicable Director, FTI Banque, Arch 600 5th Avenue - AML May 2002 Chemicals, Inc. and Lingnan Rockefeller Center Compliance Foundation New York, NY 10048-0772 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; officer and/or director, as the case may be of some of the other subsidiaries of Franklin Resources, Inc.; and officer of 40 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- MARK MOBIUS (66) President Since 1987 Not Applicable None Two Exchange Square, 39th Floor, Suite 3905-08 Hong Kong PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Portfolio Manager of various Templeton advisory affiliates; Managing Director, Templeton Asset Management Ltd.; Executive Vice President and Director, Templeton Global Advisors Limited; officer of eight of the investment companies in Franklin Templeton Investments; officer and/or director as the case may be of some of the subsidiaries of Franklin Resources, Inc.; and FORMERLY, President, International Investment Trust Company Limited (investment manager of Taiwan R.O.C. Fund) (1986-1987); and Director, Vickers da Costa, Hong Kong (1983-1986). ----------------------------------------------------------------------------------------------------------------------------------- BRUCE S. ROSENBERG (40) Treasurer Since 2000 Not Applicable None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice President, Franklin Templeton Services, LLC; and officer of some of the subsidiaries of Franklin Resources, Inc. and of 18 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- MURRAY L. SIMPSON (65) Vice President Since 2000 Not Applicable None One Franklin Parkway and Assistant San Mateo, CA 94403-1906 Secretary PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director of some of the subsidiaries of Franklin Resources, Inc.; officer of 52 of the investment companies in Franklin Templeton Investments; and FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director, Templeton Asset Management Ltd. (until 1999). -----------------------------------------------------------------------------------------------------------------------------------*We base the number of portfolios on each separate series of the U.S. registered investment companies comprising the Franklin Templeton Investments fund complex. These portfolios have a common investment adviser or affiliated investment advisers. **Charles B. Johnson is considered an interested person of the Fund under the federal securities laws due to his position as an officer and director and major shareholder of Franklin Resources, Inc., which is the parent company of the Fund's adviser. Harmon E. Burns is considered an interested person of the Fund under the federal securities laws due to his position as officer and director of Franklin Resources, Inc. Nicholas F. Brady is considered an interested person of the Fund under the federal securities laws due to his business affiliations with Franklin Resources, Inc. and Templeton Global Advisors Limited. Mr. Brady and Franklin Resources, Inc. are both limited partners of Darby Overseas Partners, L.P. (Darby Overseas). Mr. Brady is Chairman and shareholder of Darby Overseas Investments, Ltd., which is the corporate general partner of Darby Overseas. In addition, Darby Overseas and Templeton Global Advisors Limited are limited partners of Darby Emerging Markets Fund, L.P. (DEMF). Mr. Brady serves as Chairman of the corporate general partner of DEMF, and Darby Overseas and its general partner own 100% of the stock of the general partner of DEMF. Resources also is an investor in Darby Technology Ventures Group, LLC (DTV) in which Darby Overseas is a significant investor and for which Darby Overseas has the right to appoint a majority of the directors. Templeton Global Advisors Limited also is a limited partner in Darby-BBVA Latin America Private Equity Fund, L.P. (DBVA), a private equity fund in which Darby Overseas is a significant investor, and the general partner of which Darby Overseas controls jointly with an unaffiliated third party. Mr. Brady is also a director of Templeton Capital Advisors Ltd. (TCAL), which serves as investment manager to certain unregistered funds. TCAL and Templeton Global Advisors Limited are both indirect subsidiaries of Franklin Resources, Inc. Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the father and uncle, respectively, of Charles E. Johnson. 34 This page intentionally left blank. 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 Latin America Fund Templeton Pacific Growth 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 GROWTH & INCOME Franklin Convertible Securities Fund Franklin Equity Income Fund Franklin Income Fund Franklin Large Cap Value Fund 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(3) Franklin's AGE High Income Fund Franklin Floating Rate Daily Access Fund Franklin Floating Rate Trust(4) Franklin Short-Intermediate U.S. Government Securities Fund(3) Franklin Strategic Income Fund Franklin Total Return Fund Franklin U.S. Government Securities Fund(3) Franklin Federal Money Fund(3,5) Franklin Money Fund(3,5) TAX-FREE INCOME(6) 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(7) Tax-Exempt Money Fund(3,5) STATE-SPECIFIC TAX-FREE INCOME(6) Alabama Arizona California(8) Colorado Connecticut Florida(8) Georgia Kentucky Louisiana Maryland Massachusetts(7) Michigan(7) Minnesota(7) Missouri New Jersey New York(8) North Carolina Ohio(7) Oregon Pennsylvania Tennessee Virginia INSURANCE FUNDS Franklin Templeton Variable Insurance Products Trust(9) 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. An investment in the fund is neither insured nor guaranteed by the U.S. government or by any other entity or institution. 4. 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. 5. 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. 6. For investors subject to the alternative minimum tax, a small portion of these dividends may be taxable. Distributions of capital gains are generally taxable. 7. Portfolio of insured municipal securities. 8. 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). 9. 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. 09/02 [LOGO OMITTED] FRANKLIN[R] TEMPLETON[R] INVESTMENTS 100 Fountain Parkway P.O. Box 33030 St. Petersburg, FL 33733-8030 ANNUAL REPORT TEMPLETON EMERGING MARKETS FUND, INC. AUDITORS PricewaterhouseCoopers LLP 333 Market Street San Francisco, CA 94105 TRANSFER AGENT Mellon Investor Services LLC 85 Challenger Road Overpeck Centre 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. [LOGO OMITTED] Printed on recycled paper TLEMF A2002 10/02