UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-06378
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TEMPLETON DEVELOPING MARKETS TRUST
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(Exact name of registrant as specified in charter)
500 EAST BROWARD BLVD., SUITE 2100, FORT LAUDERDALE, FL 33394-3091
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(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (954) 527-7500
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Date of fiscal year end: 12/31
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Date of reporting period: 6/30/05
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ITEM 1. REPORTS TO STOCKHOLDERS.
[PHOTO OMITTED]
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JUNE 30, 2005
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER | INTERNATIONAL
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
TEMPLETON
DEVELOPING MARKETS TRUST Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
Franklin o TEMPLETON o Mutual Series
FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise
of three world-class investment management
groups--Franklin, Templeton and Mutual
Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups
operates autonomously, relying on its own
research and staying true to the unique
investment disciplines that underlie its
success.
FRANKLIN. Founded in 1947, Franklin is a
recognized leader in fixed income investing
and also brings expertise in growth- and
value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton
pioneered international investing and, in
1954, launched what has become the
industry's oldest global fund. Today, with
offices in over 25 countries, Templeton
offers investors a truly global perspective.
MUTUAL Series. Founded in 1949, Mutual
Series is dedicated to a unique style of
value investing, searching aggressively for
opportunity among what it believes are
undervalued stocks, as well as arbitrage
situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work
independently and adhere to different
investment approaches, Franklin, Templeton
and Mutual Series funds typically have
distinct portfolios. That's why our funds
can be used to build truly diversified
allocation plans covering every major asset
class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek
to consistently provide investors with
exceptional risk-adjusted returns over the
long term, as well as the reliable, accurate
and personal service that has helped us
become one of the most trusted names in
financial services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]
Not part of the semiannual report
CONTENTS
SHAREHOLDER LETTER ...................................................... 1
SEMIANNUAL REPORT
Templeton Developing Markets Trust ...................................... 4
Performance Summary ..................................................... 9
Your Fund's Expenses .................................................... 12
Financial Highlights and Statement of Investments ....................... 14
Financial Statements .................................................... 25
Notes to Financial Statements ........................................... 29
Shareholder Information ................................................. 39
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SEMIANNUAL REPORT
TEMPLETON DEVELOPING MARKETS TRUST
YOUR FUND'S GOAL AND MAIN 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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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
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GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 6/30/05
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Asia ........................................... 57.0%
Europe ......................................... 15.2%
Latin America .................................. 12.2%
Middle East & Africa ........................... 7.7%
Short-Investments and Other Net Assets ......... 7.9%
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We are pleased to bring you Templeton Developing Markets Trust's semiannual
report for the period ended June 30, 2005.
PERFORMANCE OVERVIEW
Templeton Developing Markets Trust - Class A posted a +6.38% cumulative total
return for the six months ended June 30, 2005. The Fund's Class A shares
outperformed one of its benchmarks, the Morgan Stanley Capital International
(MSCI) Emerging Markets (EM) Index, which returned 6.26% for the period under
review.(1) However, it underperformed the other benchmark, the Standard &
Poor's/International Finance Corporation Investable (S&P/IFCI) Composite
(1) Source: Standard & Poor's Micropal. The MSCI EM Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in global emerging markets. The index is
unmanaged and includes reinvested dividends. One cannot invest directly in
an index, nor is an index representative of the Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 19.
4 | Semiannual Report
Index, which posted a 6.81% total return during the same period.(2) Please note
that index performance numbers are purely for reference and that we do not
attempt to track any index, but rather undertake investments on the basis of
meticulous fundamental research. You can find the Fund's long-term performance
data for all shares in the Performance Summary beginning on page 9.
ECONOMIC AND MARKET OVERVIEW
Emerging markets started 2005 on a positive note with most markets performing
well in the first two months. Although stock markets weakened in March and
April, a rebound in the reporting period's last two months led to most markets
ending the six-month period higher.
Latin American markets stood out, outperforming Asian and Eastern European
markets partly due to a weakening dollar against major Latin American
currencies. While major economies such as Brazil's and Mexico's recorded lower
growth in the first quarter of 2005 than in 2004, growth figures were still much
higher than in previous years.
In Eastern Europe and South Africa, currency movements reduced local currency
gains when converted into U.S. dollars during the period under review. Interest
rates generally continued on a downward trend in Eastern Europe despite rising
rates in the U.S. and Asia as central banks sought to ensure a sustainable
economic recovery and inflation pressure remained benign. Expectations for
reforms, the beginning of European Union accession talks in October, as well as
additional funding from the International Monetary Fund (IMF) and World Bank,
drove the Turkish stock market to record strong gains. In South Africa, many
companies continued to support the government's "black economic empowerment"
charter.
Asian economic and social developments contributed to positive stock market
performances. In China, government efforts to slow the economy were fairly
effective. Inflationary pressures eased and there was slower growth in some
areas of the economy. Slower-than-expected growth in consumer demand in South
Korea and high oil prices led that country's economy to grow 2.7% in first
quarter 2005 compared with a year earlier.(3) The government expected 2005 gross
domestic product growth to be about 4.0%.(3)
(2) Source: Stanard & Poor's Micropal. The S&P/IFCI Composite Index measures
the total return 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 index is
unmanaged and includes reinvested dividends. One cannot invest directly in
an index, nor is an index representative of the Fund's portfolio.
(3) Source: Bank of South Korea.
TOP 10 COUNTRIES
6/30/05
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% OF TOTAL
NET ASSETS
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South Korea 16.8%
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Taiwan 13.6%
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China 8.6%
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South Africa 7.7%
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Brazil 7.5%
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Singapore 6.5%
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Mexico 4.4%
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India 3.4%
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Russia 3.0%
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Turkey 2.9%
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Semiannual Report | 5
TOP 10 EQUITY HOLDINGS
6/30/05
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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
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Samsung Electronics Co. Ltd. 3.9%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
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China Mobile (Hong Kong) Ltd., fgn. 2.8%
WIRELESS TELECOMMUNICATION
SERVICES, CHINA
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Anglo American PLC 2.5%
METALS & MINING, SOUTH AFRICA
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Keppel Corp. Ltd. 2.1%
INDUSTRIAL CONGLOMERATES, SINGAPORE
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Kimberly Clark de Mexico SA de CV, A 2.0%
HOUSEHOLD PRODUCTS, MEXICO
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Remgro Ltd. 2.0%
DIVERSIFIED FINANCIAL SERVICES,
SOUTH AFRICA
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Taiwan Mobile Co. Ltd. 1.7%
WIRELESS TELECOMMUNICATION
SERVICES, TAIWAN
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Daewoo Shipbuilding & Marine
Engineering Co. Ltd. 1.7%
MACHINERY, SOUTH KOREA
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Banco Bradesco SA, ADR, pfd. 1.5%
COMMERCIAL BANKS, BRAZIL
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Petroleo Brasileiro SA, ADR, pfd. 1.5%
OIL, GAS & CONSUMABLE FUELS, BRAZIL
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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
By country, the largest contributor to the Fund's performance relative to the
MSCI EM Index (the Index) was our underweighted position in South Africa. Having
no holdings in stocks such as Standard Bank Group, MTN Group and Sanlam resulted
in the greatest positive relative results. The Fund's out-of-benchmark position
in Singapore further enhanced performance. In addition, our stock selection and
exposure to South Korea, which was roughly in line with the Index's, also
benefited the Fund. However, our underweighted position in Brazil and no
exposure to Egypt negatively impacted the Fund's relative performance. Egypt's
strong market performance and low liquidity led to a scarcity of undervalued
investments that met our investment criteria.
With regard to sectors, our stock selection in capital goods and banks as well
as an underweighting relative to the index in insurance contributed to Fund
performance.(4) Within the capital goods sector, Singapore's Keppel and South
Korean stocks Samsung Heavy Industries and Hyundai Development enhanced returns.
Conversely, our stock selection in food, beverage and tobacco, an overweighted
exposure to diversified financials, and an underweighted position in the energy
sector produced the greatest negative effects on the Fund during the period.(5)
In the food, beverage and tobacco sector, our positions in brewers Inbev and
SABMiller hindered the Fund the most.
In general, if the value of the U.S. dollar goes up compared with a foreign
currency, an investment traded in that foreign currency will go down in value
(4) The capital goods sector comprises aerospace and defense, building
products, construction and engineering, electrical equipment, industrial
conglomerates, machinery, and trading companies and distributors in the
SOI. The banks sector comprises commercial banks and thrifts and mortgage
finance in the SOI.
(5) The food, beverage and tobacco sector comprises beverage, food products
and tobacco in the SOI. The diversified financials sector comprises
diversified financial services, consumer finance and capital markets in
the SOI. The energy sector comprises energy equipment and services; and
oil, gas and consumable fuels in the SOI.
6 | Semiannual Report
because it will be worth fewer dollars. This can have a negative effect on Fund
performance. Conversely, when the U.S. dollar weakens in relation to a foreign
currency, an investment traded in that foreign currency will increase in value,
which can contribute to Fund performance. For the six months ended June 30,
2005, the U.S. dollar rose in value relative to most non-U.S. currencies. As a
result, the Fund's performance was negatively affected by the portfolio's
predominant investment in securities with non-U.S. currency exposure.
During the period, we increased our exposure to Asia, the world's largest
emerging market region. Countries where we made large investments were Taiwan,
Thailand, India and Malaysia. Significant purchases included shares of Mega
Financial Holding, one of Taiwan's largest financial holding companies;
Kasikornbank, one of Thailand's largest banks; Premier Image, one of the largest
global manufacturers of compact and digital still cameras; and Maxis
Communications, one of Malaysia's leading telecommunications service providers.
Conversely, the Fund reduced its holdings in Hong Kong and China Red Chip shares
(Hong Kong-listed companies with significant exposure to China) as stocks
reached our sell targets. In South Korea, the Fund's largest purchases included
shares of Hana Bank and LG Corporation while sales included POSCO and shares of
Samsung Heavy Industries.
Except for investments in Russia's metals and wireless telecommunications
sectors as well as selective purchases in Croatia and Sweden, the Fund reduced
its holdings in most European countries. Additions included stocks of Mining and
Metallurgical Co. Norilsk Nickel, one of the world's largest precious metals
companies; Mobile Telesystems, one of the largest Eastern European and Russian
mobile operators; Oriflame, a cosmetic company with sales operations in more
than 50 countries; and Pliva, one of Central and Eastern Europe's largest
pharmaceutical companies. Key sales in the region included shares of MOL, Inbev
and Bank Austria. In South Africa, the Fund reduced its exposure to brewers and
the integrated oil and gas sector via sales of SABMiller and Sasol stocks.
In Latin America, we made additional investments in Mexico while adding exposure
to Panama during the period. Our largest purchases in the region included shares
of Telefonos de Mexico, Mexico's only nationwide fixed-line telephony service
company and the nation's leading Internet and local and long distance telephone
service provider; Femsa, a Mexican holding company
Semiannual Report | 7
with subsidiaries in the soft drinks, beer and retail industry; and Banco
Latinamericano de Exportaciones, a multinational bank mainly providing
trade-related financing in Latin America. The Fund repositioned its holdings in
Brazil as we added Centrais Electricas Brasileiras (Eletrobras), and reduced our
exposure to AmBev and Banco Bradesco.
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.
We thank you for your continued participation in Templeton Developing Markets
Trust and look forward to serving your future investment needs.
[PHOTO OMITTED] /s/ Mark Mobius
Mark Mobius
President and Chief Executive Officer -
Investment Management
Templeton Developing Markets Trust
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JUNE 30, 2005, 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.
8 | Semiannual Report
PERFORMANCE SUMMARY AS OF 6/30/05
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table does not reflect any taxes due on
Fund dividends, capital gain distributions, if any, or any realized gains on the
sale of Fund shares. Total return reflects reinvestment of the Fund's dividends
and capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
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CLASS A (SYMBOL: TEDMX) CHANGE 6/30/05 12/31/04
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Net Asset Value (NAV) +$1.02 $19.55 $18.53
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DISTRIBUTIONS (1/1/05-6/30/05)
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Dividend Income $0.1531
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CLASS B (SYMBOL: TDMBX) CHANGE 6/30/05 12/31/04
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Net Asset Value (NAV) +$0.94 $19.18 $18.24
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DISTRIBUTIONS (1/1/05-6/30/05)
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Dividend Income $0.1530
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CLASS C (SYMBOL: TDMTX) CHANGE 6/30/05 12/31/04
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Net Asset Value (NAV) +$0.94 $19.16 $18.22
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DISTRIBUTIONS (1/1/05-6/30/05)
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Dividend Income $0.1531
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CLASS R (SYMBOL: TDMRX) CHANGE 6/30/05 12/31/04
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Net Asset Value (NAV) +$0.99 $19.38 $18.39
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DISTRIBUTIONS (1/1/05-6/30/05)
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Dividend Income $0.1529
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ADVISOR CLASS (SYMBOL: TDADX) CHANGE 6/30/05 12/31/04
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Net Asset Value (NAV) +$1.05 $19.56 $18.51
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DISTRIBUTIONS (1/1/05-6/30/05)
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Dividend Income $0.1531
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Semiannual Report | 9
PERFORMANCE SUMMARY (CONTINUED)
PERFORMANCE
CLASS A: 5.75% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY; CLASS R: 1% CDSC FOR FIRST 18 MONTHS ONLY.
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES.
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CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return(1) +6.38% +31.97% +58.21% +79.68%
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Average Annual Total Return(2) +0.26% +24.36% +8.32% +5.41%
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Value of $10,000 Investment(3) $10,026 $12,436 $14,912 $16,934
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CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
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Cumulative Total Return(1) +6.04% +31.10% +53.20% +93.38%
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Average Annual Total Return(2) +2.04% +27.10% +8.62% +10.69%
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Value of $10,000 Investment(3) $10,204 $12,710 $15,120 $19,338
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CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return(1) +5.99% +31.06% +53.19% +67.84%
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Average Annual Total Return(2) +4.99% +30.06% +8.91% +5.31%
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Value of $10,000 Investment(3) $10,499 $13,006 $15,319 $16,784
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CLASS R 6-MONTH 1-YEAR 3-YEAR INCEPTION (1/1/02)
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Cumulative Total Return(1) +6.32% +31.80% +92.36% +105.51%
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Average Annual Total Return(2) +5.32% +30.80% +24.37% +22.92%
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Value of $10,000 Investment(3) $10,532 $13,080 $19,236 $20,551
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ADVISOR CLASS(4) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return(1) +6.55% +32.47% +61.36% +84.61%
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Average Annual Total Return(2) +6.55% +32.47% +10.04% +6.32%
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Value of $10,000 Investment(3) $10,655 $13,247 $16,136 $18,461
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
10 | Semiannual Report
PERFORMANCE SUMMARY (CONTINUED)
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 THESE MARKETS' SMALLER SIZE AND LESSER
LIQUIDITY. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN
INVESTMENT RISKS.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These
shares have higher annual fees and expenses than Class A shares.
CLASS R: 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: Shares are available to certain eligible investors as described
in the prospectus.
(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.
(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes any current,
applicable, maximum sales charge. Six-month return has not been
annualized.
(3) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated and include any current, applicable,
maximum sales charge.
(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 +53.01% and +5.13%.
Semiannual Report | 11
YOUR FUND'S EXPENSES
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
12 | Semiannual Report
YOUR FUND'S EXPENSES (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
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BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 12/31/04 VALUE 6/30/05 PERIOD* 12/31/04-6/30/05
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Actual $1,000 $1,063.80 $10.13
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Hypothetical (5% return before expenses) $1,000 $1,014.98 $ 9.89
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CLASS B
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Actual $1,000 $1,060.40 $13.38
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Hypothetical (5% return before expenses) $1,000 $1,011.80 $13.07
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CLASS C
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Actual $1,000 $1,059.90 $13.43
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Hypothetical (5% return before expenses) $1,000 $1,011.75 $13.12
- -------------------------------------------------------------------------------------------------------------------
CLASS R
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,063.20 $10.90
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Hypothetical (5% return before expenses) $1,000 $1,014.23 $10.64
- -------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
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Actual $1,000 $1,065.50 $ 8.35
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Hypothetical (5% return before expenses) $1,000 $1,016.71 $ 8.15
- -------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A:
1.98%; B: 2.62%; C: 2.62%; R: 2.13%; and Advisor: 1.63%), multiplied by
the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.
Semiannual Report | 13
TEMPLETON DEVELOPING MARKETS TRUST
FINANCIAL HIGHLIGHTS
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SIX MONTHS ENDED
JUNE 30, 2005 YEAR ENDED DECEMBER 31,
CLASS A (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 18.53 $ 14.95 $ 10.00 $ 9.88 $ 10.59 $ 15.61
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ..................... 0.16 0.18 0.22 0.10 0.11 0.07
Net realized and unrealized gains (losses) ... 1.01 3.66 4.98 0.07 (0.72) (5.03)
-----------------------------------------------------------------------------------
Total from investment operations .............. 1.17 3.84 5.20 0.17 (0.61) (4.96)
-----------------------------------------------------------------------------------
Less distributions from net investment income . (0.15) (0.26) (0.25) (0.05) (0.10) (0.06)
-----------------------------------------------------------------------------------
Redemption fees ............................... --(c) --(c) --(c) -- -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ................ $ 19.55 $ 18.53 $ 14.95 $ 10.00 $ 9.88 $ 10.59
===================================================================================
Total return(b) ............................... 6.38% 25.45% 53.14% 1.68% (5.76)% (31.85)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $2,588,764 $2,305,376 $1,873,277 $1,168,340 $1,221,011 $1,507,936
Ratios to average net assets:
Expenses ..................................... 1.98%(d) 2.03% 2.17% 2.24% 2.21% 2.09%
Net investment income ........................ 1.75%(d) 1.12% 1.85% 0.96% 1.07% 0.56%
Portfolio turnover rate ....................... 23.77% 58.74% 48.60% 49.05% 61.45% 69.37%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(c) Amount is less than $0.01 per share.
(d) Annualized.
14 | See notes to financial statements. | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
-----------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2005 YEAR ENDED DECEMBER 31,
CLASS B (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 18.24 $ 14.74 $ 9.82 $ 9.77 $ 10.44 $ 15.47
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) .............. 0.10 0.06 0.13 0.03 0.04 (0.02)
Net realized and unrealized gains (losses) ... 0.99 3.61 4.93 0.07 (0.70) (4.98)
-----------------------------------------------------------------------------------
Total from investment operations .............. 1.09 3.67 5.06 0.10 (0.66) (5.00)
-----------------------------------------------------------------------------------
Less distributions from net investment income . (0.15) (0.17) (0.14) (0.05) (0.01) (0.03)
-----------------------------------------------------------------------------------
Redemption fees ............................... --(c) --(c) --(c) -- -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ................ $ 19.18 $ 18.24 $ 14.74 $ 9.82 $ 9.77 $ 10.44
===================================================================================
Total return(b) ............................... 6.04% 24.70% 52.17% 0.98% (6.32)% (32.36)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 38,373 $ 36,992 $ 26,062 $ 12,377 $ 11,027 $ 11,508
Ratios to average net assets:
Expenses ..................................... 2.62%(d) 2.68% 2.82% 2.88% 2.86% 2.77%
Net investment income (loss) ................. 1.11%(d) 0.47% 1.20% 0.32% 0.42% (0.13)%
Portfolio turnover rate ....................... 23.77% 58.74% 48.60% 49.05% 61.45% 69.37%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Amount is less than $0.01 per share.
(d) Annualized.
Semiannual Report | See notes to financial statements. | 15
TEMPLETON DEVELOPING MARKETS TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
-----------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2005 YEAR ENDED DECEMBER 31,
CLASS C (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 18.22 $ 14.72 $ 9.79 $ 9.73 $ 10.39 $ 15.36
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) .............. 0.10 0.05 0.14 0.03 0.04 (0.01)
Net realized and unrealized gains (losses) ... 0.99 3.60 4.90 0.08 (0.70) (4.96)
-----------------------------------------------------------------------------------
Total from investment operations .............. 1.09 3.65 5.04 0.11 (0.66) (4.97)
-----------------------------------------------------------------------------------
Less distributions from net investment income . (0.15) (0.15) (0.11) (0.05) --(e) --
-----------------------------------------------------------------------------------
Redemption fees ............................... --(c) --(c) --(c) -- -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ................ $ 19.16 $ 18.22 $ 14.72 $ 9.79 $ 9.73 $ 10.39
===================================================================================
Total return(b) ............................... 5.99% 24.72% 52.25% 0.98% (6.34)% (32.36)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 276,492 $ 258,365 $ 208,581 $ 127,808 $ 139,099 $ 188,379
Ratios to average net assets:
Expenses ..................................... 2.62%(d) 2.69% 2.82% 2.89% 2.86% 2.76%
Net investment income (loss) ................. 1.11%(d) 0.46% 1.20% 0.31% 0.43% (0.11)%
Portfolio turnover rate ....................... 23.77% 58.74% 48.60% 49.05% 61.45% 69.37%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Amount is less than $0.01 per share.
(d) Annualized.
(e) Actual distribution from net investment income was ($0.001).
16 | See notes to financial statements. | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
-----------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2005 YEAR ENDED DECEMBER 31,
CLASS R (UNAUDITED) 2004 2003 2002(e)
-----------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 18.39 $ 14.85 $ 9.98 $ 9.93
-----------------------------------------------------------
Income from investment operations:
Net investment income(a) ..................... 0.15 0.16 0.17 0.03
Net realized and unrealized gains ............ 0.99 3.64 4.98 0.07
-----------------------------------------------------------
Total from investment operations .............. 1.14 3.80 5.15 0.10
-----------------------------------------------------------
Less distributions from net investment income . (0.15) (0.26) (0.28) (0.05)
-----------------------------------------------------------
Redemption fees ............................... --(c) --(c) --(c) --
-----------------------------------------------------------
Net asset value, end of period ................ $ 19.38 $ 18.39 $ 14.85 $ 9.98
-----------------------------------------------------------
Total return(b) ............................... 6.32% 25.28% 52.82% 0.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 7,785 $ 5,220 $ 1,688 $ 381
Ratios to average net assets:
Expenses ..................................... 2.13%(d) 2.18% 2.32% 2.39%(d)
Net investment income ........................ 1.60%(d) 0.97% 1.70% 0.81%(d)
Portfolio turnover rate ....................... 23.77% 58.74% 48.60% 49.05%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Amount is less than $0.01 per share.
(d) Annualized.
(e) For the period January 2, 2002 (effective date) to December 31, 2002.
Semiannual Report | See notes to financial statements. | 17
TEMPLETON DEVELOPING MARKETS TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
-----------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2005 YEAR ENDED DECEMBER 31,
ADVISOR CLASS (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 18.51 $ 14.93 $ 10.01 $ 9.84 $ 10.55 $ 15.62
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ..................... 0.19 0.24 0.26 0.12 0.14 0.11
Net realized and unrealized gains (losses) ... 1.01 3.65 4.99 0.10 (0.71) (5.03)
-----------------------------------------------------------------------------------
Total from investment operations .............. 1.20 3.89 5.25 0.22 (0.57) (4.92)
-----------------------------------------------------------------------------------
Less distributions from net investment income . (0.15) (0.31) (0.33) (0.05) (0.14) (0.15)
-----------------------------------------------------------------------------------
Redemption fees ............................... --(c) --(c) --(c) -- -- --
Net asset value, end of period ................ $ 19.56 $ 18.51 $ 14.93 $ 10.01 $ 9.84 $ 10.55
===================================================================================
Total return(b) ............................... 6.55% 25.98% 53.72% 2.20% (5.43)% (31.67)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 208,405 $ 199,101 $ 203,660 $ 130,459 $ 81,320 $ 115,144
Ratios to average net assets:
Expenses ..................................... 1.63%(d) 1.68% 1.82% 1.89% 1.87% 1.77%
Net investment income ........................ 2.10%(d) 1.47% 2.20% 1.31% 1.40% 0.88%
Portfolio turnover rate ....................... 23.77% 58.74% 48.60% 49.05% 61.45% 69.37%
(a) Based on average daily shares outstanding.
(b) Total return is not annualized for periods less than one year.
(c) Amount is less than $0.01 per share.
(d) Annualized.
18 | See notes to financial statements. | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/RIGHTS VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 87.3%
AUSTRIA 1.0%
Bank Austria Creditanstalt .......... Commercial Banks 299,690 $ 31,272,631
----------------
BELGIUM 0.5%
Inbev ............................... Beverages 450,800 15,256,671
----------------
BRAZIL 3.0%
Centrais Eletricas Brasileiras SA ... Electric Utilities 538,847,500 7,594,899
Centrais Eletricas Brasileiras SA
(Non Taxable) ..................... Electric Utilities 1,203,948,148 16,969,300
Cia de Bebidas das Americas (AmBev),
ADR ............................... Beverages 148,120 3,771,135
Embraer-Empresa Bras de
Aeronautica SA .................... Aerospace & Defense 4,321,411 26,926,641
(a)Localiza Rent a Car SA, 144A ........ Diversified Consumer Services 1,211,000 6,538,933
Souza Cruz SA (Non Taxable) ......... Tobacco 1,991,234 24,405,097
Souza Cruz SA (Taxable) ............. Tobacco 17,600 215,710
Unibanco Uniao de Bancos
Brasileiros SA, GDR ............... Commercial Banks 143,700 5,549,694
----------------
91,971,409
----------------
CHINA 8.6%
(a)Air China Ltd., H, 144A ............. Airlines 4,026,000 1,359,986
Aluminum Corp. of China Ltd., H ..... Metals & Mining 32,962,000 18,345,567
Anhui Conch Cement Co. Ltd., H ...... Construction Materials 12,332,000 11,505,434
(a)Bank of Communications, 144A ........ Commercial Banks 2,293,000 826,216
Beijing Enterprises Holdings Ltd. ... Industrial Conglomerates 940,556 1,308,076
China Mobile (Hong Kong) Ltd., fgn. . Wireless Telecommunication Services 23,314,000 86,855,402
China Resources Enterprise Ltd. ..... Distributors 18,812,000 29,050,104
China Travel International Investment
Hong Kong Ltd. .................... Hotels, Restaurants & Leisure 19,068,000 5,766,396
Chongqing Changan Automobile Co. Ltd. Automobiles 6,574,427 3,621,038
CITIC Pacific Ltd. .................. Industrial Conglomerates 7,291,764 21,347,424
Denway Motors Ltd. .................. Automobiles 32,980,386 11,777,421
Huadian Power International Corp.
Ltd., H ........................... Independent Power Producers & Energy Traders 31,816,000 9,007,406
Lenovo Group Ltd. ................... Computers & Peripherals 10,172,689 3,010,891
PetroChina Co. Ltd., H .............. Oil, Gas & Consumable Fuels 54,105,000 40,034,713
Shanghai Industrial Holdings Ltd. ... Industrial Conglomerates 7,645,000 14,904,644
TCL International Holdings Inc. ..... Household Durables 10,688,000 1,994,325
Travelsky Technology Ltd., H ........ IT Services 10,016,000 8,506,869
----------------
269,221,912
----------------
CROATIA 0.8%
Pliva D.D., GDR, Reg S .............. Pharmaceuticals 1,983,950 25,354,881
----------------
GREECE 0.3%
Coca-Cola Hellenic Bottling Co. SA .. Beverages 198,960 5,402,217
Titan Cement Co. .................... Construction Materials 140,920 4,351,477
----------------
9,753,694
----------------
Semiannual Report | 19
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/RIGHTS VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
HONG KONG 2.6%
Cathay Pacific Airways Ltd. ......... Airlines 1,518,000 $ 2,764,138
Cheung Kong Holdings Ltd. ........... Real Estate 4,054,000 39,518,264
Cheung Kong Infrastructure
Holdings Ltd. ..................... Electric Utilities 2,658,000 7,918,400
Dairy Farm International Holdings Ltd. Food & Staples Retailing 4,628,754 12,775,361
Guoco Group Ltd. .................... Diversified Financial Services 343,931 3,540,730
Hopewell Holdings Ltd. .............. Transportation Infrastructure 395,000 1,014,078
MTR Corp. Ltd. ...................... Road & Rail 7,444,036 14,369,154
----------------
81,900,125
----------------
HUNGARY 2.2%
Borsodchem RT ....................... Chemicals 174,198 1,941,745
Gedeon Richter Ltd. ................. Pharmaceuticals 137,088 20,167,408
Magyar Telekom Ltd. ................. Diversified Telecommunication Services 6,751,150 28,844,424
MOL Magyar Olaj-Es Gazipari RT ...... Oil, Gas & Consumable Fuels 191,175 16,050,289
----------------
67,003,866
----------------
INDIA 3.4%
Gail India Ltd. ..................... Gas Utilities 2,742,540 14,373,496
Hindustan Lever Ltd. ................ Household Products 7,784,500 29,293,713
Hindustan Petroleum Corp. Ltd. ...... Oil, Gas & Consumable Fuels 4,239,900 29,891,417
National Aluminum Co. Ltd. .......... Metals & Mining 345,500 1,110,209
Oil & Natural Gas Corp. Ltd. ........ Oil, Gas & Consumable Fuels 349,887 8,215,001
Oil & Natural Gas Corp. Ltd., 144A .. Oil, Gas & Consumable Fuels 74,100 1,739,795
Tata Motors Ltd. .................... Machinery 436,000 4,262,721
Tata Tea Ltd. ....................... Food Products 1,192,831 17,012,418
----------------
105,898,770
----------------
INDONESIA 0.1%
PT Bank Danamon ..................... Commercial Banks 6,057,500 3,134,260
----------------
MALAYSIA 1.8%
Kuala Lumpur Kepong Bhd. ............ Food Products 1,193,172 2,150,850
Maxis Communications Bhd. ........... Wireless Telecommunication Services 4,417,075 11,275,165
Resorts World Bhd. .................. Hotels, Restaurants & Leisure 7,606,700 19,016,750
SIME Darby Bhd. ..................... Industrial Conglomerates 6,545,100 9,989,889
Tanjong PLC ......................... Hotels, Restaurants & Leisure 832,100 2,868,555
YTL Corp. Bhd. ...................... Multi-Utilities 2,806,933 3,951,866
YTL Power International Bhd. ........ Water Utilities 11,114,688 5,849,836
----------------
55,102,911
----------------
MEXICO 4.4%
Fomento Economico Mexicano SA de
CV Femsa, ADR ..................... Beverages 673,410 40,115,034
Grupo Bimbo SA de CV, A ............. Food Products 1,604,794 4,621,389
Kimberly Clark de Mexico SA de CV, A Household Products 18,507,712 63,526,355
Telefonos de Mexico SA de CV (Telmex),
L, ADR ............................ Diversified Telecommunication Services 1,534,240 28,981,793
----------------
137,244,571
----------------
20 | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/RIGHTS VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
PANAMA 0.3%
Banco Latinoamericano de Exportaciones
SA, E ............................. Commercial Banks 585,000 $ 10,500,750
----------------
PHILIPPINES 1.2%
San Miguel Corp., B ................. Beverages 23,175,336 38,918,831
----------------
POLAND 2.3%
Polski Koncern Naftowy Orlen SA ..... Oil, Gas & Consumable Fuels 1,716,256 25,904,975
(a)Prokom Software SA .................. IT Services 17,104 501,989
Telekomunikacja Polska SA ........... Diversified Telecommunication Services 7,406,800 45,916,792
----------------
72,323,756
----------------
PORTUGAL 0.0%(b)
(a)Jeronimo Martins SGPS SA ............ Food & Staples Retailing 64,100 919,094
----------------
RUSSIA 3.0%
Lukoil Holdings, ADR ................ Oil, Gas & Consumable Fuels 967,632 35,589,505
Mining and Metallurgical Co. Norilsk
Nickel ............................ Metals & Mining 514,300 31,166,580
Mobile Telesystems, ADR ............. Wireless Telecommunication Services 757,200 25,479,780
----------------
92,235,865
----------------
SINGAPORE 6.3%
Comfortdelgro Corp. Ltd. ............ Road & Rail 17,355,000 17,393,080
Fraser & Neave Ltd. ................. Industrial Conglomerates 4,788,148 44,579,211
Keppel Corp. Ltd. ................... Industrial Conglomerates 8,951,600 66,355,334
Singapore Press Holdings Ltd. ....... Media 3,882,000 9,898,950
Singapore Technologies
Engineering Ltd. .................. Aerospace & Defense 12,085,000 17,343,118
Singapore Telecommunications Ltd. ... Diversified Telecommunication Services 24,294,214 39,906,881
----------------
195,476,574
----------------
SOUTH AFRICA 7.7%
Anglo American PLC. ................. Metals & Mining 3,291,593 77,494,115
Nedabank Group Ltd. ................. Commercial Banks 2,303,710 25,731,680
Nedabank Group Ltd., 144A ........... Commercial Banks 273,791 3,058,155
Old Mutual PLC ...................... Insurance 15,481,865 33,836,505
Remgro Ltd. ......................... Diversified Financial Services 3,888,030 61,414,528
SABMiller PLC ....................... Beverages 951,439 14,871,591
Sappi Ltd. .......................... Paper & Forest Products 1,459,974 16,178,090
Sasol Ltd. .......................... Oil, Gas & Consumable Fuels 273,088 7,413,560
The Spar Group Ltd. ................. Food & Staples Retailing 302,000 1,101,892
----------------
241,100,116
----------------
SOUTH KOREA 16.8%
CJ Corp. ............................ Food Products 431,060 32,084,698
Daelim Industrial Co. ............... Construction & Engineering 37,990 2,034,457
Daewoo Shipbuilding & Marine
Engineering Co. Ltd. .............. Machinery 2,725,450 52,295,972
Hana Bank ........................... Commercial Banks 1,263,930 33,843,268
Hite Brewery Co. Ltd. ............... Beverages 277,810 23,954,231
Semiannual Report | 21
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/RIGHTS VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
SOUTH KOREA (CONT.)
Hyundai Development Co. ............. Construction & Engineering 1,440,730 $ 33,842,184
Kangwon Land Inc. ................... Hotels, Restaurants & Leisure 2,378,766 34,031,645
Korea Gas Corp. ..................... Gas Utilities 387,860 11,116,529
(a)LG Card Co. Ltd. .................... Consumer Finance 358,140 11,909,150
LG Chem Ltd. ........................ Chemicals 607,140 22,184,526
(a)LG Corp. ............................ Industrial Conglomerates 1,282,000 32,592,170
LG Electronics Inc. ................. Household Durables 189,470 12,051,354
LG Household & Health Care Ltd. ..... Household Products 406,340 16,104,340
LG Petrochemical Co. Ltd. ........... Chemicals 357,320 8,738,711
Samsung Electronics Co. Ltd. ........ Semiconductors & Semiconductor Equipment 257,160 122,800,425
Samsung Fine Chemicals Co. Ltd. ..... Chemicals 1,017,790 21,054,332
Samsung Heavy Industries Co. Ltd. ... Machinery 2,785,220 25,334,867
SK Corp. ............................ Oil, Gas & Consumable Fuels 138,760 7,350,457
SK Telecom Co. Ltd. ................. Wireless Telecommunication Services 117,800 20,724,601
----------------
524,047,917
----------------
SWEDEN 0.7%
Oriflame Cosmetics, IDR ............. Personal Products 999,900 22,774,725
----------------
TAIWAN 13.6%
Acer Inc. ........................... Computers & Peripherals 6,857,098 13,530,186
Benq Corp. .......................... Computers & Peripherals 6,979,000 6,764,177
Chunghwa Telecom Co. Ltd. ........... Diversified Telecommunication Services 12,259,000 24,846,971
D-Link Corp. ........................ Communications Equipment 21,475,358 25,289,056
Delta Electronics Inc. .............. Electronic Equipment & Instruments 10,867,421 16,862,944
Elan Microelectronics Corp. ......... Semiconductors & Semiconductor Equipment 10,464,834 5,335,661
Giant Manufacturing Co. ............. Leisure Equipment & Products 190,000 306,519
Kinpo Electronics Inc. .............. Office Electronics 4,053,280 1,945,063
Lite-On Technology Corp. ............ Computers & Peripherals 25,787,900 29,634,714
MediaTek Inc. ....................... Semiconductors & Semiconductor Equipment 4,010,000 34,751,223
Mega Financial Holdings Co. Ltd. .... Commercial Banks 60,711,308 39,963,087
Premier Image Technology Corp. ...... Leisure Equipment & Products 16,122,000 18,272,448
President Chain Store Corp. ......... Food & Staples Retailing 10,528,164 20,740,566
Realtek Semiconductor Corp. ......... Semiconductors & Semiconductor Equipment 7,068,000 7,709,531
Siliconware Precision
Industries Co. Ltd. ............... Semiconductors & Semiconductor Equipment 13,080,000 12,883,852
Sunplus Technology Co. Ltd. ......... Semiconductors & Semiconductor Equipment 17,662,010 24,869,002
Synnex Technology International Corp. Electronic Equipment & Instruments 6,856,400 9,978,849
Taiwan Mobile Co. Ltd. .............. Wireless Telecommunication Services 51,964,106 53,481,605
Taiwan Semiconductor
Manufacturing Co. ................. Semiconductors & Semiconductor Equipment 21,039,841 36,599,692
UNI-President Enterprises Corp. ..... Food Products 61,415,790 28,890,143
Yuanta Core Pacific Securities Co. .. Capital Markets 16,483,486 12,177,224
----------------
424,832,513
----------------
THAILAND 2.3%
BEC World Public Co. Ltd., fgn. ..... Media 13,830,400 3,882,218
Kasikornbank Public Co. Ltd., fgn. .. Commercial Banks 14,705,100 20,282,896
Land and House Public Co. Ltd., fgn. Household Durables 20,733,800 3,512,077
22 | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES/RIGHTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
THAILAND (CONT.)
Shin Corp. Public Co. Ltd., fgn. .... Wireless Telecommunication Services 7,626,590 $ 6,920,681
Siam Cement Public Co. Ltd., fgn. ... Construction Materials 2,093,878 12,261,790
Siam Commercial Bank Public Co. Ltd.,
fgn. .............................. Commercial Banks 5,432,000 6,177,955
Siam Makro Public Co. Ltd., fgn. .... Food & Staples Retailing 1,202,100 1,788,969
Thai Airways International
Public Co. Ltd., fgn. ............. Airlines 2,916,200 2,977,947
(a)TMB Bank Public Co. Ltd., fgn. ...... Commercial Banks 138,549,400 13,745,978
(a)True Corp. Public Co. Ltd., rts.,
3/28/08 ........................... Diversified Telecommunication Services 2,258,595 --
----------------
71,550,511
----------------
TURKEY 2.9%
Arcelik AS, Br. ..................... Household Durables 4,722,447 28,217,553
Migros Turk TAS ..................... Food & Staples Retailing 2,914,532 22,781,761
Tupras-Turkiye Petrol Rafineleri AS . Oil, Gas & Consumable Fuels 1,973,540 28,331,164
Turkiye Is Bankasi AS, C ............ Commercial Banks 1,923,722 11,277,739
----------------
90,608,217
----------------
UNITED KINGDOM 1.5%
HSBC Holdings PLC ................... Commercial Banks 2,063,136 33,187,103
Provident Financial PLC ............. Consumer Finance 1,005,420 12,932,258
----------------
46,119,361
----------------
TOTAL COMMON STOCKS
(COST $2,020,213,931).............. 2,724,523,931
----------------
DIRECT EQUITY INVESTMENTS 0.3%
HONG KONG 0.1%
(a),(c),(d),(e)Mayfair Hanoi Ltd., 30% equity owned
through HEA Holdings Ltd., a wholly
owned investment .................. Real Estate 4,379,795
----------------
SINGAPORE 0.2%
(a),(c),(d),(e)Indotel Ltd. ........................ Hotels, Restaurants & Leisure 900,000 5,155,686
----------------
TOTAL DIRECT EQUITY INVESTMENTS
(COST $13,602,155)................. 9,535,481
----------------
PREFERRED STOCKS 4.5%
BRAZIL 4.5%
Banco Bradesco SA, ADR, pfd. ........ Commercial Banks 1,342,799 47,521,656
Cia de Bebidas das Americas (AmBev),
ADR, pfd. ......................... Beverages 720,400 22,260,360
Cia Vale do Rio Doce, A, ADR, pfd. .. Metals & Mining 646,250 16,414,750
Petroleo Brasileiro SA, ADR, pfd. ... Oil, Gas & Consumable Fuels 997,541 45,926,788
Suzano Bahia Sul Papel e Celulose SA,
pfd., A ........................... Paper & Forest Products 1,801,913 7,490,275
----------------
TOTAL PREFERRED STOCKS
(COST $81,987,470)................. 139,613,829
----------------
Semiannual Report | 23
TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (COST $250,203,148) 8.0%
UNITED STATES 8.0%
(f)U.S. Treasury Bills, 7/07/05 - 9/29/05 ........ $ 251,090,000 $ 250,193,089
----------------
TOTAL INVESTMENTS (COST $2,366,006,704) 100.1% 3,123,866,330
OTHER ASSETS, LESS LIABILITIES (0.1)% ......... (4,046,622)
----------------
NET ASSETS 100.0%.............................. $ 3,119,819,708
================
SELECTED PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
GDR - Global Depository Receipt
IDR - International Depository Receipt
PLC - Public Limited Co.
(a) Non-income producing.
(b) Rounds to less than 0.05% of net assets.
(c) See Note 10 regarding other considerations.
(d) See Note 9 regarding holdings of 5% voting securities.
(e) See Note 8 regarding restricted and illiquid securities.
(f) A portion or all of the security is traded on a discount basis with no
stated coupon rate.
24 | See notes to financial statements. | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2005 (unaudited)
Assets:
Investments in securities:
Cost - Unaffiliated issuers ....................................................... $ 2,352,404,549
Cost - Non-controlled affiliated issuers (Note 9) ................................. 13,602,155
-----------------
Total cost of investments ......................................................... $ 2,366,006,704
=================
Value - Unaffiliated issuers ...................................................... $ 3,114,330,849
Value - Non-controlled affiliated issuers (Note 9) ................................ 9,535,481
-----------------
Total value of investments ........................................................ 3,123,866,330
Cash ............................................................................... 581,537
Foreign currency, at value (cost $4,710,286) ....................................... 4,701,990
Receivables:
Investment securities sold ........................................................ 6,340,566
Capital shares sold ............................................................... 8,011,430
Dividends ......................................................................... 6,024,737
Foreign income tax ................................................................ 1,207,703
-----------------
Total assets .................................................................. 3,150,734,293
-----------------
Liabilities:
Payables:
Investment securities purchased ................................................... 18,672,736
Capital shares redeemed ........................................................... 5,437,461
Affiliates ........................................................................ 5,662,376
Deferred taxes ..................................................................... 407,986
Other liabilities .................................................................. 734,026
-----------------
Total liabilities ............................................................. 30,914,585
-----------------
Net assets, at value ........................................................ $ 3,119,819,708
=================
Net assets consist of:
Distributions in excess of net investment income ................................... $ (20,675,970)
Net unrealized appreciation (depreciation) ......................................... 757,566,997
Accumulated net realized gain (loss) ............................................... (485,813,498)
Paid-in capital .................................................................... 2,868,742,179
-----------------
Net assets, at value......................................................... $ 3,119,819,708
=================
Semiannual Report | See notes to financial statements. | 25
TEMPLETON DEVELOPING MARKETS TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
June 30, 2005 (unaudited)
CLASS A:
Net assets, at value ............................................................... $ 2,588,764,170
=================
Shares outstanding ................................................................. 132,424,110
=================
Net asset value per share(a) ....................................................... $ 19.55
=================
Maximum offering price per share (net asset value per share / 94.25%)............... $ 20.74
=================
CLASS B:
Net assets, at value ............................................................... $ 38,373,440
=================
Shares outstanding ................................................................. 2,000,843
=================
Net asset value and maximum offering price per share(a) ............................ $ 19.18
=================
CLASS C:
Net assets, at value ............................................................... $ 276,491,912
=================
Shares outstanding ................................................................. 14,429,156
=================
Net asset value and maximum offering price per share(a) ............................ $ 19.16
=================
CLASS R:
Net assets, at value ............................................................... $ 7,784,740
=================
Shares outstanding ................................................................. 401,760
=================
Net asset value and maximum offering price per share(a) ............................ $ 19.38
=================
ADVISOR CLASS:
Net assets, at value ............................................................... $ 208,405,446
=================
Shares outstanding ................................................................. 10,656,484
=================
Net asset value and maximum offering price per share(a) ............................ $ 19.56
=================
(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.
26 | See notes to financial statements. | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended June 30, 2005 (unaudited)
Investment income:
Dividends (net of foreign taxes of $5,230,501) ..................................... $ 52,389,715
Interest ........................................................................... 1,647,180
Other income (Note 11) ............................................................. 350,106
-----------------
Total investment income ....................................................... 54,387,001
-----------------
Expenses:
Management fees (Note 3a) .......................................................... 17,720,089
Administrative fees (Note 3b) ...................................................... 1,377,146
Distribution fees (Note 3c)
Class A ........................................................................... 4,169,278
Class B ........................................................................... 185,920
Class C ........................................................................... 1,308,475
Class R ........................................................................... 15,599
Transfer agent fees (Note 3e) ...................................................... 2,703,650
Custodian fees (Note 4) ............................................................ 1,562,761
Reports to shareholders ............................................................ 196,000
Registration and filing fees ....................................................... 68,700
Professional fees .................................................................. 93,683
Trustees' fees and expenses ........................................................ 59,650
Other .............................................................................. 36,150
-----------------
Total expenses ................................................................ 29,497,101
Expense reductions (Note 4) ................................................... (168)
-----------------
Net expenses ................................................................. 29,496,933
-----------------
Net investment income ....................................................... 24,890,068
-----------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ....................................................................... 228,898,413
Foreign currency transactions ..................................................... (194,587)
-----------------
Net realized gain (loss) ...................................................... 228,703,826
-----------------
Net change in unrealized appreciation (depreciation) on:
Investments ....................................................................... (76,318,236)
Translation of assets and liabilities denominated in foreign currencies ........... (22,774)
Change in deferred taxes on unrealized appreciation ................................ 798,121
-----------------
Net change in unrealized appreciation (depreciation) .......................... (75,542,889)
-----------------
Net realized and unrealized gain (loss) ............................................. 153,160,937
-----------------
Net increase (decrease) in net assets resulting from operations ..................... $ 178,051,005
=================
Semiannual Report | See notes to financial statements. | 27
TEMPLETON DEVELOPING MARKETS TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------
SIX MONTHS ENDED
JUNE 30, 2005 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2004
--------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................................................. $ 24,890,068 $ 26,154,444
Net realized gain (loss) from investments and foreign currency transactions ....... 228,703,826 251,004,438
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities denominated in foreign currencies, and deferred taxes ..... (75,542,889) 275,881,239
--------------------------------------
Net increase (decrease) in net assets resulting from operations ............... 178,051,005 553,040,121
--------------------------------------
Distributions to shareholders from:
Net investment income:
Class A .......................................................................... (19,486,077) (33,108,845)
Class B .......................................................................... (318,528) (315,700)
Class C .......................................................................... (2,184,591) (2,240,910)
Class R .......................................................................... (50,172) (52,130)
Advisor Class .................................................................... (1,636,168) (3,739,371)
--------------------------------------
Total distributions to shareholders ................................................ (23,675,536) (39,456,956)
--------------------------------------
Capital share transactions: (Note 2)
Class A .......................................................................... 155,654,820 15,356,458
Class B .......................................................................... (487,246) 4,313,113
Class C .......................................................................... 4,947,898 994,363
Class R .......................................................................... 2,244,957 2,717,669
Advisor Class .................................................................... (1,994,363) (45,241,326)
--------------------------------------
Total capital share transactions ................................................... 160,366,066 (21,859,723)
--------------------------------------
Redemption fees .................................................................... 24,990 61,365
--------------------------------------
Net increase (decrease) in net assets ......................................... 314,766,525 491,784,807
Net assets:
Beginning of period ................................................................ 2,805,053,183 2,313,268,376
--------------------------------------
End of period ...................................................................... $ 3,119,819,708 $ 2,805,053,183
======================================
Distributions in excess of net investment income included in net assets:
End of period ...................................................................... $ (20,675,970) $ (21,890,502)
======================================
28 | See notes to financial statements. | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Developing Markets Trust (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market.
Government securities generally trade in the over-the-counter market rather than
on a securities exchange. The Fund may utilize independent pricing services,
quotations from bond dealers, and information with respect to bond and note
transactions, to assist in determining a current market value for each security.
The Fund's pricing services may use valuation models or matrix pricing which
considers information with respect to comparable bond and note transactions,
quotations from bond dealers, or by reference to other securities that are
considered comparable in such characteristics as rating, interest rate and
maturity date, option adjusted spread models, prepayment projections, interest
rate spreads and yield curves, to determine current value.
Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask prices. The value
is then converted into its U.S. dollar equivalent at the foreign exchange rate
in effect at the close of the NYSE on the day that the value of the foreign
security is determined.
The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Some methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fund values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. If such an event occurs, the securities may be valued
using fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Fund's Board of
Trustees.
Semiannual Report | 29
TEMPLETON DEVELOPING MARKETS TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Fund's Board of Trustees.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments on the
Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
C. FOREIGN CURRENCY CONTRACTS
When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts.
D. INCOME AND DEFERRED TAXES
No provision has been made for U.S. income taxes because the Fund's policy is to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code and to distribute substantially all of its taxable income.
Fund distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.
30 | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. INCOME AND DEFERRED TAXES (CONTINUED)
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 in an amount that would be payable
if the securities were disposed of on the valuation date.
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
G. REDEMPTION FEES
Redemptions and exchanges of Fund shares held five trading days or less (30 days
or less prior to June 1, 2004 and 90 days or less prior to 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.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. However, based on experience, the
Fund expects the risk of loss to be remote.
Semiannual Report | 31
TEMPLETON DEVELOPING MARKETS TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
The Fund offers five classes of shares: Class A, Class B, Class C, Class R and
Advisor Class. Effective March 1, 2005, Class B shares are only offered to
existing Class B shareholders in the form of reinvested distributions and
certain exchanges from other Franklin Templeton Class B shares. Each class of
shares differs by its initial sales load, contingent deferred sales charges,
distribution fees, voting rights on matters affecting a single class and its
exchange privilege.
At June 30, 2005, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Fund's shares were as follows:
---------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, 2004
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------
CLASS A SHARES:
Shares sold ................. 26,335,153 $ 499,616,362 54,386,792 $ 864,979,010
Shares issued in reinvestment
of distributions ........... 854,229 16,879,595 1,727,121 28,781,307
Shares redeemed ............. (19,180,898) (360,841,137) (56,970,066) (878,403,859)
---------------------------------------------------------------
Net increase (decrease) ..... 8,008,484 $ 155,654,820 (856,153) $ 15,356,458
===============================================================
CLASS B SHARES:
Shares sold ................. 178,053 $ 3,304,913 618,760 $ 9,770,977
Shares issued in reinvestment
of distributions ........... 14,837 288,279 18,114 291,562
Shares redeemed ............. (220,325) (4,080,438) (376,813) (5,749,426)
---------------------------------------------------------------
Net increase (decrease) ..... (27,435) $ (487,246) 260,061 $ 4,313,113
===============================================================
CLASS C SHARES:
Shares sold ................. 1,614,207 $ 30,041,760 2,969,639 $ 46,493,499
Shares issued in reinvestment
of distributions ........... 92,359 1,792,699 118,864 1,900,231
Shares redeemed ............. (1,454,881) (26,886,561) (3,081,786) (47,399,367)
---------------------------------------------------------------
Net increase (decrease) ..... 251,685 $ 4,947,898 6,717 $ 994,363
===============================================================
CLASS R SHARES:
Shares sold ................. 183,469 $ 3,447,333 230,036 $ 3,659,861
Shares issued in reinvestment
of distributions ........... 2,522 49,437 3,101 51,961
Shares redeemed ............. (68,037) (1,251,813) (62,944) (994,153)
---------------------------------------------------------------
Net increase (decrease) ..... 117,954 $ 2,244,957 170,193 $ 2,717,669
===============================================================
ADVISOR CLASS SHARES:
Shares sold ................. 1,025,102 $ 19,398,545 1,555,426 $ 24,799,500
Shares issued in reinvestment
of distributions ........... 57,224 1,130,115 140,492 2,357,106
Shares redeemed ............. (1,184,828) (22,523,023) (4,577,426) (72,397,932)
---------------------------------------------------------------
Net increase (decrease) ..... (102,502) $ (1,994,363) (2,881,508) $ (45,241,326)
===============================================================
32 | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Fund are also officers and/or directors of the following
subsidiaries:
- ----------------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- ----------------------------------------------------------------------------------------------
Templeton Asset Management Ltd. (TAML) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin Templeton Distributors Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services LLC (Investor Services) Transfer agent
A. MANAGEMENT FEES
The Fund pays an investment management fee to TAML based on the Fund's average
daily net assets as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
1.250% Up to and including $1 billion
1.200% Over $1 billion, up to and including $5 billion
1.150% Over $5 billion, up to and including $10 billion
1.100% Over $10 billion, up to and including $15 billion
1.050% Over $15 billion, up to and including $20 billion
1.000% In excess of $20 billion
B. ADMINISTRATIVE FEES
The Fund pays an administrative fee to FT Services based on the Fund's average
daily net assets as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.150% Up to and including $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% In excess of $1.2 billion
C. DISTRIBUTION FEES
The Fund reimburses Distributors 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,
respectively, for costs incurred in marketing the Fund's shares under a Rule
12b-1 plan.
Under the Class A distribution plan, costs exceeding the maximum for the current
plan year may be reimbursed in subsequent periods. At June 30, 2005,
Distributors advised the Fund that unreimbursed costs were $1,547,229.
Semiannual Report | 33
TEMPLETON DEVELOPING MARKETS TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
D. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the period:
Net sales charges received......................... $ 186,899
Contingent deferred sales charges retained......... $ 66,250
E. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $2,703,650, of which $1,686,309 was
retained by Investor Services.
4. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended June 30, 2005, the
custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
At December 31, 2004, 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 ............................................. $217,795,285
2008 ............................................. 36,476,765
2009 ............................................. 313,161,808
2010 ............................................. 141,181,639
-------------
$708,615,497
=============
At December 31, 2004, the Fund had deferred currency losses occurring subsequent
to October 31, 2004 of $391,998. For tax purposes, such losses will be reflected
in the year ending December 31, 2005.
Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of foreign currency transactions, passive
foreign investment company shares and foreign taxes paid on net realized gains.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, passive foreign investment company shares and foreign taxes paid
on net realized gains.
34 | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. INCOME TAXES (CONTINUED)
At June 30, 2005, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments ............................... $ 2,415,630,037
================
Unrealized appreciation ........................... $ 743,198,095
Unrealized depreciation ........................... (34,961,802)
----------------
Net unrealized appreciation (depreciation) ........ $ 708,236,293
================
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
period ended June 30, 2005 aggregated $569,967,226 and $644,922,398,
respectively.
7. CREDIT RISK
Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values, changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities.
8. RESTRICTED AND ILLIQUID SECURITIES
At June 30, 2005, investments in securities included issues that are restricted
and illiquid. Restricted securities are often purchased in private placement
transactions, and cannot be sold without prior registration under the Securities
Act of 1933, unless the sale is pursuant to an exemption under the 1933 Act. The
Fund has registration rights for all restricted securities held at period end.
The issuer generally incurs all registration costs.
A security may be considered illiquid if it lacks a readily available market or
if its valuation has not changed for a certain period of time. At June 30, 2005,
the Fund held investments in restricted and illiquid securities, valued in
accordance with procedures approved by the Fund's Board of Trustees as
reflecting fair value, as follows:
- -------------------------------------------------------------------------------------------------
ACQUISITION
SHARES ISSUER DATE COST VALUE
- -------------------------------------------------------------------------------------------------
900,000 Indotel Ltd. .......................... 11/22/96 $9,154,569 $5,155,686
Mayfair Hanoi, Ltd., 30% equity
owned through HEA Holdings Ltd. ...... 10/31/96 4,447,586 4,379,795
-----------
TOTAL RESTRICTED SECURITIES (0.31% of Net Assets) $9,535,481
-----------
Semiannual Report | 35
TEMPLETON DEVELOPING MARKETS TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
9. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" to include
investments in portfolio companies in which a fund owns 5% or more of the
outstanding voting securities. Investments in "affiliated companies" for the
Fund at June 30, 2005 were as shown below.
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES VALUE AT REALIZED
HELD AT BEGINNING GROSS GROSS HELD AT END END OF INVESTMENT CAPITAL
NAME OF ISSUER OF YEAR ADDITIONS REDUCTIONS OF PERIOD PERIOD INCOME GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------------
Indotel Ltd. .......... 900,000 -- -- 900,000 $5,155,686 $ -- $ --
Mayfair Hanoi, Ltd.,
30% equity
owned through
HEA Holdings Ltd. .... -- -- -- -- 4,379,795 -- --
-----------------------------------------
TOTAL AFFILIATED SECURITIES (0.31% of Net Assets) $9,535,481 $ -- $ --
-----------------------------------------
10. OTHER CONSIDERATIONS
Directors or employees of TAML, as the Fund's Investment Manager, may serve as
members on the board of directors of certain companies in which the Fund invests
and/or may represent the Fund in certain corporate restructuring negotiations.
At June 30, 2005, such individuals serve in one or more of these capacities for
HEA Holdings Ltd., Indotel Ltd., and Mayfair Hanoi Ltd. As a result of this
involvement, such individuals may be in possession of 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.
11. REGULATORY MATTERS
INVESTIGATIONS AND SETTLEMENTS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the
National Association of Securities Dealers, Inc. ("NASD"), relating to certain
practices in the mutual fund industry, including late trading, market timing and
marketing support payments to securities dealers who sell fund shares, Franklin
Resources, Inc. and certain of its subsidiaries (as used in this section,
together, the "Company"), as well as certain current or former executives and
employees of the Company, provided documents and information in response to
subpoenas and/or requests for documents, information and/or testimony. Beginning
in August 2004, the Company entered into settlements with certain of the
regulators and a governmental entity investigating the mutual fund industry
practices noted above. The Company believes that settlement of each of the
matters is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").
36 | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
11. REGULATORY MATTERS (CONTINUED)
INVESTIGATIONS AND SETTLEMENTS (CONTINUED)
Two of the settlement agreements, those with the SEC and the CAGO concerning
marketing support payments, provide that the distribution of settlement monies
are to be made to the relevant funds, not to individual shareholders. The CAGO
has approved the distribution plan pertaining to the distribution of the monies
owed under the CAGO settlement agreement and, in accordance with the terms and
conditions of that settlement, the monies were disbursed to the participating
funds and are recorded as other income in the current period. The SEC has not
yet approved the distribution plan pertaining to the SEC settlement. When
approved, disbursements of settlement monies under the SEC's settlement will be
made promptly in accordance with the terms and conditions of that order.
OTHER LEGAL PROCEEDINGS
On April 12, 2005, the Attorney General of West Virginia filed a complaint in
the Circuit Court of Marshall County, West Virginia against a number of
companies engaged in the mutual fund industry, including Franklin Resources,
Inc. and its subsidiary, Franklin Advisers, Inc., and certain other parties
alleging violations of the West Virginia Consumer Credit and Protection Act and
seeking, among other things, civil penalties and attorneys' fees and costs.
Defendants have since removed the matter to the United States District Court for
the Northern District of West Virginia. To the extent applicable to the Company,
the complaint arises from activity that occurred in 2001 and duplicates, in
whole or in part, the allegations asserted in the February 4, 2004 Massachusetts
Administrative Complaint concerning one instance of market timing (the
"Administrative Complaint") and the SEC's findings regarding market timing in
its August 2, 2004 Order (the "SEC Order"), both of which matters were
previously reported.
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and certain current and former officers, employees, and directors,
have been named in multiple lawsuits in different courts alleging violations of
various federal securities laws and seeking, among other relief, monetary
damages, restitution, removal of fund trustees, directors, advisers,
administrators, and distributors, rescission of management contracts and 12b-1
plans, and/or attorneys' fees and costs. Specifically, the lawsuits claim breach
of duty with respect to alleged arrangements to permit market timing and/or late
trading activity, or breach of duty with respect to the valuation of the
portfolio securities of certain Templeton funds managed by Franklin Resources,
Inc. subsidiaries, resulting in alleged market timing activity. The majority of
these lawsuits duplicate, in whole or in part, the allegations asserted in the
Administrative Complaint and the SEC's findings regarding market timing in the
SEC Order. The lawsuits are styled as class actions, or derivative actions on
behalf of either the named funds or Franklin Resources, Inc.
Semiannual Report | 37
TEMPLETON DEVELOPING MARKETS TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
11. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and certain current and former officers, employees, and directors,
have been named in multiple lawsuits alleging violations of various securities
laws and pendent state law claims relating to the disclosure of marketing
support payments and/or payment of allegedly excessive commissions and/or
advisory or distribution fees, and seeking, among other relief, monetary
damages, restitution, rescission of advisory contracts, including recovery of
all fees paid pursuant to those contracts, an accounting of all monies paid to
the named advisers, declaratory relief, injunctive relief, and/or attorneys'
fees and costs. These lawsuits are styled as class actions or derivative actions
brought on behalf of the named funds.
The Company and fund management strongly believe that the claims made in each of
the lawsuits described above are without merit and intends to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. Public trust and confidence are critical to the Company's business and
any material loss of investor and/or client confidence could result in a
significant decline in assets under management by the Company, which would have
an adverse effect on future financial results. If it is determined that the
Company bears responsibility for any unlawful or inappropriate conduct that
caused losses to the Fund, it is committed to making the Fund or its
shareholders whole, as appropriate. The Company is committed to taking all
appropriate actions to protect the interests of its funds' shareholders.
38 | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT
At a meeting held March 1, 2005, the Board of Trustees ("Board"), including a
majority of non-interested or independent Trustees, approved renewal of the
investment advisory contract for the Fund. In reaching this decision, the Board
took into account information furnished throughout the year at regular Board
meetings, as well as information prepared specifically in connection with the
annual renewal review process. Information furnished and discussed throughout
the year included investment performance reports and related financial
information for the Fund, as well as periodic reports on shareholder services,
legal compliance, pricing, brokerage commissions and execution and other
services provided by the Investment Manager ("Manager") and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for the Fund prepared by Lipper Financial Services ("Lipper"),
an independent organization, as well as a Fund profitability analysis report
prepared by management. The Lipper report compared the Fund's investment
performance and expenses with those of other mutual funds deemed comparable to
the Fund as selected by Lipper. The Fund profitability analysis report discussed
the profitability to Franklin Templeton Investments from its overall U.S. fund
operations, as well as on an individual fund-by-fund basis. Included with such
profitability analysis report was information on a fund-by-fund basis listing
portfolio managers and other accounts they manage, as well as information on
management fees charged by the Manager including management's explanation of
differences where relevant, and a three-year expense analysis with an
explanation for any increase in expense ratios. Additional information
accompanying such report was a memorandum prepared by management describing
enhancements to the services provided to the Fund by the Franklin Templeton
Investments organization, as well as a memorandum relating to economies of
scale.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment advisory contract for the Fund, the Board,
including a majority of independent Trustees, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment advisory contract was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses the primary factors relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses of the Fund discussed later, the Board's opinion was based, in part,
upon periodic reports furnished them showing that the investment policies and
restrictions for the Fund were consistently complied with as well as other
reports periodically furnished the Board covering matters such as the compliance
of portfolio managers and other management personnel with the code of ethics
adopted throughout the Franklin Templeton fund complex, the adherence to fair
value pricing procedures established by the Board, and the accuracy of net asset
value calculations. The Board also noted the extent of benefits provided Fund
shareholders from being part of the Franklin Templeton family of funds,
including the
Semiannual Report | 39
TEMPLETON DEVELOPING MARKETS TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
right to exchange investments between the same class of funds without a sales
charge, the ability to reinvest Fund dividends into other funds and the right to
combine holdings in other funds to obtain a reduced sales charge. Favorable
consideration was given to management's efforts and expenditures in establishing
back-up systems and recovery procedures to function in the event of a natural
disaster, it being noted by the Board that such systems and procedures had
functioned smoothly during the hurricanes and blackout experienced last year in
Florida. Other factors taken into account by the Board were the Manager's best
execution trading policies, including a favorable third-party report on
portfolio execution, as well as the compliance procedures and qualifications of
the Chief Compliance Officer established in accordance with recently adopted SEC
requirements. Consideration was also given to the experience of the Fund's
portfolio management team, the number of accounts managed and general method of
compensation. In this latter respect, the Board noted that a primary factor in
management's determination of the amount of a portfolio manager's bonus
compensation was the relative investment performance of the funds he or she
managed so as to be aligned with the interests of Fund shareholders. The Board
also took into account the transfer agent and shareholder services provided Fund
shareholders by an affiliate of the Manager, noting continuing expenditures by
management to increase and improve the scope of such services, periodic
favorable reports on such services conducted by third parties such as Dalbar,
and the firsthand experience of the individual Trustees who deal with the
shareholder services department in their capacities as shareholders in one or
more of the various Franklin Templeton funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
performance was given to the Lipper reports furnished for the contract renewals.
The Lipper report prepared for the Fund showed the investment performance of its
Class A shares during 2004, as well as on an annualized basis during the
previous ten-year period in comparison to a performance universe consisting of
all retail and institutional emerging market funds as selected by Lipper. The
Board noted that the Fund's total return during 2004 was in the second highest
quintile of its Lipper performance universe and that its total return on an
annualized basis placed it in the top quintile for the previous three-year
period, the top half for the previous five-year period, and the second highest
quintile for the previous ten-year period. The Board was satisfied with such
performance.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fee and total expense ratios of the Fund compared with its Lipper
expense group, which was a smaller subset of retail front-end load emerging
market funds in the same size category as the Fund as determined by Lipper.
Prior to making such comparison, the Board relied upon a survey showing that the
scope of management advisory services covered under the Fund's investment
advisory contract was similar to those provided by fund managers to other mutual
fund groups
40 | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
that would be used as a basis of comparison in the Lipper reports. In reviewing
comparative costs, emphasis was given to the Fund's management fee in comparison
with the effective management fee that would have been charged by other funds
within its Lipper expense group assuming they were the same size as the Fund, as
well as the actual total expenses of the Fund in comparison with those of its
Lipper expense group. The Lipper effective management fee analysis includes
administrative charges as being part of a management fee, and actual total
expenses, for comparative consistency, are shown by Lipper for Fund Class A
shares. The results of such expense comparisons showed that the effective fee
rate for the Fund placed it in the fourth or second highest quintile of its
Lipper expense group, that its total actual expenses excluding 12b-1 fees placed
it in the third or middle quintile of its Lipper expense group, and that its
actual total expenses including 12b-1 fees placed it in the fourth quintile of
its Lipper expense group. The Board found such fee and expenses to be acceptable
in view of the Fund's performance and factors relating to its operation, such as
the quality and experience of the Fund's portfolio managers and research staff,
the nature of the disciplined value investment approach followed for the Fund
and the depth of its physical presence and coverage in emerging markets
geographical areas. The Board also noted that in the previous year it had taken
steps to lower the Fund's expenses through adding breakpoints to the Fund's
management fee, which took effect May 1, 2004.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
each of the individual funds. The Board also considered the extent to which the
Manager and its affiliates might derive ancillary benefits from fund operations,
including its interest in a joint venture entity which finances up-front
commissions paid to brokers/dealers who sold fund Class B shares, as well as
potential benefits resulting from allocation of fund brokerage and the use of
"soft" commission dollars to pay for research. Specific attention was given to
the methodology followed in allocating costs to the Fund, it being recognized
that allocation methodologies are inherently subjective and various allocation
methodologies may each be reasonable while producing different results. In this
respect, the Board noted that the cost allocation methodology was consistent
with that followed in profitability report presentations for the Fund made in
prior years and that it had engaged on a biennial basis the Fund's independent
accountants to perform certain procedures specified by the Board solely for its
purpose and use. It was also noted that legal costs and payments incurred by
Franklin Templeton in resolving various legal proceedings arising from its U.S.
fund operations had not been allocated to the Fund for purposes of determining
profitability. Included in the analysis for the Fund were the revenue and
related costs broken down separately from the management, underwriting and
shareholder services functions provided by the Manager and its affiliates to the
Fund, as well as the relative contribution of the Fund to the profitability of
the Manager's parent. In reviewing and discussing such analysis, management
discussed with the Board its belief that costs incurred in establishing the
infrastructure necessary to the type
Semiannual Report | 41
TEMPLETON DEVELOPING MARKETS TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
of mutual fund operations conducted by the Manager and its corporate affiliates
may not be fully reflected in the expenses allocated to the Fund in determining
its profitability, as well as the fact that the level of profits, to a certain
extent, reflected operational cost savings and efficiencies initiated by
management. The Board also took into account management's expenditures in
improving shareholder services provided the Fund, as well as the need to meet
additional regulatory and compliance requirements resulting from the
Sarbanes-Oxley Act and recent SEC requirements. In addition, the Board
considered a third-party study comparing the profitability of the Manager's
parent on an overall basis as compared to other publicly held managers broken
down to show profitability from management operations exclusive of distribution
expenses, as well as profitability including distribution expenses. Based upon
their consideration of all these factors, the Board determined that the level of
profits realized by the Manager under its investment advisory contract with the
Fund was not excessive in view of the nature, quality and extent of services
provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager and its affiliates as the Fund grows larger and the
extent to which this is reflected in the level of management fees charged. While
recognizing that any precise determination is inherently subjective, the
Trustees noted that based upon the Fund profitability analysis, it appears that
as some funds get larger, at some point economies of scale do result in the
Manager realizing a larger profit margin on management services provided such a
fund. The Board also noted that economies of scale are shared with a fund and
its shareholders through management fee breakpoints so that as a fund grows in
size, its effective management fee rate declines. The Fund's management advisory
fee historically was at the rate of 1.25% of Fund net assets but, in 2004, the
Board reduced such fee by adding fee breakpoints effective May 1, 2004. The
current advisory fee schedule is at the rate of 1.25% on the first $1 billion of
Fund net assets; 1.20% on the next $4 billion of Fund net assets; 1.15% on the
next $5 billion of Fund net assets; 1.1% on the next $5 billion of Fund net
assets; 1.05% on the next $5 billion of Fund net assets; and 1% on net assets in
excess of $20 billion. The Fund is also charged a separate fee for
administrative services which starts at 0.15% on the first $200 million of Fund
net assets, and declines through breakpoints to a fixed rate of 0.075% after net
assets reach the $1.2 billion level. At the end of 2004, the Fund's net assets
were approximately $2.8 billion, and to the extent economies of scale may be
realized by the Manager and its affiliates, the Board believes the schedules of
management advisory and administrative fees provide a sharing of benefits with
the Fund and its shareholders.
42 | Semiannual Report
TEMPLETON DEVELOPING MARKETS TRUST
SHAREHOLDER INFORMATION (CONTINUED)
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. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
Semiannual Report | 43
This page intentionally left blank.
LITERATURE REQUEST
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II(1)
VALUE
Franklin Balance Sheet Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund(4)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(4)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(4)
Templeton Global Bond Fund
Templeton Income Fund
TAX-FREE INCOME(5)
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(6)
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(7)
Colorado
Connecticut
Florida(7)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(6)
Michigan(6)
Minnesota(6)
Missouri
New Jersey
New York(7)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(8)
(1) The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
(2) The fund is only open to existing shareholders and select retirement
plans.
(3) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.
(4) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(5) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
(6) Portfolio of insured municipal securities.
(7) These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).
(8) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
06/05 Not part of the semiannual report
[LOGO](R) One Franklin Parkway
FRANKLIN TEMPLETON San Mateo, CA 94403-1906
INVESTMENTS
|_| WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at
franklintempleton.com. See inside for details.
SEMIANNUAL REPORT AND SHAREHOLDER LETTER
TEMPLETON
DEVELOPING MARKETS TRUST
INVESTMENT MANAGER
Templeton Asset Management Ltd.
PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. 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. The prospectus
contains this and other information; please read it carefully before investing.
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 S2005 08/05
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial experts are 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. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Directors that would require disclosure
herein.
ITEM 11. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes
in the Registrant's internal controls or in other factors that could
significantly affect the internal controls subsequent to the date of their
evaluation in connection with the preparation of this Shareholder Report on Form
N-CSR.
ITEM 12. EXHIBITS.
(A)(1) Code of Ethics
(A) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(B) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
TEMPLETON DEVELOPING MARKETS TRUST
By /s/JIMMY D. GAMBILL
-----------------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: August 19, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/JIMMY D. GAMBILL
-----------------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: August 19, 2005
By /s/GALEN G. VETTER
-----------------------------
Galen G. Vetter
Chief Financial Officer
Date: August 19, 2005