Edgar Filing: TEMPLETON EMERGING MARKETS FUND

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-04985
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TEMPLETON EMERGING MARKETS FUND
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(Exact name of registrant as specified in charter)

500 EAST BROWARD BLVD., 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: 8/31/06
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ITEM 1. REPORTS TO STOCKHOLDERS

[GRAPHIC OMITTED]

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AUGUST 31, 2006
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ANNUAL REPORT INTERNATIONAL
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TEMPLETON
EMERGING MARKETS FUND
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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS

Franklin o TEMPLETON o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE(R)

Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.

SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.

FRANKLIN. Founded in 1947, Franklin is a
recognized leader in fixed income investing and
also brings expertise in growth- and value-style
U.S. equity investing.

TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched
what has become the industry's oldest global fund.
Today, with offices in over 25 countries,
Templeton offers investors a truly global
perspective.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.

TRUE DIVERSIFICATION Because our management groups work independently
and adhere to different investment approaches,
Franklin, Templeton and Mutual Series funds
typically have distinct portfolios. That's why our
funds can be used to build truly diversified
allocation plans covering every major asset class.

RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well
as the reliable, accurate and personal service
that has helped us become one of the most trusted
names in financial services.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[PHOTO OMITTED]

Not part of the annual report

Contents

ANNUAL REPORT

Templeton Emerging Markets Fund ............................................ 1

Performance Summary ........................................................ 6

Important Notice to Shareholders ........................................... 7

Financial Highlights and Statement of Investments .......................... 8

Financial Statements ....................................................... 15

Notes to Financial Statements .............................................. 18

Report of Independent Registered Public Accounting Firm .................... 25

Tax Designation ............................................................ 26

Annual Meeting of Shareholders ............................................. 28

Board Members and Officers ................................................. 31

Shareholder Information .................................................... 37

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Annual Report

Templeton Emerging Markets Fund

YOUR FUND'S GOAL AND MAIN INVESTMENTS: Templeton Emerging Markets Fund seeks
long-term capital appreciation by investing, under normal market conditions, at
least 80% of its net assets in emerging country equity securities.

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GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 8/31/06
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Asia .................................................................... 50.8%
Europe .................................................................. 24.7%
Latin America ........................................................... 13.4%
Middle East & Africa .................................................... 9.8%
Short-Term Investments & Other Net Assets ............................... 1.3%

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Dear Shareholder:

This annual report for Templeton Emerging Markets Fund covers the fiscal year
ended August 31, 2006.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 9.

Annual Report | 1

TOP 10 COUNTRIES
Based on Equity Investments as of 8/31/06

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% OF TOTAL
NET ASSETS
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South Korea 16.1%
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China 11.9%
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Taiwan 10.9%
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Brazil 10.4%
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South Africa 9.6%
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Russia 7.7%
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Turkey 7.5%
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Thailand 3.5%
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India 2.9%
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Mexico 2.6%
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PERFORMANCE OVERVIEW

Templeton Emerging Markets Fund delivered cumulative total returns of +15.01%
based on market price and +27.64% based on net asset value for the 12 months
under review. The Morgan Stanley Capital International (MSCI) Emerging Markets
(EM) Index posted a +30.99% cumulative total return for the same period. 1 In
line with our investment strategy, we are pleased with our long-term results,
which you will find in the Performance Summary on page 6. For example, for the
10-year period ended August 31, 2006, the Fund delivered cumulative total
returns of +135.19% based on market price and +169.97% based on net asset value,
compared with the MSCI EM Index's +107.61% cumulative total return for the same
period. 1 Please note that index performance information is provided for
reference and that we do not attempt to track the index, but rather undertake
investments on the basis of fundamental research.

ECONOMIC AND MARKET OVERVIEW

Emerging markets outperformed most developed markets during the period under
review. Although a stock market correction in May led to some volatility, many
emerging markets had attractive valuations and strong underlying fundamentals.
The U.S. Federal Reserve Board's decision in August to leave interest rates
unchanged provided investors, especially those in Asian markets, with another
reason to be positive. Emerging market mutual fund inflows also stabilized in
the latter part of the fiscal year as a strong economic environment and higher
commodity prices, which helped many emerging market countries' exports, boosted
investor confidence.

The Russian market was one of the top performers as investors remained drawn to
the country's strong economic growth, strengthening finances as a result of high
commodity prices, and stable political environment. The Turkish market
underperformed its counterparts largely due to uncertainty resulting from the
lira's weakness, high inflation and a large external deficit. However, Turkey's
progress on implementing structural reforms, International Monetary Fund support
and continued efforts to ensure European Union accession could allow Turkey to
overcome these difficulties. High commodity prices, strong economic growth and
market stability supported the South African market.

Latin American economies reported strong economic data and exhibited improved
fiscal positions during the period. For example, Mexico, Brazil and

1. Source: Standard & Poor's Micropal. The MSCI EM Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in global emerging markets. As of 8/31/06, the
Fund's 10-year average annual total returns were +8.93% based on market
price and +10.44% based on net asset value. The MSCI EM Index's average
annual total return for the same period was +7.58%. The index is unmanaged
and includes reinvested dividends. One cannot invest directly in an index,
nor is an index representative of the Fund's portfolio.

2 | Annual Report

Argentina repaid debt to international creditors. Investors also focused on
politics as some countries held presidential and general elections during the
period. In Asia, countries such as India and Indonesia registered strong gains
as fund flows stabilized, while Taiwan and Thailand underperformed due to
political instability. China's strong economic growth and high liquidity
propelled stock prices despite the government's efforts to moderate economic
growth. Greater domestic liquidity, a weakening won and expectations for a
recovery in domestic consumption fueled South Korea's stock market appreciation.

INVESTMENT STRATEGY

Our investment strategy employs a bottom-up, value-oriented, long-term approach.
We focus on the market price of a company's securities relative to our
evaluation of the company's long-term earnings, asset value and cash flow
potential. As we look for investments, we focus on specific companies and
undertake in-depth research to construct an action list from which we make our
buy decisions. Before we make a purchase, we look at the company's potential for
earnings and growth over a five-year horizon. During our analysis, we also
consider the company's position in its sector, the economic framework and
political environment.

MANAGER'S DISCUSSION

The Fund's performance relative to the MSCI EM Index benefited from stock
selection in Taiwan and Brazil. Key Taiwanese and Brazilian companies that
outperformed the index, and where the Fund had overweighted exposure, were Banco
Bradesco, Uni-President Enterprises and Souza Cruz. An underweighted position in
Israel and overweighted exposure to Croatia further enhanced relative
performance. The Fund held only one Croatian stock, Pliva, which outperformed
the index.

Alternatively, our stock selection in and underweighted exposures to India and
Mexico hampered Fund performance. In India, the Fund's overweighted position in
Hindustan Petroleum and underweighted holding in Reliance Industries (sold by
period-end) hindered the Fund's results. The Fund preferred to hold Hindustan
Petroleum instead of its peer, Reliance Industries, because of what we believed
was the former's more attractive valuation and the latter's lack of
transparency. In Mexico, we held America Movil only for a short time, which hurt
relative performance because the stock experienced strong price appreciation
during the period. We did not own the company long because of what we considered
its expensive valuation. Despite delivering positive absolute returns, the
Fund's investments in Singapore, not an index component, adversely impacted
relative performance because some stocks underperformed the index.

TOP 10 EQUITY HOLDINGS
8/31/06

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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
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Samsung Electronics Co. Ltd. 5.2%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
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PetroChina Co. Ltd., common & restricted 3.6%
OIL, GAS & CONSUMABLE FUELS, CHINA
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Petroleo Brasileiro SA, ADR, pfd. 3.4%
OIL, GAS & CONSUMABLE FUELS, BRAZIL
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LUKOIL, ADR 3.1%
OIL, GAS & CONSUMABLE FUELS, RUSSIA
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Anglo American PLC 2.3%
METALS & MINING, SOUTH AFRICA
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Remgro Ltd. 2.3%
DIVERSIFIED FINANCIAL SERVICES,
SOUTH AFRICA
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China Mobile Ltd. 2.1%
WIRELESS TELECOMMUNICATION SERVICES,
CHINA
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Gazprom, ADR 2.0%
OIL, GAS & CONSUMABLE FUELS, RUSSIA
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Taiwan Semiconductor Manufacturing
Co. Ltd. 1.9%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, TAIWAN
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Banco Bradesco SA, ADR, pfd. 1.9%
COMMERCIAL BANKS, BRAZIL
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Annual Report | 3

At the sector level, the health care sector had the largest positive
contribution to relative performance mainly due to the Fund's investment in
Pliva, a non-index holding, rather than Teva Pharmaceutical Industries, which is
in the index, due to what we believed were its more attractive valuations. 2
Underweighted exposure to information technology and stock selection in consumer
staples further supported performance. 3 In consumer staples, overweighted
positions in Uni-President Enterprises and CJ Corp. (both sold by period-end)
contributed the most to relative performance. On the other hand, stock selection
in the telecommunication services and consumer discretionary sectors detracted
from relative performance. 4

May's market correction contributed to what we considered attractive valuations.
In line with our investment strategy, we used this as an opportunity to increase
the Fund's exposure to companies we believed to be oversold mainly due to weak
global market sentiment rather than poor fundamentals. We made significant
purchases in Turkey's banking, multi-sector holding, and oil, gas and consumable
fuels industries as we expect them to benefit from greater domestic demand and
high oil prices. Specific investments included new positions in Turkiye Vakiflar
Bankasi (Vakifbank) and Akbank, two major commercial and consumer banks; and KOC
Holding, a leading diversified conglomerate with interests in automotive,
consumer durables, energy and finance. We also added to our holding in
Tupras-Turkiye Petrol Rafineleri (Tupras Petrol), the country's largest
industrial company with a dominant oil refining market share.

The Fund also increased its overall exposure to the oil, gas and consumable
fuels industry as we believe energy stocks could benefit from greater revenues
and earnings as a result of relatively high oil prices. Key investments included
new positions in Russia's Gazprom, the world's largest gas producer in terms of
reserves and production; and CNOOC, China's largest offshore oil and natural gas
exploration and production company. We also added to existing holdings in
PetroChina, a dominant player in the oil and gas exploration, development and
production industry; and Russia's LUKOIL, one of the world's largest vertically
integrated oil companies.

In line with our investment strategy, we made selective purchases in South
Africa and Thailand. Significant additions in South Africa included new
positions in

2. The health care sector comprises pharmaceuticals in the SOI.

3. The information technology sector comprises electronic equipment and
instruments, and semiconductors and semi-conductor equipment in the SOI,
while the consumer staples sector comprises beverages, food and staples
retailing, food products, household products, personal products, and
tobacco.

4. The telecommunication services sector comprises diversified
telecommunication services and wireless telecommunication services in the
SOI, while the consumer discretionary sector comprises automobiles;
hotels, restaurants and leisure; and household durables.

4 | Annual Report

MTN Group, a dominant wireless telecommunications services provider in Africa;
Imperial Holdings, a diversified transport, logistics and services group; and
Edgars Consolidated Stores, a leading specialty fashion retailer in southern
Africa. We believe higher incomes and strong consumer demand could lead to
greater consumption of the products and services offered by these economic
sectors. Thai investments included adding to positions in Siam Cement Public,
Thailand's largest industrial conglomerate with substantial businesses in
cement, petrochemicals and industrial paper; and Bangkok Bank Public and
Kasikornbank Public, two of the country's largest banks. We believe Thailand's
banking sector could continue to benefit from structural reforms, which should
unlock value going forward.

Conversely, countries where we substantially reduced exposure during the period
were Singapore, South Korea, Taiwan and Mexico as certain stocks reached their
sale targets. Specific sales included Daewoo Shipbuilding & Marine Engineering,
South Korea's major shipbuilder; CJ Corp., a prominent integrated food maker in
South Korea; Keppel, Singapore's largest shipyard operator; and Mexico's Fomento
Economico Mexicano, a dominant player in its beer market. We also sold much of
our holding in Singapore's Fraser & Neave, a market leader in Asia's soft drink
market.

Thank you for your continued participation in Templeton Emerging Markets Fund.
We look forward to serving your future investment needs.

Sincerely,

[PHOTO OMITTED] /s/ Mark Mobius

Mark Mobius
President and Chief Executive Officer -
Investment Management
Templeton Emerging Markets Fund

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF AUGUST 31, 2006, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.

Annual Report | 5

Performance Summary as of 8/31/06

Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. Total return reflects reinvestment of the Fund's dividends and
capital gain distributions, if any, and any unrealized gains or losses. Total
returns do not reflect any sales charges paid at inception or brokerage
commissions paid on secondary market purchases. The performance table does not
reflect any taxes that a shareholder would pay on Fund dividends, capital gains
distributions, if any, or realized gains on the sale of Fund shares.

PRICE AND DISTRIBUTION INFORMATION

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SYMBOL: EMF CHANGE 8/31/06 8/31/05
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Net Asset Value (NAV) +$2.58 $20.56 $17.98
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Market Price (NYSE) +$0.63 $18.94 $18.31
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DISTRIBUTIONS (9/1/05-8/31/06)
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Dividend Income $0.3883
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Long-Term Capital Gain $1.6082
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TOTAL $1.9965
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PERFORMANCE

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1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1
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Based on change in NAV 2 +27.64% +177.12% +169.97%
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Based on change in market price 3 +15.01% +170.08% +135.19%
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Average Annual Total Return 1
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Based on change in NAV 2 +27.64% +22.61% +10.44%
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Based on change in market price 3 +15.01% +21.99% +8.93%
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.

ENDNOTES

SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING, INCLUDING CURRENCY
VOLATILITY, ECONOMIC INSTABILITY AND POLITICAL DEVELOPMENTS 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.

1. Total return calculations represent the cumulative and average annual
changes in value of an investment over the periods indicated.

2. Assumes reinvestment of distributions based on net asset value.

3. Assumes reinvestment of distributions based on the dividend reinvestment
and cash purchase plan.

6 | Annual Report

Important Notice to Shareholders

SHARE REPURCHASE PROGRAM

The Fund's Board previously authorized management to implement an open-market
share repurchase program pursuant to which the Fund may purchase Fund shares,
from time to time, in open-market transactions, at the discretion of management.
This authorization remains in effect.

Annual Report | 7

Templeton Emerging Markets Fund

FINANCIAL HIGHLIGHTS

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YEAR ENDED AUGUST 31,
2006 2005 2004 2003 2002
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)

Net asset value, beginning of year ................ $ 17.98 $ 13.40 $ 10.82 $ 8.76 $ 8.86
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Income from investment operations:

Net investment income a .......................... 0.33 0.32 0.22 0.18 0.15

Net realized and unrealized gains (losses) ....... 4.25 4.51 2.59 2.03 (0.14)
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Total from investment operations .................. 4.58 4.83 2.81 2.21 0.01
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Less distributions from:

Net investment income ............................ (0.39) (0.25) (0.23) (0.15) (0.11)

Net realized gains ............................... (1.61) -- -- -- --
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Total distributions ............................... (2.00) (0.25) (0.23) (0.15) (0.11)
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Net asset value, end of year ...................... $ 20.56 $ 17.98 $ 13.40 $ 10.82 $ 8.76
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Market value, end of year b ....................... $ 18.94 $ 18.31 $ 14.24 $ 11.84 $ 8.00
====================================================================

Total return (based on market value per share) .... 15.01% 30.66% 22.62% 50.83% (2.82)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year (000's) ................... $366,549 $318,240 $236,848 $191,076 $154,640

Ratios to average net assets:

Expenses ......................................... 1.58% c 1.57% c 1.63% c 1.84% 1.64%

Net investment income ............................ 1.66% 2.00% 1.70% 1.94% 1.67%

Portfolio turnover rate ........................... 43.03% 36.04% 67.63% 48.69% 65.13%

a Based on average daily shares outstanding.

b Based on the last sale on the New York Stock Exchange.

c Benefit of expense reduction rounds to less than 0.01%.

8 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Emerging Markets Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2006

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INDUSTRY SHARES/RIGHTS VALUE
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LONG TERM INVESTMENTS 98.7%
COMMON STOCKS AND RIGHTS 90.2%
ARGENTINA 0.0% a
b Grupo Financiero Galicia SA, ADR ..................... Commercial Banks 4,860 $ 29,306
b Ternium SA, ADR ...................................... Metals & Mining 3,600 90,756
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120,062
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AUSTRIA 0.5%
Wienerberger AG ...................................... Building Products 35,150 1,687,431
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BRAZIL 2.0%
Centrais Eletricas Brasileiras SA .................... Electric Utilities 67,922,000 1,482,626
Centrais Eletricas Brasileiras SA (Non-Taxable) ...... Electric Utilities 91,072,000 1,987,952
Souza Cruz SA ........................................ Tobacco 229,973 3,759,587
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7,230,165
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CHINA 11.9%
Aluminum Corp. of China Ltd., H ...................... Metals & Mining 6,288,000 4,487,242
Anhui Conch Cement Co. Ltd., H ....................... Construction Materials 776,000 1,466,739
China Mobile Ltd. .................................... Wireless Telecommunication Services 1,135,500 7,635,944
China Petroleum and Chemical Corp., H ................ Oil, Gas & Consumable Fuels 7,410,000 4,411,366
China Telecom Corp. Ltd., H .......................... Diversified Telecommunication Services 2,052,000 691,278
China Travel International Investment
Hong Kong Ltd. ...................................... Hotels, Restaurants & Leisure 3,022,000 738,281
Chongqing Changan Automobile Co. Ltd., B ............. Automobiles 1,487,800 717,381
CNOOC Ltd. ........................................... Oil, Gas & Consumable Fuels 6,512,000 5,693,735
Datang International Power Generation Co. ............
Ltd., H ............................................. Independent Power Producers & Energy Traders 380,000 253,586
Denway Motors Ltd. ................................... Automobiles 5,596,730 1,784,678
Huaneng Power International Inc., H .................. Independent Power Producers & Energy Traders 961,000 638,834
PetroChina Co. Ltd., H ............................... Oil, Gas & Consumable Fuels 9,832,000 11,087,035
c PetroChina Co. Ltd., H, 144A ......................... Oil, Gas & Consumable Fuels 1,856,000 2,092,915
Shanghai Industrial Holdings Ltd. .................... Industrial Conglomerates 973,000 1,899,147
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43,598,161
------------
CROATIA 1.4%
d Pliva d.d., GDR, Reg S ............................... Pharmaceuticals 179,920 5,208,684
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CZECH REPUBLIC 0.1%
Philip Morris CR AS .................................. Tobacco 904 379,790
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FINLAND 0.4%
Nokian Renkaat OYJ ................................... Auto Components 85,680 1,500,600
------------
HONG KONG 1.7%
Cheung Kong (Holdings) Ltd. .......................... Real Estate 298,000 3,291,420
Cheung Kong Infrastructure Holdings Ltd. ............. Electric Utilities 244,000 773,358
Dairy Farm International Holdings Ltd. ............... Food & Staples Retailing 183,900 566,412
MTR Corp. Ltd. ....................................... Road & Rail 599,830 1,533,270
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6,164,460
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Annual Report | 9

Templeton Emerging Markets Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2006 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
HUNGARY 2.5%
BorsodChem Rt ........................................ Chemicals 47,907 $ 631,711
b Magyar Telekom PLC ................................... Diversified Telecommunication Services 616,974 2,517,737
MOL Magyar Olaj-es Gazipari Rt ....................... Oil, Gas & Consumable Fuels 43,425 4,400,063
Richter Gedeon Nyrt .................................. Pharmaceuticals 7,304 1,557,889
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9,107,400
------------
INDIA 2.9%
Gail India Ltd. ...................................... Gas Utilities 295,286 1,658,443
Himatsingka Seide Ltd. ............................... Textiles, Apparel & Luxury Goods 81,970 207,835
Hindustan Petroleum Corp. Ltd. ....................... Oil, Gas & Consumable Fuels 434,540 2,598,545
Indian Oil Corp. Ltd. ................................ Oil, Gas & Consumable Fuels 104,300 1,110,880
Oil & Natural Gas Corp. Ltd. ......................... Oil, Gas & Consumable Fuels 166,930 4,366,828
c Oil & Natural Gas Corp. Ltd., 144A ................... Oil, Gas & Consumable Fuels 30,430 796,038
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10,738,569
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INDONESIA 0.6%
PT Astra International Tbk ........................... Automobiles 1,409,000 1,715,466
PT Bank Danamon Indonesia Tbk ........................ Commercial Banks 1,109,500 596,309
------------
2,311,775
------------
ISRAEL 0.2%
b Taro Pharmaceutical Industries Ltd. .................. Pharmaceuticals 46,850 612,798
------------
MALAYSIA 1.9%
Maxis Communications Bhd ............................. Wireless Telecommunication Services 1,146,500 2,740,886
Resorts World Bhd .................................... Hotels, Restaurants & Leisure 632,500 2,044,757
Sime Darby Bhd ....................................... Industrial Conglomerates 908,400 1,468,345
Tanjong PLC .......................................... Independent Power Producers & Energy Traders 149,800 537,180
YTL Power International Bhd .......................... Water Utilities 491,084 256,148
------------
7,047,316
------------
MEXICO 2.6%
Grupo Bimbo SA de CV, A .............................. Food Products 176,271 576,667
Kimberly Clark de Mexico SA de CV, A ................. Household Products 1,572,800 5,923,673
Telefonos de Mexico SA de CV, L, ADR ................. Diversified Telecommunication Services 133,674 3,226,890
------------
9,727,230
------------
PANAMA 0.3%
Banco Latinoamericano de Exportaciones SA, E ......... Commercial Banks 56,700 933,282
------------
PERU 0.1%
Compania de Minas Buenaventura SA, ADR ............... Metals & Mining 14,200 396,890
------------
PHILIPPINES 0.7%
San Miguel Corp., B .................................. Beverages 1,862,699 2,603,379
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10 | Annual Report

Templeton Emerging Markets Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2006 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
POLAND 1.2%
b Polski Koncern Naftowy Orlen SA ...................... Oil, Gas & Consumable Fuels 134,450 $ 2,241,560
Telekomunikacja Polska SA ............................ Diversified Telecommunication Services 314,099 2,057,996
------------
4,299,556
------------
PORTUGAL 0.2%
Jeronimo Martins SGPS SA ............................. Food & Staples Retailing 45,879 820,571
------------
RUSSIA 7.7%
Gazprom .............................................. Oil, Gas & Consumable Fuels 169,250 1,988,687
Gazprom, ADR ......................................... Oil, Gas & Consumable Fuels 113,610 5,339,670
LUKOIL, ADR .......................................... Oil, Gas & Consumable Fuels 101,006 8,459,252
LUKOIL, ADR (London Exchange) ........................ Oil, Gas & Consumable Fuels 36,510 3,055,887
Mining and Metallurgical Co. Norilsk Nickel .......... Metals & Mining 44,679 5,986,986
Mobile Telesystems, ADR .............................. Wireless Telecommunication Services 77,300 2,829,180
b ZAO Polyus Gold Co. .................................. Metals & Mining 16,609 705,883
------------
28,365,545
------------
SINGAPORE 0.6%
ComfortDelGro Corp. Ltd. ............................. Road & Rail 1,505,000 1,434,472
Fraser and Neave Ltd. ................................ Industrial Conglomerates 283,900 717,980
------------
2,152,452
------------
SOUTH AFRICA 9.6%
Anglo American PLC ................................... Metals & Mining 199,236 8,594,196
Edgars Consolidated Stores Ltd. ...................... Specialty Retail 296,151 1,134,615
b Imperial Holdings Ltd. ............................... Air Freight & Logistics 84,630 1,674,039
JD Group Ltd. ........................................ Specialty Retail 144,080 1,332,000
Massmart Holdings Ltd. ............................... Food & Staples Retailing 204,165 1,561,845
MTN Group Ltd. ....................................... Wireless Telecommunication Services 241,400 1,916,724
Nampak Ltd. .......................................... Containers & Packaging 182,864 435,584
Nedbank Group Ltd. ................................... Commercial Banks 289,087 4,432,212
Old Mutual PLC ....................................... Insurance 1,835,260 5,722,124
Remgro Ltd. .......................................... Diversified Financial Services 422,870 8,408,680
------------
35,212,019
------------
SOUTH KOREA 16.1%
Hana Financial Group Inc. ............................ Commercial Banks 112,352 4,844,471
Hite Brewery Co. Ltd. ................................ Beverages 7,959 902,456
Hyundai Development Co. .............................. Construction & Engineering 104,630 4,288,382
Hyundai Motor Co. Ltd. ............................... Automobiles 1,710 144,086
Kangwon Land Inc. .................................... Hotels, Restaurants & Leisure 256,748 4,860,932
Korea Gas Corp. ...................................... Gas Utilities 35,380 1,306,554
LG Card Co. Ltd. ..................................... Consumer Finance 82,840 5,075,706
LG Chem Ltd. ......................................... Chemicals 20,170 821,445
LG Corp. ............................................. Industrial Conglomerates 53,000 1,579,580
LG Electronics Inc. .................................. Household Durables 31,790 2,129,695
LG Petrochemical Co. Ltd. ............................ Chemicals 33,950 738,120

Annual Report | 11

Templeton Emerging Markets Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2006 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
SOUTH KOREA (CONTINUED)
b,c Lotte Shopping Co. Ltd., GDR, 144A ................. Multiline Retail 163,000 $ 2,754,700
Samsung Electronics Co. Ltd. ....................... Semiconductors & Semiconductor Equipment 27,936 18,889,421
Samsung Fine Chemicals Co. Ltd. .................... Chemicals 48,300 1,205,867
Shinhan Financial Group Co. Ltd. ................... Commercial Banks 65,610 2,958,695
SK Corp. ........................................... Oil, Gas & Consumable Fuels 49,120 3,162,934
SK Telecom Co. Ltd. ................................ Wireless Telecommunication Services 17,080 3,322,542
------------
58,985,586
------------
SWEDEN 0.9%
Oriflame Cosmetics SA, SDR ......................... Personal Products 91,120 3,143,001
------------
TAIWAN 10.9%
Asustek Computer Inc. .............................. Computers & Peripherals 805,200 1,806,413
AU Optronics Corp. ................................. Electronic Equipment & Instruments 807,520 1,195,471
b BenQ Corp. ......................................... Computers & Peripherals 306,000 158,600
China Motor Corp. .................................. Automobiles 5,505 4,167
Chinatrust Financial Holding Co. Ltd. .............. Commercial Banks 1,481,016 970,206
Chunghwa Telecom Co. Ltd. .......................... Diversified Telecommunication Services 1,444,320 2,370,905
D-Link Corp. ....................................... Communications Equipment 2,221,940 2,181,683
LITE-ON IT Corp. ................................... Computers & Peripherals 82,820 91,516
b Lite-On Technology Corp. ........................... Computers & Peripherals 2,198,098 2,729,581
MediaTek Inc. ...................................... Semiconductors & Semiconductor Equipment 200,090 1,824,751
Mega Financial Holding Co. Ltd. .................... Commercial Banks 7,825,661 5,197,917
President Chain Store Corp. ........................ Food & Staples Retailing 926,188 1,886,387
Realtek Semiconductor Corp. ........................ Semiconductors & Semiconductor Equipment 2,292,360 2,898,899
Siliconware Precision Industries Co. ............... Semiconductors & Semiconductor Equipment 1,551,699 1,839,624
Sunplus Technology Co. Ltd. ........................ Semiconductors & Semiconductor Equipment 1,897,676 1,820,029
Synnex Technology International Corp. .............. Electronic Equipment & Instruments 1,359,952 1,207,156
Taiwan Mobile Co. Ltd. ............................. Wireless Telecommunication Services 5,208,372 4,844,850
Taiwan Semiconductor Manufacturing Co. Ltd. ........ Semiconductors & Semiconductor Equipment 3,858,717 6,815,159
b Yageo Corp. ........................................ Electronic Equipment & Instruments 375,000 129,385
------------
39,972,699
------------
THAILAND 3.5%
Aromatics (Thailand) Public Co. Ltd., fgn .......... Chemicals 153,800 123,801
Bangkok Bank Public Co. Ltd., fgn .................. Commercial Banks 618,000 1,808,941
Kasikornbank Public Co. Ltd., fgn .................. Commercial Banks 2,165,300 3,745,197
Kiatnakin Bank Public Co. Ltd., fgn ................ Consumer Finance 407,000 308,662
Land and Houses Public Co. Ltd., fgn ............... Household Durables 6,872,332 1,389,828
Siam Cement Public Co. Ltd., fgn ................... Construction Materials 442,920 2,757,937
Siam Commercial Bank Public Co. Ltd., fgn .......... Commercial Banks 918,100 1,416,972
b TMB Bank Public Co. Ltd., fgn ...................... Commercial Banks 16,891,500 1,465,308
b True Corp. Public Co. Ltd., rts., 3/28/08 .......... Diversified Telecommunication Services 246,818 --
------------
13,016,646
------------
TURKEY 7.5%
Akbank TAS ......................................... Commercial Banks 1,050,685 5,738,704
Arcelik AS, Br ..................................... Household Durables 540,651 3,488,190

12 | Annual Report

Templeton Emerging Markets Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2006 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
TURKEY (CONTINUED)
b KOC Holding AS ..................................... Industrial Conglomerates 588,935 $ 2,191,367
b Migros Turk TAS .................................... Food & Staples Retailing 151,760 1,460,925
Tupras-Turkiye Petrol Rafineleri AS ................ Oil, Gas & Consumable Fuels 337,186 6,158,070
b Turk Hava Yollari Anonim Ortakligi ................. Airlines 69,000 240,254
b,c Turk Hava Yollari Anonim Ortakligi, 144A ........... Airlines 435,000 1,514,645
Turkcell Iletisim Hizmetleri AS .................... Wireless Telecommunication Services 525,317 2,438,831
Turkiye Is Bankasi (Isbank), C ..................... Commercial Banks 356,726 2,057,988
Turkiye Vakiflar Bankasi T.A.O ..................... Commercial Banks 442,104 2,037,415
------------
27,326,389
------------
UNITED KINGDOM 2.2%
HSBC Holdings PLC .................................. Commercial Banks 244,825 4,444,925
Provident Financial PLC ............................ Consumer Finance 285,785 3,564,175
------------
8,009,100
------------
TOTAL COMMON STOCKS AND RIGHTS
(COST $239,866,034) ............................... 330,671,556
------------
PREFERRED STOCKS 8.5%
BRAZIL 8.4%
Banco Bradesco SA, ADR, pfd ........................ Commercial Banks 208,074 6,808,181
Braskem SA, pfd., A ................................ Chemicals 36,066 234,665
Companhia Vale do Rio Doce, ADR, pfd., A ........... Metals & Mining 338,100 6,085,800
Petroleo Brasileiro SA, ADR, pfd ................... Oil, Gas & Consumable Fuels 153,880 12,405,806
Sadia SA, pfd ...................................... Food Products 157,306 421,879
Suzano Papel e Celulose SA, pfd., A ................ Paper & Forest Products 118,196 719,430
Unibanco - Uniao de Bancos Brasileiros SA,
GDR, pfd .......................................... Commercial Banks 47,600 3,443,860
Usinas Siderurgicas de Minas Gerais SA, pfd., A .... Metals & Mining 21,058 660,223
------------
30,779,844
------------
RUSSIA 0.1%
Surgutneftegaz, pfd ................................ Oil, Gas & Consumable Fuels 507,000 506,281
------------
TOTAL PREFERRED STOCKS
(COST $18,591,221) ................................ 31,286,125
------------
TOTAL LONG TERM INVESTMENTS
(COST $258,457,255) ............................... 361,957,681
------------

Annual Report | 13

Templeton Emerging Markets Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2006 (CONTINUED)

------------------------------------------------------------------------------------------------------------------------------------
SHARES VALUE
------------------------------------------------------------------------------------------------------------------------------------

SHORT TERM INVESTMENTS (COST $2,791,650) 0.8%
MONEY MARKET FUND 0.8%
UNITED STATES 0.8%
e Franklin Institutional Fiduciary Trust Money
Market Portfolio, 4.99% .............................. 2,791,650 $ 2,791,650
------------
TOTAL INVESTMENTS
(COST $261,248,905) 99.5% ........................... 364,749,331
OTHER ASSETS, LESS LIABILITIES 0.5% .................. 1,799,995
------------
NET ASSETS 100.0% .................................... $366,549,326
============

SELECTED PORTFOLIO ABBREVIATIONS

ADR - American Depository Receipt
GDR - Global Depository Receipt
SDR - Swedish Depository Receipt

a Rounds to less than 0.1% of net assets.

b Non-income producing for the twelve months ended August 31, 2006.

c 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
the guidelines approved by the Fund's Board of Trustees. At August 31,
2006, the aggregate value of these securities was $7,158,298, representing
1.95% of net assets.

d 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 August 31, 2006, the value of
this security was $5,208,684, representing 1.42% of net assets.

e See Note 8 regarding investments in Franklin Institutional Fiduciary Trust
Money Market Portfolio. The rate shown is the annualized seven-day yield
at period end.

14 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Emerging Markets Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
August 31, 2006

Assets:
Investments in securities:
Cost - Unaffiliated issuers ................................... $258,457,255
Cost - Sweep Money Fund (Note 8) .............................. 2,791,650
------------
Total cost of investments ..................................... $261,248,905
============
Value - Unaffiliated Issuers .................................. $361,957,681
Value - Sweep Money Fund (Note 8) ............................. 2,791,650
------------
Total value of investments .................................... 364,749,331
Cash ........................................................... 298,949
Foreign currency, at value (cost $304,093) ..................... 279,869
Receivables:
Investment securities sold .................................... 538,919
Dividends ..................................................... 1,079,248
Foreign tax ................................................... 250,272
------------
Total assets ............................................ 367,196,588
------------
Liabilities:
Payables:
Affiliates .................................................... 437,329
Deferred taxes ................................................ 2,174
Accrued expenses and other liabilities ......................... 207,759
------------
Total liabilities ....................................... 647,262
------------
Net assets, at value ................................. $366,549,326
============
Net assets consist of:
Paid-in capital ................................................ $207,724,757
Undistributed net investment income ............................ 868,049
Net unrealized appreciation (depreciation) ..................... 103,463,418
Accumulated net realized gain (loss) ........................... 54,493,102
------------
Net assets, at value ................................. $366,549,326
============
Shares outstanding .............................................. 17,829,304
============
Net asset value per share ....................................... $ 20.56
============

Annual Report |
The accompanying notes are an integral part of these financial statements. | 15

Templeton Emerging Markets Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended August 31, 2006

Investment income:
Dividends (net of foreign taxes of $918,873)
Unaffiliated issuers .......................................................... $10,406,410
Sweep Money Fund (Note 8) ..................................................... 915,789
Interest (net of foreign taxes of $93) ......................................... 461
-----------
Total investment income ................................................. 11,322,660
-----------
Expenses:
Management fees (Note 3a) ...................................................... 4,352,396
Administrative fees (Note 3b) .................................................. 524,583
Transfer agent fees ............................................................ 56,584
Custodian fees (Note 4) ........................................................ 372,142
Reports to shareholders ........................................................ 55,169
Registration and filing fees ................................................... 26,564
Professional fees .............................................................. 56,191
Trustees' fees and expenses .................................................... 40,762
Other .......................................................................... 29,627
-----------
Total expenses .......................................................... 5,514,018
Expense reductions (Note 4) ............................................. (724)
-----------
Net expenses ......................................................... 5,513,294
-----------
Net investment income ............................................. 5,809,366
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments (net of foreign taxes of $24,773) ................................. 59,022,505
Foreign currency transactions ................................................. (272,830)
-----------
Net realized gain (loss) ............................................. 58,749,675
-----------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................................... 16,718,946
Translation of assets and liabilities denominated in foreign currencies ....... (24,225)
Change in deferred taxes on unrealized appreciation ........................... 11,854
-----------
Net change in unrealized appreciation (depreciation) ................. 16,706,575
-----------
Net realized and unrealized gain (loss) ......................................... 75,456,250
-----------
Net increase (decrease) in net assets resulting from operations ................. $81,265,616
===========

16 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Emerging Markets Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

----------------------------
YEAR ENDED AUGUST 31,
2006 2005
----------------------------

Increase (decrease) in net assets:
Operations:
Net investment income .................................................................... $ 5,809,366 $ 5,699,526
Net realized gain (loss) from investments and foreign currency transactions .............. 58,749,675 30,281,676
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities denominated in foreign currencies, and deferred taxes ........... 16,706,575 49,504,071
----------------------------
Net increase (decrease) in net assets resulting from operations .................... 81,265,616 85,485,273
----------------------------
Distributions to shareholders from:
Net investment income .................................................................... (6,873,880) (4,335,961)
Net realized gains ....................................................................... (28,486,651) --
----------------------------
Total distributions to shareholders ....................................................... (35,360,531) (4,335,961)
----------------------------
Capital share transactions: (Note 2) ...................................................... 2,403,830 242,988
----------------------------
Net increase (decrease) in net assets .............................................. 48,308,915 81,392,300
Net assets:
Beginning of year ......................................................................... 318,240,411 236,848,111
----------------------------
End of year ............................................................................... $366,549,326 $318,240,411
----------------------------
Undistributed net investment income included in net assets:
End of year ............................................................................... $ 868,049 $ 2,172,086
============================

Annual Report |
The accompanying notes are an integral part of these financial statements. | 17

Templeton Emerging Markets Fund

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Emerging Markets Fund (the Fund) is registered under the Investment
Company Act of 1940 (1940 Act) as a diversified, closed-end investment company.

The following summarizes the Fund's significant accounting policies.

A. 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.

Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask prices. The value
is then converted into its U.S. dollar equivalent at the foreign exchange rate
in effect at the close of the NYSE on the day that the value of the foreign
security is determined.

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. The investment manager monitors price movements
following the close of trading in foreign stock markets through a series of
country specific market proxies (such as baskets of American Depository
Receipts, futures contracts and exchange traded funds). These price movements
are measured against established trigger thresholds for each specific market
proxy to assist in determining if an event has occurred. 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.

18 | Annual Report

Templeton Emerging Markets Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Fund's Board of Trustees.

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 on the
Statement of Operations.

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 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.

C. FOREIGN CURRENCY CONTRACTS

When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.

D. INCOME AND DEFERRED TAXES

No provision has been made for U.S. income taxes because the Fund intends to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute to shareholders substantially all of its taxable income and net
realized gains.

Foreign securities held by the Fund may be subject to foreign taxation on
dividend and interest income received. Foreign taxes, if any, are recorded based
on the tax regulations and rates that exist in the foreign markets in which the
Fund invests.

Annual Report | 19

Templeton Emerging Markets Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. INCOME AND DEFERRED TAXES (CONTINUED)

The Fund may be subject to a tax imposed on net realized gains on securities of
certain foreign countries. The Fund records an estimated deferred tax liability
for net unrealized gains on these securities in an amount that would be payable
if the securities were disposed of on the valuation date.

E. 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.
Interest income and estimated expenses are accrued daily. Dividend income is
recorded on the ex-dividend date except that certain dividends from foreign
securities are recognized as soon as the Fund is notified of the ex-dividend
date. Distributions to shareholders are recorded on the ex-dividend date and are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States.
These differences may be permanent or temporary. Permanent differences are
reclassified among capital accounts to reflect their tax character. These
reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they may reverse in subsequent
periods.

F. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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 expenses during the reporting period. Actual results could differ from those
estimates.

G. GUARANTEES AND INDEMNIFICATIONS

Under the Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. However, based on experience, the
Fund expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

The Board of the Fund previously authorized an open-market share repurchase
program pursuant to which the Fund may purchase, from time to time, Fund shares
in open-market transactions, at the discretion of management. This authorization
remains in effect. During the period ended August 31, 2006, there were no shares
repurchased.

20 | Annual Report

Templeton Emerging Markets Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

At August 31, 2006, there were an unlimited number of shares authorized (without
par value). During the year ended August 31, 2006, 132,985 shares were issued
for $2,403,830 from reinvested distributions. During the year ended August 31,
2005, 15,994 shares were issued for $242,988 from reinvested distributions.

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Fund are also officers and/or directors of the following
subsidiaries:

--------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
--------------------------------------------------------------------------------
Templeton Asset Management Ltd. (TAML) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager

A. MANAGEMENT FEES

The Fund pays an investment management fee to TAML based on the average daily
net assets of the Funds as follows:

--------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
--------------------------------------------------------------------------------
1.250% Up to and including $1 billion
1.200% Over $1 billion, up to and including $5 billion
1.150% Over $5 billion, up to and including $10 billion
1.100% Over $10 billion, up to and including $15 billion
1.050% Over $15 billion, up to and including $20 billion
1.000% In excess of $20 billion

B. ADMINISTRATIVE FEES

The Fund pays an administrative fee to FT Services of 0.15% per year of the
average daily net assets of the Fund.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended August 31, 2006, the
custodian fees were reduced as noted in the Statement of Operations.

Annual Report | 21

Templeton Emerging Markets Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES

For tax purposes, realized currency losses occurring subsequent to October 31
may be deferred and treated as occurring on the first day of the following
fiscal year. At August 31, 2006, the Fund deferred realized currency losses of
$203,431.

The tax character of distributions paid during the years ended August 31, 2006
and 2005, was as follows:

--------------------------
2006 2005
--------------------------
Distributions paid from:
Ordinary income ............................... $ 6,873,880 $ 4,335,961
Long term capital gain ........................ 28,486,651 --
--------------------------
$35,360,531 $ 4,335,961
==========================

Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions, passive foreign
investment company shares, and foreign taxes on sale of securities.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, passive foreign investment company shares, and foreign taxes on
sales of securities.

At August 31, 2006, the cost of investments, net unrealized appreciation
(depreciation), undistributed ordinary income and undistributed long term
capital gains for income tax purposes were as follows:

Cost of investments ........................................... $267,812,832
============

Unrealized appreciation ....................................... $102,303,553
Unrealized depreciation ....................................... (5,367,054)
------------
Net unrealized appreciation (depreciation) .................... $ 96,936,499
============

Undistributed ordinary income ................................. $ 15,976,841
Undistributed long term capital gains ......................... 46,151,668
------------
Distributable earnings ........................................ $ 62,128,509
============

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
year ended August 31, 2006, aggregated $148,266,101 and $169,605,024,
respectively.

22 | Annual Report

Templeton Emerging Markets Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities.

8. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Franklin Advisers, Inc. (an affiliate of the investment manager). Management
fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in
an amount not to exceed the management and administrative fees paid by the Sweep
Money Fund.

9. REGULATORY MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, relating to certain practices in the
mutual fund industry, including late trading, market timing and marketing
support payments to securities dealers who sell fund shares, Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the "Company"), entered into
settlements with certain of those regulators.

Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop separate plans for the distribution
of the respective settlement monies. The CAGO approved the distribution plan
pertaining to the distribution of the monies owed under the CAGO settlement
agreement, and in March 2005, the disbursement of monies to the relevant funds
in accordance with the terms and conditions of that settlement was completed.
The Fund did not participate in the CAGO Settlement.

On June 23, 2006, the SEC approved the IDC's proposed plan of distribution
arising from the December 13, 2004 SEC Order and disbursement of the settlement
monies to the designated funds in accordance with the terms and conditions of
the SEC's order and the plan was completed in September 2006. The Fund did not
participate in the December 13, 2004 SEC Order.

The IDC has also completed a proposed Plan of Distribution under the August 2,
2004 SEC Order resolving the SEC's market timing investigation and has submitted
that plan to the SEC staff, where it is under review. The SEC has announced the
following expected schedule with respect to the market timing Plan of
Distribution. The SEC anticipates that Notice of the Plan

Annual Report | 23

Templeton Emerging Markets Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. REGULATORY MATTERS (CONTINUED)

will be published on or after November 15, 2006. After publication and comment,
the proposed Distribution Plan will be submitted to the SEC for approval. When
the SEC approves the proposed Distribution Plan, with modifications as
appropriate, distributions will begin pursuant to that Plan.

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
employees, have been named in private lawsuits (styled as shareholder class
actions, or as derivative actions on behalf of either the named funds or
Franklin Resources, Inc.) relating to the industry practices referenced above,
as well as to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.

The Company and fund management strongly believe that the claims made in each of
the private lawsuits referenced above are without merit and intend to defend
against them vigorously. The Company cannot predict with certainty the eventual
outcome of these lawsuits, nor whether they will have a material negative impact
on the Company. If it is determined that the Company bears responsibility for
any unlawful or inappropriate conduct that caused losses to the Fund, it is
committed to making the Fund or its shareholders whole, as appropriate.

10. NEW ACCOUNTING PRONOUNCEMENT

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the
related interest and penalties. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. The Fund is currently evaluating the impact, if any,, of
applying the various provisions of FIN 48.

24 | Annual Report

Templeton Emerging Markets Fund

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF TEMPLETON EMERGING MARKETS FUND

In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Templeton Emerging Markets Fund
(the "Fund") at August 31, 2006, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 2006 by correspondence with the custodian provide a reasonable basis for our
opinion.

PricewaterhouseCoopers LLP

San Francisco, California
October 18, 2006

Annual Report | 25

Templeton Emerging Markets Fund

TAX DESIGNATION (UNAUDITED)

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $50,309,168 as a long
term capital gain dividend for the fiscal year ended August 31, 2006.

Under Section 871(k)(2)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $8,925,710 as a short term capital gain dividend for
purpose of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal
year ended August 31, 2006.

Under Section 854(b)(2)of the Code, the Fund designates 0.12% of the ordinary
income dividends as income qualifying for the dividends received deduction for
the fiscal year ended August 31, 2006.

Under Section 854(b)(2) of the Code, the Fund designates the maximum amount
allowable but no less than $5,755,661 as qualified dividends for purposes of the
maximum rate under Section 1(h)(11) of the Code for the fiscal year ended August
31, 2006. In January 2007, shareholders will receive Form 1099-DIV which will
include their share of qualified dividends distributed during the calendar year
2006. Shareholders are advised to check with their tax advisors for information
on the treatment of these amounts on their individual income tax returns.

Under Section 871(k)(1)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $220,163 as interest related dividend for purposes of
the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended
August 31, 2006.

At August 31, 2006, more than 50% of the Templeton Emerging Markets Fund's total
assets were invested in securities of foreign issuers. In most instances,
foreign taxes were withheld from dividends paid to the Fund on these
investments. As shown in the table below, the Fund designates to shareholders
the foreign source income and foreign taxes paid, pursuant to Section 853 of the
Code. This designation will allow shareholders of record on November 3, 2006, to
treat their proportionate share of foreign taxes paid by the Fund as having been
paid directly by them. The shareholder shall consider these amounts as foreign
taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis, by country, of foreign tax
paid, foreign source income, and foreign qualified dividends as designated by
the Fund, to shareholders of record.

RECORD DATE: 11/03/2006

26 | Annual Report

Templeton Emerging Markets Fund

TAX DESIGNATION (UNAUDITED) (CONTINUED)

--------------------------------------------------------------------------------
FOREIGN TAX FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS
COUNTRY PER SHARE PER SHARE PER SHARE
--------------------------------------------------------------------------------
Czech Republic ........... $0.0001 $0.0007 $0.0007
Finland .................. 0.0002 0.0010 0.0010
Hong Kong ................ 0.0000 0.0197 0.0000
Hungary .................. 0.0000 0.0059 0.0059
India .................... 0.0014 0.0101 0.0099
Indonesia ................ 0.0007 0.0033 0.0033
Malaysia ................. 0.0000 0.0103 0.0000
Mexico ................... 0.0000 0.0192 0.0190
Panama ................... 0.0000 0.0039 0.0039
Philippines .............. 0.0007 0.0020 0.0020
Poland ................... 0.0012 0.0057 0.0057
Portugal ................. 0.0002 0.0010 0.0010
Russia ................... 0.0027 0.0664 0.0646
Singapore ................ 0.0000 0.0089 0.0000
South Africa ............. 0.0000 0.0569 0.0138
South Korea .............. 0.0104 0.0464 0.0445
Sweden ................... 0.0000 0.0045 0.0000
Taiwan ................... 0.0277 0.0958 0.0000
Thailand ................. 0.0022 0.0159 0.0159
Turkey ................... 0.0010 0.0231 0.0231
United Kingdom ........... 0.0000 0.0089 0.0000
------------------------------------------
TOTAL .................... $0.0529 $0.4964 $0.2374
==========================================

Foreign Tax Paid per Share (Column 1) is the amount per share available to you,
as a tax credit (assuming you held your shares in the Fund for a minimum of 16
days during the 31-day period beginning 15 days before the ex-dividend date of
the Fund's distribution to which the foreign taxes relate), or, as a tax
deduction.

Foreign Source Income per Share (Column 2) is the amount per share of income
dividends paid to you that is attributable to foreign securities held by the
Fund, plus any foreign taxes withheld on these dividends. The amounts reported
include foreign source qualified dividends that have not been adjusted for the
rate differential applicable to such dividend income. 1

Foreign Qualified Dividends per Share (Column 3) is the amount per share of
foreign source qualified dividends the Fund paid to you, plus any foreign taxes
withheld on these dividends. These amounts represent the portion of the Foreign
Source Income reported to you in column 2 that were derived from qualified
foreign securities held by the Fund. 1

In January 2007, shareholders will receive Form 1099-DIV which will include
their share of taxes paid and foreign source income distributed during the
calendar year 2006. The Foreign Source Income reported on Form 1099-DIV has not
been adjusted for the rate differential on foreign source qualified dividend
income. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their 2006 individual income
tax returns.

1 Qualified dividends are taxed at a maximum rate of 15% (5% for those in
the 10% and 15% income tax brackets). In determining the amount of foreign
tax credit that may be applied against the U.S. tax liability of
individuals receiving foreign source qualified dividends, adjustments may
be required to the foreign tax credit limitation calculation to reflect
the rate differential applicable to such dividend income. The rules
however permit certain individuals to elect not to apply the rate
differential adjustments for capital gains and/or dividends for any
taxable year. Please consult your tax advisor and the instructions to Form
1116 for more information.

Annual Report | 27

Templeton Emerging Markets Fund

ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 24, 2006

The Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Fort Lauderdale, Florida, on February 24, 2006. The
purpose of the meeting was to elect three Trustees of the Fund. At the meeting,
the following persons were elected by the shareholders to serve as Trustees of
the Fund: Gordon S. Macklin, David W. Niemiec and Larry D. Thompson.* No other
business was transacted at the meeting.

The results of the voting at the Annual Meeting are as follows:

The election of three (3) Trustees:

--------------------------------------------------------------------------------------------------------
% OF % OF
SHARES SHARES
% OF PRESENT % OF PRESENT
OUTSTANDING AND OUTSTANDING AND
TERM EXPIRING 2009 FOR SHARES VOTING WITHHELD SHARES VOTING
--------------------------------------------------------------------------------------------------------

Gordon S. Macklin ....... 15,093,816 84.73% 98.32% 258,823 1.45% 1.68%
David W. Niemiec ........ 14,148,927 85.04% 98.68% 203,172 1.14% 1.32%
Larry D. Thompson ....... 15,134,240 84.96% 98.58% 217,859 1.22% 1.42%

* Harris J. Ashton, Harmon E. Burns, Frank J. Crothers, S. Joseph Fortunato,
Edith E. Holiday, Charles B. Johnson, Frank A. Olson and Constantine D.
Tseretopoulos are Trustees of the Fund who are currently serving and whose
terms of office continued after the Annual Meeting of Shareholders

28 | Annual Report

Templeton Emerging Markets Fund

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

The Fund offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") with
the following features:

Shareholders must affirmatively elect to participate in the Plan; share
dividends and capital gains distributions will be reinvested automatically;
Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938, will
provide additional Plan information upon request.

Whenever the Fund declares dividends in either cash or shares 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 shares 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 cash payments to Mellon
Bank, N.A. (the "Plan Administrator"), 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
Bank, N.A." and sent to Mellon Investor Services, P.O. Box 382009, Pittsburgh,
PA 15250-8009, Attention: Templeton Emerging Markets Fund. The Plan
Administrator shall apply such payments (less a $5.00 service charge and less a
pro rata share of trading fees) to purchases of Fund shares on 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.

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. The Plan
Administrator's fee for a sale of shares through the Plan are $15.00 per
transaction plus a $0.12 per share trading fee.

A participant may withdraw from the Plan without penalty at any time by written
notice to the Plan Administrator sent to Mellon Investor Services, P.O. Box
3338, South Hackensack, NJ 07606-1938. Upon withdrawal, the participant will
receive, without charge, share certificates issued in the participant's name for
all full shares held by the Plan Administrator; or, if the participant wishes,
the Plan Administrator will sell the shares and send the proceeds to the
participant, less a service charge of $15.00 and less trading fees of $0.12 per
share.

Annual Report | 29

Templeton Emerging Markets Fund

TRANSFER AGENT

Mellon Investor Services LLC
480 Washington Boulevard
Jersey City, NJ 07310
1-800-416-5585
WWW.MELLONINVESTOR.COM

SHAREHOLDER INFORMATION

Shares of Templeton Emerging Markets Fund are traded on the New York Stock
Exchange under the symbol "EMF." 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. Registered shareholders can access their Fund account on-line
with Investor ServiceDirect(R). For information go to Mellon Investor Services'
web site at https://vault.melloninvestor.com/isd and follow the instructions.

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 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
Fund, 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030.

30 | Annual Report

Templeton Emerging Markets Fund

BOARD MEMBERS AND OFFICERS

The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Fund, principal occupations
during the past five years and number of U.S. registered portfolios overseen in
the Franklin Templeton Investments fund complex are shown below. Generally, each
board member serves a three-year term that continues until that person's
successor is appointed and qualified.

INDEPENDENT BOARD MEMBERS

------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------------------

HARRIS J. ASHTON (1932) Trustee Since 1993 143 Director, Bar-S Foods (meat packing
500 East Broward Blvd. company).
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
------------------------------------------------------------------------------------------------------------------------------------
FRANK J. CROTHERS (1944) Trustee Since 1999 19 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Island Corporate Holdings Ltd.; Director and Vice Chairman, Caribbean Utilities Co. Ltd.; Director, Provo Power Company
Ltd.; director of various other business and nonprofit organizations; and FORMERLY, Chairman, Atlantic Equipment & Power Ltd.
(1977-2003).
------------------------------------------------------------------------------------------------------------------------------------
***S. JOSEPH FORTUNATO (1932) Trustee Since 1993 144 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch (until 2002) (Consultant (2003)).
------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since 1996 139 Director, Hess Corporation (formerly,
500 East Broward Blvd. Amerada Hess Corporation) (explo-
Suite 2100 ration and refining of oil and gas),
Fort Lauderdale, FL 33394-3091 H.J. Heinz Company (processed foods
and allied products), RTI International
Metals, Inc. (manufacture and distri-
bution of titanium), Canadian National
Railway (railroad) and White
Mountains Insurance Group, Ltd.
(holding company).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 31

***GORDON S. MACKLIN (1928) Trustee Since 1993 143 Director, MedImmune, Inc. (biotech-
500 East Broward Blvd. nology) and Overstock.com (Internet
Suite 2100 services); and FORMERLY, Director, MCI
Fort Lauderdale, FL 33394-3091 Communication Corporation (subse-
quently known as MCI WorldCom,
Inc. and WorldCom, Inc.) (communi-
cations services) (1988-2002), White
Mountains Insurance Group, Ltd.
(holding company) (1987-2004),
Spacehab, Inc. (aerospace services)
(1994-2003) and Martek Biosciences
Corporation (1998-2006).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; Senior Business Advisor, Martek Biosciences Corporation (research and development); and FORMERLY,
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company) (2001-2004); Chairman, White River Corporation (financial
services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National Association of
Securities Dealers, Inc. (1970-1987).
------------------------------------------------------------------------------------------------------------------------------------
DAVID W. NIEMIEC (1949) Trustee Since 2005 19 Director, Emeritus Corporation (assist-
500 East Broward Blvd. ed living) and OSI Pharmaceuticals,
Suite 2100 Inc. (pharmaceutical products).
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Advisor, Saratoga Partners (private equity fund); Director, various private companies; and formerly, Managing Director, Saratoga
Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc.
(investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).
------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since 2003 102 Director, Hess Corporation (formerly,
500 East Broward Blvd. Amerada Hess Corporation) (explo-
Suite 2100 ration and refining of oil and gas) and
Fort Lauderdale, FL 33394-3091 Sentient Jet (private jet service); and
FORMERLY, Director, Becton Dickinson
and Company (medical technology),
Cooper Industries, Inc. (electrical
products and tools and hardware),
Health Net, Inc. (formerly, Foundation
Health) (integrated managed care),
The Hertz Corporation, Pacific
Southwest Airlines, The RCA
Corporation, Unicom (formerly,
Commonwealth Edison), UAL
Corporation (airlines) and White
Mountains Insurance Group, Ltd.
(holding company).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
------------------------------------------------------------------------------------------------------------------------------------

32 | Annual Report

LARRY D. THOMPSON (1945) Trustee Since 2005 19 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (1997-2001); Senior Fellow of The Brookings
Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S.
Department of Justice (2001-2003)
------------------------------------------------------------------------------------------------------------------------------------
CONSTANTINE D. TSERETOPOULOS Trustee Since 1999 19 None
(1954)
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Physician, Lyford Cay Hospital (1987-present); director of various nonprofit organizations; and FORMERLY, Cardiology Fellow,
University of Maryland (1985-1987) and Internal Medicine Resident, Greater Baltimore Medical Center (1982-1985).
------------------------------------------------------------------------------------------------------------------------------------
****ROBERT E. WADE (1946) Trustee Since 29 Director, El Oro and Exploration
500 East Broward Blvd. March 2006 Co., p.l.c. (investments) and
Suite 2100 ARC Wireless Solutions, Inc.
Fort Lauderdale, FL 33394-3091 (wireless components and network
products).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Practicing attorney.
------------------------------------------------------------------------------------------------------------------------------------

INTERESTED BOARD MEMBERS AND OFFICERS

**HARMON E. BURNS (1945) Vice President Since 1996 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin
Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (1933) Trustee, Trustee and 143 None
One Franklin Parkway Chairman of Chairman of the
San Mateo, CA 94403-1906 the Board and Board since 1995
Vice President and Vice President
since 1993

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 33

JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice
Vice President President - AML
- AML Compliance since
Compliance February 2006

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of 47 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
------------------------------------------------------------------------------------------------------------------------------------
JEFFREY A. EVERETT (1964) Vice President Since 2001 Not Applicable Not Applicable
PO Box N-7759
Lyford Cay, Nassau, Bahamas

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Templeton Global Advisors Limited; and officer of 14 of the investment companies in Franklin Templeton
Investments.
------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief Executive
Fort Lauderdale, FL 33394-3091 Officer-
Finance and
Administration

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 47 of the investment
companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; and officer of 47 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, LLC,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin
Investment Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the investment
companies in Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant
and Senior Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange
Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts)
(until 1979).
------------------------------------------------------------------------------------------------------------------------------------

34 | Annual Report

RUPERT H. JOHNSON, JR. (1940) Vice President Since 1996 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and
officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of
the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
JOHN R. KAY (1940) Vice President Since 1994 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Templeton Worldwide, Inc.; Assistant Vice President, Franklin Templeton Distributors, Inc.; Senior Vice President,
Franklin Templeton Services, LLC; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 32 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Vice President and Controller, Keystone Group, Inc.
------------------------------------------------------------------------------------------------------------------------------------
CHRISTOPHER J. MOLUMPHY (1962) President and Since 2002 Not Applicable Not Applicable
One Franklin Parkway Chief Executive
San Mateo, CA 94403-1906 Officer -
Investment
Management

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President, Franklin Advisers, Inc.; and officer of six of the investment companies in Franklin Templeton
Investments.
------------------------------------------------------------------------------------------------------------------------------------
ROBERT C. ROSSELOT (1960) Secretary Since 2004 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale,FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Assistant Secretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International
of the South; and officer of 14 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
GREGORY R. SEWARD (1956) Treasurer Since 2004 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 16 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Vice President, JPMorgan Chase (2000-2004) and American General Financial Group (1991-2000).
------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 35

CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of 47 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Partner, Shearman & Sterling, LLP (2004-2005); and General Counsel, Investment Company
Institute (ICI) (1997-2004).
------------------------------------------------------------------------------------------------------------------------------------
GALEN VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 47 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and
1991-2004).
------------------------------------------------------------------------------------------------------------------------------------

* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment manager or
affiliated investment managers.

** Charles B. Johnson is considered to be an interested person of the Trust
under the federal securities laws due to his position as officer and
director and major shareholder of Franklin Resources, Inc. (Resources),
which is the parent company of the Trust's investment manager. Harmon E.
Burns is considered to be an interested person of the Trust under the
federal securities laws due to his position as officer and director of
Resources.

*** Subsequent to August 31, 2006, Mr. Fortunato and Mr. Macklin each ceased
to be a trustee of the Fund.

**** During the reporting period, Mr. Wade became a trustee.

Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers. Prior to
August 31, 2006, Mr. Fred R. Millsaps ceased to be a trustee of the Fund.

THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE U.S. SECURITIES AND
EXCHANGE COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT
COMMITTEE INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL
EXPERT WITHIN THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES
HAS DETERMINED THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT
COMMITTEE AND HAS DESIGNATED EACH OF FRANK A. OLSON AND DAVID W. NIEMIEC AS AN
AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD BELIEVES THAT MESSRS. OLSON AND
NIEMIEC QUALIFY AS SUCH AN EXPERT IN VIEW OF THEIR EXTENSIVE BUSINESS BACKGROUND
AND EXPERIENCE. MR. OLSON HAS SERVED AS A MEMBER OF THE FUND AUDIT COMMITTEE
SINCE 2003. HE CURRENTLY SERVES AS CHAIRMAN EMERITUS OF THE HERTZ CORPORATION
AND WAS FORMERLY ITS CHAIRMAN OF THE BOARD FROM 1980 TO 2000 AND ITS CHIEF
EXECUTIVE OFFICER FROM 1977 TO 1999. MR. OLSON IS ALSO A DIRECTOR AND AUDIT
COMMITTEE MEMBER OF HESS CORPORATION (FORMERLY AMERADA HESS CORPORATION), AND A
FORMER DIRECTOR AND AUDIT COMMITTEE MEMBER OF WHITE MOUNTAINS INSURANCE GROUP,
LTD. AND FORMER CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF UAL
CORPORATION. MR. NIEMIEC HAS SERVED AS A MEMBER OF THE FUND AUDIT COMMITTEE
SINCE 2005, CURRENTLY SERVES AS AN ADVISOR TO SARATOGA PARTNERS AND WAS FORMERLY
ITS MANAGING DIRECTOR FROM 1998 TO 2001. MR. NIEMIEC IS A DIRECTOR OF EMERITUS
CORPORATION AND OSI PHARMACEUTICALS, INC. AND VARIOUS PRIVATE COMPANIES, AND WAS
FORMERLY MANAGING DIRECTOR OF SBC WARBURG DILLON READ FROM 1997 TO 1998, AND WAS
VICE CHAIRMAN FROM 1991 TO 1997 AND CHIEF FINANCIAL OFFICER FROM 1982 TO 1997 OF
DILLON, READ & CO. INC. AS A RESULT OF SUCH BACKGROUND AND EXPERIENCE, THE BOARD
OF TRUSTEES BELIEVES THAT MR. OLSON AND MR. NIEMIEC HAVE EACH ACQUIRED AN
UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND FINANCIAL
STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION WITH THE
ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND EVALUATING
FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY OF
ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MESSRS. OLSON AND NIEMIEC ARE
INDEPENDENT TRUSTEES AS THAT TERM IS DEFINED UNDER THE APPLICABLE U.S.
SECURITIES AND EXCHANGE COMMISSION RULES AND RELEASES OR THE LISTING STANDARDS
APPLICABLE TO THE FUND.

36 | Annual Report

Templeton Emerging Markets Fund

SHAREHOLDER INFORMATION

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT

At a meeting held May 11, 2006, the Board of Trustees ("Board"), including a
majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for the Fund. In reaching this decision, the
Board took into account information furnished throughout the year at regular
Board meetings, as well as information prepared specifically in connection with
the annual renewal review process. Information furnished and discussed
throughout the year included investment performance reports on the Fund,
information on its share price discount to net asset value, and other related
financial information, as well as periodic reports on legal, compliance,
pricing, brokerage commissions and execution and other services provided by the
Investment Manager ("Manager") and its affiliates. Information furnished
specifically in connection with the renewal process included a report prepared
by Lipper, Inc. ("Lipper"), an independent organization, as well as a Fund
profitability analysis report prepared by management. The Lipper reports
compared the Fund's investment performance and expenses with those of other
funds deemed comparable to the Fund as selected by Lipper. The Fund
profitability analysis report discussed the profitability to Franklin Templeton
Investments from its overall U.S. fund operations, as well as on an individual
fund-by-fund basis. Included with such profitability analysis report was
information on a fund-by-fund basis listing portfolio managers and other
accounts they manage, as well as information on management fees charged by the
Manager and its affiliates including management's explanation of differences
where relevant, and a three-year expense analysis with an explanation for any
increase in expense ratios. Additional information accompanying such report was
a memorandum prepared by management describing enhancements to the services
provided to the Fund by the Franklin Templeton Investments organization, as well
as a memorandum relating to economies of scale.

In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment management agreement for the Fund, the Board,
including a majority of independent Trustees, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment management agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses some primary factors relevant to the Board's decision.

NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
the Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the code of ethics adopted
throughout the Franklin Templeton fund complex, the adherence to fair value
pricing procedures established by the Board, and the accuracy of net asset value
calculations. Favorable consideration was given to management's efforts and
expenditures in establishing back-up systems and recovery procedures to function
in the event of a natural disaster, it being noted by the Board that such
systems and

Annual Report | 37

Templeton Emerging Markets Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

procedures had functioned smoothly during the hurricanes and blackout
experienced last year in Florida. Among other factors taken into account by the
Board were the Manager's best execution trading policies, including a favorable
report by an independent portfolio trading analytical firm. Consideration was
also given to the experience of the Fund's portfolio management team, the number
of accounts managed and general method of compensation. In this latter respect,
the Board noted that a primary factor in management's determination of the level
of a portfolio manager's bonus compensation was the relative investment
performance of the funds he or she managed so as to be aligned with the
interests of Fund shareholders.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
performance was given to the Lipper reports furnished for the agreement
renewals. The Lipper report for the Fund showed its investment performance for
the one-year period ended February 28, 2006, as well as the previous ten years
ended that date in comparison to a Lipper performance universe consisting of the
Fund and all retail and institutional emerging market funds as selected by
Lipper. Such report considers total return on a fund net asset value basis
without regard to market discounts or premiums in order to accurately reflect
investment performance. The Lipper report showed the Fund's total return for the
one-year period to be in the second-lowest quintile of such performance
universe, and on an annualized basis to be in the second-lowest quintile of such
universe for the previous three-year period as well, but to be in the
second-highest and highest quintiles of such universe for the previous five- and
ten-year periods, respectively. The Board was satisfied with such performance
noting that the Fund's total return for the one-year period exceeded 32% and for
the annualized three-year period exceeded 40% as shown in the Lipper report.

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with a Lipper
selected expense group consisting of the Fund and the two other closed-end
emerging markets funds. Prior to making such comparison, the Board relied upon a
survey showing that the scope of management advisory services covered under the
Fund's investment management agreement was similar to those provided by fund
managers to other fund groups that would be used as a basis of comparison in the
Lipper reports. In reviewing comparative costs, emphasis was given to each
Fund's management fee in comparison with the effective management fee that would
have been charged by the other two funds within the Lipper expense group
assuming they were the same size as the Fund, as well as the actual total
expenses of the Fund in comparison with those of the other two funds. The Lipper
effective management fee analysis considers administrative fees to be part of
management fees and the results of such expense comparison showed the Fund's
effective management fee rate to be the highest of such expense group, but
within seven basis points of the group median, while its total actual expenses
were at the median of such group. The Board

38 | Annual Report

Templeton Emerging Markets Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

found the Fund's management fee and expenses in comparison to those of the
expense group to be acceptable in view of the Fund's investment performance and
factors relating to its operation, such as the background and experience of its
portfolio managers and research staff and their physical presence and coverage
in the geographical areas in which the Fund invests.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. Fund
business, as well as its profits in providing management and other services to
each of the individual funds. The Board also considered the extent to which the
Manager and its affiliates might derive ancillary benefits from fund operations,
as well as potential benefits resulting from allocation of fund brokerage and
the use of "soft" commission dollars to pay for research. Specific attention was
given to the methodology followed in allocating costs to the Fund, it being
recognized that allocation methodologies are inherently subjective and various
allocation methodologies may each be reasonable while producing different
results. In this respect, the Board noted that the cost allocation methodology
was consistent with that followed in profitability report presentations made in
prior years and that the Fund's independent registered public accounting firm
had been engaged by the Manager to perform certain procedures on a biennial
basis, specified and approved by the Manager and the Fund's Board solely for
their purposes and use in reference to the profitability analysis. Included in
the analysis were the revenue and related costs involved in providing services
to the Fund, as well as the Fund's relative contribution to the profitability of
the Manager's parent. In reviewing and discussing such analysis, management
discussed with the Board its belief that costs incurred in establishing the
infrastructure necessary to the type of fund operations conducted by the Manager
and its affiliates may not be fully reflected in the expenses allocated to the
Fund in determining its profitability, as well as the fact that the level of
profits, to a certain extent, reflected operational cost savings and
efficiencies initiated by management. In addition, the Board considered a
third-party study comparing the profitability of the Manager's parent on an
overall basis as compared to other publicly held managers broken down to show
profitability from management operations exclusive of distribution expenses, as
well as profitability including distribution expenses. Based upon its
consideration of all these factors, the Board determined that the level of
profits realized by the Manager and its affiliates from providing services to
the Fund was not excessive in view of the nature, quality and extent of services
provided.

ECONOMIES OF SCALE. The Board also considered whether the Manager realizes
economies of scale as the Fund grows larger and the extent to which any such
benefit is shared with the Fund and its shareholders. The Board believed that a
Manager's ability to realize economies of scale and the sharing of such benefit
is a more relevant consideration in the case of an open-end fund whose size
increases as a result of the continuous sale of its shares. A closed-end
investment company such as the Fund does not continuously offer shares and
growth following its initial public offering will primarily result from market
appreciation, which benefits its shareholders. While believing economies of
scale to be less of a factor in the context of a closed-end

Annual Report | 39

Templeton Emerging Markets Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

fund, the Board believes at some point an increase in size may lead to economies
of scale that should be shared with the Fund and its shareholders and intends to
monitor future growth of the Fund accordingly. The Board also noted that it had
previously added a breakpoint to the Fund's investment management fee at the $1
billion level.

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/527-7678 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.

QUARTERLY STATEMENT OF INVESTMENTS

The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.

CERTIFICATIONS

The Fund's Chief Executive Officer - Finance and Administration is required by
the New York Stock Exchange's Listing Standards to file annually with the
Exchange a certification that he is not aware of any violation by the Fund of
the Exchange's Corporate Governance Standards applicable to the Fund. The Fund
has filed such certification.

In addition, the Fund's Chief Executive Officer - Finance and Administration and
Chief Financial Officer and Chief Accounting Officer are required by the rules
of the U.S. Securities and Exchange Commission to provide certain certifications
with respect to the Fund's Form N-CSR and Form N-CSRS (which include the Fund's
annual and semiannual reports to shareholders) that are filed semiannually with
the Commission. The Fund has filed such certifications with its Form N-CSRS for
the six months ended February 28, 2006. Additionally, the Fund expects to file,
on or about October 29, 2006, such certifications with its Form N-CSR for the
year ended August 31, 2006.

40 | Annual Report

Literature Request

LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL

Mutual European Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL

Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH

Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1

VALUE

Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund

BLEND

Franklin Balanced Fund
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund

SECTOR

Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Global Real Estate Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund

ASSET ALLOCATION

Franklin Templeton Corefolio
Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund

TARGET FUNDS

Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

RETIREMENT TARGET FUNDS

Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund

INCOME

Franklin Adjustable U.S. Government
Securities Fund 4
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund 4
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 4
Templeton Global Bond Fund
Templeton Income Fund

TAX-FREE INCOME 5

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 6

LIMITED-TERM FUNDS

California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS

California Intermediate-Term
Tax-Free Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
New York Intermediate-Term
Tax-Free Income Fund

STATE-SPECIFIC

Alabama Michigan 6
Arizona Minnesota 6
California 7 Missouri
Colorado New Jersey
Connecticut New York 7
Florida 7 North Carolina
Georgia Ohio 6
Kentucky Oregon
Louisiana Pennsylvania
Maryland Tennessee
Massachusetts 6 Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products
Trust 8

1. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.

2. The fund is only open to existing shareholders and select retirement
plans.

3. The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.

4. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

5. For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.

6. Portfolio of insured municipal securities.

7. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).

8. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

07/06

Not part of the annual report

[LOGO](R) 100 Fountain Parkway
FRANKLIN TEMPLETON P.O. Box 33030
INVESTMENTS St. Petersburg, FL 33733-8030

ANNUAL REPORT

TEMPLETON EMERGING MARKETS FUND

INVESTMENT MANAGER

Templeton Asset Management Ltd.

TRANSFER AGENT

Mellon Investor Services LLC
P.O. Box 3315
South Hackensack, NJ 07606-1915
Toll free number: 1-800/416-5585
Hearing Impaired phone number: 1-800/231-5469
Foreign Shareholders phone number: 201/680-6578
www.melloninvestor.com/isd

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
identified by the presence of a regular beeping tone.

TLEMF A2006 10/06

ITEM 2. CODE OF ETHICS.

(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.

(d) N/A

(f) Pursuant to Item 12(a)(1), the registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.

(2) The audit committee financial experts are David W. Niemiec and Frank A.
Olson, they are "independent" as defined under the relevant Securities and
Exchange Commission Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $33,461 for the fiscal year ended August 31, 2006 and $24,978 for the
fiscal year ended August 31, 2005.

(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.

There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial
statements.

(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.

The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $3,961 for the fiscal year ended
August 31, 2006 and $4,955 for the fiscal year ended August 31, 2005. The
services for which these fees were paid included tax compliance and advise.

(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $204 for the fiscal year ended August 31, 2006
and $0 for the fiscal year ended August 31, 2005. The services for which these
fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process.

The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $175,657 for the fiscal year ended August
31, 2006 and $340 for the fiscal year ended August 31, 2005. The services for
which these fees were paid included review of materials provided to the fund
Board in connection with the investment management contract renewal process.

(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:

(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to
the registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.

(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(f) No disclosures are required by this Item 4(f).

(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $179,822 for the fiscal year ended August 31, 2006 and $5,295
for the fiscal year ended August 31, 2005.

(h) The registrant's audit committee of the board has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Members of the Audit Committee are: Frank J. Crothers, David W. Niemiec, Frank
A. Olson and Constantine D. Tseretopoulos.

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

The board of trustees of the Fund has delegated the authority to vote proxies
related to the portfolio securities held by the Fund to the Fund's manager
Templeton Asset Management Limited in accordance with the Proxy Voting Policies
and Procedures (Policies) adopted by the manager.

The manager has delegated its administrative duties with respect to the voting
of proxies to the Proxy Group within Franklin Templeton Companies, LLC (Proxy
Group), an affiliate and wholly owned subsidiary of Franklin Resources, Inc. All
proxies received by the Proxy Group will be voted based upon the manager's
instructions and/or policies.

To assist it in analyzing proxies, the manager subscribes to Institutional
Shareholder Services (ISS), an unaffiliated third party corporate governance
research service that provides in-depth analyses of shareholder meeting agendas,
vote recommendations, recordkeeping and vote disclosure services. In addition,
the manager subscribes to Glass, Lewis & Co., LLC (Glass Lewis), an unaffiliated
third party analytical research firm, to receive analyses and vote
recommendations on the shareholder meetings of publicly held U.S. companies.
Although ISS' and/or Glass Lewis' analyses are thoroughly reviewed and
considered in making a final voting decision, the manager does not consider
recommendations from ISS, Glass Lewis or any other third party to be
determinative of the manager's ultimate decision. The manager votes proxies
solely in the interests of the Fund and its shareholders. As a matter of policy,
the officers, directors/trustees and employees of the Fund, the manager and the
Proxy Group will not be influenced by outside sources whose interests conflict
with the interests of the Fund and its shareholders. Efforts are made to resolve
all conflicts in the interests of the manager's clients. In situations where the
manager perceives a material conflict of interest, the manager may: disclose the
conflict to the Fund's board of trustees; defer to the voting recommendation of
the Fund's board of trustees, ISS, Glass Lewis or those of another independent
third party provider of proxy services; or take such other action in good faith
(in consultation with counsel) which would protect the interests of the Fund and
its shareholders.

The recommendation of management on any issue is a factor which the manager
considers in determining how proxies should be voted, but is not determinative
of the manager's ultimate decision. As a matter of practice, the votes with
respect to most issues are cast in accordance with the position of the company's
management. Each issue, however, is considered on its own merits, and the
manager will not support the position of the company's management in any
situation where it deems that the ratification of management's position would
adversely affect the investment merits of owning that company's shares.

MANAGER'S PROXY VOTING POLICIES AND PRINCIPLES The manager has adopted general
proxy voting guidelines, which are summarized below. These guidelines are not an
exhaustive list of all the issues that may arise and the manager cannot
anticipate all future situations. In all cases, each proxy will be considered
based on the relevant facts and circumstances.

BOARD OF DIRECTORS. The manager supports an independent board of directors, and
prefers that key committees such as audit, nominating, and compensation
committees be comprised of independent directors. The manager will generally
vote against management efforts to classify a board and will generally support
proposals to declassify the board of directors. The manager may withhold votes
from directors who have attended less than 75% of meetings without a valid
reason. While generally in favor of separating Chairman and CEO positions, the
manager will review this issue as well as proposals to restore or provide for
cumulative voting on a case-by-case basis, taking into consideration factors
such as the company's corporate governance guidelines or provisions and
performance.

RATIFICATION OF AUDITORS OF PORTFOLIO COMPANIES. In light of several high
profile accounting scandals, the manager will closely scrutinize the role and
performance of auditors. On a case-by-case basis, the manager will examine
proposals relating to non-audit relationships and non-audit fees. The manager
will also consider, on a case-by-case basis, proposals to rotate auditors, and
will vote against the ratification of auditors when there is clear and
compelling evidence of accounting irregularities or negligence.

MANAGEMENT AND DIRECTOR COMPENSATION. A company's equity-based compensation plan
should be in alignment with its shareholders' long-term interests. The manager
evaluates plans on a case-by-case basis by considering several factors to
determine whether the plan is fair and reasonable, including the ISS
quantitative model utilized to assess such plans and/or the Glass Lewis
evaluation of the plans. The manager will generally oppose plans that have the
potential to be excessively dilutive, and will almost always oppose plans that
are structured to allow the repricing of underwater options, or plans that have
an automatic share replenishment "evergreen" feature. The manager will generally
support employee stock option plans in which the purchase price is at least 85%
of fair market value, and when potential dilution is 10% or less.

Severance compensation arrangements will be reviewed on a case-by-case basis,
although the manager will generally oppose "golden parachutes" that are
considered to be excessive. The manager will normally support proposals that
require a percentage of directors' compensation to be in the form of common
stock, as it aligns their interests with those of shareholders. The manager will
review on a case-by-case basis any shareholder proposals to adopt policies on
expensing stock option plans.

ANTI-TAKEOVER MECHANISMS AND RELATED ISSUES. The manager generally opposes
anti-takeover measures since they tend to reduce shareholder rights. On
occasion, the manager may vote with management when the research analyst has
concluded that the proposal is not onerous and would not harm the Fund or its
shareholders' interests. The manager generally supports proposals that require
shareholder rights' plans ("poison pills") to be subject to a shareholder vote
and will closely evaluate such plans on a case-by-case basis to determine
whether or not they warrant support. The manager will generally vote against any
proposal to issue stock that has unequal or subordinate voting rights. The
manager generally opposes any supermajority voting requirements as well as the
payment of "greenmail." The manager generally supports "fair price" provisions
and confidential voting.

CHANGES TO CAPITAL STRUCTURE. The manager will review, on a case-by-case basis,
proposals by companies to increase authorized shares and the purpose for the
increase and proposals seeking preemptive rights. The manager will generally not
vote in favor of dual-class capital structures to increase the number of
authorized shares where that class of stock would have superior voting rights.
The manager will generally vote in favor of the issuance of preferred stock in
cases where the company specifies the voting, dividend, conversion and other
rights of such stock and the terms of the preferred stock issuance are deemed
reasonable.

MERGERS AND CORPORATE RESTRUCTURING. Mergers and acquisitions will be subject to
careful review by the research analyst to determine whether each will be
beneficial to shareholders. The manager will analyze various economic and
strategic factors in making the final decision on a merger or acquisition.
Corporate restructuring and reincorporation proposals are also subject to a
thorough examination on a case-by-case basis.

SOCIAL AND CORPORATE POLICY ISSUES. The manager will generally give management
discretion with regard to social, environmental and ethical issues, although the
manager may vote in favor of those that are believed to have significant
economic benefits or implications for the Fund and its shareholders.

GLOBAL CORPORATE GOVERNANCE. Many of the tenets discussed above are applied to
proxy voting decisions for international companies. However, the manager must be
more flexible in these instances and must be mindful of the varied market
practices of each region.

The manager will attempt to process every proxy it receives for all domestic and
foreign issues. However, there may be situations in which the manager cannot
process proxies, for example, where a meeting notice was received too late, or
sell orders preclude the ability to vote. If a security is on loan, the manager
may determine that it is not in the best interests of the Fund to recall the
security for voting purposes. Also, the manager may abstain from voting under
certain circumstances or vote against items such as "Other Business" when the
manager is not given adequate information from the company.

Shareholders may view the complete Policies online at franklintempleton.com.
Alternatively, shareholders may request copies of the Policies free of charge by
calling the Proxy Group collect at 1-954-527-76788 or by sending a written
request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite
1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Copies of the Fund's
proxy voting records are available online at franklintempleton.com and posted
on the SEC website at WWW.SEC.GOV and reflect the twelve-month period beginning
July 1, 2005, and ending June 30, 2006.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

(a)(1) As of October 27, 2006, the portfolio managers of the Fund are as
follows:

MARK MOBIUS, PH.D., MANAGING DIRECTOR OF TEMPLETON ASSET MANAGEMENT, LTD.

Dr. Mobius has been a manager of the Fund since inception. He has primary
responsibility for the investments of the Fund. He has final responsibility
over all aspects of the Fund's investment portfolio, including but not limited
to, purchases and sales of individual securities, portfolio risk assessment,
and the management of daily cash balances in accordance with anticipated
management requirements. The degree to which he may perform these functions,
and the nature of these functions, may change from time to time. He joined
Franklin Templeton Investments in 1987.

DENNIS LIM, DIRECTOR OF EMPLETON ASSET MANAGEMENT, LTD.

Based in Singapore, Mr. Lim has been a manager of the Fund since 2000, providing
research and advice on the purchases and sales of individual securities, and
portfolio risk assessment. He joined Franklin Templeton Investments in 1990.

TOM WU, DIRECTOR OF EMPLETON ASSET MANAGEMENT, LTD.

Based in Hong Kong, Mr. Wu has been a manager of the Fund since inception,
providing research and advice on the purchases and sales of individual
securities, and portfolio risk assessment. He joined Franklin Templeton
Investments in 1987.

(a)(2) This section reflects information about the portfolio managers as of the
fiscal year ended August 31, 2006.

The following table shows the number of other accounts managed by each portfolio
manager and the total assets in the accounts managed within each category:

---------------------------------------------------------------------------------------------------------
ASSETS ASSETS OF
NUMBER OF OTHER OTHER POOLED ASSETS OF
OF OTHER REGISTERED NUMBER OF INVESTMENTS OTHER
REGISTERED INVESTMENT OTHER POOLED VEHICLES NUMBER OF ACCOUNTS
INVESTMENT COMPANIES INVESTMENT MANAGED OTHERS MANAGED
COMPANIES MANAGED VEHICLES (X $1 ACCOUNTS (X $1
NAME MANAGED (x $1 MILLION) MANAGED/1 MILLION)/1 MANAGED/1 MILLION)/1
---------------------------------------------------------------------------------------------------------

Mark Mobius 7 11,587.0 22 14,950.0 5 1,731.7
---------------------------------------------------------------------------------------------------------
Dennis Lim 4 9,751.9 4 1,311.8 2 689.6
---------------------------------------------------------------------------------------------------------
Tom Wu 4 9,751.9 4 2,408.2 2 689.6
---------------------------------------------------------------------------------------------------------

1. The various pooled investment vehicles and accounts listed are managed by a
team of investment professionals. Accordingly, the individual managers listed
would not be solely responsible for managing such listed amounts.

Portfolio managers that provide investment services to the Fund may also provide
services to a variety of other investment products, including other funds,
institutional accounts and private accounts. The advisory fees for some of such
other products and accounts may be different than that charged to the Fund and
may include performance-based compensation. This may result in fees that are
higher (or lower) than the advisory fees paid by the Fund. As a matter of
policy, each fund or account is managed solely for the benefit of the beneficial
owners thereof. As discussed below, the separation of the trading execution
function from the portfolio management function and the application of
objectively based trade allocation procedures helps to mitigate potential
conflicts of interest that may arise as a result of the portfolio managers
managing accounts with different advisory fees.

CONFLICTS. The management of multiple funds, including the Fund, and accounts
may also give rise to potential conflicts of interest if the funds and other
accounts have different objectives, benchmarks, time horizons, and fees as the
portfolio manager must allocate his or her time and investment ideas across
multiple funds and accounts. The manager seeks to manage such competing
interests for the time and attention of portfolio managers by having portfolio
manager's focus on a particular investment discipline. Most other accounts
managed by a portfolio manager are managed using the same investment strategies
that are used in connection with the management of the Fund. Accordingly,
portfolio holdings, position sizes, and industry and sector exposures tend to be
similar across similar portfolios, which may minimize the potential for
conflicts of interest. As noted above, the separate management of the trade
execution and valuation functions from the portfolio management process also
helps to reduce potential conflicts of interest. However, securities selected
for funds or accounts other than the Fund may outperform the securities selected
for the Fund. Moreover, if a portfolio manager identifies a limited investment
opportunity that may be suitable for more than one fund or other account, the
Fund may not be able to take full advantage of that opportunity due to an
allocation of that opportunity across all eligible funds and other accounts. The
manager seeks to manage such potential conflicts by using procedures intended to
provide a fair allocation of buy and sell opportunities among funds and other
accounts.

The structure of a portfolio manager's compensation may give rise to potential
conflicts of interest. A portfolio manager's base pay and bonus tend to increase
with additional and more complex responsibilities that include increased assets
under management. As such, there may be an indirect relationship between a
portfolio manager's marketing or sales efforts and his or her bonus.

Finally, the management of personal accounts by a portfolio manager may give
rise to potential conflicts of interest. While the funds and the manager have
adopted a code of ethics, which they believe contains provisions reasonably
necessary to prevent a wide range of prohibited activities by portfolio managers
and others with respect to their personal trading activities, there can be no
assurance that the code of ethics addresses all individual conduct that could
result in conflicts of interest.

The manager and the Fund have adopted certain compliance procedures that are
designed to address these, and other, types of conflicts. However, there is no
guarantee that such procedures will detect each and every situation where a
conflict arises.

COMPENSATION. The manager seeks to maintain a compensation program that is
competitively positioned to attract, retain and motivate top-quality investment
professionals. Portfolio managers receive a base salary, a cash incentive bonus
opportunity, an equity compensation opportunity, and a benefits package.
Portfolio manager compensation is reviewed annually and the level of
compensation is based on individual performance, the salary range for a
portfolio manager's level of responsibility and Franklin Templeton guidelines.
Portfolio managers are provided no financial incentive to favor one fund or
account over another. Each portfolio manager's compensation consists of the
following three elements:

BASE SALARY Each portfolio manager is paid a base salary.

ANNUAL BONUS Annual bonuses are structured to align the interests of
the portfolio manager with those of the Fund's shareholders. Each
portfolio manager is eligible to receive an annual bonus. Bonuses
generally are split between cash (50% to 65%) and restricted shares of
a Franklin Templeton fund which vest over a three-year period (17.5% to
25%) and other mutual fund shares (17.5% to 25%). The deferred
equity-based compensation is intended to build a vested interest of the
portfolio manager in the financial performance of both Franklin
Resources and mutual funds advised by the manager. The bonus plan is
intended to provide a competitive level of annual bonus compensation
that is tied to the portfolio manager achieving consistently strong
investment performance, which aligns the financial incentives of the
portfolio manager and Fund shareholders. The Chief Investment Officer
of the manager and/or other officers of the manager, with
responsibility for the Fund, have discretion in the granting of annual
bonuses to portfolio managers in accordance with Franklin Templeton
guidelines. The following factors are generally used in determining
bonuses under the plan:

o INVESTMENT PERFORMANCE. Primary consideration is given to
the historic investment performance over the 1, 3 and 5 preceding
years of all accounts managed by the portfolio manager. The
pre-tax performance of each fund managed is measured relative to a
relevant peer group and/or applicable benchmark as appropriate.

o NON-INVESTMENT PERFORMANCE. The more qualitative contributions
of a portfolio manager to the manager's business and the
investment management team, including business knowledge,
contribution to team efforts, mentoring of junior staff, and
contribution to the marketing of the Fund, are evaluated in
determining the amount of any bonus award.

o RESEARCH. Where the portfolio management team also has research
responsibilities, each portfolio manager is evaluated on
the number and performance of recommendations over time.

o RESPONSIBILITIES. The characteristics and complexity of funds
managed by the portfolio manager are factored in the manager's
appraisal.

ADDITIONAL LONG-TERM EQUITY-BASED COMPENSATION Portfolio managers may
also be awarded restricted shares or units of one or more mutual funds,
and options to purchase common shares of a Franklin Templeton fund.
Awards of such deferred equity-based compensation typically vest over
time, so as to create incentives to retain key talent.

Portfolio managers also participate in benefit plans and programs available
generally to all employees of the manager.

OWNERSHIP OF FUND SHARES. The manager has a policy of encouraging portfolio
managers to invest in the funds they manage. Exceptions arise when, for example,
a fund is closed to new investors or when tax considerations or jurisdictional
constraints cause such an investment to be inappropriate for the portfolio
manager. The following is the dollar range of Fund shares beneficially owned by
each portfolio manager as of August 31, 2006 (such amounts may change from
time to time):

--------------------------------------------------------
Dollar Range of Fund Shares
Portfolio Manager Beneficially Owned
--------------------------------------------------------
Mark Mobius None
--------------------------------------------------------
Dennis Lim None
--------------------------------------------------------
Tom Wu None
--------------------------------------------------------

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASES. N/A

ITEM 10. SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS.

There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees that would require disclosure
herein.

ITEM 11. 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 Shareholder Report on Form
N-CSR, 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 Shareholder Report on Form N-CSR.

ITEM 12. EXHIBITS

(a)(1) Code of Ethics

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

(b)Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial 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 FUND

By /s/JIMMY D. GAMBILL
Chief Executive Officer -
Finance and Administration
Date October 26, 2006

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/JIMMY D. GAMBILL
Chief Executive Officer -
Finance and Administration
Date October 26, 2006

By /s/GALEN G. VETTER
Chief Financial Officer
Date October 26, 2006