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 811-6378
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TEMPLETON DEVELOPING MARKETS TRUST
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(Exact name of registrant as specified in charter)
500 EAST BROWARD BLVD., SUITE 2100, FORT LAUDERDALE, FL 33394-3091
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(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (954) 527-7500
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Date of fiscal year end: 12/31
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Date of reporting period: 6/30/03
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ITEM 1. REPORTS TO STOCKHOLDERS.
SEMI
Annual
Report
[PASSPORT MAP LOGO OMITTED]
AND SHAREHOLDER LETTER
JUNE 30, 2003
TEMPLETON DEVELOPING
MARKETS TRUST
WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
- -----------------------------------------------
ELIGIBLE SHAREHOLDERS CAN SIGN UP FOR EDELIVERY
AT FRANKLINTEMPLETON.COM. SEE INSIDE FOR DETAILS.
[FRANLKIN TEMPLETON LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
THANK YOU FOR INVESTING WITH
FRANKLIN TEMPLETON. WE ENCOURAGE
OUR INVESTORS TO MAINTAIN A LONG-TERM
PERSPECTIVE AND REMEMBER THAT ALL
SECURITIES MARKETS MOVE BOTH UP AND
DOWN, AS DO MUTUAL FUND SHARE PRICES.
WE APPRECIATE YOUR PAST SUPPORT
AND LOOK FORWARD TO SERVING YOUR
INVESTMENT NEEDS IN THE YEARS AHEAD.
[MOBIUS PHOTO OMITTED]
MARK MOBIUS, PH.D.
PRESIDENT AND CHIEF EXECUTIVE
OFFICER - INVESTMENT MANAGEMENT
TEMPLETON DEVELOPING
MARKETS TRUST
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.
EDELIVERY DETAILS:
Log in at franklintempleton.com and click on eDelivery. Shareholders who are
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Not part of the semiannual report
SHAREHOLDER LETTER
Dear Shareholder:
We are pleased to bring you the enclosed semiannual report for Templeton
Developing Markets Trust covering the period ended June 30, 2003. The six months
under review witnessed mixed signs for economies and markets worldwide.
Concerned about a weak U.S. economy, controversy over U.S. corporate malfeasance
and the war in Iraq, investors generally shunned U.S. equities, contributing to
a U.S. dollar decline that stoked uncertainty about a U.S.-led global recovery.
At period-end, with combat virtually over, attention returned to the U.S.
economy. Global business confidence appeared to be revived, consumer attitudes
showed signs of improvement, inflation remained tame, and many equity markets
rose. Among emerging markets in Asia, China's economy accelerated sharply during
first quarter 2003. Contrary to investors' concerns, China's battle with severe
acute respiratory syndrome (SARS) has not had a material impact on its economic
recovery. Recent data showed healthy numbers with the country's gross domestic
product growing 8.9% annualized in April 2003 compared with the same month in
2002. 1 Within this global economic environment, the world's stock markets
experienced significant volatility and reflected geopolitical instability during
the period.
Historically, patient investors have achieved rewarding results through
evaluating their goals and diversifying their
1. Source: Financial Times Information.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Not part of the semiannual report
CONTENTS
SHAREHOLDER LETTER ........ 1
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SEMIANNUAL REPORT
Templeton Developing
Markets Trust ............. 4
Performance Summary ....... 10
Financial Highlights &
Statement of Investments .. 13
Financial Statements ...... 24
Notes to
Financial Statements ...... 28
assets. A long-term investment strategy offers investors an opportunity to take
advantage of a regularly scheduled investment plan regardless of market
fluctuations and includes buying during market downturns when prices are low and
subsequently benefiting from market rallies. Remember, however, to consider your
financial ability to continue purchases through times of low price levels or
changing economic conditions before committing to such a strategy. We suggest
you contact your financial advisor to discuss your goals and consider
establishing a regular investment plan.
In the enclosed semiannual shareholder report for Templeton Developing Markets
Trust, the portfolio manager discusses market conditions and how they affected
investment management decisions and Fund performance during the period under
review. You will also find performance data and financial information. Please
remember that all securities markets move up and down, as do mutual fund share
prices.
If you would like more frequent updates, franklintempleton.com provides daily
prices, monthly performance figures, portfolio holdings and other information.
You can also access your account, buy and sell shares, read timely commentary
from portfolio managers, and find helpful financial planning tools. We hope you
will take advantage of these online services.
2 Not part of the semiannual report
As always, we value your support, welcome your questions and look forward to
serving your investment needs in the future.
Sincerely,
/S/ MARK MOBIUS
Mark Mobius
President and Chief Executive Officer -
Investment Management
Templeton Developing Markets Trust
A NOTE ABOUT
DUPLICATE MAILINGS
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YOU WILL RECEIVE YOUR FUND'S
SHAREHOLDER REPORT EVERY SIX
MONTHS. TO REDUCE FUND
EXPENSES, WE TRY TO IDENTIFY
RELATED SHAREHOLDERS IN A
HOUSEHOLD AND SEND ONLY ONE
COPY OF THE REPORT. THIS PROCESS,
CALLED "HOUSEHOLDING," WILL CON-
TINUE INDEFINITELY UNLESS YOU
INSTRUCT US OTHERWISE. IF YOU
PREFER NOT TO HAVE THESE DOC-
UMENTS HOUSEHOLDED, PLEASE
CALL US AT 1-800/632-2301.
AT ANY TIME YOU MAY VIEW
CURRENT SHAREHOLDER REPORTS ON
OUR WEBSITE.
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This letter reflects our analysis and opinions as of June 30, 2003. The
information is not a complete analysis of every aspect of any market, country,
industry, security or fund. Statements of fact have been obtained from sources
considered reliable.
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Not part of the semiannual report 3
SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS
TRUST
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YOUR FUND'S GOAL: TEMPLETON DEVELOPING MARKETS TRUST SEEKS LONG-TERM CAPITAL
APPRECIATION. UNDER NORMAL CIRCUMSTANCES, THE FUND INVESTS AT LEAST 80% OF ITS
NET ASSETS IN SECURITIES OF DEVELOPING MARKET COUNTRIES.
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We are pleased to bring you this semiannual report for Templeton Developing
Markets Trust covering the period ended June 30, 2003. During the six months
under review, China's and India's economies recorded healthy gross domestic
product (GDP) expansion rates. Meanwhile, Singapore and the U.S. signed a
landmark free-trade agreement in May, the first of its kind to be signed by the
U.S. with an east Asian country. At the signing ceremony, President Bush and
Prime Minister Goh said the agreement would further improve ties between the two
countries and boost American business links with the Southeast Asian region.
South Korea made substantial improvements to its corporate governance structure
during the period; however, a great deal remains to be done. Slowing consumer
consumption and capital investment contributed to the country's weaker first
quarter 2003 GDP growth rate compared with the previous quarter. In addition to
the SK Global scandal, where a large number of accounting items allegedly were
falsified, tensions on the South
The dollar value, number of shares or principal amount, and complete legal
titles of all portfolio holdings are listed in the Fund's Statement of
Investments (SOI). The SOI begins on page 18.
[GRAPHIC OMITTED]
GEOGRAPHIC DISTRIBUTION
BASED ON TOTAL NET ASSETS 6/30/03
EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS:
Asia 49.9%
Europe 18.2%
Latin America 16.4%
Middle East & Africa 13.7%
Australia & New Zealand 0.4%
Short-Term Investments
& Other Net Assets 1.4%
4 SEMIANNUAL REPORT
Korean peninsula as a result of North Korea's nuclear program also contributed
to financial market volatility during the period. Despite these challenges, for
the six months ended June 30, 2003, the Morgan Stanley Capital International
(MSCI) Korea Index posted an 8.30% gain in U.S. dollar terms. 1
In Latin America, Mexico's economy felt the effects of weakness in industrial
production as Mexico's first quarter 2003 GDP was positive, but down from the
previous quarter. The government maintained its 3% growth forecast for 2003. 2
President Fox continued his efforts to strengthen the free-trade agreement with
the U.S. and Canada. Signaling Mexico's improving economy, the country repaid
all of its Brady bonds with a final US$1.3 billion payment in June. 3
South American leaders met in Paraguay at the Mercosur Summit, where Brazilian
President Lula and Argentine President Kirchner vowed to strengthen the trade
bloc and promote regional trade. Brazil announced plans to create a US$1 billion
fund to finance trade between the two nations. 4 Brazil's Lower House also
passed a constitutional amendment to the article that regulated changes in the
financial system, an apparent indication of Lula's support.
In May, the International Monetary Fund (IMF) completed Turkey's fifth review.
The IMF cited delays in implementation of structural reforms and urged Turkey to
accelerate its efforts. While the IMF expressed satisfaction with the country's
fiscal performance thus far, the setbacks are expected to delay disbursement of
the US$500 million tranche. 5 In Turkey's favor,
1. Source: Standard & Poor's Micropal. The MSCI Korea Index is market
capitalization-weighted and measures total returns of equity securities in
Korea.
2. Source: World Markets Research Centre.
3. Source: International Monetary Fund.
4. Source: InvestNews S.A.
5. Source: World Stream.
TOP 10 COUNTRIES
6/30/03
% OF TOTAL
NET ASSETS
- ------------------------------
South Africa 13.2%
South Korea 12.9%
Brazil 8.3%
Hong Kong 8.1%
Mexico 6.8%
Singapore 6.4%
Turkey 5.7%
Taiwan 4.8%
India 4.5%
Indonesia 4.4%
SEMIANNUAL REPORT 5
TOP 10 EQUITY HOLDINGS
6/30/03
COMPANY
SECTOR/INDUSTRY, % OF TOTAL
COUNTRY NET ASSETS
- ---------------------------------------
Anglo American PLC 3.5%
METALS & MINING,
SOUTH AFRICA
PT Telekomunikasi
Indonesia TBK, B 2.7%
DIVERSIFIED TELECOMMUNICATION
SERVICES, INDONESIA
SABMiller PLC 2.6%
BEVERAGES, SOUTH AFRICA
Akbank 2.4%
COMMERCIAL BANKS, TURKEY
Kimberly Clark de
Mexico SA de CV, A 2.2%
HOUSEHOLD PRODUCTS, MEXICO
Lukoil Holdings, ADR 2.1%
OIL & GAS, RUSSIA
Hyundai Motor Co. Ltd. 2.1%
AUTOMOBILES, SOUTH KOREA
Telefonos de Mexico SA
de CV (Telmex), L, ADR 1.9%
DIVERSIFIED TELECOMMUNICATION
SERVICES, MEXICO
Petroleo Brasileiro SA,
ADR, pfd. 1.9%
OIL & GAS, BRAZIL
OMV AG 1.9%
OIL & GAS, AUSTRIA
the government approved plans for privatization of Turk Telecom, a key condition
by the IMF.
In South Africa, the release of the Mineral and Petroleum Royalty Bill prompted
foreign mining and exploration companies to examine their operations there due
to imposition of higher than expected royalties. The new rates would only take
effect once companies convert their old order rights to new ones. The government
provided a five-year window for conversion. Citing South Africa's strengthened
fiscal revenue and improving external positions, independent credit rating
agency Standard & Poor's raised the country's credit rating to BBB from BBB- and
the long-term local currency rating to A from A-. 6
After gaining formal European Union (EU) approval, nine eastern and central
European countries are expected to hold referendums this year to ratify the
agreement for accession in 2004. During the six months under review, Malta,
Slovenia, Hungary, Poland, Lithuania, Slovakia and the Czech Republic passed the
referendum. We believe these developments should allow the seven countries to
continue working toward EU goals, which could lead to greater foreign direct
investment inflows as well as implementation of key economic and social reforms.
Within this environment, Templeton Developing Markets Trust's Class A shares
posted a +14.55% cumulative total return for the six months ended June 30, 2003,
as shown in the Performance Summary beginning on page 10. By comparison, the
Fund's benchmarks, the MSCI Emerging Markets Free (EMF) Index and
S&P/International Finance Corporation (IFC) Investable
6. These do not indicate ratings of the Fund.
6 SEMIANNUAL REPORT
Composite Index, posted cumulative total returns of 16.13% and 17.11% during the
same period. 7
During the period, the Fund's performance was enhanced by its overweighted
positions relative to the benchmark MSCI EMF Index (the Index), in Turkey,
Argentina, Indonesia and Thailand. Additionally, stock selection in India and
Austria contributed to performance. Positive attribution was also derived from
the Fund's underweighted positions, relative to the Index, in Malaysia, South
Korea and Taiwan. However, our overweighted investments in Hungary
underperformed and negatively impacted the Fund. Negative attribution was also
recorded as a result of the Fund's underweighted positions in Russia and Israel.
We repositioned several of the Fund's Asian holdings during the six months under
review, undertaking selective purchases in Singapore, India and Taiwan while
reducing our positions in Thailand and South Korea. Key purchases included
Singapore Airlines, the country's national airline; Singapore's DBS Group
Holdings, Southeast Asia's largest bank; Mahanagar Telephone, an Indian
telecommunications service provider; and Sunplus Technology, a Taiwanese
integrated circuit company. We eliminated our positions in Thailand's Siam
Cement and South Korea's LG Chem Investment, and we reduced our holdings in
South Korea's SK Telecom.
In Europe, we increased our holdings in Hellenic Telecommunications, Greece's
full-service telecommunications provider, and Pliva, one of central and eastern
Europe's largest pharmaceutical companies. The Fund divested its holdings in
Russia's
7. Source: Standard & Poor's Micropal. The unmanaged MSCI EMF Index measures
performance of securities located in 25 emerging market countries such as
Brazil, China, South Korea and Poland. The unmanaged S&P/IFC Investable
Composite Index measures performance of emerging market stocks and tracks
approximately 2,000 stocks in countries such as Brazil, Mexico, China and South
Korea. The indexes include reinvested dividends. One cannot invest directly in
an index, nor is an index representative of the Fund's portfolio.
SEMIANNUAL REPORT 7
Mosenergo and Unified Energy Systems as well as Austria's Mayr-Melnhof
and Erste Bank, as each company reached our sale targets.
We consolidated our Latin American holdings, leading to divestment of the Fund's
Chile and Peru positions while adding to its Brazil and Mexico exposure. In
Brazil, we increased the Fund's position in aircraft manufacturer
Embraer-Empresa due to its strong market share and what we consider its
competitive edge, and in national oil and gas company Petroleo Brasileiro based
on reports of its proven reserves and recent high growth rates. In Mexico, we
increased our holdings in Telefonos de Mexico, the country's largest
telecommunications systems company, based upon our analysis of its dominant
market position and strong cash flows. We also bought Grupo Televisa, the
largest media company in the Spanish-speaking world and a major participant in
the international entertainment business.
Finally, our South African exposure declined during the period mainly due to
sales in Sanlam, Barloworld and Tiger Brands as they reached our price targets.
At period-end, the Fund's top three countries were South Africa, South Korea and
Brazil, while the top three industries were oil and gas, industrial
conglomerates, and diversified telecommunication services. As always, we will
continue to focus on Templeton's bottom-up, value approach in our search for
bargain stocks.
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 340% in the last 15 years, but has
8 SEMIANNUAL REPORT
suffered 7 quarterly declines of more than 15% each during that time. 8
The Fund's definition of "developing markets" as used by the Fund's manager may
differ from the definition of the same term as used in managing other Franklin
Templeton Funds. These special risks and other considerations are discussed in
the Fund's prospectus.
8. Source: Standard & Poor's Micropal. Based on quarterly total return change
over 15 years ended 6/30/03. Market return is measured in U.S. dollars and
includes reinvested dividends. The MSCI Hong Kong Index is market
capitalization-weighted and measures total returns of equity securities in Hong
Kong.
- --------------------------------------------------------------------------------
This discussion reflects our analysis, opinions and portfolio holdings as of
June 30, 2003, the end of the reporting period. Our strategies and the Fund's
portfolio composition will change depending on 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 9
PERFORMANCE SUMMARY AS OF 6/30/03
YOUR DIVIDEND INCOME WILL VARY DEPENDING ON DIVIDENDS OR INTEREST PAID BY
SECURITIES IN THE FUND'S PORTFOLIO, ADJUSTED FOR OPERATING EXPENSES OF EACH
CLASS. CAPITAL GAIN DISTRIBUTIONS ARE NET PROFITS REALIZED FROM THE SALE OF
PORTFOLIO SECURITIES. THE PERFORMANCE TABLE DOES NOT REFLECT ANY TAXES DUE ON
FUND DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, IF ANY, OR ANY REALIZED GAINS ON THE
SALE OF FUND SHARES. TOTAL RETURN REFLECTS THE FUND'S DIVIDEND INCOME, CAPITAL
GAIN DISTRIBUTIONS, IF ANY, AND ANY UNREALIZED GAINS OR LOSSES.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 6/30/03 12/31/02
- ----------------------------------------------------------------
Net Asset Value (NAV) +$1.32 $11.32 $10.00
DISTRIBUTIONS (1/1/03-6/30/03)
Dividend Income $0.1123
CLASS B CHANGE 6/30/03 12/31/02
- ----------------------------------------------------------------
Net Asset Value (NAV) +$1.33 $11.15 $9.82
DISTRIBUTIONS (1/1/03-6/30/03)
Dividend Income $0.0538
CLASS C CHANGE 6/30/03 12/31/02
- ----------------------------------------------------------------
Net Asset Value (NAV) +$1.35 $11.13 $9.78
DISTRIBUTIONS (1/1/03-6/30/03)
Dividend Income $0.0425
CLASS R CHANGE 6/30/03 12/31/02
- ----------------------------------------------------------------
Net Asset Value (NAV) +$1.28 $11.26 $9.98
DISTRIBUTIONS (1/1/03-6/30/03)
Dividend Income $0.1338
ADVISOR CLASS CHANGE 6/30/03 12/31/02
- ----------------------------------------------------------------
Net Asset Value (NAV) +$1.31 $11.32 $10.01
DISTRIBUTIONS (1/1/03-6/30/03)
Dividend Income $0.1507
10 SEMIANNUAL REPORT Past performance does not guarantee future results.
PERFORMANCE SUMMARY (CONT.)
PERFORMANCE
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- --------------------------------------------------------------------------------
Cumulative Total Return 1 +14.55% +8.47% +11.76% +28.13%
Average Annual Total Return 2 +7.96% +2.27% +1.04% +1.90%
Value of $10,000 Investment 3 $10,796 $10,227 $10,529 $12,075
INCEPTION
CLASS B 6-MONTH 1-YEAR 3-YEAR (1/1/99)
- --------------------------------------------------------------------------------
Cumulative Total Return 1 +14.20% +7.73% -13.05% +9.75%
Average Annual Total Return 2 +10.20% +3.73% -5.51% +1.67%
Value of $10,000 Investment 3 $11,020 $10,373 $8,437 $10,775
INCEPTION
CLASS C 6-MONTH 1-YEAR 5-YEAR (5/1/95)
- --------------------------------------------------------------------------------
Cumulative Total Return 1 +14.32% +7.82% +8.07% -1.16%
Average Annual Total Return 2 +12.18% +5.80% +1.35% -0.26%
Value of $10,000 Investment 3 $11,218 $10,580 $10,695 $9,786
INCEPTION
CLASS R 6-MONTH 1-YEAR (1/1/02)
- --------------------------------------------------------------------------------
Cumulative Total Return 1 +14.43% +8.15% +15.54%
Average Annual Total Return 2 +13.43% +7.15% +9.53%
Value of $10,000 Investment 3 $11,343 $10,715 $11,454
ADVISOR CLASS 4 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- --------------------------------------------------------------------------------
Cumulative Total Return 1 +14.89% +9.12% +13.92% +30.79%
Average Annual Total Return 2 +14.89% +9.12% +2.64% +2.72%
Value of $10,000 Investment 3 $11,489 $10,912 $11,392 $13,079
ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE
RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS
UP, YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
For more current performance, see "Funds and Performance" at
franklintempleton.com or call 1-800/342-5236.
Past performance does not guarantee future results. SEMIANNUAL REPORT 11
PERFORMANCE SUMMARY (CONT.)
ENDNOTES
THE FUND INVESTS IN FOREIGN SECURITIES, WHICH CAN INVOLVE EXPOSURE TO CURRENCY
VOLATILITY AND POLITICAL, ECONOMIC AND REGULATORY UNCERTAINTY. INVESTMENTS IN
DEVELOPING MARKETS INVOLVE HEIGHTENED RISKS RELATED TO THE SAME FACTORS, IN
ADDITION TO THOSE ASSOCIATED WITH THEIR RELATIVELY SMALL SIZE AND LESSER
LIQUIDITY. THESE AND OTHER RISKS ARE DESCRIBED MORE FULLY IN THE FUND'S
PROSPECTUS.
CLASS A: Subject to the maximum 5.75% initial sales charge.
CLASS B: Subject to no initial sales charge, but subject to a contingent
deferred sales charge (CDSC) declining from 4% to 0% over six years. These
shares have higher annual fees and expenses than class a shares.
CLASS C: Subject to 1% initial sales charge and 1% cdsc for shares redeemed
within 18 months of investment. These shares have higher annual fees and
expenses than Class A shares.
CLASS R: No initial sales charge, but subject to 1% cdsc for shares redeemed
within 18 months of investment; are available to certain eligible investors as
described in the prospectus. These shares have higher annual fees and expenses
than Class A shares.
ADVISOR CLASS: No initial sales charge or Rule 12b-1 fees; are available to a
limited class of investors.
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes any applicable, maximum
sales charge(s). Six-month return has not been annualized.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include any applicable, maximum sales
charge(s).
4. Effective 1/2/97, the Fund began offering Advisor Class shares,
which do not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods prior
to 1/2/97, a restated figure is used based upon the Fund's Class A performance,
excluding the effect of Class A's maximum initial sales charge, but reflecting
the effect of the Class A Rule 12b-1 fees; and (b) for periods after 1/1/97,
actual Advisor Class performance is used reflecting all charges and fees
applicable to that class. Since 1/2/97 (commencement of sales), the cumulative
and average annual total returns of Advisor Class shares were -14.80% and
- -2.44%.
12 SEMIANNUAL REPORT Past performance does not guarantee future results.
TEMPLETON DEVELOPING MARKETS TRUST
Financial Highlights
CLASS A
---------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 --------------------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ...... $10.00 $9.88 $10.59 $15.61 $10.30 $12.94
-------------------------------------------------------------------------------------
Income from investment operations:
Net investment income a .................. .15 .10 .11 .07 .06 .17
Net realized and unrealized gains (losses) 1.28 .07 (.72) (5.03) 5.25 (2.57)
-------------------------------------------------------------------------------------
Total from investment operations .......... 1.43 .17 (.61) (4.96) 5.31 (2.40)
-------------------------------------------------------------------------------------
Less distributions from:
Net investment income .................... (.11) (.05) (.10) (.06) -- (.19)
Net realized gains ....................... -- -- -- -- -- (.05)
-------------------------------------------------------------------------------------
Total distributions ....................... (.11) (.05) (.10) (.06) -- (.24)
-------------------------------------------------------------------------------------
Net asset value, end of period ............ $11.32 $10.00 $9.88 $10.59 $15.61 $10.30
=====================================================================================
Total return b ............................ 14.55% 1.68% (5.76)% (31.85)% 51.55% (18.72)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......... $1,323,715 $1,168,340 $1,221,011 $1,507,936 $2,958,324 $2,172,954
Ratios to average net assets:
Expenses ................................. 2.25% c 2.24% 2.21% 2.09% 2.02% 2.11%
Net investment income .................... 2.89% c .96% 1.07% .56% .45% 1.40%
Portfolio turnover rate ................... 23.10% 49.05% 61.45% 69.37% 45.82% 37.51%
<FN>
a Based on average weighted shares outstanding effective year ended December 31,
1999.
b Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
c Annualized.
</FN>
SEMIANNUAL REPORT 13
TEMPLETON DEVELOPING MARKETS TRUST
Financial Highlights (CONTINUED)
CLASS B
------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 -----------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999
------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ...... $9.82 $9.77 $10.44 $15.47 $10.30
----------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) a ........... .11 .03 .04 (.02) (.06)
Net realized and unrealized gains (losses) 1.27 .07 (.70) (4.98) 5.23
----------------------------------------------------------------------
Total from investment operations .......... 1.38 .10 (.66) (5.00) 5.17
----------------------------------------------------------------------
Less distributions from net investment income (.05) (.05) (.01) (.03) --
----------------------------------------------------------------------
Net asset value, end of period ............ $11.15 $9.82 $9.77 $10.44 $15.47
======================================================================
Total return b ............................ 14.20% .98% (6.32)% (32.36)% 50.19%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......... $15,044 $12,377 $11,027 $11,508 $13,862
Ratios to average net assets:
Expenses ................................. 2.90% c 2.88% 2.86% 2.77% 2.76%
Net investment income (loss) ............. 2.24% c .32% .42% (.13)% (.47)%
Portfolio turnover rate ................... 23.10% 49.05% 61.45% 69.37% 45.82%
<FN>
a Based on average weighted shares outstanding.
b Total return does not reflect the contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.
d Effective date of Class B shares was January 1, 1999.
</FN>
14 SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS TRUST
Financial Highlights (CONTINUED)
CLASS C
------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 --------------------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ...... $9.79 $9.73 $10.39 $15.36 $10.21 $12.81
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) a ........... .11 .03 .04 (.01) (.03) .07
Net realized and unrealized gains (losses) 1.27 .08 (.70) (4.96) 5.18 (2.51)
-----------------------------------------------------------------------------------
Total from investment operations .......... 1.38 .11 (.66) (4.97) 5.15 (2.44)
-----------------------------------------------------------------------------------
Less distributions from:
Net investment income .................... (.04) (.05) -- d -- -- (.11)
Net realized gains ....................... -- -- -- -- -- (.05)
-----------------------------------------------------------------------------------
Total distributions ....................... (.04) (.05) -- -- -- (.16)
-----------------------------------------------------------------------------------
Net asset value, end of period ............ $11.13 $9.79 $9.73 $10.39 $15.36 $10.21
===================================================================================
Total return b ............................ 14.32% .98% (6.34)% (32.36)% 50.44% (19.20)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......... $144,128 $127,808 $139,099 $188,379 $385,584 $294,588
Ratios to average net assets:
Expenses ................................. 2.90% c 2.89% 2.86% 2.76% 2.73% 2.78%
Net investment income (loss) ............. 2.24% c .31% .43% (.11)% (.26)% .76%
Portfolio turnover rate ................... 23.10% 49.05% 61.45% 69.37% 45.82% 37.51%
<FN>
a Based on average weighted shares outstanding effective year ended December 31,
1999.
b Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
c Annualized.
d Actual distribution from net investment income was $.001.
</FN>
SEMIANNUAL REPORT 15
TEMPLETON DEVELOPING MARKETS TRUST
Financial Highlights (CONTINUED)
CLASS R
---------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 2002 D
---------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ..................................... $9.98 $9.93
------------------------------------
Income from investment operations:
Net investment income a ................................................. .14 .03
Net realized and unrealized gains ....................................... 1.27 .07
------------------------------------
Total from investment operations ......................................... 1.41 .10
------------------------------------
Less distributions from net investment income ............................ (.13) (.05)
------------------------------------
Net asset value, end of period ........................................... $11.26 $9.98
====================================
Total return b ........................................................... 14.43% .96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........................................ $613 $381
Ratios to average net assets:
Expenses ................................................................ 2.40% c 2.39% c
Net investment income ................................................... 2.74% c .81% c
Portfolio turnover rate .................................................. 23.10% 49.05%
<FN>
a Based on average weighted shares outstanding.
b Total return does not reflect the contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.
d Effective date of Class R shares was January 2, 2002.
</FN>
16 SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS TRUST
Financial Highlights (CONTINUED)
ADVISOR CLASS
---------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 --------------------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ...... $10.01 $9.84 $10.55 $15.62 $10.28 $12.93
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income a .................. .16 .12 .14 .11 .09 .23
Net realized and unrealized gains (losses) 1.30 .10 (.71) (5.03) 5.25 (2.60)
-----------------------------------------------------------------------------------
Total from investment operations .......... 1.46 .22 (.57) (4.92) 5.34 (2.37)
-----------------------------------------------------------------------------------
Less distributions from:
Net investment income .................... (.15) (.05) (.14) (.15) -- (.23)
Net realized gains ....................... -- -- -- -- -- (.05)
-----------------------------------------------------------------------------------
Total distributions ....................... (.15) (.05) (.14) (.15) -- (.28)
-----------------------------------------------------------------------------------
Net asset value, end of period ............ $11.32 $10.01 $9.84 $10.55 $15.62 $10.28
===================================================================================
Total return b ............................ 14.89% 2.20% (5.43)% (31.67)% 51.95% (18.47)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......... $150,746 $130,459 $81,320 $115,144 $190,341 $115,494
Ratios to average net assets:
Expenses ................................. 1.90% c 1.89% 1.87% 1.77% 1.74% 1.78%
Net investment income .................... 3.24% c 1.31% 1.40% .88% .72% 1.82%
Portfolio turnover rate ................... 23.10% 49.05% 61.45% 69.37% 45.82% 37.51%
<FN>
a Based on average weighted shares outstanding effective year ended December 31,
1999.
b Total return is not annualized for periods less than one year.
c Annualized.
</FN>
See notes to financial statements. SEMIANNUAL REPORT 17
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (UNAUDITED)
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 92.8%
ARGENTINA 1.1%
a Molinos Rio de la Plata SA, B ........ Food Products 5,369,399 $ 10,249,362
a Quilmes Industrial SA, B, ADR ........ Beverages 657,455 8,402,275
--------------
18,651,637
--------------
AUSTRALIA .4%
BHP Billiton PLC ..................... Metals & Mining 1,350,800 7,156,902
--------------
AUSTRIA 2.4%
OMV AG ............................... Oil & Gas 252,140 30,292,356
Voestalpine AG ...................... Metals & Mining 88,788 3,506,413
Wienerberger AG ...................... Building Products 321,868 5,655,172
--------------
39,453,941
--------------
BRAZIL 3.0%
Centrais Eletricas Brasileiras SA
(Non-Taxable) ...................... Electric Utilities 810,383,000 5,642,284
Centrais Eletricas Brasileiras SA
(Taxable) .......................... Electric Utilities 155,980,000 1,086,009
Embraer-Empresa Brasileira
de Aeronautica SA, ADR ............. Aerospace & Defense 1,096,673 20,946,454
Souza Cruz SA (Non-Taxable) .......... Tobacco 1,371,800 11,401,472
Souza Cruz SA (Taxable) .............. Tobacco 17,600 146,279
Ultrapar Participacoes SA, ADR ....... Gas Utilities 48,400 446,248
Unibanco Uniao de Bancos
Brasileiros SA, GDR ................ Commercial Banks 575,700 9,879,012
--------------
49,547,758
--------------
CHINA 3.7%
a Beijing Capital Land Ltd., H ......... Real Estate 3,590,000 667,530
China Mobile (Hong Kong) Ltd. ........ Wireless Telecommunication Services 4,204,000 9,919,481
China Petroleum & Chemical Corp., H .. Oil & Gas 58,712,000 14,079,165
China Telecom Corp. Ltd. ............. Diversified Telecommunication Services 27,734,000 6,366,107
Guangdong Electric Power
Development Co. Ltd., B ............ Electric Utilities 548,000 311,310
People's Food Holdings Ltd. .......... Food & Staples Retailing 10,619,000 5,788,893
PetroChina Co. Ltd., H ............... Oil & Gas 44,283,000 13,344,838
Qingling Motors Co. Ltd., H .......... Automobiles 20,602,000 3,170,290
Shandong Intl Power Development Co.
Ltd. ............................... Electric Utilities 3,780,000 1,078,525
TCL International Holdings Inc. ...... Household Durables 7,094,000 1,501,010
Travelsky Technology Ltd., H ......... IT Services 4,711,000 3,171,618
--------------
59,398,767
--------------
CROATIA .9%
b Pliva D D, GDR, Reg S ................ Pharmaceuticals 1,058,750 14,674,275
--------------
CZECH REPUBLIC .5%
CEZ AS ............................... Electric Utilities 1,643,100 6,302,452
a Unipetrol ............................ Chemicals 509,994 952,877
--------------
7,255,329
--------------
DENMARK .1%
Carlsberg AS, B ...................... Beverages 48,200 1,724,595
--------------
18 SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (UNAUDITED) (CONT.)
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
EGYPT .3%
Commercial International Bank Ltd. ... Commercial Banks 751,645 $ 4,592,510
--------------
GREECE 1.0%
Coca-Cola Hellenic Bottling Co. SA ... Beverages 482,091 8,049,521
Hellenic Telecommunications
Organization SA .................... Diversified Telecommunication Services 736,250 8,708,415
--------------
16,757,936
--------------
HONG KONG 8.1%
Asia Satellite Telecommunications
Holdings Ltd. ...................... Diversified Telecommunication Services 30,000 49,435
Beijing Enterprises Holdings Ltd. .... Industrial Conglomerates 4,282,000 3,596,635
Cafe de Coral Holdings Ltd. .......... Hotels Restaurants & Leisure 2,198,000 1,677,077
Cathay Pacific Airways Ltd. .......... Airlines 5,195,000 6,994,928
Cheung Kong Holdings Ltd. ............ Real Estate 1,924,000 11,571,411
Cheung Kong Infrastructure
Holdings Ltd. ...................... Construction Materials 2,174,000 4,209,640
China Merchants Holdings
International Co. Ltd. ............. Industrial Conglomerates 15,621,000 13,922,014
China Resources Enterprise Ltd. ...... Distributors 15,598,000 13,501,472
China Travel International
Investment Hong Kong Ltd. .......... Hotels Restaurants & Leisure 18,466,000 2,817,917
Citic Pacific Ltd. ................... Industrial Conglomerates 10,955,500 20,019,604
Cosco Pacific Ltd. ................... Transportation Infrastructure 4,674,000 4,914,858
Dairy Farm International Holdings Ltd. Food & Staples Retailing 12,262,554 15,328,193
Giordano International Ltd. .......... Specialty Retail 8,952,000 2,783,814
Hang Lung Group Ltd. ................. Real Estate 7,058,000 5,747,299
Henderson Investment Ltd. ............ Real Estate 6,240,000 6,001,423
Henderson Land Development Co. Ltd. .. Real Estate 928,000 2,665,658
Hong Kong & Shanghai Hotels Ltd. ..... Hotels Restaurants & Leisure 5,000 2,260
Hopewell Holdings Ltd. ............... Transportation Infrastructure 150,000 159,653
International Bank of Asia ........... Commercial Banks 1,296,000 457,031
MTR Corp. Ltd. ....................... Road & Rail 6,904,634 7,924,504
Shanghai Industrial Holdings Ltd. .... Industrial Conglomerates 4,595,000 6,481,666
Tingyi (Cayman Islands) Holding Corp. Food Products 8,812,000 1,615,917
--------------
132,442,409
--------------
HUNGARY 2.7%
Egis RT .............................. Pharmaceuticals 193,378 6,588,688
Gedeon Richter Ltd. .................. Pharmaceuticals 222,259 15,677,424
Matav RT ............................. Diversified Telecommunication Services 591,950 2,024,525
MOL Magyar Olaj-Es Gazipari RT ....... Oil & Gas 882,775 19,264,837
--------------
43,555,474
--------------
INDIA 4.5%
Ashok Leyland Ltd. ................... Machinery 19,453 53,729
Bharat Petroleum Corp. Ltd. .......... Oil & Gas 279,681 1,708,660
Container Corp. of India Ltd. ........ Road & Rail 386,312 2,861,801
Dr. Reddy's Laboratories Ltd. ........ Pharmaceuticals 20,200 475,854
Grasim Industries Ltd. ............... Industrial Conglomerates 1,753,748 18,943,271
Hero Honda Motors Ltd. ............... Automobiles 1,346,040 7,334,137
Hindalco Industries Inc. ............. Metals & Mining 235,920 3,781,980
Hindustan Petroleum Corporation Ltd. . Oil & Gas 136,000 1,022,853
SEMIANNUAL REPORT 19
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (UNAUDITED) (CONT.)
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
INDIA (CONT.)
ITC Ltd. ............................. Tobacco 607,238 $ 10,014,135
Mahanagar Telephone Nigam Ltd. ....... Diversified Telecommunication Services 7,511,297 18,337,780
Maruti Udyog Ltd. .................... Automobiles 369,950 995,131
Satyam Computers Services Ltd. ....... IT Services 1,785,000 7,388,525
State Bank of India .................. Commercial Banks 27,000 223,228
Videsh Sanchar Nigam Ltd. ............ Diversified Telecommunication Services 214,502 577,914
--------------
73,718,998
--------------
INDONESIA 4.4%
PT Gudang Garam TBK .................. Tobacco 9,835,750 12,160,564
PT Indosat (Persero) TBK ............. Diversified Telecommunication Services 13,950,750 14,880,800
PT Telekomunikasi Indonesia TBK, B ... Diversified Telecommunication Services 79,456,270 44,543,666
--------------
71,585,030
--------------
ISRAEL .2%
Elbit Systems Ltd. ................... Aerospace & Defense 177,451 3,451,348
--------------
LUXEMBOURG .7%
Tenaris SA, ADR ...................... Energy Equipment & Services 470,012 11,985,306
--------------
MALAYSIA .5%
Petronas Dagangan Bhd. ............... Oil & Gas 982,000 1,589,290
SIME Darby Bhd. ...................... Industrial Conglomerates 4,105,000 5,509,342
YTL Power International Bhd. ......... Electric Utilities 238,000 187,268
--------------
7,285,900
--------------
MEXICO 6.8%
Cemex SA ............................. Construction Materials 3,296,890 14,738,591
Fomento Economico Mexicano
SA de CV Femsa, ADR ................ Beverages 281,020 11,578,024
Grupo Carso SA de CV ................. Industrial Conglomerates 3,310,800 10,036,577
Grupo Televisa SA de CV, ADR ......... Media 243,800 8,411,100
Kimberly Clark de Mexico SA de CV, A . Household Products 13,293,950 35,708,998
Telefonos de Mexico SA de CV
(Telmex), L, ADR ................... Diversified Telecommunication Services 973,280 30,580,458
--------------
111,053,748
--------------
PHILIPPINES 1.5%
San Miguel Corp., B .................. Beverages 21,068,488 24,835,153
--------------
POLAND 1.6%
Polski Koncern Naftowy Orlen SA ...... Oil & Gas 5,434,290 26,380,387
--------------
PORTUGAL .1%
BPI Socieda de Gestora de
Participacoes Socias SA ............ Commercial Banks 339,000 957,660
--------------
RUSSIA 2.6%
Cherepovets Mk Severstal ............. Metals & Mining 4,300 318,200
a GUM Trade House ...................... Multiline Retail 1,340,300 2,345,525
Lukoil Holdings, ADR ................. Oil & Gas 439,488 34,719,552
Sberbank RF .......................... Commercial Banks 1,980 558,360
20 SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (UNAUDITED) (CONT.)
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
RUSSIA (CONT.)
Sibirtelecom ......................... Diversified Telecommunication Services 38,466,700 $ 1,100,148
a Sun Interbrew Ltd., B, GDR, Reg S .... Beverages 235,800 1,061,100
Yuzhnaya Telecommunication Co. ....... Diversified Telecommunication Services 24,350,000 2,130,625
--------------
42,233,510
--------------
SINGAPORE 6.4%
Comfortdelgro Corp. Ltd. ............. Road & Rail 9,254,000 4,230,250
Cycle & Carriage Ltd. ................ Distributors 888,351 2,492,024
DBS Group Holdings Ltd. .............. Commercial Banks 1,976,000 11,557,524
Fraser & Neave Ltd. .................. Beverages 4,890,165 23,881,555
Keppel Corp. Ltd. .................... Industrial Conglomerates 8,845,600 24,612,970
MobileOne (Asia) Ltd. ................ Wireless Telecommunication Services 2,971,000 2,260,727
Singapore Airlines Ltd. .............. Airlines 4,135,500 24,423,168
Singapore Press Holdings Ltd. ........ Media 317,000 3,294,208
Singapore Telecommunications Ltd. .... Diversified Telecommunication Services 9,194,000 7,883,555
--------------
104,635,981
--------------
SOUTH AFRICA 13.2%
Alexander Forbes Ltd. ................ Diversified Financial Services 870,000 1,274,301
Anglo American PLC ................... Metals & Mining 3,709,774 57,247,098
Barloworld Ltd. ...................... Industrial Conglomerates 3,293,490 23,571,916
Bidvest Group Ltd. ................... Industrial Conglomerates 42,200 241,625
Imperial Holdings Ltd. ............... Air Freight & Logistics 1,370,436 9,781,008
Investec Ltd. ........................ Capital Markets 95,150 1,247,973
Investec PLC ......................... Road & Rail 120,025 1,574,229
Nampak Ltd. .......................... Containers & Packaging 1,408,800 2,321,425
Old Mutual PLC ....................... Insurance 13,215,490 19,081,457
Remgro Ltd. .......................... Industrial Conglomerates 3,367,170 28,694,924
Reunert Ltd. ......................... Electronic Equipment & Instruments 943,200 2,235,547
SABMiller PLC ........................ Beverages 6,285,973 42,562,147
Sasol Ltd. ........................... Oil & Gas 1,693,488 18,840,336
Tiger Brands Ltd. .................... Food Products 550,331 4,923,667
Tongaat-Hulett Group Ltd. ............ Food Products 628,078 2,797,498
--------------
216,395,151
--------------
SOUTH KOREA 12.9%
Cheil Communications Inc. ............ Media 2,930 288,217
a ChoHung Bank Co. Ltd. ................ Commercial Banks 1,994,380 6,720,284
CJ Corp. ............................. Food Products 301,950 13,144,747
Daelim Industrial Co. ................ Construction & Engineering 253,500 4,414,232
Hite Brewery Co. Ltd. ................ Beverages 129,530 6,950,919
Hotel Shilla Co. ..................... Hotels Restaurants & Leisure 244,420 983,205
Hyundai Development Co. .............. Construction & Engineering 1,718,300 11,450,538
Hyundai Motor Co. Ltd. ............... Automobiles 1,281,840 33,910,543
Kangwon Land Inc. .................... Hotels Restaurants & Leisure 174,027 19,376,803
Kookmin Credit Card Co. Ltd. ......... Consumer Finance 5,224 71,067
Korea Electric Power Corp. ........... Electric Utilities 1,459,896 23,099,234
SEMIANNUAL REPORT 21
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (UNAUDITED) (CONT.)
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
SOUTH KOREA (CONT.)
Korea Gas Corp. ...................... Gas Utilities 392,030 $ 9,353,583
KT Corp. ............................. Diversified Telecommunication Services 301,459 11,785,798
LG Card Co. Ltd. ..................... Consumer Finance 90,360 1,320,035
LG Household & Health Care Ltd. ...... Household Products 306,140 7,906,588
LG Petrochemical Co. Ltd. ............ Chemicals 172,610 3,056,259
POSCO ................................ Metals & Mining 177,740 18,451,034
Samsung Fine Chemicals ............... Chemicals 1,034,130 14,111,611
Samsung Heavy Industries Co. Ltd. .... Machinery 3,512,660 14,085,928
SK Corp. ............................. Oil & Gas 836,610 7,949,371
SK Telecom Co. Ltd. .................. Wireless Telecommunication Services 15,940 2,722,277
--------------
211,152,273
--------------
TAIWAN 4.8%
Advantech Co. Ltd. ................... Computers & Peripherals 2,454,000 3,545,218
Asustek Computer Inc. ................ Computers & Peripherals 7,730,000 19,542,762
Avision Inc. ......................... Computers & Peripherals 3,023,875 1,974,562
Chunghwa Telcom Co. Ltd. ............. Diversified Telecommunication Services 1,979,000 2,916,180
Delta Electronics Inc. ............... Electronic Equipment & Instruments 3,361,260 3,991,557
Elan Microelectronics Corp. .......... Software 1,241,000 1,047,015
International Bank of Taipei ......... Commercial Banks 1,821,000 815,530
Kinpo Electronics Inc. ............... Office Electronics 807,400 394,252
Mega Financial Holdings Co. Ltd. ..... Commercial Banks 6,881,720 3,241,030
Phoenixtec Power Co. Ltd. ............ Electrical Equipment 5,875,000 4,939,685
a Sinopac Holdings ..................... Commercial Banks 32,190,237 11,765,574
Sunplus Technology Co. Ltd. .......... Semiconductors & Semiconductor Equipment 7,781,000 10,116,874
a Taiwan Cellular Corp. ................ Wireless Telecommunication Services 4,890,410 3,546,642
Tsann Kuen Enterprise Co. Ltd. ....... Household Durables 2,597,000 3,339,107
UNI-President Enterprises Corp. ...... Food Products 10,081,790 3,102,313
Yuanta Core Pacific Securities Co. ... Diversified Financial Services 8,438,000 4,412,823
--------------
78,691,124
--------------
THAILAND 2.7%
Electricity Generating Public Co.
Ltd., fgn. ......................... Electric Utilities 1,241,300 1,668,255
Hana Microelectronics Co.
Ltd., fgn. ......................... Electronic Equipment & Instruments 1,075,900 2,497,808
National Finance Public Co.
Ltd., fgn. ......................... Consumer Finance 4,908,000 1,762,864
PTT Exploration & Production
Public Co. Ltd., fgn. .............. Oil & Gas 4,940,100 19,189,304
PTT Public Co. Ltd., fgn. ............ Oil & Gas 1,492,200 2,484,634
Shin Corporation Public Co.
Ltd., fgn. ......................... Wireless Telecommunication Services 35,314,600 15,960,452
a Tisco Finance ........................ Consumer Finance 110,000 62,535
--------------
43,625,852
--------------
TURKEY 5.7%
Akbank ............................... Commercial Banks 13,223,547,519 39,173,966
Arcelik AS, Br. ...................... Household Durables 5,924,913,500 20,686,539
Migros Turk T.A.S. ................... Food & Staples Retailing 840,033,000 8,354,414
Tupras-Turkiye Petrol Rafineleri AS .. Oil & Gas 3,717,491,240 24,516,706
--------------
92,731,625
--------------
TOTAL COMMON STOCKS (COST $1,362,346,536) 1,515,930,579
--------------
22 SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (UNAUDITED) (CONT.)
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
DIRECT EQUITY INVESTMENTS .4%
a,b,c Mayfair Hanoi, Ltd., 30% equity
interest owned through HEA Holdings
Ltd., a wholly owned investment .... Real Estate $ 3,839,976
--------------
a,b,c Indotel Ltd. ......................... Leisure Equipment & Products 900,000 3,114,000
--------------
TOTAL DIRECT EQUITY INVESTMENTS (COST $13,602,155) 6,953,976
--------------
PREFERRED STOCKS 5.4%
BRAZIL 5.3%
Banco Bradesco SA, ADR, pfd. ......... Commercial Banks 1,340,475 25,040,073
Cia Vale do Rio Doce, A, ADR, pfd. ... Metals & Mining 628,040 17,428,110
a Companhia Paranaense de Energia-Copel,
ADR, pfd. .......................... Electric Utilities 1,558,039 4,674,117
Confab Industrial SA, pfd. ........... Building Products 50,000 80,296
b Duratex SA, pfd. ..................... Building Products 402,086,824 8,991,904
Petroleo Brasileiro SA, ADR, pfd. .... Oil & Gas 1,719,204 30,533,063
--------------
86,747,563
--------------
THAILAND .1%
a Siam Commercial Bank, 5.25%, cvt.
pfd., fgn. ......................... Commercial Banks 2,240,900 1,905,618
--------------
TOTAL PREFERRED STOCKS (COST $101,831,169) 88,653,181
--------------
PRINCIPAL
AMOUNT
------------
SHORT TERM INVESTMENTS (COST $29,854,585) 1.8%
U.S. Treasury Bills, 0.797% to 1.083%,
with maturities to
9/25/03 ............................ United States $ 29,903,000 29,859,333
--------------
TOTAL INVESTMENTS (COST $1,507,634,445) 100.4% 1,641,397,069
OTHER ASSETS, LESS LIABILITIES (0.4)% (7,152,037)
--------------
NET ASSETS 100.0% .................... $1,634,245,032
==============
<FN>
a Non-income producing.
b See Note 6 regarding Holdings of 5% Voting Securities.
c See Note 7 regarding restricted securities.
</FN>
See notes to financial statements. SEMIANNUAL REPORT 23
TEMPLETON DEVELOPING MARKETS TRUST
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
Assets:
Investments in securities:
Cost - Unaffiliated issuers ..................................................... $ 1,466,497,992
Cost - Non-controlled affiliated issuers ........................................ 41,136,453
===============
Value - Unaffiliated issuers .................................................... 1,610,776,914
Value - Non-controlled affiliated issuers ....................................... 30,620,155
Cash ............................................................................. 508,271
Receivables:
Investment securities sold ...................................................... 445,675
Capital shares sold ............................................................. 3,129,499
Dividends and interest .......................................................... 6,093,344
---------------
Total assets ................................................................ 1,651,573,858
---------------
Liabilities:
Payables:
Investment securities purchased ................................................. 8,392,565
Capital shares redeemed ......................................................... 4,253,253
Affiliates ...................................................................... 3,518,008
Other liabilities ................................................................ 1,165,000
---------------
Total liabilities ........................................................... 17,328,826
---------------
Net assets, at value .............................................................. $ 1,634,245,032
===============
Net assets consist of:
Undistributed net investment income .............................................. $ 10,938,760
Net unrealized appreciation (depreciation) ....................................... 133,731,584
Accumulated net realized gain (loss) ............................................. (1,107,088,659)
Capital shares ................................................................... 2,596,663,347
---------------
Net assets, at value .............................................................. $ 1,634,245,032
===============
24 SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS TRUST
Financial Statements (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONT.)
JUNE 30, 2003 (UNAUDITED)
CLASS A:
Net asset value per share ($1,323,714,691 / 116,911,050 shares outstanding) a ... $11.32
===============
Maximum offering price per share ($11.32 / 94.25%) .............................. $12.01
===============
CLASS B:
Net asset value and maximum offering price per share ($15,043,582 / 1,348,639
shares outstanding) a ......................................................... $11.15
===============
CLASS C:
Net asset value per share ($144,127,555 / 12,950,531 shares outstanding)a ....... $11.13
===============
Maximum offering price per share ($11.13 / 99.00%) .............................. $11.24
===============
CLASS R:
Net asset value and maximum offering price per share ($613,323 / 54,478
shares outstanding) a ......................................................... $11.26
===============
ADVISOR CLASS:
Net asset value and maximum offering price per share ($150,745,881 / 13,320,227
shares outstanding) ........................................................... $11.32
===============
<FN>
a Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge and redemption fees retained by the Fund.
</FN>
See notes to financial statements. SEMIANNUAL REPORT 25
TEMPLETON DEVELOPING MARKETS TRUST
Financial Statements (CONTINUED)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
Investment Income:
(net of foreign taxes of $3,595,168)
Dividends:
Unaffiliated issuers ........................................................... $ 36,876,407
Non-controlled affiliated issuers (Note 6) ..................................... 445,685
Interest ........................................................................ 160,607
------------
Total investment income .................................................... 37,482,699
------------
Expenses:
Management fees (Note 3) ........................................................ 9,119,540
Administrative fees (Note 3) .................................................... 832,309
Distribution fees (Note 3)
Class A ........................................................................ 2,077,114
Class B ........................................................................ 64,051
Class C ........................................................................ 643,592
Class R ........................................................................ 1,238
Transfer agent fees (Note 3) .................................................... 2,644,500
Custodian fees .................................................................. 754,200
Reports to shareholders ......................................................... 115,800
Registration and filing fees .................................................... 95,300
Professional fees ............................................................... 205,900
Trustees' fees and expenses ..................................................... 69,700
Other ........................................................................... 16,300
------------
Total expenses ............................................................. 16,639,544
------------
Net investment income ................................................. 20,843,155
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments .................................................................... 1,699,395
Foreign currency transactions .................................................. (1,517,398)
------------
Net realized gain (loss) ................................................... 181,997
Net unrealized appreciation (depreciation) on:
Investments .................................................................... 190,762,438
Translation of assets and liabilities denominated in foreign currencies ........ (43,591)
------------
Net unrealized appreciation (depreciation) ................................. 190,718,847
------------
Net realized and unrealized gain (loss) .......................................... 190,900,844
------------
Net increase (decrease) in net assets resulting from operations .................. $211,743,999
============
26 SEMIANNUAL REPORT See notes to financial statements.
TEMPLETON DEVELOPING MARKETS TRUST
Financial Statements (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 2002
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
----------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................................................. $ 20,843,155 $ 13,925,567
Net realized gain (loss) from investments and foreign currency transactions ....... 181,997 (56,616,899)
Net unrealized appreciation (depreciation) on investments and translation
of assets and liabilities denominated in foreign currencies ..................... 190,718,847 73,081,651
--------------------------------------
Net increase (decrease) in net assets resulting from operations ............... 211,743,999 30,390,319
Distributions to shareholders from:
Net investment income:
Class A .......................................................................... (12,940,320) (6,153,882)
Class B .......................................................................... (68,511) (57,154)
Class C .......................................................................... (544,963) (695,572)
Class R .......................................................................... (5,501) (139)
Advisor Class .................................................................... (1,904,806) (428,724)
--------------------------------------
Total distributions to shareholders ................................................ (15,464,101) (7,335,471)
Capital share transactions (Note 2):
Class A .......................................................................... (4,997,376) (70,681,837)
Class B .......................................................................... 935,210 1,457,801
Class C .......................................................................... (1,099,055) (12,234,931)
Class R .......................................................................... 165,987 382,592
Advisor Class .................................................................... 3,562,067 44,386,597
--------------------------------------
Total capital share transactions ................................................... (1,433,167) (36,689,778)
Redemption fees (Note 1g) .......................................................... 32,152 543,597
Net increase (decrease) in net assets ............................................ 194,878,883 (13,091,333)
Net assets:
Beginning of period ................................................................ 1,439,366,149 1,452,457,482
--------------------------------------
End of period ...................................................................... $1,634,245,032 $1,439,366,149
======================================
Undistributed net investment income included in net assets:
End of period ...................................................................... $ 10,938,760 $ 5,559,706
======================================
See notes to financial statements. SEMIANNUAL REPORT 27
TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Developing Markets Trust (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company. Effective
December 31, 2002, the Fund was reorganized from a Massachusetts Business Trust
into a Delaware Statutory Trust. The reorganization had no effect on shares of
the Fund or its investment portfolio. The Fund seeks long-term capital
appreciation by investing, under normal market conditions, at least 80% of its
total assets in equity securities of developing or emerging market issuers. 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 Trustees.
B. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, 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.
28 SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (unaudited) (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 substantially all of its taxable income.
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
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. REDEMPTION FEES
The Fund charges a 2% redemption fee to market timers who redeem shares held for
less than 90 days. Such fees are retained by the Fund and accounted for as paid
in capital.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liability 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. However, based on experience, the Fund expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
The Fund offers five classes of shares: Class A, Class B, Class C, Class R and
Advisor Class. Each class of shares differs by its initial sales load,
contingent deferred sales charges, distribution fees, voting rights on matters
affecting a single class and its exchange privilege.
At June 30, 2003, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Fund's shares were as follows:
SEMIANNUAL REPORT 29
TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (unaudited) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONT.)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
CLASS A SHARES:
Shares sold ......................................... 76,987,002 $ 796,269,504 110,418,030 $ 1,131,296,741
Shares issued on reinvestment of distributions ...... 1,203,551 11,373,555 496,413 5,391,055
Shares redeemed ..................................... (78,168,433) (812,640,435) (117,624,119) (1,207,369,633)
------------------------------------------------------------------------
Net increase (decrease) ............................. 22,120 $ (4,997,376) (6,709,676) $ (70,681,837)
========================================================================
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
CLASS B SHARES:
Shares sold ......................................... 192,020 $ 1,979,703 410,579 $ 4,296,010
Shares issued on reinvestment of distributions ...... 6,843 63,775 4,831 51,797
Shares redeemed ..................................... (110,723) (1,108,268) (283,974) (2,890,006)
------------------------------------------------------------------------
Net increase (decrease) ............................. 88,140 $ 935,210 131,436 $ 1,457,801
========================================================================
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
CLASS C SHARES:
Shares sold ......................................... 1,263,259 $ 12,819,489 2,088,862 $ 21,771,709
Shares issued on reinvestment of distributions ...... 51,372 477,765 56,598 605,039
Shares redeemed ..................................... (1,425,622) (14,396,309) (3,374,907) (34,611,679)
------------------------------------------------------------------------
Net increase (decrease) ............................. (110,991) $ (1,099,055) (1,229,447) $ (12,234,931)
========================================================================
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 2003 DECEMBER 31, 2002 A
------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
CLASS R SHARES:
Shares sold ......................................... 67,401 $ 673,151 42,052 $ 422,261
Shares issued on reinvestment of distributions ...... 571 5,367 6 61
Shares redeemed ..................................... (51,686) (512,531) (3,866) (39,730)
------------------------------------------------------------------------
Net increase (decrease) ............................. 16,286 $ 165,987 38,192 $ 382,592
========================================================================
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
ADVISOR CLASS SHARES:
Shares sold ......................................... 2,377,447 $ 25,110,812 6,289,373 $ 64,806,049
Shares issued on reinvestment of distributions ...... 138,504 1,306,095 35,109 379,871
Shares issued on merger (Note 8) .................... -- -- 8,715,110 80,698,235
Shares redeemed ..................................... (2,227,491) (22,854,840) (10,271,280) (101,497,558)
------------------------------------------------------------------------
Net increase (decrease) ............................. 288,460 $ 3,562,067 4,768,312 $ 44,386,597
========================================================================
<FN>
a Effective date of Class R shares was January 2, 2002.
</FN>
30 SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (unaudited) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also officers or directors of Templeton Asset
Management Ltd. (TAML), Franklin Templeton Services, LLC (FT Services),
Franklin/Templeton Distributors, Inc. (Distributors), and Franklin/Templeton
Investor Services, LLC (Investor Services), the Fund's investment manager,
administrative manager, principal underwriter, and transfer agent, respectively.
The Fund pays an investment management fee to TAML of 1.25% per year of the
average daily net assets of the Fund. The Fund pays an administrative fee to FT
Services based on the Fund's average daily net assets as follows:
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
--------------------------------------------------------------
0.150% First $200 million
0.135% Over $200 million, up to and including $700 million
0.100% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion
The Fund reimburses Distributors for costs incurred in marketing the Fund's
shares up to 0.35%, 1.00%, 1.00% and 0.50% per year of the average daily net
assets of Class A, Class B, Class C, and Class R shares, respectively. Under the
Class A distribution plan, costs exceeding the maximum may be reimbursed in
subsequent periods. At June 30, 2003, Distributors advised the Fund that
unreimbursed costs were $1,397,734. Distributors received net commissions from
sales of the Fund's shares and received contingent deferred sales charges for
the period of $75,467 and $21,807, respectively.
4. INCOME TAXES
At June 30, 2003, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments ........................ $1,527,531,937
==============
Unrealized appreciation .................... 250,432,244
Unrealized depreciation .................... (136,567,112)
--------------
Net unrealized appreciation (depreciation) . $ 113,865,132
==============
Net investment income and net realized losses differ for financial statement and
tax purposes primarily due to differing treatments of passive foreign investment
companies, wash sales, foreign currency transactions, defaulted securities,
merger expenses and losses realized subsequent to October 31 on the sales of
securities and foreign currencies.
SEMIANNUAL REPORT 31
TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (unaudited) (CONTINUED)
4. INCOME TAXES (CONT.)
At December 31, 2002, the Fund had tax basis capital losses including
$23,924,253 from the merged Templeton Vietnam and Southeast Asia and Templeton
Emerging Markets Appreciation Funds which may be carried over to offset future
capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2006 ........................ $ 47,713,809
2007 ........................ 548,121,432
2008 ........................ 36,476,765
2009 ........................ 313,161,808
2010 ........................ 141,181,639
--------------
$1,086,655,453
==============
At December 31, 2002, the Fund had deferred capital and foreign currency losses
occurring subsequent to October 31, 2002 of $9,006,899 and $503,575,
respectively. For tax purposes, such losses will be reflected in the year ending
December 31, 2003.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2003 aggregated $294,740,419 and $285,638,096,
respectively.
6. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" to include
investments in portfolio companies in which the Fund owns 5% or more of the
outstanding voting securities. Investments in "affiliated companies" at June 30,
2003 were as shown below.
REALIZED
CAPITAL
NUMBER OF NUMBER OF GAIN/LOSS
SHARES HELD GROSS GROSS SHARES HELD VALUE INVESTMENT INCOME 1/1/03-
NAME OF ISSUER DEC. 31, 2002 ADDITIONS REDUCTIONS JUNE 30, 2003 JUNE 30, 2003 1/1/03-6/30/03 6/30/03
- ------------------------------------------------------------------------------------------------------------------------------------
NON-CONTROLLED AFFILIATES
Duratex SA, pfd. .......... 402,086,824 -- -- 402,086,824 $ 8,991,904 -- --
Indotel Ltd. .............. 900,000 -- -- 900,000 3,114,000 -- --
Mayfair Hanoi Ltd., 30% equity
interest owned through HEA
Holdings Ltd. ............ -- -- -- 3,839,976 -- --
Pliva D D, GDR, Reg S ..... 898,050 160,700 1,058,750 14,674,275 $445,685
--------------------------------------------
TOTAL NON-CONTROLLED AFFILIATES $30,620,155 $445,685 $--
============================================
32 SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (unaudited) (CONTINUED)
7. RESTRICTED SECURITIES
At June 30, 2003, investments in securities included issues that are restricted
or illiquid. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. At June 30, 2003, the Fund held
investments in restricted and illiquid securities that were valued under
approved methods by the Board of Trustees, as follows:
NUMBER OF ACQUISITION
SHARES ISSUER DATE COST VALUE
- -------------------------------------------------------------------------------------------------------------------------
900,000 Indotel Ltd.* ................................................ 11/22/96 $9,154,569 $3,114,000
Mayfair Hanoi, Ltd., 30% equity interest owned through
HEA Holdings Ltd.* ........................................... 10/31/96 4,447,586 3,839,976
----------
TOTAL RESTRICTED SECURITIES (.4% OF NET ASSETS) ............................ $6,953,976
==========
<FN>
*Securities acquired upon merger. See Note 8.
</FN>
8. MERGERS
On September 26, 2002, the Fund acquired the net assets of each Templeton
Vietnam and Southeast Asia Fund, Inc. ("TVSAF") and Templeton Emerging Markets
Appreciation Fund, Inc. ("TEMAF") pursuant to plans of reorganization approved
by the shareholders of each of TVSAF, TEMAF and the Fund. The merger with TVSAF
was accomplished by a tax-free exchange of 4,186,491 Advisor Class shares of the
Fund (valued at $9.26 per share) for $38,750,302 in net assets of TVSAF,
including $6,602,254 of unrealized depreciation. The merger with TEMAF was
accomplished by a tax-free exchange of 4,528,619 Advisor Class shares of the
Fund (valued at $9.26 per share) for $41,947,933 in net assets of TEMAF,
including $3,662,951 of unrealized depreciation. The combined net assets of the
Fund immediately after the mergers were $1,324,585,699.
9. OTHER CONSIDERATIONS
Certain members of the Fund's Portfolio Management team may serve as a member on
the board of directors of certain companies in which the Fund invests and may
represent the Fund in certain corporate negotiations. Currently, these members
serve in one or more of these capacities for HEA Holdings Ltd., (which owns a
30% equity interest in Mayfair Hanoi, Ltd.), Indotel Ltd., Lukoil, Holdings, GUM
Trade House and Mayfair Hanoi Ltd. As a result of this involvement, the
Portfolio Manager could receive certain material non-public information which,
pursuant to the Fund's policies and the requirements of the federal securities
laws, could prevent the Fund from trading in the securities of such companies
for limited or extended periods of time.
SEMIANNUAL REPORT 33
TEMPLETON DEVELOPING MARKETS TRUST
Tax Designation (unaudited)
At June 30, 2003, 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. As shown in the table
below, the Fund hereby designates to shareholders the foreign source income and
foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This
designation will allow shareholders of record on March 6, 2003, to treat their
proportionate share of foreign taxes paid by the Fund as having been paid
directly by them. The shareholder shall consider these amounts as foreign taxes
paid in the tax year in which they receive the Fund distribution.
The following table provides a breakdown by country of foreign source income and
foreign taxes paid, as designated by the Fund, to Class A, Class B, Class C,
Class R, and Advisor Class shareholders.
CLASS A CLASS B CLASS C
-------------------------------------------------------------------------------------------------------
FOREIGN TAX FOREIGN SOURCE FOREIGN TAX FOREIGN SOURCE FOREIGN TAX FOREIGN SOURCE
COUNTRY PAID PER SHARE INCOME PER SHARE PAID PER SHARE INCOME PER SHARE PAID PER SHARE INCOME PER SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
Austria .................. $0.0016 $0.0037 $0.0016 $0.0021 $0.0016 $0.0018
Brazil ................... 0.0073 0.0187 0.0073 0.0106 0.0073 0.0090
Chile .................... 0.0001 0.0001 0.0001 0.0000 0.0001 0.0000
China .................... 0.0000 0.0068 0.0000 0.0039 0.0000 0.0033
Columbia ................. 0.0000 0.0005 0.0000 0.0003 0.0000 0.0002
Croatia .................. 0.0000 0.0006 0.0000 0.0004 0.0000 0.0003
Czech Republic ........... 0.0008 0.0019 0.0008 0.0011 0.0008 0.0009
Egypt .................... 0.0000 0.0024 0.0000 0.0013 0.0000 0.0011
Estonia .................. 0.0003 0.0004 0.0003 0.0002 0.0003 0.0002
Greece ................... 0.0000 0.0007 0.0000 0.0004 0.0000 0.0003
Hong Kong ................ 0.0000 0.0109 0.0000 0.0062 0.0000 0.0053
Hungary .................. 0.0007 0.0012 0.0007 0.0007 0.0007 0.0006
India .................... 0.0014 0.0044 0.0014 0.0025 0.0014 0.0021
Indonesia ................ 0.0041 0.0097 0.0041 0.0055 0.0041 0.0047
Malaysia ................. 0.0009 0.0012 0.0009 0.0007 0.0009 0.0006
Mexico ................... 0.0000 0.0124 0.0000 0.0070 0.0000 0.0060
Peru ..................... 0.0000 0.0002 0.0000 0.0001 0.0000 0.0001
Philippines .............. 0.0011 0.0016 0.0011 0.0009 0.0011 0.0008
Poland ................... 0.0002 0.0004 0.0002 0.0002 0.0002 0.0002
Russia ................... 0.0011 0.0028 0.0011 0.0016 0.0011 0.0013
Singapore ................ 0.0046 0.0146 0.0046 0.0083 0.0046 0.0071
Slovak Republic .......... 0.0002 0.0006 0.0002 0.0004 0.0002 0.0003
South Africa ............. 0.0007 0.0221 0.0007 0.0122 0.0007 0.0106
South Korea .............. 0.0015 0.0031 0.0015 0.0018 0.0015 0.0015
Taiwan ................... 0.0064 0.0061 0.0064 0.0035 0.0064 0.0030
Thailand ................. 0.0004 0.0030 0.0004 0.0017 0.0004 0.0015
Turkey ................... 0.0000 0.0035 0.0000 0.0020 0.0000 0.0017
-------------------------------------------------------------------------------------------------------
TOTAL .................... $0.0334 $0.1336 $0.0334 $0.0756 $0.0334 $0.0645
=======================================================================================================
34
TEMPLETON DEVELOPING MARKETS TRUST
Tax Designation (unaudited) (CONTINUED)
CLASS R ADVISOR CLASS
-----------------------------------------------------------------------
FOREIGN TAX FOREIGN SOURCE FOREIGN TAX FOREIGN SOURCE
COUNTRY PAID PER SHARE INCOME PER SHARE PAID PER SHARE INCOME PER SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
Austria ................................................ $0.0016 $0.0043 $0.0016 $0.0048
Brazil ................................................. 0.0073 0.0216 0.0073 0.0240
Bulgaria ............................................... 0.0000 0.0001 0.0000 0.0001
Chile .................................................. 0.0001 0.0001 0.0001 0.0001
China .................................................. 0.0000 0.0079 0.0000 0.0088
Columbia ............................................... 0.0000 0.0005 0.0000 0.0006
Croatia ................................................ 0.0000 0.0007 0.0000 0.0008
Czech Republic ......................................... 0.0008 0.0022 0.0008 0.0025
Egypt .................................................. 0.0000 0.0027 0.0000 0.0030
Estonia ................................................ 0.0003 0.0004 0.0003 0.0005
Greece ................................................. 0.0000 0.0008 0.0000 0.0009
Hong Kong .............................................. 0.0000 0.0126 0.0000 0.0140
Hungary ................................................ 0.0007 0.0014 0.0007 0.0016
India .................................................. 0.0014 0.0051 0.0014 0.0056
Indonesia .............................................. 0.0041 0.0112 0.0041 0.0124
Malaysia ............................................... 0.0009 0.0013 0.0009 0.0015
Mexico ................................................. 0.0000 0.0144 0.0000 0.0159
Peru ................................................... 0.0000 0.0002 0.0000 0.0003
Philippines ............................................ 0.0011 0.0019 0.0011 0.0020
Poland ................................................. 0.0002 0.0004 0.0002 0.0005
Russia ................................................. 0.0011 0.0032 0.0011 0.0036
Singapore .............................................. 0.0046 0.0170 0.0046 0.0188
Slovak Republic ........................................ 0.0002 0.0008 0.0002 0.0008
South Africa ........................................... 0.0007 0.0259 0.0007 0.0282
South Korea ............................................ 0.0015 0.0036 0.0015 0.0040
Taiwan ................................................. 0.0064 0.0071 0.0064 0.0079
Thailand ............................................... 0.0004 0.0035 0.0004 0.0039
Turkey ................................................. 0.0000 0.0040 0.0000 0.0045
--------------------------------------------------------------
TOTAL .................................................. $0.0334 $0.1549 $0.0334 $0.1716
==============================================================
In January 2004, shareholders will receive Form 1099-DIV which will include
their share of taxes paid and foreign source income distributed during the
calendar year 2003. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their 2003 individual
income tax returns.
35
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Franklin Small-Mid Cap
Growth Fund
Franklin Technology Fund
Franklin U.S. Long-Short Fund 3
GROWTH & INCOME
Franklin Balance Sheet Investment Fund 4
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 4
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Small Cap Value Fund
Franklin Utilities Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
FUND ALLOCATOR SERIES
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth
Target Fund
Franklin Templeton Moderate
Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Floating Rate Daily
Access Fund
Franklin Floating Rate Trust 6
Franklin Short-Intermediate
U.S. Government Securities Fund 5
Franklin Strategic Income Fund
Franklin Total Return Fund
Franklin U.S. Government
Securities Fund 5
Franklin Federal Money Fund 5,7
Franklin Money Fund 5,7
TAX-FREE INCOME 8
Double Tax-Free Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free
Income Fund
Insured Tax-Free Income Fund 9
Tax-Exempt Money Fund 5,7
STATE-SPECIFIC
TAX-FREE INCOME 8
Alabama
Arizona
California 10
Colorado
Connecticut
Florida 10
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 9
Michigan 9
Minnesota 9
Missouri
New Jersey
New York 10
North Carolina
Ohio 9
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust 11
1. Formerly Franklin Growth and Income Fund. Effective 5/1/02, the fund's name
changed; investment goal and strategy remained the same.
2. Formerly Franklin California Growth Fund. Effective 9/1/02, the fund's name
changed and its investment criteria was modified to invest a majority of its net
assets in California companies, as opposed to at least 80% of net assets.
3. Upon reaching approximately $350 million in assets, the fund will close to
all investors.
4. The fund is only open to existing shareholders as well as select retirement
plans.
5. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
6. 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.
7. No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
8. For investors subject to the alternative minimum tax, a small portion of
these dividends may be taxable. Distributions of capital gains are generally
taxable.
9. Portfolio of insured municipal securities.
10. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
intermediate-term and money market portfolios (CA and NY).
11. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally only available as investment options in variable annuity or variable
life insurance contracts.
12/02
Not part of the semiannual report
[FRANKLIN TEMPLETON LOGO OMITTED]
One Franklin Parkway
San Mateo, CA 94403-1906
WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
- ----------------------------------------------------
ELIGIBLE SHAREHOLDERS CAN SIGN UP FOR EDELIVERY
AT FRANKLINTEMPLETON.COM. SEE INSIDE FOR DETAILS.
SEMIANNUAL REPORT AND SHAREHOLDER LETTER
TEMPLETON DEVELOPING MARKETS TRUST
PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
This report must be preceded or accompanied by the current Templeton Developing
Markets Trust prospectus, which contains more complete information, including
risk factors, charges and expenses. Like any investment in securities, 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.
711 S2002 08/03
ITEM 2. CODE OF ETHICS. N/A
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. N/A
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 9. 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 10. EXHIBITS.
(A) N/A
(B)(1) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION,
AND BRUCE S. ROSENBERG, CHIEF FINANCIAL OFFICER
(B)(2) CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION,
AND BRUCE S. ROSENBERG, 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 DEVELOPING MARKETS TRUST
By /s/JIMMY D. GAMBILL
------------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: August 31, 2003
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: August 31, 2003
By /s/BRUCE S. ROSENBERG
------------------------
Bruce S. Rosenberg
Chief Financial Officer
Date: August 31, 2003