UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04985
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TEMPLETON EMERGING MARKETS FUND
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(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
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Date of reporting period: 2/29/08
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Item 1. Reports to Stockholders.
Contents
IMPORTANT NOTICE TO SHAREHOLDERS ......................................... 1
SEMIANNUAL REPORT
Templeton Emerging Markets Fund .......................................... 2
Performance Summary ...................................................... 6
Financial Highlights and Statement of Investments ........................ 7
Financial Statements ..................................................... 11
Notes to Financial Statements ............................................ 14
Annual Meeting of Shareholders ........................................... 20
Dividend Reinvestment and Cash Purchase Plan ............................. 21
Shareholder Information .................................................. 23
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Important Notice to Shareholders
EXCHANGE-TRADED FUNDS
The Fund may invest up to 10% of its total assets in shares of exchange-traded
funds (ETFs) for the purpose of short-term cash management. The Fund will use
ETFs when the investment manager determines that the Fund will benefit from
market exposure when there is excess cash in the Fund and the investment manager
is not able to invest in a single stock fast enough because either the stock is
not liquid enough to accommodate a large purchase or the Fund would cause
excessive market impact in trying to invest cash in a single stock immediately
(referred to as "equitizing cash"). This strategy can allow the investment
manager to be more selective in the securities it buys for the Fund and the
prices paid because the investment manager is not forced to buy stocks at any
price just to get market exposure. The Fund may also use ETFs to provide the
Fund with liquidity during volatile markets without having to hold
underperforming cash.
An investment in an ETF generally represents the same risks as an investment in
a conventional fund (i.e., an investment company that is not exchange-traded).
The price of an ETF can fluctuate and the Fund could lose money investing in an
ETF if the prices of the securities owned by the ETF go down. In addition, ETFs
are subject to certain other risks that do not apply to conventional funds, such
as the risk that the market price of the ETF's shares may trade at a discount to
their net asset value; the risk that an active market for an ETF's shares may
not develop or be maintained; or the risk that an ETF's shares could be delisted
from an exchange or that trading may be halted for various reasons.
Most ETFs are investment companies. Therefore, the Fund's purchases of ETFs are
subject to limitations on investments in other investment companies under
section 12(d)(1) of the 1940 Act, unless exemptions from those limitations are
available pursuant to the SEC's current rules, exemptions and interpretations
under the 1940 Act.
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.
Not part of the semiannual report | 1
Semiannual 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 2/29/08
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Asia 50.5%
Europe 25.3%
Latin America 23.8%
Short-Term Investments & Other Net Assets 0.4%
Dear Shareholder:
We are pleased to bring you Templeton Emerging Markets Fund's semiannual report
for the period ended February 29, 2008.
PERFORMANCE OVERVIEW
Templeton Emerging Markets Fund delivered cumulative total returns of +14.38%
based on market price and +11.25% based on net asset value for the six months
under review.
ECONOMIC AND MARKET OVERVIEW
Emerging market equities started the reporting period on a positive note, with
most markets recording strong returns in September and October. However, renewed
fears of a U.S. recession and its subsequent impact on emerging markets, coupled
with global credit concerns, led to market corrections and eliminated part of
the gains recorded earlier in the period.
In Asia, India, Indonesia and Pakistan were among the top performing emerging
markets. India's strong economic growth gained from a large consumer base and
vast foreign reserves. The overall Asian region benefited from a weak U.S.
dollar, and consequently countries such as Thailand delivered higher returns.
China and South Korea, on the other hand, underperformed during the period. In
Europe, the strong Russian market was supported by high commodity prices for the
country's exports, robust foreign direct investment inflows and marked economic
growth. Turkey, Poland and Hungary, however, recorded declines.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 8.
2 | Semiannual Report
Latin American markets were among the strongest performers during the reporting
period. Stronger regional currencies, high commodity prices and greater demand
for metals and soft commodities supported resource producers in markets such as
Brazil. Accelerating economic growth, high foreign investment flows and lower
interest rates pushed the Brazilian stock market to end the period with
double-digit returns. However, Mexico underperformed its regional peers as
concerns of slowing U.S. growth led investors to stay on the sidelines.
INVESTMENT STRATEGY
Our investment strategy employs a bottom-up, value-oriented, long-term approach.
We focus on the market price of a company's securities relative to our
evaluation of the company's long-term earnings, asset value and cash flow
potential. As we look for investments, we focus on specific companies and
undertake in-depth research to construct an action list from which we make our
buy decisions. Before we make a purchase, we 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 six months under review, the Fund's exposure to the energy, materials,
banks and telecommunication services sectors contributed to absolute
performance. 1 Brazil's Petrobras (Petroleo Brasileiro) and China's CNOOC in the
energy sector and CVRD (Companhia Vale do Rio Doce) of Brazil and India's Sesa
Goa in the materials sector were among the largest contributors. Rising oil and
commodity prices, coupled with growing demand for oil, coal and metals in China
as well as other emerging markets, benefited these companies. In the banks
sector, shares of Brazil's Banco Bradesco and Unibanco (Unibanco - Uniao de
Bancos Brasileiros) and Thailand's Kasikornbank made gains during the period.
Fund holdings Turkcell (Turkcell Illetisim Hizmetleri; Turkey), MTN Group (South
Africa; sold by period-end) and Mobile TeleSystems (Russia) contributed the most
in the telecommunication services sector.
TOP 10 COUNTRIES
Based on Equity Investments
2/29/08
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% OF TOTAL
NET ASSETS
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Brazil 21.3%
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China 16.0%
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Russia 9.8%
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Thailand 8.4%
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Turkey 8.1%
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South Korea 7.9%
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India 7.0%
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Taiwan 3.9%
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Hong Kong 3.0%
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Poland 2.7%
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1. The energy sector comprises energy equipment and services; and oil, gas and
consumable fuels in the SOI. The materials sector comprises construction
materials, and metals and mining in the SOI. The banks sector comprises
commercial banks in the SOI. The telecommunication services sector comprises
diversified telecommunication services and wireless telecommunication services
in the SOI.
Semiannual Report | 3
TOP 10 HOLDINGS
2/29/08
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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
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Petrobras (Petroleo Brasileiro SA), ADR, pfd. 7.6%
OIL, GAS & CONSUMABLE FUELS, BRAZIL
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CVRD (Companhia Vale do Rio Doce), ADR, pfd., A 6.6%
METALS & MINING, BRAZIL
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Chalco (Aluminum Corp. of China Ltd.), H 4.6%
METALS & MINING, CHINA
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PetroChina Co. Ltd., H 4.1%
OIL, GAS & CONSUMABLE FUELS, CHINA
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Akbank TAS 3.4%
COMMERCIAL BANKS, TURKEY
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Banco Bradesco SA, ADR, pfd. 3.0%
COMMERCIAL BANKS, BRAZIL
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Norilsk Nickel (Mining and Metallurgical Co. Norilsk Nickel) 2.9%
METALS & MINING, RUSSIA
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Sesa Goa Ltd. 2.7%
METALS & MINING, INDIA
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Gazprom, ADR 2.7%
OIL, GAS & CONSUMABLE FUELS, RUSSIA
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CNOOC Ltd. 2.6%
OIL, GAS & CONSUMABLE FUELS, CHINA
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Sectors that detracted from Fund performance during the reporting period
included transportation, consumer durables and apparel, and capital goods. 2 In
the transportation sector, China's Chiwan Wharf Holdings and South Africa's
Imperial Holdings were significant detractors. We sold the Fund's position in
Imperial Holdings by period-end to focus on what we considered more attractively
valued companies in the emerging markets investment universe. On the other hand,
we continued to hold Chiwan Wharf Holdings due to the company's strong growth in
its existing port operations and gradual diversification into other Chinese
ports. In the consumer durables and apparel sector, South Korea's Avista and
Hong Kong's Tack Fat Group International were major detractors. We continued to
hold both stocks due to their attractive valuations. In the capital goods
sector, shares of South Korea's Hyundai Development declined in value. We
remained confident of this leading residential property developer's prospects
based on its dominant market position.
Geographically, investments in Brazil and India made noteworthy contributions to
performance. In addition to the stocks discussed earlier, Souza Cruz, Brazil's
major tobacco company, Nalco (National Aluminium), India's largest aluminum
products manufacturer and distributor, and GAIL, India's biggest gas
transportation and distribution company, performed well. Conversely, investments
in China and South Korea underperformed and were the largest detractors on a
geographic basis. Fund holdings Chalco (Aluminum Corporation of China) and
Hyundai Development experienced price corrections during the period after
recording strong returns during the past few years.
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 six months
ended February 29, 2008, the U.S. dollar declined in value relative to most
non-U.S. currencies. As a result, the Fund's performance was positively affected
by the portfolio's investment predominantly in securities with non-U.S. currency
exposure. However, one cannot expect the same result in future periods.
2. The transportation sector comprises transportation infrastructure in the SOI.
The consumer durables and apparel sector comprises household durables; and
textiles, apparel and luxury goods in the SOI. The capital goods sector
comprises construction and engineering, and industrial conglomerates in the SOI.
4 | Semiannual Report
During the reporting period, we made select purchases in textiles, apparel and
luxury goods companies and food products companies as recent market corrections
made stock valuations more attractive. These included two Hong Kong-based
companies, Victory City International Holdings, a fabric and yarn manufacturer
and processor, and Tack Fat Group International, a swimwear and casual wear
producer for major international brands such as Reebok, Speedo and Calvin Klein.
People's Food Holdings, one of China's biggest meat processing companies, was
another purchase.
To raise funds for income and capital gains distributions in 2007, we sold a
number of holdings. These sales also allowed the Fund to focus on stocks we
considered relatively more attractively valued within our investment universe.
We sold select positions as stocks reached sale price targets. As a result, the
Fund's exposure to telecommunication services and pharmaceuticals companies
fell. We eliminated the Fund's exposure to South Africa and at the same time
reduced investments in Hungary, India and Turkey during the reporting period.
Major sales included Remgro, Richter Gedeon and MTN Group.
Thank you for your continued participation in Templeton Emerging Markets Fund.
We look forward to serving your future investment needs.
Sincerely,
[PHOTO OMITTED] /s/ Mark Mobius
Mark Mobius
Executive Chairman
Templeton Asset Management Ltd.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF FEBRUARY 29, 2008, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
Semiannual Report | 5
Performance Summary as of 2/29/08
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
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SYMBOL: EMF CHANGE 2/29/08 8/31/07
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Net Asset Value (NAV) +$0.73 $23.87 $23.14
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Market Price (NYSE) +$0.93 $21.49 $20.56
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DISTRIBUTIONS (9/1/07-2/29/08)
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Dividend Income $0.3369
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Short-Term Capital Gain $0.3575
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Long-Term Capital Gain $1.4726
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TOTAL $2.1670
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PERFORMANCE
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6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1
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Based on change in NAV 2 +11.25% +44.87% +356.99% +294.97%
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Based on change in market price 3 +14.38% +42.27% +342.86% +222.80%
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Average Annual Total Return 1
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Based on change in NAV 2 +11.25% +44.87% +35.50% +14.72%
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Based on change in market price 3 +14.38% +42.27% +34.65% +12.43%
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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. Six-month return has not
been annualized.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on the dividend reinvestment and
cash purchase plan.
6 | Semiannual Report
Templeton Emerging Markets Fund
FINANCIAL HIGHLIGHTS
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SIX MONTHS ENDED
FEBRUARY 29, 2008 YEAR ENDED AUGUST 31,
(UNAUDITED) 2007 2006 2005 2004 2003
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of
period ............................ $ 23.14 $ 20.56 $ 17.98 $ 13.40 $ 10.82 $ 8.76
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Income from investment operations:
Net investment income a .......... 0.03 0.37 0.33 0.32 0.22 0.18
Net realized and unrealized
gains (losses) ................. 2.87 7.47 4.25 4.51 2.59 2.03
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Total from investment operations .... 2.90 7.84 4.58 4.83 2.81 2.21
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Less distributions from:
Net investment income ............ (0.34) (0.64) (0.39) (0.25) (0.23) (0.15)
Net realized gains ............... (1.83) (4.62) (1.61) -- -- --
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Total distributions ................. (2.17) (5.26) (2.00) (0.25) (0.23) (0.15)
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Net asset value, end of period ...... $ 23.87 $ 23.14 $ 20.56 $ 17.98 $ 13.40 $ 10.82
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Market value, end of period b ....... $ 21.49 $ 20.56 $ 18.94 $ 18.31 $ 14.24 $ 11.84
=============================================================================================
Total return (based on market value
per share) c ...................... 14.38% 41.62% 15.01% 30.66% 22.62% 50.83%
RATIOS TO AVERAGE NET ASSETS d
Expenses ............................ 1.55% e 1.55% e 1.58% e 1.57% e 1.63% e 1.84%
Net investment income ............... 0.23% 1.86% 1.66% 2.00% 1.70% 1.94%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ... $ 431,416 $ 418,213 $ 366,549 $ 318,240 $ 236,848 $ 191,076
Portfolio turnover rate ............. 1.63% 33.15% 43.03% 36.04% 67.63% 48.69%
a Based on average daily shares outstanding.
b Based on the last sale on NYSE Euronext (formerly the New
York Stock Exchange).
c Total return is not annualized for periods less than one year.
d Ratios are annualized for periods less than one year.
e Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 7
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2008 (UNAUDITED)
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INDUSTRY SHARES/RIGHTS VALUE
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LONG TERM INVESTMENTS 99.6%
COMMON STOCKS AND RIGHTS 80.6%
AUSTRIA 1.5%
OMV AG ............................................. Oil, Gas & Consumable Fuels 89,020 $ 6,472,840
----------------
BRAZIL 2.3%
Centrais Eletricas Brasileiras SA .................. Electric Utilities 217,988 3,192,792
Souza Cruz SA ...................................... Tobacco 229,973 6,667,592
----------------
9,860,384
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CHINA 16.0%
Aluminum Corp. of China Ltd., H .................... Metals & Mining 9,792,000 19,757,539
China Petroleum and Chemical Corp., H .............. Oil, Gas & Consumable Fuels 7,874,000 8,955,719
Chiwan Wharf Holdings Ltd., B ...................... Transportation Infrastructure 991,000 1,719,369
CNOOC Ltd. ......................................... Oil, Gas & Consumable Fuels 6,512,000 11,231,266
Denway Motors Ltd. ................................. Automobiles 17,270,730 8,922,746
People's Food Holdings Ltd. ........................ Food Products 1,093,000 846,194
PetroChina Co. Ltd., H ............................. Oil, Gas & Consumable Fuels 11,688,000 17,784,993
----------------
69,217,826
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HONG KONG 3.0%
Dairy Farm International Holdings Ltd. ............. Food & Staples Retailing 1,595,100 7,784,088
Tack Fat Group International Ltd. .................. Textiles, Apparel & Luxury Goods 15,029,000 1,719,024
Victory City International Holdings Ltd. ........... Textiles, Apparel & Luxury Goods 11,936,000 3,482,142
----------------
12,985,254
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HUNGARY 1.8%
MOL Hungarian Oil and Gas Nyrt. .................... Oil, Gas & Consumable Fuels 56,975 7,793,534
----------------
INDIA 7.0%
Hindalco Industries Ltd. ........................... Metals & Mining 791,800 4,025,446
National Aluminium Co. Ltd. ........................ Metals & Mining 613,230 7,118,507
Oil & Natural Gas Corp. Ltd. ....................... Oil, Gas & Consumable Fuels 250,395 6,349,884
Peninsula Land Ltd. ................................ Real Estate Management & Development 305,000 735,377
Sesa Goa Ltd. ...................................... Metals & Mining 135,814 11,785,743
----------------
30,014,957
----------------
INDONESIA 2.2%
PT Astra International Tbk ......................... Automobiles 1,409,000 4,328,809
PT Bank Central Asia Tbk ........................... Commercial Banks 12,849,000 5,067,311
----------------
9,396,120
----------------
MEXICO 2.5%
Kimberly Clark de Mexico SAB de CV, A .............. Household Products 1,572,800 6,497,298
Telefonos de Mexico SAB de CV, L, ADR .............. Diversified Telecommunication Services 133,674 4,437,977
----------------
10,935,275
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8 | Semiannual Report
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2008 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/RIGHTS VALUE
------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
PAKISTAN 2.1%
Faysal Bank Ltd. ................................... Commercial Banks 5,431,500 $ 4,989,703
MCB Bank Ltd. ...................................... Commercial Banks 589,450 4,089,486
----------------
9,079,189
----------------
POLAND 2.7%
Grupa Lotos SA ..................................... Oil, Gas & Consumable Fuels 306,000 4,474,258
a Polski Koncern Naftowy Orlen SA .................... Oil, Gas & Consumable Fuels 404,750 6,951,264
----------------
11,425,522
----------------
RUSSIA 9.8%
Gazprom, ADR ....................................... Oil, Gas & Consumable Fuels 231,422 11,611,599
LUKOIL, ADR ........................................ Oil, Gas & Consumable Fuels 101,006 7,484,545
LUKOIL, ADR (London Exchange) ...................... Oil, Gas & Consumable Fuels 36,510 2,716,344
Mining and Metallurgical Co. Norilsk Nickel ........ Metals & Mining 44,679 12,670,964
Mobile TeleSystems, ADR ............................ Wireless Telecommunication Services 77,300 6,343,238
OAO TMK, GDR ....................................... Energy Equipment & Services 41,000 1,407,530
----------------
42,234,220
----------------
SOUTH KOREA 7.9%
Avista Inc. ........................................ Textiles, Apparel & Luxury Goods 186,910 2,179,505
Hyundai Development Co. ............................ Construction & Engineering 104,630 7,621,205
Kangwon Land Inc. .................................. Hotels, Restaurants & Leisure 330,008 7,309,692
Neopharm Co. Ltd. .................................. Personal Products 174,065 2,020,455
SK Energy Co. Ltd. ................................. Oil, Gas & Consumable Fuels 78,859 10,959,054
SK Holdings Co. Ltd. ............................... Industrial Conglomerates 21,990 3,992,647
----------------
34,082,558
----------------
SWEDEN 1.4%
Oriflame Cosmetics SA, SDR ......................... Personal Products 91,120 6,121,738
----------------
TAIWAN 3.9%
MediaTek Inc. ...................................... Semiconductors & Semiconductor Equipment 210,094 2,419,326
Taiwan Mobile Co. Ltd. ............................. Wireless Telecommunication Services 3,958,594 6,709,698
Taiwan Semiconductor Manufacturing Co. Ltd. ........ Semiconductors & Semiconductor Equipment 3,878,007 7,727,163
----------------
16,856,187
----------------
THAILAND 8.4%
Amata Corp. Public Co. Ltd., fgn. .................. Real Estate Management & Development 4,557,300 2,345,616
Kasikornbank Public Co. Ltd., fgn. ................. Commercial Banks 2,251,200 6,401,347
Kiatnakin Bank Public Co. Ltd., fgn. ............... Consumer Finance 6,640,700 6,224,008
Land and Houses Public Co. Ltd., fgn. .............. Household Durables 6,872,332 1,986,917
PTT Exploration and Production Public Co. Ltd.,
fgn. ............................................ Oil, Gas & Consumable Fuels 1,226,600 6,274,269
PTT Public Co. Ltd., fgn. .......................... Oil, Gas & Consumable Fuels 578,000 6,280,413
Siam Cement Public Co. Ltd., fgn. .................. Construction Materials 608,620 4,138,036
Semiannual Report | 9
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2008 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/RIGHTS VALUE
------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
THAILAND (CONTINUED)
Siam Commercial Bank Public Co. Ltd., fgn. ......... Commercial Banks 918,100 $ 2,552,303
a True Corp. Public Co. Ltd., fgn., rts., 3/28/08 .... Diversified Telecommunication Services 246,818 --
----------------
36,202,909
----------------
TURKEY 8.1%
Akbank TAS ......................................... Commercial Banks 2,723,231 14,614,636
Tupras-Turkiye Petrol Rafineleri AS ................ Oil, Gas & Consumable Fuels 427,186 10,937,782
Turkcell Iletisim Hizmetleri AS .................... Wireless Telecommunication Services 957,217 9,489,820
----------------
35,042,238
----------------
TOTAL COMMON STOCKS AND RIGHTS
(COST $197,782,590) ............................. 347,720,751
----------------
PREFERRED STOCKS 19.0%
BRAZIL 19.0%
Banco Bradesco SA, ADR, pfd. ....................... Commercial Banks 416,148 13,062,886
Companhia Vale do Rio Doce, ADR, pfd., A ........... Metals & Mining 966,300 28,331,916
Petroleo Brasileiro SA, ADR, pfd. .................. Oil, Gas & Consumable Fuels 335,160 32,822,219
Unibanco - Uniao de Bancos Brasileiros SA, GDR,
pfd. ............................................ Commercial Banks 56,700 7,689,654
----------------
TOTAL PREFERRED STOCKS (COST $21,348,293) .......... 81,906,675
----------------
TOTAL LONG TERM INVESTMENTS
(COST $219,130,883) ............................. 429,627,426
----------------
SHORT TERM INVESTMENT (COST $1,384,626) 0.3%
MONEY MARKET FUND 0.3%
UNITED STATES 0.3%
b Franklin Institutional Fiduciary Trust Money Market
Portfolio, 3.13% ................................ 1,384,626 1,384,626
----------------
TOTAL INVESTMENTS (COST $220,515,509)
99.9% ........................................... 431,012,052
OTHER ASSETS, LESS LIABILITIES 0.1% ................ 404,202
----------------
NET ASSETS 100.0% .................................. $ 431,416,254
================
SELECTED PORTFOLIO ABBREVIATIONS
ADR - American Depository Receipt
GDR - Global Depository Receipt
SDR - Swedish Depository Receipt
a Non-income producing for the twelve months ended February 29, 2008.
b See Note 7 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio. The rate shown is the annualized seven-day yield at
period end.
10 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Templeton Emerging Markets Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2008 (unaudited)
Assets:
Investments in securities:
Cost - Unaffiliated issuers ................................................ $219,130,883
Cost - Sweep Money Fund (Note 7) ........................................... 1,384,626
-------------
Total cost of investments .................................................. $220,515,509
=============
Value - Unaffiliated issuers ............................................... $429,627,426
Value - Sweep Money Fund (Note 7) .......................................... 1,384,626
-------------
Total value of investments ................................................. 431,012,052
Foreign currency, at value (cost $453,629) .................................... 453,404
Receivables:
Dividends .................................................................. 1,172,724
Foreign tax ................................................................ 49,233
-------------
Total assets ............................................................ 432,687,413
-------------
Liabilities:
Payable to affiliates ......................................................... 462,545
Deferred tax .................................................................. 657,143
Accrued expenses and other liabilities ........................................ 151,471
-------------
Total liabilities ....................................................... 1,271,159
-------------
Net assets, at value ................................................. $431,416,254
=============
Net assets consist of:
Paid-in capital ............................................................... $212,252,728
Distributions in excess of net investment income .............................. (8,679,457)
Net unrealized appreciation (depreciation) .................................... 209,846,813
Accumulated net realized gain (loss) .......................................... 17,996,170
-------------
Net assets, at value ................................................. $431,416,254
=============
Shares outstanding ............................................................... 18,073,033
=============
Net asset value per share ........................................................ $ 23.87
=============
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 11
Templeton Emerging Markets Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended February 29, 2008 (unaudited)
Investment income:
Dividends: (net of foreign taxes of $287,193)
Unaffiliated issuers ....................................................... $ 3,967,931
Sweep Money Fund (Note 7) .................................................. 29,368
-------------
Total investment income ................................................. 3,997,299
-------------
Expenses:
Management fees (Note 3a) ..................................................... 2,816,492
Administrative fees (Note 3b) ................................................. 338,255
Transfer agent fees ........................................................... 48,281
Custodian fees (Note 4) ....................................................... 187,753
Reports to shareholders ....................................................... 25,358
Registration and filing fees .................................................. 16,120
Professional fees ............................................................. 29,326
Trustees' fees and expenses ................................................... 19,469
Other ......................................................................... 7,418
-------------
Total expenses .......................................................... 3,488,472
Expense reductions (Note 4) ............................................. (759)
-------------
Net expenses ......................................................... 3,487,713
-------------
Net investment income ............................................. 509,586
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ................................................................ 19,309,209
Foreign currency transactions .............................................. (128,733)
-------------
Net realized gain (loss) .......................................... 19,180,476
-------------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................................ 33,010,915
Translation of assets and liabilities denominated in foreign currencies .... (3,288)
Change in deferred taxes on unrealized appreciation (depreciation) ............ (329,955)
-------------
Net change in unrealized appreciation (depreciation) .............. 32,677,672
-------------
Net realized and unrealized gain (loss) .......................................... 51,858,148
-------------
Net increase (decrease) in net assets resulting from operations .................. $ 52,367,734
=============
12 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Templeton Emerging Markets Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------
SIX MONTHS ENDED
FEBRUARY 29, 2008 YEAR ENDED
(UNAUDITED) AUGUST 31, 2007
------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 509,586 $ 6,749,870
Net realized gain (loss) from investments and foreign currency transactions ........... 19,180,476 60,733,635
Net change in unrealized appreciation (depreciation) on investments, translation
of assets and liabilities denominated in foreign currencies, and deferred taxes .... 32,677,672 73,705,723
------------------------------------
Net increase (decrease) in net assets resulting from operations .................. 52,367,734 141,189,228
------------------------------------
Distributions to shareholders from:
Net investment income ................................................................. (6,088,805) (11,407,091)
Net realized gains .................................................................... (33,075,458) (82,673,975)
------------------------------------
Total distributions to shareholders ...................................................... (39,164,263) (94,081,066)
------------------------------------
Capital share transactions: (Note 2) ..................................................... -- 4,555,295
------------------------------------
Net increase (decrease) in net assets ............................................ 13,203,471 51,663,457
Net assets:
Beginning of period ...................................................................... 418,212,783 366,549,326
------------------------------------
End of period ............................................................................ $ 431,416,254 $ 418,212,783
------------------------------------
Distributions in excess of net investment income included in net assets:
End of period ............................................................................ $ (8,679,457) $ (3,100,238)
====================================
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 13
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 diversified, closed-end
investment company.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
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. Investments in open-end mutual funds are valued at the closing net asset
value.
Foreign 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 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 foreign
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, 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.
14 | Semiannual Report
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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. FOREIGN CURRENCY CONTRACTS
When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate at a future date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.
D. 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.
Foreign securities held by the Fund may be subject to foreign taxation on
dividend and interest 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.
Semiannual Report | 15
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. INCOME AND DEFERRED TAXES (CONTINUED)
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.
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and 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.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
G. 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 February 29, 2008, there were an unlimited number of shares authorized
(without par value). During the period ended February 29, 2008 there were no
shares issued; all reinvested distributions were satisfied with previously
issued shares purchased in the open market. During the year ended August 31,
2007, 243,729 shares were issued for $4,555,295 from reinvested distributions.
16 | Semiannual Report
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
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 periods ended August 31, 2007 and
February 29, 2008, there were no shares repurchased.
3. TRANSACTION 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 Fund 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 period ended February 29, 2008, the
custodian fees were reduced as noted in the Statement of Operations.
Semiannual Report | 17
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. INCOME TAXES
At February 29, 2008, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments ......................................... $ 220,748,203
================
Unrealized appreciation ..................................... $ 213,976,619
Unrealized depreciation ..................................... (3,712,770)
----------------
Net unrealized appreciation (depreciation) .................. $ 210,263,849
================
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions, and passive
foreign investment company shares.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, passive foreign investment company shares, and foreign taxes on
the sales of securities.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
period ended February 29, 2008, aggregated $8,031,831 and $47,680,101,
respectively.
7. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin 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.
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. REGULATORY AND LITIGATION MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission (SEC), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support
18 | Semiannual Report
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
9. REGULATORY AND LITIGATION MATTERS (CONTINUED)
payments to securities dealers who sell fund shares (marketing support),
Franklin Resources, Inc. and certain of its subsidiaries (collectively, the
Company), entered into settlements with certain of those regulators and
governmental entities. Specifically, the Company entered into settlements with
the SEC, among others, concerning market timing and marketing support.
On June 6, 2007, the SEC posted for public comment the proposed plan of
distribution for the market timing settlement. Once the SEC approves the final
plan of distribution, disbursements of settlement monies will be made promptly
to individuals who were shareholders of the designated funds during the relevant
period, in accordance with the terms and conditions of the settlement and plan.
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above.
The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Funds, it is
committed to making the Funds or their shareholders whole, as appropriate.
10. NEW ACCOUNTING PRONOUNCEMENTS
The Fund adopted Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" (FIN 48), on February 29, 2008. FIN 48
clarifies the accounting for uncertainty in tax positions taken or expected to
be taken in a tax return. FIN 48 provides guidance on the measurement,
recognition, classification and disclosure of tax positions, along with
accounting for the related interest and penalties. The Fund has reviewed the tax
positions for each of the three open tax years as of August 31, 2007, and has
determined that the implementation of FIN 48 did not have a material impact on
the Fund's financial statements.
In September 2006, the FASB issued FASB Statement No. 157, "Fair Value
Measurement" (SFAS 157), which defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements.
SFAS 157 is effective for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. The Fund believes the adoption of
SFAS 157 will have no material impact on its financial statements.
Semiannual Report | 19
Templeton Emerging Markets Fund
ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 22, 2008
The Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Fort Lauderdale, Florida, on February 22, 2008. 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: Harris J. Ashton, Ann Torre Bates, Frank J. Crothers and Edith E.
Holiday.* 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 2011 FOR SHARES VOTING WITHHELD SHARES VOTING
-------------------------------------------------------------------------------------------------
Harris J. Ashton ....... 14,750,181 81.61% 97.21% 422,713 2.34% 2.79%
Frank J. Crothers ...... 14,747,492 81.60% 97.20% 425,402 2.35% 2.80%
Edith E. Holiday ....... 14,753,039 81.63% 97.23% 419,855 2.32% 2.77%
-------------------------------------------------------------------------------------------------
TERM EXPIRING 2009
-------------------------------------------------------------------------------------------------
Ann Torre Bates ........ 14,745,721 81.59% 97.18% 427,173 2.36% 2.82%
* Charles B. Johnson, Gregory E. Johnson, David W. Niemiec, Frank A. Olson,
Larry D. Thompson, Constantine D. Tseretopoulos and Robert E. Wade are Trustees
of the Fund who are currently serving and whose terms of office continued after
the Annual Meeting of Shareholders.
20 | Semiannual 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; share
dividends and capital gains distributions will be reinvested automatically; 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 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 NYSE Euronext (formerly 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
shall be made by check or money order payable to "Mellon Bank, N.A." and sent to
BNY Mellon Shareowner Services, P.O. Box 382009, Pittsburgh, PA 15250-8009,
Attention: Templeton Emerging Markets Fund. The Plan Administrator shall apply
such payments (less a $5.00 service charge and less a pro rata share of trading
fees) to purchases of Fund shares on the open market.
The automatic reinvestment of dividends and/or capital gains does not relieve
the participant of any income tax that may be payable on dividends or
distributions.
Whenever shares are purchased on NYSE Euronext 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 are $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.
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.
Semiannual Report | 21
Templeton Emerging Markets Fund
TRANSFER AGENT
BNY Mellon Shareowner Services
P.O. Box 358015
Pittsburgh, PA 15252-8015
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, to
electronically move book-entry shares between broker-dealers, transfer agents
and DRS eligible issuers, and eliminates 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 NYSE Euronext 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 "NYSE Euronext 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.
22 | Semiannual Report
Templeton Emerging Markets Fund
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures (Policies) that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/527-7678 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, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/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 he 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-CSR for
the year ended August 31, 2007. Additionally, the Fund expects to file, on or
about April 30, 2008, such certifications with its Form N-CSRS for the six
months ended February 29, 2008.
Semiannual Report | 23
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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. N/A
Item 5. Audit Committee of Listed Registrants.
Members of the Audit Committee are: Frank J. Crothers, David W. Niemiec, 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 Ltd. 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. The manager votes proxies
solely in the interests of the Fund and its shareholders. As a matter of policy,
the officers, directors/trustees and employees of the Fund, 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, broker
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 a 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 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 of trusteesor 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 Sections 12(d)(1) 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 which the manager
considers in determining how proxies should be voted, but is not 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. In light of several high
profile accounting scandals, 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 its 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. The manager will
review on a case-by-case basis any shareholder proposals to adopt policies on
expensing stock option plans.
Anti-takeover mechanisms and related issues. The manager generally opposes
anti-takeover measures since they tend to reduce shareholder rights. 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. 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 will review, on a case-by-case basis,
proposals by companies to increase authorized shares and the purpose for the
increase and proposals seeking preemptive rights. 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 each will 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 and reincorporation 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
proxy voting decisions for international companies. However, the manager must be
more 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 1-954/527-7678 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 Companies. N/A
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 Galen G. Vetter, Chief Executive Officer - Finance and Administration, and
Laura F. Fergerson, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Galen G. Vetter, Chief Executive Officer - Finance and Administration, and Laura
F. Fergerson, 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/GALEN G. VETTER
------------------------------
Galen G. Vetter
Chief Executive Officer -
Finance and Administration
Date: April 28, 2008
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/GALEN G. VETTER
-----------------------------
Galen G. Vetter
Chief Executive Officer -
Finance and Administration
Date: April 28, 2008
By /s/LAURA F. FERGERSON
-----------------------------
Laura F. Fergerson
Chief Financial Officer and
Chief Accounting Officer
Date: April 28, 2008