<PAGE> 1
Templeton China
World Fund
[PICTURE OF J. MARK MOBIUS]
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 $12 billion
in emerging markets investments for the Templeton Group of Funds.
Your Fund's Objective:
The Templeton China World Fund, Inc. seeks long-term capital appreciation
through equity investments in "China companies."
April 15, 1997
Dear Shareholder:
We are pleased to bring you the fourth semi-annual report for the Templeton
China World Fund, which covers the six months ending February 28, 1997. Strong
economic fundamentals and large inflows of investment capital helped many
emerging markets rally sharply during this period. Those in Hong Kong, China and
Taiwan posted some of the best performances, as increased government spending
and rising exports supported China's growing economy. The Hong Kong market was
also buoyed by a recovery in its important retail and property sectors and the
strong earnings of a number of companies listed on this exchange.
1
<PAGE> 2
Although the full impact probably won't be felt for at least several months, one
of the most important developments during this period was the death on February
19, 1997 of Deng Xiaoping, China's 92-year-old patriarch. Deng leaves a mixed
legacy. His main accomplishment was the liberalization of China's economy, but
he will also be remembered for his support of the brutal crackdown on
pro-democracy demonstrators in Tiananmen Square in 1989. The Hong Kong, China
and Taiwan markets fell briefly as Deng's health deteriorated, but rebounded
after the apparently peaceful transfer of power to President Jiang Zemin and
Premier Li Peng.
On December 11, 1996, Tung Chee Hua was selected to be China's first Chief
Executive of Hong Kong. Mr. Tung, a former shipping magnate, appears to combine
a good personal relationship with the Communist Party leadership in Beijing with
a commitment to preserving the capitalist economic structure in Hong Kong.
However, it is possible that the future of Hong Kong will be subject to
uncertainty until, and even following, the hand-over on July 1, 1997. During
this six-month period, your Fund posted a total return of 21.87% in market-price
terms, and 24.83% in net asset value terms, as discussed in the Performance
Summary on page 5.
On February 28, 1997, 64.6% of the Fund's total net assets were invested in Hong
Kong, a decrease of 4.2% during the six months under review. We also had 18.6%
invested in the markets of mainland China, 2.0% in Taiwan, and 14.8% in cash and
other liquid assets. The Fund's largest single position continued to be its
shares of HSBC Holdings PLC, the holding company for the Hongkong Bank, with
over 400 offices worldwide and major subsidiaries in the U.S. and the United
Kingdom. We also maintained significant positions in
Templeton China World Fund
Geographic Distribution on 2/28/97
Based on Total Net Assets
[PIE CHART]
<TABLE>
<S> <C>
Hong Kong 64.6%
China 18.6%
Taiwan 2.0%
Short-Term Obligations &
Other Net Assets 14.8%
</TABLE>
2
<PAGE> 3
New World Development Co. and Sun Hung Kai Properties, companies with large real
estate holdings and commercial interests in Hong Kong and China.
Looking forward, we believe that the prospects are generally positive for many
emerging markets and that stock prices of companies in China, Hong Kong, and
Taiwan have the potential to benefit should a rally of these markets be
sustained. Since China's inflation rate has fallen to relatively low levels, the
government may cut interest rates, and, in that event, we would expect its
economy to perform well. However, even though it appears unlikely that Deng's
economic reforms could be reversed, unexpected political developments could
jeopardize China's improved relationship with Taiwan and the smooth handover of
sovereignty in Hong Kong.
Of course, investing in emerging markets involves special considerations, which
may include risks related to market and currency volatility, adverse social,
economic 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 857% in the last 15 years, but has
suffered five declines of more than 20% during that time.(1)
This discussion reflects the strategies we employed for the Fund during the
six-month period under review, and includes our opinions as of the close of the
period. Since economic and market conditions
TEMPLETON CHINA WORLD FUND
Top Ten Holdings as of 2/28/97
Based on Total Net Assets
<TABLE>
<CAPTION>
% of Total
Company, Industry, Country Net Assets
<S> <C>
HSBC Holdings PLC
Banking, Hong Kong 9.5%
Cheung Kong Holdings Ltd.
Multi-Industry, Hong Kong 9.3%
New World Development Co. Ltd.
Real Estate, Hong Kong 8.0%
Sun Hung Kai Properties Ltd.
Real Estate, Hong Kong 5.9%
Hang Lung Development Co. Ltd.
Real Estate, Hong Kong 4.8%
Hopewell Holdings Ltd.
Construction & Housing, Hong Kong 2.2%
Hongkong Electric Holdings Ltd.
Utilities - Electrical & Gas, Hong Kong 2.0%
Jardine Strategic Holdings Ltd.
Multi-Industry, Hong Kong 1.9%
Lai Sun Development Co. Ltd.
Real Estate, Hong Kong 1.9%
China First Pencil Co. Ltd., B
Recreation & Other Consumer Goods, China 1.7%
</TABLE>
For a complete list of portfolio holdings, please see page 9 of this report.
1. Source: Bloomberg. Based on quarterly percentage change over 15 years ended
December 31, 1996.
3
<PAGE> 4
are constantly changing, our strategies, and our evaluations, conclusions and
decisions regarding portfolio holdings may change as new circumstances arise.
Although past performance of a specific investment or sector cannot guarantee
future performance, such information can be useful in analyzing the securities
we purchase or sell for the Fund.
Thank you for investing in the Templeton China World Fund. We appreciate your
confidence and look forward to any comments you may have.
Sincerely,
/s/ J. Mark Mobius
- --------------------------------
J. Mark Mobius, Ph.D.
President
Templeton China World Fund, Inc.
Celebrating 50 Years
This year marks 50 years of business for Franklin Templeton. Over these years,
we have experienced profound changes in technology, regulations and customer
expectations within the mutual fund industry. As one of the largest mutual fund
families, we're proud to be an innovative industry leader, providing people like
you with an opportunity to invest in companies and governments around the globe.
In addition, we want to stress that all securities markets move both up and
down. Mixed in with the good years can be some bad years. Accordingly, mutual
fund share prices also move up and down. Every investor should expect such
fluctuations, which can be wide. When markets are going down, as well as up, we
encourage investors to maintain a long-term perspective. We thank you for your
past support and look forward to serving your investment needs in the years
ahead.
4
<PAGE> 5
PERFORMANCE SUMMARY
In market-price terms, the Templeton China World Fund produced a total return of
21.87% for the six-month period ended February 28, 1997. Based on the change in
actual net asset value (in contrast to market price), the Fund delivered a total
return of 24.83% 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 (NYSE) increased by $1.875, from $11.375 per share on August 31, 1996
to $13.25 on February 28, 1997, while the net asset value increased by $2.67,
from $13.39 to $16.06.
Shareholders received combined distributions of 58.0 cents ($0.58) per share,
including dividend income totaling 27.5 cents ($0.275), short-term capital gains
of 1.0 cent ($0.01), and long-term capital gains of 29.5 cents ($0.295).
Distributions will 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
Periods Ended 2/28/97
<TABLE>
<CAPTION>
Since
Inception
One-Year Three-Year (9/9/93)
<S> <C> <C> <C>
Cumulative Total Return(1)
Based on change
in net asset value 27.11% 18.21% 33.77%
Based on change
in market price 16.74% -9.70% 4.96%
Average Annual Total Return(2)
Based on change
in net asset value 27.11% 5.73% 8.73%
Based on change
in market price 16.74% -3.34% 1.40%
</TABLE>
1. Cumulative total returns show the change in value of an investment over the
periods indicated.
2. Average annual total returns represent the average annual change in value of
an investment over the periods indicated.
All total return calculations assume reinvestment of dividends and capital
gains, either at net asset value or at market price on the reinvestment date, in
accordance with the dividend reinvestment plan. Investment return and principal
value will fluctuate with market conditions, currencies and the political and
economic climates of the countries where investments are made. Emerging markets
involve heightened risks related to the same factors, in addition to those
associated with the relatively small size and lesser liquidity of those markets.
You may have a gain or loss when you sell your shares. Past performance is not
predictive of future results.
5
<PAGE> 6
Many investors have asked us about the activities of Sir John Templeton, since
his retirement from the funds. We asked Professor Robert Herrmann to update us
on Sir John's current activities and his comments follow.
THE NEW CAREER OF
SIR JOHN TEMPLETON
[PHOTO OF SIR JOHN TEMPLETON]
By Professor Robert Herrmann
In 1992, Sir John Templeton retired after a 50-year career of helping investors
manage their money. Currently, he devotes all of his time and efforts to the
John Templeton Foundation. A major portion of his assets remain invested in
Templeton funds, managed by many of the investment professionals he selected and
trained. For sentimental reasons, he allows his name to be associated with the
funds, although he knows no more about their management and holdings than any
other investor.
Sir John Templeton established the Templeton Foundation in 1987, to foster the
acquisition of spiritual information through scientific research. Working with
scientists, theologians and others, he strives toward a new science that uses
empirical and statistical scientific methods to discover and test spiritual
knowledge. A crucial ingredient in his research is what Sir John calls "humility
theology," an attitude of humility toward the Creator, combined with
receptiveness to the theological significance of current scientific discoveries.
Universal spiritual laws, or "laws of life," are among the areas of
investigation. In his recent book, Worldwide Laws of Life, Sir John compiles 200
laws and proverbs from nearly all religions, and deeply embedded in human
history. For example, the Golden Rule taught by Jesus in the Sermon on the
Mount, states "Do unto others as you would have others do unto you," and is
affirmed by all major religions as an acceptable, universal law of life. Other
books which Sir John has authored or co-authored during the past few years
include: The Humble Approach, Is God the Only Reality, Evidence of Purpose,
Who's Who in Theology and Science and The God Who Would Be Known.
With an annual budget of more than $30 million, the Templeton Foundation
sponsors 60 programs focusing on spiritual progress and the benefits of freedom.
Sir John's first sizable investment in the programs was the Templeton Prize for
Progress in Religion. A panel of nine judges gives the annual award which now
exceeds $1.2 million to individuals who have shown extraordinary originality in
furthering the world's understanding of God or spirituality.
Recipients of the prize include Professor Paul Davies, author of The Mind of
God; the Right Honorable Lord Jacobovits, former Chief Rabbi of Great Britain
and The Commonwealth; the Reverend Dr. Billy Graham, world-renowned preacher and
presidential inauguration speaker; Mr. Nikkyo Nimano, founder of the World
Conference on Religion and Peace; and Sir Sarepalli Radhakrishnan, former
President of India, and Oxford professor of Eastern Religions and Ethics.
To encourage young people's and their parents' appreciation of spiritual laws of
life, Sir John established an essay contest for teenagers in his home county of
Franklin, Tennessee. Students submit essays about the spiritual life principles
they plan to follow, and prizes are offered semiannually. In 1996, more than 800
youth participated. Twenty-six similar programs
6
<PAGE> 7
have been launched in various locations, with the support of generous local
donors.
The Foundation also sponsors a worldwide program that awards college-level
faculty who teach courses integrating science and religion. During the program's
first two years, more than 200 courses were created. The Foundation maintains an
extensive program of research and education on the health benefits of
spirituality, including prizes for medical schools providing courses on
spirituality in medicine. Lastly, the Foundation publishes a newsletter with
over 2,000 subscribers. Free subscriptions are available to Templeton
shareholders by writing to the Foundation.
To contact Sir John Templeton or receive the free newsletter subscription,
please write to:
The John Templeton Foundation
2 Radnor Corporate Center #320
100 Matsonford Road
Radnor, PA 19087
7
<PAGE> 8
TEMPLETON CHINA WORLD FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 9,
SIX MONTHS 1993
ENDED YEAR ENDED AUGUST 31 (COMMENCEMENT OF
FEBRUARY 28, 1997 -------------------------------- OPERATIONS) TO
(UNAUDITED) 1996 1995 AUGUST 31, 1994
----------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.39 $ 12.07 $ 14.92 $ 14.10
-------- -------- --------
Income from investment operations:
Net investment income .07 .27 .33 .16
Net realized and unrealized gain (loss) 3.18 1.39 (1.91) .79
-------- -------- --------
Total from investment operations 3.25 1.66 (1.58) .95
-------- -------- --------
Underwriting expenses deducted from capital -- -- -- (.07)
Distributions:
Dividends from net investment income (.28) (.33) (0.20) (.06)
Distributions from net realized gains (.30) (.01) (1.07) --
-------- -------- --------
Total distributions (.58) (.34) (1.27) (.06)
-------- -------- --------
Change in net asset value 2.67 1.32 (2.85) .82
-------- -------- --------
Net asset value, end of period $ 16.06 $ 13.39 $ 12.07 $ 14.92
======== ======== ========
TOTAL RETURN*
Based on market value per share 21.87% 11.75% (29.58)% 9.54%
Based on net asset value per share 24.83% 14.44% (11.13)% 6.18%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 327,274 $272,966 $ 245,982 $297,835
Ratio of expenses to average net assets 1.67%** 1.65% 1.65% 1.84%**
Ratio of net investment income to average
net assets 0.92%** 2.14% 2.77% 1.09%**
Portfolio turnover rate 1.81% 14.47% 3.01% 81.81%
Average commission rate paid (per share) $ .0021 $ .0025 -- --
</TABLE>
*NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
**ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
TEMPLETON CHINA WORLD FUND, INC.
Investment Portfolio, February 28, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS: 85.2%
- ---------------------------------------------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES: 3.3%
Hualing Holdings Ltd. H.K. 2,566,500 $ 344,688
Semi-Tech (Global) Co. Ltd. H.K. 2,412,630 2,804,043
*Shanghai Narcissus Electric Appliances Co. Ltd., B Chn. 3,143,800 628,760
*Shanghai Shangling Electric Appliance, B Chn. 6,866,280 2,540,524
*Shanghai Vacuum Electron Devices Co. Ltd., B Chn. 9,960,045 1,812,728
Shenzhen Huafa Electronics Co. Ltd., B Chn. 2,164,000 1,095,456
Shenzhen Konka Electronic Group Co. Ltd., B Chn. 846,300 989,064
Tsann Kuen Enterprise Co. Ltd., B Chn. 1,074,002 524,262
------------
10,739,525
- ---------------------------------------------------------------------------------------------------------------------
AUTOMOBILES: 1.0%
Jardine International Motor Holdings Ltd. H.K. 2,484,000 3,191,730
- ---------------------------------------------------------------------------------------------------------------------
BANKING: 9.5%
HSBC Holdings PLC H.K. 1,278,145 31,195,605
- ---------------------------------------------------------------------------------------------------------------------
BROADCASTING & PUBLISHING: 0.0%
Leefung-Asco Printers Holdings Ltd. H.K. 1,127,000 123,707
- ---------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS: 2.4%
China Southern Glass Co. Ltd., B Chn. 2,752,152 1,794,797
K Wah International Holdings Ltd. H.K. 17,153,608 3,987,305
*K Wah International Holdings Ltd., wts. H.K. 1,445,978 80,294
*Shanghai Yaohua Pilkington Glass, B Chn. 4,720,000 1,972,960
------------
7,835,356
- ---------------------------------------------------------------------------------------------------------------------
CHEMICALS: 3.3%
Shanghai Chlor-Alkali Chemical Co. Ltd., B Chn. 9,459,000 3,007,962
Shanghai Pechemical Co. Ltd., H Chn. 18,370,000 5,218,952
Shenzhen Petrochemical (Group) Shareholding Co. Ltd., B Chn. 4,770,720 2,587,526
------------
10,814,440
- ---------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & HOUSING: 2.3%
Hopewell Holdings Ltd. H.K. 12,319,579 7,357,988
- ---------------------------------------------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS: 0.9%
*CCT Telecom Holdings Ltd. H.K. 9,496,000 367,886
Great Wall Electronic International Ltd. H.K. 11,907,018 1,460,757
Shanghai Automation Instrumentation Co., B Chn. 782,345 162,728
*Yageo Corp. Twn. 364,000 899,419
------------
2,890,790
- ---------------------------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS & INSTRUMENTS: 0.2%
*S. Megga International Holdings Ltd. H.K. 8,508,000 510,895
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
TEMPLETON CHINA WORLD FUND, INC.
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: 1.5%
JCG Holdings Ltd. H.K. 813,000 $ 677,176
Peregrine Investments Holdings Ltd. H.K. 1,430,000 2,613,027
*Peregrine Investments Holdings Ltd., wts. H.K. 158,100 54,614
Sun Hung Kai & Co. Ltd. H.K. 6,045,200 1,600,354
*Sun Hung Kai & Co. Ltd, wts. H.K. 1,209,040 104,608
------------
5,049,779
- ---------------------------------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS: 1.9%
*Fairwood Holdings Ltd. H.K. 6,795,000 342,220
*President Enterprises Corp. Twn. 3,146,832 5,568,703
Shanghai New Asia Group Co. Ltd., B Chn. 384,000 152,064
------------
6,062,987
- ---------------------------------------------------------------------------------------------------------------------
HEALTH & PERSONAL CARE: 1.0%
Zhuhai Sez Lizhu Pharmaceutical Group Inc., B Chn. 4,715,600 3,190,948
- ---------------------------------------------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS: 1.5%
Shanghai Refrigerator Compressor Co. Ltd., B Chn. 1,649,880 890,935
Shanghai Rubber Belt Co. Ltd., B Chn. 4,170,270 925,800
Shanghai Tyre & Rubber Co. Ltd., B Chn. 6,730,990 3,096,255
------------
4,912,990
- ---------------------------------------------------------------------------------------------------------------------
LEISURE & TOURISM: 0.2%
Shanghai Jin Jiang Tower Co. Ltd., B Chn. 2,848,947 797,705
- ---------------------------------------------------------------------------------------------------------------------
MACHINERY & ENGINEERING: 1.7%
*China Textile Machinery Co. Ltd., B Chn. 4,608,200 829,476
Guangzhou Shipyard International Co. Ltd., H Chn. 2,724,000 657,810
Northeast Electric Transmission & Transformation H.K. 3,980,000 637,318
*Shanghai Erfangji Textile Machinery Co. Ltd., B Chn. 11,745,261 2,137,638
*Shanghai Industrial Sewing Machine Corp. Chn. 2,155,100 353,436
*Shanghai Steel Tube Co. Ltd., B Chn. 5,929,280 1,090,988
------------
5,706,666
- ---------------------------------------------------------------------------------------------------------------------
MERCHANDISING: 2.6%
Dairy Farm International Holdings Ltd. H.K. 7,395,777 5,731,727
Dickson Concepts (International) Ltd. H.K. 295,699 1,080,657
Fortei Holdings Ltd. H.K. 9,582,000 717,688
Joyce Boutique Holdings Ltd. H.K. 337,000 80,075
Wo Kee Hong Holdings Ltd. H.K. 9,856,000 700,027
*Wo Kee Hong Holdings Ltd., wts. H.K. 1,971,200 16,546
*Yaohan Hongkong Corp. Ltd. H.K. 6,888,000 231,269
------------
8,557,989
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
TEMPLETON CHINA WORLD FUND, INC.
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------
METALS & MINING: 0.3%
Maanshan Iron & Steel Co. Ltd., H Chn. 3,733,000 $ 877,366
- ---------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS MATERIALS & COMMODITIES: 0.0%
Luoyang Glass Co. Ltd., H Chn. 500,000 116,224
- ---------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY: 16.0%
Cheung Kong Holdings Ltd. H.K. 3,168,000 30,273,900
CNT Group Ltd. H.K. 12,404,770 1,153,381
Jardine Matheson Holdings Ltd. H.K. 605,971 3,666,125
Jardine Strategic Holdings Ltd. H.K. 1,834,000 6,015,520
*Jardine Strategic Holdings Ltd., wts. H.K. 167,000 56,780
Lai Sun Garment International Ltd. H.K. 2,636,000 3,846,585
Stelux International Holdings Ltd. H.K. 3,011,084 657,145
*Stelux International Holdings Ltd., wts. H.K. 602,216 31,107
Swire Pacific Ltd., B H.K. 1,009,000 1,374,659
Wheelock & Co. Ltd. H.K. 1,929,000 5,181,399
------------
52,256,601
- ---------------------------------------------------------------------------------------------------------------------
REAL ESTATE: 23.3%
China Overseas Land & Investment Ltd. H.K. 4,528,000 2,645,919
Hang Lung Development Co. Ltd. H.K. 7,811,000 15,735,579
Lai Sun Development Co. Ltd. H.K. 3,970,000 5,947,028
*Lai Sun Development Co. Ltd., wts. H.K. 2,183,800 276,370
New World Development Co. Ltd. H.K. 4,241,700 26,292,547
Shanghai Jinqiao Export Processing Zone Development, B Chn. 4,421,560 2,263,839
Shanghai Lujiaxui Finance & Trade Zone Development
Stock Co. Ltd,B Chn. 619,920 507,095
Shanghai Waigaoqiao Free Trade Zone Development Co., B Chn. 616,000 266,112
Shenzhen Properties & Resources Development
(Group) Ltd., B Chn. 4,798,860 2,385,889
Sun Hung Kai Properties Ltd. H.K. 1,669,100 19,291,095
Tian An China Investments Co. Ltd. H.K. 6,019,750 707,410
------------
76,318,883
- ---------------------------------------------------------------------------------------------------------------------
RECREATION & OTHER CONSUMER GOODS: 5.2%
+China First Pencil Co. Ltd., B Chn. 11,246,884 5,735,911
*Fu Hui Jewellery Co. (H.K.) Ltd. H.K. 5,122,000 509,310
KTP Holdings Ltd. H.K. 2,652,500 101,048
Phoenix Co. Ltd. Chn. 6,148,280 1,020,615
</TABLE>
11
<PAGE> 12
TEMPLETON CHINA WORLD FUND, INC.
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------
RECREATION & OTHER CONSUMER GOODS (cont.)
Shanghai Wingsung Co. Ltd., B Chn. 4,410,710 $ 1,182,070
Shenzhen China Bicycles Co. (Holdings) Ltd., B Chn. 7,520,400 3,447,631
Yue Yuen Industrial (Holdings) Ltd. H.K. 12,516,000 5,131,694
------------
17,128,279
- ---------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL: 1.4%
Goldlion Holdings Ltd. H.K. 3,783,000 3,370,830
Laws International Holdings Ltd. H.K. 6,412,000 993,634
Tungtex (Holdings) Co. Ltd. H.K. 964,000 90,876
------------
4,455,340
- ---------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: 2.8%
Chiwan Wharf Holdings Ltd., B Chn. 3,346,000 2,285,773
Cross Harbour Tunnel Co. Ltd. H.K. 1,191,000 2,606,951
*Guangshen Railway Co. Ltd., ADR Chn. 80,000 1,930,000
IMC Holdings Ltd. H.K. 2,477,000 1,151,543
Orient Overseas International Ltd. H.K. 52,000 28,875
Shanghai Dazhong Taxi Shareholding Co. Ltd., B Chn. 1,303,900 1,176,118
------------
9,179,260
- ---------------------------------------------------------------------------------------------------------------------
UTILITIES ELECTRICAL & GAS: 2.7%
Hong Kong Electric Holdings Ltd. H.K. 1,885,000 6,523,755
Shandong Huaneng Power Chn. 132,000 1,369,500
Wing Shan International Ltd. H.K. 5,544,000 980,833
------------
8,874,088
- ---------------------------------------------------------------------------------------------------------------------
WHOLESALE & INTERNATIONAL TRADE: 0.2%
*East Asiatic Co. (Hong Kong) Ltd. H.K. 6,760,000 794,401
------------
TOTAL COMMON STOCKS (cost $240,724,866) 278,939,542
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL IN
LOCAL CURRENCY**
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS: 14.2% (cost $46,288,092)
- ---------------------------------------------------------------------------------------------------------------------
U. S. Treasury Bills, 4.78% to 5.06% with
maturities to 5/29/97 U.S. 46,549,000 46,299,334
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.4% (cost $287,012,958) 325,238,876
OTHER ASSETS, LESS LIABILITIES: 0.6% 2,035,503
------------
TOTAL NET ASSETS: 100.0% $327,274,379
============
</TABLE>
*NON-INCOME PRODUCING.
**CURRENCY OF COUNTRY INDICATED.
+SEE NOTE 5. SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
TEMPLETON CHINA WORLD FUND, INC.
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1997(unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $287,012,958) $325,238,876
Cash--foreign currencies 2,188,226
Receivables:
Investment securities sold 455,781
Dividends and interest 22,049
Unamortized organization costs 7,345
------------
Total assets 327,912,277
------------
Liabilities:
Accrued expenses 637,898
------------
Net assets, at value $327,274,379
============
Net assets consist of:
Distributions in excess of net
investment income $ (463,164)
Net unrealized appreciation 38,198,926
Accumulated net realized gain 3,824,893
Net capital paid in on shares of
capital stock 285,713,724
------------
Net assets, at value $327,274,379
============
Shares outstanding 20,383,771
============
Net asset value per share
($327,274,379 / 20,383,771) $ 16.06
============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended
February 28, 1997(unaudited)
<TABLE>
<S> <C> <C>
Investment income:
(net of $43,199 foreign
taxes withheld)
Dividends $ 3,170,303
Interest 747,141
-----------
Total income $ 3,917,444
Expenses:
Management fees (Note 3) 1,907,810
Administrative fees (Note 3) 381,563
Custodian fees 96,900
Transfer agent fees 52,824
Reports to shareholders 22,230
Audit fees 18,621
Registration and filing fees 16,037
Directors' fees and expenses 15,721
Legal fees 3,546
Amortization of organization
costs 2,353
Other 5,606
-----------
Total expenses 2,523,211
-----------
Net investment income 1,394,233
Realized and unrealized gain
(loss):
Net realized gain (loss) on:
Investments 4,039,924
Foreign currency
transactions (3,110)
-----------
4,036,814
-----------
Net unrealized appreciation
(depreciation) on:
Investments 60,673,091
Foreign currency
translation of other
assets and liabilities (4,498)
-----------
60,668,593
-----------
Net realized and
unrealized gain 64,705,407
-----------
Net increase in net assets
resulting from operations $66,099,640
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 14
TEMPLETON CHINA WORLD FUND, INC.
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, 1997 YEAR ENDED
(UNAUDITED) AUGUST 31, 1996
----------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 1,394,233 $ 5,540,705
Net realized gain on investment and foreign currency transactions 4,036,814 6,381,237
Net unrealized appreciation 60,668,593 21,920,301
------------ ------------
Net increase in net assets resulting from operations 66,099,640 33,842,243
Distributions to shareholders:
From net investment income (5,605,537) (6,624,726)
From net realized gains (6,215,884) (203,838)
------------ ------------
Net increase in net assets 54,278,219 27,013,679
Net assets:
Beginning of period 272,996,160 245,982,481
------------ ------------
End of period $ 327,274,379 $ 272,996,160
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 15
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 a
closed-end, non-diversified management investment company registered under the
Investment Company Act of 1940. The Fund seeks to achieve its objective by
investing primarily in equity securities of China companies. 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 exchange
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 in good faith by
management and approved by the Board of Directors.
B. FOREIGN CURRENCY TRANSACTIONS:
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 currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
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
foreign currencies, currency gains or losses realized between the trade and
settlement 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 from foreign
securities is recorded as soon as information is available to the Fund. Interest
income 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.
E. UNAMORTIZED ORGANIZATION COSTS:
Organization costs are being amortized on a straight line basis over five years.
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.
15
<PAGE> 16
TEMPLETON CHINA WORLD FUND, INC.
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
As of February 28,1997, there were 100,000,000 shares of capital stock
authorized ($0.01 par value). For the six months ended February 28, 1997 and for
the year ended August 31, 1996, there were no share transactions.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton Asset
Management, Ltd. (TAML) and Franklin Templeton Services, Inc. (FTSI), the Fund's
investment manager and administrative manager, respectively. The Fund pays
monthly an investment management fee to TAML equal, on an annual basis, to 1.25%
of the average weekly net assets of the Fund. The Fund pays FTSI monthly a fee
of 0.25% per annum of the Fund's average weekly net assets, of which 0.20% is
paid to Princeton Administrators, L.P., for sub-administrative services.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel for
the Fund, which firm received fees for the six months ended February 28, 1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the six
months ended February 28, 1997, aggregated $4,945,760 and $35,892,036,
respectively. The cost of securities for federal income tax purposes is
$287,103,698. Realized gains and losses are reported on an identified cost
basis.
At February 28, 1997, the aggregate gross unrealized appreciation and
depreciation of portfolio securities, based on cost for federal income taxes
purposes, was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 76,079,959
Unrealized depreciation (37,944,781)
------------
Net unrealized appreciation $ 38,135,178
============
</TABLE>
5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" as investments
in portfolio companies in which the Fund owns 5% or more of the outstanding
voting securities. Investments in "affiliated companies" at February 28, 1997
amounted to $5,735,911.
16
<PAGE> 17
TEMPLETON CHINA WORLD FUND, INC.
Annual Meeting of Shareholders, February 25, 1997
- --------------------------------------------------------------------------------
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Ft. Lauderdale, Florida, on February 25, 1997. 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 public accountants for the
fiscal year ending August 31, 1997 and in their discretion, to authorize the
proxyholders to vote upon such other matters which may legally come before the
meeting or any other adjournment thereof. At the meeting, the following persons
were elected by the shareholders to serve as directors of the Fund: John Wm.
Galbraith, Betty P. Krahmer, Gordon S. Macklin, Fred R. Millsaps and Edith E.
Holiday. The shareholders ratified the selection of McGladrey & Pullen, LLP, to
serve as the Fund's independent public accountants for the fiscal year ending
August 31, 1997. No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. Election of five (5) Directors for the terms set forth below:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
FOR SHARES WITHHELD SHARES
---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Term Expiring 2000:
John Wm. Galbraith 13,272,241 65.11% 234,137 1.15%
Betty P. Krahmer 13,273,739 65.12% 232,639 1.14%
Gordon S. Macklin 13,275,448 65.13% 230,930 1.13%
Fred R. Millsaps 13,275,652 65.13% 230,726 1.13%
Term Expiring 1999:
Edith E. Holiday 13,207,070 64.79% 299,308 1.47%
</TABLE>
2. Ratification of the selection of McGladrey & Pullen, LLP, as independent
public accountants of the Fund for the fiscal year ending August 31, 1997:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES
---------- ----------- ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
13,247,106 64.99% 95,891 0.47% 163,381 0.80%
</TABLE>
17
<PAGE> 18
TEMPLETON CHINA WORLD FUND, INC.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
The Fund offers a Dividend Reinvestment Plan (the "Plan") with the following
features: --Shareholders must affirmatively elect to participate in the Plan;
Stock dividends will be reinvested automatically; Chemical Mellon Securities
Trust Company, Dividend Reinvestment Services, P.O. Box 750, Pittsburgh, PA
15230, will provide additional Plan information upon request. --Whenever the
Fund declares dividends in either cash or common stock of the Fund, if the
market price is equal to or exceeds net asset value at the valuation date,
participants will receive the dividends entirely in stock at a price equal to
the net asset value, but not less than 95% of the then current market price of
the Fund's shares. If the market price is lower than net asset value and 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. --The reinvestment of dividends and/or capital
gains, even though no cash has been received, may be taxable. --The participant
may withdraw from the Plan without penalty at any time by written notice to
Chemical Mellon Securities Trust Company. Upon withdrawal, the participant will
receive, without charge, stock certificates issued in the participant's name for
all full shares; or, if the participant's wishes, Chemical Mellon Securities
Trust Company will sell the participant's shares and send the proceeds, less a
service fee of $5.00 and less brokerage commissions. --Whenever shares are
purchased on the New York Stock Exchange, each participant will pay a pro rata
portion of brokerage commissions. Brokerage commissions will be deducted from
amounts to be invested. --The Plan does not offer a cash purchase plan option.
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 CH.
For current information about the net asset value, call 1-800-357-0738.
If any shareholder is not receiving copies of the Reports to the Shareholders
because 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 Emerging Markets Income Fund, Inc., 700 Central
Avenue, St. Petersburg, FL 33701.
18
<PAGE> 19
FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST - Call 1-800/DIAL BEN (1-800/342-5236) today for a free
descriptive brochure and
prospectus on any of the funds listed below. The prospectus contains more
complete information, including
fees, charges and expenses, and should be read carefully before investing or
sending money.
GLOBAL GROWTH INCOME FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
Franklin Global Health Care Fund Franklin Adjustable Rate
TAX-FREE INCOME
Securities Fund
Franklin Templeton Japan Fund
Franklin Adjustable U.S.
Alabama
Templeton Developing Markets Trust
Government Securities Fund
Arizona*
Templeton Foreign Fund
Franklin's AGE High Income Fund
Arkansas**
Templeton Foreign Smaller
Franklin Investment
Companies Fund California*
Grade Income Fund
Templeton Global Infrastructure Fund
Colorado
Franklin Short-Intermediate U.S.
Templeton Global
Government Securities Fund
Connecticut
Opportunities Trust
Franklin U.S. Government
Florida*
Templeton Global Real Estate Fund
Securities Fund
Georgia
Templeton Global Smaller
Franklin Money Fund
Companies Fund Hawaii**
Franklin Federal Money Fund
Templeton Greater European Fund Indiana
Templeton Growth Fund Kentucky
FOR NON-U.S. INVESTORS:
Templeton Latin America Fund Louisiana
Franklin Tax-Advantaged
High Yield Securities Fund
Templeton Pacific Growth Fund Maryland
Franklin Tax-Advantaged
Templeton World Fund Massachusetts***
International Bond Fund
Michigan*
Franklin Tax-Advantaged U.S.
GLOBAL GROWTH AND INCOME
Minnesota***
Government Securities Fund
Franklin Global Utilities Fund
Missouri
FOR CORPORATIONS:
Franklin Templeton German
New Jersey
Franklin Corporate Qualified
Government Bond Fund
New York*
Dividend Fund
Franklin Templeton
North Carolina
Global Currency Fund
Ohio***
Mutual European Fund
FRANKLIN FUNDS SEEKING
Oregon
Templeton Global Bond Fund
TAX-FREE INCOME
Pennsylvania
Templeton Growth and Income Fund
Federal Intermediate-Term
Tennessee**
Tax-Free Income Fund
Texas
GLOBAL INCOME Federal Tax-Free Income Fund
Virginia
High Yield Tax-Free Income Fund
Franklin Global Government
Income Fund
Washington**
Insured Tax-Free Income Fund
Franklin Templeton Hard
Puerto Rico Tax-Free Income Fund
VARIABLE ANNUITIES+
Currency Fund
Tax-Exempt Money Fund
Franklin Valuemark(R)
Franklin Templeton High
Income Currency Fund
Franklin Templeton
Valuemark Income Plus
Templeton Americas
(an immediate annuity)
Government Securities Fund
*TWO OR MORE FUND OPTIONS AVAILABLE: LONG-TERM PORTFOLIO, INTERMEDIATE-TERM
PORTFOLIO, A PORTFOLIO OF INSURED MUNICIPAL SECURITIES,
AND/OR A HIGH YIELD PORTFOLIO (CA) AND A MONEY MARKET PORTFOLIO (CA AND NY).
**THE FUND MAY INVEST UP TO 100% OF ITS ASSETS IN BONDS THAT PAY INTEREST
SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX.
***PORTFOLIO OF INSURED MUNICIPAL SECURITIES.
+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.
FGF 02/97 GROWTH
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
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
FUND ALLOCATOR SERIES:
Franklin Templeton
Conservative Target Fund
Franklin Templeton
Moderate Target Fund
Franklin Templeton
Growth Target Fund
<PAGE> 20
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.
[GRAPHIC]
TEMPLETON
CHINA
WORLD
FUND, INC.
Semi-Annual Report
February 28, 1997
[FRANKLIN TEMPLETON LOGO]
