SEMI ANNUAL REPORT
SEPTEMBER 30, 1997
[PICTURE OF TWO WORLDS]
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
[FRANKLIN TEMPLETON LOGO]
<PAGE>
[FRANKLIN TEMPLETON CELEBRATING OVER 50 YEARS LOGO]
CELEBRATING 50 YEARS
This year marks 50 years of business for Franklin Templeton. Over these years,
we have experienced profound changes in technology, regulations and customer
expectations within the mutual fund industry. As one of the largest mutual fund
families, we're proud to be an innovative industry leader, providing people like
you with an opportunity to invest in companies and governments around the globe.
In addition, we want to stress that all securities markets move both up and
down. Mixed in with the good years can be some bad years. Accordingly, mutual
fund share prices also move up and down. Every investor should expect such
fluctuations, which can be wide. When markets are going down, as well as up, we
encourage investors to maintain a long-term perspective. We thank you for your
past support and look forward to serving your investment needs in the years
ahead.
[PHOTO OF J. MARK MOBIUS]
J. MARK MOBIUS, PH.D.
President
Templeton Emerging Markets
Appreciation Fund, Inc.
<PAGE>
SHAREHOLDER LETTER
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.
Dear Shareholder:
We are pleased to bring you the semi-annual report for the Templeton Emerging
Markets Appreciation Fund, which covers the six months ended September 30, 1997.
During this period, securities markets in emerging market countries turned in
mixed performances. Bond prices rose in many of these countries, as investors
reacted to market-oriented government policies and improved corporate earnings.
In addition, financial institutions that normally invest in high-yield U.S. and
European bonds sought higher yields in the emerging markets. Latin American
equity prices generally rose, but many Asian stock markets fell. Within this
environment, the Fund, which holds both stocks and bonds, produced a six-month
total return of 22.27% in market-price terms, and 14.16% in terms of net asset
value, as discussed in the Performance Summary on page 5.
At the close of the reporting period, 54.1% of the Fund's total net assets were
invested in equities, 35.2% in fixed-income securities, and 10.7% in short-term
obligations and other net assets. These holdings were spread across 30 emerging
market countries, with no individual country representing more than 17.0% of the
Fund's
CONTENTS
Shareholder Letter ..... 1
Performance Summary .... 5
Financial Highlights and
Statement of Investments 7
Financial Statements ... 16
Notes to Financial
Statements ............. 19
[PYRAMID CHART]
<PAGE>
[PIE CHART]
PORTFOLIO BREAKDOWN
Based on Total Net Assets
9/30/97
Equities 54.1%
Fixed-Income Securities 35.2%
Short-Term Obligations & Other Net Assets 10.7%
assets. Our largest single-country exposure was in Mexico, followed by
Argentina, Brazil, and Turkey.
The Fund's strong performance can be attributed in large part to bond
investments in those Latin American countries that continued to demonstrate a
commitment to policies of economic adjustment and credit quality improvement.
For example, the total return of Ecuador's bonds was 34%, Peru's 22%, and
Venezuela's 21% during the reporting period.(1) Many equity prices in this
region also increased, as higher exports sparked an economic recovery.
Attempting to take advantage of these markets, we increased our position in
Latin America, from 42.0% of total net assets on March 31, 1997 to 47.4% on
September 30, 1997.
East European emerging markets also performed well during the six months under
review. Foreign investors attracted by an improved Russian economy maintained
their heavy buying of Russian securities. Many share prices there soared, and
bonds produced an overall total return of 25%.(1) Bulgarian bonds were strong as
well, providing a total return of 50%,(1) largely because of new economic
policies and investors' positive response to the July 1, 1997 implementation of
a government currency board. However, Czech Republic bonds were adversely
affected by the abrupt devaluation of its currency.
Asian security markets did not fare as well as many others throughout the world.
During the last few months of the reporting period, the currencies of Thailand,
Malaysia, Indonesia, and the Philippines dropped sharply versus the U.S. dollar,
and their securities markets fell significantly.
On July 1, 1997, China regained sovereignty over Hong Kong, prompting some
people to fear an end to economic and personal freedom there. We think this is
unlikely, but developments
1. Source: J.P. Morgan Securities, Inc. Emerging Markets Bond Index Plus
(EMBI+). All figures measured in U.S. dollars.
2
<PAGE>
following any major transfer of political power cannot be predicted. In our
opinion, China's leaders are pragmatic, and are likely to use Hong Kong as a
blueprint for a market economy, which could benefit the citizens of Hong Kong
immeasurably. Although we expect problems to arise during this process, we are
hopeful they will be overcome. Under Chinese rule, the former British colony
could become much more than just an important island state. Hong Kong and China
together have the potential to become the largest economic superpower the world
has ever known.
Looking forward, we will continue to focus on securities from countries
experiencing strong economic growth, such as Mexico. We may consider purchasing
bonds from Peru and Venezuela, if their economies improve and they progress
further toward privatization and financial reform. In Asia, we will look for
opportunities arising from its recent currency problems. Stronger European and
U.S. demand for Southeast Asian goods, especially from the electronics sector,
coupled with the new, floating exchange rate policies of some Asian countries,
could help strengthen the economies in this region. In our opinion, Asia may be
down, but it is certainly not out.
This discussion reflects the strategies we employed for the Fund during the six
months under review, and includes our opinions as of the close of the period.
Because economic and market conditions are constantly changing, our strategies,
and our evaluations, conclusions and decisions regarding portfolio holdings may
change as new circumstances arise. All figures shown are as of September 30,
1997, and the Fund's holdings can be expected to change with market developments
and management of the portfolio. Although past performance of a specific
investment or sector cannot guarantee future performance, such information can
be useful in analyzing the securities we purchase or sell for the Fund.
[PIE CHART]
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
9/30/97
Latin American 47.4%
Asia 23.4%
Europe 15.7%
Middle East & Africa 2.8%
Short-Term Obligations & Other Net Assets 10.7%
3
<PAGE>
TOP 10 HOLDINGS
9/30/97
Company, % of Total
Industry, Country Net Assets
- --------------------------------------------------------
Telmex-Telefonos de
Mexico SA, L, ADR
Telecommunications, Mexico 3.8%
Alpha Credit Bank
Banking, Greece 2.8%
United Mexican States,
9.875%, 01/15/07
Government Bond, Mexico 2.6%
Cementos Mexicanos
SA de CV (Cemex), B
Building Materials &
Components, Mexico 2.6%
Republic of Venezuela,
9.25%, 9/15/27
Government Bond, Venezuela 2.4%
Ergo Bank SA
Banking, Greece 2.3%
Government of Brazil,
10.125%, 5/15/27
Government Bond, Brazil 2.3%
United Mexican States,
11.375%, 09/15/16
Government Bond, Mexico 2.3%
Centrais Eletricas
Brasileiras SA, B, pfd.
Utilities-Electrical & Gas 2.1%
Republic of Ecuador,
11.25%, 4/25/02
Government Bond, Ecuador 2.0%
For a complete list of portfolio holdings, please see page 8 of this report.
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. Emerging markets
involve heightened risks related to the same factors, in addition to risks
associated with the relatively small size and lesser liquidity of these markets.
While short-term volatility can be disconcerting, declines of as much as 40% to
50% are not unusual in emerging markets. In fact, the Hong Kong market has
increased 1,523% in the last 15 years, but has suffered four declines of more
than 20% during this time.(2)
We appreciate your support, welcome your comments, and look forward to serving
you in the future.
Sincerely,
/S/ J. Mark Mobius, Ph.D.
J. Mark Mobius, Ph.D.
President
Portfolio Manager - Equity Securities
Templeton Emerging Markets Appreciation Fund, Inc.
/S/ Ronald A. Johnson, Ph.D.
Ronald A. Johnson, Ph.D.
Portfolio Manager - Fixed-Income Securities
Templeton Emerging Markets Appreciation Fund, Inc.
2. Source: Bloomberg. Based on quarterly percentage change over 15 years ended
September 30, 1997.
4
<PAGE>
PERFORMANCE SUMMARY
In market-price terms, Templeton Emerging Markets Appreciation Fund produced a
22.27% total return for the six months ended September 30, 1997. Based on the
change in net asset value (in contrast to market price), the Fund delivered a
14.16% total return 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, the Fund's closing price on the New York Stock
Exchange increased $2.1875 per share, from $12.875 on March 31, 1997, to
$15.0625 on September 30, 1997, while the net asset value increased $1.40 per
share, from $15.17 to $16.57.
Shareholders received distributions of 17.5 cents ($0.175) per share in dividend
income, 18.0 cents ($0.18) in short-term capital gains, and 30.0 cents ($0.30)
in long-term capital gains. Distributions will vary depending on income earned
by the Fund and any profits realized from the sale of securities in the Fund's
portfolio, as well as the level of the Fund's operating expenses.
Past performance is not predictive of future results.
5
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND
Periods Ended 9/30/97
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 3-YEAR (4/29/94)
------ ------ ---------
<S> <C> <C> <C>
Cumulative Total Return(1)
Based on change in net asset value 30.59% 40.50% 47.35%
Based on change in market price 32.04% 25.88% 25.91%
Average Annual Total Return(2)
Based on change in net asset value 30.59% 12.00% 11.99%
Based on change in market price 32.04% 7.97% 6.97%
</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 dividends and capital gains, either at
net asset value or at market price on the reinvestment date, in accordance with
the dividend reinvestment plan and do not reflect sales charges that would have
been paid at inception or brokerage commissions that would have been paid on
secondary market purchases. Investment return and principal value will fluctuate
with market conditions, currency volatility and the economic, social, and
political climates of the countries where investments are made. Emerging markets
involve heightened risks related to the same factors, in addition to those
associated with the relatively small size and lesser liquidity of these markets.
You may have a gain or loss when you sell your shares.
Past expense reductions by the Fund's Business Manager increased the Fund's
total returns.
Past performance is not predictive of future results.
6
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, 1997 ----------------------------------------
(UNAUDITED) 1997 1996 1995+
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period............ $15.17 $13.41 $12.05 $14.10
---------------------------------------------------------
Income from investment operations:
Net investment income.......................... .33 .62 .69 .48
Net realized and unrealized gains (losses)..... 1.73 2.27 1.64 (1.97)
---------------------------------------------------------
Total from investment operations................ 2.06 2.89 2.33 (1.49)
Underwriting expenses deducted from capital..... -- -- -- (.15)
---------------------------------------------------------
Less distributions:
Dividends from net investment income........... (.18) (.51) (.86) (.32)
Distributions from net realized gains.......... (.48) (.62) (.11) (.09)
---------------------------------------------------------
Total distributions............................. (.66) (1.13) (.97) (.41)
---------------------------------------------------------
Net asset value, end of period.................. $16.57 $15.17 $13.41 $12.05
---------------------------------------------------------
Total return*
Based on market value per share................. 22.27% .40% 15.57% (11.25)%
Based on net asset value per share.............. 14.16% 22.40% 19.34% (11.64)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............... $71,074 $65,075 $57,516 $51,022
Ratios to average net assets:
Expenses....................................... 1.79%** 1.83% 1.64% 1.79%**
Net investment income.......................... 4.16%** 4.29% 5.29% 3.98%**
Portfolio turnover rate......................... 46.35% 114.78% 26.92% 58.79%
Average commission rate paid***................. $.0017 $.0036 $.0008 --
* Total return is not annualized.
** Annualized.
*** Relates to purchases and sales of equity securities. Prior to fiscal year end 1996 disclosure of average
commission rate was not required.
+ For the period April 29, 1994 (commencement of operations) to March 31, 1995.
</TABLE>
See notes to financial statements.
7
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 50.8%
APPLIANCES & HOUSEHOLD DURABLES 2.1%
Arcelik AS....................................................... Turkey 3,439,896 $ 434,330
Beko Elektronik AS............................................... Turkey 1,265,990 108,987
McCarthy Retail Ltd.............................................. South Africa 50,000 187,748
Sanyo Universal Electric Public Co. Ltd.......................... Thailand 20,000 15,427
Semi-Tech (Global) Co. Ltd....................................... Hong Kong 119,781 174,145
*Semi-Tech Co. Ltd., wts......................................... Hong Kong 11,320 2,370
Turk Demir Dokum, br............................................. Turkey 7,859,993 541,322
-----------
1,464,329
-----------
AUTOMOBILES 0.7%
Associated Motorways Ltd......................................... Sri Lanka 72,000 46,996
*Bajaj Auto Ltd.................................................. India 4,950 75,519
Ciadea S.A....................................................... Argentina 66,416 162,751
PT Gadjah Tunggal TBK, fgn....................................... Indonesia 146,500 43,416
Tofas Turk Otomobil Fabrikasi AS................................. Turkey 2,364,000 149,243
-----------
477,925
-----------
BANKING 15.2%
Akbank........................................................... Turkey 16,867,518 1,306,884
Alpha Credit Bank................................................ Greece 26,698 1,961,400
Banco Bradesco SA................................................ Brazil 25,161,228 254,931
Banco Comercial Portugues SA..................................... Portugal 29,152 615,636
*Banco de Galicia y Buenos Aires SA, B........................... Argentina 121,502 893,218
Banco do Brasil SA............................................... Brazil 2,705,276 26,422
*Banco do Brasil SA, wts., A..................................... Brazil 4,541,055 14,922
*Banco do Brasil SA, wts., B..................................... Brazil 6,811,582 22,570
*Banco do Brasil SA, wts., C..................................... Brazil 10,752,638 36,315
Banco Espirito Santo e Comercial de Lisboa....................... Portugal 3,400 94,382
Banco Totta & Acores SA.......................................... Portugal 12,090 254,982
BPI Socieda de Gestora de Participacoes Socias SA................ Portugal 4,892 111,384
Daegu Bank Co. Ltd............................................... South Korea 12,071 71,898
Ergo Bank SA..................................................... Greece 24,900 1,668,239
Espirito Santo Financial Holding SA, ADR......................... Portugal 4,220 87,829
*Grupo Financiero Banamex Accival SA, B.......................... Mexico 72,000 227,027
*Grupo Financiero Banamex Accival SA, L.......................... Mexico 44,868 131,659
*Grupo Financiero Bancomer SA de CV, B........................... Mexico 2,046,000 1,395,599
*Grupo Financiero Bancomer SA de CV, L........................... Mexico 75,778 38,035
*Grupo Financiero Serfin SA de CV, B............................. Mexico 54,277 22,284
HSBC Holdings PLC................................................ Hong Kong 21,964 735,161
*National Bank of Greece SA...................................... Greece 2,100 261,860
PT Inter-Pacific Bank, fgn....................................... Indonesia 9,500 5,017
Turkiye Garanti Bankasi AS....................................... Turkey 10,016,999 540,403
-----------
10,778,057
-----------
</TABLE>
8
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1997 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BEVERAGES & TOBACCO 0.6%
PT Hanjaya Mandala Sampoerna, fgn................................ Indonesia 20,000 $ 41,034
Quilmes Industrial SA............................................ Argentina 20,000 310,000
Zaklady Piwowarskie W Zywcu SA................................... Poland 1,000 80,362
-----------
431,396
-----------
BUILDING MATERIALS & COMPONENTS 3.6%
Cementos Mexicanos SA de CV, (Cemex) B........................... Mexico 304,000 1,821,262
Cimentas Izmir Cimento Fabrikasi Turk AS......................... Turkey 1,513,061 234,462
Cimsa Cimento Sanayi ve Ticaret AS............................... Turkey 1,047,000 195,291
Gujarat Ambuja Cements Ltd....................................... India 4,000 34,094
Izocam Ticaret ve Sanayii AS, br................................. Turkey 149,142 6,677
*Jordan Cement Factories Ltd..................................... Jordan 20,000 107,324
K Wah International Holdings Ltd................................. Hong Kong 13,912 5,439
PT Semen Cibinong TBK, fgn....................................... Indonesia 200,000 42,553
*Royal Ceramic Industry Public Co. Ltd., fgn..................... Thailand 141,700 15,224
Shanghai Yaohua Pilkington Glass, B.............................. China 96,250 29,837
Siam Cement Public Co. Ltd., (The) fgn........................... Thailand 2,550 41,868
Thai Asahi Glass Public Co. Ltd.................................. Thailand 72,610 30,004
-----------
2,564,035
-----------
CHEMICALS 1.0%
Atanor Cia Nacional Para la Industria Quimica SA, D.............. Argentina 56,550 75,792
Indian Petrochemicals Corp. Ltd.................................. India 30,000 94,567
Petkim Petrokimya Holding AS..................................... Turkey 30,000 13,602
PT Unggul Indah Corp., fgn....................................... Indonesia 68,200 70,480
Sentrachem Ltd................................................... South Africa 16,800 41,094
Shanghai Chlor-Alkali Chemical Co. Ltd., B....................... China 298,200 89,460
Slovnaft AS...................................................... Slovak Republic 8,000 213,861
*Unipetrol, fgn.................................................. Czech Republic 30,602 117,707
-----------
716,563
-----------
CONSTRUCTION & HOUSING 0.1%
Italian-Thai Development Public Company.......................... Thailand 20,000 38,567
-----------
ELECTRICAL & ELECTRONICS 0.6%
Daewoo Electronics Co............................................ South Korea 10,000 72,459
Great Wall Electronic International Ltd.......................... Hong Kong 530,679 58,980
*Great Wall Electronic International Ltd., rts................... Hong Kong 212,271 1,646
LG Electronics................................................... South Korea 2,000 39,454
*Netas Northern Electric Telekomunic Asyon AS.................... Turkey 594,000 197,727
Reunert Ltd...................................................... South Africa 30,000 88,510
-----------
458,776
-----------
ENERGY EQUIPMENT & SERVICES 0.0%
Ssangyong Oil Refining Co. Ltd................................... South Korea 1,000 19,344
-----------
</TABLE>
9
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1997 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ENERGY SOURCES 2.0%
Engen Ltd........................................................ South Africa 20,207 $ 108,395
*Purneftegaz..................................................... Russia 20,000 204,000
YPF Sociedad Anonima, ADR........................................ Argentina 30,302 1,117,386
-----------
1,429,781
-----------
FINANCIAL SERVICES 0.6%
Alpha Leasing SA................................................. Greece 10,000 245,126
Etba Leasing..................................................... Greece 16,380 158,493
MBF Capital Bhd.................................................. Malaysia 48,000 39,948
PT Sinar Mas Multi Artha, fgn.................................... Indonesia 56,800 15,538
*PT Sinar Mas Multi Artha, wts., fgn............................. Indonesia 4,260 330
-----------
459,435
-----------
FOOD & HOUSEHOLD PRODUCTS 2.1%
Bonnita Holdings Ltd............................................. South Africa 80,000 35,704
Boustead Holdings Bhd., fgn...................................... Malaysia 10,000 15,874
Chareon Pokphand Feedmill Public Co. Ltd., fgn................... Thailand 11,000 61,439
Del Monte Royal Foods Ltd........................................ South Africa 135,800 72,846
Elais Oleaginous Co.............................................. Greece 8,800 313,790
PT Charoen Pokphand Indonesia, fgn............................... Indonesia 115,000 19,225
PT Japfa Comfeed Indonesia TBK................................... Indonesia 67,000 15,274
PT Multibreeder Adirama TBK, fgn................................. Indonesia 193,500 23,526
Vitro SA......................................................... Mexico 179,000 914,582
-----------
1,472,260
-----------
FOREST PRODUCTS & PAPER 0.7%
Aracruz Celulose SA, ADR......................................... Brazil 5,000 102,812
Portucel Industrial Empresa Product de Celulose SA............... Portugal 32,000 259,642
PT Pabrik Kertas Tjiwi Kimia, fgn................................ Indonesia 100,000 55,471
Sappi Ltd........................................................ South Africa 10,177 81,014
-----------
498,939
-----------
HEALTH & PERSONAL CARE 0.1%
Hankook Cosmetics Co. Ltd........................................ South Korea 3,000 65,574
-----------
INDUSTRIAL COMPONENTS 0.7%
BTR Dunlop Ltd................................................... South Africa 50,000 26,821
Leader Universal Holdings Bhd.................................... Malaysia 67,000 53,695
Marshall Boya ve Vernik Sanayii AS............................... Turkey 1,620,528 230,189
*Shanghai Rubber Belt Co. Ltd., B................................ China 631,350 119,325
Shanghai Tyre & Rubber Co. Ltd., B............................... China 169,000 70,980
-----------
501,010
-----------
INSURANCE 0.4%
*Anadolu Anonim Turk Sigorta Sirketi,............................ Turkey 611,840 21,420
*Anadolu Anonim Turk Sigorta Sirketi, new........................ Turkey 611,840 21,420
Compania Suramericana de Seguros SA.............................. Colombia 10,000 235,493
-----------
278,333
-----------
</TABLE>
10
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1997 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
LEISURE & TOURISM 0.7%
Hinds Hotels International Ltd................................... Singapore 129,000 $ 212,540
Hong Kong & Shanghai Hotels Ltd.................................. Hong Kong 30,000 36,444
*Hotel Shilla Company............................................ South Korea 9,200 68,372
Shangri La Hotels (Malaysia) Bhd., fgn........................... Malaysia 27,000 15,647
Shangri La Hotels (Malaysia) Bhd................................. Malaysia 141,000 81,707
Sun International (South Africa) Ltd............................. South Africa 110,000 67,503
-----------
482,213
-----------
MACHINERY & ENGINEERING 0.6%
Jurong Shipyard, fgn............................................. Singapore 38,000 168,944
*Keppel Philippine Holdings Inc., B.............................. Philippines 318,750 27,863
*Mannesmann S.A.................................................. Brazil 800,000 127,059
*Shanghai Erfangji Textile Machinery Co. Ltd., B................. China 391,314 45,392
*Shanghai Industrial Sewing Machine Corp., B..................... China 249,600 31,699
*Shanghai Steel Tube Co. Ltd., B................................. China 249,700 32,461
-----------
433,418
-----------
MERCHANDISING 1.0%
Cifra S.A. de CV, A.............................................. Mexico 10,892 24,391
Cifra S.A., C.................................................... Mexico 89,056 195,075
Dairy Farm International Holdings Ltd............................ Hong Kong 132,036 125,434
*A/S Det Ostasiatiske Kompagni................................... Denmark 7,737 105,783
GUM Trade House.................................................. Russia 10,000 46,750
*Siam Makro Public Company Ltd................................... Thailand 70,000 114,738
*Wo Kee Hong Holdings Ltd........................................ Hong Kong 900,000 93,047
*Yaohan Hongkong Corp. Ltd....................................... Hong Kong 460,000 25,562
-----------
730,780
-----------
METALS & MINING 1.9%
*Antofagasta Holding PLC, cvt.................................... Chile 6,181 40,600
Antofagasta Holdings PLC......................................... Chile 34,000 225,795
Ashanti Goldfields Co. Ltd., GDR................................. Ghana 14,158 155,738
Companhia Siderurgica Nacional CSN............................... Brazil 1,500,000 57,492
Eregli Demir ve Celik Fabrikalari AS............................. Turkey 1,736,000 308,861
Hellas Can - Container Manufacturers............................. Greece 18,270 286,123
*Philex Mining Corp., B.......................................... Philippines 3,154,950 160,873
PT Tambang Timah (Persero), fgn.................................. Indonesia 34,000 49,863
South African Iron & Steel Industrial Corp. Ltd.................. South Africa 160,000 101,963
-----------
1,387,308
-----------
MULTI-INDUSTRY 5.6%
*A Soriano Corp.................................................. Philippines 500,000 32,051
Anglo American Industrial Corp. Ltd.............................. South Africa 10,791 405,198
Anglovaal Industried Ltd......................................... South Africa 10,000 33,473
Cheung Kong Holdings Ltd......................................... Hong Kong 54,000 607,134
DESC S.A. de CV DESC, B.......................................... Mexico 3,033 32,204
DESC S.A. de CV DESC, C.......................................... Mexico 94 984
*Hong Leong Industries Bhd., wts., fgn........................... Malaysia 8,500 3,668
Hong Leong Industries Bhd........................................ Malaysia 56,400 116,477
</TABLE>
11
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1997 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY (CONT.)
Koc Holding AS................................................... Turkey 3,213,019 $ 1,217,053
Koor Industries Ltd.............................................. Israel 2,000 208,315
Lai Sun Garment International Ltd................................ Hong Kong 88,000 107,470
Perlis Plantations Bhd., fgn..................................... Malaysia 70,000 151,036
*Perlis Plantations Oil Palms BHD, fgn........................... Malaysia 625 632
Renong Bhd....................................................... Malaysia 150,000 147,954
Saha Union Public Co. Ltd., fgn.................................. Thailand 39,000 31,694
Sembawang Corp. Ltd.............................................. Singapore 10,000 46,420
Sociedad Comercial del Plata Cadelplata Come..................... Argentina 201,330 410,795
Transarchipel Shipping Ltd. - TSL................................ Zimbabwe 587,000 269,427
United Communications Industry Public Co. Ltd., loc.............. Thailand 60,000 178,512
-----------
4,000,497
-----------
REAL ESTATE 2.3%
*Bangkok Land Public Co. Ltd., fgn............................... Thailand 88,300 11,554
*Filinvest Development Corp...................................... Philippines 200,000 34,965
First Capital Corp. Ltd., fgn.................................... Singapore 36,000 80,497
Hang Lung Development Co. Ltd.................................... Hong Kong 226,000 424,955
Island & Peninsula BHD, fgn...................................... Malaysia 30,000 33,475
MCL Land Ltd..................................................... Singapore 40,000 50,997
New World Development Co. Ltd.................................... Hong Kong 64,207 388,329
PT Summarecon Agung, fgn......................................... Indonesia 327,787 134,502
Sun Hung Kai Properties Ltd...................................... Hong Kong 23,000 270,483
United Industrial Corporation Ltd., fgn.......................... Singapore 270,000 187,120
-----------
1,616,877
-----------
RECREATION & OTHER CONSUMER GOODS 0.6%
China First Pencil Co. Ltd., B................................... China 512,107 179,750
*Shanghai Wingsung Co. Ltd., B................................... China 392,783 78,557
*Shenzhen China Bicycles Co. (Holdings) Ltd., B.................. China 139,200 40,655
Yue Yuen Industrial (Holdings) Ltd............................... Hong Kong 48,000 123,443
-----------
422,405
-----------
TELECOMMUNICATIONS 5.1%
Cpt-Telefonica Del Peru SA, ADR B................................ Peru 4,000 94,500
Hellenic Telecommunications Organizations OTE SA................. Greece 8,600 215,431
Jasmine International Public Co. Ltd............................. Thailand 50,000 41,667
Pakistan Telecom Corp. PTC....................................... Pakistan 29,000 28,012
Telebras-Telecomunicacoes Brasileiras SA......................... Brazil 4,525,000 522,489
Telmex-Telefonos de Mexico SA, L, ADR............................ Mexico 51,800 2,680,650
Total Access Communication Public Co. Ltd........................ Thailand 10,000 33,000
-----------
3,615,749
-----------
</TABLE>
12
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1997 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TEXTILES & APPAREL 0.2%
BYC Co. Ltd...................................................... South Korea 700 $ 71,010
Hua Thai Manufacturing Public Co. Ltd............................ Thailand 16,000 15,868
Thai Rayon Public Co. Ltd........................................ Thailand 17,000 38,519
Thai Wacoal Public Co. Ltd., fgn................................. Thailand 18,750 46,488
-----------
171,885
-----------
TRANSPORTATION 0.9%
Chiwan Wharf Holdings Ltd., B.................................... China 160,000 65,340
*Korea Express Co................................................ South Korea 2,000 39,126
Malaysian International Shipping Corp. Bhd., fgn................. Malaysia 229,333 438,272
*Pakistan International Airlines Corp............................ Pakistan 5,500 1,264
Regional Container Lines Public Co. Ltd., fgn.................... Thailand 30,000 70,041
-----------
614,043
-----------
UTILITIES ELECTRICAL & GAS 1.4%
*CEZ AS.......................................................... Czech Republic 29,000 928,071
Nafta Gbely AS................................................... Slovak Republic 1,200 51,085
-----------
979,156
-----------
TOTAL COMMON STOCKS (COST $30,344,648)........................... 36,108,655
-----------
PREFERRED STOCKS 3.3%
Banco do Brazil S.A., pfd........................................ Brazil 20,000,000 236,411
Brasmotor S.A., pfd.............................................. Brazil 410,000 79,721
Centrais Eletricas Brasileiras S.A., B, pfd...................... Brazil 2,613,000 1,478,740
Itausa-Investimentos Itau S.A., pfd.............................. Brazil 572,200 543,187
-----------
TOTAL PREFERRED STOCKS (COST $1,920,786)......................... 2,338,059
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT**
----------
<S> <C> <C> <C>
BONDS - CORPORATE 6.0%
Bridas Corp., Yankee, 12.50%, 11/18/99........................... Argentina $ 460,000 510,600
Cementos de Mexico Sa de CV, 144A, 10.75%, 7/15/00............... Mexico 230,000 247,250
Centrais Electricas Brasileiras S.A., 144A, 10%, 10/30/98........ Brazil 200,000 205,250
Essar Gujarat Ltd., 144A, 8.498%, 7/15/99, FRN................... India 80,000 77,600
Industrias Metalurgicas Pescarmona,144A, 11.75%, 3/27/98......... Argentina 250,000 254,375
Philippine Long Distance Telephone Co.:
10.625%, 6/2/04................................................ Philippines 500,000 560,105
9.25%, 6/30/06................................................. Philippines 190,000 197,125
PIV Investment Finance (Cayman) Ltd., 4.50%, 12/1/00, conv....... Hong Kong 330,000 283,800
Poland Communications Inc., 9.875%, 11/1/03...................... Poland 280,000 284,480
Protexa Construcciones SA de CV, 144A, 12.125%, 7/24/02.......... Mexico 320,000 319,200
PT Astra International, 9.75%, 4/29/01........................... Indonesia 175,000 181,562
PT Indah Kiat Financial Mauritius, 10.00%, 7/1/07................ Indonesia 625,000 614,063
Tevecap SA, 144A, 12.625%, 11/26/04.............................. Brazil 250,000 268,438
Tjiwi Kimia Int'l Finance Co. BV, 13.25%, 8/01/01................ Indonesia 250,000 276,250
-----------
TOTAL BONDS - CORPORATE (COST $4,087,464)........................ 4,280,098
-----------
</TABLE>
13
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1997 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT** VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS - GOVERNMENT & GOVERNMENT AGENCIES 29.2%
Abril SA, 144A, 12.00%, 10/25/03................................. Brazil $ 250,000 $ 275,312
Argentina Local Markets Securities Trust 1994-I
(Goldman Sachs group, L.P.), 13.375%, 8/15/01.................. Argentina 750,000ARS 894,375
Associacion Nacional del Cafe, 11.00%, 8/31/98................... Guatemala 184,000 190,440
Banco Ganadero SA, 144A, 9.75%, 8/26/99.......................... Columbia 200,000 209,500
Bancomer S.A., 8.00%, 7/07/98.................................... Mexico 200,000 201,500
Banco Nacional Obra Serv., 9.625%, 11/15/03...................... Mexico 125,000 133,125
Bepensa S.A., 144A, 9.75%, 12/30/04.............................. Mexico 270,000 271,856
Government of Brazil:
8.875%, 11/05/01............................................... Brazil 250,000 259,688
6.938%, FRN, 4/15/12........................................... Brazil 1,115,000 946,356
10.125%, 5/15/27............................................... Brazil 1,625,000 1,629,469
Minfin of Russia, 144A, 10.00%, 6/26/07.......................... Russia 1,260,000 1,336,860
Argentina Domestic Securities (Morgan Stanley), 14.75%,
9/01/02........................................................ Argentina 430,000 531,050
Republic of Argentina:
9.25%, 2/23/01................................................. Argentina 1,070,000 1,120,825
8.75%, 5/09/02................................................. Argentina 325,000 330,363
11.00%, 10/09/06............................................... Argentina 225,000 257,625
11.75%, 2/12/07, Reg S......................................... Argentina 490,000 553,198
11.375%, 1/30/17............................................... Argentina 300,000 349,050
9.75%, 9/19/27................................................. Argentina 660,000 664,290
Republic of Bulgaria, IAB, 6.6875%, 7/28/11, FRN................. Bulgaria 1,350,000 1,090,125
Republic of Ecuador:
6.688%, 2/28/25, FRN........................................... Ecuador 500,000 408,125
11.25%, 4/25/02................................................ Ecuador 600,000 643,500
11.25%, 4/25/02, 144A.......................................... Ecuador 750,000 804,375
Republic of Lithuania:
10.00%, 12/22/1997, 144A....................................... Lithuania 150,000 151,087
10.00%, 12/22/97............................................... Lithuania 10,000 10,073
Republic of Panama, 7.031%, 5/10/02, FRN......................... Panama 384,619 382,215
Republic of Turkey, 144A, 10.00%, 9/19/07........................ Turkey 790,000 817,650
Republic of Venezuela:
9.125%, 6/18/07, 144A.......................................... Venezuela 280,000 285,950
9.125%, 6/18/07, Reg S......................................... Venezuela 300,000 306,375
6.813%, 3/31/20, FRN........................................... Venezuela 310,000 291,787
9.25%, 9/15/27................................................. Venezuela 1,783,000 1,700,536
Sei Holdings IX Inc., 144A, 11.00%, 11/30/00..................... Trinidad and 210,000 222,600
Tobago
United Mexican States:
9.875%, 1/15/07................................................ Mexico 1,700,000 1,840,250
11.375%, 9/15/16............................................... Mexico 1,350,000 1,601,437
-----------
TOTAL BONDS - GOVERNMENT & GOVERNMENT AGENCIES (COST
$19,807,826)................................................... 20,710,967
-----------
</TABLE>
14
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1997 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT** VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM OBLIGATIONS (COST $6,122,845) 8.6%
United States Treasury Bills, 4.90% to 5.16% with maturities to
12/26/97....................................................... United States $6,145,000 $ 6,123,767
-----------
TOTAL INVESTMENTS (COST $62,283,569) 97.9%....................... 69,561,546
OTHER ASSETS, LESS LIABILITIES 2.1%.............................. 1,512,593
-----------
TOTAL NET ASSETS 100.0%.......................................... $71,074,139
===========
</TABLE>
CURRENCY ABBREVIATION:
ARS-Argentina
<TABLE>
<C> <S>
* Non-income producing.
** Securities traded in U.S. dollars unless otherwise indicated.
</TABLE>
See notes to financial statements.
15
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities at value (cost $62,283,569)............................... $69,561,546
Cash................................................................................ 21,410
Receivables:
Investment securities sold......................................................... 6,108,930
Dividends and interest............................................................. 640,891
Unamortized organization costs...................................................... 6,246
----------
Total assets.................................................................... 76,339,023
-----------
Liabilities:
Payables:
Investment securities purchased.................................................... 5,054,377
Affiliates......................................................................... 73,956
Accrued expenses.................................................................... 136,551
-----------
Total liabilities............................................................... 5,264,884
-----------
Net assets, at value........................................................... $71,074,139
===========
Net assets consist of:
Undistributed net investment income................................................. $ 1,118,844
Net unrealized appreciation......................................................... 7,414,651
Accumulated net realized gain....................................................... 2,706,501
Capital shares...................................................................... 59,834,143
-----------
Net assets, at value............................................................ $71,074,139
===========
Net asset value per share ($71,074,139 / 4,288,756 shares outstanding)............... $16.57
===========
</TABLE>
See notes to financial statements.
16
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income:
(net of $27,325 foreign taxes withheld)
Dividends................................................................ $ 636,366
Interest................................................................. 1,389,342
----------
Total investment income.............................................. $2,025,708
Expenses:
Management fees (Note 3)................................................. 425,653
Administrative fees (Note 3)............................................. 85,131
Transfer agent fees...................................................... 9,039
Custodian fees........................................................... 34,048
Reports to shareholders.................................................. 13,101
Registration and filing fees............................................. 8,107
Professional fees (Note 3)............................................... 23,781
Directors' fees and expenses............................................. 7,087
Amortization of organization costs....................................... 1,954
Other.................................................................... 1,918
----------
Total expenses....................................................... 609,819
----------
Net investment income............................................... 1,415,889
----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................................. 2,896,341
Foreign currency transactions........................................... (11,566)
----------
Net realized gain........................................................ 2,884,775
Net unrealized appreciation on:
Investments............................................................. 4,501,983
Translation of assets and liabilities denominated in foreign
currencies............................................................ 5,783
----------
Net unrealized appreciation.............................................. 4,507,766
----------
Net realized and unrealized gain.......................................... 7,392,541
----------
Net increase in net assets resulting from operations...................... $8,808,430
==========
</TABLE>
See notes to financial statements.
17
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
--------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income........................................ $ 1,415,889 $ 2,640,752
Net realized gain from investments and foreign currency
transactions............................................... 2,884,775 4,471,472
Net unrealized appreciation on investments................... 4,507,766 5,293,006
--------------------------------------------
Net increase in net assets resulting from operations..... 8,808,430 12,405,230
Distributions to shareholders from:
Net investment income........................................ (750,532) (2,187,265)
Net realized gain............................................ (2,058,603) (2,659,029)
--------------------------------------------
Net increase in net assets............................... 5,999,295 7,558,936
Net assets:
Beginning of period........................................... 65,074,844 57,515,908
--------------------------------------------
End of period................................................. $ 71,074,139 $ 65,074,844
============================================
Undistributed net investment income included in net assets:
Beginning of period........................................... $ 453,487 $ 0
============================================
End of period................................................. $ 1,118,844 $ 453,487
============================================
</TABLE>
See notes to financial statements.
18
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Emerging Markets Appreciation Fund, Inc. (the Fund) is registered
under the Investment Company Act of 1940 as a closed-end, non-diversified
investment company. 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. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
b. FORWARD EXCHANGE CONTRACTS:
The Fund may enter into forward exchange contracts to hedge against foreign
exchange risks. These contracts are valued daily and the Fund's equity therein
is included in the Statement of Assets and Liabilities. Realized and unrealized
gains and losses are included in the Statement of Operations.
c. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
d. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
19
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited) (cont.)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
e. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
f. ORGANIZATION COSTS:
Organization costs are 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.
h. SECURITIES TRADED ON A WHEN-ISSUED OR DELAYED BASIS:
The Fund may trade securities on a when-issued or delayed basis, with payment
and delivery scheduled for a future date. These transactions are subject to
market fluctuations and are subject to the risk that the value at delivery may
be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of acquiring such
securities, it may sell such securities before the settlement date.
Included in the statement of assets and liabilities as of September 30, 1997 are
receivables for investments securities sold and payables for investments
securities purchased of $5,167,497 and $5,028,474, respectively, related to the
sale and purchase of Russian when-issued securities. The realization of these
receivables and payables are subject to the risk that such securities may never
be issued. Included in net unrealized gains on investments is $139,023 which
related to positions sold as of September 30, 1997. In the event these
securities are not issued, such gains will not be realized.
2. CAPITAL SHARES
At September 30, 1997, there were 100,000,000 shares authorized ($0.01 par
value). During the period ended September 30, 1997 and the year ended March 31,
1997 there were no shares issued; all reinvested distributions were satisfied
with previously issued shares purchased in the open market.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also directors or officers of Templeton Asset
Management Limited (TAML), Templeton Investment Counsel, Inc. (TICI) and
Franklin Templeton Services, Inc. (FT Services), the Fund's investment manager,
sub-advisor and administrative manager, respectively.
20
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited) (cont.)
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
The Fund pays an investment management fee to TAML of 1.25% per year 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 an annual fee of 0.30% of the
Fund's average daily net assets. TAML pays monthly an economic consulting and
shareholder servicing fee to Paine Webber on an annual basis, to 0.10% of the
average daily net assets of the Fund. The Fund pays an administrative fee to FT
Services of 0.25% per year of the average daily net assets of the Fund, of which
0.20% is paid to Princeton Administrators, L.P., for sub-administrative
services, subject to a minimum monthly fee of $8,333.
During the period ended September 30, 1997, legal fees of $176 were paid to a
law firm in which an officer of the Fund is a partner.
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended September 30, 1997 were $27,858,410 and $28,875,105 respectively.
5. INCOME TAXES
At September 30, 1997, the net unrealized appreciation based on cost of
investments for income tax purposes of $62,285,233 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation........... $12,976,405
Unrealized depreciation........... (5,700,092)
-----------
Net unrealized appreciation....... $ 7,276,313
===========
</TABLE>
21
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Annual Meeting of Shareholders, September 23, 1997
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Ft. Lauderdale, Florida, on September 23, 1997. The
purpose of the meeting was to elect five Directors of the Fund, to ratify the
selection of McGladrey & Pullen, LLP, as the Fund's independent auditors for the
fiscal year ending March 31, 1998, and in their discretion, to authorize the
proxyholders to vote upon such other matters that 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: Frank J.
Crothers, Martin L. Flanagan, Andrew H. Hines, Jr., Edith E. Holiday, and
Charles B. Johnson.* The shareholders ratified the selection of McGladrey &
Pullen, LLP, to serve as the Fund's independent auditors for the fiscal year
ending March 31, 1998. No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. The election of five (5) Directors for the terms set forth below:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
TERM EXPIRING 2000: FOR SHARES WITHHELD SHARES
- --------------------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Martin L. Flanagan 3,422,111 79.79% 100,997 2.36%
Andrew H. Hines, Jr. 3,439,785 80.21% 83,323 1.94%
Edith E. Holiday 3,421,811 79.79% 101,297 2.36%
Charles B. Johnson 3,444,418 80.31% 78,690 1.84%
</TABLE>
<TABLE>
<CAPTION>
TERM EXPIRING 1998:
- ---------------------
<S> <C> <C> <C> <C>
Frank J. Crothers 3,423,377 79.82% 99,731 2.33%
</TABLE>
2. The ratification or rejection of the selection of McGladrey & Pullen, LLP,
as independent auditors of the Fund for the fiscal year ending March 31,
1998:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES
- ---------- ----------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
3,423,404 79.82% 42,764 1.00% 56,940 1.33%
</TABLE>
*Harris J. Ashton, Nicholas F. Brady, S. Joseph Fortunato, John Wm. Galbraith,
Rupert H. Johnson, Jr., Betty P. Krahmer, Gordon S. Macklin and Fred R.
Millsaps are Directors of the Fund who are currently serving and whose terms of
office continued after the Annual Meeting of Shareholders.
22
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Dividend Reinvestment Plan
The Fund offers a Dividend Reinvestment Plan (the "Plan") with the following
features: --Shareholders must affirmatively elect to participate in the Plan;
Stock dividends will be reinvested automatically; ChaseMellon Shareholder
Services, Investor Services, P.O. Box 3338, So. Hackensack, NJ 07606-1938, will
provide additional Plan information upon request. --Whenever the Fund declares
dividends in either cash or common stock of the Fund, if the market price is
equal to or exceeds net asset value at the valuation date, the participant will
receive the dividends entirely in stock at a price equal to the net asset value,
but not less than 95% of the then current market price of the Fund's shares. If
the market price is lower than net asset value or if dividends and/or capital
gains distributions are payable only in cash, the participant will receive
shares purchased on the New York Stock Exchange or otherwise on the open market.
- --The automatic reinvestment of dividends and/or capital gains does not relieve
the participant of any income tax which may be payable on dividends or
distributions. --The participant may withdraw from the Plan without penalty at
any time by written notice to Mellon Securities Trust Company at the address
above. Upon withdrawal, the participant will receive, without charge, stock
certificates issued in the participant's name for all full shares; or, if the
participant wishes, Mellon Securities Trust Company will sell the participant's
shares and send the proceeds, less a service charge of $5.00 and less trading
fees. --Whenever shares are purchased on the New York Stock Exchange or
otherwise on the open market, each participant will pay a pro rata portion of
trading fees. Trading fees will be deducted from amounts to be invested.
23
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
TRANSFER AGENT
ChaseMellon Shareholder Services
Stock Transfer Services
P.O. Box 3312
So. Hackensack, NJ 07606
800-526-0801
SHAREHOLDER INFORMATION
Shares of Templeton Emerging Markets Appreciation Fund, Inc. are traded daily on
the New York Stock Exchange under the symbol "TEA". Information about the net
asset value and the market price is published each Monday in the Wall Street
Journal, weekly in Barron's and each Saturday in The New York Times and other
newspapers. Daily market prices for the Fund's shares are published in the New
York Stock Exchange Composite Transactions section of newspapers.
For current information about dividends and shareholder accounts, call
1-800-292-9293.
The daily closing net asset value may be obtained on a two business day delay
basis by calling Franklin Templeton's Fund Information Department after 10 a.m.
Eastern Time any business day at 1-800-DIAL-BEN (1-800-342-5236).
If any shareholder is not receiving copies of the Reports to Shareholders
because shares are registered in a broker's name or in a custodian's name, he or
she can write and request that his or her name be added to the Fund's mailing
list, by writing Templeton Emerging Markets Appreciation Fund, Inc., 100
Fountain Parkway, P.O. Box 33030, St. Peterburg, FL 33733-8030.
24
<PAGE>
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. To ensure the highest quality of service, telephone calls
to or from our service departments may be monitored, recorded and accessed.
These calls can be determined by the presence of a regular beeping tone.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH
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GLOBAL GROWTH AND INCOME
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Templeton Global Bond Fund
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GLOBAL INCOME
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Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund*
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund*
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
Fund Allocator Series
Franklin Templeton Conservative
Target Fund
Franklin Templeton Moderate
Target Fund
Franklin Templeton Growth
Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment Grade
Income Fund
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
For Corporations
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
TAX-FREE INCOME
Alabama
Arizona*
Arkansas***
California**
Colorado
Connecticut
Florida**
Georgia
Hawaii***
Indiana
Kentucky
Louisiana
Maryland
Massachusetts+
Michigan**
Minnesota+
Missouri
New Jersey
New York**
North Carolina
Ohio+
Oregon
Pennsylvania
Tennessee***
Texas
Virginia
Washington***
VARIABLE ANNUITIES++
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*These funds are now closed to new accounts, with the exception of retirement
accounts.
**Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
***The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
+Portfolio of insured municipal securities.
++Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
AUDITORS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
Investors should be aware that the value of investments made for the Fund may go
up as well as down, and that the Investment Manager may make errors in selecting
securities for the Fund's portfolio. Like any investment in securities, the
Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political, and other factors. The Fund and Fund investors are not
protected from such losses by the Investment Manager. Therefore, investors who
cannot accept the risk of such losses should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
TLTEA S97 11/97 [Recycled Logo] Printed on recycled paper
