FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-07866
Templeton Emerging Markets Income Fund
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(Exact name of registrant as specified in charter)
500 East Broward Blvd., Suite 2100, Fort Lauderdale, FL 33394-3091
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(Address of principal executive offices) (Zip code)
Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: 954/527-7500
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Date of fiscal year end: 8/31
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Date of reporting period: 05/31/08
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Item 1. Schedule of Investments.
Templeton Emerging Markets Income Fund
QUARTERLY STATEMENT OF INVESTMENTS
MAY 31, 2008
CONTENTS
Statement of Investments ................................................. 3
Notes to Statement of Investments ........................................ 8
(FRANKLIN TEMPLETON INVESTMENTS LOGO)
FRANKLIN TEMPLETON INVESTMENTS
Franklin - TEMPLETON - Mututal Series
Quarterly Statement of Investments | 1
This page intentionally left blank.
Templeton Emerging Markets Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2008 (UNAUDITED)
PRINCIPAL
AMOUNT(a) VALUE
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LONG TERM INVESTMENTS 94.4%
BONDS 94.4%
ARGENTINA 10.2%
(b, c) Government of Argentina, senior bond, FRN, 3.092%, 8/03/12 .. 133,225,000 $ 71,507,670
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BOSNIA & HERZEGOVINA 1.9%
(b) Government of Bosnia & Herzegovina, FRN, 5.647%, 12/11/17 ... 10,561,634 EUR 13,305,045
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BRAZIL 16.4%
Government of Brazil,
8.00%, 1/15/18 ........................................... 16,155,000 18,465,165
(b) FRN, 8.446%, 6/29/09 .................................... 2,900,000 3,063,125
Nota Do Tesouro Nacional,
9.762%, 1/01/12 .......................................... 64,080(d) BRL 35,377,530
9.762%, 1/01/14 .......................................... 20,000(d) BRL 10,722,005
9.762%, 1/01/17 .......................................... 46,400(d) BRL 23,750,736
(e) Index Linked, 6.00%, 5/15/15 ............................ 5,600(d) BRL 5,575,612
(e) Index Linked, 6.00%, 5/15/45 ............................ 17,820(d) BRL 17,367,797
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114,321,970
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COLOMBIA 0.9%
Government of Colombia, 11.75%, 2/25/20 ..................... 4,255,000 6,456,963
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EL SALVADOR 0.4%
(f) Government of El Salvador, 144A, 7.65%, 6/15/35 ............. 2,650,000 2,848,353
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FIJI 1.1%
Republic of Fiji, 6.875%, 9/13/11 ........................... 8,200,000 7,449,208
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GEORGIA 0.4%
Government of Georgia, 7.50%, 4/15/13 ....................... 3,200,000 3,187,802
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GERMANY 2.1%
(f) City of Kiev, 144A, 8.625%, 7/15/11 ......................... 14,000,000 14,630,000
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GHANA 0.8%
(g) Government of Ghana, Reg S, 8.50%, 10/04/17 ................. 5,300,000 5,578,250
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INDIA 1.4%
(f) ICICI Bank Ltd.,
144A, 6.625%, 10/03/12 ................................... 6,625,000 6,646,882
(b) sub.bond, 144A,6.375%, 4/30/22 .......................... 3,500,000 3,075,548
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9,722,430
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INDONESIA 10.2%
Government of Indonesia,
14.25%, 6/15/13 .......................................... 169,282,000,000 IDR 19,302,092
14.275%, 12/15/13 ........................................ 166,215,000,000 IDR 19,022,692
11.00%, 10/15/14 ......................................... 120,832,000,000 IDR 12,066,320
10.75%, 5/15/16 .......................................... 26,870,000,000 IDR 2,604,404
10.00%, 7/15/17 .......................................... 18,800,000,000 IDR 1,725,609
11.50%, 9/15/19 .......................................... 40,000,000,000 IDR 3,953,948
11.00%, 11/15/20 ......................................... 132,050,000,000 IDR 12,554,548
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71,229,613
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IRAQ 4.9%
(f) Government of Iraq, 144A, 5.80%, 1/15/28 .................... 45,775,000 34,102,375
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Quarterly Statement of Investments | 3
Templeton Emerging Markets Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2008 (UNAUDITED) (CONTINUED)
PRINCIPAL
AMOUNT(a) VALUE
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LONG TERM INVESTMENTS (CONTINUED)
BONDS (CONTINUED)
KAZAKHSTAN 0.3%
(f) HSBK Europe BV, 144A, 7.25%, 5/03/17 ........................ 2,500,000 $ 2,237,500
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MALAYSIA 0.8%
Government of Malaysia,
3.756%, 4/28/11 .......................................... 15,660,000 MYR 4,848,819
3.833%, 9/28/11 .......................................... 135,000 MYR 41,909
3.461%, 7/31/13 .......................................... 1,000,000 MYR 306,067
3.814%, 2/15/17 .......................................... 910,000 MYR 277,223
4.24%, 2/07/18 ........................................... 450,000 MYR 140,941
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5,614,959
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MEXICO 5.6%
Government of Mexico,
8.00%, 12/17/15 .......................................... 1,775,000(h) MXN 17,086,477
10.00%, 12/05/24 ......................................... 1,965,000(h) MXN 22,073,771
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39,160,248
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NETHERLANDS 2.2%
Rabobank Nederland, senior note, 8.75%, 1/24/17 ............. 157,900,000 MXN 15,324,452
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PAKISTAN 1.7%
(f) Government of Pakistan, 144A, 6.875%, 6/01/17 ............... 15,000,000 11,587,500
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PANAMA 1.0%
Government of Panama, 6.70%, 1/26/36 ........................ 6,639,000 6,970,950
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PERU 4.8%
Government of Peru,
9.875%, 2/06/15 .......................................... 1,355,000 1,720,850
7.35%, 7/21/25 ........................................... 10,520,000 12,098,000
8.75%, 11/21/33 .......................................... 12,550,000 16,660,125
(f) Peru Enhanced Pass-Through Finance Ltd., senior secured
bond, A-1, 144A, zero cpn., 5/31/18 ...................... 4,689,683 3,165,536
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33,644,511
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PHILIPPINES 4.2%
Government of the Philippines,
9.00%, 2/15/13 ........................................... 21,460,000 25,054,550
(g) Reg S, 8.75%, 10/07/16 .................................. 3,750,000 4,438,706
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29,493,256
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POLAND 3.2%
Government of Poland,
6.00%, 5/24/09 ........................................... 32,600,000 PLN 14,940,260
6.25%, 10/24/15 .......................................... 15,380,000 PLN 7,059,304
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21,999,564
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RUSSIA 5.0%
(g) Alfa MTN Markets Ltd. for ABH Financial Ltd., Reg S, 8.20%,
6/25/12 .................................................. 1,575,000 1,535,790
(g) Government of Russia, Reg S,
11.00%, 7/24/18 .......................................... 12,670,000 18,145,594
12.75%, 6/24/28 .......................................... 5,616,000 10,102,342
4 | Quarterly Statement of Investments
Templeton Emerging Markets Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2008 (UNAUDITED) (CONTINUED)
PRINCIPAL
AMOUNT(a) VALUE
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LONG TERM INVESTMENTS (CONTINUED)
BONDS (CONTINUED)
RUSSIA (CONTINUED)
(g) LUKOIL International Finance BV, Reg S,
6.356%, 6/07/17 .......................................... 2,300,000 $ 2,190,060
6.656%, 6/07/22 .......................................... 3,500,000 3,241,875
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35,215,661
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SOUTH AFRICA 1.4%
(b, f) Edcon Holdings, 144A, FRN, 10.106%, 6/15/15 ................. 1,200,000 EUR 1,026,465
(b, g) Edcon Proprietary Ltd., senior secured note, Reg S, FRN,
7.856%, 6/15/14 .......................................... 2,100,000 EUR 2,416,859
Government of South Africa,
4.50%, 4/05/16 ........................................... 1,000,000 EUR 1,369,553
5.875%, 5/30/22 .......................................... 5,000,000 4,715,650
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9,528,527
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SOUTH KOREA 2.1%
Korea Treasury Bond,
5.25%, 9/10/12 ........................................... 5,355,000,000 KRW 5,158,251
5.50%, 9/10/17 ........................................... 5,305,000,000 KRW 5,097,319
5.25%, 3/10/27 ........................................... 5,148,000,000 KRW 4,749,195
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15,004,765
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(i) SUPRANATIONAL 4.4%
Inter-American Development Bank, senior note, 7.50%,
12/05/24 ................................................. 355,000,000 MXN 30,631,296
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UKRAINE 3.5%
(f) Government of the Ukraine, 144A,
7.65%, 6/11/13 ........................................... 11,948,000 12,485,660
(b) FRN, 6.391%, 8/05/09 .................................... 11,660,000 11,820,325
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24,305,985
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UNITED ARAB EMIRATES 1.0%
(g) DP World Ltd., Reg S, 6.85%, 7/02/37 ........................ 8,080,000 6,853,456
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UNITED STATES 2.4%
General Electric Capital Corp., senior note, A, 8.50%,
4/06/18 .................................................. 185,000,000 MXN 16,753,039
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VIETNAM 0.1%
(b) Government of Vietnam, FRN, 3.625%, 3/12/16 ................. 759,652 755,242
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TOTAL BONDS (COST $629,008,716) 659,420,590
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NOTIONAL AMOUNT
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OPTIONS PURCHASED (COST $3,750)0.0%(j)
PUTS
BRAZIL 0.0%(j)
(k) Brazilian Real Put, strike price 2.05 BRL, expiration date
1/20/09 .................................................. $ 100,000 580
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TOTAL LONG TERM INVESTMENTS (COST $629,012,466) ............. 659,421,170
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Quarterly Statement of Investments | 5
Templeton Emerging Markets Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2008 (UNAUDITED) (CONTINUED)
PRINCIPAL
AMOUNT(a) VALUE
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SHORT TERM INVESTMENTS 3.3%
FOREIGN GOVERNMENTSECURITIES3.0%
COSTA RICA 0.5%
(f) Citigroup Funding Inc., cvt., 144A, zero cpn., 1/09/09 ...... 3,841,535 $ 3,504,894
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EGYPT 2.5%
(l) Egypt Treasury Bills, 7/01/08 - 4/21/09 ..................... 96,525,000 EGP 17,441,053
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TOTAL FOREIGN GOVERNMENT SECURITIES
(COST $20,574,992) ....................................... 20,945,947
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TOTAL INVESTMENTS BEFORE MONEY MARKET FUND
(COST $649,587,458) ...................................... 680,367,117
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SHARES
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MONEY MARKET FUND (COST $2,387,805) 0.3%
UNITED STATES 0.3%
(m) Franklin Institutional Fiduciary Trust Money Market
Portfolio, 2.17% ......................................... 2,387,805 2,387,805
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TOTAL INVESTMENTS (COST $651,975,263) 97.7% ................. 682,754,922
NET UNREALIZED LOSS ON FORWARD EXCHANGE CONTRACTS (0.1)% .... (892,551)
OTHER ASSETS, LESS LIABILITIES 2.4% ......................... 16,565,614
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NET ASSETS 100.0% ........................................... $ 698,427,985
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CURRENCY ABBREVIATIONS
BRL - Brazilian Real
EGP - Egyptian Pound
EUR - Euro
IDR - Indonesian Rupiah
KRW - South Korean Won
MXN - Mexican Peso
MYR - Malaysian Ringgit
PLN - Polish Zloty
SELECTED PORTFOLIO ABBREVIATION
FRN - Floating Rate Note
6 | Quarterly Statement of Investments
Templeton Emerging Markets Income Fund
STATEMENT OF INVESTMENTS, MAY 31, 2008 (UNAUDITED) (CONTINUED)
(a) The principal amount is stated in U.S. dollars unless otherwise indicated.
(b) The coupon rate shown represents the rate at period end.
(c) The principal amount is stated in original face, and scheduled paydowns are
reflected in the market price on ex-date.
(d) Principal amount is stated in 1,000 Brazilian Real Units.
(e) Redemption price at maturity is adjusted for inflation.
(f) Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering registered under the
Securities Act of 1933. These securities have been deemed liquid under
guidelines approved by the Fund's Board of Trustees. At May 31, 2008, the
aggregate value of these securities were $107,131,038, representing 15.34%
of net assets.
(g) Security was purchased pursuant to Regulation S under the Securities Act of
1933, which exempts from registration securities offered and sold outside
of the United States. Such a security cannot be sold in the United States
without either an effective registration statement filed pursuant to the
Securities Act of 1933, or pursuant to an exemption from registration.
These securities have been deemed liquid under guidelines approved by the
Fund's Board of Trustees. At May 31, 2008, the aggregate value of these
securities were $54,502,932, representing 7.80% of net assets.
(h) Principal amount is stated in 100 Mexican Peso Units.
(i) A supranational organization is an entity formed by two or more central
governments through international treaties.
(j) Rounds to less than 0.1% of net assets.
(k) Non-income producing for the twelve months ended May 31, 2008.
(l) The security is traded on a discount basis with no stated coupon rate.
(m) The Franklin Institutional Fiduciary Trust Money Market Portfolio is
managed by the Fund's investment manager. The rate shown is the annualized
seven-day yield at period end.
Quarterly Statement of Investments | See Notes to Statement of Investments. | 7
Templeton Emerging Markets Income Fund
NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED)
1. ORGANIZATION
Templeton Emerging Markets Income Fund (Fund) is registered under the Investment
Company Act of 1940, as amended, (1940 Act) as a non-diversified, closed-end
investment company.
2. SECURITY VALUATION
Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Investments in open-end mutual funds are valued at the closing net asset
value.
Corporate debt securities and government securities generally trade in the
over-the-counter market rather than on a securities exchange. The Fund may
utilize independent pricing services, quotations from bond dealers, and
information with respect to bond and note transactions, to assist in determining
a current market value for each security. The Fund's pricing services may use
valuation models or matrix pricing which considers information with respect to
comparable bond and note transactions, quotations from bond dealers, or by
reference to other securities that are considered comparable in such
characteristics as rating, interest rate and maturity date, option adjusted
spread models, prepayment projections, interest rate spreads and yield curves,
to determine current value.
The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. If such an event occurs, the securities may be valued
using fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Fund's Board of
Trustees.
8 | Quarterly Statement of Investments
Templeton Emerging Markets Income Fund
NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED)
3. INCOME TAXES
At May 31, 2008, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments ......................... $656,879,169
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Unrealized appreciation ..................... $ 44,256,901
Unrealized depreciation ..................... (18,381,148)
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Net unrealized appreciation (depreciation) .. $ 25,875,753
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4. FORWARD EXCHANGE CONTRACTS
At May 31, 2008, the Fund had the following forward exchange contracts
outstanding:
CONTRACT SETTLEMENT UNREALIZED UNREALIZED
AMOUNT DATE GAIN LOSS
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CONTRACTS TO BUY
2,249,893 Peruvian Nuevo Sol .................... $ 832,369 5/15/09 $ -- $ (27,157)
2,814,447 Peruvian Nuevo Sol .................... 1,040,461 5/19/09 -- (33,149)
CONTRACTS TO SELL
34,649,958 Mexican Peso .......................... 3,050,441 6/12/08 -- (301,572)
74,700,583 Mexican Peso .......................... 6,635,215 8/27/08 -- (516,459)
13,012,157 Mexican Peso .......................... 1,146,567 9/15/08 -- (96,005)
39,897,968 Mexican Peso .......................... 3,548,221 10/01/08 -- (253,576)
39,728,544 Mexican Peso .......................... 3,528,290 10/02/08 -- (256,855)
13,190,005,600 South Korean Won ...................... 14,594,412 11/13/08 1,828,134 --
2,609,465,000 South Korean Won ...................... 2,894,260 11/17/08 368,743 --
40,428,962 Mexican Peso .......................... 3,520,460 1/27/09 -- (274,482)
8,200,000 Euro .................................. 12,547,640 3/27/09 -- (15,035)
183,978,800 Mexican Peso .......................... 16,664,746 4/07/09 -- (459,517)
389,804,593 Kazakhstani Tenge ..................... 3,099,468 4/17/09 69,698 --
433,137,268 Kazakhstani Tenge ..................... 3,446,350 4/27/09 68,330 --
167,925,352 Mexican Peso .......................... 15,279,832 5/07/09 -- (294,047)
61,513,239 Mexican Peso .......................... 5,599,239 5/15/09 -- (100,213)
457,957,173 Mexican Peso .......................... 41,806,834 5/20/09 -- (599,389)
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Unrealized gain (loss) on forward exchange contracts ... 2,334,905 (3,227,456)
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Net unrealized loss on forward exchange contracts .. $ (892,551)
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Quarterly Statement of Investments | 9
Templeton Emerging Markets Income Fund
NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED)
5. NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 157, "Fair Value Measurement" (SFAS 157), which defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. SFAS 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. The Fund
believes the adoption of SFAS 157 will have no material impact on its financial
statements.
In March 2008, FASB issued FASB Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133"
(SFAS 161), which expands disclosures about derivative investments and hedging
activities. SFAS 161 is effective for fiscal years beginning after November 15,
2008, and interim periods within those fiscal years. The Fund is currently
evaluating the impact, if any, of applying the various provisions of SFAS 161.
For information on the Fund's policy regarding other significant accounting
policies, please refer to the Fund's most recent semiannual or annual
shareholder report.
10 | Quarterly Statement of Investments
Item 2. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Quarterly Schedule of Portfolio
Holdings on Form N-Q, the Registrant had carried out an evaluation, under the
supervision and with the participation of the Registrant's management, including
the Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(b) Changes in Internal Controls. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Quarterly Schedule of Portfolio Holdings
on Form N-Q.
Item 3. Exhibits.
(a) Certification pursuant to Section 30a-2 under the Investment Company Act of
1940 of Galen G. Vetter, Chief Executive Officer - Finance and Administration,
and Laura F. Fergerson, Chief Financial Officer and Chief Accounting Officer.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Templeton Emerging Markets Income Fund
By /s/GALEN G. VETTER
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Galen G. Vetter
Chief Executive Officer -
Finance and Administration
Date July 25, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/GALEN G. VETTER
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Galen G. Vetter
Chief Executive Officer -
Finance and Administration
Date July 25, 2008
By /s/LAURA F. FERGERSON
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Laura F. Fergerson
Chief Financial Officer and
Chief Accounting Officer
Date July 25, 2008