UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4985
----------
TEMPLETON EMERGING MARKETS FUND
--------------------------------------
(Exact name of registrant as specified in charter)
500 EAST BROWARD BLVD., FORT LAUDERDALE, FL 33394-3091
--------------------------------------------------------
(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-----------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (954) 527-7500
--------------
Date of fiscal year end: 8/31
----
Date of reporting period: 2/29/04
-------
ITEM 1. REPORTS TO STOCKHOLDERS
FEBRUARY 29, 2004
[photo omitted]
SEMIANNUAL REPORT AND SHAREHOLDER INFORMATION
INTERNATIONAL
TEMPLETON
EMERGING MARKETS FUND
[graphic omitted]
[franklin templeton logo omitted]
FRANKLIN[R] TEMPLETON[R]
INVESTMENTS
Franklin o TEMPLETON o Mutual Series
PAGE
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE
SPECIALIZED EXPERTISE
TRUE DIVERSIFICATION
RELIABILITY YOU CAN TRUST
Franklin Templeton's distinct multi-manager structure combines the
specialized expertise of three world-class investment management
groups--Franklin, Templeton and Mutual Series.
Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.
FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.
MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style
of value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.
Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.
At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
[photo omitted]
Not part of the semiannual report
PAGE
Contents
Important Notice to Shareholders .......................................... 1
SEMIANNUAL REPORT
Templeton Emerging Markets Fund ........................................... 2
Performance Summary ....................................................... 6
Financial Highlights and
Statement of Investments .................................................. 7
Financial Statements ...................................................... 14
Notes to Financial Statements ............................................. 17
Annual Meeting of Shareholders ............................................ 22
Dividend Reinvestment and Cash
Purchase Plan ............................................................. 23
Proxy Voting Policies and Procedures ...................................... 25
--------------------------------------------------------------------------------
Semiannual Report
Templeton Emerging Markets Fund
YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Templeton Emerging Markets Fund seeks
long-term capital appreciation by investing, under normal market conditions, at
least 80% of its net assets in emerging country equity securities.
--------------------------------------------------------------------------------
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets as of 2/29/04
[PIE CHART OMITTED]
Asia ....................................................... 55.7%
Europe ..................................................... 16.6%
Middle East & Africa ....................................... 12.7%
Latin America .............................................. 12.1%
Short-Term Investments &
Other Net Assets ........................................... 2.9%
--------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to bring you Templeton Emerging Markets Fund's semiannual report
for the period ended February 29, 2004.
PERFORMANCE OVERVIEW
For the six months ended February 29, 2004, Templeton Emerging Markets Fund
delivered a +24.86% cumulative total return based on market price and +30.88%
based on net asset value, as shown in the Performance Summary on page 6. The
Morgan Stanley Capital International (MSCI) Emerging Markets Index and Standard
& Poor's/International Finance Corporation (S&P/IFC) Investable Composite Index
posted 28.55% and 28.76% cumulative total returns for the
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 8.
2 | Semiannual Report
PAGE
same period. 1 We are pleased with our long-term results, as well, which you
will find in the Performance Summary. For example, for the 10-year period ended
February 29, 2004, the Fund delivered a +52.64% cumulative total return based on
market price and a +64.76% cumulative total return based on net asset value,
compared to the MSCI Emerging Market Index's 10.31% cumulative return for the
same period. 1
ECONOMIC AND MARKET OVERVIEW
Most emerging markets recorded good stock market performances over the six-month
reporting period as investors regained confidence. Of the four primary emerging
markets regions, Latin America performed best as political and financial issues
that engulfed the region during 2003 subsided. Brazil and Argentina experienced
renewed investor interest as their governments strived to implement key
structural reforms and sealed agreements with the International Monetary Fund.
Asian markets benefited from strong macroeconomic data and diminished investor
concerns over the avian flu outbreak. South Africa's economy expanded at a 1.9%
rate in 2003. 2 The U.S. dollar's decline contributed to the South African
rand's strength, which helped contain inflation. Eastern European markets
continued an upward trend as European Union candidates within the region worked
toward the fulfillment of accession goals. To the south, investor confidence in
Turkey seemed to remain unshaken despite November's terrorist attacks. In fact,
Turkey was the top-performing emerging market during the six months under
review.
INVESTMENT STRATEGY
Our investment strategy employs a bottom-up, value-oriented, long-term approach.
We focus on the market price of a company's securities relative to our
evaluation of the company's long-term earnings, asset value and cash flow
potential. As we look for investments, we focus on specific companies and
undertake in-depth research to construct an action list from which we make our
buy decisions. Before we make a purchase, we examine the company's potential for
earnings and growth over a five-year horizon. During our analysis, we also
consider the company's position in its sector, the economic framework and
political environment.
TOP 10 COUNTRIES
Based on Equity Investments as of 2/29/04
----------------------
% OF TOTAL
NET ASSETS
----------------------
South Korea 13.1%
South Africa 12.5%
Taiwan 11.1%
Hong Kong 9.3%
China 7.5%
Singapore 6.3%
Brazil 6.1%
Mexico 5.2%
Hungary 3.2%
India 2.5%
1. Source: Standard & Poor's Micropal. The MSCI Emerging Markets Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in global emerging markets. The S&P/IFCI Composite Index is a
market capitalization-weighted index designed to measure performance of emerging
market stocks. It tracks approximately 2,000 securities in countries such as
Brazil, Mexico, China and South Korea. Performance represents total return in
$US. The indexes are unmanaged and include reinvested dividends. One cannot
invest directly in an index, nor is an index representative of the Fund's
portfolio.
2. Source: Statistics South Africa, 2/24/04.
Semiannual Report | 3
PAGE
TOP 10 HOLDINGS
2/29/04
-----------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
-----------------------------------------------------------
Anglo American PLC 4.5%
METALS & MINING, SOUTH AFRICA
SABMiller PLC 2.8%
BEVERAGES, SOUTH AFRICA
China Mobile (Hong Kong) Ltd., fgn. 2.6%
WIRELESS TELECOMMUNICATION SERVICES,
HONG KONG
Lukoil Holdings, ADR 2.3%
OIL & GAS, RUSSIA
Citic Pacific Ltd. 2.2%
INDUSTRIAL CONGLOMERATES, HONG KONG
Hyundai Motor Co. Ltd. 2.2%
AUTOMOBILES, SOUTH KOREA
Telefonos de Mexico SA de CV (Telmex),
L, ADR 1.8%
DIVERSIFIED TELECOMMUNICATION SERVICES,
MEXICO
Kimberly Clark de Mexico SA de CV, A 1.8%
HOUSEHOLD PRODUCTS, MEXICO
Fraser & Neave Ltd. 1.7%
BEVERAGES, SINGAPORE
Keppel Corp. Ltd. 1.6%
INDUSTRIAL CONGLOMERATES, SINGAPORE
MANAGER'S DISCUSSION
The Fund's underweighted positions relative to the MSCI Emerging Markets Index
in South Korean and Malaysian companies, as well as its overweighted positions
in Turkish and Austrian companies, contributed to the Fund's performance.
However, the Fund's underweighting in Mexican companies was detrimental to its
overall results. In line with our investment strategy, we did not invest in what
we considered were expensively valued stocks such as LG Electronics (South
Korea) and Taiwan Semiconductor Manufacturing (Taiwan), decisions that
contributed positively to performance.
By industry, the Fund's holdings in the diversified telecommunication services,
and oil and gas industries yielded the greatest contribution relative to the
MSCI Emerging Markets Index during the period. Strong contributors in the
diversified telecommunication services industry included PT Indosat (Indonesia)
and Singapore Telecommunications (Singapore). In the oil and gas industry, the
Fund's overweighted positions in SK Corp. (South Korea) and PTT Exploration &
Production Public (Thailand) contributed the greatest returns relative to the
index. Alternatively, the Fund's underweighted position in the metals and mining
industry worked against it as many such companies performed well during the
reporting period.
During the period, we made investments mainly in Asia and Europe as we continued
to find stocks that, in our view, were trading at attractive valuations,
consistent with our strategy. In Asia, we made purchases in Hong Kong, Taiwan,
and among China's H and Red Chip shares. Key additions included China Mobile
(Hong Kong) and China Telecom, China's dominant wireless and diversified
telecommunication services providers, respectively; Acer (Taiwan), a major
player in the global personal computer market; and HSBC Holdings (U.K.), one of
the world's largest emerging markets banking and financial services
organizations. Conversely, we undertook selective sales in Indonesia and
Singapore as some stocks became expensive, in our view, according to our value
investing criteria.
In Latin America, we repositioned our holdings in Brazil and Mexico to some
degree. We increased our position in Telefonos de Mexico, the country's largest
diversified telecommunication services provider, and purchased Brazil's Cia De
Bebidas Das American (Ambev), one of the world's largest beer and soft drink
producers. Meanwhile, we reduced the Fund's exposure to Petroleo Brasileiro and
Cia Vale do Rio Doce (Brazil) and divested our interests in Cemex (Mexico),
allowing the Fund to realize gains and enhancing its total return during the
period.
Our European additions were mainly in Greece, the Czech Republic and Poland,
while we sold holdings in Austria and Denmark. Key buys included
telecommunications operators such as Telecomunikacja Polska (Poland), Hellenic
4 | Semiannual Report
PAGE
Telecommunications Organization (Greece) and Cesky Telecom (Czech Republic). As
a result of these purchases and investments in Asian telecommunication
companies, the Fund's exposure to the diversified telecommunication services
sector increased during the period. To the south, we sold some of our Turkish
positions, locking in gains. In South Africa, we eliminated our exposure to
Barloworld as it reached our sale target.
We thank you for your interest in Templeton Emerging Markets Fund and look
forward to serving your future investment needs.
Sincerely,
[photo of mark mobius omitted]
/s/Mark Mobius
Mark Mobius
President and Chief Executive Officer --
Investment Management
Templeton Emerging Markets Fund
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
FEBRUARY 29, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
Semiannual Report | 5
PAGE
Performance Summary as of 2/29/04
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. Total return reflects the Fund's dividend income, capital gain
distributions, if any, and any unrealized gains or losses. 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 2/29/04 8/31/03
--------------------------------------------------------------------------------
Net Asset Value (NAV) +$3.07 $13.89 $10.82
Market Price (NYSE) +$2.66 $14.50 $11.84
DISTRIBUTIONS (9/1/03-2/29/04)
Dividend Income $0.2319
PERFORMANCE
--------------------------------------------------------------------------------
6-MONTH 1-YEAR 5-YEAR 10-YEAR
--------------------------------------------------------------------------------
Cumulative Total Return 1
Based on change in NAV +30.88% +66.22% +73.58% +64.76%
Based on change in market price +24.86% +85.26% +57.55% +52.64%
Average Annual Total Return 1
Based on change in NAV +30.88% +66.22% +11.66% +5.12%
Based on change in market price +24.86% +85.26% +9.51% +4.32%
ENDNOTES
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. ONGOING MARKET VOLATILITY
CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE RECENT RETURNS MAY DIFFER
FROM THOSE SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH
MARKET CONDITIONS. SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING,
INCLUDING CURRENCY VOLATILITY, ECONOMIC INSTABILITY AND SOCIAL AND POLITICAL
DEVELOPMENTS OF COUNTRIES WHERE THE FUND INVESTS. EMERGING MARKETS INVOLVE
HEIGHTENED RISKS RELATED TO THE SAME FACTORS, IN ADDITION TO THOSE ASSOCIATED
WITH THEIR RELATIVELY SMALL SIZE AND LESSER LIQUIDITY. YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL YOUR SHARES.
1. Total return calculations represent the cumulative and average annual changes
in value of an investment over the periods indicated. Six-month return has not
been annualized.
FOR MOST RECENT MONTH-END PERFORMANCE FIGURES, CALL FRANKLIN
TEMPLETON INVESTMENTS AT 1-800/342-5236.
6 | Past performance does not guarantee future results. | Semiannual Report
PAGE
Templeton Emerging Markets Fund
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 29, 2004 YEAR ENDED AUGUST 31,
(UNAUDITED) 2003 2002 2001 2000 1999
--------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ........... $10.82 $8.76 $8.86 $11.44 $11.60 $10.85
--------------------------------------------------------------------------
Income from investment operations:
Net investment income a ....................... .03 .18 .15 .12 .13 .13
Net realized and unrealized gains (losses) .... 3.27 2.03 (.14) (2.60) (.16) 5.17
--------------------------------------------------------------------------
Total from investment operations ............... 3.30 2.21 .01 (2.48) (.03) 5.30
--------------------------------------------------------------------------
Less distributions from:
Net investment income ......................... (.23) (.15) (.11) (.10) (.10) (.29)
Net realized gains ............................ -- -- -- -- (.03) (4.26)
--------------------------------------------------------------------------
Total distributions ............................ (.23) (.15) (.11) (.10) (.13) (4.55)
--------------------------------------------------------------------------
Net asset value, end of period ................. $13.89 $10.82 $8.76 $8.86 $11.44 $11.60
--------------------------------------------------------------------------
Market value, end of period b .................. $14.50 $11.84 $8.00 $8.35 $9.313 $12.25
==========================================================================
Total return (based on market value per share) c 24.86% 50.83% (2.82)% (9.17)% (23.10)% 99.91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $245,601 $191,076 $154,640 $156,378 $201,965 $204,804
Ratios to average net assets:
Expenses ...................................... 1.65% d 1.84% 1.64% 1.67% 1.68% 1.63%
Net investment income ......................... 0.50% d 1.94% 1.67% 1.28% 1.09% 1.18%
Portfolio turnover rate ........................ 25.33% 48.69% 65.13% 63.64% 81.66% 45.00%
aBased on average daily shares outstanding.
bBased on the last sale on the New York Stock Exchange.
cTotal return is not annualized for periods less than one year.
dAnnualized.
Semiannual Report | See notes to financial statements. | 7
PAGE
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 93.2%
ARGENTINA .8%
Tenaris SA ................................... Energy Equipment & Services 3 $ 10
Tenaris SA, ADR .............................. Energy Equipment & Services 56,970 1,974,011
---------------
1,974,021
---------------
AUSTRIA 2.3%
a Bank Austria Creditanstalt, Reg S ............ Commercial Banks 44,500 2,377,521
OMV AG ....................................... Oil & Gas 20,708 3,338,423
---------------
5,715,944
---------------
BELGIUM .3%
Interbrew .................................... Beverages 24,400 733,670
---------------
BRAZIL 2.3%
Centrais Eletricas Brasileiras SA ............ Electric Utilities 67,922,000 760,260
Embraer-Empresa Brasileira de Aeronautica SA . Aerospace & Defense 405,729 2,344,521
Souza Cruz SA ................................ Tobacco 156,986 1,649,364
Unibanco Uniao de Bancos Brasileiros SA, GDR . Commercial Banks 32,852 747,383
---------------
5,501,528
---------------
CHINA 7.5%
Beijing Enterprises Holdings Ltd. ............ Industrial Conglomerates 812,000 1,048,402
China International Marine Containers Co.,
Ltd., B ..................................... Machinery 118,800 221,762
China Petroleum & Chemical Corp., H .......... Oil & Gas 8,322,000 3,501,423
China Resources Enterprise Ltd. .............. Distributors 1,974,000 2,789,622
China Telecom Corp. Ltd., H .................. Diversified Telecommunication Services 6,554,000 2,547,049
China Travel International Investment Hong
Kong Ltd. ................................... Hotels Restaurants & Leisure 5,488,000 1,106,928
Cofco International Ltd. ..................... Food Products 302,000 182,352
Huadian Power International Corp Ltd. ........ Electric Utilities 3,706,000 1,452,148
PetroChina Co. Ltd., H ....................... Oil & Gas 5,748,000 3,083,037
TCL International Holdings Inc. .............. Household Durables 3,270,000 1,491,357
Tingyi (Cayman Islands) Holding Corp. ........ Food Products 2,064,000 623,136
Travelsky Technology Ltd., H ................. IT Services 334,000 356,148
---------------
18,403,364
---------------
CROATIA .8%
Pliva D D, GDR, Reg S ........................ Pharmaceuticals 116,900 1,908,977
---------------
CZECH REPUBLIC .9%
a Cesky Telecom AS ............................. Diversified Telecommunication Services 88,350 1,086,777
CEZ AS ....................................... Electric Utilities 175,500 1,205,141
---------------
2,291,918
---------------
EGYPT .2%
Commercial International Bank Ltd. ........... Commercial Banks 149,376 549,285
---------------
GREECE 1.7%
Coca-Cola Hellenic Bottling Co., SA .......... Beverages 57,994 1,369,091
Hellenic Telecommunications Organization
SA (OTE) .................................... Diversified Telecommunication Services 129,200 1,974,529
8 | Semiannual Report
PAGE
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
GREECE (CONT.)
Titan Cement Co. ............................. Construction Materials 19,860 $ 864,648
---------------
4,208,268
---------------
HONG KONG 9.3%
Cheung Kong Holdings Ltd. .................... Real Estate 254,000 2,422,901
Cheung Kong Infrastructure Holdings Ltd. ..... Construction Materials 288,000 734,444
China Mobile (Hong Kong) Ltd., fgn. .......... Wireless Telecommunication Services 1,835,500 6,496,531
a China Oriental Group Co. Ltd. ................ Metals & Mining 70,000 24,731
Citic Pacific Ltd. ........................... Industrial Conglomerates 1,781,000 5,502,810
Dairy Farm International Holdings Ltd. ....... Food & Staples Retailing 320,200 633,996
Guoco Group Ltd. ............................. Diversified Financial Services 118,000 894,416
Hang Lung Group Ltd. ......................... Real Estate 667,000 1,045,421
Henderson Investment Ltd. .................... Real Estate 1,100,000 1,413,183
Hong Kong Land Holdings Ltd. ................. Real Estate 319,000 606,100
a Hopewell Highway Infrastructure Ltd, wts.,
8/05/2006 ................................... Transportation Infrastructure 14,300 2,664
MTR Corp. Ltd. ............................... Road & Rail 688,193 1,091,900
Shanghai Industrial Holdings Ltd. ............ Industrial Conglomerates 658,000 1,728,720
Tack Fat Group International Ltd. ............ Specialty Retail 2,466,000 262,952
VTech Holdings Ltd. .......................... Communications Equipment 13,000 23,632
---------------
22,884,401
---------------
HUNGARY 3.2%
Egis RT ...................................... Pharmaceuticals 21,281 1,091,864
Gedeon Richter Ltd. .......................... Pharmaceuticals 17,251 1,962,242
Matav RT ..................................... Diversified Telecommunication Services 431,639 1,692,295
MOL Magyar Olaj-Es Gazipari RT ............... Oil & Gas 96,780 3,185,407
---------------
7,931,808
---------------
INDIA 2.5%
Ashok Leyland Ltd. ........................... Machinery 13,000 75,511
Hero Honda Motors Ltd. ....................... Automobiles 96,300 1,049,859
Hindustan Petroleum Corp. Ltd. ............... Oil & Gas 169,735 1,706,918
Mahanagar Telephone Nigam Ltd. ............... Diversified Telecommunication Services 760,205 2,293,135
Nestle India Ltd. ............................ Food Products 5,047 67,535
Tata Tea Ltd. ................................ Food Products 58,015 458,310
Union Bank of India Ltd. ..................... Commercial Banks 475,741 501,666
---------------
6,152,934
---------------
INDONESIA 1.8%
PT Gudang Garam TBK .......................... Tobacco 272,500 454,435
PT Indosat (Persero) TBK ..................... Diversified Telecommunication Services 1,182,500 2,552,410
a PT Perusahaan Gas Negara ..................... Gas Utilities 752,500 137,951
a PT Perusahaan Gas Negara, 144A ............... Gas Utilities 290,000 53,164
PT Telekomunikasi Indonesia TBK, B ........... Diversified Telecommunication Services 1,414,530 1,221,297
---------------
4,419,257
---------------
ISRAEL
Elbit Systems Ltd. ........................... Aerospace & Defense 4,639 87,220
Semiannual Report | 9
PAGE
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
MALAYSIA .9%
Golden Hope Plantations Bhd. ................. Food Products 20,000 $ 19,684
Petronas Dagangan Bhd. ....................... Oil & Gas 9,000 17,408
Resorts World Bhd. ........................... Hotels Restaurants & Leisure 161,000 478,763
SIME Darby Bhd. .............................. Industrial Conglomerates 71,000 113,974
Southern Bank Bhd., fgn. ..................... Commercial Banks 10,000 8,789
SP Setia Bhd. ................................ Real Estate 200,000 223,158
Tanjong PLC .................................. Hotels Restaurants & Leisure 19,000 62,000
a YTL Corporation Bhd. ......................... Electric Utilities 31,000 37,526
YTL Power International Bhd. ................. Electric Utilities 1,252,600 1,133,933
---------------
2,095,235
---------------
MEXICO 5.2%
Embotelladoras Arca SA ....................... Food & Staples Retailing 500 1,071
Embotelladoras Arca SA, 144A ................. Food & Staples Retailing 154,652 331,262
Fomento Economico Mexicano SA de CV Femsa,
ADR ......................................... Beverages 40,420 1,818,900
a Grupo Bimbo SA de CV, A ...................... Food Products 43,900 97,207
Grupo Carso SA de CV ......................... Industrial Conglomerates 354,000 1,510,447
Grupo Continental SA ......................... Beverages 84,299 165,711
Kimberly Clark de Mexico SA de CV, A ......... Household Products 1,646,200 4,362,292
Telefonos de Mexico SA de CV (Telmex), L, ADR Diversified Telecommunication Services 128,782 4,374,725
---------------
12,661,615
---------------
PERU
Credicorp Ltd. ............................... Commercial Banks 1,300 16,900
---------------
PHILIPPINES .9%
San Miguel Corp., B .......................... Beverages 1,771,090 2,201,284
---------------
POLAND 2.0%
a BRE Bank SA .................................. Commercial Banks 13,931 336,604
Polski Koncern Naftowy Orlen SA .............. Oil & Gas 477,532 3,461,477
Telekomunikacja Polska SA .................... Diversified Telecommunication Services 252,200 1,058,384
---------------
4,856,465
---------------
RUSSIA 2.4%
Aeroflot ..................................... Airlines 11,100 10,226
AvtoVAZ ...................................... Metals & Mining 5,500 169,950
Lukoil Holdings, ADR ......................... Oil & Gas 51,299 5,704,449
Yuzhnaya Telecommunication Co. ............... Diversified Telecommunication Services 917,700 94,064
---------------
5,978,689
---------------
SINGAPORE 6.3%
Comfortdelgro Corp. Ltd. ..................... Road & Rail 1,530,000 849,376
DBS Group Holdings Ltd. ...................... Commercial Banks 189,000 1,632,134
Fraser & Neave Ltd. .......................... Beverages 489,367 4,082,251
Keppel Corp. Ltd. ............................ Industrial Conglomerates 941,000 4,035,424
MobileOne (Asia) Ltd. ........................ Wireless Telecommunication Services 290,000 264,062
Singapore Press Holdings Ltd. ................ Media 10,000 109,267
Singapore Technologies Engineering Ltd. ...... Aerospace & Defense 581,000 709,931
10 | Semiannual Report
PAGE
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
SINGAPORE (CONT.)
Singapore Telecommunications Ltd. ............ Diversified Telecommunication Services 2,711,000 $ 3,678,901
---------------
15,361,346
---------------
SOUTH AFRICA 12.5%
Anglo American PLC ........................... Metals & Mining 437,912 10,952,573
BHP Billiton PLC ............................. Metals & Mining 145,500 1,353,829
Imperial Holdings Ltd. ....................... Air Freight & Logistics 160,333 1,687,335
Nampak Ltd. .................................. Containers & Packaging 146,300 292,534
Nedcor Ltd. .................................. Commercial Banks 62,803 604,284
Old Mutual PLC ............................... Insurance 738,860 1,302,621
Remgro Ltd. .................................. Industrial Conglomerates 364,700 4,016,278
SABMiller PLC ................................ Beverages 648,548 6,796,030
Sappi Ltd. ................................... Paper & Forest Products 61,500 841,482
Sasol Ltd. ................................... Oil & Gas 182,100 2,732,253
---------------
30,579,219
---------------
SOUTH KOREA 13.1%
CJ Corp. ..................................... Food Products 41,010 2,385,276
Dong-A Pharmaceutical Co. Ltd. ............... Pharmaceuticals 27,552 447,486
Hite Brewery Co., Ltd. ....................... Beverages 20,060 1,535,204
Hyundai Autonet Co. .......................... Auto Components 7,890 18,752
Hyundai Development Co. ...................... Construction & Engineering 200,590 2,208,878
Hyundai Motor Co. Ltd. ....................... Automobiles 125,460 5,334,184
a Kangwon Land Inc. ............................ Hotels Restaurants & Leisure 285,058 3,405,667
Korea Electric Power Corp. ................... Electric Utilities 158,622 2,792,071
Korea Gas Corp. .............................. Gas Utilities 44,780 997,650
KT Corp. ..................................... Diversified Telecommunication Services 58,240 2,154,286
KT&G Corp. ................................... Tobacco 20,780 488,577
LG Cable Ltd. ................................ Electrical Equipment 370 4,751
LG Home Shopping Inc. ........................ Internet & Catalog Retail 1,730 66,052
LG Household & Health Care Ltd. .............. Household Products 41,230 1,072,821
LG International Corp. ....................... Trading Companies & Distributors 38,440 248,422
POSCO Metals & Mining 7,840 1,153,333
Samsung Corp. ................................ Trading Companies & Distributors 104,170 1,027,527
Samsung Fine Chemicals ....................... Chemicals 109,500 1,694,643
Samsung Heavy Industries Co. Ltd. ............ Machinery 449,540 2,083,327
SK Corp. ..................................... Oil & Gas 84,090 3,121,198
---------------
32,240,105
---------------
TAIWAN 11.1%
Acer Inc. .................................... Computers & Peripherals 1,505,000 2,368,835
a Cheng Shin Rubber Industry Co. Ltd. .......... Auto Components 153,000 218,342
Chinatrust Financial Holding Co. Ltd. ........ Commercial Banks 1,030,540 1,229,666
Chunghwa Telcom Co. Ltd. ..................... Diversified Telecommunication Services 777,000 1,269,570
D-Link Corp. ................................. Communications Equipment 1,794,000 2,258,972
Delta Electronics Inc. ....................... Electronic Equipment & Instruments 2,093,552 2,824,459
Elan Microelectronics Corp. .................. Software 1,269,000 1,190,817
Elite Semiconductor Memory Technology Inc. ... Electrical Equipment 128,440 356,190
Semiannual Report | 11
PAGE
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
TAIWAN (CONT.)
Fubon Financial Holding Co. Ltd. ............. Diversified Financial Services 1,192,000 $ 1,268,655
Lite-on Technology Corp. ..................... Computers & Peripherals 1,878,000 2,308,440
Mega Financial Holdings Co. Ltd. ............. Commercial Banks 1,957,661 1,426,208
a Micro-Star International Co. Ltd. ............ Computers & Peripherals 131,000 216,010
Phoenixtec Power Co. Ltd. .................... Electrical Equipment 741,990 929,851
President Chain Store Corp. .................. Food & Staples Retailing 611,000 1,227,312
Princeton Technology Corp. ................... Semiconductors & Semiconductor Equipment 54,000 102,803
Sunplus Technology Co. Ltd. .................. Semiconductors & Semiconductor Equipment 1,270,300 2,856,318
Taiwan Cellular Corp. ........................ Wireless Telecommunication Services 2,510,372 2,423,444
a Tatung Co. Ltd. .............................. Industrial Conglomerates 233,000 94,304
Tsann Kuen Enterprise Co. Ltd. ............... Household Durables 297,000 538,705
UNI-President Enterprises Corp. .............. Food Products 1,221,350 717,687
Yuanta Core Pacific Securities Co. ........... Diversified Financial Services 1,683,960 1,494,385
---------------
27,320,973
---------------
THAILAND 2.3%
Delta Electronics (Thailand) Public
Co. Ltd., fgn. .............................. Electronic Equipment & Instruments 216,900 154,574
Hana Microelectronics Co. Ltd., fgn. ......... Electronic Equipment & Instruments 176,800 627,552
Krung Thai Bank Public Co. Ltd., fgn. ........ Commercial Banks 1,739,500 490,549
National Finance Public Co. Ltd., fgn. ....... Consumer Finance 976,200 380,144
PTT Exploration & Production Public Co.
Ltd., fgn. .................................. Oil & Gas 393,100 2,540,293
Siam Makro Public Company Ltd., fgn. ......... Food & Staples Retailing 71,200 77,470
a Telecomasia Corp. Public Co. Ltd., purch. rts. Diversified Telecommunication Services 246,818 --
Thai Airways International Public Co. Ltd., fgn. Airlines 463,100 698,009
a Thai Military Bank Public Company
Limited, fgn. ............................... Commercial Banks 5,695,800 695,847
Thai Union Frozen Products Ltd., fgn. ........ Food Products 88,400 60,748
---------------
5,725,186
---------------
TURKEY 2.1%
Arcelik AS, Br. .............................. Household Durables 487,047,650 2,787,320
Migros Turk T.A.S. ........................... Food & Staples Retailing 227,075,000 1,231,130
Tupras-Turkiye Petrol Rafineleri AS .......... Oil & Gas 137,701,470 1,140,599
---------------
5,159,049
---------------
UNITED KINGDOM .8%
HSBC Holdings PLC ............................ Commercial Banks 116,453 1,914,989
---------------
TOTAL COMMON STOCKS (COST $161,130,605) 228,873,650
---------------
PREFERRED STOCKS 3.9%
BRAZIL 3.9%
Banco Bradesco SA, ADR, pfd. ................. Commercial Banks 151,017 3,825,260
Cia de Bebidas Das Americas (Ambev),
ADR, pfd. ................................... Beverages 24,000 645,600
Cia Vale do Rio Doce, ADR, pfd., A ........... Metals & Mining 35,877 1,784,881
12 | Semiannual Report
PAGE
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS (CONT.)
BRAZIL (CONT.)
Duratex SA, pfd. ............................. Building Products 2,795,769 $ 76,794
Metalurgica Gerdau SA, pfd. .................. Metals & Mining 5,179 127,141
Petroleo Brasileiro SA, ADR, pfd. ............ Oil & Gas 104,164 2,927,008
Suzano, pfd. ................................. Paper & Forest Products 1,700 7,926
Usinas Siderurgicas de Minas Gerais SA, pfd. . Metals & Mining 16,300 186,086
---------------
TOTAL PREFERRED STOCKS (COST $6,880,578) 9,580,696
---------------
SHORT TERM INVESTMENTS (COST $5,688,636) 2.3%
b Franklin Institutional Fiduciary Trust Money
Market Portfolio ............................ 5,688,636 5,688,636
---------------
TOTAL INVESTMENTS (COST $173,699,819) 99.4% 244,142,982
OTHER ASSETS, LESS LIABILITIES .6% ........... 1,458,282
---------------
NET ASSETS 100.0% ............................ $ 245,601,264
===============
aNon-income producing.
bSee Note 6 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
Semiannual Report | See notes to financial statements. | 13
PAGE
Templeton Emerging Markets Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2004 (unaudited)
Assets:
Investments in securities:
Cost .................................... $173,699,819
=============
Value ................................... 244,142,982
Foreign currency, at value (cost $394,935) 398,096
Receivables:
Investment securities sold .............. 3,365,014
Dividends and interest .................. 697,264
-------------
Total assets ........................ 248,603,356
-------------
Liabilities:
Payables:
Investment securities purchased ......... 1,846,773
Affiliates .............................. 267,946
Funds advanced by custodian .............. 259,299
Deferred tax liability (Note 1f) ......... 377,390
Other liabilities ........................ 250,684
-------------
Total liabilities ................... 3,002,092
-------------
Net assets, at value .............. $245,601,264
=============
Net assets consist of:
Undistributed net investment income ...... $ (1,383,007)
Net unrealized appreciation (depreciation) 70,081,404
Accumulated net realized gain (loss) ..... (28,175,069)
Capital shares ........................... 205,077,936
-------------
Net assets, at value ...................... $245,601,264
=============
Shares outstanding ........................ 17,680,325
=============
Net asset value per share ................. $13.89
=============
14 | See notes to financial statements. | Semiannual Report
PAGE
Templeton Emerging Markets Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended February 29, 2004 (unaudited)
Investment income:
(Net of foreign taxes of $252,254)
Dividends .....................................................................$ 2,337,023
Interest ...................................................................... 3,003
------------
Total investment income 2,340,026
Expenses:
Management fees (Note 3) ...................................................... 1,358,819
Administrative fees (Note 3) .................................................. 163,808
Transfer agent fees ........................................................... 44,000
Custodian fees ................................................................ 123,700
Reports to shareholders ....................................................... 23,800
Registration and filing fees .................................................. 21,200
Professional fees ............................................................. 37,200
Trustees' fees and expenses ................................................... 22,700
Other ......................................................................... 4,400
------------
Total expenses ........................................................... 1,799,627
------------
Net investment income .................................................. 540,399
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments (net of foreign taxes of $1,076,692) (Note 1f) ................... 14,857,977
Foreign currency transactions ................................................ (88,082)
------------
Net realized gain (loss) ................................................. 14,769,895
Net unrealized appreciation (depreciation) on:
Investments .................................................................. 42,913,337
Translation of assets and liabilities denominated in foreign currencies ...... 23,343
Deferred taxes (Note 1f) ..................................................... 89,359
------------
Net unrealized appreciation (depreciation) ............................... 43,026,039
------------
Net realized and unrealized gain (loss) ........................................ 57,795,934
------------
Net increase (decrease) in net assets resulting from operations ................$58,336,333
============
Semiannual Report | See notes to financial statements. | 15
PAGE
Templeton Emerging Markets Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended February 29, 2004 (unaudited)
and the year ended August 31, 2003
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
Operations:
Net investment income .............................................................. $ 540,399 $ 3,083,598
Net realized gain (loss) from investments and foreign currency transactions ........ 14,769,895 (1,040,146)
Net unrealized appreciation (depreciation) on investments,
translation of assets and liabilities denominated
in foreign currencies, and deferred taxes ............................................ 43,026,039 37,038,648
------------------------------------
Net increase (decrease) in net assets resulting from operations ................ 58,336,333 39,082,100
Distributions to shareholders from net investment income ............................. (4,094,976) (2,646,700)
Capital share transactions (Note 2) .................................................. 284,125 --
------------------------------------
Net increase (decrease) in net assets .......................................... 54,525,482 36,435,400
------------------------------------
Net assets:
Beginning of period ................................................................. 191,075,782 154,640,382
------------------------------------
End of period ....................................................................... $245,601,264 $191,075,782
====================================
Undistributed net investment income included in net assets:
End of period ....................................................................... $ (1,383,007) $ 2,171,570
====================================
16 | See notes to financial statements. | Semiannual Report
PAGE
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Emerging Markets Fund (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 last 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. Investments in open-end mutual funds are
valued at the closing net asset value. Foreign securities are valued at the
close of trading of the foreign exchange or the NYSE, whichever is earlier. If
events occur that materially affect the values of securities after the prices or
foreign exchange rates are determined, or if market quotations are not readily
available, the securities will be valued at fair value as determined following
procedures approved by the Board of Trustees.
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.
Semiannual Report | 17
PAGE
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FOREIGN CURRENCY CONTRACTS (CONTINUED)
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 substantially all of its taxable income.
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. DEFERRED TAXES
The Fund is subject to a tax imposed on net realized gains of securities of
certain foreign countries. The Fund records an estimated deferred tax liability
for net unrealized gains on these securities as reflected in the accompanying
financial statements.
G. 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.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Trust. Additionally, in the normal course of business, the Trust
enters into contracts with service providers that contain general
indemnification clauses. The Trust's maximum exposure under these arrangements
is unknown as this would involve future claims that may be made against the
Trust that have not yet occurred. However, based on experience, the Trust
expects the risk of loss to be remote.
18 | Semiannual Report
PAGE
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
The Board of Directors of the Fund previously authorized 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.
At February 29, 2004, the Fund's authorized number of shares of beneficial
interest (without par value) is unlimited. During the period ended February 29,
2004, 23,888 shares were issued for $284,125 from reinvested distributions.
During the year ended August 31, 2003, there were no share transactions; all
reinvested distributions were satisfied with previously issued shares purchased
in the open market.
3. TRANSACTIONS WITH AFFILIATES
Certain officers of the Trust are also officers or trustees of the following
entities:
--------------------------------------------------------------------------------
ENTITY AFFILIATION
--------------------------------------------------------------------------------
Templeton Asset Management Ltd. (TAML) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
The Fund pays an investment management fee to TAML of 1.25% per year of the
average daily net assets of the fund. The Fund pays an administrative fee to FT
Services of 0.15% per year of the average daily net assets of the fund.
4. INCOME TAXES
At February 29, 2004, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments $175,616,177
-------------
Unrealized appreciation 70,229,503
Unrealized depreciation (1,702,698)
-------------
Net unrealized appreciation (depreciation) $ 68,526,805
=============
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 foreign currencies.
At August 31, 2003, 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
2011 7,846,360
------------
$41,884,905
============
Semiannual Report | 19
PAGE
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. INCOME TAXES (CONTINUED)
At August 31, 2003, the Fund had deferred currency losses occurring subsequent
to October 31, 2002 of $270,525. For tax purposes, such losses will be reflected
in the year ending August 31, 2004.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investment's (excluding short-term securities) for the
period ended February 29, 2004 aggregated $54,133,770 and $63,518,791,
respectively.
6. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Franklin Advisers Inc. (an affiliate of the investment manager). Management fees
paid by the Fund are reduced on assets invested in the Sweep Money Fund in an
amount not to exceed the management fees paid by the Sweep Money Fund. The Fund
earned $13,889 of dividend income from investment in the Sweep Money Fund for
the period ended February 29, 2004.
7. REGULATORY MATTERS
On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company"),
alleging violations of the Massachusetts Uniform Securities Act. The complaint
arises from activity that occurred in 2001 during which time an officer of a
Company subsidiary was negotiating an agreement with an investor relating to
investments in a mutual fund and a hedge fund.
The Fund, in addition to other entities within Franklin Templeton Investments,
including the Company and other funds, has been named in shareholder class and
derivative lawsuits related to the matter described above, as well as actions
seeking the return of certain management and other fees to the Fund. The Fund's
management believes that the claims made in the lawsuit are without merit and it
intends to defend vigorously against the allegations. It is anticipated that the
Fund may be named in additional similar civil actions related to the matter
described above.
20 | Semiannual Report
PAGE
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
7. REGULATORY MATTERS (CONTINUED)
In addition, as part of ongoing investigations by the U.S. Securities and
Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of
California, the New York Attorney General, the California Attorney General, the
U.S. Attorney for the District of Massachusetts, the Florida Department of
Financial Services, and the Commissioner of Securities and the Attorney General
of the State of West Virginia, relating to certain practices in the mutual fund
industry, including late trading, market timing and sales compensation
arrangements, the Company and its subsidiaries, as well as certain current or
former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees are providing documents and information in response to
these requests and subpoenas. In addition, the Company has responded to requests
for similar kinds of information from regulatory authorities in some of the
foreign countries where the Company conducts its global asset management
business.
The Staff of the SEC has informed the Company that it intends to recommend that
the Commission authorize an action against an affiliate of the Fund's investment
adviser relating to the frequent trading issues that are the subject of the
SEC's investigation. These issues were previously disclosed as being under
investigation by government authorities and the subject of an internal inquiry
by the Company in its Annual Report on Form 10-K and on its public website. The
Company currently is in discussions with the SEC Staff in an effort to resolve
the issues raised in their investigation. The Fund's management has been advised
that the Company cannot predict the likelihood of whether those discussions will
result in a settlement and, if so, the terms of such settlement. The impact, if
any, of these matters on the Fund is uncertain at this time. If the Company
finds that it bears responsibility for any unlawful or improper conduct, it has
committed to making the Fund or its shareholders whole, as appropriate.
Semiannual Report | 21
PAGE
Templeton Emerging Markets Fund
ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 27, 2004
The Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Fort Lauderdale, Florida, on February 27, 2004. The
purpose of the meeting was to elect four Trustees of the Fund. At the meeting,
the following persons were elected by the shareholders to serve as Trustees of
the Fund: Harmon E. Burns, Charles B. Johnson, Frank A. Olson and Constantine D.
Tseretopoulos.* No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
The election of four (4) Trustees:
----------------------------------------------------------------------------------------------------------
% OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING VOTED
TERM EXPIRING 2007: FOR SHARES SHARES WITHHELD SHARES SHARES
----------------------------------------------------------------------------------------------------------
Harmon E. Burns 14,832,116.3195 83.90% 98.42% 237,598.6964 1.34% 1.58%
Charles B. Johnson 14,819,267.3195 83.82% 98.34% 250,447.6964 1.42% 1.66%
Frank A. Olson 14,817,969.3195 83.82% 98.33% 251,745.6964 1.42% 1.67%
Constantine D.
Tseretopoulos 14,837,488.3195 83.93% 98.46% 232,226.6964 1.31% 1.54%
* Harris J. Ashton, Nicholas F. Brady, Frank J. Crothers, S. Joseph Fortunato,
Edith E. Holiday, Gordon S. Macklin and Fred R. Millsaps are Trustees of the
Fund who are currently serving and whose terms of office continued after the
Annual Meeting of Shareholders.
22 | Semiannual Report
PAGE
Templeton Emerging Markets Fund
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") with
the following features:
Shareholders must affirmatively elect to participate in the Plan; Stock
dividends and capital gains distributions will be reinvested automatically;
Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938, will
provide additional Plan information upon request.
Whenever the Fund declares dividends in either cash or shares 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 shares 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 Bank,
N.A. (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 Bank, N.A."
and sent to Mellon Investor Services, P.O. Box 382009, Pittsburgh, PA
15250-8009, Attn: Templeton Emerging Markets Fund. The Plan Agent shall apply
such payments (less a $5.00 service charge and less a pro rata share of trading
fees) to purchases of Fund shares on the open market.
The automatic reinvestment of dividends and/or capital gains does not relieve
the participant of any income tax that may be payable on dividends or
distributions.
The participant may withdraw from the Plan without penalty at any time by
written notice to the Plan Agent sent to Mellon Investor Services, P.O. Box
3338, South Hackensack, NJ 07606-1938. Upon withdrawal, the participant will
receive, without charge, share 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.
Effective March 3, 2004, the Plan Agent's fee for a sale of shares through the
Plan will be $15.00 per transaction plus a $0.12 per share trading fee. All
other terms and conditions of the Plan remain in effect and have not been
modified or amended.
Semiannual Report | 23
PAGE
Templeton Emerging Markets Fund
TRANSFER AGENT
Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, NJ 07660
1-800-416-5585
www.melloninvestor.com
SHAREHOLDER INFORMATION
Shares of Templeton Emerging Markets Fund are traded on the New York Stock
Exchange under the symbol "EMF." The Fund's shares are also listed and traded on
the Pacific Exchange. Information about the net asset value and the market price
is published each Monday in the Wall Street Journal, weekly in Barron's and each
Saturday in The New York Times and other newspapers. Daily market prices for the
Fund's shares are published in the New York Stock Exchange Composite
Transactions section of newspapers.
For current information about dividends and shareholder accounts, call
1-800/416-5585. Registered shareholders can access their Fund account on-line
with Investor ServiceDirect[R]. For information go to Mellon Investor Services'
web site at http://vault.melloninvestor.com/isd and follow the instructions.
The daily closing net asset value as of the previous business day may be
obtained when available by calling Franklin Templeton Fund Information after 7
a.m. pacific time any business day at
1-800/DIAL BEN[R] (1-800/342-5236). The Fund's net asset value and dividends are
also listed on the NASDAQ Stock Market, Inc.'s Mutual Fund Quotation Service
("NASDAQ MFQS").
Shareholders not receiving copies of the Reports to Shareholders because their
shares are registered in the name of a broker or a custodian can request that
they be added to the Fund's mailing list, by writing Templeton Emerging Markets
Fund, 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030.
24 | Semiannual Report
PAGE
Templeton Emerging Markets Fund
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group.
Semiannual Report | 25
PAGE
This page intentionally left
blank.
PAGE
This page intentionally left
blank.
PAGE
This page intentionally left
blank.
PAGE
Literature Request
For a brochure and prospectus, which contains more complete information,
including charges, expenses and risks, 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, we may
monitor, record and access telephone calls to or from our service departments.
These calls can be identified by the presence of a regular beeping tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1
VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5, 6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 3
Franklin Income Fund
Franklin Money Fund 5, 6
Franklin Short-Intermediate U.S. Government Securities Fund 5
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund
TAX-FREE INCOME 7
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 8
Tax-Exempt Money Fund 5, 6
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC 7
Alabama
Arizona
California 9
Colorado
Connecticut
Florida 9
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 8
Michigan 8
Minnesota 8
Missouri
New Jersey
New York 9
North Carolina
Ohio 8
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 10
1.The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
2.The fund is only open to existing shareholders as well as select retirement
plans.
3.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.
4.Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.
5.An investment in the fund is neither insured nor guaranteed by the
U.S. government or by any other entity or institution.
6.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.
7.For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.
8.Portfolio of insured municipal securities.
9.These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).
10.The funds of the Franklin Templeton Variable Insurance Products Trust
are generally available only through insurance company variable contracts.
02/04 Not part of the semiannual report
PAGE
[Franklin Templeton logo omitted]
FRANKLIN[R] TEMPLETON[R]
INVESTMENTS
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, FL 33733-8030
SEMIANNUAL REPORT AND SHAREHOLDER INFORMATION
TEMPLETON EMERGING
MARKETS FUND
INVESTMENT MANAGER
Templeton Asset Management Ltd.
TRANSFER AGENT
Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, NJ 07660
1-800/416-5585
www.mellon.com
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political and other factors. The Fund and its investors are not protected from
such losses by the Investment Manager. Therefore, investors who cannot accept
this risk should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
TLEMF S2004 04/04
PAGE
ITEM 2. CODE OF ETHICS.
(A) THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL
EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER.
(C) N/A
(D) N/A
(F) PURSUANT TO ITEM 10(A), THE REGISTRANT IS ATTACHING AS AN EXHIBIT A COPY OF
ITS CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICERS FINANCIAL
AND ACCOUNTING OFFICER.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(A)(1) THE REGISTRANT HAS AN AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS
AUDIT COMMITTEE.
(2) THE AUDIT COMMITTEE FINANCIAL EXPERTS ARE FRED R. MILLSAPS AND FRANK A.
OLSON, WHO ARE "INDEPENDENT" AS DEFINED UNDER THE RELEVANT SECURITIES AND
EXCHANGE COMMISSION RULES AND RELEASES.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Members of the Audit Committee are: Fred R. Millsaps, Frank J. Crothers,
Frank A. Olson and Constantine D. Tseretopoulos.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASERS. N/A
ITEM 9. SUBMISSTION OF MATTERS OF A VOTE SECURITY HOLDERS.
There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees that would require disclosure
herein.
ITEM 10. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 11. EXHIBITS
(A) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS.
(B)(1) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
DIOMEDES LOO-TAM, CHIEF FINANCIAL OFFICER
(B(2) CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
DIOMEDES LOO-TAM, CHIEF FINANCIAL OFFICER
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TEMPLETON EMERGING MARKETS FUND
By /s/JIMMY D. GAMBILL
Chief Executive Officer - Finance and Administration
Date April 30, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/JIMMY D. GAMBILL
Chief Executive Officer - Finance and Administration
Date April 30, 2004
By /s/DIOMEDES LOO-TAM
Chief Financial Officer
Date April 30, 2004