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
TEMPLETON EMERGING MARKETS FUND
(Exact name of registrant as specified in charter)
500 EAST BROWARD BLVD., SUITE 2100, FORT LAUDERDALE, FL 33394-3091
(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Name and address of agent for service)
Registrant's telephone number, including area code: (954) 527-7500
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Date of fiscal year end: 8/31
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Date of reporting period: 2/28/07
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
FEBRUARY 28, 2007
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SEMIANNUAL REPORT | INTERNATIONAL
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TEMPLETON
EMERGING MARKETS FUND
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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
Franklin o TEMPLETON o 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 reli- able, accurate and personal service
that has helped us become one of the most trusted
names in financial services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]
Not part of the semiannual report
Contents
SEMIANNUAL REPORT
Templeton Emerging Markets Fund ........................................... 1
Performance Summary ....................................................... 8
Important Notice to Shareholders .......................................... 9
Financial Highlights and Statement of Investments ......................... 10
Financial Statements ...................................................... 15
Notes to Financial Statements ............................................. 18
Annual Meeting of Shareholders ............................................ 25
Dividend Reinvestment and Cash Purchase Plan .............................. 26
Shareholder Information ................................................... 28
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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.
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GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 2/28/07
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL.]
Asia .............................................. 42.7%
Europe ............................................ 30.2%
Latin America ..................................... 17.9%
Middle East & Africa .............................. 7.9%
Short-Term Investments & Other Net Assets ......... 1.3%
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Dear Shareholder:
This semiannual report for Templeton Emerging Markets Fund covers the period
ended February 28, 2007.
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 11.
Semiannual Report | 1
TOP 10 COUNTRIES
Based on Equity Investments as of 2/28/07
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% OF TOTAL
NET ASSETS
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Brazil 14.6%
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China 12.4%
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Russia 10.1%
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Turkey 9.6%
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South Africa 7.9%
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South Korea 7.8%
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Thailand 7.0%
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Taiwan 5.9%
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Hungary 4.7%
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India 4.2%
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PERFORMANCE OVERVIEW
Templeton Emerging Markets Fund delivered cumulative total returns of +13.86%
based on market price and +12.98% based on net asset value for the six months
under review. The Morgan Stanley Capital International (MSCI) Emerging Markets
(EM) Index posted a +16.72% cumulative total return for the same period. 1 In
line with our investment strategy, we are pleased with our long-term results,
which you will find in the Performance Summary on page 8. For example, for the
10-year period ended February 28, 2007, the Fund delivered cumulative total
returns of +123.55% based on market price and +146.42% based on net asset value,
compared with the MSCI EM Index's +116.94% cumulative total return for the same
period. 1 Please note that index performance information is provided for
reference and that we do not attempt to track the index, but rather undertake
investments on the basis of fundamental research.
ECONOMIC AND MARKET OVERVIEW
Emerging markets recorded robust performances during the reporting period due to
ample liquidity and overall economic strength. Latin American markets were the
top performers as they benefited from relatively high commodity prices, solid
domestic demand and smooth transitions of power in some of the region's key
economies. International confidence in the region, especially Brazil, was high.
A loosening monetary policy, growing foreign reserves and implementation of
fiscal incentives aimed at boosting economic growth and investment led many
investors to remain positive on the country's prospects. In 2006, Mexico
recorded its fastest economic growth rate since 2000 due mainly to stronger oil
exports. Higher oil and tax revenues also led the country to register its first
budget surplus since 1996.
Asian economic powerhouses such as China and India continued to experience
strong economic growth, which contributed to significant investment flows into
these markets. Elsewhere in the region, South Korea and Thailand struggled with
strong local currencies that threatened to erode their export competitiveness.
According to our analysis, worries about an overheating property market and low
public approval for President Roh Moo-hyun, which led to his resignation from
his ruling Uri Party ahead of presidential elections in the fourth quarter of
2006, also had an impact on the South Korean
1. Source: Standard & Poor's Micropal. The MSCI EM Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in global emerging markets. As of 2/28/07, the
Fund's 10-year average annual total returns were +8.38% based on market
price and +9.44% based on net asset value. The MSCI EM Index's average
annual total return for the same period was +8.05%. The index is unmanaged
and includes reinvested dividends. One cannot invest directly in an index,
nor is an index representative of the Fund's portfolio.
2 | Semiannual Report
stock market. In Thailand, a military coup, capital controls, bomb blasts and
new restrictions on foreign ownership of listed companies in certain sectors
rattled investor confidence in the nation's financial markets.
Eastern Europe lagged its emerging markets counterparts, with the Russian market
underperforming its regional peers. An oil price correction during the six-month
period led investors to adopt a more cautious approach and lock in gains made
over the past few years. Nonetheless, Russia continued to report strong economic
data with estimated 6.7% gross domestic product (GDP) growth in 2006 and an
estimated US$31 billion in foreign direct investment, more than double the
amount received in 2005. 2 Over the longer term, this activity could benefit the
Russian stock market. Hungary and Poland recorded higher returns in U.S. dollar
terms, as strong local currencies enlarged both markets' returns. In Turkey,
healthier fiscal results, robust foreign direct investment inflows, continuing
European Union accession talks and support from the International Monetary Fund
boosted stock prices. In South Africa, a consumer spending boom propelled by low
borrowing rates and greater domestic demand led to higher corporate earnings in
some related companies.
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
The Fund's performance relative to the MSCI EM Index benefited from an
underweighted position and stock selection in Russia. An underweighting in
Gazprom and Surgutneftegaz and an overweighting in Norilsk Nickel were the
largest Russian contributors to relative performance. Stock selection in
TOP 10 HOLDINGS
2/28/07
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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
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Akbank TAS 4.5%
COMMERCIAL BANKS, TURKEY
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Petroleo Brasileiro SA, ADR, pfd 4.3%
OIL, GAS & CONSUMABLE FUELS, BRAZIL
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PetroChina Co. Ltd., H & 144A 4.2%
OIL, GAS & CONSUMABLE FUELS, CHINA
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Companhia Vale do Rio Doce,
ADR, pfd., A 4.1%
METALS & MINING, BRAZIL
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LUKOIL, ADR 3.4%
OIL, GAS & CONSUMABLE FUELS, RUSSIA
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SK Corp. 2.9%
OIL, GAS & CONSUMABLE FUELS,
SOUTH KOREA
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Gazprom, ord. & ADR 2.9%
OIL, GAS & CONSUMABLE FUELS, RUSSIA
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Aluminum Corp. of China Ltd., H 2.9%
METALS & MINING, CHINA
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Remgro Ltd. 2.9%
DIVERSIFIED FINANCIAL SERVICES,
SOUTH AFRICA
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Tupras-Turkiye Petrol Rafineleri AS 2.6%
OIL, GAS & CONSUMABLE FUELS, TURKEY
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2. Sources: Federal State Statistics Service (Russia); The Central Bank of
the Russian Federation.
Semiannual Report | 3
South Korea, South Africa and Brazil also had a positive impact on relative
performance. Key overweighted companies that outperformed the broad index
included Hyundai Development, SK Corp., Edgars Consolidated Stores and Companhia
Vale do Rio Doce. Our underweighting in Hyundai Motor (sold during the period)
and lack of Sasol stock further supported performance versus the benchmark
because these stocks recorded declines during the period. At the sector level,
our stock selection in materials, automobiles and components, and technology
hardware and equipment contributed to the Fund's results versus the index. 3 The
Fund also benefited from an underweighted position in the technology hardware
and equipment sector, which underperformed the index. By period-end, we
eliminated our holdings in this sector.
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 28, 2007, 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.
Several factors detracted from Fund performance. For example, our stock
selection and underweighted exposures in India and Poland hindered the Fund's
results relative to the index. Holdings in Hindalco Industries, Grupa Lotos (not
an index component) and Polski Koncern Naftowy (PKN) Orlen negatively affected
relative performance, as these stocks recorded double-digit declines. Because we
remain confident in all three companies' long-term fundamentals, based on our
analysis, we viewed the recent correction in their underlying stock prices as an
opportunity to increase those positions at cheaper share prices.
3. The materials sector comprises construction materials and metals and
mining in the SOI. The automobiles and components sector comprises
automobiles in the SOI.
4 | Semiannual Report
Another country, China, also adversely impacted relative performance, mainly
because we held no shares of China Life Insurance and Bank of Communications.
Both stocks significantly outperformed the MSCI EM Index. A significant
overweighting in PetroChina also detracted from the Fund's relative performance
as the stock posted weak, though positive, results.
By sector, the Fund's positions in banks, insurance and consumer services
negatively impacted relative performance due to overweighted positions in stocks
such as Kangwon Land. 4 Lack of exposure to China Life Insurance and Russian
commercial banker Sberbank was also detrimental. The Fund did not hold these two
stocks because we considered their valuations too expensive.
We eliminated the Fund's exposure to a number of countries to raise funds for
the November income and capital gains distribution as well as to focus on stocks
we deemed to be more attractively valued within our investment universe. This
allowed us to realign the portfolio during the reporting period in an effort to
position it to benefit from developments in emerging markets. We divested Fund
positions in Argentina, Shenzhen-China, Croatia, the Czech Republic, Finland,
Israel, Panama, Peru, the Philippines, Portugal, Singapore and the U.K. As a
result, this reduced portfolio exposure to certain sectors and industries,
namely diversified financial services, industrial conglomerates, wireless
telecommunication services, and semiconductors and semiconductor equipment.
Conversely, we made some purchases in Europe and Asia. In Europe, our recent
Polish investments included shares of Grupa Lotos and PKN Orlen, which are
leading companies involved in the refining and marketing of oil products and
petrochemicals. In Hungary, we purchased shares of MOL Hungarian Oil and Gas,
which has large exposure to Central and Eastern Europe, and Richter Gedeon, a
major pharmaceutical producer with a strong regional presence. The Fund also
purchased shares of Russia-based Gazprom, the world's largest producer of gas in
terms of reserves and production, and Austria's OMV, one of Central and Eastern
Europe's leading oil and gas groups.
4. The banks sector comprises commercial banks in the SOI.
Semiannual Report | 5
We also realigned the Fund's investments in Turkey as we initiated a position in
Akbank, a major commercial bank, and added shares of Tupras-Turkiye Petrol
Rafineleri, the country's largest industrial company, with a dominant market
share in oil refining. Turkish sales included KOC Holding, one of the country's
leading diversified conglomerates; Turkiye Is Bankasi, a principal private bank;
and Turk Hava Yollari Anonim Ortakligi, Turkey's national airline.
In Asia, we increased exposure to Thailand, Pakistan, India and China "H" shares
through investments in the aluminum industry and the energy and
telecommunications sectors. In Pakistan, we purchased shares of diversified
telecommunication services provider Pakistan Telecommunications. In our view,
greater demand for telecommunication services could boost corporate earnings in
related businesses. We increased or initiated positions in Chinese and Indian
aluminum companies Aluminum Corporation of China, National Aluminium, and
Hindalco Industries. According to our analysis, these segments of the Chinese
and Indian economies could benefit from rapid infrastructure development. China
"H" shares investments included Yanzhou Coal Mining, China's largest coal
exporter and one of the country's most profitable coal producers. We initiated
positions in PTT Public, a major Thai integrated oil and gas company; and PTT
Exploration and Production Public, the oil and natural gas exploration and
production arm of PTT Public.
Our Latin American purchases were mainly in Brazil. These included Petroleo
Brasileiro, Brazil's national oil and gas company, and Companhia Vale do Rio
Doce, one of the world's biggest iron ore producers that is also engaged in
various mining activities.
The Fund increased its exposure to the oil, gas and consumable fuels sector as
such companies could benefit from greater revenues and earnings stemming
primarily from China's strong demand and a continuation of the relatively higher
oil prices seen over the past few years. However, the aforementioned oil price
correction during the past six months provided us with an opportunity to build
related Fund positions at cheaper prices than we had seen for some time.
6 | Semiannual Report
Thank you for your continued participation in Templeton Emerging Markets Fund.
We look forward to serving your future investment needs.
[PHOTO OMITTED] /s/ Mark Mobius
Mark Mobius
President and Chief Executive Officer -
Investment Management
Templeton Emerging Markets Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF FEBRUARY 28, 2007, 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 | 7
Performance Summary as of 2/28/07
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 realized gains on the sale of Fund shares.
PRICE AND DISTRIBUTION INFORMATION
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SYMBOL: EMF CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) -$2.79 $17.77 $20.56
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Market Price (NYSE) -$2.41 $16.53 $18.94
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DISTRIBUTIONS (9/1/06-2/28/07)
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Dividend Income $0.3955
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Short-Term Capital Gain $0.5007
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Long-Term Capital Gain $2.5886
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TOTAL $3.4848
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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 +12.98% +13.31% +199.80% +146.42%
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Based on change in market price 3 +13.86% +1.53% +166.76% +123.55%
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Average Annual Total Return 1
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Based on change in NAV 2 +12.98% +13.31% +24.56% +9.44%
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Based on change in market price 3 +13.86% +1.53% +21.69% +8.38%
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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.
8 | Semiannual 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.
Semiannual Report | 9
Templeton Emerging Markets Fund
FINANCIAL HIGHLIGHTS
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SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED AUGUST 31,
(UNAUDITED) 2006 2005 2004 2003 2002
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period ........... $ 20.56 $ 17.98 $ 13.40 $ 10.82 $ 8.76 $ 8.86
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Income from investment operations:
Net investment income a ....................... 0.11 0.33 0.32 0.22 0.18 0.15
Net realized and unrealized gains (losses) .... 0.59 4.25 4.51 2.59 2.03 (0.14)
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Total from investment operations ............... 0.70 4.58 4.83 2.81 2.21 0.01
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Less distributions from:
Net investment income ......................... (0.40) (0.39) (0.25) (0.23) (0.15) (0.11)
Net realized gains ............................ (3.09) (1.61) -- -- -- --
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Total distributions ............................ (3.49) (2.00) (0.25) (0.23) (0.15) (0.11)
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Net asset value, end of period ................. $ 17.77 $ 20.56 $ 17.98 $ 13.40 $ 10.82 $ 8.76
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Market value, end of period b .................. $ 16.53 $ 18.94 $ 18.31 $ 14.24 $ 11.84 $ 8.00
============================================================================
Total return (based on market value per share) c 13.86% 15.01% 30.66% 22.62% 50.83% (2.82)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $321,077 $366,549 $318,240 $236,848 $191,076 $154,640
Ratios to average net assets:
Expenses ...................................... 1.57% d,e 1.58% e 1.57% e 1.63% e 1.84% 1.64%
Net investment income ......................... 1.13% d 1.66% 2.00% 1.70% 1.94% 1.67%
Portfolio turnover rate ........................ 22.24% 43.03% 36.04% 67.63% 48.69% 65.13%
a Based on average daily shares outstanding.
b Based on the last sale on the New York Stock Exchange.
c Total return is not annualized for periods less than one year.
d Annualized.
e Benefit of expense reduction rounds to less than 0.01%.
10 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/RIGHTS VALUE
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LONG TERM INVESTMENTS 98.7%
COMMON STOCKS AND RIGHTS 86.5%
AUSTRIA 1.5%
OMV AG ....................................... Oil, Gas & Consumable Fuels 89,020 $ 4,957,162
---------------
BRAZIL 2.4%
Centrais Eletricas Brasileiras SA ............ Electric Utilities 158,994,000 3,374,077
Souza Cruz SA ................................ Tobacco 229,973 4,175,412
---------------
7,549,489
---------------
CHINA 12.4%
Aluminum Corp. of China Ltd., H .............. Metals & Mining 9,792,000 9,374,533
China Petroleum and Chemical Corp., H ........ Oil, Gas & Consumable Fuels 7,874,000 6,298,716
CNOOC Ltd. ................................... Oil, Gas & Consumable Fuels 6,512,000 5,250,874
Denway Motors Ltd. ........................... Automobiles 7,856,730 3,117,311
PetroChina Co. Ltd., H ....................... Oil, Gas & Consumable Fuels 9,832,000 11,464,018
a PetroChina Co. Ltd., H, 144A ................. Oil, Gas & Consumable Fuels 1,856,000 2,164,078
Yanzhou Coal Mining Co. Ltd., H .............. Oil, Gas & Consumable Fuels 2,340,000 2,150,388
---------------
39,819,918
---------------
HONG KONG 0.7%
Dairy Farm International Holdings Ltd. ....... Food & Staples Retailing 581,700 2,234,224
---------------
HUNGARY 4.7%
Magyar Telekom PLC ........................... Diversified Telecommunication Services 616,974 3,022,686
MOL Hungarian Oil and Gas Nyrt ............... Oil, Gas & Consumable Fuels 56,975 6,128,779
Richter Gedeon Nyrt .......................... Pharmaceuticals 30,984 6,036,471
---------------
15,187,936
---------------
INDIA 4.2%
Gail India Ltd. .............................. Gas Utilities 295,286 1,894,517
Hindalco Industries Inc. ..................... Metals & Mining 791,800 2,506,390
Indian Oil Corp. Ltd. ........................ Oil, Gas & Consumable Fuels 104,300 979,221
National Aluminium Co. Ltd. .................. Metals & Mining 613,230 2,914,100
Oil & Natural Gas Corp. Ltd. ................. Oil, Gas & Consumable Fuels 250,395 4,488,720
a Oil & Natural Gas Corp. Ltd., 144A ........... Oil, Gas & Consumable Fuels 45,645 818,258
---------------
13,601,206
---------------
INDONESIA 0.7%
PT Astra International Tbk ................... Automobiles 1,409,000 2,171,895
---------------
MALAYSIA 2.0%
Maxis Communications Bhd ..................... Wireless Telecommunication Services 1,360,500 4,545,980
Tanjong PLC .................................. Independent Power Producers & Energy Traders 465,800 1,915,951
---------------
6,461,931
---------------
MEXICO 3.3%
Kimberly Clark de Mexico SAB de CV, A ........ Household Products 1,572,800 6,593,823
Telefonos de Mexico SA de CV, L, ADR ......... Diversified Telecommunication Services 133,674 3,881,893
---------------
10,475,716
---------------
Semiannual Report | 11
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/RIGHTS VALUE
------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
PAKISTAN 2.0%
Faysal Bank Ltd. ............................. Commercial Banks 2,337,000 $ 2,475,148
Muslim Commercial Bank Ltd. .................. Commercial Banks 363,000 1,746,453
Pakistan Telecommunications Corp., A ......... Diversified Telecommunication Services 2,323,000 2,059,803
---------------
6,281,404
---------------
POLAND 3.2%
b Grupa Lotos SA ............................... Oil, Gas & Consumable Fuels 306,000 4,342,778
Polski Koncern Naftowy Orlen SA .............. Oil, Gas & Consumable Fuels 404,750 5,997,870
---------------
10,340,648
---------------
RUSSIA 10.1%
Gazprom ...................................... Oil, Gas & Consumable Fuels 2 20
Gazprom, ADR ................................. Oil, Gas & Consumable Fuels 231,422 9,413,932
LUKOIL, ADR .................................. Oil, Gas & Consumable Fuels 101,006 8,004,726
LUKOIL, ADR (London Exchange) ................ Oil, Gas & Consumable Fuels 36,510 2,898,894
Mining and Metallurgical Co. Norilsk Nickel .. Metals & Mining 44,679 7,989,632
Mobile Telesystems, ADR ...................... Wireless Telecommunication Services 77,300 3,965,490
---------------
32,272,694
---------------
SOUTH AFRICA 7.9%
Edgars Consolidated Stores Ltd. .............. Specialty Retail 466,251 2,857,767
b Imperial Holdings Ltd. ....................... Air Freight & Logistics 84,630 1,921,418
JD Group Ltd. ................................ Specialty Retail 163,080 2,046,100
MTN Group Ltd. ............................... Wireless Telecommunication Services 241,400 2,938,086
Old Mutual PLC ............................... Insurance 1,835,260 6,326,209
Remgro Ltd. .................................. Diversified Financial Services 389,570 9,279,097
---------------
25,368,677
---------------
SOUTH KOREA 7.8%
Hyundai Development Co. ...................... Construction & Engineering 104,630 6,331,719
Kangwon Land Inc. ............................ Hotels, Restaurants & Leisure 292,418 5,588,556
LG Card Co. Ltd. ............................. Consumer Finance 54,500 3,598,823
SK Corp. ..................................... Oil, Gas & Consumable Fuels 111,070 9,453,155
---------------
24,972,253
---------------
SWEDEN 1.1%
Oriflame Cosmetics SA, SDR ................... Personal Products 91,120 3,524,939
---------------
TAIWAN 5.9%
MediaTek Inc. ................................ Semiconductors & Semiconductor Equipment 200,090 2,155,951
Siliconware Precision Industries Co. ......... Semiconductors & Semiconductor Equipment 1,353,699 2,258,339
Sunplus Technology Co. Ltd. .................. Semiconductors & Semiconductor Equipment 1,897,676 2,134,187
Taiwan Mobile Co. Ltd. ....................... Wireless Telecommunication Services 5,208,372 4,883,555
Taiwan Semiconductor Manufacturing Co. Ltd. .. Semiconductors & Semiconductor Equipment 3,858,717 7,578,124
---------------
19,010,156
---------------
12 | Semiannual Report
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/RIGHTS VALUE
------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
THAILAND 7.0%
Amata Corp. Public Co. Ltd., fgn .............. 3,515,700 $ 1,128,826
Bangkok Bank Public Co. Ltd., fgn ............. Commercial Banks 618,000 1,966,878
Kasikornbank Public Co. Ltd., fgn ............. Commercial Banks 2,251,200 4,184,740
Kiatnakin Bank Public Co. Ltd., fgn ........... Consumer Finance 2,134,600 1,788,603
Land and Houses Public Co. Ltd., fgn .......... Household Durables 6,872,332 1,374,273
PTT Exploration and Production Public Co. .....
Ltd., fgn .................................... Oil, Gas & Consumable Fuels 1,095,600 3,024,047
PTT Public Co. Ltd., fgn ...................... Oil, Gas & Consumable Fuels 578,000 3,386,115
Siam Cement Public Co. Ltd., fgn .............. Construction Materials 608,620 4,079,751
Siam Commercial Bank Public Co. Ltd., fgn ..... Commercial Banks 918,100 1,680,792
b True Corp. Public Co. Ltd., fgn., rts., 3/28/08 Diversified Telecommunication Services 246,818 --
---------------
22,614,025
---------------
TURKEY 9.6%
Akbank TAS .................................... Commercial Banks 2,178,585 14,338,882
Arcelik AS, Br ................................ Household Durables 540,651 3,654,081
Tupras-Turkiye Petrol Rafineleri AS ........... Oil, Gas & Consumable Fuels 427,186 8,238,371
Turkcell Iletisim Hizmetleri AS ............... Wireless Telecommunication Services 525,317 2,658,186
b Turkiye Vakiflar Bankasi T.A.O., D ............ Commercial Banks 442,104 1,082,576
b Turkiye Vakiflar Bankasi T.A.O ................ Commercial Banks 422,055 914,005
---------------
30,886,101
---------------
TOTAL COMMON STOCKS AND RIGHTS
(COST $197,825,877) .......................... 277,730,374
---------------
PREFERRED STOCKS 12.2%
BRAZIL 12.2%
Banco Bradesco SA, ADR, pfd ................... Commercial Banks 208,074 7,655,042
Companhia Vale do Rio Doce, ADR, pfd., A ...... Metals & Mining 441,550 13,047,803
Petroleo Brasileiro SA, ADR, pfd .............. Oil, Gas & Consumable Fuels 167,580 13,671,176
Unibanco - Uniao de Bancos Brasileiros SA,
GDR, pfd ..................................... Commercial Banks 56,700 4,846,716
---------------
TOTAL PREFERRED STOCKS (COST $20,090,627) ..... 39,220,737
---------------
TOTAL LONG TERM INVESTMENTS
(COST $217,916,504) .......................... 316,951,111
---------------
Semiannual Report | 13
Templeton Emerging Markets Fund
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------
SHARES VALUE
------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (COST $6,947,885) 2.2%
MONEY MARKET FUND 2.2%
UNITED STATES 2.2%
c Franklin Institutional Fiduciary Trust Money
Market Portfolio, 4.98% ................................................. 6,947,885 $ 6,947,885
-------------
TOTAL INVESTMENTS (COST $224,864,389)
100.9% .................................................................. 323,898,996
OTHER ASSETS, LESS LIABILITIES (0.9)% ..................................... (2,821,658)
-------------
NET ASSETS 100.0% ......................................................... $ 321,077,338
=============
SELECTED PORTFOLIO ABBREVIATIONS
ADR - American Depository Receipt
GDR - Global Depository Receipt
SDR - Swedish Depository Receipt
a Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering registered under
the Securities Act of 1933. These securities have been deemed liquid under
guidelines approved by the Fund's Board of Trustees. At February 28, 2007,
the aggregate value of these securities was $2,982,336, representing 0.93%
of net assets.
b Non-income producing for the twelve months ended February 28, 2007.
c See Note 8 regarding investments in Franklin Institutional Fiduciary Trust
Money Market Portfolio.
14 | 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 28, 2007 (unaudited)
Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................................. $ 217,916,504
Cost - Sweep Money Fund (Note 8) ........................................ 6,947,885
-------------
Total cost of investments ............................................... $ 224,864,389
=============
Value - Unaffiliated issuers ............................................ $ 316,951,111
Value - Sweep Money Fund (Note 8) ....................................... 6,947,885
-------------
Total value of investments .............................................. 323,898,996
Foreign currency, at value (cost $551,209) .............................. 547,330
Receivables:
Investment securities sold .............................................. 2,752
Dividends ............................................................... 836,757
Foreign tax ............................................................. 22,249
-------------
Total assets ...................................................... 325,308,084
-------------
Liabilities:
Payables:
Investment securities purchased ......................................... 3,648,829
Affiliates .............................................................. 346,836
Funds advanced by custodian .............................................. 11,063
Accrued expenses and other liabilities ................................... 224,018
-------------
Total liabilities ................................................. 4,230,746
-------------
Net assets, at value ........................................... $ 321,077,338
=============
Net assets consist of:
Paid-in capital .......................................................... $ 212,280,052
Distributions in excess of net investment income ......................... (8,591,007)
Net unrealized appreciation (depreciation) ............................... 99,056,001
Accumulated net realized gain (loss) ..................................... 18,332,292
-------------
Net assets, at value ........................................... $ 321,077,338
=============
Shares outstanding ........................................................ 18,073,033
=============
Net asset value per share ................................................. $ 17.77
=============
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 15
Templeton Emerging Markets Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended February 28, 2007 (unaudited)
Investment income:
Dividends (net of foreign taxes of $304,522)
Unaffiliated issuers .................................................... $ 3,438,143
Sweep Money Fund (Note 8) ............................................... 1,190,173
Interest (net of foreign taxes of $4,968) ................................ 28,690
------------
Total investment income ........................................... 4,657,006
------------
Expenses:
Management fees (Note 3a) ................................................ 2,134,147
Administrative fees (Note 3b) ............................................ 258,780
Transfer agent fees ...................................................... 30,187
Custodian fees (Note 4) .................................................. 198,216
Reports to shareholders .................................................. 18,796
Registration and filing fees ............................................. 13,436
Professional fees ........................................................ 25,528
Trustees' fees and expenses .............................................. 18,474
Other .................................................................... 12,123
------------
Total expenses .................................................... 2,709,687
Expense reductions (Note 4) ....................................... (716)
------------
Net expenses .................................................... 2,708,971
------------
Net investment income ......................................... 1,948,035
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................. 46,364,025
Foreign currency transactions ........................................... 149,141
------------
Net realized gain (loss) ........................................ 46,513,166
------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................. (4,465,819)
Translation of assets and liabilities denominated in foreign currencies . 58,402
------------
Net unrealized depreciation ..................................... (4,407,417)
------------
Net realized and unrealized gain (loss) ................................... 42,105,749
------------
Net increase (decrease) in net assets resulting from operations ........... $ 44,053,784
============
16 | 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 28, 2007 YEAR ENDED
(UNAUDITED) AUGUST 31, 2006
----------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 1,948,035 $ 5,809,366
Net realized gain (loss) from investments and foreign currency transactions ............ 46,513,166 58,749,675
Net change in unrealized appreciation (depreciation) on investments, translation
of assets and liabilities denominated in foreign currencies, and deferred taxes (4,407,417) 16,706,575
--------------------------------
Net increase (decrease) in net assets resulting from operations .................. 44,053,784 81,265,616
--------------------------------
Distributions to shareholders from:
Net investment income .................................................................. (11,407,091) (6,873,880)
Net realized gains ..................................................................... (82,673,976) (28,486,651)
--------------------------------
Total distributions to shareholders ..................................................... (94,081,067) (35,360,531)
--------------------------------
Capital share transactions: (Note 2) .................................................... 4,555,295 2,403,830
--------------------------------
Net increase (decrease) in net assets ............................................ (45,471,988) 48,308,915
Net assets:
Beginning of period .................................................................... 366,549,326 318,240,411
--------------------------------
End of period .......................................................................... $ 321,077,338 $ 366,549,326
================================
Distributions in excess of net investment income / Undistributed net investment income
included in net assets:
End of period ........................................................................... $ (8,591,007) $ 868,049
================================
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 17
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Emerging Markets Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, (the 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.
18 | Semiannual Report
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. FOREIGN CURRENCY CONTRACTS
When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified date. Realized and unrealized gains and losses 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 | 19
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (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.
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.
20 | Semiannual Report
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At February 28, 2007, there were an unlimited number of shares authorized
(without par value). During the period ended February 28, 2007, 243,729 shares
were issued for $4,555,295 from reinvested distributions. During the year ended
August 31, 2006, 132,985 shares were issued for $2,403,830 from reinvested
distributions.
The Board of the Fund 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, 2006 and February 28,
2007, there were no share repurchases.
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 Fund pays an investment management fee to TAML based on the average daily
net assets of the Funds 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 28, 2007, the
custodian fees were reduced as noted in the Statement of Operations.
Semiannual Report | 21
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
For tax purposes, realized currency 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, 2006, the Fund deferred realized currency losses of
$203,431.
At February 28, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments ........................................... $ 231,294,907
=============
Unrealized appreciation ....................................... $ 95,086,518
Unrealized depreciation ....................................... (2,482,429)
-------------
Net unrealized appreciation (depreciation) .................... $ 92,604,089
=============
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions, passive foreign
investment company shares, and foreign taxes on sales of securities.
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
sales of securities.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
period ended February 28, 2007, aggregated $74,651,282 and $161,556,058,
respectively.
7. 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.
8. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Franklin Advisers, Inc. (an affiliate of the investment manager). Management
fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in
an amount not to exceed the management and administrative fees paid by the Sweep
Money Fund.
22 | Semiannual Report
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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 23, 2006, the SEC approved the proposed plan of distribution for the
marketing support settlement, and disbursement of the settlement monies to the
designated funds, in accordance with the terms and conditions of that settlement
and plan, was completed in September 2006. The Fund did not participate in that
settlement.
The plan of distribution for the market timing settlement is currently under
review by the SEC staff. After publication of notice of the plan and a 30-day
comment period, the proposed plan of distribution will be submitted to the SEC
for approval. Following the SEC's approval of the plan of distribution, with
modifications as appropriate, distribution of the settlement monies will begin
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, as well as to allegedly excessive commissions and
advisory and distribution fees.
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 Fund, it is
committed to making the Fund or its shareholders whole, as appropriate.
Semiannual Report | 23
Templeton Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. NEW ACCOUNTING PRONOUNCEMENTS
In July 2006, the 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"), which 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. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission extended the implementation date to no later than the last net asset
value calculation in the first semi-annual reporting period in 2007. The Fund is
currently evaluating the impact, if any, of applying the various provisions of
FIN 48.
In September 2006, 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.
24 | Semiannual Report
Templeton Emerging Markets Fund
ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 23, 2007
The Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Fort Lauderdale, Florida, on February 23, 2007. The
purpose of the meeting was to elect five Trustees of the Fund. At the meeting,
the following persons were elected by the shareholders to serve as Trustees of
the Fund: Charles B. Johnson, Gregory E. Johnson, Frank A. Olson, Constantine D.
Tseretopoulos 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 five (5) Trustees:
-----------------------------------------------------------------------------------------------
% OF % OF
SHARES SHARES
% OF PRESENT % OF PRESENT
OUTSTANDING AND OUTSTANDING AND
TERM EXPIRING 2010 FOR SHARES VOTING WITHHELD SHARES VOTING
-----------------------------------------------------------------------------------------------
Charles B. Johnson ...... 13,179,614 72.92% 95.37% 639,207 3.54% 4.63%
Gregory E. Johnson ...... 13,171,170 72.88% 95.31% 647,651 3.58% 4.69%
Frank A. Olson .......... 13,147,124 72.74% 95.14% 671,697 3.72% 4.86%
Constantine D ...........
Tseretopoulos ........... 13,174,653 72.90% 95.34% 644,168 3.56% 4.66%
-----------------------------------------------------------------------------------------------
TERM EXPIRING 2009
-----------------------------------------------------------------------------------------------
Robert E. Wade .......... 13,188,661 72.97% 95.44% 630,160 3.49% 4.56%
* Harris J. Ashton, Frank J. Crothers, Edith E. Holiday, David W. Niemiec,
and Larry D. Thompson are Trustees of the Fund who are currently serving
and whose terms of office continued after the Annual Meeting of
Shareholders.
Semiannual Report | 25
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;
Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938, will
provide additional Plan information upon request.
Whenever the Fund declares dividends in either cash or shares of the Fund, if
the market price is equal to or exceeds net asset value at the valuation date,
the participant will receive the dividends entirely in shares at a price equal
to the net asset value, but not less than 95% of the then current market price
of the Fund's shares. If the market price is lower than net asset value or if
dividends and/or capital gains distributions are payable only in cash, the
participant will receive shares purchased on the New York Stock Exchange or
otherwise on the open market.
A participant has the option of submitting additional cash payments to Mellon
Bank, N.A. (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 Mellon Investor 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 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 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 Mellon Investor Services, P.O. Box
3338, South Hackensack, NJ 07606-1938. Upon withdrawal, the participant will
receive, without charge, share certificates issued in the participant's name for
all full shares held by the Plan 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.
26 | Semiannual Report
Templeton Emerging Markets Fund
TRANSFER AGENT
Mellon Investor Services LLC
480 Washington Boulevard
Jersey City, NJ 07310
1-800-416-5585
WWW.MELLONINVESTOR.COM
SHAREHOLDER INFORMATION
Shares of Templeton Emerging Markets Fund are traded on the New York Stock
Exchange under the symbol "EMF." Information about the net asset value and the
market price is published each Monday in the WALL STREET JOURNAL, weekly in
BARRON'S and each Saturday in THE NEW YORK TIMES and other newspapers. Daily
market prices for the Fund's shares are published in the "New York Stock
Exchange Composite Transactions" section of newspapers.
For current information about dividends and shareholder accounts, call
1-800-416-5585. Registered shareholders can access their Fund account on-line
with Investor ServiceDirect(R). For information go to Mellon Investor Services'
web site at https://vault.melloninvestor.com/isd and follow the instructions.
The daily closing net asset value as of the previous business day may be
obtained when available by calling Franklin Templeton Fund Information after 7
a.m. Pacific time any business day at 1-800/DIAL BEN(R) (1-800/342-5236). The
Fund's net asset value and dividends are also listed on the NASDAQ Stock Market,
Inc.'s Mutual Fund Quotation Service ("NASDAQ MFQS").
Shareholders not receiving copies of 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.
Semiannual Report | 27
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, 2006. Additionally, the Fund expects to file, on or
about April 30, 2007, such certifications with its Form N-CSRS for the six
months ended February 28, 2007.
28 | Semiannual Report
Literature Request
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) 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.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European 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 International (Ex EM) Fund 1
GLOBAL
Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1
VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund
BLEND
Franklin Balanced Fund
Franklin Blue Chip Fund 1
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Global Real Estate Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
RETIREMENT TARGET FUNDS
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 4
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund 5
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund 4
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 4
Templeton Global Bond Fund
Templeton Income Fund
TAX-FREE INCOME 6
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income
Fund Insured Tax-Free Income Fund 7
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama Michigan 7
Arizona Minnesota 7
California 8 Missouri
Colorado New Jersey
Connecticut New York 8
Florida 8 North Carolina
Georgia Ohio 7
Kentucky Oregon
Louisiana Pennsylvania
Maryland Tennessee
Massachusetts 7 Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust 9
1. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
2. The fund is only open to existing shareholders and select retirement
plans.
3. The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.
4. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
5. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy
remained the same.
6. For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
7. Portfolio of insured municipal securities.
8. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).
9. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
01/07 Not part of the semiannual report
[LOGO](R) 100 Fountain Parkway
FRANKLIN TEMPLETON P.O. Box 33030
INVESTMENTS St. Petersburg, FL 33733-8030
SEMIANNUAL REPORT
TEMPLETON EMERGING MARKETS FUND
INVESTMENT MANAGER
Templeton Asset Management Ltd.
TRANSFER AGENT
Mellon Investor Services LLC
P.O. Box 3315
South Hackensack, NJ 07606-1915
Toll free number: 1-800/416-5585
Hearing Impaired phone number: 1-800/231-5469
Foreign Shareholders phone number: 201/680-6578
www.melloninvestor.com/isd
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political and other factors. The Fund and its investors are not protected from
such losses by the investment manager. Therefore, investors who cannot accept
this risk should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
TLEMF S2007 04/07
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 experts are David W. Niemiec and Frank
A. Olson, they are "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,
Frank A. Olson 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 Institutional
Shareholder Services (ISS), 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 ISS' and/or Glass Lewis' analyses are thoroughly reviewed and
considered in making a final voting decision, the manager does not consider
recommendations from ISS, 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
will 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 ISS, 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. Where 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 trustees or a committee of the
board.
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 ISS 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 and reflect the 12-month period beginning July 1,
2005, and ending June 30, 2006.
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 Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TEMPLETON EMERGING MARKETS FUND
By /s/JIMMY D. GAMBILL
--------------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: April 26, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/JIMMY D. GAMBILL
-------------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: April 26, 2007
By /s/GALEN G. VETTER
-------------------------
Galen G. Vetter
Chief Financial Officer
Date: April 26, 2007