ANNUAL REPORT
[WORLD MAP GRAPHIC]
March 31, 1999
TEMPLETON VIETNAM
AND SOUTHEAST ASIA FUND, INC.
[FRANKLIN TEMPLETON LOGO(R)]
FRANKLIN(R) TEMPLETON(R)
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. ON APRIL
23, 1998, SHAREHOLDERS APPROVED A CHANGE IN THE FUND'S NAME AND INVESTMENT
POLICIES. THESE CHANGES ARE DESCRIBED IN MORE DETAIL LATER IN THIS REPORT.
BEFORE THAT DATE, THE FUND'S NAME WAS TEMPLETON VIETNAM OPPORTUNITIES FUND, INC.
- -------------------------------------------------------------------------------
Dear Shareholder:
This annual report of Templeton Vietnam and Southeast Asia Fund, Inc. covers the
fiscal year ended March 31, 1999. At the start of the reporting period, many
Southeast Asian equity markets were performing well. However, by late spring,
most of them declined as the Japanese yen sank in value against the U.S. dollar,
making high-quality Japanese exports more affordable, and diminishing global
demand for products from other Southeast Asian countries. Equity markets in some
of these nations fell
CONTENTS
Shareholder Letter ............ 1
Recent Changes Affecting
the Fund's Operations ......... 6
Important Notice
to Shareholders ............... 9
Performance Summary ........... 11
Financial Highlights &
Statement of Investments ...... 12
Financial Statements .......... 17
Notes to Financial
Statements .................... 20
Independent Auditor's Report .. 24
[PYRAMID]
FUND CATEGORY
Global
Growth
Growth & Income
Income
Tax-Free Income
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 13 of
this report.
PAGE
PORTFOLIO BREAKDOWN
Based on Total Net Assets
3/31/99
[PIE CHART APPEARS HERE]
[THIS CHART SHOWS IN PIE CHART FORMAT THE PORTFOLIO BREAKDOWN OF SECURITIES
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND ON MARCH 31, 1999, BASED ON TOTAL NET
ASSETS.]
Equities 98.1%
Short-Term Investments & Other Assets 1.9%
even lower than they had been after the 1997 Thai baht devaluation, and in June,
the U.S. and Japanese governments intervened to halt the yen's decline.
In August, speculative attacks against the Hong Kong dollar and Chinese renminbi
increased as Russia's economic debacle led to declines in stock markets around
the world. Investor concerns about the global economy were further aggravated in
September when Malaysia implemented strict new currency controls. By October,
the U.S. and other Group of Seven member nations(1) cut interest rates,
strengthening many Asian currencies against the U.S. dollar and leading to a
fall rally in some of the region's stock markets. South Korea and Thailand, in
particular, experienced substantial market gains. However, by the end of 1998,
many Asian markets began to reflect investors' fears about Brazil's possible
devaluation of its currency, the real. But the Hong Kong Monetary Authority's
dollar peg helped minimize the effect of renewed currency speculation there, and
concerns about the Chinese renminbi were alleviated by statements of the Chinese
government that the currency would not be devalued.
Due to the magnitude of market declines from March to August of 1998, the Morgan
Stanley Capital International(R) All Country (MSCI AC) Far East Ex-Japan Free
Index posted a total return of -8.41% for the 12 months under review.(2) As
shown in the Performance Summary on page 11, the Fund posted a -15.88% one-year
cumulative total return in market-price terms, and
1. The member nations of the Group of Seven, or "G7," are the U.S., Germany,
Japan, France, the U.K., Italy and Canada.
2. Source: Standard & Poor's(R) Micropal. We are introducing the unmanaged MSCI
AC Far East Ex-Japan Free Index, which measures the performance of stocks in 8
Far East countries, excluding Japan, because we believe its composition provides
an appropriate comparison to the Fund's current portfolio. Index includes
reinvested dividends. One cannot invest in an index, nor is an index
representative of the Fund's portfolio.
2
PAGE
- -4.30% in net asset value terms for the same period. However, during the latter
part of the reporting period, the Fund's performance improved substantially, and
it delivered a +33.73% cumulative total return in market-price terms and +42.53%
in net asset value terms for the six months ended March 31, 1999. The MSCI AC
Far East Ex-Japan Free Index delivered a +48.89% return for the same period.
At the end of the reporting period, 98.1% of the Fund's total net assets were
invested in equities, with 1.9% in short-term investments and other assets.
Among the equity positions, 15.8% were direct investments in Vietnam held
through companies domiciled in Hong Kong and Singapore. Thailand remained the
Fund's largest country weighting, and although the value of many of the Fund's
holdings there fell during the reporting period, our position in Siam Cement
Public Co. Ltd., a building materials and components company, gained 44.5%
during the year under review(3). Market volatility, noted previously, and the
newly expanded scope of the Fund's investment policy, helped us to discover
several companies with significant growth potential, and we purchased shares of
Korea Electric Power Corp., South Korea's electric utility monopoly, which could
benefit from that country's economic reforms and privatization efforts.
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
3/31/99
[THIS CHART SHOWS THE GEOGRAPHIC DISTRIBUTION IN BAR FORMAT OF TEMPLETON VIETNAM
AND SOUTHEAST ASIA FUND ON MARCH 31, 1999, BASED ON TOTAL NET ASSETS.]
[BAR GRAPH]
Thailand 28.6%
Vietnam 15.8%
Singapore 15.0%
Hong Kong 10.3%
Indonesia 8.7%
Philippines 6.5%
Malaysia 5.2%
China 3.5%
South Korea 3.2%
India 1.3%
Short-Term Investments
& Other Assets 1.9%
*These are direct investments made through companies domiciled in Hong Kong and
Singapore.
3. Source: Bloomberg. Total return is measured in U.S. dollars and includes
reinvested dividends.
3
PAGE
[THIS TABLE LISTS THE TOP 10 HOLDINGS*, INCLUDING INDUSTRY AND COUNTRY OF
ORIGIN, OF TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND AS OF MARCH 31, 1999, BASED
ON TOTAL NET ASSETS.]
TOP 10 HOLDINGS*
3/31/99
COMPANY % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
-----------------------------------------
HEA Holdings Ltd.
Real Estate, Vietnam
(direct investment) 9.0%
Siam Cement Public Co. Ltd.
Building Materials &
Components, Thailand 8.8%
Indotel Ltd.
Leisure & Tourism, Vietnam
(direct investment) 6.8%
PT Gudang Garamm
Beverages & Tobacco,
Indonesia 4.1%
Thai Farmers Bank
Public Co. Ltd.
Banking, Thailand 3.6%
Natsteel Ltd.
Metals & Mining, Singapore 3.2%
China Resources
Enterprises Ltd.
Multi-Industry, China 3.0%
Korea Electric Power Corp.
Utilities Electrical &
Gas, South Korea 2.8%
Siam Commercial
Bank Ltd., fgn.
Banking, Thailand 2.7%
Bangkok Bank Public Co. Ltd.
Banking, Thailand 2.7%
* Does not include investments in fixed-income securities, and short-term
investments and other assets.
Looking forward, we are optimistic about long-term prospects for Southeast Asia,
and Templeton Vietnam and Southeast Asia Fund, Inc. In our opinion, Asia's
recovery will proceed country by country, with those assuming the most proactive
reforms garnering the greatest investment. In fact, some Southeast Asian equity
markets such as South Korea and the Philippines, had already advanced by the
close of the reporting period. In Vietnam, the government must eliminate
bureaucratic corruption and promote a more transparent financial system, if the
country is to succeed in establishing a public securities exchange. And although
the outlook for mainland Chinese companies remains uncertain, volatility in the
Hong Kong equity market has presented what we consider to be attractive
valuations.
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, Hong Kong's equity market has increased 978% in the last 15 years,
but has suffered 5 declines of more than 20% during that time.(4) Investing in
any emerging market means accepting a certain amount of market volatility and,
in 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.
4. Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended March 31, 1999. Market return is measured in Hong Kong dollars and does
not include reinvested dividends.
4
PAGE
Please remember that this discussion reflects our views, opinions and portfolio
holdings as of March 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the Fund's portfolio composition. Although past performance
is not predictive of future results, these insights may help you better
understand our investment and management philosophy.
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
- ----------------------------------
J. Mark Mobius, Ph.D.
President
Templeton Vietnam and Southeast Asia Fund, Inc.
5
PAGE
RECENT CHANGES AFFECTING
THE FUND'S OPERATIONS
CHANGE OF NAME AND INVESTMENT POLICIES. At the Annual Meeting of Shareholders
convened on March 31, 1998 and adjourned to April 23, 1998, the shareholders of
the Fund approved a proposal to change the name of the Fund from "Templeton
Vietnam Opportunities Fund, Inc." to "Templeton Vietnam and Southeast Asia Fund,
Inc." and to amend the Fund's investment policies to enable the Fund to invest
more broadly in countries located in Southeast Asia, while continuing to focus
its investment program, to the extent feasible, on Vietnam. These changes were
implemented effective April 24, 1998.
The Fund's investment goal is long-term capital appreciation. As recently
revised with the approval of shareholders, the Fund's investment policies, under
normal market conditions, are to invest at least 65 percent of its assets in
equity and debt securities of companies (i) that are organized under the laws
of, or have a principal office in, Vietnam or other Southeast Asian countries
(the "Region Countries"); (ii) for which the principal equity securities trading
market is a Region Country; or (iii) that derive at least 50 percent of their
revenues or profits from goods produced or sold, investments made, or services
performed in a Region Country, or have at least 50 percent of their assets
invested in a Region Country (collectively, "Region Country Issuers"). For
purposes of these investment policies, Region Countries include Vietnam, China,
Hong Kong, India, Indonesia, Malaysia, Myanmar, the Philippines, Singapore,
South Korea, Taiwan and Thailand, as well as any other countries in the same
geographic region that may be approved for investment by the Board of Directors
in the future.
The Fund invests in equity and debt securities of Region Country Issuers as
appropriate opportunities arise. In seeking to invest at least 65 percent of its
assets in Region Country Issuers, the Fund's focus is to invest in equity and
debt securities of Vietnam Issuers to the extent attractive investment
opportunities are available. A "Vietnam Issuer"
6
PAGE
is a company (i) that is organized under the laws of, or has a principal office
in, Vietnam; (ii) for which the principal equity securities trading market is in
Vietnam; or (iii) that derives at least 50 percent of its revenues or profits
from goods produced or sold, investments made, or services performed in Vietnam
or that has at least 50 percent of its assets invested in Vietnam. To the extent
that the investment manager is unable to find Vietnam Issuers that it considers
attractive investment opportunities for the Fund, the Fund's assets will be
invested in equity and debt securities of other Region Country Issuers. The
amount invested in any one Region Country at any time will depend on market
conditions and the investment manager's assessment of available investments. The
Fund will not be limited in the percentage of its assets that can be invested in
any one Region Country. It is anticipated, but there can be no assurance, that
the Fund may eventually have a significant portion of its assets invested in
securities of Vietnam Issuers.
The adoption of these policies does not lower the Fund's risk profile. The risks
of investing in the Southeast Asia region are similar in many respects to the
risks of investing in Vietnam. The markets in which the Fund invests are
volatile, and the Fund's investments are subject to the risk of currency
fluctuation and local political, economic and social conditions. Recent currency
and economic crises in several Asian countries have had a severe impact on many
Asian stock markets. The Fund will continue to be subject to the risks of
investing in foreign markets generally, and to the added risks of investing in
emerging markets. Additional risks of investment in emerging markets include:
(i) a lower level of social, political and economic stability; (ii) the smaller
size and lower volume of trading in the securities markets in such countries,
which may result in a lack of liquidity and in greater price volatility; (iii)
certain foreign national policies that may restrict the Fund's investment
opportunities, including restrictions on investments in issuers or industries
deemed sensitive to national interests, or expropriation or confiscation of
assets or property, which could result in the Fund's loss of its entire
7
PAGE
investment in that market; (iv) less developed legal structures governing
private or foreign investment or allowing for judicial redress for injury to
private property; (v) higher rates of inflation; (vi) differences in, or lack
of, auditing and financial reporting standards which may result in
unavailability of material information about certain issuers; (vii) the fact
that statistical information regarding the economy of certain countries may be
inaccurate or not comparable to statistical information regarding the U.S. or
other economies; (viii) less extensive regulation of securities markets; and
(ix) risks regarding the maintenance of Fund portfolio securities and cash with
foreign subcustodians and depositories. An investment in the Fund should
continue to be viewed as speculative.
VOLUNTARY MANAGEMENT FEE WAIVER. In the light of the changes to the Fund's
investment policies and its reduced asset level, the investment manager has put
into effect a voluntary fee waiver that reduces the Fund's investment management
fee from 1.5% to 1.35% of the Fund's average weekly net assets, effective August
1, 1998. This fee waiver may be terminated upon notice to the Board of
Directors. The Fund's total return will benefit to the extent of such voluntary
fee waiver so long as it remains in effect.
8
PAGE
IMPORTANT NOTICE TO SHAREHOLDERS
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 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.
9
PAGE
If a company in which the Fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its securities will also be adversely
affected. A decrease in the value of one or more of the Fund's portfolio
holdings will have a similar impact on the Fund's performance.
Franklin Resources, Inc. (Resources) established a Year 2000 Project Team in
1996. This team has already made most of the changes necessary to make the
computer systems that service the Fund and its shareholders Year 2000 compliant
and continues to seek reasonable assurances from all suppliers that they will be
Year 2000 compliant on a timely basis. Resources is refining a contingency plan
of procedures to follow (where feasible) in the event of the failure of any
mission critical systems. However, in an operation as complex and geographically
distributed as Resources' business, the alternatives to use of normal systems,
especially mission critical systems, or supplies of electricity or long distance
voice and data lines are limited.
10
PAGE
PERFORMANCE SUMMARY AS OF 3/31/99
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 (4/1/98 - 3/31/99)
<TABLE>
<CAPTION>
CHANGE 3/31/99 3/31/98
- ----------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.39 $8.68 $9.07
Market Price (NYSE) -$1.3125 $6.9375 $8.2500
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE
INCEPTION
1-YEAR 3-YEAR (9/8/94)
- -----------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1)
Based on change in
net asset value -4.30% -34.39% -32.82%
Based on change in
market price -15.88% -43.87% -49.51%
Average Annual Total Return(2)
Based on change in
net asset value -4.30% -13.11% -8.35%
Based on change in
market price -15.88% -17.51% -13.91%
</TABLE>
Past performance is not predictive of future results.
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.
Effective August 1, 1998, the Fund's Investment Manager has 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 return. Without these reductions, the Fund's total return 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.
11
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995+
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year...................... $9.07 $14.05 $13.91 $13.09 $14.10
----------------------------------------------------------------
Income from investment operations:
Net investment income (loss)........................... (.08) .09 .29 .36 .13
Net realized and unrealized gains (losses)............. (.31) (4.86) .21 .91 (1.00)
----------------------------------------------------------------
Total from investment operations........................ (.39) (4.77) .50 1.27 (.87)
----------------------------------------------------------------
Underwriting expenses deducted from capital............. -- -- -- -- (.09)
Tender offer expenses deducted from capital............. -- (.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 year............................ $8.68 $9.07 $14.05 $13.91 $13.09
================================================================
Total Return*
Based on market value per share........................ (15.88)% (25.14)% (10.87)% 22.11% (26.33)%
Based on net asset value per share..................... (4.30)% (34.10)% 4.03% 9.80% (6.74)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)......................... $40,615 $42,437 $113,214 $112,073 $105,306
Ratios to average net assets:
Expenses............................................... 3.12% 2.23% 1.82% 1.47% 1.72%**
Expenses excluding waiver and payments by affiliates... 3.22% 2.23% 1.82% 1.47% 1.72%**
Net investment income (loss)........................... (1.06)% .91% 2.04% 2.62% 1.81%**
Portfolio turnover rate................................. 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.
See Notes to Financial Statements.
12
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 82.3%
APPLIANCES & HOUSEHOLD DURABLES
Shenzhen Konka Electronic Group Co. Ltd., B................. China 12,903 $ 7,975
-----------
AUTOMOBILES .5%
Cycle & Carriage Ltd. ...................................... Singapore 3,000 12,670
Oriental Holdings Bhd. ..................................... Malaysia 111,000 175,263
-----------
187,933
-----------
BANKING 14.3%
*Bangkok Bank Public Co. Ltd. .............................. Thailand 795,800 1,091,008
Overseas Chinese Banking Corp. Ltd., fgn. .................. Singapore 36,000 236,911
Philippine Commercial International Bank Inc. .............. Philippines 100,000 565,161
*Philippine National Bank................................... Philippines 75,000 103,548
Public Bank Bhd., fgn. ..................................... Malaysia 1,112,000 626,232
*Siam Commercial Bank Ltd., fgn. ........................... Thailand 1,903,464 1,114,767
*Thai Farmers Bank Public Co. Ltd. ......................... Thailand 925,750 1,380,061
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 34,250 69,293
*Thai Military Bank Ltd., fgn. ............................. Thailand 1,223,900 276,937
United Overseas Bank Ltd., fgn. ............................ Singapore 52,000 324,906
-----------
5,788,824
-----------
BEVERAGES & TOBACCO 9.5%
Asia Pacific Breweries Ltd. ................................ Singapore 31,000 66,358
British American Tobacco Co. Ltd. .......................... Singapore 235,000 565,577
Carnaudmetalbox Asia Ltd. .................................. Singapore 170,000 216,373
Fraser and Neave Ltd. ...................................... Singapore 131,000 466,098
PT Gudang Garamm............................................ Indonesia 1,262,000 1,676,605
Rothmans Industries Ltd. ................................... Singapore 163,000 839,283
*Tsingtao Brewey Co. Ltd., H................................ China 156,000 14,695
-----------
3,844,989
-----------
BUILDING MATERIALS & COMPONENTS 9.0%
PT Semen Gresik (Persero)................................... Indonesia 7,627 8,528
*Siam Cement Public Co. Ltd. ............................... Thailand 224,849 3,136,453
Siam Cement Public Co. Ltd., fgn. .......................... Thailand 22,251 450,173
*Southeast Asia Cement Holdings Inc. ....................... Philippines 5,550,000 74,477
-----------
3,669,631
-----------
CHEMICALS 1.8%
*PT Unggul Indah Corp. ..................................... Indonesia 3,449,600 437,413
Reliance Industries Ltd., GDR............................... India 10,900 67,035
Shanghai Petrochemical Co. Ltd., H.......................... China 766,000 85,995
*Thai Petrochemical Industry Public Co. Ltd., fgn. ......... Thailand 1,138,000 154,500
-----------
744,943
-----------
CONSTRUCTION & HOUSING 3.2%
Italian-Thai Development Public Co. Ltd., fgn. ............. Thailand 387,100 721,336
YTL Corp. Bhd. ............................................. Malaysia 473,000 587,516
-----------
1,308,852
-----------
</TABLE>
13
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ELECTRICAL & ELECTRONICS .4%
G P Batteries International Ltd. ........................... Singapore 7,000 $ 10,246
Samsung Display Devices Ltd. ............................... South Korea 2,960 145,467
-----------
155,713
-----------
ENERGY SOURCES
Petron Corp. ............................................... Philippines 20,000 2,245
-----------
FOOD & HOUSEHOLD PRODUCTS 4.1%
Boustead Holdings Bhd. ..................................... Malaysia 8,000 6,232
*Charoen Pokphand Feedmill Public Co. Ltd., fgn. ........... Thailand 307,400 313,005
Cheil Jedang Corp. ......................................... South Korea 319 11,993
Golden Resources Development International Ltd. ............ Hong Kong 5,699,000 290,482
*PT Indofoods Sukses Makmurr................................ Indonesia 424,000 263,931
Saha Pathanapibul Public Co. Ltd., fgn. .................... Thailand 71,100 79,494
San Miguel Corp., B......................................... Philippines 387,000 644,168
*Serm Suk Public Co. Ltd. .................................. Thailand 15,700 42,630
-----------
1,651,935
-----------
FOREST PRODUCTS & PAPER 1.5%
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 66,200 554,425
*PT Indah Kiat Pulp & Paper Corp. .......................... Indonesia 176,000 49,706
-----------
604,131
-----------
INSURANCE .4%
*Bangkok Insurance Public Co. Ltd. ......................... Thailand 55,000 157,394
-----------
LEISURE & TOURISM 1.7%
Dusit Thani Public Company Ltd., fgn. ...................... Thailand 529,000 443,591
Genting Bhd. ............................................... Malaysia 50,400 112,737
Hong Kong & Shanghai Hotels Ltd. ........................... Hong Kong 23,000 17,659
Resorts World Bhd. ......................................... Malaysia 38,000 46,800
Shangri-La Asia Ltd. ....................................... Hong Kong 50,000 50,971
-----------
671,758
-----------
MERCHANDISING 2.2%
Dairy Farm International Holdings Ltd. ..................... Hong Kong 270,000 313,200
Siam Makro Public Company Ltd., fgn. ....................... Thailand 342,000 591,774
-----------
904,974
-----------
METALS & MINING 3.5%
Hindalco Industries Inc., GDR, Reg S........................ India 6,500 80,112
Natsteel Ltd. .............................................. Singapore 1,223,000 1,280,665
PT Timah.................................................... Indonesia 101,000 67,527
-----------
1,428,304
-----------
MISC MATERIALS & COMMODITIES
Golden Hope Plantations Bhd. ............................... Malaysia 5,000 3,553
-----------
</TABLE>
14
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY 10.7%
Ayala Corp. ................................................ Philippines 1,030,000 $ 312,323
Beijing Datang Power Generation Co. Ltd., H................. China 131,000 35,076
China Resources Enterprises Ltd. ........................... China 829,000 1,208,806
Citic Pacific Ltd........................................... Hong Kong 424,000 891,820
Hong Leong Industries Bhd. ................................. Malaysia 102,000 74,353
Jardine Matheson Holdings Ltd. ............................. Hong Kong 225,265 680,300
Jardine Strategic Holdings Ltd. ............................ Hong Kong 120,000 202,800
Larsen and Toubro Ltd., GDR, Reg S.......................... India 34,900 371,685
Perlis Plantations Bhd. .................................... Malaysia 416,000 413,811
Saha Union Public Co. Ltd., fgn. ........................... Thailand 340,000 128,976
*Sembcorp Industries Ltd. .................................. Singapore 6,543 7,154
-----------
4,327,104
-----------
REAL ESTATE 8.4%
*Belle Corp. ............................................... Philippines 14,569,000 676,754
China Overseas Land & Investment Ltd. ...................... Hong Kong 2,361,000 231,544
City Developments Ltd. ..................................... Singapore 185,500 965,866
*Filinvest Development Corp. ............................... Philippines 207,000 10,150
First Capital Corp. Ltd. ................................... Singapore 40,000 38,878
Henderson China Holdings Limited............................ Hong Kong 8,000 2,968
Hong Kong Land Holdings Ltd. ............................... Hong Kong 128,000 166,400
New World Development Co. Ltd. ............................. Hong Kong 357,890 704,276
*PT Jakarta International Hotel & Development............... Indonesia 333,000 6,718
Sun Hung Kai Properties Ltd. ............................... Hong Kong 82,814 619,805
United Industrial Corporation Ltd. ......................... Singapore 1,000 521
United Overseas Land Ltd. .................................. Singapore 1,000 677
-----------
3,424,557
-----------
RECREATION & OTHER CONSUMER GOODS .1%
Tanjong Plc. ............................................... Malaysia 38,000 60,000
-----------
TELECOMMUNICATIONS 3.4%
*Digital Telecommunications Philippines Inc. ............... Philippines 300,000 7,897
Hong Kong Telecommunications Ltd. .......................... Hong Kong 1,200 2,369
*Jasmine International Public Co. Ltd., fgn. ............... Thailand 467,000 90,752
Philippine Long Distance Telephone Co., ADR................. Philippines 9,600 248,400
PT Indosat.................................................. Indonesia 111,000 147,467
PT Telekomunikasi Indonesia (Persero), B.................... Indonesia 1,044,000 339,977
*Total Access Communication Public Co. Ltd. ................ Thailand 180,000 388,800
*United Communications Industries, fgn. .................... Thailand 315,500 153,278
-----------
1,378,940
-----------
TEXTILES & APPAREL .8%
Hua Thai Manufacturing Public Co. Ltd., fgn. ............... Thailand 259,400 334,910
-----------
TRANSPORTATION 4.0%
Guangshen Railway Co. Ltd., H............................... China 126,000 14,633
Keppel Corp., Ltd. ......................................... Singapore 276,000 744,090
*Neptune Orient Lines Ltd. ................................. Singapore 939,000 320,515
</TABLE>
15
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TRANSPORTATION (CONT.)
*Shanghai Dazhong Taxi Shareholding Co. Ltd., B............. China 91,000 $ 29,120
*Thai Airways International Public Co. Ltd., fgn. .......... Thailand 326,600 499,920
-----------
1,608,278
-----------
UTILITIES ELECTRICAL & GAS 2.8%
Korea Electric Power Corp. ................................. South Korea 47,370 1,142,748
Shandong Huaneng Power Development Co. Ltd., ADR............ China 2,400 9,000
-----------
1,151,748
-----------
TOTAL COMMON STOCKS (COST $42,468,614)...................... 33,418,691
-----------
DIRECT EQUITY INVESTMENTS 15.8%
REAL ESTATE 9.0%
(R)+*Mayfair Hanoi, Ltd., 30% equity interest owned through
HEA Holdings Ltd., a wholly owned investment acquired
10/31/96.................................................. Vietnam 3,645,336
-----------
LEISURE & TOURISM 6.8%
(R)+*Indotel Ltd., acquired 11/22/96........................ Vietnam 900,000 2,770,002
-----------
TOTAL DIRECT EQUITY INVESTMENTS (COST $14,702,155).......... 6,415,338
-----------
PRINCIPAL
AMOUNT**
--------
SHORT TERM INVESTMENTS (COST $1,270,533) 3.1%
U.S. Treasury Bills, 4.27% to 4.44% with maturities to
8/19/99................................................... United States $ 1,281,000 1,270,554
-----------
TOTAL INVESTMENTS (COST $58,441,302) 101.2%................. 41,104,583
OTHER ASSETS, LESS LIABILITIES (1.2%)....................... (490,022)
-----------
TOTAL NET ASSETS 100.0%..................................... $40,614,561
===========
</TABLE>
*Non income producing.
**Securities denominated in U.S. dollars.
+See note 6 regarding Holdings of 5% Voting Securities.
(R)See note 7 regarding restricted securities.
See Notes to Financial Statements.
16
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $58,441,302)..... $ 41,104,583
Receivables:
Investment securities sold................................ 17,268
Dividends and interest.................................... 73,310
------------
Total assets.......................................... 41,195,161
------------
Liabilities:
Payables:
Investment securities purchased........................... 30,833
To affiliates............................................. 32,347
Funds advanced by custodian................................ 10,596
Deferred tax liability (Note 1e)........................... 259,789
Accrued expenses........................................... 247,035
------------
Total liabilities..................................... 580,600
------------
Net assets, at value........................................ $ 40,614,561
============
Net assets consist of:
Net unrealized depreciation................................ $(17,596,508)
Accumulated net realized loss.............................. (27,536,687)
Capital shares............................................. 85,747,756
------------
Net assets, at value........................................ $ 40,614,561
============
Net asset value per share ($40,614,561 / 4,681,173 shares
outstanding).............................................. $8.68
============
</TABLE>
See Notes to Financial Statements.
17
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $67,402)
Dividends.................................................. $ 425,927
Interest................................................... 323,832
-----------
Total investment income............................... $ 749,759
-----------
Expenses:
Management fees (Note 3)................................... 548,378
Administrative fees (Note 3)............................... 134,838
Transfer agent fees........................................ 5,200
Custodian fees............................................. 14,300
Reports to shareholders.................................... 97,700
Registration and filing fees............................... 22,000
Professional fees.......................................... 328,700
Directors' fees and expenses............................... 4,000
Amortization of organization costs......................... 5,900
Other...................................................... 12,752
-----------
Total expenses........................................ 1,173,768
Expenses waived/paid by affiliate (Note 3)............ (36,891)
-----------
Net expenses.................................... 1,136,877
-----------
Net investment loss............................. (387,118)
-----------
Realized and unrealized gains (losses):
Net realized loss from:
Investments............................................... (7,125,563)
Foreign currency transactions............................. (103,456)
-----------
Net realized loss..................................... (7,229,019)
Net unrealized appreciation (depreciation) on:
Investments............................................... 6,053,341
Deferred taxes (Note 1e).................................. (259,789)
-----------
Net unrealized appreciation........................... 5,793,552
-----------
Net realized and unrealized loss............................ (1,435,467)
-----------
Net decrease in net assets resulting from operations........ $(1,822,585)
===========
</TABLE>
See Notes to Financial Statements.
18
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss).............................. $ (387,118) $ 811,473
Net realized loss from investments and foreign currency
transactions............................................ (7,229,019) (20,388,614)
Net unrealized appreciation (depreciation) on investments
and deferred taxes....................................... 5,793,552 (23,246,973)
------------------------------
Net decrease in net assets resulting from operations.... (1,822,585) (42,824,114)
Distributions to shareholders from:
Net investment income..................................... -- (1,021,093)
Net realized gains........................................ -- (257,328)
Tax return of capital..................................... -- (131,834)
Capital share transactions (Note 2)........................ -- (26,542,633)
------------------------------
Net decrease in net assets.............................. (1,822,585) (70,777,002)
Net assets:
Beginning of year.......................................... 42,437,146 113,214,148
------------------------------
End of year................................................ $40,614,561 $ 42,437,146
==============================
Undistributed net investment income included in net assets:
End of year................................................ $ -- $ --
==============================
</TABLE>
See Notes to Financial Statements.
19
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Notes to Financial Statements
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.
Certain countries in which the Fund invests have imposed restrictions on the
repatriation of their currencies. Other countries have previously instituted
currency exchange controls in the past during periods of serious imbalance in
their balance of payments or upon the occurrence of other destabilizing events.
Exchange control regulations may restrict the Fund's ability to convert
investment income, capital, or the proceeds of securities into U.S. dollars. As
of March 31, 1999 the Fund has investments with a value of approximately $2
million in countries with restrictions on the repatriation of their currencies
or formal exchange controls currently in place.
20
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
c. 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.
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
e. DEFERRED TAXES:
Deferred taxes are recorded for estimated tax liabilities inherent in the Fund's
portfolio securities which may arise from subsequent sales of those securities
and asset repatriations from countries that impose such taxes.
f. 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 January 20, 1998, the Fund completed a tender offer of 3,377,430 shares of
its common stock. The cost of the shares tendered and related offering expenses
of $26,242,633 and $300,000, respectively, were charged to capital shares.
During the year ended March 31, 1999, there were no share transactions.
At March 31, 1999, there were 100,000,000 shares authorized ($0.01 par value).
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%
21
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
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 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
At March 31, 1999, the net unrealized depreciation based on the cost of
investments for income tax purposes of $65,129,834 was as follows:
Unrealized appreciation..................................... $ 4,851,492
Unrealized depreciation..................................... (28,876,743)
------------
Net unrealized depreciation................................. $(24,025,251)
=============
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:
2006........................................................ $ 501,487
2007........................................................ 19,331,627
-----------
$19,833,114
===========
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 sales
of securities and foreign currencies.
At March 31, 1999, the Fund has 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 year
ended March 31, 1999 aggregated $17,827,362 and $6,399,813, respectively.
22
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Notes to Financial Statements (continued)
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 March 31, 1999, the Fund had investments in
"affiliated persons" valued at $6,415,338.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF REALIZED
SHARES HELD GROSS GROSS SHARES HELD VALUE DIVIDEND INCOME CAPITAL
NAME OF ISSUER MAR. 31, 1998 ADDITIONS REDUCTIONS MAR. 31, 1999 MAR. 31, 1999 4/1/98-3/31/99 GAINS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mayfair Hanoi Ltd., 30%
equity interest owned
through HEA Holdings
Ltd. .................... -- -- -- -- $3,645,336 -- --
Indotel Ltd. .............. 900,000 -- -- 900,000 2,770,002 -- --
------------------------------------------
TOTAL AFFILIATES........... $6,415,338 $-- $--
==========================================
</TABLE>
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 $6,415,338 (15.8% of net assets) at March 31,
1999.
23
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Templeton Vietnam and Southeast Asia Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Templeton Vietnam and Southeast Asia Fund, Inc.
as of March 31, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton Vietnam and Southeast Asia Fund, Inc. as of March 31, 1999, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
/s/MCGLADREY & PULLEN, LLP
New York, New York
April 30, 1999
24
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
Annual Meeting of Shareholders, December 15, 1998
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Ft. Lauderdale, Florida, on December 15, 1998. The purpose
of the meeting was to elect five Directors of the Fund; to ratify the selection
of McGladrey & Pullen, LLP, as the Fund's independent auditors for the fiscal
year ending March 31, 1999; and in their discretion, to authorize the
proxyholders to vote upon such other matters that may legally come before the
meeting or any adjournment of the meeting. At the meeting, the following persons
were elected by the shareholders to serve as Directors of the Fund: Harmon E.
Burns, John Wm. Galbraith, Betty P. Krahmer, Gordon S. Macklin and Fred R.
Millsaps.* Shareholders ratified the selection of McGladrey & Pullen, LLP, to
serve as the Fund's independent auditors for the fiscal year ending March 31,
1999. No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. The election of five (5) Directors:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
TERM EXPIRING 2001: FOR SHARES WITHHELD SHARES
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harmon E. Burns............................................. 2,825,622 60.36% 121,226 2.59%
John Wm. Galbraith.......................................... 2,847,764 60.83% 99,084 2.12%
Betty P. Krahmer............................................ 2,847,494 60.83% 99,354 2.12%
Gordon S. Macklin........................................... 2,860,249 61.10% 86,599 1.85%
Fred R. Millsaps............................................ 2,838,204 60.63% 108,644 2.32%
</TABLE>
2. The ratification of the selection of McGladrey & Pullen, LLP, as independent
auditors of the Fund for the fiscal year ending March 31, 1999:
<TABLE>
<CAPTION>
% OF % OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING BROKER OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES NON-VOTES SHARES
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2,855,647 61.00% 35,426 0.76% 55,775 1.19% -- --
</TABLE>
*Harris J. Ashton, Nicholas F. Brady, Martin L. Flanagan, S. Joseph Fortunato,
Andrew H. Hines, Jr., Edith E. Holiday and Charles B. Johnson are Directors of
the Fund who are currently serving and whose terms of office continued after the
Annual Meeting of Shareholders.
25
PAGE
TEMPLETON VIETNAM AND SOUTHEAST ASIA FUND, INC.
(formerly known as Templeton Vietnam Opportunities Fund, Inc.)
Annual Meeting of Shareholders, April 23, 1998
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 East Broward Boulevard, Ft. Lauderdale, Florida, on April 23, 1998. The
purpose of the meeting was to elect four Directors of the Fund; to approve or
reject (i) an amendment to the Fund's investment policies to enable the Fund to
invest more broadly in other countries located in Southeast Asia, while
continuing to focus its investment program on Vietnam, and (ii) a corresponding
amendment to the Fund's Articles of Incorporation to change the Fund's name to
"Templeton Vietnam and Southeast Asia Fund, Inc."; to ratify the selection of
McGladrey & Pullen, LLP, as the Fund's independent auditors for the fiscal year
ending March 31, 1998; and in their discretion, to authorize the proxyholders to
vote upon other such matters that may legally come before the meeting or any
adjournment of the meeting. At the meeting, the following persons were elected
by the shareholders to serve as Directors of the Fund: Harris J. Ashton,
Nicholas F. Brady, S. Joseph Fortunato and Edith E. Holiday.* Shareholders
approved (i) the amendment to the Fund's investment policies to enable the Fund
to invest more broadly in other countries located in Southeast Asia, while
continuing to focus its investment program on Vietnam, and (ii) the
corresponding amendment to the Fund's Articles of Incorporation to change the
Fund's name to "Templeton Vietnam and Southeast Asia Fund, Inc." Shareholders
ratified the selection of McGladrey & Pullen, LLP, to serve as the Fund's
independent auditors for the fiscal year ending March 31, 1998. No other
business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. The election of four (4) Directors:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
TERM EXPIRING 2000: FOR SHARES WITHHELD SHARES
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harris J. Ashton............................................ 3,037,355 64.88% 146,810 3.14%
Nicholas F. Brady........................................... 3,032,090 64.77% 152,075 3.25%
S. Joseph Fortunato......................................... 3,036,286 64.86% 147,879 3.16%
Edith E. Holiday............................................ 3,032,217 64.77% 151,948 3.25%
</TABLE>
2. The approval or rejection of (i) an amendment to the Fund's investment
policies to enable the Fund to invest more broadly in other countries located in
Southeast Asia, while continuing to focus its investment program on Vietnam, and
(ii) a corresponding amendment to the Fund's Articles of Incorporation to change
the Fund's name to "Templeton Vietnam and Southeast Asia Fund, Inc.":
<TABLE>
<CAPTION>
% OF % OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING BROKER NON- OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES VOTES SHARES
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2,441,921 52.17% 53,423 1.14% 72,588 1.55% 616,233 13.16%
</TABLE>
3. The ratification or rejection of the selection of McGladrey & Pullen, LLP, as
independent auditors for the Fund for the fiscal year ending March 31, 1998:
<TABLE>
<CAPTION>
% OF % OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING BROKER NON- OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES VOTES SHARES
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3,045,018 65.05% 22,863 0.49% 116,282 2.48% 2 0.00%
</TABLE>
*Harmon E. Burns, Martin L. Flanagan, John Wm. Galbraith, Andrew H. Hines, Jr.,
Charles B. Johnson, Betty P. Krahmer, Gordon S. Macklin and Fred R. Millsaps are
Directors of the Fund who are currently serving and whose terms of office
continued after the Annual Meeting of Shareholders.
26
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 on the open market.
The automatic reinvestment of dividends and/or capital gains does not relieve
the participant of any income tax that may be payable on dividends or
distributions.
The participant may withdraw from the Plan without penalty at any time by
written notice to the Plan Agent sent to ChaseMellon Shareholder Services,
Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938. Upon
withdrawal, the participant will receive, without charge, stock certificates
issued in the participant's name for all full shares held by the Plan Agent; or,
if the participant wishes, the Plan Agent will sell the participant's shares and
send the proceeds, less a service charge of $5.00 and less trading fees.
Whenever shares are purchased on the New York Stock Exchange or otherwise on the
open market, each participant will pay a pro rata portion of trading fees.
Trading fees will be deducted from amounts to be invested.
27
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
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.
28
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 Real Estate Fund
Templeton Global
Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Mutual European Fund
Templeton Global Bond Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Global
Currency Fund
Franklin Templeton Hard
Currency Fund
Templeton Americas Government
Securities Fund
GROWTH
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund(1)
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund(1)
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
Fund Allocator Series
Franklin Templeton Conservative
Target Fund
Franklin Templeton Moderate
Target Fund
Franklin Templeton Growth
Target Fund
INCOME
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin Strategic Income Fund
Franklin U.S. Government
Securities Fund
Franklin Federal Money Fund(2)
Franklin Money Fund(2)
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money Fund(2)
STATE-SPECIFIC
TAX-FREE INCOME
Alabama
Arizona(3)
California(3)
Colorado
Connecticut
Florida(3)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(4)
Michigan(4)
Minnesota(4)
Missouri
New Jersey
New York(3)
North Carolina
Ohio(4)
Oregon
Pennsylvania
Tennessee(5)
Texas
Virginia
VARIABLE ANNUITIES(6)
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
1. These funds are now closed to new accounts, with the exception of retirement
plan accounts.
2. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
3. Two or more fund options available: long-term portfolio; portfolio of insured
securities; high yield portfolio (CA); intermediate-term and money market
portfolios (CA and NY).
4. Portfolio of insured municipal securities.
5. The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
6. Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC. The Franklin Valuemark Funds are managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
04/99
PAGE
[GRAPHIC OF BEN FRANKLIN (TM)]
FRANKIN(R) TEMPLETON (R)
Templeton Vietnam and Southeast Asia Fund, Inc.
100 Fountain Parkway, P.O. Box 33030
St. Petersburg, FL 33733-8030
ANNUAL REPORT
TEMPLETON VIETNAM
AND SOUTHEAST ASIA FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
AUDITORS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
1-800/416-5585
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political, and other factors. The Fund and its investors are not protected from
such losses by the Investment Manager. Therefore, investors who cannot accept
the risk of such losses should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded, and accessed. These calls can be
determined by the presence of a regular beeping tone.
TLTVF A99 05/99 [Recycle Logo] Printed on recycled paper
