<PAGE> 1
TEMPLETON EMERGING
MARKETS APPRECIATION FUND
YOUR FUND'S OBJECTIVE:
The Templeton Emerging Markets Appreciation Fund seeks long-term capital
appreciation by investing substantially all of its assets in a portfolio of
equity securities and debt obligations of issuers in emerging market countries.
November 15, 1996
Dear Shareholder:
We are pleased to bring you this semi-annual report for the Templeton Emerging
Markets Appreciation Fund, which covers the six months ended September 30, 1996.
During this period, securities markets in many developing countries rallied
strongly. Fixed income securities, in particular, performed well, largely, in
our view, because of improved investor confidence in economic stabilization
policies adopted by many developing countries. Although some equity markets
recorded large gains, others suffered losses. Within this environment, the Fund,
which holds both stocks and bonds, provided a six-month total return of 7.00% in
net asset value terms, and -7.02% in market-price terms, as shown in the
Performance Summary on page 5.
On September 30, 1996, the Fund's total net assets were invested 50.0% in
equities, 34.1% in fixed-income securities, and 15.9% in short-term obligations
and other net assets. These holdings
1
<PAGE> 2
TEMPLETON EMERGING MARKETS
APPRECIATION FUND
Portfolio Breakdown on 9/30/96
Based on Total Net Assets
<TABLE>
<CAPTION>
<S> <C>
Equities 50.0%
Fixed-Income
Securities 34.1%
Short-Term Obligations &
Other Net Assets 15.9%
</TABLE>
were spread across 37 emerging market countries, with no single market
representing more than 13.9% of the Fund's assets. The Fund's largest
single-country exposure was in Mexico, followed by Hong Kong, Brazil, Argentina
and Greece.
In Latin America, the Fund's performance was helped by its holdings of Mexican
and Argentine government bonds. During the six-month period, Mexico's bonds
provided a total return of 13.5%, while Argentina's provided 17.7%. Responding
to international investors' renewed confidence in the region, we increased our
Mexican bond holdings to 6.3% of total net assets and our Argentine bond
holdings to 4.5%. Prices of many Latin American stocks also rose, although the
Argentine stock market suffered a temporary setback following the firing of
Finance Minister Domingo Cavallo in July.
Russia's stock market was particularly strong during the period. For example,
Lukoil Holdings, one of our stocks, more than doubled in value from April 1,
1996 to September 19, 1996. Boris Yeltsin's victory in the presidential
elections seemed to indicate that many Russians are committed to continued
monetary, fiscal, and foreign reserve reforms. Although Russia's high rate of
tax evasion continues to concern us, the restructuring of its banking sector,
the government's efforts to extend maturities on domestic debt, and its plans to
issue eurobonds, have resulted in lower interest rates, which should help reduce
the fiscal deficit. Responding to these positive developments, we purchased some
of these new Russian eurobonds for the Fund's portfolio.
The Fund also benefited from its holdings of restructured Bulgarian bonds, which
rose in value after the government negotiated a new borrowing agreement with the
International Monetary Fund.
2
<PAGE> 3
TEMPLETON EMERGING MARKETS
APPRECIATION FUND
Geographic distribution on 9/30/96
Based on Total Net Assets
<TABLE>
<CAPTION>
<S> <C>
Latin America 40.2%
Asia 26.3%
Europe 15.5%
Middle East & Africa 2.1%
Short-Term Obligations &
Other Net Assets 15.9%
</TABLE>
In Asia, concerns about economic instability and excessively fast growth hurt
markets in Malaysia and Thailand, while Indonesian equity markets performed
poorly largely because of political and social unrest. The poor performance of
the Indonesian stock market reminds us that sometimes there is a price to pay
for the high returns that emerging markets can offer: namely, high risk.
Looking forward, we feel that strong world economic growth and prudent
management policies adopted in many emerging market countries could enhance
earnings of companies in our portfolio. We expect to increase our exposure in
countries that have implemented economic policies designed to improve their
fiscal positions and balance of payments. Since prices for emerging market bonds
are, in our opinion, at or above fair value, we will look for opportunities when
bond prices deviate from our assessment of the bonds' underlying value. We will
also search for emerging market stocks that are temporarily weak, but which we
expect to benefit from world economic trends or local policy changes. For
example, we believe that good value can be found in Turkey, Greece, India and
other Asian markets where price/earnings ratios have declined. The prevailing
bearish sentiment in some of these markets may provide a good opportunity to
secure bargains.
This discussion reflects the strategies we employed for the Fund during the
six-month period under review, and includes our opinions as of the close of the
period. Since economic and market conditions are constantly changing, our
strategies, evaluations, conclusions and decisions regarding portfolio holdings,
may change as new
3
<PAGE> 4
TEMPLETON EMERGING MARKETS
APPRECIATION FUND
Top Ten Holdings on 9/30/96
Based on Total Net Assets
<TABLE>
<CAPTION>
Company, % of Total
Industry, Country Net Assets
<S> <C>
Government of Brazil, 6.50%, 4/15/24
Government Bond, Brazil 2.8%
Telmex-Telefonos de Mexico SA, L, ADR
Telecommunications, Mexico 2.7%
Venezuela DCB, 6.625%, FRN, 12/18/07
Government Bond, Venezuela 2.4%
Cemex SA, B
Building Materials & Components, Mexico 2.0%
Alpha Credit Bank
Banking, Greece 1.9%
HSBC Holdings PLC
Banking, Hong Kong 1.8%
Ergo Bank SA
Banking, Greece 1.7%
Grupo Financiero Bancomer SA de CV, B
Banking, Mexico 1.6%
Petrobras-Petroleo Brasileiro SA, pfd.
Energy Sources, Brazil 1.6%
United Mexican States, 9.75%, 2/06/01
Government Bond, Mexico 1.6%
</TABLE>
For a complete list of portfolio holdings, please see page 7 of this report.
circumstances arise. Although past performance of a specific investment or
sector cannot guarantee future performance, such information can be useful in
analyzing the securities we purchase or sell for the Fund.
Of course, investments in foreign securities involve special risks, such as
adverse economic, social and political developments in the countries where the
Fund is invested, as well as market and currency volatility. Developing markets
involve heightened risks related to the same factors, in addition to risks
associated with the relatively small size and lesser liquidity of these markets.
While short-term volatility can be disconcerting, declines of as much as 40% to
50% are not unusual in emerging markets. In fact, the Hong Kong market has
increased 830% in the last 15 years, but has suffered five declines of more than
20% during that time.(1)
We thank you for your participation in the Templeton Emerging Markets
Appreciation Fund and welcome your comments and suggestions.
Sincerely,
/s/ J. Mark Mobius
- -----------------------------
J. Mark Mobius, Ph.D.
President
Portfolio Manager - Equity Securities
Templeton Emerging Markets Appreciation Fund, Inc.
/s/ Ronald A. Johnson
- -----------------------------
Ronald A. Johnson, Ph.D.
Portfolio Manager - Fixed-Income Securities
Templeton Emerging Markets Appreciation Fund, Inc.
1. Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended September 30, 1996.
4
<PAGE> 5
PERFORMANCE SUMMARY
In market-price terms, the Templeton Emerging Markets Appreciation Fund produced
a total return of -7.02% for the six-month period ended September 30, 1996.
Based on the change in actual net asset value (in contrast to market price), the
Fund delivered a total return of 7.00% for the same period. Both total return
figures assume reinvestment of dividends and capital gains in accordance with
the dividend reinvestment plan. We have always maintained a long-term
perspective when managing the Fund, and we encourage shareholders to view their
investments in a similar manner.
During the reporting period, the Fund's closing price on the New York Stock
Exchange (NYSE) decreased by $1.00, from $13.875 on March 31, 1996, to $12.875
on August 31, 1996, while the net asset value increased by 91 cents ($0.91),
from $13.41 to $14.32.
Shareholders received distributions of 2.5 cents ($0.025) per share in long-term
capital gains. Distributions will vary, however, depending on income earned by
the Fund and any profits realized from the sale of securities in the portfolio.
Past performance is not predictive of future results.
TEMPLETON EMERGING MARKETS
APPRECIATION FUND
Periods Ended 9/30/96
<TABLE>
<CAPTION>
Since
Inception
One-Year (4/29/94)
<S> <C> <C>
Cumulative Total Return(1)
Based on change in
net asset value 12.54% 13.22%
Based on change in
market price 11.91% -3.86%
Average Annual Total Return(2)
Based on change in
net asset value 12.54% 5.32%
Based on change in
market price 11.91% -1.96%
</TABLE>
1. Cumulative total returns represent the change in value of an investment over
the periods indicated.
2. Average annual total returns represent the average annual change in value of
an investment over the periods indicated.
All calculations assume reinvestment of dividend and capital gains
distributions, either at net asset value or at market price on the reinvestment
date, in accordance with the dividend reinvestment plan. Past performance is not
predictive of future results.
From September 1, 1994 through August 30, 1995, expense reductions by the Fund's
Business Manager increased the Fund's total returns.
5
<PAGE> 6
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS APRIL 29, 1994
ENDED (COMMENCEMENT
SEPTEMBER 30, 1996 YEAR ENDED OF OPERATIONS) TO
(UNAUDITED) MARCH 31, 1996 MARCH 31, 1995
------------------ -------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 13.41 $ 12.05 $ 14.10
------- ------- -------
Income from investment operations:
Net investment income .36 .69 .48
Net realized and unrealized gain (loss) .58 1.64 (1.97)
------- ------- -------
Total from investment operations .94 2.33 (1.49)
------- ------- -------
Underwriting expenses deducted from capital -- -- (.15)
------- ------- -------
Distributions:
Dividends from net investment income (.03) (.86) (.32)
Distributions from net realized gains -- (.11) (.09)
------- ------- -------
Total distributions (.03) (.97) (.41)
------- ------- -------
Change in net asset value .91 1.36 (2.05)
------- ------- -------
Net asset value, end of period $ 14.32 $ 13.41 $ 12.05
======= ======= =======
TOTAL RETURN*
Based on market value per share (7.02)% 15.57% (11.25)%
Based on net asset value per share 7.00% 19.34% (11.64)%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of period (000) $ 61,425 $ 57,516 $51,022
Ratio of expenses, inclusive of fee waiver, to average net
assets 1.86%** 1.64% 1.79%**
Ratio of net investment income to average net assets 5.21%** 5.29% 3.98%**
Portfolio turnover rate 41.90% 26.92% 58.79%
Average commission rate paid (per share) $ .0048 $ .0008
</TABLE>
* NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 7
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Investment Portfolio, September 30, 1996 (unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 46.8%
- ------------------------------------------------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES: 1.6%
Arcelik AS Tur. 2,293,264 $ 239,349
Bekoteknik AS Tur. 723,423 47,977
Foshan Electrical and Lighting Co. Ltd., B Chn. 466,500 307,662
Semi-Tech (Global) Co. Ltd. H.K. 120,400 199,291
Turk Demir Dokum, br. Tur. 4,715,996 220,470
-----------
1,014,749
- ------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES: 0.8%
Associated Motorways Ltd. Lka. 72,000 40,707
Ciadea SA Arg. 64,608 306,937
Jardine International Motor Holdings Ltd. H.K. 58,000 73,503
Otosan Otomobil Sanayii AS Tur. 152,700 43,994
Tofas Turk Otomobil Fabrikasi AS Tur. 1,736,000 60,396
-----------
525,537
- ------------------------------------------------------------------------------------------------------------------------
BANKING: 13.2%
Akbank Tur. 6,192,000 632,798
Alpha Credit Bank Gr. 18,666 1,144,555
Banco Bradesco SA Brz. 25,161,228 187,539
Banco Comercial Portugues SA Prt. 45,652 551,353
Banco de Galicia y Buenos Aires SA, B Arg. 110,779 609,382
Banco do Brasil SA Brz. 2,705,276 25,966
*Banco do Brasil SA, wts., series A Brz. 4,541,055 7,116
*Banco do Brasil SA, wts., series B Brz. 6,811,582 10,674
*Banco do Brasil SA, wts., series C Brz. 11,352,638 16,679
Banco Espirito Santo e Comercial de Lisboa Prt. 32,800 548,885
Banco Totta & Acores SA Prt. 13,090 228,748
BPI Socieda de Gestora de Participacoes Socias SA Prt. 3,835 44,711
Daegu Bank Co. Ltd. Kor. 8,527 120,699
Ergo Bank SA Gr. 18,000 1,038,002
Espirito Santo Financial Holding SA, ADR Ptr. 19,820 245,273
Grupo Financiero Banamex Accival SA, B Mex. 72,000 155,403
Grupo Financiero Banamex Accival SA, L Mex. 5,868 11,966
Grupo Financiero Bancomer SA de CV, B Mex. 2,046,000 1,005,119
Grupo Financiero Bancomer SA de CV, L Mex. 75,778 28,397
Grupo Financiero Serfin SA, B Mex. 54,277 29,827
HSBC Holdings PLC H.K. 58,605 1,087,523
National Bank of Greece SA Gr. 2,000 132,343
PT Ficorinvest Bank, fgn. Ind. 36,000 28,282
PT Inter-Pacific Bank, fgn. Ind. 9,500 5,930
Turkiye Garanti Bankasi AS Tur. 4,507,650 203,378
-----------
8,100,548
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Investment Portfolio, September 30, 1996 (unaudited) (cont.)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------------------------------------------------
BEVERAGES & TOBACCO: 0.1%
Quilmes Industrial SA Arg. 10,000 $ 103,750
- ------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS: 3.3%
Akcimento Ticaret AS Tur. 161,000 12,778
Cemex SA, B Mex. 304,000 1,243,856
Cimentas Izmir Cimento Fabrikasi TAS Tur. 1,513,061 234,411
Cimsa Cimento Sanayi ve Ticaret AS Tur. 1,120,000 90,107
Izocam Ticaret ve Sanayii AS, br. Tur. 74,571 4,621
K Wah International Holdings Ltd. H.K. 885,051 161,376
*K Wah International Holdings Ltd., wts. H.K. 83,806 3,251
Royal Ceramic Industry Public Co. Ltd. Tha. 149,000 114,250
Royal Ceramic Industry Public Co. Ltd., fgn. Tha. 32,000 24,537
Shanghai Yaohua Pilkington Glass, B Chn. 96,250 48,125
Thai Asahi Glass Public Co. Ltd. Tha. 72,610 119,917
-----------
2,057,229
- ------------------------------------------------------------------------------------------------------------------------
CHEMICALS: 0.8%
Atanor Cia Nacional Para la Industria
Quimica SA, D Arg. 56,550 87,667
Chemopetrol Group AS Csk. 2,850 139,604
Petkim Pertokimya Holdings AS Tur. 30,000 13,209
PT Unggul Indah Corp., fgn. Ind. 68,200 73,396
Shanghai Chlor-Alkali Chemical Co. Ltd., B Chn. 312,000 68,640
Shenzhen Petrochemical (Group)
Shareholding Co. Ltd., B Chn. 249,600 78,111
-----------
460,627
- ------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & HOUSING: 0.2%
Hopewell Holdings Ltd. H.K. 206,106 116,606
- ------------------------------------------------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS: 0.5%
Dae Duck Electronics Co. Ltd. Kor. 2,060 90,780
Great Wall Electronic International Ltd. H.K. 566,000 46,111
Netas Northern Electric Telekomunic Asyon AS Tur. 594,000 154,990
-----------
291,881
- ------------------------------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS & INSTRUMENTS: 0.1%
S. Megga International Holdings Ltd. H.K. 494,000 15,587
- ------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES: 0.1%
Ssangyong Oil Refining Co., Ltd Kor. 1,000 23,002
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Investment Portfolio, September 30, 1996 (unaudited) (cont.)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------------------------------------------------
ENERGY SOURCES: 1.9%
*Chernogorneft Rus. 2,000 $ 13,700
Engen Ltd. Zaf. 20,207 110,467
Lukoil-Holdings Rus. 3,000 27,510
Perez Companc SA, B Arg. 27,690 175,306
*Purneftegaz Rus. 40,000 80,800
YPF Sociedad Anonima, ADR Arg. 32,000 732,000
-----------
1,139,783
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: 0.9%
Alpha Leasing SA Gr. 10,000 202,663
Etba Leasing Gr. 12,600 154,207
MBF Capital Bhd. Mal. 50,000 71,018
PT Sinar Mas Multi Artha, fgn. Ind. 28,400 29,341
Sun Hung Kai & Co. Ltd. H.K. 349,000 102,674
-----------
559,903
- ------------------------------------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS: 1.6%
Chareon Pokphand Feedmill Public Co. Ltd., fgn. Tha. 13,000 56,997
Del Monte Royal Foods Ltd. Zaf. 85,800 93,621
Elais Oleaginous Co. Gr. 8,800 267,607
PT Charoen Pokphand Indonesia, fgn. Ind. 46,000 63,366
PT Cipendawa Farm Enterprises, fgn. Ind. 65,000 33,577
PT Japfa Comfeed Indonesia, fgn. Ind. 67,000 46,868
PT Multibreeder Adirama, fgn. Ind. 193,500 76,009
Vitro SA Mex. 179,000 374,023
-----------
1,012,068
- ------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER: 0.3%
Portucel Industrial Empresa Product de Celulose
SA Prt. 32,000 208,593
- ------------------------------------------------------------------------------------------------------------------------
HEALTH & PERSONAL CARE: 0.1%
Hankook Cosmetics Co. Ltd. Kor. 3,000 86,441
- ------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS: 0.5%
BTR Dunlop Ltd. Zaf. 50,000 63,375
Marshall Boya ve Vernik Sanayii AS Tur. 1,620,528 116,281
*Shanghai Rubber Belt Co. Ltd., B Chn. 549,000 83,448
Shanghai Tyre & Rubber Co. Ltd., B Chn. 169,000 41,912
-----------
305,016
- ------------------------------------------------------------------------------------------------------------------------
INSURANCE: 0.1%
Anadolu Anonim Turk Sigorta Sirketi Tur. 611,840 23,614
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Investment Portfolio, September 30, 1996 (unaudited) (cont.)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------------------------------------------------
LEISURE & TOURISM: 0.5%
Hinds Hotels International Ltd. Sgp. 129,000 $ 157,563
Shangri-La Hotels (Malaysia) Bhd. Mal. 141,000 141,765
Shangri La Hotels (Malaysia) Bhd., fgn. Mal. 27,000 27,147
-----------
326,475
- ------------------------------------------------------------------------------------------------------------------------
MACHINERY & ENGINEERING: 0.8%
Jurong Shipyard Ltd., fgn. Sgp. 38,000 184,846
*Keppel Philippine Holdings Inc., B Phl. 318,750 75,329
Mannesmann SA Brz. 800,000 113,614
*Shanghai Erfangji Textile Machinery Co. Ltd., B Chn. 355,740 35,574
Shanghai Industrial Sewing Machine Corp. Chn. 192,000 22,080
Shanghai Steel Tube Co. Ltd., B Chn. 249,700 31,962
-----------
463,405
- ------------------------------------------------------------------------------------------------------------------------
MERCHANDISING: 0.5%
*Cifra SA, C Mex. 89,056 127,593
Dairy Farm International Holdings Ltd. H.K. 132,991 81,125
GUM Trade House Rus. 1,000 19,050
Wo Kee Hong Holdings Ltd. H.K. 1,010,000 66,611
*Wo Kee Hong Holdings Ltd., wts. H.K. 202,000 3,396
*Yaohan Hongkong Corp. Ltd. H.K. 460,000 19,630
-----------
317,405
- ---------------------------------------------------------------------------------------------------------------------
METALS & MINING: 1.5%
Antofagasta Holdings PLC Chl. 34,000 191,605
Eregli Demir ve Celik Fabrikalari AS Tur. 1,736,000 186,849
Hellas Can-Container Manufacturers Gr. 18,270 361,550
Philex Minning Corp., B Phl. 1,103,300 130,369
PT Tambang Timah (Persero), fgn. Ind. 34,000 57,813
-----------
928,186
- ------------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY: 4.8%
Anglo American Industrial Corp. Ltd. Zaf. 500 17,635
Cheung Kong Holdings Ltd. H.K. 106,000 815,596
Clal Industries Ltd. Isr. 10,000 43,830
DESC SA, B Mex. 3,033 17,069
DESC SA, C Mex. 63 352
Hong Leong Industries Bhd. Mal. 34,000 158,714
Jardine Strategic Holdings Ltd. H.K. 28,125 89,438
*Jardine Strategic Holdings Ltd., wts. H.K. 3,125 844
Koc Holding AS Tur. 1,165,000 167,822
Koc Yatirim ve Sanayii Mamullesi Pazarlanca AS Tur. 1,534,400 233,546
Lai Sun Garment International Ltd. H.K. 163,000 223,432
</TABLE>
10
<PAGE> 11
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Investment Portfolio, September 30, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY (cont.)
Perlis Plantations Bhd., fgn. Mal. 70,000 $ 215,049
Renong Bhd. Zaf. 50,000 76,604
Saha Union Public Co. Ltd., fgn. Tha. 39,000 51,374
Shenzhen Gintian Industrial Co. Ltd., B Chn. 250,560 76,791
* Sociedad Comercial del Palata Cadelplata Come Arg. 151,000 365,479
Stelux International Holdings Ltd. H.K. 473,254 101,591
Transarchipel Shipping Ltd.-TSL Zmb. 587,000 323,588
-----------
2,978,754
- ---------------------------------------------------------------------------------------------------------------------
REAL ESTATE: 4.1%
Bangkok Land Public Co. Ltd., fgn. Tha. 118,000 146,160
First Capital Corp., Ltd., fgn. Sgp. 36,000 86,919
Hang Lung Development Co. Ltd. H.K. 300,000 574,163
Lai Sun Development Co. Ltd. H.K. 89,200 93,433
* Lai Sun Development Co. Ltd., wts. H.K. 117,800 10,054
New World Development Co. Ltd. H.K. 113,893 597,964
PT Summarecon Agung, fgn. Ind. 159,120 99,322
Shanghai Jinqiao Export Processing Zone
Development, B Chn. 115,000 38,410
Shenzhen Properties & Resources Development
(Group) Ltd., B Chn. 229,900 74,324
Sun Hung Kai Properties Ltd. H.K. 65,000 691,355
Tian An China Investments Co. Ltd. H.K. 768,000 102,294
-----------
2,514,398
- ---------------------------------------------------------------------------------------------------------------------
RECREATION, OTHER CONSUMER GOODS: 1.0%
China First Pencil Co. Ltd., B Chn. 402,600 124,806
* Fu Hui Jewellery Co. (H.K.) Ltd. H.K. 1,572,000 41,673
Shanghai Wingsung Stationery Co. Ltd., B Chn. 341,550 58,747
Shenzhen China Bicycles Co. (Holdings) Ltd., B Chn. 139,200 33,841
Yue Yuen Industrial (Holdings) Ltd. H.K. 1,236,000 335,652
-----------
594,719
- ---------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: 3.5%
Hellenic Telecommunications Organizations OTE SA Gr. 8,000 134,583
Pakistan Telecom Corp. PTC Pkr. 29,000 26,265
Telebras-Telecomunicacoes Brasileiras SA Brz. 4,525,000 294,280
Telmex-Telefonos de Mexico SA, L, ADR Mex. 51,800 1,664,075
-----------
2,119,203
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Investment Portfolio, September 30, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL: 1.1%
Hua Thai Manufacturing Public Co. Ltd. Tha. 16,000 $ 34,289
* Laws International Holdings Ltd. H.K. 438,000 58,906
PT Eratex Djaja, fgn. Ind. 144,000 44,942
PT Ganda Wangsa Utama, fgn. Ind. 275,600 109,742
PT Panasia Indosyntec, fgn. Ind. 315,200 81,412
Shanghai Lian Hua Fibre Corp., B Chn. 248,400 25,585
Thai Rayon Public Co. Ltd. Tha. 17,000 93,587
Thai Wacoal Public Co. Ltd., fgn. Tha. 18,750 72,992
Tungtex (Holdings) Co. Ltd. H.K. 1,364,000 128,762
-----------
650,217
- ---------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: 1.3%
Chiwan Wharf Holdings Ltd., B Chn. 170,000 84,637
Malaysian International Shipping Corp. Bhd., fgn. Mal. 229,333 704,542
Pakistan International Airlines Corp. Pkr. 5,500 1,340
-----------
790,519
- ---------------------------------------------------------------------------------------------------------------------
UTILITIES ELECTRICAL & GAS: 1.4%
Central Costanera SA, B Arg. 104,000 332,853
CEZ, GDR Csk. 8,000 308,000
CEZ, GDS, 144A U.S. 6,000 231,000
Hongkong Electric Holdings Ltd. H.K. 2,000 6,466
-----------
878,319
- ---------------------------------------------------------------------------------------------------------------------
WHOLESALE & INTERNATIONAL TRADE: 0.2%
East Asiatic Co. (Hong Kong) Ltd. H.K. 945,000 114,871
-----------
TOTAL COMMON STOCKS (cost $31,270,943) 28,721,405
- ---------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 3.2%
- ---------------------------------------------------------------------------------------------------------------------
Banco do Brazil SA, pfd. Brz. 20,000,000 188,051
Banespa-Banco do Estado de Sao Paulo SA, pfd. Brz. 1,924,200 4,994
Cia Mesbla SA, pfd. Brz. 2,465,000 13,279
Eletrobras-Centrais Eletricas Brasileiras SA, B, pfd. Brz. 2,613,000 729,388
Itausa-Investimentos Itau SA, pfd. Brz. 72,200 56,572
Petrobras-Petroleo Brasileiro SA, pfd. Brz. 8,347,000 980,956
-----------
TOTAL PREFERRED STOCKS (cost $2,546,770) 1,973,240
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Investment Portfolio, September 30, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
BONDS-CORPORATE: 7.4%
- ---------------------------------------------------------------------------------------------------------------------
Bridas Corp., Yankee, 12.50%, 11/15/99 U.S. 460,000 $ 483,000
Centrais Electricas Brasileiras SA, 10.00%,
10/30/98, 144A U.S. 200,000 208,000
Cementos de Mexico Sa de CV, 10.75%,
7/15/00, 144A U.S. 230,000 236,037
CEZ, 14.375%, 1/27/01 Csk. 15,590,000 598,449
Essar Gujarat Ltd., 8.53672%, FRN, 7/15/99, 144A U.S. 210,000 204,750
Guaranteed Capital Corp. Ltd., 11.00%, 3/21/97 U.S. 75,000 75,000
Industrias Metalurficas Pescarmona,
11.75%, 3/27/98 U.S. 250,000 254,687
Philippine Long Distance Telephone Co.:
10.625%, 6/02/04 U.S. 500,000 555,000
9.25%, 6/30/06 U.S. 190,000 195,937
PIV Investment Finance (Cayman) Ltd., 4.50%,
conv., 12/01/00 U.S. 330,000 282,150
Produvisa Capital Corp., 9.50%, 11/29/96 U.S. 350,000 349,125
PT Astra International, 9.75%, 4/29/01 U.S. 175,000 182,438
PT Polysindo Eka Perkasa Global, 13.00%, 6/15/01 U.S. 500,000 553,750
PT Polysindo International Finance Co.,
B 11.375%, 6/15/06 U.S. 105,000 110,513
Tjiwi Kimia International Finance Co. BV,
13.25%, 8/01/01 U.S. 250,000 280,000
-----------
TOTAL BONDS-CORPORATE (cost $4,375,002) 4,568,836
- ---------------------------------------------------------------------------------------------------------------------
BONDS-GOVERNMENT & GOVERNMENT AGENCIES: 26.7%
- ---------------------------------------------------------------------------------------------------------------------
Abril SA, 12.00%, 10/25/03, 144A U.S. 250,000 260,000
Argentina Domestic Securities (Morgan Stanley),
14.75%, 9/01/02 U.S. 430,000 470,850
Associacion Nacional del Cafe, 11.00%, 8/31/98 U.S. 368,000 377,200
Banco Central de Costa Rica, A, 6.25%, 5/21/10 U.S. 400,000 307,000
Banco Ganadero SA, 9.75%, 8/26/99, 144A U.S. 200,000 209,000
Bancomer S.A., 8.00%, 7/07/98 U.S. 500,000 498,125
Ceskoslovenska Bchodni Banka, 11.125%, 8/26/97 Csk. 5,420,000 199,320
Argentina Local Markets Securities Trust 1994-1
(Goldman Sachs Group, L.P.), 13.375%, 8/15/01 U.S. 750,000 885,000
Government of Brazil:
6.5625%, 4/15/09 U.S. 375,000 305,156
6.00%, exit bond, 9/15/13 U.S. 500,000 348,750
5.00%, 4/15/24 U.S. 280,000 167,125
6.50%, 4/15/24 U.S. 2,220,000 1,699,688
</TABLE>
13
<PAGE> 14
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Investment Portfolio, September 30, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
BONDS-GOVERNMENT & GOVERNMENT AGENCIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------
Government of Poland:
PDI, 3.75%, FRN, 10/24/14 U.S. 347,000 $ 274,998
+6.4375%, FRN, 10/27/24 U.S. 869,000 828,266
Government of Uruguay, A, 6.75%, 2/19/21 U.S. 250,000 198,750
Kingdom of Jordan, 6.625%, FRN, 12/23/05 U.S. 700,000 619,500
National Bank of Hungary, 7.95%, 11/01/03 U.S. 200,000 200,500
Republic of Argentina:
6.3125%, FRN, 3/31/05 U.S. 392,500 328,228
6.4375%, FRN, 3/31/23 U.S. 300,000 222,375
5.25%, L, VRN, 3/31/23 U.S. 230,000 134,550
Republic of Bulgaria
IAB, 6.6875%, FRN, 7/28/11 U.S. 950,000 436,406
6.6875%, 7/28/24 U.S. 200,000 101,875
Republic of Ecuador, 6.50%, FRN, 2/28/25, 144A U.S. 785,000 490,134
Republic of Lithuania:
10.00%, 12/22/97 U.S. 10,000 10,215
10.00%, 12/22/97, 144A U.S. 150,000 153,225
Republic of Panama, 6.62891%, FRN, 5/10/02 U.S. 461,540 440,771
Republic of Venezuela:
6.375%, 3/31/20, FRN U.S. 660,000 515,625
6.4375%, 3/31/20, FRN U.S. 320,000 250,000
Russia (when issue), 12/15/15 U.S. 990,000 636,075
Sei Holding IX Inc., 11.00%, 11/30/00, 144A U.S. 210,000 221,340
United Mexican States:
11.25%, FRN, 7/21/97, 144A U.S. 750,000 774,375
9.75%, 2/06/01 U.S. 950,000 971,375
11.375%, 9/15/16 U.S. 400,000 398,000
A, 6.25% 12/31/19 U.S. 250,000 173,125
B, 6.25%, 12/31/19 U.S. 740,000 512,450
11.50%, 5/15/26 U.S. 335,000 332,906
Venezuela DCB, 6.625%, FRN, 12/18/07 U.S. 1,750,000 1,450,312
-----------
TOTAL BONDS-GOVERNMENT & GOVERNMENT AGENCIES (cost $15,285,514) 16,402,590
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Investment Portfolio, September 30, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 12.0%
- ---------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.23% to 5.27% with
maturities to 10/18/96 U.S. 603,000 $ 601,542
U.S. Treasury Bills, 4.90% to 5.16%, with
maturities to 1/30/97 U.S. 6,841,000 6,798,560
-----------
TOTAL SHORT TERM OBLIGATIONS (cost $7,399,473) 7,400,102
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 96.1% (cost $60,877,702) 59,066,173
UNREALIZED GAIN IN FORWARD EXCHANGE CONTRACTS: 0.1% 4,532
OTHER ASSETS, LESS LIABILITIES: 3.8% 2,353,876
-----------
TOTAL NET ASSETS: 100.0% $61,424,581
-----------
-----------
</TABLE>
* NON-INCOME PRODUCING
** CURRENCY OF COUNTRIES INDICATED.
+ DESIGNATED IN WHOLE OR IN PART FOR WHEN ISSUED SECURITIES.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 16
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996 (unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities at value
(identified cost $60,877,702) $59,066,173
Receivables:
Investment securities sold 3,748,986
Dividends and interest 699,338
Forward contract-closed 7,709
Unamortized organization costs 10,144
Unrealized gain in forward exchange
contracts (Note 5) 4,532
-----------
Total assets 63,536,882
===========
Liabilities:
Payable for investment securities
purchased 1,933,423
Accrued expenses 178,878
-----------
Total liabilities 2,112,301
-----------
Net assets, at value $61,424,581
===========
Net assets consist of:
Undistributed net investment income $ 1,553,209
Net unrealized depreciation (1,808,830)
Accumulated net realized gain 1,846,059
Net capital paid in on shares of
capital stock 59,834,143
-----------
Net assets, at value $61,424,581
===========
Shares outstanding 4,288,756
===========
Net asset value per share
($61,424,581 / 4,288,756) $ 14.32
===========
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended
September 30, 1996 (unaudited)
<TABLE>
<S> <C> <C>
Investment income:
(net of $23,251 foreign
taxes withheld)
Dividends $ 699,278
Interest 1,408,353
----------
Total income $2,107,631
Expenses:
Management fees (Note 3) 372,706
Administrative fees (Note 3) 74,541
Transfer agent fees 11,662
Custodian fees 33,361
Reports to shareholders 14,402
Audit fees 19,057
Legal fees (Note 3) 4,020
Registration fees 8,107
Directors' fees and expenses 7,580
Amortization of organization
costs 1,955
Other 7,031
----------
Total expenses 554,422
----------
Net investment income 1,553,209
Realized and unrealized gain
(loss):
Net realized gain (loss) on:
Investments 1,888,218
Foreign currency
transactions (2,826)
----------
1,885,392
----------
Net unrealized appreciation on:
Investments 573,154
Foreign currency translation
of other assets and
liabilities 4,137
----------
577,291
----------
Net realized and
unrealized gain 2,462,683
----------
Net increase in net assets
resulting from operations $4,015,892
=========-
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 17
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
SEPTEMBER 30, 1996 ENDED
(UNAUDITED) MARCH 31, 1996
------------------ ---------------
<S> <C> <C>
Increase in net assets:
Operations:
Net investment income $ 1,553,209 $ 2,945,751
Net realized gain on investments and foreign currency transactions 1,885,392 381,307
Net unrealized appreciation 577,291 6,502,064
----------- -----------
Net increase in net assets resulting from operations 4,015,892 9,829,122
Distributions to shareholders:
From net investment income -- (3,652,323)
From net realized gain (107,219) (453,927)
Capital share transactions (Note 2) -- 771,006
----------- -----------
Net increase in net assets 3,908,673 6,493,878
Net assets:
Beginning of period 57,515,908 51,022,030
----------- -----------
End of period $ 61,424,581 $57,515,908
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 18
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Emerging Markets Appreciation Fund, Inc. (the Fund) was organized as a
Maryland corporation as a closed-end, non-diversified management investment
company registered under the Investment Company Act of 1940. The Fund seeks to
achieve its objective by investing primarily in equity securities and debt
obligations of issuers in emerging market countries. The following summarizes
the Fund's significant accounting policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange on
which the securities are traded. Over-the-counter securities and listed
securities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and
approved in good faith by the Board of Directors.
B. FOREIGN EXCHANGE CONTRACTS:
The Fund may enter into forward exchange contracts and currency option contracts
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 realized as a gain or loss.
C. FOREIGN CURRENCY TRANSACTIONS:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into a foreign exchange contract to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rates.
D. 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.
18
<PAGE> 19
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND EXPENSES:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign
securities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
F. UNAMORTIZED ORGANIZATION COSTS:
Organization costs are being amortized on a straight line basis over five years.
G. 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. TRANSACTIONS IN SHARES OF CAPITAL STOCK
At September 30, 1996, there were 100,000,000 shares of capital stock authorized
($0.01 par value).
During the year ended March 31, 1996 55,508 shares were issued for $771,006 from
reinvested distributions.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton Asset
Management Limited (TAML), 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 TAML equal, on an annual
basis, to 1.25% of the average daily net assets of the Fund. TAML has entered
into a sub-advisory agreement with TICI, whereby TICI manages the debt component
of the Fund's portfolio. For its services TAML pays to TICI a fee equal, on an
annual basis, to 0.30% of the Fund's average daily net assets. TAML pays monthly
an economic consulting and shareholder servicing fee to Paine Webber equal, on
an annual basis, to 0.10% of the average daily net assets of the Fund. The Fund
pays TGII monthly an administrative fee of 0.25% per annum of the Fund's average
daily net assets, of which 0.20% is paid to Princeton Administrators, L.P., for
sub-administrative services, 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 $4,020 for the period ended September 30,
1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
period ended September 30, 1996 aggregated $21,579,870 and $23,326,662,
respectively. The cost of securities for federal income tax purposes is
$60,894,039. Realized gains and losses are reported on an identified cost basis.
19
<PAGE> 20
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
At September 30, 1996, 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 $ 5,592,846
Unrealized depreciation (7,420,712)
-----------
Net unrealized depreciation $(1,827,866)
===========
</TABLE>
5. FINANCIAL INSTRUMENTS
During the period ended September 30, 1996, 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 transactions, 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 contracts, future movement in currency values and interest rates and
contract positions 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 September 30, 1996, the Fund had an outstanding forward exchange contract for
the sale of currency as set out below. These contracts are reported in the
financial 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 gain in forward exchange contract to sell 770,000
Deutschemarks for 509,934 U.S. Dollars, October 28, 1996 $4,532
</TABLE>
20
<PAGE> 21
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Annual Meeting of Shareholders, July 24, 1996
- --------------------------------------------------------------------------------
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
700 Central Avenue, St. Petersburg, Florida, on July 24, 1996. The purpose of
the meeting was to elect five directors of the Fund, to ratify the selection of
McGladrey & Pullen, LLP, as the Fund's independent public accountants for the
fiscal year ended March 31, 1997 and in their discretion, to authorize the
proxyholders to vote upon such other matters which may legally come before the
meeting or any other adjournment thereof. At the meeting, the following persons
were elected by the shareholders to serve as directors of the Fund: John Wm.
Galbraith, Rupert H. Johnson, Jr., Betty P. Krahmer, Gordon S. Macklin and Fred
R. Millsaps. The shareholders ratified the selection of McGladrey & Pullen, LLP,
to serve as the Fund's independent public accountants for the fiscal year ending
March 31, 1997. No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. ELECTION OF FIVE (5) DIRECTORS FOR THE TERM SET FORTH BELOW:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
TERM EXPIRING 1999: FOR SHARES AGAINST SHARES
- -------------------- -------- ----------- ------- -----------
<S> <C> <C> <C> <C>
John Wm. Galbraith 3,324,900 77.53% 66,715 1.56%
Rupert H. Johnson, Jr. 3,329,004 77.62% 62,611 1.46%
Betty P. Krahmer 3,351,500 78.15% 40,115 0.94%
Gordon S. Macklin 3,355,303 78.23% 36,312 0.85%
Fred R. Millsaps 3,310,856 77.20% 80,759 1.88%
</TABLE>
2. RATIFICATION OF THE SELECTION OF MCGLADREY & PULLEN, LLP, AS INDEPENDENT
PUBLIC ACCOUNTANTS OF THE FUND FOR THE FISCAL YEAR ENDED MARCH 31, 1997:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES
-------- ----------- ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
3,343,278 77.95% 24,745 0.58% 23,592 0.55%
</TABLE>
21
<PAGE> 22
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
shareholder will automatically be a participant in the Plan unless he elects to
withdraw. If the shares are registered in the name of a broker-dealer or other
nominee (i.e., in "street name"), the broker-dealer or nominee will elect to
participate in the Plan on the shareholder's behalf unless the shareholder
instructs them otherwise, or unless the reinvestment service is not provided by
the broker-dealer or nominee. --Participants should contact Chemical Mellon
Securities Trust Company, Dividend Reinvestment Services, P.O. Box 750,
Pittsburgh, PA 15230, to receive the Plan brochure. --To receive dividends or
distributions 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 common stock of the Fund, if the market price is equal to or exceeds 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
participants 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 charges by Mellon
upon any cash withdrawal or termination. --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.
22
<PAGE> 23
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, Inc. shares is published each Monday in the
Wall Street Journal, weekly in Barron's and each Saturday in The New York Times
and other newspapers in a table called "Publicly Traded Funds". Daily market
prices for the Fund's shares are published in the New York Stock Exchange
Composite Transactions section of newspapers under the designation "TempltnTEA".
The Fund's New York Stock Exchange trading symbol is TEA.
For current information about the net asset value, call 1-800-292-9293.
If any shareholder is not receiving copies of the Reports to Shareholders
because shares are registered in a broker's name or in a custodian's name, he or
she can write and request that his or her name be added to the Fund's mailing
list, by writing Templeton Emerging Markets Appreciation Fund, Inc., 700 Central
Avenue, St. Petersburg, FL 33701.
23
<PAGE> 24
TEMPLETON
EMERGING
MARKETS
APPRECIATION
FUND, INC.
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1996
[FRANKLIN TEMPLETON LOGO]
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Investors should be aware that the value of investments made for the Fund may go
up as well as down and that the Investment Manager may make errors in selecting
securities for the Fund's portfolio. Like any investment in securities, the
Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political, and other factors. The Fund and Fund investors are not
protected from such losses by the Investment Manager. Therefore, investors who
cannot accept the risk of such losses should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded, and accessed. These calls can be
determined by the presence of a regular beeping tone.
[RECYCLE LOGO] TLTEA S96 11/96
