<PAGE>
Templeton
China World Fund
[PHOTO APPEARS HERE]
J. Mark Mobius, Ph.D.
President
Templeton China
World Fund, Inc.
- --------------------------------------------------------------------------------
Dr. Mobius has been living overseas 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 the business
practices and customs that are unique to developing nations. Together with his
team of Templeton analysts, Dr. Mobius currently oversees more than $6 billion
in emerging markets investments for the Templeton Group of Funds.
Management Discussion
- --------------------------------------------------------------------------------
Your Fund's Objective:
The Templeton China World Fund, Inc. seeks long-term capital appreciation
through equity investments in "China companies."
- --------------------------------------------------------------------------------
April 17, 1995
Dear Shareholder:
The six months covered by this report were difficult for emerging market funds
in general and for the China World Fund in particular. As you can see in the
Performance Summary on page 4, your Fund produced a total return of -31.3% in
market-price terms for the period from August 31, 1994 through February 28,
1995.
During this time, the Chinese and Hong Kong stock markets were adversely
affected by two major factors. The first was a potential trade war between China
and the U.S., which was finally averted on February 26, 1995. The second factor
was the uncertain health of Chinese
1
<PAGE>
leader Deng Xiao Ping. Because there is no obvious successor to Deng at present,
comments from his daughter about his deteriorating health have aroused concerns
regarding the stability of China and Hong Kong in the post-Deng period. The Hong
Kong market was also affected by concerns about rising interest rates, weak
prices of residential property, and China's takeover of Hong Kong in 1997.
Weakness in these markets gave us a chance to accumulate shares at reasonable
price levels, and we began to deploy our cash as buying opportunities arose.
On August 31, 1994, cash and other liquid assets represented about 40.6% of the
Fund's total net assets. As of February 28, 1995, that figure was down to about
15.1%, with approximately 84.9% of the total net assets invested in equities.
Among the positions held by the Fund, each of which represented more than 5% of
the Fund's total net assets were: Sun Hung Kai Properties Ltd., a leading Hong
Kong property development company with interests in commercial, industrial and
residential real estate; Cheung Kong Holdings Ltd., one of the largest property
development companies in Hong Kong, with interests in telecommunications,
trading, energy and finance; and HSBC Holdings, PLC, the holding company for the
Hongkong Bank, with major subsidiaries in the U.S. and the United Kingdom.
- --------------------------------------------------------------------------------
Templeton China World Fund, Inc.
Geographic Distribution on 2/28/95
Based on Total Net Assets
[PIE CHART APPEARS HERE]
Hong Kong 63.2%
Taiwan 3.3%
China 18.4%
Short-Term Obligations
& Other Net Assets 15.1%
We are currently focusing on companies listed on the Hong Kong Stock
exchange. Many of them are benefiting from developments in China, but have
better management than companies listed on the China exchanges (China "B"
shares). Another reason for this strategy is that the availability of China
"B" shares is still relatively low. As the "B" share markets develop
further, we expect to increase the Fund's investments in them. Since
valuations on the Taiwan market were much higher than those in Hong Kong or
China markets, we limited the Fund's exposure to Taiwan, and anticipate
limiting investments in Taiwanese companies until these valuations change.
2
<PAGE>
- --------------------------------------------------------------------------------
Templeton China World Fund
Top 10 Equity Holdings on 2/28/95
Based on Total Net Assets
<TABLE>
<CAPTION>
% of Total
Company, Industry, Country Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Sun Hung Kai Properties Ltd., Real Estate
Hong Kong 7.0%
- --------------------------------------------------------------------------------
Cheung Kong Holdings Ltd., Multi-Industry
Hong Kong 6.6%
- --------------------------------------------------------------------------------
New World Development Co. Ltd., Real Estate
Hong Kong 6.5%
- --------------------------------------------------------------------------------
HSBC Holdings PLC, Banking, Hong Kong 6.2%
- --------------------------------------------------------------------------------
Hang Lung Development Co. Ltd., Real Estate
Hong Kong 5.7%
- --------------------------------------------------------------------------------
Jardine Matheson Holdings Ltd., Multi-Industry
Hong Kong 2.6%
- --------------------------------------------------------------------------------
Dairy Farm International Holdings Ltd.
Food and Household Products, Hong Kong 2.2%
- --------------------------------------------------------------------------------
Jardine Strategic Holdings Ltd., Multi-Industry
Hong Kong 2.2%
- --------------------------------------------------------------------------------
Jardine International Motor Holdings Ltd.,
Automobiles, Hong Kong 1.8%
- --------------------------------------------------------------------------------
President Enterprises Corp.,
Automobiles, Taiwan 1.7%
- --------------------------------------------------------------------------------
</TABLE>
For a detailed listing of portfolio holdings, see page 10 of this report.
Looking forward, we are positive about the investment outlook for China and the
Templeton China World Fund. Property prices in Hong Kong appear to have
stabilized. Nominal interest rates may rise, but real interest rates are likely
to remain low, making property investments attractive. Stock prices, in our
opinion, already reflect the fears that were weakening the market.
We do not expect significant changes in China's long-term economic policies
after Deng because the reform movement does not depend upon him -- or any one
person. Deng could not have enforced the movement towards a market economy
without support throughout the country, and we believe that although there may
be temporary setbacks, reformers stand a good chance of dominating China's
political agenda if China's economy continues to grow at a healthy rate.
Of course, investing in any emerging market, means putting up with some
amount of volatility and, in some cases, severe market corrections.
Investing in China is no exception, entailing special considerations,
including risks related to market and currency volatility, adverse social and
political developments, and the relatively small size and lesser liquidities
of the markets involved. While short-term volatility can be disconcerting,
declines of as much as 40-50% are not unusual in emerging markets. For
example, the Hong Kong market has increased 1,000% in the last 15 years, but
has suffered nine declines of more then 20% during that time.
Thank you for investing in the Templeton China World Fund. We appreciate your
confidence and look forward to any comments you may have.
3
<PAGE>
Performance Summary
In market-price terms, the Templeton China World Fund produced a total return
of -31.3% for the six-month period ended February 28, 1995. Based on the
change in actual net asset value (in contrast to market price), the Fund
delivered a total return of -17.2% for the same period. Both total return
figures assume reinvestment of dividends and capital gains in accordance with
the dividend reinvestment plan.
During the reporting period, the Fund's closing price on the New York Stock
Exchange fell from $16.38 per share on August 31, 1994 to $10.25 per share on
February 28, 1995, while the net asset value per share fell from $14.92 to
$11.28 during the same period. Shareholders received combined distributions
totaling $1.27 per share, including short-term capital gains of $1.07 per share
and income distributions totaling 19.5 cents ($0.195) per share. Distributions
may vary, however, depending on income earned by the Fund and any profits
realized from the sale of securities in the portfolio. Past performance is not
predictive of future results.
- --------------------------------------------------------------------------------
TEMPLETON CHINA WORLD FUND
Cumulative Total Returns*
Periods ended 2/28/95
<TABLE>
<CAPTION>
Since
Inception
Six-Month One-Year (9/9/93)
<S> <C> <C> <C>
Based on change
in net asset value -17.2% -22.22% -11.99%
Based on change
in market price -31.3% -35.28% -24.77%
</TABLE>
*Cumulative total return calculations shows the change in value of an investment
over the periods indicated. These calculations assume reinvestment of all
distributions and capital gains at net asset value or at market price on the
reinvestment date. Past performance is not predictive of future results.
4
<PAGE>
The Following Letter
was Written by Dr. Mobius
After a Recent trip to
Washington, D.C.
Although Washington, DC is not an emerging-market city, that's where work on
this letter began. I visited the U.S. capital to investigate U.S. trade actions
towards China and China's trade and investment relations with various
multilateral agencies. The following report is based on those discussions.
One of the factors impacting stock market sentiment in China and Hong Kong
during early 1995 was the threat of a trade war between the U.S. and China.
On February 4, 1995, the Clinton Administration announced it was ready to
impose the harshest trade sanctions in U.S. history, on China. U.S. Trade
Representative (USTR) Mickey Kantor stated that unless a bilateral accord
could be reached, the sanctions would take effect on February 26, regardless
of China's counter-actions and any resulting trade war between the two
economic giants. "We cannot stand by while the interests of our fastest
growing, most competitive industries are sacrificed in China," said Kantor.
The key irritant in the bilateral trade relationship has been intellectual
property rights (IPR) concerning China's piracy of Hollywood films, recorded
music, pharmaceutical and agri-chemicals patents, and computer software --
all of which are among the most competitive U.S. industries. The official
U.S. position was that China's enforcement of trade regulations was virtually
non-existent for copyrighted works.
According to the International Intellectual Property Alliance (IIPA), a
federation of U.S. trade associations, core copyright industries such as those
just mentioned make up the second largest segment of total U.S. exports. At
$45.8 billion a year, and growing by 11.7% annually, they trail only motor
vehicles and auto parts ($47.3 billion). The IIPA claims that last year the
following U.S. industries lost approximately $866 million through piracy in
China: computer programs ($351 million), sound recordings and musical
compositions ($345 million), books
5
<PAGE>
[MAP APPEARS HERE]
($120 million) and motion pictures ($50 million). The group maintains that
Chinese government ministries routinely use pirated U.S. software in their
computers and allow retailers to sell it pre-loaded onto computers. It adds
that IIPA members filed 25 civil cases on this subject in China in 1994, but
have so far obtained only one judgement in a court system that simply does
not yet work for foreign complainants. The organization says there has been
virtually no action by central, provincial, or most local governments to stem
the tide of wholesale infringements.
The USTR's office was especially disappointed because it believes China has
failed to implement the January 16, 1992, Memorandum of Understanding in which
it promised to take direct steps to protect intellectual property rights of U.S.
exporters in these critical sectors. That agreement had averted a stiff package
of trade sanctions the Bush Administration was threatening to impose at the
time. Many experts believe it may be politically impossible for Chinese trade
agencies to crack down on their country's pirate firms, which are often linked
to powerful forces in the political and military establishments.
6
<PAGE>
According to Mickey Kantor, the Business Software Alliance, a U.S. trade
association, estimated that 94% of the computer software used in China was
pirated from its members. Kantor also said that 29 compact disc factories in
China were producing 75 million U.S.-copyrighted compact discs (CDs), laser
discs, and CD-ROMs each year even though China's domestic market capacity for
such products was only 5 million units a year. He accused China of
intentionally pirating these products in order to fuel a lucrative export
business, and claimed that China created demand for bootleg U.S. movie videos
by preventing Hollywood from showing more than 10 films there per year. "The
Chinese," said Kantor, "have taken some steps, but they have not addressed
the major substantive problems - or the continuing operation of Chinese
factories that mass produce pirated products for export."
Kantor's comments came after six months of IPR negotiations with China,
beginning on June 30, 1994. When these talks failed to reach a conclusion,
his office announced on December 31, 1994, that it was threatening to impose
stiff sanctions on $2.5 billion worth of Chinese exports. The month of
January saw much behind-the-scenes lobbying, with U.S. industries struggling
to ensure that the proposed sanctions would not hurt them. By February 4, the
lobbying campaign had lowered the proposed sanctions to only $1.1 billion --
a small portion of China's $30 billion U.S. trade deficit with China. The
prevailing belief was that such action would not harm the core aspects of
economic relations between the U.S. and China.
China quickly threatened to impose sanctions of its own, which many experts
say were far less threatening to the U.S. than those Washington wanted to
impose on Beijing. The most serious measures appeared to be a suspension of
legally imported films and videos from the U.S., and an end to negotiations
on joint ventures with U.S. auto makers. Since few of the former are allowed
in to China now, and German and Japanese car makers are already present to
pre-empt the latter, Beijing probably chose these counter-retaliatory
measures because they would have little impact on China's domestic economy.
Potentially the world's largest consumer market, China is of growing interest
to all exporting nations. However, the prevailing thinking in Washington is
7
<PAGE>
that the U.S. is a far more important market to China than China is to the U.S.
For now at least, any trade war would seem to hurt China more than the U.S. Many
experts doubt China would impose any retaliatory sanctions that would restrict
its ability to benefit from U.S. trade and investment in telecommunications,
power generation and aircraft assembly. Still, the White House can hardly ignore
the fact that China is currently the world's fastest growing market for U.S.
exports, showing volume increase of 18% between 1993 and 1994, compared with 4%
for U.S. exports to the world overall during that period.
Finally, on February 26, the Office of the United States Trade Representative
issued an announcement stating that the U.S. and China had reached an accord
on protection of intellectual property rights, and that China had promised to
take immediate steps to address rampant piracy throughout that country. The
agreement provided for a special enforcement period during which China would
make long-term changes to ensure effective enforcement of intellectual
property rights and would provide U.S. right-holders with enhanced access to
the Chinese market.
I believe that it will be very difficult to eliminate piracy of intellectual
property rights in China. The value of pirated property is so great, and the
ability to pay for it is so limited, that violation of the February 26 accord
will likely be tempting to people who have taken to heart Deng Xiao Ping's
dictum, "to be rich is glorious." China will probably continue to absorb
technology and know-how from the U.S. and other countries, and pay only a
fraction of what they should be paying for such assets. However, such technology
and know-how should enable China to increase productivity and upgrade its growth
prospects, and benefits should eventually accrue to the rest of the world.
Sincerely,
/s/ J. Mark Mobius
J. Mark Mobius, Ph.D.
President
Templeton China World Fund, Inc.
8
<PAGE>
Templeton China World Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (For a share outstanding throughout the period)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS SEPTEMBER 9, 1993
ENDED (COMMENCEMENT OF
FEBRUARY 28, 1995 OPERATIONS) TO
(UNAUDITED) AUGUST 31, 1994
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period $ 14.92 $ 14.10
--------- --------
Income from investment operations:
Net investment income .13 .16
Net realized and unrealized gain (loss) (2.50) .79
--------- --------
Total from investment operations (2.37) .95
--------- --------
Underwriting expenses deducted from capi-
tal -- (.07)
Distributions:
Dividends from net investment income (.20) (.06)
Dividends from realized capital gains (1.07) --
--------- --------
Total distributions (1.27) (.06)
Change in net asset value (3.64) .82
--------- --------
Net asset value, end of period $ 11.28 $ 14.92
========= ========
TOTAL RETURN *
Based on market value per share (31.32)% 9.54%
Based on net asset value per share (17.20)% 6.18%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 229,892 $297,835
Ratio of expenses to average net assets 1.67%** 1.84%**
Ratio of net investment income to average
net assets 2.05%** 1.09%**
Portfolio turnover rate 0.89% 81.81%
</TABLE>
* NOT ANNUALIZED IN PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Templeton China World Fund, Inc.
Investment Portfolio, February 28, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS: 84.9%
- -------------------------------------------------------------------------------
Appliances & Household Durables: 2.5%
Semi-Tech (Global) Co. Ltd. H.K. 2,024,993 $ 3,522,752
*Shanghai Narcissus Electric
Appliances Industrial Co.
Ltd., B Chn. 1,070,000 256,800
Shanghai Vacuum Electron
Devices Co. Ltd. B Chn. 7,396,322 1,375,716
Shenzhen Huafa Electronics Co.
Ltd., B Chn. 1,728,000 290,552
Shenzhen Konka Electronics Co.
Ltd., B Chn. 651,000 324,174
-----------
5,769,994
- -------------------------------------------------------------------------------
Automobiles: 3.4%
Jardine International Motor
Holdings Ltd. H.K. 3,704,000 4,072,172
*President Enterprises Corp. Twn. 2,009,475 3,813,588
-----------
7,885,760
- -------------------------------------------------------------------------------
Banking: 6.5%
HSBC Holdings PLC H.K. 1,365,784 14,352,965
JCG Holdings Ltd. H.K. 1,194,000 629,315
-----------
14,982,280
- -------------------------------------------------------------------------------
Broadcasting & Publishing: 0.1%
Leefung-Acso Printers Holdings
Ltd. H.K. 1,071,000 157,918
- -------------------------------------------------------------------------------
Chemicals:
3.3%
Shanghai Chlor-Alkali Chemical
Co. Ltd., B Chn. 8,151,000 2,086,656
Shanghai Petrochemical Co.
Ltd., H Chn. 7,500,000 2,303,887
Shenzhen Petrochemical (Group)
Shareholding Co. Ltd., B Chn. 4,240,600 1,234,088
Zhuhai SEZ Lizhu
Pharmaceutical Group, Inc. B Chn. 4,309,600 1,895,187
-----------
7,519,818
- -------------------------------------------------------------------------------
Construction & Housing: 4.0%
CTCI Corp. Twn. 819,600 1,882,082
Hopewell Holdings Ltd. H.K. 2,947,000 2,248,891
K-Wah International Holdings
Ltd. H.K. 14,459,789 2,300,400
Shanghai Yaohua Pilkington
Glass Co. Ltd., B Chn. 2,670,000 2,670,000
Wai Kee Holdings Ltd. H.K. 386,000 74,888
-----------
9,176,261
- -------------------------------------------------------------------------------
Electrical & Electronics: 1.6%
*China Treasure
Telecommunications Holdings
Ltd. H.K. 2,000,000 117,700
Gold Peak Industries
(Holdings) Ltd. H.K. 1,812,000 662,084
Great Wall Electronic
International Ltd. H.K. 12,668,000 983,095
Tsann Kuen (China) Enterprise
Co. Ltd., B Chn. 5,834,000 1,961,896
-----------
3,724,775
- -------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Templeton China World Fund, Inc.
Investment Portfolio, February 28, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Electrical Components: 0.3%
S. Megga International
Holdings Ltd. H.K. 6,882,000 $ 578,581
- -------------------------------------------------------------------------------
Financial Services: 1.6%
Peregrine Investments Holdings
Ltd. H.K. 1,581,000 1,932,413
Sun Hung Kai & Co. Ltd. H.K. 4,318,000 1,773,220
-----------
3,705,633
- -------------------------------------------------------------------------------
Food & Household Products: 3.7%
C. P. Pokphand Co. Ltd. H.K. 10,234,000 2,528,221
Dairy Farm International
Holdings Ltd. H.K. 4,193,425 5,044,151
Fairwood Holdings Ltd. H.K. 4,530,000 480,450
Vitasoy International Holdings
Ltd. H.K. 1,400,000 543,232
-----------
8,596,054
- -------------------------------------------------------------------------------
Health & Personal Care: 0.1%
*China Pharmaceutical
Enterprise & Investment Corp. H.K. 1,000,000 126,754
- -------------------------------------------------------------------------------
Industrial Components: 0.9%
*Shanghai Rubber Belt Co.
Ltd., B Chn. 4,170,270 625,541
Shanghai Tyre & Rubber Co.
Ltd., B Chn. 4,611,100 1,374,108
-----------
1,999,649
- -------------------------------------------------------------------------------
Leisure & Tourism: 0.2%
Shanghai Jin Jiang Tower Co.
Ltd., B Chn. 1,322,952 510,659
- -------------------------------------------------------------------------------
Machinery & Engineering: 2.5%
*China Textile Machinery Co.
Ltd., B Chn. 13,200,200 1,980,030
Guangzhou Shipyard
International Co. Ltd., H Chn. 1,204,000 490,539
Shanghai Erfangji Textile
Machinery Co. Ltd., B Chn. 7,434,100 1,457,084
*Shanghai Industrial Sewing
Machine Co. Ltd., B Chn. 2,155,100 659,461
*Shanghai Refrigerator
Compressor Company, B Chn. 333,000 119,880
*Shanghai Steel Tube Co. Ltd.,
B Chn. 4,785,000 1,090,980
-----------
5,797,974
- -------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Templeton China World Fund, Inc.
Investment Portfolio, February 28, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Merchandising: 2.8%
Dickson Concepts
(International) Ltd. H.K. 2,689,000 $ 1,460,751
Fortei Holdings Ltd. H.K. 9,582,000 817,968
Joyce Boutique Holdings Ltd. H.K. 2,896,000 543,129
Le Saunda Holdings Ltd. H.K. 1,776,000 151,608
Li & Fung Ltd. H.K. 1,826,000 1,110,030
Linkful International Holdings
Ltd. H.K. 1,700,000 136,325
Wo Kee Hong (Holdings) Ltd. H.K. 6,826,000 1,403,782
Yaohan Hong Kong Corp. Ltd. H.K. 6,888,000 846,356
-----------
6,469,949
- -------------------------------------------------------------------------------
Multi-Industry: 15.4%
CNT Group Ltd. H.K. 16,342,000 845,476
Cheung Kong (Holdings) Ltd. H.K. 3,468,000 15,116,290
China Southern Glass Co. Ltd.,
B Chn. 480,800 295,389
Jardine Matheson Holdings Ltd. H.K. 648,367 5,964,976
Jardine Strategic Holdings
Ltd. H.K. 1,336,000 4,969,920
Lai Sun Garment International
Ltd. H.K. 1,907,000 2,034,890
Shenzhen Gintian Industrial
Co. Ltd., B Chn. 1,852,067 661,153
Shenzhen Tellus Machinery &
Electronics Co. Ltd., B Chn. 2,455,200 523,971
Stelux Holdings Ltd. H.K. 8,475,084 2,493,800
Swire Pacific Ltd., B H.K. 465,000 505,206
Wheelock & Co. Ltd. H.K. 1,220,000 2,059,238
-----------
35,470,309
- -------------------------------------------------------------------------------
Real Estate: 25.0%
China Overseas Land &
Investment Ltd. H.K. 6,048,000 1,118,624
Hang Lung Development Co. Ltd. H.K. 8,729,000 12,927,252
*Hang Lung Development Co.
Ltd., wts. H.K. 872,900 153,546
Lai Sun Development Co. Ltd. H.K. 21,838,000 2,937,531
New World Development Co. Ltd. H.K. 5,509,414 15,035,716
*Prince Housing Development
Corp. Twn. 1,986,000 1,861,904
Shanghai Jinqiao Export
Processing Zone Development,
B Chn. 4,421,560 2,794,426
*Shanghai Lujiazui Finance and
Trade Zone Development B Chn. 894,000 625,800
*Shanghai Outer Gaoqiao Free
Trade Zone Development Co. B Chn. 616,000 325,248
Shenzhen Properties &
Resources Development (Group)
Ltd., B Chn. 4,366,000 1,665,873
Shenzhen Vanke Co. Ltd., B Chn. 1,935,675 876,268
Sun Hung Kai Properties Ltd. H.K. 2,395,100 16,108,802
Tian An China Investments Co.
Ltd. H.K. 6,869,750 1,199,530
*Tian An China Investments Co.
Ltd. , wts. H.K. 82,350 660
-----------
57,631,180
- -------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Templeton China World Fund, Inc.
Investment Portfolio, February 28, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Recreation & Other Consumer Goods: 4.8%
China First Pencil Co. Ltd., B Chn. 8,551,200 $ 2,522,604
*Fu Hui Jewellery Co. (HK)
Ltd. H.K. 5,382,000 306,290
*Shanghai Forever Bicycle Co.
Ltd., B Chn. 5,726,000 1,133,748
*Shanghai Phoenix Bicycle Co.
Ltd., B Chn. 2,411,000 718,478
Shanghai Wingsung Stationery
Co. Ltd., B Chn. 3,835,400 958,850
Shenzhen China Bicycles Co.
(Holdings) Ltd., B Chn. 5,827,000 2,498,416
Yue Yuen Industrial (Holdings)
Ltd. H.K. 12,346,000 2,794,477
-----------
10,932,863
- -------------------------------------------------------------------------------
Telecommunications: 0.1%
*Shanghai Post &
Telecommunication Equipment
Co. Ltd. Chn. 50,000 30,100
- -------------------------------------------------------------------------------
Textiles & Apparel: 2.2%
Goldlion Holdings Ltd. H.K. 9,210,000 2,048,917
Laws International Holdings
Ltd. H.K. 3,332,000 560,254
Shanghai Lian Hua Fibre Corp.,
B Chn. 4,166,300 1,458,205
Top Form International Ltd. H.K. 1,252,000 105,258
Tungtex Holdings Co. Ltd. H.K. 1,364,000 158,779
Victor Onward Textile
Industrial Co. Ltd., B Chn. 3,253,800 652,317
-----------
4,983,730
- -------------------------------------------------------------------------------
Transportation: 1.9%
Chiwan Wharf Holdings Ltd., B Chn. 1,470,000 608,420
Cross Harbour Tunnel Co. Ltd. H.K. 973,000 1,912,902
IMC Holdings Ltd. H.K. 2,435,000 1,952,661
-----------
4,473,983
- -------------------------------------------------------------------------------
Utilities--Electric & Gas: 1.6%
Hong Kong Electric Holdings
Ltd. H.K. 642,000 1,922,305
Shandong Huaneng Power Chn. 132,000 1,204,500
Wing Shan International Ltd. H.K. 4,474,000 584,458
-----------
3,711,263
- -------------------------------------------------------------------------------
Wholesale & International Trade: 0.4%
East Asiatic Co., (Hong Kong)
Ltd. H.K. 6,170,000 837,936
-----------
TOTAL COMMON STOCKS (cost $251,359,397) 195,073,423
- -------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Templeton China World Fund, Inc.
Investment Portfolio, February 28, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY VALUE
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 10.8% (cost $24,802,606)
- ---------------------------------------------------------------------------
U.S. Treasury Bills,
5.18% to 5.65% with
maturities
to 4/20/95 U.S. 24,893,000 $ 24,802,812
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS: 95.7% (cost $276,162,003) 219,876,235
OTHER ASSETS, LESS LIABILITIES: 4.3% 10,015,892
------------
TOTAL NET ASSETS: 100.0% $229,892,127
============
</TABLE>
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Templeton China World Fund, Inc.
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1995 (unaudited)
<TABLE>
<S> <C>
Assets:
Investment in securities,
at value (identified cost
$276,162,003) $219,876,235
Cash 10,914,552
Dividends receivable 19,003
Unamortized organization
costs 16,848
------------
Total assets 230,826,638
------------
Liabilities:
Accrued expenses 934,511
------------
Total liabilities 934,511
------------
Net assets, at value 229,892,127
============
Net assets consists of:
Undistributed net
investment income $ 609,845
Net unrealized
depreciation (56,129,029)
Accumulated net realized
loss (302,413)
Net capital paid in on
shares
of capital stock 285,713,724
------------
Net assets, at value $229,892,127
============
Shares outstanding 20,383,772
============
Net asset value per share
($229,892,127 / 20,383,772) $ 11.28
============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended February 28, 1995 (unaudited)
<TABLE>
<S> <C> <C>
Investment income:
(net of $25,639
foreign taxes withheld)
Dividends $ 3,483,886
Interest 1,240,351
------------
Total income $ 4,724,237
Expenses:
Management fees (Note 3) 1,656,958
Administrative fees (Note 3) 254,917
Custodian fees 82,632
Transfer agent fees 68,536
Audit fees 19,058
Directors' fees and expenses 14,795
Registration and filing fees 12,950
Legal fees 7,527
Amortization of organization costs 2,353
Other 4,216
------------
Total expenses 2,123,942
------------
Net investment income 2,600,295
Realized and unrealized loss:
Net realized loss on:
Investments (25,775)
Foreign currency transactions (28,123)
------------
(53,898)
Net unrealized depreciation on:
Investments (50,742,020)
Foreign currency translation of other assets and
liabilities (50,921)
------------
(50,792,941)
------------
Net realized and unrealized loss (50,846,839)
------------
Net decrease in net assets resulting from
operations $(48,246,544)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Templeton China World Fund, Inc.
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS SEPTEMBER 9, 1993
ENDED (COMMENCEMENT
FEBRUARY 28, 1995 OF OPERATIONS) TO
(UNAUDITED) AUGUST 31, 1994
----------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 2,600,295 $ 3,137,784
Net realized gain (loss) from security
and foreign currency transactions (53,898) 21,107,798
Net unrealized depreciation (50,792,941) (5,336,088)
------------ ------------
Net increase (decrease) in net asset re-
sulting from operations (48,246,544) 18,909,494
Distributions to shareholders:
From net investment income (3,932,176) (1,196,058)
From net realized capital gains (21,356,313) --
Capital share transactions (Note 2) 5,592,621 280,021,092
------------ ------------
Net increase (decrease) in net assets (67,942,412) 297,734,528
Net assets:
Beginning of period 297,834,539 100,011
------------ ------------
End of period $229,892,127 $297,834,539
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Templeton China World Fund, Inc.
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton China World Fund, Inc. (the Fund), is a Maryland corporation and com-
menced operations on September 9, 1993 as a closed-end, non-diversified manage-
ment investment company registered under the Investment Company Act of 1940.
The following summarizes the Fund's significant accounting policies.
a. Securities Valuations:
Securities listed or traded on a recognized national or foreign stock exchange
or NASDAQ are valued at the last reported sales prices on the principal ex-
change on which the securities are traded. Over-the-counter securities and
listed securities for which no sale is reported are valued at the mean between
the last current bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
and approved in good faith by the Board of Directors.
b. Foreign Currency Translations:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign curren-
cies are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customar-
ily enters into foreign exchange contracts to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of for-
eign currencies, currency gains or losses realized between the trade and set-
tlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at the end
of the fiscal period, resulting from changes in the exchange rates.
c. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
d. Security Transactions, Investment Income, Distributions and Expenses:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign securi-
ties is recorded as soon as information is available to the Fund. Interest in-
come and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
On September 9, 1993, the fund completed the initial public offering of
19,927,199 shares of its common stock; proceeds paid to the Fund amounted to
$279,624,231, after deduction of underwriting commissions and expenses of
$1,349,288.
As of February 28, 1995, there were 100,000,000 shares of capital stock autho-
rized ($0.01 par value). For the six months ended February 28, 1995 and the
year ended August 31, 1994, 426,593 shares were issued for $5,592,621 and
22,887 shares were issued for $396,861 from reinvested distributions, respec-
tively .
17
<PAGE>
Templeton China World Fund, Inc.
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton In-
vestment Management (Hong Kong) Limited (TIML) and Templeton Global Investors,
Inc. (TGII), the Fund's investment manager and administrative manager, respec-
tively. The Fund pays monthly an investment management fee to TIML equal, on an
annual basis, to 1.25% of the average weekly net assets of the Fund. The Fund
pays TGII monthly a fee of 0.25% per annum of the Fund's average weekly net as-
sets. TGII has entered into a sub-administrative agreement with Middlesex Ad-
ministrators L.P. (Middlesex), an affiliate of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, whereby Middlesex provides various administrative services
to the Fund. For its services TGII pays to Middlesex a fee equal, on an annual
basis, to 0.20% of the Fund's average weekly net assets.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received $7,527 for the six months ended February 28,
1995.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the six
months ended February 28, 1995, aggregated $71,168,833 and $1,770,751, respec-
tively. The cost of securities for federal income tax purposes is $276,252,645.
Realized gains and losses are reported on an identified cost basis.
At February 28, 1995, the aggregate gross unrealized appreciation and deprecia-
tion of portfolio securities, based on cost for federal income taxes purposes,
was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 3,357,396
Unrealized depreciation (59,733,806)
------------
Net unrealized depreciation $(56,376,410)
============
</TABLE>
5. UNAUDITED QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
NET INCREASE
NET GAIN (LOSS) (DECREASE)
ON SECURITY AND IN NET ASSETS
INVESTMENT NET INVESTMENT FOREIGN CURRENCY RESULTING FROM
INCOME INCOME TRANSLATIONS OPERATIONS
---------------- ----------------- -------------------- --------------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
---------- ----- ---------- ----- ------------ ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995
For the quarter ended:
November 30, 1994 $2,619,334 $.13 $1,281,642 $ .06 $(36,609,484) $(1.80) $(35,327,842) $(1.74)
February 28, 1995 2,104,903 .10 1,318,653 .07 (14,237,355) (.70) (12,918,702) (.63)
---------- ---- ---------- ----- ------------ ------ ------------ ------
$4,724,237 $.23 $2,600,295 $ .13 $(50,846,839) $(2.50) $(48,246,544) $(2.37)
========== ==== ========== ===== ============ ====== ============ ======
1994
For the period ended:
November 30, 1993 $2,039,067 $.10 $ 966,328 $ .05 $ 16,935,638 $ .85 $ 17,901,966 $ .90
February 28, 1994 1,187,223 .06 (332,525) (.02) 20,750,274 1.04 20,417,749 1.02
May 31, 1994 2,032,737 .10 701,892 .04 (33,091,784) (1.66) (32,389,892) (1.62)
August 31, 1994 3,185,578 .16 1,802,089 .09 11,177,582 .56 12,979,671 .65
---------- ---- ---------- ----- ------------ ------ ------------ ------
$8,444,605 $.42 $3,137,784 $ .16 $ 15,771,710 $ .79 $ 18,909,494 $ .95
========== ==== ========== ===== ============ ====== ============ ======
</TABLE>
18
<PAGE>
Templeton China World Fund, Inc.
Annual Meeting of Shareholders, February 21, 1995
- --------------------------------------------------------------------------------
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
700 Central Avenue, St. Petersburg, Florida, on February 21, 1995. The purpose
of the meeting was to elect twelve directors of the Fund and to ratify the se-
lection of McGladrey & Pullen, LLP, as the Fund's independent public accoun-
tants for the fiscal year ending August 31, 1995. At the meeting, the following
persons were elected by the shareholders to serve as directors of the Fund: An-
drew H. Hines, Jr., John G. Bennett, Jr., F. Bruce Clarke, Charles E. Johnson,
John M. Templeton, Betty P. Krahmer, Fred R. Millsaps, Gordon S. Macklin,
Hasso-G von Diergardt-Naglo, Harris J. Ashton, S. Joseph Fortunato and Nicholas
F. Brady. In addition, the shareholders ratified the selection of McGladrey &
Pullen, LLP, to serve as the Fund's independent public accountants for the fis-
cal year ending August 31, 1995. No other business was transacted at the Annual
Meeting.
The results of the voting at the Annual Meeting are as follows:
1. Election of twelve (12) Directors:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING SHARES OUTSTANDING
FOR SHARES VOTED AGAINST % ABSTAIN SHARES
---------- ----------- ------ ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Andrew H.
Hines,
Jr. 17,353,564 85.13% 99.33% -0- -0- 117,734 0.58%
John G.
Bennett,
Jr. 17,355,032 85.14% 99.33% -0- -0- 116,266 0.57%
F. Bruce
Clarke 17,334,985 85.04% 99.22% -0- -0- 136,313 0.67%
Charles
E. John-
son 17,310,438 84.92% 99.08% -0- -0- 160,862 0.79%
John M.
Templeton 17,312,870 84.93% 99.09% -0- -0- 158,428 0.78%
Betty P.
Krahmer 17,354,800 85.14% 99.33% -0- -0- 116,498 0.57%
Fred R.
Millsaps 17,353,232 85.13% 99.32% -0- -0- 118,066 0.58%
Gordon S.
Macklin 17,306,992 84.91% 99.06% -0- -0- 164,306 0.81%
Hasso-G
von
Diegardt-
Naglo 17,306,152 84.90% 99.05% -0- -0- 165,146 0.81%
Harris J.
Ashton 17,309,157 84.92% 99.07% -0- -0- 162,141 0.80%
S. Joseph
Fortunato 17,307,607 84.91% 99.06% -0- -0- 163,691 0.80%
Nicholas
F. Brady 17,307,258 84.91% 99.06% -0- -0- 164,040 0.80%
2. Ratification of the selection of McGladrey & Pullen, LLP, as independent
public accountants of the Fund for the fiscal year ending August 31, 1995:
<CAPTION>
% OF % OF % OF % OF
OUTSTANDING SHARES OUTSTANDING OUTSTANDING
FOR SHARES VOTED AGAINST SHARES ABSTAIN SHARES
---------- ----------- ------ ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
17,324,883 84.99% 99.16% 63,712 0.31% 82,703 0.41%
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
TEMPLETON CHINA WORLD FUND, INC.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Investors should be aware that the value of investments made for the Fund may
go up as well as down and that the Investment Manager may make errors in
selecting securities for the Fund's portfolio. Like any investment in
securities, the Fund's portfolio will be subject to the risk of loss from
market, currency, economic, political and other factors. The Fund and Fund
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 bythe presence of a regular beeping tone.
- --------------------------------------------------------------------------------
TEMPLETON
CHINA
WORLD
FUND, INC.
Semi-Annual Report
February 28, 1995
[FRANKLIN TEMPLETON LOGO APPEARS HERE]
[RECYCLING LOGO APPEARS HERE]
TLTCH S95 04/95
