UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04985
TEMPLETON EMERGING MARKETS FUND
------------------------------------------
(Exact name of registrant as specified in charter)
500 EAST BROWARD BLVD., SUITE 2100, FORT LAUDERDALE, FL 33394-3091
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(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (954) 527-7500
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Date of fiscal year end: 8/31
----
Date of reporting period: 8/31/09
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ITEM 1. REPORTS TO STOCKHOLDERS.
AUGUST 31, 2009
ANNUAL REPORT
(GRAPHIC)
INTERNATIONAL
TEMPLETON
EMERGING MARKETS FUND
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)
Franklin - TEMPLETON - Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management
groups--Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE 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 recognized
leader in fixed income investing and also brings
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 offices in over 25 countries, Templeton offers
investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently and
adhere to different investment approaches, Franklin,
Templeton and Mutual Series funds typically have
distinct portfolios. That's why our funds can be
used to build truly diversified allocation plans
covering every major asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable, accurate and personal service that has
helped us become one of the most trusted names in
financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
(GRAPHIC)
Not part of the annual report
Contents
ANNUAL REPORT
Templeton Emerging Markets Fund ........................................... 1
Performance Summary ....................................................... 6
Important Notice to Shareholders .......................................... 7
Financial Highlights and Statement of Investments ......................... 8
Financial Statements ...................................................... 12
Notes to Financial Statements ............................................. 15
Report of Independent Registered Public Accounting Firm ................... 21
Tax Designation ........................................................... 22
Annual Meeting of Shareholders ............................................ 24
Dividend Reinvestment and Cash Purchase Plan .............................. 25
Board Members and Officers ................................................ 28
Shareholder Information ................................................... 33
Annual Report
Templeton Emerging Markets Fund
YOUR FUND'S GOAL AND MAIN 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 BREAKDOWN
Based on Total Net Assets as of 8/31/09
Asia 54.4%
Latin America & Caribbean 23.1%
Europe 21.1%
Middle East & Africa 0.2%
Short-Term Investments & Other Net Assets 1.2%
Dear Shareholder:
This annual report for Templeton Emerging Markets Fund covers the fiscal year
ended August 31, 2009.
PERFORMANCE OVERVIEW
Templeton Emerging Markets Fund had cumulative total returns of -1.27% based on
market price and -5.54% based on net asset value for the 12 months under review.
ECONOMIC AND MARKET OVERVIEW
The 2008 financial crisis drove significant corrections in global stock markets
as extreme risk aversion led investors to shy away from most forms of
investments including equities. Emerging markets were no exception, as the
Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Index declined
more than 50% in U.S. dollar terms from the beginning of 2008 to reach a
year-low
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 9.
Annual Report | 1
TOP 10 COUNTRIES
Based on Equity Investments as of 8/31/09
% OF TOTAL
NET ASSETS
----------
Brazil 21.2%
China 16.4%
India 11.0%
Thailand 8.7%
Turkey 8.2%
Russia 7.6%
South Korea 6.6%
Hong Kong 5.9%
Indonesia 4.6%
U.K. 2.1%
in October 2008.(1) Markets subsequently traded sideways for about four months
as governments globally implemented fiscal stimuli and loosened monetary
policies to support their domestic economies and ease liquidity conditions.
Partly as a result of these efforts, emerging markets stocks, which recovered
much of their 2008 decline, returned +71.13% in the last six months of the
reporting period and -9.96% for the 12 months.(1) Part of this decline was due
to weakness in emerging markets currencies as the U.S. dollar benefited from
funds seeking a safe haven during the earlier part of the period.
Stock markets in Eastern Europe were the weakest emerging market performers
during the 12-month reporting period due to concerns about the financial state
of European banks and current account deficits in several European countries,
including the Baltic states. Eastern European markets, however, outperformed
their emerging market counterparts in the latter half of the reporting period
with a +91.41% six-month total return as investors returned in search of
oversold stocks.(1) Turkey's stock market delivered +19.72% total return in
local currency terms for the year, but a weak lira reversed the gains and the
market had a -5.40% return in U.S. dollar terms.(1)
Asian stock markets, on the other hand, outperformed their emerging market peers
as signs of economic recovery and improved investor confidence led to
significant inflows. Chinese equities were among top performers during the
period. China remained one of the world's fastest growing major economies, as
2009 second quarter gross domestic product growth accelerated to 8% from 6% in
the first quarter, year-over-year.(2)
In Latin America, Brazil and Mexico were adversely affected by weaker domestic
currencies and a correction in commodity prices. Close economic ties with the
U.S. further impacted the recession-burdened Mexican economy.
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
(1.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The MSCI EM Index is a free float-adjusted, market
capitalization-weighted index designed to measure equity market performance
in global emerging markets. Country and regional returns are from
subindexes of the MSCI EM Index. One cannot invest directly in an index,
nor is an index representative of the Fund's portfolio.
(2.) Source: National Bureau of Statistics, China.
2 | Annual Report
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 look at 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.
MANAGER'S DISCUSSION
For the 12 months under review, among the most significant detractors from the
Fund's absolute performance were CNOOC, China's largest offshore oil and natural
gas exploration and production company, Victory City International Holdings, a
Hong Kong textile maker with production facilities in China, and Oriflame
Cosmetics, a Swedish cosmetics company that sells natural skin care and makeup
products through an independent sales force. We continued to hold our position
in Victory City because we considered its valuations attractive. Based on our
research, we believed Victory City could benefit for the longer term from
possible consolidations in China's textile industry. On the other hand, we
divested the Fund's holdings in CNOOC and Oriflame Cosmetics due to availability
of what we considered attractively valued stocks elsewhere in our investment
universe.
On a positive note, the most significant contributors to the Fund's absolute
performance during this review period included China's Denway Motors, Brazil's
Itau Unibanco Holding and Chalco (Aluminum Corp. of China). Denway Motors has a
joint venture with Honda Motor for the production and sales of Honda Accord, Fit
and Odyssey models in the country. The company also manufactures automobile
audio equipment and trades motor vehicles. We increased the Fund's holdings in
Denway Motors during the reporting period, and based on our analysis, we
maintained a positive long-term view on China's automobile sector, where low
market penetration rates and government efforts supporting the sector could
point to considerable growth potential. Itau Unibanco Holding is one of Brazil's
largest financial conglomerates that provides a full range of banking and
financial services. The merger between Itau and Unibanco in 2008 allowed the
joint company to unlock hidden value, which had a positive impact on stock
prices. We believe the continued liberalization of Brazil's financial sector and
growing financial needs of the region's consumers could further benefit Itau
Unibanco Holding. Chalco is China's leading producer of alumina and primary
aluminum products. The company recorded significant price declines in the
earlier part of the year due to commodity price correction and demand concerns
amid slowing global growth. Since then, Chalco's share price regained some
ground
TOP 10 HOLDINGS
8/31/09
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
------------------------ ----------
Petrobras (Petroleo Brasileiro SA),
ADR, pfd. 7.9%
OIL, GAS & CONSUMABLE FUELS, BRAZIL
Akbank TAS 6.0%
COMMERCIAL BANKS, TURKEY
Vale SA, ADR, pfd., A 5.9%
METALS & MINING, BRAZIL
PetroChina Co. Ltd., H 4.6%
OIL, GAS & CONSUMABLE FUELS, CHINA
Sesa Goa Ltd. 4.2%
METALS & MINING, INDIA
Itau Unibanco Holding SA, ADR 3.9%
COMMERCIAL BANKS, BRAZIL
Chalco (Aluminum Corp. of China Ltd.), H 3.7%
METALS & MINING, CHINA
Banco Bradesco SA, ADR, pfd. 3.6%
COMMERCIAL BANKS, BRAZIL
Denway Motors Ltd. 3.5%
AUTOMOBILES, CHINA
Dairy Farm International Holdings Ltd. 3.3%
FOOD & STAPLES RETAILING, HONG KONG
Annual Report | 3
along with commodity prices. Although commodity prices came down from their 2008
peaks, we believe they could trend upward in the long term and further benefit
companies such as Chalco.
It is important to recognize the effect of currency movements on the Fund's
performance. In general, if the value of the U.S. dollar goes up compared with a
foreign currency, an investment traded in that foreign currency will go down in
value because it will be worth fewer U.S. dollars. This can have a negative
effect on Fund performance. Conversely, when the U.S. dollar weakens in relation
to a foreign currency, an investment traded in that foreign currency will
increase in value, which can contribute to Fund performance. For the 12 months
ended August 31, 2009, the U.S. dollar rose in value relative to most
currencies. As a result, the Fund's performance was negatively affected by the
portfolio's investment predominantly in securities with non-U.S. currency
exposure.
We sold a number of holdings during this review period as stocks reached sale
price targets or were no longer attractively valued in our investment universe.
As we raised funds for income and capital gains distributions, we reduced the
Fund's investments in semiconductors, oil and gas, and telecommunication
services companies and the Fund's exposure to Taiwan, Poland and Turkey. Major
sales included TSMC (Taiwan Semiconductor Manufacturing Co.), the world's
largest independent integrated circuit foundry, Turkcell (Turkcell Iletisim
Hizmetleri), Turkey's leading mobile communication services provider, and PKN
Orlen (Polski Koncern Naftowy Orlen), Poland's major oil and gas company.
During the reporting period, we made select purchases in diversified metals and
mining, food retail, and IT consulting companies as price corrections made
valuations more attractive in our view. We also increased the Fund's investments
in India, South Africa and Brazil. Key additions included U.K.'s Anglo American,
an international natural resources group, Walmex (Wal-Mart de Mexico), the
largest retailer in Latin America, and India's Tata Consultancy Services, a
major IT consulting company.
4 | Annual Report
Thank you for your continued participation in Templeton Emerging Markets Fund.
We look forward to serving your future investment needs.
Sincerely,
(PHOTO OF MARK MOBIUS)
/s/ Mark Mobius
Mark Mobius
Executive Chairman
Templeton Asset Management Ltd.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF AUGUST 31, 2009, 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.
Annual Report | 5
Performance Summary as of 8/31/09
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 reinvestment of the Fund's dividends and
capital gain distributions, if any, and any unrealized gains or losses. Total
returns do not reflect any sales charges paid at inception or brokerage
commissions paid on secondary market purchases. The performance table does not
reflect any taxes that a shareholder would pay on Fund dividends, capital gain
distributions, if any, or any realized gains on the sale of Fund shares.
PRICE AND DISTRIBUTION INFORMATION
SYMBOL: EMF CHANGE 8/31/09 8/31/08
----------- ------ ------- -------
Net Asset Value (NAV) -$3.43 $15.68 $19.11
Market Price (NYSE) -$2.61 $15.02 $17.63
DISTRIBUTIONS (9/1/08-8/31/09)
Dividend Income $0.3045
Short-Term Capital Gain $0.0006
Long-Term Capital Gain $1.1385
TOTAL $1.4436
PERFORMANCE
1-YEAR 5-YEAR 10-YEAR
------ ------ -------
Cumulative Total Return(1)
Based on change in NAV(2) -5.54% +113.82% +165.72%
Based on change in market price(3) -1.27% +95.38% +146.10%
Average Annual Total Return(1)
Based on change in NAV(2) -5.54% +16.42% +10.26%
Based on change in market price(3) -1.27% +14.34% +9.42%
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
ENDNOTES
SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING, INCLUDING CURRENCY
VOLATILITY, ECONOMIC INSTABILITY 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.
(1.) Total return calculations represent the cumulative and average annual
changes in value of an investment over the periods indicated.
(2.) Assumes reinvestment of distribution based on net asset value.
(3.) Assumes reinvestment of distribution based on the dividend reinvestment and
cash purchase plan.
6 | Annual Report
Important Notice to Shareholders
SHARE REPURCHASE PROGRAM
The Fund's Board previously authorized management to implement an open-market
share repurchase program pursuant to which the Fund may purchase Fund shares,
from time to time, in open-market transactions, at the discretion of management.
This authorization remains in effect.
Annual Report | 7
Templeton Emerging Markets Fund
FINANCIAL HIGHLIGHTS
YEAR ENDED AUGUST 31,
------------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 19.11 $ 23.14 $ 20.56 $ 17.98 $ 13.40
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income(a) ........................ 0.19 0.30 0.37 0.33 0.32
Net realized and unrealized gains (losses) ...... (2.18) (2.16) 7.47 4.25 4.51
-------- -------- -------- -------- --------
Total from investment operations ................... (1.99) (1.86) 7.84 4.58 4.83
-------- -------- -------- -------- --------
Less distributions from:
Net investment income ........................... (0.30) (0.34) (0.64) (0.39) (0.25)
Net realized gains .............................. (1.14) (1.83) (4.62) (1.61) --
-------- -------- -------- -------- --------
Total distributions ................................ (1.44) (2.17) (5.26) (2.00) (0.25)
-------- -------- -------- -------- --------
Net asset value, end of year ....................... $ 15.68 $ 19.11 $ 23.14 $ 20.56 $ 17.98
-------- -------- -------- -------- --------
Market value, end of year(b) ....................... $ 15.02 $ 17.63 $ 20.56 $ 18.94 $ 18.31
======== ======== ======== ======== ========
Total return (based on market value per share) ..... (1.27)% (6.16)% 41.62% 15.01% 30.66%
RATIOS TO AVERAGE NET ASSETS
Expenses(c) ........................................ 1.55% 1.55% 1.55% 1.58% 1.57%
Net investment income .............................. 1.55% 1.28% 1.86% 1.66% 2.00%
SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $283,401 $345,403 $418,213 $366,549 $318,240
Portfolio turnover rate ............................ 13.03% 9.33% 33.15% 43.03% 36.04%
(a) Based on average daily shares outstanding.
(b) Based on the last sale on the New York Stock Exchange.
(c) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
8 | Annual Report
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, AUGUST 31, 2009
INDUSTRY SHARES VALUE
---------------------------------------- ---------- ------------
COMMON STOCKS 81.5%
AUSTRIA 1.2%
OMV AG ................................................. Oil, Gas & Consumable Fuels 89,020 $ 3,507,462
------------
BRAZIL 3.9%
Itau Unibanco Holding SA, ADR .......................... Commercial Banks 666,034 11,156,061
------------
CHINA 16.4%
Aluminum Corp. of China Ltd., H ........................ Metals & Mining 9,792,000 10,385,168
(a) Brilliance China Automotive Holdings Ltd. .............. Automobiles 32,040,000 3,761,873
China Petroleum and Chemical Corp., H .................. Oil, Gas & Consumable Fuels 7,136,000 5,957,025
Chiwan Wharf Holdings Ltd., B .......................... Transportation Infrastructure 1,918,967 2,391,745
Denway Motors Ltd. ..................................... Automobiles 22,188,730 9,876,926
PetroChina Co. Ltd., H ................................. Oil, Gas & Consumable Fuels 11,688,000 12,908,752
Win Hanverky Holdings Ltd. ............................. Textiles, Apparel & Luxury Goods 9,844,000 1,168,503
------------
46,449,992
------------
HONG KONG 5.9%
Dairy Farm International Holdings Ltd. ................. Food & Staples Retailing 1,658,100 9,451,170
(a) Victory City International Holdings Ltd. ............... Textiles, Apparel & Luxury Goods 28,152,000 4,249,770
VTech Holdings Ltd. .................................... Communications Equipment 392,500 3,114,476
------------
16,815,416
------------
HUNGARY 1.3%
(a) MOL Hungarian Oil and Gas Nyrt. ........................ Oil, Gas & Consumable Fuels 45,775 3,590,669
------------
INDIA 11.0%
National Aluminium Co. Ltd. ............................ Metals & Mining 665,030 4,728,556
Oil & Natural Gas Corp. Ltd. ........................... Oil, Gas & Consumable Fuels 270,795 6,591,625
Peninsula Land Ltd. .................................... Real Estate Management & Development 714,291 1,299,778
Sesa Goa Ltd. .......................................... Metals & Mining 2,716,280 11,857,575
Tata Consultancy Services Ltd. ......................... IT Services 617,600 6,684,641
------------
31,162,175
------------
INDONESIA 4.6%
PT Astra International Tbk ............................. Automobiles 2,195,000 6,565,402
PT Bank Central Asia Tbk ............................... Commercial Banks 15,134,500 6,381,113
------------
12,946,515
------------
MEXICO 1.9%
Wal-Mart de Mexico SAB de CV, V ........................ Food & Staples Retailing 1,511,000 5,342,794
------------
PAKISTAN 1.3%
(a) Faysal Bank Ltd. ....................................... Commercial Banks 8,493,739 1,126,694
MCB Bank Ltd. .......................................... Commercial Banks 971,245 2,425,624
------------
3,552,318
------------
POLAND 0.6%
(a) Polnord SA ............................................. Construction & Engineering 92,806 1,607,466
------------
Annual Report | 9
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, AUGUST 31, 2009 (CONTINUED)
INDUSTRY SHARES VALUE
---------------------------------------- ---------- ------------
COMMON STOCKS (CONTINUED)
RUSSIA 7.6%
Gazprom, ADR ........................................... Oil, Gas & Consumable Fuels 241,722 $ 4,897,288
LUKOIL Holdings, ADR ................................... Oil, Gas & Consumable Fuels 101,006 4,974,545
LUKOIL Holdings, ADR (London Exchange) ................. Oil, Gas & Consumable Fuels 36,510 1,847,406
(a) Mining and Metallurgical Co. Norilsk Nickel ............ Metals & Mining 44,679 4,757,346
Mobile TeleSystems, ADR ................................ Wireless Telecommunication Services 77,300 3,353,274
OAO TMK ................................................ Energy Equipment & Services 660,934 1,798,361
------------
21,628,220
------------
SOUTH AFRICA 0.2%
Impala Platinum Holdings Ltd. .......................... Metals & Mining 18,800 439,325
------------
SOUTH KOREA 6.6%
Avista Inc. ............................................ Textiles, Apparel & Luxury Goods 332,550 1,549,592
Hyundai Development Co. ................................ Construction & Engineering 165,470 6,041,179
Neopharm Co. Ltd. ...................................... Personal Products 302,793 2,298,221
SK Energy Co. Ltd. ..................................... Oil, Gas & Consumable Fuels 109,364 8,799,905
------------
18,688,897
------------
TAIWAN 0.0%(b)
MediaTek Inc. .......................................... Semiconductors & Semiconductor Equipment 908 13,188
------------
THAILAND 8.7%
Amata Corp. Public Co. Ltd., fgn. ...................... Real Estate Management & Development 7,206,800 1,504,065
Hemaraj Land and Development Public Co. Ltd., fgn. ..... Real Estate Management & Development 29,653,100 784,474
Kasikornbank Public Co. Ltd., fgn. ..................... Commercial Banks 2,251,200 4,996,049
Kiatnakin Bank Public Co. Ltd., fgn. ................... Consumer Finance 7,554,400 4,174,683
Land and Houses Public Co. Ltd., fgn. .................. Real Estate Management & Development 8,514,132 1,651,772
PTT Exploration and Production Public Co. Ltd., fgn. ... Oil, Gas & Consumable Fuels 1,226,600 4,993,654
PTT Public Co. Ltd., fgn. .............................. Oil, Gas & Consumable Fuels 578,000 4,145,561
Siam Cement Public Co. Ltd., fgn. ...................... Construction Materials 415,120 2,409,941
------------
24,660,199
------------
TURKEY 8.2%
Akbank TAS ............................................. Commercial Banks 2,952,231 16,924,996
Tupras-Turkiye Petrol Rafinerileri AS .................. Oil, Gas & Consumable Fuels 427,186 6,407,363
------------
23,332,359
------------
UNITED KINGDOM 2.1%
(a) Anglo American PLC ..................................... Metals & Mining 189,200 6,079,887
------------
TOTAL COMMON STOCKS
(COST $186,070,169) ................................. 230,972,943
------------
10 | Annual Report
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, AUGUST 31, 2009 (CONTINUED)
INDUSTRY SHARES VALUE
---------------------------------------- ---------- ------------
PREFERRED STOCKS 17.3%
BRAZIL 17.3%
Banco Bradesco SA, ADR, pfd. ........................... Commercial Banks 624,222 $ 10,118,638
Petroleo Brasileiro SA, ADR, pfd. ...................... Oil, Gas & Consumable Fuels 670,320 22,254,624
Vale SA, ADR, pfd., A .................................. Metals & Mining 966,300 16,630,023
------------
TOTAL PREFERRED STOCKS
(COST $18,224,142) .................................. 49,003,285
------------
TOTAL INVESTMENTS BEFORE SHORT TERM
INVESTMENTS (COST $204,294,311) ..................... 279,976,228
------------
SHORT TERM INVESTMENTS (COST $3,366,055) 1.2%
MONEY MARKET FUNDS 1.2%
UNITED STATES 1.2%
(c) Institutional Fiduciary Trust Money Market Portfolio,
0.00% ............................................... 3,366,055 3,366,055
------------
TOTAL INVESTMENTS (COST $207,660,366) 100.0% ........... 283,342,283
OTHER ASSETS, LESS LIABILITIES 0.0%(b) ................. 58,513
------------
NET ASSETS 100.0% ...................................... $283,400,796
============
See Abbreviations on page 20.
(a) Non-income producing.
(b) Rounds to less than 0.1% of net assets.
(c) See Note 7 regarding investments in the Institutional Fiduciary Trust Money
Market Portfolio. The rate shown is the annualized seven-day yield at
period end.
The accompanying notes are an integral part of these financial statements.
Annual Report | 11
Templeton Emerging Markets Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2009
Assets:
Investments in securities:
Cost - Unaffiliated issuers ........................................................ $204,294,311
Cost - Sweep Money Fund (Note 7) ................................................... 3,366,055
------------
Total cost of investments .......................................................... $207,660,366
============
Value - Unaffiliated issuers ....................................................... $279,976,228
Value - Sweep Money Fund (Note 7) .................................................. 3,366,055
------------
Total value of investments ......................................................... 283,342,283
Receivables:
Dividends .......................................................................... 1,113,515
Foreign tax ........................................................................ 11,859
------------
Total assets .................................................................... 284,467,657
------------
Liabilities:
Payables:
Investment securities purchased .................................................... 53,040
Affiliates ......................................................................... 343,349
Custodian fees ..................................................................... 100,880
Deferred tax .......................................................................... 500,218
Accrued expenses and other liabilities ................................................ 69,374
------------
Total liabilities ............................................................... 1,066,861
------------
Net assets, at value ......................................................... $283,400,796
============
Net assets consist of:
Paid-in capital ....................................................................... $212,251,815
Undistributed net investment income ................................................... 2,542,876
Net unrealized appreciation (depreciation) ............................................ 75,181,437
Accumulated net realized gain (loss) .................................................. (6,575,332)
------------
Net assets, at value ......................................................... $283,400,796
============
Shares outstanding ....................................................................... 18,073,033
============
Net asset value per share ................................................................ $ 15.68
============
The accompanying notes are an integral part of these financial statements.
12 | Annual Report
Templeton Emerging Markets Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended August 31, 2009
Investment income:
Dividends: (net of foreign taxes of $672,751)
Unaffiliated issuers ............................................................... $ 6,774,982
Sweep Money Fund (Note 7) .......................................................... 76,991
------------
Total investment income ......................................................... 6,851,973
------------
Expenses:
Management fees (Note 3a) ............................................................. 2,738,965
Administrative fees (Note 3b) ......................................................... 331,508
Transfer agent fees ................................................................... 75,834
Custodian fees (Note 4) ............................................................... 138,824
Reports to shareholders ............................................................... 30,426
Registration and filing fees .......................................................... 24,759
Professional fees ..................................................................... 36,251
Trustees' fees and expenses ........................................................... 29,206
Other ................................................................................. 25,136
------------
Total expenses .................................................................. 3,430,909
Expense reductions (Note 4) ..................................................... (384)
------------
Net expenses ................................................................. 3,430,525
------------
Net investment income ........................................................ 3,421,448
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................................................ (6,394,030)
Foreign currency transactions ...................................................... 15,760
------------
Net realized gain (loss) ..................................................... (6,378,270)
------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................................ (32,489,296)
Translation of other assets and liabilities denominated in foreign currencies ...... 29,126
Change in deferred taxes on unrealized appreciation (depreciation) .................... (494,981)
------------
Net change in unrealized appreciation (depreciation) ......................... (32,955,151)
------------
Net realized and unrealized gain (loss) .................................................. (39,333,421)
------------
Net increase (decrease) in net assets resulting from operations .......................... $(35,911,973)
============
The accompanying notes are an integral part of these financial statements.
Annual Report | 13
Templeton Emerging Markets Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
---------------------------
2009 2008
------------ ------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................... $ 3,421,448 $ 5,447,035
Net realized gain (loss) from investments and foreign currency transactions ............. (6,378,270) 29,939,997
Net change in unrealized appreciation (depreciation) on investments, translation of
other assets and liabilities denominated in foreign currencies and deferred taxes .... (32,955,151) (69,032,553)
------------ ------------
Net increase (decrease) in net assets resulting from operations ................... (35,911,973) (33,645,521)
------------ ------------
Distributions to shareholders from:
Net investment income ................................................................... (5,503,239) (6,088,805)
Net realized gains ...................................................................... (20,586,992) (33,075,457)
------------ ------------
Total distributions to shareholders ........................................................ (26,090,231) (39,164,262)
------------ ------------
Net increase (decrease) in net assets ............................................. (62,002,204) (72,809,783)
Net assets:
Beginning of year .......................................................................... 345,403,000 418,212,783
------------ ------------
End of year ................................................................................ $283,400,796 $345,403,000
------------ ------------
Undistributed net investment income included in net assets:
End of year ................................................................................ $ 2,542,876 $ 4,906,482
============ ============
The accompanying notes are an integral part of these financial statements.
14 | Annual Report
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Emerging Markets Fund (Fund) is registered under the Investment
Company Act of 1940, as amended, (1940 Act) as a closed-end investment company.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Equity and other securities listed on a securities exchange or on the NASDAQ
National Market System are valued at the last quoted sale price or the official
closing price of the day, respectively. Over-the-counter securities and listed
securities for which there is no reported sale are valued within the range of
the most recent quoted bid and ask prices. Securities that trade in multiple
markets or on multiple exchanges are valued according to the broadest and most
representative market. Certain equity securities are valued based upon
fundamental characteristics or relationships to similar securities. Investments
in open-end mutual funds are valued at the closing net asset value.
Foreign equity securities are valued as of the close of trading on the foreign
stock exchange on which the security is primarily traded, or the NYSE, whichever
is earlier. If no sale is reported at that time, the foreign equity security
will be valued within the range of the most recent quoted bid and ask prices.
The value is then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect at the close of the NYSE on the day that the value of
the security is determined.
The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis based upon the underlying investment book value,
anticipated future cash flows, market changes in comparable or similar
securities, matrix pricing, discounts from market prices of similar securities,
or discounts applied due to the nature and duration of restrictions on the
disposition of the securities. Due to the inherent uncertainty of valuations of
such securities, the fair values may differ significantly from the values that
would have been used had a ready market for such investments existed.
Occasionally, events occur between the time at which trading in a security is
completed and the close of the NYSE that might call into question the
availability (including the reliability) of the value of a portfolio security
held by the Fund. The investment manager monitors price movements following the
close of trading in foreign stock markets through a series of country specific
market proxies (such as baskets of American Depository Receipts, futures
contracts and exchange traded funds). These price movements are measured against
established trigger thresholds for each specific market proxy to assist in
determining if an event has occurred. If such an event occurs, the securities
may be valued using fair value procedures, which may include the use of
independent pricing services. All security valuation procedures are approved by
the Fund's Board of Trustees.
Annual Report | 15
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Fund's Board of Trustees.
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 on the
Statement of Operations.
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. INCOME AND DEFERRED TAXES
No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.
The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of August 31, 2009, and has
determined that no provision for income tax is required in the Fund's financial
statements.
Foreign securities held by the Fund may be subject to foreign taxation on
dividend income received. Foreign taxes, if any, are recorded based on the tax
regulations and rates that exist in the foreign markets in which the Fund
invests.
The Fund may be subject to a tax imposed on net realized gains on securities of
certain foreign countries. The Fund records an estimated deferred tax liability
for net unrealized gains on these securities in an amount that would be payable
if the securities were disposed of on the valuation date.
16 | Annual Report
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. 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.
Estimated expenses are accrued daily. Dividend income is recorded on the
ex-dividend date except that certain dividends from foreign securities are
recognized as soon as the Fund is notified of the ex-dividend date.
Distributions to shareholders are recorded on the ex-dividend date and are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. These differences may be permanent or temporary. Permanent differences
are reclassified among capital accounts to reflect their tax character. These
reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they may reverse in subsequent
periods.
E. 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 expenses during the reporting period. Actual results could differ from those
estimates.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. Currently, the Fund expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At August 31, 2009, there were an unlimited number of shares authorized (without
par value). During the years ended August 31, 2009 and August 31, 2008, there
were no shares issued; all reinvested distributions were satisfied with
previously issued shares purchased in the open market.
The Fund's Board of Trustees previously authorized an open-market share
repurchase program pursuant to which the Fund may purchase, from time to time,
Fund shares in open-market transactions, at the discretion of management. This
authorization remains in effect. During the years ended August 31, 2009 and
August 31, 2008, there were no shares repurchased.
Annual Report | 17
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Fund are also officers and/or directors of the following
subsidiaries:
SUBSIDIARY AFFILIATION
---------- ----------------------
Templeton Asset Management Ltd. (TAML) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
A. MANAGEMENT FEES
The Funds pays an investment management fee to TAML based on the average daily
net assets of the Fund as follows:
ANNUALIZED FEE RATE NET ASSETS
------------------- -------------------------------------------------
1.250% Up to and including $1 billion
1.200% Over $1 billion, up to and including $5 billion
1.150% Over $5 billion, up to and including $10 billion
1.100% Over $10 billion, up to and including $15 billion
1.050% Over $15 billion, up to and including $20 billion
1.000% In excess of $20 billion
B. ADMINISTRATIVE FEES
The Fund pays an administrative fee to FT Services of 0.15% per year of the
average daily net assets of the Fund.
4. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended August 31, 2009, the
custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At August 31, 2009, the Fund had tax basis capital losses of
$1,375,872 expiring in 2017.
For tax purposes, realized capital losses occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At August 31, 2009, the Fund deferred realized capital losses of
$3,998,148.
18 | Annual Report
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The tax character of distributions paid during the years ended August 31, 2009
and 2008, was as follows:
2009 2008
----------- ------------
Distributions paid from:
Ordinary income ................................ $ 5,514,083 $ 12,549,914
Long term capital gain ......................... 20,576,007 26,614,348
----------- ------------
$26,090,090 $ 39,164,262
=========== ============
At August 31, 2009, the cost of investments, net unrealized appreciation
(depreciation) and undistributed ordinary income for income tax purposes were as
follows:
Cost of investments ............................................. $208,861,678
============
Unrealized appreciation ......................................... $ 96,905,994
Unrealized depreciation ......................................... (22,425,389)
------------
Net unrealized appreciation (depreciation) ...................... $ 74,480,605
============
Distributable earnings - undistributed ordinary income .......... $ 2,542,876
============
Net investment income differs for financial statement and tax purposes primarily
due to differing treatment of foreign currency transactions.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatment of wash sales and foreign currency
transactions.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
year ended August 31, 2009, aggregated $29,107,439 and $39,828,419,
respectively.
7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Institutional Fiduciary Trust Money Market Portfolio
(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 and administrative fees paid by the Sweep Money Fund.
Annual Report | 19
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. CONCENTRATION OF RISK
Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities.
9. FAIR VALUE MEASUREMENTS
The Fund adopted Financial Accounting Standards Board (FASB) Statement No. 157,
"Fair Value Measurement" (SFAS 157), on September 1, 2008. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The Fund has determined that the implementation
of SFAS 157 did not have a material impact on the Fund's financial statements.
SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Fund's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Fund's investments and are summarized in the following fair
value hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
At August 31, 2009, all the Fund's investments in securities carried at fair
value were in Level 1 inputs. For detailed country descriptions, see the
accompanying Statement of Investments.
10. SUBSEQUENT EVENTS
The Fund has evaluated subsequent events through October 20, 2009, the issuance
date of the financial statements, and determined that no events have occurred
that require disclosure.
ABBREVIATIONS
SELECTED PORTFOLIO
ADR - American Depository Receipt
20 | Annual Report
Templeton Emerging Markets Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF TEMPLETON EMERGING MARKETS FUND
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 Templeton Emerging Markets Fund
(the "Fund") at August 31, 2009, 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 five 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards 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, 2009 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
October 20, 2009
Annual Report | 21
Templeton Emerging Markets Fund
TAX DESIGNATION (UNAUDITED)
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $20,576,007 as a long
term capital gain dividend for the fiscal year ended August 31, 2009.
Under Section 871(k)(2)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $10,408 as a short term capital gain dividend for
purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the
fiscal year ended August 31, 2009.
Under Section 854(b)(2) of the Code, the Fund designates the maximum amount
allowable but no less than $4,474,561 as qualified dividends for purposes of the
maximum rate under Section 1(h)(11) of the Code for the fiscal year ended August
31, 2009. Distributions, including qualified dividend income, paid during
calendar year 2009 will be reported to shareholders on Form 1099-DIV in January
2010. Shareholders are advised to check with their tax advisors for information
on the treatment of these amounts on their individual income tax returns.
Under Section 871(k)(1)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $41,414 as interest related dividends for purposes of
the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended
August 31, 2009.
At August 31, 2008, more than 50% of the Fund's total assets were invested in
securities of foreign issuers. In most instances, foreign taxes were withheld
from income paid to the Fund on these investments. As shown in the table below,
the Fund designates to shareholders the foreign source income and foreign taxes
paid, pursuant to Section 853 of the Code. This designation will allow
shareholders of record on December 16, 2008, to treat their proportionate share
of foreign taxes paid by the Funds as having been paid directly by them. The
shareholder shall consider these amounts as foreign taxes paid in the tax year
in which they receive the Fund distribution.
The following table provides a detailed analysis of foreign tax paid, foreign
source income, and foreign qualified dividends as designated by the Fund to
shareholders of record.
RECORD DATE: 12/16/2008
FOREIGN TAX PAID FOREIGN SOURCE FOREIGN QUALIFIED
CLASS PER SHARE INCOME PER SHARE DIVIDENDS PER SHARE
----- ---------------- ---------------- -------------------
Class A ............ $0.0589 $0.3585 $0.2508
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you,
as a tax credit (assuming you held your shares in the Fund for a minimum of 16
days during the 31-day period beginning 15 days before the ex-dividend date of
the Fund's distribution to which the foreign taxes relate), or, as a tax
deduction.
Foreign Source Income Per Share (Column 2) is the amount per share of income
dividends paid to you that is attributable to foreign securities held by the
Fund, plus any foreign taxes withheld on these dividends. The amounts reported
include foreign source qualified dividends that have not been adjusted for the
rate differential applicable to such dividend income.(1)
22 | Annual Report
Templeton Emerging Markets Fund
TAX DESIGNATION (UNAUDITED) (CONTINUED)
Foreign Qualified Dividends Per Share (Column 3) is the amount per share of
foreign source qualified dividends the Fund paid to you, plus any foreign taxes
withheld on these dividends. These amounts represent the portion of the Foreign
Source Income reported to you in column 2 that were derived from qualified
foreign securities held by the Fund.(1)
In January 2009, shareholders received Form 1099-DIV which included their share
of taxes paid and foreign source income distributed during the calendar year
2008. The Foreign Source Income reported on Form 1099-DIV has not been adjusted
for the rate differential on foreign source qualified dividend income.
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their 2008 individual income tax returns.
(1) Qualified dividends are taxed at a maximum rate of 15% (5% for those in the
10% and 15% income tax bracket). In determining the amount of foreign tax
credit that may be applied against the U.S. tax liability of individuals
receiving foreign source qualified dividends, adjustments may be required
to the foreign tax credit limitation calculation to reflect the rate
differential applicable to such dividend income. The rules however permit
certain individuals to elect not to apply the rate differential adjustments
for capital gains and/or dividends for any taxable year. Please consult
your tax advisor and the instructions to Form 1116 for more information.
Annual Report | 23
Templeton Emerging Markets Fund
ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 20, 2009
The Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Boulevard, Fort Lauderdale, Florida, on February 20, 2009. 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: Ann Torre Bates, David W. Niemiec, Larry D. Thompson and Robert E.
Wade.* No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
The election of four Trustees:
% OF % OF
SHARES SHARES
% OF PRESENT % OF PRESENT
OUTSTANDING AND OUTSTANDING AND
TERM EXPIRING 2012 FOR SHARES VOTING WITHHELD SHARES VOTING
------------------ ---------- ----------- ------- -------- ----------- -------
Ann Torre Bates ........ 14,146,699 78.28% 93.98% 905,556 5.01% 6.02%
David W. Niemiec ....... 14,162,041 78.36% 94.09% 890,214 4.93% 5.91%
Larry D. Thompson ...... 14,135,519 78.21% 93.91% 916,736 5.07% 6.09%
Robert E. Wade ......... 14,149,904 78.29% 94.01% 902,351 4.99% 5.99%
* Charles B. Johnson, Gregory E. Johnson, Harris J. Ashton, Frank J.
Crothers, Edith E. Holiday, Frank A. Olson, and Constantine D.
Tseretopoulos are Trustees of the Fund who are currently serving and whose
terms of office continued after the Annual Meeting of Shareholders.
24 | Annual Report
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. If you decide
to use this service, share dividends and capital gains distributions will be
reinvested automatically in shares of the Fund for your account. BNY Mellon
Shareowner Services, P.O. Box 358035, Pittsburgh, PA 15252-8035, 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 new 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 cash payments to the Plan
Administrator, 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
can be made by check or money order payable to The Bank of New York Mellon (the
"Plan Administrator") and sent to BNY Mellon Shareowner Services, P.O. Box
382009, Pittsburgh, PA 15250-8009, Attention: Templeton Emerging Markets Fund.
The Plan Administrator will 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.
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. The Plan
Administrator's fee for a sale of shares through the Plan is $15.00 per
transaction plus a $0.12 per share trading fee.
A participant may withdraw from the Plan without penalty at any time by written
notice to the Plan Administrator sent to BNY Mellon Shareowner Services, P.O.
Box 358035, Pittsburgh, PA 15252-8035. Upon withdrawal, the participant will
receive, without charge, share certificates issued in the participant's name for
all full shares held by the Plan Administrator; or, if the participant wishes,
the Plan Administrator will sell the shares and send the proceeds to the
participant, less a service charge of $15.00 and less trading fees of $0.12 per
share. The Plan Administrator will convert any fractional shares you hold at the
time of your withdrawal to cash at the current market value and send you a check
for the net proceeds.
Annual Report | 25
Templeton Emerging Markets Fund
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
DIRECT DEPOSIT SERVICE FOR REGISTERED SHAREHOLDERS
Cash distributions can now be electronically credited to a checking or saving
account at any financial institution that participates in the Automated Clearing
House ("ACH") system. The Direct Deposit service is provided for registered
shareholders at no charge. To enroll in the service, access your account online
by going to http://vault.bnymellon.com/isd or dial 1-800-416-5585 (toll free)
and follow the instructions. Direct Deposit will begin with the next scheduled
distribution payment date following enrollment in the service.
26 | Annual Report
Templeton Emerging Markets Fund
TRANSFER AGENT
BNY Mellon Shareowner Services
P.O. Box 358035
Pittsburgh, PA 15252-8035
1-800-416-5585
www.bnymellon.com
DIRECT REGISTRATION
If you are a registered shareholder of the Fund, purchases of shares of the Fund
can be electronically credited to your Fund account at BNY Mellon Shareowner
Services through Direct Registration. This service provides shareholders with a
convenient way to keep track of shares through book entry transactions,
electronically move book-entry shares between broker-dealers, transfer agents
and DRS eligible issuers, and eliminate the possibility of lost certificates.
For additional information, please contact BNY Mellon Shareowner Services at
1-800-416-5585.
SHAREHOLDER INFORMATION
Shares of Templeton Emerging Markets Fund are traded on the New York Stock
Exchange under the symbol "EMF." 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 BNY Mellon Shareowner
Services' web site at https://vault.bnymellon.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 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.
Annual Report | 27
Templeton Emerging Markets Fund
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, 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. Generally, each
board member serves a three-year term that continues until that person's
successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
------------------------------ --------------- ------------------ ----------------------- ----------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1992 134 Bar-S Foods (meat packing
500 East Broward Blvd. company).
Suite 2100
Fort 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).
ANN TORRE BATES (1958) Trustee Since 2008 31 SLM Corporation (Sallie Mae) and
500 East Broward Blvd. Allied Capital Corporation
Suite 2100 (financial services).
Fort Lauderdale, FL 33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Independent strategic and financial consultant; and FORMERLY, Executive Vice President and Chief Financial Officer, NHP Incorporated
(manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).
FRANK J. CROTHERS (1944) Trustee Since 1999 23 Fortis, Inc. (utility holding
500 East Broward Blvd. company), Victory Nickel Inc.
Suite 2100 (mineral exploration) and ABACO
Fort Lauderdale, FL 33394-3091 Markets Limited (retail
distributors).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director and Vice Chairman, Caribbean Utilities Company, Ltd. and director of various other private business and nonprofit
organizations.
EDITH E. HOLIDAY (1952) Lead Trustee since 134 Hess Corporation (exploration and
500 East Broward Blvd. Independent 1996 and Lead refining of oil and gas), H.J.
Suite 2100 Trustee Independent Heinz Company (processed foods and
Fort Lauderdale, FL 33394-3091 Trustee since 2007 allied products), RTI
International Metals, Inc.
(manufacture and distribution of
titanium), Canadian National
Railway (railroad) and White
Mountains Insurance Group, Ltd.
(holding company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; 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).
28 | Annual Report
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
------------------------------ --------------- ------------------ ----------------------- ----------------------------------
DAVID W. NIEMIEC (1949) Trustee Since 2005 23 Emeritus Corporation (assisted
500 East Broward Blvd. living) and OSI Pharmaceuticals,
Suite 2100 Inc. (pharmaceutical products).
Fort Lauderdale, FL 33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Advisor, Saratoga Partners (private equity fund); and FORMERLY, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg
Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief
Financial Officer, Dillon, Read & Co. Inc. (1982-1997).
FRANK A. OLSON (1932) Trustee Since 2003 134 Hess Corporation (exploration and
500 East Broward Blvd. refining of oil and gas).
Suite 2100
Fort Lauderdale, FL 33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
LARRY D. THOMPSON (1945) Trustee Since 2005 142 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow of
The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General,
U.S. Department of Justice (2001-2003).
CONSTANTINE D. TSERETOPOULOS Trustee Since 1999 23 None
(1954)
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Physician, Lyford Cay Hospital (1987-present); director of various nonprofit organizations; and FORMERLY, Cardiology Fellow,
University of Maryland (1985-1987) and Internal Medicine Resident, Greater Baltimore Medical Center (1982-1985).
ROBERT E. WADE (1946) Trustee Since 2006 38 El Oro Ltd (investments).
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney at law.
Annual Report | 29
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
------------------------------ --------------- ------------------ ----------------------- ----------------------------------
**CHARLES B. JOHNSON (1933) Trustee, Trustee and 134 None
One Franklin Parkway Chairman of Chairman of the
San Mateo, CA 94403-1906 the Board and Board since 1995
Vice President and Vice President
since 1992
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide, Inc.;
and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 41
of the investment companies in Franklin Templeton Investments.
**GREGORY E. JOHNSON (1961) Trustee Since 2007 90 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director, Templeton
Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 32 of the investment companies in Franklin Templeton Investments.
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice President
Vice President - AML Compliance
- AML since 2006
Compliance
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of
45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc.
(1994-2001).
LAURA F. FERGERSON (1962) Chief Executive Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Officer -
San Mateo, CA 94403-1906 Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the
investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC
(1997-2003).
ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
30 | Annual Report
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
------------------------------ --------------- ------------------ ----------------------- ----------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and/or director, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.
STEVEN J. GRAY (1955) Vice President Vice President Not Applicable Not Applicable
One Franklin Parkway since August 2009
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer
of 45 of the investment companies in Franklin Templeton Investments.
RUPERT H. JOHNSON, JR. (1940) Vice President Since 1996 Not Applicable Not Applicable
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.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, 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 43 of the investment companies in Franklin
Templeton Investments.
MARK MOBIUS (1936) President and President since Not Applicable Not Applicable
17th Floor, Chater House Chief Executive 1987 and Chief
8 Connaught Road Central Officer - Executive Officer -
Hong Kong Investment Investment
Management Management
since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Portfolio Manager of various Templeton advisory affiliates; Executive Chairman, Templeton Asset Management Ltd.; and officer and/or
director, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of six of the investment companies
in Franklin Templeton Investments; 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).
MARK H. OTANI (1968) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Fund Accounting Operations, Franklin Templeton Investments; and officer of 14 of the investment companies in
Franklin Templeton Investments.
Annual Report | 31
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
------------------------------ --------------- ------------------ ----------------------- ----------------------------------
ROBERT C. ROSSELOT (1960) Secretary and Secretary since Not Applicable Not Applicable
500 East Broward Blvd. Vice President 2004 and Vice
Suite 2100 President since
Fort Lauderdale, FL 33394-3091 August 2009
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Secretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International of the
South; and officer of 45 of the investment companies in Franklin Templeton Investments.
KAREN L. SKIDMORE (1952) Vice President Since August 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin
Templeton Investments.
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman & Sterling,
LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
* We base the number of portfolios on each separate series of the registered
investment companies comprising the Franklin Templeton Investments fund
complex. These portfolios have a common investment manager or affiliated
investment managers.
** Charles B. Johnson is considered to be an interested person of the Fund
under the federal securities laws due to his position as officer and
director and major shareholder of Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's investment manager. Gregory E.
Johnson is considered to be an interested person of the Fund under the
federal securities laws due to his position as officer and director of
Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE U.S. SECURITIES AND
EXCHANGE COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT
COMMITTEE INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL
EXPERT WITHIN THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED EACH OF ANN TORRE BATES AND DAVID W. NIEMIEC AS AN AUDIT COMMITTEE
FINANCIAL EXPERT. THE BOARD BELIEVES THAT MS. BATES AND MR. NIEMIEC QUALIFY AS
SUCH AN EXPERT IN VIEW OF THEIR EXTENSIVE BUSINESS BACKGROUND AND EXPERIENCE.
MS. BATES HAS SERVED AS A MEMBER OF THE FUND AUDIT COMMITTEE SINCE 2008. SHE
CURRENTLY SERVES AS A DIRECTOR OF SLM CORPORATION AND ALLIED CAPITAL CORPORATION
AND WAS FORMERLY THE EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER OF NHP
INCORPORATED AND VICE PRESIDENT AND TREASURER OF US AIRWAYS, INC. MR. NIEMIEC
HAS SERVED AS A MEMBER OF THE FUND AUDIT COMMITTEE SINCE 2005, CURRENTLY SERVES
AS AN ADVISOR TO SARATOGA PARTNERS AND WAS FORMERLY ITS MANAGING DIRECTOR FROM
1998 TO 2001. MR. NIEMIEC IS A DIRECTOR OF EMERITUS CORPORATION AND OSI
PHARMACEUTICALS, INC. AND VARIOUS PRIVATE COMPANIES, AND WAS FORMERLY MANAGING
DIRECTOR OF SBC WARBURG DILLON READ FROM 1997 TO 1998, AND WAS VICE CHAIRMAN
FROM 1991 TO 1997 AND CHIEF FINANCIAL OFFICER FROM 1982 TO 1997 OF DILLON, READ
& CO. INC. AS A RESULT OF SUCH BACKGROUND AND EXPERIENCE, THE BOARD BELIEVES
THAT MS. BATES AND MR. NIEMIEC HAVE EACH ACQUIRED AN UNDERSTANDING OF GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES AND FINANCIAL STATEMENTS, THE GENERAL APPLICATION
OF SUCH PRINCIPLES IN CONNECTION WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND
RESERVES, AND ANALYZING AND EVALUATING FINANCIAL STATEMENTS THAT PRESENT A
BREADTH AND LEVEL OF COMPLEXITY OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO
THOSE OF THE FUND, AS WELL AS AN UNDERSTANDING OF INTERNAL CONTROLS AND
PROCEDURES FOR FINANCIAL REPORTING AND AN UNDERSTANDING OF AUDIT COMMITTEE
FUNCTIONS. MS. BATES AND MR. NIEMIEC ARE INDEPENDENT BOARD MEMBERS AS THAT TERM
IS DEFINED UNDER THE APPLICABLE U.S. SECURITIES AND EXCHANGE COMMISSION RULES
AND RELEASES OR THE LISTING STANDARDS APPLICABLE TO THE FUND.
32 | Annual Report
Templeton Emerging Markets Fund
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held May 19, 2009, the Board of Trustees (Board), including a
majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for the Fund. In reaching this decision, the
Board took into account information furnished throughout the year at regular
Board meetings, as well as information prepared specifically in connection with
the annual renewal review process. Information furnished and discussed
throughout the year included investment performance reports on the Fund,
information on its share price discount to net asset value, and other related
financial information, as well as periodic reports on legal, compliance,
pricing, brokerage commissions and execution and other services provided by the
Investment Manager (Manager) and its affiliates. Information furnished
specifically in connection with the renewal process included a report prepared
by Lipper, Inc. (Lipper), an independent organization, as well as additional
material, including a Fund profitability analysis report prepared by management.
The Lipper reports compared the Fund's investment performance and expenses with
those of other funds deemed comparable to the Fund as selected by Lipper. The
Fund profitability analysis report discussed the profitability to Franklin
Templeton Investments from its overall U.S. fund operations, as well as on an
individual fund-by-fund basis. Included with such profitability analysis report
was information on a fund-by-fund basis listing portfolio managers and other
accounts they manage, as well as information on management fees charged by the
Manager and its affiliates including management's explanation of differences
where relevant, and a three-year expense analysis with an explanation for any
increase in expense ratios. Additional material accompanying such report was a
memorandum prepared by management describing project initiatives and capital
investments relating to the services provided to the Fund by the Franklin
Templeton Investments organization, as well as a memorandum relating to
economies of scale. Such material also discussed some of the actions taken by
management in coping with problems arising out of the past year's financial
upheaval.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment management agreement for the Fund, the Board,
including a majority of independent Trustees, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment management agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses some primary factors relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished it showing that the investment policies and restrictions for
the Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the code of ethics adopted
throughout the Franklin Templeton fund
Annual Report | 33
Templeton Emerging Markets Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
complex, the adherence to fair value pricing procedures established by the
Board, and the accuracy of net asset value calculations. Favorable consideration
was given to management's continuous efforts and expenditures in establishing
back-up systems and recovery procedures to function in the event of a natural
disaster, it being noted that such systems and procedures had functioned
smoothly during the Florida hurricanes and blackouts experienced in recent
years. Among other factors taken into account by the Board were the Manager's
best execution trading policies, including a favorable report by an independent
portfolio trading analytical firm. Consideration was also given to the
experience of the Fund's portfolio management team, the number of accounts
managed and general method of compensation. In this latter respect, the Board
noted that a primary factor in management's determination of the level of a
portfolio manager's bonus compensation was the relative investment performance
of the funds he or she managed and that a portion of such bonus was required to
be invested in a predesignated list of funds within such person's fund
management area so as to be aligned with the interests of Fund shareholders.
Particular attention was given to the overall performance and actions taken by
the Manager and its affiliates in response to problems arising out of the market
turmoil and financial crisis experienced during the past year. In this respect,
the Board noted that management's independent credit analysis and diligent risk
management procedures had prevented any structured investment products or other
volatile instruments from being held in the portfolios of any of the money
market funds within the Franklin Templeton complex, including the sweep money
fund utilized by many of the funds as part of their cash management. The Board
also took into account, among other things, the strong financial position of the
Manager's parent company and its commitment to the fund business. The Board also
noted that during the past year Franklin Templeton Investments, like many other
fund managers, had announced a hiring freeze and implemented employee
reductions, and the Board discussed with management the nature of such
reductions and steps being taken to minimize any negative impact on the nature
and quality of services being provided the Fund.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
performance was given to the Lipper reports furnished for the agreement renewal.
The Lipper report for the Fund showed its investment performance for the
one-year period ended February 28, 2009, as well as the previous 10 years ended
that date in comparison to a performance universe consisting of the Fund and all
other closed-end nonleveraged emerging markets funds as selected by Lipper. Such
report considers total return on a fund net asset value basis without regard to
market discounts or premiums to accurately reflect investment performance.
Consistent with the market sell-off that occurred in 2008, the Fund and all
other funds within such performance universe experienced losses for the one-year
period. On a comparative basis, the Lipper report showed the Fund's total return
for the one-year period to be in the middle quintile of the performance
universe, and on an annualized basis to also be in the middle quintile of such
universe for each of the previous three- and five-year periods, and to be in the
second-lowest
34 | Annual Report
Templeton Emerging Markets Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
quintile of such universe for the previous 10-year period. The Board found such
comparative performance to be acceptable noting that the Fund's total return had
exceeded the median of its Lipper performance universe for the one-year period
and for the previous year was in the highest quintile of such universe as shown
in the Lipper report.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with those of a
group of other funds selected by Lipper as its appropriate Lipper expense group.
Lipper expense data is based upon historical information taken from each fund's
most recent annual report and, as a result of the severe decline in fund
industry assets during the last quarter of 2008, is based on asset levels that
are higher than the level currently existing for most funds. While recognizing
the limitations inherent in Lipper's methodology and recognizing that current
expense ratios may increase as assets decline, the Board believed that the
independent analysis conducted by Lipper remained an appropriate measure of
comparative expenses. In reviewing comparative costs, Lipper provides
information on the Fund's investment contractual management fee rate in
comparison with the investment contractual management fee rate that would have
been charged by the other funds within the Lipper expense group assuming they
were similar in size to the Fund, as well as the actual total expense rate of
the Fund in comparison with those of such other funds. The Lipper contractual
investment management fee analysis considers administrative fees to be part of
management fees. The Lipper expense group was composed of eight funds, and the
results of such expense comparison showed the Fund's contractual investment
management fee rate to be the highest of such expense group, and its actual
total expense rate to be the second highest of such group, but within eight
basis points of the group median. The Board found the Fund's contractual
investment management fee and expenses in comparison to those of the expense
group to be acceptable in view of factors relating to the Fund's operation, such
as the background and experience of its portfolio managers and research staff
and their physical presence and coverage in the geographical areas in which the
Fund invests.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
the Fund during the 12-month period ended September 30, 2008, being the most
recent fiscal year end for Franklin Resources, Inc., the Manager's parent.
During such period, the assets of the Franklin Templeton U.S. fund business were
significantly higher than currently existing, and to such extent the
profitability analysis does not reflect current fund operations. While taking
this into account in assessing the significance of the Fund profitability
analysis, the Board recognized such analysis was made at a given point in time
and that the decline in assets and effect on profitability would be reflected in
the profitability analysis covering Franklin Resources' 2009 fiscal year period.
In reviewing the analysis, attention was given to the methodology followed in
allocating costs to the Fund, it being recognized that allocation methodologies
are inherently
Annual Report | 35
Templeton Emerging Markets Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
subjective and various allocation methodologies may each be reasonable while
producing different results. In this respect, the Board noted that, while being
continuously refined and reflecting changes in the Manager's own cost
accounting, the allocation methodology was consistent with that followed in
profitability report presentations made in prior years and that the Fund's
independent registered public accounting firm had been engaged by the Manager to
perform certain procedures on a biennial basis, specified and approved by the
Manager and the Fund's Board solely for their purposes and use in reference to
the profitability analysis. In reviewing and discussing such analysis,
management discussed with the Board its belief that costs incurred in
establishing the infrastructure necessary for the type of fund operations
conducted by the Manager and its affiliates may not be fully reflected in the
expenses allocated to the Fund in determining its profitability, as well as the
fact that the level of profits, to a certain extent, reflected operational cost
savings and efficiencies initiated by management. In addition, the Board
considered a third-party study comparing the profitability of the Manager's
parent on an overall basis as compared to other publicly held managers broken
down to show profitability from management operations exclusive of distribution
expenses, as well as profitability including distribution expenses. The Board
also considered the extent to which the Manager and its affiliates might derive
ancillary benefits from fund operations, as well as potential benefits resulting
from allocation of fund brokerage and the use of commission dollars to pay for
research. Based upon its consideration of all these factors, the Board
determined that the level of profits realized by the Manager and its affiliates
from providing services to the Fund was not excessive in view of the nature,
quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether the Manager realizes
economies of scale as the Fund grows larger and the extent to which any such
benefit is shared with the Fund and its shareholders. The Board believed that a
manager's ability to realize economies of scale and the sharing of such benefit
is a more relevant consideration in the case of an open-end fund whose size
increases as a result of the continuous sale of its shares. A closed-end
investment company such as the Fund does not continuously offer shares, and
growth following its initial public offering will primarily result from market
appreciation, which benefits its shareholders. While believing economies of
scale to be less of a factor in the context of a closed-end fund, the Board
believes at some point an increase in size may lead to economies of scale that
should be shared with the Fund and its shareholders and intends to monitor
future growth of the Fund accordingly. The Board also noted that it had
previously added a breakpoint to the Fund's investment management fee at the
$1 billion level.
36 | Annual Report
Templeton Emerging Markets Fund
SHAREHOLDER INFORMATION (CONTINUED)
PROXY VOTING POLICIES AND PROCEDURES
The Fund's investment manager 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 (954) 527-7678 or by sending a written request to: Franklin Templeton
Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL
33394, Attention: Proxy Group. Copies of the Fund's proxy voting records are
also made available online at franklintempleton.com and posted on the U.S.
Securities and Exchange Commission's website at sec.gov and reflect the most
recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, D.C. Information regarding the
operations of the Public Reference Room may be obtained by calling (800)
SEC-0330.
CERTIFICATIONS
The Fund's Chief Executive Officer - Finance and Administration is required by
the New York Stock Exchange's Listing Standards to file annually with the
Exchange a certification that she is not aware of any violation by the Fund of
the Exchange's Corporate Governance Standards applicable to the Fund. The Fund
has filed such certification.
In addition, the Fund's Chief Executive Officer - Finance and Administration and
Chief Financial Officer and Chief Accounting Officer are required by the rules
of the U.S. Securities and Exchange Commission to provide certain certifications
with respect to the Fund's Form N-CSR and Form N-CSRS (which include the Fund's
annual and semiannual reports to shareholders) that are filed semiannually with
the Commission. The Fund has filed such certifications with its Form N-CSRS for
the six months ended February 28, 2009. Additionally, the Fund expects to file,
on or about October 30, 2009, such certifications with its Form N-CSR for the
year ended August 31, 2009.
Annual Report | 37
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Franklin Templeton Funds
LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL
BEN/(800) 342-5236 OR VISIT franklintempleton.com. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. 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.
VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund
Mutual Recovery Fund(2)
Mutual Shares Fund
BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund
GROWTH
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund
GLOBAL
Mutual Global Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
INTERNATIONAL
Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Frontier Markets Fund
HYBRID
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
FIXED INCOME
Franklin Adjustable U.S. Government Securities Fund(3)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(3)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(3)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
TAX-FREE INCOME(4)
NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(5)
LIMITED-/INTERMEDIATE-TERM
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(6)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(7)
Michigan(7)
Minnesota(7)
Missouri
New Jersey
New York(6)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(8)
(1.) The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.
(2.) 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.
(3.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(4.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(5.) The fund invests primarily in insured municipal securities.
(6.) These funds are available in four or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and money market portfolios.
(7.) The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/17/09.
(8.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
04/09 Not part of the annual report
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) 100 Fountain Parkway
P.O. Box 33030
St. Petersburg, FL 33733-8030
ANNUAL REPORT
TEMPLETON EMERGING MARKETS FUND
INVESTMENT MANAGER
Templeton Asset Management Ltd.
TRANSFER AGENT
BNY Mellon Shareowner Services
P.O. Box 358035
Pittsburgh, PA 15252-8035
Toll free number: (800) 416-5585
Hearing Impaired phone number: (800) 231-5469
Foreign Shareholders phone number: (201) 680-6578
www.melloninvestor.com/isd
FUND INFORMATION
(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 A2009 10/09
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 12(a)(1), the Registrant is attaching as an exhibit a
copy of its code of ethics that applies to its principal executive
officers and principal 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 expert is David W. Niemiec and he is
"independent" as defined under the relevant Securities and Exchange
Commission Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $30,838 for the fiscal year ended August 31, 2009 and $31,842 for the
fiscal year ended August 31, 2008.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial
statements.
(c) Tax Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning were $1,290 for the fiscal year ended August 31, 2009
and $0 for the fiscal year ended August 31, 2008. The services for which these
fees were paid included tax compliance and advice.
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $6,000 for the fiscal year ended
August 31, 2009 and $0 for the fiscal year ended August 31, 2008. The services
for which these fees were paid included tax compliance and advice.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended August 31, 2009
and $324 for the fiscal year ended August 31, 2008. The services for which these
fees were paid include review of materials provided to the fund Board in
connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended August 31,
2009 and $283,753 for the fiscal year ended August 31, 2008. The services for
which these fees were paid include review of materials provided to the fund
Board in connection with the investment management contract renewal process.
(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to
the registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $7,290 for the fiscal year ended August 31, 2009 and $284,077
for the fiscal year ended August 31, 2008.
(h) The registrant's audit committee of the board has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Members of the Audit Committee are: David W. Niemiec, Frank J. Crothers, Ann
Torre Bates and Constantine D. Tseretopoulos.
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The board of trustees of the Fund has delegated the authority to vote proxies
related to the portfolio securities held by the Fund to the Fund's manager
Templeton Asset Management Limited in accordance with the Proxy Voting Policies
and Procedures (Policies) adopted by the manager.
The manager has delegated its administrative duties with respect to the voting
of proxies to the Proxy Group within Franklin Templeton Companies, LLC (Proxy
Group), an affiliate and wholly owned subsidiary of Franklin Resources, Inc. All
proxies received by the Proxy Group will be voted based upon the manager's
instructions and/or policies.
To assist it in analyzing proxies, the manager subscribes to RiskMetrics Group
(RiskMetrics), an unaffiliated third-party corporate governance research service
that provides in-depth analyses of shareholder meeting agendas, vote
recommendations, recordkeeping and vote disclosure services. In addition, the
manager subscribes to Glass, Lewis & Co., LLC (Glass Lewis), an unaffiliated
third-party analytical research firm, to receive analyses and vote
recommendations on the shareholder meetings of publicly held U.S. companies.
Although RiskMetrics' and/or Glass Lewis' analyses are thoroughly reviewed and
considered in making a final voting decision, the manager does not consider
recommendations from RiskMetrics, Glass Lewis or any other third party to be
determinative of the manager's ultimate decision. As a matter of policy, the
officers, directors/trustees and employees of the manager and the Proxy Group
will not be influenced by outside sources whose interests conflict with the
interests of the Fund and its shareholders. Efforts are made to resolve all
conflicts in the interests of the manager's clients. Material conflicts of
interest are identified by the Proxy Group based upon analyses of client,
distributor, broker dealer and vendor lists, information periodically gathered
from directors and officers, and information derived from other sources,
including public filings. In situations where a material conflict of interest is
identified, the Proxy Group may defer to the voting recommendation of
RiskMetrics, Glass Lewis or those of another independent third-party provider of
proxy services; or send the proxy directly to the Fund with the manager's
recommendation regarding the vote for approval. If the conflict is not resolved
by the Fund, the Proxy Group may refer the matter, along with the recommended
course of action by the manager, if any, to an interdepartmental Proxy Review
Committee (which may include portfolio managers and/or research analysts
employed by the manager), for evaluation and voting instructions. The Proxy
Review Committee may defer to the voting recommendation of RiskMetrics, Glass
Lewis or those of another independent third-party provider of proxy services; or
send the proxy directly to the Fund. Where the Proxy Group or the Proxy Review
Committee refers a matter to the Fund, it may rely upon the instructions of a
representative of the Fund, such as the board or a committee of the board.
Where a material conflict of interest has been identified, but the items on
which the manager's vote recommendations differ from Glass Lewis, RiskMetrics,
or another independent third-party provider of proxy services relate
specifically to (1) shareholder proposals regarding social or environmental
issues or political contributions, (2) "Other Business" without describing the
matters that might be considered, or (3) items the manager wishes to vote in
opposition to the recommendations of an issuer's management, the Proxy Group may
defer to the vote recommendations of the manager rather than sending the proxy
directly to the Fund for approval.
To avoid certain potential conflicts of interest, the manager will employ echo
voting, if possible, in the following instances: (1) when the Fund invests in an
underlying fund in reliance on any one of Sections 12(d)(1)(E), (F), or (G) of
the 1940 Act, or pursuant to an SEC exemptive order; (2) when the Fund invests
uninvested cash in affiliated money market funds pursuant to an SEC exemptive
order ("cash sweep arrangement"); or (3) when required pursuant to the Fund's
governing documents or applicable law. Echo voting means that the investment
manager will vote the shares in the same proportion as the vote of all of the
other holders of the Fund's shares.
The recommendation of management on any issue is a factor that the manager
considers in determining how proxies should be voted. However, the manager does
not consider recommendations from management to be determinative of the
manager's ultimate decision. As a matter of practice, the votes with respect to
most issues are cast in accordance with the position of the company's
management. Each issue, however, is considered on its own merits, and the
manager will not support the position of the company's management in any
situation where it deems that the ratification of management's position would
adversely affect the investment merits of owning that company's shares.
MANAGER'S PROXY VOTING POLICIES AND PRINCIPLES The manager has adopted general
proxy voting guidelines, which are summarized below. These guidelines are not an
exhaustive list of all the issues that may arise and the manager cannot
anticipate all future situations. In all cases, each proxy will be considered
based on the relevant facts and circumstances.
BOARD OF DIRECTORS. The manager supports an independent board of directors, and
prefers that key committees such as audit, nominating, and compensation
committees be comprised of independent directors. The manager will generally
vote against management efforts to classify a board and will generally support
proposals to declassify the board of directors. The manager may withhold votes
from directors who have attended less than 75% of meetings without a valid
reason. While generally in favor of separating Chairman and CEO positions, the
manager will review this issue as well as proposals to restore or provide for
cumulative voting on a case-by-case basis, taking into consideration factors
such as the company's corporate governance guidelines or provisions and
performance.
RATIFICATION OF AUDITORS OF PORTFOLIO COMPANIES. The manager will closely
scrutinize the role and performance of auditors. On a case-by-case basis, the
manager will examine proposals relating to non-audit relationships and non-audit
fees. The manager will also consider, on a case-by-case basis, proposals to
rotate auditors, and will vote against the ratification of auditors when there
is clear and compelling evidence of accounting irregularities or negligence.
MANAGEMENT AND DIRECTOR COMPENSATION. A company's equity-based compensation plan
should be in alignment with the shareholders' long-term interests. The manager
believes that executive compensation should be directly linked to the
performance of the company. The manager evaluates plans on a case-by-case basis
by considering several factors to determine whether the plan is fair and
reasonable, including the RiskMetrics quantitative model utilized to assess such
plans and/or the Glass Lewis evaluation of the plans. The manager will generally
oppose plans that have the potential to be excessively dilutive, and will almost
always oppose plans that are structured to allow the repricing of underwater
options, or plans that have an automatic share replenishment "evergreen"
feature. The manager will generally support employee stock option plans in which
the purchase price is at least 85% of fair market value, and when potential
dilution is 10% or less.
Severance compensation arrangements will be reviewed on a case-by-case basis,
although the manager will generally oppose "golden parachutes" that are
considered to be excessive. The manager will normally support proposals that
require a percentage of directors' compensation to be in the form of common
stock, as it aligns their interests with those of shareholders.
ANTI-TAKEOVER MECHANISMS AND RELATED ISSUES. The manager generally opposes
anti-takeover measures since they tend to reduce shareholder rights. However, as
with all proxy issues, the manager conducts an independent review of each
anti-takeover proposal. On occasion, the manager may vote with management when
the research analyst has concluded that the proposal is not onerous and would
not harm the Fund or its shareholders' interests. The manager generally supports
proposals that require shareholder rights' plans ("poison pills") to be subject
to a shareholder vote and will closely evaluate such plans on a case-by-case
basis to determine whether or not they warrant support. In addition, the manager
will generally vote against any proposal to issue stock that has unequal or
subordinate voting rights. The manager generally opposes any supermajority
voting requirements as well as the payment of "greenmail." The manager generally
supports "fair price" provisions and confidential voting.
CHANGES TO CAPITAL STRUCTURE. The manager realizes that a company's financing
decisions have a significant impact on its shareholders, particularly when they
involve the issuance of additional shares of common or preferred stock or the
assumption of additional debt. The manager will review, on a case-by-case basis,
proposals by companies to increase authorized shares and the purpose for the
increase. The manager will generally not vote in favor of dual-class capital
structures to increase the number of authorized shares where that class of stock
would have superior voting rights. The manager will generally vote in favor of
the issuance of preferred stock in cases where the company specifies the voting,
dividend, conversion and other rights of such stock and the terms of the
preferred stock issuance are deemed reasonable.
MERGERS AND CORPORATE RESTRUCTURING. Mergers and acquisitions will be subject to
careful review by the research analyst to determine whether they would be
beneficial to shareholders. The manager will analyze various economic and
strategic factors in making the final decision on a merger or acquisition.
Corporate restructuring proposals are also subject to a thorough examination on
a case-by-case basis.
SOCIAL AND CORPORATE POLICY ISSUES. The manager will generally give management
discretion with regard to social, environmental and ethical issues, although the
manager may vote in favor of those that are believed to have significant
economic benefits or implications for the Fund and its shareholders.
GLOBAL CORPORATE GOVERNANCE. Many of the tenets discussed above are applied to
the manager's proxy voting decisions for international investments. However, the
manager must be flexible in these instances and must be mindful of the varied
market practices of each region.
The manager will attempt to process every proxy it receives for all domestic and
foreign issuers. However, there may be situations in which the manager cannot
process proxies, for example, where a meeting notice was received too late, or
sell orders preclude the ability to vote. If a security is on loan, the manager
may determine that it is not in the best interests of the Fund to recall the
security for voting purposes. Also, the manager may abstain from voting under
certain circumstances or vote against items such as "Other Business" when the
manager is not given adequate information from the company.
Shareholders may view the complete Policies online at franklintempleton.com.
Alternatively, shareholders may request copies of the Policies free of charge by
calling the Proxy Group collect at (954)527-7678 or by sending a written request
to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite 1500,
Fort Lauderdale, FL 33394, Attention: Proxy Group. Copies of the Fund's proxy
voting records are available online at franklintempleton.com and posted on the
SEC website at WWW.SEC.GOV. The proxy voting records are updated each year by
August 31 to reflect the most recent 12-month period ended June 30.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANY AND
AFFILIATED PURCHASERS.
(a)(1) As of October 30, 2009, the portfolio managers of the Fund are as
follows:
MARK MOBIUS, PH.D, EXECUTIVE CHAIRMAN OF TEMPLETON ASSET MANAGEMENT LTD.
Dr. Mobius has been a portfolio manager of the Fund since its inception. He has
primary responsibility for the investments of the Fund. He has final authority
over all aspects of the Fund's investment portfolio, including but not limited
to, purchases and sales of individual securities, portfolio risk assessment, and
the management of daily cash balances in accordance with anticipated management
requirements. The degree to which he may perform these functions, and the nature
of these functions, may change from time to time. He joined Franklin Templeton
Investments in 1987.
DENNIS LIM, CO-CHIEF EXECUTIVE OFFICER AND DIRECTOR OF TEMPLETON ASSET
MANAGEMENT LTD.
Based in Hong Kong, Mr. Lim has been a portfolio manager of the Fund since 2000,
providing research and advice on the purchases and sales of individual
securities, and portfolio risk assessment. He joined Franklin Templeton
Investments in 1990.
TOM WU, DIRECTOR OF TEMPLETON ASSET MANAGEMENT LTD.
Based in Hong Kong, Mr. Wu has been a portfolio manager of the Fund since its
inception, providing research and advice on the purchases and sales of
individual securities, and portfolio risk assessment. He joined Franklin
Templeton Investments in 1987.
(a)(2) This section reflects information about the portfolio managers as of the
fiscal year ended August 31, 2009.
The following table shows the number of other accounts managed by each portfolio
manager and the total assets in the accounts managed within each category:
-------------------------------------------------------------------------------
NAME NUMBER ASSETS NUMBER ASSETS NUMBER ASSETS
OF OTHER OF OTHER OF OTHER OF OTHER OF OF
REGISTERED REGISTERED POOLED POOLED OTHER OTHER
INVESTMENT INVESTMENT INVESTMENT INVESTMENT ACCOUNTS ACCOUNTS
COMPANIES COMPANIES VEHICLES VEHICLES MANAGED/1 MANAGED
MANAGED MANAGED MANAGED/1 MANAGED (X $1
(X $1 (X $1 MILLION)/1
MILLION) MILLION)/1
-------------------------------------------------------------------------------
Mark Mobius 9 7,489.2 33 15,178.2 10 1,719.0
-------------------------------------------------------------------------------
Dennis Lim 5 5,581.6 4 1,242.2 1 197.9
-------------------------------------------------------------------------------
Tom Wu 5 5,581.6 4 2,047.1 1 197.9
-------------------------------------------------------------------------------
1. The various pooled investment vehicles and accounts listed are managed by a
team of investment professionals. Accordingly, the individual managers listed
would not be solely responsible for managing such listed amounts.
Portfolio managers that provide investment services to the Fund may also provide
services to a variety of other investment products, including other funds,
institutional accounts and private accounts. The advisory fees for some of such
other products and accounts may be different than that charged to the Fund and
may include performance based compensation. This may result in fees that are
higher (or lower) than the advisory fees paid by the Fund. As a matter of
policy, each fund or account is managed solely for the benefit of the beneficial
owners thereof. As discussed below, the separation of the trading execution
function from the portfolio management function and the application of
objectively based trade allocation procedures helps to mitigate potential
conflicts of interest that may arise as a result of the portfolio managers
managing accounts with different advisory fees.
CONFLICTS. The management of multiple funds, including the Fund, and accounts
may also give rise to potential conflicts of interest if the funds and other
accounts have different objectives, benchmarks, time horizons, and fees as the
portfolio manager must allocate his or her time and investment ideas across
multiple funds and accounts. The manager seeks to manage such competing
interests for the time and attention of portfolio managers by having portfolio
managers focus on a particular investment discipline. Most other accounts
managed by a portfolio manager are managed using the same investment strategies
that are used in connection with the management of the Fund. Accordingly,
portfolio holdings, position sizes, and industry and sector exposures tend to be
similar across similar portfolios, which may minimize the potential for
conflicts of interest. As noted above, the separate management of the trade
execution and valuation functions from the portfolio management process also
helps to reduce potential conflicts of interest. However, securities selected
for funds or accounts other than the Fund may outperform the securities selected
for the Fund. Moreover, if a portfolio manager identifies a limited investment
opportunity that may be suitable for more than one fund or other account, the
Fund may not be able to take full advantage of that opportunity due to an
allocation of that opportunity across all eligible funds and other accounts. The
manager seeks to manage such potential conflicts by using procedures intended to
provide a fair allocation of buy and sell opportunities among funds and other
accounts.
The structure of a portfolio manager's compensation may give rise to potential
conflicts of interest. A portfolio manager's base pay and bonus tend to increase
with additional and more complex responsibilities that include increased assets
under management. As such, there may be a relationship between a portfolio
manager's marketing or sales efforts and his or her bonus.
Finally, the management of personal accounts by a portfolio manager may give
rise to potential conflicts of interest. While the funds and the manager have
adopted a code of ethics which they believe contains provisions reasonably
necessary to prevent a wide range of prohibited activities by portfolio managers
and others with respect to their personal trading activities, there can be no
assurance that the code of ethics addresses all individual conduct that could
result in conflicts of interest.
The manager and the Fund have adopted certain compliance procedures that are
designed to address these, and other, types of conflicts. However, there is no
guarantee that such procedures will detect each and every situation where a
conflict arises.
COMPENSATION. The manager seeks to maintain a compensation program that is
competitively positioned to attract, retain and motivate top-quality investment
professionals. Portfolio managers receive a base salary, a cash incentive bonus
opportunity, an equity compensation opportunity, and a benefits package.
Portfolio manager compensation is reviewed annually and the level of
compensation is based on individual performance, the salary range for a
portfolio manager's level of responsibility and Franklin Templeton guidelines.
Portfolio managers are provided no financial incentive to favor one fund or
account over another. Each portfolio manager's compensation consists of the
following three elements:
BASE SALARY Each portfolio manager is paid a base salary.
ANNUAL BONUS Annual bonuses are structured to align the interests of
the portfolio manager with those of the Fund's shareholders. Each
portfolio manager is eligible to receive an annual bonus. Bonuses
generally are split between cash (50% to 65%) and restricted shares of
a Franklin Templeton fund which vest over a three-year period (17.5% to
25%) and other mutual fund shares (17.5% to 25%). The deferred
equity-based compensation is intended to build a vested interest of the
portfolio manager in the financial performance of both Franklin
Resources and mutual funds advised by the manager. The bonus plan is
intended to provide a competitive level of annual bonus compensation
that is tied to the portfolio manager achieving consistently strong
investment performance, which aligns the financial incentives of the
portfolio manager and Fund shareholders. The Chief Investment Officer
of the manager and/or other officers of the manager, with
responsibility for the Fund, have discretion in the granting of annual
bonuses to portfolio managers in accordance with Franklin Templeton
guidelines. The following factors are generally used in determining
bonuses under the plan:
|X| INVESTMENT PERFORMANCE. Primary consideration is given to the
historic investment performance over the 1, 3 and 5 preceding
years of all accounts managed by the portfolio manager. The
pre-tax performance of each fund managed is measured relative to a
relevant peer group and/or applicable benchmark as appropriate.
|X| NON-INVESTMENT PERFORMANCE. The more qualitative contributions of
a portfolio manager to the manager's business and the investment
management team, including business knowledge, contribution to
team efforts, mentoring of junior staff, and contribution to the
marketing of the Fund, are evaluated in determining the amount of
any bonus award.
|X| RESEARCH. Where the portfolio management team also has research
responsibilities, each portfolio manager is evaluated on the
number and performance of recommendations over time.
|X| RESPONSIBILITIES. The characteristics and complexity of funds
managed by the portfolio manager are factored in the manager's
appraisal.
ADDITIONAL LONG-TERM EQUITY-BASED COMPENSATION Portfolio managers may
also be awarded restricted shares or units of one or more mutual funds,
and options to purchase common shares of a Franklin Templeton fund.
Awards of such deferred equity-based compensation typically vest over
time, so as to create incentives to retain key talent.
Portfolio managers also participate in benefit plans and programs available
generally to all employees of the manager.
OWNERSHIP OF FUND SHARES. The manager has a policy of encouraging portfolio
managers to invest in the funds they manage. Exceptions arise when, for example,
a fund is closed to new investors or when tax considerations or jurisdictional
constraints cause such an investment to be inappropriate for the portfolio
manager. The following is the dollar range of Fund shares beneficially owned by
each portfolio manager (such amounts may change from time to time):
Dollar Range of Fund
Shares Beneficially
Portfolio Manager Owned
----------------------------------------------------------------------
Mark Mobius None
----------------------------------------------------------------------
Dennis Lim None
----------------------------------------------------------------------
Tom Wu None
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Note: Because the portfolio managers are all foreign nationals, they do not hold
shares in this U.S. registered fund, however they own shares in other similar
Franklin Templeton funds managed by them, registered offshore and appropriate
for foreign nationals.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF 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 11. 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 12. EXHIBITS.
(A)(1) Code of Ethics
(A)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Mark H. Otani, Chief Financial Officer and Chief Accounting Officer
(B) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Mark H. Otani, Chief Financial Officer and Chief Accounting 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/LAURA F. FERGERSON
-------------------------------------
Laura F. Fergerson
Chief Executive Officer - Finance and
Administration
Date: October 28, 2009
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/LAURA F. FERGERSON
-------------------------------------
Laura F. Fergerson
Chief Executive Officer - Finance and
Administration
Date: October 28, 2009
By /s/MARK H. OTANI
------------------------------------
Mark H. Otani
Chief Financial Officer and
Chief Accounting Officer
Date: October 28, 2009