Edgar Filing: TEMPLETON EMERGING MARKETS INCOME FUND INC

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 811-07866
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TEMPLETON EMERGING MARKETS INCOME 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)

MURRAY L. SIMPSON, 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: 8/31/04
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ITEM 1. REPORTS TO STOCKHOLDERS

AUGUST 31, 2004
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ANNUAL REPORT | INCOME
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TEMPLETON EMERGING MARKETS
INCOME FUND

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[LOGO OMITTED]
FRANKLIN [R] TEMPLETON [R]
INVESTMENTS
Franklin o TEMPLETON o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE

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
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.

MUTUAL SERIES. Founded in 1949, Mutual Series is dedicated to a unique style of
value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.

TRUE DIVERSIFICATION

Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios 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 account services that have 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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Not part of the annual report

Contents

ANNUAL REPORT

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

Performance Summary ................... 8

Important Notice to
Shareholders .......................... 9

Financial Highlights and
Statement of Investments .............. 10

Financial Statements .................. 14

Notes to Financial Statements ......... 17

Report of Independent
Registered Public
Accounting Firm ....................... 24

Tax Designation ....................... 25

Annual Meeting of
Shareholders .......................... 27

Dividend Reinvestment and
Cash Purchase Plan .................... 30

Board Members and Officers ............ 33

Shareholder Information ............... 39

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Annual Report

Templeton Emerging Markets
Income Fund

YOUR FUND'S GOAL AND MAIN INVESTMENTS: Templeton Emerging Markets Income Fund
seeks high, current income, with a secondary goal of capital appreciation, by
investing, under normal market conditions, at least 80% of its total net assets
in income-producing securities of sovereign or sovereign-related entities and
private sector companies in emerging market countries.

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GEOGRAPHIC DISTRIBUTION*
Based on Total Net Assets as of 8/31/04

[EDGAR REPRESENTATION OF DATA POINTS USE IN PRINTED GRAPHIC AS FOLLOWS:]
[GRAPHIC OMITTED]

Latin America ..................................... 43.1%
Europe ............................................ 26.4%
Asia .............................................. 25.4%
Middle East & Africa .............................. 2.0%
Short-Term Investments & Other Net Assets ......... 3.1%

*The Geographic Distribution is a snapshot of the Fund on 8/31/04 and may not
reflect ongoing repositioning or reinvestment of cash in the Fund.
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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 11.

Annual Report | 1

Dear Shareholder:

This annual report for Templeton Emerging Markets Income Fund covers the fiscal
year ended August 31, 2004.

PERFORMANCE OVERVIEW

For the year under review, Templeton Emerging Markets Income Fund delivered
cumulative total returns of 11.48% based on market price and 14.12% based on net
asset value. In comparison, the J.P. Morgan (JPM) Emerging Markets Bond Index
Global (EMBIG) posted a 13.57% cumulative total return in U.S. dollar terms for
the same period. 1 You can find the Fund's long-term performance data in the
Performance Summary on page 8.

ECONOMIC AND MARKET OVERVIEW

Over the past fiscal year, the global economic recovery solidified,
characterized by improved growth in the U.S. and Asia and export-led growth in
much of Europe. Despite a large rise in oil and other commodity prices,
underlying global inflation remained subdued during most of the period, although
an upturn was observed in some regions later in the reporting period. As a
result, global bond markets generated positive returns in local currency terms
while currency gains against the U.S. dollar further extended bond market
returns for the period.

Amid this more positive global growth environment, some inflationary pressures
finally began to emerge in the U.S., in part as high global commodity prices
passed through to domestic prices. Core consumer prices (excluding food and
energy) rose from historically low levels of 1.3% at the beginning of the fiscal
year to a more typical level of 1.7% by period-end. Additionally, the labor
market began to recover, although the pace of hiring was more tentative than in
prior economic cycles. Even with some slowing in economic activity during the
second quarter of 2004, productivity rates remained favorable. The Federal
Reserve Board (Fed) began to remove some economic stimulus, raising the federal
funds target rate half a percentage point (0.50%) to 1.50% by period-end as some
of the deflationary risks present in the economy since the last rate reduction
appeared to diminish.

Consistent with a pick-up in economic growth with U.S. trade partners and a
relatively weaker U.S. dollar, export growth rebounded. However, import growth
surged as well, driving the U.S. trade deficit to another record monthly deficit
level

1. Source: J.P. Morgan. The JPM EMBIG tracks total returns for U.S.
dollar-denominated debt instruments issued by emerging market sovereign and
quasi-sovereign entities: Brady bonds, loans and Eurobonds. The index is
unmanaged and includes reinvested interest. One cannot invest directly in an
index, nor is an index representative of the Fund's portfolio.

2 | Annual Report

of nearly $50 billion in July. 2 The trade deficit helped drive the current
account deficit to a record level totaling over $500 billion, adding further
negative pressure on the U.S. balance of payments position. 3 The magnitude of
the current account deficit also remained quite large relative to the country's
economy at nearly 5.0% of gross domestic product (GDP). 4 To help finance the
deficit within the balance of payments, the U.S. continued to rely on
foreigners' purchases of U.S. bonds. The U.S. dollar continued to depreciate
over the past year, declining 8.34% against the U.S.'s major trading partners. 5

Economic growth in the 12-country euro zone strengthened throughout the course
of the Fund's fiscal year, reaching 2.0% during the second quarter compared with
one year earlier. 6 Growth was driven by the export sector rather than domestic
demand, limiting underlying inflation pressures. The relatively stronger euro
compared with prior periods has helped allow the European Central Bank (ECB) to
keep rates historically low, in both nominal and real terms. The rebounding
global economy also maintained healthy export growth, despite the relatively
stronger euro. In contrast to the U.S., the euro zone current account remained
in surplus at 0.7% of GDP. 7 Growth among surrounding European economies,
including Scandinavia and central Europe, remained higher and more broad-based,
reaching rates of 4.1% in Norway, 3.4% in Sweden, 4.0% in Hungary and 6.1% in
Poland in second quarter 2004 compared with a year earlier. 8

Asia's economic growth remained robust, despite some indication of an engineered
slowdown in China marginally impacting growth of regional trade partners. During
the second quarter of 2004, economic growth was 9.6% in China, 6.3% in Thailand,
5.5% in South Korea and 4.3% in Indonesia compared with the same quarter in
2003. 9 Japan was the exception, with growth rates falling from 6.4% in the
first quarter compared with a year earlier to 1.3% in the second quarter
compared with a year earlier as a domestic demand recovery failed to take hold.
10 While growth was more broad-based in some Asian countries than others, one
common characteristic was external sector strength. In South Korea for example,
export growth continued to accelerate, exceeding 29% by period-end. 11
Similarly, Thai exports rose nearly 25% and Japan's over 14%.12 These positive
conditions contributed to the region's rising international reserves, and
despite showing signs

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WHAT IS BALANCE OF PAYMENTS?
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Balance of payments is a record of all of a country's exports and imports of
goods and services, borrowing and lending with the rest of the world during a
particular time period. It helps a country evaluate its competitive strengths
and weaknesses and forecast the strength of its currency.
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WHAT IS A CURRENT ACCOUNT?
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A current account is that part of the balance of payments where all of one
country's international transactions in goods and services are recorded.
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2. Source: U.S. Census Bureau.
3. For the past four quarters ended 6/30/04.
4. Source: Bureau of Economic Analysis. For the one year ended 6/30/04.
5. Source: Federal Reserve Board.
6. Source: Eurostat.
7. Source: European Central Bank. As of second quarter 2004.
8. Sources: Statistics Norway, Statistics Sweden, Hungarian Statistical Office
and Eurostat (Poland).
9. Sources: National Bureau of Statistics (China), National Economic and Social
Development (Thailand), Bank of Korea and BPS (Indonesia).
10. Source: Economic and Social Research Institute, Japan.
11. Source: Korea International Trade Association.
12. Sources: Bank of Thailand; Ministry of Finance, Japan.

Annual Report | 3

of slowing, remained impressive. In Japan, foreign currency reserves increased
$273 billion for the 12-month period, partially as a result of massive direct
currency intervention during the first quarter of the year. Japan purchased
foreign currency worth approximately $140 billion, slowing currency appreciation
relative to the U.S. dollar. Overall, Japan's foreign currency reserves stood at
$808 billion on August 31, 2004, up 51% from a year earlier. 13 Other Asian
countries continued to experience similar reserve accumulation, although on a
smaller scale. South Korea's reserves rose 25%, Thailand's 14% and Indonesia's
4% for the year under review. 14 With the exceptions of Japan, South Korea and
Indonesia, there was some evidence of mounting inflationary pressure throughout
the region, given strong aggregate growth and little changes in monetary or
exchange rate policy.

INVESTMENT STRATEGY

We invest selectively in bonds around the world to generate income for the Fund,
seeking opportunities while monitoring changes in interest rates, currency rates
and credit risk.

MANAGER'S DISCUSSION

Sovereign interest rate yields declined from 482 basis points (100 basis points
equal 1.00%) greater than the U.S. Treasury market at the beginning of the
reporting period to 425 basis points by period-end. 15 Regionally, Latin
American sovereign debt market returns rose 15.84%, eastern Europe 11.48%, and
Asia 8.47% in U.S. dollars. 1 The JPM Euro EMBIG rose 11.41% in euro terms and
23.89% in U.S. dollar terms. 16 The global demand recovery significantly
benefited emerging market economies, particularly commodity exporters,
supporting growth and in some countries, balance of payment and fiscal
conditions. As a result, underlying economic and credit fundamentals remained
stronger than in previous economic tightening cycles. Although producing solid
returns over the 12-month period, the Fund shortened duration and reallocated
away from U.S. dollar-denominated sovereign credit given a greater sensitivity
to rising U.S. rates. Consequently, the Fund added to local currency market
exposure given our assessment of prospects for yield and currency appreciation.

LATIN AMERICA

The Fund's Latin American holdings were composed primarily of U.S.
dollar-denominated emerging market debt. Despite some volatility surrounding the
Fed's

13. Source: Ministry of Finance, Japan.
14. Sources: Bank of Korea, Bank of Thailand and Bank of Indonesia.
15. Source: J.P. Morgan, "EMBI Monitor," 8/31/04.
16. Source: J.P. Morgan. The JPM Euro EMBIG tracks total returns for
euro-denominated, straight fixed coupon instruments issued by emerging market
sovereign and quasi-sovereign entities.

4 | Annual Report

TOP 10 COUNTRIES
8/31/04

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% OF TOTAL
NET ASSETS
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Brazil 19.1%
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Russia 11.2%
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Indonesia 10.2%
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Venezuela 9.7%
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Mexico 5.8%
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Ukraine 5.0%
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South Korea 4.9%
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Philippines 4.7%
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Poland 4.6%
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Thailand 4.2%
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first interest rate increase, Latin America was the best performing region
within the JPM EMBIG. The Fund benefited from its exposure to Brazil and
Venezuela, whose bond markets rose 21.45% and 28.71% in U.S. dollars during the
Fund's fiscal year. 1

In Brazil, aggressive interest rate easing earlier in the period provided growth
stimulus and lower cost of interest on domestic government debt, strengthening
credit fundamentals. Venezuela, one of the larger global oil exporters, and
Venezuelan bond markets benefited from high oil prices. The nation's credit also
benefited from increased stability following the conclusion of a lengthy
referendum process that left the current presidential administration in place.
Additionally, independent credit rating agency Standard & Poor's upgraded
Venezuela's long-term sovereign credit from B- to B. 17

The Fund established a new position in Argentina during the Fund's fiscal year
given improved economic conditions. In particular, growth recovered, rising to a
7.0% annual rate by the second quarter of 2004 while the country maintained a
trade surplus. 18 Furthermore, Argentina demonstrated the ability to meet
primary surplus targets. While much of Argentina's sovereign debt remained in
default status, the Fund's holding paid interest. The Argentine subcomponent of
the JPM EMBIG trailed other Latin American debt markets, rising only 1.03% in
U.S. dollars during the period. 1

EASTERN AND CENTRAL EUROPE

Eastern Europe benefited from rising global demand, particularly commodity
demand from Asia. In Russia, high oil prices provided an opportunity for the
government to establish a stabilization fund. Russian reserves rose 42% during
the Fund's fiscal year to over $88 billion, while economic growth remained
strong at 7.4% in June 2004 compared with a year earlier. 19 Similarly in
Ukraine, economic growth benefited from the rise in global demand for
commodities, driving Ukraine's export and economic growth rates of over 13%. 20
This strong external environment supported underlying credit conditions, and
Russia and Ukraine received credit upgrades during the period. Russia's
sovereign debt was upgraded by independent credit rating agency Moody's
Investors Service to investment grade status, from Ba2 to Baa3, and one notch
below investment grade by Standard & Poor's, from BB to BB+. 21 Similarly,
Ukraine was upgraded by Moody's from B2 to B1, and by Standard & Poor's from B
to B+. 21 While generating positive returns,

17. This does not indicate Standard & Poor's rating of the Fund.
18. Source: Ministerio de Economia y Obros y Servicios Publicos, Argentina.
19. Sources: Reuters, "Russia C. Bank Gold/Forex Reserves Rise to $88.8 BLN on
August 27," 9/1/04; Federal Service of State Statistics.
20. Sources: The Economist Intelligence Unit, "Ukraine: Country Outlook,"
9/8/04; Reuters, "Ukraine's January-July GDP Growth Quickens to 13.5%," 8/16/04.
21. These do not indicate ratings of the Fund.

Annual Report | 5

Russia's and Ukraine's bond markets underperformed the JPM EMBIG during the
period, returning 8.16% and 8.19% in U.S. dollars, and detracted from Fund
performance relative to the Index. 1 The Fund took profits in Russia and added
to local currency denominated positions in central Europe.

Central European economies, including Hungary and Poland, which joined the
European Union (EU) in May 2004, also benefited from strong growth rates and
export performance. The Hungarian forint rose 14.58%, bringing cumulative bond
market returns for the 12-month period to 17.38% in U.S. dollars, as measured by
the JPM Government Bond Index (GBI) Broad, benefiting relative Fund
performance. 22 In addition to the Hungarian forint's appreciation, the Polish
zloty rose 8.64%. Higher growth rates, prospects for rising interest rates and
attractive yields relative to the euro zone provided support to these
currencies. The Fund added a new position in Poland later in the reporting
period as its government bonds lagged other European markets. The zloty began to
benefit only later in the period from progress on fiscal reform, entry into the
EU and solid macroeconomic performance.

ASIA

The Fund also benefited from its overweighted position in South Korea, whose
bond market rose 10.36% in U.S. dollar terms, as measured by the HSBC Asian
Local Bond Index (ALBI), following 2.29% appreciation of the South Korean won
versus the U.S. dollar. 23 The Fund continued to increase its allocation to
non-Japan Asia during the period given strong regional growth and trade
patterns, and the potential for currency appreciation. Exposure to other Asian
currencies weighed on relative Fund performance. Strong economic expansion
driven by export growth and private investment prompted the Thai central bank to
raise interest rates 25 basis points to 1.50%. 24 Local bond markets reacted,
declining 3.29% during the Fund's fiscal year while the Thai baht depreciated
1.34%. 23 To help manage this risk, we positioned the Fund in short duration
assets in Thailand.

Indonesia, on the other hand, reduced interest rates 150 basis points to 7.00%,
following an inflation decline and improved macroeconomic stability, driving
local bond market returns of 10.34% during the Fund's fiscal year. 23,25
Following stable economic and fiscal policy, Indonesia concluded its program
with the International Monetary Fund successfully and early. Strong local market
returns in Indonesia provided a cushion to currency volatility as the market
reacted to uncertainty

22. Source: J.P. Morgan. The JPM GBI Broad is a combination of the GBI Global
and selected other countries, launched in 1997 to increase country and return
diversification in international fixed income markets.
23. Source: HSBC. The HSBC ALBI tracks total return performance of a bond
portfolio, which consists of local-currency denominated, high quality and liquid
bonds in Asia ex-Japan. Local bond market returns are from country sub-indexes
of the HSBC ALBI.
24. Source: Bank of Thailand.
25. Source: Bank of Indonesia.

6 | Annual Report

surrounding Indonesia's first round of presidential elections. Although creating
some currency volatility, Indonesia's presidential elections were the nation's
first fully democratic elections. The Indonesian rupiah declined 9.49% against
the U.S. dollar, bringing bond market returns in U.S. dollar terms to -0.08% for
the fiscal year. 1

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

Sincerely,

[PHOTO OMITTED]
/S/SIGNATURE

Alex C. Calvo

[PHOTO OMITTED]
/S/SIGNATURE

Michael Hasenstab, Ph.D.

Portfolio Managers
Templeton Emerging Markets Income Fund

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF AUGUST 31, 2004, 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 | 7

Performance Summary as of 8/31/04

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 the Fund's dividend income, capital gain
distributions, if any, and any unrealized gains or losses. All total returns
include reinvested distributions according to the terms specified in the Fund's
dividend reinvestment and cash purchase plan and do not reflect any sales
charges paid at inception or brokerage commissions paid on secondary market
purchases. The performance table does not reflect any taxes due on Fund
dividends, capital gain distributions, if any, or realized gains on the sale of
Fund shares.

PRICE AND DISTRIBUTION INFORMATION
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CHANGE 8/31/04 8/31/03
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Net Asset Value (NAV) +$0.70 $13.23 $12.53
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Market Price (NYSE) +$0.39 $12.82 $12.43
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DISTRIBUTIONS (9/1/03-8/31/04)
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Dividend Income $1.00
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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 14.12% 97.74% 208.81%
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Based on change in market price 11.48% 119.04% 196.94%
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Average Annual Total Return 1
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Based on change in NAV 14.12% 14.60% 11.93%
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Based on change in market price 11.48% 16.97% 11.50%
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PERFORMANCE DATA SHOWN REPRESENTS 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.

FOR MORE CURRENT PERFORMANCE, CALL FRANKLIN TEMPLETON INVESTMENTS AT
1-800/342-5236.

ENDNOTES

SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING, INCLUDING CURRENCY
VOLATILITY, ECONOMIC INSTABILITY AND SOCIAL 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. ALSO, AS A NON-DIVERSIFIED
INVESTMENT COMPANY, THE FUND MAY INVEST IN A RELATIVELY SMALL NUMBER OF ISSUERS
AND, AS A RESULT, BE SUBJECT TO GREATER RISK OF LOSS WITH RESPECT TO ITS
PORTFOLIO SECURITIES.

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

8 | 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 | 9

Templeton Emerging Markets Income Fund

FINANCIAL HIGHLIGHTS

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YEAR ENDED AUGUST 31,
2004 2003 2002 2001 2000
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)

Net asset value, beginning of year ................................ $12.53 $11.11 $11.48 $12.43 $11.36
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Income from investment operations:

Net investment income a .......................................... .84 .93 1.16d 1.26 1.27

Net realized and unrealized gains (losses) ....................... .86 1.61 (.27)d (.93) 1.03
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Total from investment operations .................................. 1.70 2.54 .89 .33 2.30
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Capital share repurchases ......................................... -- -- -- .01 .01
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Distributions from net investment income .......................... (1.00) (1.12) (1.26) (1.29) (1.24)
---------------------------------------------------------

Net asset value, end of year ...................................... $13.23 $12.53 $11.11 $11.48 $12.43
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Market value, end of year b ....................................... $12.82 $12.43 $11.00 $10.93 $10.688
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Total return (based on market value per share) c .................. 11.48% 24.44% 12.38% 15.53% 21.62%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year (000's) ................................... $624,112 $591,029 $522,210 $539,423 $587,397

Ratios to average net assets:

Expenses ......................................................... 1.24% 1.17% 1.15% 1.18% 1.19%

Net investment income ............................................ 6.46% 7.78% 9.99%d 10.77% 10.62%

Portfolio turnover rate ........................................... 68.25% 142.71% 95.94% 138.63% 53.40%

a Based on average daily shares outstanding.
b Based on the last sale on the New York Stock Exchange.
c Total return is not annualized.
d Effective September 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing all
premium and discount on fixed-income securities, as required. The effect of
this change was as follows:
Net Investment income per share ................................. $(.03)
Net realized and unrealized gains/(losses) per share ............ .03
Ratio of net investment income to average net assets ............ (.29)%
Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.

10 | See notes to financial statements. | Annual Report

Templeton Emerging Markets Income Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2004

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PRINCIPAL AMOUNT A VALUE
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LONG TERM INVESTMENTS 96.9%
ARGENTINA 2.5%

Republic of Argentina, FRN, 1.980%, 8/03/12 .............................. $ 21,680,000 $ 15,501,200
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BRAZIL 19.1%
b Globo Communicacoes Participacoes Ltd., 144A, 10.625%, 12/05/08 .......... 5,000,000 3,375,000
Republic of Brazil,
DCB, L, FRN, 2.125%, 4/15/12 ........................................... 48,786,065 44,212,372
RG, FRN, 2.125%, 4/15/12 ............................................... 9,360,035 8,482,410
8.00%, 4/15/14 ......................................................... 64,766,223 63,511,378
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119,581,160
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BULGARIA 2.6%
Republic of Bulgaria,
7.50%, 1/15/13 ......................................................... 4,200,000 EUR 6,074,595
FRN, 2.75%, 7/28/11 .................................................... 10,537,800 10,521,361
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16,595,956
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COLOMBIA 3.7%
Republic of Colombia,
10.50%, 7/09/10 ........................................................ 2,758,000 3,206,175
10.75%, 1/15/13 ........................................................ 12,450,000 14,465,655
11.75%, 2/25/20 ........................................................ 4,255,000 5,227,906
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22,899,736
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HUNGARY 3.0%
Government of Hungary,
9.25%, 5/12/05 ......................................................... 345,900,000 HUF 1,667,876
8.50%, 10/12/05 ........................................................ 2,983,400,000 HUF 14,168,412
7.00%, 4/12/06 ......................................................... 120,000,000 HUF 552,912
6.25%, 6/12/08 ......................................................... 500,000,000 HUF 2,155,551
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18,544,751
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INDONESIA 10.2%
Indonesia Recapital Bond,
14.00%, 6/15/09 ........................................................ 146,160,000,000 IDR 17,441,755
13.15%, 3/15/10 ........................................................ 183,420,000,000 IDR 21,178,902
14.275%, 12/15/13 ...................................................... 18,550,000,000 IDR 2,261,431
FRN, 14.25%, 6/15/13 ................................................... 88,950,000,000 IDR 10,832,028
b P T Indah Kiat Finance Mauritius Ltd., 10.00%, 7/01/07 ................... 16,375,000 8,596,875
b PT Inti Indorayon Utama TBK, 9.125, 10/15/49 ............................. 6,830,000 102,450
b Tjiwi Kimia International Finance Co. BV, senior note, 13.25%, 8/01/01 ... 8,000,000 3,160,000
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63,573,441
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MALAYSIA .4%
Petronas Capital Ltd., 144A, 7.00%, 5/22/12, ............................. 2,000,000 2,269,780
-------------

Annual Report | 11

Templeton Emerging Markets Income Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)

Pemex Project Funding Master Trust, 144A, 2.82%, 6/15/10 ................. $ 11,910,000 $ 12,172,020
United Mexican States,
10.375%, 2/17/09 ....................................................... 6,660,000 8,268,823
5.375%, 6/10/13 ........................................................ 5,500,000 EUR 6,791,214
144A, 7.50%, 3/08/10 ................................................... 2,910,000 EUR 4,046,853
Reg S, 7.50%, 3/08/10 .................................................. 3,600,000 EUR 5,006,417
-------------
36,285,327
-------------

PANAMA .9%
Republic of Panama, 10.75%, 5/15/20 ...................................... 4,600,000 5,497,000
-------------

PERU 1.4%
Republic of Peru, 9.875%, 2/06/15 ........................................ 7,640,000 8,652,300
-------------

PHILIPPINES 4.7%
Philippine Long Distance Telephone Co.,
9.25%, 6/30/06 ......................................................... 620,000 671,150
MTN, Series E, 9.25%, 6/30/06 .......................................... 5,080,000 5,499,100
Republic of Philippines,
9.00%, 2/15/13 ......................................................... 7,000,000 7,262,850
Reg S, 9.125%, 2/22/10 ................................................. 8,380,000 EUR 10,740,768
Reg S, 8.75%, 10/07/16 ................................................. 5,450,000 5,327,375
-------------
29,501,243
-------------

POLAND 4.6%
Republic of Poland,
8.50%, 11/12/06 ........................................................ 35,600,000 PLN 9,849,059
8.50%, 5/12/07 ......................................................... 46,500,000 PLN 12,950,672
6.00%, 5/24/09 ......................................................... 23,000,000 PLN 5,882,490
-------------
28,682,221
-------------

RUSSIA 11.2%
Federation of Russia,
Reg S, 11.00%, 7/24/18 ................................................. 44,725,000 58,764,625
Reg S, 12.75%, 6/24/28 ................................................. 7,356,000 11,175,603
-------------
69,940,228
-------------

SOUTH AFRICA 2.0%
Republic of South Africa, 5.25%, 5/16/13 ................................. 10,490,000 EUR 12,805,898
-------------

SOUTH KOREA 4.9%
Korea Treasury Bond,
4.50%, 9/03/06 ......................................................... 1,000,000,000 KRW 903,485
6.90%, 1/16/07 ......................................................... 10,000,000,000 KRW 9,412,727
4.75%, 3/12/08 ......................................................... 21,865,000,000 KRW 20,085,313
-------------
30,401,525
-------------

12 | Annual Report

Templeton Emerging Markets Income Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)

Government of Thailand, 4.80%, 4/09/10 ................................... 212,000,000 THB $ 5,331,151
Kingdom of Thailand,
8.50%, 10/14/05 ........................................................ 670,000,000 THB 17,252,733
8.00%, 12/08/06 ........................................................ 31,000,000 THB 836,084
4.125%, 2/12/08 ........................................................ 98,000,000 THB 2,441,706
8.50%, 12/08/08 ........................................................ 11,000,000 THB 317,235
-------------
26,178,909
-------------

UKRAINE 5.0%
Republic of Ukraine,
144A, FRN, 5.361%, 8/05/09 ............................................. 11,100,000 11,419,125
144A, 7.65%, 6/11/13 ................................................... 18,148,000 18,405,792
FRN, 5.361%, 8/05/09 ................................................... 1,200,000 1,233,420
-------------
31,058,337
-------------

VENEZUELA 9.7%
Republic of Venezuela,
10.75%, 9/19/13 ........................................................ 6,175,000 6,746,188
9.25%, 9/15/27 ......................................................... 57,409,000 53,677,415
-------------
60,423,603
-------------

VIETNAM 1.0%
Republic of Vietnam, 4.00%, 3/12/16 ...................................... 6,592,000 6,103,500
-------------
TOTAL LONG TERM INVESTMENTS (COST $584,222,358) .......................... 604,496,115
-------------

---------------
SHARES
---------------
SHORT TERM INVESTMENTS (COST $3,165,162) .5%
MONEY FUND
c Franklin Institutional Fiduciary Trust Money Market Portfolio ............ 3,165,162 3,165,162
-------------

TOTAL INVESTMENTS (COST $587,387,520) 97.4% .............................. 607,661,277
OTHER ASSETS, LESS LIABILITIES 2.6% ...................................... 16,450,454
-------------

NET ASSETS 100.0% ........................................................ $624,111,731
-------------

a The principal amount is stated in U.S. dollars unless otherwise indicated.
b See Note 7 regarding defaulted securities.
c See Note 9 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.

Annual Report | See notes to financial statements. | 13

Templeton Emerging Markets Income Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
August 31, 2004

Assets:
Investments in securities:

Cost - Unaffiliated issuers .............................................. $584,222,358
Cost - Sweep money fund (Note 9) ......................................... 3,165,162
-------------
Value - Unaffiliated issuers ............................................. 604,496,115
Value - Sweep money fund (Note 9) ........................................ 3,165,162
Foreign currency, at value (cost $3,190,823) .............................. 3,156,458
Receivables:
Investment securities sold ............................................... 3,036,263
Dividends and interest ................................................... 13,892,114
-------------
Total assets ......................................................... 627,746,112
-------------
Liabilities:
Payables:
Investment securities purchased .......................................... 2,631,574
Affiliates ............................................................... 520,316
Other liabilities ......................................................... 482,491
-------------
Total liabilities .................................................... 3,634,381
-------------
Net assets, at value ............................................... $624,111,731
-------------
Net assets consist of:
Distributions in excess of net investment income .......................... $ (5,497,616)
Net unrealized appreciation (depreciation) ................................ 20,183,835
Accumulated net realized gain (loss) ...................................... (51,302,046)
Capital shares ............................................................ 660,727,558
-------------
Net assets, at value ....................................................... $624,111,731
-------------
Shares outstanding ......................................................... 47,165,033
-------------
Net asset value per share .................................................. $13.23
-------------

14 | See notes to financial statements. | Annual Report

Templeton Emerging Markets Income Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended August 31, 2004

Investment income:
(net of foreign taxes of $624,710)

Dividends - Sweep money fund (Note 9) ............................................... $ 62,570
Interest ............................................................................ 47,211,066
------------
Total investment income ........................................................ 47,273,636
------------
Expenses:
Management fees (Note 3) ............................................................ 5,198,350
Administrative fees (Note 3 ) ....................................................... 922,305
Transfer agent fees ................................................................. 894,300
Custodian fees (Note 4) ............................................................. 303,653
Reports to shareholders ............................................................. 46,200
Registration and filing fees ........................................................ 57,800
Professional fees ................................................................... 108,900
Trustees' fees and expenses ......................................................... 45,900
Other ............................................................................... 30,500
------------
Total expenses ................................................................. 7,607,908
Expense reductions (Note 4) .................................................... (99)
------------
Net expenses ................................................................. 7,607,809
------------
Net investment income ...................................................... 39,665,827
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................................................ 40,815,866
Foreign currency transactions ...................................................... (144,707)
------------
Net realized gain (loss) ..................................................... 40,671,159
Net unrealized appreciation (depreciation) on:
Investments ........................................................................ (24,021)
Translation of assets and liabilities denominated in foreign currencies ............ (65,437)
------------
Net unrealized depreciation .................................................. (89,458)
------------
Net realized and unrealized gain (loss) .............................................. 40,581,701
------------
Net increase (decrease) in net assets resulting from operations ...................... $80,247,528
------------

Annual Report | See notes to financial statements. | 15

Templeton Emerging Markets Income Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the years ended August 31, 2004 and 2003

--------------------------------
2004 2003
--------------------------------
Increase (decrease) in net assets:
Operations:

Net investment income .............................................................. $ 39,665,827 $ 43,612,179
Net realized gain (loss) from investments and foreign currency transactions ........ 40,671,159 16,033,480
Net unrealized appreciation (depreciation) on investments and translation of assets
and liabilities denominated in foreign currencies ................................. (89,458) 59,941,032
--------------------------------
Net increase (decrease) in net assets resulting from operations ................ 80,247,528 119,586,691
Distributions to shareholders from net investment income ............................ (47,165,033) (52,719,576)
Capital share transactions (Note 2) ................................................. -- 1,952,424
--------------------------------
Net increase (decrease) in net assets .......................................... 33,082,495 68,819,539
Net assets:
Beginning of year ................................................................... 591,029,236 522,209,697
--------------------------------
End of year ......................................................................... $624,111,731 $591,029,236
--------------------------------
Distributions in excess of net investment income/undistributed net investment
income included in net assets:
End of year ......................................................................... $ (5,497,616) $ 800,391
--------------------------------

16 | See notes to financial statements. | Annual Report

Templeton Emerging Markets Income Fund

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Emerging Markets Income Fund (the Fund, formerly Templeton Emerging
Markets Income Fund, Inc.) is registered under the Investment Company Act of
1940 as a closed-end, non-diversified investment company. Effective June 1,
2004, the Fund was reorganized from a Maryland corporation into a Delaware
statutory trust. The Fund seeks high current income, with a secondary goal of
capital appreciation, by investing at least 80% of its net assets in a portfolio
of high-yielding debt obligations of sovereign or sovereign-related entities and
private sector companies in emerging market countries. The following summarizes
the Fund's significant accounting policies.

A. SECURITY VALUATION

Securities listed or traded on a recognized national exchange are valued at the
last reported sales price. Securities listed or traded on NASDAQ are valued at
their official closing price. Debt securities, other over-the-counter securities
and listed securities for which no sale is reported are valued within the range
of the latest quoted bid and asked prices by independent pricing services or
recognized dealers in such securities. Foreign securities are valued at the
close of trading of the foreign exchange or the NYSE, whichever is earlier. If
events occur that materially affect the values of securities after the prices or
foreign exchange rates are determined, but prior to 4:00 p.m. Eastern time or
the close of trading on the NYSE, whichever is earlier, or if market quotations
are deemed not readily available or reliable, the securities will be valued at
fair value. Investments in open-end mutual funds are valued at the closing net
asset value. All security valuation procedures are approved by the Board of
Trustees.

B. FOREIGN CURRENCY TRANSLATION

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date.

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

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

Annual Report | 17

Templeton Emerging Markets Income Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 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.

D. INCOME TAXES

No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income. Fund distributions to
shareholders are determined on a tax basis and may differ from net investment
income and realized gains for financial reporting purposes.

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.
Certain income from foreign securities is recorded as soon as information is
available. Interest income and estimated expenses are accrued daily. Discounts
and premiums on securities purchased are amortized over the lives of the
respective securities. Dividend income and distributions to shareholders are
recorded on the ex-dividend date.

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 against certain liability 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.

18 | Annual Report

Templeton Emerging Markets Income Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST

The Board of the Fund previously authorized management to implement 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. Through August 31, 2004, the
Fund had repurchased a total of 610,500 shares.

At August 31, 2004, there were an unlimited number of shares authorized (without
par value). During the year ended August 31, 2004, there were no share
transactions; all reinvested distributions were satisfied with previously issued
shares purchased in the open market. During the year ended August 31, 2003,
169,776 shares were issued for $1,952,424 from reinvested distributions.

3. TRANSACTIONS WITH AFFILIATES

Certain officers of the Fund are also officers or directors of the following
entities:

-------------------------------------------------------------------------------
ENTITY AFFILIATION
-------------------------------------------------------------------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager

A. MANAGEMENT FEE

The Fund pays an investment management fee to Advisers based on the Fund's
average daily net assets as follows:

-------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
-------------------------------------------------------------------------------
0.850% First $1 billion
0.830% Over $1 billion, up to and including $5 billion
0.810% Over $5 billion, up to and including $10 billion
0.790% Over $10 billion, up to and including $15 billion
0.770% Over $15 billion, up to and including $20 billion
0.750% Over $20 billion

Prior to June 1, 2004 the Fund paid an investment management fee to Advisers of
0.85% per year of the average daily net assets of the Fund.

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.

Annual Report | 19

Templeton Emerging Markets Income Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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, 2004, the
custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

At August 31, 2004, the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2009 ................................................. $ 4,205,169
2010 ................................................. 22,453,289
2011 ................................................. 24,484,014
-----------
$51,142,472
-----------

At August 31, 2004, the cost of investments, net unrealized appreciation
(depreciation), and undistributed ordinary income for income tax purposes were
as follows:

Cost of investments ...................................... $591,759,516
------------
Unrealized appreciation .................................. $ 43,669,125
Unrealized depreciation .................................. (27,767,364)
------------
Net unrealized appreciation (depreciation) ............... $ 15,901,761
------------
Distributable earnings - ordinary income ................. $ 3,553,693
------------

Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of accrual of interest on defaulted bonds,
foreign currency transactions, and bond discounts and premiums.

Net realized gains differ for financial statement and tax purposes primarily due
to differing treatments of wash sales, foreign currency transactions, and bond
discounts and premiums.

The tax character of distributions paid during the years ended August 31, 2004
and 2003, was as follows:

-----------------------------
2004 2003
-----------------------------
Distributions paid from:
Ordinary income ......................... $47,165,033 $52,719,576

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
year ended August 31, 2004 aggregated $422,621,858 and $402,271,016,
respectively.

20 | Annual Report

Templeton Emerging Markets Income Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. CREDIT RISK, DEFAULTED SECURITIES

The Fund has 22.75% of its portfolio invested in below investment grade and
comparable quality unrated high yield securities, which tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities because such securities are generally unsecured and are
often subordinated to other creditors of the issuer.

The Fund held defaulted securities and/or other secuities for which the income
has been deemed uncollectible. At August 31, 2004, the value of these securities
was $15,234,325 representing 2.4% of the Fund's net assets. The Fund
discontinues accruing income on securities for which income has been deemed
uncollectible and provides an estimate for losses on interest receivable. For
information as to specific securities, see the accompanying Statement of
Investments.

8. CONCENTRATION OF RISK

Investing in securities of emerging market issuers includes certain risks not
typically associated with investing in countries with more developed securities
markets, such as political, economic and legal uncertainties, delays in settling
portfolio transactions, currency fluctuations, and the risk of loss from
underdeveloped systems of securities registration and transfer. As of August 31,
2004, approximately 30% of the Fund's net assets are obligations of the
governments of Brazil or Russia and are subject to the credit risk of such
issuers.

9. 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
Advisers. Management fees paid by the Fund are reduced on assets invested in the
Sweep Money Fund, in an amount not to exceed the management fees paid by the
Sweep Money Fund.

10. REGULATORY MATTERS

MASSACHUSETTS ADMINISTRATIVE PROCEEDING
On September 20, 2004, Franklin Resources, Inc. (Franklin Resources, Inc. and
its subsidiaries are referred to collectively as the "Company") announced that
an agreement has been reached by two of its subsidiaries, Franklin Advisers,
Inc. ("Franklin Advisers") and Franklin Templeton Alternative Strategies, Inc.
("FTAS"), with the Securities Division of the Office of the Secretary of the
Commonwealth of Massachusetts (the "State of Massachusetts") related to an
administrative complaint filed on February 4, 2004. The administrative complaint
addressed one instance of market timing that was also a subject of the August 2,
2004 settlement that Franklin Advisers reached with the SEC, as described below.

Annual Report | 21

Templeton Emerging Markets Income Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

10. REGULATORY MATTERS (CONTINUED)

MASSACHUSETTS ADMINISTRATIVE PROCEEDING (CONTINUED)
Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers and FTAS have consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts. The consent order has multiple sections, including
"Statements of Fact" and "Violations of Massachusetts Securities Laws." The
Company admitted the "Statements of Fact." The Company did not admit or deny the
"Violations of the Massachusetts Securities Laws." While Franklin Advisers and
FTAS did not admit or deny engaging in any wrongdoing, the Company believes that
it is in its best interest and the interests of its funds' shareholders to
settle this issue now and move forward.

U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT
On August 2, 2004, the Company announced that an agreement has been reached by
Franklin Advisers with the SEC that resolves the issues resulting from the SEC's
investigation of market timing activity and the SEC issued an "Order instituting
administrative and cease-and-desist proceedings pursuant to sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and sections 9(b) and 9(f) of the
Investment Company Act of 1940, making findings and imposing remedial sanctions
and a cease-and-desist order" (the "Order"). The SEC's Order concerns the
activities of a limited number of third parties that ended in 2000 and those
that are the subject of the Massachusetts administrative complaint described
above.

Under the terms of the SEC's Order, pursuant to which Franklin Advisers neither
admits nor denies any wrongdoing, Franklin Advisers has agreed to pay $50
million, of which $20 million is a civil penalty, to be distributed to
shareholders of certain funds in accordance with a plan to be developed by an
Independent Distribution Consultant. At this time, it is unclear which funds
will receive distributions or which shareholders of any particular fund will
receive distributions. The SEC Order also requires Franklin Advisers to, among
other things, enhance and periodically review compliance policies and
procedures.

OTHER GOVERNMENTAL INVESTIGATIONS
As part of ongoing investigations by the SEC, the U.S. Attorney for the Northern
District of California, the New York Attorney General, the California Attorney
General, the U.S. Attorney for the District of Massachusetts, the Florida
Department of Financial Services and the Commissioner of Securities, the West
Virginia Attorney General, the Vermont Department of Banking, Insurance,
Securities, and Health Care Administration and the National Association of
Securities Dealers, relating to certain practices in the mutual fund industry,
including late trading, market timing and payments to securities dealers who
sell fund shares, the Company and its subsidiaries, as well as certain current
or former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees have been providing documents and information in response
to these requests and subpoenas. In addition, the Company has responded to
requests for similar kinds of information from regulatory authorities in some of
the foreign countries where the Company conducts its global asset management
business.

22 | Annual Report

Templeton Emerging Markets Income Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

10. REGULATORY MATTERS (CONTINUED)

OTHER GOVERNMENTAL INVESTIGATIONS (CONTINUED)
The staff of the SEC has also informed the Company that it is considering
recommending a civil action or proceeding against Franklin Advisers and Franklin
Templeton Distributors, Inc. ("FTDI") concerning payments to securities dealers
who sell fund shares (commonly referred to as "revenue sharing"). The staff of
the California Attorney General's Office ("CAGO") also has advised the Company
that the California Attorney General is authorized to bring a civil action
against the Company and FTDI arising from the same events. Even though the
Company currently believes that the charges the SEC staff and CAGO staff are
contemplating are unwarranted, it also believes that it is in the best interest
of the Company's and funds' shareholders to resolve these issues voluntarily, to
the extent the Company can reasonably do so. The Company continues to have
discussions towards resolving these governmental investigations.

OTHER LEGAL PROCEEDINGS
The Company, in addition to other entities within Franklin Templeton
Investments, including certain of its subsidiaries, other funds, and current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Specifically, the lawsuits claim
breach of duty with respect to alleged arrangements to permit market timing
and/or late trading activity, or breach of duty with respect to the valuation of
the portfolio securities of certain funds managed by Company subsidiaries,
resulting in alleged market timing activity. The majority of these lawsuits
duplicate, in whole or in part, the allegations asserted in the Massachusetts
administrative complaint described above. The lawsuits are styled as class
actions or derivative actions on behalf of either the named funds or the
Company.

Various subsidiaries of the Company have also been named in multiple lawsuits
filed in state courts in Illinois alleging breach of duty with respect to
valuation of the portfolio securities of certain funds managed by such
subsidiaries.

In addition, the Company and certain of its subsidiaries, as well as certain
current and former officers, employees, and directors have been named in
multiple lawsuits alleging violations of various securities laws and pendent
state law claims relating to the disclosure of directed brokerage payments
and/or payment of allegedly excessive advisory, commission, and distribution
fees. These lawsuits are styled as class actions and derivative actions brought
on behalf of certain funds.

The Company's management strongly believes that the claims made in each of these
lawsuits are without merit and intends to vigorously defend against them.

The Company cannot predict with certainty the eventual outcome of the foregoing
governmental investigations or class actions or other lawsuits. If the Company
finds that it 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.

Annual Report | 23

Templeton Emerging Markets Income Fund

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF TEMPLETON EMERGING MARKETS INCOME
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 the Templeton Emerging Markets
Income Fund (the "Fund," formerly Templeton Emerging Markets Income Fund, Inc.)
at August 31, 2004, 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, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
October 13, 2004

24 | Annual Report

Templeton Emerging Markets Income Fund

TAX DESIGNATION (UNAUDITED)

At August 31, 2004, more than 50% of the Templeton Emerging Markets Income Fund
total assets were invested in securities of foreign issuers. In most instances,
foreign taxes were withheld from income paid to the Fund on these investments.
As shown in the table below, the Fund hereby designates to shareholders the
foreign source income and foreign taxes paid, pursuant to Section 853 of the
Internal Revenue Code. This designation will allow shareholders of record on
September 30, 2004 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, foreign qualified dividends, and adjusted foreign
source income as designated by the Fund, to shareholders of record. As a service
to individual shareholders filing Form 1116, "Adjusted Foreign Source Income per
Share" in column 4 below reports foreign source income with the required
adjustments to foreign source qualified dividends. This information is provided
to simplify your reporting of foreign source income for line 1 of Form 1116.

-----------------------------------------------------------------------------------------------------------
ADJUSTED
FOREIGN TAX FOREIGN FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE
-----------------------------------------------------------------------------------------------------------

Argentina ................................ 0.0000 0.0094 0.0000 0.0094
Brazil ................................... 0.0000 0.1991 0.0000 0.1991
Bulgaria ................................. 0.0000 0.0137 0.0000 0.0137
Colombia ................................. 0.0000 0.0475 0.0000 0.0475
Hungary .................................. 0.0000 0.0232 0.0000 0.0232
Indonesia ................................ 0.0099 0.1105 0.0000 0.1105
Malaysia ................................. 0.0000 0.0113 0.0000 0.0113
Mexico ................................... 0.0000 0.0346 0.0000 0.0346
Netherlands .............................. 0.0000 0.0008 0.0000 0.0008
Panama ................................... 0.0000 0.0087 0.0000 0.0087
Peru ..................................... 0.0000 0.0128 0.0000 0.0128
Philippines .............................. 0.0000 0.0453 0.0000 0.0453
Poland ................................... 0.0000 0.0071 0.0000 0.0071
Russia ................................... 0.0000 0.1252 0.0000 0.1252
South Africa ............................. 0.0000 0.0122 0.0000 0.0122
South Korea .............................. 0.0033 0.0221 0.0000 0.0221
Thailand ................................. 0.0000 0.0081 0.0000 0.0081
Ukraine .................................. 0.0000 0.0417 0.0000 0.0417
Venezuela 0.0000 0.1128 0.0000 0.1128
Vietnam .................................. 0.0000 0.0054 0.0000 0.0054
----------------------------------------------------------
TOTAL .................................... $0.0132 $0.8515 $0.0000 $0.8515
----------------------------------------------------------

Foreign Tax Paid per Share (Column 1) is the amount per share available to you,
as a tax credit or deduction (assuming you held your shares in the Fund for a
minimum of 16 days during the 30-day period beginning 15 days before the
ex-dividend date of the Fund's distribution to which the foreign taxes relate).

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 without adjustment for the lower U.S.
tax rates. Generally, this is the foreign source income to be reported by
certain trusts and corporate shareholders.

Annual Report | 25

Templeton Emerging Markets Income Fund

TAX DESIGNATION (UNAUDITED) (CONTINUED)

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. If you are an individual shareholder who
does not meet the qualified dividend holding period requirements, you may find
this information helpful to calculate the foreign source income adjustment
needed to complete line 1 of Form 1116.

Adjusted Foreign Source Income per Share (Column 4) is the adjusted amount per
share of foreign source income the Fund paid to you. These amounts reflect the
Foreign Source Income reported in column 2 adjusted for the tax rate
differential on foreign source qualified dividends that may be required for
certain individual shareholders pursuant to Internal Revenue Code 904(b)(2)(B).
If you are an individual shareholder who meets the qualified dividend holding
period requirements, generally, these Adjusted Foreign Source Income amounts may
be reported directly on line 1 of Form 1116 without additional adjustment.

In January 2005, shareholders will receive Form 1099-DIV which will include
their share of taxes paid and foreign source income distributed during the
calendar year 2004. The Foreign Source Income reported on Form 1099-DIV has been
reduced to take into account the tax rate differential on foreign source
qualified dividend income pursuant to Internal Revenue Code 904(b)(2)(B).
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their 2004 individual income tax returns.

26 | Annual Report

Templeton Emerging Markets Income Fund, Inc.

ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 27, 2004

The Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Boulevard, Fort Lauderdale, Florida, on February 27, 2004. The
purpose of the meeting was to elect four Directors of the Fund, to approve an
Agreement and Plan of Reorganization providing for the reorganization of the
Fund from a Maryland corporation to a Delaware statutory trust, to approve
amendments to certain of the Fund's fundamental investment restrictions
(including six Sub-Proposals), and to approve the elimination of certain of the
Fund's fundamental investment restrictions. At the meeting, the following
persons were elected by the shareholders to serve as Directors of the Fund:
Harmon E. Burns, Frank J. Crothers, Charles B. Johnson and Frank A. Olson.* In
addition, Shareholders approved an Agreement and Plan of Reorganization
providing for the reorganization of the Fund from a Maryland corporation to a
Delaware statutory trust, amendments to certain of the Fund's fundamental
investment restrictions (including six Sub-Proposals), and the elimination of
certain of the Fund's fundamental investment restrictions. No other business was
transacted at the meeting.

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

Proposal 1. The election of four (4) Directors:

--------------------------------------------------------------------------------------------------------
% OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING VOTED
TERM EXPIRING 2007: FOR SHARES SHARES WITHHELD SHARES SHARES
--------------------------------------------------------------------------------------------------------

Harmon E. Burns ....... 33,363,251.9928 70.74% 96.95% 1,051,181.083 2.23% 3.05%
Frank J. Crothers ..... 33,373,935.9928 70.76% 96.98% 1,040,497.083 2.21% 3.02%
Charles B. Johnson .... 33,400,848.9928 70.82% 97.05% 1,013,584.083 2.15% 2.95%
Frank A. Olson ........ 33,287,288.9928 70.58% 96.72% 1,127,144.083 2.39% 3.28%

* Harris J. Ashton, Nicholas F. Brady, S. Joseph Fortunato, Edith E. Holiday,
Gordon S. Macklin, Fred R. Millsaps and Constantine D. Tseretopoulos are
currently serving on the Board and their terms of office continued after the
Annual Meeting of Shareholders.

Proposal 2. The approval of an Agreement and Plan of Reorganization that
provides for the reorganization of the Fund from a Maryland
corporation to a Delaware statutory trust:

----------------------------------------------------------------------------------------------------
SHARES VOTED % OF OUTSTANDING SHARES % OF SHARES PRESENT
----------------------------------------------------------------------------------------------------

For .................... 25,472,948.8986 54.01% 74.02%
Against ................ 945,625.1862 2.00% 2.75%
Abstain ................ 611,576.9910 1.30% 1.78%
Broker Non-Votes ....... 7,384,282.0002 15.66% 21.46%
----------------------------------------------------------------------------------------------------
TOTAL .................. 34,414,433.0760 72.97% 100.00%

Annual Report | 27

Templeton Emerging Markets Income Fund, Inc.

ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 27, 2004 (CONTINUED)

Proposal 3. The approval of amendments to certain of the Fund's fundamental
investment restrictions (includes six (6) Sub-Proposals):

Sub-Proposal 3a: To amend the Fund's fundamental investment restriction
regarding industry concentration:

--------------------------------------------------------------------------------------------------
SHARES VOTED % OF OUTSTANDING SHARES % OF SHARES PRESENT
--------------------------------------------------------------------------------------------------

For ................... 24,635,395.9154 52.23% 71.58%
Against ............... 1,654,708.0633 3.51% 4.81%
Abstain ............... 740,046.0971 1.57% 2.15%
Broker Non-Votes ...... 7,384,283.0002 15.66% 21.46%
--------------------------------------------------------------------------------------------------
TOTAL ................. 34,414,433.0760 72.97% 100.00%

Sub-Proposal 3b: To amend the Fund's fundamental investment restriction
regarding borrowing and issuing senior securities:

For ................... 24,039,938.3969 50.97% 69.85%
Against ............... 2,151,064.1753 4.56% 6.25%
Abstain ............... 839,245.5036 1.78% 2.44%
Broker Non-Votes ...... 7,384,185.0002 15.66% 21.46%
--------------------------------------------------------------------------------------------------
TOTAL ................. 34,414,433.0760 72.97% 100.00%

Sub-Proposal 3c: To amend the Fund's fundamental investment restriction
regarding investments in commodities:

For ................... 24,060,453.4881 51.01% 69.91%
Against ............... 2,186,957.8233 4.64% 6.35%
Abstain ............... 782,738.7644 1.66% 2.27%
Broker Non-Votes ...... 7,384,283.0002 15.66% 21.46%
--------------------------------------------------------------------------------------------------
TOTAL ................. 34,414,433.0760 72.97% 100.00%

Sub-Proposal 3d: To amend the Fund's fundamental investment restriction
regarding lending:

For ................... 23,952,538.0229 50.78% 69.60%
Against ............... 2,227,415.0122 4.72% 6.47%
Abstain ............... 850,198.0407 1.80% 2.47%
Broker Non-Votes ...... 7,384,282.0002 15.66% 21.46%
--------------------------------------------------------------------------------------------------
TOTAL ................. 34,414,433.0760 72.97% 100.00%

28 | Annual Report

Templeton Emerging Markets Income Fund, Inc.

ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 27, 2004 (CONTINUED)

Sub-Proposal 3e: To amend the Fund's fundamental investment restriction
regarding underwriting:

For ................... 24,283,732.1778 51.49% 70.56%
Against ............... 1,867,807.5439 3.96% 5.43%
Abstain ............... 878,610.3541 1.86% 2.55%
Broker Non-Votes ...... 7,384,283.0002 15.66% 21.46%
--------------------------------------------------------------------------------------------------
TOTAL ................. 34,414,433.0760 72.97% 100.00%

Sub-Proposal 3f: To amend the Fund's fundamental investment restriction
regarding investments in real estate:

For ................... 24,525,529.9261 52.00% 71.27%
Against ............... 1,703,603.5377 3.61% 4.95%
Abstain ............... 801,384.6120 1.70% 2.33%
Broker Non-Votes ...... 7,383,915.0002 15.66% 21.46%
--------------------------------------------------------------------------------------------------
TOTAL ................. 34,414,433.0760 72.97% 100.00%

Proposal 4: The approval of the elimination of certain of the Fund's fundamental
investment restrictions:

For ................... 24,051,324.2065 50.99% 69.89%
Against ............... 2,138,072.1790 4.53% 6.21%
Abstain ............... 840,752.6903 1.78% 2.44%
Broker Non-Votes ...... 7,384,284.0002 15.66% 21.46%
--------------------------------------------------------------------------------------------------
TOTAL ................. 34,414,433.0760 72.97% 100.00%

Note: Due to rounding, the percentage totals may not necessarily agree with the
arithmetic sum of the figures.

Annual Report | 29

Templeton Emerging Markets Income Fund

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

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

If shares of the Fund are held in the shareholder's name, the shareholder will
automatically be a participant in the Plan unless he elects to withdraw. If the
shares are registered in the name of a broker-dealer or other nominee (i.e., in
"street name"), the broker-dealer or nominee will elect to participate in the
Plan on the shareholder's behalf unless the shareholder instructs them
otherwise, or unless the reinvestment service is not provided by the
broker-dealer or nominee.

Participants should contact Mellon Investor Services, P.O. Box 3338, South
Hackensack, NJ 07606-1938, to receive the Plan brochure.

To receive dividends or distributions in cash, the shareholder must notify
Mellon Investor Services (the "Plan Administrator") at the address above or the
institution in whose name the shares are held. The Plan Administrator must
receive written notice within 10 business days before the record date for the
distribution.

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

30 | Annual Report

Templeton Emerging Markets Income Fund

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)

The 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, less a
service charge of $15.00 and less trading fees, to the participant.

Annual Report | 31

Templeton Emerging Markets Income Fund

TRANSFER AGENT

Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, NJ 07660
1-800-416-5585
www.melloninvestor.com

SHAREHOLDER INFORMATION

Shares of Templeton Emerging Markets Income Fund are traded on the New York
Stock Exchange under the symbol "TEI." Information about the net asset value and
the market price is published each Monday in the WALL STREET JOURNAL, weekly in
BARRON'S and each Saturday in THE NEW YORK TIMES and other newspapers. Daily
market prices for the Fund's shares are published in the "New York Stock
Exchange Composite Transactions" section of newspapers.

For current information about distributions 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
Income Fund, 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL
33733-8030.

32 | Annual Report

Board Members and Officers

The name, age 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. Each board member
will serve until that person's successor is elected and qualified.

INDEPENDENT BOARD MEMBERS

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

HARRIS J. ASHTON (72) Trustee Since 1993 140 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 (60) Trustee Since 1999 21 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Island Corporate Holdings Ltd. (Vice Chairman 1996-2003); Vice Chairman, Caribbean Utilities Co. Ltd.; Director and
President, Provo Power Company Ltd.; Director, Caribbean Electric Utility Services Corporation (Chairman until 2002); director of
various other business and nonprofit organizations; and FORMERLY, Chairman, Atlantic Equipment & Power Ltd. (1977-2003).
------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (72) Trustee Since 1993 141 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.
------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (52) Trustee Since 1996 96 Director, Amerada Hess Corporation
500 East Broward Blvd. (exploration and refining of oil and
Suite 2100 gas); H.J. Heinz Company (processed
Fort Lauderdale, FL 33394-3091 foods and allied products); RTI
International Metals, Inc. (manufac-
ture and distribution of titanium); and
Canadian National Railway (railroad).

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 | 33

GORDON S. MACKLIN (76) Trustee Since 1993 140 Director, White Mountains Insurance
500 East Broward Blvd. Group, Ltd. (holding company);
Suite 2100 Martek Biosciences Corporation;
Fort Lauderdale, FL 33394-3091 MedImmune, Inc. (biotechnology);
and Overstock.com (Internet servi-
ces); and FORMERLY, Director, MCI
Communication Corporation (subse-
quently known as MCI WorldCom,
Inc. and WorldCom, Inc.) (communi-
cations services) (1988-2002) and
Spacehab, Inc. (aerospace services)
(1994-2003).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, 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).
------------------------------------------------------------------------------------------------------------------------------------
FRED R. MILLSAPS (75) Trustee Since 1993 28 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various business and nonprofit organizations; manager of personal investments (1978-present); and FORMERLY, Chairman
and Chief Executive Officer, Landmark Banking Corporation (1969-1978); Financial Vice President, Florida Power and Light
(1965-1969); and Vice President, Federal Reserve Bank of Atlanta (1958-1965).
------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (72) Trustee Since 2003 21 Director, Becton, Dickinson and Co.
500 East Broward Blvd. (medical technology); White
Suite 2100 Mountains Insurance Group Ltd.
Fort Lauderdale, FL 33394-3091 (holding company); and Amerada
Hess Corporation (exploration and
refining of oil and gas).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, The Hertz Corporation (car rental) (since 1980) (Chief Executive Officer 1977-1999); and FORMERLY,
Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
------------------------------------------------------------------------------------------------------------------------------------
CONSTANTINE D. TSERETOPOULOS Trustee Since 1999 21 None
(50)
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).
------------------------------------------------------------------------------------------------------------------------------------

34 | Annual Report

INTERESTED BOARD MEMBERS AND OFFICERS

**NICHOLAS F. BRADY (74) Trustee Since 1993 21 Director, Amerada Hess Corporation
500 East Broward Blvd. (exploration and refining of oil and
Fort Lauderdale, FL 33394-3091 investment business); and FORMERLY,
Director, H.J. Heinz Company
(processed foods and allied products)
(1987-1988; 1993-2003).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Darby Overseas Investments, Ltd., Darby Emerging Markets Investments LDC and Darby Technology Ventures Group, LLC
(investment firms) (1994-present); Director, Templeton Capital Advisors Ltd. and Franklin Templeton Investment Fund; and FORMERLY,
Chairman, Templeton Emerging Markets Investment Trust PLC (until 2003), Secretary of the United States Department of the Treasury
(1988-1993); Chairman of the Board, Dillon, Read & Co., Inc. (investment banking) (until 1988); and U.S. Senator, New Jersey (April
1982-December 1982).
------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (59) Trustee and Trustee Since 36 None
One Franklin Parkway Vice President 1993 and Vice
San Mateo, CA 94403-1906 President since
1996

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.; Director, Franklin Investment Advisory Services,
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 49 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (71) Trustee, Trustee and 140 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.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (52) Chief Since July 2004 Not Applicable None
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Director, Global Compliance, Franklin Resources, Inc.;
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 35

JEFFREY A. EVERETT (40) Vice President Since 2001 Not Applicable None
PO Box N-7759
Lyford Cay, Nassau, Bahamas

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Templeton Global Advisors Limited; officer of 15 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Investment Officer, First Pennsylvania Investment Research (until 1989).
------------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (44) Vice President Since 1993 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin
Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice
President and Chief Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.;
Executive Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief
Financial Officer, Franklin Advisory Services, LLC; Chairman, Franklin Templeton 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 49 of the investment companies in
Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (57) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
Administration

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment
companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (57) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources, Inc.;
officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer and
Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
------------------------------------------------------------------------------------------------------------------------------------

36 | Annual Report

BARBARA J. GREEN (56) Vice President Vice President Not Applicable None
One Franklin Parkway and Secretary since 2000
San Mateo, CA 94403-1906 and Secretary
since 1996

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, Inc.,
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 51 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).
------------------------------------------------------------------------------------------------------------------------------------
RUPERT H. JOHNSON, JR. (64) Vice President Since 1996 Not Applicable None
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. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or Director, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
JOHN R. KAY (64) Vice President Since 1994 Not Applicable None
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 35 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Vice President and Controller, Keystone Group, Inc.
------------------------------------------------------------------------------------------------------------------------------------
DIOMEDES LOO-TAM (65) Treasurer Since March Not Applicable None
One Franklin Parkway 2004
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 15 of the investment companies in Franklin Templeton Investments; Consultant, MyVest Corporation (software development
company and investment advisory services); and FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc.
(2002-2003); Treasurer/Controller of most of the investment companies in Franklin Templeton Investments (1985-2000); and Senior
Vice President, Franklin Templeton Services, LLC (1997-2000).
------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (67) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue - AML Chemicals, Inc. and Lingnan
Rockefeller Center Compliance Foundation
New York, NY 10020-2302

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; and officer and/or director, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton
Investments.
------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 37

CHRISTOPHER J. MOLUMPHY (42) President and Since 2002 Not Applicable None
One Franklin Parkway Chief
San Mateo, CA 94403-1906 Executive
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.
------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (67) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of
the subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and
Director, Templeton Asset Management Ltd. (until 1999).
------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (52) Chief Financial Since May 2004 Not Applicable None
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Senior Vice President, Franklin Templeton Services,
LLC; and FORMERLY, Managing Director, RSM McGladrey, Inc.; and Partner, McGladrey & Pullen, LLP.
------------------------------------------------------------------------------------------------------------------------------------

* 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 adviser or affiliated
investment advisers.

** Charles B. Johnson is considered to be an interested person of the Fund under
the federal securities laws due to his position as an officer and director and
major shareholder of Franklin Resources, Inc. (Resources), which is the parent
company of the Fund's adviser and distributor. Harmon E. Burns is considered to
be an interested person of the Fund under the federal securities laws due to his
position as officer and director of Resources. Nicholas F. Brady is considered
to be an interested person of the Fund under the federal securities laws due to
his ownership interest in a subsidiary of Resources, as well as his director
positions with such company and certain other related companies.

Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.

THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE 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 FRED R. MILLSAPS AND FRANK A. OLSON AS AN AUDIT COMMITTEE
FINANCIAL EXPERT. THE BOARD BELIEVES THAT MESSRS. MILLSAPS AND OLSON QUALIFY AS
SUCH AN EXPERT IN VIEW OF THEIR EXTENSIVE BUSINESS BACKGROUND AND EXPERIENCE.
MR. MILLSAPS, WHO IS CURRENTLY A DIRECTOR OF VARIOUS BUSINESS AND NONPROFIT
ORGANIZATIONS, HAS SERVED AS A MEMBER AND CHAIRMAN OF THE FUND AUDIT COMMITTEE
SINCE INCEPTION AND WAS FORMERLY CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF
LANDMARK BANKING CORPORATION AND FINANCIAL VICE PRESIDENT OF FLORIDA POWER AND
LIGHT. MR. OLSON, WHO CURRENTLY SERVES AS CHAIRMAN OF THE BOARD OF THE HERTZ
CORPORATION AND WAS ITS CHIEF EXECUTIVE OFFICER FROM 1977 TO 1999, IS A DIRECTOR
AND AUDIT COMMITTEE MEMBER OF AMERADA HESS CORPORATION AND WHITE MOUNTAINS
INSURANCE GROUP, LTD. AND A FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
UNITED AIRLINES. AS A RESULT OF SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF
TRUSTEES BELIEVES THAT MR. MILLSAPS AND MR. OLSON 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. MILLSAPS AND OLSON ARE
INDEPENDENT TRUSTEES AS THAT TERM IS DEFINED UNDER THE APPLICABLE STOCK EXCHANGE
RULES AND SECURITIES AND EXCHANGE COMMISSION RULES AND RELEASES.

38 | Annual Report

Templeton Emerging Markets Income Fund

SHAREHOLDER INFORMATION

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 1-954/847-2268 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 Securities and Exchange Commission's
website at sec.gov and reflect the 12-month period beginning July 1, 2003, and
ending June 30, 2004.

QUARTERLY STATEMENT OF INVESTMENTS

The Fund files a complete statement of investments with the 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 SEC to provide certain certifications with respect to the Fund's Form
N-CSR and Form N-CSRS (which includes the Fund's annual and semi-annual reports
to shareholders) that are filed semi-annually with the SEC. The Fund has filed
such certifications with its Form N-CSRS for the six months ended February 29,
2004. Additionally, the Fund expects to file, on or before October 29, 2004,
such certifications with its Form N-CSR for the year ended August 31, 2004.

Annual Report | 39

This page intentionally left blank.

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 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 Capital Accumulator 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 Cap Growth Fund II 1
Franklin Small-Mid Cap Growth Fund

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

BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4

SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care 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

INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5, 6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 3
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund 5, 7
Franklin Money Fund 5, 6
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund

TAX-FREE INCOME 8
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 9
Tax-Exempt Money Fund 5, 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
Arizona
California 10
Colorado
Connecticut
Florida 10
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 9
Michigan 9
Minnesota 9
Missouri
New Jersey
New York 10
North Carolina
Ohio 9
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 11

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. Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.

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

6. Although the fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.

7. Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
Effective 9/1/04, the fund's name changed; its investment goal and strategy
remained the same.

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

9. Portfolio of insured municipal securities.

10. 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).

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

09/04 Not part of the annual report

[LOGO OMITTED]
FRANKLIN [R] TEMPLETON [R]
INVESTMENTS

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

ANNUAL REPORT
TEMPLETON EMERGING MARKETS
INCOME FUND

INVESTMENT MANAGER
Franklin Advisers, Inc.

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: 201/329-8660
www.melloninvestor.com

FUND INFORMATION
1-800/342-5236

Investors should be aware that the value of investments made for the Fund may go
down as well as up. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political and other factors. The Fund and its investors are not protected from
such losses by the Investment Manager. Therefore, investors who cannot accept
this risk should not invest in shares of the Fund.

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

TLTEI A2004 10/04

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 11(a), the registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers
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 Fred R. Millsaps 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 $9,099 for the fiscal year ended August 31, 2004 and $29,906 for the fiscal
year ended August 31, 2003.

(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.

The aggregate 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 the their financial
statements were $45,000 for the fiscal year ended August 31, 2004 and $3,614 for
the fiscal year ended August 31, 2003. The services for which these fees were
paid included attestation services.

(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.

There were no 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.

(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 $298 for the fiscal year ended August 31, 2004
and $0 for the fiscal year ended August 31, 2003. 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 $99,702 for the fiscal year ended August
31, 2004 and $0 for the fiscal year ended August 31, 2003. 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 pre-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 $145,000 for the fiscal year ended August 31, 2004 and $3,614
for the fiscal year ended August 31, 2003.

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

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Members of the Audit Committee are: Fred R. Millsaps, Frank J. Crothers, 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
Franklin Advisers, Inc. 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, 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. All conflicts are resolved 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. 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 & 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 proxies. 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. 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 on-line at franklintempleton.com.
Alternatively, shareholders may request copies of the Policies free of charge by
calling the Proxy Group collect at 1-954/847-2268 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 on-line at franklintempleton.com and posted
on the SEC website at WWW.SEC.GOV and reflect the twelve-month period beginning
July 1, 2003, and ending June 30, 2004.

ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASES. N/A

ITEM 9. 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 10. 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 11. EXHIBITS

(a) Code of Ethics

(b)(1) 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)(2) 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 INCOME FUND

By /s/JIMMY D. GAMBILL
Chief Executive Officer - Finance and Administration
Date October 29, 2004

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 29, 2004

By /s/GALEN G. VETTER
Chief Financial Officer
Date October 29, 2004