<PAGE> 1
Templeton Emerging Markets
Fund, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
Investors should be aware that the value of investments made for the Fund may go
up as well as down and that the Investment Manager may make errors in selecting
securities for the Fund's portfolio. Like any investment in securities, the
Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political, and other factors. The Fund and Fund investors are not
protected from such losses by the Investment Manager. Therefore, investors who
cannot accept the risk of such losses should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
TLEMF A96 10/96
[GRAPHIC]
TEMPLETON
EMERGING
MARKETS
FUND, INC.
Annual Report
August 31, 1996
[FRANKLIN TEMPLETON LOGO]
<PAGE> 2
TEMPLETON EMERGING
MARKETS FUND
[PHOTO OF J. MARK MOBIUS]
J. Mark Mobius, Ph.D.
President
Templeton Emerging
Markets Fund
Dr. Mobius has been living overseas since earning his Ph.D. in economics and
political science at Massachusetts Institute of Technology in 1964. During his
extensive travels, he has acquired a thorough knowledge of the business
practices and customs that are unique to developing nations. Together with his
team of Templeton analysts, Dr. Mobius currently oversees more than $9 billion
in emerging markets investments for the Templeton Group of Funds.
YOUR FUND'S OBJECTIVE:
The Templeton Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in emerging country equity securities.
October 15, 1996
Dear Shareholder:
We are pleased to bring you the annual report of the Templeton Emerging Markets
Fund, which covers the fiscal year ended August 31, 1996. During this period,
equities in emerging markets regained favor among many investors due to a
combination of record-high U.S. equity prices, increased demand for products of
third world countries, and the belief that developing markets had recovered from
the effects of the Mexico peso devaluation and debt crises of 1994/95.
The most significant gains were made in Latin America. For example, measured in
U.S. dollars, Mexico's Bolsa Index provided a total return of 9.49% during the
fiscal year, and Argentina's Merval Index returned 12.30%. These markets
produced such
1
<PAGE> 3
TEMPLETON EMERGING MARKETS FUND
Geographic Distribution on 8/31/96
Based on Total Net Assets
Asian Stocks 50.5%
Latin American Stocks 25.2%
European Stocks 16.1%
Middle Eastern & African Stocks 0.7%
Short-Term Obligations & Other Net Assets 7.5%
positive returns partly because of the large losses they suffered during the
previous year, and partly due to the increased share of international
investments that Latin American markets attracted this year. Equity markets in
Eastern Europe also performed relatively well. The re-election of Russia's
President Yeltsin was followed by an influx of foreign money and propelled
prices sharply higher on the Russian equity markets, while successful
privatization programs encouraged foreign investment in Hungary and Poland.
Of course, the recovery in emerging market equity prices this year has not been
without problems. In Argentina, stock prices fell sharply following the firing
of Finance Minister Cavallo, the author of Argentina's successful economic
revival plan. In Asia, Indonesian equity markets performed poorly due to
political and social unrest, markets in Malaysia and Thailand under-performed
their Latin American counterparts because of concerns about economic instability
and excessively fast growth, and Indian stocks declined in an atmosphere of
generally bearish sentiment.
Within this environment, the Fund provided a one-year total return of 7.45% in
market-price terms, as discussed in the Performance Summary on page 5. In terms
of net asset value, the Fund's return was 8.69%.
At the end of the fiscal year, 92.5% of the Fund's total net assets were
invested in equities, with the remaining 7.5% in cash and other liquid assets.
These assets were allocated among 27 emerging markets, with the largest
percentage of our holdings in Hong Kong (14.9%) and Brazil (12.8%). Regionally,
the largest portion was invested in Asia (50.5%), where we found the largest
number of bargain stocks, followed by Latin America (25.2%) and Europe (16.1%).
2
<PAGE> 4
In our opinion, strong world economic growth and the adoption of prudent
macroeconomic management policies in many emerging market countries could lead
to higher earnings for companies in those countries. We believe that, with the
continued liberalization of markets and privatization of assets, increased
earnings should translate into solid returns on equity investments in many
emerging market countries.
TEMPLETON EMERGING MARKETS FUND
Top Ten Holdings on 8/31/96
Based on Total Net Assets
<TABLE>
<CAPTION>
% of Total
Company, Industry, Country Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Cheung Kong Holdings Ltd.
Multi-Industry, Hong Kong 4.5%
- --------------------------------------------------------------------------------
Philippine National Bank
Banking, Philippines 3.8%
- --------------------------------------------------------------------------------
Philippine Long Distance Telephone Co.
Telecommunications, Philippines 3.8%
- --------------------------------------------------------------------------------
Banco Comercial Portugues SA
Banking, Portugal 3.3%
- --------------------------------------------------------------------------------
Ergo Bank SA
Banking, Greece 2.8%
- --------------------------------------------------------------------------------
Antofagasta Holdings PLC
Metals & Mining, Chile 2.7%
- --------------------------------------------------------------------------------
Oriental Holdings BHD
Automobiles, Malaysia 2.7%
- --------------------------------------------------------------------------------
Alpha Credit Bank
Banking, Greece 2.7%
- --------------------------------------------------------------------------------
Eletrobras-Centrais Eletricas Brasileiras SA, B
Utilities, Electrical & Gas, Brazil 2.6%
- --------------------------------------------------------------------------------
Telmex-Telefonos de Mexico SA;
Telecommunications, Mexico 2.4%
- --------------------------------------------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 10 of this report.
TEMPLETON EMERGING MARKETS FUND
Top 10 Countries Represented in the Fund on 8/31/96
As a Percentage of Total Net Assets
<TABLE>
<CAPTION>
% of Total
Country Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Hong Kong 14.9%
- --------------------------------------------------------------------------------
Brazil 12.8%
- --------------------------------------------------------------------------------
Greece 9.0%
- --------------------------------------------------------------------------------
Philippines 8.3%
- --------------------------------------------------------------------------------
Turkey 7.8%
- --------------------------------------------------------------------------------
Malaysia 7.4%
- --------------------------------------------------------------------------------
Portugal 6.1%
- --------------------------------------------------------------------------------
Mexico 5.7%
- --------------------------------------------------------------------------------
Indonesia 4.5%
- --------------------------------------------------------------------------------
Singapore 3.1%
- --------------------------------------------------------------------------------
</TABLE>
Of course, investments in foreign securities involve special risks, such as
adverse economic, social and political developments in the countries where the
Fund is invested, as well as market and currency volatility. Developing markets
involve heightened risks related to the same factors, in addition to risks
associated with the relatively small size and lesser liquidity of these markets.
While short-term volatility can be disconcerting, declines of as much as 40% to
50% are not unusual in emerging markets. In fact, the Hong Kong market has
increased 535% in the last 15 years, but has suffered six declines of more than
20% during that time. (1)
1. Source: Bloomberg. Based on quarterly percentage
change over 15 years ended June 30, 1996.
3
<PAGE> 5
This discussion reflects the strategies we employed for the Fund during the past
fiscal year, and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies and
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise. Although past performance of a specific investment
or sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase or sell for the Fund.
We thank you for your participation in the Templeton Emerging Markets Fund and
welcome your comments and suggestions.
On April 16, 1996, the Fund's Board of Directors adopted a non-fundamental
policy permitting investment in Russian securities up to 5% of its total
assets. Russian securities involve additional significant risks, including
political and social uncertainty (for example, regional conflicts and risk of
war), currency exchange rate volatility, pervasiveness of corruption and crime
in the Russian economic system, delays in settling portfolio transactions and
risk of loss arising out of Russia's system of share registration and custody.
4
<PAGE> 6
PERFORMANCE SUMMARY
In market-price terms, the Templeton Emerging Markets Fund produced a total
return of 7.45% for the one-year period ended August 31, 1996. Based on the
change in actual net asset value (in contrast to market price), the Fund
delivered a total return of 8.69% for the same period. Both total return figures
assume reinvestment of dividends and capital gains in accordance with the
dividend reinvestment plan.
We have always maintained a long-term perspective when managing the Fund, and we
encourage shareholders to view their investments in a similar manner. As you can
see from the table to the right, based on the change in market price, the Fund
delivered a cumulative total return of 459.31% for the period from its inception
on February 26, 1987 through August 31, 1996.
During the reporting period, the Fund's closing price on the New York Stock
Exchange (NYSE) decreased by $1.25, from $19.625 on August 31, 1995, to $18.375
on August 31, 1996, while the net asset value decreased by 97 cents ($0.97),
from $18.23 to $17.26.
Shareholders received combined distributions totaling $2.425 per share,
including long-term capital gains of $2.145, short-term capital gains of 1.5
cents ($0.015) and dividend income totaling 26.5 cents ($0.265) per share.
Distributions will vary, however, depending on income earned by the Fund and any
profits realized from the sale of securities in the portfolio. Past performance
is not predictive of future results.
TEMPLETON EMERGING MARKETS FUND
Periods Ended 8/31/96
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year (2/26/87)
<S> <C> <C> <C>
Cumulative Total Return (1)
Based on change in
net asset value 8.69% 121.01% 456.06%
Based on change in
market price 7.45% 119.09% 459.31%
Average Annual Total Return (2)
Based on change in
net asset value 8.69% 17.18% 19.75%
Based on change in
market price 7.45% 16.98% 19.83%
</TABLE>
1. Cumulative total returns show the change in value of an investment over the
periods indicated.
2. Average annual total returns represent the average annual change in value of
an investment over the periods indicated.
All calculations assume reinvestment of dividend and capital gains
distributions, either at net asset value or at market price on the reinvestment
date, in accordance with the dividend reinvestment plan.
5
<PAGE> 7
THE FOLLOWING LETTER WAS WRITTEN BY DR. MOBIUS AFTER A TRIP TO PORTUGAL IN MAY,
1996.
When I first visited Portugal in 1988, it was still shaking off the cobwebs of
many years of dictatorship and military rule. Today, however, Portuguese cities
and villages are vibrant with activity, modern retail distribution networks are
growing, and there is a wide selection of consumer goods in shops.
Prior to my visit, the country had gone through two political elections, one for
parliament in October 1995, and one for the presidency in January 1996. The
Socialist Party won both elections, but fell short of obtaining an absolute
majority in Parliament by four seats. However, it is clear that the Portuguese
economy is being more affected by other European developments than by its own
domestic, political and economic considerations. Most Portuguese politicians
want the country to participate in the European Monetary Union (EMU) so that the
country can share a common currency with the rest of Europe. They are,
therefore, committed to meeting the Maastricht Agreement criteria concerning
inflation and interest rates, and are determined to override any issues that
might sidetrack Portugal from monetary convergence with members of the EMU.
During the last ten years, Portugal's economy has grown more rapidly than the
economies of many developed countries, which has fueled the rapid expansion of
the Portuguese stock market. In 1985, there were only 24 listed companies on the
Portuguese stock exchange, and by 1995 that number had increased to 169. When we
began our trip in May, most emerging markets were bullish, and Portugal was no
exception. In fact, the Lisbon BVL General Index had risen about 15% between
January 1996 and May 1996.
In our opinion, two factors favor the continued expansion of Portugal's stock
market. First, the government is planning to step up its privatization program
appreciably. The proposed expansion includes cement, tobacco, petroleum,
shipping, mining, agriculture companies, and banks. Secondly, corporate
restructuring, which has cut costs and improved corporate earnings in recent
years, is likely to continue. In
6
<PAGE> 8
[MAP PORTUGAL WITH LISBON HIGHLIGHTED]
recent years, consolidation in the banking sector, probably the largest sector
of Portugal's stock market, has resulted in some significant savings in banks'
operating costs. Banco Portugues Sotto Mayor and Banco Totta & Acores merged
with Mundial Confianca, an insurance company, while Banco Portuguese do
Atlantico was purchased by Banco Comercial Portugues. However, corporate
restructuring in Portugal can be expensive due to the high cost of dismissing
workers. Usually if a company fires a worker, it must pay him one month's wages
for every year of employment.
Mergers have also transformed the communications sector of the Portuguese stock
market. Since the combination of three government-owned or -controlled
telecommunication companies into one single organization -- Portugal Telecom --
the rate of installations has accelerated and the long waiting list for
telephone lines has declined. The new company has the exclusive right to operate
fixed lines until the year 2003 and expects that traffic will rise as
inter-urban and international call tariffs fall.
An interesting transformation is also taking place in Portuguese retailing.
During the last decade, large retail organizations took over many traditional
retail outlets, and supermarket sales now represent over 30% of the total retail
market. However, supermarket operators are being hampered by government
regulations designed to protect small retailers who were gradually being
squeezed out by large supermarkets. Since 1994, stores larger than 2,000 square
meters were required to have national licenses that, according to one
supermarket operator, were difficult to obtain. His company solved this problem
by dividing its large shopping centers into separate units of less than 2,000
square meters. For example, each complex has separate stores for hard goods,
furniture, and
7
<PAGE> 9
textiles. They are all run as a single store, but from a legal and tax point of
view they are separate.
As you can see in the table on page 3, Portugal was number seven of the ten top
countries represented in the Fund. The corporate restructuring it is presently
experiencing bodes well for Portugal's economic development, and as a result of
what I saw during my trip, I believe that investing in Portuguese companies now
should provide the Fund's shareholders with attractive benefits in the future.*
Sincerely,
/s/ J. Mark Mobius
J. Mark Mobius, Ph.D.
President
Templeton Emerging Markets Fund, Inc.
*This letter reflects the strategies employed for the Fund during the past
fiscal year and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies and
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise.
8
<PAGE> 10
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
---------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 18.23 $ 22.77 $ 17.94 $ 18.74 $ 18.16
-------- --------- -------- -------- --------
Income from investment operations:
Net investment income .25 .23 .10 .29 .41
Net realized and unrealized gain (loss) 1.20 (1.62) 5.87 4.93 4.21
-------- --------- -------- -------- --------
Total from investment operations 1.45 (1.39) 5.97 5.22 4.62
-------- --------- -------- -------- --------
Distributions:
Dividends from net investment income (.26) (.10) (.29) (.39) (.08)
Distributions from net realized gains (2.16) (3.05) (.85) (5.63) (3.96)
-------- --------- -------- -------- --------
Total distributions (2.42) (3.15) (1.14) (6.02) (4.04)
-------- --------- -------- -------- --------
Change in net asset value (.97) (4.54) 4.83 (.80) .58
-------- --------- -------- -------- --------
Net asset value, end of year $ 17.26 $ 18.23 $ 22.77 $ 17.94 $ 18.74
======== ========= ======== ======== ========
TOTAL RETURN
Based on market value per share 7.45% (16.94)% 26.11% 44.30% 34.90%
Based on net asset value per share 8.69% (8.53)% 33.39% 34.30% 24.09%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of year (000) $283,678 $294,962 $363,760 $285,407 $243,261
Ratio of expenses to average net assets 1.71% 1.73% 1.78% 1.84% 1.91%
Ratio of net investment income to average net assets 1.51% 1.28% .46% 2.07% 2.34%
Portfolio turnover rate 8.83% 27.58% 6.50% 21.55% 53.45%
Average commission rate paid (per share) $ .0008
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 11
TEMPLETON EMERGING MARKETS FUND, INC.
Investment Portfolio, August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
INDUSTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS: 92.5%
---------------------------------------------------------------------------------------------------------------------
ARGENTINA: 2.6%
Astra Cia Argentina de Petroleo SA Energy Sources 154,902 $ 221,636
* Atanor Cia Nacional Para la Industria Quimica
SA, D Chemicals 57,964 86,996
Banco de Galicia y Buenos Aires SA, B Banking 335,430 1,745,231
Capex SA, A Utilities Electrical & Gas 12,400 92,185
Central Costanera SA, B Utilities Electrical & Gas 35,884 110,586
* Ciadea SA Automobiles 66,733 297,131
Ipako Industrias Petroquimicas Argentinas SA, B Chemicals 176,191 572,947
Molinos Rio de Plata SA, B Food & Household Products 71,957 216,714
Perez Companc SA, B Energy Sources 168,888 966,590
Quilmes Industrial SA Beverages & Tobacco 10,000 100,000
* Sevel Argentina SA, C Automobiles 0 1
* Sociedad Comercial del Plata Cadelplata Come Multi-Industry 912,370 2,063,132
YPF Sociedad Anonima, ADR Energy Sources 39,000 823,875
------------
7,297,024
---------------------------------------------------------------------------------------------------------------------
BRAZIL: 12.8%
Banco Bradesco SA Banking 212,011,201 1,522,784
Banco Bradesco SA, PN. Banking 206,511,555 1,747,429
* Banco do Brasil SA Banking 693,000 6,682
* Banco do Brasil SA, wts., A Banking 4,388,600 8,204
* Banco do Brasil SA, wts., B Banking 6,507,900 12,358
* Banco do Brasil SA, wts., C Banking 10,846,500 20,384
* Banco do Brazil SA, PN. Banking 21,000,000 206,622
* Banespa-Banco do Estado de Sao Paulo SA, PN. Banking 172,796,000 527,050
Cemig-Cia Energetica de Minas Gerais, PN. Utilities Electrical & Gas 122,441,093 3,686,424
* Cia Mesbla SA, PN. Merchandising 6,825,690 33,579
Copene-Petroquimica do Nordeste SA, A, PN. Chemicals 5,861,800 2,497,328
Duratex SA, PN. Forest Products & Paper 8,887,800 345,333
Eletrobras-Centrais Eletricas Brasileiras SA, B,
PN. Utilities Electrical & Gas 26,820,977 7,362,673
Itausa-Investimentos Itau SA, PN. Multi-Industry 7,947,346 6,568,378
* Mannesmann SA Machinery & Engineering 31,968 4,529
* Mannesmann SA, PN. Machinery & Engineering 2,085,844 289,373
Petrobras-Petroleo Brasileiro SA, PN. Energy Sources 51,584,966 6,166,747
Telebras-Telecomunicacoes Brasileiras SA Telecommunications 83,151,950 5,030,760
Telerj-Telecomunicacoes do Rio de Janeiro SA,
PN. Telecommunications 7,585 813
Unibanco-Uniao de Bancos Brasileiros SA, PN. Banking 14,446,936 369,578
------------
36,407,028
---------------------------------------------------------------------------------------------------------------------
CHILE: 2.7%
Antofagasta Holdings PLC Metals & Mining 1,585,000 7,795,204
---------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 12
TEMPLETON EMERGING MARKETS FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
INDUSTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
---------------------------------------------------------------------------------------------------------------------
CHINA: 1.0%
China Southern Glass Co. Ltd., B Building Materials & Components 726,700 $ 291,338
Chiwan Wharf Holdings Ltd., B Transportation 1,122,000 507,856
Foshan Electrical and Lighting Co. Ltd., B Appliances & Household Durables 400,000 387,973
Shandong Huaneng Power Utilities Electrical & Gas 24,000 225,000
Shanghai Chlor-Alkali Chemical Co. Ltd., B Chemicals 1,088,000 243,712
* Shanghai Erfangji Textile Machinery Co. Ltd., B Machinery & Engineering 333,960 35,400
* Shanghai Industrial Sewing Machine Corp. Machinery & Engineering 190,000 24,130
* Shanghai Jin Jiang Tower Co. Ltd., B Leisure & Tourism 630,300 143,708
Shanghai Jinqiao Export Processing Zone
Development, B Real Estate 108,000 41,040
Shanghai Lian Hua Fibre Corp., B Textiles & Apparel 73,560 8,459
Shanghai Lujiaxui Finance & Trade Zn Dev Stock
Co Ltd., B Real Estate 100,000 92,200
* Shanghai Steel Tube Co. Ltd., B Machinery & Engineering 499,400 64,922
* Shanghai Tyre & Rubber Co. Ltd., B Industrial Components 649,000 162,250
* Shanghai Vacuum Electron Devices Co. Ltd., B Appliances & Household Durables 1,035,760 147,078
* Shanghai Yaohua Pilkington Glass, B Building Materials & Components 251,250 125,625
* Shenzhen Gintian Industry Co. Ltd., B Multi-Industry 77,760 21,822
Shenzhen Properties & Resources Develop. (Group)
Ltd., B Real Estate 508,200 155,105
Shenzhen Vanke Co. Ltd., B Real Estate 110,000 53,346
Zhuhai Sez Lizhu Pharmaceutical Group Inc., B Health & Personal Care 250,000 88,910
------------
2,819,874
---------------------------------------------------------------------------------------------------------------------
COLOMBIA: 0.1%
Compania Suramericana de Seguros Insurance 12,000 201,584
---------------------------------------------------------------------------------------------------------------------
CZECH REPUBLIC: 0.1%
* CEZ, GDR Utilities Electrical & Gas 2,000 79,250
* CEZ, GDS, 144A Utilities Electrical & Gas 4,000 158,500
------------
237,750
---------------------------------------------------------------------------------------------------------------------
GREECE: 9.0%
Alpha Credit Bank Banking 130,160 7,603,150
Delta Dairy SA, PN. Food & Household Products 5,676 47,194
Elais Oleaginous Co. Food & Household Products 28,290 877,607
Ergo Bank SA Banking 134,800 8,010,737
Fourlis Brothers Corp. SA Appliances & Household Durables 133,820 1,694,424
Hellas Can-Container Manufacturers Metals & Mining 12,000 252,733
Hellenic Bottling Co., SA Food & Household Products 43,572 1,513,517
Hellenic Telecommunications Organizations OTE Telecommunications 8,000 136,580
Intracom SA, reg. Electrical & Electronics 6,000 157,008
</TABLE>
11
<PAGE> 13
TEMPLETON EMERGING MARKETS FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
INDUSTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
---------------------------------------------------------------------------------------------------------------------
GREECE (cont.)
National Bank of Greece SA Banking 11,940 $ 726,187
Titan Cement Co., reg. Building Materials & Components 91,996 4,651,636
------------
25,670,773
---------------------------------------------------------------------------------------------------------------------
HONG KONG: 14.9%
Cheung Kong Holdings Ltd. Multi-Industry 1,838,000 12,895,118
Cross Harbour Tunnel Co. Ltd. Transportation 12,000 26,305
Dairy Farm Int'l Holdings Ltd., 6.50%, conv.,
PN. Merchandising 29,000 21,025
Dairy Farm International Holdings Ltd. Merchandising 273,178 215,811
Hang Lung Development Co. Ltd. Real Estate 3,179,000 6,002,380
Hongkong Electric Holdings Ltd. Utilities Electrical & Gas 171,000 510,844
Hopewell Holdings Ltd. Construction & Housing 2,491,553 1,329,150
HSBC Holdings PLC Banking 340,022 5,870,409
Jardine International Motor Holdings Ltd. Automobiles 404,000 525,082
Jardine Matheson Holdings Ltd. (Singapore) Multi-Industry 31,212 196,636
Jardine Strategic Holdings Ltd. (Singapore) Multi-Industry 242,500 776,000
* Jardine Strategic Holdings Ltd., wts., expire
5/02/98 Multi-Industry 12,500 3,437
K Wah International Holdings Ltd. Building Materials & Components 2,264,003 471,393
* K Wah International Holdings Ltd., wts., expire
12/01/97 Building Materials & Components 214,379 9,288
* Lai Sun Development Co. Ltd., wts., expire
03/23/99 Real Estate 10,000 854
Lai Sun Garment International Ltd. Multi-Industry 97,000 124,817
New World Development Co. Ltd. Real Estate 1,119,010 5,426,819
Stelux International Holdings Ltd. Multi-Industry 585,133 121,075
Sun Hung Kai Properties Ltd. Real Estate 582,000 5,682,638
Swire Pacific Ltd., B Multi-Industry 460,000 642,483
Tian An China Investments Co. Ltd. Real Estate 6,201,000 665,610
Wheelock & Co. Ltd. Multi-Industry 342,000 689,971
* Yaohan Hongkong Corp. Ltd. Merchandising 3,244,000 144,737
------------
42,351,882
---------------------------------------------------------------------------------------------------------------------
HUNGARY: 0.3%
* Fotex First Hungarian-American Photo-Service Multi-Industry 973,000 728,804
* Ibusz Leisure & Tourism 800 3,995
* Ibusz, new Leisure & Tourism 266 1,224
------------
734,023
---------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 14
TEMPLETON EMERGING MARKETS FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
INDUSTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
---------------------------------------------------------------------------------------------------------------------
INDIA: 1.4%
ATV Project India Ltd. Machinery & Engineering 200,000 $ 45,722
Bharat Petroleum Corp., Ltd. Energy Sources 92,000 718,710
Bombay Dyeing & Manufacturing Co. Ltd. Chemicals 41,000 193,787
Bses Ltd. Utilities Electrical & Gas 46,650 257,458
Cochin Refineries Ltd. Energy Sources 17,850 70,098
DCW Ltd. Chemicals 12,500 11,395
Essar Shipping Ltd. Transportation 59,250 31,245
Garden Silk Mills Ltd. Textiles & Apparel 85,700 43,872
Grasim Industries Ltd Ord INR10 Multi-Industry 17,000 210,891
Gujarat Narmada Valley Fertilizers Co. Ltd. Chemicals 36,600 35,163
Hindustan Petroleum Corp. Ltd. Energy Sources 12,000 117,980
Indian Petrochemicals Corp. Ltd. Chemicals 63,500 237,346
Indian Rayon and Industries Ltd. Multi-Industry 18,500 196,806
Indo Gulf Fertilisers & Chemicals Corp. Ltd. Chemicals 55,000 60,168
Industrial Credit & Investment Corp. of India
Ltd. Financial Services 439,600 937,156
Reliance Industries Ltd. Chemicals 52,000 307,770
Steel Authority of India Ltd. Metals & Mining 100,000 77,139
Tata Chemicals Ltd. Chemicals 34,000 200,042
Tata Iron & Steel Co. Ltd. Metals & Mining 17,000 93,226
Videocon International Ltd. Appliances & Household Durables 90,000 147,686
------------
3,993,660
---------------------------------------------------------------------------------------------------------------------
INDONESIA: 4.5%
PT Anwar Sierad, fgn. Food & Household Products 211,500 171,584
PT Astra International, fgn. Multi-Industry 41,100 53,525
PT Barito Pacific Timber, fgn. Forest Products & Paper 5,521,500 3,418,520
PT Charoen Pokphand Indonesia, fgn. Food & Household Products 500,000 661,827
PT Dharmala Intiland, fgn. Real Estate 360,000 380,444
PT Duta Anggada Realty, fgn. Real Estate 34,000 29,761
PT Duta Pertiwi Nusantara Chemicals 409,750 148,714
PT Eratex Djaja, fgn. Textiles & Apparel 283,000 87,607
PT Gadjah Tunggal, fgn. Automobiles 83,000 35,440
PT Intan Wijaya Chemical Industry, fgn. Chemicals 526,000 247,054
PT Japfa Comfeed Indonesia, fgn. Food & Household Products 539,000 310,696
PT Metrodata Electronic, fgn. Electrical & Electronics 347,000 374,114
PT Panasia Indosyntec, fgn. Textiles & Apparel 2,668,400 683,621
PT Polysindo Eka Perkasa, fgn. Textiles & Apparel 9,996,500 5,122,032
PT Pudjiadi Prestige Ltd., fgn. Real Estate 632,100 472,321
PT Sinar Mas Multi Artha, fgn. Financial Services 354,050 347,701
PT Sumalindo Lestari Jaya, fgn. Forest Products & Paper 123,000 105,038
------------
12,649,999
---------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 15
TEMPLETON EMERGING MARKETS FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
INDUSTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
---------------------------------------------------------------------------------------------------------------------
ISRAEL: 0.2%
Clal Industries Ltd. Multi-Industry 57,000 $ 245,956
Discount Investment Corp. Multi-Industry 6,000 360,073
The First International Bank of Israel Banking 977 111,551
------------
717,580
---------------------------------------------------------------------------------------------------------------------
KOREA (SOUTH): 1.2%
* Central Banking Corp. Financial Services 3,856 68,248
Dae Duck Electronics Co. Ltd. Electrical & Electronics 4,120 188,587
Daegu Bank Co. Ltd. Banking 52,613 776,046
Daehan Synthetic Fiber Co. Ltd. Textiles & Apparel 2,410 226,512
Dongkuk Steel Mill Co. Ltd. Metals & Mining 3,000 60,055
Hae In Corp. Ltd. Merchandising 1,531 93,439
Hankook Cosmetics Co. Ltd. Health & Personal Care 8,700 244,248
Korea Kumho Petrochemical Chemicals 5,000 44,187
Kyung Dong Boiler Co. Ltd. Energy Equipment & Services 8,154 254,797
Saehan Precision Co. Ltd. Electrical & Electronics 8,400 297,345
* Saehan Precision Co. Ltd., new Electrical & Electronics 3,188 96,117
Ssangyong Oil Refining Co. Ltd. Energy Equipment & Services 34,000 784,376
* Tong Yang Investment and Finance Co. Ltd. Financial Services 8,333 127,144
Yuhwa Textiles & Apparel 3,580 194,458
------------
3,455,559
---------------------------------------------------------------------------------------------------------------------
MALAYSIA: 7.4%
Aokam Perdana Bhd. Multi-Industry 61,000 93,948
Berjaya Singer Bhd. Appliances & Household Durables 80,000 77,006
Boustead Holdings Bhd., fgn. Food & Household Products 54,000 112,622
Federal Flour Mills Bhd. Food & Household Products 974,998 2,424,493
Hong Leong Industries Bhd. Multi-Industry 18,000 83,022
Malayawata Steel Bhd., fgn. Metals & Mining 738,000 1,326,050
Malaysian International Shipping Corp. Bhd.,
fgn. Transportation 1,930,666 5,884,996
Oriental Holdings Bhd. Automobiles 960,200 7,740,753
Perlis Plantations Bhd. Multi-Industry 783,599 2,749,965
Perlis Plantations Bhd., fgn. Multi-Industry 78,750 276,366
Renong Bhd. Multi-Industry 67,000 97,814
* Renong Bhd., wts. Multi-Industry 8,375 3,460
Renong, 4.00%, conv., 9/9/01 Multi-Industry 13,400 4,703
------------
20,875,198
---------------------------------------------------------------------------------------------------------------------
MEXICO: 5.7%
Alfa SA de CV, A Multi-Industry 132,774 582,229
Cemex SA, B Building Materials & Components 372,250 1,541,530
</TABLE>
14
<PAGE> 16
TEMPLETON EMERGING MARKETS FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
INDUSTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
---------------------------------------------------------------------------------------------------------------------
MEXICO (cont.)
* Cifra SA, C Merchandising 1,131,043 $ 1,748,213
* DESC SA, A Multi-Industry 138,000 723,442
* DESC SA, B Multi-Industry 1,000 5,170
* DESC SA, C Multi-Industry 2,895 15,043
* Grupo Financiero Banamex Accival SA, B Banking 613,000 1,299,972
* Grupo Financiero Banamex Accival SA, L Banking 49,959 102,521
* Grupo Financiero Bancomer SA de CV, B Banking 1,576,000 766,955
* Grupo Financiero Bancomer SA de CV, L Banking 2,730,370 1,008,247
Grupo Financiero Serfin SA, B Banking 1,020,411 538,298
Grupo Industrial Maseca SA de CV, B Food & Household Products 95,093 113,873
Telmex-Telefonos de Mexico SA, L, ADR Telecommunications 204,700 6,729,512
Vitro SA Food & Household Products 553,355 1,080,073
------------
16,255,078
---------------------------------------------------------------------------------------------------------------------
PAKISTAN: 0.4%
* DG Khan Cement Co. Building Materials & Components 110,000 32,458
Fauji Fertilizer Co. Ltd. Chemicals 67,000 136,977
* National Development Leasing Corp. Financial Services 148,500 28,169
* Pakistan Telecom Corp. PTC Telecommunications 873,000 881,969
------------
1,079,573
---------------------------------------------------------------------------------------------------------------------
PHILIPPINES: 8.3%
* Keppel Philippine Holdings Inc., B Machinery & Engineering 572,314 114,157
* Philex Mining Corp., B Metals & Mining 5,187,339 653,492
Philippine Long Distance Telephone Co., ADR Telecommunications 178,353 10,678,886
* Philippine National Bank Banking 644,874 10,770,467
RFM Corp. Food & Household Products 5,770,100 870,086
Sime Darby Pilipinas Inc. Industrial Components 573,286 503,362
------------
23,590,450
---------------------------------------------------------------------------------------------------------------------
POLAND: 0.5%
Agros Holding SA, C Food & Household Products 12,000 328,527
Bank Slaski SA W Katowicach Banking 5,000 455,375
* Debica SA, A Automobiles 6,000 130,316
Mostostal Export SA Construction & Housing 82,620 235,239
Polifarb Ceiszyu SA Chemicals 25,000 109,509
Rolimpex SA Wholesale & International Trade 382 18,546
Zaklady Cementowo Wapiennicze
Gorazdze Chorula Building Materials & Components 4,000 119,000
------------
1,396,512
---------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 17
TEMPLETON EMERGING MARKETS FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
INDUSTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
---------------------------------------------------------------------------------------------------------------------
PORTUGAL: 6.1%
Banco Chemical (Portugal) Banking 9,300 $ 99,216
Banco Comercial Portugues SA Banking 782,132 9,333,047
Banco Espirito Santo e Comercial de Lisboa Banking 44,500 738,492
Banco Totta & Acores SA Banking 108,181 2,043,221
BPI Socieda de Gestora de Participacoes Socias
SA Banking 260,642 3,235,497
Espirito Santo Financial Holding SA, ADR Banking 114,000 1,410,750
Portucel Industrial Empresa Product de Celulose
SA Forest Products & Paper 39,000 264,281
* Sociedade Portuguesa de Celulose SA Forest Products & Paper 6,500 154,099
------------
17,278,603
---------------------------------------------------------------------------------------------------------------------
RUSSIA: 0.1%
* Chernogorneft Energy Sources 13,000 83,200
GUM Trade House Merchandising 4,000 80,000
* Lukoil-Holdings Energy Sources 21,000 208,950
------------
372,150
---------------------------------------------------------------------------------------------------------------------
SINGAPORE: 3.1%
First Capital Corp. Ltd., fgn. Real Estate 57,000 141,771
G.P. Batteries International Ltd. Electrical & Electronics 35,000 98,000
* GP Batteries International Ltd., wts., expire
11/15/00 Electrical & Electronics 8,750 5,906
Jaya Holdings Ltd. Transportation 356,500 273,607
Jaya Holdings Ltd., 3.00%, conv. ln. stk.,
8/31/98 Transportation 15,900 19,491
* Jaya Holdings Ltd., wts., expire 8/31/98 Transportation 30,051 15,376
* Jaya Holdings Ltd., wts., expire 10/09/99 Transportation 36,780 16,989
Osprey Maritime Ltd. Transportation 48,000 64,800
Prima Ltd. Food & Household Products 511,000 1,906,445
Singapore Bus Service (1978) Ltd., fgn. Transportation 903,600 5,987,827
TIBS Holdings Ltd. Transportation 105,600 226,629
* TIBS Holdings Ltd., wts., expire 4/17/00 Transportation 380 261
WBL Corp. Ltd. Multi-Industry 43,000 94,116
------------
8,851,218
---------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA: 0.4%
Del Monte Royal Foods Ltd. Food & Household Products 467,825 489,978
Engen Ltd. Energy Sources 85,723 501,446
Rembrandt Group Ltd. Multi-Industry 8,600 72,345
------------
1,063,769
---------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 18
TEMPLETON EMERGING MARKETS FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
INDUSTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
---------------------------------------------------------------------------------------------------------------------
SRI LANKA: 0.1%
Aitken Spence & Co. Ltd. Multi-Industry 50,000 $ 113,984
* Lanka Ceramic Ltd. Building Materials & Components 162,000 74,299
* Lanka Walltile Ltd. Building Materials & Components 27,300 13,503
United Motor Lanka Ltd. Automobiles 190,320 104,402
------------
306,188
---------------------------------------------------------------------------------------------------------------------
THAILAND: 0.4%
American Standard Sanitaryware (THB) Public Co.
Ltd., fgn Building Materials & Components 17,000 288,876
Asia Fibre Public Co. Ltd., fgn. Textiles & Apparel 233,600 86,775
Ayudhya Insurance Public Co. Ltd., fgn. Insurance 15,000 112,626
Charoen Pokphand Feedmill Public Co. Ltd. Food & Household Products 64,000 230,152
Karat Sanitaryware Public Co. Ltd. Building Materials & Components 100 277
Kian Gwan (Thailand) Public Co. Ltd., fgn. Real Estate 26,000 67,813
* Padaeng Industry Public Co. Ltd., fgn. Metals & Mining 52,650 21,846
Regional Container Lines Public Co. Ltd., fgn. Transportation 8,000 106,224
Sanyo Universal Electric Public Co. Ltd., fgn. Appliances & Household Durables 6,000 19,621
Thai Rayon Public Co. Ltd. Textiles & Apparel 4,100 23,169
Thai Wah Public Co. Ltd., fgn. Multi-Industry 8,450 5,593
United Standard Terminal Public Co. Ltd., fgn. Wholesale & International Trade 44,000 71,942
------------
1,034,914
---------------------------------------------------------------------------------------------------------------------
TURKEY: 7.8%
Akbank Banking 42,264,958 4,234,039
Akcimento Building Materials & Components 11,106,000 780,086
* Alcatel Teletas Endustri Tic AS Telecommunications 760,000 44,631
Arcelik AS Appliances & Household Durables 33,333,694 2,955,489
Bagfas Chemicals 2,805,790 557,313
Bekoteknik AS Appliances & Household Durables 10,169,935 597,233
* Celik Halat ve Sanayii ve Ticaret AS Building Materials & Components 8,469,035 370,572
Cimentas Izmir Cimento Fabrikasi Turk AS Building Materials & Components 4,802,763 774,238
Cimsa Cimento Sanayi ve Ticaret AS Building Materials & Components 3,040,000 255,536
Compagnie Financiere Ottomane SA Banking 37,000 2,585,130
Eregli Demir ve Celik Fabrikalari AS Metals & Mining 25,961,250 2,301,821
Finans Bank AS, br. Banking 84,146,077 1,404,938
Izocam Ticaret ve Sanayii AS, br. Building Materials & Components 4,179,793 264,711
Koc Holding AS Multi-Industry 2,793,000 570,853
Koc Yatirim ve Sanayii Mamullesi Pazarlanca AS Multi-Industry 6,519,681 900,871
Marshall Boya ve Vernik Sanayii AS Industrial Components 5,828,256 436,222
Otosan Otomobil Sanayii AS Automobiles 5,819,932 1,625,118
Tekstil Bankasi AS, br. Banking 2,171,764 36,886
</TABLE>
17
<PAGE> 19
TEMPLETON EMERGING MARKETS FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
INDUSTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
---------------------------------------------------------------------------------------------------------------------
TURKEY (cont.)
* Tofas Turk Otomobil Fabrikasi AS Automobiles 1,681,750 $ 68,746
Trakya Cam Sanayii AS Building Materials & Components 2,987,379 139,316
Turk Demir Dokum, br. Appliances & Household Durables 15,287,042 668,902
Turkiye Garanti Bankasi AS Banking 12,559,078 448,306
Vakif Finansal Kiralama AS Financial Services 4,161,357 201,252
------------
22,222,209
---------------------------------------------------------------------------------------------------------------------
VENEZUELA: 1.3%
Ceramica Carabobo CA, A, ADR Building Materials & Components 143,000 139,803
Consolidada Carabobo, B Building Materials & Components 1,856,631 61,106
Electricidad de Caracas Utilities Electrical & Gas 1,054,743 856,207
* Manufacturera de Aparatos Domesticos SA Appliances & Household Durables 36,000 36,340
Mavesa SA, ADR Food & Household Products 289,500 1,461,183
Siderurgica Venezolana Sivensa Saica Svs. Metals & Mining 1,455,440 902,945
Siderurgica Venezolana Sivensa Saica Svs., ADR Metals & Mining 21,750 67,468
Siderurgica Venezolana Sivensa SAICA Svs., ADR,
B, new Metals & Mining 28,440 82,538
Venezolana Prerreducidos Caroni Venprecar CA,
GDS, 144A Metals & Mining 1,764 8,661
------------
3,616,251
---------------------------------------------------------------------------------------------------------------------
ZIMBABWE: 0.1%
Transarchipel Shipping Ltd.--TSL Multi-Industry 587,000 204,371
---------------------------------------------------------------------------------------------------------------------
TOTAL LONG TERM INVESTMENTS (cost $180,633,737) 262,478,424
---------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 7.2% (cost $20,310,983)
---------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 4.925% to 5.145% with
maturities to 11/21/96 U.S. 20,450,000 20,317,990
---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.7% (cost $200,944,720) 282,796,414
OTHER ASSETS, LESS LIABILITIES: 0.3% 881,590
------------
TOTAL NET ASSETS: 100.0% $283,678,004
------------
------------
</TABLE>
* NON-INCOME PRODUCING.
** CURRENCY OF COUNTRIES INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 20
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $200,944,720) $282,796,414
Cash 1,535
Receivables:
Investment securities sold 405,555
Dividends 961,953
------------
Total assets 284,165,457
------------
Liabilities:
Payable for investment securities
purchased 597
Accrued expenses 486,856
------------
Total liabilities 487,453
------------
Net assets, at value $283,678,004
------------
------------
Net assets consist of:
Undistributed net investment income $ 3,574,929
Net unrealized appreciation 81,851,694
Accumulated net realized gain 7,517,588
Net capital paid in on shares of
capital stock 190,733,793
------------
Net assets, at value $283,678,004
------------
------------
Shares outstanding 16,435,495
------------
------------
Net asset value per share
($283,678,004 / 16,435,495) $ 17.26
------------
------------
</TABLE>
STATEMENT OF OPERATIONS
for the year ended August 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
(net of $637,976 foreign
taxes withheld)
Dividends $ 7,863,615
Interest 941,588
-----------
Total income $ 8,805,203
Expenses:
Management fees (Note 3) 3,421,404
Administrative fees (Note 3) 410,567
Transfer agent fees 11,500
Custodian fees 517,000
Reports to shareholders 181,300
Audit fees 44,500
Legal fees (Note 3) 1,000
Registration and filing fees 36,500
Directors' fees and expenses 32,000
Other 13,396
-----------
Total expenses 4,669,167
-----------
Net investment income 4,136,036
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments 9,123,909
Foreign currency
transactions (169,483)
-----------
8,954,426
Net unrealized appreciation
on investments 10,755,338
-----------
Net realized and
unrealized gain 19,709,764
-----------
Net increase in net assets resulting
from operations $23,845,800
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 21
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 4,136,036 $ 3,824,734
Net realized gain on investment and foreign currency transactions 8,954,426 33,982,789
Net unrealized appreciation (depreciation) 10,755,338 (60,839,978)
------------ ------------
Net increase (decrease) in net assets resulting from operations 23,845,800 (23,032,455)
Distributions to shareholders:
From net investment income (4,331,298) (1,597,491)
From net realized gain (34,941,931) (48,808,530)
Capital share transactions (Note 2) 4,143,230 4,640,626
------------ ------------
Net decrease in net assets (11,284,199) (68,797,850)
Net assets:
Beginning of year 294,962,203 363,760,053
------------ ------------
End of year $283,678,004 $294,962,203
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 22
TEMPLETON EMERGING MARKETS FUND, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Emerging Markets Fund, Inc. (the Fund) is a closed-end, diversified
management investment company registered under the Investment Company Act of
1940. The Fund seeks long-term capital appreciation by primarily investing in
emerging country equity securities. The following summarizes the Fund's
significant accounting policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange on
which the securities are traded. Over-the-counter securities and listed
securities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and
approved in good faith by the Board of Directors.
B. FOREIGN CURRENCY TRANSACTIONS:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into a foreign exchange contract to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net 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, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rates.
The Brazilian Government has exercised and may continue to exercise substantial
influence over exchange of its currency. Under current Brazilian law, whenever
there occurs a serious imbalance of Brazil's balance of payments or serious
reasons to foresee the imminence of such an imbalance, Brazil's National
Monetary Council may, for a limited period, impose restrictions of foreign
capital remittances abroad. Exchange control regulations may restrict
repatriation of investment income, capital, or the proceeds of securities sales
by foreign investors. The Fund has investments in Brazilian companies with a
value of approximately $36 million as of August 31, 1996.
C. INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND EXPENSES:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign
securities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
E. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
21
<PAGE> 23
TEMPLETON EMERGING MARKETS FUND, INC.
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
As of August 31, 1996, there were 30,000,000 shares of capital stock authorized
($0.01 par value). During the years ended August 31, 1996 and 1995, 251,242
shares were issued for $4,143,230 and 209,342 shares were issued for $4,640,626
from reinvested distributions, respectively.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton Asset
Management Ltd. (TAML) and Templeton Global Investors, Inc. (TGII), the Fund's
investment manager and administrative manager, respectively. The Fund pays
monthly an investment management fee to TAML equal, on an annual basis, to 1.25%
of the average daily net assets of the Fund. The Fund pays TGII monthly a fee
computed at an annual rate of 0.15% of the Fund's average daily net assets.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel for
the Fund, which firm received fees of $1,000 for the year ended August 31, 1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1996 aggregated $22,677,601 and $50,444,020, respectively. The
cost of securities for federal income tax purposes is $201,256,714. Realized
gains and losses are reported on an identified cost basis.
At August 31, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income tax purposes, was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $102,788,126
Unrealized depreciation (21,248,426)
------------
Net unrealized appreciation $ 81,539,700
============
</TABLE>
22
<PAGE> 24
TEMPLETON EMERGING MARKETS FUND, INC.
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Templeton Emerging Markets Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton Emerging Markets Fund, Inc. as of August
31, 1996, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton Emerging Markets Fund, Inc. as of August 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
[McGladrey & Pullen, LLP]
New York, New York
September 27, 1996
23
<PAGE> 25
TEMPLETON EMERGING MARKETS FUND, INC.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
The Fund offers a Dividend Reinvestment Plan (the "Plan") with the following
features: --Shareholders must affirmatively elect to participate in the Plan;
Stock dividends will be reinvested automatically; Chemical Mellon Shareholder
Services, Shareholder Investment Services, P.O. Box 750, Pittsburgh, PA 15230,
will provide additional Plan information upon request. --Whenever the Fund
declares dividends in either cash or common stock of the Fund, if the market
price is equal to or exceeds net asset value at the valuation date, participants
will receive the dividends entirely in stock at a price equal to the net asset
value, but not less than 95% of the then current market price of the Fund's
shares. If the market price is lower than net asset value and 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. --The reinvestment of dividends and/or capital gains, even though
no cash has been received, may be taxable. --The participant may withdraw from
the Plan without penalty at any time by written notice to Mellon Securities
Trust Company. Upon withdrawal, the participant will receive, without charge,
stock certificates issued in the participant's name for all full shares; or, if
the participant's wishes, Mellon Securities Trust Company will sell the
participant's shares and send the proceeds, less a service fee of $2.50 and less
brokerage commissions. --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 brokerage commissions. Brokerage commissions will be deducted from
amounts to be invested. --The Plan does not offer a cash purchase plan option.
SHAREHOLDER INFORMATION
Weekly comparative net asset value and market price information about Templeton
Emerging Markets Fund, Inc. shares is published each Monday in the Wall Street
Journal, weekly in Barron's and each Saturday in The New York Times and other
newspapers in a table called "Publicly Traded Funds." Daily market prices for
the Fund's shares are published in the New York Stock Exchange Composite
Transactions section of newspapers under the designation "TempltnEFd." The
Fund's New York Stock Exchange trading symbol is EMF. The Fund's shares are also
listed and traded on the Pacific Stock Exchange.
For current information about the net asset value, call 1-800-292-9293
If any shareholder is not receiving copies of the Reports to Shareholders
because shares are registered in a broker's name or in a custodian's name, he or
she can write and request that his or her name be added to the Fund's mailing
list, by writing Templeton Emerging Markets Fund, Inc., 700 Central Avenue, St.
Petersburg, FL 33701.
24
<PAGE> 26
NOTES
<PAGE> 27
LITERATURE REQUEST
- --------------------------------------------------------------------------------
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. To ensure the highest quality of service, telephone calls
to or from our service departments may be monitored, recorded and accessed.
These calls can be determined by the presence of a regular beeping tone.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH INCOME
Franklin Global Health Franklin Adjustable Rate
Care Fund Securities Fund
Franklin Templeton Franklin Adjustable U.S.
Japan Fund Government Securities Fund
Templeton Developing Franklin's AGE High
Markets Trust Income Fund
Templeton Foreign Fund Franklin Investment Grade
Templeton Foreign Smaller Income Fund
Companies Fund Franklin Short-Intermediate U.S.
Templeton Global Government Securities Fund
Infrastructure Fund Franklin U.S. Government
Templeton Global Securities Fund
Opportunities Trust Franklin Money Fund
Templeton Global Franklin Federal Money Fund
Real Estate Fund
Templeton Global Smaller FOR NON-U.S. INVESTORS:
Companies Fund
Templeton Greater Franklin Tax-Advantaged
European Fund High Yield Securities Fund
Templeton Growth Fund Franklin Tax-Advantaged
Templeton Latin America International Bond Fund
Fund Franklin Tax-Advantaged U.S.
Templeton Pacific Government Securities Fund
Growth Fund
Templeton World Fund FOR CORPORATIONS:
GLOBAL GROWTH AND INCOME Franklin Corporate Qualified
Dividend Fund
Franklin Global Utilities Fund
Franklin Templeton German FRANKLIN FUNDS SEEKING
Government Bond Fund TAX-FREE INCOME
Franklin Templeton
Global Currency Fund Federal Intermediate-Term
Templeton Global Bond Fund Tax-Free Income Fund
Templeton Growth and Federal Tax-Free Income Fund
Income Fund High Yield Tax-Free
Income Fund
GLOBAL INCOME Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Franklin Global Government Income Fund
Income Fund Tax-Exempt Money Fund
Franklin Templeton Hard
Currency Fund FRANKLIN STATE-SPECIFIC
Franklin Templeton High FUNDS SEEKING
Income Currency Fund TAX-FREE INCOME
Templeton Americas
Government Securities Fund Alabama
Arizona*
GROWTH Arkansas**
California*
Franklin Blue Chip Fund Colorado
Franklin California Growth Fund Connecticut
Franklin DynaTech Fund Florida*
Franklin Equity Fund Georgia
Franklin Gold Fund Hawaii**
Franklin Growth Fund Indiana
Franklin MidCap Growth Fund Kentucky
Franklin Small Cap Growth Fund Louisiana
Maryland
GROWTH AND INCOME Massachusetts***
Michigan*
Franklin Asset Allocation Fund Minnesota***
Franklin Balance Sheet Missouri
Investment Fund New Jersey
Franklin Convertible New York*
Securities Fund North Carolina
Franklin Equity Income Fund Ohio***
Franklin Income Fund Oregon
Franklin MicroCap Value Fund Pennsylvania
Franklin Natural Resources Fund Tennessee**
Franklin Real Estate Texas
Securities Fund Virginia
Franklin Rising Dividends Fund Washington**
Franklin Strategic Income Fund
Franklin Utilities Fund VARIABLE ANNUITIES
Franklin Value Fund
Templeton American Trust, Inc. Franklin Valuemark(SM)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities. 10/96.1
