SemiAnnual Report
February 29, 2000
[GLOBAL MAP GRAPHIC]
TEMPLETON EMERGING
MARKETS INCOME FUND, INC.
[FRANKLIN TEMPLETON LOGO]
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
YOUR FUND'S GOAL: TEMPLETON EMERGING MARKETS INCOME FUND SEEKS HIGH CURRENT
INCOME, WITH A SECONDARY GOAL OF CAPITAL APPRECIATION, BY INVESTING PRIMARILY IN
A PORTFOLIO OF HIGH-YIELDING DEBT OBLIGATIONS OF SOVEREIGN OR SOVEREIGN-RELATED
ENTITIES AND PRIVATE SECTOR COMPANIES IN EMERGING MARKET COUNTRIES.
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to bring you this semiannual report of Templeton Emerging Markets
Income Fund, which covers the six months ended February 29, 2000. During the
reporting period, many emerging country bond markets performed well due, in
part, to rising global commodity prices, which improved the export revenues and
debt repayment capacity of many emerging market countries. The rapid advance of
the U.S. equity market also eased the risk aversion of many investors, and
increased their appetite for emerging market bonds.
In Latin America, Brazil's bonds continued their recovery from earlier crises
largely as a result of external financing from the International Monetary Fund
(IMF) and foreign governments, as well as the implementation of economic
CONTENTS
Shareholder Letter ............................ 1
Important Notice to Shareholders .............. 5
Performance Summary ........................... 6
Financial Highlights & Statement of
Investments................................... 7
Financial Statements .......................... 11
Notes to Financial Statements ................. 14
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the Fund's Statement of Investments (SOI), a complete listing of
the Fund's portfolio holdings, including dollar value and number of shares or
principal amount. The SOI begins on page 8.
[FUND CATEGORY PYRAMID GRAPHIC]
[PIE CHART]
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
2/29/00
Latin America 66.4%
Asia 19.5%
Europe 10.9%
Short-Term Investments & Other Net Assets 3.2%
measures designed to stabilize the country's fiscal situation. Elsewhere in the
region, Venezuelan and Mexican debt rose in value, as both nations' revenues
were positively impacted by a combination of rising oil prices and the
relatively large volume of oil exported by each country. Argentina did not fare
as well during the period. Its economy suffered from recession aggravated by the
country's fixed exchange rate, which prevented it from stimulating growth by
reducing interest rates. But even in the face of lower tax revenues and a larger
budget deficit caused by reduced economic activity, Argentina's government
succeeded in obtaining private sector credit to meet its debt payment
obligations.
Despite Russia's default on U.S. Treasury-backed Brady bonds and other external
debt, its eurobonds recovered on speculation that the country's government would
continue to give priority to servicing their eurobond obligations over debt
issued by the former Soviet Union. Bulgarian debt securities also rebounded in
value mainly because of that country's relatively strong economic fundamentals
during the period, and Turkey's bonds rose in price as its government obtained
both external financial support from the IMF and parliamentary approval of
economic reforms.
Within this environment, Templeton Emerging Markets Income Fund produced a 3.13%
cumulative total return based on market price and 15.94% based on net asset
value for the six months ended February 29, 2000, as shown in the Performance
Summary on page 6. During the same period, the J.P. Morgan Emerging Markets Bond
Index Plus (EMBI+) returned 16.49%.(1) At the end of the reporting period, most
(66.4%) of the Fund's total net assets were invested in Latin American
securities.
(1) Source: J.P. Morgan Securities, Inc. The unmanaged J.P. Morgan EMBI+
measures performance of external debt instruments in 14 emerging markets. It
includes reinvested interest. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.
2
Our largest regional holdings were Mexican bonds (20.0%), followed by those from
Brazil (16.9%), Argentina (12.8%), and Venezuela (8.5%). During the six months
under review, we sold Ecuadorian Brady bonds and added to our holdings in Brazil
following improvements in its fiscal budget. We also purchased Argentinian bonds
after prompt implementation of measures intended to reduce that country's budget
deficit.
Asian holdings represented 19.5% of total net assets on February 29, 2000.
Turkey was the largest country weighting in the region at 9.3%, followed by
Indonesia and the Philippines at 4.6% and 3.5%, respectively. The Fund's
European exposure remained comparatively small during the period, split among
Russia (5.1% of total net assets), the Netherlands (3.5%) and Bulgaria (2.3%).
During the period, we maintained very little emerging market currency exchange
rate exposure (2.5% of total net assets at the end of the period), as we
invested primarily in U.S. dollar-denominated bonds. Given past market
volatility, our focus was on liquid instruments, namely sovereign eurobonds and
Brady bonds, which represented 69.2% and 4.6%, respectively, of the Fund's total
net assets as of February 29, 2000. We favored eurobonds over U.S.
Treasury-backed Brady bonds to reduce the Fund's sensitivity to changes in U.S.
interest rates. Corporate eurobonds, at the end of the six months under review,
represented 23.0% of total net assets, while the Fund's short-term investments
and other net assets were 3.2%.
Looking forward, we believe U.S. interest rates, if they continue to rise, will
strongly influence global bond markets. Rising U.S. rates are usually negative
for emerging market economies because they ordinarily force developing countries
to raise their
TOP 10 COUNTRIES REPRESENTED IN THE FUND
2/29/00
% OF TOTAL
COUNTRY NET ASSETS
- -----------------------------------
Mexico 20.0%
Brazil 16.9%
Argentina 12.8%
Turkey 9.3%
Venezuela 8.5%
Russia 5.1%
Indonesia 4.6%
Philippines 3.5%
Netherlands 3.5%
Colombia 2.8%
3
own rates, leading to falling bond prices. However, in our opinion, the impact
may not be as severe as in prior years since relatively high interest rates
already prevail in many emerging markets. We intend to continue focusing on
bonds from countries with positive economic growth and relatively low inflation,
and on countries we believe show improving repayment capacity. In doing so, we
will attempt to position the Fund to take advantage of sovereign bonds we
believe are deeply discounted due to market overreaction to their risk levels.
Of course, investments in foreign securities involve special risks, such as
market and currency volatility, and adverse economic, social and political
developments in countries where the Fund invests. Emerging market securities
involve heightened risks related to the same factors, in addition to risks
associated with their relatively small size and lesser liquidity. Investing in
any emerging market means accepting a certain amount of volatility and, in some
cases, the consequences of severe market corrections.
We welcome your comments and suggestions and look forward to serving your
investment needs in the years to come.
Portfolio Management Team
Templeton Emerging Markets Income Fund, Inc.
- --------------------------------------------------------------------------------
This discussion reflects our views, opinions and portfolio holdings as of
February 29, 2000, the end of the reporting period. The information provided is
not a complete analysis of every aspect of any country, industry, security or
the Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance is
no guarantee of future results, these insights may help you understand our
investment and management philosophy.
- --------------------------------------------------------------------------------
4
IMPORTANT NOTICE TO SHAREHOLDERS
- -----------------------------------------------------------------------------
EURO RISK. On January 1, 1999, the European Economic and Monetary Union (EMU)
introduced a new single currency called the euro. By July 1, 2002, the euro,
which will be implemented in stages, will have replaced the national currencies
of the following member countries: Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Currently, the exchange rate of the currencies of each of these countries is
fixed to the euro. The euro trades on currency exchanges and is available for
non-cash transactions. The participating countries currently issue sovereign
debt exclusively in euro. By July 1, 2002, euro-denominated bills and coins will
replace the bills and coins of the above countries.
The new European Central Bank has control over each country's monetary policies.
Therefore, the participating countries no longer control their own monetary
policies by directing independent interest rates for their currencies. The
national governments of each of the participating countries, however, has
retained the authority to set its own tax and spending policies and public debt
levels.
The change to the euro as a single currency is new and untested. It is uncertain
how eleven different economies will adjust to a unified monetary system and the
loss of exchange rate flexibility. In the first six months of the euro's
existence, the exchange rates of the euro versus many of the world's major
currencies steadily declined. In this environment, U.S. and other foreign
investors experienced erosion of their investment returns on their
euro-denominated securities.
It is not possible to predict the impact of the euro on currency values or on
the business or financial condition of European countries and issuers and
issuers in other regions whose securities the Fund may hold, or the impact, if
any, on Fund performance. The transition and the elimination of currency risk
among EMU countries may change the economic environment and behavior of
investors, particularly in European markets. The Fund's non-U.S. dollar (euro or
other) denominated investments will still be exposed to currency risk due to
fluctuations among those currencies and versus the U.S. dollar.
While the implementation of the euro could have a negative effect on the Fund,
the Fund's manager and its affiliated service providers are taking steps they
believe are reasonably designed to address the euro issue.
- -----------------------------------------------------------------------------
5
1. Cumulative total return represents the change in value of an investment over
the periods indicated.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
Past expense reductions by the Fund's manager and shareholder servicing agent
increased the Fund's total return. Without these reductions, total return would
have been lower.
- --------------------------------------------------------------------------------
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility, and the economic,
social and political climates of countries where the Fund invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. Also, as
a non-diversified investment company, the Fund may invest in a relatively small
number of issuers and, as a result, be subject to greater risk of loss with
respect to its portfolio securities. You may have a gain or loss when you sell
your shares.
- --------------------------------------------------------------------------------
SIX-MONTH PERFORMANCE SUMMARY AS OF 2/29/00
DISTRIBUTIONS WILL VARY BASED ON EARNINGS OF THE FUND'S PORTFOLIO AND ANY
PROFITS REALIZED FROM THE SALE OF THE PORTFOLIO'S SECURITIES, AS WELL AS THE
LEVEL OF THE FUND'S OPERATING EXPENSES. PAST DISTRIBUTIONS ARE NOT INDICATIVE OF
FUTURE TRENDS. ALL TOTAL RETURNS INCLUDE REINVESTED DISTRIBUTIONS ACCORDING TO
THE TERMS SPECIFIED IN THE FUND'S DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
AND DO NOT REFLECT SALES CHARGES PAID AT INCEPTION OR BROKERAGE COMMISSIONS PAID
ON SECONDARY MARKET PURCHASES.
PERFORMANCE
<TABLE>
<S> <C> <C>
Six-Month Total Return 15.94% (Based on Net Asset Value)
3.13% (Based on Market Price)
Net Asset Value (NAV) $12.37 (2/29/00) $11.36 (8/31/99)
Change in NAV +$1.01
Market Price (NYSE) $9.625 (2/29/00) $9.9375 (8/31/99)
Change in Market Price -$0.3125
Distributions (9/1/99 - 2/29/00) Dividend Income $0.62
</TABLE>
ADDITIONAL PERFORMANCE AS OF 3/31/00
<TABLE>
<CAPTION>
INCEPTION
1-YEAR 5-YEAR (9/23/93)
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1)
Based on change in
net asset value 21.58% 99.89% 69.04%
Based on change in
market price 6.16% 52.30% 23.88%
Average Annual Total Return(2)
Based on change in
net asset value 21.58% 14.85% 8.39%
Based on change in
market price 6.16% 8.77% 3.34%
</TABLE>
For updated performance figures, please call Franklin Templeton at
1-800/342-5236.
Past performance does not guarantee future results.
6
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 --------------------------------------------------------------------
(UNAUDITED)+ 1999+ 1998 1997 1996 1995
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding
throughout the period)
Net asset value, beginning of
period........................ $11.36 $9.46 $14.33 $12.92 $11.52 $12.35
-------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income.......... .56 1.26 1.22 1.18 1.24 1.33
Net realized and unrealized
gains (losses)............... 1.07 1.88 (4.85) 1.47 1.40 (.92)
-------------------------------------------------------------------------------------------
Total from investment
operations.................... 1.63 3.14 (3.63) 2.65 2.64 .41
-------------------------------------------------------------------------------------------
Distributions from net
investment income............. (.62) (1.24) (1.24) (1.24) (1.24) (1.24)
-------------------------------------------------------------------------------------------
Net asset value, end of
period........................ $12.37 $11.36 $9.46 $14.33 $12.92 $11.52
===========================================================================================
Total Return*
Based on market value per
share........................ 3.13% 37.66% (33.52)% 22.11% 23.73% (4.28)%
Based on net asset value per
share........................ 15.94% 35.16% (27.44)% 22.20% 24.31% 3.82%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's)....................... $588,917 $540,977 $450,329 $682,212 $614,951 $548,448
Ratios to average net assets:
Expenses....................... 1.17%** 1.18% 1.18% 1.19% 1.09% .81%
Expenses, excluding waiver and
payments by affiliate........ 1.17%** 1.18% 1.18% 1.19% 1.20% 1.28%
Net investment income.......... 9.56%** 11.30% 9.01% 8.62% 10.14% 11.79%
Portfolio turnover rate......... 26.72% 38.29% 122.92% 266.79% 77.90% 58.73%
</TABLE>
*Total return is not annualized.
**Annualized.
+Based on average weighted shares outstanding.
See Notes to Financial Statements.
7
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT** VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES 96.8%
ARGENTINA 12.8%
Republic of Argentina:
9.25%, 2/23/01............................................ $27,220,000 $ 27,308,465
8.75%, 5/09/02............................................ 8,750,000 8,391,250
11.00%, 10/09/06.......................................... 6,575,000 6,492,813
Reg S, 11.75%, 2/12/07.................................... 13,180,000 ARS 12,308,671
11.75%, 4/07/09........................................... 6,550,000 6,636,788
11.375%, 1/30/17.......................................... 7,400,000 7,312,125
9.75%, 9/19/27............................................ 7,800,000 6,903,000
------------
75,353,112
------------
BRAZIL 16.9%
Companhia Paranaense de Energia-Copel, 9.75%, 5/02/05....... 5,700,000 5,682,045
Globo Communicacoes Participacoes Ltd., 10.625%, 12/05/08... 7,000,000 6,142,500
Republic of Brazil:
11.625%, 4/15/04.......................................... 6,800,000 6,740,500
9.375%, 4/07/08........................................... 18,500,000 15,921,563
14.50%, 10/15/09.......................................... 24,460,000 26,441,260
Series L, cvt., FRN, 7.00%, 4/15/12....................... 18,275,000 13,603,453
12.75%, 1/15/20........................................... 2,000,000 1,962,500
10.125%, 5/15/27.......................................... 28,580,000 23,106,930
------------
99,600,751
------------
BULGARIA 2.3%
Republic of Bulgaria, FRN, 7.0625%, 7/28/11................. 16,000,000 13,210,000
------------
COLOMBIA 2.8%
Republic of Colombia:
9.75%, 4/23/09............................................ 10,650,000 9,393,300
9.75%, 4/23/09, Series NOV................................ 7,800,000 7,279,997
------------
16,673,297
------------
ECUADOR 1.4%
Republic of Ecuador:
144A, 11.25%, 4/25/02..................................... 4,690,000 1,735,300
Reg S, 11.25%, 4/25/02.................................... 17,920,000 6,630,400
------------
8,365,700
------------
INDIA .1%
+*Essar Steel Ltd.:
144A, FRN, 7.635%, 7/20/99................................ 475,000 327,750
Reg S, FRN, 7.635%, 7/20/99............................... 495,000 341,550
------------
669,300
------------
</TABLE>
8
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT** VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
INDONESIA 4.6%
*PT Astra International, wts., 12/31/03..................... 5,786,583 IDR $ 2,165,098
PT Indah Kiat Finance Mauritius Ltd., 10.00%, 7/01/07....... 16,375,000 11,257,812
PT Indah Kiat Pulp & Paper Corp., 144A, 8.875%, 11/01/00.... 4,840,000 4,622,200
+PT Inti Indorayon Utama, 9.125%, 10/15/00.................. 6,830,000 1,946,550
Tjiwi Kimia Int'l Finance Co. BV, 13.25%, 8/01/01........... 8,000,000 7,040,000
------------
27,031,660
------------
JAMAICA .9%
Government of Jamaica, Reg S, 9.625%, 7/02/02............... 5,670,000 5,499,900
------------
MEXICO 20.0%
Banco Nacional Obra Serv., 9.625%, 11/15/03................. 3,500,000 3,587,500
Bepensa SA, 144A, 9.75%, 9/30/04............................ 7,060,000 6,495,200
Cemex SA, 144A, 10.75%, 7/15/00............................. 6,440,000 6,536,600
Nacional Financiera Sociedad Nacional de Credito, 144A,
9.75%, 3/12/02............................................ 5,850,000 6,032,812
Petroleos Mexicanos (PEMEX), 9.375%, 12/02/08............... 5,280,000 5,418,600
Protexa Construcciones SA de CV, 144A, 12.125%, 7/24/02..... 5,754,220 4,459,521
United Mexican States:
9.875%, 1/15/07........................................... 19,880,000 20,849,150
8.625%, 3/12/08........................................... 22,575,000 22,394,400
11.375%, 9/15/16.......................................... 32,020,000 38,063,775
11.50%, 5/15/26........................................... 3,260,000 4,076,630
------------
117,914,188
------------
NETHERLANDS 3.5%
Astra Overseas Finance NV, FRN, Reg S:
Series I, 6.688%, 12/31/01................................ 923,000 793,780
Series II, 6.688%, 6/30/05................................ 3,113,000 2,179,100
Series III, zero coupon, 6/30/06.......................... 4,036,000 1,594,220
Cellco Finance NV:
144A, 12.75%, 8/01/05..................................... 3,900,000 4,251,000
15.00%, 8/01/05........................................... 10,450,000 11,574,420
------------
20,392,520
------------
PANAMA 2.1%
Republic of Panama, 9.375%, 4/01/29......................... 12,940,000 12,461,220
------------
PHILIPPINES 3.5%
Philippine Long Distance Telephone Co.:
10.625%, 6/02/04.......................................... 5,500,000 5,651,250
9.25%, 6/30/06............................................ 5,080,000 4,836,668
Republic of Philippines, Reg S, 8.75%, 10/07/16............. 5,450,000 4,796,000
Subic Power Corp., 144A, 9.50%, 12/28/08.................... 5,648,276 5,337,621
------------
20,621,539
------------
</TABLE>
9
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT** VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
RUSSIA 5.1%
Minfin of Russia:
144A, 10.00%, 6/26/07..................................... $20,050,000 $ 13,634,000
Reg S, 10.00%, 6/26/07.................................... 22,215,000 15,106,200
+Vnesheconombank, FRN, 6.906%, 12/15/15..................... 6,342,340 1,530,089
------------
30,270,289
------------
SOUTH KOREA 2.0%
Hanvit Bank, 144A, 12.75%, 3/01/10.......................... 11,500,000 11,815,100
------------
TRINIDAD AND TOBAGO 1.0%
SEI Holdings IX Inc.:
11.00%, 11/30/00.......................................... 380,000 380,000
144A, 11.00%, 11/30/00.................................... 5,210,000 5,210,000
------------
5,590,000
------------
TURKEY 9.3%
Pera Financial Services:
144A, 9.375%, 10/15/02.................................... 8,950,000 8,659,125
Reg S, 9.375%, 10/15/02................................... 1,100,000 1,064,250
Republic of Turkey:
144A, 9.875%, 2/23/05..................................... 7,450,000 7,356,875
144A, 10.00%, 9/19/07..................................... 17,450,000 16,926,500
12.375%, 6/15/09.......................................... 4,525,000 4,841,750
11.875%, 1/15/30.......................................... 15,000,000 15,670,320
------------
54,518,820
------------
VENEZUELA 8.5%
Republic of Venezeula:
144A, 9.125%, 6/18/07..................................... 7,200,000 5,796,000
Reg S, 9.125%, 6/18/07.................................... 10,050,000 8,090,250
9.25%, 9/15/27............................................ 53,569,000 36,292,998
------------
50,179,248
------------
TOTAL LONG TERM SECURITIES (COST $624,254,727).............. 570,166,644
------------
SHORT TERM INVESTMENTS (COST $3,556,000) .6%
Deutsche Bank Securities (DTT), 5.81%, 3/01/00, Time
Deposit................................................... 3,556,000 3,556,000
------------
TOTAL INVESTMENTS (COST $627,810,727) 97.4%................. 573,722,644
OTHER ASSETS, LESS LIABILITIES 2.6%......................... 15,194,840
------------
TOTAL NET ASSETS 100.0%..................................... $588,917,484
============
</TABLE>
CURRENCY ABBREVIATIONS:
ARS -- Argentine Peso
IDR -- Indonesian Rupiah
*Non-income producing.
**Securities denominated in U.S. dollars unless otherwise indicated.
+Represents defaulted bonds.
See Notes to Financial Statements.
10
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $627,810,727).... $573,722,644
Receivables:
Investment securities sold................................ 4,173,364
Interest.................................................. 16,735,119
------------
Total assets.......................................... 594,631,127
------------
Liabilities:
Payables:
Investment securities purchased........................... 4,440,771
To affiliates............................................. 461,509
Funds advanced by custodian................................ 373,616
Accrued expenses........................................... 437,747
------------
Total liabilities..................................... 5,713,643
------------
Net assets, at value........................................ $588,917,484
============
Net assets consist of:
Undistributed net investment income........................ $ 8,864,704
Net unrealized depreciation................................ (54,088,120)
Accumulated net realized loss.............................. (30,798,067)
Capital shares............................................. 664,938,967
------------
Net assets, at value........................................ $588,917,484
============
Net asset value per share ($588,917,484 / 47,605,757 shares
outstanding).............................................. $12.37
============
</TABLE>
See Notes to Financial Statements.
11
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
Interest Income:
(net of foreign taxes of $1,340)........................... $30,103,484
Expenses:
Management fees (Note 3)................................... 2,377,477
Administrative fees (Note 3)............................... 419,554
Transfer agent fees........................................ 304,100
Custodian fees............................................. 41,200
Reports to shareholders.................................... 62,000
Registration and filing fees............................... 21,500
Professional fees.......................................... 23,500
Directors' fees and expenses............................... 26,000
Other...................................................... 5,904
-----------
Total expenses........................................ 3,281,235
-----------
Net investment income........................... 26,822,249
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... (5,855,489)
Foreign currency transactions............................. 2,659
-----------
Net realized loss..................................... (5,852,830)
Net unrealized appreciation (depreciation) on:
Investments............................................... 56,486,561
Translation of assets and liabilities denominated in
foreign currencies...................................... (54)
-----------
Net unrealized appreciation........................... 56,486,507
-----------
Net realized and unrealized gain............................ 50,633,677
-----------
Net increase in net assets resulting from operations........ $77,455,926
===========
</TABLE>
See Notes to Financial Statements.
12
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 29, 2000 YEAR ENDED
(UNAUDITED) AUGUST 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 26,822,249 $ 59,782,959
Net realized loss from investments and foreign currency
transactions............................................. (5,852,830) (17,013,740)
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign
currencies............................................... 56,486,507 106,909,696
---------------------------------------
Net increase in net assets resulting from operations.... 77,455,926 149,678,915
Distributions to shareholders from net investment income... (29,515,570) (59,031,139)
---------------------------------------
Net increase in net assets.............................. 47,940,356 90,647,776
Net assets:
Beginning of period........................................ 540,977,128 450,329,352
---------------------------------------
End of period.............................................. $588,917,484 $540,977,128
=======================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 8,864,704 $ 11,558,025
=======================================
</TABLE>
See Notes to Financial Statements.
13
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Emerging Markets Income Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940 as a closed-end, non-diversified investment
company. The Fund seeks high current income, with a secondary objective of
capital appreciation, by investing primarily in a portfolio of high-yielding
debt obligations of sovereign or sovereign-related entities and private sector
companies in emerging market countries. 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 Directors.
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
portfolio 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, and the difference between the recorded
amounts of 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 currency
denominated assets and liabilities other than investments in securities held at
the end of the reporting period.
c. 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.
Distributions to shareholders are recorded on the ex-dividend date.
14
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. 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. CAPITAL SHARES
At February 29, 2000, there were 100,000,000 shares authorized ($.01 par value).
During the six months ended February 29, 2000 and year ended August 31, 1999,
there were no share transactions; all reinvested distributions were satisfied
with previously issued shares purchased in the open market.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton
Investment Counsel, Inc. (TICI) and Franklin Templeton Services, Inc. (FT
Services), the Fund's investment manager and administrative manager,
respectively.
The Fund pays an investment management fee to TICI of 0.85% per year of the
average daily net assets of the Fund. The Fund pays an administrative fee to FT
Services of 0.15% per year of the Fund's average daily net assets. The Fund pays
monthly a transfer agent fee to Paine Webber Group Inc. equal, on an annual
basis to 0.10% of the average daily assets of the Fund.
4. 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.
At February 29, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $635,039,663 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 8,412,006
Unrealized depreciation..................................... (69,729,025)
------------
Net unrealized depreciation................................. $(61,317,019)
============
</TABLE>
Net realized capital gains differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and losses realized
subsequent to October 31, on the sale of securities.
At August 31, 1999, the Fund had deferred capital losses occurring subsequent to
October 31, 1999 of $14,500,000. For tax purposes, such losses will be reflected
in the year ending August 31, 2000.
15
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES (CONT.)
At August 31, 1999, the Fund had tax basis capital losses of $1,900,000 which
may be carried over to offset future capital gains. Such losses expire August
31, 2007.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended February 29, 2000 aggregated $143,205,522 and $136,236,684
respectively.
16
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
Annual Meeting of Shareholders, March 7, 2000
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Ft. Lauderdale, Florida, on March 7, 2000. The purpose of
the meeting was to elect four Directors of the Fund; to ratify the selection of
PricewaterhouseCoopers LLP, as the Fund's independent auditors for the fiscal
year ending August 31, 2000; and to authorize the proxyholders, in their
discretion, to vote upon such other matters that may properly come before the
meeting or any adjournments of the meeting. At the meeting, the following
persons were elected by the shareholders to serve as Directors of the Fund: John
Wm. Galbraith, Betty P. Krahmer, Gordon S. Macklin and Fred R. Millsaps.*
Shareholders also ratified the selection of PricewaterhouseCoopers LLP, to serve
as the Fund's independent auditors for the fiscal year ending August 31, 2000.
No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. The election of four (4) Directors:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING VOTED OUTSTANDING
TERM EXPIRING 2003: FOR SHARES SHARES WITHHELD SHARES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John Wm. Galbraith.............................. 42,613,264 89.51% 98.24% 765,524 1.61%
Betty P. Krahmer................................ 42,612,461 89.51% 98.23% 766,327 1.61%
Gordon S. Macklin............................... 42,622,043 89.53% 98.26% 756,745 1.59%
Fred R. Millsaps................................ 42,551,805 89.38% 98.09% 826,983 1.74%
</TABLE>
2. The ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors of the Fund for the fiscal year ending August 31, 2000:
<TABLE>
<CAPTION>
% OF % OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING OUTSTANDING BROKER OUTSTANDING
FOR SHARES SHARES AGAINST SHARES ABSTAIN SHARES NON-VOTES SHARES
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
42,762,421 89.82% 98.58% 309,271 0.65% 307,096 0.65% -- --
</TABLE>
3. The transaction of any other business that may properly come before the
meeting or any adjournments thereof:
<TABLE>
<CAPTION>
% OF % OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING OUTSTANDING BROKER OUTSTANDING
FOR SHARES SHARES AGAINST SHARES ABSTAIN SHARES NON-VOTES SHARES
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
41,713,424 87.62% 96.16% 966,723 2.03% 698,641 1.47% -- --
</TABLE>
*Harris J. Ashton, Nicholas F. Brady, Harmon E. Burns, Frank J. Crothers, S.
Joseph Fortunato, Andrew H. Hines, Jr., Edith E. Holiday, Charles B. Johnson and
Constantine D. Tseretopoulos are Directors of the Fund who are currently serving
and whose terms of office continued after the Annual Meeting of Shareholders.
17
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
Dividend Reinvestment and Cash Purchase Plan
The Fund offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") with
the following features:
If shares of the Fund are held in the shareholder's name, the shareholder will
automatically be a participant in the Plan unless he elects to withdraw. If the
shares are registered in the name of a broker-dealer or other nominee (i.e., in
"street name"), the broker-dealer or nominee will elect to participate in the
Plan on the shareholder's behalf unless the shareholder instructs them
otherwise, or unless the reinvestment service is not provided by the
broker-dealer or nominee.
Participants should contact ChaseMellon Shareholder Services, Investor Services,
P.O. Box 3338, South Hackensack, NJ 07606-1938, to receive the Plan brochure.
To receive dividends or distributions in cash, the shareholder must notify
Mellon Securities Trust Company (the "Plan Agent") at the address above or the
institution in whose name the shares are held. The Plan Agent must receive
written notice within 10 business days before the record date for the
distribution.
Whenever the Fund declares dividends in either cash or common stock of the Fund,
if the market price is equal to or exceeds net asset value at the valuation
date, the participant will receive the dividends entirely in stock at a price
equal to the net asset value, but not less than 95% of the then current market
price of the Fund's shares. If the market price is lower than net asset value or
if dividends and/or capital gains distributions are payable only in cash, the
participant will receive shares purchased on the New York Stock Exchange or
otherwise on the open market.
A participant has the option of submitting additional payments to the Plan
Agent, in any amounts of at least $100, up to a maximum of $5,000 per month, for
the purchase of Fund shares for his or her account. These payments shall be made
by check or money order payable to "Mellon Securities Trust Co." and sent to
ChaseMellon Shareholder Services, Investor Services, P.O. Box 382009,
Pittsburgh, PA 15250-8009, Attn: Templeton Emerging Markets Income Fund, Inc.
The Plan Agent shall apply such payments (less a $5.00 service charge and less a
pro rata share of trading fees) to purchases of Fund shares in the open market.
The automatic reinvestment of dividends and/or capital gains does not relieve
the participant of any income tax that may be payable on dividends or
distributions.
The participant may withdraw from the Plan without penalty at any time by
written notice to the Plan Agent sent to ChaseMellon Shareholder Services,
Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938. Upon
withdrawal, the participant will receive, without charge, stock certificates
issued in the participant's name for all full shares held by the Plan Agent; or,
if the participant wishes, the Plan Agent will sell the participant's shares and
send the proceeds, less a service charge of $5.00 and less trading fees.
Whenever shares are purchased on the New York Stock Exchange or otherwise on the
open market, each participant will pay a pro rata portion of trading fees.
Trading fees will be deducted from amounts to be invested.
18
TEMPLETON EMERGING MARKETS INCOME FUND, INC.
SHAREHOLDER INFORMATION
Shares of Templeton Emerging Markets Income Fund, Inc. are traded daily on the
New York Stock Exchange under the symbol "TEI." Information about the net asset
value and the market price is published each Monday in the Wall Street Journal,
weekly in Barron's and each Saturday in The New York Times and other newspapers.
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transactions section of newspapers.
For current information about dividends and shareholder accounts, call
1-800/416-5585.
The daily closing net asset value as of the previous business day may be
obtained when available by calling Franklin Templeton Fund Information after 7
a.m. pacific time any business day at 1-800/DIAL BEN(R) (1-800/342-5236). The
Fund's net asset value and dividends are also listed on the NASDAQ Stock Market,
Inc.'s Mutual Fund Quotation Service ("NASDAQ MFQS").
Shareholders not receiving copies of the Reports to Shareholders because their
shares are registered in the name of a broker or a custodian can request that
they be added to the Fund's mailing list, by writing Templeton Emerging Markets
Income Fund, Inc., 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL
33733-8030.
19
SEMIANNUAL REPORT
TEMPLETON EMERGING MARKETS
INCOME FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
1-800/416-5585
www.chasemellon.com
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political and other factors. The Fund and its investors are not protected from
such losses by the Investment Manager. Therefore, investors who cannot accept
this risk should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
TLTEI S00 04/00 [RECYCLE LOGO] Printed on recycled paper
