ANNUAL REPORT
[Photo of Globe]
AUGUST 31, 1997
TEMPLETON EMERGING
MARKETS FUND, INC.
[FRANKLIN TEMPLETON LOGO]
<PAGE>
[LOGO CELEBRATING OVER 50 YEARS]
CELEBRATING 50 YEARS
This year marks 50 years of business for Franklin Templeton. Over these years,
we have experienced profound changes in technology, regulations and customer
expectations within the mutual fund industry. As one of the largest mutual fund
families, we're proud to be an innovative industry leader, providing people like
you with an opportunity to invest in companies and governments around the globe.
In addition, we want to stress that all securities markets move both up and
down. Mixed in with the good years can be some bad years. Accordingly, mutual
fund share prices also move up and down. Every investor should expect such
fluctuations, which can be wide. When markets are going down, as well as up, we
encourage investors to maintain a long-term perspective. We thank you for your
past support and look forward to serving your investment needs in the years
ahead.
[PHOTO J MARK MOBIUS, PH.D.]
J. MARK MOBIUS, PH.D.
President
Templeton Emerging
Markets Fund, Inc.
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 $15 billion
in emerging markets investments for the Templeton Group of Funds.
<PAGE>
SHAREHOLDER LETTER
Your Fund's Objective: The Templeton Emerging Markets Fund seeks long-term
capital appreciation by investing primarily in emerging country equity
securities.
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, 1997. During this period,
the Fund provided a total return of 33.81% in market-price terms, and 27.34% in
terms of net asset value, as discussed in the Performance Summary on page 6.
At the end of the fiscal year, 89.9% of the Fund's total net assets were
invested in long-term securities, with the remaining 10.1% in cash and other
liquid assets. These assets were allocated among 29 emerging markets, with the
largest percentage in Brazil (13.8%), Hong Kong (12.2%), and Greece (11.2%).
Regionally, the largest portion was invested in Asia (38.3%), followed by Latin
America (30.1%) and Europe (20.2%).
Spurred by large capital inflows from developed market countries, equity markets
in emerging market countries experienced strong gains during the twelve months
under review. Latin American countries were the star performers, as increased
exports sparked a strong economic recovery and higher equity prices throughout
the region. Brazil, where the Bovespa Index
CONTENTS
Shareholder Letter .......... 1
Performance Summary ......... 6
Travel Letter ............... 8
Financial Highlights and
Statement of Investments .... 10
Financial Statements ........ 20
Notes to Financial
Statements .................. 23
Independent Auditor's
Report ...................... 26
Tax Designation ............. 28
[PYRAMID GRAPHIC]
<PAGE>
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
8/31/97
[PIE CHART]
Asia 38.3%
Latin America 30.1%
Europe 20.2%
Middle East &
Africa 1.3%
Short-Term
Obligations &
Other Net Assets 10.1%
steadily increased until July, was one of the best-performing markets. However,
it became more volatile after an Asian currency crisis prompted fears among some
investors that Latin American currencies would also be attacked by speculators.
This concern proved to be unfounded, and the Bovespa quickly rebounded.
Stock markets in Asian nations did not fare as well. During the last two
decades, Asia's rapidly increasing exports contributed to strong economic
growth. Combined with relative political stability, cheap, generally
well-educated workforces, and government-controlled foreign exchange rates, this
growth attracted large investments from developed countries, producing a
seemingly inexorable rise in the region's stock markets. However, Asian exports
failed to keep pace with the growth in world trade, and it became apparent that
these countries might devalue their currencies in an effort to renew export
growth. In fact, during the last few months of the reporting period, the
currencies of Thailand, Malaysia, Indonesia, and the Philippines were so heavily
sold by speculators that these governments were forced to let their currencies
float freely. As a result, the baht, ringgit, rupiah, and peso dropped sharply
versus the U.S. dollar, and their stock markets, along with those in Hong Kong
and Singapore, fell significantly.
However, stronger European and U.S. demand for Southeast Asian goods, especially
from the electronics sector, in which world inventory levels are very low, could
contribute to an economic upturn in Asia. Coupled with the new floating exchange
rate policies of these Asian countries, this could potentially produce faster
economic growth, and bolster some of the region's stock markets. We already see
signs that this process is taking place, and we believe Asian stock markets
could possibly move to a higher level in the next fiscal year. In our opinion,
Asia may be down, but it is certainly not out.
2
<PAGE>
As you know, China regained sovereignty over Hong Kong on July 1, 1997. Some
people believe the handover of Hong Kong could ultimately mean an end to
economic and personal freedom there. We think this is unlikely, but developments
following any major transfer of political power cannot be predicted. In our
opinion, China's leaders are pragmatic, and are likely to use Hong Kong as a
blueprint for a market economy, which could benefit the citizens of Hong Kong
immeasurably. While we expect that problems will arise during this process, we
are hopeful they will be overcome. Although Hong Kong is likely to undergo vast
changes, what makes it special should remain the same. Under Chinese rule, the
former British colony has the chance to become much more than just an important
island state. Together, Hong Kong and China have the potential to become the
largest economic superpower the world has ever known.
Of course, investing in foreign securities involves 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. Emerging 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 1,089% in the last 15 years, but has suffered five declines of more
than 20% during that time.(1)
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. Because
economic and market conditions are constantly changing, our strategies, and our
evaluations,
(1) Source: Bloomberg. Based on quarterly percentage change over 15 years ended
June 30, 1997.
TOP 10 HOLDINGS
8/31/97
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
- -------------------------------------------------
<S> <C>
Cheung Kong Holdings Ltd.
Multi-Industry, Hong Kong 4.6%
Banco Comercial Portugues SA
Banking, Portugal 4.0%
Alpha Credit Bank
Banking, Greece 3.6%
Eletrobras-Centrais Eletricas
Brasileiras SA, B, pfd.
Utilities Electrical & Gas, Brazil 3.6%
Antofagasta Holdings Plc
Metals & Mining, Chile 3.5%
Ergo Bank SA
Banking, Greece 3.2%
Petrobras-Petroleo
Brasileiro SA, pfd.
Energy Sources, Brazil 2.9%
Titan Cement Co., reg.
Building Materials &
Components, Greece 2.7%
Telefonos de
Mexico SA, L, ADR
Telecommunications, Mexico 2.7%
Telebras-Telecomunicacocs
Brasileiras SA
Telecommunications, Brazil 2.6%
</TABLE>
For a complete list of portfolio holdings, please see page 11 of this report.
3
<PAGE>
TOP 10 COUNTRIES REPRESENTED
IN THE FUND*
Equity Investments
8/31/97
<TABLE>
<CAPTION>
% OF TOTAL
COUNTRY NET ASSETS
- ----------------------------
<S> <C>
Brazil 13.8%
Hong Kong 12.2%
Greece 11.2%
Turkey 8.6%
Portugal 7.3%
Mexico 6.6%
Malaysia 3.7%
Chile 3.5%
Thailand 2.8%
Argentina 2.8%
</TABLE>
*Does not include investments in fixed-income securities, and short-term
obligations and other net assets. See portfolio holdings beginning on page 11.
conclusions and decisions regarding portfolio holdings may change as new
circumstances arise. All figures shown are as of August 31, 1997, and the Fund's
holdings can be expected to change with market developments and management of
the portfolio. 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.
4
<PAGE>
The Templeton Emerging Market Fund's investment objective is "long-term capital
appreciation" which it seeks to achieve by investing primarily in emerging
country equity securities. As described in the Fund's prospectus dated February
26, 1987, an emerging country is any country with a low or middle income
economy, as determined by the World Bank. On May 22, 1997, the Fund's Board of
Directors modified the description of "emerging country" and "emerging country
equity security" to be consistent with the scope of investments that can be made
by other Templeton funds that invest in emerging markets. The Board concluded
that it was consistent with the Fund's investment objective to adopt the revised
definitions, which are set forth below:
'An "emerging country" is any country that is considered to be an emerging or
developing country by the International Bank for Reconstruction and Development
(the "World Bank") and the International Finance Corporation, as well as
countries that are classified by the United Nations or otherwise regarded by
their authorities as emerging or developing. In addition, "emerging country
equity securities" means equity securities issued by (i) companies with a
principal securities trading market in an emerging country, as defined above,
(ii) companies that derive 50% or more of their total revenue from either goods
or services produced in such emerging countries or sales made in such emerging
countries, or (iii) companies organized under the laws of, and with principal
offices in, such emerging countries.'
On July 1, 1997, Hong Kong reverted to the sovereignty of China. As with any
major political transfer of power, this could result in political, social,
economic, market or other developments in Hong Kong, China or other countries
that could affect the value of Fund investments.
5
<PAGE>
PERFORMANCE SUMMARY
In market-price terms, the Templeton Emerging Markets Fund produced a total
return of 33.81% for the one-year period ended August 31, 1997. Based on the
change in net asset value (in contrast to market price), the Fund delivered a
total return of 27.34% 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 on the following page, based on the change in market price,
the Fund delivered a cumulative total return of 596.99% for the period from its
inception on February 26, 1987 through August 31, 1997.
During the reporting period, the Fund's closing price on the New York Stock
Exchange increased $4.75 per share, from $18.375 on August 31, 1996, to $23.125
on August 31, 1997, while the net asset value increased $3.41 per share, from
$17.26 to $20.67.
Shareholders received combined distributions of $1.13 per share, including
long-term capital gains of 88.5 cents ($0.885), short-term capital gains of 3.0
cents ($0.03) and dividend income totaling 21.5 cents ($0.215). Distributions
will vary depending on income earned by the Fund and any profits realized from
the sale of securities in the Fund's portfolio, as well as the level of the
Fund's operating expenses.
Past performance is not predictive of future results.
6
<PAGE>
TEMPLETON EMERGING MARKETS FUND
Periods ended 8/31/97
SINCE
INCEPTION
1-YEAR 5-YEAR 10-YEAR (2/26/87)
- --------------------------------------------------------------------------------
Cumulative Total Return(1)
Based on change in net asset value 27.34% 126.79% 528.09% 596.99%
Based on change in market price 33.81% 117.32% 546.24% 627.03%
Average Annual Total Return(2)
Based on change in net asset value 27.34% 17.79% 20.17% 20.27%
Based on change in market price 33.81% 16.79% 20.51% 20.76%
(1) Cumulative total returns represent 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 dividends and capital gains, either at
net asset value or at market price on the reinvestment date, in accordance with
the dividend reinvestment plan and do not reflect sales charges that would have
been paid at inception or brokerage commissions that would have been paid on
secondary market purchases. Investment return and principal value will fluctuate
with market conditions, currency volatility and the economic, social, and
political climates of the countries where investments are made. Emerging markets
involve heightened risks related to the same factors, in addition to those
associated with the relatively small size and lesser liquidity of these markets.
You may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
7
<PAGE>
[MAP OF CHINA]
THE FOLLOWING LETTER WAS WRITTEN BY DR. MOBIUS AFTER A RECENT TRIP TO BEIJING.
Beijing, a metropolis of wide, sweeping avenues, majestic buildings and enormous
open spaces, is one of China's most architecturally attractive cities. The
Forbidden City, which houses the Imperial Palace, the Summer Palace and
Tiananmen Square, is quite staggering. Tiananmen Square, for example, is almost
incomprehensibly large. It spans 98 acres and can accommodate more than 1
million people.
A major industrial and commercial center, Beijing is the second-largest city in
China. It is now so big that many taxi drivers have trouble finding their way
around. However, government offices are still housed in large, run-down
buildings that remind one of India. As in India, it is not uncommon to have an
elevator door open onto an animated game of table tennis, which workers often
play in the corridors of office buildings. Privately run restaurants, serving
delicious, regional Chinese food for only a few dollars have sprung up
throughout the city. But government-owned eating establishments, patronized by
government officials, continue to charge hundreds of dollars for a Beijing Duck
banquet.
Beijing, a transportation hub for northern China, possesses important facilities
for processing petroleum, coal and iron ore. It is also home to many small
industries. One company we visited produces sheet-fed offset presses. Although
this company has a dominant position in China, it faces increasing competition
from major overseas producers because it cannot produce machines matching the
speed and quality of those
8
<PAGE>
manufactured abroad. Although this company has not achieved significant growth,
many other companies we visited were aggressively pursuing production and
earnings increases.
It is difficult to know which companies will survive the changes now taking
place in China. As a result of liberalized trade regulations, some businesses
are faced with stiff competition from abroad. Others may find themselves in
financial difficulty if the government follows through on its plan to stop
subsidizing enterprises they have subsidized in the past. But this is all part
of the move toward a market economy.
As I traveled to the airport, I thought about China's enormous potential to
become one of the most important economies in the world. If the Chinese
government drops restrictions on foreign exchange capital flows, and allows
locals and foreigners to own the same class of stock, foreigners would be able
to participate more actively in this potential, and Chinese companies could
benefit from the additional resources available to them. I believe that this day
will come soon.*
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 our
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise.
9
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year................... $17.26 $18.23 $22.77 $17.94 $18.74
----------------------------------------------------------------
Income (loss) from investment operations:
Net investment income............................... .27 .25 .23 .10 .29
Net realized and unrealized gains (losses).......... 4.27 1.20 (1.62) 5.87 4.93
----------------------------------------------------------------
Total from investment operations..................... 4.54 1.45 (1.39) 5.97 5.22
----------------------------------------------------------------
Less distributions:
Dividends from net investment income................ (.21) (.26) (.10) (.29) (.39)
Distributions from net realized gains............... (.92) (2.16) (3.05) (.85) (5.63)
----------------------------------------------------------------
Total distributions.................................. (1.13) (2.42) (3.15) (1.14) (6.02)
----------------------------------------------------------------
Net asset value, end of year......................... $20.67 $17.26 $18.23 $22.77 $17.94
================================================================
Total return
Based on market value per share..................... 33.81% 7.45% (16.94)% 26.11% 44.30%
Based on net asset value per share.................. 27.34% 8.69% (8.53)% 33.39% 34.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's)...................... $342,002 $283,678 $294,962 $363,760 $285,407
Ratios to average net assets:
Expenses............................................ 1.67% 1.71% 1.73% 1.78% 1.84%
Net investment income............................... 1.38% 1.51% 1.28% .46% 2.07%
Portfolio turnover rate.............................. 12.60% 8.83% 27.58% 6.50% 21.55%
Average commission rate paid*........................ $.0010 $.0008 -- -- --
</TABLE>
*Relates to purchases and sales of equity securities. Prior to fiscal year end
1996 disclosure of average commission rate was not required.
See notes to financial statements.
10
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES 89.9%
ARGENTINA 2.8%
Astra Cia Argentina de Petroleo SA...................... Energy Sources 154,900 $ 314,692
Atanor Cia Nacional Para la Industria Quimica SA, D..... Chemicals 57,964 84,113
Banco de Galicia y Buenos Aires SA, B................... Banking 398,447 3,010,623
Capex SA, A............................................. Utilities Electrical & Gas 12,400 107,344
Ciadea SA............................................... Automobiles 66,976 172,262
*Garovaglio Y Zorraquin SA.............................. Chemicals 176,191 714,130
Molinos Rio de Plata SA, B.............................. Food & Household Products 116,957 415,521
Nobleza Piccardo Sdad Industrial Comercial y
Financial............................................. Beverages & Tobacco 15,000 95,324
Perez Companc SA, B..................................... Energy Sources 46,499 371,352
Quilmes Industrial SA................................... Beverages & Tobacco 16,000 214,000
Sociedad Comercial del Plata Cadelplata Come............ Multi-Industry 1,216,493 2,702,723
YPF Sociedad Anonima, ADR............................... Energy Sources 39,000 1,269,937
------------
9,472,021
------------
BRAZIL 13.8%
Banco Bradesco SA....................................... Banking 212,011,201 2,078,351
Banco Bradesco SA, pfd.................................. Banking 206,511,555 2,043,358
*Banco do Brasil SA..................................... Banking 693,000 6,349
*Banco do Brazil SA, pfd................................ Banking 21,000,000 213,752
*Banco do Brasil SA, wts., A............................ Banking 4,338,600 14,707
*Banco do Brasil SA, wts., B............................ Banking 6,507,900 23,790
*Banco do Brasil SA, wts., C............................ Banking 10,246,500 35,391
*Banespa-Banco do Estado de Sao Paulo SA, pfd........... Banking 19,576,000 932,259
Copene-Petroquimica do Nordeste SA, A, pfd.............. Chemicals 5,861,800 2,293,164
Duratex SA, pfd......................................... Forest Products & Paper 8,887,800 496,707
Eletrobras-Centrais Eletricas Brasileiras SA, B, pfd.... Utilities Electrical & Gas 26,820,977 12,212,575
Itausa-Investimentos Itau SA, pfd....................... Multi-Industry 7,947,346 7,281,123
*Mannesmann SA.......................................... Machinery & Engineering 31,968 4,539
*Mannesmann SA, pfd..................................... Machinery & Engineering 2,085,844 300,981
Petrobras-Petroleo Brasileiro SA, pfd................... Energy Sources 40,500,966 9,907,245
Telebras-Telecomunicacoes Brasileiras SA................ Telecommunications 83,151,950 8,913,218
Unibanco-Uniao de Bancos Brasileiros SA, pfd............ Banking 14,446,936 489,726
------------
47,247,235
------------
CHILE 3.5%
Antofagasta Holdings Plc................................ Metals & Mining 1,585,000 10,145,603
*Antofagasta Holdings Plc, cvt.......................... Metals & Mining 288,181 1,938,050
------------
12,083,653
------------
CHINA 0.9%
*China Southern Glass Co. Ltd., B....................... Building Materials & Components 867,316 390,597
Chiwan Wharf Holdings Ltd., B........................... Transportation 1,084,000 665,829
*Luoyang Glass Co. Ltd., H.............................. Misc Materials & Commodities 406,000 124,427
Shandong Huaneng Power.................................. Utilities Electrical & Gas 24,000 286,500
Shanghai Chlor-Alkali Chemical Co. Ltd., B.............. Chemicals 1,196,800 378,189
*Shanghai Erfangji Textile Machinery Co. Ltd., B........ Machinery & Engineering 367,356 47,022
*Shanghai Industrial Sewing Machine Corp................ Machinery & Engineering 247,000 32,110
*Shanghai Jin Jiang Tower Co. Ltd., B................... Leisure & Tourism 756,360 213,293
Shanghai New Asia Group Co. Ltd., B..................... Food & Household Products 115,200 52,761
*Shanghai Steel Tube Co. Ltd., B........................ Machinery & Engineering 499,400 66,919
</TABLE>
11
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
CHINA (CONT.)
Shanghai Tyre & Rubber Co. Ltd., B...................... Industrial Components 649,000 $ 318,010
*Shanghai Vacuum Electron Devices Co. Ltd., B........... Appliances & Household Durables 892,360 137,423
Shanghai Yaohua Pilkington Glass, B..................... Building Materials & Components 251,250 84,922
*Shenzhen Properties & Resources Develop.(Group) Ltd.,
B..................................................... Real Estate 290,200 82,759
Shenzhen Vanke Co. Ltd., B.............................. Real Estate 156,480 129,028
------------
3,009,789
------------
COLOMBIA 1.5%
Bavaria SA.............................................. Beverages & Tobacco 52,000 464,908
Cementos Argos SA....................................... Building Materials & Components 341,236 2,588,852
Cia Colombiana de Tabacos SA Coltabaco.................. Beverages & Tobacco 70,000 241,395
Compania Nacional de Chocolates SA...................... Food & Household Products 80,000 687,996
Compania Suramericana de Seguros........................ Insurance 39,137 1,099,705
------------
5,082,856
------------
CZECH REPUBLIC 0.1%
*CEZ.................................................... Utilities Electrical & Gas 15,600 484,597
------------
GHANA 0.1%
Ashanti Goldfields Co. Ltd., GDR........................ Metals & Mining 23,222 240,928
------------
GREECE 11.2%
Alpha Credit Bank....................................... Banking 190,240 12,416,284
Elais Oleaginous Co..................................... Food & Household Products 28,290 792,092
Ergo Bank SA............................................ Banking 186,473 10,875,839
Fourlis Brothers Corp. SA............................... Appliances & Household Durables 118,630 986,632
Hellas Can -- Container Manufacturers................... Metals & Mining 12,000 156,470
Hellenic Bottling Co. SA................................ Food & Household Products 43,572 1,574,679
Hellenic Telecommunications Organizations OTE........... Telecommunications 16,122 358,791
Intracom SA, reg........................................ Electrical & Electronics 5,400 223,795
*National Bank of Greece SA............................. Banking 12,734 1,486,067
Titan Cement Co., reg................................... Building Materials & Components 183,992 9,398,661
------------
38,269,310
------------
HONG KONG 12.2%
Cheung Kong Holdings Ltd................................ Multi-Industry 1,478,000 15,639,202
Dairy Farm International Holdings Ltd................... Merchandising 278,264 233,742
Dairy Farm Int'l Holdings Ltd., 6.50%, conv., pfd....... Merchandising 29,000 22,910
Hang Lung Development Co. Ltd........................... Real Estate 2,907,000 5,251,693
Hopewell Holdings Ltd................................... Construction & Housing 962,553 574,464
HSBC Holdings PLC....................................... Banking 195,992 5,968,658
Jardine Matheson Holdings Ltd........................... Multi-Industry 30,150 211,050
Jardine Strategic Holdings Ltd.......................... Multi-Industry 154,500 571,650
K Wah International Holdings Ltd........................ Building Materials & Components 50,937 27,935
Lai Sun Garment International Ltd....................... Multi-Industry 45,000 54,294
New World Development Co. Ltd........................... Real Estate 1,086,726 6,773,194
Sun Hung Kai Properties Ltd............................. Real Estate 463,000 5,257,629
Tian An China Investments Co. Ltd....................... Real Estate 4,714,000 754,288
*Yaohan Hongkong Corp. Ltd.............................. Merchandising 3,244,000 200,931
------------
41,541,640
------------
</TABLE>
12
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
HUNGARY 0.3%
*Fotex First Hungarian-American Photo-Service........... Multi-Industry 973,000 $ 1,133,845
*Ibusz RT............................................... Leisure & Tourism 1,066 4,322
------------
1,138,167
------------
INDIA 1.6%
Arvind Mills Ltd........................................ Textiles & Apparel 8,500 26,033
*ATV Project India Ltd.................................. Machinery & Engineering 200,000 23,623
Bharat Petroleum Corp., Ltd............................. Energy Sources 92,200 1,081,428
Bombay Dyeing & Manufacturing Co. Ltd................... Chemicals 42,950 108,835
Bses Ltd................................................ Utilities Electrical & Gas 26,650 139,637
Cochin Refineries Ltd................................... Energy Sources 37,850 146,856
DCW Ltd................................................. Chemicals 12,500 7,966
*Essar Shipping Ltd..................................... Transportation 59,249 22,541
Garden Silk Mills Ltd................................... Textiles & Apparel 85,700 35,311
Grasim Industries Ltd Ord............................... Multi-Industry 27,550 275,084
Great Eastern Shipping Co. Ltd.......................... Transportation 63,500 74,131
Gujarat Industries Power Ltd............................ Energy Equipment & Services 2,800 2,500
Gujarat Narmada Valley Fertilizers Co. Ltd.............. Chemicals 43,600 31,139
*Hindustan Organic Chemicals Ltd........................ Chemicals 2,000 1,483
Hindustan Petroleum Corp. Ltd........................... Energy Sources 32,900 431,301
India Cements Ltd....................................... Building Materials & Components 44,000 122,071
India Cements Ltd., GDR................................. Building Materials & Components 61,890 239,824
Indian Aluminium Co. Ltd................................ Metals & Mining 2,000 6,867
Indian Petrochemicals Corp. Ltd......................... Chemicals 63,500 209,748
Indian Rayon & Industries Ltd........................... Multi-Industry 27,750 199,521
Indian Rayon & Industries Ltd., GDR..................... Multi-Industry 5,800 62,350
Indo Gulf Fertilisers & Chemicals Corp. Ltd............. Chemicals 55,000 75,539
Industrial Credit & Inv. Corp. of India (ICICI)......... Financial Services 439,600 1,086,774
Larsen and Toubro Ltd................................... Multi-Industry 12,000 74,165
Mahanagar Telephone Nigam Ltd........................... Telecommunications 2,600 17,105
National Aluminium Co. Ltd.............................. Metals & Mining 64,000 75,594
Reliance Industries Ltd................................. Chemicals 52,000 470,649
Steel Authority of India Ltd............................ Metals & Mining 100,000 55,624
Tata Chemicals Ltd...................................... Chemicals 34,000 148,496
Tata Engineering & Locomotive Co. (Telco)............... Machinery & Engineering 11,000 101,222
Tata Iron & Steel Co. Ltd............................... Metals & Mining 35,000 173,774
Videocon International Ltd.............................. Appliances & Household Durables 90,000 96,415
------------
5,623,606
------------
INDONESIA 2.4%
Asia Pulp & Paper Co. Ltd., ADR......................... Forest Products & Paper 7,400 95,738
PT Barito Pacific Timber, fgn........................... Forest Products & Paper 5,620,500 3,364,717
PT Charoen Pokphand Indonesia, fgn...................... Food & Household Products 1,450,000 342,327
PT Ciputra Dev.......................................... Real Estate 204,000 56,762
PT Gadjah Tunggal TBK, fgn.............................. Automobiles 223,000 56,408
PT Indah Kiat Pulp & Paper Corp. TBK, fgn............... Forest Products & Paper 282,300 109,492
PT Indocement Tunggal Prakarsa, fgn..................... Building Materials & Components 150,000 156,829
PT Indosat, fgn......................................... Telecommunications 71,000 143,676
PT Jakarta International Hotel & Development TBK,
fgn................................................... Real Estate 112,000 55,717
PT Japfa Comfeed Indonesia TBK.......................... Food & Household Products 539,000 209,055
</TABLE>
13
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
INDONESIA (CONT.)
PT Kalbe Farma, fgn..................................... Health & Personal Care 144,000 $ 91,062
PT Metrodata Electronic, fgn............................ Electrical & Electronics 347,000 351,096
PT Polysindo Eka Perkasa, fgn........................... Textiles & Apparel 5,424,000 2,378,145
PT Semen Cibinong TBK, fgn.............................. Building Materials & Components 10,500 2,479
PT Sinar Mas Agro Resources & Technology Corp., fgn..... Food & Household Products 92,400 52,978
PT Sinar Mas Multi Artha, fgn........................... Financial Services 708,050 370,144
*Pt Sinar Mas Multi Artha, fgn., wts.................... Financial Services 53,100 17,909
PT Sumalindo Lestari Jaya TBK, fgn...................... Forest Products & Paper 123,000 72,597
PT Tambang Timah (Persero), fgn......................... Metals & Mining 210,000 276,222
------------
8,203,353
------------
ISRAEL 0.3%
Clal Industries Ltd..................................... Multi-Industry 77,000 427,077
Discount Investment Corp................................ Multi-Industry 18,000 514,180
First International Bank of Israel...................... Banking 195 144,095
------------
1,085,352
------------
JORDAN 0.0%
*Jordan Cement Factories Ltd............................ Building Materials & Components 5,000 27,343
------------
MALAYSIA 3.7%
Berjaya Singer Bhd...................................... Appliances & Household Durables 80,000 124,771
Boustead Holdings Bhd., fgn............................. Food & Household Products 54,000 83,112
Federal Flour Mills Bhd................................. Food & Household Products 974,998 1,859,124
Hong Leong Industries Bhd............................... Multi-Industry 28,800 63,535
*Hong Leong Industries Bhd, wts., fgn................... Multi-Industry 4,500 2,101
Leader Universal Holdings Bhd........................... Industrial Components 93,000 89,382
Malayawata Steel Bhd., fgn.............................. Metals & Mining 736,000 727,504
Malaysian International Shipping Corp. Bhd., fgn........ Transportation 1,930,666 3,962,034
MBF Capital Bhd......................................... Financial Services 98,000 91,841
Oriental Holdings Bhd................................... Automobiles 975,880 3,504,657
*Perlis Plantations Bhd................................. Multi-Industry 783,598 1,929,681
Perlis Plantations Bhd., fgn............................ Multi-Industry 78,750 193,929
Perlis Plantations Oil Palms Bhd........................ Multi-Industry 625 515
Renong Bhd.............................................. Multi-Industry 112,000 114,921
*Renong Bhd., wts....................................... Multi-Industry 8,375 2,578
Renong, 4.00%, conv., 9/09/01........................... Multi-Industry 13,400** 3,025
------------
12,752,710
------------
MEXICO 6.6%
*Altos Hornos de Mexico SA.............................. Metals & Mining 4,000 10,762
Cementos Mexicanos SA de CV (Cemex), B.................. Building Materials & Components 514,250 2,848,133
Cifra SA de CV, A....................................... Merchandising 138,335 254,201
Cifra SA, C............................................. Merchandising 1,131,043 2,017,332
DESC SA, A.............................................. Multi-Industry 138,000 1,117,193
DESC SA, B.............................................. Multi-Industry 1,000 8,353
DESC SA, C.............................................. Multi-Industry 4,314 35,755
*Grupo Financiero Banamex Accival SA, B................. Banking 613,000 1,642,386
*Grupo Financiero Banamex Accival SA, L................. Banking 49,959 123,581
*Grupo Financiero Bancomer SA de CV, B.................. Banking 1,576,000 961,964
*Grupo Financiero Bancomer SA de CV, L.................. Banking 2,730,370 1,403,428
</TABLE>
14
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
MEXICO (CONT.)
*Grupo Financiero Serfin SA, B.......................... Banking 1,020,411 $ 432,711
Telefonos de Mexico SA, L, ADR.......................... Telecommunications 204,700 9,390,612
Vitro SA................................................ Food & Household Products 553,355 2,410,529
------------
22,656,940
------------
PAKISTAN 0.4%
*DG Khan Cement Co...................................... Building Materials & Components 110,000 32,609
Fauji Fertilizer Co. Ltd................................ Chemicals 67,000 148,964
National Development Leasing Corp....................... Financial Services 148,500 33,567
Pakistan Telecom Corp. PTC.............................. Telecommunications 873,000 792,568
Pakistan Telecommunications Corp., PTC, A............... Telecommunications 420,000 381,304
------------
1,389,012
------------
PHILIPPINES 2.5%
*A Soriano Corp......................................... Multi-Industry 1,000,000 72,631
*Keppel Philippine Holdings Inc., B..................... Machinery & Engineering 572,313 58,100
*Philex Mining Corp., B................................. Metals & Mining 8,231,008 554,350
Philippine Long Distance Telephone Co., ADR............. Telecommunications 150,706 3,805,326
*Philippine National Bank............................... Banking 550,430 2,398,704
RFM Corporation......................................... Food & Household Products 5,770,100 1,066,773
RFM Corporation, conv., pfd............................. Food & Household Products 1,049,109 162,094
Sime Darby Pilipinas Inc................................ Industrial Components 573,286 470,798
------------
8,588,776
------------
POLAND 0.2%
Mostostal Export SA..................................... Construction & Housing 82,978 269,847
*Polifarb Ceiszyu SA.................................... Chemicals 25,000 139,578
*Rolimpex SA............................................ Wholesale & International Trade 1,910 7,421
Zaklady Cementowo Wapiennicze Gorazdze Chorula.......... Building Materials & Components 2,186 89,333
------------
506,179
------------
PORTUGAL 7.3%
Banco Comercial Portugues SA............................ Banking 733,432 13,610,863
Banco Espirito Santo e Comercial de Lisboa.............. Banking 14,900 366,293
Banco Totta & Acores SA................................. Banking 102,881 1,849,104
BPI Socieda de Gestora de Participacoes Socias SA....... Banking 350,585 6,892,955
Espirito Santo Financial Holding SA, ADR................ Banking 91,600 1,694,600
Portucel Industrial Empresa Product de Celulose SA...... Forest Products & Paper 39,000 292,739
*Sociedade Portuguesa de Celulose SA.................... Forest Products & Paper 6,200 186,288
------------
24,892,842
------------
RUSSIA 1.1%
*Aeroflot............................................... Transportation 800 114,000
GUM Trade House......................................... Merchandising 40,000 168,000
Irkutskenergo........................................... Utilities Electrical & Gas 1,000,000 308,000
Lukoil-Holdings......................................... Energy Sources 13,000 296,660
Mosenergo............................................... Utilities Electrical & Gas 300,000 462,000
*Norilsk Nickel......................................... Metals & Mining 56,000 674,800
Rao Gazprom, ADR, 144A.................................. Energy Sources 8,000 155,400
Rostelekom, pfd......................................... Telecommunications 138,400 357,072
</TABLE>
15
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
RUSSIA (CONT.)
*Saint Petersburg City Telephone Net, pfd............... Telecommunications 58,000 $ 69,020
Unified Energy System................................... Utilities Electrical & Gas 3,000,000 1,191,000
------------
3,795,952
------------
SINGAPORE 2.3%
First Capital Corp. Ltd................................. Real Estate 22,000 49,196
First Capital Corp. Ltd., fgn........................... Real Estate 107,000 239,272
GP Batteries International Ltd.......................... Electrical & Electronics 35,000 94,939
*GP Batteries International Ltd., wts................... Electrical & Electronics 8,750 8,336
Hai Sun Hup Group Ltd................................... Transportation 112,000 71,876
*Hai Sun Hup Group Ltd., wts............................ Transportation 33,600 7,225
Inchcape Bhd., fgn...................................... Wholesale & International Trade 40,000 133,642
Jaya Holdings Ltd....................................... Transportation 356,500 172,176
Jaya Holdings Ltd., 3.00%, 8/31/98, conv................ Transportation 15,900** 9,257
*Jaya Holdings Ltd., wts., expire 8/31/98............... Transportation 30,051 4,672
*Jaya Holdings Ltd., wts., expire 10/09/99.............. Transportation 36,780 10,524
Jurong Shipyard, fgn.................................... Machinery & Engineering 26,000 115,250
MCL Land Ltd............................................ Real Estate 15,000 19,649
Natsteel Ltd., fgn...................................... Metals & Mining 1,000 2,726
Osprey Maritime Ltd..................................... Transportation 248,000 288,773
*Osprey Maritime Ltd., cvt., prf........................ Transportation 66,960 43,857
Prima Ltd............................................... Food & Household Products 511,000 1,514,575
Sembawang Corp. Ltd..................................... Multi-Industry 122,000 520,609
Singapore Bus Service (1978) Ltd., fgn.................. Transportation 903,600 4,095,044
Tibs Holdings Ltd....................................... Transportation 105,600 123,747
United Industrial Corp.................................. Real Estate 164,000 111,756
WBL Corp. Ltd........................................... Multi-Industry 43,000 108,104
------------
7,745,205
------------
SOUTH AFRICA 0.7%
Anglo American Industrial Corp. Ltd..................... Multi-Industry 2,044 85,938
Anglovaal Industried Ltd................................ Multi-Industry 15,825 58,186
Bonnita Holdings Ltd.................................... Food & Household Products 80,000 39,220
BTR Dunlop Ltd.......................................... Industrial Components 61,000 39,007
CG Smith Ltd............................................ Multi-Industry 32,000 163,359
Del Monte Royal Foods Ltd............................... Food & Household Products 517,825 298,013
Edgars Stores........................................... Textiles & Apparel 3,050 81,264
Engen Ltd............................................... Energy Sources 85,724 456,805
Foodcorp Ltd............................................ Food & Household Products 4,000 24,640
Kersaf Investments Ltd.................................. Leisure & Tourism 15,000 108,707
Palabora Mining Co. Ltd................................. Metals & Mining 3,500 62,293
Rembrandt Group Ltd..................................... Multi-Industry 2,100 20,322
Reunert Ltd............................................. Electrical & Electronics 20,000 66,077
Sappi Ltd............................................... Forest Products & Paper 17,000 157,263
Sentrachem Ltd.......................................... Chemicals 24,000 58,062
South African Breweries Ltd............................. Beverages & Tobacco 18,306 549,199
South African Iron & Steel Industrial Corp. Ltd......... Metals & Mining 164,000 101,025
</TABLE>
16
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
SOUTH AFRICA (CONT.)
Sun International (South Africa) Ltd.................... Leisure & Tourism 74,000 $ 47,319
Toyota South Africa Limited............................. Automobiles 12,000 79,292
------------
2,495,991
------------
SOUTH KOREA 0.8%
Central Banking Corp.................................... Financial Services 3,856 45,289
Dae Duck Electronics Co. Ltd............................ Electrical & Electronics 1,586 119,675
Daegu Bank Co. Ltd...................................... Banking 74,484 461,347
Dongkuk Steel Mill Co. Ltd.............................. Metals & Mining 3,000 66,814
Hae In Corp. Ltd........................................ Merchandising 1,531 70,400
Hankook Cosmetics Co. Ltd............................... Health & Personal Care 8,700 205,330
Korea Kumho Petrochemical............................... Chemicals 5,000 30,471
Kyung Dong Boiler Co Ltd................................ Energy Equipment & Services 8,154 302,669
Saehan Precision Co Ltd................................. Electrical & Electronics 11,892 342,595
*Saehan Precision Co. Ltd., rts......................... Electrical & Electronics 3,569 7,909
Samsung Display Devices (L) Ltd......................... Electrical & Electronics 1,730 92,655
*Samsung Heavy Industries Co. Ltd....................... Machinery & Engineering 11,000 131,634
Ssangyong Oil Refining Co Ltd........................... Energy Equipment & Services 34,000 678,116
Tong Yang Merchant Bank................................. Financial Services 8,666 73,937
------------
2,628,841
------------
SRI LANKA 0.1%
Aitken Spence & Co. Ltd................................. Multi-Industry 50,000 151,809
*Lanka Ceramic Ltd...................................... Building Materials & Components 162,000 81,977
Lanka Walltile Ltd...................................... Building Materials & Components 27,300 12,203
United Motor Lanka Ltd.................................. Automobiles 188,320 165,179
------------
411,168
------------
THAILAND 2.8%
American Standard Sanitaryware Public Co. Ltd., fgn..... Building Materials & Components 17,000 136,114
Asia Credit Public Co. Ltd.............................. Financial Services 36,000 77,917
*Asia Fibre Public Co. Ltd., fgn........................ Textiles & Apparel 233,600 44,411
Ayudhya Insurance Public Co. Ltd., fgn.................. Insurance 15,000 74,144
Bangkok Insurance....................................... Insurance 13,000 161,977
Bangkok Insurance, fgn.................................. Insurance 4,900 75,886
*Banpu Public Company Ltd............................... Energy Sources 7,000 64,288
Charoen Pokphand Feedmill Public Co. Ltd................ Food & Household Products 64,000 106,698
Chareon Pokphand Feedmill Public Co. Ltd., fgn.......... Food & Household Products 22,700 51,787
Hana Microelectronics Co. Ltd........................... Electrical & Electronics 80,000 325,241
Hana Microelectronics Co. Ltd., fgn..................... Electrical & Electronics 45,000 221,117
Industrial Finance Corp. of Thailand, fgn............... Banking 500,300 395,089
Italian-Thai Development Public Company................. Construction & Housing 147,000 262,270
Jasmine International Public Co. Ltd.................... Telecommunications 115,100 90,053
Jasmine International Public Co. Ltd., fgn.............. Telecommunications 603,900 472,546
Kian Gwan (Thailand) Public Co. Ltd., fgn............... Real Estate 26,000 50,190
*Land and House Public Co. Ltd.......................... Multi-Industry 80,000 67,271
Land and House Public Co. Ltd., sec..................... Multi-Industry 88,236 71,471
Phatra Thanakit Public Co. Ltd.......................... Multi-Industry 493,000 403,744
Phatra Thanakit Public Co. Ltd., fgn.................... Multi-Industry 393,000 390,816
Regional Container Lines Public Co. Ltd., fgn........... Transportation 48,100 103,403
</TABLE>
17
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
THAILAND (CONT.)
*Regional Container Lines Public Co. Ltd., rts.......... Transportation 89,800 $ 140,518
Saha Union Public Co. Ltd............................... Multi-Industry 332,500 189,639
Sanyo Universal Electric Public Co Ltd., fgn............ Appliances & Household Durables 6,000 4,738
Serm Suk Public Co. Ltd................................. Food & Household Products 57,000 563,498
Siam Cement Public Co. Ltd. (The), loc.................. Building Materials & Components 6,700 76,426
Siam Cement Co. Ltd.(The), fgn.......................... Building Materials & Components 37,900 580,860
Siam Cement Public Co. Ltd. (The) , sec................. Building Materials & Components 23,300 268,066
*Siam Makro Public Company Ltd.......................... Merchandising 224,000 353,787
*Thai Airways International Public Co. Ltd.............. Transportation 388,000 448,260
Thai Investments and Securities Ltd..................... Financial Services 281,000 673,940
Thai Petrochemical Industry Public Co. Ltd.............. Chemicals 500,000 157,210
Thai Petrochemical Industry Public Co. Ltd., fgn........ Chemicals 656,000 206,259
Thai Rayon Public Co. Ltd............................... Textiles & Apparel 4,100 9,353
*Thai Telephone & Telecommunication Public Co. Ltd...... Telecommunications 151,000 47,477
Thai Wah Public Co. Ltd., fgn........................... Multi-Industry 8,450 2,162
Tipco Asphalt Public Co. Ltd............................ Building Materials & Components 10,000 30,418
Tipco Asphalt Public Co. Ltd., fgn...................... Building Materials & Components 97,000 297,894
Total Access Communication Public Co. Ltd............... Telecommunications 36,000 144,000
United Communications Industry Public Co. Ltd., loc..... Multi-Industry 534,000 1,671,190
United Standard Terminal Public Co. Ltd., fgn........... Wholesale & International Trade 44,000 53,407
------------
9,565,535
------------
TURKEY 8.6%
Akbank.................................................. Banking 115,164,373 7,386,296
Akcansa Cimento Sanayi Ve Ticaret AS.................... Building Materials & Components 3,147,523 469,471
Arcelik AS.............................................. Appliances & Household Durables 50,000,541 4,996,773
Bagfas.................................................. Chemicals 2,805,790 711,450
Beko Elektronik AS...................................... Appliances & Household Durables 17,797,386 1,353,837
Cimentas Izmir Cimento Fabrikasi Turk AS................ Building Materials & Components 4,802,763 616,069
Cimsa Cimento Sanayi ve Ticaret AS...................... Building Materials & Components 2,841,000 389,851
Erciyas Biracilik....................................... Food & Household Products 800,000 103,812
Eregli Demir ve Celik Fabrikalari AS.................... Metals & Mining 25,961,250 4,259,497
Finansbank.............................................. Banking 168,292,154 2,033,241
Izocam Ticaret ve Sanayii AS, br........................ Building Materials & Components 8,359,587 329,176
Koc Holding AS.......................................... Multi-Industry 4,654,999 1,194,230
Koc Yatirim ve Sanayii Mamullesi Pazarlanca AS.......... Multi-Industry 6,519,681 2,022,692
Marshall Boya ve Vernik Sanayii AS...................... Industrial Components 5,828,256 599,829
*Netas Northern Electric Telekomunic Asyon AS........... Electrical & Electronics 364,000 96,641
Petkim Petrokimya Holding AS............................ Chemicals 170,000 67,955
Sasa Suni Ve Sentetik Elyaf Sanayi AS................... Chemicals 1,400,000 63,481
Tekstil Bankasi AS, br.................................. Banking 4,343,527 67,377
Tofas Turk Otomobil Fabrikasi AS........................ Automobiles 2,282,625 126,653
Turk Demir Dokum, br.................................... Appliances & Household Durables 25,478,402 1,216,080
Turkiye Garanti Bankasi AS.............................. Banking 27,909,060 1,115,630
Vakif Finansal Kiralama AS.............................. Financial Services 12,484,069 193,655
------------
29,413,696
------------
VENEZUELA 1.9%
Ceramica Carabobo CA, A, ADR............................ Building Materials & Components 190,666 222,124
*Consolidada Carabobo, B................................ Building Materials & Components 962,630 64,401
</TABLE>
18
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
VENEZUELA (CONT.)
Electricidad de Caracas................................. Utilities Electrical & Gas 1,279,754 $ 2,165,539
*Manufacturera de Aparatos Domesticos SA................ Appliances & Household Durables 36,000 37,593
Mavesa SA, ADR.......................................... Food & Household Products 289,500 2,279,812
Siderurgica Venezolana Sivensa SAICA Svs., ADR.......... Metals & Mining 21,750 115,971
Siderurgica Venezolana Sivensa SAICA Svs., ADR, B,
new................................................... Metals & Mining 2,910,880 1,552,079
Siderurgica Venezolana Sivensa SAICA Svs., ADR, B, new,
144A.................................................. Metals & Mining 28,440 151,642
Venezolana Prerreducidos Caroni Venprecar CA, GDS,
144A.................................................. Metals & Mining 1,764 10,795
------------
6,599,956
------------
ZIMBABWE 0.2%
Meikles Africa Ltd...................................... Multi-Industry 63,000 151,200
Transarchipel Shipping Ltd.............................. Multi-Industry 587,000 295,160
Zimbabwe Sun Ltd........................................ Multi-Industry 102,671 43,882
------------
490,242
------------
TOTAL LONG TERM SECURITIES (COST $189,893,817).......... 307,442,895
------------
SHORT TERM OBLIGATIONS 9.4% (COST $32,108,170)
U.S. Treasury Bills, 4.82% to 5.16% with maturities to
11/28/97............................................. 32,340,000 32,119,902
------------
TOTAL INVESTMENTS 99.3% (COST $222,001,987)............. 339,562,797
OTHER ASSETS, LESS LIABILITIES 0.7%..................... 2,439,464
------------
TOTAL NET ASSETS 100.0%................................. $342,002,261
============
</TABLE>
*Non-income producing.
**Designates debt securities that are traded in U.S. dollars.
See notes to financial statements.
19
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $222,001,987)............................. $339,562,797
Cash................................................................................ 1,447,183
Receivables:
Investment securities sold......................................................... 784,845
Dividends and other................................................................ 1,175,895
------------
Total assets.................................................................... 342,970,720
------------
Liabilities:
Payable for investment securities purchased......................................... 122,792
Accrued expenses.................................................................... 845,667
------------
Total liabilities............................................................... 968,459
------------
Net assets, at value............................................................ $342,002,261
============
Net assets consist of:
Undistributed net investment income................................................. $ 4,351,887
Net unrealized appreciation......................................................... 117,560,810
Accumulated net realized gain....................................................... 27,324,327
Capital shares...................................................................... 192,765,237
------------
Net assets, at value............................................................ $342,002,261
============
Net asset value per share ($342,002,261 / 16,547,739 shares outstanding)............. $20.67
============
</TABLE>
See notes to financial statements.
20
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1997
<TABLE>
<S> <C> <C>
Investment income:
(net of $396,424 foreign taxes withheld)
Dividends............................................................... $ 8,459,108
Interest................................................................ 1,419,631
------------
Total investment income............................................. $ 9,878,739
Expenses:
Management fees (Note 3)................................................ 4,044,551
Administrative fees (Note 3)............................................ 485,346
Transfer agent fees..................................................... 20,050
Custodian fees.......................................................... 586,714
Reports to shareholders................................................. 171,700
Registration and filing fees............................................ 19,600
Professional fees (Note 3).............................................. 39,330
Directors' fees and expenses............................................ 31,100
Other................................................................... 9,540
------------
Total expenses...................................................... 5,407,931
------------
Net investment income............................................. 4,470,808
------------
Realized and unrealized gains:
Net realized gain from:
Investments............................................................ 34,698,228
Foreign currency transactions.......................................... 15,942
------------
Net realized gain 34,714,170
Net unrealized appreciation on investments.............................. 35,709,116
------------
Net realized and unrealized gain......................................... 70,423,286
------------
Net increase in net assets resulting from operations..................... $74,894,094
============
</TABLE>
See notes to financial statements.
21
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income............................................... $ 4,470,808 $ 4,136,036
Net realized gain from investments and foreign currency
transactions...................................................... 34,714,170 8,954,426
Net unrealized appreciation on investments.......................... 35,709,116 10,755,338
-------------------------------
Net increase in net assets resulting from operations............ 74,894,094 23,845,800
Distributions to shareholders from:
Net investment income............................................... (3,534,016) (4,331,298)
Net realized gains.................................................. (15,067,265) (34,941,931)
Capital share transactions (Note 2).................................. 2,031,444 4,143,230
-------------------------------
Net increase (decrease) in net assets........................... 58,324,257 (11,284,199)
Net assets:
Beginning of year.................................................... 283,678,004 294,962,203
-------------------------------
End of year.......................................................... $342,002,261 $283,678,004
===============================
Undistributed net investment income included in net assets:
Beginning of year.................................................... $ 3,574,929 $ 3,770,191
===============================
End of year.......................................................... $ 4,351,887 $ 3,574,929
===============================
</TABLE>
See notes to financial statements.
22
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Emerging Markets Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940 as a closed-end, diversified investment company.
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. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
The Brazilian Government has exercised and may continue to exercise substantial
influence over the exchange of Brazilian 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 $47 million as of August 31, 1997.
c. 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.
23
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
Notes to Financial Statements (cont.)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders 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.
2. CAPITAL SHARES
At August 31, 1997, there were 30 million shares authorized ($0.01 par value).
During the years ended August 31, 1997 and 1996, 112,244 shares were issued for
$2,031,444 and 251,242 shares were issued for $4,143,230 from reinvested
distributions, respectively.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers and directors of Templeton Asset
Management Ltd. (TAML), and Franklin Templeton Services, Inc. (FT Services), the
Fund's investment manager and administrative manager, respectively.
The Fund pays an investment management fee to TAML of 1.25% per year of the
average daily net assets of the Fund. The Fund pays an administrative fee
monthly to FT Services based on a rate of 0.15% per year of the Fund's average
daily net assets.
During the year ended August 31, 1997, legal fees of $11,552 were paid to a law
firm in which an officer of the fund is a partner.
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1997 aggregated $36,996,946 and $62,435,051, respectively.
24
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
Notes to Financial Statements (cont.)
5. INCOME TAXES
At August 31, 1997, the net unrealized appreciation based on the cost of
investments for income tax purposes of $223,213,067 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation........... $139,231,665
Unrealized depreciation........... (22,881,935)
------------
Net unrealized appreciation....... $116,349,730
============
</TABLE>
25
<PAGE>
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 statement of investments, of Templeton Emerging Markets Fund, Inc. as of
August 31, 1997, 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, 1997, 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, 1997, 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
New York, New York
September 26, 1997
26
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
Annual Meeting of Shareholders, February 25, 1997
- --------------------------------------------------------------------------------
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Ft. Lauderdale, Florida, on February 25, 1997. The purpose
of the meeting was to elect five directors of the Fund, to ratify the selection
of McGladrey & Pullen, LLP, as the Fund's independent public accountants for the
fiscal year ending August 31, 1997 and in their discretion, to authorize the
proxyholders to vote upon such other matters which may legally come before the
meeting or any other adjournment thereof. At the meeting, the following persons
were elected by the shareholders to serve as directors of the Fund: John Wm.
Galbraith, Betty P. Krahmer, Gordon S. Macklin, Fred R. Millsaps and Edith E.
Holiday. The shareholders ratified the selection of McGladrey & Pullen, LLP, to
serve as the Fund's independent public accountants for the fiscal year ending
August 31, 1997. No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. Election of five (5) Directors for the terms set forth below:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
FOR SHARES WITHHELD SHARES
----------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Term expiring 2000:
John Wm. Galbraith 11,795,340 71.43% 158,362 0.96%
Betty P. Krahmer 11,811,107 71.53% 142,595 0.86%
Gordon S. Macklin 11,810,545 71.52% 143,157 0.87%
Fred R. Millsaps 11,771,446 71.29% 182,256 1.10%
Term Expiring 1999:
Edith E. Holiday 11,722,942 70.99% 230,760 1.40%
</TABLE>
2. Ratification of the selection of McGladrey & Pullen, LLP, as independent
public accountants of the Fund for the fiscal year ending August 31, 1997:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES
----------- ----------- ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
11,750,278 71.16% 50,592 0.31% 152,832 0.92%
</TABLE>
27
<PAGE>
TEMPLETON EMERGING MARKETS FUND, INC.
Tax Designation
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates $33,500,000 as a capital gain dividend for the fiscal year ended
August 31, 1997.
28
<PAGE>
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 and capital gains distributions will be reinvested
automatically; ChaseMellon Shareholder Services, Investor Services, P.O. Box
3338, South Hackensack, NJ 07606-1938, will provide additional Plan information
upon request. -- Whenever the Fund declares dividends in either cash or common
stock of the Fund, if the market price is equal to or exceeds net asset value at
the valuation date, the participant will receive the dividends entirely in stock
at a price equal to the net asset value, but not less than 95% of the then
current market price of the Fund's shares. If the market price is lower than net
asset value 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 automatic reinvestment of
dividends and/or capital gains does not relieve the participant of any income
tax which may be payable on dividends or distributions. -- The participant may
withdraw from the Plan without penalty at any time by written notice to Mellon
Securities Trust Company (the "Plan Agent") at the address above. Upon
withdrawal, the participant will receive, without charge, stock certificates
issued in the participant's name for all full shares; or, if the participant
wishes, Mellon Securities Trust Company will sell the participant's shares and
send the proceeds, less a service fee of $5.00 and less trading
fees. -- Whenever shares are purchased on the New York Stock Exchange or
otherwise on the open market, each participant will pay a pro rata portion of
trading fees. Trading fees will be deducted from amounts to be invested.
SHAREHOLDER INFORMATION
Shares of Templeton Emerging Markets Fund, Inc. are traded daily on the New York
Stock Exchange under the symbol "EMF". The Fund's shares are also listed and
traded on the Pacific Exchange. Information about the net asset value and the
market price is published each Monday in the Wall Street Journal, weekly in
Barron's and each Saturday in The New York Times and other newspapers. Daily
market prices for the Fund's shares are published in the New York Stock Exchange
Composite Transactions section of newspapers.
For current information about dividends and shareholder accounts, call
1-800-292-9293.
The daily closing net asset value as of the previous business day may be
obtained by calling Franklin Templeton's Fund Information Department after 10
a.m. Eastern Time any business day at 1-800-DIAL-BEN (1-800-342-5236).
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., 100 Fountain Parkway,
P.O. Box 33030, St. Petersburg, FL 33733-8030.
29
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<PAGE>
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<PAGE>
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<PAGE>
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
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global
Real Estate Fund
Templeton Global
Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton Global
Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and
Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High Income
Currency Fund
Templeton Americas Government
Securities Fund
GROWTH
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
Fund Allocator Series
Franklin Templeton Conservative
Target Fund
Franklin Templeton Moderate
Target Fund
Franklin Templeton Growth
Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment Grade
Income Fund
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
For Corporations
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES+
Franklin Valuemark(R)
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.
+Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
09/97.1
<PAGE>
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
SHAREHOLDER SERVICES
1-800/632-2301
FUND INFORMATION
1-800/342-5236
This report must be preceded or accompanied by the current prospectus for the
Templeton Emerging Markets Fund, Inc., which contains more complete information
including risk factors, charges and expenses. 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, as well as investment decisions by the
Investment Manager, which will not always be profitable or wise. 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 A97 10/97
