<PAGE>
Templeton Emerging Markets
Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
Your Fund's Objective
The Templeton Emerging Markets Appreciation Fund seeks capital appreciation by
investing substantially all of its assets in a portfolio of equity securities
and debt obligations of issuers in emerging market countries.
- --------------------------------------------------------------------------------
May 15, 1995
Dear Shareholder:
We are pleased to bring you the first annual report of the Templeton Emerging
Markets Appreciation Fund, which covers the period from the Fund's inception
on April 29, 1994 through March 31, 1995.
This period was especially challenging for emerging-market investors. In
1994, securities prices in these markets suffered severe declines, due
primarily to rising interest rates, weakness of the U.S. dollar, and Mexico's
massive devaluation of its peso. This devaluation caused the Mexican stock
market to tumble, which resulted in a flight of foreign capital from all over
Latin America and created ripple effects in emerging markets around the
world. Some investors sold shares in other Latin American markets in order to
cover losses in Mexico, while others feared that Argentina's dollarized
currency might also face devaluation. We viewed these declines as an
opportunity to seek new buying opportunities during the reporting period.
By the end of the fiscal year, 51.4% of the Fund's total net assets were
invested in equities, 31.5% in fixed-income securities, and 17.1% in short-term
obligations and other assets. The equity portion of the Fund's portfolio was
well-diversified across 18 emerging markets, with no single
- --------------------------------------------------------------------------------
Templeton Emerging Markets
Appreciation Fund
Portfolio Breakdown on 3/31/95
Based on Total Net Assets
Equities 51.4%
[PIE CHART APPEARS HERE] Fixed-Income Securities 31.5%
Short-Term Obligations
& Other Net Assets 17.1%
1
<PAGE>
market accounting for more than 19% of the Fund's total net assets. The largest
portion of the equity portfolio was invested in Asia, followed by Southern
Europe, Latin America, South Africa, Eastern Europe, and the Middle East.
Since the Fund's last report dated September 30, 1994, the only major change in
the equity portfolio's geographical exposure was Asia, whose weighting was
reduced from about 48% to 39.5% due mainly to selling pressures and a market
correction in Hong Kong. However, we further diversified geographically by
purchasing stocks in Brazil and Korea. In Brazil, we bought shares of Centrals
Electricas Brasileiras SA (electricity company), Petrobras-Petroleo Brasileiro
SA (oil and natural gas producer), and Telebras-Telecomunicacoes Brasileiras SA
(telecommunications company). Our Korean purchases included shares of Daegu Bank
(regional bank) and Hankook Cosmetics Co. (cosmetics manufacturer).
In the fixed-income portion of the portfolio, we responded to Mexico's
financial crisis by selling all of the Fund's Mexican Brady bonds (about 9%
of total net assets) and all of its Mexican peso-denominated investments (1%
of total net assets) immediately after the peso had fallen by only 13% and
before the market was forced to much lower levels. Shortly thereafter, we
also sold the majority of our
- --------------------------------------------------------------------------------
Templeton Emerging Markets
Appreciation Fund
Geographic Distribution on 3/31/95
Based on Total Net Assets
Asia 36.5%
Latin America 26.8%
[PIE CHART APPEARS HERE] Mid-East/Africa 3.9%
Europe 15.7%
Short-Term Obligations
& Other Net Assets 17.1%
Argentinian peso-denominated securities, which represented 3% of the portfolio.
After investors reacted by selling emerging-market securities at depressed
prices regardless of market fundamentals, we put our cash reserves to work by
purchasing attractive fixed-income securities in Brazil, Costa Rica, Guatemala,
Indonesia, and Uruguay. We also reinvested about 3.5% of the Fund's total net
assets in Mexican government bonds offering very high yields. We recently
increased our exposure to Argentinian Brady bonds in hopes that this country's
efforts to restore investor confidence will pay off in the long term.
2
<PAGE>
Looking forward, we are optimistic about long-term prospects for emerging market
economies. Economic and political changes, and our meetings with management
teams of many impressive Latin American companies, have convinced us that the
outlook for Latin America's business climate is positive. The Mexican government
responded to the financial crisis surrounding the devaluation with bold
measures, and we expect it to succeed in stabilizing the economy over the long
term. Argentina also reacted swiftly and, we believe, competently to the
stresses, thus far maintaining stability in its currency and providing optimism
that it too will weather the storm. Moreover, the Mercosur agreement, which
became effective in January 1995, is integrating the economies of Argentina,
Brazil, Paraguay and Uruguay, and it is clear that Latin American companies now
have greater potential to explore the large North American market.
While many emerging markets may have been oversold, it's possible that some may
decline further. For example, fears about China's takeover of Hong Kong in 1997
have created a great deal of uncertainty among international investors. However,
in our opinion, many Hong Kong and Chinese companies offer attractive investment
opportunities. Although short-term market sentiment may be dampened by rising
interest rates and weak Hong Kong real estate prices, we believe these companies
should
- --------------------------------------------------------------------------------
Templeton Emerging Markets
Appreciation Fund
Top 10 Holdings on 3/31/95
Based on Total Net Assets
<TABLE>
<CAPTION>
% of Total
Name, Industry, Country Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Telefonos de Mexico SA, L, ADR;
Telecommunications, Mexico 2.7%
- --------------------------------------------------------------------------------
Government of Brazil, FRN A, 1/01/01,
Government Bond, Brazil 2.3%
- --------------------------------------------------------------------------------
Akbank; Banking, Turkey 2.2%
- --------------------------------------------------------------------------------
Alpha Credit Bank; Banking, Greece 2.0%
- --------------------------------------------------------------------------------
Kingdom of Morocco Loan Partn., 1/1/09,
Government Bond, Morocco 1.7%
- --------------------------------------------------------------------------------
Egro Bank SA; Banking, Greece 1.5%
- --------------------------------------------------------------------------------
Bank Foreign Economic Affairs USSR, 3/2/96,
Government Bond, Russia 1.4%
- --------------------------------------------------------------------------------
Malaysian International Shipping Corp., Bhd., fgn.;
Transportation, Malaysia 1.3%
- --------------------------------------------------------------------------------
CEZ AS, 1/27/01, Corporate Bond,
Czechoslovakia 1.3%
- --------------------------------------------------------------------------------
Cheung Kong Holdings Ltd.; Multi-Industry,
Hong Kong 1.2%
- --------------------------------------------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 7 of this report.
benefit over the long term by their significant exposure to China's fast growing
economy.
It should be remembered that investing in emerging markets involves special
considerations, which may include risks related to market and currency
volatility, adverse social and political developments, and the relatively small
size and lesser liquidity of these markets. While short-term volatility can be
disconcerting, declines of as much
3
<PAGE>
as 40% to 50% are not unusual in emerging markets. For example, the Hong Kong
equity market has increased 1000% in the last 15 years, but has suffered nine
declines of more than 20% during that time.
Despite their recent weakness, we think emerging markets will continue to grow
faster than mature economies, and we remain committed to the Templeton strategy
of long-term value investing. This means that we intend to: (1) search the world
for the best investment bargains, (2) focus on the long term, not the short
term, (3) use common sense, and (4) buy when others are despondently selling and
sell when others are greedily buying.
We appreciate your participation in the Templeton Emerging Markets Appreciation
Fund and look forward to serving your investment needs in the months and years
to come.
Sincerely,
/s/ J. Mark Mobius
J. Mark Mobius, Ph.D.
President
Portfolio Manager -- Equity Securities
Templeton Emerging Markets Appreciation Fund, Inc.
/s/ Thomas W. Wilkinson
Tom Wilkinson, CFA
Portfolio Manager -- Fixed-Income Securities
Templeton Emerging Markets Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
Although Sir John Templeton has not been involved in investment management of
the Templeton funds since October 1992, we were saddened by his recent decision
to step down as Chairman and Director of the U.S. registered Templeton funds.
The independent directors have nominated John Wm. Galbraith, former vice
chairman of Templeton, Galbraith & Hansberger, Ltd. to succeed him. The
investment manager will continue to use the investment philosophies and
principles established by Sir John.
- --------------------------------------------------------------------------------
4
<PAGE>
Performance Summary
Based on the change in net asset value, the Templeton Emerging Markets
Appreciation Fund reported a total return of -11.64% for the period from its
inception on April 29, 1994 through March 31, 1995. Based on the New York Stock
Exchange (NYSE) market price, total return was -11.25% for the same period. Both
total return figures assume reinvestment of dividends and capital gains in
accordance with the dividend reinvestment plan.
During the reporting period, shareholders received distributions of 31.5 cents
($0.315) per share in dividend income and 9.5 cents ($0.095) per share in short-
term capital gains. The Fund's net asset value per share decreased from $14.10
on April 29, 1994 to $12.05 on March 31, 1995, and the Fund's closing NYSE
market price per share decreased from $15.00 to $12.875 during the same period.
Of course, past performance is not indicative of future results, and
distributions will vary depending on income earned by the Fund, as well as any
profits realized from the sale of securities in the portfolio.
- --------------------------------------------------------------------------------
Templeton Emerging Markets
Appreciation Fund
Cumulative Total Returns*
Period ended 3/31/95
<TABLE>
<CAPTION>
Since
Inception
(04/29/94)
<S> <C>
Based on change
in net asset value -11.64%
Based on change
in market price -11.25%
</TABLE>
*Total return calculations assume reinvestment of all distributions at net
asset value or at market price in accordance with the dividend reinvestment
plan. Past performance is not predictive of future results.
5
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (For a share outstanding throughout the period)
<TABLE>
<CAPTION>
APRIL 29, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MARCH 31, 1995
-----------------
<S> <C>
Net asset value, beginning of period $ 14.10
---------
Income from investment operations:
Net investment income .48
Net realized and unrealized loss (1.97)
---------
Total from investment operations (1.49)
---------
Underwriting expenses deducted from capital (.15)
---------
Distributions:
Dividends from net investment income (.32)
Distributions from net realized gains (.09)
---------
Total distributions (.41)
---------
Change in net asset value (2.05)
---------
Net asset value, end of period $ 12.05
=========
TOTAL RETURN*
Based on market value per share (11.25)%
Based on net asset value per share (11.64)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 51,022
Ratio of expenses, inclusive of fee waiver, to average net
assets 1.79%**
Ratio of net investment income to average net assets 3.98%**
Portfolio turnover rate 58.79%
</TABLE>
*NOT ANNUALIZED.
**ANNUALIZED
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Investment Portfolio, March 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS: 49.0%
- -------------------------------------------------------------------------------
Appliances & Household Durables: 1.6%
Arcelik AS Tur. 855,218 $ 200,631
Bekoteknik AS Tur. 211,000 42,500
Semi-Tech (Global) Co. Ltd. H.K. 105,935 176,056
Turk Demir Dokum, br. Tur. 1,886,400 402,313
------------
821,500
- -------------------------------------------------------------------------------
Automobiles: 1.7%
Associated Motorways Ltd. Lka. 72,000 100,413
Jardine International Motor
Holdings Ltd. H.K. 152,000 168,081
Oriental Holdings Bhd., fgn. Mal. 108,000 563,256
Otosan Otomobil Sanayii AS Tur. 141,800 33,602
------------
865,352
- -------------------------------------------------------------------------------
Banking: 12.6%
Akbank Tur. 2,716,000 756,231
*Akbank, new Tur. 1,358,000 362,026
Alpha Credit Bank Gr. 20,000 995,810
Banco Comercial Portugues SA Prt. 37,000 513,805
Banco Espirito Santo e
Comercial de Lisboa Prt. 26,000 442,036
Banco Portugues de
Investimento SA Prt. 11,000 193,101
Banco Totta & Acores SA Prt. 3,000 63,217
Bangkok Bank Public Co. Ltd. Tha. 16,100 117,031
Daegu Bank Co. Ltd. Kor. 7,000 89,302
Ergo Bank SA Gr. 18,000 743,815
Espirito Santo Financial
Holding SA, ADR Prt. 19,820 205,633
*First National Bank Holdings
Ltd. Zaf. 40,000 253,073
Grupo Financiero Banamex
Accival SA, C Mex. 72,000 82,528
Grupo Financiero Bancomer SA,
C Mex. 2,046,000 360,794
Grupo Financiero Serfin SA, B Mex. 40,000 28,802
HSBC Holdings PLC H.K. 55,233 623,264
National Bank of Greece SA Gr. 2,000 93,495
*Nedcor Ltd. Zaf. 15,253 186,402
Turkiye Garanti Bankasi AS Tur. 1,001,700 332,318
------------
6,442,683
- -------------------------------------------------------------------------------
Building Materials & Components: 3.4%
Akcimento Ticaret AS Tur. 25,000 36,730
Cemex SA, B Mex. 262,000 573,665
*Cimentas Izmir Cimento
Fabrikasi TAS Tur. 528,000 312,796
Cimsa Cimento Sanayi ve
Ticaret AS Tur. 47,000 139,218
Izocam Ticaret ve Sanayii AS,
br. Tur. 29,000 7,731
K Wah International Holdings
Ltd. H.K. 838,060 136,570
*Royal Ceramic Industry Public
Co. Ltd. Tha. 149,000 240,518
</TABLE>
7
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Investment Portfolio, March 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Building Materials & Components (cont.)
Royal Ceramic Industry Public
Co. Ltd., fgn. Tha. 32,000 $ 51,655
*Shanghai Yaohua Pilkington
Glass, B Chn. 77,000 84,700
Thai Asahi Glass Public Co.
Ltd. Tha. 72,610 160,700
------------
1,744,283
- -------------------------------------------------------------------------------
Chemicals:
0.4%
*Petkim Petrokimya Holding AS Tur. 47,000 30,071
PT Unggul Indah Corp., fgn. Idn. 62,000 56,792
Shanghai Chlor-Alkali Chemical
Co. Ltd., B Chn. 312,000 78,624
Shenzhen Petrochemical (Group)
Shareholding Co. Ltd., B Chn. 208,000 53,802
------------
219,289
- -------------------------------------------------------------------------------
Construction & Housing: 0.3%
Hopewell Holdings Ltd. H.K. 198,000 139,563
- -------------------------------------------------------------------------------
Electrical & Electronics: 0.1%
Great Wall Electronic
International Ltd. H.K. 566,000 42,457
- -------------------------------------------------------------------------------
Electronic Components & Instruments: 0.1%
S. Megga International
Holdings Ltd. H.K. 494,000 33,862
- -------------------------------------------------------------------------------
Energy Sources: 1.0%
Engen Ltd. ZAF 25,775 201,592
YPF Sociedad Anonima, ADR Arg. 15,000 285,000
------------
486,592
- -------------------------------------------------------------------------------
Financial Services: 2.0%
Alpha Leasing SA Gr. 10,000 227,122
Etba Leasing Gr. 12,600 263,947
Peregrine Investments Holdings
Ltd. H.K. 106,000 121,327
PT BBL Dharmala Finance, fgn. Idn. 48,500 80,183
PT Ficorinvest Bank, fgn. Idn. 112,000 55,675
PT Gajah Surya Multi Finance,
fgn. Idn. 293,000 144,013
PT Inter-Pacific Bank, fgn. Idn. 9,500 9,763
Sun Hung Kai & Co. Ltd. H.K. 349,000 139,924
------------
1,041,954
- -------------------------------------------------------------------------------
Food & Household Products: 3.8%
Chareon Pokphand Feedmill
Public Co. Ltd., fgn. Tha. 13,000 88,162
Dairy Farm International
Holdings Ltd. H.K. 121,874 156,047
*Del Monte Royal Foods Ltd. Zaf. 4,000 6,906
Elais Oleaginous Co. Gr. 4,800 285,777
Hellas Can--Container
Manufacturers Gr. 18,270 318,265
Hellenic Bottling Co. SA Gr. 7,500 182,580
</TABLE>
8
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Investment Portfolio, March 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Food & Household Products (cont.)
PT Anwar Sierad,fgn. Idn. 102,000 $ 60,389
PT Charoen Pokphand Indonesia,
fgn. Idn. 46,000 85,299
PT Cipendawa Farm Enterprises,
fgn. Idn. 65,000 82,775
PT Japfa Comfeed Indonesia,
fgn. Idn. 67,000 55,384
*PT Multibreeder Adirama, fgn. Idn. 129,000 201,743
Tat Konserve Sanayii AS Tur. 19,000 31,967
Vitro SA Mex. 130,000 367,935
------------
1,923,229
- -------------------------------------------------------------------------------
Health & Personal Care: 0.2%
Hankook Cosmetics Co. Ltd. Kor. 3,000 123,559
- -------------------------------------------------------------------------------
Industrial Components: 0.6%
Marshall Boya ve Vernik
Sanayii AS Tur. 578,760 157,719
*Shanghai Rubber Belt Co.
Ltd., B Chn. 549,000 85,644
Shanghai Tyre & Rubber Co.
Ltd., B Chn. 169,000 47,320
------------
290,683
- -------------------------------------------------------------------------------
Leisure & Tourism: 0.6%
Hinds Hotels International
Ltd. Sgp. 129,000 148,969
Shangri-La Hotels (Malaysia)
Bhd. Mal. 141,000 162,114
------------
311,083
- -------------------------------------------------------------------------------
Machinery & Engineering: 0.3%
Shanghai Erfangji Textile
Machinery Co. Ltd., B Chn. 294,000 54,684
*Shanghai Industrial Sewing
Machine Corp. Chn. 192,000 54,528
*Shanghai Steel Tube Co. Ltd.,
B Chn. 227,000 51,756
------------
160,968
- -------------------------------------------------------------------------------
Merchandising: 1.0%
Dickenson Concept H.K. 227,000 121,838
Fortei Holdings Ltd. H.K. 1,668,000 127,279
Wo Kee Hong Holdings Ltd. H.K. 1,010,000 212,920
Yaohan Hongkong Corp. Ltd. H.K. 460,000 59,493
------------
521,530
- -------------------------------------------------------------------------------
Metals & Mining: 0.8%
Antofagasta Holdings PLC Chil. 34,000 165,271
Malayawata Steel Bhd., fgn. Mal. 87,000 173,588
*Tubos de Acero de Mexico SA Mex. 23,224 82,760
------------
421,619
- -------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Investment Portfolio, March 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Multi-Industry: 4.1%
Cheung Kong Holdings Ltd. H.K. 146,000 $ 636,342
Clal Industries Ltd. Isr. 10,000 58,412
*Comercial de Plata SA Arg. 65,000 142,343
DESC SA, B Mex. 3,033 5,723
Grupo Industrial Alfa SA, A Mex. 29,000 207,965
Hayleys Ltd. Lka. 45,600 185,488
Jardine Strategic Holdings
Ltd. (Singapore) H.K. 25,000 95,000
Koc Yatirim ve Sanayii
Mamullesi Pazarlanca AS Tur. 108,000 101,090
Lai Sun Garment International
Ltd. H.K. 163,000 177,082
Perlis Plantations Bhd., fgn. Mal. 60,000 196,760
*Rembrandt Group Ltd. Zaf. 10,000 81,006
Shenzhen Gintian Industrial
Co. Ltd., B Chn. 174,000 77,638
*Stelux International Holdings
Ltd. H.K. 473,254 137,716
------------
2,102,565
- -------------------------------------------------------------------------------
Real Estate: 4.0%
Bangkok Land Co. Ltd., fgn. Tha. 118,000 170,112
Hang Lung Development Co. Ltd. H.K. 300,000 457,838
*Hang Lung Development Co.
Ltd., wts. H.K. 30,000 4,578
Lai Sun Development Co. Ltd. H.K. 1,178,000 153,877
New World Development Co. Ltd. H.K. 109,091 296,995
PT Summarecon Agung, fgn. Idn. 153,000 147,838
Shanghai Jinqiao Export
Processing Zone Development, B Chn. 115,000 74,520
*Shanghai Outer Gaoqiao Free
Trade Zone Develop. Co., B Chn. 131,000 70,740
Shenzhen Properties &
Resources Develop.(Group)
Ltd., B Chn. 190,000 71,262
Sun Hung Kai Properties Ltd. H.K. 65,000 443,449
Tian An China Investments Co.
Ltd. H.K. 768,000 131,112
------------
2,022,321
- -------------------------------------------------------------------------------
Recreation, Other Consumer Goods: 1.5%
China First Pencil Co. Ltd., B Chn. 310,000 102,300
*Fu Hui Jewellery Co. (H.K.)
Ltd. H.K. 1,572,000 97,589
*Shanghai Forever Bicycle Co.
Ltd., B Chn. 295,000 53,100
Shanghai Phoenix Bicycle Co.
Ltd., B Chn. 291,000 84,390
Shanghai Wingsung Stationery
Co. Ltd., B Chn. 297,000 71,874
Shenzhen China Bicycles Co.
(Holdings) Ltd., B Chn. 116,000 46,058
Yue Yuen Industrial (Holdings)
Ltd. H.K. 1,288,000 311,505
------------
766,816
- -------------------------------------------------------------------------------
Telecommunications: 2.7%
Telefonos de Mexico SA, L, ADR Mex. 47,800 1,362,300
- -------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Investment Portfolio, March 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Textiles & Apparel: 2.8%
Goldlion Holdings Ltd. H.K. 519,000 $ 123,508
Hua Thai Manufacturing Public
Co. Ltd. Tha. 16,000 38,335
Laws International Holdings
Ltd. H.K. 438,000 75,341
PT Eratex Djaja, fgn. Idn. 144,000 62,735
PT Ganda Wangsa Utama, fgn. Idn. 275,600 98,517
PT Hadtex Indosyntec, fgn. Idn. 114,000 54,759
PT Polysindo Eka Perkasa,
fgn. Idn. 398,000 391,242
Saha Union Public Co. Ltd.,
fgn. Tha. 80,000 114,518
Shanghai Lian Hua Fibre
Corp., B Chn. 207,000 53,613
Thai Rayon Public Co. Ltd. Tha. 17,000 143,594
Thai Wacoal Public Co. Ltd.,
fgn. Tha. 12,500 92,640
Tungtex (Holdings) Co. Ltd. H.K. 1,364,000 176,409
------------
1,425,211
- -------------------------------------------------------------------------------
Transportation: 1.4%
Chiwan Wharf Holdings Ltd., B Chn. 170,000 77,503
Malaysian International
Shipping Corp. Bhd., fgn. Mal. 229,333 661,450
------------
738,953
- -------------------------------------------------------------------------------
Utilities Electrical & Gas: 1.7%
*CEZ, GDR Csk. 8,000 334,000
*CEZ, GDS Csk. 6,000 250,500
Compania Boliviana de Energia
Electricas SA Bol. 12,400 297,600
------------
882,100
- -------------------------------------------------------------------------------
Wholesale & International Trade: 0.3%
East Asiatic Co. (Hong Kong)
Ltd. H.K. 945,000 135,663
------------
TOTAL COMMON STOCKS (cost $30,518,375) 25,026,135
- -------------------------------------------------------------------------------
PREFERRED STOCKS: 2.4%
- -------------------------------------------------------------------------------
Eletrobras-Centrais Eletricas
Brasileiras SA, B, pfd. Brz. 1,960,000 374,994
Petrobras-Petroleo Brasileiro
SA, pfd. Brz. 6,072,000 422,135
Telebras-Telecomunicacoes
Brasileiras SA, pfd. Brz. 15,533,000 418,130
------------
TOTAL PREFERRED STOCKS (cost $2,455,367) 1,215,259
- -------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Investment Portfolio, March 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
BONDS--CORPORATE: 10.6%
- --------------------------------------------------------------------------------------------------------------
Bariven SA, 10.625%, 3/17/02 Ven. 330,000 $ 278,850
Bridas Corp., Yankee, 12.50%, 11/18/99 Arg. 400,000 324,000
Ceskoslovenska Obchodni Banka, 11.125%, 8/26/97 Csk. 5,420,000 208,913
CEZ AS, 14.375%, 1/27/01 Csk. 15,590,000 645,793
Essar Gujarat Ltd., 9.4%, FRN, 7/15/99 Ind. 300,000 294,000
Gloria SA, 11.00%, 3/21/97 Per. 300,000 273,000
Henderson Capital International Ltd., 4.25%, 10/27/96 H.K. 600,000 587,250
Industrias Klabin de Papel Celulose SA,
12.125%,12/28/02 Brz. 210,000 187,950
Iochpe--Maxion SA, 144A, 12.375%, 11/08/02 Brz. 250,000 216,250
Philippine Long Distance Telephone Co., 10.625%, 6/2/04 Phl. 500,000 480,625
PIV Investment Finance (Cayman) Ltd., 4.5%, conv.,
12/1/00 H.K. 430,000 316,050
Produvisa Capital Corp., 9.50%, 11/29/96 Ven. 350,000 306,250
PT Astra International, 9.75%, 4/29/01 Indo. 175,000 160,125
PT Polysindo Eka Perkasa Global, 13.0%, 6/15/01 Indo. 500,000 460,000
Telefonica de Argentina SA, 11.875%, 11/01/04 Arg. 450,000 409,500
Tjiwi Kimia Int'l Finance Co. BV, 13.25%, 8/01/01 Idr. 250,000 251,250
-----------
TOTAL BONDS--CORPORATE (cost $5,663,561) 5,399,806
- --------------------------------------------------------------------------------------------------------------
BONDS--GOVERNMENT AND GOVERNMENT AGENCIES: 20.9%
- --------------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de La Federacion, 7/27/95 Mex. 420,000 380,129
Dharmala Sakti Sajahtera, 9/25/96, CP Idr. 500,000,000 161,975
Goldman Argentina Loc Mkts Secs Trust 94-I, 8/15/01 Arg. 750,000 538,125
Vnesheconombank Loan Participation Sun. 750,000 168,750
Associacion Nacional del Cafe, 11.00%, 8/31/98 Gtm. 460,000 441,600
Banco Central de Costa Rica, A, 6.25%, 5/21/10 Cri. 400,000 196,000
Banco Ganadero, 9.75%, 8/26/99 Col. 200,000 188,000
Bank Foreign Economic Affairs USSR, 7.00%, 3/29/96 Sun. 1,000,000 689,248
Government of Brazil, 6.6875%, EI, FRN, L, 4/15/06 Brz. 950,000 475,000
Government of Brazil, 7.8125%, FRN A, 1/01/01 Brz. 1,600,500 1,174,367
Government of Uruguay, A, 6.75%, 2/19/21 Uru. 250,000 131,250
Kingdom of Jordan, 7.625%, FRN, 12/23/05 Jor. 700,000 364,000
Kingdom of Morocco Loan Partn., 5.9375%, FRN, 1/1/09 Mar. 1,500,000 866,250
Morgan Stanley Repack Arg Dom Secs Trust, 14.75%,
9/1/02 Arg. 430,000 246,175
National Bank of Hungary, 7.95%, 11/01/03 Hun. 200,000 132,000
</TABLE>
12
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Investment Portfolio, March 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
BONDS--GOVERNMENT AND GOVERNMENT AGENCIES (CONT.)
- -----------------------------------------------------------------------------------------------------------------
National Bank of Hungary, 8.875%, 11/01/13 Hun. 300,000 $ 173,625
Philippine Pars, B, 5.75%, FRN, 12/01/17 Phl. 500,000 301,563
Poland, disc. 6.8125%, FRN, 10/27/24 Pol. 619,000 396,934
Poland, PDI, 3.25%, FRN, 10/27/14 Pol. 347,000 139,668
Rep. Turkey Public Partn. Auth., ser. 4, 6.5625%, 2/21/96 Tur. 40,000 38,650
Rep. Turkey Public Partn. Auth., ser. 5, 6.8125%, 2/21/97 Tur. 295,000 274,350
Republic of Argentina, 6.5%, FRN, 3/31/05 Arg. 650,000 350,594
Republic of Argentina, 7.125%, FRN, 3/31/23 Arg. 300,000 158,250
Republic of Bulgaria, IAB, 7.5625%, FRN, 7/28/24 Bgr. 1,000,000 338,750
Republic of Ecuador, disc, FRN, 7.25%, 2/28/25 Ecu. 825,000 367,125
Republic of Ecuador, IE, FRN, 7.6875%, 12/21/04 Ecu. 177,000 87,173
Republic of Ecuador, PDI w/i, FRN, 7.25%, 4/28/15 Ecu. 810,000 184,275
Republic of Pakistan, 11.5%, 12/22/99 Pak. 140,000 131,600
Republic of Panama, 7.125%, FRN, 5/10/02 Pan. 500,000 342,500
Republic of Trinidad and Tobago, 11.75%, 10/3/04 Trin. 170,000 171,275
Republic of Venezuela, 9.00%, 5/27/96 Ven. 75,000 69,000
Republic of Venezuela, 9.125%, 3/11/96 Ven. 150,000 139,500
Tribasa Toll Road Trust I, 10.50%, 12/01/11 Mex. 300,000 120,000
United Mexican States, 8.50%, 9/15/02 Mex. 295,000 157,825
United Mexican States, B, 6.25%, 12/31/19 Mex. 1,200,000 568,500
-----------
TOTAL BONDS--GOVERNMENT AND GOVERNMENT AGENCIES (cost $12,531,872) 10,664,026
- -----------------------------------------------------------------------------------------------------------------
INDEXED SECURITIES: 0.4% (cost $200,000)
- -----------------------------------------------------------------------------------------------------------------
Goldman Sachs Group LP, (principal and interest is linked
to the change in the Indonesian Rupiah to U.S. Dollar
foreign exchange rate between issue date (2,179.25
Rupiah/U.S. Dollar) and maturity date), 14.00%, 6/15/95 Idn. 200,000 193,900
- -----------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 14.7% (cost $7,172,840)
- -----------------------------------------------------------------------------------------------------------------
Industrial Finance Corp., Thailand, zero, 6/15/95 Tha. 10,000,000 395,127
PT Polysindo Eka Perkasa, 7.00%, 6/21/95 Idn. 550,000,000 233,775
U.S. Treasury Bills, 5.40% to 5.72%, with
maturities to 6/15/95 U.S. 6,891,000 6,856,971
-----------
TOTAL SHORT TERM OBLIGATIONS (cost $7,491,015) 7,485,873
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 98.0% (cost $58,860,190) 49,984,999
UNREALIZED LOSS IN FORWARD EXCHANGE CONTRACTS: (0.1%) (15,846)
OTHER ASSETS, LESS LIABILITIES: 2.1% 1,052,877
-----------
TOTAL NET ASSETS: 100.0% $51,022,030
===========
</TABLE>
*NON-INCOME PRODUCING.
**PRINCIPAL AMOUNT IN CURRENCY OF COUNTRY INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (identified cost $58,860,190) $49,984,999
Cash 8,265
Receivables:
Investment securities sold 465,603
Dividends and interest 526,917
Other 300,000
Unamortized organization costs 16,008
-----------
Total assets 51,301,792
-----------
Liabilities:
Payable for investment securities purchased 77,282
Unrealized loss in forward exchange contracts (Note 5) 15,846
Accrued expenses 186,634
-----------
Total liabilities 279,762
-----------
Net assets, at value $51,022,030
===========
Net assets consists of:
Undistributed net investment income $ 706,572
Net unrealized depreciation (8,888,185)
Accumulated net realized gain 140,506
Net capital paid in on shares of capital stock 59,063,137
-----------
Net assets, at value $51,022,030
===========
Shares outstanding 4,233,248
===========
Net asset value per share ($51,022,030 / 4,233,248) $ 12.05
===========
</TABLE>
STATEMENT OF OPERATIONS
for the period April 29, 1994 (commencement of operations) to March 31, 1995
<TABLE>
<S> <C> <C>
Investment income:
(net of $9,284 foreign
taxes withheld)
Dividends $ 492,086
Interest 2,463,806
-----------
Total income $ 2,955,892
Expenses:
Management fees (Note 3) 434,759
Administrative fees (Note 3) 127,833
Transfer agent fees 54,000
Custodian fees 92,300
Reports to shareholders 46,585
Audit fees 30,350
Legal fees 24,400
Registration and filing fees 15,114
Directors' fees and expenses 73,660
Amortization of organization costs 3,492
Other 13,718
-----------
Total expenses 916,211
-----------
Net investment income 2,039,681
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments 705,897
Foreign currency transactions (163,342)
-----------
542,555
-----------
Net unrealized depreciation on:
Investments (8,875,191)
Foreign currency translation of other assets and
liabilities (12,994)
-----------
(8,888,185)
-----------
Net realized and unrealized loss (8,345,630)
-----------
Net decrease in net assets resulting from operations $(6,305,949)
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
APRIL 29, 1994
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 1995
----------------
<S> <C>
Increase in net assets:
Operations:
Net investment income $ 2,039,681
Net realized gain from security and foreign currency
transactions 542,555
Net unrealized depreciation (8,888,185)
-----------
Net decrease in net assets resulting from operations (6,305,949)
Distributions to shareholders:
From net investment income (1,333,109)
From net realized gain (402,049)
Capital share transactions (Note 2): 58,963,126
-----------
Net increase in net assets 50,922,019
Net assets:
Beginning of period 100,011
-----------
End of period $51,022,030
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Emerging Markets Appreciation Fund, Inc. (the Fund) was organized as
a Maryland corporation on February 16, 1994 and commenced operations on April
29, 1994 as a closed-end, non-diversified management investment company regis-
tered under the Investment Company Act of 1940. The following summarizes the
Fund's significant accounting policies.
A. Securities Valuations:
Securities listed or traded on a recognized national or foreign stock exchange
or NASDAQ are valued at the last reported sales prices on the principal ex-
change on which the securities are traded. Over-the-counter securities and
listed securities for which no sale is reported are valued at the mean between
the last current bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
and approved in good faith by the Board of Directors.
B. Foreign Exchange Contracts:
The Fund may enter into forward exchange contracts and currency option con-
tracts in order to hedge against foreign exchange risks.
(i) Forward Exchange Contracts: These contracts are valued daily and the Fund's
equity therein, representing unrealized gain or loss on the contracts, is
included in the Statement of Assets and Liabilities. Realized and
unrealized gains and losses are included in the Statement of Operations.
(ii) Currency Option Contracts: Options purchased are recorded as
investments: options written (sold) are accounted for as liabilities. When
an option expires, the premium (original option value) is realized as a
gain if the option was written or realized as a loss if the option was
purchased. When the exercise of an option results in a cash settlement,
the difference between the premium and the settlement proceeds is realized
as a gain or loss. When securities are acquired or delivered upon exercise
of an option, the acquisition cost or sale proceeds are adjusted by the
amount of the premium. When an option is closed, the difference between
the premium and the cost to close the position is a realized as a gain or
loss.
C. Indexed Securities:
The Fund may invest in debt instruments in which the principal and/or interest
is dependent on another factor such as a yield curve currency exchange rates or
commodity prices. The Fund's objective is holding these notes, commonly called
structured notes, is to tailor the Fund's investment based on specific risk and
returns it wishes to assume while avoiding unwanted risk or change the Fund's
exposure to a particular foreign exchange rate or the spread between two for-
eign exchange rates.
D. Foreign Currency Translations:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign curren-
cies are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customar-
ily enters into foreign exchange contracts to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of for-
eign currencies, currency gains or losses realized between the trade and set-
tlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at the end
of the fiscal period, resulting from changes in the exchange rates.
16
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
E. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
F. Security Transactions, Investment Income, Distributions and Expenses:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income from foreign secu-
rities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
G. Unamortized Organization Costs:
Organization costs are being amortized on a straight line basis over a five
year period.
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
On April 29, 1994, the fund completed the initial public offering of 4,000,000
shares of its common stock; proceeds paid to the Fund amounted to $55,776,685,
after deduction of underwriting commissions and expenses of $623,315. On June
17, 1994, the Fund completed a subsequent offering of 225,000 shares of its
common stock; proceeds paid to the Fund amounted to $3,172,500.
At March 31, 1995, there were 100,000,000 shares of capital stock authorized
($0.01 par value).
During the period ended March 31, 1995, 1,155 shares were issued for $13,942
from distributions reinvested.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton In-
vestment Management (Hong Kong) Limited (TIML), Templeton Investment Counsel,
Inc. (TICI) and Templeton Global Investors, Inc. (TGII), the Fund's investment
manager, sub-advisor and administrative manager, respectively. The Fund pays
monthly an investment management fee to TIML equal, on an annual basis, to
1.25% of the average daily net assets of the Fund. TIML has entered into a sub-
advisory agreement with TICI, whereby TICI manages the debt component of the
Fund's portfolio. For its services TIML pays to TICI a fee equal, on an annual
basis, to 0.30% of the Fund's average daily net assets. TIML pays monthly an
economic consulting and shareholder servicing fee to Paine Webber (formerly
Kidder, Peabody & Co.) equal, on an annual basis, to 0.10% of the average daily
net assets of the Fund. TIML and Paine Webber have agreed to reduce their fee
by one half during the quarter following the fiscal period ending May 31, 1994
and any succeeding four full fiscal quarters in which the average closing price
of the Fund's shares on the New York Stock Exchange is less than the $15 ini-
tial offering price. Such reduction in fees for TIML and Paine Webber amounted
to $204,407 and $16,353, respectively, for the period ended March 31, 1995. The
Fund pays TGII monthly an administrative fee of 0.25% per annum of the Fund's
average daily net assets. TGII has entered into a sub-administrative agreement
with Princeton Administrators, L.P. (Princeton), an affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, whereby Princeton provides various admin-
istrative services for the Fund. For its services, TGII pays to Princeton a fee
equal, on an annual basis, to 0.20% of the Fund's average daily net assets,
subject to a minimum monthly fee of $8,333.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received fees of $24,400 for the period April 29, 1994
(commencement of operations) through March 31, 1995.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
year ended March 31, 1995 aggregated $73,509,529 and $23,044,420, respectively.
The cost of securities for federal income tax purposes is $58,922,729. Realized
gains and losses are reported on an identified cost basis.
17
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
At March 31, 1995, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income taxes purposes, was
as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 1,478,454
Unrealized depreciation (10,416,184)
------------
Net unrealized depreciation $ (8,937,730)
============
</TABLE>
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
During the period ended March 31, 1995, the Fund has been a party to financial
instruments with off-balance-sheet risks, primarily forward exchange contracts,
in order to minimize the risk to the Fund, with respect to its portfolio trans-
actions, from adverse changes in the relationship between the U.S. dollar and
foreign currencies and interest rates. These instruments involve market risk in
excess of the amount recognized on the Statement of Assets and Liabilities;
some of these risks have been minimized by offsetting contracts. Risks arise
from the possible inability of counterparties to meet the terms of their con-
tracts, future movement in currency values and interest rates and contract po-
sitions that are not exact offsets. The contract amount indicates the extent of
the Fund's involvement in such contracts.
Forwards: A forward exchange contract is an agreement between two parties to
exchange different currencies at a specific rate at an agreed future date.
At March 31, 1995, the Fund had outstanding forward exchange contracts for the
sale of currencies as set out below. These contracts are reported in the finan-
cial statements at the Fund's net equity, as measured by the difference between
the forward exchange rates at the reporting date and the forward exchange rates
at the date of entry into the contract:
<TABLE>
<S> <C>
Net unrealized loss in forward exchange contracts to sell
1,600,000
Deutschemarks for 1,150,000 U.S. Dollars, June 12, 1995 $(15,846)
</TABLE>
6. UNAUDITED QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
NET INCREASE
NET GAIN (LOSS) (DECREASE)
ON INVESTMENT AND IN NET ASSETS
INVESTMENT NET INVESTMENT FOREIGN CURRENCY RESULTING FROM
INCOME INCOME TRANSACTIONS OPERATIONS
---------------- ---------------- ------------------- -------------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
---------- ----- ---------- ----- ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995
For the quarter ended:
June 30, 1994 $ 426,842 $.10 $ 236,441 $.05 $(1,152,308) $ (.27) $ (915,867) $ (.22)
September 30, 1994 858,573 .20 539,556 .13 3,412,377 .80 3,951,933 .93
December 31, 1994 878,186 .21 608,449 .15 (7,059,694) (1.67) (6,451,245) (1.52)
March 31, 1995 792,291 .19 655,235 .16 (3,546,005) (.84) (2,890,770) (.68)
---------- ---- ---------- ---- ----------- ------ ----------- ------
$2,955,892 $.70 $2,039,681 $.49 $(8,345,630) $(1.98) $(6,305,949) $(1.49)
========== ==== ========== ==== =========== ====== =========== ======
</TABLE>
18
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Templeton Emerging Markets Appreciation Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton Emerging Markets Appreciation Fund,
Inc., as of March 31, 1995, and the related statement of operations, the state-
ment of changes in net assets and the financial highlights for the period from
April 29, 1994 (commencement of operations) to March 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's man-
agement. Our responsibility is to express an opinion on these financial state-
ments and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights 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
March 31, 1995, 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 pre-
sentation. We believe that our audit provides a reasonable basis for our opin-
ion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Tem-
pleton Emerging Markets Appreciation Fund, Inc. as of March 31, 1995, the re-
sults of its operations, the changes in its net assets and the financial high-
lights for the period indicated, in conformity with generally accepted account-
ing principles.
/s/ McGladrey & Pullen, LLP
New York, New York April 28, 1995
19
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
The Fund offers a Dividend Reinvestment Plan (the "Plan") with the following
features: *If shares of the Fund are held in the shareholder's name, the share-
holder will automatically be a participant in the Plan unless he elects to
withdraw. If the shares are registered in the name of a broker-dealer or other
nominee (i.e., in "street name"), the broker-dealer or nominee will elect to
participate in the Plan on the shareholder's behalf unless the shareholder in-
structs them otherwise, or unless the reinvestment service is not provided by
the broker-dealer or nominee. *Participants should contact Chemical Mellon Se-
curities Trust Company, Dividend Reinvestment Services, P.O. Box 750, Pitts-
burgh, PA 15230, to receive the Plan brochure. *To receive dividends or distri-
butions in cash, the shareholder must notify Chemical Mellon Securities Trust
Company ("Mellon") or the institution in whose name the shares are held. Mellon
must receive written notice within 10 business days before the record date for
the distribution. *Whenever the Fund declares dividends in either cash or com-
mon stock of the Fund, if the market price is equal to or exceeds net asset
value at the valuation date, participants will receive the dividends entirely
in stock at a price equal to the net asset value but not less than 95% of the
then current market price of the Fund's shares. If the market price is lower
than net asset value and if dividends and/or capital gains distributions are
payable only in cash, the participant will receive shares purchased on the New
York Stock Exchange. *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. Upon withdrawal, the
participant will receive, without charge, stock certificates issued and in the
participant's name for all full shares; or, if the participant's wishes, Mellon
will sell the participant's shares and send the proceeds, net of any brokerage
commissions. A $5.00 fee is charged by Mellon upon any cash withdrawal or ter-
mination. *Whenever shares are purchased on the New York Stock Exchange, each
participant will pay a pro rata portion of brokerage commissions. Brokerage
commissions will be deducted from amounts to be invested.
20
<PAGE>
Templeton Emerging Markets Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
TRANSFER AGENT
Chemical Mellon Shareholder Services
Securities Transfer Services
450 West 33rd Street, 15th Floor
New York, NY 10001
800-526-0801
SHAREHOLDER INFORMATION
Weekly comparative net asset value and market price information about Templeton
Emerging Markets Appreciation Fund shares is published each Monday in The Wall
Street Journal, weekly in Barron's and each Saturday in The New York Times and
other newspapers in a table called "Publicly Traded Funds". Daily market prices
for the Fund's shares are published in the New York Stock Exchange Composite
Transactions section of newspapers under the designation "TempltnTEA". The
Fund's New York Stock Exchange trading symbol is TEA. The Fund's shares are
also listed and traded on the Pacific Stock Exchange.
For current information about the net asset value, call 1-800-292-9293.
If any shareholder is not receiving copies of the Reports to Shareholders be-
cause shares are registered in a broker's name or in a custodian's name, he or
she can write and request that his or her name be added to the Fund's mailing
list, by writing Templeton Emerging Markets Fund, Inc., 700 Central Avenue, St.
Petersburg, FL 33701.
21
<PAGE>
NOTES
-----
<PAGE>
The Franklin Templeton Group
- --------------------------------------------------------------------------------
Literature Request -- Call today for a free descriptive brochure and prospectus
on any of the funds listed below. The prospectus contains more complete
information, including fees, charges and expenses, and should be read carefully
before investing or sending money.
TEMPLETON Massachusetts*** German Government Bond Fund
FUNDS Michigan*** Global Government Income Fund
Minnesota*** Investment Grade Income Fund
American Trust Missouri U.S. Government Securities Fund
American Government New Jersey
Securities Fund New York* FRANKLIN FUNDS SEEKING HIGH
Developing Markets North Carolina CURRENT INCOME AND STABILITY
Trust Ohio*** OF PRINCIPAL
Foreign Fund Oregon Adjustable Rate Securities
Global Infrastructure Pennsylvania Fund
Fund Tennessee** Adjustable U.S. Government
Global Opportunities Texas Securities Fund
Trust Virginia Short-Intermediate U.S.
Global Rising Dividends Washington** Government Securities Fund
Fund
Greater European Fund FRANKLIN FUNDS FRANKLIN FUNDS FOR NON-U.S.
Growth Fund SEEKING CAPITAL GROWTH INVESTORS
Income Fund California Tax-Advantaged High Yield
Japan Fund DynaTech Fund Securities Fund
Latin America Fund Growth Fund Tax-Advantaged International
Money Fund Equity Fund Bond Fund
Real Estate Securities Global Health Tax-Advantaged U.S.
Fund Care Fund Government Securities Fund
Smaller Companies Gold Fund
Growth Fund Growth Fund FRANKLIN TEMPLETON
World Fund International INTERNATIONAL CURRENCY FUNDS
Equity Fund Global Currency Fund
FRANKLIN FUNDS Pacific Hard Currency Fund
SEEKING TAX- Growth Fund High Income Currency Fund
FREE INCOME Real Estate
Federal Intermediate Securities FRANKLIN MONEY MARKET FUNDS
Term Fund California Tax-Exempt Money
Tax-Free Income Fund Small Cap Fund
Federal Tax-Free Growth Fund Federal Money Fund
Income Fund IFT U.S. Treasury Money
High Yield Tax-Free Market Portfolio
Income Fund FRANKLIN FUNDS SEEKING Money Fund
Insured Tax-Free GROWTH AND INCOME New York Tax-Exempt Money
Income Fund*** Balance Sheet Fund
Puerto Rico Tax-Free Investment Fund Tax-Exempt Money Fund
Income Fund Convertible Securities
Fund FRANKLIN FUND FOR
FRANKLIN STATE-SPECIFIC Equity Income Fund CORPORATIONS
FUNDS SEEKING TAX-FREE Global Utilities Fund Corporate Qualified Dividend
INCOME Income Fund Fund
Alabama Premier Return Fund
Arizona* Rising Dividends Fund FRANKLIN TEMPLETON VARIABLE
Arkansas** Strategic Income Fund ANNUITIES
California* Utilities Fund Franklin Valuemark
Colorado Franklin Templeton Valuemark
Connecticut FRANKLIN FUNDS SEEKING Income
Florida* HIGH CURRENT INCOME Plus (an intermediate
Georgia AGE High Income Fund annuity)
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Toll-free 1-800/DIAL BEN (1-800/342-5236)
* Two or more fund options available: Long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** 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.
<PAGE>
- --------------------------
TEMPLETON EMERGING
MARKETS
APPRECIATION FUND,
INC.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
Investors should be aware that the value of investments made for the Fund may
go up as well as down and that the Investment Manager may make errors in
selecting securities for the Fund's portfolio. Like any investment in
securities, the Fund's portfolio will be subject to the risk of loss from
market, currency, economic, political and other factors. The Fund and Fund
investors are not protected from such losses by the Investment Manager.
Therefore, investors who cannot accept the risk of such losses should not
invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our
service de-partments may be moni-tored, recorded and ac-cessed. These calls can
be determined by the presence of a regular beeping tone.
--------------------------
TLTEA A95 05/95
[RECLYCING LOGO APPEARS HERE]
TEMPLETON
EMERGING
MARKETS
APPRECIATION
FUND, INC.
Annual Report
March 31, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
