ANNUAL REPORT
[WORLD MAP GRAPHIC]
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
MARCH 31, 1999
[FRANKLIN TEMPLETON(R) LOGO]
FRANKLIN(R) TEMPLETON(R)
PAGE
[PHOTO 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 annual report of Templeton Emerging Markets Appreciation Fund covers the
fiscal year ended March 31, 1999. During this time, many emerging markets
performed poorly due to a series of troubling political and economic events
around the world. Early in the period, devaluation of the Japanese yen adversely
affected the economies of some Asian nations by making it harder for them to
compete with Japanese exports, which in turn reduced their demand for
commodities from other emerging market countries. In May 1998, Indonesia's
economy was disrupted by the resignation of President Suharto, and in August,
Russia devalued its ruble and defaulted on its domestic debts, sending shock
waves through securities markets worldwide.
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 12 of
this report.
CONTENTS
<TABLE>
<S> <C>
Shareholder Letter ....................................................... 1
Important Notice to Shareholders ......................................... 7
Performance Summary ...................................................... 10
Financial Highlights & Statement of Investments .......................... 11
Financial Statements ..................................................... 22
Notes to Financial Statements ............................................ 25
Independent Auditor's Report ............................................. 28
Tax Designation .......................................................... 32
</TABLE>
FUND CATEGORY
Global
Growth
Growth & Income
Income
Tax-Free Income
[PYRAMID GRAPH]
PAGE
ASSET ALLOCATION
Based on Total Net Assets
3/31/99
[THIS CHART SHOWS IN PIE CHART FORMAT THE ASSET ALLOCATION OF SECURITIES IN
TEMPLETON EMERGING MARKETS APPRECIATION FUND ON MARCH 31, 1999, BASED ON TOTAL
NET ASSETS.]
[PIE GRAPH]
Equity 64.2%
Fixed-Income Securities 34.6%
Short-Term Investments & Other Net Assets 1.2%
During the last quarter of 1998, many emerging equity and debt markets rallied,
in response to interest rate cuts by the U.S. and a host of other nations, but
by year end, many investors were focusing on the growing flight of foreign
capital from Brazil. The situation worsened after Brazil's central bank devalued
the real by 8% on January 13, 1999. Two days later the government decided to
float the currency, allowing its value to fluctuate with market forces, rather
than pegging it within a daily trading band, and by the end of January the real
had depreciated over 40% against the U.S. dollar.(1) Although some emerging
markets appeared to weather this volatility without major losses, and a few
actually began to rebound, the float of the real caused a number of currencies
in Asia, Eastern Europe and Africa to decrease in value versus the U.S. dollar.
The Morgan Stanley Capital International(R) (MSCI) Emerging Markets Free Index,
which measures the performance of stocks in 25 emerging market countries, posted
a -20.95% cumulative total return for the 12 months under review.(2) The J.P.
Morgan Emerging Market Bond Index Plus (EMBI+), which measures performance of
external debt instruments(3) in emerging markets, reported a -14.47% cumulative
total return for the same period.(4) Within this environment, the Fund posted a
one-year cumulative total return of -19.96% in market-price terms and -8.34% in
net asset value terms, as shown in the Performance Summary on page 10. However,
the Fund's performance
1. Source: Bloomberg.
2. Source: Standard & Poor's(R) Micropal. Total return is measured in U.S.
dollars. Index is unmanaged and includes reinvested dividends. One cannot invest
directly in an index, nor is an index representative of the Fund's portfolio.
3. External debt instruments are bonds issued or loans owed by governments or
private companies to foreign creditors, which may include governments such as
the U.S., banks such as J.P. Morgan, multilateral lending agencies such as the
IMF, and foreign bondholders such as Templeton.
4. Source: Emerging Markets Bond Index Monitor, J.P. Morgan Securities Inc.
2
PAGE
significantly improved during the latter half of the reporting period, when it
delivered a +28.01% six-month cumulative total return in market-price terms and
+29.08% in net asset value terms, while the MSCI Emerging Markets Free Index and
the J.P. Morgan EMBI+ returned +32.66% and +15.48%, respectively. Additionally,
Lipper Analytical Services Inc. ranked Templeton Emerging Markets Appreciation
Fund number one out of six closed-end emerging market equity funds in total
return, based on change in net asset value for the year ended March 31, 1999.(5)
At the close of the reporting period, 64.2% of the Fund's total net assets were
held in equities, 34.6% in fixed-income securities, and 1.2% in short-term
investments and other net assets. The portfolio included investments from 34
countries, with no single market representing more than 14.9% of the Fund's
total net assets. Its largest weighting by country was Mexico followed by
Brazil, Argentina and Turkey.
Because bonds issued by Ecuador's and Venezuela's governments declined in value
during the reporting period due to weak oil prices and political uncertainty, we
focused on bonds issued by the governments of Mexico and Argentina. These
countries have reduced spending, raised domestic interest rates and restructured
their banking sectors, which we believe may help defend their economies against
falling commodity prices and other external risks. And with falling global
commodity prices dampening investor sentiment toward Africa, we were able to
purchase what we considered to be bargain stocks there, increasing our South
African holdings from 1.8% of total net
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
3/31/99
[THIS CHART SHOWS I PIE CHART FORMAT THE GEOGRAPHIC DISTRIBUTION OF TEMPLETON
EMERGING MARKETS APPRECIATION FUND ON MARCH 31, 1999, BASED ON TOTAL NET
ASSETS.]
[PIE CHART]
Latin America 47.9%
Asia 38.7%
Europe 6.4%
Middle-East & Africa 5.8%
Short-Term Investments & Other Net Assets 1.2%
5. Lipper Analytical Services is a nationally recognized mutual fund research
organization. Past performance is no guarantee of future results.
Total returns are measured in U.S. dollars. Indices are unmanaged and include
reinvested dividends or 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
3/31/99
[THIS TABLE LISTS THE TOP 10 COUNTRIES REPRESENTED IN TEMPLETON EMERGING MARKETS
APPRECIATION FUND ON MARCH 31, 1999.
% OF TOTAL
COUNTRY NET ASSETS
- ----------------------------
Mexico 14.9%
Brazil 11.6%
Argentina 10.0%
Turkey 7.5%
Singapore 7.2%
South Africa 5.4%
Thailand 5.0%
South Korea 4.2%
Venezuela 3.9%
Malaysia 3.5%
assets on March 31, 1998 to 5.4% at the end of the reporting period. In Europe,
the Fund's exposure to Russia, where debt securities fell 81.84%(6) and the
stock market tumbled 67.70%(7) during the reporting period, was low. Instead, we
focused on Poland, where our analysis indicated many stocks were undervalued,
and bonds issued by its government were among the top performers in the EMBI+.
Most of the bonds in the Fund's portfolio were sovereign eurobonds with fixed
coupons, issued by countries with relatively strong repayment capacity, and
denominated in U.S. dollars for minimal foreign currency exposure.
Looking forward, we are optimistic about the long-term prospects for emerging
market securities and Templeton Emerging Markets Appreciation Fund. Although the
float of the Brazilian real has revived questions about potential devaluation of
the Chinese renminbi and the future of the Hong Kong dollar's peg to the U.S.
dollar, we are hopeful about the ongoing recovery of Asian countries such as
South Korea. In our view, increased Asian industrial production, coupled with
renewed commitment by the Organization of Petroleum Exporting Countries (OPEC)
to reduce oil production, may help developing economies in South America and
Africa that rely heavily on commodity exports. And because our portfolio was
structured in part with possible currency devaluation in mind, we believe many
of our Latin American holdings may benefit from the float of the Brazilian real.
6. Source: Emerging Markets Bond Index Monitor, J.P. Morgan Securities Inc.
7. Source: International Finance Corporation (IFC). As measured by the unmanaged
IFC Investable Russia Index.
Total returns are measured in U.S. dollars. Indices are unmanaged and include
reinvested dividends or interest. One cannot invest directly in an index, nor is
an index representative of the Fund's portfolio.
4
PAGE
While we are more cautious in our approach to Eastern Europe, we believe the
efforts of some governments to meet European Monetary Union criteria might
encourage economic reforms that could bode well for the future. In general, we
will remain focused on securities that we consider to have long-term potential
for growth, from countries we believe are demonstrating a commitment to
financial reforms and prudent fiscal and monetary management policies. In our
opinion, the underlying value of such securities may increase as a result of
better economic performance and creditworthiness.
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 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 these
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, Taiwan's equity market has increased 855% in the last 15 years, but
has suffered 6 declines of more than 20% during that time.(8) 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.
TOP 10 HOLDINGS
3/31/99
[THIS TABLE LISTS THE TOP 10 HOLDINGS*, INCLUDING INDUSTRY AND COUNTRY OF
ORIGIN, OF TEMPLETON EMERGING MARKETS APPRECIATION FUND AS OF MARCH 31, 1999,
BASED ON TOTAL NET ASSETS.]
COMPANY, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
Telefonos de Mexico SA
(Telmex), L, ADR
Telecommunications, Mexico 4.3%
Korea Electric Power Corp.
Utilities Electrical &
Gas, South Korea 3.0%
Republic of Turkey,
144A, 10.00%, 9/19/07
Government Bonds, Turkey 2.2%
United Mexican States,
9.875%, 1/15/07
Government Bonds, Mexico 2.2%
Akbank
Banking, Turkey 2.2%
Thai Farmers Bank
Public Co. Ltd.
Banking, Thailand 2.0%
Republic of Venezuela,
9.25%, 9/15/27
Government Bonds, Venezuela 2.0%
Republic of Argentina,
9.75%, 9/19/27
Government Bonds, Argentina 1.6%
Republic of Argentina,
9.25%, 2/23/01
Government Bonds, Argentina 1.6%
Republic of Brazil,
10.125%, 5/15/27
Government Bonds, Brazil 1.5%
8. Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended March 31, 1999. Market return is measured in U.S. dollar terms and does
not include reinvested dividends.
5
PAGE
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of March 31, 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.
6
PAGE
IMPORTANT NOTICE TO SHAREHOLDERS
EURO RISK. On January 1, 1999, the European Monetary Union (EMU) introduced a
new single currency, the euro, which will replace the national currency for
participating member countries. The transition and the elimination of currency
risk among EMU countries may change the economic environment and behavior of
investors, particularly in European markets.
Because this change to a single currency is new and untested, it is not possible
to predict the impact of the euro on the business or financial condition of
European issuers which the Fund may hold in its portfolio, and their impact on
Fund performance. 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.
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.
7
PAGE
When evaluating current and potential portfolio positions, Year 2000 is one of
the factors the Fund's investment 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 will also be adversely
affected. A decrease in the value of one or more of the Fund's portfolio
holdings will have a similar impact on the Fund's performance.
Franklin Resources, Inc. (Resources) established a Year 2000 Project Team in
1996. This team has already made most of 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 refining 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.
8
PAGE
PORTFOLIO MANAGEMENT. Templeton Investment Counsel, Inc. (Investment Counsel),
through its Templeton Global Bond Managers division (Global Bond Managers) is
the investment manager of the debt portion of the Fund's portfolio. Together,
Investment Counsel and its affiliates manage over $227 billion in assets. Since
February 1999, a team from Global Bond Managers is responsible for the
day-to-day management of the debt portion of the Fund's portfolio. Dr. J. Mark
Mobius continues as the Fund's principal portfolio manager for equity
investments.
9
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.
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 credit risks than higher-rated bonds. You may
have a gain or loss when you sell your shares.
PERFORMANCE SUMMARY AS OF 3/31/99
Distributions will vary based on earnings of the Fund's portfolio, as well as
any profits realized from the sale of the portfolio's securities and 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 AND DISTRIBUTION INFORMATION (4/1/98 - 3/31/99)
<TABLE>
<CAPTION>
CHANGE 3/31/99 3/31/98
- ----------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE -$ 1.62 $ 11.73 $ 13.35
MARKET PRICE (NYSE) -$2.9375 $9.6875 $12.6250
DISTRIBUTIONS
----------------------------------
DIVIDEND INCOME $ 0.41
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
1-YEAR 3-YEAR (4/29/94)
- -----------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return (1)
Based on change in
net asset value -8.34% +15.91% +22.22%
Based on change
in market price -19.96% -7.49% -5.11%
Average Annual Total Return (2)
Based on change in
net asset value -8.34% +5.04% +4.16%
Based on change in
market price -19.96% -2.56% -1.06%
</TABLE>
Past performance is not predictive of future results.
10
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995+
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year.................... $13.35 $15.17 $13.41 $12.05 $14.10
-------------------------------------------------------------
Income from investment operations:
Net investment income................................ .56 .56 .62 .69 .48
Net realized and unrealized gains (losses)........... (1.77) (.23) 2.27 1.64 (1.97)
-------------------------------------------------------------
Total from investment operations...................... (1.21) .33 2.89 2.33 (1.49)
-------------------------------------------------------------
Underwriting expenses deducted from capital........... -- -- -- -- (.15)
-------------------------------------------------------------
Less distributions from:
Net investment income................................ (.41) (.72) (.51) (.86) (.32)
Net realized gains................................... -- (1.24) (.62) (.11) (.09)
In excess of net realized gains...................... -- (.19) -- -- --
-------------------------------------------------------------
Total distributions................................... (.41) (2.15) (1.13) (.97) (.41)
-------------------------------------------------------------
Net asset value, end of year.......................... $11.73 $13.35 $15.17 $13.41 $12.05
=============================================================
Total Return*
Based on market value per share...................... (19.96)% 15.12% .40% 15.57% (11.25)%
Based on net asset value per share................... (8.34)% 3.31% 22.40% 19.34% (11.64)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)....................... $51,433 $58,520 $65,075 $57,516 $51,022
Ratios to average net assets:
Expenses............................................. 1.90% 1.88% 1.83% 1.64% 1.79%**
Net investment income................................ 4.97% 3.76% 4.29% 5.29% 3.98%**
Portfolio turnover rate............................... 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.
See Notes to Financial Statements.
11
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 60.1%
APPLIANCES & HOUSEHOLD DURABLES .5%
Arcelik AS.................................................. Turkey 4,549,896 $ 149,407
*Sanyo Universal Electric Public Co. Ltd., fgn. ............ Thailand 20,000 3,993
*Semi-Tech Co. Ltd. ........................................ Hong Kong 530,761 9,109
Shenzhen Konka Electronic Group Co. Ltd., B................. China 142,901 88,327
-----------
250,836
-----------
AUTOMOBILES 1.0%
Bajaj Auto Ltd. ............................................ India 1,600 23,219
Cycle & Carriage Ltd. ...................................... Singapore 87,000 367,428
*GAZ Auto Plant............................................. Russia 160 3,276
Oriental Holdings Bhd. ..................................... Malaysia 4,000 6,316
Perusahaan Otomobil Nasional Bhd. .......................... Malaysia 67,000 89,040
*Tofas Turk Otomobil Fabrikasi AS........................... Turkey 2,300,200 24,356
-----------
513,635
-----------
BANKING 9.9%
Akbank...................................................... Turkey 34,849,276 1,121,006
Banco Bradesco SA BBD....................................... Brazil 22,262,925 98,268
Banco de Galicia y Buenos Aires SA, B....................... Argentina 19,710 80,027
Banco do Brasil SA.......................................... Brazil 1,821,276 7,221
Banco Frances SA............................................ Argentina 10,000 58,503
Bancolombia SA.............................................. Colombia 1,000 685
*Bangkok Bank Public Co. Ltd. .............................. Thailand 268,000 367,416
*Bangkok Bank Public Co. Ltd., fgn. ........................ Thailand 24,600 50,425
Bank Austria AG............................................. Austria 100 5,949
Bank Handlowy W Warszawie SA................................ Poland 3,454 40,661
Bank Handlowy W Warszawie SA, GDR, Reg S.................... Poland 10,400 126,360
Bank Slaski SA W Katowicach................................. Poland 3,600 150,262
Big Bank Gdanski SA, G...................................... Poland 167,200 298,795
Commercial International Bank Ltd. ......................... Egypt 1,000 10,302
*Daegu Bank Co. Ltd. ....................................... South Korea 1,917 6,109
*Grupo Financiero Banamex Accival SA de CV, B............... Mexico 86,500 187,056
*Grupo Financiero Banamex Accival SA de CV, L............... Mexico 21,868 43,846
Grupo Financiero Bancomer SA de CV, L....................... Mexico 27,778 7,582
*Grupo Financiero Serfin SA de CV, B........................ Mexico 41,277 4,333
HSBC Holdings PLC........................................... Hong Kong 8,599 269,636
Overseas Chinese Banking Corp. Ltd., fgn. .................. Singapore 46,000 311,368
Philippine Commercial International Bank Inc. .............. Philippines 600 3,391
Public Bank Bhd. ........................................... Malaysia 258,000 142,579
*Thai Farmers Bank Public Co. Ltd. ......................... Thailand 421,200 627,904
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 198,500 401,597
*Turkiye Garanti Bankasi AS................................. Turkey 4,726,498 196,383
Turkiye Is Bankasi AS, C.................................... Turkey 403,000 17,555
United Overseas Bank Ltd., fgn. ............................ Singapore 73,000 456,118
-----------
5,091,337
-----------
</TABLE>
12
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BEVERAGES & TOBACCO 2.7%
Asia Pacific Breweries Ltd. ................................ Singapore 24,000 $ 51,374
*Austria Tabak AG........................................... Austria 1,300 87,577
Bavaria SA.................................................. Colombia 24,200 105,766
Cia Cervecerias Unidas SA, ADR.............................. Chile 6,000 126,750
Coca Cola Femsa SA de CV, L, ADR............................ Mexico 3,800 61,987
Eastern Tobacco Co. ........................................ Egypt 100 2,834
Fraser and Neave Ltd. ...................................... Singapore 121,000 430,518
Nobleza Piccardo Sdad Industrial Comercial y Financial...... Argentina 1,500 4,725
PT Gudang Garamm............................................ Indonesia 13,000 17,271
Quilmes Industrial SA, ADR.................................. Argentina 16,400 154,775
South African Breweries PLC................................. South Africa 31,960 276,453
Souza Cruz SA............................................... Brazil 12,000 72,770
Tabak AS.................................................... Czech Republic 110 24,102
-----------
1,416,902
-----------
BROADCASTING & PUBLISHING .1%
*Agora SA, 144A, GDR........................................ Poland 700 7,560
Times Publishing Ltd. ...................................... Singapore 13,000 19,555
-----------
27,115
-----------
BUILDING MATERIALS & COMPONENTS 1.4%
Cementos Argos SA........................................... Colombia 77,300 191,611
Cemex SA.................................................... Mexico 20,530 83,728
Cemex SA, B................................................. Mexico 31,000 130,007
Juan Minetti SA............................................. Argentina 1,500 3,300
*PT Indocement Tunggal Prakarsa............................. Indonesia 124,000 41,452
*PT Semen Cibinong.......................................... Indonesia 367,500 6,354
PT Semen Gresik (Persero), TBK.............................. Indonesia 74,740 83,571
*Siam Cement Public Co. Ltd. ............................... Thailand 2,600 36,268
*Siam Cement Public Co. Ltd., fgn. ......................... Thailand 4,750 96,100
*Thai Asahi Glass Public Co. Ltd. .......................... Thailand 66,610 11,792
*Tipco Asphalt Public Co. Ltd., fgn. ....................... Thailand 600 1,030
Vencemos de Cementos SA..................................... Venezuela 42,500 17,853
Venezolana de Cementos - Vencemos #2........................ Venezuela 5,400 2,315
-----------
705,381
-----------
CHEMICALS 1.3%
Aeci Ltd. .................................................. South Africa 5,000 7,356
*Atanor Cia Nacional Para la Industria Quimica SA, D........ Argentina 55,550 29,443
Borsodchem RT............................................... Hungary 3,550 65,848
Borsodchem RT, GDR, Reg S................................... Hungary 2,150 40,151
Engro Chemical Pakistan Ltd. ............................... Pakistan 1,150 2,394
Indian Petrochemicals Corp. Ltd. ........................... India 49,000 127,610
*PT Unggul Indah Corp....................................... Indonesia 136,400 17,296
Reliance Industries Ltd. ................................... India 2,000 6,147
Reliance Industries Ltd., GDR............................... India 5,700 35,055
Shanghai Petrochemical Co. Ltd., H.......................... China 772,000 86,668
</TABLE>
13
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
CHEMICALS (CONT.)
Singapore Petroleum Company, fgn. .......................... Singapore 2,000 $ 868
Slovnaft AS................................................. Slovak Republic 8,000 115,617
Sociedad Quimica y Minera de Chile SA, ADR.................. Chile 1,000 32,000
*Sociedad Quimica y Minera de Chile SA Soquimich, ADR, 57 114
rts. ..................................................... Chile
*Thai Petrochemical Industry Public Co. Ltd., fgn. ......... Thailand 69,000 9,368
Tiszai Vegyi Kombinat RT.................................... Hungary 2,870 26,770
Tiszai Vegyi Kombinat RT, GDR, Reg S........................ Hungary 900 8,392
Unipetrol................................................... Czech Republic 29,602 34,941
-----------
646,038
-----------
CONSTRUCTION & HOUSING .2%
*Italian-Thai Development Public Co. Ltd., fgn. ............ Thailand 61,300 114,229
-----------
DATA PROCESSING & REPRODUCTION
*Satyam Computers Services Ltd. ............................ India 600 21,565
-----------
ELECTRICAL & ELECTRONICS 1.3%
Acma Ltd. .................................................. Singapore 4,000 1,678
Empresa Nacional de Electricidad SA, ADR.................... Chile 23,280 327,375
Great Wall Electronic International Ltd. ................... Hong Kong 525,572 13,225
Samsung Display Devices Ltd. ............................... South Korea 3,465 170,285
*Samsung Electronics Co. Ltd. .............................. South Korea 1,689 130,770
*Shin Corporations Public Company Ltd., fgn. ............... Thailand 600 1,565
-----------
644,898
-----------
ENERGY SOURCES 2.3%
Astra Cia Argentina de Petroleo SA.......................... Argentina 10,760 13,558
Bharat Petroleum Corp. Ltd. ................................ India 1,000 4,937
Hindustan Petroleum Corporation Ltd. ....................... India 4,400 20,927
Lukoil Holdings, ADR........................................ Russia 440 12,725
Mol Magyar Olay-Es Gazipari RT.............................. Hungary 1,790 38,401
OMV AG...................................................... Austria 1,000 88,419
Perez Companc SA, B......................................... Argentina 28,000 131,607
Petron Corporation.......................................... Philippines 1,258,000 141,221
Sasol Ltd. ................................................. South Africa 41,000 202,183
YPF Sociedad Anonima, ADR................................... Argentina 17,060 538,456
-----------
1,192,434
-----------
FINANCIAL SERVICES .2%
Industrial Credit & Inv. Corp. of India, GDR, Reg. S........ India 500 3,088
Industrial Finance Corp. of Thailand, fgn. ................. Thailand 257,300 80,481
-----------
83,569
-----------
FOOD & HOUSEHOLD PRODUCTS 1.2%
Boustead Holdings Bhd. ..................................... Malaysia 15,000 11,684
*Chareon Pokphand Feedmill Public Co. Ltd., fgn. ........... Thailand 71,000 72,295
Cheil Jedang Corp. ......................................... South Korea 36 1,352
Grupo Industrial Maseca SA de CV, B......................... Mexico 3,000 2,425
Mavesa SA, ADR.............................................. Venezuela 3,940 10,835
</TABLE>
14
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
FOOD & HOUSEHOLD PRODUCTS (CONT.)
Panamerican Beverages Inc., A............................... Mexico 5,100 $ 89,569
*PT Indofoods Sukses Makmur................................. Indonesia 21,000 13,072
San Miguel Corp., B......................................... Philippines 40,000 66,581
*Serm Suk Public Co. Ltd., fgn. ............................ Thailand 4,900 19,892
Vitro SA.................................................... Mexico 155,000 312,408
-----------
600,113
-----------
FOREST PRODUCTS & PAPER 2.3%
Aracruz Celulose SA, ADR.................................... Brazil 44,000 638,000
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 17,600 147,400
Masisa SA, ADR.............................................. Chile 200 1,550
*PT Indah Kiat Pulp & Paper Corp. .......................... Indonesia 117,000 33,043
*PT Tjiwi Kimia TBK......................................... Indonesia 155,500 34,506
Sappi Ltd. ................................................. South Africa 69,677 294,029
*Shin Poong Paper Manufacturing Co. Ltd. ................... South Korea 3,900 35,281
-----------
1,183,809
-----------
HEALTH & PERSONAL CARE .2%
Gedeon Richter Ltd. ........................................ Hungary 2,130 69,084
Hankook Cosmetics Co. Ltd. ................................. South Korea 3,000 50,000
*PT Tempo Scan Pacific...................................... Indonesia 102,000 6,467
-----------
125,551
-----------
INDUSTRIAL COMPONENTS
*Leader Universal Holdings Bhd. ............................ Malaysia 65,000 14,283
Pannonplast Plastic Industries PLC.......................... Hungary 120 2,048
*Shanghai Tyre & Rubber Co. Ltd., B......................... China 22,730 2,136
-----------
18,467
-----------
INSURANCE .3%
*Anadolu Anonim Turk Sigorta Sirketi, Br. .................. Turkey 2,024,360 30,388
Compania Suramericana de Inversiones SA..................... Colombia 39,992 62,610
Liberty Life Association of Africa Ltd. .................... South Africa 7,000 86,467
Warta SA.................................................... Poland 174 2,740
-----------
182,205
-----------
LEISURE & TOURISM 2.7%
*Danubius Hotel and Spa RT.................................. Hungary 2,200 40,108
Genting Berhad.............................................. Malaysia 186,000 416,053
Hinds Hotels International Ltd. ............................ Singapore 129,000 87,318
*Hotel Shilla Co. .......................................... South Korea 20,003 130,419
Kersaf Investments Ltd. .................................... South Africa 14,500 50,638
Overseas Union Enterprise Ltd. ............................. Singapore 21,200 36,427
Republic Hotels & Resorts Ltd. ............................. Singapore 49,000 22,537
Resorts World Bhd........................................... Malaysia 444,000 546,821
Shangri La Hotels (Malaysia) Bhd. .......................... Malaysia 168,000 45,979
-----------
1,376,300
-----------
</TABLE>
15
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MACHINERY & ENGINEERING .6%
*Cummins India Ltd. ........................................ India 1,000 $ 8,349
Jurong Shipyard Ltd. ....................................... Singapore 28,000 110,963
*Keppel Philippine Holdings Inc., B......................... Philippines 403,218 8,064
*Mannesmann SA.............................................. Brazil 740,000 81,983
*Samsung Heavy Industries Co. Ltd. ......................... South Korea 6,475 33,615
Tata Engineering & Locomotive Co. .......................... India 10,600 42,270
*Thai Engine Manufacturing Public Company Ltd., fgn. ....... Thailand 4,800 652
-----------
285,896
-----------
MERCHANDISING .7%
*Cifra SA de CV, C.......................................... Mexico 44,000 67,898
*Cifra SA de CV, V.......................................... Mexico 9,000 14,115
Dairy Farm International Holdings Ltd. ..................... Hong Kong 113,389 131,531
Siam Makro Public Company Ltd., fgn. ....................... Thailand 71,000 122,854
-----------
336,398
-----------
METALS & MINING 3.4%
Anglo-American Corp of South Africa Ltd. ................... South Africa 19,122 661,618
Antofagasta Holdings PLC.................................... Chile 37,181 153,955
Ashanti Goldfields Co. Ltd., GDR, Reg S..................... Ghana 13,412 117,355
*Eregli Demir ve Celik Fabrikalari AS....................... Turkey 770,000 10,733
*Eregli Demir ve Celik Fabrikalari AS, new.................. Turkey 4,620,000 60,993
Hindalco Industries Inc. ................................... India 2,000 21,966
Hindalco Industries Inc., GDR, Reg S........................ India 5,000 61,625
*Hylsamex SA de CV, partn. ctf., B.......................... Mexico 4,000 7,382
Iscor Ltd. ................................................. South Africa 287,172 71,503
*National Aluminum Co. Ltd. ................................ India 5,000 1,944
Natsteel Ltd. .............................................. Singapore 207,000 216,760
Palabora Mining Co. Ltd. ................................... South Africa 7,900 42,470
*Philex Mining Corp., B..................................... Philippines 3,094,950 19,568
PT Timah TBK................................................ Indonesia 241,500 161,464
*Siderar, A................................................. Argentina 4,399 7,127
Siderca SA, A............................................... Argentina 109,990 120,995
Siderurgica Venezolana Sivensa Saica Services, A, ADR....... Venezuela 700 1,386
-----------
1,738,844
-----------
MISC MATERIALS & COMMODITIES .6%
De Beers/Centenary Linked Units, Reg. ...................... South Africa 13,000 250,121
Golden Hope Plantations Bhd. ............................... Malaysia 54,000 38,369
-----------
288,490
-----------
MULTI-INDUSTRY 5.8%
*A Soriano Corp. ........................................... Philippines 480,000 10,405
Alfa SA de CV, A............................................ Mexico 48,000 145,370
Ayala Corp. ................................................ Philippines 44,000 13,342
Barlow Ltd. ................................................ South Africa 40,500 216,087
CG Smith Ltd. .............................................. South Africa 77,500 206,750
Cheung Kong Holdings Ltd. .................................. Hong Kong 32,000 243,627
</TABLE>
16
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY (CONT.)
China Resources Enterprises Ltd. ........................... China 32,000 $ 46,661
Citic Pacific Ltd. ......................................... Hong Kong 141,000 296,572
Delta Corp. ................................................ Zimbabwe 27,054 6,896
DESC SA de CV DESC, B....................................... Mexico 80,000 95,738
Egis RT..................................................... Hungary 1,240 20,766
*Egis RT, EDR, Reg S........................................ Hungary 1,000 16,747
Haci Omer Sabanci Holding AS................................ Turkey 50,000 1,206
Haci Omer Sabanci Holding AS, 144A, ADR..................... Turkey 10,600 62,805
Hong Leong Industries Bhd. ................................. Malaysia 56,400 41,113
*Hong Leong Industries Bhd., wts. .......................... Malaysia 6,500 599
Jardine Matheson Holdings Ltd. ............................. Hong Kong 83,998 253,674
Jardine Strategic Holdings Ltd. ............................ Hong Kong 2,000 3,380
Koor Industries Ltd. ....................................... Israel 691 73,291
Lai Sun Garment International Ltd. ......................... Hong Kong 308,000 18,084
Larsen and Toubro Ltd. ..................................... India 33,850 186,681
Larsen and Toubro Ltd., GDR, Reg S.......................... India 1,300 13,845
Malbak Ltd. ................................................ South Africa 5,750 3,486
Perlis Plantations Bhd. .................................... Malaysia 83,000 82,563
Quinenco SA, ADR............................................ Chile 10,500 104,344
Rembrandt Group Ltd. ....................................... South Africa 38,000 272,175
*Renong Bhd. ............................................... Malaysia 186,000 29,858
*Sembcorp Industries Ltd. .................................. Singapore 243,336 266,072
*Sociedad Comercial del Plata Cadelplata Come............... Argentina 247,720 104,048
Technology Resources Industries Bhd. ....................... Malaysia 90,000 31,263
Tongaat-Hulett Group Ltd. .................................. South Africa 20,500 118,326
-----------
2,985,774
-----------
REAL ESTATE 2.7%
*Belle Corp. ............................................... Philippines 396,000 18,395
City Developments Ltd. ..................................... Singapore 93,000 484,235
*Filinvest Development Corp. ............................... Philippines 160,000 7,845
First Capital Corp. Ltd. ................................... Singapore 14,000 13,607
Hang Lung Development Co. Ltd. ............................. Hong Kong 197,000 238,956
Hong Leong Properties Bhd. ................................. Malaysia 29,000 4,694
Island & Peninsula Bhd. .................................... Malaysia 30,000 20,447
*Land and House Public Co. Ltd., fgn. ...................... Thailand 7,900 4,469
New World Development Co. Ltd. ............................. Hong Kong 92,110 181,259
*PT Ciputra Development..................................... Indonesia 172,000 1,983
*PT Pakuwon Jati............................................ Indonesia 116,000 1,003
Sun Hung Kai Properties Ltd. ............................... Hong Kong 14,504 108,552
United Industrial Corporation Ltd. ......................... Singapore 536,000 279,086
United Overseas Land Ltd. .................................. Singapore 46,000 31,137
-----------
1,395,668
-----------
</TABLE>
17
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
RECREATION & OTHER CONSUMER GOODS .4%
China First Pencil Co. Ltd., B.............................. China 340,107 $ 44,894
Tanjong PLC................................................. Malaysia 91,000 143,684
-----------
188,578
-----------
TELECOMMUNICATIONS 10.4%
*Advanced Info Service Public Co. Ltd., fgn. ............... Thailand 22,000 159,297
*Alcatel Teletas............................................ Turkey 53,000 3,268
BEC World Public Co. Ltd., fgn. ............................ Thailand 17,000 82,364
Compania Anonima Nacional Telefonos de Venezuela, ADR....... Venezuela 7,900 143,681
Compania De Telecomunicaciones de Chile SA, ADR............. Chile 26,926 634,444
*Digital Telecommunications Philippines Inc. ............... Philippines 116,000 3,053
Mahanagar Telephone Nigam Ltd. ............................. India 14,500 60,351
Pakistan Telecommunications Corp., PTC, A................... Pakistan 429,000 159,748
Philippine Long Distance Telephone Co., ADR................. Philippines 12,800 331,200
PT Indosat.................................................. Indonesia 74,500 98,975
PT Telekomunikasi Indonesia (Persero), B.................... Indonesia 991,000 322,718
Rostelekom.................................................. Russia 8,000 6,240
Rostelekom, ADR............................................. Russia 7,050 33,047
*SPT Telecom AS............................................. Czech Republic 3,400 44,927
Telecom Argentina Stet-France SA, ADR....................... Argentina 5,000 137,188
Telecomunicacoes Brasileiras SA (Telebras).................. Brazil 4,525,000 222,978
Telefonica de Argentina SA, ADR............................. Argentina 5,800 175,450
Telefonica del Peru SA, B, ADR.............................. Peru 21,500 274,125
Telefonos de Mexico SA (Telmex), L, ADR..................... Mexico 33,400 2,187,700
*Telekomunikacja Polska SA.................................. Poland 4,000 21,095
*Thai Telephone & Telecommunication Public Co. Ltd.,fgn. ... Thailand 270,000 32,344
*Total Access Communication Public Co. Ltd. ................ Thailand 83,600 180,576
*United Communications Industries, fgn. .................... Thailand 55,500 26,963
*Vimpel Communications, ADR................................. Russia 2,050 31,775
-----------
5,373,507
-----------
TEXTILES & APPAREL .2%
BYC Co. Ltd. ............................................... South Korea 700 31,948
Hua Thai Manufacturing Public Co. Ltd., fgn. ............... Thailand 16,000 20,657
*Thai Rayon Public Co. Ltd. ................................ Thailand 2,942 2,751
Thai Rayon Public Co. Ltd., fgn. ........................... Thailand 7,058 6,599
Thai Wacoal Public Co. Ltd., fgn. .......................... Thailand 18,750 30,198
-----------
92,153
-----------
TRANSPORTATION 1.4%
Chiwan Wharf Holdings Ltd., B............................... China 134,000 13,314
Delgro Corp. ............................................... Singapore 5,500 7,223
Guangshen Railway Co. Ltd., H............................... China 576,000 66,894
Guangshen Railway Co. Ltd., H, ADR.......................... China 6,700 37,687
Keppel Corp., Ltd. ......................................... Singapore 164,000 442,141
Malaysian Airline System Bhd. .............................. Malaysia 23,000 9,079
Malaysian International Shipping Corp., fgn. ............... Malaysia 93,333 118,877
</TABLE>
18
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TRANSPORTATION (CONT.)
*Neptune Orient Lines Ltd. ................................. Singapore 88,000 $ 30,038
Regional Container Lines Public Co. Ltd., fgn. ............. Thailand 30,000 13,177
*Thai Airways International Public Co. Ltd., fgn. .......... Thailand 1,000 1,531
-----------
739,961
-----------
UTILITIES ELECTRICAL & GAS 6.3%
Centrais Eletricas Brasileiras SA (Electrobras)............. Brazil 5,227,000 102,041
Central Costanera SA, B..................................... Argentina 5,000 13,001
*CEZ AS..................................................... Czech Republic 362,450 501,946
Companhia Paranaense de Energia-Copel, ADR.................. Brazil 4,500 33,750
Electricidad de Caracas SAICA SACA, ADR..................... Venezuela 24,484 375,719
Enersis SA, ADR............................................. Chile 11,550 309,684
*Irkutskenergo.............................................. Russia 439,500 22,854
*Irkutskenergo, ADR......................................... Russia 1,820 4,732
Korea Electric Power Corp. ................................. South Korea 64,700 1,560,815
Mosenergo................................................... Russia 1,377,500 31,683
*Mosenergo, ADR............................................. Russia 4,210 9,999
Nafta Gbely AS.............................................. Slovak Republic 960 7,829
Transportadora de Gas del Sur SA, B......................... Argentina 41,000 77,904
Transportadora de Gas del Sur SA, B, ADR, Reg. S............ Argentina 15,800 148,125
Unified Energy Systems...................................... Russia 943,900 43,419
Unified Energy Systems, ADR................................. Russia 2,000 9,166
-----------
3,252,667
-----------
WHOLESALE & INTERNATIONAL TRADE
Metro Holdings Ltd. ........................................ Singapore 21,000 19,439
-----------
TOTAL COMMON STOCKS (COST $34,282,598)...................... 30,891,759
-----------
PREFERRED STOCKS 4.1%
Banco Bradesco SA BBD, pfd. ................................ Brazil 18,627,359 99,925
Banco do Brazil SA, pfd. ................................... Brazil 10,790,000 57,631
Brasmotor SA, pfd. ......................................... Brazil 370,500 28,085
Centrais Eletricas Brasileiras SA (Electrobras), B, pfd. ... Brazil 30,371,000 636,640
Centrais Geradoras do Sul do Brasil SA, B, pfd. ............ Brazil 32,640,000 25,693
Cia Cervejaria Brahma, pfd. ................................ Brazil 27,000 12,705
Cia Energetica de Minas Gerais (Cemig), ADR, pfd. .......... Brazil 2,650 59,258
Cia Energetica de Minas Gerais (Cemig), Br., pfd. .......... Brazil 10,819,000 241,929
*Cia Mesbla SA, pfd. ....................................... Brazil 2,465,000 10,837
Cia Vale do Rio Doce, A, pfd. .............................. Brazil 4,250 62,573
Cia Vale do Rio Doce, A, ADR, pfd. ......................... Brazil 300 4,417
Companhia Energetica do Ceara, pfd. ........................ Brazil 16,642,000 41,726
Copene-Petroquimica do Nordeste SA, A, pfd. ................ Brazil 180,000 21,516
Duratex SA, pfd. ........................................... Brazil 216,000 4,584
Investimentos Itau SA, pfd. ................................ Brazil 980,200 502,960
*Investimentos Itau SA, pfd., rts. ......................... Brazil 22,410 523
*Tele Norte Leste Participacoes SA, pfd. ................... Brazil 6,400,000 97,773
</TABLE>
19
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (CONT.)
Telecomunicacoes Brasileiras SA (Telebras), pfd. ........... Brazil 2,278,000 $ 184,631
Telecomunicacoes Brasileiras SA (Telebras), ADR, pfd. ...... Brazil 40 3,225
-----------
TOTAL PREFERRED STOCKS (COST $3,170,395).................... 2,096,631
-----------
PRINCIPAL
AMOUNT**
-----------
BONDS - CORPORATE 7.4%
Banco Nacional Obra Serv., 9.625%, 11/15/03................. Mexico $ 125,000 125,625
Bepensa SA, 144A, 9.75%, 9/30/04............................ Mexico 270,000 241,650
Bridas Corp., Yankee, 12.50%, 11/15/99...................... Argentina 460,000 472,650
Cellco Finance NV, 144A, 15.00%, 8/01/05.................... Turkey 300,000 292,500
Cemex SA, 144A, 10.75%, 7/15/00............................. Mexico 230,000 238,625
Companhia Paranaense de Energia-Copel, 9.75%, 5/02/05....... Brazil 200,000 164,461
Essar Steel Ltd., 144A, FRN, 7.635%, 7/20/99................ India 30,000 20,850
Pera Financial Services, 144A, 9.375%, 10/15/02............. Turkey 300,000 267,000
Petroleos Mexicanos, 144A, 9.375%, 12/02/08................. Mexico 200,000 205,000
Philippine Long Distance Telephone Co.:
10.625%, 6/02/04.......................................... Philippines 500,000 499,221
9.25%, 6/30/06............................................ Philippines 190,000 180,500
Poland Communications Inc., 9.875%, 11/01/03................ Poland 280,000 260,400
Protexa Construcciones SA de CV, 144A, 12.125%, 7/24/02..... Mexico 320,000 260,800
*PT Astra International, 9.75%, 4/29/01..................... Indonesia 175,000 56,875
PT Indah Kiat Finance Mauritius Ltd., 144A, 10.00%, 625,000 356,250
7/01/07................................................... Indonesia
Tjiwi Kimia Int'l Finance Co. BV, 13.25%, 8/01/01........... Indonesia 250,000 176,250
-----------
TOTAL BONDS - CORPORATE (COST $4,443,997)................... 3,818,657
-----------
BONDS - GOVERNMENT & GOVERNMENT AGENCIES 27.2%
Minfin of Russia:
144A, 10.00%, 6/26/07..................................... Russia 810,000 224,273
Reg S, 10.00%, 6/26/07.................................... Russia 300,000 83,064
Republic of Argentina:
9.25%, 2/23/01............................................ Argentina 820,000 822,665
8.75%, 5/09/02............................................ Argentina 325,000 298,269
11.00%, 10/09/06.......................................... Argentina 225,000 214,172
Reg S, 11.75%, 2/12/07.................................... Argentina 490,000ARS 451,435
11.375%, 1/30/17.......................................... Argentina 300,000 283,125
9.75%, 9/19/27............................................ Argentina 990,000 824,175
Republic of Brazil:
9.375%, 4/07/08........................................... Brazil 950,000 723,188
FRN, 6.1875%, 4/15/12..................................... Brazil 1,115,000 650,190
8.00%, 4/15/14............................................ Brazil 471,045 299,497
10.125%, 5/15/27.......................................... Brazil 1,075,000 784,750
Republic of Bulgaria:
FRN, 5.875% 7/28/11....................................... Bulgaria 500,000 336,720
FRN, 5.875% 7/28/24....................................... Bulgaria 410,000 278,800
Republic of Ecuador:
11.25%, 4/25/02........................................... Ecuador 850,000 549,313
144A, 11.25%, 4/25/02..................................... Ecuador 550,000 355,437
</TABLE>
20
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT**
--------
<S> <C> <C> <C>
BONDS - GOVERNMENT & GOVERNMENT AGENCIES (CONT.)
Republic of Panama, FRN, 6.1913%, 5/14/02................... Panama $ 269,243 $ 261,166
Republic of Peru, FRN, 4.50%, 3/07/17....................... Peru 200,000 127,626
Republic of Turkey:
144A, 9.875%, 2/23/05..................................... Turkey 500,000 461,548
144A, 10.00%, 9/19/07..................................... Turkey 1,230,000 1,143,592
Republic of Venezuela:
144A, 9.125%, 6/18/07..................................... Venezuela 280,000 214,200
Reg S, 9.125%, 6/18/07.................................... Venezuela 300,000 229,500
9.25%, 9/15/27............................................ Venezuela 1,655,000 1,016,273
Sei Holdings IX Inc., 144A, 11.00%, 11/30/00................ Trinidad and Tobago 210,000 201,600
United Mexican States:
9.75%, 2/06/01............................................ Mexico 340,000 352,070
9.75%, 4/06/05............................................ Mexico 250,000 250,437
9.875%, 1/15/07........................................... Mexico 1,120,000 1,134,000
8.625%, 3/12/08........................................... Mexico 825,000 778,594
11.375%, 9/15/16.......................................... Mexico 600,000 649,110
-----------
TOTAL BONDS - GOVERNMENT & GOVERNMENT AGENCIES (COST
$17,233,211).............................................. 13,998,789
-----------
SHORT TERM INVESTMENT 1.7% (COST $903,000)
Den Dansk Bank AG, 5.00%, 4/01/99, Time Deposit............. United States 903,000 903,000
-----------
TOTAL INVESTMENTS (COST $60,033,201) 100.5%................. 51,708,836
OTHER ASSETS, LESS LIABILITIES (.5%)........................ (276,336)
-----------
TOTAL NET ASSETS 100.0%..................................... $51,432,500
===========
</TABLE>
CURRENCY ABBREVIATION:
<TABLE>
<S> <C>
ARS -- Argentina Peso
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars unless otherwise indicated.
See Notes to Financial Statements.
21
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $60,033,201)..... $51,708,836
Receivables:
Investment securities sold................................ 9,923
Dividends and interest.................................... 647,107
-----------
Total assets.......................................... 52,365,866
-----------
Liabilities:
Payables:
Investment securities purchased........................... 262,294
To affiliates............................................. 54,122
Funds advanced by custodian................................ 275,590
Deferred tax liability (Note 1f)........................... 258,891
Accrued expenses........................................... 82,469
-----------
Total liabilities..................................... 933,366
-----------
Net assets, at value........................................ $51,432,500
===========
Net assets consist of:
Undistributed net investment income........................ $ 889,812
Net unrealized depreciation................................ (8,595,896)
Accumulated net realized loss.............................. (1,859,481)
Capital shares............................................. 60,998,065
-----------
Net assets, at value........................................ $51,432,500
===========
Net asset value per share ($51,432,500 / 4,384,710 shares
outstanding).............................................. $11.73
===========
</TABLE>
See Notes to Financial Statements.
22
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $54,825)
Dividends.................................................. $ 986,568
Interest................................................... 2,420,873
-----------
Total investment income............................... $ 3,407,441
Expenses:
Management fees (Note 3)................................... 619,972
Administrative fees (Note 3)............................... 123,990
Transfer agent fees........................................ 34,037
Custodian fees............................................. 44,137
Reports to shareholders.................................... 14,453
Registration and filing fees............................... 16,506
Professional fees.......................................... 69,269
Directors' fees and expenses............................... 6,207
Other...................................................... 12,254
-----------
Total expenses........................................ 940,825
-----------
Net investment income........................... 2,466,616
-----------
Realized and unrealized losses:
Net realized loss from:
Investments............................................... (850,199)
Foreign currency transactions............................. (4,133)
-----------
Net realized loss..................................... (854,332)
Net unrealized depreciation on:
Investments............................................... (6,623,813)
Deferred taxes (Note 1f).................................. (258,891)
Translation of assets and liabilities denominated in
foreign currencies...................................... (18,996)
-----------
Net unrealized depreciation........................... (6,901,700)
-----------
Net realized and unrealized loss............................ (7,756,032)
-----------
Net decrease in net assets resulting from operations........ $(5,289,416)
============
</TABLE>
See Notes to Financial Statements.
23
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-----------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 2,466,616 $ 2,402,241
Net realized gain (loss) from investments and foreign
currency transactions................................... (854,332) 3,700,546
Net unrealized depreciation on investments, translation of
assets and liabilities denominated in foreign currencies
and deferred taxes....................................... (6,901,700) (4,601,081)
-----------------------------
Net increase (decrease) in net assets resulting from
operations............................................ (5,289,416) 1,501,706
Distributions to shareholders from:
Net investment income..................................... (1,797,731) (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.............................. (7,087,147) (6,555,197)
Net assets:
Beginning of year.......................................... 58,519,647 65,074,844
-----------------------------
End of year................................................ $51,432,500 $58,519,647
=============================
Undistributed net investment income included in net assets:
End of year................................................ $ 889,812 $ 49,894
==============================
</TABLE>
See Notes to Financial Statements.
24
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements
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.
Certain countries in which the Fund invests have imposed restrictions on the
repatriation of their currencies. Other countries have previously instituted
currency exchange controls in the past during periods of serious imbalance in
their balance of payments or upon the occurrence of other destabilizing events.
Exchange control regulations may restrict the Fund's ability to convert
investment income, capital, or the proceeds of securities into U.S. dollars. As
of March 31, 1999 the Fund has investments with a value of approximately $2
million in countries with restrictions on the repatriation of their currencies
or formal exchange controls currently in place.
25
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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.
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. DEFERRED TAXES:
Deferred taxes are recorded for estimated tax liabilities inherent in the Fund's
portfolio securities which may arise from subsequent sales of those securities
and asset repatriations from countries that impose such taxes.
g. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
At March 31, 1999, there were 100,000,000 shares authorized ($0.01 par value).
During 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. During the year ended March 31, 1998, 95,954 shares were
issued for $1,163,922 from reinvested distributions.
26
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (continued)
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. TAML pays TICI a sub-advisory 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 Services 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
At March 31, 1999, the net unrealized depreciation based on the cost of
investments for income tax purposes of $60,263,679 was as follows:
Unrealized appreciation..................................... $ 5,254,111
Unrealized depreciation..................................... (13,808,954)
------------
Net unrealized depreciation................................. $ (8,554,843)
=============
Net realized capital losses differ for financial statement and tax purposes
primarily due to differing tax treatments of wash sales, passive foreign
investment companies, and losses realized subsequent to October 31, on the sale
of securities.
At March 31, 1999, the Fund had tax basis capital losses of $400,000 which may
be carried over to offset future capital gains. Such losses expire March 31,
2007.
At March 31, 1999, the Fund has deferred capital losses occurring subsequent to
October 31, 1998 of $1,218,000. For tax purposes, such losses will be reflected
in the year ending March 31, 2000.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended March 31, 1999 aggregated $24,126,657 and $19,684,111,
respectively.
27
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Templeton Emerging Markets Appreciation Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Templeton Emerging Markets Appreciation Fund,
Inc. as of March 31, 1999, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended and the financial highlights for the periods indicated in
the accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton Emerging Markets Appreciation Fund, Inc. as of March 31, 1999, the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
/s/MCGLADREY & PULLEN, LLP
New York, New York
April 30, 1999
28
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.
29
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 the 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 on 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 full 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 or otherwise on the
open market, each participant will pay a pro rata portion of trading fees.
Trading fees will be deducted from amounts to be invested.
30
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
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 one
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.
31
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
TAX DESIGNATION
At March 31, 1999, more than 50% of the Templeton Emerging Markets Appreciation
Fund, Inc.'s total assets were invested in securities of foreign issuers. In
most instances, foreign taxes were withheld from dividends paid to the fund on
these investments. As in prior years, the Fund intends to make an election under
Section 853 of the Internal Revenue Code. This election will allow shareholders
to treat their proportionate share of foreign taxes paid by the Fund as having
been paid directly by them.
In January 2000, shareholders will receive Form 1099-DIV, which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 1999.
32
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
TAX DESIGNATION (continued)
The following table provides a breakdown by country of foreign source income and
foreign taxes paid to shareholders in May 1999.
<TABLE>
<CAPTION>
FOREIGN TAXES FOREIGN SOURCE
COUNTRY WITHHELD PER SHARE INCOME PER SHARE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Argentina................................................... $0.0000 $0.0629
Bermuda..................................................... 0.0000 0.0004
Brazil...................................................... 0.0076 0.1039
Bulgaria.................................................... 0.0000 0.0026
Chile....................................................... 0.0008 0.0022
China....................................................... 0.0000 0.0018
Colombia.................................................... 0.0000 0.0026
Czech Republic.............................................. 0.0000 0.0002
Ecuador..................................................... 0.0000 0.0272
Ghana....................................................... 0.0000 0.0002
Greece...................................................... 0.0000 0.0174
Hong Kong................................................... 0.0000 0.0144
Hungary..................................................... 0.0000 0.0001
India....................................................... 0.0000 0.0029
Indonesia................................................... 0.0002 0.0168
Israel...................................................... 0.0002 0.0006
Jordan...................................................... 0.0000 0.0003
Luxembourg.................................................. 0.0000 0.0004
Malaysia.................................................... 0.0000 0.0076
Mexico...................................................... 0.0002 0.0862
Pakistan.................................................... 0.0005 0.0024
Panama...................................................... 0.0000 0.0049
Peru........................................................ 0.0000 0.0027
Philippines................................................. 0.0005 0.0133
Poland...................................................... 0.0001 0.0051
Portugal.................................................... 0.0001 0.0003
Russia...................................................... 0.0000 0.0194
Singapore................................................... 0.0000 0.0062
Slovakia.................................................... 0.0003 0.0012
South Africa................................................ 0.0000 0.0160
South Korea................................................. 0.0016 0.0068
Sri Lanka................................................... 0.0000 0.0002
Thailand.................................................... 0.0002 0.0018
Trinidad and Tobago......................................... 0.0000 0.0039
Turkey...................................................... 0.0000 0.0565
United Kingdom.............................................. 0.0000 0.0016
Venezuela................................................... 0.0001 0.0473
Zimbabwe.................................................... 0.0001 0.0005
--------------------------------------
TOTAL....................................................... $0.0125 $0.5408
======================================
</TABLE>
33
PAGE
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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 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
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 (1)
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund (1)
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 Valuemark(R)
Franklin Templeton Valuemark Income Plus (an immediate annuity)
1. These funds are now 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
NALAC Financial Plans, LLC. The Franklin Valuemark Funds are managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
04/99
PAGE
[GRAPHIC OF BEN FRANKLIN (TM)]
FRANKLIN(R)TEMPLETON(R)
Templeton Emerging Markets Appreciation Fund, Inc.
100 Fountain Parkway, P.O. Box 33030
St. Petersburg, FL 33733-8030
ANNUAL REPORT
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
AUDITORS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
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. 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 A99 05/99 [RECYCLE LOGO] Printed on recycled paper
