Annual
Report
March 31, 2000
Templeton Emerging Markets
Appreciation Fund, Inc.
[FRANKLIN TEMPLETON LOGO]
PAGE
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective, and remember that all securities markets move
both up and down, as do fund share prices. We appreciate your past support and
look forward to serving your investment needs in the years to come.
[PHOTO OF MARK MOBIUS APPEARS HERE]
Mark Mobius
PRESIDENT
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
Mark 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
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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.
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Dear Shareholder:
This annual report of Templeton Emerging Markets Appreciation Fund covers the 12
months ended March 31, 2000. During this period, stock markets in many emerging
market countries rose as several of these nations experienced economic growth.
The creditworthiness of bond issuers, particularly that of sovereign
governments, also generally improved during the reporting period as many
countries benefited from rising commodity prices. Also, in response to past
financial crises, many governments implemented and generally adhered to prudent
economic policies and regained access to external financial support. However,
other emerging market countries faced economic and political challenges,
resulting in declining stock and bond prices.
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the Fund's Statement of Investments (SOI), which is a complete
listing of the Fund's portfolio holdings, including dollar value and number of
shares or principal amount. The SOI begins on page 9.
CONTENTS
<TABLE>
<S> <C>
Shareholder Letter ...................................... 1
Performance Summary ..................................... 6
Important Notice to
Shareholders ............................................ 7
Financial Highlights &
Statement of Investments ................................ 8
Financial Statements .................................... 18
Notes to Financial
Statements .............................................. 21
Independent Auditors'
Report .................................................. 24
Tax Designation ......................................... 25
</TABLE>
[PYRAMID GRAPHIC]
Global
Growth
Growth & Income
Income
Tax-Free Income
PAGE
ASSET ALLOCATION
Based on Total Net Assets
03/31/00
[PIE CHART GRAPHIC]
Equity 61.5%
Fixed-Income Securities 35.4%
Short-Term Investments & Other Net Assets 3.1%
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
03/31/00
[PIE CHART GRAPHIC]
Latin America 45.8%
Asia 24.9%
Europe 18.9%
Mid-East/Africa 7.3%
Short-Term Investments & Other Net Assets 3.1%
In Asia, many emerging market countries experienced significant economic
recovery. China's agreement with the U.S. concerning possible membership in the
World Trade Organization was an encouraging development, and Disney(R) Corp.'s
decision to build a theme park in Hong Kong helped to boost the local economy
and contributed to a rise in its securities markets. For much of the reporting
period, Thailand's economy had been recovering more slowly than the economies of
many other Asian countries. However, late in the period, Thailand's economy
seemed poised to start catching up. While there has been concern about political
turmoil and the pace of reform, economic growth began to exceed expectations,
inflation was low, and growing imports indicated a robust level of domestic
consumption. In addition, the Thai government passed legislation opening up the
economy to more foreign economic participation. These developments culminated in
the International Monetary Fund's announcement that the country will not need to
renew its US$17 billion loan package as scheduled in June 2000.
During the reporting period, many Latin American countries also enjoyed economic
growth. The release of stronger-than-expected economic data concerning Mexico,
the successful conclusion of this country's first primary election in over half
a century, and the approval of a US$1 billion "Fund to Strengthen the State"
contributed to increased investor confidence in that nation. Announcement of
plans by Mexico's government to invest almost US$1.5 billion in its energy
sector also assisted in boosting market sentiment even further. In Brazil, the
government's reform drive regained momentum and, combined with
better-than-expected economic data, helped to strengthen investor confidence
there. Investor confidence in South Africa also rose as the government announced
plans to accelerate the reform of state industries. A
2
PAGE
compromise with the European Union (EU) allowing free-trade talks to resume, and
a budget incorporating a lower-than-expected deficit, as well as a schedule to
reduce inflation and ease foreign exchange controls, also contributed to
positive market sentiment about South Africa.
Throughout the period, the EU played a dominant role in the development of many
Eastern European countries. Vying to be included in the next list of EU
candidates, Poland, Slovakia, Hungary and the Czech Republic adopted economic
measures in efforts to meet EU standards. Despite international concern about
the ongoing military campaign in Chechnya, which led to sanctions by the
European Union, Russia's markets performed well. On December 31, 1999, Boris
Yelstin announced his resignation and appointed Prime Minister Vladimir Putin as
acting president. On March 26, 2000, Putin was formally elected to the office of
president.
Within this environment, Templeton Emerging Markets Appreciation Fund produced a
+13.50% one-year cumulative total return in market-price terms for the period
ended March 31, 2000, 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 +29.27%. The Morgan Stanley Capital International(R) (MSCI) Emerging
Markets Free Index and J.P. Morgan Emerging Markets Bond Index Plus (EMBI+)
returned 51.59% and 29.05%, respectively, during the same period.(1)
During the 12 months under review, we made a number of changes to the Fund's
portfolio in order to take advantage of what we believed were bargains to be
found elsewhere. We sold our
(1) Source: Standard & Poor's Micropal (MSCI); J.P. Morgan. The MSCI Emerging
Markets Free Index measures the performance of securities located in 25 emerging
market countries in regions such as Latin America, Eastern Europe, and Asia. The
J.P. Morgan EMBI+ tracks total returns for external debt instruments in 16
emerging market countries. Market returns are measured in U.S. dollars. One
cannot invest directly in an index, nor is an index representative of the Fund's
portfolio.
TOP 10 COUNTRIES
REPRESENTED IN THE FUND*
3/31/00
% OF TOTAL
COUNTRY NET ASSETS
----------------------------
Brazil 16.7%
Mexico 13.8%
Turkey 7.7%
Argentina 6.8%
South Africa 5.1%
Hong Kong 4.8%
Venezuela 4.7%
South Korea 4.6%
Thailand 4.6%
Indonesia 4.0%
* Excludes short-term investments and other net assets.
3
PAGE
TOP 10 HOLDINGS
03/31/00
COMPANY, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
------------------------------------------------
Telefonos de Mexico SA
(Telmex), Series L, ADR,
Telecommunications, Mexico 5.0%
Republic of Venezuela,
9.25%, 9/15/27,
Government Bonds,
Venezuela 2.8%
Korea Electric Power Corp.,
Utilities Electrical & Gas,
South Korea 2.5%
Republic of Brazil,
14.50%, 10/15/09,
Government Bonds, Brazil 2.5%
Republic of Turkey,
144A, 10.00%, 9/19/07,
Government Bonds, Turkey 1.9%
United Mexican States,
9.875%, 1/15/07,
Government Bonds, Mexico 1.8%
CEZ AS,
Utilities Electrical & Gas,
Czech Republic 1.8%
Republic of Turkey,
11.875%, 1/15/30,
Government Bonds, Turkey 1.7%
Centrais Eletricas
Brasileiras SA (Eletrobras),
B, pfd.,
Utilities Electrical & Gas, Brazil 1.4%
Republic of Brazil,
10.125%, 5/15/27,
Government Bonds, Brazil 1.4%
positions in Ghana and Zimbabwe and initiated holdings in Taiwan, Estonia,
Croatia and Greece. In March, Moody's Investors Service, an independent credit
rating agency, upgraded Mexican debt to an investment grade rating. We sold some
of our Mexican bond holdings for a profit and used the proceeds to purchase debt
securities from Argentina, Brazil and Venezuela.
Looking forward, we are optimistic about emerging markets and Templeton Emerging
Markets Appreciation Fund over the long term. We believe that economic recovery
and growth in emerging markets could continue, with some corrections, for the
next several years, and that equity markets of many developing countries may
continue to perform well. As for bonds, we expect the recent positive trend in
credit fundamentals of emerging market countries to continue. However, given the
possibility of market volatility in the near term, we will continue to pursue a
defensive credit and duration posture. In general, our focus will continue to be
on bonds from countries we believe are making structural reform progress and
adhering to responsible fiscal and monetary management policies. In our opinion,
the underlying value of securities from such countries may increase as a result
of better economic performance and improved creditworthiness.
Of course, investing in foreign securities involves special risks, such as
adverse economic, social and political developments in 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
4
PAGE
consequences of severe market corrections. For example, Mexico's equity market
has increased 4,412% in the last 15 years, but has suffered eight declines of
more than 15% during that time.(2) 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.
We thank you for your participation in Templeton Emerging Markets Appreciation
Fund, welcome your comments and suggestions, and look forward to serving your
future investment needs.
Sincerely,
/s/MARK MOBIUS
MARK MOBIUS
President
Templeton Emerging Markets Appreciation Fund, Inc.
(2). Source: Mexico Bolsa Index. Based on quarterly percentage price change over
15 years ended March 31, 2000. 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.
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This discussion reflects our views, opinions and portfolio holdings as of March
31, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change depending
on market and economic conditions. Although historical performance does not
guarantee future results, these insights may help you understand our investment
and management philosophy.
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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.
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.
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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.
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ONE-YEAR PERFORMANCE SUMMARY
AS OF 3/31/00
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.
PERFORMANCE
One-Year Total Return +29.27% (Based on change in Net Asset Value)
+13.50% (Based on change in Market Price)
Net Asset Value (NAV) $14.48 (3/31/00) $11.73 (3/31/99)
Change in NAV +$2.75
Market Price (NYSE) $10.50 (3/31/00) $9.6875 (3/31/99)
Change in Market Price +$0.8125
Distributions (4/1/99-3/31/00) Dividend Income $0.5532
ADDITIONAL PERFORMANCE
Inception
1-Year 5-Year (4/29/94)
---------------------------------------------------------------------
Cumulative Total Return(1)
Based on change in
net asset value +29.27% +75.48% +55.52%
Based on change in
market price +13.50% +22.01% +8.28%
Average Annual Total Return(2)
Based on change in
net asset value +29.27% +11.90% +7.78%
Based on change in
market price +13.50% +4.06% +1.36%
Past performance does not guarantee future results.
For updated performance figures, please call Franklin Templeton at
1-800/342-5236.
6
PAGE
IMPORTANT NOTICE TO SHAREHOLDERS
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ADOPTION OF DEFINITIONS OF "EMERGING MARKET" AND "EMERGING MARKET COMPANY." The
Fund's Board of Directors uses the following 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; or (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. The Board
of Directors may change these definitions without shareholder approval.
INVESTMENT OF CASH BALANCES. The U.S. Securities and Exchange Commission 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.
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7
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TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------
2000+ 1999 1998 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year...................... $11.73 $13.35 $15.17 $13.41 $12.05
------------------------------------------------------------
Income from investment operations:
Net investment income.................................. .49 .56 .56 .62 .69
Net realized and unrealized gains (losses)............. 2.81 (1.77) (.23) 2.27 1.64
------------------------------------------------------------
Total from investment operations........................ 3.30 (1.21) .33 2.89 2.33
------------------------------------------------------------
Less distributions from:
Net investment income.................................. (.55) (.41) (.72) (.51) (.86)
Net realized gains..................................... -- -- (1.24) (.62) (.11)
In excess of net realized gains........................ -- -- (.19) -- --
------------------------------------------------------------
Total distributions..................................... (.55) (.41) (2.15) (1.13) (.97)
------------------------------------------------------------
Net asset value, end of year............................ $14.48 $11.73 $13.35 $15.17 $13.41
============================================================
Total Return
Based on market value per share........................ 13.50% (19.96)% 15.12% .40% 15.57%
Based on net asset value per share..................... 29.27% (8.34)% 3.31% 22.40% 19.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)......................... $63,505 $51,433 $58,520 $65,075 $57,516
Ratios to average net assets:
Expenses............................................... 1.88% 1.90% 1.88% 1.83% 1.64%
Net investment income.................................. 3.54% 4.97% 3.76% 4.29% 5.29%
Portfolio turnover rate................................. 54.73% 42.68% 74.67% 114.78% 26.92%
</TABLE>
+Based on average weighted shares outstanding.
See Notes to Financial Statements.
8
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2000
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 53.1%
AEROSPACE & MILITARY TECHNOLOGY .2%
Empresa Brasileira de Aeronautica SA........................ Brazil 21,000 $ 107,708
-----------
APPLIANCES & HOUSEHOLD DURABLES .6%
Arcelik AS, Br. ............................................ Turkey 6,475,833 362,853
-----------
AUTOMOBILES
*Ford Otomotiv Sanayi AS.................................... Turkey 161,000 8,064
*GAZ Auto Works............................................. Russia 150 6,075
-----------
14,139
-----------
BANKING 7.5%
Akbank...................................................... Turkey 41,721,552 779,246
Banco de Galicia y Buenos Aires SA, B....................... Argentina 7,200 36,520
*Bangkok Bank Public Co. Ltd. .............................. Thailand 79,500 82,002
*Bangkok Bank Public Co. Ltd., fgn. ........................ Thailand 6,340 10,899
Bank Austria AG............................................. Austria 7,880 383,805
*Bank Polska Kasa Opieki Grupa Pekao SA..................... Poland 2,500 33,600
Bank Rozwoju Eksportu SA.................................... Poland 2,830 102,112
Bank Slaski SA W Katowicach................................. Poland 3,630 240,857
Commercial International Bank Ltd. ......................... Egypt 4,000 47,504
DBS Group Holdings Ltd. .................................... Singapore 4,163 55,004
*Grupo Financiero Banamex Accival SA de CV.................. Mexico 144,910 663,579
*Grupo Financiero Bancomer SA de CV......................... Mexico 517,500 292,178
Hana Bank................................................... South Korea 3,400 20,764
*Hansabank Ltd. ............................................ Estonia 7,700 65,622
HSBC Holdings PLC........................................... Hong Kong 14,463 169,028
OTP Bank.................................................... Hungary 1,950 105,171
Oversea Chinese Banking Corp. Ltd. ......................... Singapore 35,950 222,783
*Thai Farmers Bank Public Co. Ltd. ......................... Thailand 585,200 530,100
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 309,300 341,531
*Turkiye Garanti Bankasi AS................................. Turkey 8,968,000 114,203
Unibanco Uniao de Bancos Brasileiros SA, GDR................ Brazil 4,690 148,908
United Overseas Bank Ltd., fgn. ............................ Singapore 41,200 252,909
Yapi Ve Kredi Bankasi AS.................................... Turkey 1,985,000 53,084
-----------
4,751,409
-----------
BEVERAGES & TOBACCO 1.9%
Austria Tabak AG............................................ Austria 640 24,497
Bavaria SA.................................................. Colombia 3,400 14,850
Coca Cola Femsa SA de CV, Series L, ADR..................... Mexico 2,350 43,622
Fomento Economico Mexicano SA de CV Femsa................... Mexico 1,590 71,550
Fraser and Neave Ltd. ...................................... Singapore 109,300 311,829
Grupo Modelo SA de CV, C.................................... Mexico 21,500 46,053
PT Gudang Garamm............................................ Indonesia 46,000 87,807
</TABLE>
9
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BEVERAGES & TOBACCO (CONT.)
Quilmes Industrial SA, ADR.................................. Argentina 12,800 $ 134,400
South African Breweries PLC................................. South Africa 56,760 433,614
Tabak AS.................................................... Czech Republic 60 10,806
-----------
1,179,028
-----------
BUILDING MATERIALS & COMPONENTS 1.8%
Akcansa Cimento Sanayi Ve Ticaret AS........................ Turkey 500,000 10,188
Associated Cement Companies Ltd. ........................... India 6,600 21,251
Cementos Argos SA........................................... Colombia 64,600 150,148
Cemex SA.................................................... Mexico 128,354 582,233
*PT Indocement Tunggal Prakarsa............................. Indonesia 95,000 35,139
PT Semen Gresik (Persero), TBK.............................. Indonesia 98,740 112,827
*Siam Cement Public Co. Ltd., fgn. ......................... Thailand 9,330 227,019
Suez Cement Co. ............................................ Egypt 900 12,131
-----------
1,150,936
-----------
CHEMICALS .9%
Borsodchem RT............................................... Hungary 4,650 180,688
Israel Chemicals Ltd. ...................................... Israel 9,000 11,475
Reliance Industries Ltd. ................................... India 10,150 73,207
*Slovnaft AS................................................ Slovak Republic 8,000 128,517
Tiszai Vegyi Kombinat RT.................................... Hungary 9,550 175,109
-----------
568,996
-----------
CONSTRUCTION & HOUSING .1%
*Italian-Thai Development Public Co. Ltd., fgn. ............ Thailand 27,300 19,856
YTL Corp. Bhd. ............................................. Malaysia 7,000 13,263
-----------
33,119
-----------
DATA PROCESSING & REPRODUCTION 1.6%
Comparex Holdings Ltd. ..................................... South Africa 2,500 4,450
Elron Electronic Industries Ltd. ........................... Israel 1,130 42,662
Formula Systems Ltd. ....................................... Israel 2,550 158,127
*Fundtech Ltd. ............................................. Israel 3,080 80,080
*Graphisoft NV.............................................. Hungary 100 2,057
*Korea Data Systems......................................... South Korea 7,050 77,182
Legend Holdings Ltd. ....................................... Hong Kong 16,000 24,966
*Mashov Computers Ltd. ..................................... Israel 1,700 13,548
NIIT Ltd. .................................................. India 2,660 125,115
Optimus SA, D............................................... Poland 1,350 82,383
Prokom Software SA.......................................... Poland 5,540 304,536
*Technomatix Technologies Ltd. ............................. Israel 443 19,215
*Vocaltec Communications Ltd. .............................. Israel 3,030 88,249
-----------
1,022,570
-----------
</TABLE>
10
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ELECTRICAL & ELECTRONICS 1.5%
Creative Technology Ltd. ................................... Singapore 1,150 $ 36,507
Empresa Nacional de Electricidad SA, ADR.................... Chile 3,991 43,402
*Orbotech Ltd. ............................................. Israel 590 50,150
Phoenixtec Power Co. Ltd. .................................. Taiwan 5,000 11,502
Samsung Electronics Co. Ltd. ............................... South Korea 1,876 568,613
Samsung SDI Co. Ltd. ....................................... South Korea 2,725 101,086
*Shin Corporations Public Company Ltd., fgn. ............... Thailand 16,700 121,904
*Sunplus Technology Company Ltd. ........................... Taiwan 4,000 25,501
*Tower Semiconductor Ltd. .................................. Israel 480 10,920
-----------
969,585
-----------
ELECTRONIC COMPONENTS & INSTRUMENTS .7%
*China Aerospace International Holdings Ltd. ............... Hong Kong 229,000 72,790
*Crystal Systems Solutions Ltd. ............................ Israel 710 9,718
*Galileo Technology Ltd. ................................... Israel 13,940 254,405
*Opto Technology Corp. ..................................... Taiwan 5,000 9,448
*Via Technologies Inc. ..................................... Taiwan 7,000 104,666
-----------
451,027
-----------
ENERGY SOURCES 2.2%
*Gas Authority Of India Ltd., GDR........................... India 2,000 15,100
Hindustan Petroleum Corporation Ltd. ....................... India 2,500 7,554
*Hub Power Co. Ltd. ........................................ Pakistan 259,000 140,243
Lukoil Holdings, ADR........................................ Russia 2,640 155,760
Mol Magyar Olay-Es Gazipari RT.............................. Hungary 7,290 141,568
OMV AG...................................................... Austria 2,020 154,480
*PC Holdings SA, B.......................................... Argentina 197,704 340,204
*Polski Koncern Naftowy SA.................................. Poland 14,800 82,431
*PTT Exploration & Production Public Co. Ltd., fgn. ........ Thailand 10,400 53,637
Sasol Ltd. ................................................. South Africa 42,800 266,805
SK Corp. ................................................... South Korea 1540 35,531
-----------
1,393,313
-----------
FINANCIAL SERVICES .2%
*African Bank Investments Ltd. ............................. South Africa 17,900 37,879
BOE Ltd. ................................................... South Africa 62,020 51,833
*Old Mutual PLC............................................. South Africa 21,020 49,964
-----------
139,676
-----------
FOOD & HOUSEHOLD PRODUCTS 1.9%
Chareon Pokphand Feedmill Public Co. Ltd., fgn. ............ Thailand 82,810 315,383
*Grupo Bimbo SA de CV, A.................................... Mexico 21,000 35,072
Mavesa SA, ADR.............................................. Venezuela 944 2,478
*PT Indofoods Sukses Makmurr................................ Indonesia 262,500 199,389
San Miguel Corp., B......................................... Philippines 194,200 228,998
</TABLE>
11
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
FOOD & HOUSEHOLD PRODUCTS (CONT.)
Serm Suk Public Co. Ltd., fgn. ............................. Thailand 1,300 $ 5,604
Tiger Brands Ltd. .......................................... South Africa 19,273 200,239
Vitro SA.................................................... Mexico 118,000 188,424
-----------
1,175,587
-----------
FOREST PRODUCTS & PAPER 1.8%
*Aracruz Celulose SA, ADR................................... Brazil 18,100 383,494
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 13,490 99,489
Mayr-Melnhof Karton AG...................................... Austria 463 23,308
Nampak Ltd. ................................................ South Africa 50,808 117,996
*PT Indah Kiat Pulp & Paper Corp. .......................... Indonesia 951,500 314,234
*PT Tjiwi Kimia TBK......................................... Indonesia 60,500 14,386
Sappi Ltd. ................................................. South Africa 20,827 161,015
-----------
1,113,922
-----------
HEALTH & PERSONAL CARE .6%
Gedeon Richter Ltd. ........................................ Hungary 4,270 280,754
Pliva D D, GDR, Reg S....................................... Croatia 300 4,598
Teva Pharmaceutical Industries Ltd., ADR.................... Israel 2,280 85,073
-----------
370,425
-----------
INDUSTRIAL COMPONENTS
Madeco Manufacturera de Cobre SA, ADR....................... Chile 710 7,810
-----------
INSURANCE .4%
Compania Suramericana de Inversiones SA..................... Colombia 31,706 32,717
Fedsure Holdings Ltd. ...................................... South Africa 14,800 84,797
Liberty Life Association of Africa Ltd. .................... South Africa 14,028 133,957
Warta SA.................................................... Poland 174 7,753
-----------
259,224
-----------
LEISURE & TOURISM .2%
Genting Bhd. ............................................... Malaysia 3,000 12,474
*Hong Kong & Shanghai Hotels Ltd. .......................... Hong Kong 9,000 4,594
Kersaf Investments Ltd. .................................... South Africa 4,900 17,369
*Orbis SA................................................... Poland 4,600 43,221
Overseas Union Enterprise Ltd. ............................. Singapore 14,200 37,025
Resorts World Bhd. ......................................... Malaysia 7,000 23,211
Shangri-La Asia Ltd. ....................................... Hong Kong 8,000 8,990
-----------
146,884
-----------
</TABLE>
12
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MACHINERY & ENGINEERING .3%
*Samsung Heavy Industries Co. Ltd. ......................... South Korea 28,894 $ 105,354
Sembcorp Marine Ltd. ....................................... Singapore 98,000 83,648
Tata Engineering & Locomotive Co. .......................... India 5,900 18,320
-----------
207,322
-----------
MERCHANDISING .3%
Dairy Farm International Holdings Ltd. ..................... Hong Kong 118,350 75,744
Siam Makro Public Company Ltd., fgn. ....................... Thailand 45,200 57,860
*Tansas Izmir Buyuksehir Belediyesi Ic Ve Dis............... Turkey 25,000 5,412
*Wal-Mart de Mexico SA de CV, V............................. Mexico 24,378 57,787
-----------
196,803
-----------
METALS & MINING 2.2%
Anglo American PLC.......................................... South Africa 17,382 802,573
Companhia Siderurgica Nacional Sid Nacional CSN............. Brazil 660,000 23,298
Iscor Ltd. ................................................. South Africa 63,621 170,110
Natsteel Ltd. .............................................. Singapore 141,000 329,728
Palabora Mining Co. Ltd. ................................... South Africa 3,800 17,708
PT Timah TBK................................................ Indonesia 178,500 73,098
-----------
1,416,515
-----------
MISC MATERIALS & COMMODITIES .2%
De Beers/Centenary Linked Units, Reg. ...................... South Africa 3,740 87,428
*Golden Agri-Resources Ltd. ................................ Singapore 105,000 22,713
Golden Hope Plantations Bhd. ............................... Malaysia 8,000 7,495
IOI Corp. Bhd. ............................................. Malaysia 20,000 14,526
-----------
132,162
-----------
MULTI-INDUSTRY 6.5%
Barlow Ltd. ................................................ South Africa 48,340 319,805
CG Smith Ltd. .............................................. South Africa 104,930 1,603
Cheung Kong Holdings Ltd. .................................. Hong Kong 54,000 807,937
China Resources Enterprises Ltd. ........................... China 8,000 10,993
Citic Pacific Ltd. ......................................... Hong Kong 141,000 854,710
Clal Industries Ltd. ....................................... Israel 1,217 14,851
*DESC SA de CV DESC, B...................................... Mexico 47,500 34,700
*Dimension Data Holdings Ltd. .............................. South Africa 1,250 11,096
*Dogan Sirketler Grubu Holding AS........................... Turkey 6,236,000 227,649
Egis RT..................................................... Hungary 796 39,511
Elektrim SA................................................. Poland 14,550 211,406
Haci Omer Sabanci Holding AS................................ Turkey 8,714,560 159,065
*Haci Omer Sabanci Holding AS., rts., 4/06/00............... Turkey 3,856,000 91,661
Hutchison Whampoa Ltd. ..................................... Hong Kong 21,000 378,925
ITC Ltd. ................................................... India 3,500 58,996
Jardine Matheson Holdings Ltd. ............................. Hong Kong 72,670 281,960
Koc Holding AS.............................................. Turkey 115,000 25,384
</TABLE>
13
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY (CONT.)
Koor Industries Ltd. ....................................... Israel 831 $ 77,193
*P.T. Astra International, wts., 12/31/03................... Indonesia 163,229 58,960
Rembrandt Group Ltd. ....................................... South Africa 22,400 198,503
Sembcorp Industries Ltd. ................................... Singapore 55,336 56,290
SIME Darby Bhd. ............................................ Malaysia 12,000 15,663
Tongaat-Hulett Group Ltd. .................................. South Africa 9,400 46,677
United Industrial Corporation Ltd. ......................... Singapore 342,000 143,958
-----------
4,127,496
-----------
REAL ESTATE .2%
*Filinvest Development Corp. ............................... Philippines 39,000 1,574
First Capital Corp. Ltd. ................................... Singapore 1,200 1,024
Hang Lung Development Co. Ltd. ............................. Hong Kong 112,000 92,057
Henderson China Holdings Limited............................ Hong Kong 2,000 950
Hong Kong Land Holdings Ltd. ............................... Hong Kong 35,400 49,206
*Land and House Public Co. Ltd., fgn. ...................... Thailand 21,356 12,285
-----------
157,096
-----------
TELECOMMUNICATIONS 13.3%
*Advanced Info Service Public Co. Ltd., fgn................. Thailand 4,700 70,854
BEC World Public Co Ltd., fgn. ............................. Thailand 18,520 136,169
Cable & Wireless HKT Ltd. .................................. Hong Kong 86,400 226,361
*Cesky Telecom AS........................................... Czech Republic 1,550 34,074
*China Telecom HK Ltd. ..................................... China 21,000 184,069
Cia de Telecomunicaciones de Chile SA, ADR.................. Chile 23,246 528,847
Compania Anonima Nacional Telefonos de Venezuela, ADR....... Venezuela 13,190 382,510
ECI Telecom Ltd. ........................................... Israel 2,320 72,790
Eesti Telekom AS, GDR, Reg S................................ Estonia 550 15,262
Hellenic Telecommunications Organization SA................. Greece 110 3,127
*Jasmine International Public Co. Ltd., fgn. ............... Thailand 14,000 8,979
Mahanagar Telephone Nigam Ltd. ............................. India 10,500 56,588
Pakistan Telecommunications Corp. PTC, A.................... Pakistan 305,000 193,068
Philippine Long Distance Telephone Co., ADR................. Philippines 17,580 385,661
PT Indosat.................................................. Indonesia 96,000 163,593
PT Telekomunikasi Indonesia (Persero), B.................... Indonesia 1,489,780 723,242
*Rostelecom, ADR............................................ Russia 13,690 325,138
Singapore Telecommunications Ltd. .......................... Singapore 2,000 2,853
Smartone Telecommunications Holdings Ltd. .................. Hong Kong 8,000 29,230
Telecom Argentina Stet-France SA, (Teco), B, ADR............ Argentina 19,098 663,656
*Telecomasia Corp. Public Co. Ltd., fgn. ................... Thailand 170,000 281,010
Telefonica del Peru SA, ADR................................. Peru 7,000 119,000
Telefonos de Mexico SA (Telmex), Series L, ADR.............. Mexico 47,160 3,159,720
Telekom Malaysia Bhd. ...................................... Malaysia 3,000 12,316
Telekomunikacja Polska SA................................... Poland 28,000 256,302
*Total Access Communication Public Co. Ltd. ................ Thailand 88,500 283,200
*TTI Team Telecom International Ltd. ....................... Israel 1100 36,300
</TABLE>
14
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TELECOMMUNICATIONS (CONT.)
TV Azteca SA de CV, ADR..................................... Mexico 100 $ 1,475
*United Communications Industries, fgn. .................... Thailand 42,000 45,821
*Vimpel Communications, ADR................................. Russia 312 13,202
-----------
8,414,417
-----------
TRANSPORTATION .4%
Keppel Corp., Ltd. ......................................... Singapore 112,600 264,631
*Thai Airways International Public Co. Ltd., fgn. .......... Thailand 5,900 6,866
-----------
271,497
-----------
UTILITIES ELECTRICAL & GAS 5.6%
BSES Ltd. .................................................. India 981 5,350
*CEZ AS..................................................... Czech Republic 362,450 1,156,776
Electricidad de Caracas SAICA SACA, ADR..................... Venezuela 28,030 395,924
*Electricity Generating Public Company Ltd., fgn. .......... Thailand 7,000 8,238
Enersis SA, ADR............................................. Chile 1,863 37,842
Korea Electric Power Corp. ................................. South Korea 56,210 1,602,004
Mosenergo, ADR.............................................. Russia 5,270 35,572
Mosenergo, GDR.............................................. Russia 13,300 85,015
Nafta Gbely AS.............................................. Slovak Republic 960 7,050
Transportadora de Gas del Sur SA, B, ADR.................... Argentina 1,090 9,265
Unified Energy Systems...................................... Russia 943,900 183,117
Unified Energy Systems, ADR................................. Russia 1,800 34,650
-----------
3,560,803
-----------
TOTAL COMMON STOCKS (COST $25,977,360)...................... 33,702,322
-----------
PREFERRED STOCKS 8.4%
Banco Bradesco SA, pfd. .................................... Brazil 27,159,344 223,812
*Celular CRT Participacoes SA, pfd.......................... Brazil 170,500 78,165
Centrais Eletricas Brasileiras SA (Electrobras), B, pfd. ... Brazil 46,926,000 900,872
Cia Cervejaria Brahma, pfd. ................................ Brazil 14,000 11,056
Cia Energetica de Minas Gerais (Cemig), Br., pfd. .......... Brazil 4,089,000 71,423
Cia Vale do Rio Doce, A, pfd. .............................. Brazil 21,340 580,888
Companhia Paranaense de Energia-Copel, B, pfd. ............. Brazil 12,004,000 101,466
*Companhia Riograndense de Telecom, A, pfd. ................ Brazil 193,000 87,375
Copene-Petroquimica do Nordeste SA, A, pfd. ................ Brazil 45,000 15,499
Electropaulo Metropolitana SA, pfd. ........................ Brazil 993,000 74,318
Embratel Participacoes SA, pfd. ............................ Brazil 3,264,000 83,050
Investimentos Itau SA, pfd. ................................ Brazil 632,200 615,897
Investimentos Itau SA, pfd., new............................ Brazil 59,556 56,345
Petroleo Brasileiro SA, pfd. ............................... Brazil 1,349,000 364,887
*Siam Commercial Bank, cvt., 144A, 5.25%, fgn., pfd. ....... Thailand 364,700 291,779
Tele Centro Sul Participacoes SA, pfd. ..................... Brazil 24,420,000 397,157
</TABLE>
15
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (CONT.)
Telecomunicacoes de Sao Paulo SA, ADR, pfd. ................ Brazil 18,950 $ 562,578
Tele Norte Leste Participacoes SA, pfd. .................... Brazil 20,808,000 556,867
Tele Sudeste Celular Participacoes SA, pfd. ................ Brazil 30,679,000 309,076
-----------
TOTAL PREFERRED STOCKS (COST $4,688,618).................... 5,382,510
-----------
<CAPTION>
PRINCIPAL
AMOUNT**
-----------
<S> <C> <C> <C>
BONDS - CORPORATE 6.3%
Astra Overseas Finance NV, Reg S, FRN:
Series I, 6.688%, 12/31/01................................ Netherlands $ 26,000 22,620
Series II, 6.688%, 6/30/05................................ Netherlands 89,000 66,305
*Series III, zero cpn., 6/30/06........................... Netherlands 113,000 44,070
Banco Nacional Obra Serv., 9.625%, 11/15/03................. Mexico 125,000 127,500
Bepensa SA, 144A, 9.75%, 9/30/04............................ Mexico 270,000 253,125
Cellco Finance NV, 144A, 15.00%, 8/01/05.................... Netherlands 300,000 326,760
Cemex SA, 144A, 10.75%, 7/15/00............................. Mexico 230,000 233,162
Companhia Paranaense de Energia-Copel, 9.75%, 5/02/05....... Brazil 200,000 198,480
+*Essar Steel Ltd., 144A, FRN, 8.025%, 7/20/99.............. India 30,000 20,700
Hanvit Bank, 144A, 12.75%, 3/01/10.......................... South Korea 400,000 414,000
Pera Financial Services, 144A, 9.375%, 10/15/02............. Turkey 300,000 289,500
Petroleos Mexicanos, 9.375%, 12/02/08....................... Mexico 200,000 206,000
Philippine Long Distance Telephone Co.:
10.625%, 6/02/04.......................................... Philippines 500,000 505,000
9.25%, 6/30/06............................................ Philippines 490,000 466,137
Protexa Construcciones SA de CV, 144A, 12.125%, 7/24/02..... Mexico 197,398 152,983
PT Indah Kiat Finance Mauritius Ltd., 144A, 10.00%,
7/01/07................................................... Indonesia 625,000 435,938
Tjiwi Kimia Int'l Finance Co. BV, 13.25%, 8/01/01........... Indonesia 250,000 227,500
-----------
TOTAL BONDS - CORPORATE (COST $4,295,471)................... 3,989,780
-----------
BONDS - GOVERNMENT & GOVERNMENT AGENCIES 29.1%
Minfin of Russia:
144A, 10.00%, 6/26/07..................................... Russia 810,000 608,209
Reg S, 10.00%, 6/26/07.................................... Russia 300,000 225,262
Republic of Argentina:
8.75%, 5/09/02............................................ Argentina 325,000 317,119
11.00%, 10/09/06.......................................... Argentina 225,000 222,750
11.75%, 4/07/09........................................... Argentina 805,000 795,944
11.375%, 3/15/10.......................................... Argentina 650,000 630,013
11.375%, 1/30/17.......................................... Argentina 300,000 292,687
9.75%, 9/19/27............................................ Argentina 990,000 858,825
Republic of Brazil:
11.625%, 4/15/04.......................................... Brazil 200,000 201,050
9.375%, 4/07/08........................................... Brazil 950,000 843,125
14.50%, 10/15/09.......................................... Brazil 1,440,000 1,571,040
FRN, 7.00%, 4/15/12....................................... Brazil 1,115,000 847,400
FRN, 5.75%, 4/15/24....................................... Brazil 500,000 327,500
10.125%, 5/15/27.......................................... Brazil 1,075,000 874,512
</TABLE>
16
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT** VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS - GOVERNMENT & GOVERNMENT AGENCIES (CONT.)
Republic of Bulgaria:
FRN, 7.0625%, 7/28/11..................................... Bulgaria $ 500,000 $ 398,440
Series A, FRN, 7.0625%, 7/28/24........................... Bulgaria 410,000 332,998
Republic of Columbia, 9.75%, 4/23/09........................ Colombia 300,000 280,371
Republic of Ecuador:
+144A, 11.25%, 4/25/02.................................... Ecuador 380,000 142,500
+Reg S, 11.25%, 4/25/02................................... Ecuador 670,000 251,250
Republic of Panama:
FRN, 7.0013%, 5/14/02..................................... Panama 192,324 190,401
9.375%, 4/01/29........................................... Panama 250,000 239,875
Republic of Peru, FRN, 4.50%, 3/07/17....................... Peru 200,000 133,750
Republic of Philippines, 9.875%, 3/16/10.................... Philippines 100,000 95,750
Republic of Turkey:
144A, 9.875%, 2/23/05..................................... Turkey 500,000 486,250
144A, 10.00%, 9/19/07..................................... Turkey 1,230,000 1,184,951
11.875%, 1/15/30.......................................... Turkey 1,000,000 1,061,250
Republic of Venezuela:
144A, 9.125%, 6/18/07..................................... Venezuela 280,000 226,800
Reg S, 9.125%, 6/18/07.................................... Venezuela 300,000 243,000
9.25%, 9/15/27............................................ Venezuela 2,660,000 1,758,094
SEI Holdings IX Inc., 144A, 11.00%, 11/30/00................ Trinidad and Tobago 210,000 210,000
United Mexican States:
9.75%, 4/06/05............................................ Mexico 250,000 262,813
9.875%, 1/15/07........................................... Mexico 1,120,000 1,173,480
8.625%, 3/12/08........................................... Mexico 825,000 806,231
11.375%, 9/15/16.......................................... Mexico 300,000 357,375
-----------
TOTAL BONDS - GOVERNMENT & GOVERNMENT AGENCIES (COST
$20,060,044).............................................. 18,451,015
-----------
SHORT TERM INVESTMENTS 1.5%
Den Danske Bank, 6.25%, 4/03/00, Time Deposit............... United States 371,000 371,000
U.S. Treasury Bills, 5.590% to 5.715% with maturities to
6/29/00................................................... United States 596,000 588,484
-----------
TOTAL SHORT TERM INVESTMENTS (COST $959,314)................ 959,484
-----------
TOTAL INVESTMENTS (COST $55,980,807) 98.4%.................. 62,485,111
OTHER ASSETS, LESS LIABILITIES 1.6%......................... 1,019,565
-----------
TOTAL NET ASSETS 100.0%..................................... $63,504,676
===========
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars.
+Represents defaulted bonds.
See Notes to Financial Statements.
17
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $55,980,807)..... $62,485,111
Cash....................................................... 950,282
Receivables:
Investment securities sold................................ 247,467
Dividends and interest.................................... 839,068
-----------
Total assets.......................................... 64,521,928
-----------
Liabilities:
Payables:
Investment securities purchased........................... 819,217
To affiliates............................................. 81,597
Accrued expenses........................................... 116,438
-----------
Total liabilities..................................... 1,017,252
-----------
Net assets, at value........................................ $63,504,676
===========
Net assets consist of:
Undistributed net investment income........................ $ 548,702
Net unrealized appreciation................................ 6,510,052
Accumulated net realized loss.............................. (4,552,143)
Capital shares............................................. 60,998,065
-----------
Net assets, at value........................................ $63,504,676
===========
Net asset value per share ($63,504,676 / 4,384,710 shares
outstanding).............................................. $14.48
===========
</TABLE>
See Notes to Financial Statements.
18
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $96,539)
Dividends.................................................. $ 939,976
Interest................................................... 2,339,060
-----------
Total investment income............................... $ 3,279,036
Expenses:
Management fees (Note 3)................................... 756,199
Administrative fees (Note 3)............................... 151,240
Transfer agent fees........................................ 29,079
Custodian fees............................................. 52,852
Reports to shareholders.................................... 35,896
Registration and filing fees............................... 16,170
Professional fees.......................................... 75,977
Directors' fees and expenses............................... 6,628
Other...................................................... 15,654
-----------
Total expenses........................................ 1,139,695
-----------
Net investment income........................... 2,139,341
-----------
Realized and unrealized gains (losses):
Net realized loss from:
Investments (net of foreign taxes $55,501)................ (2,710,726)
Foreign currency transactions............................. (36,765)
-----------
Net realized loss..................................... (2,747,491)
Net unrealized appreciation on:
Investments............................................... 14,828,669
Translation of assets and liabilities denominated in
foreign currencies...................................... 277,279
-----------
Net unrealized appreciation........................... 15,105,948
-----------
Net realized and unrealized gain............................ 12,358,457
-----------
Net increase in net assets resulting from operations........ $14,497,798
===========
</TABLE>
See Notes to Financial Statements.
19
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
-----------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 2,139,341 $ 2,466,616
Net realized loss from investments and foreign currency
transactions............................................. (2,747,491) (854,332)
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated in
foreign currencies....................................... 15,105,948 (6,901,700)
-----------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 14,497,798 (5,289,416)
Distributions to shareholders from:
Net investment income:.................................... (2,425,622) (1,797,731)
-----------------------------
Net increase (decrease) in net assets................... 12,072,176 (7,087,147)
Net assets:
Beginning of year.......................................... 51,432,500 58,519,647
-----------------------------
End of year................................................ $63,504,676 $51,432,500
=============================
Undistributed net investment income included in net assets:
End of year................................................ $ 548,702 $ 889,812
=============================
</TABLE>
See Notes to Financial Statements.
20
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, 2000, the Fund has investments and cash with a value of
approximately $450,000 in countries with restrictions on the repatriation of
their currencies or formal exchange controls currently in place.
21
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. 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 March 31, 2000, there were 100,000,000 shares authorized ($0.01 par value).
During the years ended March 31, 2000 and 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.
22
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (continued)
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.
At March 31, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $56,357,633 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $11,547,422
Unrealized depreciation..................................... (5,419,944)
-----------
Net unrealized appreciation................................. $ 6,127,478
===========
</TABLE>
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, 2000, the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:
<TABLE>
<S> <C>
Capital loss carryovers expiring in:
2007........................................................ $ 396,155
2008........................................................ 3,261,368
----------
$3,657,523
==========
</TABLE>
At March 31, 2000, the Fund has deferred capital and currency losses occurring
subsequent to October 31, 1999 of $547,816. For tax purposes, such losses will
be reflected in the year ending March 31, 2001.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended March 31, 2000 aggregated $31,885,273 and $33,369,410, respectively.
23
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of
Templeton Emerging Markets Appreciation Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Templeton Emerging Markets
Appreciation Fund, Inc. at March 31, 2000, and the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the United
States. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of securities at March 31, 2000 by correspondence with the custodian and
brokers, provides a reasonable basis for the opinion expressed above. The
financial statements for the year ended March 31, 1999, including the financial
highlights for each of the four years in the period then ended were audited by
other independent accountants whose report dated April 30, 1999 expressed an
unqualified opinion on those financial statements.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
April 28, 2000
24
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Tax Designation
At March 31, 2000, 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. 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.
The following table provides a breakdown by country of foreign source income and
foreign taxes paid, as designated by the Fund, to shareholders in May 2000.
<TABLE>
<CAPTION>
FOREIGN TAX FOREIGN SOURCE
COUNTRY PAID PER SHARE INCOME PER SHARE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Argentina................................................... $ 0.0000 $ 0.0559
Austria..................................................... 0.0003 0.0012
Brazil...................................................... 0.0087 0.1064
Bulgaria.................................................... 0.0000 0.0100
Chile....................................................... 0.0008 0.0020
Colombia.................................................... 0.0000 0.0042
Czech Republic.............................................. 0.0001 0.0005
Denmark..................................................... 0.0000 0.0011
Ecuador..................................................... 0.0000 0.0048
Egypt....................................................... 0.0000 0.0001
Germany..................................................... 0.0000 0.0014
Ghana....................................................... 0.0000 0.0002
Hong Kong................................................... 0.0000 0.0186
Hungary..................................................... 0.0005 0.0016
India....................................................... 0.0000 0.0009
Indonesia................................................... 0.0008 0.0213
Israel...................................................... 0.0001 0.0006
Luxembourg.................................................. 0.0000 0.0006
Malaysia.................................................... 0.0000 0.0033
Mexico...................................................... 0.0010 0.0842
Pakistan.................................................... 0.0003 0.0011
Panama...................................................... 0.0000 0.0045
Peru........................................................ 0.0000 0.0030
Philippines................................................. 0.0003 0.0156
Poland...................................................... 0.0002 0.0031
Russia...................................................... 0.0000 0.0176
Singapore................................................... 0.0000 0.0124
South Africa................................................ 0.0000 0.0165
South Korea................................................. 0.0016 0.0070
Taiwan...................................................... 0.0000 0.0001
Thailand.................................................... 0.0008 0.0052
Trinidad and Tobago......................................... 0.0000 0.0035
Turkey...................................................... 0.0000 0.0407
United Kingdom.............................................. 0.0001 0.0006
Venezuela................................................... 0.0001 0.0453
----------------------------------
TOTAL....................................................... $ 0.0157 $ 0.4951
==================================
</TABLE>
In January 2001, shareholders will receive Form 1099-DIV which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 2000. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their individual income tax
returns.
25
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 properly 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>
3. The transaction of any other business that may properly come before the
meeting:
<TABLE>
<CAPTION>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
---------------------------------------
<S> <C> <C> <C>
For......................................................... 3,450,541 78.69% 89.57%
Against..................................................... 267,404 6.10% 6.94%
Abstain..................................................... 134,436 3.07% 3.49%
Broker Non-Votes............................................ -- -- --
--------- ------ -------
TOTAL....................................................... 3,852,381 87.86% 100.00%
</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.
26
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Dividend Reinvestment and Cash Purchase Plan
The Fund offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") with
the following features:
Shareholders must affirmatively elect to participate in the Plan; Stock
dividends and capital gains distributions will be reinvested automatically;
ChaseMellon Shareholder Services, Investor Services, P.O. Box 3338, South
Hackensack, NJ 07606-1938, will provide additional Plan information upon
request.
Whenever the Fund declares dividends in either cash or common stock of the Fund,
if the market price is equal to or exceeds net asset value at the valuation
date, the participant will receive the dividends entirely in stock at a price
equal to the net asset value, but not less than 95% of the then current market
price of the Fund's shares. If the market price is lower than net asset value or
if dividends and/or capital gains distributions are payable only in cash, the
participant will receive shares purchased on the New York Stock Exchange or
otherwise on the open market.
A participant has the option of submitting additional payments to Mellon
Securities Trust Company (the "Plan Agent"), in any amounts of at least $100, up
to a maximum of $5,000 per month, for the purchase of Fund shares for his or her
account. These payments shall be made by check or money order payable to "Mellon
Securities Trust Co." and sent to ChaseMellon Shareholder Services, Investor
Services, P.O. Box 382009, Pittsburgh, PA 15250-8009, Attn: Templeton Emerging
Markets Appreciation Fund, Inc. The Plan Agent shall apply such payments (less a
$5.00 service charge and less a pro rata share of trading fees) to purchases of
Fund shares 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 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.
27
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.
28
PAGE
[FRANKLIN TEMPLETON LOGO]
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.
AUDITORS
PricewaterhouseCoopers LLP
333 Market Street
San Francisco, California 94105
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 A00 05/00 [LOGO OMITTED] Printed on recycled paper
