[GLOBAL GRAPHIC LOGO]
SEMI ANNUAL REPORT
SEPTEMBER 30, 2000
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
[FRANKLIN TEMPLETON, INVESTMENTS LOGO]
FRANKLIN (R) TEMPLETON (R)
INVESTMENTS
PAGE
(Mark Mobius Photo)
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
Your Fund's Goal: Templeton Emerging Markets Appreciation Fund seeks capital
appreciation. Under normal market conditions, the Fund invests substantially all
of its assets in a portfolio of equity securities and debt obligations of
issuers in emerging market countries.
Dear Shareholder:
This semiannual report of Templeton Emerging Markets Appreciation Fund covers
the six months ended September 30, 2000. During this period, many emerging
countries released strong macroeconomic figures suggesting steady improvement.
In South Africa, the release of positive economic figures indicating slowing
inflation and rising domestic demand suggested that its economy could be well on
its way to recovery. Moreover, signs that the country is no longer as dependent
on the agricultural sector suggest its recovery is now more broad-based. In
another positive development, the government announced that it intended to
accelerate the privatization of state-owned companies and to raise at least US$6
billion by 2004, primarily through foreign direct investment.
The dollar value, number of shares or principal value, and complete legal titles
of all portfolio holdings are listed in the Fund's Statement of Investments
(SOI). The SOI begins on page 9.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Shareholder Letter 1
Performance Summary 6
Important Notice to Shareholders 7
Financial Highlights &
Statement of Investments 8
Financial Statements 19
Notes to Financial
Statements 22
</TABLE>
[FUND CATAGORY PYRAMID GRAPHIC]
PAGE
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets 9/30/00
[GEOGRAPHIC DISTRIBUTION PIECHART]
<TABLE>
<S> <C>
Latin America 41.8%
Asia 25.2%
Mid-East/Africa 16.1%
Europe 12.3%
Short-Term Investments &
Other Net Assets 4.6%
</TABLE>
In March 2000, Moody's Investors Service, an independent credit rating agency,
assigned Mexico a coveted investment-grade rating, thereby allowing that country
to obtain lower financing costs. This rating upgrade also makes the country
eligible for investment by a broad group of U.S. institutional investors
restricted to investment-grade securities. Also encouraging, Mexico cleared its
outstanding debt with the International Monetary Fund (IMF), thereby allowing
the newly elected government to start afresh with the organization. Brazil
completed the largest emerging market debt exchange, swapping over US$5 billion
Brady bonds for new 40-year global bonds. The 40-year period is the longest
maturity period undertaken by an emerging market. This bond exchange, combined
with Moody's announcement to place Brazil's foreign debt on review for a
possible upgrade, improved the perception of the country's risk level. Further
encouragement was evidenced by a relaxation of IMF fiscal targets for next year.
In Asia, Thailand's credit rating was upgraded to investment grade by Moody's,
lowering that country's borrowing costs and increasing the possibilities for
foreign investment there. After the unprecedented meeting between North and
South Korea in June, cooperation between these countries continued as South
Korean companies expanded their business to the North and border offices were
reopened. Regarding China, the U.S. Senate, in a historic vote, granted the
country permanent normal trading relations. At the end of the reporting period,
the bill awaited President Clinton's signature. The deal could create new
business opportunities and trade between the two nations. However, China has yet
to conclude agreements with Mexico and Switzerland on its accession into the
World Trade Organization.
2
PAGE
Despite the improving economies of many developing nations, rising oil prices
adversely affected global stock markets, especially those of emerging market
countries. And a steep decline in the price of technology stocks led to
across-the-board selling in most sectors. On the fixed income side, emerging
market bonds generally performed well as a slowdown in the economic growth rate
of several developed countries made it less likely that central banks in
developed countries would raise interest rates to control inflation.
Furthermore, credit fundamentals of many emerging market governments improved as
higher oil prices resulted in lower fiscal deficits for oil-exporting countries
such as Mexico, Venezuela, Russia, Malaysia and Indonesia.
Within this environment, the Fund posted a -11.26% cumulative total return in
market-price terms for the six months ended September 30, 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 -9.65%. The Morgan Stanley
Capital International (MSCI) Emerging Markets Free Index and J.P. Morgan
Emerging Markets Bond Index Plus (EMBI+) returned -21.84% and 5.67%,
respectively, during the same period.(1)
Geographically, Brazil, Mexico and South Korea represented the largest
percentage of the Fund's holdings on September 30, 2000. By industry, we
continued to invest predominantly in companies in the telecommunications,
banking, and oil and gas sectors.
(1) Source: Standard & Poor's Micropal (MSCI); JP 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.
ASSET ALLOCATION
Based on Total Net Assets 9/30/00
[ASSET ALLOCATION PIECHART]
<TABLE>
<S> <C>
Equity 55.2%
Fixed Income Securities 40.2%
Short-Term Investments &
Other Net Assets 4.6%
</TABLE>
3
PAGE
<TABLE>
<CAPTION>
TOP 10 COUNTRIES*
9/30/00
% OF TOTAL
NET ASSETS
<S> <C>
Brazil 15.9%
Mexico 12.4%
South Korea 7.6%
South Africa 7.4%
Turkey 6.3%
Argentina 5.4%
Venezuela 4.8%
Singapore 3.6%
Russia 3.3%
Thailand 3.3%
</TABLE>
*Excludes short-term investments and other net assets.
However, even though we took into consideration regional events and trends, our
main focus, as always, was on individual company value.
Looking forward, we are optimistic about the long-term potential of emerging
market equities, but expect most markets to continue to experience some
short-term volatility. In our opinion, economic recovery will be driven by
countries that proactively engage in reform despite their returning prosperity.
The return of wealth to these markets could test the resolve of reform-minded
officials and business leaders, potentially increasing stock market volatility.
Regarding emerging market bonds, we believe that the positive trend in credit
fundamentals should continue. However, we are being selective in our country
allocation since political uncertainty and other risk factors may limit the
performance of some countries. In general, we expect to focus on Latin American
and Eastern European bonds because of their higher relative yields and the
prospects for credit rating upgrades for some countries in these two regions. In
our opinion, if economic performance and creditworthiness improve, the
underlying value of securities from such countries may increase.
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 those
markets. Investing in any emerging market means accepting a certain
4
PAGE
amount of volatility and, in some cases, the consequences of severe market
corrections. For example, the MSCI Mexico Free Index has increased 907% in the
last 12 years, but has suffered five 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 and welcome your comments and suggestions.
Sincerely,
/s/ Mark Mobius
Mark Mobius
President
Templeton Emerging Markets Appreciation Fund, Inc.
This discussion reflects our views, opinions and portfolio holdings as of
September 30, 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.
2. Source: Morgan Stanley Capital International/MSCI Mexico Free Index. Based on
quarterly percentage price change over 12 years ended September 30, 2000. Return
is measured in U.S. dollars and does not include reinvested dividends. The MSCI
Mexico Free Index reflects actual buyable opportunities for global investors by
taking into account local market restrictions on share ownership by foreigners.
The MSCI Mexico Free Index is a capitalization weighted index of 34 companies as
of 9/30/00. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
9/30/00
COMPANY % OF TOTAL
SECTOR, COUNTRY NET ASSETS
<S> <C>
Government of Brazil,
11.00%, 8/17/40
Government Bonds, Brazil 4.3%
Republic of Venezuela,
9.25%, 9/15/27
Government Bonds, Venezuela 3.3%
Korea Electric Power Corp.
Electric Utilities, South Korea 2.4%
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%
Centrais Eletricas Brasileiras
SA (Eletrobras), B, pfd.
Electric Utilities, Brazil 1.8%
CEZ AS
Electric Utilities, Czech 1.7%
Republic
Cheung Kong Holdings Ltd.
Real Estate, Hong Kong 1.7%
Grupo Financiero Banamex
Accival SA de CV
Banks, Mexico 1.7%
Government of Brazil, Series L,
cvt., FRN, 7.4375%, 4/15/12
Government Bonds, Brazil 1.6%
</TABLE>
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.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility, and the economic,
social and political climates of countries where the Fund invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. Also, as
a non-diversified investment company, the Fund may invest in a relatively small
number of issuers and, as a result, be subject to greater risk of loss with
respect to its portfolio securities. The Fund may also invest in lower-rated
"junk bonds," which entail greater risk than higher-rated bonds. You may have a
gain or loss when you sell your shares.
PERFORMANCE SUMMARY
AS OF 9/30/00
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
<TABLE>
<CAPTION>
SIX-MONTH TOTAL RETURN -9.65% Based on Net Asset Value
-11.26% Based on Market Price
on the New York Stock
Exchange (NYSE)
<S> <C> <C>
Net Asset Value (NAV) $12.90 (9/30/00) $14.48 (3/31/00)
Change in NAV -$1.58
Market Price (NYSE) $9.1875 (9/30/00) $10.5000 (3/31/00)
Change in Market Price -$1.3125
Distributions (4/1/00-9/30/00) Dividend Income $0.1325
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL PERFORMANCE
As of 9/30/00
INCEPTION
1-YEAR 5-YEAR (4/29/94)
<S> <C> <C> <C>
Cumulative Total Return (1)
Based on change in NAV +5.71% +40.92% +40.13%
Based on change in
market price -5.93% +12.77% -3.91%
Average Annual Total Return (2)
Based on change in NAV +5.71% +7.10% +5.42%
Based on change in
market price -5.93% +2.43% -0.62%
</TABLE>
For updated performance figures, call Franklin Templeton Investments at
1-800/342-5236.
Past performance does not guarantee future results.
6
PAGE
IMPORTANT NOTICE TO SHAREHOLDERS
SHARE REPURCHASE PROGRAM
On May 17, 2000, the Board of Directors of the Fund authorized management to
implement an open-market share repurchase program pursuant to which the Fund may
purchase, from time to time, shares of the Fund's common stock in open-market
transactions, at the discretion of management.
7
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, 2000 ----------------------------------------------------
(UNAUDITED) 2000 1999 1998 1997 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE+
(For a share outstanding throughout the
period)
Net asset value, beginning of period........ $14.48 $11.73 $13.35 $15.17 $13.41 $12.05
--------------------------------------------------------------------------
Income from investment operations:
Net investment income...................... .33 .49 .56 .56 .62 .69
Net realized and unrealized gains
(losses)................................. (1.96) 2.81 (1.77) (.23) 2.27 1.64
--------------------------------------------------------------------------
Total from investment operations............ (1.63) 3.30 (1.21) .33 2.89 2.33
--------------------------------------------------------------------------
Capital share repurchases................... .18 -- -- -- -- --
--------------------------------------------------------------------------
Less distributions from:
Net investment income...................... (.13) (.55) (.41) (.72) (.51) (.86)
Net realized gains......................... -- -- -- (1.24) (.62) (.11)
In excess of net realized gains............ -- -- -- (.19) -- --
--------------------------------------------------------------------------
Total distributions......................... (.13) (.55) (.41) (2.15) (1.13) (.97)
--------------------------------------------------------------------------
Net asset value, end of period.............. $12.90 $14.48 $11.73 $13.35 $15.17 $13.41
==========================================================================
Total Return*
Based on market value per share............ (11.26)% 13.50% (19.96)% 15.12% .40% 15.57%
Based on net asset value per share......... (9.65)% 29.27% (8.34)% 3.31% 22.40% 19.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)........... $53,919 $63,505 $51,433 $58,520 $65,075 $57,516
Ratios to average net assets:
Expenses................................... 1.94%** 1.88% 1.90% 1.88% 1.83% 1.64%
Net investment income...................... 4.85%** 3.54% 4.97% 3.76% 4.29% 5.29%
Portfolio turnover rate..................... 34.45% 54.73% 42.68% 74.67% 114.78% 26.92%
</TABLE>
*Total return is not annualized.
**Annualized.
+Based on average weighted shares outstanding effective year ended March 31,
2000.
See Notes to Financial Statements.
8
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 49.6%
AEROSPACE & DEFENSE .4%
Embraer-Empresa Brasileira de Aeronautica SA................ Brazil 31,800 $ 217,515
-----------
AIRLINES
*Thai Airways International Public Co. Ltd., fgn. .......... Thailand 8,400 6,868
-----------
AUTOMOBILES .5%
GAZ Auto Works.............................................. Russia 150 6,750
Hyundai Motor Co. Ltd. ..................................... South Korea 19,160 249,132
PT Astra International, wts., 12/31/03...................... Indonesia 163,229 29,623
-----------
285,505
-----------
BANKS 7.0%
Akbank...................................................... Turkey 75,931,104 387,913
*Bangkok Bank Public Co. Ltd. .............................. Thailand 3,500 1,825
*Bangkok Bank Public Co. Ltd., fgn. ........................ Thailand 102,440 75,868
Bank Austria AG............................................. Austria 3,860 209,643
Bank Rozwoju Eksportu SA.................................... Poland 4,730 142,962
Bank Slaski SA W Katowicach................................. Poland 3,620 162,921
Commercial International Bank Ltd. ......................... Egypt 10,300 86,175
Credicorp Ltd. ............................................. Peru 2,200 15,950
DBS Group Holdings Ltd. .................................... Singapore 8,163 90,059
Firstrand Ltd. ............................................. South Africa 38,000 36,837
*Grupo Financiero Banamex Accival SA de CV.................. Mexico 194,910 893,647
*Grupo Financiero Bancomer SA de CV, O...................... Mexico 298,500 171,944
Hana Bank................................................... South Korea 21,980 130,088
Hansabank Ltd. ............................................. Estonia 9,500 67,866
HSBC Holdings PLC........................................... Hong Kong 7,662 107,115
Nedcor Ltd. ................................................ South Africa 2,900 62,329
OTP Bank.................................................... Hungary 1,440 74,214
Oversea Chinese Banking Corp. Ltd. ......................... Singapore 40,950 258,835
*Thai Farmers Bank Public Co. Ltd. ......................... Thailand 112,400 53,276
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 688,600 350,869
Unibanco Uniao de Bancos Brasileiros SA, GDR................ Brazil 8,070 266,310
United Overseas Bank Ltd. .................................. Singapore 11,509 82,665
*Yapi Ve Kredi Bankasi AS................................... Turkey 3,900,000 28,128
-----------
3,757,439
-----------
</TABLE>
9
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TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BEVERAGES 2.7%
*Al Ahram Beverages Co., GDR................................ Egypt 5,322 $ 76,238
BBAG Oesterreichische Brau-Beteiligungs AG.................. Austria 642 27,419
Fomento Economico Mexicano SA de CV Femsa................... Mexico 1,780 69,420
Fraser and Neave Ltd. ...................................... Singapore 118,300 407,861
Hartwall OYJ, A............................................. Finland 440 8,367
Quilmes Industrial SA, ADR.................................. Argentina 11,490 120,645
San Miguel Corp., B......................................... Philippines 273,200 292,714
Serm Suk Public Co. Ltd., fgn. ............................. Thailand 1,300 2,575
South African Breweries PLC................................. South Africa 65,960 446,675
-----------
1,451,914
-----------
CHEMICALS .4%
LG Chemical Ltd. ........................................... South Korea 8,700 108,443
*Makhteshim-Agan Industries Ltd. ........................... Israel 48,876 114,659
-----------
223,102
-----------
COMMERCIAL SERVICES & SUPPLIES
Cosco Pacific Ltd. ......................................... Hong Kong 28,000 21,188
-----------
COMMUNICATIONS EQUIPMENT .1%
*Nice Systems Ltd. ......................................... Israel 456 32,466
*United Communications Industries, fgn. .................... Thailand 19,200 15,471
-----------
47,937
-----------
COMPUTERS & PERIPHERALS 1.0%
*Accton Technology Corp. ................................... Taiwan 79,000 152,553
Advantech Co. Ltd. ......................................... Taiwan 7,000 38,653
*Korea Data Systems......................................... South Korea 17,090 66,358
Natsteel Electronics Ltd. .................................. Singapore 114,000 294,777
*Ritek Corp. ............................................... Taiwan 2,000 6,607
-----------
558,948
-----------
CONSTRUCTION MATERIALS 2.0%
Akcansa Cimento Sanayi Ve Ticaret AS........................ Turkey 1,092,000 12,142
Cementos Argos SA........................................... Colombia 63,100 112,602
Cemex SA.................................................... Mexico 171,996 692,064
*PT Indocement Tunggal Prakarsa............................. Indonesia 68,500 11,826
PT Semen Gresik (Persero) TBK............................... Indonesia 101,740 70,609
*Siam Cement Public Co. Ltd., fgn. ......................... Thailand 14,330 113,431
*Suez Cement Co. ........................................... Egypt 7,020 62,378
-----------
1,075,052
-----------
</TABLE>
10
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
CONTAINERS & PACKAGING .3%
Mayr-Melnhof Karton AG...................................... Austria 1,503 $ 63,647
Nampak Ltd. ................................................ South Africa 37,708 69,452
-----------
133,099
-----------
DIVERSIFIED FINANCIALS 1.7%
*African Bank Investments Ltd. ............................. South Africa 78,800 70,932
*Ampal-American Israel Corp., A............................. Israel 330 4,331
Compania Suramericana de Inversiones SA..................... Colombia 31,706 21,343
*Dogan Sirketler Grubu Holding AS........................... Turkey 5,826,000 109,425
Hutchison Whampoa Ltd. ..................................... Hong Kong 17,600 233,633
Keppel Corp., Ltd. ......................................... Singapore 143,600 292,101
Swire Pacific Ltd., A....................................... Hong Kong 27,000 168,299
-----------
900,064
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES 6.3%
*Cesky Telecom AS........................................... Czech Republic 330 4,364
*Cia de Telecomunicaciones de Chile SA, ADR................. Chile 8,246 143,274
Compania Anonima Nacional Telefonos de Venezuela, ADR....... Venezuela 12,760 311,822
Eesti Telekom AS, GDR, Reg S................................ Estonia 350 5,521
Hellenic Telecommunications Organization SA................. Greece 3,890 74,468
*Jasmine International Public Co. Ltd., fgn. ............... Thailand 14,000 2,853
Korea Telecom Corp. ........................................ South Korea 350 20,966
Korea Telecom Corp., ADR.................................... South Korea 1,005 33,793
Mahanagar Telephone Nigam Ltd. ............................. India 48,500 115,574
Matav RT.................................................... Hungary 13,500 64,832
*Orckit Communications Ltd. ................................ Israel 1,100 8,525
Pakistan Telecommunications Corp., A........................ Pakistan 446,000 197,542
Philippine Long Distance Telephone Co., ADR................. Philippines 5,590 95,729
PT Indosat (Persero) TBK.................................... Indonesia 135,500 110,021
PT Telecomunikasi Indonesia (Persero), B.................... Indonesia 1,585,780 502,390
Rostelecom, ADR............................................. Russia 13,810 121,701
Telecom Argentina Stet-France Telecom SA, B, ADR............ Argentina 18,128 392,018
*Telecomasia Corp. Public Co. Ltd., fgn. ................... Thailand 153,600 102,837
Telefonos de Mexico SA de CV (Telmex), L, ADR............... Mexico 9,581 509,589
Telecomunikacja Polska SA................................... Poland 55,000 294,854
*Total Access Communication Public Co. Ltd. ................ Thailand 77,000 258,720
-----------
3,371,393
-----------
</TABLE>
11
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ELECTRIC UTILITIES 4.5%
Centrais Eletricas Brasileiras SA (Eletrobras).............. Brazil 2,006,000 $ 39,033
*CEZ AS..................................................... Czech Republic 337,550 899,608
Electricity Generating Public Company Ltd., fgn. ........... Thailand 14,600 15,225
*Hub Power Co. Ltd. ........................................ Pakistan 357,000 117,059
Korea Electric Power Corp. ................................. South Korea 48,660 1,269,790
Mosenergo, ADR.............................................. Russia 9,910 35,924
Mosenergo, GDR.............................................. Russia 3,900 14,316
*Unified Energy Systems..................................... Russia 413,400 55,395
-----------
2,446,350
-----------
ELECTRICAL EQUIPMENT .5%
*Elektrim SA................................................ Poland 32,800 295,962
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS 1.0%
Dae Duck Electronics Co. Ltd. .............................. South Korea 650 5,829
Elron Electronic Industries Ltd. ........................... Israel 4,980 182,418
Hon Hai Precision Industry Co. Ltd. ........................ Taiwan 15,200 99,943
*Orbotech Ltd. ............................................. Israel 155 8,476
Reunert Ltd. ............................................... South Africa 13,000 20,253
*Samsung Electro-Mechanics Co. ............................. South Korea 780 26,370
Samsung SDI Co. Ltd. ....................................... South Korea 4,815 190,415
-----------
533,704
-----------
FOOD & DRUG RETAILING .1%
Dairy Farm International Holdings Ltd. ..................... Hong Kong 123,750 53,212
-----------
FOOD PRODUCTS 1.7%
CG Smith Ltd. .............................................. South Africa 104,930 1,453
Chareon Pokphand Foods Public Co. Ltd., fgn. ............... Thailand 145,920 161,240
*Chareon Pokphand Foods Public Co. Ltd., fgn., wts.,
4/28/02................................................... Thailand 77,310 7,878
Cheil Jedang Corp. ......................................... South Korea 2,520 91,295
*Golden Agri-Resources Ltd. ................................ Singapore 111,000 18,178
Golden Hope Plantations Bhd. ............................... Malaysia 15,000 13,895
Grupo Bimbo SA de CV, A..................................... Mexico 47,000 78,134
IOI Corp. Bhd. ............................................. Malaysia 62,000 47,316
*PT Indofoods Sukses Makmurr TBK............................ Indonesia 1,537,500 148,932
*Seminis Inc., A............................................ United States 400 500
Tiger Brands Ltd. .......................................... South Africa 34,973 273,643
Tongaat-Hulett Group Ltd. .................................. South Africa 15,100 73,189
UNI-President Enterprises Corp. ............................ Taiwan 35,640 25,140
-----------
940,793
-----------
GAS UTILITIES
Gas Authority of India Ltd., GDR, Reg S..................... India 2,000 11,300
-----------
</TABLE>
12
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
HOTELS RESTAURANTS & LEISURE .5%
Genting Bhd. ............................................... Malaysia 47,400 $ 120,995
Hong Kong & Shanghai Hotels Ltd. ........................... Hong Kong 21,000 12,726
Kersaf Investments Ltd. .................................... South Africa 12,600 56,012
*Orbis SA................................................... Poland 8,100 45,747
Overseas Union Enterprise Ltd. ............................. Singapore 11,200 30,891
Resorts World Bhd. ......................................... Malaysia 3,000 4,855
-----------
271,226
-----------
HOUSEHOLD DURABLES .5%
*Land and House Public Co. Ltd., fgn. ...................... Thailand 24,356 9,236
LG Electronics Inc. ........................................ South Korea 12,830 249,662
-----------
258,898
-----------
HOUSEHOLD PRODUCTS
*Colgate-Palmolive (INDIA) Ltd. ............................ India 200 690
-----------
INDUSTRIAL CONGLOMERATES 1.9%
Alfa SA de CV, A............................................ Mexico 27,800 58,344
Barlow Ltd. ................................................ South Africa 56,840 350,281
*China Aerospace International Holdings Ltd. ............... Hong Kong 184,000 20,295
DESC SA de CV DESC, B....................................... Mexico 62,500 35,075
Grasim Industries Ltd. ..................................... India 3,900 18,121
*Grupo Carso SA de CV....................................... Mexico 29,000 86,134
*Natsteel Ltd. ............................................. Singapore 119,000 140,177
*Remgro Ltd. ............................................... South Africa 32,200 190,186
Sembcorp Industries Ltd. ................................... Singapore 107,336 99,916
-----------
998,529
-----------
INSURANCE 1.4%
Fedsure Holdings Ltd. ...................................... South Africa 27,844 107,967
Liberty Group Ltd. ......................................... South Africa 19,128 167,678
Old Mutual PLC.............................................. South Africa 133,450 321,609
Sanlam Ltd. ................................................ South Africa 123,100 141,494
-----------
738,748
-----------
IT CONSULTING & SERVICES .5%
*Comparex Holdings Ltd. .................................... South Africa 8,200 11,867
NIIT Ltd. .................................................. India 1,180 36,539
Prokom Software SA.......................................... Poland 3,640 162,215
Satyam Computers Services Ltd. ............................. India 3,500 37,045
-----------
247,666
-----------
</TABLE>
13
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MACHINERY .9%
*Hyundai Heavy Industries................................... South Korea 6,750 $ 121,060
*Procomp Informatics Co. Ltd. .............................. Taiwan 15,000 71,337
*Samsung Heavy Industries Co. Ltd. ......................... South Korea 63,114 213,087
Sembcorp Marine Ltd. ....................................... Singapore 191,000 77,923
-----------
483,407
-----------
MEDIA .2%
BEC World Public Co. Ltd., fgn. ............................ Thailand 16,220 83,032
*Pentamedia Graphics Ltd. .................................. India 4,000 36,742
-----------
119,774
-----------
METALS & MINING 1.7%
Anglo American PLC.......................................... South Africa 9,448 499,811
De Beers Centenary AG....................................... South Africa 1,040 28,891
Grupo Mexico SA de CV, B.................................... Mexico 39,600 150,953
Hindalco Industries Inc. ................................... India 1,950 34,377
Iscor Ltd. ................................................. South Africa 76,221 158,860
*Madeco Manufacturera de Cobre SA, ADR...................... Chile 1,990 11,318
Palabora Mining Co. Ltd. ................................... South Africa 3,800 22,839
PT Timah TBK................................................ Indonesia 159,500 29,264
-----------
936,313
-----------
MULTILINE RETAIL .1%
Siam Makro Public Company Ltd., fgn. ....................... Thailand 41,800 51,018
-----------
OIL & GAS 4.6%
Hindustan Petroleum Corporation Ltd. ....................... India 25,875 60,788
Lukoil Holdings............................................. Russia 9,600 138,240
Lukoil Holdings, ADR........................................ Russia 4,160 232,960
Mol Magyar Olay-Es Gazipari RT.............................. Hungary 8,440 138,402
OMV AG...................................................... Austria 2,260 163,287
Perez Companc SA, B......................................... Argentina 98,104 159,024
Polski Koncern Naftowy Orlen SA............................. Poland 81,200 322,453
PTT Exploration & Production Public Co. Ltd., fgn. ......... Thailand 47,600 120,706
Sasol Ltd. ................................................. South Africa 62,700 494,931
SK Corp. ................................................... South Korea 11,740 198,974
*Slovnaft AS................................................ Slovak Republic 8,000 89,577
*Tupras-Turkiye Petrol Rafineleri AS........................ Turkey 8,668,100 351,660
-----------
2,471,002
-----------
</TABLE>
14
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
PAPER & FOREST PRODUCTS .7%
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 32,990 $ 57,732
*PT Indah Kiat Pulp & Paper Corp. TBK....................... Indonesia 944,000 125,867
PT Tjiwi Kimia TBK.......................................... Indonesia 122,500 12,494
Sappi Ltd. ................................................. South Africa 23,227 172,088
-----------
368,181
-----------
PHARMACEUTICALS .8%
Egis RT..................................................... Hungary 1,603 71,671
Gedeon Richter Ltd. ........................................ Hungary 3,750 198,287
Pliva D D, GDR, Reg S....................................... Croatia 13,400 144,385
-----------
414,343
-----------
REAL ESTATE 2.3%
Cheung Kong Holdings Ltd. .................................. Hong Kong 74,000 894,528
*Filinvest Development Corp. ............................... Philippines 39,000 844
First Capital Corp. Ltd. ................................... Singapore 9,200 7,930
Hang Lung Development Co. Ltd. ............................. Hong Kong 166,000 167,131
Hong Kong Land Holdings Ltd. ............................... Hong Kong 32,400 59,616
United Industrial Corporation Ltd. ......................... Singapore 282,000 131,253
-----------
1,261,302
-----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS 1.2%
*Galileo Technology Ltd. ................................... Israel 850 26,988
*Hyundai Electronics Industries Co. ........................ South Korea 15,160 216,834
Samsung Electronics Co. Ltd. ............................... South Korea 2,236 405,032
*Siliconware Precision Industries Co Ltd. .................. Taiwan 420 421
-----------
649,275
-----------
SOFTWARE .6%
*Crystal Systems Solutions Ltd. ............................ Israel 210 1,756
*DSQ Software Ltd. ......................................... India 2,600 29,352
*Formula Systems Ltd. ...................................... Israel 2,230 94,542
*Fundtech Ltd. ............................................. Israel 4,220 100,687
*Magic Software Enterprises Ltd. ........................... Israel 4,050 30,881
*Sapiens International Corp. ............................... Israel 3,500 13,563
*Tecnomatix Technologies Ltd. .............................. Israel 510 6,407
*TTI Team Telecom International Ltd. ....................... Israel 540 11,003
*Vocaltec Communications Ltd. .............................. Israel 3,350 33,709
-----------
321,900
-----------
SPECIALTY RETAIL .2%
Cycle & Carriage Ltd. ...................................... Singapore 2,000 4,022
*Imperial Holdings Ltd. .................................... South Africa 8,416 66,200
Super Group Ltd. ........................................... South Africa 16,000 13,848
-----------
84,070
-----------
</TABLE>
15
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TOBACCO .1%
Austria Tabak AG............................................ Austria 290 $ 11,467
PT Gudang Garamm............................................ Indonesia 39,000 46,600
Tabak AS.................................................... Czech Republic 40 5,459
-----------
63,526
-----------
TRADING COMPANIES & DISTRIBUTORS .2%
Samsung Corp. .............................................. South Korea 9,050 62,489
SK Global................................................... South Korea 2,500 25,781
-----------
88,270
-----------
WIRELESS TELECOMMUNICATION SERVICES 1.0%
*Advanced Info Service Public Co. Ltd., fgn. ............... Thailand 5,700 48,091
*Orascom Telecom............................................ Egypt 6,000 80,157
*Shin Corporations Public Company Ltd., fgn. ............... Thailand 23,100 79,381
*Turkcell Iletisim Hizmetleri AS............................ Turkey 5,420,000 244,318
Venfin Ltd. ................................................ South Africa 32,200 112,595
-----------
564,542
-----------
TOTAL COMMON STOCKS (COST $28,386,227)...................... 26,724,025
-----------
PREFERRED STOCKS 5.6%
Banco Bradesco SA, pfd. .................................... Brazil 65,444,344 541,290
Brasil Telecom Participacoes SA, pfd. ...................... Brazil 1,600,000 18,645
Centrais Eletricas Brasileiras SA (Eletrobras), B, pfd. .... Brazil 47,846,000 971,702
Cia Energetica de Minas Gerais, (Cemig), Br., pfd. ......... Brazil 8,233,000 136,324
Cia Vale do Rio Doce, A, pfd. .............................. Brazil 13,170 330,499
Companhia Paranaense de Energia-Copel, B, pfd. ............. Brazil 17,435,000 155,923
*Companhia Riograndense de Telecom, A, pfd. ................ Brazil 324,100 125,600
Copene-Petroquimica do Nordeste SA, A, pfd. ................ Brazil 45,000 18,292
Eletropaulo Metropolitana SA, pfd. ......................... Brazil 1,332,000 79,783
Investimentos Itau SA, pfd. ................................ Brazil 133,756 135,568
*Siam Commercial Bank, 5.25%, fgn., cvt. pfd. .............. Thailand 512,200 197,257
Tele Norte Leste Participacoes SA, pfd. .................... Brazil 12,498,855 284,527
-----------
TOTAL PREFERRED STOCKS (COST $3,227,100).................... 2,995,410
-----------
</TABLE>
16
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT** VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS - CORPORATE 6.5%
Astra Overseas Finance NV, Reg S, FRN:
Series I, 7.1639%, 12/31/01............................... Netherlands $ 26,000 $ 24,180
Series II, 7.1639%, 6/30/05............................... Netherlands 91,725 57,787
Series III, zero cpn., 6/30/06............................ Netherlands 113,000 35,030
Banco Nacional Obra Serv., 9.625%, 11/15/03................. Mexico 125,000 130,312
Bepensa SA, 144A, 9.75%, 9/30/04............................ Mexico 270,000 253,125
Cellco Finance NV, 15.00%, 8/01/05.......................... Netherlands 300,000 315,750
Companhia Paranaense de Energia-Copel, Reg S, 9.75%,
5/02/05................................................... Brazil 200,000 199,564
Essar Steel Ltd, 144A, 10.3825%, 7/31/05.................... India 30,000 15,750
Hanvit Bank, 144A, 12.75%, 3/01/10.......................... South Korea 400,000 407,000
Pera Financial Services, 144A, 9.375%, 10/15/02............. Turkey 300,000 295,500
Petroleos Mexicanos, 9.375%, 12/02/08....................... Mexico 200,000 206,000
Philippine Long Distance Telephone Co.:
10.625%, 6/02/04.......................................... Philippines 500,000 504,575
9.25%, 6/30/06............................................ Philippines 490,000 445,900
Protexa Construcciones SA de CV, 144A, 12.125%, 7/24/02..... Mexico 197,398 128,309
PT Indah Kiat Finance Mauritius Ltd., 10.00%, 7/01/07....... Indonesia 625,000 301,562
Tjiwi Kimia Int'l Finance Co. BV, 13.25%, 8/01/01........... Indonesia 250,000 212,500
-----------
TOTAL BONDS - CORPORATE (COST $4,069,013) 3,532,844
-----------
BONDS - GOVERNMENT & GOVERNMENT AGENCIES 33.7%
Government of Brazil:
11.625%, 4/15/04.......................................... Brazil 200,000 206,850
9.375%, 4/07/08........................................... Brazil 950,000 851,437
Series L, cvt., FRN, 7.4375%, 4/15/12..................... Brazil 1,115,000 855,417
10.125%, 5/15/27.......................................... Brazil 1,075,000 838,500
11.00%, 8/17/40........................................... Brazil 2,905,000 2,320,369
Minfin of Russia:
144A, 10.00%, 6/26/07..................................... Russia 810,000 627,750
Reg S, 10.00%, 6/26/07.................................... Russia 700,000 542,500
Republic of Argentina:
11.00%, 10/09/06.......................................... Argentina 225,000 215,156
11.75%, 4/07/09........................................... Argentina 805,000 759,719
11.375%, 3/15/10.......................................... Argentina 220,000 201,300
11.375%, 1/30/17.......................................... Argentina 300,000 269,906
9.75%, 9/19/27............................................ Argentina 990,000 786,431
Republic of Bulgaria:
FRN, 7.75%, 7/28/11....................................... Bulgaria 500,000 382,500
Series A, FRN, 7.75% 7/28/24.............................. Bulgaria 410,000 315,700
Republic of Colombia, 9.75%, 4/23/09........................ Colombia 300,000 269,068
Republic of Ecuador, 144A, 12.00%, 11/15/12................. Ecuador 720,000 506,700
Republic of Panama:
FRN, 7.93%, 5/14/02....................................... Panama 153,864 152,402
9.375%, 4/01/29........................................... Panama 250,000 241,563
Republic of Peru, FRN, 4.50%, 3/07/17....................... Peru 140,000 88,638
Republic of Philippines, 9.875%, 3/16/10.................... Philippines 100,000 93,563
</TABLE>
17
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT** VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS - GOVERNMENT & GOVERNMENT AGENCIES (CONT.)
Republic of Turkey:
144A, 9.875%, 2/23/05..................................... Turkey $ 500,000 $ 493,750
144A, 10.00%, 9/19/07..................................... Turkey 1,230,000 1,197,713
11.875%, 1/15/30.......................................... Turkey 277,000 277,000
Republic of Venezuela:
144A, 9.125%, 6/18/07..................................... Venezuela 280,000 228,200
Reg S, 9.125%, 6/18/07.................................... Venezuela 300,000 244,500
9.25%, 9/15/27............................................ Venezuela 2,660,000 1,803,812
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 250,000 265,062
9.875%, 1/15/07........................................... Mexico 1,120,000 1,182,440
8.625%, 3/12/08........................................... Mexico 825,000 818,400
10.375%, 2/17/09.......................................... Mexico 200,000 218,050
11.375%, 9/15/16.......................................... Mexico 300,000 349,875
11.50%, 5/15/26........................................... Mexico 300,000 364,800
-----------
TOTAL BONDS - GOVERNMENT & GOVERNMENT AGENCIES (COST
$19,284,234).............................................. 18,179,071
-----------
SHORT TERM INVESTMENTS 2.8%
Den Danske Bank, 6.6875%, 10/02/00, Time Deposit............ United States 1,123,000 1,123,000
U.S. Treasury Bills, 5.955% to 6.070% with maturities to
12/14/00.................................................. United States 376,000 374,541
-----------
TOTAL SHORT TERM INVESTMENTS (COST $1,497,430).............. 1,497,541
-----------
TOTAL INVESTMENTS (COST $56,464,004) 98.2%.................. 52,928,891
OTHER ASSETS, LESS LIABILITIES 1.8%......................... 990,323
-----------
TOTAL NET ASSETS 100.0%..................................... $53,919,214
===========
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars.
See Notes to Financial Statements.
18
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $56,464,004)..... $52,928,891
Cash....................................................... 66,949
Receivables:
Investment securities sold................................ 1,837,955
Dividends and interest.................................... 633,561
-----------
Total assets.......................................... 55,467,356
-----------
Liabilities:
Payables:
Investment securities purchased........................... 1,319,847
Capital shares repurchased................................ 54,281
To affiliates............................................. 68,494
Accrued expenses........................................... 105,520
-----------
Total liabilities..................................... 1,548,142
-----------
Net assets, at value........................................ $53,919,214
===========
Net assets consist of:
Undistributed net investment income........................ $ 1,372,054
Net unrealized depreciation................................ (3,536,566)
Accumulated net realized loss.............................. (2,907,606)
Capital shares............................................. 58,991,332
-----------
Net assets, at value........................................ $53,919,214
===========
Net asset value per share ($53,919,214 / 4,178,410 shares
outstanding).............................................. $12.90
===========
</TABLE>
See Notes to Financial Statements.
19
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $37,594)
Dividends.................................................. $ 422,080
Interest................................................... 1,544,690
------------
Total investment income............................... $ 1,966,770
Expenses:
Management fees (Note 3)................................... 362,198
Administrative fees (Note 3)............................... 72,440
Transfer agent fees........................................ 24,383
Custodian fees............................................. 26,937
Reports to shareholders.................................... 15,046
Registration and filing fees............................... 8,107
Professional fees.......................................... 40,446
Directors' fees and expenses............................... 3,092
Other...................................................... 9,795
------------
Total expenses........................................ 562,444
------------
Net investment income........................... 1,404,326
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 1,677,355
Foreign currency transactions............................. (32,818)
------------
Net realized gain..................................... 1,644,537
Net unrealized depreciation on:
Investments............................................... (10,039,417)
Translation of assets and liabilities denominated in
foreign currencies...................................... (7,201)
------------
Net unrealized depreciation........................... (10,046,618)
------------
Net realized and unrealized loss............................ (8,402,081)
------------
Net decrease in net assets resulting from operations........ $ (6,997,755)
============
</TABLE>
See Notes to Financial Statements.
20
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 2000 YEAR ENDED
(UNAUDITED) MARCH 31, 2000
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 1,404,326 $ 2,139,341
Net realized gain (loss) from investments and foreign
currency transactions.................................... 1,644,537 (2,747,491)
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated in
foreign currencies....................................... (10,046,618) 15,105,948
---------------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ (6,997,755) 14,497,798
Distributions to shareholders from net investment income... (580,974) (2,425,622)
Capital share transactions (Note 2)........................ (2,006,733) --
---------------------------------------
Net increase (decrease) in net assets................... (9,585,462) 12,072,176
Net assets:
Beginning of period........................................ 63,504,676 51,432,500
---------------------------------------
End of period.............................................. $ 53,919,214 $63,504,676
=======================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 1,372,054 $ 548,702
=======================================
</TABLE>
See Notes to Financial Statements.
21
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Emerging Markets Appreciation Fund, Inc. (the Fund) is registered
under the Investment Company Act of 1940 as a closed-end, non-diversified
investment company. The Fund seeks capital appreciation by investing
substantially all of its assets in a portfolio of equity securities and debt
obligations of issuers in emerging market countries. The following summarizes
the Fund's significant accounting policies.
a. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, and the difference between the recorded
amounts of dividends, interest, and foreign withholding taxes and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in foreign exchange rates
on foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
c. FORWARD EXCHANGE CONTRACTS:
The Fund may enter into forward exchange contracts to hedge against foreign
exchange risks. These contracts are valued daily and the Fund's equity therein
is included in the Statement of Assets and Liabilities. Realized and unrealized
gains and losses are included in the Statement of Operations.
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.
22
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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
On May 17, 2000, the Board of Directors of the Fund authorized management to
implement an open-market share repurchase program pursuant to which the Fund may
purchase, from time to time, shares of the Fund's common stock in open-market
transactions, at the discretion of management.
At September 30, 2000, there were 100,000,000 shares authorized ($0.01 par
value). During the six months ended September 30, 2000, 206,300 shares were
repurchased for $2,006,733. The weighted average discount of market price to net
asset value of shares repurchased during the period ended September 30, 2000 was
28%. During the year ended March 31, 2000 there were no share transactions; all
reinvested distributions were satisfied with previously issued shares purchased
in the open market. Through September 30, 2000, the Fund had repurchased a total
of 206,300 shares.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton Asset
Management Limited (TAML), Templeton Investment Counsel, Inc. (TICI), and
Franklin Templeton Services, Inc. (FT Services), the Fund's investment manager,
sub-advisor, and administrative manager, respectively.
The Fund pays an investment management fee to TAML of 1.25% per year of the
average daily net assets of the Fund. TAML has entered into a sub-advisory
agreement with TICI, whereby TICI manages the debt component of the Fund's
portfolio. TAML pays to TICI a fee of 0.30% per year of the Fund's average daily
net assets. TAML pays an economic consulting and shareholder servicing fee to
Paine Webber Group Inc. of 0.10% per year of the average daily net assets of the
Fund. The Fund pays FT Service an administrative fee of 0.25% per year of the
Fund's average daily net assets, of which 0.20% is paid to Princeton
Administrators, L.P., for sub-administrative services, subject to a minimum
monthly fee of $8,333.
4. INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
23
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES (CONT.)
At September 30, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $56,738,363 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 4,180,148
Unrealized depreciation..................................... (7,989,620)
-----------
Net unrealized depreciation................................. $(3,809,472)
===========
</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:
Capital loss carryovers expiring in:
<TABLE>
<S> <C>
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 six
months ended September 30, 2000 aggregated $18,457,581 and $20,228,933,
respectively.
24
PAGE
TEMPLETON EMERGING MARKETS APPRECIATION FUND, INC.
Annual Meeting of Shareholders, August 28, 2000
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Ft. Lauderdale, Florida, on August 28, 2000. 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, 2001; 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:
Martin L. Flanagan, Andrew H. Hines, Jr., Edith E. Holiday, Charles B. Johnson
and Constantine D. Tseretopoulos.* Shareholders ratified the selection of
PricewaterhouseCoopers LLP, to serve as the Fund's independent auditors for the
fiscal year ending March 31, 2001. 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 % OF
TERM EXPIRING 2003: FOR OUTSTANDING SHARES VOTED SHARES WITHHELD OUTSTANDING SHARES
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Martin L. Flanagan......... 4,067,876 92.78% 97.03% 124,692 2.84%
Andrew H. Hines, Jr........ 4,091,704 93.32% 97.59% 100,864 2.30%
Edith E. Holiday........... 4,070,323 92.83% 97.08% 122,245 2.79%
Charles B. Johnson......... 4,095,504 93.41% 97.68% 97,064 2.21%
Constantine D.
Tseretopoulos............ 4,065,017 92.71% 96.96% 127,551 2.91%
<CAPTION>
% OF
TERM EXPIRING 2003: VOTED SHARES
---------------------------
<S> <C>
Martin L. Flanagan......... 2.97%
Andrew H. Hines, Jr........ 2.41%
Edith E. Holiday........... 2.92%
Charles B. Johnson......... 2.32%
Constantine D.
Tseretopoulos............ 3.04%
</TABLE>
2. The ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors of the Fund for the fiscal year ending March 31, 2001:
<TABLE>
<CAPTION>
SHARES % OF % OF
VOTED OUTSTANDING SHARES VOTED SHARES
--------------------------------------------------------------------------------
<S> <C> <C> <C>
For........................ 4,128,914 94.17% 98.48%
Against.................... 30,350 0.69% 0.72%
Abstain.................... 33,304 0.76% 0.80%
</TABLE>
3. The transaction of any other business that may properly come before the
meeting or any adjournments thereof:
<TABLE>
<CAPTION>
SHARES % OF % OF
VOTED OUTSTANDING SHARES VOTED SHARES
--------------------------------------------------------------------------------
<S> <C> <C> <C>
For........................ 3,606,095 82.25% 86.01%
Against.................... 460,936 10.51% 10.99%
Abstain.................... 125,537 2.86% 3.00%
</TABLE>
*John Wm. Galbraith, Rupert H. Johnson, Jr., Betty P. Krahmer, Gordon S.
Macklin, Fred R. Millsaps, Harris J. Ashton, Nicholas F. Brady, Frank J.
Crothers and S. Joseph Fortunato are Directors of the Fund who are currently
serving and whose terms of office continued after the Annual Meeting of
Shareholders.
25
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.
26
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.
27
PAGE
[FRANKLIN TEMPLETON, INVESTMENTS LOGO]
FRANKLIN (R) TEMPLETON (R) INVESTMENT
Templeton Emerging Markets Appreciation Fund, Inc.
100 Fountain Parkway, P.O. Box 33030
St. Petersburg, FL 33733-8030
SEMIANNUAL REPORT
TEMPLETON EMERGING MARKETS
APPRECIATION FUND, INC.
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
1-800/416-5585
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 S00 11/00 {Recycle Logo} Printed on recycled paper
