ANNUAL REPORT
TEMPLETON EMERGING
MARKETS FUND, INC.
AUGUST 31, 1999
[FRANKLIN(R) TEMPLETON(R) LOGO]
PAGE
[Franklin(R) Templeton(R) SEAL]
[PHOTO]
J. MARK MOBIUS, PH.D.
President
Templeton Emerging
Markets Fund, Inc.
Dr. Mobius has been living in emerging market countries 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 business practices and customs unique to developing nations.
PAGE
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
Your Fund's Goal: 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 this annual report of Templeton Emerging Markets
Fund, covering the year ended August 31, 1999. We are also pleased to announce
that the Fund delivered a +99.91% one-year cumulative total return in
market-price terms, and +60.34% in net asset value terms, as shown in the
Performance Summary on page 5.
The period under review began with the bottoming out of most emerging market
equities. But despite the imposition of strict currency controls by Malaysia in
September 1998, many emerging markets began to recover in October, when the U.S.
began a series of interest rate reductions. These were followed by reductions by
other central banks around the world, and the resulting boost in liquidity
sparked a strong recovery in some emerging markets during the latter portion of
CONTENTS
Shareholder Letter ..... 1
Performance Summary .... 5
Important Notice
to Shareholders ........ 6
Year 2000
Readiness Update ....... 9
Financial Highlights &
Statement of Investments 11
Financial Statements ... 19
Notes to
Financial Statements ... 22
Independent
Auditors' Report ....... 25
Tax Designation ........ 26
Change in Independent
Auditor ................ 30
[FUND CATEGORY PYRAMID GRAPHIC]
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 12 of
this report.
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
8/31/99
[PIE CHART]
Asia 45.4%
Latin America 28.2%
Mid-East/Africa 13.0%
Europe 5.8%
Short-Term Investments & Other Net Assets 7.6%
1998. However, by the end of November, the inability of the Brazilian government
to pass key reforms through its Congress caused global investors to fear that
another crisis was developing, and investment in emerging markets returned to
the sidelines. Outflows of investment dollars during most of December and into
the new year prompted Brazil's government to float the real. Although this
caused the real to plummet, it also initiated a Latin American stock market
rally that lasted throughout the first quarter of 1999. Fears of yet another
crisis faded and Asian equity markets resumed their recovery.
This recovery continued until a slight rise in inflation was reported in the
U.S., prompting Alan Greenspan, Chairman of the U.S. Federal Reserve Board, to
warn of a possible interest rate increase. Reacting to these developments in the
U.S., Latin American and Asian markets corrected sharply. However, the
correction was short-lived and when the U.S. raised interest rates in June and
August, the news had already been discounted by the market and little reaction
was recorded.
During the year under review, we made some significant changes to the Fund's
portfolio, reducing its defensive position in short-term investments and other
net assets from 31.6% of total net assets to 7.6% at the end of the reporting
period. Our new investments maintained the Fund's previous geographic exposures,
and on August 31, 1999, South African holdings constituted the greatest
proportion of the portfolio (12.8% of
2
PAGE
total net assets), followed by South Korea (10.9%), Mexico (9.7%) and Brazil
(9.7%). Asia continued to represent the highest concentration of Fund holdings,
and our investments in Singapore, Thailand, Hong Kong and South Africa were top
contributors to the Fund's performance. By industry breakdown,
telecommunications, multi-industry, and banking were the largest weightings
represented in the Fund.
Looking forward, recent announcements of positive global economic indicators may
contribute to favorable results among emerging market securities. However,
markets may be in for a bit of short-term volatility as Asia responds to
tensions following China's rebuff of Taiwan's efforts to normalize relations,
and upcoming elections create political uncertainty in Russia, Japan, Malaysia,
Mexico and Argentina. In spite of these and other concerns, we continue to
regard market corrections as important opportunities to strengthen the Fund's
portfolio, and we believe that the recovery in emerging markets may be sustained
over the long term.
Of course, investing in foreign securities involves special risks, such as
adverse economic, social and political developments in the countries where the
Fund invests, as well as market and currency volatility. Emerging market
securities involve heightened risks related to the same factors, in addition to
those associated with the relatively small size and lesser liquidity of these
markets. Investing in any emerging market means accepting a certain amount of
volatility and, in some cases, the consequences of severe market corrections.
For example, Mexico's
TOP 10 COUNTRIES*
Based on Total Net Assets
8/31/99
% OF TOTAL
COUNTRY NET ASSETS
- -----------------------------
South Africa 12.8%
South Korea 10.9%
Mexico 9.7%
Brazil 9.7%
Thailand 8.6%
Singapore 8.5%
Hong Kong** 5.9%
Indonesia 4.6%
Philippines 4.0%
Argentina 3.6%
* Does not include short-term investments and other net assets.
** Hong Kong reverted to the sovereignty of China on July 1, 1997.
3
PAGE
TOP 10 HOLDINGS*
8/31/99
COMPANY % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
- ---------------------------------------------
Telefonos de Mexico SA
(Telmex), ADR
Telecommunications, Mexico 4.0%
Korea Electric Power Corp.
Utilities Electrical & Gas,
South Korea 3.7%
Anglo American PLC
Metals & Mining,
South Africa 3.1%
LG Electronics Inc.
Electrical & Electronics,
South Korea 2.6%
Thai Farmers Bank Public
Co. Ltd.
Banking, Thailand 2.4%
Philippine Long Distance
Telephone Co., ADR
Telecommunications,
Philippines 2.0%
City Developments Ltd.
Real Estate, Singapore 1.9%
Cemex SA
Building Materials &
Components, Mexico 1.9%
Samsung Display Devices Ltd.
Electrical & Electronics,
South Korea 1.7%
Telesp Participacoes SA
Telecommunications, Brazil 1.7%
* Does not include short-term investments and other net assets.
equity market has increased 3,760% in the last 15 years, but has suffered eight
quarterly declines of more than 15% during that time.(1) While short-term
volatility can be disconcerting, declines in excess of 50% are not unusual in
emerging markets.
Please remember that this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our investment strategies and the Fund's portfolio composition. Although past
performance is not predictive of future results, these insights may help you
better understand our investment and management philosophy.
We thank you for your participation in Templeton Emerging Markets Fund and
welcome your comments and suggestions.
Sincerely,
/s/ J. MARK MOBIUS
J. Mark Mobius, Ph.D.
President
Templeton Emerging Markets Fund, Inc.
(1) Source: Mexico Bolsa Index. Based on quarterly percentage price change over
15 years ended June 30, 1999. Market return is measured in U.S. dollar terms and
does not include reinvested dividends.
4
PAGE
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the Fund's portfolio and any
profits realized from the sale of the portfolio's securities, as well as the
level of the Fund's operating expenses. Past distributions are not indicative of
future trends. All total returns include reinvested distributions according to
the terms specified in the Fund's dividend reinvestment and cash purchase plan
and do not reflect any sales charges paid at inception or brokerage commissions
paid on secondary market purchases.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CHANGE 8/31/99 8/31/98
- ----------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value +$0.75 $11.60 $10.85
Market Price (NYSE) +$3.0625 $12.2500 $ 9.1875
<CAPTION>
DISTRIBUTIONS (9/1/98 - 8/31/99)
------------------------------------
<S> <C>
Dividend Income $0.29
Long-Term Capital Gain $4.25
Short-Term Capital Gain $0.01
TOTAL $4.55
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
1-YEAR 5-YEAR 10-YEAR (2/26/87)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1)
Based on change in
net asset value +60.34% +22.42% +369.33% +573.99%
Based on change in
market price +99.91% +8.98% +408.31% +563.48%
Average Annual Total Return(2)
Based on change in
net asset value +60.34% +4.13% +16.71% +16.47%
Based on change in
market price +99.91% +1.73% +17.65% +16.32%
</TABLE>
Templeton Emerging Markets Fund paid distributions derived from long-term
capital gains of $4.25 per share in November and December 1998. The Fund hereby
designates such distributions as capital gain dividends per Internal Revenue
Code Section 852 (b)(3).
Past performance is not predictive of future results.
1. Cumulative total return represents the change in value of an investment over
the periods indicated.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
- --------------------------------------------------------------------------------
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility, and the economic,
social and political climates of countries where the Fund invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. You may
have a gain or loss when you sell your shares.
- --------------------------------------------------------------------------------
5
PAGE
IMPORTANT NOTICE TO SHAREHOLDERS
ADOPTION OF DEFINITIONS OF "EMERGING MARKET" AND "EMERGING MARKET COMPANY." On
July 21, 1999, the Fund's Board of Directors adopted non-fundamental definitions
of "emerging market" and "emerging market company" to reflect the dynamic nature
of what constitutes an "emerging market" or an "emerging market company." The
following definitions generally will be used in managing the Fund's portfolio:
"Emerging market" countries are (i) countries that are generally considered low
or middle income countries by the International Bank of Reconstruction and
Development (commonly known as the World Bank) and the International Finance
Corporation; or (ii) countries that are classified by the United Nations or
otherwise regarded by their authorities as developing or (iii) countries with a
stock market capitalization of less than 3% of the Morgan Stanley Capital
International(R) World Index.
"Emerging market companies" are (i) companies whose principal securities trading
markets are in emerging market countries or (ii) companies that derive a
significant share of their total revenue from either goods or services produced
or sales made in emerging market countries or (iii) companies that have a
significant portion of their assets in emerging market countries or (iv)
companies that are linked to currencies of emerging market countries or (v)
companies that are organized under the laws of or with principal offices in,
emerging market countries.
EURO RISK. On January 1, 1999, the European Monetary Union (EMU) introduced a
new single currency, the euro, which will replace the national currency for
participating member countries. The transition and the elimination of currency
risk among EMU countries may change the
6
PAGE
economic environment and behavior of investors, particularly in European
markets.
Because this change to a single currency is new and untested, it is not possible
to predict the impact of the euro on the business or financial condition of
European issuers which the Fund may hold in its portfolio, and their impact on
Fund performance. To the extent the Fund holds non-U.S. dollar (euro or other)
denominated securities, it will still be exposed to currency risk due to
fluctuations in those currencies versus the U.S. dollar.
YEAR 2000 ISSUE. Like all investment companies, the Fund's business operations
depend on a worldwide network of computer systems that contain date fields. Many
of the systems currently use a two digit date field to represent the date, and
these systems must be changed or modified to enable them to distinguish the Year
1900 from the Year 2000 (commonly referred to as the Year 2000 problem).
When the Year 2000 arrives, the Fund's operations could be adversely affected if
the computer systems used by any of the parties who service the Fund or with
which it does business are not Year 2000 ready. The Fund could experience
difficulties in effecting transactions if any of its foreign subcustodians, or
if foreign broker-dealers or foreign markets are not ready for Year 2000.
When evaluating current and potential portfolio positions, Year 2000 is one of
the factors the Fund's investment manager considers. The investment manager will
rely upon public filings and other statements made by companies about their Year
2000 readiness. Issuers in countries outside the U.S., particularly in emerging
markets, may be more susceptible to Year 2000 risks and there may be less public
disclosure of these factors. The investment manager, of course, cannot audit
each company and its major suppliers to verify
7
PAGE
their Year 2000 readiness. The Fund's ability to reduce the effects of the Year
2000 problem is also very much dependent upon the efforts of third parties over
which the Fund and its investment manager may have no control.
If a company in which the Fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its securities also will be adversely
affected. A decrease in the value of one or more of the Fund's portfolio
holdings may have an impact on the Fund's performance.
Franklin Resources, Inc. (Resources) established a Year 2000 Project Team in
1996. This team has been making the changes necessary to make the computer
systems that service the Fund and its shareholders Year 2000 compliant and
continues to seek reasonable assurances from all suppliers that they will be
Year 2000 compliant on a timely basis. Resources is also developing a
contingency plan of procedures to follow (where feasible) in the event of the
failure of any mission critical systems. However, in an operation as complex and
geographically distributed as Resources' business, the alternatives to use of
normal systems, especially mission critical systems, or supplies of electricity
or long distance voice and data lines are limited.
8
PAGE
FRANKLIN TEMPLETON
IS READY FOR YEAR 2000
Year 2000 Readiness Disclosure as of 9/30/99
WE ARE READY!
WE'VE DONE A LOT TO PREPARE!
The enormous scope of this project encompassed practically every
computer-dependent record and process within the company. Naturally, our Y2K
plan focused first on readying "mission-critical" systems -- those that are
necessary for our core business functions. As of September 30, 1999, all our
mission-critical systems that could affect our shareholders were certified as
Y2K compliant.
Our business operations rely greatly on a complex, worldwide network of computer
systems owned and managed by third parties. We continue to work with these
outside companies and your Fund's transfer agent to confirm their preparedness
for Year 2000.
WE HAVE CONTINGENCY PLANS.
Our company recognizes that even our extensive testing cannot guarantee the
absence of difficulties associated with the Y2K transition. Therefore, we are
developing and integrating worldwide contingency plans.
9
PAGE
Franklin Templeton is confident it is well-positioned to meet the challenges of
Y2K.
HOW DOES YEAR 2000 AFFECT OUR
PORTFOLIO MANAGERS' INVESTMENT STRATEGIES?
All our portfolio managers recognize the importance of Year 2000 and its
potential to impact the issuers and industries in which we invest, as well as
the U.S. and world economy as a whole. As long-term investors, we seek to make
and hold investments in companies we believe are well-managed, with good
prospects for the future. In our experience, such companies are more likely to
have sufficient Y2K programs in place.
Technological changes are ever-present in our industry, and we believe we have
the experience and skills necessary to realize and to react to any challenges
that may arise due to this transition. Once again, Franklin Templeton is ready
for Year 2000, and we look forward to moving into the new millennium with you.
For additional information on Franklin Templeton's Y2K efforts, check our Web
site at www.franklintempleton.com.
- --------------------------------------------------------------------------------
These statements should be considered Year 2000 Readiness Disclosures, as such
term is understood under the "Year 2000 Information and Readiness Disclosure
Act." This information is not intended as a representation or warranty and does
not create a legal obligation on the part of Franklin Resources, Inc. or its
affiliates to the recipient.
- --------------------------------------------------------------------------------
10
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
--------------------------------------------------------
1999+ 1998 1997 1996 1995
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year......................... $10.85 $20.67 $17.26 $18.23 $22.77
--------------------------------------------------------
Income from investment operations:
Net investment income..................................... .13 .26 .27 .25 .23
Net realized and unrealized gains (losses)................ 5.17 (7.64) 4.27 1.20 (1.62)
--------------------------------------------------------
Total from investment operations........................... 5.30 (7.38) 4.54 1.45 (1.39)
--------------------------------------------------------
Less distributions from:
Net investment income..................................... (.29) (.26) (.21) (.26) (.10)
Net realized gains........................................ (4.26) (2.18) (.92) (2.16) (3.05)
--------------------------------------------------------
Total distributions........................................ (4.55) (2.44) (1.13) (2.42) (3.15)
--------------------------------------------------------
Net asset value, end of year............................... $11.60 $10.85 $20.67 $17.26 $18.23
========================================================
Total Return
Based on market value per share........................... 99.91% (54.35)% 33.81% 7.45% (16.94)%
Based on net asset value per share........................ 60.34% (39.69)% 27.34% 8.69% (8.53)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................ $204,804 $182,352 $342,002 $283,678 $294,962
Ratios to average net assets:
Expenses.................................................. 1.63% 1.70% 1.67% 1.71% 1.73%
Net investment income..................................... 1.18% 1.58% 1.38% 1.51% 1.28%
Portfolio turnover rate.................................... 45.00% 40.51% 12.60% 8.83% 27.58%
</TABLE>
+Based on average weighted shares outstanding.
See Notes to Financial Statements.
11
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES 92.4%
ARGENTINA 3.6%
*Capex SA, A........................................ Utilities Electrical & Gas 37,400 $ 160,836
Central Costanera SA, B............................. Utilities Electrical & Gas 4,601 11,044
*Molinos Rio de la Plata SA, B...................... Food & Household Products 160,262 272,473
Nobleza Piccardo Sdad Industrial Comercial y
Financial......................................... Beverages & Tobacco 18,760 51,595
Perez Companc SA, B................................. Energy Sources 250,300 1,456,892
Quilmes Industrial SA, ADR.......................... Beverages & Tobacco 36,000 355,500
*Sociedad Comercial del Plata Cadelplata Come....... Multi-Industry 538,930 159,000
Telecom Argentina Stet-France SA (Teco), B, ADR..... Telecommunications 68,800 1,943,600
Telefonica de Argentina SA, ADR..................... Telecommunications 68,335 2,032,966
Transportadora de Gas del Sur SA, B................. Utilities Electrical & Gas 3,138 4,833
Transportadora de Gas del Sur SA, B, ADR............ Utilities Electrical & Gas 124,700 950,838
------------
7,399,577
------------
AUSTRIA 1.6%
Austria Tabak AG.................................... Beverages & Tobacco 13,612 741,885
Bank Austria AG..................................... Banking 30,000 1,592,289
OMV AG.............................................. Energy Sources 10,000 1,002,905
------------
3,337,079
------------
BRAZIL 9.7%
Banco Bradesco SA................................... Banking 152,659,741 502,776
Banco Bradesco SA, pfd. ............................ Banking 104,290,328 412,386
Centrais Eletricas Brasileiras SA (Electrobras), B,
pfd. ............................................. Utilities Electrical & Gas 166,011,770 2,621,466
Cia Cervejaria Brahma, pfd. ........................ Beverages & Tobacco 30,900 16,350
Cia Energetica de Minas Gerais, pfd. ............... Utilities Electrical & Gas 70,457,000 1,085,082
*Cia Mesbla SA, pfd. ............................... Merchandising 6,825,690 0
Cia Vale do Rio Doce, A, pfd. ...................... Metals & Mining 104,300 2,311,748
Copene-Petroquimica do Nordeste SA, A, pfd. ........ Chemicals 5,201,800 806,523
Duratex SA, pfd. ................................... Forest Products & Paper 7,910,800 159,080
Embratel Participacoes SA, pfd. .................... Telecommunications 18,947,000 198,145
Itausa-Investimentos SA, pfd., new.................. Multi-Industry 159,031 72,813
Itausa-Investimentos SA, pfd. ...................... Multi-Industry 3,664,346 1,715,875
*Mannesmann SA, pfd. ............................... Machinery & Engineering 1,931,344 82,409
Petroleo Brasileiro SA (Petrobras), pfd. ........... Energy Sources 1,791,966 239,613
Tele Centro Sul Participacoes SA, pfd. ............. Telecommunications 211,075,000 2,251,320
Tele Norte Leste Participacoes SA, pfd. ............ Telecommunications 136,567,000 2,202,694
Tele Sudeste Celular Participacoes SA, pfd. ........ Telecommunications 263,471,000 1,246,073
Telesp Celular Participacoes SA, pfd. .............. Telecommunications 18,947,000 172,514
Telesp Participacoes SA, pfd. ...................... Telecommunications 14,577,000 240,422
Telesp Participacoes SA, ADR, pfd. ................. Telecommunications 197,500 3,221,719
Unibanco Uniao de Bancos Brasileiros SA, unit....... Banking 7,223,468 248,048
------------
19,807,056
------------
</TABLE>
12
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
CHILE 1.5%
Cia de Telecomunicaciones de Chile SA, ADR.......... Telecommunications 91,300 $ 2,054,250
Empresa Nacional de Electricidad SA, ADR............ Electrical & Electronics 14,264 176,517
Enersis SA, ADR..................................... Utilities Electrical & Gas 36,500 818,969
Quinenco SA, ADR.................................... Multi-Industry 1,700 16,894
------------
3,066,630
------------
CHINA .7%
China Resources Enterprises Ltd. ................... Multi-Industry 289,000 474,524
*China Telecommunications Ltd. ..................... Telecommunications 216,000 671,771
China Vanke Co. Ltd., B............................. Real Estate 94,860 42,756
Guangshen Railway Co. Ltd., H....................... Transportation 453,000 58,338
Shandong Huaneng Power Development Co. Ltd., ADR.... Utilities Electrical & Gas 29,000 126,875
------------
1,374,264
------------
COLOMBIA .9%
Bavaria SA.......................................... Beverages & Tobacco 98,000 295,033
Cementos Argos SA................................... Building Materials & Components 556,528 1,146,256
Cia Colombiana de Tabacos SA........................ Beverages & Tobacco 67,049 75,893
Compania Nacional de Chocolates SA.................. Food & Household Products 74,155 202,120
Compania Suramericana de Inversiones SA............. Insurance 154,840 167,222
------------
1,886,524
------------
CZECH REPUBLIC .5%
*CEZ AS............................................. Utilities Electrical & Gas 272,950 594,328
*SPT Telecom AS..................................... Telecommunications 24,603 417,926
Tabak AS............................................ Beverages & Tobacco 100 23,591
------------
1,035,845
------------
EGYPT .1%
Commercial International Bank Ltd. ................. Banking 27,700 238,895
------------
HONG KONG 5.9%
CDL Hotel International Ltd. ....................... Leisure & Tourism 63,361 22,847
Cheung Kong Holdings Ltd. .......................... Multi-Industry 285,000 2,477,415
Citic Pacific Ltd. ................................. Multi-Industry 451,000 1,402,632
Dairy Farm International Holdings Ltd. ............. Merchandising 568,116 565,275
Hang Lung Development Co. Ltd. ..................... Real Estate 1,066,000 1,228,656
Hong Kong Land Holdings Ltd. ....................... Real Estate 210,000 310,800
Hopewell Holdings Ltd. ............................. Construction & Housing 6,000 4,172
HSBC Holdings PLC................................... Banking 111,542 1,382,577
Hutchison Whampoa Ltd. ............................. Multi-Industry 154,000 1,502,289
Jardine Matheson Holdings Ltd. ..................... Multi-Industry 285,530 1,364,833
Jardine Strategic Holdings Ltd. .................... Multi-Industry 166,500 382,950
New World Development Co. Ltd. ..................... Real Estate 319,585 769,623
</TABLE>
13
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
HONG KONG (CONT.)
Sun Hung Kai Properties Ltd. ....................... Real Estate 69,599 $ 596,039
Wheelock and Company Ltd. .......................... Multi-Industry 1,000 1,301
------------
12,011,409
------------
HUNGARY 1.3%
Borsodchem RT....................................... Chemicals 31,472 914,244
*Fotex First Hungarian-American Photo Service
Co. .............................................. Multi-Industry 973,000 368,499
Matav RT............................................ Telecommunications 21,200 129,522
Mol Magyar Olay-Es Gazipari RT...................... Energy Sources 32,980 849,618
OTP Bank............................................ Banking 2,200 100,945
Tiszai Vegyi Kombinat RT............................ Chemicals 22,300 347,569
------------
2,710,397
------------
INDONESIA 4.6%
*Asia Pulp & Paper Co. Ltd., ADR.................... Forest Products & Paper 167,500 1,277,200
*Asia Pulp & Paper Co. Ltd., ADR, wts. ............. Forest Products & Paper 27,540 37,868
*PT Barito Pacific Timber TBK....................... Forest Products & Paper 6,233,500 385,787
*PT Indah Kiat Pulp & Paper Corp. TBK............... Forest Products & Paper 1,349,800 492,435
*PT Indocement Tunggal Prakarsa..................... Building Materials & Components 1,021,000 412,391
*PT Indofoods Sukses Makmurr........................ Food & Household Products 1,903,250 2,033,440
PT Indosat.......................................... Telecommunications 244,000 379,114
*PT Semen Cibinong.................................. Building Materials & Components 1,331,500 60,720
PT Semen Gresik..................................... Building Materials & Components 131,611 257,220
*PT Sinar Mas Agro Resources & Technology Corp. .... Food & Household Products 73,400 33,472
PT Timah TBK........................................ Metals & Mining 1,215,000 799,446
PT Telekomunikasi Indonesia (Persero), B............ Telecommunications 8,082,460 3,106,613
*PT Tjiwi Kimia TBK................................. Forest Products & Paper 814,000 233,329
------------
9,509,035
------------
ISRAEL .1%
*Formula Systems Ltd. .............................. Data Processing & Reproduction 9,890 247,842
Koor Industries Ltd. ............................... Multi-Industry 10 877
------------
248,719
------------
MALAYSIA
Boustead Holdings Bhd. ............................. Food & Household Products 65,000 49,605
Shangri-La Hotels (Malaysia) Bhd. .................. Leisure & Tourism 72,000 24,063
------------
73,668
------------
MEXICO 9.7%
Cemex SA............................................ Building Materials & Components 33,811 149,246
Cemex SA, B......................................... Building Materials & Components 838,750 3,720,226
*Cifra SA, V........................................ Merchandising 938,263 1,552,601
Coca Cola Femsa SA, L, ADR.......................... Beverages & Tobacco 56,200 853,538
DESC SA de CV DESC, A............................... Multi-Industry 463,000 466,505
DESC SA de CV DESC, B............................... Multi-Industry 861,000 798,667
</TABLE>
14
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
MEXICO (CONT.)
Fomento Economico Mexicano SA de Cv Femsa........... Beverages & Tobacco 17,500 $ 578,594
*Grupo Financiero Banamex Accival SA................ Banking 1,114,794 2,139,492
*Grupo Financiero Bancomer SA de CV................. Banking 467,000 113,526
Panamerican Beverages Inc., A....................... Food & Household Products 31,100 585,069
Telefonos de Mexico SA (Telmex), ADR................ Telecommunications 109,800 8,166,375
Vitro SA............................................ Food & Household Products 515,855 731,514
------------
19,855,353
------------
PAKISTAN .2%
Pakistan Telecommunications Corp., PTC, A........... Telecommunications 902,000 365,147
------------
PERU .9%
Telefonica del Peru SA, B, ADR...................... Telecommunications 136,400 1,866,975
------------
PHILIPPINES 4.0%
*A Soriano Corp. ................................... Multi-Industry 577,000 14,180
Ayala Corp. ........................................ Multi-Industry 598,680 162,213
*Filinvest Development Corp. ....................... Real Estate 1,066,000 81,948
*Keppel Philippine Holdings Inc., B................. Machinery & Engineering 133,462 2,691
*Metro Pacific Corp. MDI............................ Multi-Industry 3,419,000 124,092
Petron Corporation.................................. Energy Sources 197,000 17,627
Philippine Long Distance Telephone Co., ADR......... Telecommunications 169,004 4,003,282
*Philippine National Bank........................... Banking 550,430 1,817,425
RFM Corp. .......................................... Food & Household Products 6,732,209 822,967
San Miguel Corp., B................................. Food & Household Products 645,100 1,048,745
------------
8,095,170
------------
POLAND 1.5%
Bank Rozwoju Eksportu SA............................ Banking 10,050 328,101
Bank Slaski SA W Katowicach......................... Banking 12,660 836,158
Impexmetal SA....................................... Metals & Mining 1,603 7,045
Prokom Software SA.................................. Data Processing & Reproduction 17,978 505,659
*Rolimpex SA........................................ Wholesale & International Trade 670 925
Telekomunikacja Polska SA........................... Telecommunications 205,121 1,390,825
Warta SA............................................ Insurance 2,566 74,750
------------
3,143,463
------------
RUSSIA .8%
Aeroflot............................................ Transportation 105,300 8,424
*GUM Trade House.................................... Merchandising 30,000 27,402
Irkutskenergo....................................... Utilities Electrical & Gas 439,500 39,555
Lukoil Holdings, ADR................................ Energy Sources 8,000 239,040
Mosenergo........................................... Utilities Electrical & Gas 3,443,000 99,847
Mosenergo, ADR...................................... Utilities Electrical & Gas 24,670 74,627
*Norilsk Nickel..................................... Metals & Mining 19,018 51,729
*Red October........................................ Food & Household Products 22,000 96,690
*Rostelecom......................................... Telecommunications 201,000 229,140
</TABLE>
15
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
RUSSIA (CONT.)
*Rostelecom, ADR.................................... Telecommunications 15,300 $ 104,231
*Rostelecom, pfd. .................................. Telecommunications 138,400 55,360
*Tyumenaviatrans.................................... Transportation 530,000 7,155
Unified Energy Systems.............................. Utilities Electrical & Gas 7,183,900 500,718
Unified Energy Systems, pfd. ....................... Utilities Electrical & Gas 1,260,000 32,508
*Vimpel Communications, ADR......................... Telecommunications 10,950 170,409
------------
1,736,835
------------
SINGAPORE 8.5%
Acer Computer International Ltd. ................... Electrical & Electronics 13,000 12,090
Acma Ltd. .......................................... Electrical & Electronics 273,000 207,469
Asia Pacific Breweries Ltd. ........................ Beverages & Tobacco 24,000 66,971
City Developments Ltd. ............................. Real Estate 658,000 3,984,801
Cycle & Carriage Ltd. .............................. Automobiles 198,000 1,116,784
Development Bank of Singapore Ltd. ................. Banking 16,304 186,824
First Capital Corp. Ltd. ........................... Real Estate 167,000 232,013
Fraser and Neave Ltd. .............................. Beverages & Tobacco 416,000 1,580,716
G P Batteries International Ltd. ................... Electrical & Electronics 9,000 15,656
*Hai Sun Hup Group Ltd. ............................ Transportation 192,000 85,495
Inchcape Motors Ltd., fgn. ......................... Wholesale & International Trade 40,000 54,147
Jurong Shipyard Ltd., fgn. ......................... Machinery & Engineering 17,000 76,708
Keppel Corp., Ltd. ................................. Transportation 743,000 2,404,174
MCL Land Ltd. ...................................... Real Estate 161,000 168,236
*Metro Holdings Ltd. ............................... Wholesale & International Trade 40,000 49,397
Natsteel Ltd. ...................................... Metals & Mining 162,000 344,333
Overseas Chinese Banking Corp. Ltd., fgn. .......... Banking 250,000 1,751,469
Overseas Union Enterprise Ltd. ..................... Leisure & Tourism 49,400 139,023
Sembcorp Industries Ltd. ........................... Multi-Industry 979,096 1,302,129
Singapore Airlines Ltd., fgn. ...................... Transportation 28,000 262,661
United Industrial Corporation Ltd. ................. Real Estate 693,000 397,046
United Overseas Bank Ltd., fgn. .................... Banking 313,000 2,322,923
United Overseas Land Ltd. .......................... Real Estate 421,000 392,430
*United Overseas Land Ltd., wts. ................... Real Estate 106,300 39,761
WBL Corp. Ltd. ..................................... Multi-Industry 114,000 142,813
------------
17,336,069
------------
SLOVAK REPUBLIC .1%
Nafta Gbely AS...................................... Utilities Electrical & Gas 5,662 63,337
*Slovnaft AS........................................ Chemicals 8,000 134,428
Vychodoslovenske Zeleziarne AS...................... Metals & Mining 5,000 13,323
------------
211,088
------------
SOUTH AFRICA 12.8%
Aeci Ltd. .......................................... Chemicals 84,000 225,123
Anglo American Corp of South Africa Ltd. ........... Metals & Mining 113,944 6,272,353
Barlow Ltd. ........................................ Multi-Industry 406,044 2,069,609
</TABLE>
16
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
SOUTH AFRICA (CONT.)
CG Smith Ltd. ...................................... Multi-Industry 891,500 $ 2,374,597
De Beers Centenary Linked Units, Reg................ Misc Materials & Commodities 112,500 3,070,536
*Del Monte Royal Foods Ltd. ........................ Food & Household Products 517,825 395,904
Edgars Stores Ltd. ................................. Textiles & Apparel 18,995 158,656
Firstrand Ltd. ..................................... Insurance 431,000 437,236
Iscor Ltd. ......................................... Metals & Mining 1,415,238 525,886
Kersaf Investments Ltd. ............................ Leisure & Tourism 54,075 227,609
*Liberty International PLC.......................... Insurance 24,710 184,864
Liberty Life Association of Africa Ltd. ............ Insurance 95,359 1,117,905
Palabora Mining Co. Ltd. ........................... Metals & Mining 37,900 309,083
Rembrandt Group Ltd. ............................... Multi-Industry 205,700 1,542,243
Sappi Ltd. ......................................... Forest Products & Paper 246,000 2,269,089
Sasol Ltd. ......................................... Energy Sources 257,500 1,871,342
South African Breweries Ltd. ....................... Beverages & Tobacco 317,448 2,609,734
Tongaat-Hulett Group Ltd. .......................... Multi-Industry 101,581 497,717
------------
26,159,486
------------
SOUTH KOREA 10.9%
*Cho Hung Bank Co. Ltd. ............................ Banking 33,500 180,767
*Daegu Bank Co. Ltd. ............................... Banking 95,404 408,932
Korea Electric Power Corp. ......................... Utilities Electrical & Gas 204,400 7,618,467
LG Electronics Inc. ................................ Electrical & Electronics 126,771 5,369,377
Pohang Iron & Steel Co. Ltd., ADR................... Metals & Mining 2,600 95,550
Samsung Display Devices Ltd. ....................... Electrical & Electronics 61,586 3,563,171
Samsung Electronics Co. Ltd. ....................... Electrical & Electronics 16,177 3,069,587
*Samsung Heavy Industries Co. Ltd. ................. Machinery & Engineering 158,858 1,466,795
SK Corp. ........................................... Energy Sources 3,820 92,223
SK Telecom Co. Ltd. ................................ Telecommunications 60 60,025
Ssangyong Oil Refining Co. Ltd. .................... Chemicals 4,710 116,902
Tong Yang Merchant Bank............................. Financial Services 8,502 41,124
------------
22,082,920
------------
THAILAND 8.6%
Advanced Info Service Ltd., fgn. ................... Telecommunications 114,600 1,571,623
American Standard Sanitaryware Public Co. Ltd.
fgn. ............................................. Building Materials & Components 17,000 75,349
Ayudhya Insurance Public Co. Ltd., fgn. ............ Insurance 11,900 35,525
*Bangkok Bank Public Co. Ltd. ...................... Banking 60,800 92,734
*Bangkok Bank Public Co. Ltd., fgn. ................ Banking 26,000 66,093
*Bangkok Insurance Public Co. Ltd. BKI.............. Insurance 15,840 55,959
*Charoen Pokphand Feedmill Public Co. Ltd., fgn. ... Food & Household Products 158,180 474,272
Dusit Thani Public Company Ltd., fgn. .............. Leisure & Tourism 74,500 86,242
*Hana Microelectronics Co. Ltd., fgn. .............. Electrical & Electronics 203,700 594,822
Industrial Finance Corp. of Thailand, fgn. ......... Financial Services 270,400 133,949
Italian-Thai Development Public Co. Ltd., fgn. ..... Construction & Housing 156,100 242,157
*Jasmine International Public Co. Ltd., fgn. ....... Telecommunications 876,000 405,397
*Jasmine International Public Co. Ltd., fgn.,
wts. ............................................. Telecommunications 876,000 291,201
</TABLE>
17
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
INDUSTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
THAILAND (CONT.)
*Land and House Public Co. Ltd. .................... Real Estate 71,736 $ 65,929
*Land and House Public Co. Ltd., fgn. .............. Real Estate 216,400 327,237
*PTT Exploration & Production Public Co. Ltd.,
fgn. ............................................. Energy Sources 9,700 76,376
*Saha Union Public Co. Ltd. ........................ Multi-Industry 101,214 32,986
Saha Union Public Co. Ltd., fgn. ................... Multi-Industry 100,786 36,131
*Serm Suk Public Co. Ltd. .......................... Food & Household Products 85,700 396,604
Serm Suk Public Co. Ltd., fgn. ..................... Food & Household Products 4,900 26,586
*Shin Corporations Public Company Ltd., fgn. ....... Electrical & Electronics 104,300 475,883
*Siam Cement Public Co. Ltd. ....................... Building Materials & Components 110,565 1,706,543
Siam Cement Public Co. Ltd., fgn. .................. Building Materials & Components 59,735 1,544,965
*Siam Commercial Bank, 144A, 5.25%, fgn., cvt.,
pfd. ............................................. Banking 216,000 244,975
Siam Makro Public Company Ltd., fgn. ............... Merchandising 438,100 882,939
*Telecomasia Corp. Public Co. Ltd., fgn. ........... Telecommunications 75,000 71,861
*Thai Airways International Public Co. Ltd.,
fgn. ............................................. Transportation 316,800 557,528
*Thai Farmers Bank Public Co. Ltd. ................. Banking 347,600 380,634
*Thai Farmers Bank Public Co. Ltd., fgn. ........... Banking 1,919,500 2,752,509
*Thai Farmers Bank Public Co. Ltd., fgn., rts....... Banking 1,919,500 1,751,597
*Thai Petrochemical Industry Public Co. Ltd.,
fgn. ............................................. Chemicals 309,100 161,178
*Thai Telephone & Telecommunication Public Co.
Ltd.,fgn. ........................................ Telecommunications 713,400 165,539
*Total Access Communication Public Co. Ltd. ........ Telecommunications 375,000 840,000
*United Communications Industry Public Co. Ltd.,
fgn. ............................................. Telecommunications 1,074,000 966,054
------------
17,589,377
------------
TURKEY 2.0%
Akbank.............................................. Banking 195,135,861 2,583,711
Arcelik AS.......................................... Appliances & Household Durables 64,921,865 1,493,378
*Erciyas Biracilik.................................. Food & Household Products 540,000 10,058
------------
4,087,147
------------
VENEZUELA 1.9%
Compania Anonima Nacional Telefonos de Venezuela,
ADR............................................... Telecommunications 72,950 1,454,442
Electricidad de Caracas............................. Utilities Electrical & Gas 142,056 2,039,372
Mavesa SA, ADR...................................... Food & Household Products 171,800 483,188
------------
3,977,002
------------
TOTAL LONG TERM SECURITIES (COST $179,654,999)...... 189,205,130
------------
<CAPTION>
PRINCIPAL
AMOUNT**
--------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS (COST $10,194,115) 5.0%
U.S. Treasury Bills, 4.60% to 4.87%, with maturities
to 2/24/00........................................ $ 10,371,000 10,194,754
------------
TOTAL INVESTMENTS (COST $189,849,114) 97.4%......... 199,399,884
OTHER ASSETS, LESS LIABILITIES 2.6%................. 5,403,977
------------
TOTAL NET ASSETS 100.0%............................. $204,803,861
============
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars.
See Notes to Financial Statements.
18
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $189,849,114).... $199,399,884
Cash....................................................... 6,098,441
Receivables:
Investment securities sold................................ 1,144,614
Dividends and interest.................................... 516,313
------------
Total assets.......................................... 207,159,252
------------
Liabilities:
Payables:
Investment securities purchased........................... 1,891,667
To affiliates............................................. 246,093
Accrued expenses........................................... 217,631
------------
Total liabilities..................................... 2,355,391
------------
Net assets, at value........................................ $204,803,861
============
Net assets consist of:
Undistributed net investment income........................ $ 1,289,249
Net unrealized appreciation................................ 9,550,770
Distributions in excess of net realized gains.............. (10,833,111)
Capital shares............................................. 204,796,953
------------
Net assets, at value........................................ $204,803,861
============
Net asset value per share ($204,803,861 / 17,656,437 shares
outstanding).............................................. $11.60
============
</TABLE>
See Notes to Financial Statements.
19
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1999
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $579,174)
Dividends.................................................. $ 4,565,178
Interest................................................... 767,525
-----------
Total investment income............................... $ 5,332,703
Expenses:
Management fees (Note 3)................................... 2,369,680
Administrative fees (Note 3)............................... 284,362
Transfer agent fees........................................ 54,700
Custodian fees............................................. 121,500
Reports to shareholders.................................... 101,600
Registration and filing fees............................... 42,100
Professional fees.......................................... 87,900
Directors' fees and expenses............................... 26,700
Other...................................................... 789
-----------
Total expenses........................................ 3,089,331
-----------
Net investment income........................... 2,243,372
-----------
Realized and unrealized gains (losses):
Net realized loss from:
Investments (net of foreign taxes of $348,860)............ (8,686,100)
Foreign currency transactions............................. (350,710)
-----------
Net realized loss..................................... (9,036,810)
Net unrealized appreciation on investments............ 97,897,584
-----------
Net realized and unrealized gain............................ 88,860,774
-----------
Net increase in net assets resulting from operations........ $91,104,146
===========
</TABLE>
See Notes to Financial Statements.
20
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 2,243,372 $ 4,311,591
Net realized gain (loss) from investments and foreign
currency transactions.................................... (9,036,810) 78,186,635
Net unrealized appreciation (depreciation) on
investments.............................................. 97,897,584 (205,907,624)
--------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 91,104,146 (123,409,398)
Distributions to shareholders from:
Net investment income..................................... (4,872,098) (4,385,151)
Net realized gains........................................ (71,586,456) (36,081,159)
Capital share transactions (Note 2)........................ 7,806,529 4,225,187
--------------------------------
Net increase (decrease) in net assets................... 22,452,121 (159,650,521)
Net assets:
Beginning of year.......................................... 182,351,740 342,002,261
--------------------------------
End of year................................................ $204,803,861 $ 182,351,740
================================
Undistributed net investment income included in net assets:
End of year................................................ $ 1,289,249 $ 4,795,230
================================
</TABLE>
See Notes to Financial Statements.
21
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 investing primarily 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.
Certain countries in which the Fund invests have imposed restrictions on the
repatriation of their currencies. Other countries have previously instituted
currency exchange controls in the past during periods of serious imbalance in
their balance of payments or upon the occurrence of other destabilizing events.
Exchange control regulations may restrict the Fund's ability to convert
investment income, capital, or the proceeds of securities into U.S. dollars. As
of August 31, 1999, the Fund has cash and investments with a value of
approximately $5.3 million in countries with restrictions on the repatriation of
their currencies or formal exchange controls currently in place.
22
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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 all of its taxable income.
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, 1999, there were 30 million shares authorized ($0.01 par value).
During the years ended August 31, 1999 and 1998, 856,099 shares were issued for
$7,806,529 and 252,599 shares were issued for $4,225,187 from reinvested
distributions, respectively.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or 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 the rate of 0.15% per year of the Fund's average
daily net assets.
23
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
Notes to Financial Statements (continued)
4. INCOME TAXES
At August 31, 1999, the net unrealized appreciation based on the cost of
investments for income tax purposes of $190,894,315 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 45,452,020
Unrealized depreciation..................................... (36,946,451)
------------
Net unrealized appreciation................................. $ 8,505,569
============
</TABLE>
Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatments of wash sales
and losses realized subsequent to October 31 on the sale of securities and
foreign currencies.
At August 31, 1999, the Fund had deferred capital and currency losses occurring
subsequent to October 31, 1998 of $10,700,000. For tax purposes, such losses
will be reflected in the year ending August 31, 2000.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1999 aggregated $77,117,472 and $103,445,026, respectively.
24
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Templeton Emerging Markets
Fund, Inc. (the "Fund") at August 31, 1999, the results of its operations, the
changes in its net assets and the financial highlights for the year then ended,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at August 31, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above. The financial statements for the year ended August
31, 1998, including financial highlights for each of the four years in the
period then ended, were audited by other independent accountants whose report
dated September 29, 1998 expressed an unqualified opinion on those financial
statements.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
September 30, 1999
25
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
Tax Designation
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates $982,396 as a capital gain dividend for the fiscal year ended August
31, 1999.
At August 31, 1999, more than 50% of the Fund's total assets were invested in
securities of foreign issuers. In most instances, foreign taxes were withheld
from dividends paid to the fund on these investments. The Fund intends to make
an election under Section 853 of the Internal Revenue Code. This election will
allow shareholders to treat their proportionate share of foreign taxes paid by
the Fund as having been paid directly by them.
The following table provides a breakdown by country of foreign source income and
foreign taxes paid, as designated by the Fund to shareholders in October 1999.
<TABLE>
<CAPTION>
FOREIGN TAX FOREIGN SOURCE
COUNTRY PAID PER SHARE INCOME PER SHARE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Argentina................................................... $0.0000 $0.0049
Austria..................................................... 0.0005 0.0010
Brazil...................................................... 0.0146 0.0360
Chile....................................................... 0.0005 0.0023
China....................................................... 0.0000 0.0010
Colombia.................................................... 0.0000 0.0039
Czech Republic.............................................. 0.0000 0.0001
Egypt....................................................... 0.0000 0.0006
Finland..................................................... 0.0000 0.0000
France...................................................... 0.0000 0.0000
Ghana....................................................... 0.0000 0.0001
Hong Kong................................................... 0.0001 0.0082
Hungary..................................................... 0.0004 0.0011
India....................................................... 0.0000 0.0027
Indonesia................................................... 0.0010 0.0030
Israel...................................................... 0.0003 0.0006
Malaysia.................................................... 0.0032 0.0073
Mexico...................................................... 0.0003 0.0114
Pakistan.................................................... 0.0002 0.0031
Panama...................................................... 0.0008 0.0000
Peru........................................................ 0.0000 0.0004
Philippines................................................. 0.0003 0.0007
Poland...................................................... 0.0002 0.0005
Russia...................................................... 0.0002 0.0006
Singapore................................................... 0.0048 0.0089
South Africa................................................ 0.0000 0.0171
South Korea................................................. 0.0020 0.0060
Thailand.................................................... 0.0001 0.0003
Turkey...................................................... 0.0000 0.0084
Venezuela................................................... 0.0000 0.0044
----------------------------------
TOTAL....................................................... $0.0295 $0.1346
==================================
</TABLE>
In January 2000, shareholders will receive Form 1099-DIV which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 1999. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their individual income tax
returns.
26
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
Annual Meeting of Shareholders, February 16, 1999
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Ft. Lauderdale, Florida, on February 16, 1999. The purpose
of the meeting was to elect six Directors of the Fund; to ratify the selection
of McGladrey & Pullen, LLP, as the Fund's independent auditors for the fiscal
year ending August 31, 1999; and in their discretion, to authorize the
proxyholders to vote upon such other matters that may legally come before the
meeting or any adjournment of the meeting. At the meeting, the following persons
were elected by the shareholders to serve as Directors of the Fund: Harris J.
Ashton, Nicholas F. Brady, Frank J. Crothers, S. Joseph Fortunato, Edith E.
Holiday and Constantine D. Tseretopoulos.* Shareholders ratified the selection
of McGladrey & Pullen, LLP, to serve as the Fund's independent auditors for the
fiscal year ending August 31, 1999. No other business was transacted at the
meeting.
The results of the voting at the Annual Meeting are as follows:
1. The election of six (6) Directors:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
TERM EXPIRING 2001: FOR SHARES WITHHELD SHARES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Constantine D. Tseretopoulos................................ 11,988,699 67.92% 305,757 1.73%
TERM EXPIRING 2002:
- -------------------
Harris J. Ashton............................................ 12,025,886 68.13% 268,570 1.52%
Nicholas F. Brady........................................... 12,024,038 68.12% 270,418 1.53%
Frank J. Crothers........................................... 11,996,724 67.96% 297,732 1.69%
S. Joseph Fortunato......................................... 12,008,398 68.03% 286,058 1.62%
Edith E. Holiday............................................ 12,017,189 68.08% 277,267 1.57%
</TABLE>
2. The ratification of the selection of McGladrey & Pullen, LLP, as independent
auditors of the Fund for the fiscal year ending August 31, 1999:
<TABLE>
<CAPTION>
% OF % OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING BROKER OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES NON-VOTES SHARES
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12,077,730 68.42% 89,237 0.51% 127,489 0.72% -- --
</TABLE>
*Harmon E. Burns, John Wm. Galbraith, Andrew H. Hines, Jr., Charles B. Johnson,
Betty P. Krahmer, Gordon S. Macklin and Fred R. Millsaps are Directors of the
Fund who are currently serving and whose terms of office continued after the
Annual Meeting of Shareholders.
27
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
Dividend Reinvestment and Cash Purchase Plan
The Fund offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") with
the following features:
Shareholders must affirmatively elect to participate in the Plan; 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 or
if dividends and/or capital gains distributions are payable only in cash, the
participant will receive shares purchased on the New York Stock Exchange or
otherwise on the open market.
A participant has the option of submitting additional payments to Mellon
Securities Trust Company (the "Plan Agent"), in any amounts of at least $100, up
to a maximum of $5,000 per month, for the purchase of Fund shares for his or her
account. These payments shall be made by check or money order payable to "Mellon
Securities Trust Co." and sent to ChaseMellon Shareholder Services, Investor
Services, P.O. Box 382009, Pittsburgh, PA 15250-8009, Attn: Templeton Emerging
Markets Fund, Inc. The Plan Agent shall apply such payments (less a $5.00
service charge and less a pro rata share of trading fees) to purchases of Fund
shares in the open market.
The automatic reinvestment of dividends and/or capital gains does not relieve
the participant of any income tax that may be payable on dividends or
distributions.
The participant may withdraw from the Plan without penalty at any time by
written notice to the Plan Agent sent to ChaseMellon Shareholder Services,
Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938. Upon
withdrawal, the participant will receive, without charge, stock certificates
issued in the participant's name for all full shares held by the Plan Agent; or,
if the participant wishes, the Plan Agent will sell the participant's shares and
send the proceeds, less a service charge 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.
28
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
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
1-800/416-5585.
The daily closing net asset value as of the previous business day may be
obtained when available by calling Franklin Templeton Fund Information after 7
a.m. pacific time any business day at 1-800/DIAL BEN(R) (1-800/342-5236). The
Fund's net asset value and dividends are also listed on the NASDAQ Stock Market,
Inc.'s Mutual Fund Quotation Service ("NASDAQ MFQS").
Shareholders not receiving copies of the Reports to Shareholders because their
shares are registered in the name of a broker or a custodian can request that
they be added to the Fund's mailing list, by writing Templeton Emerging Markets
Fund, Inc., 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030.
29
PAGE
TEMPLETON EMERGING MARKETS FUND, INC.
CHANGE IN INDEPENDENT AUDITOR
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of the Fund. McGladrey resigned pursuant to their agreement to sell
their investment company practice to PricewaterhouseCoopers LLP (PwC). The
McGladrey partners and professionals previously serving the Fund, have joined
PwC and performed the August 31, 1999 audit.
None of the reports of McGladrey on the financial statements of the Fund,
including those of the past two fiscal years have ever contained an adverse
opinion or a disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles.
During the period McGladrey served the Fund, including the two most recent
fiscal years and subsequent interim period, there were no disagreements with
McGladrey on any matter of accounting principle or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of McGladrey would have caused it to make
reference to the subject matter of disagreement in connection with its report.
On August 31, 1999, the Fund, with the approval of its Board of Directors and
its Audit Committee, engaged PwC as its independent auditors.
30
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ANNUAL REPORT
TEMPLETON EMERGING
MARKETS FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
1-800/416-5585
www.chasemellon.com
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political and other factors. The Fund and its investors are not protected from
such losses by the Investment Manager. Therefore, investors who cannot accept
this risk should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
TLEMF A99 10/99 [RECYCLED LOGO] Printed on recycled paper
