<PAGE> 1
[MAP OF GLOBE]
TEMPLETON
DEVELOPING
MARKETS
TRUST
Annual Report
December 31, 1996
[Franklin Templeton Logo]
<PAGE> 2
Dr. Mobius has been living overseas since earning his Ph.D. in economics and
political science at Massachusetts Institute of Technology in 1964. During his
extensive travels, he has acquired a thorough knowledge of the business
practices and customs that are unique to developing nations. Together with his
team of Templeton analysts, Dr. Mobius currently oversees more than $10 billion
in emerging markets investments for the Templeton Group of Funds.
[PICTURE OF J. MARK MOBIUS, PH.D.]
J. MARK MOBIUS, PH.D.
PRESIDENT
TEMPLETON DEVELOPING MARKETS TRUST
<PAGE> 3
MANAGEMENT
DISCUSSION
Your Fund's Objective: The Templeton Developing Markets Trust seeks long-term
capital appreciation by investing primarily in securities of issuers of
countries having developing markets.
FEBRUARY 18, 1997
Dear Shareholder:
We are pleased to bring you this annual report of the Templeton Developing
Markets Trust, which covers the year ended December 31, 1996. This has been a
satisfying year for many investors in emerging markets, as after-shocks of the
Mexican currency crisis appeared to have finally dissipated and investor
confidence in them returned. The Fund's Class I shares earned a one-year total
return of 22.51%, as discussed in the Performance Summary on page 6, while the
unmanaged International Finance Corporation's Investable Composite Index (IFC),
composed entirely of emerging market stocks, reported a total return of only
9.3%. The unmanaged Morgan Stanley Capital International World Index
(MSCI)(R)(1), which was heavily weighted (43.4%) in the booming U.S. market,
reported a 14.0% total return for the period.
As of December 31, 1996, the Trust owned investments in 35 countries, with Hong
Kong being our largest country holding (16.2% of total net assets). Our largest
regional holdings were Asia (40.7%), followed by Latin America (30.1%), Europe
(17.1%), and the Middle East/Africa (3.1%). Although investments in emerging
markets as a whole performed well, returns provided by individual countries
varied according to each market's particular economic and political
circumstances.
Brazil and Venezuela were two of our best-performing markets. By balancing the
national budget and privatizing a number of government-owned companies, Brazil
reduced inflation from more than 2500% per annum in 1993, to an annual level of
just 14% in August 1996. As a result, its stock market attracted significant
interest from both domestic and international investors, and,
- --------------------------------------------------------------------------------
1. A registered trademark of Morgan Stanley & Co., Inc.
1
<PAGE> 4
TEMPLETON DEVELOPING
MARKETS TRUST
Geographic Distribution on 12/31/96
Based on Total Net Assets
[PIE CHART]
Asia 40.7%
Latin America 30.1%
Europe 17.1%
Middle East & Africa 3.1%
Short-Term Obligations & Other
Net Assets 9.0%
measured in U.S. dollars, rallied 54% during 1996. In Venezuela, reforms
initiated by President Rafael Caldera resulted in lower inflation, higher
economic growth and a rising stock market.
Russia and Poland also experienced rising equity prices. Early in 1996, prices
of Russian stocks were depressed, in part, because of fears that a Communist
victory in the June presidential election would result in a repeal of previously
enacted economic reforms. But, as the balloting drew near and Boris Yeltsin's
win seemed likely, prices of several stocks more than tripled. Although some
equity prices fell after the elections, the ASP-Moscow Times Index increased by
126% for the year as a whole.(2) The Polish stock market, sparked by
privatization, foreign investment, and rapid growth in construction activity,
rose 62% during 1996.(2)
In Asia, the Hong Kong stock market rallied strongly, buoyed by the economic
recovery of the retail and property sectors. Malaysia and Taiwan's markets also
performed relatively well. However, some markets bucked the general trend and
experienced steep setbacks. Undermined by a slowdown in economic
<TABLE>
<CAPTION>
TOP 10 COUNTRIES REPRESENTED IN
THE TRUST ON 12/31/96
As a Percentage of Total Net Assets
Country % of Total Net Assets
<S> <C>
Hong Kong 16.2%
Brazil 10.8%
Mexico 7.6%
Argentina 6.3%
Turkey 4.6%
Portugal 4.1%
Greece 3.8%
Indonesia 3.6%
Venezuela 3.3%
Malaysia 3.1%
</TABLE>
2. Price change measured in U.S. dollars.
2
<PAGE> 5
TEMPLETON DEVELOPING
MARKETS TRUST
Asset Allocation on 12/31/96
Based on Total Net Assets
[PIE CHART]
Equity 91.0%
Short-Term Obligations & Other
Net Assets 9.0%
growth and poor corporate earnings, equity prices in South Korea, Thailand,
India, Singapore and Sri Lanka declined during 1996. And, Pakistan's stock
market fell sharply during the last few months of the period, ending the year
substantially below its year-opening level.
Looking forward, we believe that weak markets such as South Korea and Thailand
are likely to offer opportunities to purchase stocks at bargain prices. We also
believe that even after last year's strong rise, the Russian market may have
room to advance. Russia possesses some of the largest reserves of natural
resources in the world and has companies which may one day be equal to the best
in their fields. We are, of course, concerned about the outlook for Hong Kong's
economy following its transfer to China on July 1, 1997. However, even though
there is a possibility of economic
<TABLE>
<CAPTION>
TOP 10 HOLDINGS ON 12/31/96
As a Percentage of Total Net Assets
Company,
Industry, % of Total
Country Net Assets
<S> <C>
Cheung Kong Holdings Ltd.
Multi-Industry
Hong Kong 3.1%
HSBC Holdings PLC
Banking
Hong Kong 2.5%
Electricidad de Caracas
Utilities - Electrical & Gas
Venezuela 2.4%
Electrobras-Centrais Eletricas
Brasileiras SA,
Utilities - Electrical & Gas
Brazil 2.4%
Telebras-Telecomunicacoes Brasileiras SA
Telecommunications
Brazil 2.2%
Telefonos de Mexico SA, L
Telecommunications
Mexico 2.1%
New World Development Co. Ltd.
Real Estate
Hong Kong 2.1%
Petrobras-Petroleo Brasileiro SA, pfd.
Energy Sources
Brazil 1.8%
Sun Hung Kai Properties Ltd.
Real Estate
Hong Kong 1.8%
Perez Companc SA, B
Energy Sources
Argentina 1.5%
</TABLE>
- --------------------------------------------------------------------------------
For a complete list of portfolio holdings, please see page 14 of this report.
3
<PAGE> 6
disaster, in our opinion it is more likely that Hong Kong's economy will
continue to prosper. The Chinese government has indicated that the economic and
social status quo will be maintained, and evidence that many investors believe
this may be found in the narrowing of the gap in valuations between Hong Kong
stocks and other Asian stocks.
This discussion reflects the strategies we employed for the Fund during the past
fiscal year, and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies,
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise. Although past performance of a specific investment
or sector cannot guarantee future performance, such information can be useful in
analyzing the securities we purchase or sell for the Fund. Of course, investing
in emerging markets involves special considerations, which may include risks
related to market and currency volatility, adverse social, economic and
political developments and the relatively small size and lesser liquidity of
these markets. While short-term volatility can be disconcerting, declines of as
much as 40% to 50% are not unusual in emerging markets. In fact, the Hong Kong
market has increased 857% in the last 15 years, but has suffered five declines
of more than 20% during that time.(3) These special risks and other
considerations are discussed in the Fund's prospectus.
Choosing stocks in the rapidly growing emerging markets universe requires an
- --------------------------------------------------------------------------------
3. Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended December 31, 1996.
4
<PAGE> 7
effective team of analysts to locate potential bargains throughout the world.
Since the difference between stocks that appear to be, and those that prove to
be, bargains lies in the competence and integrity of the management of those
companies, on-site inspection of potential investments is essential. That is why
our analysts examine hundreds of companies each year, why I spent 1996 visiting
over 300 companies in more than 30 countries, and why two new analysts recently
joined our South African office. An account of my recent trip to South Africa is
included on page 10 of this report.
Thank you for investing in the Templeton Developing Markets Trust. We appreciate
your support and welcome your comments.
On April 16, 1996, the Fund's Board of Directors adopted a non-fundamental
policy permitting investment in Russian securities up to 5% of its total assets.
Russian securities involve additional significant risks, including political and
social uncertainty (for example, regional conflicts and risk of war), currency
exchange rate volatility, pervasiveness of corruption and crime in the Russian
economic system, delays in settling portfolio transactions and risk of loss
arising out of Russia's system of share registration and custody.
5
<PAGE> 8
PERFORMANCE
SUMMARY
Class I
Class II
Performance
Summary
begins on
page 8
The Templeton Developing Markets Trust - Class I reported a total return of
22.51% for the one-year period ended December 31, 1996. Total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains distributions, and does not include the initial sales charge. As
the chart on this page illustrates, the Fund's Class I shares delivered a
cumulative total return of 77.64% since inception on October 17, 1991.
During the reporting period, Class I shareholders received distributions of 17.5
cents ($0.175) per share in income dividends, 3.5 cents ($0.035) in short-term
capital gains, and 30.5 cents ($0.305) in long-term capital gains. As measured
by net asset value, the price of the Fund's Class I shares increased by $2.39,
from $13.01 on December 31, 1995, to $15.40 on December 31, 1996. Of course,
past performance is not predictive of future results, and distributions will
vary depending on income earned by the Fund, as well as any profits realized
from the sale of securities in the portfolio.
The graph on page 7 compares the performance of the Fund's Class I shares with
that of the broad-based Morgan Stanley Capital International (MSCI) World Index.
The index contains approximately 1,563 companies, representing the stock markets
of 22 countries, including the U.S., Canada, Australia, New Zealand and several
countries in Europe and Asia. It differs
TEMPLETON DEVELOPING
MARKETS TRUST - CLASS I
Periods ended December 31, 1996
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year (10/17/91)
<S> <C> <C> <C>
Cumulative
Total Return(1) 22.51% 77.01% 77.64%
Average
Annual
Total Return(2) 15.50% 10.78% 10.40%
Value of
$10,000
Investment(3) $11,550 $16,686 $16,742
</TABLE>
One-Year Total Return(4)
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
<S> <C> <C> <C> <C>
-9.75% 74.50% -8.64% 0.36% 22.51%
</TABLE>
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 5.75% initial
sales charge. See Note below.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the specified periods and include the maximum 5.75% initial sales
charge.
4. One-year total return represents the change in value of an investment over
the one-year periods ended on the specified dates and does not include the
initial sales charge.
Note: All total return calculations assume that all dividends and capital gains
distributions were reinvested when paid. From October 17, 1991 to December 31,
1992, expense limitations increased the Fund's total return.
Investment return and principal value will fluctuate with market conditions,
currencies and the economic, social and political climates of the countries
where investments are made. Developing markets involve heightened risks related
to the same factors, in addition to those associated with the relatively small
size and lesser liquidity of these markets. Thus, your shares, when redeemed,
may be worth more or less than their initial cost. Past performance is not
predictive of future results.
6
<PAGE> 9
[BAR CHART]
TEMPLETON DEVELOPING
MARKETS TRUST -- CLASS I
Comparative Performance for 1996
22.5% 9.3% 14.0%
Templeton International Finance Morgan Stanley
Developing Markets Corporation's Capital
Trust -- Class I(1) Investable International
Composite Index(2) World Index(2)
1. Includes all sales charges and represents the change in value of an
investment over the period shown. Total return assumes reinvestment of
dividends and capital gains. Past performance is not predictive of future
results.
2. Indices are unmanaged and include reinvested dividends from the Fund because
it includes stocks from some developed countries such as the U. S. where the
Fund is not allowed to invest. On December 31, 1996, the index's U.S. weighting
was 43.4%. During the year, it posted a total return of 14.0%, compared to the
Fund's 22.51%.
The graph also compares the Fund's performance with that of the more narrow
International Finance Corporation's (IFC) Investable Composite Index. The IFC
Index was designed to reflect the performance of emerging market investments and
includes 1,225 stocks that foreigners can buy in 26 countries, including Mexico,
South Korea, Brazil, Jordan and Turkey. During the year, it posted a total
return of 9.3%, compared to the Fund's 22.51%.
Please remember that the Fund's performance differs from that of the indices
because the indices are unmanaged, do not contain cash (the Fund generally
carries a certain percentage of cash at any given time), and do not include
sales charges or management expenses. The Fund's performance can also be
markedly different because our philosophy of investing in bargain stocks may
result in our purchasing stocks which are not predominant in any index, and not
"popular" index stocks. Of course, one cannot invest directly in an index.
TEMPLETON DEVELOPING MARKETS TRUST -- CLASS I
Total Return Index Comparison
$10,000 Investment (10/17/91 - 12/31/96)
[LINE GRAPH]
<TABLE>
<CAPTION>
TEMPLETON
DEVELOPING
MARKETS MSCI IFCI
TRUST -- WORLD COMPOSITE
I* INDEX INDEX
-------- -------- --------
<C> <C> <C> <C> <S> <C> <C> <C>
10/16/91 $ 9,425 $ 10,000 $ 10,000 MS World GD........................................ $ IFCI Comp $T
Oct-91 $ 9,435 $ 10,079 $ 10,317 0.79%.............................................. 3.17%
Nov-91 $ 9,406 $ 9,642 $ 10,337 -4.34%.............................................. 0.19%
Dec-91 $ 9,458 $ 10,345 $ 11,436 7.30%.............................................. 10.64%
Jan-92 $ 9,619 $ 10,156 $ 12,861 -1.83%.............................................. 12.46%
Feb-92 $ 9,562 $ 9,982 $ 13,189 -1.71%.............................................. 2.55%
Mar-92 $ 9,364 $ 9,514 $ 13,121 -4.69%.............................................. -0.52%
Apr-92 $ 9,468 $ 9,648 $ 13,193 1.41%.............................................. 0.55%
May-92 $ 9,628 $ 10,034 $ 13,114 4.00%.............................................. -0.60%
Jun-92 $ 9,609 $ 9,700 $ 11,767 -3.33%.............................................. -10.27%
Jul-92 $ 9,392 $ 9,726 $ 11,741 0.27%.............................................. -0.22%
Aug-92 $ 9,137 $ 9,965 $ 11,246 2.45%.............................................. -4.22%
Sep-92 $ 9,033 $ 9,875 $ 11,013 -0.90%.............................................. -2.07%
Oct-92 $ 8,788 $ 9,609 $ 11,504 -2.69%.............................................. 4.46%
Nov-92 $ 8,439 $ 9,783 $ 11,429 1.81%.............................................. -0.65%
Dec-92 $ 8,536 $ 9,864 $ 11,810 0.83%.............................................. 3.33%
Jan-93 $ 8,960 $ 9,899 $ 11,759 0.35%.............................................. -0.43%
Feb-93 $ 9,741 $ 10,136 $ 12,054 2.39%.............................................. 2.51%
Mar-93 $ 9,591 $ 10,725 $ 12,436 5.82%.............................................. 3.17%
Apr-93 $ 10,046 $ 11,224 $ 12,880 4.65%.............................................. 3.57%
May-93 $ 10,597 $ 11,485 $ 13,151 2.32%.............................................. 2.10%
Jun-93 $ 10,906 $ 11,390 $ 13,524 -0.82%.............................................. 2.84%
Jul-93 $ 10,868 $ 11,627 $ 13,946 2.08%.............................................. 3.12%
Aug-93 $ 11,825 $ 12,162 $ 15,079 4.60%.............................................. 8.12%
Sep-93 $ 12,289 $ 11,940 $ 15,685 -1.83%.............................................. 4.02%
Oct-93 $ 12,792 $ 12,270 $ 17,037 2.77%.............................................. 8.62%
Nov-93 $ 13,449 $ 11,578 $ 18,117 -5.64%.............................................. 6.34%
Dec-93 $ 14,896 $ 12,147 $ 21,211 4.91%.............................................. 17.08%
Jan-94 $ 15,198 $ 12,950 $ 21,356 6.61%.............................................. 0.68%
Feb-94 $ 14,866 $ 12,784 $ 20,805 -1.28%.............................................. -2.58%
Mar-94 $ 14,268 $ 12,236 $ 18,701 -4.29%.............................................. -10.11%
Apr-94 $ 13,699 $ 12,616 $ 18,346 3.11%.............................................. -1.90%
May-94 $ 13,689 $ 12,650 $ 18,779 0.27%.............................................. 2.36%
Jun-94 $ 13,464 $ 12,616 $ 18,110 -0.27%.............................................. -3.56%
Jul-94 $ 13,935 $ 12,858 $ 19,413 1.92%.............................................. 7.19%
Aug-94 $ 14,749 $ 13,247 $ 21,897 3.02%.............................................. 12.80%
Sep-94 $ 14,887 $ 12,901 $ 22,449 -2.61%.............................................. 2.52%
Oct-94 $ 14,543 $ 13,271 $ 21,711 2.87%.............................................. -3.29%
Nov-94 $ 14,023 $ 12,698 $ 20,877 -4.32%.............................................. -3.84%
Dec-94 $ 13,617 $ 12,823 $ 18,631 0.99%.............................................. -10.76%
Jan-95 $ 12,846 $ 12,634 $ 16,173 -1.48%.............................................. -13.19%
Feb-95 $ 12,805 $ 12,821 $ 15,963 1.48%.............................................. -1.30%
Mar-95 $ 12,948 $ 13,441 $ 15,928 4.84%.............................................. -0.22%
Apr-95 $ 13,377 $ 13,913 $ 16,594 3.51%.............................................. 4.18%
May-95 $ 13,836 $ 14,034 $ 17,213 0.87%.............................................. 3.73%
Jun-95 $ 13,877 $ 14,033 $ 17,314 -0.01%.............................................. 0.59%
Jul-95 $ 14,469 $ 14,737 $ 17,851 5.02%.............................................. 3.10%
Aug-95 $ 14,091 $ 14,411 $ 17,372 -2.21%.............................................. -2.68%
Sep-95 $ 14,071 $ 14,834 $ 17,240 2.93%.............................................. -0.76%
Oct-95 $ 13,591 $ 14,602 $ 16,585 -1.56%.............................................. -3.80%
Nov-95 $ 13,438 $ 15,112 $ 16,502 3.49%.............................................. -0.50%
Dec-95 $ 13,666 $ 15,556 $ 17,077 2.94%.............................................. 3.48%
Jan-96 $ 15,000 $ 15,841 $ 18,520 1.83%.............................................. 8.45%
Feb-96 $ 14,931 $ 15,941 $ 18,090 0.63%.............................................. -2.32%
Mar-96 $ 14,995 $ 16,208 $ 18,350 1.68%.............................................. 1.44%
Apr-96 $ 15,490 $ 16,592 $ 19,092 2.37%.............................................. 4.04%
May-96 $ 15,743 $ 16,609 $ 18,922 0.10%.............................................. -0.89%
Jun-96 $ 15,838 $ 16,695 $ 19,143 0.52%.............................................. 1.17%
Jul-96 $ 15,121 $ 16,108 $ 17,887 -3.52%.............................................. -6.56%
Aug-96 $ 15,427 $ 16,296 $ 18,442 1.17%.............................................. 3.10%
Sep-96 $ 15,754 $ 16,937 $ 18,715 3.93%.............................................. 1.48%
Oct-96 $ 15,807 $ 17,059 $ 18,313 0.72%.............................................. -2.15%
Nov-96 $ 16,355 $ 18,017 $ 18,584 5.62%.............................................. 1.48%
Dec-96 $ 16,742 $ 17,733 $ 18,665 -1.58%.............................................. 0.44%
</TABLE>
Templeton Developing MSCI World Index(2) IFC Investable
Markets Trust - Class 1(1) Composite Index(2)
1. Includes all sales charges and represents the change in value of an
investment over the period shown. Total return assumes reinvestment of
dividends and capital gains. Past performance is not predictive of future
results.
2. Indices are unmanaged and include reinvested dividends.
7
<PAGE> 10
PERFORMANCE
SUMMARY
Class II
Class I
Performance
Summary
begins on
page 6
The Templeton Developing Markets Trust - Class II reported a total return of
21.58% for the one-year period ended December 31, 1996. Total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains distributions, and does not include sales charges. As the chart on
this page illustrates, the Fund's Class II shares delivered a cumulative total
return of 23.66% since inception on May 1, 1995.
During the reporting period, Class II shareholders received distributions of
11.46 cents ($0.1146) per share in income dividends, 3.5 cents ($0.035) in
short-term capital gains and 30.5 cents ($0.305) in long-term capital gains. As
measured by net asset value, the price of the Fund's Class II shares increased
by $2.32, from $12.95 on December 31, 1995, to $15.27 on December 31, 1996. Of
course, past performance is not predictive of future results, and distributions
will vary depending on income earned by the Fund, as well as any profits
realized from the sale of securities in the portfolio.
The graph on page 9 compares the performance of the Fund's Class II shares with
that of the broad-based Morgan Stanley Capital International (MSCI) World Index.
The index contains approximately 1,563 companies, representing the stock markets
of 22 countries, including the U.S., Canada, Australia, New Zealand and several
countries in Europe and Asia. It differs from the Fund because it includes
stocks from some developed countries, such as the U.S., where the Fund is not
allowed to invest. On December 31, 1996, the index's U.S. weighting was
TEMPLETON DEVELOPING MARKETS
TRUST - CLASS II
Period ended December 31, 1996
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/1/95)
<S> <C> <C>
Cumulative
Total Return(1) 21.58% 23.66%
Average Annual
Total Return(2) 19.39% 12.90%
Value of
$10,000 Investment(3) $11,939 $12,244
</TABLE>
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 1.00% initial
sales charge and the 1.00% contingent deferred sales charge (CDSC) applicable to
shares redeemed within 18 months of purchase. See Note below.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the specified periods and include all sales charges.
Note: All total return calculations assume that all dividends and capital gains
distributions were reinvested when paid.
Investment return and principal value will fluctuate with market conditions,
currencies and the economic, social and political climates of the countries
where investments are made. Developing markets involve heightened risks related
to the same factors, in addition to those associated with the relatively small
size and lesser liquidity of these markets. Thus, your shares, when redeemed,
may be worth more or less than their initial cost. Past performance is not
predictive of future results.
8
<PAGE> 11
TEMPLETON DEVELOPING
MARKETS TRUST - CLASS II
Comparative Performance for 1996
[BAR CHART]
<TABLE>
<S> <C>
Templeton Developing Markets Trust - Class II(1) 21.6%
International Finance Corporation's
Investable Composite Index(2) 9.3%
Morgan Stanley Capital International
World Index(2) 14.0%
</TABLE>
1. Includes all sales charges and represents the change in value of an
investment over the period shown. Total return assumes reinvestment of
dividends and capital gains. Past performance is not predictive of future
results.
2. Indices are unmanaged and include reinvested dividends 43.4%. During
the year, it posted a total return of 14.0%, compared to the Fund's 21.58%.
The graph also compares the Fund's performance with that of the more narrow
International Finance Corporation's (IFC) Investable Composite Index. The IFC
Index was designed to reflect the performance of emerging market investments and
includes 1,225 stocks that foreigners can buy in 26 countries, including Mexico,
South Korea, Brazil, Jordan and Turkey. During the year, it posted a total
return of 9.3%, compared to the Fund's 21.58%.
Please remember that the Fund's performance differs from that of the indices
because the indices are unmanaged, do not contain cash (the Fund generally
carries a certain percentage of cash at any given time), and do not include
sales charges or management expenses. The Fund's performance can also be
markedly different because our philosophy of investing in bargain stocks may
result in our purchasing stocks which are not predominant in any index, and not
"popular" index stocks. Of course, one cannot invest directly in an index.
TEMPLETON DEVELOPING
MARKETS TRUST - CLASS II
Total Return Index Comparison
$10,000 Investment (5/1/95 - 12/31/96)
[LINE GRAPH}
<TABLE>
<CAPTION>
TEMPLETON
DEVELOPING
MARKETS MSCI IFCI
TRUST -- WORLD COMPOSITE
II* INDEX INDEX
-------- -------- --------
<C> <C> <C> <C> <S> <C> <C> <C>
5/1/95 $ 9,902 $ 10,000 $ 10,000 MS World GD........................................... $ IFCI Comp $T
May-95 $ 10,242 $ 10,087 $ 10,373 0.87%................................................. 3.73%
Jun-95 $ 10,265 $ 10,086 $ 10,434 -0.01%................................................ 0.59%
Jul-95 $ 10,695 $ 10,592 $ 10,758 5.02%................................................. 3.10%
Aug-95 $ 10,408 $ 10,358 $ 10,469 -2.21%................................................ -2.68%
Sep-95 $ 10,385 $ 10,662 $ 10,390 2.93%................................................. -0.76%
Oct-95 $ 10,015 $ 10,495 $ 9,995 -1.56%................................................ -3.80%
Nov-95 $ 9,909 $ 10,862 $ 9,945 3.49%................................................. -0.50%
Dec-95 $ 10,070 $ 11,181 $ 10,291 2.94%................................................. 3.48%
Jan-96 $ 11,042 $ 11,386 $ 11,161 1.83%................................................. 8.45%
Feb-96 $ 10,983 $ 11,457 $ 10,902 0.63%................................................. -2.32%
Mar-96 $ 11,022 $ 11,650 $ 11,059 1.68%................................................. 1.44%
Apr-96 $ 11,381 $ 11,926 $ 11,506 2.37%................................................. 4.04%
May-96 $ 11,561 $ 11,938 $ 11,403 0.10%................................................. -0.89%
Jun-96 $ 11,623 $ 12,000 $ 11,537 0.52%................................................. 1.17%
Jul-96 $ 11,085 $ 11,578 $ 10,780 -3.52%................................................ -6.56%
Aug-96 $ 11,311 $ 11,713 $ 11,114 1.17%................................................. 3.10%
Sep-96 $ 11,538 $ 12,173 $ 11,278 3.93%................................................. 1.48%
Oct-96 $ 11,577 $ 12,261 $ 11,036 0.72%................................................. -2.15%
Nov-96 $ 11,967 $ 12,950 $ 11,199 5.62%................................................. 1.48%
Dec-96 $ 12,244 $ 12,745 $ 11,249 -1.58%................................................ 0.44%
</TABLE>
Templeton Developing Markets Trust - Class II(1)
MSCI World Index(2)
IFC Investable Composite Index(2)
1. Includes all sales charges and represents the change in value of an
investment over the period shown Total return assumes reinvestment of dividends
and capital gains. Past performance is not predictive of future results.
2. Indices are unmanaged and include reinvested dividends.
9
<PAGE> 12
THE FOLLOWING
LETTER WAS
WRITTEN BY
DR. MOBIUS AFTER
A RECENT TRIP
TO SOUTH AFRICA.
[PHOTO]
We arrived in Johannesburg, the largest city in South Africa, after a short
flight from Botswana. Despite a superficial appearance of order, there is a
strong undercurrent of tension in this country of 45 million people. Promises
made by Nelson Mandela's ruling African National Congress party (ANC) have not
been fulfilled, and in a nation where a majority of the population has been
waiting so long for prosperity, many are understandably impatient.
In my view, South Africa's paramount problem is a shortage of skilled workers
caused by language barriers and lack of education. Four different language
groups (with many variations in each group) exist among the black population of
South Africa, undermining the mobility of labor and interfering with the ability
of individuals to secure productive work. Despite these language difficulties,
many people have migrated from their tribal lands to Johannesburg, where the
combination of unemployment and feelings of dislocation has resulted in rapidly
increasing crime rates. As you drive through the city, you hear radio broadcasts
advising motorists not to make any sudden moves because hijackers may shoot
nervously if they see the hands of their potential victims moving.
From Johannesburg in the Northeast, we traveled to Cape Town in the Southwest.
Although the Cape Town region is the most spectacular and beautiful part of
South Africa, the slums on the outskirts of the city are a huge conglomeration
of huts built from scraps of wood, tin, and rock. The South African government
faces a monumental task in attempting to alleviate problems of housing,
education, electrification and fresh water in this area.
Despite these issues, South Africa's basic infrastructure is excellent compared
to many other parts of the world, as evidenced by the beautifully built
four-lane highway on which we drove. And the opening up of many new markets
following the abolition of apartheid has been a boon to some South African
exporters. In Durban, we visited a major tire producer recently licensed to sell
its product in 70 countries around the world. We also visited a company helping
black businessmen get started in the contracting business which had established
sales centers in Angola, Zimbabwe, Zambia and Namibia.
10
<PAGE> 13
[MAP OF SOUTH AFRICA]
The key questions for us as investors are: "Is it safe to invest in South
Africa?" and "Does South Africa have a long-term future?" Our answer to both
questions is "yes". The transition from white minority rule to black majority
rule has been relatively successful and has confounded all the critics who
predicted chaos and bloodshed in the streets. The fact that the crime problem is
talked about so much and attacked in the press is evidence that people are
concerned and trying to do something about it. Another sign of progress is that
the press is now quite free to criticize the government.
Although we have a long list of South African stocks that we are interested in
adding to the Fund's portfolio, most did not appear to be bargains as of
December 31, 1996. Since we were also concerned about further depreciation of
the local currency, only 2.0% of our total net assets were invested in South
African equities at that time. However, I feel that the country's future is
bright. In my opinion, it could become one of the major emerging markets in
which we invest, as well as the driving force for strong economic growth in
sub-Saharan Africa.*
Sincerely,
/s/ J. Mark Mobius
- ----------------------------------
J. Mark Mobius, Ph.D.
President
Templeton Developing Markets Trust
*This letter reflects the strategies employed for the Fund during the past
fiscal year and includes our opinion as of the close of the period. Since
economic and market conditions are constantly changing, our strategies,
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise.
11
<PAGE> 14
TEMPLETON DEVELOPING MARKETS TRUST
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE -- CLASS I
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.01 $ 13.42 $ 15.27 $ 8.86 $ 10.02
---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income .16 .21 .14 .04 .08
Net realized and unrealized gain (loss) 2.75 (.18) (1.44) 6.55 (1.06)
---------- ---------- ---------- ---------- --------
Total from investment operations 2.91 .03 (1.30) 6.59 (.98)
---------- ---------- ---------- ---------- --------
Distributions:
Dividends from net investment income (.17) (.20) (.12) (.05) (.07)
Amount in excess of net investment income (.01) -- -- -- --
Distributions from net realized gains (.34) (.24) (.43) (.13) (.11)
---------- ---------- ---------- ---------- --------
Total distributions (.52) (.44) (.55) (.18) (.18)
---------- ---------- ---------- ---------- --------
Change in net asset value 2.39 (.41) (1.85) 6.41 (1.16)
---------- ---------- ---------- ---------- --------
Net asset value, end of year $ 15.40 $ 13.01 $ 13.42 $ 15.27 $ 8.86
========== ========== ========== ========== ========
TOTAL RETURN* 22.51% .36% (8.64)% 74.50% (9.75)%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of year (000) $3,308,753 $2,147,664 $2,009,154 $1,396,392 $180,189
Ratio of expenses to average net assets 2.03% 2.10% 2.11% 2.20% 2.52%
Ratio of expenses, net of reimbursement, to average net assets 2.03% 2.10% 2.11% 2.20% 2.25%
Ratio of net investment income to average net assets 1.16% 1.66% 1.08% .57% 1.30%
Portfolio turnover rate 12.47% 9.76% 18.57% 16.01% 21.98%
Average commission rate paid (per share) $ .0024
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS.
12
<PAGE> 15
TEMPLETON DEVELOPING MARKETS TRUST
Financial Highlights (cont.)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE -- CLASS II
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1995+
YEAR ENDED THROUGH
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period $ 12.95 $ 13.10
-------- -------
Income from investment operations:
Net investment income .17 .02
Net realized and unrealized gain 2.60 .19
-------- -------
Total from investment operations 2.77 .21
-------- -------
Distributions:
Dividends from net investment income (.10) (.18)
Amount in excess of net investment income (.01) --
Distributions from net realized gains (.34) (.18)
-------- -------
Total distributions (.45) (.36)
-------- -------
Change in net asset value 2.32 (.15)
-------- -------
Net asset value, end of period $ 15.27 $ 12.95
======== =======
TOTAL RETURN* 21.58% 1.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 226,629 $41,012
Ratio of expenses to average net assets 2.74% 2.73%**
Ratio of net investment income to average net assets .33% .19%**
Portfolio turnover rate 12.47% 9.76%
Average commission rate paid (per share) $ .0024
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE CONTINGENT DEFERRED
SALES CHARGE. NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
+ COMMENCEMENT OF SALES.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 16
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES: 91.0%
- ---------------------------------------------------------------------------------------------------------------------------------
ARGENTINA: 6.3%
Aluar Aluminio Argentino SA, B Misc Materials & Commodities 294,678 $ 742,722
+ Astra Cia Argentina de Petroleo SA Energy Sources 4,228,830 8,078,519
* Atanor Cia Nacional Para la Industria Quimica
SA, D Chemicals 3,507,414 5,086,666
* Banco Bansud SA, B Banking 139,927 1,676,627
Banco de Galicia y Buenos Aires SA, B Banking 3,817,994 22,950,275
Banco Frances del Rio de la Plata SA Banking 1,445,643 13,519,196
* Buenos Aires Embotelladora SA, ADR Beverages & Tobacco 746,000 2,797,500
Capex SA, A Utilities Electrical & Gas 123,774 1,021,319
Central Costanera SA, B Utilities Electrical & Gas 433,769 1,327,572
* Ciadea SA Automobiles 833,497 3,959,825
* Ipako Industrias Petroquimicas Argentinas SA, B Chemicals 1,612,631 4,935,539
Juan Minetti SA Building Materials & Components 736,681 3,065,145
Juan Minetti SA, conv. Building Materials & Components 113,266 113,286
Molinos Rio de Plata SA, B Food & Household Products 7,818,377 27,838,433
Nobleza Piccardo Sdad Industrial Comercial y
Financial Beverages & Tobacco 241,538 918,010
Perez Companc SA, B Energy Sources 7,607,567 53,490,824
Quilmes Industrial SA Beverages & Tobacco 953,500 8,700,688
Quilmes Industrial SA, reg Beverages & Tobacco 105,000 840,000
* Sevel Argentina SA, C Automobiles 2,413,186 6,082,323
Siderar, A Metals & Mining 367,250 1,057,870
* Sociedad Comercial del Plata Cadelplata Come Multi-Industry 7,156,070 18,322,837
Transportadora de Gas del Sur SA, B Energy Sources 649,645 1,598,414
YPF Sociedad Anonima, ADR Energy Sources 1,312,410 33,138,353
* Zanella Hermanos SA Automobiles 931,434 204,952
------------
221,466,895
- ---------------------------------------------------------------------------------------------------------------------------------
BRAZIL: 10.8%
Aracruz Celulose SA, ADR Forest Products & Paper 25,400 209,550
Banco Bradesco SA Banking 1,501,078,668 10,184,395
Banco Bradesco SA, pfd. Banking 728,000,794 5,275,571
* Banco do Brasil SA Banking 958,445,791 8,301,426
* Banco do Brasil SA, wts., A Banking 216,046,382 340,984
* Banco do Brasil SA, wts., B Banking 324,069,574 499,000
* Banco do Brasil SA, wts., C Banking 540,115,956 727,709
* Banco do Brazil SA, pfd. Banking 818,346,120 7,087,975
* Banespa-Banco do Estado de Sao Paulo SA, pfd. Banking 1,282,693,850 6,172,139
Brasmotor SA, pfd. Multi-Industry 45,992,231 12,769,472
Cia Mesbla SA, pfd. Merchandising 75,117,000 --
Cia Vale do Rio Doce, pfd. Metals & Mining 785,141 15,111,943
Companhia Siderurgica Nacional Metals & Mining 1,960,000 55,644
* Confab Industrial SA, pfd. Industrial Components 1,434,340 1,546,012
Copene-Petroquimica do Nordeste SA, A, pfd. Chemicals 34,105,550 13,128,881
Duratex SA, pfd. Forest Products & Paper 478,134,600 17,945,577
Eletrobras-Centrais Eletricas Brasileiras SA Utilities Electrical & Gas 66,800,000 23,914,541
Eletrobras-Centrais Eletricas Brasileiras SA,
B, pfd. Utilities Electrical & Gas 160,885,847 59,765,121
Itausa-Investimentos Itau SA, pfd. Multi-Industry 55,824,179 41,904,398
* Mannesmann SA Machinery & Engineering 15,037,010 2,043,621
* Mannesmann SA, pfd. Machinery & Engineering 5,137,562 741,636
* Marcopolo SA, pfd. Automobiles 14,371,400 2,406,528
Petrobras-Petroleo Brasileiro SA, pfd. Energy Sources 402,036,333 64,033,311
* Refripar-Refrigeracao Parana Sa, pfd. Appliances & Household Durables 185,362,000 419,210
Telebras-Telecomunicacoes Brasileiras SA Telecommunications 738,109,194 52,919,964
Telebras-Telecomunicacoes Brasileiras SA, pfd. Telecommunications 329,573,973 25,373,802
Unibanco-Uniao de Bancos Brasileiros SA, pfd. Banking 238,662,372 7,786,213
------------
380,664,623
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 17
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
CHILE: 0.1%
Antofagasta Holdings PLC Metals & Mining 901,550 $ 5,251,088
- ---------------------------------------------------------------------------------------------------------------------------------
CHINA: 2.0%
China First Pencil Co. Ltd., B Recreation & Other Consumer Goods 402,600 177,949
China Southern Glass Co. Ltd., B Building Materials & Components 4,929,462 3,059,205
Chiwan Wharf Holdings Ltd., B Transportation 12,168,000 8,652,660
Guangzhou Shipyard International Co. Ltd., H Machinery & Engineering 8,308,000 2,105,331
Luoyang Glass Co. Ltd., H Misc Materials & Commodities 2,779,000 853,336
Shandong Huaneng Power Utilities Electrical & Gas 284,000 2,769,000
Shanghai Chlor-Alkali Chemical Co. Ltd., B Chemicals 12,105,300 3,365,273
Shanghai Dazhong Taxi Shareholding Co. Ltd., B Transportation 1,690,000 1,395,940
* Shanghai Erfangji Textile Machinery Co. Ltd., B Machinery & Engineering 8,770,806 1,508,579
* Shanghai Industrial Sewing Machine Corp. Machinery & Engineering 3,573,700 679,003
* Shanghai Jin Jiang Tower Co. Ltd., B Leisure & Tourism 5,649,600 1,717,478
Shanghai Jinqiao Export Processing Zone
Development, B Real Estate 5,299,000 2,861,460
Shanghai Lujiaxui Finance & Trade Zone
Development Stock Co. Ltd., B Real Estate 18,383,274 17,905,309
* Shanghai Narcissus Electric Appliances Co.
Ltd., B Appliances & Household Durables 807,950 169,670
Shanghai New Asia Group Co. Ltd., B Food & Household Products 4,148,500 1,808,746
Shanghai Pechemical Co. Ltd., H Chemicals 14,464,000 4,394,647
Shanghai Refrigerator Compressor Co. Ltd., B Industrial Components 1,466,010 797,509
Shanghai Rubber Belt Co. Ltd., B Industrial Components 600,480 144,115
* Shanghai Shangling Electric Appliance, B Appliances & Household Durables 3,391,000 1,471,694
* Shanghai Steel Tube Co. Ltd., B Machinery & Engineering 1,273,800 242,022
* Shanghai Tyre & Rubber Co. Ltd., B Industrial Components 4,995,000 2,117,880
* Shanghai Vacuum Electron Devices Co. Ltd., B Appliances & Household Durables 1,984,800 385,051
* Shanghai Wingsung Co. Ltd., B Recreation & Other Consumer Goods 558,210 156,299
* Shanghai Yaohua Pilkington Glass, B Building Materials & Components 7,795,250 3,710,539
* Shenzhen China Bicycles Co. (Holdings) Ltd., B Recreation & Other Consumer Goods 1,526,400 663,094
Shenzhen Konka Electronic Group Co. Ltd., B Appliances & Household Durables 1,300,000 1,470,683
Shenzhen Properties & Resources Develop.(Group)
Ltd., B Real Estate 1,367,156 724,719
Shenzhen Vanke Co. Ltd., B Real Estate 7,252,878 5,129,387
Zhuhai Sez Lizhu Pharmaceutical Group Inc., B Health & Personal Care 478,800 284,141
-----------
70,720,719
- ---------------------------------------------------------------------------------------------------------------------------------
COLOMBIA: 1.8%
Banco Ganadero SA, ADR C Banking 215,000 4,622,500
Banco Industrial Colombiano SA Banking 437,000 1,522,247
Bavaria SA Beverages & Tobacco 65,644 267,482
Cementos Argos SA Building Materials & Components 2,580,385 13,527,659
Cia Colombiana de Tabacos SA Coltabaco Beverages & Tobacco 2,114,327 6,305,998
Compania Nacional de Chocolates SA Food & Household Products 1,764,924 14,944,497
Compania Suramericana de Seguros Insurance 1,264,146 23,116,961
Promigas SA Utilities Electrical & Gas 197,437 627,905
-----------
64,935,249
- ---------------------------------------------------------------------------------------------------------------------------------
CZECH REPUBLIC: 1.4%
* CEZ Utilities Electrical & Gas 135,720 4,886,000
* CEZ, GDR Utilities Electrical & Gas 412,580 14,852,880
* CEZ, GDS, 144A Utilities Electrical & Gas 30,000 1,080,000
Chemopetrol Group AS Chemicals 259,501 11,260,248
Elektrarny Opatovice AS Energy Sources 20,096 3,241,195
Komercni Banka AS Banking 9,822 818,440
* SPT Telecom AS Telecommunications 94,000 11,704,199
Tabak AS Beverages & Tobacco 11,168 2,813,150
-----------
50,656,112
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
ECUADOR: 0.1%
La Cemento Nacional CA, GDR Multi-Industry 8,400 $ 1,923,600
- ---------------------------------------------------------------------------------------------------------------------------------
EGYPT: 0.1%
Commercial International Bank Ltd. Banking 9,565 1,443,391
- ---------------------------------------------------------------------------------------------------------------------------------
GHANA: 0.1%
Ashanti Goldfields Co. Ltd., GDR Metals & Mining 456,000 5,643,000
- ---------------------------------------------------------------------------------------------------------------------------------
GREECE: 3.8%
Alpha Credit Bank Banking 712,701 45,354,488
Alpha Leasing SA Financial Services 250,690 4,877,435
Delta Dairy SA Food & Household Products 465,250 5,318,005
Delta Dairy SA, pfd. Food & Household Products 189,101 1,571,307
Elais Oleaginous Co. Food & Household Products 169,100 4,828,785
Ergo Bank SA Banking 305,480 15,483,877
Etba Leasing Financial Services 120,040 1,384,272
Fourlis Brothers Corp. SA Appliances & Household Durables 298,150 3,746,362
Hellas Can-Container Manufacturers Metals & Mining 248,290 3,477,127
Hellenic Bottling Co. SA Food & Household Products 193,385 6,196,378
Hellenic Telecommunications Organizations OTE Telecommunications 287,310 4,908,644
Hellenic Telecommunications Organizations OTE,
144A Telecommunications 815,000 13,924,142
Intracom SA, reg. Electrical & Electronics 91,000 2,047,140
National Bank of Greece SA Banking 133,275 8,481,284
Titan Cement Co., reg. Building Materials & Components 247,410 13,453,063
Titan Cement Co., reg. pfd. Building Materials & Components 7,100 256,706
X. Benrubi & Son SA Food & Household Products 220,120 706,640
------------
136,015,655
- ---------------------------------------------------------------------------------------------------------------------------------
HONG KONG: 16.2%
C.P. Pokphand Co. Ltd. Food & Household Products 215,000 84,088
Cheung Kong Holdings Ltd. Multi-Industry 12,151,000 108,007,143
China Overseas Land & Investment Ltd. Real Estate 16,777,000 8,513,766
China Treasure Telecomunications Holdings Ltd. Electrical & Electronics 4,132,000 144,242
* Citybus Transportation 1,060,178 280,996
CNT Group Ltd. Multi-Industry 31,301,789 2,549,632
Cross Harbour Tunnel Co. Ltd. Transportation 1,459,598 3,179,808
Dairy Farm International Holdings Ltd. Merchandising 10,439,663 8,403,929
Dickson Concepts (International) Ltd. Merchandising 2,439,599 9,147,116
* East Asiatic Co. (Hong Kong) Ltd. (The) Wholesale & International Trade 2,976,000 307,816
* Fairwood Holdings Ltd. Food & Household Products 13,188,000 733,188
Fortei Holdings Ltd. Merchandising 5,768,000 499,652
Fu Hui Jewellery Co. (H.K.) Ltd. Recreation & Other Consumer Goods 4,630,000 431,004
Goldlion Holdings Ltd. Textiles & Apparel 7,614,000 6,251,070
Great Wall Electronic International Ltd. Electrical & Electronics 3,577,924 444,089
Hang Lung Development Co. Ltd. Real Estate 17,628,000 38,745,362
Hongkong Electric Holdings Ltd. Utilities Electrical & Gas 1,928,000 6,406,309
Hopewell Holdings Ltd. Construction & Housing 13,401,002 8,663,134
HSBC Holdings PLC Banking 4,165,974 89,141,987
Hualing Holdings Ltd. Appliances & Household Durables 968,000 107,632
IMC Holdings Ltd. Transportation 793,000 420,363
Jardine International Motor Holdings Ltd. Automobiles 4,571,000 6,116,730
Jardine Matheson Holdings Ltd. (Singapore) Multi-Industry 1,944,295 12,832,347
Jardine Strategic Holdings Ltd. (Singapore) Multi-Industry 5,349,562 19,365,414
* Jardine Strategic Holdings Ltd., wts. Multi-Industry 536,062 214,425
JCG Holdings Ltd. Financial Services 2,951,000 2,880,606
Joyce Boutique Holdings Ltd. Merchandising 2,347,000 594,753
</TABLE>
16
<PAGE> 19
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
HONG KONG (cont.)
K Wah International Holdings Ltd. Building Materials & Components 32,667,930 $ 8,067,198
* K Wah International Holdings Ltd., wts. Building Materials & Components 2,901,142 187,546
* KTP Holdings Ltd. Recreation & Other Consumer Goods 8,000,000 336,156
Lai Sun Development Co. Ltd. Real Estate 8,030,800 12,148,214
* Lai Sun Development Co. Ltd., wts. Real Estate 4,365,000 564,355
Lai Sun Garment International Ltd. Multi-Industry 4,127,000 6,563,075
Laws International Holdings Ltd. Textiles & Apparel 7,054,000 1,103,541
Leefung-Asco Printers Holdings Ltd. Broadcasting & Publishing 932,000 91,579
* Luks Industrial Co. Ltd. Appliances & Household Durables 3,214,000 315,811
* Luks Industrial Co. Ltd., wts. Appliances & Household Durables 642,800 23,686
New World Development Co. Ltd. Real Estate 11,044,051 74,607,494
NG Fund Hong Ltd. Food & Household Products 674,000 605,637
Peregrine Investments Holdings Ltd. Financial Services 2,307,000 3,952,130
* Peregrine Investments Holdings Ltd., wts. Financial Services 254,400 81,407
* S. Megga International Holdings Ltd. Electronic Components &
Instruments 5,782,000 381,255
Semi-Tech (Global) Co. Ltd. Appliances & Household Durables 3,394,356 5,617,397
* South Sea Development Co. Ltd. Real Estate 1,115,000 50,456
Stelux International Holdings Ltd. Multi-Industry 8,190,570 2,117,931
Sun Hung Kai & Co. Ltd. Financial Services 24,460,800 6,261,864
Sun Hung Kai Properties Ltd. Real Estate 5,169,900 63,332,862
Swire Pacific Ltd., B Multi-Industry 4,667,500 7,060,540
Tian An China Investments Co. Ltd. Real Estate 23,396,000 3,357,626
Tungtex (Holdings) Co. Ltd. Textiles & Apparel 6,914,000 759,829
Wheelock & Co. Ltd. Multi-Industry 10,613,000 30,256,209
Wing Shan International Ltd. Utilities Electrical & Gas 6,442,000 891,194
* Wo Kee Hong Holdings Ltd. Merchandising 22,943,000 1,868,781
* Wo Kee Hong Holdings Ltd., wts. Merchandising 4,588,600 51,021
* Yaohan Hongkong Corp. Ltd. Merchandising 9,530,000 381,964
Yue Yuen Industrial (Holdings) Ltd. Recreation & Other Consumer Goods 23,734,000 9,052,337
------------
574,555,696
- ---------------------------------------------------------------------------------------------------------------------------------
HUNGARY: 0.9%
* Danubius Hotel and Spa RT Leisure & Tourism 38,000 998,763
Egis RT Multi-Industry 67,100 3,919,354
* Fotex First Hungarian-American Photo-Service Multi-Industry 2,630,400 1,457,218
Gedeon Richter Ltd., Global investment
certificate Health & Personal Care 33,000 1,938,750
* Ibusz Leisure & Tourism 125,680 452,566
Inter-Europa Bank RT Banking 1,408 322,177
Mol Magyar Olay-Es Gazipari RT Energy Sources 12,340 154,155
OTP Bank, GDR Banking 448,000 8,034,632
Pick Szeged RT Food & Household Products 53,403 3,160,586
Pick Szeged RT, GDR Food & Household Products 30,430 1,800,959
* Tiszai Vegyi Kombinat RT Chemicals 149,558 1,701,835
* Tiszai Vegyi Kombinat RT, GDR, 144A Chemicals 571,000 6,452,300
* Tiszai Vegyi Kombinat RT, GDR, S Chemicals 152,000 1,717,600
-----------
32,110,895
- ---------------------------------------------------------------------------------------------------------------------------------
INDIA: 2.8%
Aban Loyd Chiles Offshore Ltd. Energy Sources 245,000 380,997
Arvind Mills Ltd. Textiles & Apparel 857,800 2,907,188
ATV Project India Ltd. Machinery & Engineering 1,732,000 258,471
Bharat Petroleum Corp., Ltd. Energy Sources 1,303,000 10,831,074
Bombay Dyeing & Manufacturing Co. Ltd. Chemicals 302,800 933,317
Bses Ltd. Utilities Electrical & Gas 502,300 2,893,304
Cochin Refineries Ltd. Energy Sources 113,350 313,017
DCW Ltd. Chemicals 500,000 345,188
</TABLE>
17
<PAGE> 20
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
INDIA (cont.)
Dr. Reddys Laboratories Ltd. Health & Personal Care 94,200 $ 430,929
Essar Shipping Ltd. Transportation 773,500 388,368
Flex Industries Ltd. Food & Household Products 40,000 79,219
Ganesh Benzoplast Ltd. Chemicals 159,100 108,286
Garden Silk Mills Ltd. Textiles & Apparel 229,600 90,303
Grasim Industries Ltd. Multi-Industry 651,650 7,602,583
Great Eastern Shipping Co. Ltd. Transportation 3,229,800 3,063,130
Gujarat Narmanda Valley Fertilizers Co. Ltd.,
ADR Chemicals 72,000 198,000
Hindalco Industries Metals & Mining 154,725 2,833,388
Hindustan Organic Chemicals Ltd. Chemicals 471,000 400,711
Hindustan Petroleum Corp. Ltd. Energy Sources 935,000 8,658,856
* India Cements Ltd. Building Materials & Components 207,000 519,665
India Cements Ltd., GDR Building Materials & Components 692,500 1,731,250
Indian Aluminium Co. Ltd. Metals & Mining 86,800 368,628
Indian Petrochemicals Corp. Ltd. Chemicals 2,118,800 7,106,993
Indian Rayon & Industries Ltd., GDR Multi-Industry 66,000 564,300
Indian Rayon and Industries Ltd. Multi-Industry 338,300 2,830,962
Indo Gulf Fertilisers & Chemicals Corp. Ltd. Chemicals 3,552,300 2,873,548
* Indo Gulf Fertilisers & Chemicals, GDR Chemicals 64,150 46,509
Industrial Credit & Inv. Corp. of India (ICICI) Financial Services 5,843,550 9,576,250
Industrial Development Bank of India Banking 1,383,600 3,357,690
ITC Bhadrachalam Paperboards Ltd. Forest Products & Paper 106,850 175,848
Larsen and Toubro Ltd. Multi-Industry 607,000 3,703,801
National Aluminium Co. Ltd. Metals & Mining 607,900 525,660
Oriental Bank of Commerce Banking 459,400 996,328
Reliance Industries Ltd. Chemicals 996,800 5,651,314
Shipping Corporation of India Ltd. Transportation 1,694,500 1,205,293
State Bank of India Banking 76,000 480,167
Steel Authority of India Ltd. Metals & Mining 1,445,000 745,676
Steel Authority of India Ltd., GDR, 144A Metals & Mining 62,000 596,006
Steel Authority of India Ltd, GDR, reg S Metals & Mining 561,000 5,392,893
* Sterlite Industries (India) Ltd. Metals & Mining 236,300 1,283,666
Tamil Nadu Newsprint & Papers Ltd. Forest Products & Paper 150,000 309,623
Tata Chemicals Ltd. Chemicals 439,000 2,109,282
Tata Iron & Steel Co. Ltd. Metals & Mining 542,300 2,477,033
Videocon International Ltd. Appliances & Household Durables 404,000 419,777
Wockhardt Health & Personal Care 138,800 788,856
----------
98,553,347
- ---------------------------------------------------------------------------------------------------------------------------------
INDONESIA: 3.6%
* Asia Pulp & Paper Co. Ltd., ADR Forest Products & Paper 429,000 4,879,875
PT Bank Dagang Nasional Indonesia, fgn. Banking 1,250,000 1,270,110
PT Bank Danamon, fgn. Banking 1,423,000 1,340,464
PT Bank PDFCI, fgn. Banking 623,000 580,271
PT Barito Pacific Timber, fgn. Forest Products & Paper 28,688,000 17,611,177
PT BBL Dharmala Finance, fgn. Financial Services 1,653,000 2,029,509
PT Bimantara Citra, fgn. Multi-Industry 1,903,000 2,537,870
PT Branta Mulia, fgn. Automobiles 1,356,500 1,493,184
*+ PT Charoen Pokphand Indonesia, fgn. Food & Household Products 7,950,500 8,793,684
PT Cipendawa Farm Enterprises, fgn. Food & Household Products 65,000 41,279
PT Dharmala Intiland, fgn. Real Estate 3,963,000 5,872,354
PT Duta Pertiwi Nusantura, fgn. Chemicals 687,500 298,344
PT Eratex Djaja, fgn. Textiles & Apparel 368,500 109,208
PT Gadjah Tunggal, fgn. Automobiles 19,561,500 8,488,797
PT Gajah Surya Multi Finance, fgn. Financial Services 1,173,200 707,794
PT Ganda Wangsa Utama, fgn. Textiles & Apparel 1,022,000 367,782
PT Hotel Prapatan, fgn. Leisure & Tourism 201,000 123,391
</TABLE>
18
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TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
INDONESIA (cont.)
PT Indah Kiat Pulp & Paper Corp., fgn. Forest Products & Paper 1,098,000 $ 801,884
PT Indocement Tunggal Prakarsa, fgn. Building Materials & Components 382,000 582,218
PT Intan Wijaya Chemical Industry, fgn. Chemicals 1,490,500 694,136
PT Inter-Pacific Bank, fgn. Banking 738,000 523,349
PT Jakarta International Hotel & Development,
fgn. Real Estate 6,439,250 4,634,515
PT Japfa Comfeed Indonesia, fgn. Food & Household Products 3,839,500 2,438,294
PT Kalbe Farma, fgn. Health & Personal Care 660,000 754,445
PT Metrodata Electronic, fgn. Electrical & Electronics 345,500 497,333
PT Multibreeder Adirama, fgn. Food & Household Products 858,750 318,123
PT Pabrik Kertas Tjiwi Kimia, fgn. Forest Products & Paper 5,848,910 5,819,195
PT Panasia Indosyntec, fgn. Textiles & Apparel 8,053,900 1,960,623
PT Polysindo Eka Perkasa, fgn. Textiles & Apparel 20,653,500 11,804,498
PT Pudjiadi Prestige Ltd., fgn. Real Estate 2,135,000 768,311
*+ PT Sarasa Nugraha, fgn. Textiles & Apparel 1,992,500 759,208
PT Semen Cibinong, fgn. Building Materials & Components 17,500 49,270
PT Sinar Mas Agro Resources & Technology Corp.,
fgn. Food & Household Products 5,184,500 3,676,561
PT Sinar Mas Multi Artha, fgn. Financial Services 12,855,200 10,748,950
PT Sumalindo Lestari Jaya, fgn. Forest Products & Paper 4,059,500 3,007,674
PT Summarecon Agung, fgn. Real Estate 833,040 282,147
PT Tambang Timah (Persero), fgn. Metals & Mining 2,631,500 4,790,622
PT Ultra Jaya Milk, fgn. Food & Household Products 4,139,500 1,927,794
PT Unggul Indah Corp., fgn. Chemicals 1,410,200 1,432,887
PT United Tractors, fgn. Machinery & Engineering 5,493,000 11,511,579
-----------
126,328,709
- ---------------------------------------------------------------------------------------------------------------------------------
ISRAEL: 0.9%
Agis Industries Ltd. Health & Personal Care 203,870 1,493,111
Bank Hapoalim BM Banking 2,147,109 3,401,806
Clal Industries Ltd. Multi-Industry 2,511,178 12,005,539
Discount Investment Corp. Multi-Industry 133,732 8,575,798
+ First International Bank of Israel Banking 31,977 3,689,351
* Koor Industries Ltd. Multi-Industry 18,334 1,597,514
----------
30,763,119
- ---------------------------------------------------------------------------------------------------------------------------------
ITALY: 3.1%
Banco Ambrosiano Veneto SPA, di Risp Banking 8,653,000 16,090,242
Instituto Finanziaro Industriale SPA, pfd. Automobiles 1,832,500 20,428,265
Istituto Mobiliare Italiano SPA Banking 1,085,000 9,261,148
Italmobiliare SPA Multi-Industry 1,272,710 19,518,804
Italmobiliare SPA, di Risp, conv. Multi-Industry 906,100 6,742,555
Mediobanca/Italmobiliare, 6.00%, conv.,
12/31/99 Multi-Industry 2,922,480,000** 1,929,685
Sirti SPA Construction & Housing 5,466,000 33,596,430
+ Teleco Cavi SPA, di Risp Telecommunications 557,000 1,524,769
-----------
109,091,898
- ---------------------------------------------------------------------------------------------------------------------------------
MALAYSIA: 3.1%
* Aokam Perdana Bhd. Multi-Industry 3,422,000 4,051,388
Berjaya Singer Bhd. Appliances & Household Durables 3,663,000 5,511,542
Berjaya Singer Bhd., fgn. Appliances & Household Durables 933,000 1,403,841
Boustead Holdings Bhd., fgn. Food & Household Products 968,000 2,165,591
Federal Flour Mills Bhd. Food & Household Products 2,221,250 5,541,031
Hong Leong Industries Bhd. Multi-Industry 1,328,000 4,522,194
* Hong Leong Industries Bhd, new Multi-Industry 796,800 2,697,541
* Hong Leong Industries Bhd, wts., fgn. Multi-Industry 332,000 78,875
Island & Peninsula Bhd, fgn. Real Estate 505,000 1,689,665
Leader Universal Holdings Bhd. Industrial Components 2,530,000 5,309,444
Malayawata Steel Bhd. Metals & Mining 1,626,000 3,064,645
Malayawata Steel Bhd., fgn. Metals & Mining 1,418,000 2,672,611
</TABLE>
19
<PAGE> 22
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
MALAYSIA (cont.)
Malaysian International Shipping Corp. Bhd.,
fgn. Transportation 5,552,000 $ 16,487,824
MBF Capital Bhd. Financial Services 5,280,000 8,571,768
Oriental Holdings Bhd. Automobiles 420,000 2,860,424
Oriental Holdings Bhd., fgn. Automobiles 2,022,624 13,775,147
Perlis Plantations Bhd. Multi-Industry 1,535,750 4,773,565
Perlis Plantations Bhd., fgn. Multi-Industry 3,597,500 11,182,093
Renong Bhd. Multi-Industry 5,885,000 10,439,438
* Renong Bhd., wts. Multi-Industry 87,250 42,839
Renong, 4.00%, conv., 9/09/01 Multi-Industry 139,600** 58,593
Shangri La Hotels (Malaysia) Bhd., fgn. Leisure & Tourism 414,000 390,148
Shangri-La Hotels (Malaysia) Bhd. Leisure & Tourism 2,252,202 2,122,447
-----------
109,412,654
- ---------------------------------------------------------------------------------------------------------------------------------
MEXICO: 7.6%
Alfa SA de CV, A Multi-Industry 3,860,768 17,827,606
Cementos Mexicanos SA de CV (Cemex), B Building Materials & Components 8,978,750 35,016,213
* Cifra SA, C Merchandising 18,397,824 22,436,371
Coca Cola Femsa SA de CV, ADR Beverages & Tobacco 390,600 11,278,575
Cydea SA de CV Chemicals 1,470,463 2,643,172
* DESC SA, A Multi-Industry 500,000 2,556,529
* DESC SA, B Multi-Industry 1,024,108 5,594,086
* DESC SA, C Multi-Industry 614,667 3,353,652
Fomento Economico Mexicano SA de CV, B Beverages & Tobacco 1,723,000 5,909,680
Grupo Carso SA de CV Multi-Industry 163,143 860,065
* Grupo Financiero Banamex Accival SA, B Banking 7,679,000 16,212,523
* Grupo Financiero Banamex Accival SA, L Banking 12,217,422 24,056,154
* Grupo Financiero Bancomer SA de CV, B Banking 35,846,000 14,343,864
* Grupo Financiero Bancomer SA de CV, L Banking 33,313,518 11,214,535
* Grupo Financiero Serfin SA, B Banking 26,071,187 8,975,218
Telefonos de Mexico SA, L Telecommunications 181,000 298,448
Telefonos de Mexico SA, L, ADR Telecommunications 2,257,300 74,490,900
Vitro SA Food & Household Products 6,538,388 11,877,407
-----------
268,944,998
- ---------------------------------------------------------------------------------------------------------------------------------
PAKISTAN: 0.5%
* Bank of Punjab Banking 2,764,606 1,110,536
* DG Khan Cement Co. Building Materials & Components 3,014,450 695,702
Engro Chemical Chemicals 1,003,900 3,368,884
Exide Pakistan Ltd. Energy Equipment & Services 18,400 16,022
Fauji Fertilizer Co. Ltd. Chemicals 1,526,800 2,571,339
Khadim Ali Sham Bukhari & Co. Ltd. Financial Services 223,309 89,146
* Kohinoor Industries Ltd. Textiles & Apparel 358,720 35,800
National Development Leasing Corp. Financial Services 918,853 166,210
* Pakistan Electron Ltd. Appliances & Household Durables 371,146 108,807
* Pakistan International Airlines Corp. Transportation 165,500 36,131
* Pakistan Telecom Corp., PTC Telecommunications 10,475,300 6,560,147
* Pakistan Telecom Corp., PTC, A Telecommunications 4,146,000 2,596,429
* Pakistan Telecom Corp., PTC, GDR Telecommunications 21,000 1,302,000
+ Trust Modaraba Financial Services 2,427,000 317,909
* Union Bank Ltd. Banking 1,049,978 261,971
----------
19,237,033
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
PERU: 0.1%
Cpt-Telefonica del Peru SA, ADR B Telecommunications 63,000 $ 1,189,125
- ---------------------------------------------------------------------------------------------------------------------------------
PHILIPPINES: 1.8%
* A Soriano Corp. Multi-Industry 16,716,567 1,779,711
* Belle Corp. Real Estate 56,285,000 15,622,833
* Keppel Philippine Holdings Inc., B Machinery & Engineering 682,650 75,273
* Philex Minning Corp., B Metals & Mining 21,294,095 2,428,984
Philippine Long Distance Telephone Co., ADR Telecommunications 456,575 23,285,325
* Philippine National Bank Banking 1,178,254 14,000,166
RFM Corp. Food & Household Products 28,117,750 4,811,022
Sime Darby Pilipinas Inc. Industrial Components 659,658 852,790
----------
62,856,104
- ---------------------------------------------------------------------------------------------------------------------------------
POLAND: 1.3%
Bank Gdanski SA Banking 282,714 3,677,629
* Bank Inicjatyw Gospodarczch SA, G Banking 4,883,425 6,812,339
Bank Przemyslowo-Handlowy SA Banking 108,970 7,030,568
Bank Rozwoju Eksportu SA Banking 45,000 1,349,655
Bank Slaski SA W Katowicach Banking 9,700 987,794
Elektrim Towarzystwo Handlowe SA Utilities Electrical & Gas 669,316 6,068,988
* Farm Food SA, rts. Food & Household Products 13,295 61,203
Farm Food SA Food & Household Products 66,476 1,071,072
Huta Olawa SA Metals & Mining 45,442 196,513
Mostostal Export SA Construction & Housing 1,235,436 2,929,820
Polifarb Ceiszyu SA Chemicals 952,769 5,283,193
* Raciborska Fabryka Kotlow SA Energy Equipment & Services 204,036 1,159,861
Rolimpex SA Wholesale & International Trade 19,294 150,051
Warta SA Insurance 145,000 2,351,433
Wielkopolski Bank Kredytowy SA Banking 900,944 6,095,527
Zaklady Cementowo Wapiennicze Gorazdze Chorula Building Materials & Components 115,243 2,873,640
----------
48,099,286
- ---------------------------------------------------------------------------------------------------------------------------------
PORTUGAL: 4.1%
Banco Comercial Portugues SA Banking 2,725,020 35,941,089
Banco Comercial Portugues, 8.75%, conv.,
5/21/02 Banking 8,780,000** 11,366,846
Banco Espirito Santo e Comercial de Lisboa Banking 1,693,545 29,796,780
Banco Totta & Acores SA Banking 905,080 17,068,390
BPI Socieda de Gestora de Participacoes Socias
SA Banking 1,569,294 19,533,940
* BPI Socieda de Gestora de Participacoes Socias,
new Banking 596,331 7,038,283
Cel-Cat Fabrica Nacional de Conductores
Electricos SA Electronic Components & 64,581 1,107,936
Instruments
+ Compta-Equipamentos e Servicos de Informatica
SA Business & Public Services 150,000 1,838,117
Espirito Santo Financial Holding SA, ADR Banking 953,200 12,629,900
Portucel Industrial Empresa Product de Celulose
SA Forest Products & Paper 729,000 4,231,538
Portugal Telecom SA Telecommunications 93,000 2,651,145
* Sociedade Portuguesa de Celulose SA Forest Products & Paper 110,940 2,962,216
-----------
146,166,180
- ---------------------------------------------------------------------------------------------------------------------------------
RUSSIA: 0.9%
* Chernogorneft Energy Sources 86,000 999,750
GUM Trade House Merchandising 36,000 990,000
Irkutskenergo Utilities Electrical & Gas 14,000,000 1,848,000
* Kamaz Automobiles 573,000 730,575
* Krasnoyarsk Aluminum Plant Metals & Mining 58,192 680,846
Lukoil-Holdings Energy Sources 321,000 3,688,290
* Lukoil Holdings., pfd. Energy Sources 311,000 2,559,530
* Megionneftegaz Multi-Industry 374,000 1,196,800
Mosenergo Utilities Electrical & Gas 4,454,000 4,543,080
* Norilsk Nickel Metals & Mining 473,000 2,483,250
* Norilsk Nickel, pfd. Metals & Mining 20,000 60,200
</TABLE>
21
<PAGE> 24
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
RUSSIA (cont.)
* Novolipetsk Mettallurgy Multi-Industry 8,000 $ 268,000
* Noyabrskneftegaz Multi-Industry 170,930 1,072,586
Primorsk Shipping Transportation 167,000 292,250
* Purneftegaz Energy Sources 272,000 707,200
Rostelekom Telecommunications 1,981,000 4,734,590
* Rostelekom, pfd. Telecommunications 554,000 1,066,450
* Saint Petersburg City Telephone Net, pfd. Telecommunications 31,000 28,675
* Unified Energy System Utilities Electrical & Gas 50,060,000 4,580,490
* Uralmash Machinery & Engineering 2,300 7,820
----------
32,538,382
- ---------------------------------------------------------------------------------------------------------------------------------
SINGAPORE: 2.0%
Acer Computer International Ltd. Electrical & Electronics 1,681,000 2,891,320
* Acer Computer International Ltd., wts. Electrical & Electronics 176,200 82,814
Acma Ltd., fgn. Electrical & Electronics 730,400 1,576,365
* Acma Ltd., fgn., wts. Electrical & Electronics 182,600 116,792
British American Tobacco Ltd. Beverages & Tobacco 119,000 510,255
Chemical Industries (Far East) Ltd. Chemicals 591,000 1,393,768
First Capital Corp. Ltd. Real Estate 1,111,000 3,350,547
First Capital Corp. Ltd., fgn. Real Estate 1,735,000 5,232,402
G.P. Batteries International Ltd. Electrical & Electronics 37,000 122,840
* GP Batteries International Ltd., wts. Electrical & Electronics 9,250 11,748
Hai Sun Hup Group Ltd. Transportation 6,523,000 4,801,465
Hinds Hotels International Ltd. Leisure & Tourism 335,000 428,536
Hinds Hotels International Ltd., fgn. Leisure & Tourism 449,000 574,366
Hour Glass Ltd. Merchandising 1,436,000 1,046,752
Inchcape Bhd., fgn. Wholesale & International Trade 2,132,000 7,404,788
Isetan (Singapore) Ltd., fgn. Merchandising 426,500 922,006
Jaya Holdings Ltd. Transportation 2,314,000 1,686,758
Jaya Holdings Ltd., 3.00%, conv., 8/31/98 Transportation 508,800** 413,607
* Jaya Holdings Ltd., warrants expire 8/31/98 Transportation 89,071 33,418
* Jaya Holdings Ltd., warrants expire 10/09/99 Transportation 164,760 68,881
Jurong Shipyard, fgn Machinery & Engineering 1,968,000 9,915,243
Natsteel Ltd. Metals & Mining 1,260,000 2,863,432
Natsteel Ltd., fgn. Metals & Mining 2,301,000 5,229,172
* Osprey Maritime Ltd. Transportation 849,500 1,293,100
Prima Ltd. Food & Household Products 947,000 3,485,350
Resources Development Corp. Ltd. Building Materials & Components 232,500 727,757
Sembawang Corp. Ltd. Multi-Industry 1,950,000 10,312,299
Singapore Bus Service (1978) Ltd., fgn. Transportation 328,200 1,723,912
TIBS Holdings Ltd. Transportation 788,800 1,392,365
* TIBS Holdings Ltd., wts. Transportation 640 284
WBL Corp. Ltd. Multi-Industry 1,243,000 2,913,628
----------
72,525,970
- ---------------------------------------------------------------------------------------------------------------------------------
SLOVAK REPUBLIC: 0.3%
Nafta Gbely AS Utilities Electrical & Gas 95,454 4,763,391
* Slovakofarma AS Health & Personal Care 617 69,320
Slovnaft AS Chemicals 278,604 6,781,965
* Vychodoslovenske Zeleziarne AS Metals & Mining 24,100 421,191
----------
12,035,867
- ---------------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA: 2.0%
Anglo American Industrial Corp. Ltd. Multi-Industry 88,924 3,221,677
Anglo American Platinum Corp. Ltd. Metals & Mining 77,110 457,369
Anglovaal Industried Ltd. Multi-Industry 507,666 2,294,995
BTR Dunlop Ltd. Industrial Components 1,623,700 1,761,308
CG Smith Ltd. Multi-Industry 276,900 1,352,392
Del Monte Royal Foods Ltd Food & Household Products 5,992,050 6,019,586
</TABLE>
22
<PAGE> 25
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA (cont.)
Engen Ltd. Energy Sources 2,577,152 $ 13,771,251
First National Bank Holdings Ltd. Banking 553,600 2,709,723
Kersaf Investments Ltd. Leisure & Tourism 27,900 255,683
Malbak Ltd. Multi-Industry 413,100 1,810,099
* McCarthy Retail Ltd. Appliances & Household Durables 974,200 2,498,750
McCarthy Retail, zero, conv., 9/30/03 Appliances & Household Durables 223,000** 524,313
Nedcor Ltd. Banking 109,222 1,494,113
Palabora Mining Co. Ltd. Metals & Mining 308,000 5,036,230
Polifin Ltd. Chemicals 293,010 488,507
Potgietersrust Platinums Ltd. Metals & Mining 153,903 756,603
* Rainbow Chicken Ltd. Food & Household Products 847,900 159,485
* Rainbow Chicken Ltd., conv., pfd. Food & Household Products 2,034,960 417,562
Rembrandt Group Ltd. Multi-Industry 365,770 3,264,058
Reunert Ltd. Electrical & Electronics 510,700 1,691,963
Sappi Ltd. Forest Products & Paper 917,913 8,240,322
Sasol Ltd. Energy Sources 2,473 29,337
South African Breweries Ltd. Beverages & Tobacco 144,500 3,659,987
South African Iron & Steel Industrial Corp.
Ltd. Metals & Mining 7,349,108 5,246,558
Sun International (South Africa) Ltd. Leisure & Tourism 3,028,842 2,427,735
----------
69,589,606
- ---------------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA: 2.4%
Asia Cement Co. Ltd. Building Materials & Components 57,380 1,439,593
Boram Bank Co. Ltd. Banking 741,840 6,145,420
* Boram Bank Co. Ltd., new Banking 82,357 638,389
BYC Co. Ltd. Textiles & Apparel 9,060 964,970
Central Banking Corp. Financial Services 407,993 6,276,815
* Cho Hung Bank, GDR 144A Banking 1,300,000 9,750,000
Choil Aluminium Mfg. Co. Ltd. Metals & Mining 63,326 1,229,049
Dae Duck Electronics Co. Ltd. Electrical & Electronics 43,698 2,115,087
Daegu Bank Co. Ltd. Banking 695,758 8,307,845
Daehan Synthetic Fiber Co. Ltd. Textiles & Apparel 25,010 2,175,426
Dongkuk Steel Mill Co. Ltd. Metals & Mining 173,440 3,427,749
Hae In Corp. Ltd. Merchandising 25,548 1,142,857
* Hana Bank, GDR Banking 481,708 7,288,242
Hankook Cosmetics Co. Ltd. Health & Personal Care 52,400 1,178,225
Korea First Bank Banking 1,025,090 5,192,172
Korea Kumho Petrochemical Chemicals 694,000 5,749,112
Kyong Nam Bank Banking 276,600 3,034,417
Kyung Dong Boiler Co Ltd Energy Equipment & Services 36,029 1,206,652
Moon Bae Steel Co. Ltd. Metals & Mining 15,480 357,231
Samsung Electronics Co. Ltd. Multi-Industry 400 23,746
Shinsung Industries Co. Ltd. Electrical & Electronics 40,000 904,142
Ssangyong Oil Refining Co Ltd Energy Equipment & Services 667,430 14,612,373
Tong Yang Merchant Bank Financial Services 248,739 2,796,474
----------
85,955,986
- ---------------------------------------------------------------------------------------------------------------------------------
SPAIN: 1.3%
Banco Bilbao Vizcaya Banking 314,200 16,965,469
Bankinter SA Banking 113,750 17,637,493
Telefonica de Espana SA Telecommunications 479,424 11,133,937
----------
45,736,899
- ---------------------------------------------------------------------------------------------------------------------------------
SRI LANKA: 0.1%
Aitken Spence & Co. Ltd. Multi-Industry 150,000 236,647
Associated Motorways Ltd. Automobiles 281,088 133,781
* Ceylon Holiday Resorts Ltd. Leisure & Tourism 144,600 50,978
* Colombo Dock Yard Ltd. Transportation 40,000 10,224
* Lanka Ceramic Ltd. Building Materials & Components 309,100 168,907
</TABLE>
23
<PAGE> 26
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
SRI LANKA (cont.)
Lanka Orix Leasing Co. Ltd. Financial Services 819 $ 2,072
National Develpoment Bank of Sri Lanka Banking 140,000 481,227
United Motor Lanka Ltd. Automobiles 341,808 166,445
---------
1,250,281
- ---------------------------------------------------------------------------------------------------------------------------------
TAIWAN: 0.1%
* United Microelectronics Corp. Electronic Components &
Instruments 633,000 897,709
- ---------------------------------------------------------------------------------------------------------------------------------
THAILAND: 1.4%
American Standard Sanitaryware (THB) Public Co.
Ltd., fgn Building Materials & Components 362,200 4,801,840
* Asia Fibre Public Co. Ltd., fgn. Textiles & Apparel 943,500 342,141
Ayudhya Insurance Public Co. Ltd. Insurance 4,700 36,286
Ayudhya Insurance Public Co. Ltd., fgn. Insurance 277,000 2,138,579
Bangkok Bank Public Co. Ltd. Banking 417,408 3,108,669
Bangkok Insurance, fgn. Insurance 8,000 113,546
Bangkok Land Public Co. Ltd. Real Estate 269,000 112,756
Bangkok Land Public Co. Ltd., fgn. Real Estate 1,257,500 1,397,440
Charoen Pokphand Feedmill Public Co. Ltd. Food & Household Products 794,900 2,479,607
Chareon Pokphand Feedmill Public Co. Ltd., fgn. Food & Household Products 338,500 1,227,501
Hua Thai Manufacturing Public Co. Ltd. Textiles & Apparel 175,000 464,010
Karat Sanitaryware Public Co. Ltd., fgn. Building Materials & Components 370,950 432,119
Kian Gwan (Thailand) Public Co. Ltd., fgn. Real Estate 96,000 260,158
* Land and House Public Co. Ltd. Multi-Industry 220,000 1,492,630
* Padaeng Industry Public Co. Ltd., fgn. Metals & Mining 535,665 214,091
Regional Container Lines Public Co. Ltd., fgn. Transportation 289,600 2,800,468
* Royal Ceramic Industry Public Co. Ltd., fgn. Building Materials & Components 53,200 38,376
Saha Pathanapibul Public Co Ltd., fgn. Food & Household Products 284,500 665,601
Saha Union Public Co. Ltd. Multi-Industry 5,009,700 4,297,489
Saha Union Public Co. Ltd., fgn. Multi-Industry 2,220,080 1,991,026
Sanyo Universal Electric Public Co. Ltd. Appliances & Household Durables 499,500 1,577,614
Sanyo Universal Electric Public Co Ltd., fgn. Appliances & Household Durables 949,700 2,999,520
Siam Cement Co. Ltd.(The), fgn. Building Materials & Components 108,500 3,401,466
Siam City Bank Public Co. Ltd., fgn. Banking 2,622,000 2,453,716
* Siam Commercial Bank Ltd., loc. Banking 292,000 1,912,813
+ Sino-Thai Engineering & Construction Public Co. Construction & Housing 1,289,700 3,369,332
Textile Prestige Public Co. Ltd., fgn. Textiles & Apparel 99,000 148,620
Thai Asahi Glass Public Co. Ltd. Building Materials & Components 40,700 45,626
Thai Asahi Glass Public Co. Ltd., fgn. Building Materials & Components 32,000 35,873
Thai Farmers Bank Public Co. Ltd. Banking 971,000 4,732,707
Thai Rayon Public Co. Ltd. Textiles & Apparel 43,700 166,137
Thai Rayon Public Co. Ltd., fgn. Textiles & Apparel 11,400 62,232
Thai Wacoal Public Co. Ltd. Textiles & Apparel 140,700 592,513
Thai Wacoal Public Co. Ltd., fgn. Textiles & Apparel 148,800 657,085
Thai Wah Public Co. Ltd., fgn. Multi-Industry 208,900 126,256
United Motor Works (Siam) Public Co. Ltd. Machinery & Engineering 30,400 101,349
United Standard Terminal Public Co. Ltd., fgn. Wholesale & International Trade 155,600 285,159
----------
51,082,351
- ---------------------------------------------------------------------------------------------------------------------------------
TURKEY: 4.6%
Akbank Banking 351,697,998 47,833,472
* Akcansa Cimento Building Materials & Components 44,743,621 4,125,738
Aksigorta AS Insurance 32,286,000 952,654
* Alarko Sanayii ve Ticaret SA Appliances & Household Durables 3,840,000 531,121
* Alcatel Teletas Endustri Tic AS Telecommunications 45,325,000 3,218,097
Anadolu Anonim Turk Sigorta Sirketi Insurance 17,364,000 768,532
Arcelik AS Appliances & Household Durables 171,190,797 17,363,670
Bagfas Chemicals 9,786,000 2,210,761
Beko Elektronik AS Appliances & Household Durables 47,214,562 4,462,418
</TABLE>
24
<PAGE> 27
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
TURKEY (cont.)
Borusan AS Industrial Components 15,548,000 $ 974,886
* Celik Halat ve Sanayii ve Ticaret AS Building Materials & Components 16,153,092 834,092
Cimentas Izmir Cimento Fabrikasi Turk AS Building Materials & Components 16,488,253 1,748,409
Cimsa Cimento Sanayi ve Ticaret AS Building Materials & Components 41,810,000 3,855,233
Erciyas Biracilik Food & Household Products 85,846,000 9,300,968
Eregli Demir ve Celik Fabrikalari AS Metals & Mining 139,943,750 16,775,104
Finans Bank AS, br. Banking 116,597,077 2,284,636
Goodyear Lastikleri TAS, Industrial Components 37,000 16,717
Izocam Ticaret ve Sanayii AS, br. Building Materials & Components 15,397,239 1,022,223
Kartonsan Forest Products & Paper 62,097,000 6,012,158
Koc Holding AS Multi-Industry 14,898,332 2,610,127
Koc Yatirim ve Sanayii Mamullesi Pazarlanca AS Multi-Industry 36,898,143 7,059,811
Marshall Boya ve Vernik Sanayii AS Industrial Components 12,978,392 993,275
Netas Northern Electric Telekomunic Asyon AS Electrical & Electronics 10,022,000 2,264,076
Otosan Otomobil Sanayii AS Automobiles 11,779,000 4,778,940
Petkim Petrokimya Holding AS Chemicals 5,454,000 2,187,635
* Sasa Sun'i Sente Chemicals 5,000,000 336,561
Tat Konserve Sanayii AS Food & Household Products 14,991,737 2,246,341
Tekstil Bankasi AS, br. Banking 182,516 5,049
* Tofas Turk Otomobil Fabrikasi AS Automobiles 103,077,650 4,039,465
Trakya Cam Sanayii AS Building Materials & Components 13,465,130 682,879
Turk Demir Dokum, br. Appliances & Household Durables 26,653,982 2,408,566
Turkiye Garanti Bankasi AS Banking 161,959,393 7,317,667
Vakif Finansal Kiralama AS Financial Services 16,152,092 625,531
------------
161,846,812
- ---------------------------------------------------------------------------------------------------------------------------------
VENEZUELA: 3.3%
* Banco Provincial SAICA Banking 101,061 187,797
Ceramica Carabobo CA, A Building Materials & Components 315,480 344,457
Ceramica Carabobo CA, A, ADR Building Materials & Components 143,000 156,135
Ceramica Carabobo CA, B Building Materials & Components 2,117,123 2,311,585
Consolidada Carabobo, A Building Materials & Components 5,053,975 221,524
Consolidada Carabobo, B Building Materials & Components 26,359,743 1,073,750
Electricidad de Caracas Utilities Electrical & Gas 84,142,611 85,334,288
Fabrica Nacional de Cementos CA Building Materials & Components 1,831,500 423,019
H.L. Boulton & Co. SA Multi-Industry 15,564,847 1,176,543
Industrias Ventane Utilities Electrical & Gas 3,960,414 2,644,406
Inmuebles y Valores Caracas CA Building Materials & Components 1,015,000 1,118,886
* Manufacturera de Aparatos Domesticos SA Appliances & Household Durables 545,225 602,174
Mavesa SA, ADR Food & Household Products 1,541,899 10,324,544
Siderurgica Venezolana Sivensa Saica Svs Metals & Mining 150,000 112,755
Siderurgica Venezolana Sivensa Saica Svs.,, ADR Metals & Mining 699,270 2,628,200
Siderurgica Venezolana Sivensa SAICA Svs., ADR,
B, new Metals & Mining 66,298 227,951
Venezolana de Cementos Vencemos #1 Building Materials & Components 2,345,746 6,403,019
Venezolana de Cementos Vencemos #2 Building Materials & Components 831,999 2,218,641
------------
117,509,674
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 28
TEMPLETON DEVELOPING MARKETS TRUST
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
ZIMBABWE: 0.1%
Delta Corp. Multi-Industry 14,000 $ 49,057
* Meikles Africa Ltd. Multi-Industry 300,000 444,000
Ta Holdings Multi-Industry 50,000 8,069
Zimbabwe Sun Ltd. Multi-Industry 1,780,000 664,761
--------------
1,165,887
--------------
TOTAL LONG TERM OBLIGATIONS (cost $2,788,908,436) 3,218,164,800
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 8.9% (cost $313,511,165)
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 4.82% to 5.01% with
maturities to 3/27/97 U.S. 315,965,000 313,570,696
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.9% (cost $3,102,419,601) 3,531,735,496
OTHER ASSETS, LESS LIABILITIES: 0.1% 3,646,166
--------------
TOTAL NET ASSETS: 100.0% $3,535,381,662
==============
</TABLE>
* NON-INCOME PRODUCING.
** PRINCIPAL AMOUNT IN CURRENCY OF COUNTRIES INDICATED.
+ SEE NOTE 5.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 29
TEMPLETON DEVELOPING MARKETS TRUST
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $3,102,419,601) $3,531,735,496
Cash 2,091,895
Receivables:
Investment securities sold 3,017,354
Fund shares sold 10,333,338
Dividends and interest 6,678,504
--------------
Total assets 3,553,856,587
--------------
Liabilities:
Payables:
Investment securities purchased 7,297,985
Fund shares redeemed 2,610,211
Accrued expenses 8,566,729
--------------
Total liabilities 18,474,925
--------------
Net assets, at value $3,535,381,662
==============
Net assets consist of:
Distribution in excess of net investment income $ (1,516,948)
Net unrealized appreciation 429,315,895
Accumulated net realized gain 17,459,582
Net capital paid in on shares of beneficial interest 3,090,123,133
--------------
Net assets, at value $3,535,381,662
==============
Class I
Net asset value per share
($3,308,752,690 / 214,864,523 shares outstanding) $ 15.40
==============
Maximum offering price
($15.40 / 94.25%) $ 16.34
==============
Class II
Net asset value per share
($226,628,972 / 14,845,210 shares outstanding) $ 15.27
==============
Maximum offering price
($15.27 / 99.00%) $ 15.42
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 30
TEMPLETON DEVELOPING MARKETS TRUST
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
for the year ended December 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
(net of $5,801,128 foreign taxes withheld)
Dividends $ 75,169,266
Interest 20,802,310
------------
Total income $ 95,971,576
Expenses:
Management fees (Note 3) 37,609,530
Administrative fees (Note 3) 2,831,572
Distribution fees (Note 3)
Class I 8,450,539
Class II 1,423,427
Transfer agent fees (Note 3) 4,303,000
Custodian fees 5,633,000
Reports to shareholders 1,273,000
Audit fees 54,000
Legal fees 11,000
Registration and filing fees 433,500
Trustees' fees and expenses 105,000
Other 87,082
------------
Total expenses 62,214,650
------------
Net investment income 33,756,926
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments 89,204,921
Foreign currency transactions (4,537,071)
------------
84,667,850
Net unrealized appreciation on:
Investments 445,595,591
Foreign currency translation of other assets and liabilities 618,176
------------
446,213,767
------------
Net realized and unrealized gain 530,881,617
------------
Net increase in net assets resulting from operations $564,638,543
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 31
TEMPLETON DEVELOPING MARKETS TRUST
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 33,756,926 $ 34,733,235
Net realized gain on investment and foreign currency transactions 84,667,850 36,819,502
Net unrealized appreciation (depreciation) 446,213,767 (67,443,609)
-------------- --------------
Net increase in net assets resulting from operations 564,638,543 4,109,128
Distributions to shareholders:
From net investment income
Class I (34,428,429) (32,067,523)
Class II (1,401,202) (535,755)
Amount in excess of net investment income
Class I (1,420,492) --
Class II (96,456) --
From net realized gain
Class I (69,400,180) (38,696,973)
Class II (4,469,289) (521,839)
Capital share transactions (Note 2)
Class I 723,963,075 204,236,626
Class II 169,320,035 42,998,205
-------------- --------------
Net increase in net assets 1,346,705,605 179,521,869
Net assets:
Beginning of year 2,188,676,057 2,009,154,188
-------------- --------------
End of year $3,535,381,662 $2,188,676,057
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 32
TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Developing Markets Trust (the Fund) is a Massachusetts business trust
and an open-end, diversified management investment company registered under the
Investment Company Act of 1940. The Fund seeks long-term capital appreciation by
investing in securities of issuers of countries having developing markets. The
following summarizes the Fund's significant accounting policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange on
which the securities are traded. Over-the-counter securities for which no sale
is reported are valued at the mean between the last current bid and asked
prices. Securities for which market quotations are not readily available are
valued at fair value as determined by management in good faith and approved by
the Board of Trustees.
B. FOREIGN CURRENCY TRANSACTIONS:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into a foreign exchange contract to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rates.
The Brazilian government has exercised and may continue to exercise substantial
influence over the exchange of Brazilian currency. Under current Brazilian law,
whenever there occurs a serious imbalance, Brazil's National Monetary Council
may, for a limited period, impose restrictions on foreign capital remittances
abroad. Exchange control regulations may restrict repatriation of investment
income, capital, or the proceeds of securities sales by foreign investors.
C. INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND EXPENSES:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign
securities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
E. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles 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 reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
30
<PAGE> 33
TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Fund offered two classes of shares: Class I shares and Class II shares.
Shares of each class are identical except for their initial sales load, a
contingent deferred sales charge on Class II shares, distribution fees, and
voting rights on matters affecting a single class. At December 31, 1996, there
were an unlimited number of shares of beneficial interest authorized for each
class of shares ($0.01 par value). Transactions in the Fund's shares were as
follows:
<TABLE>
<CAPTION>
CLASS I
-------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 81,183,040 $1,183,527,421 48,470,874 $ 646,712,609
Shares issued on reinvestment of distributions 6,016,317 88,975,415 4,711,716 59,816,280
Shares redeemed (37,415,543) (548,539,761) (37,809,132) (502,292,263)
---------- -------------- ----------- -------------
Net increase 49,783,814 $ 723,963,075 15,373,458 $ 204,236,626
========== ============== =========== =============
</TABLE>
<TABLE>
<CAPTION>
CLASS II
-------------------------------------------------------
FOR THE PERIOD
MAY 1, 1995
YEAR ENDED THROUGH
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 12,543,242 $181,957,609 3,421,478 $46,480,813
Shares issued on reinvestment of distributions 328,438 4,824,061 66,344 839,919
Shares redeemed (1,194,443) (17,461,635) (319,849) (4,322,527)
---------- ------------ --------- -----------
Net increase 11,677,237 $169,320,035 3,167,973 $42,998,205
========== ============ ========= ===========
</TABLE>
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton Asset
Management Ltd. (TAML), Franklin Templeton Services, Inc. (FTSI), Franklin
Templeton Distributors, Inc. (FTD) and Franklin Templeton Investor Services,
Inc. (FTIS), the Fund's investment manager, administrative manager, principal
underwriter, and transfer agent, respectively.
The Fund pays monthly an investment management fee to TAML equal, on an annual
basis, to 1.25% of the average daily net assets of the Fund. The Fund pays FTSI
monthly an administrative fee of 0.15% per annum on the first $200 million of
the Fund's aggregate average daily net assets, 0.135% of the next $500 million,
0.10% of the next $500 million, and 0.075% per annum of such average net assets
in excess of $1.2 billion. For the year ended December 31, 1996, FTD received
net commissions of $1,902,013 from the sale of the Fund's shares and FTIS
received fees of $4,303,000.
Under the distribution plans for Class I and Class II shares, the Fund
reimburses FTD quarterly for FTD's costs and expenses in connection with
activities that are primarily intended to result in a sale of Fund shares,
subject to a maximum of 0.35% and 1.00% per annum of the average daily net
assets of Class I and Class II shares, respectively. Under the Class I
distribution plan, costs and expenses exceeding the maximum may be reimbursed in
subsequent periods. At December 31, 1996 there were no unreimbursed expenses.
Class II shares redeemed within 18 months are subject to a contingent deferred
sales charge. Contingent deferred sales charges of $111,388 were paid to FTD for
the year ended December 31, 1996.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel for
the Funds, which firm received fees for the year ended December 31, 1996.
31
<PAGE> 34
TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the year
ended December 31, 1996 aggregated $1,182,991,292 and $324,936,882,
respectively. The cost of securities for federal income tax purposes is
$3,103,465,711. Realized gains and losses are reported on an identified cost
basis.
At December 31, 1996, the aggregate gross unrealized appreciation and
depreciation of portfolio securities, based on cost for federal income tax
purposes, was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 747,492,169
Unrealized depreciation (319,222,384)
-------------
Net unrealized appreciation $ 428,269,785
=============
</TABLE>
5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" as investments
in portfolio companies in which the Fund owns 5% or more of the outstanding
voting securities. Investments in "affiliated companies" at December 31, 1996
amounted to $28,370,889. For the year ended December 31, 1996, dividends and
interest income from "affiliated companies" was $287,580 and net realized losses
from disposition of "affiliated companies" were $136,317.
32
<PAGE> 35
TEMPLETON DEVELOPING MARKETS TRUST
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
Templeton Developing Markets Trust
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton Developing Markets Trust as of December
31, 1996, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton Developing Markets Trust as of December 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
[McGLADREY & PULLEN, LLP SIGNATURE]
New York, New York
January 31, 1997
33
<PAGE> 36
NOTES
--------
<PAGE> 37
NOTES
--------
<PAGE> 38
NOTES
--------
<PAGE> 39
FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST E Call 1-800/DIAL BEN (1-800/342-5236) today for a free
descriptive brochure and prospectus on any of the funds listed below. The
prospectus contains more complete information, including fees, charges and
expenses, and should be read carefully before investing or sending money.
GLOBAL GROWTH
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton
Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
FUND ALLOCATOR SERIES:
Franklin Templeton
Conservative Target Fund
Franklin Templeton
Moderate Target Fund
Franklin Templeton
Growth Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR NON-U.S. INVESTORS:
Franklin Tax-Advantaged
High Yield Securities Fund
Franklin Tax-Advantaged
International Bond Fund
Franklin Tax-Advantaged U.S.
Government Securities Fund
FOR CORPORATIONS:
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*TWO OR MORE FUND OPTIONS AVAILABLE: LONG-TERM PORTFOLIO, INTERMEDIATE-TERM
PORTFOLIO, A PORTFOLIO OF INSURED MUNICIPAL SECURITIES,
AND/OR A HIGH YIELD PORTFOLIO (CA) AND A MONEY MARKET PORTFOLIO (CA AND NY).
**THE FUND MAY INVEST UP TO 100% OF ITS ASSETS IN BONDS THAT PAY INTEREST
SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX.
***PORTFOLIO OF INSURED MUNICIPAL SECURITIES.
TO ENSURE THE HIGHEST QUALITY OF SERVICE, TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS MAY BE MONITORED, RECORDED AND ACCESSED. THESE CALLS CAN BE
DETERMINED BY THE PRESENCE OF A REGULAR BEEPING TONE.
12/96.1
<PAGE> 40
[MAP OF GLOBE]
Templeton Developing
Markets Trust
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
Principal Underwriter:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida, 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800-342-5236
This report must be preceded or accompanied by the current prospectus of the
Templeton Developing Markets Trust, which contains more complete information
including risk factors, charges and expenses. Like any investment in
securities, the Fund's portfolio will be subject to the risk of loss from
market, currency, economic, political, and other factors, as well as investment
decisions by the Investment Manager which will not always be profitable or
wise. The Fund and Fund investors are not protected from such losses by the
Investment Manager. Therefore, investors who cannot accept the risk of such
losses should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our
service departments may be monitored, recorded and accessed. These calls can
be determined by the presence of a regular, beeping tone.
TL711 A96 02/97
[Recycled Paper Logo]
