<PAGE>
Templeton China
World Fund
- --------------------------------------------------------------------------------
Your Fund's Objective:
The Templeton China World Fund seeks long-term capital appreciation through
equity investments in "China companies."
- --------------------------------------------------------------------------------
January 16, 1996
Dear Shareholder:
This update for the quarter ended November 30, 1995, includes your Fund's long-
term performance, a listing of its investments, and a brief discussion by Dr.
Mark Mobius on a topic of current interest. Please keep in mind that this
summary is one of four reports you will receive during the Fund's fiscal year.
Next quarter, you will receive the semi-annual report covering the six months
ending February 29, 1996, which is more comprehensive. It will include a
discussion of the financial markets and a summary of the Fund's performance and
investment direction during the period. The portfolio manager's outlook and the
Fund's financial statements and investment portfolio will also be included.
If you have any questions regarding this report, you may call the Franklin
Templeton Fund Information Department, toll free, at 1-800/342-5236.
- --------------------------------------------------------------------------------
Templeton China World Fund
Cumulative Total Returns*
Periods Ended 11/30/95
<TABLE>
<CAPTION>
Since
Inception
One-Year (9/9/93)
<S> <C> <C>
Based on change
in net asset value 0.58% -6.56%
Based on change
in market price -16.17% -22.91%
</TABLE>
*Cumulative total return calculations show the change in value of an investment
over the periods indicated. These calculations assume reinvestment of all
distributions and capital gains, either at net asset value or at market price on
the reinvestment date, in accordance with the dividend reinvestment plan. Past
performance is not predictive of future results.
Investing in geographically concentrated developing markets involves special
considerations, which may include increased risks related to market and currency
volatility, adverse social and political developments, and the relatively small
size and lesser liquidity of these markets. While short-term volatility can be
disconcerting, declines of as much as 40% to 50% are not unusual in emerging
markets. For example, the Hong Kong market has increased 695% in the last 15
years, but has suffered six declines of more than 20% during that time.
(Source: Bloomberg. Based on quarterly percentage change over 15 years ended
September 30, 1995.)
- --------------------------------------------------------------------------------
1
<PAGE>
The Following Letter
was Written by Dr. Mobius
During a Trip to Shanghai.
Shanghai is at the heart of an area that has been described as the largest
market in Asia. Some analysts have said that the largest concentration of
consumers in the Asia Pacific area is not Japan, not southern China, and not any
single country, but the Yangtze River Delta region. This market includes
Shanghai and the provinces of Jiangsu, Anhui and Zhejiang. It is estimated to
contain almost 200 million people, a population larger than Indonesia's or
Japan's. Although foreign investors who came to China in the 1980s concentrated
on Guangdong, the focus shifted to the Yangtze River Delta in the 1990s. One
quarter of China's increased economic production comes from this region, which
has been growing faster than Taiwan and South Korea. In addition to Shanghai,
the autonomous townships and village enterprises in the vicinity have grown a
great deal. These areas offer lower taxes and cheap credit to export-oriented
enterprises and are not restricted by the quotas and targets to which the state
enterprises are subject.
Progress in Shanghai is really amazing. As we came off the newly completed
north-south elevated highway, which had just been finished and was festooned
with banners celebrating its opening, we noticed numerous buildings being
completed throughout the city. A Shanghai municipal official told us that the
Pudong New Area development, which will result in an entirely new city at the
mouth of the Yangtze River, will have a major port, a new airport, office
buildings, housing, and a new stock exchange. He said that although Hong Kong
was now the largest port in China, Shanghai would eventually surpass it and
become China's financial and trade center. He added that this did not mean Hong
Kong would become smaller, but that all of China's financial activity and trade
would increase.
We visited several companies in Shanghai, all of which are benefiting in one way
or another from the region's extraordinary growth. Shanghai Shangling Electric
Appliances Co. makes refrigera-
2
<PAGE>
[MAP OF CHINA APPEARS HERE]
tors, air-conditioners, and microwave ovens that are in demand as changing
lifestyles increase the desire for fast- and frozen-foods. Shangling has a close
relationship with Mitsubishi of Japan, whose influence was apparent when we
visited. Our three hosts were wearing crisp white- and blue-striped uniform
shirts. Everyone in the plant wore uniforms, and the company brochure and
annual report had the bright, quality feel of a major Japanese appliance
company.
Next, we visited the Lian Hua plant, a joint-venture fiber and textiles factory
started by the Shanghai Chemical Fibre Corporation and a Hong Kong company
controlled by a Taiwanese investor. On this dark, rainy day, they were trying
to save electricity, and no lights were on in their offices. Between January
1993 and December 1994, electricity prices rose by 55%, and we were told they
were expected to continue rising. To save money, the company increases
production at night when electricity costs are lower.
Ironically, our next visit was to a company that makes light bulbs. Shanghai
Jianbao Industry has
3
<PAGE>
recognized that the light bulb business offers only low profit margins and has
begun to diversify. One of its new ventures produces chicken essence, another
makes chemicals, another makes packaging materials, and one is engaged in port
construction.
We also made a series of visits to automobile-related companies such as Shanghai
Tyre and Rubber Company, Shanghai Diesel, which assembles diesel engines under
license from U.S.-based Caterpillar Corporation, and Volkswagen. One of the
managers at the Volkswagen plant told me that working in China involved language
difficulties and meant using an interpreter, which is time consuming. The plant
was not very different from other automobile plants we had visited, with its
moving assembly line, conveniently placed parts bins, and workers adding various
parts to the cars moving along the line.
Our last visit was to the enormous Shanghai Yaohua Pilkington glass plant, where
the production line was humming. The manufacturing process starts with a
mixture of silica, waste glass and soda ash feeding into a white hot furnace.
This inferno of material, reminiscent of volcanic lava with a crust on top,
flows from the furnace onto a bed of molten tin and then to the cooling process,
which reveals the smooth glass. Just walking from one end to another took about
half an hour.
There are 85 cities and towns in the Yangtze River Delta, and 35 have
populations of more than one million. Although the Chinese previously were not
allowed to move from one area to another, the situation has completely changed,
and the region is now attracting migrants at an estimated rate of nine million
per year. This has created infrastructure, housing, and security problems, and
in order to provide the necessary water, sewerage, rail, roads, power and
housing services, local governments in the area will require more and more
foreign investment. We shall, of course, continue to monitor the situation as we
pursue future investment opportunities for the benefit of the Fund's
shareholders.
Sincerely,
/s/ J. Mark Mobius
J. Mark Mobius, Ph.D.
President
Templeton China World Fund, Inc.
4
<PAGE>
Templeton China World Fund, Inc.
Investment Portfolio, November 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
COMMON STOCKS: 92.2%
- -------------------------------------------------------------------------------------------------
Appliances & Household Durables: 3.5%
Hualing Holdings Ltd. H.K. 1,330,500 $ 209,855
Semi-Tech (Global) Co., Ltd. H.K. 2,192,013 3,372,371
Shanghai Narcissus Electric Appliances Co. Ltd., B Chn. 2,858,000 571,600
Shanghai Vacuum Electron Devices Co. Ltd., B Chn. 9,054,586 2,127,828
Shenzhen Huafa Electronics Co. Ltd., B Chn. 2,442,000 435,682
Shenzhen Konka Electronic Group Co. Ltd., B Chn. 651,000 378,738
Tsann Kuen Enterprise Co. Ltd., B Chn. 5,834,000 1,214,332
------------
8,310,406
- -------------------------------------------------------------------------------------------------
Automobiles: 2.2%
Jardine International Motor Holdings Ltd. H.K. 3,704,000 4,142,213
Qing Ling Motors Co. Ltd., H Chn. 5,000,000 1,234,664
------------
5,376,877
- -------------------------------------------------------------------------------------------------
Banking: 9.0%
HSBC Holdings PLC H.K. 1,416,889 20,882,668
JCG Holdings Ltd. H.K. 813,000 599,116
------------
21,481,784
- -------------------------------------------------------------------------------------------------
Broadcasting & Publishing: 0.1%
Leefung-Asco Printers Holdings Ltd. H.K. 1,143,000 165,504
- -------------------------------------------------------------------------------------------------
Building Materials & Components: 2.2%
K Wah International Holdings Ltd. H.K. 15,437,956 2,355,142
K Wah International Holdings Ltd., wts. H.K. 1,445,978 51,409
Shanghai Yaohua Pilkington Glass, B Chn. 3,152,000 2,773,760
------------
5,180,311
- -------------------------------------------------------------------------------------------------
Chemicals: 4.0%
Shanghai Chlor-Alkali Chemical Co. Ltd., B Chn. 9,459,000 2,440,422
Shanghai Pechemical Co. Ltd., H Chn. 15,480,000 4,352,868
Shenzhen Petrochemical (Group) Shareholding Co. Ltd., B Chn. 5,088,720 1,398,018
Zhuhai Sez Lizhu Pharmaceutical, B Chn. 4,309,600 1,504,340
------------
9,695,648
- -------------------------------------------------------------------------------------------------
Construction & Housing: 2.6%
Hopewell Holdings Ltd. H.K. 10,329,344 5,842,465
Wai Kee Holdings Ltd. H.K. 3,626,000 478,160
------------
6,320,625
- -------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
Templeton China World Fund, Inc.
Investment Portfolio, November 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------
Electrical & Electronics: 1.0%
China Treasure Telecomunications Holdings Ltd. H.K. 1,870,000 $ 83,408
Gold Peak Industries (Holdings) Ltd. H.K. 1,746,000 795,699
Great Wall Electronic International Ltd. H.K. 12,668,000 1,031,796
Shanghai Automation Instrumentation Co., B Chn. 680,300 126,536
Yaego Corp. Twn. 260,000 435,991
------------
2,473,430
- --------------------------------------------------------------------------------------------
Electronic Components & Instruments: 0.2%
S. Megga International Holdings Ltd. H.K. 8,508,000 384,982
- --------------------------------------------------------------------------------------------
Financial Services: 1.4%
Min Xin Holdings H.K. 1,000,000 182,291
Peregrine Investments Holdings Ltd. H.K. 1,581,000 2,054,202
Sun Hung Kai & Co. Ltd. H.K. 4,318,000 1,010,431
------------
3,246,924
- --------------------------------------------------------------------------------------------
Food & Household Products: 4.5%
C.P. Pokphand Co. Ltd. H.K. 2,540,000 1,034,402
Dairy Farm International Holdings LTd. H.K. 6,860,255 5,625,409
Fairwood Holdings Ltd. H.K. 4,530,000 427,530
President Enterprises Corp. Twn. 2,622,360 2,861,193
Shanghai New Asia Group Co. Ltd., B Chn. 384,000 195,840
Vitasoy International Holdings Ltd. H.K. 1,682,000 723,041
------------
10,867,415
- --------------------------------------------------------------------------------------------
Industrial Components: 1.1%
Shanghai Refrigerator Compressor Co. Ltd., B Chn. 574,900 229,960
Shanghai Rubber Belt Co. Ltd., B Chn. 4,170,270 679,754
Shanghai Shangling Electric Appliance, B Chn. 835,900 526,617
Shanghai Tyre & Rubber Co. Ltd., B Chn. 5,530,100 1,271,923
------------
2,708,254
- --------------------------------------------------------------------------------------------
Leisure & Tourism: 0.3%
Glynhill International Ltd. H.K. 1,950,000 53,698
Shanghai Jin Jiang Tower Co. Ltd., B Chn. 2,589,952 776,986
------------
830,684
- --------------------------------------------------------------------------------------------
Machinery & Engineering: 2.2%
China Textile Machinery Co. Ltd., B Chn. 13,612,200 2,123,503
Guangzhou Shipyard International Co. Ltd., H Chn. 1,316,000 338,574
Northeast Electric Transmission & Transformation H.K. 34,000 6,593
</TABLE>
6
<PAGE>
Templeton China World Fund, Inc.
Investment Portfolio, November 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -----------------------------------------------------------------------------------------------
Machinery & Engineering (cont.)
Shanghai Erfangji Textile Machinery Co. Ltd., B Chn. 10,677,510 $ 1,793,822
Shanghai Industrial Sewing Machine Corp. Chn. 2,155,100 331,885
Shanghai Steel Tube Co. Ltd., B Chn. 5,263,500 757,944
------------
5,352,321
- -----------------------------------------------------------------------------------------------
Merchandising: 2.2%
Dickson Concepts (International) Ltd. H.K. 2,689,000 1,946,812
Fortei Holdings Ltd. H.K. 9,582,000 445,968
Joyce Boutique Holdings Ltd. H.K. 2,835,000 667,067
Le Saunda Holdings Ltd. H.K. 1,776,000 137,765
LI & Fung Ltd. H.K. 146,980 109,263
Linkful International Holdings Ltd. H.K. 1,700,000 129,672
Wo Kee Hong Holdings Ltd. H.K. 8,256,000 1,611,729
Yaohan Hongkong Corp. Ltd. H.K. 6,888,000 365,109
------------
5,413,385
- -----------------------------------------------------------------------------------------------
Metals & Mining: 0.2%
Maanshan Iron & Steel Co. Ltd., H Chn. 3,524,000 578,609
- -----------------------------------------------------------------------------------------------
Miscellaneous Materials & Commodities: 0.1%
Luoyang Glass Co. Ltd., H Chn. 500,000 155,141
- -----------------------------------------------------------------------------------------------
Multi-Industry: 16.7%
Cheung Kong Holdings Ltd. H.K. 3,468,000 19,727,728
China Southern Glass Co. Ltd., B Chn. 1,505,840 579,177
CNT Group Ltd. H.K. 16,802,770 988,411
Jardine Matheson Holdings Ltd. H.K. 669,257 4,049,005
Jardine Strategic Holdings Ltd. H.K. 1,834,000 4,823,420
Jardine Strategic Holdings Ltd., wts. H.K. 167,000 44,255
Lai Sun Garment International Ltd. H.K. 2,508,000 2,610,169
Shenzhen Gintian Industrial Co. Ltd., B Chn. 2,433,680 1,000,543
Shenzhen Tellus Machinery & Electronics Co. Ltd., B Chn. 3,036,720 510,380
Stelux International Holdings Ltd. H.K. 8,475,084 2,169,474
Swire Pacific Ltd., B H.K. 445,000 546,549
Wheelock & Co. Ltd. H.K. 1,820,000 3,023,568
------------
40,072,679
- -----------------------------------------------------------------------------------------------
Real Estate: 27.7%
China Overseas Land & Investment Ltd. H.K. 6,048,000 1,079,037
Hang Lung Development Co. Ltd. H.K. 8,729,000 13,824,387
Hang Lung Development Co. Ltd., wts. H.K. 872,900 143,322
Lai Sun Development Co. Ltd. H.K. 21,838,000 2,738,608
</TABLE>
7
<PAGE>
Templeton China World Fund, Inc.
Investment Portfolio, November 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------------------------
Real Estate (cont.)
New World Development Co. Ltd. H.K. 5,574,485 $ 23,278,370
Prince Housing Development Corp. Twn. 2,184,600 1,487,728
Shanghai Jinqiao Export Processing Zone Development, B Chn. 4,421,560 1,857,055
Shanghai Lujiaxui Finance & Trade Zone Development
Stock Co Ltd, B Chn. 894,000 563,220
Shanghai Outer Gaoqiao Free Trade Zone
Development Co., B Chn. 616,000 232,848
Shenzhen Properties & Resources Development
(Group) Ltd., B Chn. 4,802,600 999,649
Sun Hung Kai Properties Ltd. H.K. 2,395,100 19,275,618
Tian An China Investments Co. Ltd. H.K. 6,869,750 817,098
Tian An China Investments Co. Ltd., wts. H.K. 82,350 106
------------
66,297,046
- ------------------------------------------------------------------------------------------------
Recreation, Other Consumer Goods: 4.3%
China First Pencil Co. Ltd., B Chn. 10,224,440 3,394,514
Fu Hui Jewellery Co. (H.K.) Ltd. H.K. 5,382,000 194,826
KTP Holdings Ltd. H.K. 2,122,000 90,533
Phoenix Co. Ltd. Chn. 3,894,800 701,064
Shanghai Forever Bicycle Co. Ltd., B Chn. 5,726,000 835,996
Shanghai Wingsung Stationery Co. Ltd., B Chn. 3,835,400 690,372
Shenzhen China Bicycles Co. (Holdings) Ltd., B Chn. 7,520,400 1,244,504
Yue Yuen Industrial (Holdings) Ltd. H.K. 12,180,000 3,086,375
------------
10,238,184
- ------------------------------------------------------------------------------------------------
Textiles & Apparel: 2.9%
Goldlion Holdings Ltd. H.K. 7,592,000 4,883,088
Laws International Holdings Ltd. H.K. 5,726,000 592,225
Shanghai Lian Hua Fibre Corp., B Chn. 4,999,560 839,926
Top Form International Ltd. H.K. 1,252,000 79,313
Tungtex (Holdings) Co. Ltd. H.K. 964,000 93,472
Victor Onward Textile Industrial Co. Ltd., B Chn. 3,579,180 555,278
------------
7,043,302
- ------------------------------------------------------------------------------------------------
Transportation: 1.9%
Chiwan Wharf Holdings Ltd., B Chn. 1,470,000 589,148
Cross Harbour Tunnel Co. Ltd. H.K. 1,052,000 2,040,104
IMC Holdings Ltd. H.K. 2,435,000 1,463,852
Shanghai Dazhong Taxi Shareholding Co. Ltd., B Chn. 700,000 541,100
------------
4,634,204
- ------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Templeton China World Fund, Inc.
Investment Portfolio, November 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------------------
Utilities Electrical & Gas: 1.5%
Hongkong Electric Holdings Ltd. H.K. 565,500 $ 1,897,209
Shandong Huaneng Power Chn. 132,000 940,500
Wing Shan International Ltd. H.K. 5,544,000 637,909
------------
3,475,618
- -------------------------------------------------------------------------------------------
Wholesale & International Trade: 0.4%
East Asiatic Co. (Hong Kong) Ltd. H.K. 6,760,000 873,961
------------
TOTAL COMMON STOCKS: (cost $267,503,667) 221,177,294
- -------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT*
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT TERM OBLIGATIONS: 2.6% (cost $6,132,935)
- -------------------------------------------------------------------------------------------
U.S. Treasury Bills, 5.12% to 5.34%, with
maturities to 1/25/96 U.S. 6,147,000 6,132,478
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 94.8% (cost $273,636,602) 227,309,772
OTHER ASSETS, LESS LIABILITIES: 5.2% 12,358,863
------------
TOTAL NET ASSETS: 100.0% $239,668,635
============
</TABLE>
* CURRENCY OF COUNTRY INDICATED.
9
<PAGE>
Templeton China World Fund, Inc.
Financial Highlights, November 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
TOTAL NET ASSETS PER SHARE
------------------------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value:
Beginning of period, September
1, 1995 $245,982,481 $ 12.07
Net investment income $ 1,645,385 $ .08
Distributions from net
investment income (4,892,105) (.24)
Net loss from security and
foreign currency transactions (2,863,288) (.14)
Distributions from net realized
gains (203,838) (.01)
----------- -------
Net decrease in net asset value (6,313,846) (.31)
------------ --------
End of period, November 30, 1995 $239,668,635 $11.76
============ ========
</TABLE>
- ---
This report is sent to the shareholders of Templeton China World Fund, Inc.
for their information. It is not a prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of any
securities mentioned in the report.
10
<PAGE>
Templeton China World Fund, Inc.
- --------------------------------------------------------------------------------
TRANSFER AGENT
Chemical Mellon Shareholder Services Securities Transfer Services 450 West 33rd
Street New York, NY 10001 800-526-0801
SHAREHOLDER INFORMATION
Weekly comparative net asset value and market price information about Templeton
China World Fund, Inc., shares is published each Monday in The Wall Street
Journal, weekly in Barron's and each Saturday in The New York Times and other
newspapers in a table called "Publicly Traded Funds". The Fund's New York Stock
Exchange trading symbol is TCH.
For current information about the net asset value, call 1-800-292-9293.
If any shareholder is not receiving copies of the Reports to Shareholders be-
cause shares are registered in a broker's name or in a custodian's name, he or
she can write and request that his or her name be added to the Fund's mailing
list, by writing Templeton China World Fund, Inc., 700 Central Avenue, St. Pe-
tersburg, FL 33701.
11
<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 by the presence of
a regular beeping tone.
- --------------------------------------------
[RECYCLED PAPER LOGO APPEARS HERE] TLTCH Q95 01/96
TEMPLETON
CHINA
WORLD
FUND, INC.
First Quarter Report
November 30, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
- --------------------------------------------------------------------------------
