UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-6378
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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: 12/31/03
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ITEM 1. REPORTS TO STOCKHOLDERS.
DECEMBER 31, 2003
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ANNUAL REPORT AND SHAREHOLDER LETTER INTERNATIONAL
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TEMPLETON
DEVELOPING MARKETS TRUST
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WANT TO RECEIVE
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Eligible shareholders can
sign up for eDelivery at
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See inside for details.
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FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
Franklin o TEMPLETON o Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a leader in
tax-free investing and a driving force in fixed
income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity
investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with research offices in over 25 countries, they
offer investors the broadest global reach in the
industry.
MUTUAL SERIES. Established in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among
undervalued stocks, arbitrage situations and
distressed companies.
TRUE DIVERSIFICATION Because our management groups work independently and
adhere to distinctly different investment
approaches, Franklin, Templeton and Mutual Series
funds typically have a low overlap of securities.
That's why our funds can be used to build truly
diversified portfolios covering every major asset
class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk- adjusted returns over the long term, as well
as the reliable account services that have helped us
become one of the most trusted names in financial
services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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Not part of the annual report
Contents
SHAREHOLDER LETTER............................. 1
ANNUAL REPORT
Templeton Developing Markets Trust............. 4
Performance Summary............................ 8
Financial Highlights and
Statement of Investments....................... 13
Financial Statements........................... 24
Notes to Financial Statements.................. 27
Independent Auditors' Report................... 34
Tax Designation................................ 35
Board Members and Officers..................... 42
Proxy Voting Policies and Procedures........... 48
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Regulatory Update
AS OF FEBRUARY 12, 2004
On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company"),
alleging violations of the Massachusetts Uniform Securities Act. The complaint
arises from activity that occurred in 2001 during which time an officer of a
Company subsidiary was negotiating an agreement with an investor relating to
investments in a mutual fund and a hedge fund.
The Company, in addition to other entities within Franklin Templeton
Investments, including the Fund and other funds, has been named in shareholder
class actions related to the matter described above. The Company believes that
the claims made in the lawsuit are without merit and it intends to defend
vigorously against the allegations. It is anticipated that the Company may be
named in additional similar civil actions related to the matter described above.
In addition, as part of ongoing investigations by the U.S. Securities and
Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of
California, the New York Attorney General, the California Attorney General, the
U.S. Attorney for the District of Massachusetts, the Florida Department of
Financial Services, and the Commissioner of Securities and the Attorney General
of the State of West Virginia, relating to certain practices in the mutual fund
industry, including late trading, market timing and sales compensation
arrangements, the Company and its subsidiaries, as well as certain current or
former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees are providing documents and information in response to
these requests and subpoenas. In addition, the Company has responded to requests
for similar kinds of information from regulatory authorities in some of the
foreign countries where the Company conducts its global asset management
business.
The Staff of the SEC has informed the Company that it intends to recommend that
the Commission authorize an action against an affiliate of the Fund's adviser
and a senior executive officer relating to the frequent trading issues that are
the subject of the SEC's investigation. These issues were previously disclosed
as being under investigation by government authorities and the subject of an
internal inquiry by the Company in its Annual Report on Form 10-K and on its
public website. The Company currently is in discussions with the SEC Staff in an
effort to resolve the issues raised in their investigation. Such discussions are
preliminary and the Company cannot predict the likelihood of whether those
discussions will result in a settlement and, if so, the terms of such
settlement. The impact, if any, of these matters on the Fund is uncertain at
this time. If it is found that the Company bears responsibility for any unlawful
or improper conduct, we have committed to making the funds or their shareholders
whole, as appropriate. Any further updates on these matters will be disclosed on
the Company's website at franklintempleton.com under "Statement on Current
Industry Issues."
Not part of the annual report | 3
Annual Report
Templeton Developing Markets Trust
YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: 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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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS
FOLLOWS:
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets as of 12/31/03
Asia 53.2%
Europe 16.9%
Latin America 14.6%
Middle East & Africa 11.2%
Short-Term Investments &
Other Net Assets 4.1%
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We are pleased to bring you Templeton Developing Markets Trust's
annual report for the fiscal year ended December 31, 2003.
PERFORMANCE OVERVIEW
Templeton Developing Markets Trust - Class A posted a +53.14%
cumulative total return for the year ended December 31, 2003, as
shown in the Performance Summary beginning on page 8. The Fund
underperformed its benchmarks, the Morgan Stanley Capital
International (MSCI) Emerging Markets Free (EMF) Index and the
Standard & Poor's/International Finance Corporation Investable
(S&P/IFCI) Composite Index, which returned 56.28% and 57.16%
during the
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.
4 | Annual Report
same period. 1 Please note that the index performance
numbers are purely for reference and that Templeton
does not index its funds, but rather undertakes
investments on the basis of meticulous fundamental research.
ECONOMIC AND MARKET OVERVIEW
For the year ended December 31, 2003, generally
improving economic growth worldwide had favorable
effects on many emerging market economies, which
exhibited faster growth than many developed countries.
Many emerging country financial markets seemed to
reflect the strengthening global economic conditions.
Early in 2003, concerns about military conflicts in
Afghanistan and Iraq, as well as high oil prices,
rattled investor confidence, and most equity markets
experienced losses in the first quarter. However, a
quicker-than-expected end to major combat in Iraq
relieved some market concerns, and many emerging
markets rebounded in the second quarter. The severe
acute respiratory syndrome (SARS) outbreak in early
spring greatly impacted Asian market performance as
regional tourism suffered, particularly the airline and
hospitality sectors. However, the containment of SARS
in following months allowed concerns to subside, and
investors returned from the sidelines. Largely as a
result, emerging markets generally outperformed the
U.S., European and Japanese markets for the 12 months
under review. For example, the MSCI EMF Index returned
56.28% for the year ended December 31, 2003. The
Standard & Poor's 500 Composite Index (S&P 500), a
broad measure of U.S. equity performance, returned
28.67%, while the MSCI Europe Australasia Far East
(EAFE) Index and MSCI Japan Index returned 39.17% and
36.15% for the same one-year period. 2
During the Fund's fiscal year, Latin American markets
were some of the world's strongest performing as
political and financial issues that engulfed the region
in 2002 subsided. Brazil and Argentina experienced
renewed investor interest as their governments strove
to implement key structural reforms and sealed
agreements with the International Monetary Fund. Asian
markets rebounded sharply in 2003's second half largely
due to strong macroeconomic data. In Africa, South
Africa ended years of ongoing debate, and the
government agreed to provide free
1. Source: Standard & Poor's Micropal. The MSCI EMF
Index is market capitalization-weighted and measures
total returns of equity securities available to foreign
(non-local) investors in emerging markets globally. The
S&P/IFCI Composite Index measures the total return with
dividends reinvested of equity securities in emerging
markets globally. Securities' weights are adjusted to
reflect only the portion of the market capitalization
available to foreign (non-local) investors. Securities
included in the index are weighted according to their
adjusted market capitalization (outstanding investable
shares times price). The indexes are unmanaged and
include reinvested dividends. One cannot invest
directly in an index, nor is an index representative of
the Fund's portfolio.
2. Source: Standard & Poor's Micropal. See footnote 1
for a description of the MSCI EMF Index. The S&P 500
consists of 500 stocks chosen for market size,
liquidity and industry group representation. Each
stock's weight in the index is proportionate to its
market value. The S&P 500 is one of the most widely
used benchmarks of U.S. equity performance. The MSCI
EAFE Index is market capitalization-weighted and
measures total returns of equity securities in
developed markets in Europe, Australasia and the Far
East. The MSCI Japan Index is market capitalization-
weighted and measures total returns of equity
securities in Japan.
Annual Report | 5
TOP 10 COUNTRIES
12/31/03
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% of Total
NET ASSETS
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South Korea 12.1%
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South Africa 11.0%
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Taiwan 9.4%
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Brazil 8.6%
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Hong Kong 8.2%
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China 7.6%
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Singapore 6.4%
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Mexico 4.9%
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India 4.1%
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Turkey 3.5%
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AIDS-related treatments, creating the world's largest such
program. Eastern European equity markets' upward trend continued
as prospective European Union (EU) candidates successfully passed
referendums for accession into the EU in 2004. In Russia, an
investigation and subsequent arrest of Michail Khodorkovsky,
the CEO and major shareholder of oil company Yukos, as well as
the breakup of the Sibneft-Yukos merger, contributed to some
severe market fluctuations during 2003's fourth quarter. For the
year, however, Russia's market outperformed its regional peers.
To the south, Turkey's market appeared to take recent terrorist
attacks in stride and continued its upward trend as investor
confidence seemed to remain largely unshaken.
INVESTMENT STRATEGY
We employ a bottom-up, value-oriented, long-term investment
approach. We focus on the market price of a company's securities
relative to our evaluation of its long-term earnings, asset value
and cash flow potential. As we look for investments, we focus on
specific companies and perform in-depth research to construct an
"action list" from which we make our investment decisions. Before
we make a purchase, we generally look at a company's potential
for earnings and growth over a five-year horizon. During our
analysis, we also consider a company's position in its sector,
economic framework and political environment.
MANAGER'S DISCUSSION
During the year under review, the Fund's performance benefited
from its Austrian exposure. In addition, the Fund's performance
was helped by its relatively overweighted position, relative to
the MSCI EMF Index, in Turkey, which outperformed the index. Also
aiding Fund performance were underweighted positions in South
Korea and Malaysia because those countries underperformed the
index.
By industry, the Fund's holdings and industry allocations in
banks (including commercial banks), food and staples retailing,
and industrial conglomerates provided the greatest contribution
to Fund performance relative to the MSCI EMF Index during the
period. Individual contributors included Turkey's Akbank,
Brazil's Banco Bradesco, Hong Kong retailer Dairy Farm
International, and industrial conglomerates including India's
Grasim Industries and Singapore's Keppel.
Areas that hindered Fund performance during the period included a
relatively overweighted position in the Philippines and
underweighted positions in Brazil and Russia. The Fund's
Philippine position is concentrated in San Miguel Corp., one of
the largest beverage companies in the Asia-Pacific region. The
company and its subsidiaries have broad exposure in the Asia-
Pacific region and operate more than 100 facilities in the
Philippines, China and other Southeast Asian countries. We
6 | Annual Report
believe Asia's economic recovery could bode
well for the company; therefore, consistent
with our investment strategy, we continued
to hold the stock. Poor liquidity made
additional investments in Russia difficult,
while Brazil's strong market performance led
to increasingly expensive valuations.
During the Fund's fiscal year, we made
investments in several Asian countries,
including Taiwan, Singapore and China (Red
Chip shares, Hong Kong-listed companies with
significant exposure to China, and H shares,
Hong Kong-listed Chinese companies).
Consistent with our investment strategy, we
purchased shares of China Mobile, a dominant
wireless telecommunications operator in China;
China Telecom and Taiwan Cellular, key
integrated telecommunications services
providers in China and Taiwan, respectively;
and Singapore Telecommunications, one of
Asia's leading communications companies.
Conversely, we undertook selective sales in
strong performers in Indonesia and Thailand
as some stock valuations became expensive.
In Latin America, we increased our Mexican
holdings primarily by adding to our shares
of Telefonos de Mexico, the country's
largest integrated telecommunications services
provider. We decreased our Argentina position
during the period and repositioned our Brazil
holdings by adding to our shares of Embraer-
Empresa Brasileira de Aeronautica, one of the
world's largest aircraft manufacturers, and
reducing our position and taking profits in
Cia Vale Do Rio Doce.
We purchased shares in several European
companies during the fiscal year, including
Poland's Telekomunikacja Polska SA, Greece's
Hellenic Telecommunications Organization SA
(OTE) and the Czech Republic's Cesky Telecom.
Largely as a result of these purchases and
some of our Asian investments, the Fund's
exposure to telecommunications increased
during the period. We sold some of our Turkey
holdings before the terrorist attacks there,
locking in gains.
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.
THIS DISCUSSION REFLECTS OUR ANALYSIS,
OPINIONS AND PORTFOLIO HOLDINGS AS OF
DECEMBER 31, 2003, THE END OF THE REPORTING
PERIOD. THE WAY WE IMPLEMENT OUR MAIN
INVESTMENT STRATEGIES AND THE RESULTING
PORTFOLIO HOLDINGS MAY CHANGE DEPENDING ON
FACTORS SUCH AS MARKET AND ECONOMIC
CONDITIONS. THESE OPINIONS MAY NOT BE RELIED
UPON AS INVESTMENT ADVICE OR AN OFFER FOR A
PARTICULAR SECURITY. THE INFORMATION IS NOT
A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY
MARKET, COUNTRY, INDUSTRY, SECURITY OR THE
FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT
MANAGER MAKES NO REPRESENTATION OR WARRANTY
AS TO THEIR COMPLETENESS OR ACCURACY.
ALTHOUGH HISTORICAL PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS
MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
TOP 10 EQUITY HOLDINGS
12/31/03
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Company % of Total
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SECTOR/INDUSTRY, COUNTRY NET ASSETS
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Anglo American PLC 3.7%
METALS & MINING, SOUTH AFRICA
------------------------------------
SABMiller PLC 2.8%
BEVERAGES, SOUTH AFRICA
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Hyundai Motor Co. Ltd. 2.1%
AUTOMOBILES, SOUTH KOREA
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Citic Pacific Ltd. 2.1%
INDUSTRIAL CONGLOMERATES,
HONG KONG
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China Mobile (Hong Kong) Ltd. 2.0%
WIRELESS TELECOMMUNICATION
SERVICES, CHINA
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Embraer-Empresa Brasileira de
Aeronautica SA, ord. & ADR 1.8%
AEROSPACE & DEFENSE, BRAZIL
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Petroleo Brasileiro SA,
ADR, pfd. 1.8%
OIL & GAS, BRAZIL
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Lukoil Holdings, ADR 1.8%
OIL & GAS, RUSSIA
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Telefonos de Mexico SA de
CV (Telmex), L, ADR 1.6%
DIVERSIFIED TELECOMMUNICATION
SERVICES, MEXICO
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Remgro Ltd. 1.5%
INDUSTRIAL CONGLOMERATES,
SOUTH AFRICA
------------------------------------
Annual Report | 7
Performance Summary as of 12/31/03
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 and graphs do 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
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CLASS A CHANGE 12/31/03 12/31/02
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Net Asset Value (NAV) +$4.99 $14.99 $10.00
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DISTRIBUTIONS (1/1/03-12/31/03)
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Dividend Income $0.2511
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CLASS B CHANGE 12/31/03 12/31/02
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Net Asset Value (NAV) +$4.95 $14.77 $9.82
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DISTRIBUTIONS (1/1/03-12/31/03)
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Dividend Income $0.1375
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CLASS C CHANGE 12/31/03 12/31/02
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Net Asset Value (NAV) +$4.97 $14.75 $9.78
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DISTRIBUTIONS (1/1/03-12/31/03)
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Dividend Income $0.1125
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CLASS R CHANGE 12/31/03 12/31/02
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Net Asset Value (NAV) +$4.91 $14.89 $9.98
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DISTRIBUTIONS (1/1/03-12/31/03)
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Dividend Income $0.2752
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ADVISOR CLASS CHANGE 12/31/03 12/31/02
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Net Asset Value (NAV) +$4.95 $14.96 $10.01
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DISTRIBUTIONS (1/1/03-12/31/03)
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Dividend Income $0.3289
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THE NAV DOES NOT AGREE WITH THE NAV DISCLOSED IN THE ACCOMPANYING FINANCIAL
STATEMENTS DUE TO A FINANCIAL STATEMENT ADJUSTING ENTRY POSTED AS OF THE YEAR
ENDED 12/31/03.
8 | Past performance does not guarantee future results. | Annual Report
Performance Summary (CONTINUED)
PERFORMANCE
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CLASS A 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +53.14% +51.56% +25.43%
Average Annual Total Return 2 +44.34% +7.39% +1.69%
Value of $10,000 Investment 3 $14,434 $14,282 $11,823
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CLASS B 1-YEAR 5-YEAR INCEPTION (1/1/99)
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Cumulative Total Return 1 +52.17% +46.24% +46.24%
Average Annual Total Return 2 +48.17% +7.60% +7.60%
Value of $10,000 Investment 3 $14,817 $14,424 $14,424
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CLASS C 1-YEAR 5-YEAR INCEPTION (5/1/95)
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Cumulative Total Return 1 +52.25% +46.54% +31.63%
Average Annual Total Return 2 +49.72% +7.73% +3.10%
Value of $10,000 Investment 3 $14,972 $14,512 $13,034
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CLASS R 1-YEAR INCEPTION (1/1/02)
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Cumulative Total Return 1 +52.82% +54.29%
Average Annual Total Return 2 +51.82% +24.29%
Value of $10,000 Investment 3 $15,182 $15,429
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ADVISOR CLASS4 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +53.72% +54.25% +28.13%
Average Annual Total Return 2 +53.72% +9.06% +2.51%
Value of $10,000 Investment 3 $15,372 $15,425 $12,813
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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, INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS,
AND 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.
Annual Report | Past performance does not guarantee future results. | 9
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes the applicable maximum sales charge(s), Fund expenses,
account fees and reinvested distributions. The unmanaged indexes include
reinvested dividends. They differ from the Fund in composition and do not pay
management fees or expenses. One cannot invest directly in an index.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------
Class A 12/31/03
- --------------------------------------------
1-Year +44.34%
- --------------------------------------------
5-Year +7.39%
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10-Year +1.69%
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CLASS A (1/1/94-12/31/03)
Templeton Developing S&P/IFCI MSCI Emerging Markets
Markets Trust Composite Index5 Free Index5
01/01/94 $9,426 $10,000 $10,000
01/31/94 $9,617 $10,068 $10,182
02/28/94 $9,407 $9,808 $10,001
03/31/94 $9,029 $8,817 $9,096
04/30/94 $8,669 $8,649 $8,914
05/31/94 $8,662 $8,853 $9,219
06/30/94 $8,520 $8,538 $8,965
07/31/94 $8,818 $9,152 $9,522
08/31/94 $9,333 $10,328 $10,704
09/30/94 $9,420 $10,585 $10,826
10/31/94 $9,203 $10,235 $10,630
11/30/94 $8,873 $9,851 $10,078
12/31/94 $8,617 $8,799 $9,268
01/31/95 $8,129 $7,625 $8,282
02/28/95 $8,103 $7,528 $8,070
03/31/95 $8,193 $7,506 $8,121
04/30/95 $8,465 $7,821 $8,485
05/31/95 $8,755 $8,117 $8,937
06/30/95 $8,781 $8,164 $8,963
07/31/95 $9,155 $8,423 $9,165
08/31/95 $8,917 $8,196 $8,949
09/30/95 $8,904 $8,134 $8,906
10/31/95 $8,600 $7,827 $8,565
11/30/95 $8,503 $7,788 $8,412
12/31/95 $8,648 $8,059 $8,786
01/31/96 $9,492 $8,746 $9,410
02/29/96 $9,448 $8,543 $9,260
03/31/96 $9,488 $8,666 $9,333
04/30/96 $9,802 $9,016 $9,706
05/31/96 $9,962 $8,937 $9,662
06/30/96 $10,022 $9,042 $9,723
07/31/96 $9,568 $8,448 $9,058
08/31/96 $9,762 $8,709 $9,290
09/30/96 $9,969 $8,838 $9,371
10/31/96 $10,002 $8,648 $9,121
11/30/96 $10,349 $8,776 $9,274
12/31/96 $10,594 $8,814 $9,315
01/31/97 $11,399 $9,438 $9,951
02/28/97 $11,732 $9,899 $10,377
03/31/97 $11,490 $9,655 $10,104
04/30/97 $11,608 $9,491 $10,122
05/31/97 $12,209 $9,814 $10,412
06/30/97 $12,728 $10,238 $10,969
07/31/97 $13,267 $10,337 $11,133
08/31/97 $12,105 $9,017 $9,716
09/30/97 $12,776 $9,310 $9,986
10/31/97 $10,363 $7,779 $8,347
11/30/97 $9,679 $7,410 $8,042
12/31/97 $9,597 $7,515 $8,236
01/31/98 $8,751 $7,021 $7,590
02/28/98 $9,663 $7,737 $8,383
03/31/98 $10,111 $8,041 $8,746
04/30/98 $10,148 $8,061 $8,651
05/31/98 $8,772 $7,056 $7,465
06/30/98 $7,912 $6,335 $6,682
07/31/98 $7,965 $6,587 $6,894
08/31/98 $6,005 $4,736 $4,901
09/30/98 $6,289 $4,964 $5,212
10/31/98 $7,217 $5,534 $5,761
11/30/98 $8,009 $5,951 $6,240
12/31/98 $7,801 $5,861 $6,149
01/31/99 $7,361 $5,719 $6,050
02/28/99 $7,407 $5,821 $6,109
03/31/99 $8,482 $6,500 $6,914
04/30/99 $10,065 $7,387 $7,769
05/31/99 $9,845 $7,255 $7,724
06/30/99 $10,641 $8,045 $8,601
07/31/99 $10,156 $7,930 $8,367
08/31/99 $9,709 $8,016 $8,443
09/30/99 $9,346 $7,793 $8,158
10/31/99 $9,626 $7,925 $8,331
11/30/99 $10,315 $8,638 $9,078
12/31/99 $11,822 $9,795 $10,233
01/31/00 $11,277 $9,794 $10,294
02/29/00 $10,860 $9,786 $10,430
03/31/00 $10,976 $9,926 $10,481
04/30/00 $10,056 $8,899 $9,487
05/31/00 $9,288 $8,662 $9,095
06/30/00 $9,972 $8,910 $9,415
07/31/00 $9,577 $8,481 $8,931
08/31/00 $9,752 $8,515 $8,975
09/30/00 $8,779 $7,753 $8,191
10/31/00 $8,042 $7,123 $7,597
11/30/00 $7,616 $6,496 $6,933
12/31/00 $8,057 $6,684 $7,101
01/31/01 $8,993 $7,543 $8,078
02/28/01 $8,323 $6,962 $7,446
03/31/01 $7,544 $6,361 $6,714
04/30/01 $7,887 $6,738 $7,046
05/31/01 $8,177 $6,942 $7,130
06/30/01 $8,139 $6,817 $6,984
07/31/01 $7,636 $6,351 $6,543
08/31/01 $7,651 $6,265 $6,478
09/30/01 $6,667 $5,293 $5,475
10/31/01 $6,865 $5,622 $5,815
11/30/01 $7,285 $6,280 $6,422
12/31/01 $7,593 $6,803 $6,932
01/31/02 $8,000 $7,045 $7,167
02/28/02 $8,015 $7,181 $7,285
03/31/02 $8,461 $7,682 $7,723
04/30/02 $8,731 $7,753 $7,773
05/31/02 $8,693 $7,620 $7,649
06/30/02 $8,152 $7,076 $7,075
07/31/02 $7,705 $6,628 $6,537
08/31/02 $7,681 $6,714 $6,638
09/30/02 $7,102 $5,968 $5,922
10/31/02 $7,288 $6,351 $6,306
11/30/02 $7,867 $6,792 $6,740
12/31/02 $7,720 $6,535 $6,516
01/31/03 $7,596 $6,541 $6,488
02/28/03 $7,589 $6,347 $6,313
03/31/03 $7,320 $6,114 $6,134
04/30/03 $8,077 $6,738 $6,680
05/31/03 $8,562 $7,207 $7,159
06/30/03 $8,843 $7,653 $7,568
07/31/03 $9,210 $8,064 $8,041
08/31/03 $9,640 $8,646 $8,581
09/30/03 $9,921 $8,740 $8,644
10/31/03 $10,710 $9,450 $9,380
11/30/03 $10,921 $9,572 $9,495
12/31/03 $11,823 $10,270 $10,183
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------
Class B 12/31/03
- --------------------------------------------
1-Year +48.17%
- --------------------------------------------
5-Year +7.60%
- --------------------------------------------
Since Inception (1/1/99) +7.60%
- --------------------------------------------
CLASS B (1/1/99-12/31/03
MSCI Emerging
Templeton Developing S&P/IFCI Markets Free
Markets Trust Composite Index5 Index5
01/01/99 $10,000 $10,000 $10,000
01/31/99 $9,417 $9,758 $9,839
02/28/99 $9,476 $9,931 $9,934
03/31/99 $10,835 $11,090 $11,244
04/30/99 $12,854 $12,602 $12,635
05/31/99 $12,563 $12,377 $12,561
06/30/99 $13,573 $13,725 $13,987
07/31/99 $12,942 $13,529 $13,607
08/31/99 $12,369 $13,675 $13,731
09/30/99 $11,893 $13,295 $13,266
10/31/99 $12,233 $13,521 $13,548
11/30/99 $13,107 $14,736 $14,763
12/31/99 $15,019 $16,711 $16,641
01/31/00 $14,311 $16,708 $16,740
02/29/00 $13,777 $16,695 $16,961
03/31/00 $13,916 $16,935 $17,044
04/30/00 $12,739 $15,183 $15,428
05/31/00 $11,756 $14,779 $14,790
06/30/00 $12,622 $15,201 $15,311
07/31/00 $12,116 $14,469 $14,524
08/31/00 $12,330 $14,527 $14,595
09/30/00 $11,094 $13,227 $13,321
10/31/00 $10,160 $12,153 $12,355
11/30/00 $9,615 $11,083 $11,275
12/31/00 $10,160 $11,404 $11,547
01/31/01 $11,347 $12,868 $13,137
02/28/01 $10,481 $11,877 $12,108
03/31/01 $9,498 $10,853 $10,919
04/30/01 $9,926 $11,496 $11,459
05/31/01 $10,286 $11,844 $11,595
06/30/01 $10,228 $11,630 $11,357
07/31/01 $9,595 $10,835 $10,640
08/31/01 $9,605 $10,688 $10,535
09/30/01 $8,369 $9,031 $8,904
10/31/01 $8,613 $9,591 $9,457
11/30/01 $9,138 $10,714 $10,444
12/31/01 $9,518 $11,606 $11,273
01/31/02 $10,015 $12,020 $11,655
02/28/02 $10,034 $12,251 $11,847
03/31/02 $10,589 $13,106 $12,559
04/30/02 $10,922 $13,227 $12,641
05/31/02 $10,863 $13,000 $12,439
06/30/02 $10,188 $12,072 $11,506
07/31/02 $9,620 $11,307 $10,631
08/31/02 $9,591 $11,454 $10,795
09/30/02 $8,857 $10,181 $9,630
10/31/02 $9,082 $10,835 $10,255
11/30/02 $9,806 $11,587 $10,961
12/31/02 $9,611 $11,149 $10,597
01/31/03 $9,464 $11,159 $10,551
02/28/03 $9,444 $10,828 $10,266
03/31/03 $9,095 $10,431 $9,975
04/30/03 $10,030 $11,495 $10,863
05/31/03 $10,631 $12,295 $11,643
06/30/03 $10,975 $13,056 $12,307
07/31/03 $11,418 $13,758 $13,077
08/31/03 $11,950 $14,751 $13,955
09/30/03 $12,294 $14,912 $14,057
10/31/03 $13,269 $16,123 $15,254
11/30/03 $13,515 $16,330 $15,441
12/31/03 $14,424 $17,521 $16,560
10 | Past performance does not guarantee future results. | Annual Report
Performance Summary (CONTINUED)
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
CLASS C (5/1/95-12/31/03)
Templeton Developing S&P/IFCI MSCI Emerging Markets
Markets Trust Composite Index5 Free Index5
05/01/95 $9,902 $10,000 $10,000
05/31/95 $10,242 $10,378 $10,532
06/30/95 $10,265 $10,438 $10,563
07/31/95 $10,695 $10,769 $10,800
08/31/95 $10,408 $10,480 $10,546
09/30/95 $10,385 $10,400 $10,496
10/31/95 $10,015 $10,008 $10,094
11/30/95 $9,909 $9,958 $9,914
12/31/95 $10,070 $10,304 $10,354
01/31/96 $11,042 $11,182 $11,090
02/29/96 $10,983 $10,923 $10,913
03/31/96 $11,022 $11,080 $10,998
04/30/96 $11,381 $11,528 $11,438
05/31/96 $11,561 $11,426 $11,387
06/30/96 $11,623 $11,560 $11,458
07/31/96 $11,085 $10,802 $10,675
08/31/96 $11,311 $11,136 $10,948
09/30/96 $11,538 $11,300 $11,043
10/31/96 $11,577 $11,057 $10,749
11/30/96 $11,967 $11,221 $10,929
12/31/96 $12,244 $11,270 $10,978
01/31/97 $13,166 $12,067 $11,727
02/28/97 $13,538 $12,656 $12,229
03/31/97 $13,256 $12,344 $11,908
04/30/97 $13,377 $12,135 $11,929
05/31/97 $14,062 $12,548 $12,270
06/30/97 $14,650 $13,090 $12,927
07/31/97 $15,271 $13,216 $13,120
08/31/97 $13,917 $11,529 $11,451
09/30/97 $14,682 $11,903 $11,768
10/31/97 $11,902 $9,946 $9,837
11/30/97 $11,112 $9,475 $9,478
12/31/97 $11,007 $9,609 $9,706
01/31/98 $10,036 $8,977 $8,945
02/28/98 $11,076 $9,893 $9,879
03/31/98 $11,577 $10,280 $10,307
04/30/98 $11,612 $10,306 $10,195
05/31/98 $10,043 $9,021 $8,798
06/30/98 $9,056 $8,099 $7,875
07/31/98 $9,099 $8,422 $8,125
08/31/98 $6,854 $6,055 $5,776
09/30/98 $7,184 $6,347 $6,142
10/31/98 $8,241 $7,076 $6,789
11/30/98 $9,134 $7,609 $7,353
12/31/98 $8,894 $7,494 $7,247
01/31/99 $8,389 $7,313 $7,130
02/28/99 $8,432 $7,443 $7,199
03/31/99 $9,652 $8,311 $8,148
04/30/99 $11,455 $9,444 $9,156
05/31/99 $11,185 $9,275 $9,103
06/30/99 $12,091 $10,286 $10,136
07/31/99 $11,525 $10,139 $9,861
08/31/99 $11,011 $10,249 $9,950
09/30/99 $10,593 $9,963 $9,614
10/31/99 $10,906 $10,133 $9,818
11/30/99 $11,682 $11,044 $10,699
12/31/99 $13,380 $12,524 $12,059
01/31/00 $12,753 $12,522 $12,131
02/29/00 $12,274 $12,512 $12,291
03/31/00 $12,405 $12,692 $12,351
04/30/00 $11,351 $11,379 $11,180
05/31/00 $10,480 $11,076 $10,718
06/30/00 $11,246 $11,392 $11,096
07/31/00 $10,793 $10,844 $10,525
08/31/00 $10,993 $10,887 $10,577
09/30/00 $9,887 $9,913 $9,653
10/31/00 $9,051 $9,108 $8,953
11/30/00 $8,572 $8,306 $8,171
12/31/00 $9,051 $8,546 $8,368
01/31/01 $10,105 $9,644 $9,520
02/28/01 $9,347 $8,901 $8,775
03/31/01 $8,467 $8,134 $7,913
04/30/01 $8,851 $8,615 $8,304
05/31/01 $9,164 $8,876 $8,403
06/30/01 $9,121 $8,716 $8,230
07/31/01 $8,546 $8,120 $7,710
08/31/01 $8,563 $8,010 $7,634
09/30/01 $7,457 $6,768 $6,453
10/31/01 $7,675 $7,188 $6,853
11/30/01 $8,145 $8,030 $7,569
12/31/01 $8,477 $8,698 $8,169
01/31/02 $8,930 $9,008 $8,446
02/28/02 $8,939 $9,182 $8,585
03/31/02 $9,436 $9,822 $9,101
04/30/02 $9,733 $9,913 $9,160
05/31/02 $9,689 $9,742 $9,015
06/30/02 $9,077 $9,047 $8,338
07/31/02 $8,578 $8,474 $7,704
08/31/02 $8,543 $8,584 $7,823
09/30/02 $7,895 $7,630 $6,979
10/31/02 $8,096 $8,120 $7,432
11/30/02 $8,744 $8,684 $7,943
12/31/02 $8,560 $8,355 $7,679
01/31/03 $8,429 $8,363 $7,646
02/28/03 $8,412 $8,115 $7,439
03/31/03 $8,107 $7,817 $7,228
04/30/03 $8,942 $8,615 $7,872
05/31/03 $9,479 $9,215 $8,437
06/30/03 $9,786 $9,785 $8,918
07/31/03 $10,182 $10,311 $9,477
08/31/03 $10,648 $11,055 $10,113
09/30/03 $10,956 $11,175 $10,187
10/31/03 $11,818 $12,083 $11,054
11/30/03 $12,046 $12,238 $11,190
12/31/03 $13,034 $13,131 $12,001
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------
Class C 12/31/03
- --------------------------------------------
1-Year +49.72%
- --------------------------------------------
5-Year +7.73%
- --------------------------------------------
Since Inception (5/1/95) +3.10%
- --------------------------------------------
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
CLASS R (1/1/02-12/31/03)
Templeton Developing S&P/IFCI MSCI Emerging Markets
Markets Trust Composite Index5 Free Index5
1/1/02 $10,000 $10,000 $10,000
1/31/02 $10,483 $10,357 $10,339
2/28/02 $10,503 $10,557 $10,509
3/31/02 $11,097 $11,293 $11,141
4/30/02 $11,441 $11,397 $11,213
5/31/02 $11,391 $11,201 $11,034
6/30/02 $10,683 $10,402 $10,207
7/31/02 $10,096 $9,743 $9,430
8/31/02 $10,066 $9,869 $9,576
9/30/02 $9,307 $8,773 $8,543
10/31/02 $9,539 $9,336 $9,097
11/30/02 $10,308 $9,984 $9,723
12/31/02 $10,096 $9,606 $9,400
1/31/03 $9,945 $9,615 $9,359
2/28/03 $9,935 $9,330 $9,106
3/31/03 $9,563 $8,988 $8,848
4/30/03 $10,548 $9,905 $9,636
5/31/03 $11,184 $10,594 $10,328
6/30/03 $11,553 $11,250 $10,917
7/31/03 $12,026 $11,855 $11,600
8/31/03 $12,590 $12,710 $12,379
9/30/03 $12,949 $12,849 $12,470
10/31/03 $13,974 $13,892 $13,531
11/30/03 $14,251 $14,071 $13,697
12/31/03 $15,429 $15,097 $14,690
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------
CLASS R 12/31/03
- --------------------------------------------
1-Year +51.82%
- --------------------------------------------
Since Inception (1/1/02) +24.29%
- --------------------------------------------
Annual Report | Past performance does not guarantee future results. | 11
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------
Advisor Class4 12/31/03
- --------------------------------------------
1-Year +53.72%
- --------------------------------------------
5-Year +9.06%
- --------------------------------------------
10-Year +2.51%
- --------------------------------------------
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
ADVISOR CLASS (1/1/94-12/31/03)4
Templeton Developing S&P/IFCI MSCI Emerging Markets
Markets Trust Composite Index5 Free Index5
01/01/94 $10,000 $10,000 $10,000
01/31/94 $10,203 $10,068 $10,182
02/28/94 $9,980 $9,808 $10,001
03/31/94 $9,579 $8,817 $9,096
04/30/94 $9,197 $8,649 $8,914
05/31/94 $9,190 $8,853 $9,219
06/30/94 $9,039 $8,538 $8,965
07/31/94 $9,355 $9,152 $9,522
08/31/94 $9,902 $10,328 $10,704
09/30/94 $9,994 $10,585 $10,826
10/31/94 $9,763 $10,235 $10,630
11/30/94 $9,414 $9,851 $10,078
12/31/94 $9,142 $8,799 $9,268
01/31/95 $8,624 $7,625 $8,282
02/28/95 $8,597 $7,528 $8,070
03/31/95 $8,693 $7,506 $8,121
04/30/95 $8,980 $7,821 $8,485
05/31/95 $9,289 $8,117 $8,937
06/30/95 $9,316 $8,164 $8,963
07/31/95 $9,713 $8,423 $9,165
08/31/95 $9,460 $8,196 $8,949
09/30/95 $9,446 $8,134 $8,906
10/31/95 $9,124 $7,827 $8,565
11/30/95 $9,022 $7,788 $8,412
12/31/95 $9,175 $8,059 $8,786
01/31/96 $10,070 $8,746 $9,410
02/29/96 $10,024 $8,543 $9,260
03/31/96 $10,066 $8,666 $9,333
04/30/96 $10,399 $9,016 $9,706
05/31/96 $10,569 $8,937 $9,662
06/30/96 $10,633 $9,042 $9,723
07/31/96 $10,151 $8,448 $9,058
08/31/96 $10,357 $8,709 $9,290
09/30/96 $10,576 $8,838 $9,371
10/31/96 $10,612 $8,648 $9,121
11/30/96 $10,980 $8,776 $9,274
12/31/96 $11,240 $8,814 $9,315
01/31/97 $12,071 $9,438 $9,951
02/28/97 $12,423 $9,899 $10,377
03/31/97 $12,174 $9,655 $10,104
04/30/97 $12,298 $9,491 $10,122
05/31/97 $12,935 $9,814 $10,412
06/30/97 $13,492 $10,238 $10,969
07/31/97 $14,063 $10,337 $11,133
08/31/97 $12,833 $9,017 $9,716
09/30/97 $13,551 $9,310 $9,986
10/31/97 $10,996 $7,779 $8,347
11/30/97 $10,271 $7,410 $8,042
12/31/97 $10,188 $7,515 $8,236
01/31/98 $9,290 $7,021 $7,590
02/28/98 $10,259 $7,737 $8,383
03/31/98 $10,742 $8,041 $8,746
04/30/98 $10,774 $8,061 $8,651
05/31/98 $9,320 $7,056 $7,465
06/30/98 $8,407 $6,335 $6,682
07/31/98 $8,462 $6,587 $6,894
08/31/98 $6,381 $4,736 $4,901
09/30/98 $6,690 $4,964 $5,212
10/31/98 $7,683 $5,534 $5,761
11/30/98 $8,525 $5,951 $6,240
12/31/98 $8,306 $5,861 $6,149
01/31/99 $7,838 $5,719 $6,050
02/28/99 $7,887 $5,821 $6,109
03/31/99 $9,034 $6,500 $6,914
04/30/99 $10,722 $7,387 $7,769
05/31/99 $10,496 $7,255 $7,724
06/30/99 $11,345 $8,045 $8,601
07/31/99 $10,827 $7,930 $8,367
08/31/99 $10,351 $8,016 $8,443
09/30/99 $9,971 $7,793 $8,158
10/31/99 $10,262 $7,925 $8,331
11/30/99 $11,005 $8,638 $9,078
12/31/99 $12,622 $9,795 $10,233
01/31/00 $12,040 $9,794 $10,294
02/29/00 $11,595 $9,786 $10,430
03/31/00 $11,723 $9,926 $10,481
04/30/00 $10,739 $8,899 $9,487
05/31/00 $9,927 $8,662 $9,095
06/30/00 $10,658 $8,910 $9,415
07/31/00 $10,244 $8,481 $8,931
08/31/00 $10,439 $8,515 $8,975
09/30/00 $9,390 $7,753 $8,191
10/31/00 $8,609 $7,123 $7,597
11/30/00 $8,154 $6,496 $6,933
12/31/00 $8,624 $6,684 $7,101
01/31/01 $9,638 $7,543 $8,078
02/28/01 $8,911 $6,962 $7,446
03/31/01 $8,082 $6,361 $6,714
04/30/01 $8,459 $6,738 $7,046
05/31/01 $8,771 $6,942 $7,130
06/30/01 $8,729 $6,817 $6,984
07/31/01 $8,188 $6,351 $6,543
08/31/01 $8,205 $6,265 $6,478
09/30/01 $7,156 $5,293 $5,475
10/31/01 $7,369 $5,622 $5,815
11/30/01 $7,828 $6,280 $6,422
12/31/01 $8,156 $6,803 $6,932
01/31/02 $8,595 $7,045 $7,167
02/28/02 $8,612 $7,181 $7,285
03/31/02 $9,101 $7,682 $7,723
04/30/02 $9,393 $7,753 $7,773
05/31/02 $9,351 $7,620 $7,649
06/30/02 $8,777 $7,076 $7,075
07/31/02 $8,294 $6,628 $6,537
08/31/02 $8,277 $6,714 $6,638
09/30/02 $7,652 $5,968 $5,922
10/31/02 $7,861 $6,351 $6,306
11/30/02 $8,502 $6,792 $6,740
12/31/02 $8,335 $6,535 $6,516
01/31/03 $8,210 $6,541 $6,488
02/28/03 $8,202 $6,347 $6,313
03/31/03 $7,910 $6,114 $6,134
04/30/03 $8,731 $6,738 $6,680
05/31/03 $9,264 $7,207 $7,159
06/30/03 $9,576 $7,653 $7,568
07/31/03 $9,966 $8,064 $8,041
08/31/03 $10,440 $8,646 $8,581
09/30/03 $10,744 $8,740 $8,644
10/31/03 $11,608 $9,450 $9,380
11/30/03 $11,835 $9,572 $9,495
12/31/03 $12,813 $10,270 $10,183
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. THE
FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE
MAIN INVESTMENT RISKS.
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; shares 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; shares 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).
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
+13.99% and +1.89%.
5. Source: Standard & Poor's Micropal. The S&P/IFCI
Composite Index measures the total return with
dividends reinvested of equity securities in emerging
markets globally. Securities' weights are adjusted to
reflect only the portion of the market capitalization
available to foreign (non-local) investors. Securities
included in the index are weighted according to their
adjusted market capitalization (outstanding investable
shares times price). The MSCI Emerging Markets Free
Index is market capitalization-weighted and measures
total returns of equity securities available to foreign
(non-local) investors in emerging markets globally.
12 | Past performance does not guarantee future results. | Annual Report
Templeton Developing Markets Trust
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
CLASS A 2003 2002 2001 2000 1999
---------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year..................... $10.00 $9.88 $10.59 $15.61 $10.30
---------------------------------------------------------------------
Income from investment operations:
Net investment incomea................................ .22 .10 .11 .07 .06
Net realized and unrealized gains (losses)............ 4.98 .07 (.72) (5.03) 5.25
---------------------------------------------------------------------
Total from investment operations....................... 5.20 .17 (.61) (4.96) 5.31
Less distributions from net investment income.......... (.25) (.05) (.10) (.06) --
Redemption fees........................................ --c -- -- -- --
---------------------------------------------------------------------
Net asset value, end of year........................... $14.95 $10.00 $9.88 $10.59 $15.61
=====================================================================
Total return b......................................... 53.14% 1.68% (5.76)% (31.85)% 51.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)........................ $1,873,277 $1,168,340 $1,221,011 $1,507,936 $2,958,324
Ratios to average net assets:
Expenses.............................................. 2.17% 2.24% 2.21% 2.09% 2.02%
Net investment income................................. 1.85% .96% 1.07% .56% .45%
Portfolio turnover rate................................ 48.60% 49.05% 61.45% 69.37% 45.82%
aBased on average daily shares outstanding.
bTotal return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
cAmount is less than $0.01 per share.
Annual Report | 13
Templeton Developing Markets Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
CLASS B 2003 2002 2001 2000 1999C
---------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year..................... $9.82 $9.77 $10.44 $15.47 $10.30
---------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)a......................... .13 .03 .04 (.02) (.06)
Net realized and unrealized gains (losses)............ 4.93 .07 (.70) (4.98) 5.23
---------------------------------------------------------------------
Total from investment operations....................... 5.06 .10 (.66) (5.00) 5.17
Less distributions from net investment income.......... (.14) (.05) (.01) (.03) --
Redemption fees........................................ --d -- -- --
---------------------------------------------------------------------
Net asset value, end of year........................... $14.74 $9.82 $9.77 $10.44 $15.47
=====================================================================
Total returnb.......................................... 52.17% .98% (6.32)% (32.36)% 50.19%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)........................ $26,062 $12,377 $11,027 $11,508 $13,862
Ratios to average net assets:
Expenses.............................................. 2.82% 2.88% 2.86% 2.77% 2.76%
Net investment income (loss).......................... 1.20% .32% .42% (.13)% (.47)%
Portfolio turnover rate................................ 48.60% 49.05% 61.45% 69.37% 45.82%
aBased on average daily shares outstanding.
bTotal return does not reflect the contingent deferred sales charge, and is not
annualized for periods less than one year.
cEffective date of Class B shares was January 1, 1999. dAmount is less than
$0.01 per share.
14 | Annual Report
Templeton Developing Markets Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
CLASS C 2003 2002 2001 2000 1999
---------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year..................... $9.79 $9.73 $10.39 $15.36 $10.21
---------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)a......................... .14 .03 .04 (.01) (.03)
Net realized and unrealized gains (losses)............ 4.90 .08 (.70) (4.96) 5.18
---------------------------------------------------------------------
Total from investment operations....................... 5.04 .11 (.66) (4.97) 5.15
Less distributions from net investment income.......... (.11) (.05) --c -- --
Redemption fees........................................ --d -- -- -- --
---------------------------------------------------------------------
Net asset value, end of year........................... $14.72 $9.79 $9.73 $10.39 $15.36
=====================================================================
Total returnb.......................................... 52.25% .98% (6.34)% (32.36)% 50.44%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)........................ $208,581 $127,808 $139,099 $188,379 $385,584
Ratios to average net assets:
Expenses.............................................. 2.82% 2.89% 2.86% 2.76% 2.73%
Net investment income (loss).......................... 1.20% .31% .43% (.11)% (.26)%
Portfolio turnover rate................................ 48.60% 49.05% 61.45% 69.37% 45.82%
aBased on average daily shares outstanding.
bTotal return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
cActual distribution from net investment income was $.001.
dAmount is less than $0.01 per share.
Annual Report | 15
Templeton Developing Markets Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------------
YEAR ENDED PERIOD ENDED
CLASS R DECEMBER 31, 2003 DECEMBER 31, 2002C
---------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year..................... $9.98 $9.93
---------------------------------------------
Income from investment operations:
Net investment incomea................................ .17 .03
Net realized and unrealized gains..................... 4.98 .07
---------------------------------------------
Total from investment operations....................... 5.15 .10
Less distributions from net investment income.......... (.28) (.05)
Redemption fees........................................ --e --
---------------------------------------------
Net asset value, end of year........................... $14.85 $9.98
=============================================
Total return b......................................... 52.82% .96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)........................ $1,688 $381
Ratios to average net assets:
Expenses.............................................. 2.32% 2.39%d
Net investment income................................. 1.70% .81%d
Portfolio turnover rate................................ 48.60% 49.05%
aBased on average daily shares outstanding.
bTotal return does not reflect the contingent deferred sales charge, and is not
annualized for periods less than one year.
cEffective date of Class R shares was January 2, 2002.
dAnnualized.
eAmount is less than $0.01 per share.
16 | Annual Report
Templeton Developing Markets Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
ADVISOR CLASS 2003 2002 2001 2000 1999
---------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year..................... $10.01 $9.84 $10.55 $15.62 $10.28
---------------------------------------------------------------------
Income from investment operations:
Net investment incomea................................ .26 .12 .14 .11 .09
Net realized and unrealized gains (losses)............ 4.99 .10 (.71) (5.03) 5.25
---------------------------------------------------------------------
Total from investment operations....................... 5.25 .22 (.57) (4.92) 5.34
Less distributions from net investment income.......... (.33) (.05) (.14) (.15) --
Redemption fees........................................ --c -- -- -- --
---------------------------------------------------------------------
Net asset value, end of year........................... $14.93 $10.01 $9.84 $10.55 $15.62
=====================================================================
Total returnb.......................................... 53.72% 2.20% (5.43)% (31.67)% 51.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)........................ $203,660 $130,459 $81,320 $115,144 $190,341
Ratios to average net assets:
Expenses.............................................. 1.82% 1.89% 1.87% 1.77% 1.74%
Net investment income................................. 2.20% 1.31% 1.40% .88% .72%
Portfolio turnover rate................................ 48.60% 49.05% 61.45% 69.37% 45.82%
aBased on average daily shares outstanding.
bTotal return is not annualized for periods less than one year.
cAmount is less than $0.01 per share.
Annual Report | See notes to financial statements. | 17
Templeton Developing Markets Trust
STATEMENT OF INVESTMENTS, DECEMBER 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
COMMON STOCKS 90.9%
ARGENTINA 1.1%
aMolinos Rio de la Plata SA, B............ Food Products 3,550,983 $ 6,357,259
Tenaris SA............................... Energy Equipment & Services 559,064 1,868,313
Tenaris SA, ADR.......................... Energy Equipment & Services 518,342 17,271,155
----------------
25,496,727
----------------
AUSTRIA 2.9%
aBank Austria Creditanstalt, Reg S........ Commercial Banks 457,000 23,345,736
OMV AG................................... Oil & Gas 205,680 30,634,075
Wienerberger AG.......................... Building Products 464,118 12,399,116
----------------
66,378,927
----------------
BRAZIL 3.9%
Centrais Eletricas Brasileiras SA
(Non-Taxable).......................... Electric Utilities 322,397,000 5,419,845
Centrais Eletricas Brasileiras SA
(Taxable).............................. Electric Utilities 790,283,000 13,285,519
Embraer-Empresa Brasileira de
Aeronautica SA......................... Aerospace & Defense 2,435,000 16,289,601
Embraer-Empresa Brasileira de Aeronautica
SA, ADR................................ Aerospace & Defense 750,073 26,275,057
Souza Cruz SA (Non-Taxable).............. Tobacco 1,371,800 14,393,201
Souza Cruz SA (Taxable).................. Tobacco 17,600 184,663
Unibanco Uniao de Bancos Brasileiros
SA, GDR................................ Commercial Banks 575,700 14,363,715
----------------
90,211,601
----------------
CHINA 7.6%
China Mobile (Hong Kong) Ltd., fgn. ..... Wireless Telecommunication Services 15,164,000 46,584,239
China Petroleum & Chemical Corp., H ..... Oil & Gas 77,726,000 34,790,284
China Telecom Corp. Ltd., H ............. Diversified Telecommunication Services 69,514,000 28,652,275
Huadian Power International Corp. Ltd. .. Electric Utilities 25,612,000 10,721,702
PetroChina Co. Ltd., H .................. Oil & Gas 56,511,000 32,391,410
Shanghai Industrial Holdings Ltd. ....... Industrial Conglomerates 8,066,000 18,441,380
Travelsky Technology Ltd., H ............ IT Services 2,967,000 3,191,104
----------------
174,772,394
----------------
CROATIA .7%
bPliva D D, GDR, Reg S.................... Pharmaceuticals 1,058,750 17,257,625
----------------
CZECH REPUBLIC .6%
aCesky Telecom AS ........................ Diversified Telecommunication Services 480,750 5,467,142
CEZ AS................................... Electric Utilities 1,643,100 9,361,956
----------------
14,829,098
----------------
DENMARK .8%
Carlsberg AS, B.......................... Beverages 396,575 18,273,024
----------------
EGYPT .2%
Commercial International Bank Ltd. ...... Commercial Banks 1,503,290 5,364,539
----------------
18 | Annual Report
Templeton Developing Markets Trust
STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
GREECE 1.3%
Coca-Cola Hellenic Bottling Co. SA....... Beverages 583,991 $ 12,168,934
Hellenic Telecommunications
Organization SA........................ Diversified Telecommunication Services 1,366,620 18,065,310
----------------
30,234,244
----------------
HONG KONG 8.0%
Beijing Enterprises Holdings Ltd. ....... Industrial Conglomerates 4,468,000 5,237,106
Cheung Kong Holdings Ltd. ............... Real Estate 2,364,000 18,802,746
Cheung Kong Infrastructure Holdings Ltd.. Construction Materials 2,682,000 6,010,974
China Resources Enterprise Ltd........... Distributors 18,734,000 21,234,891
China Travel International Investment
Hong Kong Ltd. ....................... Hotels Restaurants & Leisure 53,950,000 10,215,171
Citic Pacific Ltd........................ Industrial Conglomerates 19,166,500 48,881,537
Dairy Farm International Holdings Ltd. .. Food & Staples Retailing 12,267,054 20,547,315
Guoco Group Ltd. ........................ Diversified Financial Services 313,000 2,298,032
Hang Lung Group Ltd...................... Real Estate 5,863,000 7,325,352
Henderson Investment Ltd................. Real Estate 5,016,000 5,782,523
Hong Kong Land Holdings Ltd.............. Real Estate 2,444,000 4,154,800
aHopewell Highway Infrastructure Ltd., wts.,
8/05/06................................ Transportation Infrastructure 143,100 27,833
HSBC Holdings PLC........................ Commercial Banks 77,600 1,224,432
MTR Corp. Ltd............................ Road & Rail 7,027,372 9,277,985
Tack Fat Group International Ltd......... Specialty Retail 23,762,000 2,417,948
TCL International Holdings Inc........... Household Durables 31,898,000 14,072,164
Tingyi (Cayman Islands) Holding Corp..... Food Products 27,032,000 6,337,040
VTech Holdings Ltd....................... Communications Equipment 63,000 89,668
----------------
183,937,517
----------------
HUNGARY 2.8%
Egis RT.................................. Pharmaceuticals 195,338 7,948,505
Gedeon Richter Ltd....................... Pharmaceuticals 177,209 20,978,865
Matav RT................................. Diversified Telecommunication Services 2,069,450 7,882,034
MOL Magyar Olaj-Es Gazipari RT........... Oil & Gas 890,275 27,105,275
----------------
63,914,679
----------------
INDIA 4.1%
Container Corp. of India Ltd............. Road & Rail 150,460 2,194,490
HCL Technologies Ltd..................... IT Services 592,500 3,979,003
Hero Honda Motors Ltd.................... Automobiles 1,346,040 13,242,083
Hindustan Petroleum Corp. Ltd............ Oil & Gas 1,606,400 15,403,836
aIndraprastha Gas Ltd..................... Gas Utilities 530,000 1,723,299
ITC Ltd.................................. Tobacco 211,688 4,568,053
Mahanagar Telephone Nigam Ltd............ Diversified Telecommunication Services 7,617,297 22,989,628
aMaruti Udyog Ltd......................... Automobiles 1,090,559 8,994,572
Nestle India Ltd......................... Food Products 53,500 808,510
Satyam Computers Services Ltd............ IT Services 1,785,000 14,371,940
aUnion Bank of India Ltd.................. Commercial Banks 3,711,000 4,168,520
Videsh Sanchar Nigam Ltd................. Diversified Telecommunication Services 732,427 2,367,846
----------------
94,811,780
----------------
Annual Report | 19
Templeton Developing Markets Trust
STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
INDONESIA 2.1%
PT Gudang Garam TBK ..................... Tobacco 7,902,750 $ 12,760,748
PT Indosat (Persero) TBK................. Diversified Telecommunication Services 13,950,750 24,845,503
aPT Perusahaan Gas Negara, 144A........... Oil & Gas 3,711,000 682,938
PT Telekomunikasi Indonesia TBK, B....... Diversified Telecommunication Services 14,078,841 11,283,132
----------------
49,572,321
----------------
ISRAEL
Elbit Systems Ltd........................ Aerospace & Defense 54,737 985,142
----------------
MALAYSIA .4%
YTL Power International Bhd.............. Electric Utilities 9,990,500 8,833,705
----------------
MEXICO 4.9%
Alfa SA ................................. Industrial Conglomerates 26,200 78,901
Cemex SA................................. Construction Materials 1 5
Embotelladoras Arca SA................... Food & Staples Retailing 352,000 673,474
Embotelladoras Arca SA, 144A............. Food & Staples Retailing 1,401,358 2,681,190
Fomento Economico Mexicano SA de CV
Femsa, ADR............................. Beverages 378,350 13,953,548
Grupo Bimbo SA de CV, A.................. Food Products 2,074,700 3,895,630
Grupo Carso SA de CV..................... Industrial Conglomerates 3,310,800 11,637,776
Grupo Continental SA..................... Beverages 1,346,343 2,276,404
Grupo Televisa SA, de CV, ADR............ Media 169,800 6,768,228
Kimberly Clark de Mexico SA de CV, A Household Products 13,311,950 34,117,258
Telefonos de Mexico SA de CV (Telmex),
L, ADR................................. Diversified Telecommunication Services 1,156,190 38,188,956
----------------
114,271,370
----------------
PERU
Credicorp Ltd............................ Commercial Banks 17,700 236,295
----------------
PHILIPPINES 1.1%
San Miguel Corp., B...................... Beverages 21,068,488 24,286,441
----------------
POLAND 2.0%
aBRE Bank SA.............................. Commercial Banks 149,050 3,683,541
Polski Koncern Naftowy Orlen SA.......... Oil & Gas 4,384,585 29,286,015
Telekomunikacja Polska SA................ Diversified Telecommunication Services 3,458,500 13,998,844
----------------
46,968,400
----------------
RUSSIA 1.8%
Aeroflot................................. Airlines 41,500 28,635
Lukoil Holdings, ADR..................... Oil & Gas 439,488 40,907,543
Yuzhnaya Telecommunication Co............ Diversified Telecommunication Services 13,227,000 1,283,019
----------------
42,219,197
----------------
SINGAPORE 6.3%
Comfortdelgro Corp. Ltd.................. Road & Rail 15,819,000 7,591,406
DBS Group Holdings Ltd................... Commercial Banks 1,976,000 17,103,692
Fraser & Neave Ltd....................... Beverages 4,580,148 33,980,960
Keppel Corp. Ltd......................... Industrial Conglomerates 8,961,600 32,188,518
MobileOne (Asia) Ltd..................... Wireless Telecommunication Services 2,579,000 2,277,866
20 | Annual Report
Templeton Developing Markets Trust
STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
SINGAPORE (CONT.)
Singapore Airlines Ltd................... Airlines 3,118,500 $ 20,565,978
Singapore Technologies Engineering Ltd... Aerospace & Defense 5,514,000 6,623,424
Singapore Telecommunications Ltd......... Diversified Telecommunication Services 21,287,000 24,567,226
----------------
144,899,070
----------------
SOUTH AFRICA 11.0%
Anglo American PLC....................... Metals & Mining 3,996,493 85,617,753
Barloworld Ltd........................... Industrial Conglomerates 220,669 2,319,091
Imperial Holdings Ltd.................... Air Freight & Logistics 1,370,436 13,755,687
Investec Ltd............................. Capital Markets 1 19
Nampak Ltd............................... Containers & Packaging 1,408,800 2,743,730
Nedcor Ltd............................... Commercial Banks 372,500 3,461,599
Old Mutual PLC........................... Insurance 13,243,490 21,811,301
Remgro Ltd............................... Industrial Conglomerates 3,367,170 35,613,813
SABMiller PLC............................ Beverages 6,285,973 64,046,296
Sasol Ltd................................ Oil & Gas 1,786,324 25,423,338
----------------
254,792,627
----------------
SOUTH KOREA 12.1%
CJ Corp.................................. Food Products 301,950 15,737,386
Dong-A Pharmaceutical Co. Ltd............ Pharmaceuticals 146,642 2,283,012
Hite Brewery Co. Ltd..................... Beverages 215,030 15,773,078
Hyundai Development Co................... Construction & Engineering 1,866,300 19,344,360
Hyundai Motor Co. Ltd.................... Automobiles 1,170,560 49,612,488
Kangwon Land Inc......................... Hotels Restaurants & Leisure 2,937,406 35,007,273
Korea Electric Power Corp................ Electric Utilities 1,459,896 26,220,541
Korea Gas Corp........................... Gas Utilities 439,950 9,138,701
KT Corp.................................. Diversified Telecommunication Services 383,019 14,337,094
KT&G Corp................................ Tobacco 216,070 3,753,797
LG Card Co. Ltd.......................... Consumer Finance 639,636 1,634,655
LG Chem Ltd.............................. Chemicals 1,440 66,471
LG Home Shopping Inc..................... Internet & Catalog Retail 53,794 2,717,918
LG Household & Health Care Ltd........... Household Products 372,860 9,732,225
LG International Corp.................... Trading Companies & Distributors 159,000 1,067,562
Poongsan Corp............................ Metals & Mining 59,410 628,255
POSCO.................................... Metals & Mining 51,190 7,002,912
Samsung Corp............................. Trading Companies & Distributors 1,233,390 10,248,058
Samsung Fine Chemicals................... Chemicals 1,098,270 15,070,679
Samsung Heavy Industries Co. Ltd......... Machinery 3,690,630 20,412,297
SK Corp.................................. Oil & Gas 836,610 19,238,870
----------------
279,027,632
----------------
TAIWAN 9.4%
Acer Inc................................. Computers & Peripherals 5,831,000 8,673,505
Amtran Technology Co. Ltd................ Computers & Peripherals 1,852,000 1,560,153
Cheng Shin Rubber Industry Co. Ltd....... Auto Components 1,475,000 1,881,222
Chinatrust Financial Holding Co. Ltd..... Commercial Banks 9,770,270 9,813,438
Chunghwa Telcom Co. Ltd.................. Diversified Telecommunication Services 5,136,000 7,458,168
D-Link Corp.............................. Communications Equipment 17,431,000 23,258,448
Delta Electronics Inc.................... Electronic Equipment & Instruments 15,857,260 20,317,844
Annual Report | 21
Templeton Developing Markets Trust
STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
TAIWAN (CONT.)
Elan Microelectronics Corp............... Software 12,219,000 $ 10,977,305
Elite Semiconductor Memory
Technology Inc......................... Electrical Equipment 2,703,600 5,216,077
Fubon Financial Holding Co. Ltd.......... Diversified Financial Services 6,178,000 5,914,138
Lite-on Technology Corp.................. Computers & Peripherals 16,870,000 17,888,660
Mega Financial Holdings Co. Ltd.......... Commercial Banks 20,861,308 12,535,219
Micro-Star International Co. Ltd......... Computers & Peripherals 458,000 674,521
Phoenixtec Power Co. Ltd................. Electrical Equipment 6,285,375 7,368,422
President Chain Store Corp............... Food & Staples Retailing 5,332,000 8,166,833
Sunplus Technology Co. Ltd............... Semiconductors & Semiconductor Equipment 15,970,100 29,870,437
Taiwan Cellular Corp..................... Wireless Telecommunication Services 24,090,106 20,932,493
Taiwan Glass Industrial Corp............. Building Products 540,000 408,778
aTatung Co. Ltd........................... Industrial Conglomerates 5,768,000 1,461,113
Tsann Kuen Enterprise Co. Ltd............ Household Durables 4,640,000 6,751,576
UNI-President Enterprises Corp........... Food Products 14,719,790 6,048,338
Yuanta Core Pacific Securities Co........ Diversified Financial Services 15,676,285 9,373,449
----------------
216,550,137
----------------
THAILAND 1.8%
Delta Electronics (Thailand)
Public Co. Ltd., fgn. ................. Electronic Equipment & Instruments 3,561,700 2,418,064
Hana Microelectronics Co. Ltd., fgn...... Electronic Equipment & Instruments 1,212,500 3,825,163
Krung Thai Bank Public Co. Ltd., fgn..... Commercial Banks 1,980,000 614,651
National Finance Public Co. Ltd., fgn.... Consumer Finance 4,908,000 2,068,613
PTT Exploration & Production Public Co.
Ltd., fgn.............................. Oil & Gas 4,367,200 29,539,014
Shin Corporation Public Co. Ltd., fgn.... Wireless Telecommunication Services 1,147,500 1,129,472
Siam City Cement Public Co. Ltd., fgn.... Construction Materials 96,000 552,413
Siam Makro Public Company Ltd., fgn...... Food & Staples Retailing 83,700 97,172
Thai Airways International Public Co.
Ltd., fgn.............................. Airlines 665,800 768,764
aThai Military Bank Public Company
Limited, fgn........................... Commercial Banks 2,800,000 484,068
Thai Union Frozen Products Ltd., fgn..... Food Products 90,000 72,687
----------------
41,570,081
----------------
TURKEY 3.5%
Akbank................................... Commercial Banks 2,182,403,497 11,416,851
Arcelik AS, Br........................... Household Durables 4,839,921,500 26,869,308
Migros Turk T.A.S........................ Food & Staples Retailing 840,033,000 12,017,554
Tupras-Turkiye Petrol Rafineleri AS...... Oil & Gas 3,717,491,240 30,957,035
----------------
81,260,748
----------------
UNITED KINGDOM .5%
BHP Billiton PLC......................... Metals & Mining 1,350,800 11,737,288
----------------
TOTAL COMMON STOCKS
(COST $1,561,314,597).................. 2,102,692,609
----------------
22 | Annual Report
Templeton Developing Markets Trust
STATEMENT OF INVESTMENTS, DECEMBER 31, 2003 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
DIRECT EQUITY INVESTMENTS .3%
a,b,cIndotel Ltd. ............................ Leisure Equipment & Products 900,000 $ 3,114,000
----------------
a,b,cMayfair Hanoi, Ltd., 30% equity interest
owned through HEA Holdings Ltd., a wholly
owned investment ........................ Real Estate 3,839,976
----------------
TOTAL DIRECT EQUITY INVESTMENTS (COST $13,602,155) 6,953,976
----------------
PREFERRED STOCKS 4.7%
Banco Bradesco SA, ADR, pfd.............. Commercial Banks 1,340,475 35,401,945
Cia Vale do Rio Doce, A, ADR, pfd. Metals & Mining 466,190 24,013,447
aCompanhia Paranaense de Energia-Copel,
ADR, pfd............................... Electric Utilities 72,700 346,779
bDuratex SA, pfd.......................... Building Products 228,486,824 6,574,242
Petroleo Brasileiro SA, ADR, pfd......... Oil & Gas 1,591,404 42,426,831
----------------
TOTAL PREFERRED STOCKS (COST $76,436,845) 108,763,244
----------------
------------------
PRINCIPAL AMOUNT
------------------
SHORT TERM INVESTMENTS (COST $93,648,635) 4.0%
UNITED STATES
U.S. Treasury Bills, 0.847% to 0.912%, with
maturities to 3/25/04.................. $ 93,810,000 93,660,673
----------------
TOTAL INVESTMENTS (COST $1,745,002,232) 99.9% 2,312,070,502
OTHER ASSETS, LESS LIABILITIES .1%....... 1,197,874
----------------
NET ASSETS 100.0%........................ $ 2,313,268,376
----------------
aNon-income producing.
bSee Note 6 regarding Holdings of 5% Voting Securities. cSee Note 7 regarding
restricted securities.
Annual Report | See notes to financial statements. | 23
Templeton Developing Markets Trust
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2003
Assets:
Investments in securities:
Cost - Unaffiliated issuers.................................. $1,719,160,016
Cost - Non-controlled affiliated issuers..................... 25,842,216
--------------
Value - Unaffiliated issuers................................. 2,287,858,901
Value - Non-controlled affiliated issuers.................... 24,211,601
Foreign currency, at value (cost $4,907,438)................. 4,896,088
Receivables:
Investment securities sold.................................... 10,663,557
Capital shares sold........................................... 11,517,168
Dividends and interest........................................ 4,511,576
--------------
Total assets............................................. 2,343,658,891
--------------
Liabilities:
Payables:
Investment securities purchased.............................. 6,262,336
Capital shares redeemed...................................... 8,705,684
Affiliates................................................... 4,544,391
Deferred tax liability (Note 1f).............................. 9,840,302
Other liabilities............................................. 1,037,802
--------------
Total liabilities........................................ 30,390,515
--------------
Net assets, at value................................... $2,313,268,376
--------------
Net assets consist of:
Undistributed net investment income........................... $ (3,198,042)
Net unrealized appreciation (depreciation).................... 557,228,647
Accumulated net realized gain (loss).......................... (970,911,710)
Capital shares................................................ 2,730,149,481
--------------
Net assets, at value........................................... $2,313,268,376
--------------
CLASS A:
Net asset value per share ($1,873,277,020 / 125,271,779
shares outstanding)a.......................................... $14.95
--------------
Maximum offering price per share ($14.95 / 94.25%)............ $15.86
--------------
CLASS B:
Net asset value and maximum offering price per share
($26,062,214 / 1,768,217 shares outstanding)a................. $14.74
--------------
CLASS C:
Net asset value per share ($208,581,417 / 14,170,754
shares outstanding)a.......................................... $14.72
--------------
Maximum offering price per share ($14.72 / 99.00%)............ $14.87
--------------
CLASS R:
Net asset value and maximum offering price per share
($1,687,688 / 113,613 shares outstanding)a..................... $14.85
--------------
ADVISOR CLASS:
Net asset value and maximum offering price per share
($203,660,037 / 13,640,494 shares outstanding)a............... $14.93
--------------
aRedemption price is equal to net asset value less any applicable contingent
deferred sales charge and redemption fees retained by the Fund.
24 | See notes to financial statements. | Annual Report
Templeton Developing Markets Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended December 31, 2003
Investment income:
(net of foreign taxes of $6,277,685)
Dividends:
Unaffiliated issuers........................................... $ 67,849,882
Non-controlled affiliated issuers (Note 6)..................... 560,554
Interest........................................................ 285,432
------------
Total investment income.................................... 68,695,868
------------
Expenses:
Management fees (Note 3)........................................ 21,401,889
Administrative fees (Note 3).................................... 1,859,113
Distribution fees (Note 3)
Class A........................................................ 4,871,735
Class B........................................................ 163,000
Class C........................................................ 1,512,720
Class R........................................................ 3,873
Transfer agent fees (Note 3).................................... 5,114,500
Custodian fees.................................................. 1,712,100
Reports to shareholders......................................... 267,900
Registration and filing fees.................................... 153,700
Professional fees............................................... 380,200
Trustees' fees and expenses..................................... 172,100
Other........................................................... 44,400
------------
Total expenses............................................. 37,657,230
------------
Net investment income.................................... 31,038,638
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers (net of foreign taxes....................
of $1,356,378) (Note 1f)...................................... 138,990,684
Non-controlled affiliated issuers (Note 6).................... (4,064,528)
Foreign currency transactions.................................. (2,339,167)
------------
Net realized gain (loss)................................. 132,586,989
------------
Net unrealized appreciation (depreciation) on:
Investments.................................................... 624,068,084
Translation of assets and liabilities denominated
in foreign currencies....................................... (11,872)
Deferred taxes (Note 1f)....................................... (9,840,302)
------------
Net unrealized appreciation (depreciation)............... 614,215,910
------------
Net realized and unrealized gain (loss).......................... 746,802,899
------------
Net increase (decrease) in net assets resulting from operations.. $777,841,537
------------
Annual Report | See notes to financial statements. | 25
Templeton Developing Markets Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended December 31, 2003 and 2002
-------------------------------
2003 2002
-------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income.................................................... $ 31,038,638 $ 13,925,567
Net realized gain (loss) from investments and
foreign currency transactions........................................... 132,586,989 (56,616,899)
Net unrealized appreciation (depreciation)on investments,
translation of assets and liabilities denominated in foreign
currencies, and deferred taxes.......................................... 614,215,910 73,081,651
-------------------------------
Net increase (decrease) in net assets resulting from operations..... 777,841,537 30,390,319
Distributions to shareholders from:
Net investment income:
Class A ............................................................... (30,016,350) (6,153,882)
Class B ............................................................... (211,579) (57,154)
Class C ............................................................... (1,517,457) (695,572)
Class R ............................................................... (20,109) (139)
Advisor Class.......................................................... (4,258,934) (428,724)
---------------------------------
Total distributions to shareholders...................................... (36,024,429) (7,335,471)
Capital share transactions (Note 2):
Class A................................................................ 101,510,926 (70,681,837)
Class B................................................................ 6,380,974 1,457,801
Class C................................................................ 14,799,977 (12,234,931)
Class R................................................................ 946,068 382,592
Advisor Class.......................................................... 8,377,033 44,386,597
---------------------------------
Total capital share transactions......................................... 132,014,978 (36,689,778)
Redemption fees (Note 1h)................................................ 70,141 543,597
Net increase (decrease) in net assets.................................. 873,902,227 (13,091,333)
Net assets:
Beginning of year........................................................ 1,439,366,149 1,452,457,482
---------------------------------
End of year.............................................................. $2,313,268,376 $1,439,366,149
Undistributed net investment income included in net assets:
End of year.............................................................. $ (3,198,042) $ 5,559,706
---------------------------------
26 | See notes to financial statements. | Annual Report
Templeton Developing Markets Trust
NOTES TO FINANCIAL STATEMENTS
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. 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 last 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. Investments in open-end mutual funds are
valued at the closing net asset value. Foreign securities are valued at the
close of trading of the foreign exchange or the NYSE, whichever is earlier. If
events occur that materially affect the values of securities after the prices or
foreign exchange rates are determined, or if market quotations are not readily
available, the securities will be valued at fair value as determined following
procedures approved 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.
Annual Report | 27
Templeton Developing Markets Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. DEFERRED TAXES
The Fund is subject to a tax imposed on net realized gains of securities of
certain foreign countries. The Fund records an estimated deferred tax liability
for net unrealized gains on these securities as reflected in the accompanying
financial statements.
G. 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.
H. REDEMPTION FEES
Redemption of Fund shares held 90 days or less (30 days or less effective
January 1, 2004) may be subject to the Fund's redemption fee, which is 2% of the
amount redeemed. Such fees are retained by the Fund and accounted for as
additional paid in capital.
I. 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.
28 | Annual Report
Templeton Developing Markets Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 December 31, 2003, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Fund's shares were as follows:
----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
2003 2002
----------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------
CLASS A SHARES:
Shares sold ..................... 159,452,859 $ 1,836,033,832 110,418,030 $ 1,131,296,741
Shares issued on reinvestment
of distributions .............. 2,268,784 26,723,452 496,413 5,391,055
Shares redeemed ................. (153,338,794) (1,761,246,358) (117,624,119) (1,207,369,633)
----------------------------------------------------------------------------------
Net increase (decrease) ......... 8,382,849 $ 101,510,926 (6,709,676) $ (70,681,837)
----------------------------------------------------------------------------------
CLASS B SHARES:
Shares sold ..................... 696,226 $ 8,515,051 410,579 $ 4,296,010
Shares issued on reinvestment
of distributions .............. 16,201 196,754 4,831 51,797
Shares redeemed ................. (204,709) (2,330,831) (283,974) (2,890,006)
----------------------------------------------------------------------------------
Net increase (decrease) ......... 507,718 $ 6,380,974 131,436 $ 1,457,801
----------------------------------------------------------------------------------
CLASS C SHARES:
Shares sold ..................... 3,930,724 $ 46,951,553 2,088,862 $ 21,771,709
Shares issued on reinvestment
of distributions .............. 110,962 1,323,339 56,598 605,039
Shares redeemed ................. (2,932,454) (33,474,915) (3,374,907) (34,611,679)
----------------------------------------------------------------------------------
Net increase (decrease) ......... 1,109,232 $ 14,799,977 (1,229,447) $ (12,234,931)
----------------------------------------------------------------------------------
CLASS R SHARESA:
Shares sold ..................... 131,034 $ 1,512,727 42,052 $ 422,261
Shares issued on reinvestment
of distributions .............. 1,591 19,974 6 61
Shares redeemed ................. (57,204) (586,633) (3,866) (39,730)
----------------------------------------------------------------------------------
Net increase (decrease) ......... 75,421 $ 946,068 38,192 $ 382,592
----------------------------------------------------------------------------------
ADVISOR CLASS SHARES:
Shares sold ..................... 5,375,459 $ 64,110,884 6,289,373 $ 64,806,049
Shares issued on reinvestment
of distributions .............. 230,577 2,632,513 35,109 379,871
Shares issued on merger
(Note 8) ...................... -- -- 8,715,110 80,698,235
Shares redeemed ................. (4,997,309) (58,366,364) (10,271,280) (101,497,558)
----------------------------------------------------------------------------------
Net increase (decrease) ......... 608,727 $ 8,377,033 4,768,312 $ 44,386,597
----------------------------------------------------------------------------------
aEffective date of Class R shares was January 2, 2002.
Annual Report | 29
Templeton Developing Markets Trust
NOTES TO FINANCIAL STATEMENTS (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 December 31, 2003, Distributors advised the Fund that
unreimbursed costs were $1,993,931. Distributors received net commissions from
sales of the Fund's shares and received contingent deferred sales charges for
the year of $283,143 and $100,837, respectively.
The Fund paid transfer agent fees of $5,114,500, of which $3,245,828 was paid to
Investor Services.
4. INCOME TAXES
At December 31, 2003, the cost of investments, net unrealized appreciation
(depreciation), and undistributed ordinary income for income tax purposes were
as follows:
Cost of investments $1,777,916,261
--------------
Unrealized appreciation ................................ 585,883,678
Unrealized depreciation ................................ (51,729,437)
--------------
Net unrealized appreciation (depreciation) ............. $ 534,154,241
--------------
Distributable earnings - ordinary income ............... $ 21,815,951
--------------
The tax character of distributions paid during the years ended December 31, 2003
and 2002 was as follows:
--------------------------
2003 2002
--------------------------
Distributions paid from ordinary income ....... $36,024,429 $7,335,471
30 | Annual Report
Templeton Developing Markets Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions and passive foreign
investment company shares.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to different treatment of wash sales, foreign currency
transactions, passive foreign investment company shares and taxes on net
realized gains.
At December 31, 2003, the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2007 ................................................ $471,546,298
2008 ................................................ 36,476,765
2009 ................................................ 313,161,808
2010 ................................................ 141,181,639
--------------
$962,366,510
--------------
At December 31, 2003, the Fund had deferred foreign currency losses occurring
subsequent to October 31, 2003 of $427,168. For tax purposes, such losses will
be reflected in the year ending December 31, 2004.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended December 31, 2003 aggregated $865,299,321 and $815,063,490, 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 December
31, 2003 were as shown below.
- ------------------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES HELD AT SHARES HELD VALUE AT REALIZED
BEGINNING OF GROSS GROSS AT END OF END OF INVESTMENT CAPITAL
NAME OF ISSUER DEC. 31, 2002 ADDITIONS REDUCTIONS 12/31/03 12/31/03 INCOME GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------
NON-CONTROLLED AFFILIATES
Duratex SA, pfd. .........402,086,824 -- 173,600,000 228,486,824 $ * 114,869 $(4,064,528)
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 17,257,625 445,685 --
-------------------------------------------
TOTAL NON-CONTROLLED AFFILIATES $24,211,601 $560,554 $(4,064,528)
-------------------------------------------
*As of December 31, 2003, no longer an affiliate.
Annual Report | 31
Templeton Developing Markets Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. RESTRICTED SECURITIES
At December 31, 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 December 31, 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 (.3% OF NET ASSETS) ............. $6,953,976
-----------
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, 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.
32 | Annual Report
Templeton Developing Markets Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. REGULATORY MATTERS
On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company"),
alleging violations of the Massachusetts Uniform Securities Act. The complaint
arises from activity that occurred in 2001 during which time an officer of a
Company subsidiary was negotiating an agreement with an investor relating to
investments in a mutual fund and a hedge fund.
The Fund, in addition to other entities within Franklin Templeton Investments,
including the Company and other funds, has been named in shareholder class
actions related to the matter described above. The Fund's management believes
that the claims made in the lawsuit are without merit and it intends to defend
vigorously against the allegations. It is anticipated that the Fund may be named
in additional similar civil actions related to the matter described above.
In addition, as part of ongoing investigations by the U.S. Securities and
Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of
California, the New York Attorney General, the California Attorney General, the
U.S. Attorney for the District of Massachusetts, the Florida Department of
Financial Services, and the Commissioner of Securities and the Attorney General
of the State of West Virginia, relating to certain practices in the mutual fund
industry, including late trading, market timing and sales compensation
arrangements, the Company and its subsidiaries, as well as certain current or
former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees are providing documents and information in response to
these requests and subpoenas. In addition, the Company has responded to requests
for similar kinds of information from regulatory authorities in some of the
foreign countries where the Company conducts its global asset management
business.
The Staff of the SEC has informed the Company that it intends to recommend that
the Commission authorize an action against an affiliate of the Fund's adviser
and a senior executive officer relating to the frequent trading issues that are
the subject of the SEC's investigation. These issues were previously disclosed
as being under investigation by government authorities and the subject of an
internal inquiry by the Company in its Annual Report on Form 10-K and on its
public website. The Company currently is in discussions with the SEC Staff in an
effort to resolve the issues raised in their investigation. Such discussions are
preliminary and the Fund's management has been advised that the Company cannot
predict the likelihood of whether those discussions will result in a settlement
and, if so, the terms of such settlement. The impact, if any, of these matters
on the Fund is uncertain at this time. If the Company finds that it bears
responsibility for any unlawful or improper conduct, it has committed to making
the Fund or its shareholders whole, as appropriate.
Annual Report | 33
Templeton Developing Markets Trust
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF TEMPLETON DEVELOPING MARKETS TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Templeton Developing Markets Trust
(the "Fund") at December 31, 2003, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
January 30, 2004, except for Note 10, as to which the date is February 12, 2004.
34 | Annual Report
Templeton Developing Markets Trust
TAX DESIGNATION (UNAUDITED)
Under Section 854(b)(2) of the Internal Revenue Code (Code), the Fund hereby
designates up to a maximum of $33,682,668 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
December 31, 2003. In January 2004, shareholders will receive Form 1099-DIV
which will include their share of qualified dividends 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 individual income tax
returns.
At December 31, 2003, more than 50% of the Templeton Developing Markets Trust'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 December 11, 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 tables provide a detailed analysis, by country, of Foreign Tax
Paid, Foreign Source Income, Foreign Qualified Dividends and Adjusted Foreign
Source Income as designated by the Fund, to Class A, Class B, Class C, Class R
and Advisor Class shareholders of record. As a service to individual
shareholders filing Form 1116, "Adjusted Foreign Source Income per Share" in
column 4 below reports foreign source income with the required adjustments to
foreign source qualified dividends. This information is provided to simplify
your reporting of foreign source income for line 1 of Form 1116.
Annual Report | 35
Templeton Developing Markets Trust
TAX DESIGNATION (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
CLASS A
ADJUSTED
FOREIGN TAX FOREIGN FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE
- ------------------------------------------------------------------------------------------------------------------
Austria ................................... 0.0015 0.0060 0.0060 0.0026
Bermuda ................................... 0.0000 0.0001 0.0000 0.0001
Brazil .................................... 0.0069 0.0330 0.0035 0.0310
Chile ..................................... 0.0001 0.0003 0.0000 0.0003
China ..................................... 0.0000 0.0113 0.0064 0.0076
Croatia ................................... 0.0000 0.0017 0.0000 0.0017
Czech Republic ............................ 0.0003 0.0011 0.0011 0.0005
Egypt ..................................... 0.0000 0.0015 0.0015 0.0006
Greece .................................... 0.0000 0.0082 0.0082 0.0035
Hong Kong ................................. 0.0000 0.0399 0.0000 0.0399
Hungary ................................... 0.0007 0.0024 0.0024 0.0010
India ..................................... 0.0051 0.0108 0.0077 0.0064
Indonesia ................................. 0.0038 0.0148 0.0148 0.0063
Israel .................................... 0.0001 0.0001 0.0001 0.0000
Luxembourg ................................ 0.0000 0.0018 0.0018 0.0008
Malaysia .................................. 0.0011 0.0023 0.0000 0.0023
Mexico .................................... 0.0000 0.0172 0.0169 0.0075
Philippines ............................... 0.0008 0.0020 0.0020 0.0009
Poland .................................... 0.0002 0.0008 0.0008 0.0003
Portugal .................................. 0.0000 0.0001 0.0001 0.0000
Russia .................................... 0.0005 0.0019 0.0019 0.0008
Singapore ................................. 0.0058 0.0266 0.0000 0.0266
South Africa .............................. 0.0020 0.0390 0.0229 0.0259
South Korea ............................... 0.0092 0.0330 0.0042 0.0306
Switzerland ............................... 0.0000 0.0002 0.0000 0.0002
Taiwan .................................... 0.0067 0.0151 0.0000 0.0151
Thailand .................................. 0.0005 0.0069 0.0069 0.0030
Turkey .................................... 0.0000 0.0095 0.0095 0.0041
United Kingdom ............................ 0.0001 0.0008 0.0008 0.0003
-----------------------------------------------------------------
TOTAL ..................................... $0.0454 $0.2884 $0.1195 $0.2199
-----------------------------------------------------------------
36 | Annual Report
Templeton Developing Markets Trust
TAX DESIGNATION (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
CLASS B
ADJUSTED
FOREIGN TAX FOREIGN FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE
- ------------------------------------------------------------------------------------------------------------------
Austria ................................... 0.0015 0.0048 0.0048 0.0021
Brazil .................................... 0.0069 0.0266 0.0028 0.0250
Chile ..................................... 0.0001 0.0003 0.0000 0.0003
China ..................................... 0.0000 0.0091 0.0051 0.0062
Croatia ................................... 0.0000 0.0014 0.0000 0.0014
Czech Republic ............................ 0.0003 0.0009 0.0009 0.0004
Egypt ..................................... 0.0000 0.0013 0.0013 0.0006
Greece .................................... 0.0000 0.0066 0.0066 0.0028
Hong Kong ................................. 0.0000 0.0321 0.0000 0.0321
Hungary ................................... 0.0007 0.0019 0.0019 0.0008
India ..................................... 0.0051 0.0088 0.0063 0.0052
Indonesia ................................. 0.0038 0.0120 0.0120 0.0051
Israel .................................... 0.0001 0.0001 0.0001 0.0000
Luxembourg ................................ 0.0000 0.0015 0.0015 0.0006
Malaysia .................................. 0.0011 0.0019 0.0000 0.0019
Mexico .................................... 0.0000 0.0139 0.0137 0.0061
Philippines ............................... 0.0008 0.0016 0.0016 0.0007
Poland .................................... 0.0002 0.0006 0.0006 0.0003
Portugal .................................. 0.0000 0.0001 0.0001 0.0000
Russia .................................... 0.0005 0.0015 0.0015 0.0006
Singapore ................................. 0.0058 0.0215 0.0000 0.0215
South Africa .............................. 0.0020 0.0316 0.0185 0.0210
South Korea ............................... 0.0092 0.0266 0.0034 0.0247
Switzerland ............................... 0.0000 0.0001 0.0000 0.0001
Taiwan .................................... 0.0067 0.0122 0.0000 0.0122
Thailand .................................. 0.0005 0.0056 0.0056 0.0024
Turkey .................................... 0.0000 0.0077 0.0077 0.0033
United Kingdom ............................ 0.0001 0.0007 0.0007 0.0003
-----------------------------------------------------------------
TOTAL ..................................... $0.0454 $0.2330 $0.0967 $0.1777
-----------------------------------------------------------------
Annual Report | 37
Templeton Developing Markets Trust
TAX DESIGNATION (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
CLASS C
ADJUSTED
FOREIGN TAX FOREIGN FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE
- ------------------------------------------------------------------------------------------------------------------
Austria ................................... 0.0015 0.0046 0.0046 0.0020
Brazil .................................... 0.0069 0.0251 0.0026 0.0236
Chile ..................................... 0.0001 0.0003 0.0000 0.0003
China ..................................... 0.0000 0.0086 0.0048 0.0059
Croatia ................................... 0.0000 0.0013 0.0000 0.0013
Czech Republic ............................ 0.0003 0.0008 0.0008 0.0003
Egypt ..................................... 0.0000 0.0012 0.0012 0.0005
Greece .................................... 0.0000 0.0062 0.0062 0.0027
Hong Kong ................................. 0.0000 0.0302 0.0000 0.0302
Hungary ................................... 0.0007 0.0018 0.0018 0.0008
India ..................................... 0.0051 0.0083 0.0060 0.0049
Indonesia ................................. 0.0038 0.0113 0.0113 0.0048
Israel .................................... 0.0001 0.0001 0.0001 0.0000
Luxembourg ................................ 0.0000 0.0014 0.0014 0.0006
Malaysia .................................. 0.0011 0.0018 0.0000 0.0018
Mexico .................................... 0.0000 0.0131 0.0129 0.0057
Philippines ............................... 0.0008 0.0015 0.0015 0.0006
Poland .................................... 0.0002 0.0006 0.0006 0.0003
Portugal .................................. 0.0000 0.0001 0.0001 0.0000
Russia .................................... 0.0005 0.0015 0.0015 0.0006
Singapore ................................. 0.0058 0.0203 0.0000 0.0203
South Africa .............................. 0.0020 0.0297 0.0174 0.0198
South Korea ............................... 0.0092 0.0251 0.0032 0.0233
Switzerland ............................... 0.0000 0.0001 0.0000 0.0001
Taiwan .................................... 0.0067 0.0115 0.0000 0.0115
Thailand .................................. 0.0005 0.0052 0.0052 0.0022
Turkey .................................... 0.0000 0.0073 0.0073 0.0031
United Kingdom ............................ 0.0001 0.0006 0.0006 0.0003
-----------------------------------------------------------------
TOTAL ..................................... $0.0454 $0.2196 $0.0911 $0.1675
-----------------------------------------------------------------
38 | Annual Report
Templeton Developing Markets Trust
TAX DESIGNATION (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
CLASS R
ADJUSTED
FOREIGN TAX FOREIGN FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE
- ------------------------------------------------------------------------------------------------------------------
Austria ................................... 0.0015 0.0060 0.0060 0.0026
Bermuda ................................... 0.0000 0.0001 0.0000 0.0001
Brazil .................................... 0.0069 0.0332 0.0035 0.0312
Chile ..................................... 0.0001 0.0003 0.0000 0.0003
China ..................................... 0.0000 0.0114 0.0064 0.0077
Croatia ................................... 0.0000 0.0018 0.0000 0.0018
Czech Republic ............................ 0.0003 0.0011 0.0011 0.0005
Egypt ..................................... 0.0000 0.0016 0.0016 0.0007
Greece .................................... 0.0000 0.0083 0.0083 0.0036
Hong Kong ................................. 0.0000 0.0401 0.0000 0.0401
Hungary ................................... 0.0007 0.0024 0.0024 0.0010
India ..................................... 0.0051 0.0109 0.0078 0.0064
Indonesia ................................. 0.0038 0.0149 0.0149 0.0064
Israel .................................... 0.0001 0.0001 0.0001 0.0000
Luxembourg ................................ 0.0000 0.0018 0.0018 0.0008
Malaysia .................................. 0.0011 0.0024 0.0000 0.0024
Mexico .................................... 0.0000 0.0173 0.0170 0.0076
Philippines ............................... 0.0008 0.0020 0.0020 0.0009
Poland .................................... 0.0002 0.0008 0.0008 0.0003
Portugal .................................. 0.0000 0.0001 0.0001 0.0000
Russia .................................... 0.0005 0.0019 0.0019 0.0008
Singapore ................................. 0.0058 0.0269 0.0000 0.0269
South Africa .............................. 0.0020 0.0394 0.0231 0.0262
South Korea ............................... 0.0092 0.0332 0.0042 0.0308
Switzerland ............................... 0.0000 0.0002 0.0000 0.0002
Taiwan .................................... 0.0067 0.0152 0.0000 0.0152
Thailand .................................. 0.0005 0.0069 0.0069 0.0030
Turkey .................................... 0.0000 0.0096 0.0096 0.0041
United Kingdom ............................ 0.0001 0.0008 0.0008 0.0003
-----------------------------------------------------------------
TOTAL ..................................... $0.0454 $0.2907 $0.1203 $0.2219
-----------------------------------------------------------------
Annual Report | 39
Templeton Developing Markets Trust
TAX DESIGNATION (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
ADJUSTED
FOREIGN TAX FOREIGN FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE
- ------------------------------------------------------------------------------------------------------------------
Austria ................................... 0.0015 0.0068 0.0068 0.0029
Bermuda ................................... 0.0000 0.0001 0.0000 0.0001
Brazil .................................... 0.0069 0.0375 0.0039 0.0353
Chile ..................................... 0.0001 0.0004 0.0000 0.0004
China ..................................... 0.0000 0.0128 0.0072 0.0087
Croatia ................................... 0.0000 0.0020 0.0000 0.0020
Czech Republic ............................ 0.0003 0.0012 0.0012 0.0005
Egypt ..................................... 0.0000 0.0018 0.0018 0.0008
Greece .................................... 0.0000 0.0093 0.0093 0.0040
Hong Kong ................................. 0.0000 0.0464 0.0000 0.0464
Hungary ................................... 0.0007 0.0027 0.0027 0.0012
India ..................................... 0.0051 0.0123 0.0088 0.0073
Indonesia ................................. 0.0038 0.0169 0.0169 0.0072
Israel .................................... 0.0001 0.0001 0.0001 0.0000
Luxembourg ................................ 0.0000 0.0021 0.0021 0.0009
Malaysia .................................. 0.0011 0.0027 0.0000 0.0027
Mexico .................................... 0.0000 0.0195 0.0192 0.0085
Philippines ............................... 0.0008 0.0022 0.0022 0.0009
Poland .................................... 0.0002 0.0009 0.0009 0.0004
Portugal .................................. 0.0000 0.0001 0.0001 0.0000
Russia .................................... 0.0005 0.0022 0.0022 0.0009
Singapore ................................. 0.0058 0.0303 0.0000 0.0303
South Africa .............................. 0.0020 0.0444 0.0260 0.0295
South Korea ............................... 0.0092 0.0375 0.0048 0.0348
Switzerland ............................... 0.0000 0.0002 0.0000 0.0002
Taiwan .................................... 0.0067 0.0172 0.0000 0.0172
Thailand .................................. 0.0005 0.0078 0.0078 0.0033
Turkey .................................... 0.0000 0.0108 0.0108 0.0046
United Kingdom ............................ 0.0001 0.0009 0.0009 0.0004
-----------------------------------------------------------------
TOTAL ..................................... $0.0454 $0.3291 $0.1357 $0.2514
-----------------------------------------------------------------
Foreign Tax Paid per Share (Column 1) is the amount per share available to you,
as a tax credit or deduction (assuming you held your shares in the fund for a
minimum of 16 days during the 30-day period beginning 15 days before the
ex-dividend date of the fund's distribution to which the foreign taxes relate).
Foreign Source Income per Share (Column 2) is the amount per share of income
dividends paid to you that is attributable to foreign securities held by the
fund, plus any foreign taxes withheld on these dividends. The amounts reported
include foreign source qualified dividends without adjustment for the lower U.S.
tax rates. Generally, this is the foreign source income to be reported by
certain trusts and corporate shareholders.
40 | Annual Report
Templeton Developing Markets Trust
TAX DESIGNATION (UNAUDITED) (CONTINUED)
Foreign Qualified Dividends per Share (Column 3) is the amount per share of
foreign source qualified dividends the fund paid to you, plus any foreign taxes
withheld on these dividends. These amounts represent the portion of the Foreign
Source Income reported to you in column 2 that were derived from qualified
foreign securities held by the fund. If you are an individual shareholder who
does not meet the qualified dividend holding period requirements, you may find
this information helpful to calculate the foreign source income adjustment
needed to complete line 1 of Form 1116.
Adjusted Foreign Source Income per Share (Column 4) is the adjusted amount per
share of foreign source income the fund paid to you. These amounts reflect the
Foreign Source Income reported in column 2 adjusted for the tax rate
differential on foreign source qualified dividends that may be required for
certain individual shareholders pursuant to Internal Revenue Code 904(b)(2)(B).
If you are an individual shareholder who meets the qualified dividend holding
period requirements, generally, these Adjusted Foreign Source Income amounts may
be reported directly on line 1 of Form 1116 without additional adjustment.
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. The Foreign Source Income reported on Form 1099-DIV has been
reduced to take into account the tax rate differential on foreign source
qualified dividend income pursuant to Internal Revenue Code 904(b)(2)(B).
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their 2003 individual income tax returns.
Annual Report | 41
Board Members and Officers
Board Members and Officers
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of U.S. registered portfolios overseen in the
Franklin Templeton Investments fund complex are shown below. Each board member
will serve until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (71) Trustee Since 1992 142 Director, Bar-S Foods (meat packing
500 East Broward Blvd. company).
Suite 2100
Fort Lauderdale, FL 33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding
company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and
craft centers) (until 1998).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK J. CROTHERS (59) Trustee Since 1991 20 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Ventures Resources Corporation (Vice Chairman 1996-2003); Vice Chairman, Caribbean Utilities Co. Ltd.; Director and
President, Provo Power Company Ltd.; Director, Caribbean Electric Utility Services Corporation (Chairman until 2002); director of
various other business and nonprofit organizations; and FORMERLY, Chairman, Atlantic Equipment & Power Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (71) Trustee Since 1992 143 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (51) Trustee Since 1996 96 Director, Amerada Hess Corporation
500 East Broward Blvd. (exploration and refining of oil and
Suite 2100 gas); Beverly Enterprises, Inc. (health
Fort Lauderdale, FL 33394-3091 care); H.J. Heinz Company (processed
foods and allied products); RTI
International Metals, Inc. (manufacture
and distribution of titanium); and
Canadian National Railway (railroad).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- ------------------------------------------------------------------------------------------------------------------------------------
42 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
BETTY P. KRAHMER (74) Trustee Since 1995 21 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various civic associations; and FORMERLY, Economic Analyst, U.S. government.
- ------------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (75) Trustee Since 1993 142 Director, White Mountains Insurance
500 East Broward Blvd. Group, Ltd. (holding company); Martek
Suite 2100 Biosciences Corporation; MedImmune,
Fort Lauderdale, FL 33394-3091 Inc. (biotechnology); and Overstock.com
(Internet services); and FORMERLY,
Director, MCI Communication Corporation
(subsequently known as MCI WorldCom,
Inc. and WorldCom, Inc.)
(communications services) (1988-2002)
and Spacehab, Inc. (aerospace services)
(1994-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation
(financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National Association
of Securities Dealers, Inc. (1970-1987).
- ------------------------------------------------------------------------------------------------------------------------------------
FRED R. MILLSAPS (74) Trustee Since 1992 28 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various business and nonprofit organizations; manager of personal investments (1978-present); and FORMERLY, Chairman
and Chief Executive Officer, Landmark Banking Corporation (1969-1978); Financial Vice President, Florida Power and Light
(1965-1969); and Vice President, Federal Reserve Bank of Atlanta (1958-1965).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (71) Trustee Since 2003 20 Director, Becton, Dickinson and Co.
500 East Broward Blvd. (medical technology); White Mountains
Suite 2100 Insurance Group Ltd. (holding company);
Fort Lauderdale, FL 33394-3091 and Amerada Hess Corporation
(exploration and refining of oil and
gas).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, The Hertz Corporation (car rental) (since 1980) (Chief Executive Officer 1977-1999); and FORMERLY, Chairman
of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 43
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTANTINE D. TSERETOPOULOS (49) Trustee Since 1991 20 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Physician, Lyford Cay Hospital (1987-present); director of various nonprofit organizations; and FORMERLY, Cardiology Fellow,
University of Maryland (1985-1987) and Internal Medicine Resident, Greater Baltimore Medical Center (1982-1985).
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**NICHOLAS F. BRADY (73) Trustee Since 1993 21 Director, Amerada Hess Corporation
500 East Broward Blvd. (exploration and refining of oil and
Suite 2100 gas); and C2, Inc. (operating and
Fort Lauderdale, FL 33394-3091 investment business); and FORMERLY,
Director, H.J. Heinz Company
(processed foods and allied
products)(1987-1988;1993-2003).
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Darby Overseas Investments, Ltd., Darby Emerging Markets Investments LDC and Darby Technology Ventures Group, LLC
(investment firms) (1994-present); Director, Templeton Capital Advisors Ltd. and Franklin Templeton Investment Fund; and FORMERLY,
Chairman, Templeton Emerging Markets Investment Trust PLC (until 2003); Secretary of the United States Department of the Treasury
(1988-1993); Chairman of the Board, Dillon, Read & Co., Inc. (investment banking) (until 1988); and U.S. Senator, New Jersey (April
1982-December 1982).
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (70) Trustee Trustee and 142 None
One Franklin Parkway Chairman of Chairman of the
San Mateo, CA 94403-1906 the Board and Board since 1995
Vice President and Vice President
since 1992
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (58) Vice President Since 1996 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services,
Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and
of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
44 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
JEFFREY A. EVERETT (39) Vice President Since 2001 Not Applicable None
PO Box N-7759
Lyford Cay, Nassau, Bahamas
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Templeton Global Advisors Limited; officer of 15 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Investment Officer, First Pennsylvania Investment Research (until 1989).
- ------------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (43) Vice President Since 1991 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin
Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice
President and Chief Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.;
Executive Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief
Financial Officer, Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director or
trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in
Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (56) Senior Vice Administration Not Applicable None
500 East Broward Blvd. President and Since 2002
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources, Inc.;
officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer and
Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 45
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (56) Vice President Vice President Not Applicable None
One Franklin Parkway and Secretary since 2000 and
San Mateo, CA 94403-1906 Secretary since
1996
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, Inc.,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin
Investment Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment
companies in Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant
and Senior Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange
Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts)
(until 1979).
- ------------------------------------------------------------------------------------------------------------------------------------
RUPERT H. JOHNSON, JR. (63) Vice President Since 1996 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JOHN R. KAY (63) Vice President Since 1994 Not Applicable None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Templeton Worldwide, Inc.; Assistant Vice President, Franklin Templeton Distributors, Inc.; Senior Vice President,
Franklin Templeton Services, LLC; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 35 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Vice President and Controller, Keystone Group, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (66) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue - AML Chemicals, Inc. and Lingnan
Rockefeller Center Compliance Foundation.
New York, NY 10048-0772
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; and officer and/or director, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
46 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
MARK MOBIUS (67) President and President since Not Applicable None
17th Floor, Chief 1991 and Chief
The Chater House Executive Executive
8 Connaught Road Officer - Officer -
Central Hong Kong Investment Investment
Management Management
since 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Portfolio Manager of various Templeton advisory affiliates; Managing Director, Templeton Asset Management Ltd.; Executive Vice
President and Director, Templeton Global Advisors Limited; and officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of six of the investment companies in Franklin Templeton Investments; and FORMERLY,
President, International Investment Trust Company Limited (investment manager of Taiwan R.O.C. Fund) (1986-1987); and Director,
Vickers da Costa, Hong Kong (1983-1986).
- ------------------------------------------------------------------------------------------------------------------------------------
KIMBERLEY H. MONASTERIO (40) Treasurer and Treasurer and Not Applicable None
One Franklin Parkway Chief Financial Chief Financial
San Mateo, CA 94403-1906 Officer Officer since
2003
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 51 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (66) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton
Investments fund complex. These portfolios have a common investment adviser or affiliated investment advisers.
**Charles B. Johnson is considered an interested person of the Fund under the federal securities laws due to his position as an
officer and director and major shareholder of Franklin Resources, Inc. (Resources), which is the parent company of the Fund's
adviser and distributor. Nicholas F. Brady is considered an interested person of the Fund under the federal securities laws due to
his business affiliations with Resources, and Templeton Global Advisors Limited. On October 1, 2003, Resources acquired all of the
shares of Darby Overseas Investments, Ltd. (Darby Investments) and the remaining portion of the limited partner interests not
currently owned by Resources of Darby Overseas Partners, L.P. (Darby Partners). Mr. Brady, formerly a shareholder of Darby
Investments and a partner of Darby Partners, will continue as Chairman of Darby Investments, which is the corporate general partner
of Darby Partners. In addition, Darby Partners and Templeton Global Advisors Limited are limited partners of Darby Emerging Markets
Fund, L.P. (DEMF). Mr. Brady will also continue to serve as Chairman of the corporate general partner of DEMF, and Darby Partners
and Darby Investments own 100% of the stock of the general partner of DEMF. Resources also is an investor in Darby Technology
Ventures Group, LLC (DTV) in which Darby Partners is a significant investor and for which Darby Partners has the right to appoint a
majority of the directors. Templeton Global Advisors Limited also is a limited partner in Darby--BBVA Latin America Private Equity
Fund, L.P. (DBVA), a private equity fund in which Darby Partners is a significant investor, and the general partner of which Darby
Partners controls jointly with an unaffiliated third party. Mr. Brady is also a director of Templeton Capital Advisors Ltd. (TCAL),
which serves as investment manager to certain unregistered funds. TCAL and Templeton Global Advisors Limited are both indirect
subsidiaries of Resources.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE
FUND'S AUDIT COMMITTEE INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN THE MEANING OF SUCH ACT AND
RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED EACH OF FRED R. MILLSAPS AND FRANK A. OLSON AS AN AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD BELIEVES THAT MESSRS.
MILLSAPS AND OLSON QUALIFY AS SUCH AN EXPERT IN VIEW OF THEIR EXTENSIVE BUSINESS BACKGROUND AND EXPERIENCE. MR. MILLSAPS, WHO IS
CURRENTLY A DIRECTOR OF VARIOUS BUSINESS AND NONPROFIT ORGANIZATIONS, HAS SERVED AS A MEMBER AND CHAIRMAN OF THE FUND AUDIT
COMMITTEE SINCE 1992 AND WAS FORMERLY CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF LANDMARK BANKING CORPORATION AND FINANCIAL VICE
PRESIDENT OF FLORIDA POWER AND LIGHT. MR. OLSON, WHO CURRENTLY SERVES AS CHAIRMAN OF THE BOARD OF THE HERTZ CORPORATION AND WAS ITS
CHIEF EXECUTIVE OFFICER FROM 1977 TO 1999, IS A DIRECTOR AND AUDIT COMMITTEE MEMBER OF AMERADA HESS CORPORATION AND WHITE MOUNTAINS
INSURANCE GROUP, LTD. AND A FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER OF UNITED AIRLINES. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. MILLSAPS AND MR. OLSON HAVE EACH ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES AND FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION WITH THE ACCOUNTING
ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR
FINANCIAL REPORTING AND AN UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MESSRS. MILLSAPS AND OLSON ARE INDEPENDENT TRUSTEES AS THAT
TERM IS DEFINED UNDER THE APPLICABLE STOCK EXCHANGE RULES AND SECURITIES AND EXCHANGE COMMISSION RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT
CHARGE, UPON REQUEST. SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
</FN>
Annual Report | 47
Templeton Developing Markets Trust
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group.
48 | Annual Report
Literature Request
For a brochure and prospectus, which contains more complete information,
including charges and expenses, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, we may
monitor, record and access telephone calls to or from our service departments.
These calls can be identified by the presence of a regular beeping tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1
VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 3
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 4
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 5
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government
Securities Fund 6
Franklin's AGE High Income Fund
Franklin Federal Money Fund 6,7
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 4
Franklin Income Fund
Franklin Money Fund 6,7
Franklin Short-Intermediate U.S. Government
Securities Fund 6
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio 6
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 6
Templeton Global Bond Fund
TAX-FREE INCOME8
NATIONAL FUNDS
Double 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 6,7
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC 8
Alabama Michigan 9
Arizona Minnesota 9
California 10 Missouri
Colorado New Jersey
Connecticut New York 10
Florida 10 North Carolina
Georgia Ohio 9
Kentucky Oregon
Louisiana Pennsylvania
Maryland Tennessee
Massachusetts 9 Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 11
1.The fund is closed to new investors. Existing shareholders can continue adding
to their accounts.
2.The fund is only open to existing shareholders as well as select retirement
plans.
3.Effective June 30, 2003, the fund reopened to all new investors.
4.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.
5.Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.
6.An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
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
money market portfolios (CA and NY).
11.The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
11/03 Not part of the annual report
[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
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.
ANNUAL REPORT AND SHAREHOLDER LETTER
Templeton
Developing Markets Trust
AUDITORS
PricewaterhouseCoopers LLP
333 Market Street
San Francisco, CA 94105
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 value
of the Fund's portfolio will be subject to the risk of loss from market,
currency, economic, political and other factors. The Fund and its investors are
not protected from such losses by the Investment Manager. Therefore, investors
who cannot accept this risk should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
711 A2003 02/04
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 10(a), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial experts are Fred R. Millsaps and Frank A.
Olson and they are "independent" as defined under the relevant Securities and
Exchange Commission Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $72,557 for the fiscal year ended December 31, 2003 and $29,677 for the
fiscal year ended December 31, 2002.
(b) Audit-Related Fees
The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4 were $8,483 for
the fiscal year ended December 31, 2003 and $6,311 for the fiscal year ended
December 31, 2002. The services for which these fees were paid included payments
for internal control examination pursuant to the Statement of Auditing Standards
No. 70 and other attestation services.
The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of the their financial
statements were $316,594 for the fiscal year ended December 31, 2003 and
$357,762 for the fiscal year ended December 31, 2002. The services for which
these fees were paid included payments for internal control examination pursuant
to the Statement of Auditing Standards No. 70 and other attestation services.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $0 for the fiscal year ended
December 31, 2003 and $84,424 for the fiscal year ended December 31, 2002. The
services for which these fees were paid included payments for tax compliance and
advice.
(d) All Other Fees
There were no fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant, other than the services
reported in paragraphs (a)-(c) of Item 4.
There were no fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant, other than
the services reported in paragraphs (a)-(c) of Item 4.
(e) (1) The Fund's audit committee is directly responsible for approving the
services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided
to the Fund by the auditors to the Fund's investment adviser or to any entity
that controls, is controlled by or is under common control with the Fund's
investment adviser and that provides ongoing services to the Fund where the
non-audit services relate directly to the operations or financial reporting
of the Fund; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were pre-approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $325,078 for the fiscal year ended December 31, 2003 and
$448,497 for the fiscal year ended December 31, 2002.
(h) No disclosures are required by this Item 4(h).
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 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. N/A
ITEM 10. 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 11. EXHIBITS.
(A) Code of Ethics for Principal Executive and Senior Financial Officers
(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
Kimberley H. Monasterio, 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
Kimberley H. Monasterio, 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: February 23, 2004
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: February 23, 2004
By /s/KIMBERLEY H. MONASTERIO
----------------------------
Kimberley H. Monasterio
Chief Financial Officer
Date: February 23, 2004