SEMI
ANNUAL
REPORT
SEPTEMBER 30, 1998
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
[LOGO] FRANKLIN TEMPLETON
PAGE
[SEAL]
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do mutual fund share prices. We appreciate your past
support and look forward to serving your investment needs in the years ahead.
In 1992, Sir John Templeton retired after a 50-year career of helping investors
manage their money. Currently he devotes all of his time and efforts to the John
Templeton Foundation. A major portion of his assets remain invested in the
Templeton funds which are managed by many of the investment professionals he
selected and trained.
[PHOTO OF J. MARK MOBIUS]
J. MARK MOBIUS, Ph.D.
President
Templeton Emerging Markets
Appreciation Fund, Inc.
Dr. Mobius, a German citizen, has been living in emerging market countries since
earning his Ph.D. in economics and political science at Massachusetts Institute
of Technology in 1964. During his extensive travels, he has acquired a thorough
knowledge of business practices and customs unique to developing nations.
PAGE
CONTENTS
Shareholder Letter .....................1
Performance Summary ....................7
Financial Highlights &
Statement of Investments ...............9
Financial Statements ..................20
Notes to the Financial
Statements ............................23
[PYRAMID GRAPHIC]
SHAREHOLDER LETTER
Your Fund's Objective: Templeton Emerging Markets Appreciation Fund seeks
capital appreciation by investing substantially all of its assets in a portfolio
of equity securities and debt obligations of issuers in emerging market
countries.
Dear Shareholder:
This semiannual report of Templeton Emerging Markets Appreciation Fund covers
the six months ended September 30, 1998. During this time, the Asian currency
crisis, coupled with Russia's economic meltdown and devaluation of the ruble,
led to severe declines in emerging market stock and bond prices. Within this
environment, the Fund posted a six-month -37.48% cumulative total return in
market-price terms, as discussed in the Performance Summary on page 7. Based on
change in net asset value, the Fund's cumulative total return for the same
period was -28.99%.
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 10 of
this report.
PAGE
<TABLE>
<CAPTION>
ASSET ALLOCATION
Based on Total Net Assets
9/30/98
<S> <C>
Equity 48.3%
Fixed-Income Securities 37.7%
Short-Term Investments &
Other Net Assets 14.0%
</TABLE>
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
9/30/98
<S> <C>
Latin America 46.0%
Asia 30.2%
Middle-East & Africa 5.5%
Europe 4.3%
Short-Term Investments &
Other Net Assets 14.0%
</TABLE>
At the end of the reporting period, 48.3% of the Fund's total net assets were
invested in equities, 37.7% in fixed-income securities, and 14.0% in short-term
investments and other assets. These holdings were spread across 31 emerging
market countries, with no individual market representing more than 13.8% of the
Fund's total net assets. Its largest single-country exposure was Mexico,
followed by Brazil, Argentina, and Turkey.
During the six months under review, most Asian financial markets performed
poorly as Japan's inability to solve its economic problems and political unrest
in Indonesia and Malaysia dampened investor sentiment about the region.
Throughout the period, China experienced massive floods, rising unemployment,
decelerating export growth, and the possible devaluation of its currency. The
peg of the Hong Kong dollar to the U.S. dollar came under fire, but was
preserved by direct intervention of the Hong Kong Special Administrative Region
government. The continued existence of the peg, however, is uncertain.
In Europe, the Portuguese and Greek stock markets performed well, but Russian
financial markets began a steady decline in May 1998, as slumping oil prices,
soaring government debt, speculative currency attacks, and an inefficient tax
system, combined with the withholding
2
PAGE
of International Monetary Fund (IMF) loans, created seemingly insurmountable
problems. Although a temporary solution appeared to have been reached in July
when the IMF agreed to release funds to Russia, the Russian parliament rejected
a tax reform package, forcing President Boris Yeltsin to implement most of its
provisions by presidential decree. In August, the ruble's trading range was
officially widened and its value plummeted, sending securities markets spiraling
downward throughout the world. On the positive side, the Fund's exposure to
Russia was relatively low at the close of the period.
Latin America also had its share of problems during the reporting period.
Although the Mexican and Argentine governments generally succeeded in protecting
their economies from falling commodity prices, most countries in the region
experienced severe declines in their financial markets. Venezuelan bonds
performed especially poorly as weak oil prices adversely affected this nation's
exports.
Looking forward, we will maintain our focus on securities from countries that we
believe have the potential for strong economic growth. In our opinion, robust
economic performance and improved creditworthiness could boost the underlying
value of these securities. We are aware that volatility could continue to affect
countries with weak currencies, but are optimistic that many of them may be able
to service their debt obligations through privatization and financial reform.
TOP 10 COUNTRIES
REPRESENTED IN THE FUND*
9/30/98
<TABLE>
<CAPTION>
% OF TOTAL
COUNTRY NET ASSETS
- ---------------------------------------------
<S> <C>
Mexico 13.8%
Brazil 11.4%
Argentina 9.2%
Turkey 6.4%
Venezuela 5.0%
South Africa 4.8%
Hong Kong** 4.1%
Singapore 4.0%
Malaysia 3.1%
South Korea 2.8%
</TABLE>
* Does not include short-term investments and other net assets.
** Hong Kong reverted to the sovereignty of China on July 1, 1997.
3
PAGE
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
9/30/98
COMPANY % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------
<S> <C>
Telefonos de Mexico SA
(Telmex), L, ADR
Telecommunications, Mexico 3.6%
Republic of Venezuela,
9.25%, 9/15/27
Government Bonds, Venezuela 3.5%
United Mexican States,
9.875%, 1/15/07
Government Bonds, Mexico 2.5%
Republic of Turkey, 144A,
10.00%, 9/19/07
Government Bonds, Turkey 2.4%
Korea Electric Power Corp.
Utilities Electrical & Gas,
South Korea 2.1%
Republic of Argentina,
9.75%, 9/19/27
Government Bonds, Argentina 2.0%
Republic of Argentina,
9.25%, 2/23/01
Government Bonds, Argentina 1.8%
Centrais Eletricas Brasileiras SA
(Electrobras)
Utilities Electrical & Gas, Brazil 1.7%
United Mexican States,
8.625%, 3/12/08
Government Bonds, Mexico 1.7%
Republic of Brazil,
10.125%, 5/15/27
Government Bonds, Brazil 1.6%
</TABLE>
Of course, investments in foreign securities involve special risks, such as
adverse economic, social and political developments in the countries where the
Fund invests, as well as market and currency volatility. Emerging markets
involve heightened risks related to the same factors, in addition to those
associated with their relatively small size and lesser liquidity. Investing in
any emerging market means accepting a certain amount of volatility and, in some
cases, severe market corrections. 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 equity market has increased 939.6% in the last
15 years, but has suffered five declines of more than 20% during that time.* In
addition, the Fund may also invest in lower-rated "junk bonds," which entail
greater credit risks than higher-rated bonds.
This discussion reflects our views, opinions and portfolio holdings as of
September 30, 1998, the end of the reporting period. However, market and
economic conditions are changing constantly, which can be expected to affect our
strategies and the Fund's portfolio
*Source: Bloomberg. Market return is measured in Hong Kong dollars and based on
quarterly percentage price change over 15 years ended September 30, 1998.
4
PAGE
composition. Although historical performance is no guarantee of future results,
these insights may help you better understand our investment and management
philosophy.
We thank you for your participation in Templeton Emerging Markets 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/ Umran Demirors
Umran Demirors, Ph.D.
Portfolio Manager -- Fixed-Income Securities
Templeton Emerging Markets Appreciation Fund, Inc.
Since May 1998, Umran Demirors, Ph.D., has been the principal portfolio manager
of the debt securities portion of Templeton Emerging Markets Appreciation Fund's
portfolio. Dr. Demirors is Vice President of the Templeton Global Bond Managers
Division ("TGBM") of Templeton Investment Counsel, Inc., the Fund's sub-adviser.
He holds a Ph.D. and an MA in economics from New York University, and a BA in
economics from Bursa Academy of Economics and Business Administration in Turkey.
Prior to joining the Franklin Templeton Group in 1996, Dr. Demirors was a
principal and portfolio manager for Socimer Advisory Inc. in New York. Before
joining Socimer Advisory Inc., Dr. Demirors was the head of research and
strategy at VestcorPartners Group in Miami from 1992 through 1994. Currently,
Dr. Demirors manages several emerging markets fixed-income portfolios, and
directs the TGBM emerging markets group. Dr. J. Mark Mobius continues as
Templeton Emerging Markets Appreciation Fund's principal portfolio manager for
equity investments.
5
PAGE
IMPORTANT NOTICE TO SHAREHOLDERS
INTRODUCTION OF THE EURO. On January 1, 1999, the European Monetary Union (EMU)
plans to introduce a new single currency, the Euro, which will replace the
national currency for participating member countries. If the Fund holds
investments in countries with currencies replaced by the Euro, the investment
process, including trading, foreign exchange, payments, settlements, cash
accounts, custody and accounting will be impacted.
The process to establish the Euro may result in market volatility. It is not
possible to predict the impact of the Euro on the business or financial
condition of European issuers or on the Fund. The transition and elimination of
currency risk among EMU countries may change the economic environment and
behavior of investors, particularly in European markets. To the extent the Fund
holds non-U.S. dollar (Euro or other) denominated securities, it will still be
exposed to currency risk due to fluctuations in those currencies versus the U.S.
dollar.
Franklin Resources, Inc. has created an interdepartmental team to handle all
Euro-related changes to enable the Franklin Templeton Funds to process
transactions accurately and completely with minimal disruption to business
activities. While there can be no assurance that the Fund will not be adversely
affected, the manager and its affiliated service providers are taking steps that
they believe are reasonably designed to address the Euro issue.
YEAR 2000. The Fund's business operations use a worldwide network of computer
systems. Many of them have date fields that use two digits to represent the date
and these systems must be replaced or modified, so that they can distinguish the
year 1900 from the year 2000 (commonly referred to as the year 2000 bug).
When the year 2000 arrives, the Fund's operations could be affected if the
computer systems used by the manager, its service providers and other third
parties it does business with are not Year 2000 ready. For example, the Fund's
portfolio and operational areas could be impacted, including securities trade
processing, interest and dividend payments, securities pricing, shareholder
account services, reporting, custody functions and others. The Fund could
experience difficulties in effecting transactions if any of its foreign
subcustodians, or if foreign broker/dealers or foreign markets are not ready for
the year 2000.
The Fund's manager and its affiliated service providers are making a concerted
effort to take steps they believe are reasonably designed to get ready for Year
2000. Of course, the Fund's ability to reduce the effects of Year 2000 issues is
also very much dependent upon the efforts of third parties.
In evaluating current and potential portfolio positions, Year 2000 is one of the
factors that the Fund's manager takes into consideration. It will rely upon
public filings and other statements made by companies regarding their Year 2000
readiness. Issuers in countries outside of the U.S., and in particular in
emerging markets, may not be required to make the level of disclosure regarding
Year 2000 readiness that is required in the U.S. Like with many other matters,
the manager, of course, cannot audit each portfolio company and its major
suppliers, and so cannot verify their Year 2000 readiness. If the value of a
Fund investment is adversely affected by a Year 2000 problem, the net asset
value of the Fund will be affected as well.
6
PAGE
PERFORMANCE SUMMARY
CLASS I
In market-price terms, Templeton Emerging Markets Appreciation Fund posted a
- -37.48% cumulative total return for the six-month period ended September 30,
1998. Based on the change in net asset value (in contrast to market price), the
Fund posted a -28.99% cumulative total return for the same period. Both total
return figures assume reinvestment of distributions in accordance with the
dividend reinvestment and cash purchase plan.
During the reporting period, the Fund's closing price on the New York Stock
Exchange decreased $4.75 per share, from $12.625 on March 31, 1998, to $7.875 on
September 30, 1998, while the net asset value decreased $3.89 per share, from
$13.35 to $9.46.
Shareholders received per-share distributions of 2 cents ($0.02) in income
dividends during the period. Distributions will vary depending on income earned
by the Fund and any profits realized from the sale of securities in the
portfolio, as well as the level of the Fund's operating expenses.
Past performance is not predictive of future results.
7
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND
Periods ended 9/30/98
<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 -35.74% -5.56% -5.31%
Based on change in market price -41.09% -12.96% -25.83%
Average Annual Total Return(2)
Based on change in net asset value -35.74% -1.89% -1.23%
Based on change in market price -41.09% -4.52% -6.53%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
All calculations assume reinvestment of distributions, either at net asset value
or market price on the reinvestment date, in accordance with the dividend
reinvestment and cash purchase plan, and do not reflect any sales charges paid
at inception or brokerage commissions paid on secondary market purchases. Since
markets can go down as well as up, investment return and principal value will
fluctuate with market conditions, currency volatility, and the economic, social
and political climates of countries where the Fund invests. Emerging markets
involve heightened risks related to the same factors, in addition to those
associated with their relatively small size and lesser liquidity. Also, as a
non-diversified investment company, the Fund may invest in a relatively small
number of issuers and, as a result, may be subject to greater risk of loss with
respect to its portfolio securities. The Fund may also invest in lower-rated
"junk bonds," which entail greater credit risks than higher-rated bonds. 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. Without these reductions, the Fund's total returns would have
been lower.
Past performance is not predictive of future results.
8
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, 1998 ------------------------------------------------
(UNAUDITED) 1998 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............. $13.35 $15.17 $13.41 $12.05 $14.10
------------------------------------------------------------------------
Income from investment operations:
Net investment income........................... .32 .56 .62 .69 .48
Net realized and unrealized gains (losses)...... (4.19) (.23) 2.27 1.64 (1.97)
------------------------------------------------------------------------
Total from investment operations................. (3.87) .33 2.89 2.33 (1.49)
Underwriting expenses deducted from capital...... -- -- -- -- (.15)
------------------------------------------------------------------------
Less distributions from:
Net investment income........................... (.02) (.72) (.51) (.86) (.32)
Net realized gains.............................. -- (1.24) (.62) (.11) (.09)
In excess of net realized gains................. -- (.19) -- -- --
------------------------------------------------------------------------
Total distributions.............................. (.02) (2.15) (1.13) (.97) (.41)
------------------------------------------------------------------------
Net asset value, end of period................... $9.46 $13.35 $15.17 $13.41 $12.05
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Return*
Based on market value per share................. (37.48)% 15.12% .40% 15.57% (11.25)%
Based on net asset value per share.............. (28.99)% 3.31% 22.40% 19.34% (11.64)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)................ $41,499 $58,520 $65,075 $57,516 $51,022
Ratios to average net assets:
Expenses........................................ 1.96%** 1.88% 1.83% 1.64% 1.79%**
Net investment income........................... 5.47%** 3.76% 4.29% 5.29% 3.98%**
Portfolio turnover rate.......................... 33.95% 74.67% 114.78% 26.92% 58.79%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period April 29, 1994 (commencement of operations) to March 31, 1995.
See Notes to Financial Statements.
9
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 45.0%
APPLIANCES & HOUSEHOLD DURABLES .4%
Arcelik AS.................................................. Turkey 2,004,896 $ 46,942
Beko Elektronik AS.......................................... Turkey 832,992 10,802
Sanyo Universal Electric Public Co. Ltd. ................... Thailand 20,000 2,226
Semi-Tech Co. Ltd. ......................................... Hong Kong 540,761 20,937
Turk Demir Dokum, br. ...................................... Turkey 7,545,986 76,108
-----------
157,015
-----------
AUTOMOBILES .5%
Associated Motorways Ltd. .................................. Sri Lanka 31,300 15,654
Cycle & Carriage Ltd. ...................................... Singapore 89,000 144,221
Perusahaan Otomobil Nasional Bhd. .......................... Malaysia 67,000 47,706
Renault Argentina SA........................................ Argentina 11,926 12,523
-----------
220,104
-----------
BANKING 5.7%
Akbank...................................................... Turkey 25,301,276 355,438
Alpha Credit Bank........................................... Greece 6 446
Amalgamated Banks of South Africa Ltd. ..................... South Africa 800 2,912
Banco Bradesco SA........................................... Brazil 25,566,127 148,841
Banco do Brasil SA.......................................... Brazil 2,137,276 11,722
Bangkok Bank Public Co. Ltd. ............................... Thailand 268,000 157,627
Bangkok Bank Public Co. Ltd., fgn. ......................... Thailand 24,600 23,337
Bank Handlowy W Warszawie SA................................ Poland 3,354 34,544
Bank Handlowy W Warszawie SA, GDR........................... Poland 9,600 97,920
Big Bank Gdanski SA, G...................................... Poland 121,100 105,069
*Daegu Bank Co. Ltd. ....................................... South Korea 12,071 12,585
*Grupo Financiero Banamex Accival SA, B..................... Mexico 86,500 76,398
*Grupo Financiero Banamex Accival SA, L..................... Mexico 31,868 27,990
Grupo Financiero Bancomer SA de CV, B....................... Mexico 1,384,000 244,475
Grupo Financiero Bancomer SA de CV, L....................... Mexico 27,778 3,339
Grupo Financiero Serfin SA de CV, B......................... Mexico 41,277 2,876
HSBC Holdings Plc. ......................................... Hong Kong 13,564 248,576
OTP Bank.................................................... Hungary 300 8,509
OTP Bank, GDR............................................... Hungary 380 10,792
Overseas Chinese Banking Corp. Ltd., fgn. .................. Singapore 53,000 133,389
Philippine Commercial International Bank Inc. .............. Philippines 10,000 22,400
PT Inter-Pacific Bank, fgn. ................................ Indonesia 11,875 888
Public Bank Bhd. ........................................... Malaysia 258,000 71,508
*Siam Commercial Bank Ltd., loc. ........................... Thailand 19,000 4,807
*Thai Farmers Bank Public Co. Ltd. ......................... Thailand 423,200 235,527
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 189,500 127,036
Turkiye Garanti Bankasi AS.................................. Turkey 2,454,999 42,447
United Overseas Bank Ltd., fgn. ............................ Singapore 47,000 137,259
-----------
2,348,657
-----------
</TABLE>
10
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BEVERAGES & TOBACCO 1.4%
Asia Pacific Breweries Ltd. ................................ Singapore 24,000 $ 42,595
Bavaria SA.................................................. Colombia 20,700 77,141
Fraser and Neave Ltd. ...................................... Singapore 88,000 189,090
Nobleza Piccardo Sdad Industrial Comercial y Financial...... Argentina 1,000 2,500
Quilmes Industrial SA....................................... Argentina 12,200 99,888
South African Breweries Ltd. ............................... South Africa 11,400 171,776
-----------
582,990
-----------
BROADCASTING & PUBLISHING
Times Publishing Ltd. ...................................... Singapore 13,000 16,976
-----------
BUILDING MATERIALS & COMPONENTS 1.5%
Alpha Ltd. ................................................. South Africa 2,900 30,578
Cementos Argos SA........................................... Colombia 81,300 172,086
Cemex SA.................................................... Mexico 11,500 25,336
Cemex SA, B................................................. Mexico 9,030 22,553
Cimentas Izmir Cimento Fabrikasi Turk AS.................... Turkey 3,755,152 169,081
Izocam Ticaret ve Sanayii AS, br. .......................... Turkey 148,284 1,215
Jordan Cement Factories Ltd. ............................... Jordan 12,000 31,730
PT Indocement Tunggal Prakarsa.............................. Indonesia 124,000 37,084
*PT Semen Cibinong, loc. ................................... Indonesia 389,500 5,460
PT Semen Gresik (Persero)TBK................................ Indonesia 87,000 48,785
Shanghai Yaohua Pilkington Glass, B......................... China 24,250 2,958
Siam Cement Public Co. Ltd. ................................ Thailand 2,600 15,128
Siam Cement Public Co. Ltd., fgn. .......................... Thailand 4,750 45,662
*Thai Asahi Glass Public Co. Ltd. .......................... Thailand 72,610 8,817
Tipco Asphalt Public Co. Ltd. .............................. Thailand 600 414
Vencemos de Cementos SA..................................... Venezuela 40,500 12,714
Venezolana de Cementos-Vencemos, #2......................... Venezuela 5,400 1,695
-----------
631,296
-----------
CHEMICALS 1.4%
Aeci Ltd. .................................................. South Africa 5,000 8,801
*Atanor Cia Nacional Para la Industria Quimica SA, D........ Argentina 56,550 27,147
Borsodchem RT............................................... Hungary 2,550 52,376
Borsodchem RT, GDR.......................................... Hungary 2,150 42,462
Engro Chemical Pakistan Ltd. ............................... Pakistan 1,150 1,384
Indian Petrochemicals Corp. Ltd. ........................... India 57,500 74,582
PT Unggul Indah Corp. ...................................... Indonesia 136,400 6,693
Reliance Industries Ltd., GDR............................... India 5,300 28,620
Shanghai Petrochemical Co. Ltd., H.......................... China 842,000 85,846
Singapore Petroleum Company, fgn. .......................... Singapore 2,000 531
Slovnaft AS................................................. Slovak Republic 8,000 153,036
*Thai Petrochemical Industry Public Co. Ltd., fgn. ......... Thailand 69,000 5,237
Tiszai Vegyi Kombinat RT.................................... Hungary 2,660 26,588
</TABLE>
11
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
CHEMICALS (CONT.)
Tiszai Vegyi Kombinat RT, GDR, Reg S........................ Hungary 900 $ 8,730
Unipetrol................................................... Czech Republic 30,602 64,004
-----------
586,037
-----------
CONSTRUCTION & HOUSING .1%
*Italian-Thai Development Public Co. Ltd. .................. Thailand 50,000 26,562
*Italian-Thai Development Public Co. Ltd., fgn. ............ Thailand 16,200 8,606
-----------
35,168
-----------
ELECTRICAL & ELECTRONICS .9%
Acma Ltd. .................................................. Singapore 8,000 2,659
Daewoo Electronics Co. ..................................... South Korea 30,200 62,973
Empresa Nacional de Electricidad SA, ADR.................... Chile 18,980 161,330
Great Wall Electronic International Ltd. ................... Hong Kong 502,102 14,256
LG Electronics Inc. ........................................ South Korea 2,000 16,322
*Netas Northern Electric Telekomunic Asyon AS............... Turkey 427,000 11,843
*Netas Northern Electric Telekomunic Asyon AS - New......... Turkey 1,793,400 42,442
Reunert Ltd. ............................................... South Africa 23,200 20,123
Samsung Display Devices Ltd. ............................... South Korea 1,659 38,769
*Samsung Display Devices Ltd., rts. ........................ South Korea 286 1,954
-----------
372,671
-----------
ENERGY SOURCES 1.9%
Engen Ltd. ................................................. South Africa 45,507 160,203
Hindustan Petroleum Corporation Ltd. ....................... India 2,100 14,437
Mol Magyar Olay - Es Gazipari RT............................ Hungary 950 18,426
Perez Companc SA, B......................................... Argentina 4,500 18,339
*Petron Corporation......................................... Philippines 548,000 35,698
Sasol Ltd. ................................................. South Africa 27,500 126,042
Transportadora de Gas del Sur SA, B......................... Argentina 41,000 77,908
Transportadora de Gas del Sur SA, B, ADR.................... Argentina 12,800 124,800
YPF Sociedad Anonima, ADR................................... Argentina 7,560 196,560
-----------
772,413
-----------
FINANCIAL SERVICES .3%
AMMB Holdings Bhd. ......................................... Malaysia 130,000 66,161
Industrial Credit & Inv. Corp. of India, GDR................ India 500 4,163
Industrial Finance Corp. of Thailand........................ Thailand 251,100 50,182
Industrial Finance Corp. of Thailand, fgn. ................. Thailand 1,200 237
*SG Asia Credit Public Co. Ltd. ............................ Thailand 7,000 1,487
-----------
122,230
-----------
FOOD & HOUSEHOLD PRODUCTS 1.2%
Bonnita Holdings Ltd. ...................................... South Africa 80,000 37,687
Boustead Holdings Bhd. ..................................... Malaysia 15,000 7,598
Chareon Pokphand Feedmill Public Co. Ltd., fgn. ............ Thailand 71,000 50,740
</TABLE>
12
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
FOOD & HOUSEHOLD PRODUCTS (CONT.)
*Del Monte Royal Foods Ltd. ................................ South Africa 135,800 $ 46,421
Mavesa SA, ADR.............................................. Venezuela 2,940 11,576
Ng Fung Hong Ltd. .......................................... Hong Kong 60,000 50,719
Panamerican Beverages Inc., A............................... Mexico 2,100 37,406
PT Charoen Pokphand Indonesia............................... Indonesia 115,000 1,747
*PT Indofoods Sukses Makmur................................. Indonesia 5,000 748
San Miguel Corp., B......................................... Philippines 2,000 2,583
*Serm Suk Public Co. Ltd., fgn. ............................ Thailand 4,900 24,791
Vitro SA.................................................... Mexico 150,000 205,496
-----------
477,512
-----------
FOREST PRODUCTS & PAPER 1.5%
Aracruz Celulose SA, ADR.................................... Brazil 43,100 293,619
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 11,300 60,031
PT Indah Kiat Pulp & Paper Corp. ........................... Indonesia 65,000 9,264
PT Tjiwi Kimia TBK.......................................... Indonesia 155,500 14,533
Sappi Ltd. ................................................. South Africa 67,677 216,382
Shin Poong Paper Manufacturing Co. Ltd. .................... South Korea 3,900 19,854
-----------
613,683
-----------
HEALTH & PERSONAL CARE .1%
Gedeon Richter Ltd. ........................................ Hungary 1,170 36,128
Hankook Cosmetics Co. Ltd. ................................. South Korea 3,000 17,041
PT Tempo Scan Pacific....................................... Indonesia 102,000 1,668
-----------
54,837
-----------
INDUSTRIAL COMPONENTS .1%
Dunlop Africa Ltd. ......................................... South Africa 50,000 11,054
Leader Universal Holdings Bhd. ............................. Malaysia 65,000 10,017
Shanghai Tyre & Rubber Co. Ltd., B.......................... China 147,730 20,387
-----------
41,458
-----------
INSURANCE .2%
*Anadolu Anonim Turk Sigorta Sirketi, br. .................. Turkey 2,024,360 18,959
Compania Suramericana de Inversiones SA..................... Colombia 38,992 49,895
-----------
68,854
-----------
LEISURE & TOURISM 2.2%
Genting Berhad.............................................. Malaysia 180,000 303,208
Hinds Hotels International Ltd. ............................ Singapore 129,000 68,149
*Hotel Shilla Co. .......................................... South Korea 13,900 53,571
Kersaf Investments Ltd. .................................... South Africa 3,000 9,036
Overseas Union Enterprise Ltd. ............................. Singapore 25,200 31,113
Republic Hotels & Resorts Ltd. ............................. Singapore 49,000 13,670
Resorts World Bhd. ......................................... Malaysia 427,000 346,885
</TABLE>
13
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
LEISURE & TOURISM (CONT.)
Shangri La Hotels (Malaysia) Bhd. .......................... Malaysia 168,000 $ 36,528
Sun International (South Africa) Ltd. ...................... South Africa 165,000 28,061
-----------
890,221
-----------
MACHINERY & ENGINEERING .7%
Jurong Shipyard Ltd. ....................................... Singapore 28,000 99,721
*Keppel Philippine Holdings Inc., B......................... Philippines 403,218 11,843
*Mannesmann SA.............................................. Brazil 740,000 56,818
PT United Tractors.......................................... Indonesia 13,000 273
Samsung Heavy Industries Co. Ltd. .......................... South Korea 4,352 18,463
*Shanghai Steel Tube Co. Ltd., B............................ China 138,700 11,096
Tata Engineering & Locomotive Co., GDR...................... India 8,600 26,445
Tata Engineering & Locomotive Co. Telco..................... India 17,600 57,279
Thai Engine Manufacturing Public Company Ltd. .............. Thailand 4,800 753
-----------
282,691
-----------
MERCHANDISING .7%
Cifra SA, C................................................. Mexico 44,000 53,975
Dairy Farm International Holdings Ltd. ..................... Hong Kong 128,389 136,092
Siam Makro Public Company Ltd. ............................. Thailand 70,000 109,790
-----------
299,857
-----------
METALS & MINING 2.0%
Anglo-American Corp of South Africa Ltd. ................... South Africa 5,700 162,857
Antofagasta Holdings Plc. .................................. Chile 37,181 107,415
Ashanti Goldfields Co. Ltd., GDR............................ Ghana 14,412 131,509
Companhia Siderurgica Nacional Sid Nacional CSN............. Brazil 1,370,000 22,564
Eregli Demir ve Celik Fabrikalari AS........................ Turkey 770,000 57,553
Hindalco Industries Inc., GDR............................... India 5,000 55,375
Iscor Ltd. ................................................. South Africa 217,672 48,865
Natsteel Ltd. .............................................. Singapore 107,000 78,756
Palabora Mining Co. Ltd. ................................... South Africa 7,900 26,871
*Philex Mining Corp., B..................................... Philippines 3,154,950 35,696
PT Timah TBK................................................ Indonesia 237,500 103,767
Siderca SA, A............................................... Argentina 6,000 7,201
Tata Iron & Steel Co., Ltd. ................................ India 4,500 9,774
-----------
848,203
-----------
MISC MATERIALS & COMMODITIES .3%
De Beers/Centenary Linked Units, Reg. ...................... South Africa 9,100 119,786
Golden Hope Plantations Bhd. ............................... Malaysia 37,000 20,952
-----------
140,738
-----------
MULTI-INDUSTRY 6.3%
*A Soriano Corp. ........................................... Philippines 500,000 8,229
Alfa SA de CV, A............................................ Mexico 48,000 122,473
</TABLE>
14
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY (CONT.)
Anglo American Industrial Corp. Ltd. ....................... South Africa 19,896 $ 218,585
Anglovaal Industried Ltd. .................................. South Africa 29,000 25,400
Barlow Ltd. ................................................ South Africa 28,500 106,633
CG Smith Ltd. .............................................. South Africa 72,500 144,260
Cheung Kong Holdings Ltd. .................................. Hong Kong 40,000 185,326
China Resources Enterprises Ltd. ........................... China 98,000 89,166
Citic Pacific Ltd. ......................................... Hong Kong 169,000 296,625
Delta Corp. ................................................ Zimbabwe 27,054 7,038
Egis RT..................................................... Hungary 960 17,127
Egis RT, EDR................................................ Hungary 1,000 17,841
Hong Leong Industries Bhd. ................................. Malaysia 56,400 25,065
*Hong Leong Industries Bhd., wts............................ Malaysia 8,500 660
Hutchison Whampoa Ltd. ..................................... Hong Kong 22,000 115,842
Jardine Matheson Holdings Ltd. ............................. Hong Kong 82,000 168,100
Koor Industries Ltd. ....................................... Israel 691 57,684
Lai Sun Garment International Ltd. ......................... Hong Kong 84,000 12,684
Larsen and Toubro Ltd. ..................................... India 28,850 125,190
Larsen and Toubro Ltd., GDR reg S........................... India 500 4,100
Malbak Ltd. ................................................ South Africa 11,750 4,296
McCarthy Retail Ltd. ....................................... South Africa 44,785 8,530
Perlis Plantations Bhd. .................................... Malaysia 78,000 62,620
Quinenco SA, ADR............................................ Chile 9,800 67,987
Rembrandt Group Ltd. ....................................... South Africa 28,000 167,381
*Renong Bhd. ............................................... Malaysia 267,000 61,563
Saha Union Public Co. Ltd., fgn. ........................... Thailand 39,000 12,086
Samsung Electronics Co. Ltd. ............................... South Korea 1,602 43,772
Sembawang Corp. Ltd. ....................................... Singapore 89,000 148,448
Sociedad Comercial del Plata Cadelplata Come................ Argentina 247,720 118,917
Technology Resources Industries Bhd. ....................... Malaysia 90,000 26,020
Tongaat-Hulett Group Ltd. .................................. South Africa 20,500 108,078
Transarchipel Shipping Ltd. - TSL........................... Zimbabwe 587,000 33,279
-----------
2,611,005
-----------
REAL ESTATE 2.1%
Belle Corp. ................................................ Philippines 396,000 7,241
City Developments Ltd. ..................................... Singapore 75,000 164,718
Filinvest Development Corp. ................................ Philippines 200,000 6,857
First Capital Corp. Ltd. ................................... Singapore 34,000 10,091
Hang Lung Development Co. Ltd. ............................. Hong Kong 197,000 172,885
Hong Leong Properties Bhd. ................................. Malaysia 35,000 4,349
Island & Peninsula Bhd. .................................... Malaysia 30,000 16,486
Land and House Public Co. Ltd. ............................. Thailand 7,900 1,499
Land and House Public Co. Ltd., fgn. ....................... Thailand 600 117
MCL Land Ltd. .............................................. Singapore 42,000 10,845
New World Development Co. Ltd. ............................. Hong Kong 102,339 137,359
PT Ciputra Dev.............................................. Indonesia 175,000 1,636
PT Pakuwon Jati............................................. Indonesia 134,000 939
</TABLE>
15
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
REAL ESTATE (CONT.)
PT Summarecon Agung......................................... Indonesia 327,787 $ 3,063
Sun Hung Kai Properties Ltd. ............................... Hong Kong 44,072 156,130
United Industrial Corporation Ltd. ......................... Singapore 536,000 155,897
United Overseas Land Ltd. .................................. Singapore 90,000 36,327
-----------
886,439
-----------
RECREATION & OTHER CONSUMER GOODS .4%
China First Pencil (Group) Co Ltd., B....................... China 512,107 77,840
Tanjong Plc. ............................................... Malaysia 79,000 70,218
-----------
148,058
-----------
TELECOMMUNICATIONS 6.9%
Advanced Info Service Ltd., fgn. ........................... Thailand 10,000 57,172
Compania Anonima Nacional Telefonos de Venezuela, ADR....... Venezuela 1,200 20,400
Compania De Telecomunicaciones De Chile SA, ADR............. Chile 7,426 142,022
Jasmine International Public Co. Ltd., fgn. ................ Thailand 60,600 20,696
Matav RT, regd. ............................................ Hungary 3,000 13,202
Pakistan Telecommunications Corp., PTC, A................... Pakistan 429,000 220,640
Philippine Long Distance Telephone Co., ADR................. Philippines 11,400 230,850
PT Indosat.................................................. Indonesia 64,500 34,812
PT Telekomunikasi Indonesia (Persero), B.................... Indonesia 652,000 92,925
+Receipts of Telebras stock................................. Brazil 4,525,000 194,714
Rostelekom.................................................. Russia 1,000 310
Telefonica del Peru SA, B, ADR.............................. Peru 20,600 252,350
Telefonos de Mexico SA (Telmex), L, ADR..................... Mexico 33,400 1,477,950
*Thai Telephone & Telecommunication Public Co. Ltd. ........ Thailand 37,000 3,838
*Thai Telephone & Telecommunication Public Co. Ltd., fgn. .. Thailand 320,000 33,999
Total Access Communication Public Co. Ltd. ................. Thailand 80,600 53,599
United Communications Industries, fgn. ..................... Thailand 65,500 20,298
-----------
2,869,777
-----------
TEXTILES & APPAREL .2%
BYC Co. Ltd. ............................................... South Korea 700 15,502
Graboplast Textil Es Muborgyarto Rt......................... Hungary 5,150 32,747
Hua Thai Manufacturing Public Co. Ltd. ..................... Thailand 16,000 23,476
Thai Rayon Public Co. Ltd. ................................. Thailand 17,000 8,386
Thai Wacoal Public Co. Ltd., fgn. .......................... Thailand 18,750 16,068
-----------
96,179
-----------
TRANSPORTATION .9%
Chiwan Wharf Holdings Ltd., B............................... China 134,000 24,038
Delgro Corp. ............................................... Singapore 5,500 4,016
Guangshen Railway Co. Ltd., ADR............................. China 6,700 44,806
Guangshen Railway Co. Ltd., H............................... China 334,000 43,536
Keppel Corp., Ltd. ......................................... Singapore 108,000 127,572
Malaysian Airline System Bhd. .............................. Malaysia 23,000 8,243
</TABLE>
16
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TRANSPORTATION (CONT.)
Malaysian International Shipping Corp., fgn. ............... Malaysia 93,333 $ 85,188
Neptune Orient Lines Ltd. .................................. Singapore 97,000 19,864
Regional Container Lines Public Co. Ltd., fgn. ............. Thailand 30,000 30,357
SBS Bus Service Ltd., fgn. ................................. Singapore 5,500 2,546
-----------
390,166
-----------
UTILITIES ELECTRICAL & GAS 5.1%
Centrais Eletricas Brasileiras SA (Electrobras)............. Brazil 5,056,000 104,942
*CEZ AS..................................................... Czech Republic 29,000 536,585
Cia Energetica de Minas Gerais, ADR......................... Brazil 2,650 57,686
Electricidad de Caracas SAICA SACA.......................... Venezuela 902,822 251,932
Enersis SA, ADR............................................. Chile 11,100 226,163
*Irkutskenergo.............................................. Russia 439,500 7,911
Korea Electric Power Corp. ................................. South Korea 63,500 881,215
Mosenergo................................................... Russia 1,377,500 11,020
Nafta Gbely AS.............................................. Slovak Republic 960 10,701
Unified Energy Systems...................................... Russia 943,900 17,557
-----------
2,105,712
-----------
WHOLESALE & INTERNATIONAL TRADE
Metro Holdings Ltd. ........................................ Singapore 24,000 11,397
-----------
TOTAL COMMON STOCKS (COST $33,368,709)...................... 18,682,344
-----------
PREFERRED STOCKS 3.3%
Banco do Brazil SA, pfd..................................... Brazil 14,490,000 103,919
Brasmotor SA, pfd........................................... Brazil 390,500 33,772
Centrais Eletricas Brasileiras SA (Electrobras), ADR, pfd... Brazil 5,100 56,370
Centrais Eletricas Brasileiras SA (Electrobras), B, pfd..... Brazil 24,956,000 551,677
*Centrais Geradoras Do Sul Do Brasil SA (Gerasul), pfd...... Brazil 24,956,000 24,847
*Cia Mesbla SA, pfd......................................... Brazil 2,465,000 728
Cia Vale do Rio Doce, A, pfd................................ Brazil 50 759
Copene-Petroquimica do Nordeste SA, A, pfd.................. Brazil 150,000 20,376
Investimentos Itau SA, pfd.................................. Brazil 962,200 527,700
Petrobras-Petroleo Brasileiro SA, pfd....................... Brazil 10,000 1,029
+Receipts of Telebras stock................................. Brazil 783,000 54,570
-----------
TOTAL PREFERRED STOCKS (COST $2,357,275).................... 1,375,747
-----------
<CAPTION>
PRINCIPAL
AMOUNT**
----------
<S> <C> <C> <C>
BONDS -- CORPORATE 7.5%
Banco Nacional Obra Serv., 9.625, 11/15/03.................. Mexico $ 125,000 103,750
Bepensa SA, 144A, 9.75%, 9/30/04............................ Mexico 270,000 203,850
Bridas Corp., Yankee, 12.50%, 11/15/99...................... Argentina 460,000 463,450
Cellco Finance NV, 15.00%, 8/01/05.......................... Turkey 300,000 240,750
Cemex SA, 144A, 10.75%, 7/15/00............................. Mexico 230,000 229,425
Companhia Paranaense De Energia-Copel, 9.75%, 5/02/05....... Brazil 200,000 145,000
</TABLE>
17
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT** VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS -- CORPORATE (CONT.)
Essar Steel Ltd., FRN, 144A, 8.40%, 7/20/99................. India $ 30,000 $ 25,350
Pera Financial Services, 9.375%, 10/15/02................... Turkey 300,000 195,000
Philippine Long Distance Telephone Co.:
10.625%, 6/02/04.......................................... Philippines 500,000 431,497
9.25%, 6/30/06............................................ Philippines 190,000 152,000
Poland Communications Inc., 9.875%, 11/01/03................ Poland 280,000 221,200
Protexa Construcciones SA de CV, 144A, 12.125%, 7/24/02..... Mexico 320,000 248,000
PT Astra International, 9.75%, 4/29/01...................... Indonesia 175,000 42,875
PT Indah Kiat Finance Mauritius Ltd., 10.00%, 7/01/07....... Indonesia 625,000 268,750
Tjiwi Kimia Int'l Finance Co. BV, 13.25%, 8/01/01........... Indonesia 250,000 125,000
-----------
TOTAL BONDS -- CORPORATE (COST $4,242,470).................. 3,095,897
-----------
BONDS -- GOVERNMENT & GOVERNMENT AGENCIES 30.2%
Abril SA, 144A, 12.00%, 10/25/03............................ Brazil 250,000 238,750
Minfin of Russia:
144A, 10.00%, 6/26/07..................................... Russia 810,000 180,225
Reg S, 10.00%, 6/26/07.................................... Russia 300,000 66,750
Republic of Argentina:
9.25%, 2/23/01............................................ Argentina 820,000 752,350
8.75%, 5/09/02............................................ Argentina 325,000 274,787
11.00%, 10/09/06.......................................... Argentina 225,000 209,250
Reg S, 11.75%, 2/12/07.................................... Argentina 490,000 ARS 339,359
11.375%, 1/30/17.......................................... Argentina 300,000 275,625
9.75%, 9/19/27............................................ Argentina 990,000 813,656
Republic of Brazil:
9.375%, 4/07/08........................................... Brazil 950,000 589,000
FRN, 6.6875%, 4/15/12..................................... Brazil 1,115,000 558,894
8.00%, 4/15/14............................................ Brazil 464,084 275,938
10.125%, 5/15/27.......................................... Brazil 1,075,000 657,094
Republic of Ecuador:
11.25%, 4/25/02........................................... Ecuador 850,000 553,563
144A, 11.25%, 4/25/02..................................... Ecuador 550,000 358,187
Republic of Panama, FRN, 6.75%, 5/14/02..................... Panama 307,703 275,779
Republic of Peru, FRN, 4.00%, 3/07/17....................... Peru 200,000 104,500
Republic of Turkey:
144A, 9.875%, 2/23/05..................................... Turkey 500,000 410,000
144A, 10.00%, 9/19/07..................................... Turkey 1,230,000 986,562
Republic of Venezuela:
144A, 9.125%, 6/18/07..................................... Venezuela 280,000 157,500
Reg S, 9.125%, 6/18/07.................................... Venezuela 300,000 168,750
9.25%, 9/15/27............................................ Venezuela 2,660,000 1,463,000
Sei Holdings IX Inc., 144A, 11.00%, 11/30/00................ Trinidad and 210,000 201,600
Tobago
</TABLE>
18
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT** VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS -- GOVERNMENT & GOVERNMENT AGENCIES (CONT.)
United Mexican States:
9.75%, 2/06/01............................................ Mexico $ 340,000 $ 337,450
9.875%, 1/15/07........................................... Mexico 1,120,000 1,034,600
8.625%, 3/12/08........................................... Mexico 825,000 704,344
11.375%, 9/15/16.......................................... Mexico 600,000 572,250
-----------
TOTAL BONDS -- GOVERNMENT & GOVERNMENT AGENCIES (COST
$17,583,734).............................................. 12,559,763
-----------
SHORT TERM INVESTMENTS 13.1%
Den Danske Bank AG, 5.6875%, 10/01/98, Time Deposit......... United States 531,000 531,000
U.S. Treasury Bills, 5.08% to 5.105% with maturities to
12/17/98.................................................. United States 4,925,000 4,885,279
-----------
TOTAL SHORT TERM INVESTMENTS (COST $5,407,075).............. 5,416,279
-----------
TOTAL INVESTMENTS (COST $62,959,263) 99.1%.................. 41,130,030
OTHER ASSETS, LESS LIABILITIES 0.9%......................... 368,716
-----------
TOTAL NET ASSETS 100.0%..................................... $41,498,746
===========
</TABLE>
CURRENCY ABBREVIATION:
ARS -- Argentina Peso
*Non-income producing.
**Securities traded in U.S. dollars unless otherwise indicated.
+Receipts of Telebras stock represent a basket of twelve new holding companies
to be received in conjunction with the "split-up" of Telecomunicacoes
Brasileiras SA (Telebras).
See Notes to Financial Statements.
19
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $62,959,263)..... $ 41,130,030
Cash....................................................... 37,179
Dividends and interest receivable.......................... 704,073
------------
Total assets.......................................... 41,871,282
------------
Liabilities:
Payables:
Investment securities purchased........................... 204,666
To affiliates............................................. 41,828
Accrued expenses........................................... 126,042
------------
Total liabilities..................................... 372,536
------------
Net assets, at value........................................ $ 41,498,746
============
Net assets consist of:
Undistributed net investment income........................ $ 1,370,764
Net unrealized depreciation................................ (21,837,910)
Accumulated net realized gain.............................. 967,827
Capital shares............................................. 60,998,065
------------
Net assets, at value........................................ $ 41,498,746
============
Net asset value per share ($41,498,746 / 4,384,710 shares
outstanding).............................................. $9.46
============
</TABLE>
See Notes to Financial Statements.
20
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $13,258)
Dividends.................................................. $ 634,229
Interest................................................... 1,277,770
------------
Total investment income............................... $ 1,911,999
Expenses:
Management fees (Note 3)................................... 321,705
Administrative fees (Note 3)............................... 64,342
Transfer agent fees........................................ 18,364
Custodian fees............................................. 27,049
Reports to shareholders.................................... 17,772
Registration and filing fees............................... 8,108
Professional fees.......................................... 31,975
Directors' fees and expenses............................... 6,695
Amortization of organization costs......................... 1,954
Other...................................................... 5,471
------------
Total expenses........................................ 503,435
------------
Net investment income........................... 1,408,564
------------
Realized and unrealized gains (losses):
Net realized gain from:
Investments............................................... 1,783,135
Foreign currency transactions............................. 18,808
------------
Net realized gain..................................... 1,801,943
Net unrealized depreciation on:
Investments............................................... (20,128,681)
Translation of assets and liabilities denominated in
foreign currencies...................................... (15,033)
------------
Net unrealized depreciation........................... (20,143,714)
------------
Net realized and unrealized loss............................ (18,341,771)
------------
Net decrease in net assets resulting from operations........ $(16,933,207)
============
</TABLE>
See Notes to Financial Statements.
21
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 1,408,564 $ 2,402,241
Net realized gain from investments and foreign currency
transactions............................................ 1,801,943 3,700,546
Net unrealized depreciation on investments and translation
of assets and liabilities denominated in foreign
currencies............................................... (20,143,714) (4,601,081)
---------------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ (16,933,207) 1,501,706
Distributions to shareholders from:
Net investment income..................................... (87,694) (3,087,904)
Net realized gains........................................ -- (5,298,805)
In excess of net realized gains........................... -- (834,116)
Capital share transactions (Note 2)........................ -- 1,163,922
---------------------------------------
Net decrease in net assets.............................. (17,020,901) (6,555,197)
Net assets:
Beginning of period........................................ 58,519,647 65,074,844
---------------------------------------
End of period.............................................. $ 41,498,746 $58,519,647
=======================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 1,370,764 $ 49,894
=======================================
</TABLE>
See Notes to Financial Statements.
22
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 capital appreciation by investing
substantially all of its assets in a portfolio of 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. 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.
c. 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.
23
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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.
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. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
At September 30, 1998, there were 100,000,000 shares authorized ($0.01 par
value). During the period ended September 30, 1998, there were no share
transactions. During the year ended March 31, 1998, 95,954 shares were issued
for $1,163,922 from reinvested distributions; 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.
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 a fee of 0.30% per year of the
Fund's average daily net assets. TAML pays an economic consulting and
shareholder servicing fee to Paine Webber Group Inc. of 0.10% per year of the
average daily net assets of the Fund. The Fund pays FT Service an administrative
fee of 0.25% per year 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.
24
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES
At September 30, 1998, the net unrealized depreciation based on the cost of
investments for income tax purposes of $63,086,506 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 920,604
Unrealized depreciation..................................... (22,877,080)
------------
Net unrealized depreciation................................. $(21,956,476)
============
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended September 30, 1998 aggregated $15,610,107 and $15,347,611,
respectively.
25
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Annual Meeting of Shareholders, September 29, 1998
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Ft. Lauderdale, Florida, on September 29, 1998. 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, 1999; and in their discretion, to authorize the
proxyholders to vote upon such other matters that may legally come before the
meeting or any adjournment of the meeting. At the meeting, the following persons
were elected by the shareholders to serve as Directors of the Fund: Harris J.
Ashton, Nicholas F. Brady, Frank J. Crothers, S. Joseph Fortunato, and
Constantine D. Tseretopoulos.* Shareholders ratified the selection of McGladrey
& Pullen, LLP, to serve as the Fund's independent auditors for the fiscal year
ending March 31, 1999. No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. The election of five (5) Directors:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
TERM EXPIRING 2000: FOR SHARES WITHHELD SHARES
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Constantine D. Tseretopoulos................................ 3,655,098 83.36% 112,460 2.56%
TERM EXPIRING 2001:
- --------------
Harris J. Ashton............................................ 3,684,247 84.02% 83,311 1.90%
Nicholas F. Brady........................................... 3,688,136 84.11% 79,422 1.81%
Frank J. Crothers........................................... 3,652,502 83.30% 115,056 2.62%
S. Joseph Fortunato......................................... 3,682,472 83.98% 85,086 1.94%
</TABLE>
2. The ratification of the selection of McGladrey & Pullen, LLP, as independent
auditors for the Fund for the fiscal year ending March 31, 1999:
<TABLE>
<CAPTION>
% OF % OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING BROKER OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES NON-VOTES SHARES
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3,691,640.. 84.19% 34,367 0.78% 41,550 0.95% 1 0.00%
</TABLE>
*Martin L. Flanagan, John Wm. Galbraith, Andrew H. Hines, Jr., Edith E. Holiday,
Charles B. Johnson, 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.
26
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Dividend Reinvestment and Cash Purchase Plan
The Fund offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") with
the following features:
Shareholders must affirmatively elect to participate in the Plan; Stock
dividends and capital gains distributions will be reinvested automatically;
ChaseMellon Shareholder Services, Investor Services, P.O. Box 3338, South
Hackensack, NJ 07606-1938, will provide additional Plan information upon
request.
Whenever the Fund declares dividends in either cash or common stock of the Fund,
if the market price is equal to or exceeds net asset value at the valuation
date, the participant will receive the dividends entirely in stock at a price
equal to the net asset value, but not less than 95% of the then current market
price of the Fund's shares. If the market price is lower than net asset value or
if dividends and/or capital gains distributions are payable only in cash, the
participant will receive shares purchased on the New York Stock Exchange or
otherwise on the open market.
A participant has the option of submitting additional payments to Mellon
Securities Trust Company (the "Plan Agent"), in any amounts of at least $100, up
to a maximum of $5,000 per month, for the purchase of Fund shares for his or her
account. These payments shall be made by check or money order payable to "Mellon
Securities Trust Co." and sent to ChaseMellon Shareholder Services, Investor
Services, P.O. Box 382009, Pittsburgh, PA 15250-8009, Attn: Templeton Emerging
Markets Appreciation Fund, Inc. The Plan Agent shall apply such payments (less a
$5.00 service charge and less a pro rata share of trading fees) to purchases of
Fund shares in the open market.
The automatic reinvestment of dividends and/or capital gains does not relieve
the participant of any income tax which may be payable on dividends or
distributions.
The participant may withdraw from the Plan without penalty at any time by
written notice to the Plan Agent sent to ChaseMellon Shareholder Services,
Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938. Upon
withdrawal, the participant will receive, without charge, stock certificates
issued in the participant's name for all shares held by the Plan Agent; or, if
the participant wishes, the Plan Agent will sell the participant's shares and
send the proceeds, less a service charge of $5.00 and less trading fees.
Whenever shares are purchased on the New York Stock Exchange, each participant
will pay a pro rata portion of trading fees. Trading fees will be deducted from
amounts to be invested.
27
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
TRANSFER AGENT
ChaseMellon Shareholder Services
450 West 33rd Street
New York, New York 10001
1-800/416-5585
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 distributions and shareholder accounts, call
1-800-416-5585.
The daily closing net asset value may be obtained when available on a two
business day delay basis by calling Franklin Templeton Fund Information after 7
a.m. Pacific Time any business day at 1-800-DIAL BEN(R) (1-800-342-5236).
Shareholders not receiving copies of the Reports to Shareholders because their
shares are registered in the name of a broker or a custodian can request that
they be added to the Fund's mailing list, by writing Templeton Emerging Markets
Appreciation Fund, Inc., 100 Fountain Parkway, P.O. Box 33030, St. Petersburg,
FL 33733-8030.
28
PAGE
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Templeton Fund Information at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, telephone
calls to or from our service departments may be monitored, recorded and
accessed. These calls can be determined by the presence of a regular beeping
tone.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH
Franklin Global Health Care Fund
Mutual Discovery Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global
Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and
Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Global
Currency Fund
Franklin Templeton Hard
Currency Fund
Templeton Americas Government
Securities Fund
GROWTH
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
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
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 Bond Fund
Franklin Floating Rate Trust
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
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
plan 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. The Franklin Valuemark Funds are managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
09/98
PAGE
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
TRANSFER AGENT
ChaseMellon Shareholder Services
450 West 33rd Street
New York, New York 10001
1-800/416-5585
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up, and that the Investment Manager may make errors in selecting
securities for the Fund's portfolio. Like any investment in securities, the
value of the Fund's portfolio will be subject to the risk of loss from market,
currency, economic, political, and other factors. The Fund and its investors are
not protected from such losses by the Investment Manager. Therefore, investors
who cannot accept 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 S98 11/98 [RECYCLING LOGO] Printed on recycled paper
