SEMI ANNUAL
REPORT
September 30, 1999
TEMPLETON VIETNAM
AND SOUTHEAST ASIA FUND, INC.
[FRANKLIN TEMPLETON LOGO]
<PAGE>
[PICTURE OF J. MARK MOBIUS APPEARS HERE]
J. MARK MOBIUS, Ph.D.
President
Templeton Vietnam and
Southeast Asia Fund, Inc.
Dr. Mobius has been living in emerging market countries since earning his Ph.D.
in economics and political science at Massachusetts Institute of Technology in
1964. During his extensive travels, he has acquired a thorough knowledge of
business practices and customs unique to developing nations.
<PAGE>
SHAREHOLDER LETTER
YOUR FUND'S GOAL: TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC. SEEKS
LONG-TERM CAPITAL APPRECIATION. UNDER NORMAL MARKET CONDITIONS, THE FUND INVESTS
IN THE EQUITY AND DEBT SECURITIES OF REGION COUNTRY ISSUERS. REGION COUNTRIES
CURRENTLY INCLUDE VIETNAM, CHINA, HONG KONG, INDIA, INDONESIA, MALAYSIA,
MYANMAR, THE PHILIPPINES, SINGAPORE, SOUTH KOREA, TAIWAN, AND THAILAND.
Dear Shareholder:
We are pleased to bring you this semiannual report of Templeton Vietnam and
Southeast Asia Fund, which covers the six months ended September 30, 1999.
During this time, several emerging market economies reported surprisingly strong
economic growth after being in crisis a relatively short time ago. Most of this
recovery occurred in Asia, and stock prices rose in many of the region's
markets. However, economic challenges and political problems led to weakened
investor confidence in some markets. In South Korea, the nation's second largest
conglomerate, Daewoo Ltd., required emergency funds to prevent it from
defaulting on its debt to foreign
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Shareholder Letter .....................................1
Performance Summary ....................................5
Important Notice
to Shareholders ....................................... 6
Year 2000 Readiness Update ............................ 9
Financial Highlights &
Statement of Investments ..............................11
Financial Statements ..................................16
Notes to Financial Statements .........................19
Change in Independent
Auditor ...............................................25
</TABLE>
FUND CATEGORY
[PYRAMID GRAPHIC]
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 12 of
this report.
<PAGE>
GEOGRAPHIC DISTRIBUTION
BASED ON TOTAL NET ASSETS
9/30/99
[THIS CHART SHOWS IN BAR FORMAT THE GEOGRAPHIC DISTRIBUTION OF TEMPLETON VIETNAM
AND SOUTHEAST ASIA FUND, BASED ON TOTAL NET ASSETS AS OF 9/30/99.]
<TABLE>
<S> <C>
Thailand 19.1%
Vietnam* 13.4%
South Korea 13.4%
Singapore 12.6%
Hong Kong 12.4%
Indonesia 10.7%
Philippines 7.6%
China 7.4%
Taiwan 1.8%
Other Net Assets 1.6%
</TABLE>
* These are direct investments made through companies domiciled in Hong Kong and
Singapore.
and domestic creditors. The situation at Daewoo highlighted other issues in
South Korea, such as the alleged use of corporate connections by some companies
to artificially sustain their share prices and the questionable raising of
capital by other companies despite the protests of foreign and domestic
investors. During the six months under review, Thailand reported some strong
economic data; however, the recovery of its stock market was hampered by
problems in the banking sector and the country's relatively large load of
non-performing debt. In Indonesia, a banking scandal clouded the otherwise
positive news that the country held its first democratic election in over 40
years, an event that was, for the most part, peaceful.
Within this environment, the Fund produced a +24.32% cumulative total return in
market-price terms for the six months ended September 30, 1999, as shown in the
Performance Summary on page 5. Based on change in net asset value, the Fund's
cumulative total return for the same period was +22.00%. By comparison, the
Morgan Stanley Capital International(R) All Countries Asia Free ex-Japan Index,
increased 24.71% in U.S. dollar terms during the same time period.(1)
At the end of the reporting period, 98.4% of the Fund's total net assets were
invested in equities, with 1.6% in other net assets. The chart to the left
illustrates the Fund's geographic exposure. Among the holdings, 13.4% were
direct investments in Vietnam held through companies domiciled in Hong Kong and
Singapore. The Fund's exposure to Hong Kong, Singapore, and Taiwan generally
benefited its performance during the reporting period. But our Vietnam holdings
did not perform as well, in part due to the country's lack of a stock market and
its restricted currency.
(1) Source: Morgan Stanley Capital International. Index is unmanaged and
includes reinvested dividends. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.
2
<PAGE>
During the six months under review, we sold the Fund's holdings in China's
Shenzhen market, as well as our positions in Malaysia and India because we
believed the political and economic conditions in those countries suggested that
better opportunities could be found elsewhere. To gain exposure to technology
stocks, we purchased shares in Acer Computer International Ltd. and Acma Ltd.,
both located in Singapore, as well as South Korea's LG Electronics Inc., Samsung
Display Devices Ltd., and Samsung Electronics Co. Ltd.
In our opinion, the recovery in Asia's emerging markets may be preserved over
the next four to five years. Although uncertainty about the China-Taiwan
relationship could contribute to bouts of weakness in the short term, and
developments in South Korea and Indonesia may contribute to weakness over the
medium term, we believe these problems should not halt Asia's overall recovery.
In fact, such trouble spots could lead to price declines that may provide us
with interesting investment opportunities.
Investing in Vietnam and Southeast Asia involves special considerations
including risks relating to direct investments, as well as the risks associated
with investing in an emerging market. These risks include adverse economic,
social and political developments, the absence of an organized stock exchange in
Vietnam, reduced liquidity of emerging markets, and greater currency volatility.
For example, Taiwan's equity market has increased 974% in the last 15 years, but
has suffered six declines of more than 20% during that time.(2) Investing in any
emerging market means accepting a certain amount of market volatility and, in
TOP 10 INDUSTRIES
9/30/99
[THIS CHART LISTS THE TOP 10 INDUSTRIES OF TEMPLETON VIETNAM AND SOUTHEAST ASIA
FUND, BASED ON TOTAL NET ASSETS AS OF 9/30/99.]
<TABLE>
<CAPTION>
% OF TOTAL
INDUSTRY NET ASSETS
-------- ----------
<S> <C>
Real Estate 16.9%
Multi-Industry 11.5%
Telecommunications 9.4%
Banking 8.7%
Metals & Mining 7.1%
Leisure & Tourism 7.0%
Building Materials &
Components 6.4%
Beverages & Tobacco 6.2%
Electrical & Electronics 5.8%
Utilities Electrical & Gas 5.4%
</TABLE>
(2.) Source: Taiwan Weighted Index (Bloomberg). Based on quarterly percentage
price change over 15 years ended September 30, 1999. Return is measured in U.S.
dollars and does not include reinvested dividends. One cannot invest directly in
an index, nor is an index representative of the Fund's portfolio.
3
<PAGE>
TOP 10 HOLDINGS
9/30/99
[THIS CHART LISTS THE TOP 10 HOLDINGS, INCLUDING INDUSTRY AND COUNTRY, OF
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, BASED ON TOTAL NET ASSETS AS OF
9/30/99.]
<TABLE>
<CAPTION>
COMPANY, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
<S> <C>
HEA Holdings Ltd.
(direct investment),
Real Estate, Vietnam 7.8%
Siam Cement Public Co. Ltd.,
Building Materials &
Components, Thailand 5.7%
Indotel Ltd.,
Leisure & Tourism, Singapore 5.6%
Korea Electric Power Corp.,
Utilities Electrical & Gas,
South Korea 5.4%
PT Gudang Garamm,
Beverages & Tobacco,
Indonesia 4.9%
Natsteel Ltd.,
Metals & Mining, Singapore 4.2%
China Telecom HK Ltd.,
Telecommunications, China 3.7%
China Resources Enterprises Ltd.,
Multi-Industry, China 3.3%
Citic Pacific Ltd.,
Multi-Industry, Hong Kong 3.2%
Samsung Electronics Co. Ltd.,
Electrical & Electronics,
South Korea 3.0%
</TABLE>
some cases, the consequences of severe market corrections. While short-term
volatility can be disconcerting, declines in excess of 50% are not unusual in
emerging markets. Investment in the Fund should be considered speculative.
Because the Fund invests a significant amount of its assets in Vietnam and
Southeast Asia, it may be subject to greater risks and may experience greater
volatility than a fund that is more broadly diversified geographically.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of September 30, 1999, the end of the reporting period. However,
market and economic conditions are changing constantly, which can be expected to
affect our investment strategies and the Fund's portfolio composition. Although
past performance is not predictive of future results, these insights may help
you better understand our investment and management philosophy.
Thank you for investing in Templeton Vietnam and Southeast Asia Fund, Inc. We
appreciate your support, welcome your comments, and look forward to serving you
in the future.
Sincerely,
/s/ J. MARK MOBIUS, PH.D.
- -----------------------------
J. Mark Mobius, Ph.D.
President
Templeton Vietnam and Southeast Asia Fund, Inc.
4
<PAGE>
PERFORMANCE SUMMARY AS OF 9/30/99
Distributions will vary based on earnings of the Fund's portfolio and any
profits realized from the sale of the portfolio's securities, as well as the
level of the Fund's operating expenses. Past distributions are not indicative of
future trends. All total returns include reinvested distributions according to
the terms specified in the Fund's dividend reinvestment and cash purchase plan
and do not reflect any sales charges paid at inception or brokerage commissions
paid on secondary market purchases.
PRICE INFORMATION
<TABLE>
<CAPTION>
CHANGE 9/30/99 3/31/99
<S> <C> <C> <C>
Net Asset Value +$1.91 $10.59 $8.68
Market Price (NYSE) +$1.6875 $8.6250 $6.9375
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
6-MONTH 1-YEAR 5-YEAR (9/8/94)
Cumulative Total Return(1)
<S> <C> <C> <C> <C>
Based on change in
net asset value +22.00% +73.89% - 17.32% - 18.04%
Based on change in
market price +24.32% +66.27% - 43.49% - 37.23%
Average Annual Total Return(2)
Based on change in
net asset value +22.00% +73.89% - 3.73% - 3.85%
Based on change in
market price +24.32% +66.27% - 10.79% - 8.79%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated. Six-month returns have not been
annualized.
Effective August 1, 1998, the Fund's Investment Manager agreed to reduce its
fees to 1.35% of the Fund's average weekly net assets. This fee waiver may be
terminated at any time upon notice to the Fund's Board of Directors. From
October 1, 1994, through September 30, 1995, additional fee waivers 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. In addition, the Fund's direct equity
investments may involve a high degree of business and financial risk, as well as
risks posed by the illiquidity of these investments due to the absence of a
public trading market. You may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
5
<PAGE>
IMPORTANT NOTICE TO SHAREHOLDERS
INVESTMENT OF CASH BALANCES. The U.S. Securities and Exchange Commission
recently granted the Franklin Templeton Funds an order that allows the funds,
including Templeton Vietnam and Southeast Asia Fund, Inc., to invest their
uninvested cash balances in affiliated Franklin Templeton money market funds.
Among the conditions of the SEC order are that the funds will not pay sales
loads or distribution fees and that there will be no layering of investment
advisory fees, with regard to their investments in the Franklin Templeton money
market funds. Subject to these and other conditions of the SEC order, the Fund
may invest cash balances in Franklin Templeton money market funds. The Board of
Directors of the Fund has approved a change in the Fund's policy limiting
investments in affiliated funds in order to allow the Fund to do so.
YEAR 2000 ISSUE. Like all investment companies, the Fund's business operations
depend on a worldwide network of computer systems that contain date fields. Many
of the systems currently use a two digit date field to represent the date, and
these systems must be changed or modified to enable them to distinguish the Year
1900 from the Year 2000 (commonly referred to as the Year 2000 problem).
When the Year 2000 arrives, the Fund's operations could be adversely affected if
the computer systems used by any of the parties who service the Fund or with
which it does business are not Year 2000 ready. The Fund could experience
difficulties in effecting transactions if any of its foreign subcustodians, or
if foreign broker-dealers or foreign markets are not ready for Year 2000.
When evaluating current and potential portfolio positions, Year 2000 is one of
the factors the Fund's investment manager considers. The investment manager will
rely upon public
6
<PAGE>
filings and other statements made by companies about their Year 2000 readiness.
Issuers in countries outside the U.S., particularly in emerging markets, may be
more susceptible to Year 2000 risks and there may be less public disclosure of
these factors. The investment manager, of course, cannot audit each company and
its major suppliers to verify their Year 2000 readiness. The Fund's ability to
reduce the effects of the Year 2000 problem is also very much dependent upon the
efforts of third parties over which the Fund and its investment manager may have
no control.
If a company in which the Fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its securities also will be adversely
affected. A decrease in the value of one or more of the Fund's portfolio
holdings may have an impact on the Fund's performance.
Franklin Resources, Inc. (Resources) established a Year 2000 Project Team in
1996. This team has been making the changes necessary to make the computer
systems that service the Fund and its shareholders Year 2000 compliant and
continues to seek reasonable assurances from all suppliers that they will be
Year 2000 compliant on a timely basis. Resources is also developing a
contingency plan of procedures to follow (where feasible) in the event of the
failure of any mission critical systems. However, in an operation as complex and
geographically distributed as Resources' business, the alternatives to use of
normal systems, especially mission critical systems, or supplies of electricity
or long distance voice and data lines are limited.
ADOPTION OF DEFINITIONS OF "EMERGING MARKET" AND "EMERGING MARKET COMPANY." On
21, 1999, the Fund's Board of Directors adopted non-fundamental definitions of
"emerging market" and "emerging market company" to reflect the dynamic nature of
what constitutes an "emerging market"
7
<PAGE>
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.
8
<PAGE>
FRANKLIN TEMPLETON
IS READY FOR YEAR 2000
Year 2000 Readiness Disclosure as of 9/30/99
WE ARE READY!
WE'VE DONE A LOT TO PREPARE!
The enormous scope of this project encompassed practically every
computer-dependent record and process within the company. Naturally, our Y2K
plan focused first on readying "mission-critical" systems -- those that are
necessary for our core business functions. As of September 30, 1999, all our
mission-critical systems that could affect our funds were certified as Y2K
compliant.
Our business operations rely greatly on a complex, worldwide network of computer
systems owned and managed by third parties. We continue to work with these
outside companies and your Fund's transfer agent to determine their preparedness
for Year 2000.
WE HAVE CONTINGENCY PLANS.
Our company recognizes that even our extensive testing cannot guarantee the
absence of difficulties associated with the Y2K transition. Therefore, we are
developing and integrating worldwide contingency plans.
9
<PAGE>
Franklin Templeton is confident it is well-positioned to meet the challenges of
Y2K.
HOW DOES YEAR 2000 AFFECT OUR
PORTFOLIO MANAGERS' INVESTMENT STRATEGIES?
All our portfolio managers recognize the importance of Year 2000 and its
potential to impact the issuers and industries in which we invest, as well as
the U.S. and world economy as a whole. As long-term investors, we seek to make
and hold investments in companies we believe are well-managed, with good
prospects for the future. In our experience, such companies are more likely to
have sufficient Y2K programs in place.
Technological changes are ever-present in our industry, and we believe we have
the experience and skills necessary to realize and to react to any challenges
that may arise due to this transition. Once again, Franklin Templeton is ready
for Year 2000, and we look forward to moving into the new millennium with you.
For additional information on Franklin Templeton's Y2K efforts, check our Web
site at www.franklintempleton.com.
These statements should be considered Year 2000 Readiness Disclosures, as such
term is understood under the "Year 2000 Information and Readiness Disclosure
Act." This information is not intended as a representation or warranty and does
not create a legal obligation on the part of the Fund, or Franklin Resources,
Inc., and its affiliates to the recipient.
10
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, 1999 -----------------------------------------------------------------
(UNAUDITED)++ 1999 1998 1997 1996 1995+
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of
period......................... $8.68 $9.07 $14.05 $13.91 $13.09 $14.10
-----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)..... (.07) (.08) .09 .29 .36 .13
Net realized and unrealized gains
(losses)....................... 1.98 (.31) (4.86) .21 .91 (1.00)
-----------------------------------------------------------------------------------------
Total from investment
operations...................... 1.91 (.39) (4.77) .50 1.27 (.87)
-----------------------------------------------------------------------------------------
Underwriting expenses deducted
from capital.................... -- -- -- -- (0.09)
Tender offer expenses deducted
from capital.................... -- (0.04) -- -- --
-----------------------------------------------------------------------------------------
Less distributions from:
Net investment income............ -- -- (.13) (.31) (.38) (.05)
Net realized gains............... -- -- (.03) (.05) (.07) --
Tax return of capital............ -- -- (.01) -- -- --
-----------------------------------------------------------------------------------------
Total distributions............... -- -- (.17) (.36) (.45) (.05)
-----------------------------------------------------------------------------------------
Net asset value, end of period.... $10.59 $8.68 $9.07 $14.05 $13.91 $13.09
=========================================================================================
Total Return*
Based on market value per
share.......................... 24.32% (15.88)% (25.14)% (10.87)% 22.11% (26.33)%
Based on net asset value per
share.......................... 22.00% (4.30)% (34.10)% 4.03% 9.80% (6.74)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's)......................... $49,558 $40,615 $42,437 $113,214 $112,073 $105,306
Ratios to average net assets:
Expenses......................... 2.36%** 3.12% 2.23% 1.82% 1.47% 1.72%**
Expenses, excluding waiver and
payments by affiliate.......... 2.52%** 3.22% 2.23% 1.82% 1.47% 1.72%**
Net investment income (loss)..... (1.16)%** (1.06)% .91% 2.04% 2.62% 1.81%**
Portfolio turnover rate........... 36.82% 20.56% 89.42% 20.16% 4.01% 11.77%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period September 8, 1994 (commencement of operations) to March 31,
1995.
++Based on average weighted shares outstanding.
See Notes to Financial Statements.
11
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 83.3%
AUTOMOBILES
Cycle & Carriage Ltd. ...................................... Singapore 2,000 $ 6,704
-----------
BANKING 7.0%
*Bangkok Bank Public Co. Ltd. .............................. Thailand 472,800 540,095
*Bangkok Bank Public Co. Ltd., fgn. ........................ Thailand 2,700 5,311
*Daegu Bank Co. Ltd. ....................................... South Korea 5,000 17,674
DBS Group Holdings Ltd. .................................... Singapore 19,489 217,754
Equitable PCI Bank.......................................... Philippines 112,800 234,425
Overseas Chinese Banking Corp. Ltd., fgn. .................. Singapore 31,000 240,635
Overseas Union Bank Ltd. ................................... Singapore 44,000 195,354
*Philippine National Bank................................... Philippines 236,000 819,364
*Siam Commercial Bank, fgn., wts., 6/22/04.................. Thailand 396,666 99,348
*Thai Farmers Bank Public Co. Ltd. ......................... Thailand 663,750 608,201
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 24,050 28,355
*Thai Farmers Bank Public Co. Ltd., fgn., rts., 9/17/99..... Thailand 24,050 16,601
United Overseas Bank Ltd., fgn.............................. Singapore 59,000 447,574
-----------
3,470,691
-----------
BEVERAGES & TOBACCO 6.2%
Asia Pacific Breweries Ltd. ................................ Singapore 53,000 136,825
Fraser and Neave Ltd........................................ Singapore 131,000 427,551
PT Gudang Garamm............................................ Indonesia 1,213,000 2,446,326
*Tsingtao Brewey Co. Ltd., H................................ China 172,000 48,160
-----------
3,058,862
-----------
BUILDING MATERIALS & COMPONENTS 6.4%
*PT Indocement Tunggal Prakarsa............................. Indonesia 399,000 161,176
PT Semen Gresik (Persero)................................... Indonesia 107,627 171,327
*Siam Cement Public Co. Ltd. ............................... Thailand 193,649 2,309,119
Siam Cement Public Co. Ltd., fgn. .......................... Thailand 24,801 516,321
-----------
3,157,943
-----------
CONSTRUCTION & HOUSING .7%
Hopewell Holdings Ltd. ..................................... Hong Kong 8,000 5,613
Italian-Thai Development Public Co. Ltd., fgn. ............. Thailand 247,100 369,518
-----------
375,131
-----------
ELECTRICAL & ELECTRONICS 5.8%
Acer Computer International Ltd. ........................... Singapore 87,000 62,205
Acma Ltd. .................................................. Singapore 18,000 11,326
G P Batteries International Ltd. ........................... Singapore 22,000 34,802
LG Electronics Inc. ........................................ South Korea 19,610 657,697
Samsung Display Devices Ltd. ............................... South Korea 9,310 528,064
Samsung Electronics Co. Ltd. ............................... South Korea 9,317 1,508,795
*Shin Corporations Public Company Ltd., fgn. ............... Thailand 19,200 79,287
-----------
2,882,176
-----------
</TABLE>
12
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ENERGY SOURCES .5%
*PTT Exploration & Production Public Co. Ltd., fgn. ........ Thailand 700 $ 4,892
SK Corp. ................................................... South Korea 11,480 228,373
-----------
233,265
-----------
FOOD & HOUSEHOLD PRODUCTS 4.0%
*Charoen Pokphand Feedmill Public Co. Ltd., fgn. ........... Thailand 338,140 833,679
*PT Indofoods Sukses Makmurr................................ Indonesia 326,500 309,696
Saha Pathanapibul Public Co. Ltd., fgn. .................... Thailand 25,900 31,010
San Miguel Corp., B......................................... Philippines 502,480 761,706
*Serm Suk Public Co. Ltd. .................................. Thailand 15,700 59,079
UNI-President Enterprises Corp. ............................ Taiwan 23,000 14,906
-----------
2,010,076
-----------
FOREST PRODUCTS & PAPER 1.7%
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 61,800 363,075
*Asia Pulp & Paper Co. Ltd., ADR, wts., 7/27/00............. Indonesia 11,156 9,064
*PT Indah Kiat Pulp & Paper Corp. .......................... Indonesia 581,500 207,057
*PT Tjiwi Kimia............................................. Indonesia 1,128,000 273,393
-----------
852,589
-----------
INSURANCE .3%
*Bangkok Insurance Public Co. Ltd. ......................... Thailand 43,000 132,389
-----------
LEISURE & TOURISM 1.4%
CDL Hotel International Ltd. ............................... Hong Kong 112,000 38,209
Dusit Thani Public Company Ltd., fgn. ...................... Thailand 529,000 518,336
Hong Kong & Shanghai Hotels Ltd. ........................... Hong Kong 41,500 31,521
Shangri-La Asia Ltd. ....................................... Hong Kong 82,000 90,785
Shangri-La Hotel Ltd. ...................................... Singapore 8,000 14,302
-----------
693,153
-----------
MACHINERY & ENGINEERING 1.2%
*Samsung Heavy Industries Co. Ltd. ......................... South Korea 82,400 575,750
-----------
MERCHANDISING 2.1%
Dairy Farm International Holdings Ltd. ..................... Hong Kong 443,000 440,785
Siam Makro Public Company Ltd., fgn. ....................... Thailand 342,000 601,686
-----------
1,042,471
-----------
METALS & MINING 7.1%
China Steel Corp. .......................................... Taiwan 1,089,000 883,945
Natsteel Ltd. .............................................. Singapore 1,187,000 2,094,090
Pohang Iron & Steel Co. Ltd., ADR........................... South Korea 14,600 457,163
PT Tambang Timah............................................ Indonesia 101,000 68,300
-----------
3,503,498
-----------
</TABLE>
13
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY 11.5%
Ayala Corp. ................................................ Philippines 226,000 $ 54,152
Beijing Datang Power Generation Co. Ltd., H................. China 287,000 64,658
Cheung Kong Holdings Ltd. .................................. Hong Kong 9,000 75,021
Cheung Kong Infrastructure Holdings Ltd. ................... Hong Kong 157,000 310,249
China Resources Enterprises Ltd. ........................... China 1,209,000 1,642,029
Citic Pacific Ltd. ......................................... Hong Kong 566,000 1,566,595
Hutchison Whampoa Ltd. ..................................... Hong Kong 70,000 651,085
Jardine Matheson Holdings Ltd. ............................. Hong Kong 236,947 971,483
Jardine Strategic Holdings Ltd. ............................ Hong Kong 118,000 240,720
Saha Union Public Co. Ltd., fgn. ........................... Thailand 340,000 106,341
Sembcorp Industries Ltd. ................................... Singapore 6,543 7,542
Wheelock and Company Ltd. .................................. Hong Kong 12,000 15,448
-----------
5,705,323
-----------
REAL ESTATE 9.1%
*Belle Corp. ............................................... Philippines 19,772,000 1,498,611
*China Overseas Land & Investment Ltd. ..................... Hong Kong 2,361,000 264,434
City Developments Ltd. ..................................... Singapore 185,500 943,590
*Filinvest Development Corp. ............................... Philippines 425,000 31,174
First Capital Corp. Ltd. ................................... Singapore 86,000 97,101
Hang Lung Development Co. Ltd. ............................. Hong Kong 36,000 40,784
Henderson China Holdings Limited............................ Hong Kong 10,000 5,149
Hong Kong Land Holdings Ltd. ............................... Hong Kong 188,000 246,280
*Land and House Public Co. Ltd., fgn. ...................... Thailand 1,000 880
MCL Land Ltd. .............................................. Singapore 265,000 224,405
New World Development Co. Ltd. ............................. Hong Kong 224,778 493,378
Sun Hung Kai Properties Ltd. ............................... Hong Kong 82,814 631,676
United Industrial Corporation Ltd. ......................... Singapore 30,000 16,319
United Overseas Land Ltd. .................................. Singapore 28,000 24,699
-----------
4,518,480
-----------
TELECOMMUNICATIONS 9.4%
BEC World Public Co Ltd., fgn. ............................. Thailand 4,000 21,698
*China Telecom HK Ltd. ..................................... China 602,000 1,856,111
*Jasmine International Public Co. Ltd., fgn. ............... Thailand 467,000 165,461
Philippine Long Distance Telephone Co., ADR................. Philippines 17,500 380,625
PT Indosat.................................................. Indonesia 137,000 183,651
PT Telekomunikasi Indonesia (Persero), B.................... Indonesia 3,098,680 1,094,088
*Telecomasia Corp. Public Co. Ltd., fgn. ................... Thailand 559,000 382,456
*Thai Telephone & Telecommunication Public Co. Ltd.,
fgn. ..................................................... Thailand 394,000 64,503
*Total Access Communication Public Co. Ltd. ................ Thailand 172,000 328,520
*United Communications Industries, fgn. .................... Thailand 292,500 192,975
-----------
4,670,088
-----------
TEXTILES & APPAREL .6%
Hua Thai Manufacturing Public Co. Ltd., fgn. ............... Thailand 225,500 303,054
-----------
</TABLE>
14
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TRANSPORTATION 2.9%
Guangshen Railway Co. Ltd., H............................... China 428,000 $ 55,650
Keppel Corp., Ltd. ......................................... Singapore 359,000 1,047,127
Singapore Airlines Ltd. .................................... Singapore 1,000 9,762
*Thai Airways International Public Co. Ltd., fgn. .......... Thailand 250,700 339,984
-----------
1,452,523
-----------
UTILITIES ELECTRICAL & GAS 5.4%
Korea Electric Power Corp. ................................. South Korea 80,670 2,652,528
Shandong Huaneng Power Development Co. Ltd., ADR............ China 2,400 10,500
-----------
2,663,028
-----------
TOTAL COMMON STOCKS (COST $40,283,375)...................... 41,307,194
-----------
PREFERRED STOCKS (COST $1,059,171) 1.7%
*Siam Commercial Bank, 144A, 5.25%, cvt. pfd., fgn. ........ Thailand 927,000 832,431
-----------
DIRECT EQUITY INVESTMENTS 13.4%
REAL ESTATE 7.8%
(R)+*Mayfair Hanoi, Ltd., 30% equity interest owned through
HEA Holdings Ltd., a wholly owned investment acquired
10/31/96.................................................. Vietnam 3,864,001
LEISURE & TOURISM 5.6%
(R)+*Indotel Ltd., acquired 11/22/96........................ Vietnam 900,000 2,776,000
-----------
TOTAL DIRECT EQUITY INVESTMENTS (COST $14,702,155).......... 6,640,001
-----------
TOTAL INVESTMENTS (COST $56,044,701) 98.4%.................. 48,779,626
OTHER ASSETS, LESS LIABILITIES 1.6%......................... 778,128
-----------
TOTAL NET ASSETS 100.0%..................................... $49,557,754
===========
</TABLE>
*Non income producing.
+See note 6 regarding Holdings of 5% Voting Securities.
(R)See note 7 regarding restricted securities.
See Notes to Financial Statements.
15
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $56,044,701)..... $ 48,779,626
Cash....................................................... 2,000,808
Receivables:
Investment securities sold................................ 89,253
Dividends................................................. 61,718
------------
Total assets.......................................... 50,931,405
------------
Liabilities:
Payables:
Investment securities purchased........................... 1,061,580
To affiliates............................................. 64,781
Accrued expenses........................................... 247,290
------------
Total liabilities..................................... 1,373,651
------------
Net assets, at value........................................ $ 49,557,754
============
Net assets consist of:
Accumulated net investment loss............................ $ (310,897)
Net unrealized depreciation................................ (7,265,075)
Accumulated net realized loss.............................. (28,614,030)
Capital shares............................................. 85,747,756
------------
Net assets, at value........................................ $ 49,557,754
============
Net asset value per share ($49,557,754 / 4,681,173 shares
outstanding).............................................. $10.59
============
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $54,074)
Dividends.................................................. $ 297,510
Interest................................................... 26,239
-----------
Total investment income............................... $ 323,749
-----------
Expenses:
Management fees (Note 3)................................... 404,003
Administrative fees (Note 3)............................... 80,127
Transfer agent fees........................................ 5,800
Custodian fees............................................. 19,400
Reports to shareholders.................................... 57,100
Registration and filing fees............................... 8,600
Professional fees.......................................... 100,900
Directors' fees and expenses............................... 200
Other...................................................... 1,394
-----------
Total expenses........................................ 677,524
Expenses waived/paid by affiliate (Note 3)............ (42,878)
-----------
Net expenses...................................... 634,646
-----------
Net investment loss............................. (310,897)
-----------
Realized and unrealized gains (losses):
Net realized loss from:
Investments............................................... (1,043,263)
Foreign currency transactions............................. (34,080)
-----------
Net realized loss..................................... (1,077,343)
Net unrealized appreciation on:
Investments............................................... 10,071,644
Translation of assets and liabilities denominated in
foreign currencies...................................... 259,789
-----------
Net unrealized appreciation........................... 10,331,433
-----------
Net realized and unrealized gain............................ 9,254,090
-----------
Net increase in net assets resulting from operations........ $ 8,943,193
===========
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1999 YEAR ENDED
(UNAUDITED) MARCH 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment loss....................................... $ (310,897) $ (387,118)
Net realized loss from investments and foreign currency
transactions............................................ (1,077,343) (7,229,019)
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign
currencies.............................................. 10,331,433 5,793,552
---------------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 8,943,193 (1,822,585)
Net assets:
Beginning of period........................................ 40,614,561 42,437,146
---------------------------------------
End of period.............................................. $49,557,754 $40,614,561
=======================================
Accumulated net investment loss included in net assets:
End of period.............................................. $ (310,897) $ --
=======================================
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Vietnam and Southeast Asia Fund, Inc. (the Fund) is registered under
the Investment Company Act of 1940 as a closed-end, non-diversified investment
company. The Fund formerly sought long-term capital appreciation by investing in
the equity and debt securities of Vietnam companies and Vietnam-related
companies, as defined in the Fund's prospectus. On April 23, 1998, the
shareholders voted to modify the Fund's investment policies to require, under
normal market conditions, that at least 65% of the Fund's total assets to be
invested in equity and debt securities of Region Company Issuers and to change
the name of the Fund to Templeton Vietnam and Southeast Asia Fund, Inc. 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. 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.
19
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
At September 30, 1999, there were 100,000,000 shares authorized ($0.01 par
value). During the six months ended September 30, 1999 and year ended March 31,
1999, there were no share transactions; all reinvested distributions were
satisfied with previously issued shares purchased in the open market.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also directors or officers of Templeton Asset
Management Ltd. (TAML) and Franklin Templeton Services, Inc. (FT Services), the
Fund's investment manager and administrative manager, respectively.
The Fund pays an investment management fee to TAML of 1.5% per year of the
average weekly net assets of the Fund. From its investment management fee, TAML
pays a shareholder servicing agent fee to Paine Webber of 0.10% per year of the
average weekly net assets of the Fund. The Fund pays FT Services an
administrative fee of 0.15% per year of the Fund's average weekly net assets.
Effective August 1, 1998, TAML agreed to reduce its investment management fee to
an annual rate of 1.35% of the Fund's average weekly net assets, as reflected in
the Statement of Operations. This fee waiver may be terminated at any time upon
notice to the Fund's Board of Directors.
Three individuals have brought actions against the Fund's investment manager and
certain of its affiliates, Fund officers and directors seeking to recover
damages in connection with the Fund's tender offer on January 20, 1998 and
certain investments of the Fund. The Fund has been named as a nominal defendant
in these actions; however, no damages are being sought against the Fund. The
investment manager and its affiliates strongly believe that the claims made in
these actions are without merit and intend to vigorously defend against these
actions.
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.
20
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES (CONT.)
At September 30, 1999, the net unrealized depreciation based on the cost of
investments for income tax purposes of $59,125,194 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 7,533,481
Unrealized depreciation..................................... (17,879,049)
------------
Net unrealized depreciation................................. $(10,345,568)
============
</TABLE>
At March 31, 1999 the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire in:
<TABLE>
<S> <C>
2006........................................................ $ 501,487
2007........................................................ 19,331,627
-----------
$19,833,114
===========
</TABLE>
Net realized capital gains differ for financial statement and tax purposes
primarily due to differing tax treatments of wash sales, passive foreign
investment companies, and losses realized on the sale of securities subsequent
to October 31 on the sales of securities and foreign currencies.
At March 31, 1999, the Fund had deferred capital and currency losses occurring
subsequent to October 31, 1998 of $1,015,000. For tax purposes, such losses will
be reflected in the year ending March 31, 2000.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the six
months ended September 30, 1999 aggregated $18,865,985 and $19,009,571,
respectively.
6. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated persons" to include any
person, such as the Fund, that owns 5% or more of the outstanding voting
securities of another person. As of September 30, 1999, the Fund had investments
in "affiliated persons" valued at $6,640,001.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF REALIZED
SHARES HELD GROSS GROSS SHARES HELD VALUE DIVIDEND INCOME CAPITAL
NAME OF ISSUER MARCH 31, 1999 ADDITIONS REDUCTIONS SEPT. 30, 1999 SEPT. 30, 1999 4/1/99-9/30/99 GAINS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mayfair Hanoi, Ltd., 30%
equity interest owned
through HEA Holdings
Ltd. .................... -- -- -- -- $3,864,001 -- --
Indotel Ltd. .............. 900,000 -- -- 900,000 2,776,000 -- --
--------------------------------------------
TOTAL AFFILIATES........... $6,640,001 $-- $--
===========================================
</TABLE>
21
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Notes to Financial Statements (unaudited) (continued)
7. DIRECT INVESTMENTS IN VIETNAM VENTURES
The Fund may, to the extent consistent with its investment policies, invest up
to 65% of its total net assets in direct equity investments. These investments
typically take the form of a business corporation contract, joint venture
company established in Vietnam or a wholly owned foreign company established in
Vietnam. Since these securities are not publicly traded, and may be restricted
as to resale, they may be less liquid than securities traded in active markets.
Direct investments in Vietnam ventures include certain risks not typically
associated with investing in countries with developed securities markets, such
as political, economic, and legal uncertainties. Readily available market
quotations cannot be obtained for these securities. The fair value of these
securities is estimated using methods approved by the Board. However, because of
the inherent uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready market for
the securities existed, and the differences could be material. The total value
of direct equity investments was $6,640,001 (13.4% of net assets) at September
30, 1999.
22
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Dividend Reinvestment and Cash Purchase Plan
The Fund offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") with
the following features:
If shares of the Fund are held in the shareholder's name, the shareholder will
automatically be a participant in the Plan unless he elects to withdraw. If the
shares are registered in the name of a broker-dealer or other nominee (i.e., in
"street name"), the broker-dealer or nominee will elect to participate in the
Plan on the shareholder's behalf unless the shareholder instructs them
otherwise, or unless the reinvestment service is not provided by the
broker-dealer or nominee.
Participants should contact ChaseMellon Shareholder Services, Investor Services,
P.O. Box 3338, South Hackensack, NJ 07606-1938, to receive the Plan brochure.
To receive dividends or distributions in cash, the shareholder must notify
Mellon Securities Trust Company (the Plan Agent) at the address above or the
institution in whose name the shares are held. The Plan Agent must receive
written notice within 10 business days before the record date for the
distribution.
Whenever the Fund declares dividends in either cash or common stock of the Fund,
if the market price is equal to or exceeds net asset value at the valuation
date, the participant will receive the dividends entirely in stock at a price
equal to the net asset value, but not less than 95% of the then current market
price of the Fund's shares. If the market price is lower than the net asset
value or if dividends and/or capital gains distributions are payable only in
cash, the participant will receive shares purchased on the New York Stock
Exchange or otherwise on the open market.
A participant has the option of submitting additional payments to 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 Vietnam and Southeast Asia Fund, Inc.
The Plan Agent shall apply such payments (less a $5.00 service charge and less a
pro rata share of trading fees) to purchases of Fund shares in the open market.
The automatic reinvestment of dividends and/or capital gains does not relieve
the participant of any income tax that may be payable on dividends or
distributions.
The participant may withdraw from the Plan without penalty at any time by
written notice to the Plan Agent sent to ChaseMellon Shareholder Services,
Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938. Upon
withdrawal, the participant will receive, without charge, stock certificates
issued in the participant's name for all full shares held by the Plan Agent; or,
if the participant wishes, the Plan Agent will sell the participant's shares and
send the proceeds, less a service charge of $5.00 and less trading fees.
Whenever shares are purchased on the New York Stock Exchange or otherwise on the
open market, each participant will pay a pro rata portion of trading fees.
Trading fees will be deducted from amounts to be invested.
23
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA 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 Vietnam and Southeast Asia Fund, Inc. are traded daily on
the New York Stock Exchange under the symbol "TVF." 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 dividends and shareholder accounts, call
1-800-416-5585.
The daily closing net asset value as of the previous business day may be
obtained when available 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").
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 Vietnam and
Southeast Asia Fund, Inc., 100 Fountain Parkway, P.O. Box 33030, St. Petersburg,
FL 33733-8030.
24
<PAGE>
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Change in Independent Auditor
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of the Fund pursuant to an agreement by PricewaterhouseCoopers LLP
(PwC) to acquire McGladrey's investment company practice. The McGladrey partners
and professionals serving the Fund at the time of the acquisition joined PwC.
The reports of McGladrey on the financial statements of the Fund during the past
two fiscal years contained no adverse opinion or disclaimer of opinion, and were
not qualified or modified as to uncertainty, audit scope or accounting
principles. In connection with its audits for the two most recent fiscal years
and through August 13, 1999, there were no disagreements with McGladrey on any
matter of accounting principle or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of McGladrey would have caused it to make reference to the subject
matter of disagreement in connection with its report. On October 21, 1999, the
Fund, with the approval of its Board of Directors and its Audit Committee,
engaged PwC as its independent auditors.
25
<PAGE>
This page intentionally left blank.
<PAGE>
This page intentionally left blank.
<PAGE>
This page intentionally left blank.
<PAGE>
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Templeton Fund Information at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, telephone
calls to or from our service departments may be monitored, recorded and
accessed. These calls can be determined by the presence of a regular beeping
tone.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH
Franklin Global Health Care Fund
Mutual Discovery Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Opportunities Trust
Templeton Global
Smaller Companies Fund
Templeton International Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund*
Mutual European Fund
Templeton Global Bond Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Global
Currency Fund
Franklin Templeton Hard
Currency Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin Large Cap Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund(1)
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund(7)
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
FUND ALLOCATOR SERIES
Franklin Templeton Conservative
Target Fund
Franklin Templeton Moderate
Target Fund
Franklin Templeton Growth
Target Fund
INCOME
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin Strategic Income Fund
Franklin U.S. Government
Securities Fund
Franklin Federal Money Fund(2)
Franklin Money Fund(2)
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money Fund(2)
STATE-SPECIFIC
TAX-FREE INCOME
Alabama
Arizona(3)
California(3)
Colorado
Connecticut
Florida(3)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(4)
Michigan(4)
Minnesota(4)
Missouri
New Jersey
New York(3)
North Carolina
Ohio(4)
Oregon
Pennsylvania
Tennessee(5)
Texas
Virginia
VARIABLE ANNUITIES(6)
Franklin(R) Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*Effective November 15, 1999, the fund will be renamed Franklin Global
Communications Fund.
1. This fund is closed to new accounts, with the exception of retirement plan
accounts.
2. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
3. Two or more fund options available: long-term portfolio; portfolio of insured
securities; high yield portfolio (CA); intermediate-term and money market
portfolios (CA and NY).
4. Portfolio of insured municipal securities.
5. The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
6. Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
USAllianz Investor Services, LLC. Franklin Templeton Variable Insurance Products
Trust, formerly Franklin Valuemark Funds, is managed by Franklin Advisers, Inc.
and its Templeton and Franklin affiliates.
7. Franklin MicroCap Value Fund has reopened to new investors.
10/99
<PAGE>
[TEMPLETON LOGO]
Templeton Vietnam and Southeast Asia Fund, Inc.
100 Fountain Parkway, P.O. Box 33030
St. Petersburg, FL 33733-8030
SEMIANNUAL REPORT
TEMPLETON VIETNAM
AND SOUTHEAST ASIA FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
1-800/416-5585
www.chasemellon.com
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political, and other factors. The Fund and its investors are not protected from
such losses by the Investment Manager. Therefore, investors who cannot accept
the risk of such losses should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
TLTVF S99 11/99 [RECYCLE LOGO] Printed on recycled paper
