SEMI ANNUAL REPORT
[Globe Graphic] SEPTEMBER 30, 1999
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
REPORT
[LOGO(R)]
FRANKLIN(R) TEMPLETON(R)
<PAGE>
[PICTURE OF J. MARK MOBIUS APPEARS HERE]
J. Mark Mobius, Ph.D.
President
Templeton Emerging Markets
Appreciation Fund, Inc.
Dr. Mobius has been living in emerging market countries since earning his Ph.D.
in economics and political science at Massachusetts Institute of Technology in
1964. During his extensive travels, he has acquired a thorough knowledge of
business practices and customs unique to developing nations.
<PAGE>
SHAREHOLDER LETTER
- -------------------------------------------------------------------------------
YOUR FUND'S GOAL: TEMPLETON EMERGING MARKETS APPRECIATION FUND SEEKS CAPITAL
APPRECIATION. UNDER NORMAL MARKET CONDITIONS, THE FUND INVESTS 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, 1999. During this time, several emerging
market economies reported surprisingly strong economic growth after being in
crisis a relatively short time ago. Most of this recovery occurred in Asia, and
stock prices rose in many markets in the region. However, economic challenges
and political problems led to weakened investor confidence in other markets.
In South Korea, for example, the nation's second largest conglomerate, Daewoo
Ltd., required emergency funds to keep it from defaulting on its debt to
foreign and domestic creditors. The fiasco at Daewoo highlighted other issues in
South Korea, such as the alleged use of corporate connections by some companies
to
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Shareholder Letter ...................... 1
Performance Summary ..................... 6
Important Notice
to Shareholders ......................... 7
Year 2000 Readiness Update .............. 10
Financial Highlights &
Statement of Investments ................ 12
Financial Statements .................... 21
Notes to Financial Statements ........... 24
Change in Independent
Auditor ................................. 30
</TABLE>
FUND CATEGORY
[PYRAMID GRAPHIC]
You will find a complete listing of the Fund's portfolio holdings, including
dollar amount and number of shares or principal amount, beginning on page 13 of
this report.
<PAGE>
ASSET ALLOCATION
BASED ON TOTAL NET ASSETS
9/30/99
[PIE CHART]
[THIS CHART SHOWS IN PIE FORMAT THE ASSET ALLOCATION OF TEMPLETON EMERGING
MARKETS APPRECIATION FUND, BASED ON TOTAL NET ASSETS AS OF 9/30/99.]
<TABLE>
<S> <C>
Equity 64.0%
Fixed Income 34.9%
Short-Term Investments & Other Net Assets 1.1%
</TABLE>
artificially sustain their share prices and the questionable raising of capital
by other companies despite the protests of foreign and domestic investors.
Elsewhere, an independent auditor's report claimed that the Russian government
had been misrepresenting its fiscal health to the International Monetary Fund
(IMF). However, the IMF shrugged off the report, stating it would continue aid
to the country. Russian President Boris Yeltsin fired his fourth prime minister,
appointing Vladmir Putin, a former head of intelligence, to the post and
announced that State Duma elections would be held in December, likely assuring
the ratification of Mr. Putin by the government.
In Indonesia, a banking scandal clouded the otherwise positive news that the
country held its first democratic election in over 40 years, an event that was,
for the most part, peaceful. South Africa also held peaceful elections,
resulting in a victory for the African National Congress led by Thabo Mbeki, the
hand-picked replacement for Nelson Mandela.
Brazil's Congress passed economic reform measures and devalued the Brazilian
real in January. Although Brazil's economy performed better than many had
expected following devaluation, its government faces problems in the collection
of tax revenues. Elsewhere in Latin America, debates were sparked in Argentina
over abandoning its currency's peg to the U.S. dollar. This dispute led to
volatility in the Argentine market, which spilled over to much of the rest of
the continent. Despite challenges to investor confidence about stocks from
developing countries, the Morgan Stanley Capital International(R) (MSCI)
2
<PAGE>
Emerging Markets Free Index rose 17.99% in U.S. dollar terms during the six
months under review.(1)
As for bonds, emerging market debt securities generally continued to recover
from the correction that followed Russia's devaluation of the ruble in August
1998 and Brazil's January 1999 devaluation of the real. Several countries
benefited from rising oil prices during the reporting period, notably Mexico and
Venezuela, due to their relatively high volume of oil exports and the positive
impact of rising prices on fiscal revenues. Bulgarian bonds also performed
relatively well after the resolution of the war in Yugoslavia, and the Morgan
Stanley Capital International(R) Emerging Markets Bond Index Plus posted a 6.51%
six month return.(2)
Within this environment, the Fund produced a +7.07% cumulative total return in
market-price terms for the six months ended September 30, 1999, as shown in the
Performance Summary on page 6. Based on change in net asset value, the Fund's
cumulative total return for the same period was +10.49%. At the end of the
reporting period, the Fund's largest geographic exposure was to Mexico (14.2% of
total net assets), Brazil (13.8%), and South Africa (9.6%).
Since the 1997 - 1998 crisis in emerging markets, we have been reducing the
number of stocks in our portfolio and have refocused the Fund on markets we
believe could have the potential for economic growth over the next four to five
years. During the reporting period, we sold our holdings in China's Shanghai and
Shenzhen markets, as well as our positions in
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
9/30/99
[Pie Chart]
[THIS CHART SHOWS IN PIE FORMAT THE GEOGRAPHIC DISTRIBUTION OF TEMPLETON
EMERGING MARKETS APPRECIATION FUND, BASED ON TOTAL NET ASSETS AS OF 9/30/99.]
<TABLE>
<S> <C>
Asia 26.9%
Latin America 21.0%
Mid-East/Africa 9.8%
Europe 6.3%
Fixed Income Securities 34.9%
Short-Term Investments & Other Net Assets 1.1%
</TABLE>
(1) Source: Morgan Stanley Capital International. The index measures the
performance of securities located in 25 emerging market countries in regions
such as Latin America, Eastern Europe, and Asia. One cannot invest directly in
an index, nor is an index representative of the Fund's portfolio.
(2) Source: J.P. Morgan Emerging Markets Bond Index Plus (EMBI+). The index
tracks total returns for external debt instruments in 16 emerging market
countries. Market return is measured U.S. dollars and includes reinvested
interest. One cannot invest directly in an index, nor is an index representative
of the Fund's portfolio.
3
<PAGE>
TOP 10 COUNTRIES
REPRESENTED IN THE FUND*
9/30/99
[THIS CHART LIST THE TOP 10 COUNTRIES REPRESENTED IN TEMPLETON EMERGING MARKETS
APPRECIATION FUND, EXCLUDING SHORT-TERM INVESTMENTS AND OTHER NET ASSETS, BASED
ON TOTAL NET ASSETS AS OF 9/30/99.]
<TABLE>
<CAPTION>
% OF TOTAL
COUNTRY NET ASSETS
- ------- ----------
<S> <C>
Mexico 14.2%
Brazil 13.8%
South Africa 9.6%
Argentina 9.4%
Singapore 7.0%
South Korea 5.9%
Turkey 5.7%
Venezuela 4.9%
Hong Kong 4.0%
Thailand 3.9%
</TABLE>
*Excludes short-term investments and other net assets.
Egypt, Ghana, and Zimbabwe, because we believed that political and economic
risks indicated that better investment opportunities could be found elsewhere.
These reductions, which resulted in greater relative exposure to South Africa,
positively impacted the Fund's performance. However, our lesser relative
exposure to Thailand and Brazil negatively affected the portfolio's performance.
Looking forward, we are optimistic about potential investment opportunities in
emerging market equities. Although the considerable level of political
uncertainty in some countries could offset gains made by a return to economic
growth and lead to periods of short-term weakness in stock prices throughout the
emerging market universe, we believe these problems should not be enough to
reverse the overall recovery trend. In fact, price declines could provide us
with interesting investment opportunities that we shall endeavor to take
advantage of by following our long-term value investing strategy.
Regarding fixed-income securities, we believe global bond markets will be
influenced by rising U.S. interest rates. In the past, rising U.S. interest
rates have usually been a negative factor for emerging market economies, forcing
them to follow suit and raise rates. But because high interest rates already
prevail in many developing countries, we believe the effect of higher U.S. rates
may be less detrimental to emerging markets in the future. In our opinion, this
possibility, combined with floating exchange rates and historically low levels
of inflation, might even enable monetary authorities to reduce interest rates in
some countries, such as Mexico and Brazil.
Of course, investing in foreign securities involves special risks, such as
adverse economic, social and political developments in the countries where the
Fund invests, as well as market and
4
<PAGE>
currency volatility. Emerging market securities involve heightened risks related
to the same factors, in addition to those associated with the relatively small
size and lesser liquidity of those markets. Investing in any emerging market
means accepting a certain amount of volatility and, in some cases, the
consequences of severe market corrections. For example, Mexico's equity market
has increased 2,367% in the last 15 years, but has suffered nine declines of
more than 15% during that time.(3) While short-term volatility can be
disconcerting, declines in excess of 50% are not unusual in emerging markets. In
addition, the Fund may also invest in "junk bonds," which entail greater credit
risks than higher-rated bonds.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of September 30, 1999, 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 composition. Although past
performance is not predictive of future results, these insights may help you
better understand our investment and management philosophy.
We thank you for your participation in Templeton Emerging Markets Appreciation
Fund, and welcome your comments and suggestions.
Sincerely,
/s/J. MARK MOBIUS
- ----------------------
J. Mark Mobius, Ph.D.
President
Templeton Emerging Markets Appreciation Fund, Inc.
TOP 10 HOLDINGS
9/30/99
[THIS CHART LISTS THE TOP 10 HOLDINGS, INCLUDING INDUSTRY AND COUNTRY, OF
TEMPLETON EMERGING MARKETS APPRECIATION FUND, BASED ON TOTAL NET ASSETS AS OF
9/30/99.]
<TABLE>
<CAPTION>
HOLDING, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
----------------- ----------
<S> <C>
Korea Electric Power
Corp., Utilities Electrical
& Gas, South Korea 3.6%
Telefonos de Mexico SA
(Telmex), L, ADR,
Telecommunications, Mexico 3.2%
Republic of Venezuela,
9.25%, 9/15/27, Government
Bonds, Venezuela 2.7%
United Mexican States,
11.375%, 9/15/16,
Government Bonds, Mexico 2.1%
Republic of Turkey, 144A,
10.00%, 9/19/07,
Government Bonds, Turkey 2.0%
United Mexican States,
9.875%, 1/15/07,
Government Bonds, Mexico 2.0%
Anglo American PLC, Metals
& Mining, South Africa 2.0%
CEZ AS, Utilities Electrical
& Gas, Czech Republic 1.8%
Aracruz Celulose SA, ADR,
Forest Products & Paper,
Brazil 1.5%
Republic of Argentina,
9.75%, 9/19/27, Government
Bonds, Argentina 1.5%
</TABLE>
3. Source: Mexico Bolsa Index. Based on quarterly percentage price change over
15 years ended September 30, 1999. Return is measured in U.S. dollars and does
not include reinvested dividends. One cannot invest directly in an index, nor is
an index representative of the Fund's portfolio.
5
<PAGE>
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. Six month returns have not been
annualized.
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.
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, 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 risk than higher-rated bonds. You may have a
gain or loss when you sell your shares.
PERFORMANCE SUMMARY AS OF 9/30/99
Distributions will vary based on earnings of the Fund's portfolio and any
profits realized from the sale of the portfolio's securities, as well as the
level of the Fund's operating expenses. Past distributions are not indicative of
future trends. All total returns include reinvested distributions according to
the terms specified in the Fund's dividend reinvestment and cash purchase plan
and do not reflect any sales charges paid at inception or brokerage commissions
paid on secondary market purchases.
PRICE INFORMATION
<TABLE>
<CAPTION>
CHANGE 9/30/99 3/31/99
------- ----------------- -------
<S> <C> <C> <C>
Net Asset Value +$1.00 $ 12.73 $ 11.73
Market Price (NYSE) +$0.500 $10.1875 $9.6875
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE
INCEPTION
6-MONTH 1-YEAR 5-YEAR (4/29/94)
------- ------ ------ ---------
<S> <C> <C> <C> <C>
Cumulative Total Return(1)
Based on change in
net asset value +10.49% +42.62% +28.76% +35.04%
Based on change in
market price +7.07% +37.06% +1.64% +1.60%
Average Annual Total Return(2)
Based on change in
net asset value +10.49% +42.62% +5.19% +5.68%
Based on change in
market price +7.07% +37.06% +0.33% +0.29%
</TABLE>
Past performance is not predictive of future results.
6
<PAGE>
IMPORTANT NOTICE TO SHAREHOLDERS
INVESTMENT OF CASH BALANCES. The U.S. Securities and Exchange Commission
recently granted the Franklin Templeton Funds an order that allows the funds,
including Templeton Emerging Markets Appreciation Fund, Inc., to invest their
uninvested cash balances in affiliated Franklin Templeton money market funds.
Among the conditions of the SEC order are that the funds will not pay sales
loads or distribution fees and that there will be no layering of investment
advisory fees, with regard to their investments in the Franklin Templeton money
market funds. Subject to these and other conditions of the SEC order, the Fund
may invest cash balances in Franklin Templeton money market funds. The Board of
Directors of the Fund has approved a change in the Fund's policy limiting
investments in affiliated funds in order to allow the Fund to do so.
YEAR 2000 ISSUE. Like all investment companies, the Fund's business operations
depend on a worldwide network of computer systems that contain date fields. Many
of the systems currently use a two digit date field to represent the date, and
these systems must be changed or modified to enable them to distinguish the Year
1900 from the Year 2000 (commonly referred to as the Year 2000 problem).
When the Year 2000 arrives, the Fund's operations could be adversely affected if
the computer systems used by any of the parties who service the Fund or with
which it does business are not Year 2000 ready. The Fund could experience
difficulties in effecting transactions if any of its foreign subcustodians, or
if foreign broker-dealers or foreign markets are not ready for Year 2000.
When evaluating current and potential portfolio positions, Year 2000 is one of
the factors the Fund's investment
7
<PAGE>
manager considers. The investment manager will rely upon public filings and
other statements made by companies about their Year 2000 readiness. Issuers in
countries outside the U.S., particularly in emerging markets, may be more
susceptible to Year 2000 risks and there may be less public disclosure of these
factors. The investment manager, of course, cannot audit each company and its
major suppliers to verify their Year 2000 readiness. The Fund's ability to
reduce the effects of the Year 2000 problem is also very much dependent upon the
efforts of third parties over which the Fund and its investment manager may have
no control.
If a company in which the Fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its securities also will be adversely
affected. A decrease in the value of one or more of the Fund's portfolio
holdings may have an impact on the Fund's performance.
Franklin Resources, Inc. (Resources) established a Year 2000 Project Team in
1996. This team has been making the changes necessary to make the computer
systems that service the Fund and its shareholders Year 2000 compliant and
continues to seek reasonable assurances from all suppliers that they will be
Year 2000 compliant on a timely basis. Resources is also developing a
contingency plan of procedures to follow (where feasible) in the event of the
failure of any mission critical systems. However, in an operation as complex and
geographically distributed as Resources' business, the alternatives to use of
normal systems, especially mission critical systems, or supplies of electricity
or long distance voice and data lines are limited.
ADOPTION OF DEFINITIONS OF "EMERGING MARKET" AND "EMERGING MARKET COMPANY." On
July 21, 1999, the Fund's Board of Directors adopted non-fundamental
8
<PAGE>
definitions of "emerging market" and "emerging market company" to reflect the
dynamic nature of what constitutes an "emerging market" or an "emerging market
company." The following definitions generally will be used in managing the
Fund's portfolio:
"Emerging market" countries are (i) countries that are generally considered low
or middle income countries by the International Bank of Reconstruction and
Development (commonly known as the World Bank) and the International Finance
Corporation; or (ii) countries that are classified by the United Nations or
otherwise regarded by their authorities as developing; (iii) countries with a
stock market capitalization of less than 3% of the Morgan Stanley Capital
International(R) World Index.
"Emerging market companies" are (i) companies whose principal securities trading
markets are in emerging market countries or (ii) companies that derive a
significant share of their total revenue from either goods or services produced
or sales made in emerging market countries or (iii) companies that have a
significant portion of their assets in emerging market countries or (iv)
companies that are linked to currencies of emerging market countries or (v)
companies that are organized under the laws of, or with principal offices in,
emerging market countries.
These definitions as used by the Fund's manager may differ from the definition
of the same terms as used in managing other Franklin Templeton funds.
9
<PAGE>
FRANKLIN TEMPLETON
IS READY FOR YEAR 2000
Year 2000 Readiness Disclosure as of 9/30/99
WE ARE READY!
WE'VE DONE A LOT TO PREPARE!
The enormous scope of this project encompassed practically every
computer-dependent record and process within the company. Naturally, our Y2K
plan focused first on readying "mission-critical" systems - those that are
necessary for our core business functions. As of September 30, 1999, all our
mission-critical systems that could affect our funds were certified as Y2K
compliant.
Our business operations rely greatly on a complex, worldwide network of computer
systems owned and managed by third parties. We continue to work with these
outside companies and your Fund's transfer agent to determine their preparedness
for Year 2000.
WE HAVE CONTINGENCY PLANS.
Our company recognizes that even our extensive testing cannot guarantee the
absence of difficulties associated with the Y2K transition. Therefore, we are
developing and integrating worldwide contingency plans.
10
<PAGE>
Franklin Templeton is confident it is well-positioned to meet the challenges of
Y2K.
HOW DOES YEAR 2000 AFFECT OUR PORTFOLIO MANAGERS' INVESTMENT STRATEGIES?
All our portfolio managers recognize the importance of Year 2000 and its
potential to impact the issuers and industries in which we invest, as well as
the U.S. and world economy as a whole. As long-term investors, we seek to make
and hold investments in companies we believe are well-managed, with good
prospects for the future. In our experience, such companies are more likely to
have sufficient Y2K programs in place.
Technological changes are ever-present in our industry, and we believe we have
the experience and skills necessary to realize and to react to any challenges
that may arise due to this transition. Once again, Franklin Templeton is ready
for Year 2000, and we look forward to moving into the new millennium with you.
For additional information on Franklin Templeton's Y2K efforts, check our Web
site at www.franklintempleton.com
These statements should be considered Year 2000 Readiness Disclosures, as such
term is understood under the "Year 2000 Information and Readiness Disclosure
Act." This information is not intended as a representation or warranty and does
not create a legal obligation on the part of the Fund, or Franklin Resources,
Inc., and its affiliates to the recipient.
11
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, 1999 --------------------------------------------------------------
(UNAUDITED)++ 1999 1998 1997 1996 1995+
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout
the period)
Net asset value, beginning of
period............................. $11.73 $13.35 $15.17 $13.41 $12.05 $14.10
--------------------------------------------------------------------------------------
Income from investment operations:
Net investment income............... .24 .56 .56 .62 .69 .48
Net realized and unrealized gains
(losses).......................... .97 (1.77) (.23) 2.27 1.64 (1.97)
--------------------------------------------------------------------------------------
Total from investment operations..... 1.21 (1.21) .33 2.89 2.33 (1.49)
--------------------------------------------------------------------------------------
Underwriting expenses deducted from
capital............................ -- -- -- -- -- (.15)
--------------------------------------------------------------------------------------
Less distributions from:
Net investment income............... (.21) (.41) (.72) (.51) (.86) (.32)
Net realized gains.................. -- -- (1.24) (.62) (.11) (.09)
In excess of net realized gains..... -- -- (.19) -- -- --
--------------------------------------------------------------------------------------
Total distributions.................. (.21) (.41) (2.15) (1.13) (.97) (.41)
--------------------------------------------------------------------------------------
Net asset value, end of period....... $12.73 $11.73 $13.35 $15.17 $13.41 $12.05
======================================================================================
Total Return*
Based on market value per share..... 7.07% (19.96)% 15.12% .40% 15.57% (11.25)%
Based on net asset value per
share............................. 10.49% (8.34)% 3.31% 22.40% 19.34% (11.64)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's).... $55,796 $51,433 $58,520 $65,075 $57,516 $51,022
Ratios to average net assets:
Expenses............................ 1.88%** 1.90% 1.88% 1.83% 1.64% 1.79%**
Net investment income............... 3.59%** 4.97% 3.76% 4.29% 5.29% 3.98%**
Portfolio turnover rate.............. 24.24% 42.68% 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.
++Based on average weighted shares outstanding.
See Notes to Financial Statements.
12
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 57.4%
APPLIANCES & HOUSEHOLD DURABLES .4%
Arcelik AS, Br. ............................................ Turkey 7,112,833 $ 227,378
-----------
AUTOMOBILES .4%
Cycle & Carriage Ltd. ...................................... Singapore 73,000 244,693
GAZ Auto Works.............................................. Russia 160 4,000
-----------
248,693
-----------
BANKING 6.7%
Akbank...................................................... Turkey 40,265,552 602,138
Banco de Galicia y Buenos Aires SA, B....................... Argentina 6,200 32,185
Banco Frances SA............................................ Argentina 7,000 46,629
*Bangkok Bank Public Co. Ltd. .............................. Thailand 160,000 182,773
*Bangkok Bank Public Co. Ltd., fgn. ........................ Thailand 3,240 6,373
Bank Austria AG............................................. Austria 7,000 348,521
Bank Rozwoju Eksportu SA.................................... Poland 2,700 70,177
Bank Slaski SA W Katowicach................................. Poland 3,900 195,119
Cho Hung Bank Co. Ltd. ..................................... South Korea 5,700 27,645
*Daegu Bank Co. Ltd. ....................................... South Korea 14,917 52,728
DBS Group Holdings Ltd. .................................... Singapore 7,163 80,034
*Grupo Financiero Banamex Accival SA de CV.................. Mexico 105,410 189,696
*Grupo Financiero Bancomer SA de CV......................... Mexico 527,000 117,280
HSBC Holdings PLC........................................... Hong Kong 16,680 191,112
OTP Bank.................................................... Hungary 2,730 121,298
Overseas Chinese Banking Corp. Ltd., fgn. .................. Singapore 39,000 302,734
*Thai Farmers Bank Public Co. Ltd. ......................... Thailand 299,200 274,160
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 141,500 166,827
*Thai Farmers Bank Public Co. Ltd., fgn., rts., 10/15/99.... Thailand 141,500 97,676
*Turkiye Garanti Bankasi AS................................. Turkey 8,388,000 60,900
United Overseas Bank Ltd., fgn. ............................ Singapore 74,000 561,364
-----------
3,727,369
-----------
BEVERAGES & TOBACCO 2.8%
Asia Pacific Breweries Ltd. ................................ Singapore 24,000 61,958
Austria Tabak AG............................................ Austria 2,700 127,327
Bavaria SA.................................................. Colombia 21,000 63,916
Cia Cervecerias Unidas SA, ADR.............................. Chile 550 12,650
Coca Cola Femsa SA de CV, L, ADR............................ Mexico 2,200 30,388
Fomento Economico Mexicano SA de CV Femsa................... Mexico 200 6,263
Fraser and Neave Ltd. ...................................... Singapore 121,000 394,913
PT Gudang Garamm............................................ Indonesia 42,000 84,704
Quilmes Industrial SA, ADR.................................. Argentina 16,400 156,825
South African Breweries PLC................................. South Africa 66,760 567,460
Tabak AS.................................................... Czech Republic 110 25,282
-----------
1,531,686
-----------
</TABLE>
13
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BUILDING MATERIALS & COMPONENTS 1.6%
Cementos Argos SA........................................... Colombia 75,000 $ 159,891
Cemex SA.................................................... Mexico 73,854 355,580
*PT Indocement Tunggal Prakarsa............................. Indonesia 124,000 50,090
*PT Semen Cibinong.......................................... Indonesia 111,500 4,671
PT Semen Gresik (Persero), TBK.............................. Indonesia 69,740 111,016
*Siam Cement Public Co. Ltd. ............................... Thailand 1,500 17,886
*Siam Cement Public Co. Ltd., fgn. ......................... Thailand 9,400 195,695
-----------
894,829
-----------
CHEMICALS .7%
Aeci Ltd. .................................................. South Africa 5,000 16,500
Borsodchem RT............................................... Hungary 4,900 138,122
*Slovnaft AS................................................ Slovak Republic 8,000 118,083
Tiszai Vegyi Kombinat RT.................................... Hungary 9,060 138,739
-----------
411,444
-----------
CONSTRUCTION & HOUSING .1%
Hopewell Holdings Ltd. ..................................... Hong Kong 8,000 5,613
Italian-Thai Development Public Co. Ltd., fgn. ............. Thailand 37,300 55,779
-----------
61,392
-----------
DATA PROCESSING & REPRODUCTION .1%
Formula Systems Ltd. ....................................... Israel 1,100 27,247
Prokom Software SA. ........................................ Poland 2,489 46,469
-----------
73,716
-----------
ELECTRICAL & ELECTRONICS 1.8%
Acma Ltd. .................................................. Singapore 3,000 1,888
Empresa Nacional de Electricidad SA, ADR.................... Chile 15,382 199,966
Samsung Display Devices Ltd. ............................... South Korea 6,415 363,859
Samsung Electronics Co. Ltd. ............................... South Korea 2,056 332,949
*Shin Corporations Public Company Ltd., fgn. ............... Thailand 20,100 83,003
-----------
981,665
-----------
ENERGY SOURCES 2.8%
Hindustan Petroleum Corporation Ltd. ....................... India 100 583
Lukoil Holdings, ADR........................................ Russia 2,600 70,720
Mol Magyar Olay-Es Gazipari RT.............................. Hungary 14,980 317,314
OMV AG...................................................... Austria 2,100 194,687
Perez Companc SA, B......................................... Argentina 89,000 538,558
Sasol Ltd. ................................................. South Africa 48,300 371,910
SK Corp. ................................................... South Korea 4,080 81,164
-----------
1,574,936
-----------
</TABLE>
14
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
FINANCIAL SERVICES .1%
BOE Ltd. ................................................... South Africa 13,000 $ 9,555
Standard Bank Investment Corp. Ltd. ........................ South Africa 21,729 69,533
-----------
79,088
-----------
FOOD & HOUSEHOLD PRODUCTS 1.4%
*Charoen Pokphand Feedmill Public Co. Ltd., fgn. ........... Thailand 78,100 192,555
Mavesa SA, ADR.............................................. Venezuela 1,291 3,873
Panamerican Beverages Inc., A............................... Mexico 6,500 107,656
*PT Indofoods Sukses Makmur................................. Indonesia 10,000 9,485
San Miguel Corp., B......................................... Philippines 132,200 200,401
Serm Suk Public Co. Ltd., fgn. ............................. Thailand 4,900 22,629
Vitro SA.................................................... Mexico 154,500 217,538
-----------
754,137
-----------
FOREST PRODUCTS & PAPER 3.6%
Aracruz Celulose SA, ADR.................................... Brazil 41,300 862,137
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 16,000 94,000
*Asia Pulp & Paper Co. Ltd., ADR, wts., 7/27/00............. Indonesia 2,520 2,048
*PT Indah Kiat Pulp & Paper Corp. .......................... Indonesia 902,500 321,357
*PT Tjiwi Kimia TBK......................................... Indonesia 105,500 25,570
Sappi Ltd. ................................................. South Africa 70,127 683,738
-----------
1,988,850
-----------
HEALTH & PERSONAL CARE .3%
Gedeon Richter Ltd. ........................................ Hungary 3,710 148,740
Teva Pharmaceutical Industries Ltd., ADR.................... Israel 540 27,169
-----------
175,909
-----------
INSURANCE .8%
Compania Suramericana de Inversiones SA..................... Colombia 35,692 39,107
Fedsure Holdings Ltd. ...................................... South Africa 2,500 16,667
Firstrand Ltd. ............................................. South Africa 207,400 214,313
Liberty Life Association of Africa Ltd. .................... South Africa 18,528 145,136
Warta SA.................................................... Poland 174 4,565
-----------
419,788
-----------
LEISURE & TOURISM .2%
Kersaf Investments Ltd. .................................... South Africa 15,000 49,125
Overseas Union Enterprise Ltd. ............................. Singapore 16,200 45,537
Shangri La Asia Ltd. ....................................... Hong Kong 12,000 13,286
Shangri La Hotels (Malaysia) Bhd. .......................... Malaysia 84,000 27,189
-----------
135,137
-----------
</TABLE>
15
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MACHINERY & ENGINEERING .8%
Jurong Shipyard Ltd. ....................................... Singapore 27,000 $ 123,846
Keppel Philippine Holdings Inc., B.......................... Philippines 12,055 277
*Mannesmann SA.............................................. Brazil 683,000 23,552
*Samsung Heavy Industries Co. Ltd. ......................... South Korea 42,614 297,755
-----------
445,430
-----------
MERCHANDISING .6%
*Cifra SA de CV, V.......................................... Mexico 60,378 95,091
Dairy Farm International Holdings Ltd. ..................... Hong Kong 136,389 135,707
Siam Makro Public Company Ltd., fgn. ....................... Thailand 71,000 124,911
-----------
355,709
-----------
METALS & MINING 3.8%
Anglo American PLC.......................................... South Africa 20,082 1,125,262
Iscor Ltd. ................................................. South Africa 965,672 373,393
Natsteel Ltd. .............................................. Singapore 200,000 352,838
Palabora Mining Co. Ltd. ................................... South Africa 6,900 53,475
Pohang Iron & Steel Co. Ltd., ADR........................... South Korea 2,900 90,806
PT Timah TBK................................................ Indonesia 199,500 134,910
-----------
2,130,684
-----------
MISC MATERIALS & COMMODITIES .7%
De Beers/Centenary Linked Units, Reg. ...................... South Africa 13,990 384,725
-----------
MULTI-INDUSTRY 6.2%
Ayala Corp. ................................................ Philippines 5,800 1,390
Barlow Ltd. ................................................ South Africa 74,840 366,716
Beijing Datang Power Generation Co. Ltd., H................. China 32,000 7,209
CG Smith Ltd. .............................................. South Africa 112,030 315,551
Cheung Kong Holdings Ltd. .................................. Hong Kong 47,000 391,778
Cheung Kong Infrastructure Holdings Ltd. ................... Hong Kong 31,000 61,259
China Resources Enterprises Ltd. ........................... China 32,000 43,461
Citic Pacific Ltd. ......................................... Hong Kong 141,000 390,265
DESC SA de CV DESC, B....................................... Mexico 148,500 127,106
*Dogan Sirketler Grubu Holding AS........................... Turkey 3,500,000 50,064
Egis RT..................................................... Hungary 1,240 36,414
Haci Omer Sabanci Holding AS................................ Turkey 2,702,000 70,272
Haci Omer Sabanci Holding AS, 144A, ADR..................... Turkey 200 1,315
Hutchison Whampoa Ltd. ..................................... Hong Kong 20,000 186,024
Investimentos Itau SA....................................... Brazil 39,489 20,324
Jardine Matheson Holdings Ltd. ............................. Hong Kong 87,676 359,472
Jardine Strategic Holdings Ltd. ............................ Hong Kong 1,000 2,040
Johnnies Industrial Corporation Ltd. ....................... South Africa 26,800 176,433
Koor Industries Ltd. ....................................... Israel 681 57,925
*PT Astra International, wts., 12/31/03..................... Indonesia 163,229 33,762
</TABLE>
16
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY (CONT.)
Quinenco SA, ADR............................................ Chile 6,400 $ 64,800
Rembrandt Group Ltd. ....................................... South Africa 38,000 289,750
Sembcorp Industries Ltd. ................................... Singapore 243,336 280,470
*Sociedad Comercial del Plata Cadelplata Come............... Argentina 32,940 10,839
Tongaat-Hulett Group Ltd. .................................. South Africa 17,500 101,354
Wheelock and Company Ltd. .................................. Hong Kong 10,000 12,874
-----------
3,458,867
-----------
REAL ESTATE 2.6%
*Belle Corp. ............................................... Philippines 287,000 21,753
City Developments Ltd. ..................................... Singapore 93,000 473,067
*Filinvest Development Corp. ............................... Philippines 160,000 11,736
First Capital Corp. Ltd. ................................... Singapore 59,200 66,842
Hang Lung Development Co. Ltd. ............................. Hong Kong 192,000 217,513
Hong Kong Land Holdings Ltd. ............................... Hong Kong 42,000 55,020
*Land and House Public Co. Ltd., fgn. ...................... Thailand 26,900 23,663
New World Development Co. Ltd. ............................. Hong Kong 53,853 118,205
Sun Hung Kai Properties Ltd. ............................... Hong Kong 14,504 110,631
United Industrial Corporation Ltd. ......................... Singapore 536,000 291,561
United Overseas Land Ltd. .................................. Singapore 46,000 40,576
-----------
1,430,567
-----------
TELECOMMUNICATIONS 10.8%
Advanced Info Service Public Co. Ltd., fgn. ................ Thailand 19,000 217,275
BEC World Public Co. Ltd., fgn. ............................ Thailand 21,000 113,916
China Telecom HK Ltd. ...................................... China 36,000 110,997
Compania Anonima Nacional Telefonos de Venezuela, ADR ...... Venezuela 8,520 228,443
Compania de Telecomunicaciones de Chile SA, ADR............. Chile 25,826 466,482
Matav RT.................................................... Hungary 1,100 6,042
Pakistan Telecommunications Corp., PTC, A................... Pakistan 182,000 74,149
Philippine Long Distance Telephone Co., ADR................. Philippines 21,800 474,150
PT Indosat.................................................. Indonesia 116,500 156,170
PT Telekomunikasi Indonesia (Persero), B.................... Indonesia 1,324,780 467,756
*Rostelecom................................................. Russia 8,000 6,000
*Rostelecom, ADR............................................ Russia 10,450 48,331
*SPT Telecom AS............................................. Czech Republic 3,400 52,265
Telecom Argentina Stet-France Telecom SA, ADR............... Argentina 21,158 564,654
*Telecomasia Corp. Public Co. Ltd., fgn. ................... Thailand 45,000 30,788
Telefonica de Argentina SA, ADR............................. Argentina 20,900 551,238
Telefonica del Peru SA, B, ADR.............................. Peru 21,500 288,906
Telefonos de Mexico SA (Telmex), L, ADR..................... Mexico 25,200 1,795,500
Telekomunikacja Polska SA................................... Poland 27,000 132,447
*Thai Telephone & Telecommunication Public Co. Ltd.,
fgn. ..................................................... Thailand 198,000 32,415
</TABLE>
17
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TELECOMMUNICATIONS (CONT.)
*Total Access Communication Public Co. Ltd. ................ Thailand 91,600 $ 174,956
*United Communications Industries, fgn. .................... Thailand 51,500 33,977
Vimpel Communications, ADR.................................. Russia 2,025 25,819
-----------
6,052,676
-----------
TEXTILES & APPAREL .1%
Hua Thai Manufacturing Public Co. Ltd., fgn. ............... Thailand 8,000 10,752
Thai Wacoal Public Co. Ltd., fgn. .......................... Thailand 13,450 22,430
-----------
33,182
-----------
TRANSPORTATION 1.0%
Guangshen Railway Co. Ltd., H............................... China 43,000 5,591
Keppel Corp., Ltd. ......................................... Singapore 185,000 539,606
-----------
545,197
-----------
UTILITIES ELECTRICAL & GAS 7.0%
Central Costanera SA, B..................................... Argentina 500 1,190
*CEZ AS..................................................... Czech Republic 362,450 993,162
Electricidad de Caracas SAICA SACA, ADR..................... Venezuela 30,030 604,189
Enersis SA, ADR............................................. Chile 6,983 145,770
Irkutskenergo............................................... Russia 395,550 29,172
Irkutskenergo, ADR.......................................... Russia 1,820 6,711
Korea Electric Power Corp. ................................. South Korea 61,300 2,015,619
Mosenergo................................................... Russia 1,377,500 35,264
Mosenergo, ADR.............................................. Russia 4,210 10,794
Nafta Gbely AS.............................................. Slovak Republic 960 11,383
Unified Energy Systems...................................... Russia 943,900 49,366
Unified Energy Systems, ADR................................. Russia 1,800 9,418
-----------
3,912,038
-----------
WHOLESALE & INTERNATIONAL TRADE
*Metro Holdings Ltd. ....................................... Singapore 21,000 24,575
-----------
TOTAL COMMON STOCKS (COST $29,525,919)...................... 32,059,667
-----------
PREFERRED STOCKS 6.6%
Banco Bradesco SA BBD, pfd. ................................ Brazil 614,359 2,884
Brasmotor SA, pfd. ......................................... Brazil 299,500 23,121
Centrais Eletricas Brasileiras SA (Electrobras), B, pfd. ... Brazil 45,526,000 768,530
Cia Cervejaria Brahma, pfd. ................................ Brazil 26,000 15,389
Cia Energetica de Minas Gerais (Cemig), Br., pfd. .......... Brazil 16,894,000 252,149
*Cia Mesbla SA, pfd. ....................................... Brazil 2,465,000 0
Cia Vale do Rio Doce, A, pfd. .............................. Brazil 29,150 613,605
Copene-Petroquimica do Nordeste SA, A, pfd. ................ Brazil 97,000 17,173
Embratel Participacoes SA, pfd. ............................ Brazil 6,157,000 70,316
</TABLE>
18
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (CONT.)
Investimentos Itau SA, pfd. ................................ Brazil 864,200 $ 462,567
*Siam Commercial Bank, 5.25%, 144A, fgn., cvt., pfd. ....... Thailand 81,000 72,737
Tele Centro Sul Participacoes SA, pfd. ..................... Brazil 31,951,000 345,327
Tele Norte Leste Participacoes SA, pfd. .................... Brazil 22,157,000 345,526
Tele Sudeste Celular Participacoes SA, pfd. ................ Brazil 44,996,000 195,454
Telesp Celular Participacoes SA, pfd. ...................... Brazil 2,883,000 28,177
Telesp Participacoes SA, ADR, pfd. ......................... Brazil 29,220 460,215
-----------
TOTAL PREFERRED STOCKS (COST $5,066,671).................... 3,673,170
-----------
PRINCIPAL
AMOUNT**
----------
BONDS -- CORPORATE 7.4%
Astra Overseas Finance NV:
FRN, 6.504%, 12/31/01..................................... Netherlands $ 26,000 19,110
FRN, 6.504%, 6/30/05...................................... Netherlands 89,000 46,725
* zero cpn., 6/30/06....................................... Netherlands 113,000 22,035
Banco Nacional Obra Serv., 9.625%, 11/15/03................. Mexico 125,000 124,688
Bepensa SA, 144A, 9.75%, 9/30/04............................ Mexico 270,000 228,150
Bridas Corp., Yankee, 12.50%, 11/15/99...................... Argentina 460,000 462,300
Cellco Finance NV, 144A, 15.00%, 8/01/05.................... Turkey 300,000 315,570
Cemex SA, 144A, 10.75%, 7/15/00............................. Mexico 230,000 236,182
Companhia Paranaense de Energia-Copel, 9.75%, 5/02/05....... Brazil 200,000 180,000
+*Essar Steel Ltd., 144A, FRN, 8.025%, 7/20/99.............. India 30,000 13,500
Pera Financial Services, 144A, 9.375%, 10/15/02............. Turkey 300,000 273,000
Petroleos Mexicanos, 144A, 9.375%, 12/02/08................. Mexico 200,000 203,750
Philippine Long Distance Telephone Co.:
10.625%, 6/02/04.......................................... Philippines 500,000 518,300
9.25%, 6/30/06............................................ Philippines 490,000 460,600
Poland Communications Inc., 9.875%, 11/01/03................ Poland 280,000 281,050
Protexa Construcciones SA de CV, 144A, 12.125%, 7/24/02..... Mexico 280,000 201,600
PT Indah Kiat Finance Mauritius Ltd., 144A, 10.00%,
7/01/07................................................... Indonesia 625,000 353,125
Tjiwi Kimia Int'l Finance Co. BV, 13.25%, 8/01/01........... Indonesia 250,000 190,000
-----------
TOTAL BONDS -- CORPORATE (COST $4,714,814).................. 4,129,685
-----------
BONDS -- GOVERNMENT & GOVERNMENT AGENCIES 27.5%
Minfin of Russia:
144A, 10.00%, 6/26/07..................................... Russia 810,000 345,262
Reg S, 10.00%, 6/26/07.................................... Russia 300,000 127,875
Republic of Argentina:
9.25%, 2/23/01............................................ Argentina 820,000 798,475
8.75%, 5/09/02............................................ Argentina 325,000 301,844
11.00%, 10/09/06.......................................... Argentina 225,000 215,859
Reg S, 11.75%, 2/12/07.................................... Argentina 490,000ARS 422,097
11.375%, 1/30/17.......................................... Argentina 300,000 282,937
9.75%, 9/19/27............................................ Argentina 990,000 831,600
</TABLE>
19
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT** VALUE
------- -------- -----
<S> <C> <C> <C>
BONDS -- GOVERNMENT & GOVERNMENT AGENCIES (CONT.)
Republic of Brazil:
11.625%, 4/15/04.......................................... Brazil $ 200,000 $ 187,750
9.375%, 4/07/08........................................... Brazil 950,000 754,062
FRN, 5.938%, 4/15/12...................................... Brazil 1,115,000 669,000
8.00%, 4/15/14............................................ Brazil 478,112 296,707
FRN, 5.75%, 4/15/24....................................... Brazil 500,000 283,125
10.125%, 5/15/27.......................................... Brazil 1,075,000 803,563
Republic of Bulgaria:
FRN, 6.50%, 7/28/11....................................... Bulgaria 500,000 356,875
FRN, 6.50%, 7/28/24....................................... Bulgaria 410,000 282,773
Republic of Ecuador:
11.25%, 4/25/02........................................... Ecuador 650,000 221,000
144A, 11.25%, 4/25/02..................................... Ecuador 580,000 197,200
Republic of Panama, FRN, 6.084%, 5/14/02.................... Panama 230,784 223,860
Republic of Peru, FRN, 4.50%, 3/07/17....................... Peru 200,000 123,750
Republic of Turkey:
144A, 9.875%, 2/23/05..................................... Turkey 500,000 465,780
144A, 10.00%, 9/19/07..................................... Turkey 1,230,000 1,137,750
Republic of Venezuela:
144A, 9.125%, 6/18/07..................................... Venezuela 280,000 203,000
Reg S, 9.125%, 6/18/07.................................... Venezuela 300,000 217,500
9.25%, 9/15/27............................................ Venezuela 2,255,000 1,491,119
SEI Holdings IX Inc., 144A, 11.00%, 11/30/00................ Trinidad and Tobago 210,000 210,000
United Mexican States:
9.75%, 2/06/01............................................ Mexico 340,000 352,920
9.75%, 4/06/05............................................ Mexico 250,000 253,062
9.875%, 1/15/07........................................... Mexico 1,120,000 1,130,360
8.625%, 3/12/08........................................... Mexico 825,000 769,931
11.375%, 9/15/16.......................................... Mexico 1,100,000 1,167,925
11.50%, 5/15/26........................................... Mexico 200,000 220,600
-----------
TOTAL BONDS -- GOVERNMENT & GOVERNMENT AGENCIES (COST
$18,687,542).............................................. 15,345,561
-----------
SHORT TERM INVESTMENTS 1.9%
Deutsche Bank Finance, 5.50%, 10/01/99, Time Deposit........ United States 1,035,000 1,035,000
U.S. Treasury Bill, 4.365%, 10/14/99........................ United States 3,000 2,995
-----------
TOTAL SHORT TERM INVESTMENTS (COST $1,037,995).............. 1,037,995
-----------
TOTAL INVESTMENTS (COST $59,032,941) 100.8%................. 56,246,078
OTHER ASSETS, LESS LIABILITIES (.8%)........................ (449,843)
-----------
TOTAL NET ASSETS 100.0%..................................... $55,796,235
===========
</TABLE>
CURRENCY ABBREVIATION:
ARS -- Argentine Peso
*Non-income producing.
**Securities denominated in U.S. dollars unless otherwise indicated.
+Represents defaulted bonds.
See Notes to Financial Statements.
20
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $59,032,941)..... $56,246,078
Receivables:
Investment securities sold................................ 1,270,842
Dividends and interest.................................... 640,893
-----------
Total assets.......................................... 58,157,813
-----------
Liabilities:
Payables:
Investment securities purchased........................... 276,041
To affiliates............................................. 70,376
Funds advanced by custodian................................ 1,891,629
Accrued expenses........................................... 123,532
-----------
Total liabilities..................................... 2,361,578
-----------
Net assets, at value........................................ $55,796,235
===========
Net assets consist of:
Undistributed net investment income........................ $ 1,031,389
Net unrealized depreciation................................ (2,789,726)
Accumulated net realized loss.............................. (3,443,493)
Capital shares............................................. 60,998,065
-----------
Net assets, at value........................................ $55,796,235
===========
Net asset value per share ($55,796,235 / 4,384,710 shares
outstanding).............................................. $12.73
===========
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $24,310)
Dividends.................................................. $ 403,074
Interest................................................... 1,203,156
-----------
Total investment income............................... $ 1,606,230
Expenses:
Management fees (Note 3)................................... 366,693
Administrative fees (Note 3)............................... 73,339
Transfer agent fees........................................ 17,015
Custodian fees............................................. 20,276
Reports to shareholders.................................... 20,473
Registration and filing fees............................... 7,798
Professional fees.......................................... 38,053
Directors' fees and expenses............................... 3,301
Other...................................................... 5,247
-----------
Total expenses........................................ 552,195
-----------
Net investment income........................... 1,054,035
-----------
Realized and unrealized gains (losses):
Net realized loss from:
Investments............................................... (1,514,537)
Foreign currency transactions............................. (69,475)
-----------
Net realized loss..................................... (1,584,012)
Net unrealized appreciation on:
Investments............................................... 5,537,502
Translation of assets and liabilities denominated in
foreign currencies...................................... 268,668
-----------
Net unrealized appreciation........................... 5,806,170
-----------
Net realized and unrealized gain............................ 4,222,158
-----------
Net increase in net assets resulting from operations........ $ 5,276,193
===========
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1999 YEAR ENDED
(UNAUDITED) MARCH 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 1,054,035 $ 2,466,616
Net realized loss from investments and foreign currency
transactions............................................ (1,584,012) (854,332)
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated in
foreign currencies....................................... 5,806,170 (6,901,700)
---------------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 5,276,193 (5,289,416)
Distributions to shareholders from net investment income... (912,458) (1,797,731)
---------------------------------------
Net increase (decrease) in net assets................... 4,363,735 (7,087,147)
Net assets:
Beginning of period........................................ 51,432,500 58,519,647
---------------------------------------
End of period.............................................. $55,796,235 $51,432,500
=======================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 1,031,389 $ 889,812
=======================================
</TABLE>
See Notes to Financial Statements.
23
<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.
24
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
At September 30, 1999, there were 100,000,000 shares authorized ($0.01 par
value). During the six months ended September 30, 1999, and the year ended March
31, 1999 there were no share transactions; 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 officers or directors 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. 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.
4. 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.
25
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES (CONT.)
At September 30, 1999, the net unrealized depreciation based on the cost of
investments for income tax purposes of $59,162,866 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 6,587,336
Unrealized depreciation..................................... (9,504,124)
-----------
Net unrealized depreciation................................. $(2,916,788)
===========
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the six
months ended September 30, 1999 aggregated $13,973,685 and $13,596,882,
respectively.
26
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Annual Meeting of Shareholders, September 23, 1999
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, 1999. The
purpose of the meeting was to elect five Directors of the Fund; to ratify the
selection of PricewaterhouseCoopers LLP, as the Fund's independent auditors for
the fiscal year ending March 31, 2000; and in their discretion, to authorize the
proxyholders to vote upon such other matters that may legally come before the
meeting or any adjournments of the meeting. At the meeting, the following
persons were elected by the shareholders to serve as Directors of the Fund: John
Wm. Galbraith, Rupert H. Johnson, Jr., Betty P. Krahmer, Gordon S. Macklin and
Fred R. Millsaps.* Shareholders ratified the selection of PricewaterhouseCoopers
LLP, to serve as the Fund's independent auditors for the fiscal year ending
March 31, 2000. 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 2002: FOR SHARES WITHHELD SHARES
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John Wm. Galbraith.......................................... 3,782,672 86.27% 69,709 1.59%
Rupert H. Johnson, Jr. ..................................... 3,752,241 85.58% 100,140 2.28%
Betty P. Krahmer............................................ 3,784,881 86.32% 67,500 1.54%
Gordon S. Macklin........................................... 3,787,966 86.39% 64,415 1.47%
Fred R. Millsaps............................................ 3,747,944 85.48% 104,437 2.38%
</TABLE>
2. The ratification of the selection of PricewaterhouseCoopers LLP, as
independent auditors of the Fund for the fiscal year ending March 31, 2000:
<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>
3,820,529.. 87.13% 14,331 .33% 17,520 .40% -- --
</TABLE>
*Harris J. Ashton, Nicholas F. Brady, Frank J. Crothers, S. Joseph Fortunato,
Martin L. Flanagan, Andrew H. Hines, Jr., Edith E. Holiday, Charles B. Johnson
and Constantine Dean Tseretopoulos are Directors of the Fund who are currently
serving and whose terms of office continued after the Annual Meeting of
Shareholders.
27
<PAGE>
TEMPLETON EMERGING MARKETS 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 in 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 that may be payable on dividends or
distributions.
The participant may withdraw from the Plan without penalty at any time by
written notice to the Plan Agent sent to ChaseMellon Shareholder Services,
Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938. Upon
withdrawal, the participant will receive, without charge, stock certificates
issued in the participant's name for all 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.
28
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
1-800/416-5585
www.chasemellon.com
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 dividend 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). The
Fund's net asset value and dividends are also listed on the NASDAQ Stock Market,
Inc.'s Mutual Fund Quotation Service ("NASDAQ MFQS") on a one business day delay
basis.
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.
29
<PAGE>
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Change in Independent Auditor
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of the Fund pursuant to an agreement by PricewaterhouseCoopers LLP
(PwC) to acquire McGladrey's investment company practice. The McGladrey partners
and professionals serving the Fund at the time of the acquisition joined PwC.
The reports of McGladrey on the financial statements of the Fund during the past
two fiscal years contained no adverse opinion or disclaimer of opinion, and were
not qualified or modified as to uncertainty, audit scope or accounting
principles. In connection with its audits for the two most recent fiscal years
and through August 13, 1999, there were no disagreements with McGladrey on any
matter of accounting principle or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of McGladrey would have caused it to make reference to the subject
matter of disagreement in connection with its report.
30
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<PAGE>
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<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
Opportunities Trust
Templeton Global
Smaller Companies Fund
Templeton International 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
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Global
Currency Fund
Franklin Templeton Hard
Currency Fund
GROWTH
Franklin Aggressive Growth Fund
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 Large Cap Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund(1)
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund(7)
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends 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 U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin Strategic Income Fund
Franklin U.S. Government
Securities Fund
Franklin Federal Money Fund(2)
Franklin Money Fund(2)
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(2)
STATE-SPECIFIC
TAX-FREE INCOME
Alabama
Arizona(3)
California(3)
Colorado
Connecticut
Florida(3)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(4)
Michigan(4)
Minnesota(4)
Missouri
New Jersey
New York(3)
North Carolina
Ohio(4)
Oregon
Pennsylvania
Tennessee(5)
Texas
Virginia
VARIABLE ANNUITIES(6)
Franklin(R) Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*Effective November 15, 1999, the fund will be renamed Franklin Global
Communications Fund.
1. This fund is closed to new accounts, with the exception of retirement plan
accounts.
2. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
3. Two or more fund options available: long-term portfolio; portfolio of
insured securities; high yield portfolio (CA); intermediate-term and money
market portfolios (CA and NY).
4. Portfolio of insured municipal securities.
5. The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
6. 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
USAllianz Investor Services, LLC. Franklin Templeton Variable Insurance
Products Trust, formerly Franklin Valuemark Funds, is managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
7. Franklin MicroCap Value Fund has reopened to new investors.
10/99
<PAGE>
[FRANKLIN(R) TEMPLETON(R) LOGO]
Templeton Emerging Markets Appreciation Fund, Inc.
100 Fountain Parkway, P.O. Box 33030
St. Petersburg, FL 33733-8030
SEMIANNUAL REPORT
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
1-800/416-5585
www.chasemellon.com
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political, and other factors. The Fund and its investors are not protected from
such losses by the Investment Manager. Therefore, investors who cannot accept
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 S99 11/99 [RECYCLE LOGO] Printed on recycled paper
