TEMPLETON DEVELOPING MARKETS TRUST, N-30D, 1998-02-25

TEMPLETON DEVELOPING MARKETS TRUST
N-30D, 1998-02-25

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<PAGE> 1
TEMPLETON DEVELOPING
MARKETS TRUST

Annual Report
DECEMBER 31, 1997

[LOGO] FRANKLIN TEMPLETON
<PAGE> 2
[CELEBRATING OVER 50 YEARS LOGO]

Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective, and to expect that mixed in with the good
years can be some bad years. It's important to remember that all securities
markets move both up and down, as do mutual fund share prices. We appreciate
your past support and look forward to serving your investment needs in the years
ahead.

In 1992, Sir John Templeton retired after a 50-year career of helping investors
manage their money. Currently he devotes all of his time and efforts to the John
Templeton Foundation. A major portion of his assets remain invested in the
Templeton funds which are managed by many of the investment professionals he
selected and trained.

[PHOTO]

J. MARK MOBIUS, PH.D.
President
Templeton Developing
Markets Trust

Dr. Mobius, a German citizen, has been living in emerging market countries since
earning his Ph.D. in economics and political science at Massachusetts Institute
of Technology in 1964. During his extensive travels, he has acquired a thorough
knowledge of the business practices and customs that are unique to developing
nations.
<PAGE> 3

SHAREHOLDER LETTER

- -------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------

Dear Shareholder:

This annual report of the Templeton Developing Markets Trust covers the fiscal
year ended December 31, 1997.

During the first half of the period, large capital inflows from developed market
countries contributed to rising prices of many emerging market equities.
However, since June, an Asian currency crisis affecting several emerging market
countries caused these prices to fall sharply. Within this environment, the
Fund's Class I shares provided a one-year total return of -9.41%, as discussed
in the Performance Summary on page 6. We understand how uncomfortable it can be
to watch the value of your fund decline, but we have always recommended that
shareholders focus on the long-term and we remain optimistic about the eventual
recovery of Asian economies and the long-term prospects for developing markets
in general.

You may find a complete listing of the Fund's portfolio holdings, including the
number of shares and dollar value, beginning on page 23 of this report.

CONTENTS

<S> <C>
Shareholder Letter .............. 1

Performance Summary
Class I ....................... 6
Class II ...................... 10
Advisor Class ................. 14

Travel Letter ................... 18

Financial Highlights &
Statement of Investments ........ 20

Financial Statements ............ 40

Notes to Financial Statements ... 43

Independent Auditor's Report .... 47
</TABLE>

[FUND CATEGORY PYRAMID GRAPHIC]

<PAGE> 4

CHANGE IN VALUE OF VARIOUS CURRENCIES VS. U.S. DOLLAR*
12/31/96-12/31/97
--------------------------------------------
Indonesian rupiah -56.3%
South Korean won -47.4%
Thai baht -45.4%
Malaysian ringgit -34.8%

Philippine peso -33.4%

Singapore dollar -16.6%

Hong Kong dollar -0.2%
*Source: Bloomberg.

TOTAL RETURN OF LOCAL STOCK INDEX, MEASURED IN U.S. DOLLARS*
Year ended 12/31/97
--------------------------------------------

Thailand -74.7%

Indonesia -70.5%

South Korea -69.2%

Malaysia -67.8%

Philippines -60.3%

Singapore -41.1%

Hong Kong -17.7%

*Source: Bloomberg.

The crisis first became apparent when the Thai government devalued the baht in
July 1997. During the remainder of the year, the value of the Thai baht declined
45%, the Indonesian rupiah skidded 55%, the Malaysian ringgit plunged 35%, the
Philippine peso dropped 33%, and the Singapore dollar fell 15% versus the U.S.
dollar.(1) These devaluations thrust many companies into bankruptcy, and
adversely affected the banking systems in these countries. Stock markets in the
region also suffered, as a rush for cash drove equity prices down in a wild
melee of selling, the likes of which had not been seen for many years. As of
December 31, 1997, the Thai market was down 56% in local currency terms from its
yearly high reached on January 22, 1997. Enormous falls from 1997 highs were
also seen in the markets in Korea (-53% since June 17), Malaysia (-53% since
February 25) and a number of other countries.(2)

During the latter half of the reporting period, the Asian currency crisis
created some exceptional opportunities in certain stocks we previously had
considered overvalued. Seeking to take advantage of these opportunities, we sold
shares in Latin America and Eastern Europe, and bought others in Asia, where
prices had declined the most. For example, because we believed they represented
excellent opportunities for long-term investors, we increased our Thai stock
holdings from 1.4% of total net assets on December 31, 1996 to 4.4% on December
31, 1997.

1. Source: Bloomberg. Percentages represent the change in value of various
currencies versus the U.S. dollar from June 30, 1997 to December 31, 1997.
2. Source: Bloomberg.

2
<PAGE> 5

At year-end, the Fund owned investments in 35 countries, with Brazil being our
largest country holding (12.7% of total net assets). Our largest regional
holdings were Latin America (36.4%), followed by Asia (35.7%), Europe (14.7%),
and the Mid-East/Africa (4.5%). Only 8.7% of the Fund's total net assets were
held in short-term investments and other net assets, down from 14.3% at
mid-year, reflecting the exceptional number of buying opportunities we were able
to locate.

Looking forward, we believe that many countries in Asia, having swallowed the
bitter medicine of currency devaluation, may be well-placed for an export-led
recovery, despite higher costs for imported raw materials. This may be
particularly true of Indonesia, Malaysia and Thailand. Using a theory known as
Purchasing Power Parity (PPP), which calculates the degree to which a given
currency may be either under- or over-valued versus the U.S. dollar, it appears
to us that the rupiah, ringgit, and baht have become seriously undervalued and
may actually begin appreciating if exports begin to grow strongly. Such
developments, if they occur, could help stock prices in all these countries rise
from depressed year-end levels, especially in Thailand, where we are finding
what we consider to be some of the best bargains in emerging markets since the
Mexican peso crisis of 1994-95.

In our view, the situation is somewhat different in the Philippines and
Singapore, where local currencies are not yet undervalued according to PPP
theory. International investors may continue selling the Philippine peso and
Singapore dollar, which could negatively impact these economies.

GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
12/31/97

<S> <C>
Latin America 36.4%

Asia 35.7%

Europe 14.7%

Mid-East/Africa 4.5%

Short-Term Investments
& Other Net Assets 8.7%
</TABLE>

3
<PAGE> 6

In Hong Kong, where authorities were able to defend its dollar's peg to the U.S.
dollar throughout 1997 by sharply increasing overnight interbank interest rates,
the government faces a dilemma. If it maintains its fixed-rate exchange currency
policy versus the U.S. dollar, it risks further attacks in the foreign exchange
market and continued upward pressure on interest rates. This could damage the
property sector and the outlook for Hong Kong banks. On the other hand, by
floating the currency, the government risks inflation. A difficult choice, but
given the underlying health of the economy, we believe Hong Kong's government
has made the right decision in continuing its dollar's peg to the U.S. dollar,
at least for the moment. In the long run, however, the Hong Kong dollar may have
to be devalued unless inflation there can be lowered below the U.S. inflation
rate.

In our opinion, the current emerging market crisis represents an opportunity to
purchase stocks that were previously overvalued. Consequently, we firmly believe
that now is the time to maintain our rational investing approach and seek to buy
what we perceive to be bargain-priced stocks.

Please remember, this discussion reflects our views and opinions as of December
31, 1997, the end of the reporting period. However, market and economic
conditions are changing constantly, which may affect our strategies and
portfolio holdings. Although historic performance is no guarantee of future
results, these insights may help you understand

TOP 10 HOLDINGS
12/31/97
COMPANY % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
--------------------------------------------

Electricidad de Caracas
Utilities Electrical & Gas
Venezuela 3.2%

Cemex SA, B
Building Materials & Components
Mexico 3.1%

Telmex - Telefonos de Mexico SA, L,
Telecommunications
Mexico 2.9%

Centrais Eletricas Brasileiras SA
Utilities Electrical & Gas
Brazil 2.8%

Telebras - Telecomunicacoes Brasileiras SA
Telecommunications
Brazil 2.4%
HSBC Holdings Plc
Banking
Hong Kong 2.3%
Akbank
Banking
Turkey 2.3%

Cheung Kong Holdings Ltd.
Multi-Industry
Hong Kong 1.9%

Petrobras - Petroleo Brasileiro SA, pfd.
Energy Sources
Brazil 1.9%

Grupo Financiero Banamex Accival SA
Banking
Mexico 1.5%

<PAGE> 7

our investment and management philosophy. 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. Investing in any emerging market means accepting a certain amount of
volatility and, in some cases, severe market corrections. 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 1268%
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.

Thank you for investing in the Templeton Developing Markets Trust. We appreciate
your support and welcome your comments.

Sincerely,
/s/ J. Mark Mobius, Ph.D.
J. Mark Mobius, Ph.D.
President
Templeton Developing Markets Trust

3. Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended December 31, 1997.

TOP 10 COUNTRIES
12/31/97

% OF TOTAL
COUNTRY NET ASSETS
--------------------------------------------

Brazil 12.7%

Mexico 12.1%

Hong Kong 8.3%

Turkey 6.6%

Argentina 4.4%

Thailand 4.4%
India 4.3%

Portugal 4.0%

Venezuela 3.7%

Singapore 3.5%

5
<PAGE> 8

PERFORMANCE SUMMARY

CLASS I

Templeton Developing Markets Trust - Class I provided a cumulative total return
of -9.41% for the one-year period ended December 31, 1997. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, and does not include the sales charge. We have
always maintained a long-term perspective when managing the Fund, and we
encourage shareholders to view their investments in a similar manner. As the
table on page 9 illustrates, the Fund produced a cumulative total return of more
than 60% since its inception on October 17, 1991.

The Fund's share price, as measured by net asset value, decreased by $2.46, from
$15.40 on December 31, 1996, to $12.94 on December 31, 1997. During the
reporting period, shareholders received per share distributions of 15.5 cents
($0.155) in income dividends, 1 cent ($0.01) in short-term capital gains, and 83
cents ($0.83) in long-term capital gains. Distributions will vary depending on
income earned by the Fund and any profits realized from the sale of securities
in the portfolio, as well as the level of the Fund's operating expenses.

The graph on page 8 compares the performance of Templeton Developing Markets
Trust - Class I and the Morgan Stanley Capital International(R) (MSCI) World
Index since the Fund's inception on October 17, 1991. The Index includes
approximately 1,500 companies, representing the stock markets of 23 countries,
including the

Past performance is not predictive of future results.
6
<PAGE> 9

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, 1997, the Index's U.S. weighting was 49.4%. During the year, the
index posted a total return of 16.23%, compared to the Fund's -9.41%.

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 approximately 1,200 stocks that foreign investors can buy in 26
countries, including Mexico, South Korea, Brazil, Jordan and Turkey. During the
year, the index posted a total return of -14.84%, compared to the Fund's -9.41%.

Please remember that the Fund's performance differs from that of an index
because an index is not managed according to any investment strategy, does not
contain cash (the Fund generally carries a certain percentage of cash at any
given time), and includes no sales charges or management expenses. Of course,
one cannot invest directly in an index, nor is an index representative of the
Fund's portfolio.

Past performance is not predictive of future results. 7
<PAGE> 10
CLASS I
Total Return Index Comparison
$10,000 Investment (10/17/91 - 12/31/97)

<TABLE>
<CAPTION>
TEMPLETON MSCI WORLD IFC INVESTABLE
DEVELOPING INDEX 2 COMPOSITE INDEX 2
MARKETS
TRUST -
CLASS I 1

THE HISTORICAL PERFORMANCE DATA SHOWN PERTAINS ONLY TO THE FUND'S CLASS I
SHARES. THE FUND OFFERS OTHER SHARE CLASSES SUBJECT TO DIFFERENT FEES AND
EXPENSES, WHICH AFFECT THEIR PERFORMANCE. PLEASE SEE THE PROSPECTUS FOR MORE
DETAILS.

1. Includes the sales charge and represents the change in value of an investment
over the period shown. Total return assumes reinvestment of dividends and
capital gains at net asset value.

2. Indices are unmanaged and include reinvested dividends. One cannot invest
directly in an index.

Past performance is not predictive of future results.
8
<PAGE> 11

CLASS I
Periods ended 12/31/97

<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (10/17/91)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -9.41% 77.57% 60.91%
Average Annual Total Return(2) -14.63% 10.86% 6.94%
Value of $10,000 Investment(3) $8,537 $16,746 $15,166
</TABLE>

<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year Total Return(4) 74.50% -8.64% 0.36% 22.51% -9.41%
</TABLE>

1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the sales charge.

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 periods indicated and include the maximum 5.75% initial sales
charge.

4. One-year total return represents the change in value of an investment over
the periods ended on the specified dates and does not include the sales charge.

Note: Total returns have been restated to reflect the current maximum initial
sales charge of 5.75%. Prior to July 1, 1992, Fund shares were offered at a
higher initial sales charge. Thus, actual total returns for investors who paid
this higher charge would have been lower than noted. On January 1, 1993, the
Fund implemented a plan of distribution under Rule 12b-1, which affects
subsequent performance.

All calculations assume reinvestment of dividends and capital gains at net asset
value. From October 17, 1991 to December 31, 1992, expense waivers by the Fund's
Manager increased the Fund's total returns. Investment return and principal
value will fluctuate with market conditions, currency volatility, and the
economic, social, and political climates of countries where investments are
made. Emerging 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. You may have a gain or loss when you sell your shares.

Past performance is not predictive of future results. 9
<PAGE> 12

CLASS II

Templeton Developing Markets Trust - Class II produced a cumulative total return
of -10.10% for the one-year period ended December 31, 1997. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, and does not include sales charges. We have always
maintained a long-term perspective when managing the Fund, and we encourage
shareholders to view their investments in a similar manner. As the table on page
13 illustrates, the Fund delivered a cumulative total return of more than 11%
since inception on May 1, 1995.

The Fund's share price, as measured by net asset value, decreased by $2.46, from
$15.27 on December 31, 1996, to $12.81 on December 31,1997. During the reporting
period, Class II shareholders received per share distributions of 6.61 cents
($0.0661) in dividend income, 1 cent ($0.01) in short-term capital gains, and 83
cents ($0.83) in long-term capital gains. Distributions will vary depending on
income earned by the Fund and any profits realized from the sale of securities
in the portfolio, as well as the level of the Fund's operating expenses.

The graph on page 12 compares the performance of Templeton Developing Markets
Trust - Class II and the Morgan Stanley Capital International(R) (MSCI) World
Index since the inception of Class II on May 1, 1995. The Index includes
approximately 1,500 companies representing the stock markets of 23 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

Past performance is not predictive of future results.
10
<PAGE> 13

developed countries, such as the U.S., where the Fund is not allowed to invest.
On December 31, 1997, the Index's U.S. weighting was 49.4%. During the year, the
Index posted a total return of 16.23%, compared to the Fund's -10.10%.

Past performance is not predictive of future results. 11
<PAGE> 14
CLASS II
Total Return Index Comparison
$10,000 Investment (5/1/95 - 12/31/97)

<TABLE>
<CAPTION>
TEMPLETON IFC
DEVELOPING MSCI WORLD INVESTABLE
MARKETS TRUST - INDEX 2 COMPOSITE
CLASS II 1 INDEX 2
<S> <C> <C> <C>
5/95 $ 9,902 $10,000 $10,000
5/95 $10,242 $10,088 $10,373
6/95 $10,265 $10,086 $10,434
7/95 $10,695 $10,593 $10,767
8/95 $10,408 $10,359 $10,478
9/95 $10,385 $10,663 $10,402
10/95 $10,015 $10,497 $10,007
11/95 $ 9,909 $10,863 $ 9,957
12/95 $10,070 $11,183 $10,303
1/96 $11,042 $11,387 $11,181
2/96 $10,983 $11,458 $10,919
3/96 $11,022 $11,651 $11,078
4/96 $11,381 $11,927 $11,522
5/96 $11,561 $11,940 $11,425
6/96 $11,623 $12,002 $11,559
7/96 $11,085 $11,581 $10,800
8/96 $11,311 $11,716 $11,134
9/96 $11,538 $12,177 $11,299
10/96 $11,577 $12,264 $11,056
11/96 $11,967 $12,953 $11,219
12/96 $12,244 $12,748 $11,269
1/97 $13,166 $12,904 $12,065
2/97 $13,538 $13,054 $12,655
3/97 $13,256 $12,799 $12,343
4/97 $13,377 $13,219 $12,133
5/97 $14,062 $14,038 $12,545
6/97 $14,650 $14,739 $13,087
7/97 $15,271 $15,421 $13,219
8/97 $13,917 $14,392 $11,530
9/97 $14,682 $15,175 $11,907
10/97 $11,902 $14,379 $ 9,949
11/97 $11,112 $14,636 $ 9,473
12/97 $11,007 $14,816 $ 9,596

</TABLE>

THE HISTORICAL PERFORMANCE DATA SHOWN PERTAINS ONLY TO THE FUND'S CLASS II
SHARES. THE FUND OFFERS OTHER SHARE CLASSES SUBJECT TO DIFFERENT FEES AND
EXPENSES, WHICH AFFECT THEIR PERFORMANCE. PLEASE SEE THE PROSPECTUS FOR MORE
DETAILS.

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 at net asset value.

2. Indices are unmanaged and include reinvested dividends. One cannot invest
directly in an index.

Past performance is not predictive of future results.
12
<PAGE> 15

CLASS II
Periods ended 12/31/97

<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR (5/1//95)
----------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) -10.10% 11.16%
Average Annual Total Return(2) -11.81% 3.66%
Value of $10,000 Investment(3) $8,819 $11,007
</TABLE>

<TABLE>
<CAPTION>
12/31/96 12/31/97
----------------------------------------------------------------------
<S> <C> <C>
One-Year Total Return(4) 21.58% -10.10%
</TABLE>

1. Cumulative total return represents the change in value of an investment over
the indicated periods and does not include sales charges.

2. Average annual total return represents the average annual change in value of
an investment over the indicated periods, and includes the 1.00% initial sales
charge and the 1.00% contingent deferred sales charge applicable to shares
redeemed within 18 months of purchase.

3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the indicated periods and include all sales charges.

4. One-year total return represents the change in value of an investment over
the periods ended on the specified dates indicated and does not include sales
charges.

All calculations assume reinvestment of dividends and capital gains at net asset
value. Investment return and principal value will fluctuate with market
conditions, currency volatility, and the economic, social, and political
climates of countries where investments are made. Emerging 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. You may
have a gain or loss when you sell your shares.

Past performance is not predictive of future results. 13
<PAGE> 16

ADVISOR CLASS

Templeton Developing Markets Trust - Advisor Class produced a cumulative total
return of -9.36% for the period from January 2, 1997 (commencement of sales)
through December 31, 1997. Cumulative total return measures the change in value
of an investment, assuming reinvestment of dividends and capital gains.

The Fund's share price, as measured by net asset value, decreased by $2.50 from
$15.43 on January 2, 1997 (commencement of sales), to $12.93 on December 31,
1997. During the reporting period, shareholders received per-share distributions
of 19.92 cents ($0.1992) in dividend income, 1 cent ($0.01) in short-term
capital gains, and 83 cents ($0.83) in long-term capital gains. Distributions
will vary depending on income earned by the Fund and any profits realized from
the sale of securities in the portfolio, as well as the level of the Fund's
operating expenses.

The graph on page 16 compares the performance of Templeton Developing Markets
Trust - Advisor Class and the Morgan Stanley Capital International(R) (MSCI)
World Index since the Fund's inception on October 17, 1991. For periods prior to
January 2, 1997, the Fund's performance is that of the Fund's Class I shares,
excluding the sales charge, but including Class I expenses. The Index includes
approximately 1,500 companies, representing the stock markets of 23 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, 1997, the Index's U.S. weighting was 49.4%. During the year, the
Index posted a total return of 16.23%, compared to the Fund's -9.18%.

Past performance is not predictive of future results.
14
<PAGE> 17

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 approximately 1,200 stocks that foreign investors can buy in 26
countries, including Mexico, South Korea, Brazil, Jordan and Turkey. During the
year, the Index posted a total return of -14.84%, compared to the Fund's -9.18%.

Past performance is not predictive of future results. 15
<PAGE> 18
ADVISOR CLASS
Total Return Index Comparison
$10,000 Investment (10/17/91 - 12/31/97)

<TABLE>
<CAPTION>
TEMPLETON IFC
DEVELOPING MSCI INVESTABLE
MARKETS TRUST - WORLD COMPOSITE
ADVISOR 1 INDEX 2 INDEX 2
<S> <C> <C> <C>
10/91 $10,000 $10,000 $10,000
10/91 $10,010 $10,088 $ 9,977
11/91 $ 9,980 $ 9,650 $ 9,996
12/91 $10,035 $10,355 $11,059
1/92 $10,205 $10,165 $12,438
2/92 $10,145 $ 9,991 $12,755
3/92 $ 9,935 $ 9,522 $12,689
4/92 $10,045 $ 9,656 $12,759
5/92 $10,215 $10,042 $12,683
6/92 $10,195 $ 9,707 $11,381
7/92 $ 9,965 $ 9,734 $11,348
8/92 $ 9,695 $ 9,973 $10,877
9/92 $ 9,584 $ 9,883 $10,652
10/92 $ 9,324 $ 9,617 $11,127
11/92 $ 8,953 $ 9,791 $11,054
12/92 $ 9,057 $ 9,873 $11,423
1/93 $ 9,507 $ 9,907 $11,370
2/93 $10,335 $10,143 $11,656
3/93 $10,176 $10,734 $12,022
4/93 $10,659 $11,233 $12,456
5/93 $11,243 $11,494 $12,722
6/93 $11,572 $11,399 $13,078
7/93 $11,531 $11,636 $13,486
8/93 $12,546 $12,171 $14,584
9/93 $13,039 $11,948 $15,175
10/93 $13,572 $12,279 $16,479
11/93 $14,270 $11,586 $17,523
12/93 $15,804 $12,155 $20,517
1/94 $16,125 $12,960 $20,656
2/94 $15,773 $12,794 $20,123
3/94 $15,139 $12,244 $18,089
4/94 $14,535 $12,625 $17,745
5/94 $14,524 $12,660 $18,164
6/94 $14,285 $12,627 $17,519
7/94 $14,785 $12,869 $18,777
8/94 $15,649 $13,259 $21,192
9/94 $15,795 $12,913 $21,716
10/94 $15,430 $13,282 $20,999
11/94 $14,878 $12,709 $20,193
12/94 $14,448 $12,834 $18,056
1/95 $13,630 $12,644 $15,642
2/95 $13,587 $12,831 $15,440
3/95 $13,738 $13,452 $15,411
4/95 $14,193 $13,923 $16,048
5/95 $14,680 $14,045 $16,647
6/95 $14,723 $14,043 $16,745
7/95 $15,351 $14,749 $17,279
8/95 $14,951 $14,423 $16,816
9/95 $14,929 $14,846 $16,694
10/95 $14,420 $14,615 $16,059
11/95 $14,258 $15,125 $15,979
12/95 $14,500 $15,570 $16,535
1/96 $15,915 $15,854 $17,943
2/96 $15,842 $15,953 $17,523
3/96 $15,909 $16,222 $17,779
4/96 $16,435 $16,606 $18,491
5/96 $16,704 $16,623 $18,335
6/96 $16,804 $16,711 $18,550
7/96 $16,043 $16,124 $17,333
8/96 $16,368 $16,312 $17,869
9/96 $16,715 $16,954 $18,133
10/96 $16,771 $17,075 $17,743
11/96 $17,352 $18,035 $18,005
12/96 $17,763 $17,749 $18,085
1/97 $19,113 $17,965 $19,362
2/97 $19,671 $18,176 $20,309
3/97 $19,277 $17,819 $19,809
4/97 $19,474 $18,405 $19,471
5/97 $20,483 $19,544 $20,133
6/97 $21,364 $20,522 $21,003
7/97 $22,268 $21,470 $21,214
8/97 $20,321 $20,037 $18,505
9/97 $21,457 $21,129 $19,109
10/97 $17,411 $20,020 $15,967
11/97 $16,263 $20,377 $15,203
12/97 $16,133 $20,629 $15,400
</TABLE>

THE HISTORICAL PERFORMANCE DATA SHOWN PERTAINS ONLY TO THE FUND'S ADVISOR CLASS
SHARES. THE FUND OFFERS OTHER SHARE CLASSES SUBJECT TO DIFFERENT FEES AND
EXPENSES, WHICH AFFECT THEIR PERFORMANCE. PLEASE SEE THE PROSPECTUS FOR MORE
DETAILS.

1. Represents the change in value of an investment over the period shown. Total
return assumes reinvestment of dividends and capital gains at net asset value.
On January 2, 1997, the Fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
the Fund's Class I performance, excluding the effect of the Class I maximum
initial sales charge, but including the effect of the Class I expenses,
including Rule 12b-1 fees; and (b) for periods after January 1, 1997, figures
reflect actual Advisor Class performance including the deduction of all fees and
expenses applicable only to that class.

2. Indices are unmanaged and include reinvested dividends. One cannot invest
directly in an index.

Past performance is not predictive of future results.
16
<PAGE> 19

ADVISOR CLASS
Periods ended 12/31/97

<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR* 5-YEAR* (10/17//91)*
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) -9.18% 78.02% 61.33%
Average Annual Total Return(1) -9.18% 12.24% 8.01%
Value of $10,000 Investment(2) $9,082 $17,802 $16,133
</TABLE>

*On January 2, 1997, the Fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
the Fund's Class I performance, excluding the effect of the Class I maximum
initial sales charge, but including the effect of the Class I expenses,
including Rule 12b-1 fees; and (b) for periods after January 1, 1997, figures
reflect actual Advisor Class performance including the deduction of all fees and
expenses applicable only to that class. Since January 2, 1997 (commencement of
sales), the cumulative total return of Advisor Class shares was -9.36%.

1. Cumulative total return represents the change in value of an investment over
the periods indicated. Average annual total return represents the average annual
change in value of an investment over the periods indicated. See Note below.

2. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated. See Note below.

3. One-year total return represents the change in value of an investment over
the periods ended on the specified dates. See Note below.

Note: On January 1, 1993, the Fund implemented a plan of distribution under Rule
12b-1, which affects performance for periods after that date.

Past performance is not predictive of future results. 17
<PAGE> 20

THE FOLLOWING LETTER WAS WRITTEN BY DR. MOBIUS AFTER A TRIP TO SOUTHEAST
ASIA.

I recently visited Thailand, Malaysia, Indonesia and Hong Kong, where the
stocks of many companies were selling at prices far below their actual asset
value. Although I met with some businessmen and investors who were glum
about declines in the value of their nations' currencies, others with more
perspective viewed the recent crisis as an opportunity.

One banker in Thailand admitted that his country and his bank were facing
very difficult times. He said: "It is up to us. If we are willing to work
hard and pull ourselves up, all will be well. At times like these, future
fortunes will be built." A leading Malaysian businessman told me that
governments and businessmen in the region would be forced to make changes
for the better -- changes that have been long overdue, and which will make
governments and the business community more efficient.

My trip to Malaysia revealed exciting possibilities for investors looking to
purchase assets at rock-bottom prices. One firm with extensive interests in
construction, manufacturing, property development and power generation was
the first Malaysian company to sign an agreement with the country's national
power company. It has more than US$400 million in deposits which it is
planning to use to acquire businesses that complement its existing
operations. I also inspected a diversified Malaysian shipping company
involved mainly with the transportation of natural gas, which appeared to be
a highly lucrative operation.

In Indonesia, I visited a cement company, which because of the weak rupiah,
is now able to export competitively to almost any
Past performance is not predictive of future results.

18
<PAGE> 21

country in the world. Another Indonesian company I looked at, a vertically
integrated pulp and paper producer, has its own energy supply, access to
low-cost hardwood fiber, and labor costs which are among the world's lowest.
This firm also benefits from the depreciation of the rupiah because about 50% of
its products are exported.

The crisis in Asia's capital markets can be seen as an opportunity to obtain
investment bargains, which probably will not be seen again for years to come. I
remember arriving in Hong Kong in 1967, at the time when China's Cultural
Revolution was spilling over the Crown Colony. As a result of threats that Red
Guard hordes would sweep over Hong Kong in a bloodthirsty search for the
"peoples' enemies," investors were fleeing and selling their assets for any
price. These prices proved to be bargains for investors willing to wait and
suffer through a number of difficult years. Many of those investors are today
among the richest people in the world. Will history repeat itself? It generally
does. But the rewards come only to the brave and the patient.*

Sincerely,

/s/ J. Mark Mobius, Ph.D.
J. Mark Mobius, Ph.D.
President
Templeton Developing Markets Trust

*This letter reflects the strategies employed for the Fund during the past year
and includes our opinions as of the close of the period. However, market and
economic conditions are constantly changing, which may affect our strategies and
portfolio holdings.

Past performance is not predictive of future results.

19
<PAGE> 22

TEMPLETON DEVELOPING MARKETS TRUST
Financial Highlights

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE - CLASS I
(For a share outstanding throughout the year)
Net asset value, beginning of year.................. $15.40 $13.01 $13.42 $15.27 $8.86
------------------------------------------------------------------
Income from investment operations:
Net investment income.............................. .16 .16 .21 .14 .04
Net realized and unrealized gain (loss)............ (1.62) 2.75 (.18) (1.44) 6.55
------------------------------------------------------------------
Total from investment operations.................... (1.46) 2.91 .03 (1.30) 6.59
------------------------------------------------------------------
Less distributions from:
Net investment income.............................. (.16) (.17) (.20) (.12) (.05)
In excess of net investment income................. -- (.01) -- -- --
Net realized gains................................. (.53) (.34) (.24) (.43) (.13)
In excess of net realized gains.................... (.31) -- -- -- --
------------------------------------------------------------------
Total distributions................................. (1.00) (.52) (.44) (.55) (.18)
------------------------------------------------------------------
Net asset value, end of year........................ $12.94 $15.40 $13.01 $13.42 $15.27
==================================================================
Total Return*....................................... (9.41)% 22.51% .36% (8.64)% 74.50%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of year (000's)..................... $3,444,029 $3,308,753 $2,147,664 $2,009,154 $1,396,392
Ratios to average net assets:
Expenses........................................... 1.96% 2.03% 2.10% 2.11% 2.20%
Net investment income.............................. 0.99% 1.16% 1.66% 1.08% 0.57%
Portfolio turnover rate............................. 30.06% 12.47% 9.76% 18.57% 16.01%
Average commission rate paid **..................... $.0019 $.0024 -- -- --
</TABLE>

*Total return does not reflect sales commissions.
**Relates to purchases and sales of equity securities. Prior to fiscal year 1996
disclosure of average commission rate was not required.

20
<PAGE> 23

TEMPLETON DEVELOPING MARKETS TRUST
Financial Highlights (continued)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995+
-------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE - CLASS II
(For a share outstanding throughout the year)
Net asset value, beginning of year.................................. $15.27 $12.95 $13.10
-------------------------------------------
Income from investment operations:
Net investment income.............................................. .09 .17 .02
Net realized and unrealized gain (loss)............................ (1.64) 2.60 .19
-------------------------------------------
Total from investment operations.................................... (1.55) 2.77 .21
-------------------------------------------
Less distributions from:
Net investment income.............................................. (.07) (.10) (.18)
In excess of net investment income................................. -- (.01) --
Net realized gains................................................. (.53) (.34) (.18)
In excess of net realized gains.................................... (.31) -- --
-------------------------------------------
Total distributions................................................. (.91) (.45) (.36)
-------------------------------------------
Net asset value, end of year........................................ $12.81 $15.27 $12.95
===========================================
Total Return*....................................................... (10.10)% 21.58% 1.70%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of year (000's)..................................... $402,542 $226,629 $41,012
Ratios to average net assets:
Expenses........................................................... 2.69% 2.74% 2.73%**
Net investment income.............................................. 0.21% 0.33% 0.19%**
Portfolio turnover rate............................................. 30.06% 12.47% 9.76%
Average commission rate paid***..................................... $.0019 $.0024 --
</TABLE>

*Total return does not reflect sales commissions or the contingent deferred
sales charge and is not annualized.
**Annualized.
***Relates to purchases and sales of equity securities. Prior to fiscal year
1996 disclosure of average commission rate was not required.
+For the period May 1, 1995 (commencement of operations) to December 31, 1995.

21
<PAGE> 24

TEMPLETON DEVELOPING MARKETS TRUST
Financial Highlights (continued)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997+
-------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE - ADVISOR CLASS
(For a share outstanding throughout the year)
Net asset value, beginning of year......................................................... $15.43
-------------
Income from investment operations:
Net investment income..................................................................... .17
Net realized and unrealized loss.......................................................... (1.63)
-------------
Total from investment operations........................................................... (1.46)
-------------
Less distributions from:
Net investment income..................................................................... (.20)
Net realized gains........................................................................ (.53)
In excess of net realized gains........................................................... (.31)
-------------
Total distributions........................................................................ (1.04)
-------------
Net asset value, end of year............................................................... $12.93
=============
Total Return*.............................................................................. (9.36)%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of year (000's)............................................................ $98,101
Ratios to average net assets:
Expenses.................................................................................. 1.69%**
Net investment income..................................................................... 1.04%**
Portfolio turnover rate.................................................................... 30.06%
Average commission rate paid ***........................................................... $.0019
</TABLE>

*Total return is not annualized.
**Annualized.
***Relates to purchases and sales of equity securities.
+For the period January 2, 1997 (effective date) to December 31, 1997. Based on
average weighted shares outstanding.
See Notes to Financial Statements.

22
<PAGE> 25

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES 91.3%
ARGENTINA 4.4%
Aluar Aluminio Argentino SA, B Misc Materials & Commodities 91,447 $ 320,125
Astra Cia Argentina de Petroleo SA Energy Sources 636,830 1,114,664
Atanor Cia Nacional Para la Industria
Quimica SA, D Chemicals 3,507,414 4,841,151
Banco de Galicia y Buenos Aires SA, B Banking 2,836,994 18,160,212
Banco Frances del Rio de la Plata SA Banking 1,095,266 10,166,000
*Buenos Aires Embotelladora SA, ADR Beverages & Tobacco 746,000 7,460
Capex SA, A Utilities Electrical & Gas 223,774 1,488,380
Central Costanera SA, B Utilities Electrical & Gas 591,624 1,538,515
+Garovaglio Y Zorraquin SA Chemicals 1,612,631 5,000,106
Juan Minetti SA Building Materials & Components 366,295 1,143,058
Juan Minetti SA, conv. Building Materials & Components 113,000 113,021
Molinos Rio de Plata SA, B Food & Household Products 6,718,504 16,127,474
Nobleza Piccardo Sdad Industrial Comercial y
Financial Beverages & Tobacco 346,930 1,561,482
Perez Companc SA, B Energy Sources 5,757,463 41,116,098
Quilmes Industrial SA Beverages & Tobacco 7,000 75,250
Quilmes Industrial SA, pfd., ADR Beverages & Tobacco 1,057,500 14,474,531
Renault Argentina SA Automobiles 739,667 1,035,730
*Sevel Argentina SA, C Automobiles 1,503,470 1,383,455
Siderar, A Metals & Mining 114,250 485,655
Sociedad Comercial del Plata Cadelplata Come Multi-Industry 9,387,500 14,835,069
Transportadora de Gas del Sur SA, B Energy Sources 703,011 1,596,138
Transportadora de Gas del Sur SA, B, ADR Energy Sources 42,000 469,875
YPF Sociedad Anonima, ADR Energy Sources 1,055,899 36,098,547
*Zanella Hermanos SA Automobiles 931,434 93,161
--------------
173,245,157
--------------
BRAZIL 12.7%
Aracruz Celulose SA, ADR Forest Products & Paper 1,422,200 20,444,125
Banco Bradesco SA Banking 1,907,479,668 18,971,394
*Banco Bradesco SA BBD, pfd. rts. Banking 149,878,717 537,176
*Banco Bradesco SA BBD, rts. Banking 81,554,621 299,605
Banco Bradesco SA, pfd. Banking 3,505,510,794 34,550,978
Banco do Brasil SA Banking 1,192,085,792 7,690,532
*Banco do Brasil SA, wts., A Banking 216,046,382 369,740
*Banco do Brasil SA, wts., B Banking 324,069,573 566,225
*Banco do Brasil SA, wts., C Banking 471,615,956 921,216
Banco do Brazil SA, pfd. Banking 719,346,120 5,317,509
*Banco do Estado de Sao Paulo SA, pfd. Banking 298,503,850 12,169,639
Brasmotor SA, pfd. Multi-Industry 62,402,231 6,150,482
Centrais Eletricas Brasileiras SA Utilities Electrical & Gas 668,000,000 33,218,942
Centrais Eletricas Brasileiras SA, B, pfd Utilities Electrical & Gas 1,513,208,470 77,284,067
*Cia Vale do Rio Doce, pfd. Metals & Mining 660,577 13,287,894
Companhia Siderurgica Nacional Sid Nacional CSN Metals & Mining 353,336,000 9,814,449
Copene-Petroquimica do Nordeste SA, A, pfd. Chemicals 34,105,550 10,390,114
Duratex SA, pfd. Forest Products & Paper 478,134,600 18,850,340
Investimentos Itau SA, pfd. Multi-Industry 64,824,179 50,532,714
*Mannesmann SA Machinery & Engineering 23,369,010 2,743,014
</TABLE>

23
<PAGE> 26

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
BRAZIL (CONT.)
*Mannesmann SA, pfd. Machinery & Engineering 5,137,562 $ 644,468
Marcopolo SA, pfd. Automobiles 7,750,400 916,673
Petrobras-Petroleo Brasileiro SA, pfd. Energy Sources 319,786,333 74,785,389
Telebras-Telecomunicacoes Brasileiras SA Telecommunications 738,109,194 75,064,194
Telebras-Telecomunicacoes Brasileiras SA, pfd. Telecommunications 168,548,973 19,225,200
*Unibanco Uniao de Bamncos Brasileiros SA, unit Banking 119,331,186 8,126,132
--------------
502,872,211
--------------
CHILE 0.2%
Antofagasta Holdings Plc. Metals & Mining 813,668 4,409,907
Empresa Nacional de Electricidad SA, ADR Electrical & Electronics 165,700 2,930,819
--------------
7,340,726
--------------
CHINA 1.3%
China First Pencil Co. Ltd., B Recreation & Other Consumer Goods 512,107 97,300
China Southern Glass Co. Ltd., B Building Materials & Components 9,229,913 2,596,620
Chiwan Wharf Holdings Ltd., B Transportation 11,593,800 3,650,648
Guangshen Railway Co. Ltd., ADR Transportation 379,600 5,100,875
*Luoyang Glass Co. Ltd., H Misc Materials & Commodities 9,903,000 894,580
Shandong Huaneng Power Development Co. Ltd., ADR Utilities Electrical & Gas 618,600 4,252,875
*Shanggone Co. Ltd., B Machinery & Engineering 4,481,610 394,382
Shanghai Chlor-Alkali Chemical Co. Ltd., B Chemicals 11,689,530 2,010,599
*Shanghai Dazhong Taxi Shareholding Co. Ltd., B Transportation 1,418,500 1,061,038
*Shanghai Erfangji Textile Machinery Co. Ltd., B Machinery & Engineering 8,840,787 671,900
*Shanghai Jin Jiang Tower Co. Ltd., B Leisure & Tourism 8,065,954 1,500,267
Shanghai Jinqiao Export Processing Zone
Development, B Real Estate 4,088,273 1,594,426
*Shanghai Lujiaxui Finance & Trade Zone
Development Stock Co Ltd., B Real Estate 14,624,412 11,407,041
Shanghai New Asia Group Co. Ltd., B Food & Household Products 5,292,580 1,428,997
Shanghai Petrochemical Co. Ltd., H Chemicals 18,724,000 2,923,737
*Shanghai Refrigerator Compressor Co. Ltd., B Industrial Components 1,542,913 428,930
*Shanghai Rubber Belt Co. Ltd., B Industrial Components 610,352 90,332
*Shanghai Shangling Electric Appliance, B Appliances & Household Durables 2,875,980 592,452
*Shanghai Steel Tube Co. Ltd., B Machinery & Engineering 1,182,900 101,729
Shanghai Tyre & Rubber Co. Ltd., B Industrial Components 5,035,500 1,258,875
*Shanghai Vacuum Electron Devices Co. Ltd., B Appliances & Household Durables 2,324,500 348,675
*Shanghai Wingsung Co. Ltd., B Recreation & Other Consumer Goods 606,442 99,456
Shanghai Yaohua Pilkington Glass, B Building Materials & Components 7,588,450 1,047,206
*Shanghai Zhenhua Port Machinery Co. Ltd., B Machinery & Engineering 550,000 378,400
*Shenzhen China Bicycles Co. Ltd., B Recreation & Other Consumer Goods 1,386,400 227,220
Shenzhen Konka Electronic Group Co. Ltd., B Appliances & Household Durables 921,327 993,973
*Shenzhen Properties & Resources Development
Ltd., B Real Estate 1,301,156 251,869
Shenzhen Vanke Co. Ltd., B Real Estate 10,124,642 5,879,583
*Zhuhai Sez Lizhu Pharmaceutical Group Inc., B Health & Personal Care 168,386 41,504
--------------
51,325,489
--------------
</TABLE>

24
<PAGE> 27

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
COLOMBIA 2.2%
Banco Ganadero SA, ADR C Banking 186,400 $ 4,473,600
Banco Industrial Colombiano SA Banking 1,482,000 4,562,638
Bavaria SA Beverages & Tobacco 377,062 3,867,601
Cementos Argos SA Building Materials & Components 3,615,735 21,192,755
Cia Colombiana de Tabacos SA Beverages & Tobacco 2,600,150 7,519,811
Compania Nacional de Chocolates SA Food & Household Products 2,264,924 15,546,079
Compania Suramericana de Seguros SA Insurance 1,613,318 30,483,393
Promigas SA Utilities Electrical & Gas 202,881 1,071,789
--------------
88,717,666
--------------
CZECH REPUBLIC 1.3%
*CEZ AS Utilities Electrical & Gas 726,000 23,824,958
Elektrarny Opatovice AS Energy Sources 20,096 2,329,988
Komercni Banka AS Banking 18,822 710,192
Komercni Banka AS, GDR Banking 206,000 2,523,500
*Leciva AS Health & Personal Care 1,900 115,365
*SPT Telecom AS Telecommunications 102,740 10,991,095
Tabak AS Beverages & Tobacco 10,668 2,436,743
*Unipetrol, fgn. Chemicals 2,854,511 8,210,454
--------------
51,142,295
--------------
ECUADOR 0.1%
La Cemento Nacional CA, GDR, 144A Multi-Industry 4,510 938,080
La Cemento Nacional SA, GDR Multi-Industry 14,400 2,995,200
--------------
3,933,280
--------------
EGYPT 0.2%
Commercial International Bank Ltd. Banking 95,650 1,930,148
Eastern Tobacco Co. Beverages & Tobacco 184,711 4,289,204
--------------
6,219,352
--------------
GHANA 0.3%
Ashanti Goldfields Co. Ltd., GDR Metals & Mining 1,385,548 10,391,610
--------------
GREECE 3.5%
Alpha Credit Bank Banking 896,881 52,372,037
Alpha Leasing SA Financial Services 240,460 4,743,970
Delta Dairy SA Food & Household Products 527,070 5,979,092
Delta Dairy SA, pfd. Food & Household Products 4,080 36,651
Ergo Bank SA Banking 354,351 18,326,132
Etba Leasing Financial Services 151,372 1,253,212
Fourlis Brothers Corp. SA Appliances & Household Durables 278,100 1,807,625
Hellas Can Sa Packaging Manufacturers Metals & Mining 263,490 3,805,915
Hellenic Telecommunications Organizations Telecommunications 283,688 5,816,678
Hellenic Telecommunications Organizations, 144A Telecommunications 659,100 13,514,046
*National Bank of Greece SA Banking 115,874 10,203,525
</TABLE>

25
<PAGE> 28

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
GREECE (CONT.)
Titan Cement Co. Building Materials & Components 406,310 $ 18,536,954
X. Benrubi & Son SA Food & Household Products 136,590 322,888
--------------
136,718,725
--------------
HONG KONG 8.3%
CDL Hotel International Ltd. Leisure & Tourism 5,595,000 1,696,767
Cheung Kong Holdings Ltd. Multi-Industry 11,691,000 76,567,073
Cross Harbour Tunnel Co. Ltd. Transportation 248,598 423,473
Dairy Farm International Holdings Ltd. Merchandising 9,254,590 9,994,957
Fortei Holdings Ltd. Merchandising 5,366,000 169,657
Goldlion Holdings Ltd. Textiles & Apparel 106,000 35,224
Great Wall Electronic International Ltd. Electrical & Electronics 4,674,963 361,979
Hang Lung Development Co. Ltd. Real Estate 16,755,000 23,568,138
Hong Kong & Shanghai Hotels Ltd. Leisure & Tourism 187,000 154,446
Hong Kong Electric Holdings Ltd. Utilities Electrical & Gas 235,900 896,536
Hopewell Holdings Ltd. Construction & Housing 8,307,002 2,068,978
HSBC Holdings Plc. Banking 3,668,471 90,421,727
IMC Holdings Ltd. Transportation 120,000 30,972
Jardine International Motor Holdings Ltd. Automobiles 2,423,000 1,313,279
Jardine Matheson Holdings Ltd. Multi-Industry 1,478,672 7,541,227
Jardine Strategic Holdings Ltd. Multi-Industry 4,199,062 11,085,524
JCG Holdings Ltd. Financial Services 59,000 25,316
Joyce Boutique Holdings Ltd. Merchandising 1,183,000 50,379
K Wah International Holdings Ltd. Building Materials & Components 26,773,019 4,698,839
*Lai Fung Holdings Ltd. Real Estate 69,336 23,935
Lai Sun Development Co. Ltd. Real Estate 3,566,800 1,173,744
Lai Sun Garment International Ltd. Multi-Industry 3,568,000 2,221,654
*Lai Sun Hotels International Ltd., wts. Leisure & Tourism 572,693 2,217
Laws International Holdings Ltd. Textiles & Apparel 6,216,000 858,320
New World Development Co. Ltd. Real Estate 10,826,883 37,444,892
Semi-Tech Co. Ltd. Appliances & Household Durables 14,486,891 2,374,287
*Semi-Tech Co. Ltd., wts. Appliances & Household Durables 333,585 12,054
*Sun Hung Kai & Co. Ltd, wts. Financial Services 2,023,360 69,195
Sun Hung Kai & Co. Ltd. Financial Services 3,655,800 632,181
Sun Hung Kai Properties Ltd. Real Estate 4,687,900 32,668,293
Swire Pacific Ltd., A Multi-Industry 125,000 685,572
Swire Pacific Ltd., B Multi-Industry 1,903,500 1,928,310
Tungtex (Holdings) Co. Ltd. Textiles & Apparel 2,400,000 257,065
Wheelock and Company Ltd. Multi-Industry 9,609,000 11,222,280
*Wo Kee Hong Holdings Ltd. Merchandising 5,329,200 295,723
Yue Yuen Industrial (Holdings) Ltd. Recreation & Other Consumer Goods 2,070,800 4,382,645
--------------
327,356,858
--------------
HUNGARY 1.1%
Borsodchem RT, GDR Chemicals 30,000 1,081,500
Egis RT Multi-Industry 67,100 4,205,146
**Fotex First Hung-Amer Photo Co., 12.00%, conv.,
5/11/00 Multi-Industry 32,000 32,000
</TABLE>

26
<PAGE> 29

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
HUNGARY (CONT.)
*Fotex First Hungarian American Photo Service Co. Multi-Industry 241,689 $ 272,166
*Fotex First Hungarian-American Photo-Service Multi-Industry 2,630,400 2,873,730
*Ibusz RT Leisure & Tourism 122,363 650,023
Inter-Europa Bank RT Banking 8,816 811,480
OTP Bank, GDR Banking 399,000 15,132,075
Pick Szeged RT Food & Household Products 9,076 724,320
Pick Szeged RT, GDR Food & Household Products 30,430 2,428,500
Tiszai Vegyi Kombinat RT Chemicals 149,558 2,511,611
Tiszai Vegyi Kombinat RT, GDR, 144A Chemicals 571,000 9,764,100
Tiszai Vegyi Kombinat RT, GDR, Reg S Chemicals 152,000 2,599,200
--------------
43,085,851
--------------
INDIA 4.3%
Aban Loyd Chiles Offshore Ltd. Energy Sources 237,600 239,418
*Andhra Valley Power Supply Co. Ltd. Utilities Electrical & Gas 69,100 140,580
Arvind Mills Ltd. Textiles & Apparel 1,772,300 3,989,936
*ATV Projects India Ltd. Machinery & Engineering 1,644,600 125,862
*Bajaj Auto Ltd. Automobiles 283,900 4,381,620
Bank of Baroda Banking 428,700 1,208,453
Bharat Petroleum Corp. Ltd. Energy Sources 1,185,900 12,592,624
Bombay Dyeing & Manufacturing Co. Ltd. Chemicals 342,300 866,665
Bses Ltd. Utilities Electrical & Gas 131,950 575,598
Cochin Refineries Ltd. Energy Sources 212,650 922,207
DCW Ltd. Chemicals 395,700 162,015
*Essar Shipping Ltd. Transportation 770,000 257,321
*Ganesh Benzoplast Ltd. Chemicals 81,900 33,846
Garden Silk Mills Ltd. Textiles & Apparel 229,600 79,071
Grasim Industries Ltd. Multi-Industry 1,078,550 9,602,397
Great Eastern Shipping Co. Ltd. Transportation 7,166,700 8,409,903
Gujarat Ambuja Cements Ltd. Building Materials & Components 950,600 6,693,000
Gujarat Industries Power Ltd. Energy Equipment & Services 425,700 285,067
Gujarat Narmada Valley Fertilizers Co. Ltd. Chemicals 1,838,650 1,043,621
Gujarat Narmanda Valley Fertilizers Co. Ltd., ADR Chemicals 341,000 511,500
Hindalco Industries Inc. Metals & Mining 145,725 2,762,084
*Hindustan Organic Chemicals Ltd. Chemicals 838,600 308,057
Hindustan Petroleum Corp. Ltd. Energy Sources 657,300 8,124,027
India Cements Ltd. Building Materials & Components 520,050 888,861
India Cements Ltd., GDR Building Materials & Components 552,910 1,050,529
Indian Aluminium Co. Ltd. Metals & Mining 259,500 488,217
Indian Petrochemicals Corp. Ltd. Chemicals 4,784,900 8,636,012
Indian Rayon & Industries Ltd. Multi-Industry 551,700 2,607,205
Indian Rayon & Industries Ltd., GDR Multi-Industry 183,309 779,063
Indo Gulf Fertilisers & Chemicals Corp. Ltd. Chemicals 3,927,500 3,682,031
Indo Gulf Fertilisers & Chemicals Corp. Ltd., GDR Chemicals 64,150 57,093
Industrial Credit & Inv. Corp. of India Financial Services 6,643,800 12,965,579
Industrial Development Bank of India Banking 2,255,500 5,322,290
ITC Bhadrachalam Paperboards Ltd. Forest Products & Paper 106,850 94,720
</TABLE>

27
<PAGE> 30

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
INDIA (CONT.)
Larsen and Toubro Ltd. Multi-Industry 2,271,500 $ 11,748,638
Madras Cements Ltd. Building Materials & Components 7,840 915,000
*Mahanagar Telephone Nigam Ltd. Telecommunications 544,900 3,586,332
National Aluminium Co. Ltd. Metals & Mining 3,169,600 2,385,286
Oriental Bank of Commerce Banking 3,860,200 6,326,986
Reliance Industries Ltd. Chemicals 2,267,200 9,571,980
Shipping Corporation of India Ltd. Transportation 1,896,200 2,176,760
State Bank of India Banking 76,000 471,122
Steel Authority of India Ltd, GDR, Reg S Metals & Mining 386,000 1,235,200
Steel Authority of India Ltd. Metals & Mining 4,479,900 1,114,261
Steel Authority of India Ltd., GDR, 144A Metals & Mining 62,000 198,400
Sterlite Industries Ltd. Metals & Mining 323,400 1,637,625
Tamil Nadu Newsprint & Papers Ltd. Forest Products & Paper 205,400 120,515
Tata Chemicals Ltd. Chemicals 1,030,000 3,915,051
Tata Engineering & Locomotive Co. Telco Machinery & Engineering 2,465,900 18,635,788
Tata Hydro-Electric Power Co. Utilities Electrical & Gas 210,900 402,163
Tata Iron & Steel Co. Ltd. Metals & Mining 1,062,750 3,639,648
Thermax Ltd. Energy Equipment & Services 78,400 348,000
Videocon International Ltd. Appliances & Household Durables 299,700 223,628
Wockhardt Health & Personal Care 178,100 839,387
--------------
169,378,242
--------------
INDONESIA 1.8%
Asia Pulp & Paper Co. Ltd., ADR Forest Products & Paper 481,100 4,841,069
*PT Bank Dagang Nasional Indonesia, wts. Banking 625,000 5,795
PT Indofoods Sukses Makmur Food & Household Products 4,059,480 1,328,557
PT Tempo Scan Pacific Health & Personal Care 3,968,000 306,618
*PT Tjiwi Kimia TBK, wts. Forest Products & Paper 1,553,725 90,399
PT Lippo Life Insurance TBK Insurance 10,389,000 377,782
PT Pakuwon Jati Real Estate 11,993,500 981,286
PT Tjiwi Kimia TBK Forest Products & Paper 22,651,830 5,559,995
PT Bank Dagang Nasional Indonesia, fgn. Banking 7,912,000 503,491
PT Bank Danamon, fgn. Banking 13,250,000 843,182
*PT Bank International Indonesia, fgn. Banking 18,738,500 1,107,275
PT Bank PDFCI, fgn. Banking 984,000 313,091
PT Barito Pacific Timber TBK Forest Products & Paper 39,077,500 11,190,375
PT BBL Dharmala Finance, fgn. Financial Services 3,295,000 958,545
PT BDNI Capital Corporation, fgn. Financial Services 2,372,400 388,211
+PT Charoen Pokphand Indonesia Food & Household Products 21,812,250 1,189,759
PT Ciputra Dev. Real Estate 11,535,500 524,341
PT Dharmala Intiland Real Estate 5,532,800 1,282,604
PT Gadjah Tunggal Automobiles 61,884,000 5,907,109
PT Hanjaya Mandala Sampoerna Beverages & Tobacco 2,995,000 2,259,864
PT Indah Kiat Pulp & Paper Corp. Forest Products & Paper 29,212,050 5,178,500
*PT Indah Kiat Pulp & Paper Corp. TBK, wts. Forest Products & Paper 1,175,920 32,071
PT Indocement Tunggal Prakarsa Building Materials & Components 14,473,000 4,736,618
PT Indosat Telecommunications 711,500 1,319,509
</TABLE>

28
<PAGE> 31

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
INDONESIA (CONT.)
PT Inter-Pacific Bank, fgn. Banking 738,000 $ 207,982
PT Jakarta International Hotel & Development Real Estate 6,280,750 1,227,601
PT Japfa Comfeed Indonesia Food & Household Products 3,839,500 314,141
PT Kalbe Farma Health & Personal Care 2,898,500 513,825
PT Metrodata Electronic Electrical & Electronics 345,500 125,636
PT Modern Photo Film Co. Multi-Industry 319,500 92,945
PT Multibreeder Adirama Indonesia TBK Food & Household Products 858,750 27,324
PT Semen Cibinong, loc. Building Materials & Components 21,139,000 960,864
PT Semen Gresik Building Materials & Components 6,499,500 3,811,070
PT Sinar Mas Agro Resources & Technology Corp. Food & Household Products 7,221,400 623,666
PT Sinar Mas Multi Artha, fgn. Financial Services 12,855,200 1,577,684
*PT Sinar Mas Multi Artha, wts., fgn. Financial Services 964,140 12,271
PT Sumalindo Lestari Jaya TBK Forest Products & Paper 4,059,500 572,020
PT Summarecon Agung Real Estate 858,031 54,602
PT Tambang Timah (Persero) Metals & Mining 6,669,500 7,154,555
PT Ultra Jaya Milk Food & Household Products 4,655,000 846,364
PT Unggul Indah Corp. Chemicals 2,820,400 679,460
PT United Tractors Machinery & Engineering 5,587,000 660,282
--------------
70,688,338
--------------
ISRAEL 0.8%
Bank Hapoalim BM Banking 1,256,909 3,014,196
Clal Industries Ltd. Multi-Industry 1,358,098 7,633,859
Discount Investment Corp. Multi-Industry 25,088 700,845
First International Bank of Israel Banking 1,792 1,314,315
Koor Industries Ltd. Multi-Industry 164,461 18,209,957
--------------
30,873,172
--------------
ITALY 0.8%
Instituto Finanziaro Industriale SpA, pfd. Automobiles 769,950 8,699,260
Italmobiliare SpA Multi-Industry 496,210 9,383,390
Italmobiliare SpA, di Risp, conv. Multi-Industry 28,100 293,088
Sirti SpA Construction & Housing 2,318,500 14,014,540
Teleco Cavi SpA, di Risp Telecommunications 120,000 332,459
--------------
32,722,737
--------------
JORDAN
*Jordan Cement Factories Ltd. Building Materials & Components 222,750 948,474
--------------
KAZAKHSTAN 0.1%
*Kazkommertsbank, ADR, 144A Banking 117,660 2,470,860
--------------
MALAYSIA 2.2%
AMMB Holdings Bhd. Banking 1,336,400 876,159
Berjaya Singer Bhd. Appliances & Household Durables 3,663,000 1,167,790
Berjaya Singer Bhd, fgn. Appliances & Household Durables 933,000 297,447
Boustead Holdings Bhd., fgn. Food & Household Products 4,232,000 3,503,545
Cement Industries of Malaysia Bhd. Building Materials & Components 275,000 161,203
</TABLE>

29
<PAGE> 32

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
MALAYSIA (CONT.)
Federal Flour Mills Bhd. Food & Household Products 2,506,250 $ 1,997,525
Genting Berhad Leisure & Tourism 3,137,400 7,864,674
*Hong Leong Industries Bhd., wts., fgn. Multi-Industry 332,000 30,729
Hong Leong Industries Bhd. Multi-Industry 5,392,800 5,490,548
Hong Leong Properties Bhd. Real Estate 2,169,000 395,935
Hong Leong Properties Bhd., fgn. Real Estate 4,512,000 823,633
Island & Peninsula Bhd., fgn. Real Estate 3,880,000 2,593,650
Kian Joo Can Factory Bhd. Industrial Components 1,521,000 1,353,043
Leader Universal Holdings Bhd. Industrial Components 16,439,000 5,071,809
Malayawata Steel Bhd. Metals & Mining 2,439,000 595,719
Malayawata Steel Bhd., fgn. Metals & Mining 2,127,000 519,514
Malaysian Airline System Bhd. Transportation 5,682,000 4,557,871
Malaysian International Shipping Corp., fgn. Transportation 2,792,000 4,091,631
MBF Capital Bhd. Financial Services 9,448,000 2,198,339
MBF Capital Bhd., fgn. Financial Services 9,648,000 2,244,875
Oriental Holdings Bhd. Automobiles 574,400 702,955
Oriental Holdings Bhd., fgn. Automobiles 2,300,198 2,815,000
Perlis Plantations Bhd. Multi-Industry 1,535,750 2,171,648
Perlis Plantations Bhd., fgn. Multi-Industry 3,597,500 5,087,093
Perusahaan Otomobil Nasional Bhd., fgn. Automobiles 1,311,000 1,280,833
*Public Bank Berhad, fgn., rts. Banking 519,800 26,728
Public Bank Bhd. Banking 1,238,000 385,134
Public Bank Bhd., fgn. Banking 3,118,800 1,074,481
Public Finance Bhd., fgn. Financial Services 3,327,000 915,256
*Renong Bhd. Multi-Industry 25,220,000 11,671,423
*Renong Bhd., wts. Multi-Industry 87,250 11,216
**Renong, 4.00%, conv., 5/22/01 Multi-Industry 139,600MYR 14,716
Resorts World Bhd. Leisure & Tourism 6,914,000 11,643,322
Shangri La Hotels (Malaysia) Bhd., fgn. Leisure & Tourism 1,526,000 415,879
Shangri-La Hotels (Malaysia) Bhd. Leisure & Tourism 2,983,202 813,008
YTL Corp. Berhad Multi-Industry 835,000 1,127,073
--------------
85,991,404
--------------
MEXICO 12.1%
Alfa SA de CV, A Multi-Industry 672,768 4,559,867
*Altos Hornos de Mexico SA Metals & Mining 8,119,000 20,120,191
*Cemex SA, B Building Materials & Components 22,815,750 121,846,084
*Cifra SA de CV Merchandising 877,192 2,162,954
Cifra SA, C Merchandising 16,990,824 38,105,931
Coca Cola Femsa SA de CV, ADR Beverages & Tobacco 227,600 13,200,800
Cydea SA de CV Chemicals 771,463 2,150,786
DESC SA de CV DESC, A Multi-Industry 395,000 3,440,741
DESC SA de CV DESC, B Multi-Industry 916,108 8,751,865
DESC SA de CV DESC, C Multi-Industry 650,255 6,123,460
Fomento Economico Mexicano SA de CV, B Beverages & Tobacco 1,080,000 8,631,435
*Grupo Financiero Banamex Accival SA, B Banking 6,527,000 19,531,262
*Grupo Financiero Banamex Accival SA, L Banking 15,291,422 39,410,393
</TABLE>

30
<PAGE> 33

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
MEXICO (CONT.)
*Grupo Financiero Bancomer SA de CV, B Banking 27,950,000 $ 18,008,797
*Grupo Financiero Bancomer SA de CV, L Banking 44,548,593 17,718,974
*Grupo Financiero Serfin SA de CV, B Banking 30,652,187 7,444,184
Panamerican Beverages Inc., A Food & Household Products 441,700 14,410,463
Telmex-Telefonos de Mexico SA, L, ADR Telecommunications 2,048,500 114,844,031
Vitro SA Food & Household Products 3,894,388 17,154,513
--------------
477,616,731
--------------
PAKISTAN 0.9%
*Bank of Punjab Banking 2,383,377 1,015,505
*DG Khan Cement Co. Building Materials & Components 2,855,950 532,173
Engro Chemical Pakistan Ltd. Chemicals 1,852,865 4,806,266
*Exide Pakistan Ltd. Energy Equipment & Services 21,160 10,098
Fauji Fertilizer Co. Ltd. Chemicals 1,897,500 3,632,786
*Khadim Ali Sham Bukhari & Co. Ltd. Financial Services 223,309 98,446
National Development Leasing Corp. Financial Services 919,121 126,362
*Pakistan Electron Ltd. Appliances & Household Durables 371,146 44,278
*Pakistan International Airlines Corp. Transportation 135,500 20,938
Pakistan Telecom Corp. PTC Telecommunications 21,000 1,449,000
Pakistan Telecommunications Corp., PTC, A Telecommunications 30,765,300 23,245,608
*Trust Modaraba Financial Services 995,580 95,020
*Union Bank Ltd. Banking 1,049,978 254,108
--------------
35,330,588
--------------
PERU 1.0%
Telefonica Del Peru SA, ADR B Telecommunications 1,737,400 40,503,137
--------------
PHILIPPINES 1.0%
*A Soriano Corp. Multi-Industry 121,762,903 4,750,256
Ayala Corp., B Multi-Industry 2,935,100 1,141,428
*Belle Corp. Real Estate 65,368,000 2,517,878
Filinvest Development Corp. Real Estate 14,609,000 1,226,435
*Keppel Philippine Holdings Inc., B Machinery & Engineering 785,048 47,297
Metro Pacific Corp. MDI Multi-Industry 27,618,500 763,771
*Philex Mining Corp., B Metals & Mining 43,260,142 1,068,152
Philippine Commercial International Bank Inc. Banking 1,478,150 4,197,216
Philippine Long Distance Telephone Co., ADR Telecommunications 615,150 13,840,875
*Philippine National Bank Banking 1,768,328 3,885,955
RFM Corp. Food & Household Products 27,769,750 4,525,441
RFM Corporation, 10.00%, conv., pfd. Food & Household Products 5,112,318 590,757
Sime Darby Pilipinas Inc. Industrial Components 659,658 496,779
*Southeast Asia Cement Holdings Inc. Building Materials & Components 64,711,000 846,835
--------------
39,899,075
--------------
POLAND 1.2%
*Bank Handlowy W Warszawie SA, 144A Banking 170,000 2,170,213
Bank Przemyslowo-Handlowy SA Banking 108,970 5,657,166
Bank Rozwoju Eksportu SA Banking 45,000 931,915
</TABLE>

31
<PAGE> 34

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
POLAND (CONT.)
Big Bank Gdanski SA, G Banking 11,530,367 $ 11,285,040
*Big Bank Gdanski SA, GDR Banking 272,667 4,158,167
*Farm Food SA Food & Household Products 74,761 636,264
*Huta Olawa SA Metals & Mining 45,442 165,009
*Impexmetal SA, A Metals & Mining 273,349 2,186,792
Mostostal Export SA Construction & Housing 1,166,947 2,946,334
*Polifarb Cieszyn Wroclaw SA Chemicals 671,571 3,181,627
*Polifarb Cieszyu Wroclwa SA, D Chemicals 264,654 1,058,616
*Raciborska Fabryka Kotlow SA Energy Equipment & Services 204,036 544,096
*Rolimpex SA Wholesale & International Trade 412,481 936,127
Warta SA Insurance 213,714 2,540,317
Wielkopolski Bank Kredytowy SA Banking 1,000,944 5,026,017
Zaklady Cementowo Wapiennicze Gorazdze Chorula Building Materials & Components 97,889 2,415,984
--------------
45,839,684
--------------
PORTUGAL 4.0%
Banco Comercial Portugues SA Banking 2,671,627 54,637,349
Banco Espirito Santo e Comercial de Lisboa Banking 1,257,245 37,413,371
Banco Totta & Acores SA Banking 328,970 6,459,645
BPI Socieda de Gestora de Participacoes Socias SA Banking 1,590,225 38,664,802
Cel-Cat Fabrica Nacional de Conductores 9,601 130,309
Electricos SA Electronic Components & Instruments
+Compta-Equipamentos e Servicos de Informatica SA Business & Public Services 142,000 1,504,482
Espirito Santo Financial Group SA, ADR Banking 666,700 13,542,344
Portucel Industrial Empresa Product de Celulose
SA Forest Products & Paper 585,500 3,572,488
*Sociedade Portuguesa de Celulose SA Forest Products & Paper 76,240 2,154,023
--------------
158,078,813
--------------
RUSSIA 2.3%
*Aeroflot Transportation 27,100 3,322,460
*Cheliabenergo Telecommunications 2,020,000 1,070,600
GUM Trade House Merchandising 510,000 1,415,250
Irkutskenergo Utilities Electrical & Gas 17,734,000 3,511,332
*JSC Chernogorneft Energy Sources 17,000 194,225
*Kamaz Automobiles 981,792 1,472,688
Krasnoyarsk Aluminum Plant Metals & Mining 64,192 962,880
Lukoil Holdings., pfd. Energy Sources 88,000 1,386,000
Lukoil-Holdings Energy Sources 373,000 8,586,460
*Megionneftegaz Energy Sources 247,000 1,284,400
Mosenergo Utilities Electrical & Gas 4,132,000 5,247,640
Norilsk Nickel Metals & Mining 519,800 3,248,750
*Norilsk Nickel, pfd. Metals & Mining 20,000 124,000
*Norilsk Nickel, rts., pfd. Metals & Mining 10,000 500
*Norilsk Nickel, rts. Metals & Mining 259,900 25,990
*Novorosissk Sea Shipping Transportation 1,630,000 472,700
*Noyabrskneftegaz Energy Sources 124,930 849,524
Primorsk Sea Shipping Transportation 150,850 565,688
*Purneftegaz Energy Sources 202,000 1,599,840
</TABLE>

32
<PAGE> 35

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
RUSSIA (CONT.)
Rao Gazprom, ADR, 144A Energy Sources 95,000 $ 2,275,250
+Red October Food & Household Products 195,000 3,412,500
*Rostelekom Telecommunications 4,231,000 15,020,050
Rostelekom, pfd. Telecommunications 3,459,900 8,061,567
*Saint Petersburg City Telephone Network, pfd., A Telecommunications 1,063,000 930,125
*St. Petersburg Intercity International Telephone Telecommunications 184,940 411,491
*St. Petersburg MMT, pfd. Telecommunications 229,800 357,339
*Tyumen Aviatrans Telecommunications 3,330,000 261,405
Unified Energy System Utilities Electrical & Gas 68,020,000 20,569,248
*Unified Energy System, pfd. Utilities Electrical & Gas 13,160,000 2,835,980
*Uralmash Zavody Machinery & Engineering 70,418 642,564
--------------
90,118,446
--------------
SINGAPORE 3.5%
Acer Computer International Ltd. Electrical & Electronics 1,563,000 1,437,960
*Acer Computer International Ltd., wts. Electrical & Electronics 176,200 20,263
Acma Ltd. Electrical & Electronics 2,881,000 1,982,771
Acma Ltd., fgn. Electrical & Electronics 730,400 502,678
*Acma Ltd., fgn., wts. Electrical & Electronics 182,600 12,459
British American Tobacco Co. Ltd. Beverages & Tobacco 119,000 356,894
Chemical Industries (Far East) Ltd. Chemicals 454,500 674,132
*Chemical Industries (Far East) Ltd., wts. Chemicals 137,850 29,034
Cycle & Carriage Ltd. Wholesale & International Trade 1,591,000 6,560,338
Delgro Corp. Transportation 550,400 672,693
First Capital Corp. Ltd. Real Estate 3,395,000 3,142,213
First Capital Corp. Ltd., fgn. Real Estate 2,782,000 2,574,856
Fraser and Neave Ltd., fgn. Beverages & Tobacco 2,393,000 10,364,224
G P Batteries International Ltd. Electrical & Electronics 96,000 249,469
*G.P. Batteries International Ltd., wts. Electrical & Electronics 9,250 7,573
Hai Sun Hup Group Ltd. Transportation 13,977,000 5,638,896
*Hai Sun Hup Group Ltd., wts Transportation 2,436,300 195,135
Hinds Hotels International Ltd. Leisure & Tourism 295,000 253,782
Hinds Hotels International Ltd., fgn. Leisure & Tourism 417,000 358,736
Hong Leong Finance Ltd. Financial Services 1,907,000 2,036,547
Hour Glass Ltd. Merchandising 1,436,000 553,782
Inchcape Bhd., fgn. Wholesale & International Trade 3,418,000 5,252,222
*Inchcape Marketing Services, fgn. Broadcasting & Publishing 3,418,000 1,013,942
Isetan (Singapore) Ltd., fgn. Merchandising 218,500 326,681
Jaya Holdings Ltd. Transportation 2,314,000 542,290
**Jaya Holdings Ltd., 3.00%, conv., 8/31/98 Transportation 508,800SGD 120,748
*Jaya Holdings Ltd., warrants expire 8/31/98 Transportation 89,071 1,057
*Jaya Holdings Ltd., warrants expire 10/09/99 Transportation 164,760 5,621
Jurong Shipyard Ltd., fgn. Machinery & Engineering 2,921,000 13,864,135
Keppel Corp. Ltd. Transportation 4,952,000 14,219,923
Lim Kah Ngam Ltd. Real Estate 949,000 450,430
MCL Land Ltd. Real Estate 8,331,000 4,819,178
Metro Holdings Ltd., fgn. Wholesale & International Trade 1,726,000 2,140,220
</TABLE>

33
<PAGE> 36

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
SINGAPORE (CONT.)
Natsteel Ltd. Metals & Mining 1,260,000 $ 1,704,420
Natsteel Ltd., fgn. Metals & Mining 2,301,000 3,112,596
Neptune Orient Lines Ltd. Transportation 8,232,000 3,247,867
Osprey Maritime Ltd. Transportation 3,383,000 2,709,611
*Osprey Maritime Ltd., conv., pfd. Transportation 459,810 210,059
Overseas Union Enterprise Ltd. Leisure & Tourism 2,045,000 4,901,691
Prima Ltd. Food & Household Products 947,000 1,741,738
Republic Hotels & Resorts Ltd. Leisure & Tourism 2,087,000 1,077,241
Robinson & Co. Ltd. Merchandising 144,000 512,608
*SBS Bus Service Ltd., fgn. Transportation 275,200 99,598
Sembawang Corp. Ltd. Multi-Industry 6,173,000 13,184,693
Sembawang Resources Ltd. Building Materials & Components 534,750 761,436
Singapore Petroleum Company, fgn. Chemicals 893,900 586,034
TIBS Holdings Ltd. Transportation 1,577,600 856,425
*TIBS Holdings Ltd., wts. Transportation 921 137
Times Publishing Ltd. Broadcasting & Publishing 655,000 1,138,624
United Industrial Corporation Ltd. Real Estate 1,351,000 529,018
United Industrial Corporation Ltd., fgn. Real Estate 33,044,000 12,939,211
United Overseas Land Ltd. Real Estate 5,559,000 4,683,346
+Van Der Horst Ltd. Machinery & Engineering 5,930,000 2,269,267
WBL Corp. Ltd. Multi-Industry 349,000 323,014
--------------
136,969,516
--------------
SLOVAK REPUBLIC 0.4%
Nafta Gbely AS Utilities Electrical & Gas 152,454 5,395,809
Slovakofarma AS Health & Personal Care 719 99,957
Slovnaft AS Chemicals 247,604 6,617,811
Vychodoslovenske Zeleziarne AS Metals & Mining 137,707 2,702,226
--------------
14,815,803
--------------
SOUTH AFRICA 3.2%
Aeci Ltd. Chemicals 256,000 799,589
Alpha Ltd. Building Materials & Components 161,000 1,786,500
Anglo American Industrial Corp. Ltd. Multi-Industry 563,484 13,663,025
Anglovaal Industried Ltd. Multi-Industry 2,600,766 4,809,800
Bonnita Holdings Ltd. Food & Household Products 1,379,200 354,259
BTR Dunlop Ltd. Industrial Components 2,122,100 654,094
CG Smith Ltd. Multi-Industry 1,865,000 7,664,646
Del Monte Royal Foods Ltd. Food & Household Products 8,489,050 5,582,032
Edgars Stores Ltd. Textiles & Apparel 628,762 10,723,774
Engen Ltd. Energy Sources 4,359,552 22,171,769
First National Bank Holdings Ltd. Banking 210,600 1,871,663
Foodcorp Ltd. Food & Household Products 87,433 449,157
Kersaf Investments Ltd. Leisure & Tourism 554,700 2,906,576
Malbak Ltd. Multi-Industry 3,828,825 3,737,166
McCarthy Retail Ltd. Appliances & Household Durables 1,750,510 3,597,062
**McCarthy Retail Ltd., zero, conv., 9/30/03 Appliances & Household Durables 152,000ZAR 296,722
</TABLE>

34
<PAGE> 37

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
SOUTH AFRICA (CONT.)
Palabora Mining Co. Ltd. Metals & Mining 471,000 $ 4,829,528
Plate Glass & Shatterprufe Industries Ltd. Building Materials & Components 20 383
Polifin Ltd. Chemicals 397,610 571,924
*Rainbow Chicken Ltd. Food & Household Products 896,769 38,698
Rembrandt Group Ltd. Multi-Industry 23,570 171,938
Reunert Ltd. Electrical & Electronics 6,168,300 10,013,268
Sappi Ltd. Forest Products & Paper 1,632,379 8,218,080
Sasol Ltd. Energy Sources 123 1,289
South African Breweries Ltd. Beverages & Tobacco 235,788 5,814,150
South African Iron & Steel Industrial Corp. Ltd. Metals & Mining 42,609,987 12,608,318
Sun International (South Africa) Ltd. Leisure & Tourism 8,278,642 3,402,298
Toyota South Africa Limited Automobiles 129,300 670,877
Voltex Holdings Ltd. Electrical & Electronics 505,142 259,500
--------------
127,668,085
--------------
SOUTH KOREA 1.3%
Asia Cement Co. Ltd. Building Materials & Components 147,390 708,689
Boram Bank Co. Ltd. Banking 1,204,657 2,935,241
BYC Co. Ltd. Textiles & Apparel 12,070 530,510
Central Banking Corp. Financial Services 407,993 197,377
Cho Hung Bank Co. Ltd. Banking 1,204,000 2,461,274
Cho Hung Bank Co. Ltd., GDR Banking 1,500,000 2,850,000
Cho Hung Bank Co. Ltd., GDR 144A Banking 1,300,000 2,470,000
+Choil Aluminium Mfg. Co. Ltd. Metals & Mining 237,556 761,020
Dae Duck Electronics Co. Ltd. Electrical & Electronics 2,642 74,272
Daegu Bank Co. Ltd. Banking 1,211,815 2,731,052
Daewoo Electric Components Co. Ltd. Electronic Components & Instruments 189,000 398,628
Daewoo Electronics Co. Electrical & Electronics 1,530,000 4,048,407
*Dongbu Steel Co. Ltd., fgn. Metals & Mining 286,000 803,162
Dongkuk Steel Mill Co. Ltd. Metals & Mining 189,900 751,197
Hae In Corp. Ltd. Merchandising 25,548 474,032
Hana Bank Banking 246,509 1,371,434
Hana Bank, GDR Banking 1,472,045 8,648,264
Hankook Cosmetics Co. Ltd. Health & Personal Care 52,400 210,991
*Hotel Shilla Co. Leisure & Tourism 428,750 901,766
*Korea Express Co. Ltd. Transportation 548,000 2,149,970
Kyong Nam Bank Banking 798,170 1,765,486
Kyung Dong Boiler Co. Ltd. Energy Equipment & Services 36,029 206,290
LG Electronics Inc. Electrical & Electronics 427,000 3,237,139
LG Industrial Systems Ltd. Electrical & Electronics 474,000 1,859,646
Moon Bae Steel Co. Ltd. Metals & Mining 15,480 200,007
Saehan Precision Co. Ltd. Electrical & Electronics 55,350 432,677
Samsung Display Devices Ltd. Electrical & Electronics 34,230 643,201
Samsung Electronics Co. Ltd. Multi-Industry 406 9,210
*Samsung Heavy Industries Co. Ltd. Machinery & Engineering 1,362,980 3,023,484
*Seah Steel Corp. Metals & Mining 44,000 205,074
+Shin Poong Paper Manufacturing Co. Ltd. Forest Products & Paper 113,820 637,929
</TABLE>

35
<PAGE> 38

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
SOUTH KOREA (CONT.)
Ssangyong Oil Refining Co. Ltd. Energy Equipment & Services 639,110 $ 2,703,492
+Tong Yang Merchant Bank Financial Services 626,395 1,238,008
--------------
51,638,929
--------------
SRI LANKA 0.1%
Aitken Spence & Co. Ltd. Multi-Industry 150,000 340,081
Associated Motorways Ltd. Automobiles 126,378 81,864
*Ceylon Holiday Resorts Inc. Leisure & Tourism 84,600 41,444
Colombo Dock Yard Ltd. Transportation 40,000 9,879
Lanka Orix Leasing Co. Ltd. Financial Services 982 2,067
National Development Bank of Sri Lanka Banking 820,000 3,050,931
United Motor Lanka Ltd. Automobiles 139,808 101,884
--------------
3,628,150
--------------
THAILAND 4.4%
Advanced Info Service Ltd., fgn. Telecommunications 1,198,300 5,889,081
American Standard Sanitaryware Public Co. Ltd.,
fgn Building Materials & Components 362,200 1,780,043
Asia Credit Public Co. Ltd. Financial Services 2,010,188 440,266
Asia Credit Public Co. Ltd., fgn. Financial Services 448,512 98,232
*Asia Fibre Public Co. Ltd., fgn. Textiles & Apparel 621,000 75,635
Ayudhya Insurance Public Co. Ltd., fgn. Insurance 302,600 1,157,380
Bangkok Bank Public Co. Ltd. Banking 15,721,412 28,889,774
Bangkok Bank Public Co. Ltd., fgn. Banking 20,596 52,810
Bangkok Insurance Public Co. Ltd. BKI Insurance 195,200 1,126,154
Bangkok Insurance Public Co. Ltd. BKI, fgn. Insurance 8,000 66,667
Bank of Ayudhya Public Co. Ltd., fgn. Banking 14,978,400 6,241,000
Banpu Public Co. Ltd. Energy Sources 796,400 2,212,222
Banpu Public Co. Ltd., fgn. Energy Sources 121,600 501,470
Chareon Pokphand Feedmill Public Co. Ltd., fgn. Food & Household Products 1,150,400 2,851,419
Charoen Pokphand Feedmill Public Co. Ltd. Food & Household Products 1,015,500 1,236,827
Dusit Thani Public Company Ltd. Leisure & Tourism 297,000 225,288
*First Bangkok City Bank Public Co. Ltd. Banking 19,122,478 3,881,700
First Bangkok City Bank Public Co. Ltd., fgn. Banking 12,571,322 2,525,009
*Hana Microelectronics Co. Ltd. Electrical & Electronics 429,058 866,367
Hana Microelectronics Co. Ltd., fgn. Electrical & Electronics 1,518,884 3,480,776
Hana Microelectronics Co. Ltd., SEC Electronic Components & Instruments 429,058 866,367
Hua Thai Manufacturing Public Co. Ltd. Textiles & Apparel 175,000 145,833
Industrial Finance Corp. of Thailand Banking 4,221,986 586,387
Industrial Finance Corp. of Thailand, fgn. Banking 9,782,414 1,546,792
Italian-Thai Development Public Co. LTD., fgn. Construction & Housing 1,274,600 408,526
Jasmine International Public Co. Ltd., fgn. Telecommunications 10,229,000 2,185,684
*Karat Sanitaryware Public Co. Ltd., fgn. Building Materials & Components 351,250 75,053
Kian Gwan (Thailand) Public Co. Ltd., fgn. Real Estate 96,000 113,846
Land and House Public Co. Ltd. Multi-Industry 4,728,500 909,327
*Land and House Public Co. Ltd. Multi-Industry 1,629,696 317,791
Land and House Public Co. Ltd., fgn. Multi-Industry 3,499,628 717,872
National Petrochemical Public Company Ltd., fgn. Chemicals 707,400 385,442
</TABLE>

36
<PAGE> 39

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
THAILAND (CONT.)
Phatra Thanakit Public Co. Ltd. Multi-Industry 7,856,879 $ 3,777,346
Phatra Thanakit Public Co. Ltd., fgn. Multi-Industry 3,343,400 1,911,025
Regional Container Lines Public Co. Ltd. Transportation 225,000 182,692
Regional Container Lines Public Co. Ltd., fgn. Transportation 1,166,600 947,239
*Royal Ceramic Industry Public Co. Ltd., fgn. Building Materials & Components 13,900 446
Saha Pathanapibul Public Co. Ltd., fgn. Food & Household Products 284,500 273,558
Saha Union Public Co. Ltd. Multi-Industry 8,386,470 4,972,747
Saha Union Public Co. Ltd., fgn. Multi-Industry 2,314,410 1,594,866
Sanyo Universal Electric Public Co Ltd., fgn. Appliances & Household Durables 1,418,500 310,676
Sanyo Universal Electric Public Co. Ltd. Appliances & Household Durables 30,700 6,724
Serm Suk Public Co. Ltd. Food & Household Products 622,900 3,460,556
Serm Suk Public Co. Ltd., fgn. Food & Household Products 8,600 60,641
Siam Cement Public Co. Ltd. Building Materials & Components 1,408,450 7,222,821
Siam Cement Public Co. Ltd., fgn. Building Materials & Components 819,850 6,656,902
Siam City Bank Public Co. Ltd., fgn. Banking 25,453,000 1,767,569
Siam Commercial Bank Banking 4,340,073 4,535,376
Siam Commercial Bank Ltd., fgn. Banking 7,278,460 8,553,746
*Siam Makro Public Company Ltd., fgn. Merchandising 3,422,200 4,204,626
+*Sino-Thai Engineering & Construction Public
Co., fgn. Construction & Housing 1,291,200 165,538
Textile Prestige Public Co. Ltd., fgn. Textiles & Apparel 99,000 50,769
Thai Airways International Public Co. Ltd., fgn. Transportation 5,438,900 6,217,546
Thai Asahi Glass Public Co. Ltd. Building Materials & Components 40,700 9,349
Thai Asahi Glass Public Co. Ltd., fgn. Building Materials & Components 32,000 7,350
*Thai Engine Manufacturing Public Company Ltd. Machinery & Engineering 1,051,000 1,796,581
Thai Farmers Bank Public Co. Ltd. Banking 22,083,744 28,312,492
Thai Farmers Bank Public Co. Ltd., fgn. Banking 100,156 187,257
Thai Investments and Securities Ltd. Financial Services 3,062,200 981,474
Thai Military Bank Ltd., fgn. Banking 14,690,400 3,138,974
Thai Petrochemical Industry Public Co. Ltd., fgn. Chemicals 15,995,740 1,572,231
Thai Plastic and Chemical Co. Ltd., fgn. Chemicals 2,500 4,848
Thai Rayon Public Co. Ltd. Textiles & Apparel 108,500 146,058
Thai Rayon Public Co. Ltd., fgn. Textiles & Apparel 11,400 15,346
*Thai Telephone & Telecommunication Public Co.
Ltd., fgn. Telecommunications 3,114,000 266,154
Thai Wacoal Public Co. Ltd. Textiles & Apparel 138,776 266,877
Thai Wacoal Public Co. Ltd., fgn. Textiles & Apparel 150,724 289,854
Thai Wah Public Co. Ltd., fgn. Multi-Industry 208,900 14,507
Tipco Asphalt Public Co. Ltd. Building Materials & Components 62,600 49,491
Tipco Asphalt Public Co. Ltd., fgn. Building Materials & Components 3,157,000 2,563,376
Total Access Communication Public Co. Ltd. Telecommunications 2,250,400 765,136
United Communications Industries, fgn. Multi-Industry 793,100 330,458
United Communications Industry Public Co. Ltd.,
loc. Multi-Industry 5,238,900 2,126,904
United Motor Works (Siam) Public Co. Ltd. Machinery & Engineering 30,400 15,103
United Standard Terminal Public Co. Ltd., fgn. Wholesale & International Trade 155,600 110,549
*United Standard Terminal Public Co. Ltd., fgn.,
rts. Wholesale & International Trade 155,600 77,301
--------------
171,778,119
--------------
</TABLE>

37
<PAGE> 40

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
TURKEY 6.6%
Akbank Banking 1,024,144,529 $ 90,183,836
Alarko Sanayii ve Ticaret SA Appliances & Household Durables 6,399,999 609,891
*Anadolu Anonim Turk Sigorta Sirketi, br. Insurance 17,453,000 555,801
*Anadolu Anonim Turk Sigorta Sirketi, new Insurance 17,364,000 552,967
Arcelik AS Appliances & Household Durables 227,433,195 21,398,987
Beko Elektronik AS Appliances & Household Durables 76,208,483 4,688,338
Borusan AS Industrial Components 15,161,000 709,586
Cimentas Izmir Cimento Fabrikasi Turk AS Building Materials & Components 16,488,253 1,809,929
Cimsa Cimento Sanayi ve Ticaret AS Building Materials & Components 69,525,000 3,773,975
Erciyas Biracilik Food & Household Products 103,139,000 14,431,995
Eregli Demir ve Celik Fabrikalari AS Metals & Mining 139,943,750 21,607,720
Finansbank Banking 349,791,231 6,666,684
Izocam Ticaret ve Sanayii AS, br. Building Materials & Components 31,986,478 1,111,231
+Kartonsan Forest Products & Paper 84,020,250 5,168,878
Koc Holding AS Multi-Industry 99,382,831 23,257,225
Marshall Boya ve Vernik Sanayii AS Industrial Components 12,903,392 1,805,541
*Netas Northern Electric Telekomunic Asyon AS Electrical & Electronics 7,717,000 2,792,642
Petkim Petrokimya Holding AS Chemicals 5,454,000 2,960,555
*Sabanci Holdings AS Multi-Industry 5,850,000 359,891
*Sabanci Holdings AS, ADR Multi-Industry 1,540,500 23,492,625
Sasa Suni Ve Sentetik Elyaf Sanayi AS Chemicals 10,400,000 564,536
Tat Konserve Sanayii AS Food & Household Products 37,479,342 1,772,244
Tekstil Bankasi AS, br. Banking 361,031 5,836
Tofas Turk Otomobil Fabrikasi AS Automobiles 119,647,475 6,783,353
Turk Demir Dokum, br. Appliances & Household Durables 30,293,301 1,680,931
Turkiye Garanti Bankasi AS Banking 409,726,741 20,263,884
Vakif Finansal Kiralama AS Financial Services 40,380,229 516,321
--------------
259,525,402
--------------
VENEZUELA 3.7%
Ceramica Carabobo CA, A Building Materials & Components 409,640 308,672
Ceramica Carabobo CA, A, ADR Building Materials & Components 416,421 313,781
Ceramica Carabobo CA, B Building Materials & Components 1,739,830 1,379,996
*Corporacion Industrial Carabobo Saca SIC, A Building Materials & Components 4,028,333 189,714
*Corporacion Industrial Carbabobo Saca SIC, B Building Materials & Components 25,069,743 1,143,375
Electricidad de Caracas Utilities Electrical & Gas 103,679,850 124,382,925
*Industrias Ventane IVE Utilities Electrical & Gas 15,816,656 1,795,565
Inmuebles Y Valores 231107 SA Building Materials & Components 1,015,000 10,325
*Manufacturera de Aparatos Domesticos SA Appliances & Household Durables 527,478 418,384
Mavesa SA, ADR Food & Household Products 1,367,899 8,720,356
Siderurgica Venezolana Sivensa Saica Svs., ADR Metals & Mining 431,270 1,804,441
Siderurgica Venezolana Sivensa Saica Svs., ADR, B Metals & Mining 2,728 12,712
Siderurgica Venezolana Sivensa Saica Svs., ADR,
B, new Metals & Mining 18,570 86,535
Venezolana de Cementos Vencemos #1 Building Materials & Components 2,348,750 3,795,818
Venezolana de Cementos Vencemos #2 Building Materials & Components 1,876,537 3,006,627
--------------
147,369,226
--------------
</TABLE>

38
<PAGE> 41

TEMPLETON DEVELOPING MARKETS TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (continued)

*Non-income producing.
**Securities traded in U.S. dollars unless otherwise indicated.
+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 non-controlled "affiliated
companies" at 12/31/97 were $21,347,487.

CURRENCY ABBREVIATIONS:
MYR -- Malaysia Ringgit
SGD -- Singapore Dollar
ZAR -- South Africa C Rand

See Notes to Financial Statements.

39
<PAGE> 42

TEMPLETON DEVELOPING MARKETS TRUST
Financial Statements

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997

<TABLE>
<S> <C>
Assets:
Investments in securities, at value ($4,244,776,950)............................... $3,930,875,068
Cash............................................................................... 4,848,753
Receivables:
Investment securities sold........................................................ 31,928,664
Fund shares sold.................................................................. 19,385,981
Dividends and interest............................................................ 7,391,230
Other assets....................................................................... 12,061
-----------
Total assets................................................................... 3,994,441,757
-----------
Liabilities:
Payables:
Investment securities purchased................................................... 105,169
Fund shares redeemed.............................................................. 33,969,568
To affiliates..................................................................... 7,611,592
Distributions to shareholders...................................................... 688,336
Other liabilities.................................................................. 7,395,023
-----------
Total liabilities.............................................................. 49,769,688
-----------
Net assets, at value................................................................ $3,944,672,069
===========
Net assets consist of:
Undistributed net investment income................................................ $ 2,826,387
Net unrealized depreciation........................................................ (313,901,882)
Accumulated distributions in excess of net realized gain........................... (90,981,028)
Beneficial shares.................................................................. 4,346,728,592
-----------
Net assets, at value................................................................ $3,944,672,069
===========
CLASS I
Net asset value per share ($3,444,028,769 / 266,131,599 shares outstanding)............... $12.94
======
Maximum offering price per share ($12.94 / 94.25%)........................................ $13.73
======
CLASS II
Net asset value per share ($402,542,464 / 31,420,494 shares outstanding)*................. $12.81
======
Maximum offering price per share ($12.81 / 99.00%)........................................ $12.94
======
ADVISOR CLASS
Net asset value and offering price per share ($98,100,836 / 7,588,510 shares
outstanding)............................................................................. $12.93
======
</TABLE>

*Redemption price per share is equal to net asset value less any applicable
sales charge.

See Notes to Financial Statements.

40
<PAGE> 43

TEMPLETON DEVELOPING MARKETS TRUST
Financial Statements (continued)

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C> <C>
Investment income:
(net of foreign taxes of $7,391,512)
Dividends.......................................................... $109,662,416
Interest........................................................... 24,868,738
------------
Total investment income........................................ $ 134,531,154
Expenses:
Management fees (Note 3)........................................... 57,060,597
Administrative fees (Note 3)....................................... 3,998,636
Distribution fees (Note 3)
Class I...................................................... 11,239,348
Class II..................................................... 3,953,434
Transfer agent fees (Note 3)....................................... 6,189,408
Custodian fees..................................................... 7,688,862
Reports to shareholders............................................ 1,356,100
Registration and filing fees....................................... 498,400
Professional fees (Note 3)......................................... 124,512
Trustees' fees and expenses........................................ 122,500
Other.............................................................. 50,876
------------
Total expenses................................................. 92,282,673
-------------
Net investment income.......................................... 42,248,481
-------------

Realized and unrealized gain (loss):
Net realized gain from:
Investments....................................................... 133,003,049
Foreign currency transactions..................................... 2,715,000
------------
Net realized gain.............................................. 135,718,049

Net unrealized depreciation on investments..................... (743,217,777)
-------------
Net realized and unrealized loss.................................... (607,499,728)
-------------
Net decrease in net assets resulting from operations................ $(565,251,247)
=============
</TABLE>

See Notes to Financial Statements.

41
<PAGE> 44

TEMPLETON DEVELOPING MARKETS TRUST
Financial Statements (continued)

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
-----------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income........................................... $ 42,248,481 $ 33,756,926
Net realized gain from investments and foreign currency
transactions.................................................. 135,718,049 84,667,850
Net unrealized appreciation (depreciation) on investments....... (743,217,777) 446,213,767
-----------------------------------
Net increase (decrease) in net assets resulting from
operations.................................................. (565,251,247) 564,638,543
Distributions to shareholders from:
Net investment income:
Class I......................................................... (39,274,553) (34,428,429)
Class II........................................................ (1,913,743) (1,401,202)
Advisor Class................................................... (1,069,766) --
In excess of net investment income:
Class I......................................................... -- (1,420,492)
Class II........................................................ -- (96,456)
Net realized gains:
Class I......................................................... (131,568,835) (69,400,180)
Class II........................................................ (14,713,519) (4,469,289)
Advisor Class................................................... (2,542,361) --
In excess of net realized gains:
Class I......................................................... (79,901,425) --
Class II........................................................ (9,361,096) --
Advisor Class................................................... (1,718,507) --

Beneficial share transactions (Note 2):
Class I......................................................... 853,998,736 723,963,075
Class II........................................................ 280,828,480 169,320,035
Advisor Class................................................... 121,778,243 --
-----------------------------------
Net increase in net assets.................................... 409,290,407 1,346,705,605
Net assets:
Beginning of year................................................ 3,535,381,662 2,188,676,057
-----------------------------------
End of year...................................................... $3,944,672,069 $3,535,381,662
===================================
Undistributed net investment income/(distributions in excess of
net investment income) included in net assets:
End of year...................................................... $ 2,826,387 $ (1,516,948)
===================================
</TABLE>

See Notes to Financial Statements.

42
<PAGE> 45

TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Developing Markets Trust (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company. The Fund
seeks long-term capital appreciation by investing in securities of issuers of
countries having developing markets. The following summarizes the Fund's
significant accounting policies.

a. SECURITY VALUATION:

Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Trustees.

b. FOREIGN CURRENCY TRANSLATION:

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.

The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.

Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, the differences between the recorded amounts
of dividends, interest, and foreign withholding taxes, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.

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 of Brazil's balance of payments or
serious reasons to foresee the imminence of such an 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. The Fund has investments in Brazilian companies with a
value of approximately $503 million as of December 31, 1997.

43
<PAGE> 46

TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

c. INCOME TAXES:

No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.

d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.

Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.

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 amounts of income and expense during the reporting
period. Actual results could differ from those estimates.

2. BENEFICIAL SHARES

The Fund offers three classes of shares: Class I, Class II and Advisor Class
shares. The shares differ by their initial sales load, distribution fees, voting
rights on matters affecting a single class of shares, and the exchange privilege
of each class.

At December 31, 1997, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS I
Shares sold......................................... 101,497,736 $ 1,720,171,397 81,183,040 $1,183,527,421
Shares issued on reinvestment of distributions...... 16,789,330 214,448,966 6,016,317 88,975,415
Shares redeemed..................................... (67,019,990) (1,080,621,627) (37,415,543) (548,539,761)
--------------------------------------------------------------------
Net increase........................................ 51,267,076 $ 853,998,736 49,783,814 $ 723,963,075
====================================================================
</TABLE>

44
<PAGE> 47

TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (continued)

2. BENEFICIAL SHARES (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996
--------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS II
Shares sold............................................. 19,937,056 $336,719,829 12,543,242 $181,957,609
Shares issued on reinvestment of distributions.......... 1,673,980 21,068,086 328,438 4,824,061
Shares redeemed......................................... (5,035,752) (76,959,435) (1,194,443) (17,461,635)
--------------------------------------------------------------
Net increase............................................ 16,575,284 $280,828,480 11,677,237 $169,320,035
==============================================================
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997*
--------------------------
SHARES AMOUNT
--------------------------
<S> <C> <C>
ADVISOR CLASS
Shares sold............................................. 10,481,151 $167,153,596
Shares issued on reinvestment of distributions.......... 388,246 4,881,386
Shares redeemed......................................... (3,280,887) (50,256,739)
--------------------------
Net increase............................................ 7,588,510 $121,778,243
==========================
</TABLE>

*Effective date of Advisor Class shares was January 2, 1997.

3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

Certain Officers of the Fund are also officers or directors of Templeton Asset
Management Ltd. (TAML), Franklin Templeton Services, Inc. (FT Services),
Franklin/Templeton Distributors, Inc. (Distributors) and Franklin/Templeton
Investor Services, Inc. (Investor Services), the Fund's investment manager,
administrative manager, principal underwriter, and transfer agent, respectively.

The Fund pays an investment management fee to TAML of 1.25% per year of the
average daily net assets of the fund. The Fund pays an administrative fee to FT
Services based on the Fund's average daily net assets as follows:

<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
------------------------------------------------------------------
<C> <S>
0.15% First $200 million
0.135% Over $200 million, up to and including $700 million
0.10% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion
</TABLE>

The Fund reimburses Distributors up to 0.35% and 1.00% per year of the average
daily net assets of Class I and Class II, respectively, for costs incurred in
marketing the Fund's Class I and Class II shares. Under the Class I distribution
plan, costs exceeding the maximum may be reimbursed in subsequent periods. At
December 31, 1997 there were no unreimbursed costs. Distributors received net
commissions from sales of the Fund's shares and received contingent deferred
sales charges for the year of $2,257,338 and $293,215, respectively.

45
<PAGE> 48

TEMPLETON DEVELOPING MARKETS TRUST
Notes to Financial Statements (continued)

3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)

Included in professional fees are legal fees of $65,623 that were paid to a law
firm in which a partner is an officer of the Fund.

4. INCOME TAXES

At December 31, 1997, the net unrealized depreciation based on the cost of
investments for income tax purposes of $4,364,050,335 was as follows:

<TABLE>
<S> <C>
Unrealized appreciation......................................................... $ 885,839,702
Unrealized depreciation......................................................... (1,319,014,969)
---------------
Net unrealized depreciation..................................................... $ (433,175,267)
===============
</TABLE>

Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatments of passive
foreign investment companies and wash sales.

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the year
ended December 31, 1997 aggregated $2,190,002,719 and $1,199,983,885
respectively.

46
<PAGE> 49

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 statement of investments of Templeton Developing Markets Trust as of
December 31, 1997, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
periods 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, 1997 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, 1997, 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

New York, New York
January 30, 1998

47
<PAGE> 50
LITERATURE REQUEST

For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. 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.

FRANKLIN TEMPLETON GROUP

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 Biotechnology
Discovery Fund
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 Financial Services 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 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)

*These funds are now closed to new accounts, with the exception of retirement
accounts.

**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.

++ Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC. 10/97.1
<PAGE> 51
TEMPLETON DEVELOPING
MARKETS TRUST

AUDITORS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017-2416

PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404-1585

SHAREHOLDER SERVICES
1-800-632-2301

FUND INFORMATION
1-800-342-5236

This report must be preceded or accompanied by a current prospectus of the
Templeton Developing Markets Trust, which contains more complete information,
including charges and expenses. Like any investment in securities, the value of
the Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political and other factors, as well as investment decisions by the
Investment Manager, which will not always be profitable or wise. The Fund and
its investors are not protected from such losses by the Investment Manager.
Therefore, investors who cannot accept this risk should not invest in shares of
the Fund.

To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded, and accessed. These calls can be
determined by the presence of a regular beeping tone.

711 A97 02/98 [LOGO] Printed on recycled paper