N-30D 1 f7556414.txt EMERGING MKTS FUND ANNUAL REPORT DTD 8/31/01 ANNUAL REPORT TEMPLETON EMERGING MARKETS FUND, INC. AUGUST 31, 2001 [FRANKLIN TEMPLETON INVESTMENTS LOGO] [PHOTO OF MARK MOBIUS] MARK MOBIUS President Templeton Emerging Markets Fund, Inc. Mark Mobius has been living in emerging market countries since earning his Ph.D. in economics and political science at Massachusetts Institute of Technology in 1964. During his extensive travels, he has acquired a thorough knowledge of business practices and customs unique to developing nations. SHAREHOLDER LETTER -------------------------------------------------------------------------------- Your Fund's Goal: Templeton Emerging Markets Fund seeks long-term capital appreciation by investing primarily in emerging country equity securities. -------------------------------------------------------------------------------- Dear Shareholder: This annual report for Templeton Emerging Markets Fund covers the fiscal year ended August 31, 2001. After experiencing varying levels of economic recovery in the first half of the reporting period, many emerging markets began to struggle against a growing trend of fewer exports, decreasing business investment and increasingly wary consumers. Other constraining factors included generally rising unemployment and lower industrial production in the face of falling demand. Most foreign government central banks moved to stimulate foundering economies with monetary easing policies, but remained hamstrung by these and other factors. Although some of the problems were endemic to emerging markets, much of the general deceleration began as ripple effects from the U.S. and other major economies that weakened during the year under review. The dollar value, number of shares or principal value, and complete legal titles of all portfolio holdings are listed in the Fund's Statement of Investments (SOI). The SOI begins on page 11. CONTENTS Shareholder Letter ............................................................1 Performance Summary ...........................................................8 Important Notice to Shareholders ..............................................9 Financial Highlights & Statement of Investments ..............................10 Financial Statements .........................................................17 Notes to Financial Statements ................................................20 Independent Auditors' Report .................................................23 [FUND CATEGORY PYRAMID GRAPHIC] GEOGRAPHIC DISTRIBUTION Based on Total Net Assets 8/31/01 [PIE CHART] Asia 35.2% Latin America 16.6% Mid-East/Africa 15.4% Europe 11.8% Short-Term Investments & Other Net Assets 21.0%
Although Asia's economies are not completely dependent on the U.S., slowing U.S. growth and falling demand for Asian exports nonetheless contributed to declines in most Asian economic growth rates in terms of gross domestic product (GDP) during the latter half of the reporting period. In fact some economies, such as Hong Kong's and Thailand's, actually contracted in 2001's second quarter. Companies in most Asian markets did, however, continue to expand trade relations, creating greater independence from U.S. influence. As further signs of progress, many Asian governments moved to abandon their pegged exchange rates, decreased their short-term debt and built up large current account surpluses and foreign exchange reserves, all of which help to provide cushion from an economic downturn. In Latin America, declining exports and capital investment squelched economic progress. Argentina entered its fourth year of recession amid uncertainties about its debt burden and the sustainability of the peso's peg to the U.S. dollar. Concerns about the possible repercussions of Argentina's difficulties that might affect capital flows into Brazil put significant downward pressure on the real and depressed Brazilian equity valuations. Energy rationing further dampened Brazil's economic activities, and led its Central Bank to lower the 2001 GDP growth forecast to 2.8% from 4.3%.(1) The bright spot, however, was Mexico, where foreign direct investment remained strong and GDP growth, although slowing in line with that of the U.S., improved substantially. The proposed takeover of Banacci by Citigroup was also a highlight, and would mean a fresh inflow of approximately US$6.5 billion into Mexico.(2) We believe that other companies may follow Banacci's path of improving 1. Source: Brazilian Finance Ministry, Brazilian Macroeconomic Outlook Report, 6/29/01. 2. Source: Business Wire, 5/17/01. 2 corporate governance, which would benefit minority and majority shareholders alike. In South Africa, economic growth slowed as a result of a greater-than-expected 5.8% decline in agricultural production between first quarter 2001 and fourth quarter 2000, and second quarter 2001 GDP eventually fell to an annualized rate of 2.3% compared to 2.9% one year earlier.(3) Finally, in Eastern Europe aspirations of convergence to European Monetary Union standards continued to push most markets to strive toward positive change. However, questions about Turkey's ability to raise funds and support its financial system caused unease in the markets. Decelerating growth in both developed and emerging markets, continued weakness in the technology sector and investor concerns over the actual delivery of company earnings took a toll on stock markets across the globe. Most markets fell during the year under review and the Morgan Stanley Capital International (MSCI(R)) Emerging Markets Free Index, a leading benchmark of emerging market performance, returned -27.82% in U.S. dollar terms for the 12 months under review.(4) Within this environment, the Fund posted one-year cumulative total returns of -9.17% in market price terms and -21.55% in net asset value terms as of August 31, 2001, as shown in the Performance Summary on page 8. During the 12-month reporting period, our value-focused investment strategy led us to divest our holdings in the TOP 10 COUNTRIES Based on Equity Investments 8/31/01
% OF TOTAL NET ASSETS -------------------------------------------------------------------------------- South Africa 14.0% Mexico 11.1% Thailand 5.3% Turkey 4.8% Indonesia 4.7% South Korea 4.7% Hong Kong 4.5% Brazil 4.1% China 4.1% Russia 2.9%
3. Source: South Africa Central Statistical Office. 4. Source: Standard & Poor's Micropal. The unmanaged MSCI Emerging Markets Free Index is a market-capitalization weighted index comprising 26 of the 48 countries in the MSCI universe. "Free" denotes investment opportunities in the developing world available to foreign investors. The index includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Fund's portfolio. 3 Shanghai B share market and accumulate positions in China H (Hong Kong-listed Chinese companies) and red chip (Hong Kong-registered firms with significant exposure to China) share markets as we deemed them undervalued. We also reduced our positions in Korea, Singapore and Hong Kong, allowing us to take advantage of the value found in China-related shares. We believe that China's imminent entry into the World Trade Organization (WTO) and the hosting of the Olympic Games in 2008 could lead to greater opportunities for Chinese companies' earnings growth. We sold all positions in Israel due to continued regional tensions, and exited Greece by selling the Fund's investment in telecommunications company Hellenic Telecom, which we deemed overvalued at that time. Finally, we significantly reduced our exposure to Brazil due to political uncertainty surrounding upcoming elections and the contagion emanating from Argentina's bleak situation. As a result, the Fund's cash levels rose to 21% at period-end. While our objective is always to be fully invested, short-term investments will typically increase when we are adjusting the portfolio. In terms of industry exposure, banking stocks dominated the portfolio at period-end (10.0% of total net assets), followed by oil and gas (9.6%) and diversified telecommunication services (7.3%). Although we are value oriented investors focusing on companies rather than top-down analyses of economies or sectors, we also take into account prospects of industries and economies but do not intentionally over- or underweight any sector or country. Due to the aforementioned portfolio changes and varying performances of individual stocks, the following holdings fell out of the Fund's top 10 list during the Fund's fiscal year: South 4 Africa's Sasol and Anglo American, Grupo Financiero Banamex (Mexico) and Korea Electric Power (South Korea). South Africa's Remgro and South African Breweries, Kimberly Clark (Mexico) and PT Telekomunikasi Indonesia (Indonesia) replaced them as of August 31, 2001. Recent tragic events in New York have impacted financial markets worldwide and are sure to cause short-term volatility. Although this emphasizes the unexpected risks all investors must face in both developed and emerging markets, history shows us that sustained calm assessment of investment opportunities and purchases of stocks when there is excessive selling often result in enhanced portfolio performance. We will continue this process to ensure that the portfolio contains what we believe are the very best investment bargains found in emerging markets. Looking forward, we are optimistic about the Fund's long-term prospects. Lately, we have seen governments of many nations making positive efforts to provide new stimulus to their respective stock markets. For example, in Taiwan, the Finance Ministry announced important reforms that include the relaxation of some qualified foreign institutional investors (QFII) requirements. These changes reduced the initial required investment from US$1 billion to US$200 million and lowered from three years to one year the requirement for companies' experience in asset management. In our view, this continued deregulation and simplification of QFII requirements was positive news for foreign investors and Taiwan's stock market. We believe government actions such as these could support the long-term performance of some emerging markets and help TOP 10 EQUITY HOLDINGS 8/31/01
COMPANY % OF TOTAL INDUSTRY, COUNTRY NET ASSETS -------------------------------------------------------------------------------- Cemex SA 4.8% Construction Materials, Mexico South African Breweries PLC 3.3% Beverages, South Africa Kimberly Clark de Mexico SA de CV, A 2.7% Paper & Forest Products, Mexico Telefonos de Mexico SA de CV (Telmex), ADR 2.4% Diversified Telecommunication Services, Mexico PT Telekomunikasi Indonesia (Persero), B 2.1% Diversified Telecommunication Services, Indonesia Remgro Ltd. 1.9% Industrial Conglomerates, South Africa Cheung Kong Holdings Ltd. 1.5% Real Estate, Hong Kong Banco Bradesco SA, pfd. 1.5% Banks, Brazil Samsung Electronics Co. Ltd. 1.4% Semiconductor Equipment & Products, South Korea Barloworld Ltd. 1.4% Industrial Conglomerates, South Africa
5 increase investor confidence. Although volatility in one market may affect the performance of another, it should be noted that each country's internal situation differs. The movement of a country's stock market is dependent on a wide range of factors, including political and financial stability, implementation of reforms, ability to attract foreign investments, corporate governance standards, positive economic performances and appropriate fiscal and monetary policies. The list is really endless. While emerging market economies' growth rates are decelerating, they are still growing at roughly 2.6 times the rate of developed countries. Moreover, we continue to find stocks with solid fundamentals trading at what we consider to be appealing valuations. Although many emerging markets have fallen to historically low levels, we believe good upside potential still exists in some countries. Furthermore, many countries have embarked on key reform efforts, providing impetus for investors to return. Thus, we believe that we continue to position the Fund to benefit from any expected recovery. It is important to note that investing in foreign securities involves special risks, such as adverse economic, social and political developments in the countries where the Fund invests, as well as market and currency volatility. Emerging markets securities involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Investing in any emerging market means accepting a certain amount of volatility and, in some cases, the consequences of severe market corrections. For example, Hong Kong's equity market has increased 651% in the last 15 years, 6 but has suffered 7 quarterly declines of more than 15% each during that time.(5) While short-term volatility can be disconcerting, declines exceeding 50% are not unusual in emerging markets. Thank you for your continued participation in Templeton Emerging Markets Fund. We welcome your comments and suggestions. Sincerely, /s/ MARK MOBIUS Mark Mobius President Templeton Emerging Markets Fund, Inc. 5. Source: Hong Kong's Hang Seng Index. Based on quarterly percentage price change over 15 years ended 6/30/01. Market return is measured in U.S. dollars and does not include reinvested dividends. The unmanaged Hang Seng Index is a capitalization-weighted index of 33 companies that represent approximately 70% of the total market capitalization of the Stock Exchange of Hong Kong. The components of the index are divided into four subindexes: Finance, Utilities, Properties and Commerce & Industry. -------------------------------------------------------------------------------- This discussion reflects our views, opinions and portfolio holdings as of August 31, 2001, the end of the reporting period. The information provided is not a complete analysis of every aspect of any country, industry, security or the Fund. Our strategies and the Fund's portfolio composition will change depending on market and economic conditions. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. -------------------------------------------------------------------------------- 7 PERFORMANCE SUMMARY AS OF 8/31/01 Distributions and returns will vary based on earnings of the Fund's portfolio and any profits realized from the sale of the portfolio's securities, as well as the level of the Fund's operating expenses. All total returns include reinvested distributions according to the terms specified in the Fund's dividend reinvestment and cash purchase plan and do not reflect any sales charges paid at inception or brokerage commissions paid on secondary market purchases. PRICE AND DISTRIBUTION INFORMATION
CHANGE 8/31/01 8/31/00 -------------------------------------------------------------------------------- Net Asset Value -$2.58 $8.86 $ 11.44 Market Price (NYSE) -$0.9625 $8.35 $9.3125 DISTRIBUTIONS (9/1/00 - 8/31/01) Dividend Income $0.1029
PERFORMANCE
1-YEAR 5-YEAR 10-YEAR -------------------------------------------------------------------------------- Cumulative Total Return(1) Based on change in net asset value -21.55% -1.87% +119.66% Based on change in market price -9.17% -12.92% +93.57% Average Annual Total Return(1) Based on change in net asset value -21.55% -0.38% +8.19% Based on change in market price -9.17% -2.73% +6.83%
Templeton Emerging Markets Fund, Inc. paid distributions derived from long-term capital gains of 10.29 cents ($0.1029) per share in January 2001. The Fund hereby designates such distributions as capital gain dividends per Internal Revenue Code Section 852 (b)(3). 1. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. -------------------------------------------------------------------------------- Ongoing stock market volatility can dramatically change the Fund's short-term performance; current results may differ. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, currency volatility, and the economic, social and political climates of countries where the Fund invests. Emerging markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. You may have a gain or loss when you sell your shares. -------------------------------------------------------------------------------- For updated performance figures, please call Franklin Templeton Investments at 1-800/342-5236. Past performance does not guarantee future results. 8 IMPORTANT NOTICE TO SHAREHOLDERS -------------------------------------------------------------------------------- NAMES RULE. The U.S. Securities and Exchange Commission adopted new Rule 35d-1 under the Investment Company Act of 1940, as amended (the "Names Rule"), requiring a fund with a name suggesting a focus in a particular type of investment, in a particular industry, or in a particular geographic region, to invest, under normal circumstances, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in the type of investment, industry or geographic region suggested by its name. Consistent with the Names Rule, in July 2001, the Fund's Board of Directors adopted a non-fundamental investment policy to invest, under normal circumstances, at least 80% of the Fund's net assets in "emerging country equity securities," effective July 31, 2002. In accordance with the Names Rule, the Fund has also adopted a non-fundamental policy to provide shareholders with 60 days' advance notice of any change to the foregoing 80% investment policy. The Fund's current non-fundamental investment policy is to invest at least 75% of its total assets in "emerging country equity securities." SHARE REPURCHASE PROGRAM. On November 28, 2000, the Board of Directors of the Fund authorized management to implement an open-market share repurchase program pursuant to which the Fund may purchase, from time to time, shares of the Fund's common stock in open-market transactions, at the discretion of management. This authorization remains in effect. -------------------------------------------------------------------------------- 9 TEMPLETON EMERGING MARKETS FUND, INC. Financial Highlights
YEAR ENDED AUGUST 31, -------------------------------------------------------- 2001 2000 1999 1998 1997 -------------------------------------------------------- PER SHARE OPERATING PERFORMANCE+ (For a share outstanding throughout the year) Net asset value, beginning of year......................... $11.44 $11.60 $10.85 $20.67 $17.26 -------------------------------------------------------- Income from investment operations: Net investment income..................................... .12 .13 .13 .26 .27 Net realized and unrealized gains (losses)................ (2.60) (.16) 5.17 (7.64) 4.27 -------------------------------------------------------- Total from investment operations........................... (2.48) (.03) 5.30 (7.38) 4.54 -------------------------------------------------------- Less distributions from: Net investment income..................................... (.10) (.10) (.29) (.26) (.21) Net realized gains........................................ -- (.03) (4.26) (2.18) (.92) -------------------------------------------------------- (.10) (.13) (4.55) (2.44) (1.13) -------------------------------------------------------- Net asset value, end of year............................... $8.86 $11.44 $11.60 $10.85 $20.67 ======================================================== Market Value, end of year(a)............................... $8.3500 $9.3125 $12.2500 $9.1875 $23.1250 ======================================================== Total Return (based on market value per share)............. (9.17)% (23.10)% 99.91% (54.35)% 33.81% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's)............................ $156,378 $201,965 $204,804 $182,352 $342,002 Ratios to average net assets: Expenses.................................................. 1.67% 1.68% 1.63% 1.70% 1.67% Net investment income..................................... 1.28% 1.09% 1.18% 1.58% 1.38% Portfolio turnover rate.................................... 63.64% 81.66% 45.00% 40.51% 12.60%
+Based on average weighted shares outstanding effective year ended August 31, 1999. (a) Based on the last sale on the New York Stock Exchange. See Notes to Financial Statements. 10 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2001
SHARES/ INDUSTRY WARRANTS VALUE ---------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 79.0% ARGENTINA 1.0% *BBVA Banco Frances SA, ADR...................... Banks 5,200 $ 70,824 *Capex SA, A..................................... Electric Utilities 26,514 63,375 Grupo Financiero Galicia SA...................... Banks 192,000 195,860 *Molinos Rio de la Plata SA, B................... Food Products 113,832 146,289 Quilmes Industrial SA, B, ADR.................... Beverages 74,135 1,081,630 ------------ 1,557,978 ------------ AUSTRIA 2.9% BBAG Oesterreichische Brau-Beteiligungs AG....... Beverages 7,607 309,214 Erste Bank Der Oester Sparkassen AG.............. Banks 34,970 1,857,294 Mayr-Melnhof Karton AG........................... Containers & Packaging 11,710 575,980 OMV AG........................................... Oil & Gas 17,768 1,726,929 *Telekom Austria AG.............................. Diversified Telecommunication Services 11,660 76,364 ------------ 4,545,781 ------------ BRAZIL 4.1% Aracruz Celulose SA, ADR......................... Paper & Forest Products 8,180 140,287 Banco Bradesco SA, pfd. ......................... Banks 530,951,001 2,393,547 Centrais Eletricas Brasileiras SA (Eletrobras)... Electric Utilities 94,818,000 1,356,665 Centrais Eletricas Brasileiras SA (Eletrobras), B, pfd. ....................................... Electric Utilities 140,896,770 1,767,423 Companhia Paranaense de Energia-Copel, B, pfd. .......................................... Electric Utilities 81,895,000 589,092 Duratex SA, pfd. ................................ Building Products 8,256,910 137,561 ------------ 6,384,575 ------------ *CHILE Madeco Manufacturera de Cobre SA, ADR............ Metals & Mining 12,204 52,477 ------------ CHINA 4.1% Beijing Capital International Airport Co. Ltd. .......................................... Transportation Infrastructure 232,000 56,514 Beijing Datang Power Generation Co. Ltd., H...... Electric Utilities 842,000 283,373 *Beijing North Star.............................. Real Estate 80,000 14,052 China Eastern Airline Corp. Ltd., H.............. Airlines 7,056,000 859,407 China Petroleum & Chemical Corp., H.............. Oil & Gas 8,540,000 1,248,186 China Resources Enterprise Ltd. ................. Distributors 834,000 973,025 China Shipping Development Co. Ltd., H........... Marine 712,000 111,367 *China Southern Airlines Co. Ltd., H............. Airlines 2,918,000 776,282 PetroChina Co. Ltd., H........................... Oil & Gas 7,844,000 1,599,010 Sinopec Beijing Yanhua Petrochemical Co. Ltd. ... Chemicals 536,000 43,981 Sinopec Shanghai Petrochemical Co. Ltd. ......... Chemicals 3,374,000 281,174 Sinopec Zhenhai Refining & Chemical Co. Ltd., H.............................................. Oil & Gas 718,000 107,703 Tsingtao Brewery Co. Ltd., H..................... Beverages 30,000 8,654 ------------ 6,362,728 ------------
11 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2001 (CONT.)
SHARES/ INDUSTRY WARRANTS VALUE ---------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) COLOMBIA .4% Cementos Argos SA................................ Construction Materials 205,928 $ 498,197 Compania Nacional de Chocolates SA............... Food Products 62,837 168,312 ------------ 666,509 ------------ CROATIA .5% Pliva D D, GDR, Reg S............................ Pharmaceuticals 77,600 787,640 ------------ CZECH REPUBLIC .8% CEZ AS........................................... Electric Utilities 542,650 1,119,839 Philip Morris CR AS.............................. Tobacco 435 72,692 ------------ 1,192,531 ------------ EGYPT 1.4% *Al Ahram Beverages Co., GDR..................... Beverages 41,817 365,899 Commercial International Bank Ltd. .............. Banks 115,385 1,010,575 *Orascom Telecom................................. Wireless Telecommunication Services 48,900 211,788 Suez Cement Co................................... Construction Materials 61,450 529,402 ------------ 2,117,664 ------------ ESTONIA .4% Hansabank Ltd. .................................. Banks 77,150 680,471 ------------ FINLAND .2% Hartwall OYJ, A.................................. Beverages 19,700 375,783 ------------ HONG KONG 4.5% Beijing Enterprises Holdings Ltd. ............... Industrial Conglomerates 144,000 148,619 Cheung Kong Holdings Ltd. ....................... Real Estate 261,000 2,409,293 China Merchants Holdings International Co. Ltd. .......................................... Industrial Conglomerates 1,113,000 706,345 China Travel International Investment Hong Kong Ltd. .......................................... Hotels Restaurants & Leisure 548,000 104,685 Citic Pacific Ltd. .............................. Industrial Conglomerates 760,000 1,685,684 Cosco Pacific Ltd. .............................. Transportation Infrastructure 2,066,000 1,099,246 Hang Lung Development Co. Ltd. .................. Real Estate 953,000 928,588 Jiangsu Expressway Co. Ltd. ..................... Transportation Infrastructure 120,000 23,385 ------------ 7,105,845 ------------ HUNGARY 1.7% Egis RT.......................................... Pharmaceuticals 6,612 277,074 Gedeon Richter Ltd. ............................. Pharmaceuticals 15,000 864,956 Matav RT......................................... Diversified Telecommunication Services 228,439 579,269 Mol Magyar Olay-Es Gazipari RT................... Oil & Gas 65,150 961,365 ------------ 2,682,664 ------------ INDIA 1.1% Bajaj Auto Ltd. ................................. Automobiles 4,800 25,965 BSES Ltd. ....................................... Electric Utilities 40,160 154,157
12 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2001 (CONT.)
SHARES/ INDUSTRY WARRANTS VALUE ---------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) INDIA (CONT.) Grasim Industries Ltd. .......................... Industrial Conglomerates 131,442 $ 750,340 Hindustan Petroleum Corporation Ltd. ............ Oil & Gas 66,291 180,915 ICICI Bank Ltd. ................................. Banks 16,800 37,812 Tata Power Co. Ltd. ............................. Electric Utilities 71,998 178,468 Videsh Sanchar Nigam Ltd. ....................... Diversified Telecommunication Services 56,326 337,669 Zee Telefilms Ltd. .............................. Media 37,500 92,199 ------------ 1,757,525 ------------ INDONESIA 4.7% PT Gudang Garam.................................. Tobacco 418,500 576,102 PT Hanjaya Mandala Sampoerna..................... Tobacco 143,500 272,832 *PT Indocement Tunggal Prakarsa.................. Construction Materials 576,000 82,866 PT Indofoods Sukses Makmur TBK................... Food Products 10,582,750 955,284 PT Indosat TBK................................... Diversified Telecommunication Services 1,392,500 1,453,385 PT Semen Gresik TBK.............................. Construction Materials 569,111 571,519 PT Telekomunikasi Indonesia (Persero), B......... Diversified Telecommunication Services 9,975,460 3,320,463 PT Timah TBK..................................... Metals & Mining 1,014,000 165,901 ------------ 7,398,352 ------------ MALAYSIA .7% Genting Bhd. .................................... Hotels Restaurants & Leisure 365,893 1,011,020 Public Bank Bhd. ................................ Banks 30,000 19,500 Tanjong PLC...................................... Hotels Restaurants & Leisure 16,000 31,158 ------------ 1,061,678 ------------ MEXICO 11.1% Cemex SA......................................... Construction Materials 1,465,261 7,508,896 DESC SA de CV DESC, B............................ Industrial Conglomerates 371,900 191,836 *Grupo Carso SA de CV............................ Industrial Conglomerates 196,000 561,916 *Grupo Financiero Bancomer SA de CV.............. Banks 558,500 469,435 Grupo Mexico SA de CV, B......................... Metals & Mining 295,732 595,735 Kimberly Clark de Mexico SA de CV, A............. Paper & Forest Products 1,344,600 4,197,996 Telefonos de Mexico SA (Telmex), ADR............. Diversified Telecommunication Services 103,912 3,788,632 ------------ 17,314,446 ------------ PERU Credicorp Ltd. .................................. Banks 6,400 59,200 ------------ PHILIPPINES 1.7% *Philippine National Bank........................ Banks 679,360 712,662 San Miguel Corp., B.............................. Beverages 1,769,090 1,925,186 ------------ 2,637,848 ------------
13 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2001 (CONT.)
SHARES/ INDUSTRY WARRANTS VALUE ---------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) POLAND 2.3% *Elektrim SA..................................... Electrical Equipment 148,298 $ 719,791 *Orbis SA........................................ Hotels Restaurants & Leisure 46,300 188,550 Polski Koncern Naftowy Orlen SA.................. Oil & Gas 477,850 2,013,858 Telekomunikacja Polska SA........................ Diversified Telecommunication Services 227,006 696,024 ------------ 3,618,223 ------------ RUSSIA 2.9% GUM Trade House.................................. Multiline Retail 27,000 41,850 Lukoil Holdings, ADR............................. Oil & Gas 34,849 1,489,795 Mosenergo, ADR................................... Electric Utilities 186,160 632,944 Rostelecom, ADR.................................. Diversified Telecommunication Services 160,320 657,312 Rostelecom, pfd. ................................ Diversified Telecommunication Services 95,500 28,340 Unified Energy Systems........................... Electric Utilities 13,537,800 1,463,436 *Vimpel Communications, ADR...................... Wireless Telecommunication Services 13,300 232,883 ------------ 4,546,560 ------------ SINGAPORE 2.9% Cycle & Carriage Ltd. ........................... Specialty Retail 84,306 167,499 DBS Group Holdings Ltd. ......................... Banks 40,000 314,671 First Capital Corp. Ltd. ........................ Real Estate 24,000 15,022 Fraser and Neave Ltd. ........................... Beverages 444,700 1,966,230 Keppel Corp. Ltd. ............................... Diversified Financials 887,000 1,629,859 Sembcorp Marine Ltd. ............................ Machinery 38,000 17,893 Singapore Telecommunications Ltd. ............... Diversified Telecommunication Services 236,000 273,741 United Industrial Corp. Ltd. .................... Real Estate 326,000 149,756 ------------ 4,534,671 ------------ SLOVAK REPUBLIC .1% Slovnaft AS...................................... Oil & Gas 7,600 111,367 ------------ SOUTH AFRICA 14.0% ABSA Group Ltd. ................................. Banks 26,700 123,537 Anglo American PLC............................... Metals & Mining 41,780 602,731 Barloworld Ltd. ................................. Industrial Conglomerates 320,244 2,214,986 Firstrand Ltd. .................................. Banks 1,023,000 1,035,252 *Imperial Holdings Ltd. ......................... Specialty Retail 82,933 678,888 Johnnic Holdings Ltd. ........................... Diversified Financials 500 3,025 Liberty Group Ltd. .............................. Insurance 137,959 929,651 Nampak Ltd. ..................................... Containers & Packaging 18,000 26,693 Nedcor Ltd. ..................................... Banks 17,792 310,709 Old Mutual PLC................................... Insurance 815,760 1,635,803 Remgro Ltd. ..................................... Industrial Conglomerates 421,300 2,983,920 Reunert Ltd. .................................... Electronic Equipment & Instruments 187,000 380,476 Sanlam Ltd. ..................................... Insurance 1,203,000 1,527,112 Sasol Ltd. ...................................... Oil & Gas 236,000 2,189,476
14 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2001 (CONT.)
SHARES/ INDUSTRY WARRANTS VALUE ---------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) SOUTH AFRICA (CONT.) South African Breweries PLC...................... Beverages 692,348 $ 5,125,431 Tiger Brands Ltd. ............................... Food Products 213,333 1,556,519 Tongaat-Hulett Group Ltd. ....................... Food Products 98,681 559,021 ------------ 21,883,230 ------------ SOUTH KOREA 4.7% Cheil Jedang Corp. .............................. Food Products 25,780 776,932 Hyundai Motor Co. Ltd. .......................... Automobiles 17,580 293,115 Kookmin Bank..................................... Banks 25,350 341,307 Korea Electric Power Corp. ...................... Electric Utilities 17,842 316,338 Pohang Iron & Steel Co. Ltd. .................... Metals & Mining 4,150 293,992 Samsung Electro-Mechanics Co. ................... Electronic Equipment & Instruments 10,930 310,147 Samsung Electronics Co. Ltd. .................... Semiconductor Equipment & Products 14,947 2,223,037 Samsung Fire & Marine Insurance Co. Ltd. ........ Insurance 9,000 264,892 *Samsung Heavy Industries Co. Ltd. .............. Machinery 428,448 1,274,444 Samsung SDI Co. Ltd. ............................ Electronic Equipment & Instruments 10,866 450,801 SK Corp. ........................................ Oil & Gas 55,520 564,978 SK Telecom Co. Ltd. ............................. Wireless Telecommunication Services 1,340 236,008 ------------ 7,345,991 ------------ TAIWAN .7% Asustek Computer Inc. ........................... Computers & Peripherals 53,000 193,397 China Motor Co. Ltd. ............................ Automobiles 650 407 Formosa Plastic.................................. Chemicals 238,000 251,578 Hon Hai Precision Industry Co. Ltd. ............. Electronic Equipment & Instruments 3,000 11,599 Ritek Corp. ..................................... Computers & Peripherals 25,800 28,243 *Siliconware Precision Industries Co. Ltd. ...... Semiconductor Equipment & Products 237,000 150,999 *Taiwan Semiconductor Manufacturing Co. ......... Semiconductor Equipment & Products 81,000 150,130 *Yageo Corp. .................................... Electronic Equipment & Instruments 386,000 282,821 ------------ 1,069,174 ------------ THAILAND 5.3% *American Standard Sanitaryware Public Co. Ltd., fgn. .......................................... Building Products 13,300 34,694 *Bangkok Bank Public Co. Ltd., fgn. ............. Banks 734,800 808,388 Electricity Generating Public Co. Ltd., fgn. .... Electric Utilities 112,100 110,612 *Land and House Public Co. Ltd., fgn. ........... Household Durables 399,749 362,708 *Land And House Public Company Ltd., wts., 5/10/08........................................ Household Durables 199,874 63,474 PTT Exploration & Production Public Co. Ltd., fgn. .......................................... Oil & Gas 332,700 882,974 *Shin Corporations Public Co. Ltd., fgn. ........ Wireless Telecommunication Services 250,400 1,147,347 *Siam Cement Public Co. Ltd. .................... Construction Materials 70,165 744,862 *Siam Cement Public Co. Ltd., fgn. .............. Construction Materials 86,065 1,171,351 *Siam Commercial Bank, 144A, 5.25%, fgn., cvt. pfd. .......................................... Banks 2,538,300 1,165,943 Siam Makro Public Co. Ltd., fgn. ................ Multiline Retail 140,100 142,213 *Thai Farmers Bank Public Co. Ltd., fgn. ........ Banks 2,586,100 1,305,222
15 TEMPLETON EMERGING MARKETS FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2001 (CONT.)
SHARES/ INDUSTRY WARRANTS VALUE ---------------------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) THAILAND (CONT.) *Total Access Communication Public Co. Ltd. ..... Diversified Telecommunication Services 101,700 $ 174,924 *United Communications Industry Public Co. Ltd., fgn. .......................................... Communications Equipment 201,000 119,684 ------------ 8,234,396 ------------ TURKEY 4.8% Akbank........................................... Banks 857,498,755 1,877,049 Anadolu Efes Biracilik Ve Malt Sanayii AS........ Beverages 1,365,000 49,301 Arcelik AS, Br................................... Household Durables 109,393,500 694,435 Haci Omer Sabanci Holding AS..................... Diversified Financials 163,315,996 566,035 KOC Holding AS................................... Diversified Financials 54,431,332 1,092,201 Tupras-Turkiye Petrol Rafineleri AS.............. Oil & Gas 85,248,200 1,990,472 *Turkcell Iletisim Hizmetleri AS................. Wireless Telecommunication Services 78,182,336 279,528 *Yapi Ve Kredi Bankasi AS........................ Banks 402,000,000 909,303 ------------ 7,458,324 ------------ TOTAL LONG TERM INVESTMENTS (COST $140,738,268).................................. 123,543,631 ------------ (a)Short Term Investments (Cost $32,421,669) 20.7% Franklin Institutional Fiduciary Trust Money Market Portfolio............................... 32,421,669 32,421,669 ------------ TOTAL INVESTMENTS (COST $173,159,937) 99.7%...... 155,965,300 OTHER ASSETS, LESS LIABILITIES .3%............... 412,559 ------------ TOTAL NET ASSETS 100.0%.......................... $156,377,859 ============
*Non-income producing. (a)The Franklin Institutional Fiduciary Trust Money Market Portfolio is managed by Franklin Advisers Inc., an affiliate of Franklin Resources Inc. See Notes to Financial Statements. 16 TEMPLETON EMERGING MARKETS FUND, INC. Financial Statements STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2001 Assets: Investments in securities, at value (cost $173,159,937).... $155,965,300 Cash....................................................... 203,854 Receivables: Investment securities sold................................ 1,586,239 Dividends and interest.................................... 415,648 ------------ Total assets.......................................... 158,171,041 ------------ Liabilities: Payables: Investment securities purchased........................... 1,393,928 To affiliates............................................. 199,742 Other liability............................................ 70,733 Accrued expenses........................................... 128,779 ------------ Total liabilities..................................... 1,793,182 ------------ Net assets, at value........................................ $156,377,859 ============ Net assets consist of: Undistributed net investment income........................ $ 1,668,883 Net unrealized depreciation................................ (17,265,370) Accumulated net realized loss.............................. (32,819,465) Capital shares............................................. 204,793,811 ------------ Net assets, at value........................................ $156,377,859 ============ Net asset value per share ($156,377,859 / 17,656,437 shares outstanding).............................................. $8.86 ============
See Notes to Financial Statements. 17 TEMPLETON EMERGING MARKETS FUND, INC. Financial Statements (continued) STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2001 Investment Income: (net of foreign taxes of $383,853) Dividends.................................................. $ 4,514,493 Interest................................................... 444,523 ------------ Total investment income............................... $ 4,959,016 Expenses: Management fees (Note 3)................................... 2,106,453 Administrative fees (Note 3)............................... 252,774 Transfer agent fees........................................ 110,000 Custodian fees............................................. 208,200 Registration and filing fees............................... 36,700 Professional fees.......................................... 58,528 Directors' fees and expenses............................... 35,600 ------------ Total expenses........................................ 2,808,255 ------------ Net investment income........................... 2,150,761 ------------ Realized and unrealized losses: Net realized loss from: Investments............................................... (28,180,589) Foreign currency transactions............................. (411,319) ------------ Net realized loss..................................... (28,591,908) Net unrealized depreciation on: Investments............................................... (17,258,385) Translation of assets and liabilities denominated in foreign currencies...................................... (70,733) ------------ Net unrealized depreciation........................... (17,329,118) ------------ Net realized and unrealized loss............................ (45,921,026) ------------ Net decrease in net assets resulting from operations........ $(43,770,265) ============
See Notes to Financial Statements. 18 TEMPLETON EMERGING MARKETS FUND, INC. Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED AUGUST 31, 2001 AND 2000
2001 2000 ------------------------------- Increase (decrease) in net assets: Operations: Net investment income..................................... $ 2,150,761 $ 2,344,394 Net realized gain (loss) from investments and foreign currency transactions.................................... (28,591,908) 6,673,232 Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies............................................... (17,329,118) (9,487,022) ------------------------------- Net decrease in net assets resulting from operations.... (43,770,265) (469,396) Distributions to shareholders from: Net investment income..................................... (1,816,847) (1,820,379) Net realized gains........................................ -- (549,115) ------------------------------- Total distributions to shareholders........................ (1,816,847) (2,369,494) Net decrease in net assets.............................. (45,587,112) (2,838,890) Net assets: Beginning of year.......................................... 201,964,971 204,803,861 ------------------------------- End of year................................................ $156,377,859 $201,964,971 =============================== Undistributed net investment income included in net assets: End of year................................................ $ 1,668,883 $ 1,727,654 ===============================
See Notes to Financial Statements. 19 TEMPLETON EMERGING MARKETS FUND, INC. Notes to Financial Statements 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Templeton Emerging Markets Fund, Inc. (the Fund) is registered under the Investment Company Act of 1940 as a closed-end, diversified investment company. The Fund seeks long-term capital appreciation by investing primarily in emerging country equity securities. The following summarizes the Fund's significant accounting policies. a. SECURITY VALUATION: Securities listed or traded on a recognized national exchange or NASDAQ are valued at the latest reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Securities for which market quotations are not readily available are valued at fair value as determined by management in accordance with procedures established by the Board of Directors. b. FOREIGN CURRENCY TRANSLATION: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. c. FOREIGN CURRENCY CONTRACTS: When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations. The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts. 20 TEMPLETON EMERGING MARKETS FUND, INC. Notes to Financial Statements (continued) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.) d. INCOME TAXES: No provision has been made for income taxes because the Fund's policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute all of its taxable income. e. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS: Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Certain income from foreign securities is recorded as soon as information is available to the Fund. Interest income and estimated expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. f. ACCOUNTING ESTIMATES: The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expense during the reporting period. Actual results could differ from those estimates. 2. CAPITAL SHARES On November 29, 2000, the Board of Directors of the Fund authorized management to implement an open-market share repurchase program pursuant to which the Fund may purchase, from time to time, shares of the Fund's common stock in open-market transactions, at the discretion of management. At August 31, 2001, there were 30 million shares authorized ($0.01 par value). During the years ended August 31, 2000 and 2001, there were no share transactions. 3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Certain officers of the Fund are also officers or directors of Templeton Asset Management Ltd. (TAML) and Franklin Templeton Services, LLC (FT Services), the Fund's investment manager and administrative manager, respectively. The Fund pays an investment management fee to TAML of 1.25% per year of the Fund's average daily net assets. Management fees were reduced on assets invested in the Franklin Institutional Fiduciary Trust Money Market Portfolio. The Fund pays an administrative fee monthly to FT Services at an annual rate of 0.15% per year of the Fund's average daily net assets. 21 TEMPLETON EMERGING MARKETS FUND, INC. Notes to Financial Statements (continued) 4. INCOME TAXES At August 31, 2001, the net unrealized depreciation based on the cost of investments for income tax purposes of $176,897,486 was as follows: Unrealized appreciation..................................... $ 10,896,912 Unrealized depreciation..................................... (31,829,098) ------------ Net unrealized depreciation................................. $(20,932,186) ============
Net investment income and net realized capital gains differ for financial statement and tax purposes primarily due to differing treatments of passive foreign investment companies, wash sales, foreign currency transactions and losses realized subsequent to October 31 on the sale of securities and foreign currencies. At August 31, 2001, the Fund had deferred capital and currency losses occurring subsequent to October 31, 2000 of $25,355,976 and $299,663 respectively. For tax purposes, such losses will be reflected in the year ending August 31, 2002. At August 31, 2001, the Fund had tax basis capital losses which may be carried over to offset future capital gains. Such losses expire as follows: Capital loss carryovers expiring in: 2008...................................................... $1,056,614 2009...................................................... 2,373,131 ---------- $3,429,745 ==========
5. INVESTMENT TRANSACTIONS Purchases and sales of securities (excluding short-term securities) for the year ended August 31, 2001 aggregated $97,972,398 and $125,913,855, respectively. 22 TEMPLETON EMERGING MARKETS FUND, INC. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Templeton Emerging Markets Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Templeton Emerging Markets Fund, Inc. (the "Fund") at August 31, 2001, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2001 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights for each of the two years in the period ended August 31, 1998 were audited by other independent accountants whose report dated September 29, 1998 expressed an unqualified opinion on those financial statements. PricewaterhouseCoopers LLP San Francisco, California September 26, 2001 23 TEMPLETON EMERGING MARKETS FUND, INC. Tax Designation At August 31, 2001, more than 50% of the Fund's total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from dividends paid to the Fund on these investments. The Fund intends to make an election under Section 853 of the Internal Revenue Code. This election will allow shareholders to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The following table provides a breakdown by country of foreign source income and foreign taxes paid, as designated by the Fund to shareholders in November 2001.
FOREIGN TAX FOREIGN SOURCE COUNTRY PAID PER SHARE INCOME PER SHARE ----------------------------------------------------------------------------------------------- Argentina................................................... $0.0000 $0.0039 Austria..................................................... 0.0011 0.0033 Brazil...................................................... 0.0037 0.0129 China....................................................... 0.0000 0.0020 Colombia.................................................... 0.0000 0.0016 Croatia..................................................... 0.0000 0.0006 Czech Republic.............................................. 0.0002 0.0007 Egypt....................................................... 0.0000 0.0037 Estonia..................................................... 0.0001 0.0001 Finland..................................................... 0.0000 0.0001 Greece...................................................... 0.0000 0.0012 Hong Kong................................................... 0.0000 0.0063 Hungary..................................................... 0.0003 0.0007 India....................................................... 0.0000 0.0011 Indonesia................................................... 0.0018 0.0055 Israel...................................................... 0.0009 0.0017 Malaysia.................................................... 0.0004 0.0008 Mexico...................................................... 0.0017 0.0186 Pakistan.................................................... 0.0008 0.0025 Philippines................................................. 0.0005 0.0009 Poland...................................................... 0.0005 0.0014 Russia...................................................... 0.0003 0.0010 Singapore................................................... 0.0024 0.0049 Slovak Republic............................................. 0.0000 0.0001 South Africa................................................ 0.0003 0.0266 South Korea................................................. 0.0025 0.0070 Taiwan...................................................... 0.0009 0.0002 Thailand.................................................... 0.0002 0.0017 Turkey...................................................... 0.0000 0.0066 United Kingdom.............................................. 0.0001 0.0025 Venezuela................................................... 0.0000 0.0008 --------------------------------- TOTAL....................................................... $0.0187 $0.1210 =================================
In January 2002, shareholders will receive Form 1099-DIV which will include their share of taxes withheld and foreign source income distributed during the calendar year 2001. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns. 24 TEMPLETON EMERGING MARKETS FUND, INC. Annual Meeting of Shareholders, February 26, 2001 An Annual Meeting of Shareholders of the Fund was held at the Tower Club, Bank of America Building, One Financial Plaza, Ft. Lauderdale, Florida, on February 26, 2001. The purpose of the meeting was to elect four Directors of the Fund; to ratify the selection of PricewaterhouseCoopers LLP, as the Fund's independent auditors for the fiscal year ending August 31, 2001; and to authorize the proxyholders, in their discretion, to vote upon such other matters that may properly come before the meeting or any adjournments of the meeting. At the meeting, the following persons were elected by the shareholders to serve as Directors of the Fund: Harmon E. Burns, Andrew H. Hines, Jr., Charles B. Johnson and Constantine D. Tseretopoulos.* Shareholders also ratified the selection of PricewaterhouseCoopers LLP, to serve as the Fund's independent auditors for the fiscal year ending August 31, 2001. No other business was transacted at the meeting. The results of the voting at the Annual Meeting are as follows: 1. The election of four (4) Directors:
% OF % OF % OF TERM EXPIRING 2004: FOR OUTSTANDING SHARES VOTED SHARES WITHHELD OUTSTANDING SHARES ---------------------------------------------------------------------------------------------------------------------- Harmon E. Burns........... 14,536,196 82.33% 97.37% 393,052 2.22% Andrew H. Hines, Jr....... 14,534,689 82.32% 97.36% 394,559 2.23% Charles B. Johnson........ 14,563,296 82.48% 97.55% 365,952 2.07% Constantine D. Tseretopoulos........... 14,542,080 82.36% 97.41% 387,168 2.19% % OF TERM EXPIRING 2004: VOTED SHARES Harmon E. Burns........... 2.63% Andrew H. Hines, Jr....... 2.64% Charles B. Johnson........ 2.45% Constantine D. Tseretopoulos........... 2.59%
2. The ratification or rejection of the selection of PricewaterhouseCoopers LLP as independent auditors of the Fund for the fiscal year ending August 31, 2001:
SHARES % OF % OF VOTED OUTSTANDING SHARES VOTED SHARES -------------------------------------------------------------------------------- For....................... 14,680,345 83.14% 98.33% Against................... 158,944 0.90% 1.07% Abstain................... 89,959 0.51% 0.60% -------------------------------------------------------------------------------- Total..................... 14,929,248 84.55% 100.00%
3. The transaction of any other business that may properly come before the meeting or any adjournments thereof:
SHARES % OF % OF VOTED OUTSTANDING SHARES VOTED SHARES -------------------------------------------------------------------------------- For....................... 13,206,104 74.79% 88.45% Against................... 913,207 5.17% 6.12% Abstain................... 809,937 4.59% 5.43% -------------------------------------------------------------------------------- Total..................... 14,929,248 84.55% 100.00%
*Harris J. Ashton, Nicholas F. Brady, Frank J. Crothers, S. Joseph Fortunato, Edith E. Holiday, Betty P. Krahmer, Gordon S. Macklin and Fred R. Millsaps, are Directors of the Fund who are currently serving and whose terms of office continued after the Annual Meeting of Shareholders. 25 TEMPLETON EMERGING MARKETS FUND, INC. Dividend Reinvestment and Cash Purchase Plan The Fund offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") with the following features: Shareholders must affirmatively elect to participate in the Plan; Stock dividends and capital gains distributions will be reinvested automatically; Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938, will provide additional Plan information upon request. Whenever the Fund declares dividends in either cash or common stock of the Fund, if the market price is equal to or exceeds net asset value at the valuation date, the participant will receive the dividends entirely in stock at a price equal to the net asset value, but not less than 95% of the then current market price of the Fund's shares. If the market price is lower than net asset value or if dividends and/or capital gains distributions are payable only in cash, the participant will receive shares purchased on the New York Stock Exchange or otherwise on the open market. A participant has the option of submitting additional payments to Mellon Securities Trust Company (the "Plan Agent"), in any amounts of at least $100, up to a maximum of $5,000 per month, for the purchase of Fund shares for his or her account. These payments shall be made by check or money order payable to "Mellon Securities Trust Co." and sent to Mellon Investor Services, P.O. Box 382009, Pittsburgh, PA 15250-8009, Attn: Templeton Emerging Markets Fund, Inc. The Plan Agent shall apply such payments (less a $5.00 service charge and less a pro rata share of trading fees) to purchases of Fund shares on the open market. The automatic reinvestment of dividends and/or capital gains does not relieve the participant of any income tax that may be payable on dividends or distributions. The participant may withdraw from the Plan without penalty at any time by written notice to the Plan Agent sent to Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938. Upon withdrawal, the participant will receive, without charge, stock certificates issued in the participant's name for all full shares held by the Plan Agent; or, if the participant wishes, the Plan Agent will sell the participant's shares and send the proceeds, less a service charge of $5.00 and less trading fees. Whenever shares are purchased on the New York Stock Exchange or otherwise on the open market, each participant will pay a pro rata portion of trading fees. Trading fees will be deducted from amounts to be invested. 26 TEMPLETON EMERGING MARKETS FUND, INC. SHAREHOLDER INFORMATION Shares of Templeton Emerging Markets Fund, Inc. are traded on the New York Stock Exchange under the symbol "EMF." The Fund's shares are also listed and traded on the Pacific Exchange. Information about the net asset value and the market price is published each Monday in the Wall Street Journal, weekly in Barron's and each Saturday in The New York Times and other newspapers. Daily market prices for the Fund's shares are published in the New York Stock Exchange Composite Transactions section of newspapers. For current information about dividends and shareholder accounts, call 1-800/416-5585. Registered shareholders can now access their Fund account on-line with Investor ServiceDirect(SM). For information go to Mellon Investor Services' web site at https://vault.mellon-investor.com/isd and follow the instructions. The daily closing net asset value as of the previous business day may be obtained when available by calling Franklin Templeton Fund Information after 7 a.m. pacific time any business day at 1-800/DIAL BEN(R) (1-800/342-5236). The Fund's net asset value and dividends are also listed on the NASDAQ Stock Market, Inc.'s Mutual Fund Quotation Service ("NASDAQ MFQS"). Shareholders not receiving copies of the Reports to Shareholders because their shares are registered in the name of a broker or a custodian can request that they be added to the Fund's mailing list, by writing Templeton Emerging Markets Fund, Inc., 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030. 27 ANNUAL REPORT AUDITORS PricewaterhouseCoopers LLP 333 Market Street San Francisco, CA 94105 TEMPLETON EMERGING MARKETS FUND, INC. 100 Fountain Parkway P.O. Box 33030 St. Petersburg, FL 33733-8030 TRANSFER AGENT Mellon Investor Services LLC 85 Challenger Road Overpeck Centre Ridgefield Park, NJ 07660 1-800/416-5585 www.mellon-investor.com FUND INFORMATION 1-800/342-5236 Investors should be aware that the value of investments made for the Fund may go down as well as up. Like any investment in securities, the value of the Fund's portfolio will be subject to the risk of loss from market, currency, economic, political and other factors. The Fund and its investors are not protected from such losses by the Investment Manager. Therefore, investors who cannot accept this risk should not invest in shares of the Fund. To ensure the highest quality of service, telephone calls to or from our service departments may be monitored, recorded and accessed. These calls can be determined by the presence of a regular beeping tone. TLEMF A2001 10/01 [RECYCLED LOGO] Printed on recycled paper