<PAGE>
Templeton Emerging Markets
Income Fund
- --------------------------------------------------------------------------------
Your Fund's Objective:
Seeks high current income, with a secondary objective of capital appreciation by
investing primarily in a portfolio of high yielding debt obligations of
sovereign-related entities and private sector companies in emerging market
countries. Investments in foreign securities involve special risks, such as
market and currency volatility and adverse economic, social and political
developments in the countries where the Fund is invested. Developing markets
involve heightened risks related to the same factors, in addition to risks
associated with the relatively small size and lesser liquidity of these markets.
- --------------------------------------------------------------------------------
July 21, 1995
Dear shareholder:
This quarterly update covers the period ended May 31, 1995 and includes your
Fund's long-term performance, a listing of portfolio holdings and a brief
commentary from the Fund's manager regarding the investment environment.
This update is one of four reports you receive during the Fund's fiscal year.
Next quarter, you will receive the annual report covering the 12-months ended
August 31, 1995. The annual report provides a more comprehensive discussion of
the financial markets that impact the Fund, a summary of the fund's performance,
and an in-depth manager's discussion and analysis. Also included are the Fund's
audited financial statements and complete investment portfolio.
If you have any questions about this quarterly update, you may call the Franklin
Templeton Fund Information Department at 1-800/342-5236.
1
<PAGE>
Manager's Discussion
After months of upheaval, a string of favorable events seems to have stabilized
the emerging nations' debt markets. The turn began with government assistance
packages in both Argentina and Mexico that convinced investors funding was
adequate to overcome liquidity concerns. Second, optimism broadened as a solid
U.S. bond market rally caused fixed income investors to consider allocating
their dollars to the higher yields available from emerging nations' debt.
Finally, the re-election of Argentinean president Carlos Menem appeared to
signal continued recognition of market-oriented reform as the route to economic
progress and indicated a strong commitment to reform by the people of Argentina.
Templeton Emerging Markets Income Fund's holding in Argentina FRBs (the Fund's
largest position at 5.5% of total net assets) is possibly the best example of
rebound. These bonds, which are relatively short-maturity Brady bonds of March
2005, fell from a price of $70.38 on December 19, 1994 to $37.75 on March 8, and
surged back to $68.79 by May 17. Of course, the markets vary and past
performance is not indicative of future results.
The threat of market crisis seems to be quickly receding, and the potential
outlook appears to be positive for spreads of emerging market debt to narrow
further in coming months.
- --------------------------------------------------------------------------------
TEMPLETON EMERGING MARKETS
INCOME FUND, INC.
Cumulative Total Returns*
Periods Ended 5/31/95
<TABLE>
<CAPTION>
Since
Inception
One-Year (9/23/93)
-------- ---------
<S> <C> <C>
Based on change -0.14% -4.62%
in net asset value
Based on change -1.08% -12.32%
in market price
</TABLE>
*Cumulative total return calculations show the change in value of an investment
over the periods indicated. These calculations assume reinvestment of all
distributions and capital gains, either at net asset value or at market price on
the reinvestment date in accordance with the dividend reinvestment plan.
The Fund's investment manager and shareholder servicing agent are waiving a
portion of their fees, which reduces operating expenses and increases total
return to shareholders. Without these reductions, the Fund's total return would
have been lower. In accordance with the Fund's prospectus, this fee waiver was
undertaken during the fiscal quarter following the fiscal period ended November
30, 1993, and may continue through any of the succeeding eight full fiscal
quarters of the Fund during which the average closing price of the Fund's shares
is less than the $15.00 maximum initial offering price.
Past performance is not predictive of future results.
- --------------------------------------------------------------------------------
As a result of the better performance of emerging market bonds, the net asset
value per share of the Templeton Emerging Markets Income Fund increased during
the three months covered by this report, from $10.56 on February 28, 1995 to
$11.38 on May 31, 1995. The market price per share on the New York Stock
Exchange also increased during this time from $10.38 on February 28 to $11.50 on
May 31, 1995.
/s/ Thomas W. Wilkinson, CFA
Thomas W. Wilkinson, CFA
Portfolio Manager,
Templeton Emerging Markets Income Fund, Inc.
<PAGE>
Templeton Emerging Markets Income Fund, Inc.
Investment Portfolio, May 31, 1995 (unaudited)
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<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
- -------------------------------------------------------------------------------------------
LONG TERM SECURITIES: 93.9%
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Algeria: 0.2%
Banque National D'Algerie, FRN, 12/19/94 U.S. 4,666,667 $ 1,353,333
- -------------------------------------------------------------------------------------------
Argentina: 15.1%
Argentina Domestic Securities Trust (Morgan Stanley)
14.75%, 9/01/02 U.S. 11,800,000 9,440,000
Argentina Local Markets Securities Trust 1994-I
(Goldman Sachs Group, L.P.) 13.375%, 8/15/01 U.S. 12,500,000 11,375,000
Bridas Corp., Yankee, 12.50%, 11/18/99 U.S. 12,180,000 11,296,950
Republic of Argentina:
7.3125%, FRN, 3/31/05 U.S. 43,600,000 28,503,500
7.125%, VRN, 3/31/23 U.S. 15,000,000 9,168,750
Telefonica de Argentina SA, 11.875%, 11/01/04 U.S. 12,000,000 11,850,000
------------
81,634,200
- -------------------------------------------------------------------------------------------
Brazil: 16.8%
Aracruz Celulose SA, 10.375%, 1/31/02 U.S. 5,500,000 5,128,750
Bombril SA, 8.00%, 8/26/98 U.S. 3,000,000 2,520,000
Brazil C Bond, 8.00%, 4/15/14 U.S. 11,444,400 5,695,248
Companhia Suzano Papel, 10.25%, 10/06/01 U.S. 6,000,000 5,520,000
Copene-Petroquimica do Nordeste SA, 9.50%, 10/19/01 U.S. 14,150,000 11,744,500
Government of Brazil:
7.8125%, FRN, 1/01/01 U.S. 19,497,000 15,658,528
7.25%, FRN, 4/15/06 U.S. 32,450,000 19,632,250
7.3125%, FRN, 4/15/12 U.S. 26,825,000 14,351,375
Industrias Klabin de Papel Celulose SA,
12.125%, 12/28/02 U.S. 5,600,000 5,614,000
Iochpe-Maxion SA, 144A, 12.375%, 11/08/02 U.S. 6,050,000 5,354,250
------------
91,218,901
- -------------------------------------------------------------------------------------------
Bulgaria: 2.5%
Republic of Bulgaria, IAB, 7.5625%, FRN, 7/28/24 U.S. 33,250,000 13,757,188
- -------------------------------------------------------------------------------------------
Chile: 1.1%
Compania Sud Americana de Vapores SA,
7.375%, 12/08/03 U.S. 6,620,000 5,941,450
- -------------------------------------------------------------------------------------------
China: 0.8%
Guangdong Enterprises Holdings Ltd.,
8.75%, 12/22/03 U.S. 5,000,000 4,250,000
- -------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
Templeton Emerging Markets Income Fund, Inc.
Investment Portfolio, May 31, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
- -----------------------------------------------------------------------------------------------
LONG TERM SECURITIES (CONT.)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Colombia: 1.2%
Banco Ganadero, 9.75%, 8/26/99 U.S. 5,580,000 $ 5,566,050
Empresa Colombiana de Petroleos, 7.25%, 7/08/98 U.S. 1,000,000 975,000
------------
6,541,050
- -----------------------------------------------------------------------------------------------
Costa Rica: 2.0%
Banco Central de Costa Rica, A, 6.25%, 5/21/10 U.S. 16,900,000 8,872,500
Instituto Costarricense de Electricidad, 8.375%, 1/27/97 U.S. 1,900,000 1,812,125
------------
10,684,625
- -----------------------------------------------------------------------------------------------
Czech Republic: 3.6%
Ceskoslovenska Obchodni Banka, 11.125%, 8/26/97 Csk. 144,580,000 5,500,925
CEZ AS, 14.375%, 1/27/01 Csk. 122,770,000 5,039,416
Skofin, 11.625%, 2/09/98, 144A Csk. 230,750,000 8,880,579
------------
19,420,920
- -----------------------------------------------------------------------------------------------
Ecuador: 4.1%
Republic of Ecuador:
7.6875%, FRN, 12/21/04 U.S. 2,411,000 1,482,765
7.25%, FRN, 2/27/15 U.S. 31,365,000 11,016,956
7.25%, FRN, 4/28/15 U.S. 10,607,681 3,725,948
7.25%, FRN, 2/28/25 U.S. 10,999,999 5,719,999
------------
21,945,668
- -----------------------------------------------------------------------------------------------
Guatemala: 2.0%
Associacion Nacional del Cafe, 11.00%, 8/31/98 U.S. 10,910,000 10,910,000
- -----------------------------------------------------------------------------------------------
Hungary: 1.4%
National Bank of Hungary, 7.95%, 11/01/03 U.S. 9,600,000 7,464,000
- -----------------------------------------------------------------------------------------------
India: 1.3%
Essar Gujarat Ltd., FRN, 7/15/99 U.S. 6,900,000 6,900,000
- -----------------------------------------------------------------------------------------------
Indonesia: 6.8%
Dharmala Sakti Sajahtera, 7/22/96 Idr. 5,000,000,000 1,695,486
Dharmala Sakti Sajahtera, 9/25/96, CP Idr. 14,000,000,000 4,574,444
PT Astra International, 9.75%, 4/29/01 U.S. 6,150,000 6,257,625
PT Indah Kiat Pulp & Paper Corp., 8.875%, 11/01/00 U.S. 4,840,000 4,404,400
PT Inti Indorayon Utama, 9.125%, 10/15/00 U.S. 6,830,000 6,283,600
PT Polysindo Eka Perkasa Global, 13.00%, 6/15/01 U.S. 5,000,000 5,050,000
Tjiwi Kimia Int'l Finance Co. BV, 13.25%, 8/01/01 U.S. 8,000,000 8,480,000
------------
36,745,555
- -----------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Templeton Emerging Markets Income Fund, Inc.
Investment Portfolio, May 31, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
- ------------------------------------------------------------------------------------------
LONG TERM SECURITIES (CONT.)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jordan: 1.8%
Kingdom of Jordan:
Collateralized, FRN, 12/23/05 U.S. 1,866,331 $ 1,259,773
Collateralized, FRN, 12/23/23 U.S. 5,706,250 3,366,688
Collateralized, Par Bond, 4.00%, 12/23/23 U.S. 13,325,332 5,063,626
------------
9,690,087
- ------------------------------------------------------------------------------------------
Mexico: 7.1%
Bonos de la Tesoreria de La Federacion, 7/27/95 U.S. 4,650,000 4,556,218
Hylsa SA, 11.00%, 2/23/98 U.S. 10,000,000 9,000,000
United Mexican States:
8.50%, 9/15/02 U.S. 10,585,000 8,176,913
Par B, 6.25%, 12/31/19 U.S. 29,700,000 16,687,688
------------
38,420,819
- ------------------------------------------------------------------------------------------
Morocco: 3.6%
Kingdom of Morocco Loan Participation, FRN, 1/01/09 U.S. 32,000,000 19,520,000
- ------------------------------------------------------------------------------------------
Nicaragua: 0.3%
Nicaragua Loan Participation U.S. 25,000,000 1,750,000
- ------------------------------------------------------------------------------------------
Pakistan: 0.7%
Republic of Pakistan, 11.50%, 12/22/99 U.S. 3,800,000 3,757,250
- ------------------------------------------------------------------------------------------
Panama: 1.0%
Republic of Panama, 7.125%, FRN, 5/10/02 U.S. 7,000,000 5,337,500
- ------------------------------------------------------------------------------------------
Peru: 1.0%
Gloria SA, 11.00%, 3/21/97 U.S. 5,840,000 5,518,800
- ------------------------------------------------------------------------------------------
Philippines: 4.3%
National Power Corp., 7.625%, 11/15/00 U.S. 10,000,000 9,450,000
Philippine Long Distance Telephone Co.,
10.625%, 6/02/04 U.S. 5,500,000 5,852,352
Subic Power Corp., 9.50%, 12/28/08 U.S. 8,786,050 8,116,114
------------
23,418,466
- ------------------------------------------------------------------------------------------
Poland: 1.1%
Government of Poland:
FRN, 20 year bond U.S. 5,000,000 2,600,000
FRN, 30 year bond U.S. 5,000,000 3,603,125
Republic of Poland, 2.75%, VRN, 10/27/24 U.S. 17,000 6,843
------------
6,209,968
- ------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
Templeton Emerging Markets Income Fund, Inc.
Investment Portfolio, May 31, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
- -----------------------------------------------------------------------------------------------------
LONG TERM SECURITIES (CONT.)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Russia: 2.3%
Bank Foreign Economic Affairs:
6.375%, 8/04/95 Ger. 2,000,000 $ 1,403,472
7.00%, 3/29/96 Ger. 13,000,000 8,938,735
7.50%, 9/27/96 Ger. 3,000,000 2,041,574
------------
12,383,781
- -----------------------------------------------------------------------------------------------------
Thailand: 4.5%
ABN Amro Bank (THB), 9.10%, 8/05/97, CD Thai. 250,000,000 9,737,642
Bangkok Bank, 11.50%, 5/16/96 Thai. 50,000,000 2,029,915
Industrial Finance Corp. Thailand, zero, 6/15/95 Thai. 180,000,000 7,241,572
Thailand Military Bank:
11.125%, 6/03/96 Thai. 70,000,000 2,836,305
11.00%, 6/05/96 Thai. 60,000,000 2,431,118
------------
24,276,552
- -----------------------------------------------------------------------------------------------------
Trinidad and Tobago: 0.8%
Republic of Trinidad and Tobago, 11.75%, 10/03/04 U.S. 4,290,000 4,461,600
- -----------------------------------------------------------------------------------------------------
Turkey: 1.5%
Republic of Turkey:
series 4, 6.5625%, 2/21/96 U.S. 1,000,000 988,750
series 5, 6.8125%, 2/21/97 U.S. 7,730,000 7,382,150
------------
8,370,900
- -----------------------------------------------------------------------------------------------------
Uruguay: 0.7%
Government of Uruguay, A, 6.75%, 2/19/21 U.S. 6,000,000 3,810,000
- -----------------------------------------------------------------------------------------------------
Venezuela: 4.3%
Bariven SA, 10.625%, 3/17/02 U.S. 15,650,000 13,791,563
Electricidad de Caracas, FRN, 9/30/03 U.S. 2,741,475 1,192,542
Produvisa Capital Corp., 9.50%, 11/29/96 U.S. 6,750,000 5,906,250
Republic of Venezuela:
9.125%, 3/11/96 U.S. 1,410,000 1,374,750
9.00%, 5/27/96 U.S. 1,000,000 960,000
------------
23,225,105
------------
TOTAL LONG TERM SECURITIES 508,917,718
- -----------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Templeton Emerging Markets Income Fund, Inc.
Investment Portfolio, May 31, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
- -------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 4.6%
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Federal Home Loan Bank,
5.88% to 5.91% with
maturities to 7/13/95 U.S. 5,735,000 $ 5,696,486
Goldman Sachs Group LP,
(principal and interest
is linked to the change
in the Indonesian Rupiah
to U.S. Dollar foreign
exchange rate between
issue date (2,179.25
Rupiah/U.S. Dollar) and
maturity date), 14.00%,
6/15/95 U.S. 5,600,000 5,458,320
PT Polysindo Eka Perkasa,
18.00%, 6/21/95 Idr. 12,900,000,000 5,677,970
U.S. Treasury Bills,
5.55% to 5.74% with
maturities to 9/21/95 U.S. 8,260,000 8,137,292
------------
TOTAL SHORT TERM OBLIGATIONS 24,970,068
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS: 98.5% 533,887,786
UNREALIZED GAIN IN FORWARD EXCHANGE
CONTRACTS: 0.1% 393,893
OTHER ASSETS, LESS LIABILITIES: 1.4% 7,448,601
------------
TOTAL NET ASSETS: 100.0% $541,730,280
============
</TABLE>
* PRINCIPAL AMOUNT IN CURRENCY OF COUNTRY INDICATED.
7
<PAGE>
Templeton Emerging Markets Income Fund, Inc.
Financial Highlights, May 31, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
TOTAL NET ASSETS PER SHARE
-------------------------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value:
Beginning of period, March 1,
1995 $502,803,186 $ 10.56
Net investment income $ 16,482,787 $ 0.35
Distribution from net investment
income (14,757,785) (0.31)
Net realized and unrealized gain
from security transactions 37,202,092 0.78
------------ -------
Net increase in net asset value 38,927,094 0.82
------------ -------
End of period, May 31, 1995 $541,730,280 $ 11.38
============ =======
</TABLE>
- ---
This report is sent to the shareholders of Templeton Emerging Markets Income
Fund, Inc. for their information. It is not a prospectus, circular, or repre-
sentation intended for use in the purchase or sale of shares of the Fund or of
any securities mentioned in the report.
8
<PAGE>
Templeton Emerging Markets Income Fund, Inc.
- --------------------------------------------------------------------------------
TRANSFER AGENT
Chemical Mellon Shareholder Services
Securities Transfer Services
450 West 33rd
Street New York, NY 10001
800-526-0801
SHAREHOLDER INFORMATION
Weekly comparative net asset value and market price information about Templeton
Emerging Markets Income Fund, Inc. shares is published each Monday in The Wall
Street Journal, weekly in Barron's and each Saturday in The New York Times and
other newspapers in a table called "Publicly Traded Funds." The Fund's New York
Stock Exchange trading symbol is TEI.
For current information about the net asset value, call 1-800-292-9293.
If any shareholder is not receiving copies of the Reports to Shareholders
because shares are registered in a broker's name or in a custodian's name, he or
she can write and request that his or her name be added to the Fund's mailing
list, by writing Templeton Emerging Markets Income Fund, Inc., 700 Central
Avenue, St. Petersburg, FL 33701.
9
<PAGE>
Notes
-----
<PAGE>
Notes
-----
<PAGE>
- -------------------------------------------
TEMPLETON EMERGING MARKETS
INCOME FUND, INC.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Investors should be aware that the value
of investments made for the Fund may go
up as well as down and that the
Investment Manager may make errors in
selecting securities for the Fund's
portfolio. Like any investment in
securities, the Fund's portfolio will be
subject to the risk of loss from market,
currency, economic, political, and other
factors. The Fund and Fund investors are
not protected from such losses by the
Investment Manager. Therefore, investors
who cannot accept the risk of such losses
should not invest in shares of the Fund.
To ensure the highest quality of service,
telephone calls to or from our service
departments may be monitored, record-
ed, and accessed. These calls can be
determined by the presence of a regular
beeping tone.
- -------------------------------------------
(RECYCLED PAPER LOGO APPEARS HERE) TLTEI Q95 5/95
TEMPLETON
EMERGING
MARKETS
INCOME
FUND, INC.
Third Quarter Report
May 31, 1995
(LOGO OF FRANKLIN TEMPLETON APPEARS HERE)
