ANNUAL REPORT
AUGUST 31, 1998
TEMPLETON CHINA WORLD FUND, INC.
[FRANKLIN TEMPLETON LOGO]
PAGE
[LOGO CELEBRATING OVER 50 YEARS]
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do mutual fund share prices. We appreciate your past
support and look forward to serving your investment needs in the years ahead.
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 the
Templeton funds which are managed by many of the investment professionals he
selected and trained.
[PHOTO OF J. MARK MOBIUS APPEARS HERE]
J. MARK MOBIUS, PH.D.
President
Templeton China World Fund, Inc.
Dr. Mobius, a German citizen, has been living in emerging market countries since
earning his Ph.D. in economics and political science at Massachusetts Institute
of Technology in 1964. During his extensive travels, he has acquired a thorough
knowledge of the business practices and customs that are unique to developing
nations.
PAGE
CONTENTS
<TABLE>
<S> <C>
Shareholder Letter .................................................... 1
Performance Summary ................................................... 6
Financial Highlights & Statement of Investments ....................... 8
Financial Statements .................................................. 13
Notes to Financial Statements ......................................... 16
Independent Auditor's Report .......................................... 19
Tax Designation ....................................................... 22
</TABLE>
[FUND CATEGORY PYRAMID OMITTED]
SHAREHOLDER LETTER
- -------------------------------------------------------------------------------
Your Fund's Objective: Templeton China World Fund seeks long-term capital
appreciation by investing primarily in equity securities of "China companies."
- -------------------------------------------------------------------------------
Dear Shareholder:
This annual report for Templeton China World Fund covers the fiscal year ended
August 31, 1998. During the first half of the period, economic conditions in
Asia went from bad to worse as most of the smaller countries in the region
experienced massive currency devaluations. Financial markets throughout the area
collapsed, and China faced significant pressure to devalue the Hong Kong dollar
and Chinese renminbi. Although devaluation pressures eased and a few currencies
and stock markets appreciated somewhat during the spring of 1998, export levels
stagnated and the overall situation remained grim. By August 31, most Southeast
Asian economies had entered into recession. Within this environment, the Fund
posted a -61.83% one-year cumulative total return in market-price terms and a
- -59.73% one-year cumulative total return in net asset value terms, as discussed
in the Performance Summary on page 6.
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 9 of
this report.
PAGE
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
8/31/98
<TABLE>
<S> <C>
Hong Kong Shares ............................................. 54.0%
Short-Term Investments & Other Net Assets .................... 25.9%
China B-Shares ............................................... 17.3%
Other Shares ................................................. 2.8%
</TABLE>
On August 31, 1998, 54.0% of the Fund's total net assets were invested in the
Hong Kong Special Administrative Region, 17.3% in mainland China and 2.8%
elsewhere, with 25.9% in cash and other liquid assets. The Fund's largest single
position remained its shares of HSBC Holdings Plc., the holding company for
Hongkong Bank. HSBC maintains over 400 offices worldwide and has major
subsidiaries in the U.S. and the U.K.
As a result of speculative attacks against the Hong Kong dollar's peg to the
U.S. dollar, overnight bank lending rates in Hong Kong skyrocketed and property
values plummeted, contributing to a 46.3% decline in the Hang Seng stock index
during the period under review.(1) Although the peg remained intact, Hong Kong
authorities broke their policy of non-intervention, and directly supported its
currency and stock markets. They also tried to prop up property prices by
suspending periodic auctions of land to developers and allowing banks to keep an
increased percentage of mortgages in their loan portfolios.
In China, exports dwindled and economic growth slowed from 7.2% during the first
three months of 1998, to 6.8% during the following three months, as foreign
customers switched their purchases of economic goods to countries in the region
that had devalued their currencies.(2) Responding to fears of a currency
devaluation by China, prices on the Shenzhen and Shanghai B-share markets
dropped along with the rest of the region's markets. The Chinese government
actively supported its currency by selling U.S. dollars and buying renminbi,
causing their foreign reserves to fall by U.S. $400 million in June, the first
monthly decline since 1993.(2) The government seemed to believe
1. Market returns are measured in U.S. dollars and include reinvested dividends.
An index is an unmanaged group of securities that is used to measure market
performance. One cannot invest directly in an index.
2. Source: Jardine Fleming Research: Yuan Impact, August 1998. Measured in U.S.
dollars.
2
PAGE
the benefits of a firm monetary policy and lower raw materials costs were more
valuable to China than any gain that might be realized from making its products
more price competitive on world markets.
Looking forward, possible further declines in Hong Kong property prices or
devaluation of the Hong Kong or Chinese currencies could limit the near-term
upside potential of their stock markets. However, the corporate borrowing of
Hong Kong companies is relatively low, and falling wages and property rentals
have gradually improved the competitiveness of Hong Kong's service sectors. In
our opinion, China could show positive economic growth this year, and we believe
that an improvement in the overall Asian situation could ease the pressure on
China and Hong Kong, allowing their economies to realize the benefits of reduced
raw material and import costs resulting from other nations' currency
devaluations. Although this is a difficult period for Hong Kong and mainland
China, times of crisis often are times of opportunity for the careful investor,
and we shall continue to scrutinize these markets for opportunities to
capitalize on an Asian resurgence.
Of course, investing in foreign securities involves special risks, such as
adverse economic, social and political developments in the countries where the
Fund invests, as well as market and currency volatility. Emerging markets
involve heightened risks related to the same factors, in addition to those
associated with their relatively small size and lesser liquidity. While
short-term volatility can be disconcerting, declines of as much as 40% to 50%
are not unusual in emerging markets. In fact, the Hong Kong equity market
increased 785% in the last 15 years, but suffered six declines of more than 20%
during that time.(3)
TOP 10 HOLDINGS
8/31/98
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
INDUSTRY, COUNTRY* NET ASSETS
- ------------------------------------------------------------------------
<S> <C>
HSBC Holdings Plc
Banking, Hong Kong 9.2%
Dairy Farm International
Holdings Ltd.
Merchandising, Hong Kong 5.8%
Hutchison Whampoa Ltd.
Multi-Industry, Hong Kong 4.6%
Cheung Kong Holdings Ltd.
Multi-Industry, Hong Kong 4.3%
China Resources Enterprises Ltd.
Real Estate, China 2.8%
Sun Hung Kai Properties Ltd.
Real Estate, Hong Kong 2.8%
Hang Lung Development Co. Ltd.
Real Estate, Hong Kong 2.5%
Wheelock and Co. Ltd.
Multi-Industry, Hong Kong 2.4%
Citic Pacific Ltd.
Multi-Industry, Hong Kong 2.3%
Yue Yuen Industrial (Holdings) Ltd.
Recreation & Other Consumer
Goods, Hong Kong 2.3%
</TABLE>
*Hong Kong reverted to the sovereignty of China on July 1, 1997.
3. Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended June 30, 1998. Market returns are measured in Hong Kong dollars.
3
PAGE
Please remember that this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1998, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the Fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
Thank you for investing in Templeton China World Fund. We appreciate your
confidence and look forward to any comments you may have.
Sincerely,
/s/ J. Mark Mobius, Ph.D.
- --------------------------------
J. Mark Mobius, Ph.D.
President
Templeton China World Fund, Inc.
4
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IMPORTANT NOTICE TO SHAREHOLDERS
INTRODUCTION OF THE EURO. On January 1, 1999, the European Monetary Union (EMU)
plans to introduce a new single currency, the Euro, which will replace the
national currency for participating member countries. If the Fund holds
investments in countries with currencies replaced by the Euro, the investment
process, including trading, foreign exchange, payments, settlements, cash
accounts, custody and accounting will be impacted.
The process to establish the Euro may result in market volatility. It is not
possible to predict the impact of the Euro on the business or financial
condition of European issuers or on the Fund. The transition and the elimination
of currency risk among EMU countries may change the economic environment and
behavior of investors, particularly in European markets. To the extent the Fund
holds non-U.S. dollar (Euro or other) denominated securities, it will still be
exposed to currency risk due to fluctuations in those currencies versus the U.S.
dollar.
Franklin Resources, Inc. has created an interdepartmental team to handle all
Euro-related changes to enable the Franklin Templeton Funds to process
transactions accurately and completely with minimal disruption to business
activities. While there can be no assurance that the Fund will not be adversely
affected, the manager and its affiliated service providers are taking steps that
they believe are reasonably designed to address the Euro issue.
YEAR 2000. The Fund's business operations use a worldwide network of computer
systems. Many of them have date fields that use two digits to represent the date
and these systems must be replaced or modified, so that they can distinguish the
Year 1900 from the Year 2000 (commonly referred to as the Year 2000 bug).
When the year 2000 arrives, the Fund's operations could be affected if the
computer systems used by the manager, its service providers and other third
parties it does business with are not Year 2000 ready. For example, the Fund's
portfolio and operational areas could be impacted, including securities trade
processing, interest and dividend payments, securities pricing, shareholder
account services, reporting, custody functions and others. The Fund could
experience difficulties in effecting transactions if any of its foreign
subcustodians, or if foreign broker/dealers or foreign markets are not ready for
year 2000.
The Fund's manager and its affiliated service providers are making a concerted
effort to take steps they believe are reasonably designed to get ready for Year
2000. Of course, the Fund's ability to reduce the effects of Year 2000 issues is
also very dependent upon the efforts of third parties.
In evaluating current and potential portfolio positions, Year 2000 is one of the
factors that the Fund's manager takes into consideration. It will rely upon
public filings and other statements made by companies regarding their Year 2000
readiness. Issuers in countries outside of the U.S., and in particular in
emerging markets, may not be required to make the level of disclosure regarding
Year 2000 readiness that is required in the U.S. Like with many other matters,
the manager, of course, cannot audit each portfolio company and its major
suppliers, and so cannot verify their Year 2000 readiness. If the value of a
Fund investment is adversely affected by a Year 2000 problem, the net asset
value of the Fund will be affected as well.
SHARE REPURCHASE PROGRAM. On October 23, 1997, the Board of Directors of the
Fund authorized management to implement an open-market share repurchase program
pursuant to which the Fund, from time to time, at the discretion of management
may purchase up to an aggregate of 2 million shares of the Fund's Common Stock
(approximately 10% of the shares outstanding on October 17, 1997) in open-market
transactions. This authorization remains in effect.
5
PAGE
PERFORMANCE SUMMARY
In market-price terms, Templeton China World Fund produced a -61.83% cumulative
total return for the one-year period ended August 31, 1998. Based on the change
in net asset value (in contrast to market price), the Fund delivered a -59.73%
cumulative total return for the same period. Both total return figures assume
reinvestment of all distributions in accordance with the dividend reinvestment
and cash purchase plan.
During the reporting period, the Fund's closing price on the New York Stock
Exchange decreased $8.1875 per share, from $12.50 on August 31, 1997, to $4.3125
on August 31, 1998, while the net asset value decreased $11.02 per share, from
$17.32 to $6.30.
Shareholders received per-share distributions of 56.5 cents ($0.565) in
long-term capital gains, 12.5 cents ($0.125) in short-term capital gains, and 26
cents ($0.26) in income dividends. Distributions will vary depending on income
earned by the Fund and any profits realized from the sale of securities in the
portfolio, as well as the level of the Fund's operating expenses.
Past performance is not predictive of future results.
6
PAGE
TEMPLETON CHINA WORLD FUND
Periods ended 8/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 3-YEAR (9/9/93)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1)
Based on change in net asset value -59.73% -37.63% -41.15%
Based on change in market price -61.83% -50.96% -62.17%
Average Annual Total Return(2)
Based on change in net asset value -59.73% -14.55% -10.10%
Based on change in market price -61.83% -21.12% -17.74%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
All calculations assume reinvestment of distributions, either at net asset value
or at market price on the reinvestment date, in accordance with the dividend
reinvestment and cash purchase plan, and do not reflect any sales charges paid
at inception or brokerage commissions paid on secondary market purchases. Since
markets can go down as well as up, investment return and principal value will
fluctuate with market conditions, currency volatility, and the economic, social
and political climates of countries where the Fund invests. Emerging markets
involve heightened risks related to the same factors, in addition to those
associated with their relatively small size and lesser liquidity. Also, as a
non-diversified investment company investing in "China companies," the Fund may
invest in a relatively small number of issuers and, as a result, be subject to
greater risk of loss with respect to its portfolio securities. You may have a
gain or loss when you sell your shares.
Past performance is not predictive of future results.
7
PAGE
TEMPLETON CHINA WORLD FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
--------------------------------------------------------
1998 1997 1996 1995 1994+
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year......................... $17.32 $13.39 $12.07 $14.92 $14.10
--------------------------------------------------------
Income from investment operations:
Net investment income..................................... .30 .24 .27 .33 .16
Net realized and unrealized gains (losses)................ (10.37) 4.27 1.39 (1.91) .79
--------------------------------------------------------
Total from investment operations........................... (10.07) 4.51 1.66 (1.58) .95
--------------------------------------------------------
Underwriting expenses deducted from capital................ -- -- -- -- (.07)
--------------------------------------------------------
Less distributions from:
Net investment income..................................... (.26) (.28) (.33) (.20) (.06)
Net realized gains........................................ (.69) (.30) (.01) (1.07) --
--------------------------------------------------------
Total distributions........................................ (.95) (.58) (.34) (1.27) (.06)
--------------------------------------------------------
Net asset value, end of year............................... $6.30 $17.32 $13.39 $12.07 $14.92
========================================================
Total Return*
Based on market value per share........................... (61.83)% 14.97% 11.75% (29.58)% 9.54%
Based on net asset value per share........................ (59.73)% 35.33% 14.44% (11.13)% 6.18%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................ $121,697 $353,049 $272,996 $245,982 $297,835
Ratios to average net assets:
Expenses.................................................. 1.68% 1.65% 1.65% 1.65% 1.84%**
Net investment income..................................... 2.88% 1.55% 2.14% 2.77% 1.09%**
Portfolio turnover rate.................................... 34.75% 19.51% 14.47% 3.01% 81.81%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period September 9, 1993 (commencement of operations) to August 31,
1994.
See Notes to Financial Statements.
8
PAGE
TEMPLETON CHINA WORLD FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 74.1%
APPLIANCES & HOUSEHOLD DURABLES 1.5%
Semi-Tech Co. Ltd. ......................................... Hong Kong 11,410,874 $ 397,581
*Shanghai Vacuum Electron Devices Co. Ltd., B............... China 9,695,054 1,221,577
Shenzhen Konka Electronic Group Co. Ltd., B................. China 430,600 213,933
------------
1,833,091
------------
AUTOMOBILES 1.4%
Cycle & Carriage Ltd........................................ Singapore 61,000 81,058
Jardine International Motor Holdings Ltd. .................. Hong Kong 2,612,000 1,078,615
Oriental Holdings Bhd....................................... Malaysia 151,000 145,038
Qingling Motors Co. Ltd., H................................. China 3,028,000 367,305
------------
1,672,016
------------
BANKING 10.2%
HSBC Holdings Plc........................................... Hong Kong 525,819 11,162,085
*Overseas Chinese Banking Corp. Ltd., fgn. ................. Singapore 138,000 355,878
*Philippine National Bank................................... Philippines 373,000 217,158
Public Bank Bhd., fgn. ..................................... Malaysia 962,000 191,929
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 549,500 236,062
United Overseas Bank Ltd., fgn. ............................ Singapore 102,000 241,216
------------
12,404,328
------------
BEVERAGES & TOBACCO .5%
Fraser and Neave Ltd. ...................................... Singapore 84,000 133,851
*Tsingtao Brewery Co., H.................................... China 5,101,000 487,114
------------
620,965
------------
BUILDING MATERIALS & COMPONENTS 1.1%
China Southern Glass Co. Ltd., B............................ China 1,115,640 125,252
K Wah International Holdings Ltd. .......................... Hong Kong 16,993,619 679,815
Shanghai Yaohua Pilkington Glass, B......................... China 4,648,000 464,800
*Siam Cement Public Co. Ltd., fgn. ......................... Thailand 4,000 25,585
------------
1,295,452
------------
CHEMICALS 1.8%
*Shanghai Chlor-Alkali Chemical Co. Ltd., B................. China 8,789,000 667,964
Shanghai Petrochemical Co. Ltd., H.......................... China 21,512,000 1,152,052
*Shenzhen Petrochemical Shareholding Co. Ltd., B............ China 2,669,720 316,954
------------
2,136,970
------------
CONSTRUCTION & HOUSING .8%
Hopewell Holdings Ltd. ..................................... Hong Kong 7,990,579 804,296
YTL Corp. Bhd. ............................................. Malaysia 247,000 147,542
------------
951,838
------------
</TABLE>
9
PAGE
TEMPLETON CHINA WORLD FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ELECTRICAL & ELECTRONICS .5%
Great Wall Electronic International Ltd. ................... Hong Kong 22,795,597 $ 535,384
*Shanghai Automation Instrumentation Co., B................. China 747,491 88,204
------------
623,588
------------
ENERGY SOURCES .2%
Yanzhou Coal Mining Company Ltd. ........................... China 2,412,000 258,344
------------
FINANCIAL SERVICES .2%
JCG Holdings Ltd. .......................................... Hong Kong 808,000 126,165
Sun Hung Kai & Co. Ltd. .................................... Hong Kong 2,556,200 125,349
*Sun Hung Kai & Co. Ltd, wts. .............................. Hong Kong 989,040 1,532
------------
253,046
------------
FOOD & HOUSEHOLD PRODUCTS 1.5%
Golden Resources Development International Ltd. ............ Hong Kong 7,533,000 359,677
Ng Fung Hong Ltd. .......................................... Hong Kong 1,720,000 937,774
San Miguel Corp., B......................................... Philippines 2,000 1,758
*Shanghai New Asia Group Co. Ltd., B........................ China 1,588,295 203,302
Tingyi (Cayman Islands) Holding Corp. ...................... Hong Kong 4,512,000 285,304
------------
1,787,815
------------
HEALTH & PERSONAL CARE .3%
*Zhuhai Sez Lizhu Pharmaceutical Group Inc., B.............. China 2,570,529 358,253
------------
INDUSTRIAL COMPONENTS 1.2%
*Shanghai Refrigerator Compressor Co. Ltd., B............... China 1,060,944 108,216
+*Shanghai Rubber Belt Co. Ltd., B.......................... China 5,038,892 493,812
*Shanghai Tyre & Rubber Co. Ltd., B......................... China 7,580,089 848,970
------------
1,450,998
------------
LEISURE & TOURISM 2.4%
Genting Bhd. ............................................... Malaysia 93,800 172,573
Hong Kong & Shanghai Hotels Ltd. ........................... Hong Kong 4,854,000 2,395,931
Resorts World Bhd. ......................................... Malaysia 137,000 105,404
*Shanghai Jin Jiang Tower Co. Ltd., B....................... China 3,480,004 306,240
------------
2,980,148
------------
MACHINERY & ENGINEERING 1.0%
*China Textile Machinery Co. Ltd., B........................ China 5,060,486 323,871
Guangzhou Shipyard International Co. Ltd., H................ China 216,000 10,174
*Northeast Electric Transmission & Transformation, H........ China 1,822,000 72,888
*Shanghai Erfangji Textile Machinery Co. Ltd., B............ China 7,111,192 455,116
*Shanghai Steel Tube Co. Ltd., B............................ China 4,663,280 307,776
------------
1,169,825
------------
</TABLE>
10
PAGE
TEMPLETON CHINA WORLD FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MERCHANDISING 6.1%
Dairy Farm International Holdings Ltd. ..................... Hong Kong 7,411,594 $ 7,041,014
Joyce Boutique Holdings Ltd. ............................... Hong Kong 20,352,000 262,634
*Wo Kee Hong Holdings Ltd. ................................. Hong Kong 17,422,200 161,875
------------
7,465,523
------------
METALS & MINING .3%
Bengang Steel Plates Co. Ltd. .............................. China 3,914,800 409,202
------------
MISCELLANEOUS MATERIALS & COMMODITIES
*Luoyang Glass Co. Ltd., H.................................. China 2,144,000 55,611
------------
MULTI-INDUSTRY 17.0%
Cheung Kong Holdings Ltd. .................................. Hong Kong 1,353,000 5,237,960
Citic Pacific Ltd. ......................................... Hong Kong 2,217,000 2,832,331
Hong Leong Industries Bhd. ................................. Malaysia 65,000 38,516
Hutchison Whampoa Ltd. ..................................... Hong Kong 1,290,000 5,593,352
Jardine Matheson Holdings Ltd. ............................. Hong Kong 905,455 1,611,710
Jardine Strategic Holdings Ltd. ............................ Hong Kong 1,230,000 1,439,100
Lai Sun Garment International Ltd. ......................... Hong Kong 6,042,000 896,647
Sembawang Corp. Ltd. ....................................... Singapore 82,000 98,806
Wheelock and Company Ltd. .................................. Hong Kong 5,553,000 2,920,105
------------
20,668,527
------------
REAL ESTATE 13.9%
*Belle Corp. ............................................... Philippines 24,132,000 446,277
China Overseas Land & Investment Ltd. ...................... Hong Kong 18,778,000 1,575,092
China Resources Enterprises Ltd. ........................... China 4,744,000 3,428,276
China Vanke Co. Ltd., B..................................... China 356,400 101,182
Hang Lung Development Co. Ltd. ............................. Hong Kong 3,903,000 3,021,989
Henderson China Holdings Limited............................ Hong Kong 584,500 142,557
Lai Sun Development Co. Ltd. ............................... Hong Kong 11,058,000 1,270,018
New World Development Co. Ltd. ............................. Hong Kong 2,497,099 2,690,701
Shanghai Jinqiao Export Processing Zone Dev., B............. China 2,837,328 590,164
*Shanghai Wai Gaoqiao Free Trade Zone Dev. Co., B........... China 247,800 55,012
*Shenzhen Properties & Resources Development Ltd., B........ China 929,636 80,377
Sun Hung Kai Properties Ltd. ............................... Hong Kong 1,093,901 3,359,682
Tian An China Investments Co. Ltd. ......................... Hong Kong 1,237,750 22,681
United Industrial Corporation Ltd. ......................... Singapore 182,000 41,503
United Overseas Land Ltd. .................................. Singapore 410,000 129,279
------------
16,954,790
------------
RECREATION & OTHER CONSUMER GOODS 4.7%
+China First Pencil (Group) Co Ltd. ........................ China 14,306,036 1,659,500
KTP Holdings Ltd. .......................................... Hong Kong 3,500 99
*KTP Holdings Ltd., wts. ................................... Hong Kong 53,050 68
*Phoenix Co. Ltd. .......................................... China 6,723,576 537,886
</TABLE>
11
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TEMPLETON CHINA WORLD FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
RECREATION & OTHER CONSUMER GOODS (CONT.)
+*Shanghai Wingsung Co. Ltd., B............................. China 5,635,365 $ 473,371
Tanjong Plc. ............................................... Malaysia 305,000 271,095
Yue Yuen Industrial (Holdings) Ltd. ........................ Hong Kong 1,527,200 2,759,098
------------
5,701,117
------------
TELECOMMUNICATIONS .2%
Philippine Long Distance Telephone Co., ADR................. Philippines 16,200 253,125
------------
TEXTILES & APPAREL .5%
Goldlion Holdings Ltd. ..................................... Hong Kong 8,605,000 621,845
------------
TRANSPORTATION 3.0%
Chiwan Wharf Holdings Ltd., B............................... China 3,346,000 453,376
Cross Harbour Tunnel Co. Ltd. .............................. Hong Kong 1,274,000 961,764
Guangshen Railway Co. Ltd., ADR............................. China 89,900 376,456
Guangshen Railway Co. Ltd., H............................... China 9,424,000 875,610
IMC Holdings Ltd............................................ Hong Kong 2,626,000 304,986
Keppel Corp., Ltd. ......................................... Singapore 158,000 128,998
*Shanghai Dazhong Taxi Shareholding Co. Ltd., B............. China 1,421,000 537,138
------------
3,638,328
------------
UTILITIES ELECTRICAL & GAS 3.8%
CLP Holdings Ltd. .......................................... Hong Kong 51,000 214,551
Guangdong Electric Power Development Co Ltd., B,............ China 6,490,000 1,817,388
Hong Kong Electric Holdings Ltd. ........................... Hong Kong 542,600 1,610,463
Shandong Huaneng Power Development Co. Ltd., ADR............ China 201,200 729,350
Wing Shan International Ltd. ............................... Hong Kong 3,989,000 231,643
------------
4,603,395
------------
TOTAL COMMON STOCKS (COST $197,924,897)..................... 90,168,140
------------
<CAPTION>
PRINCIPAL
AMOUNT**
--------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS (COST $31,755,367) 26.1%
U.S. Treasury Bills, 5.035% to 5.15%, with maturities to
12/10/98.................................................. United States $32,126,000 31,779,169
------------
TOTAL INVESTMENTS (COST $229,680,264) 100.2%................ 121,947,309
OTHER ASSETS, LESS LIABILITIES (0.2%)....................... (249,838)
------------
TOTAL NET ASSETS 100.0%..................................... $121,697,471
============
</TABLE>
*Non-income producing.
**Securities traded in U.S. dollars.
+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 August 31,
1998, were $2,626,683.
See Notes to Financial Statements.
12
PAGE
TEMPLETON CHINA WORLD FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $229,680,264).... $ 121,947,309
Cash....................................................... 71,324
Receivables:
Investment securities sold................................ 227,038
Dividends and interest.................................... 345,302
-------------
Total assets.......................................... 122,590,973
-------------
Liabilities:
Payables:
Investment securities purchased........................... 635,516
To affiliates............................................. 138,438
Accrued liabilities........................................ 119,548
-------------
Total liabilities..................................... 893,502
-------------
Net assets, at value........................................ $ 121,697,471
=============
Net assets consist of:
Undistributed net investment income........................ $ 3,776,668
Net unrealized depreciation................................ (107,732,967)
Accumulated net realized loss.............................. (52,119,619)
Capital shares............................................. 277,773,389
-------------
Net assets, at value........................................ $ 121,697,471
=============
Net asset value per share ($121,697,471 / 19,319,572 shares
outstanding).............................................. $6.30
=============
</TABLE>
See Notes to Financial Statements.
13
PAGE
TEMPLETON CHINA WORLD FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1998
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $83,491)
Dividends.................................................. $ 8,574,237
Interest................................................... 872,823
-------------
Total investment income............................... $ 9,447,060
Expenses:
Management fees (Note 3)................................... 2,589,414
Administrative fees (Note 3)............................... 517,883
Transfer agent fees........................................ 85,351
Custodian fees............................................. 122,624
Reports to shareholders.................................... 38,362
Registration and filing fees............................... 32,340
Professional fees.......................................... 53,506
Directors' fees and expenses............................... 33,227
Amortization of organization costs......................... 4,745
Other...................................................... 7,400
-------------
Total expenses........................................ 3,484,852
-------------
Net investment income........................... 5,962,208
-------------
Realized and unrealized gains (losses):
Net realized loss from:
Investments............................................... (50,317,177)
Foreign currency transactions............................. (236,248)
-------------
Net realized loss..................................... (50,553,425)
Net unrealized appreciation (depreciation) on:
Investments............................................... (159,786,206)
Translation of assets and liabilities denominated in
foreign currencies...................................... 330,417
-------------
Net unrealized depreciation........................... (159,455,789)
-------------
Net realized and unrealized loss............................ (210,009,214)
-------------
Net decrease in net assets resulting from operations........ $(204,047,006)
==============
</TABLE>
See Notes to Financial Statements.
14
PAGE
TEMPLETON CHINA WORLD FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 5,962,208 $ 4,971,637
Net realized gain (loss) from investments and foreign
currency transactions................................... (50,553,425) 12,710,529
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated in
foreign currencies....................................... (159,455,789) 74,192,489
--------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ (204,047,006) 91,874,655
Distributions to shareholders from:
Net investment income..................................... (5,299,780) (5,605,537)
Net realized gains........................................ (14,064,803) (6,215,883)
Capital share transactions (Note 2)........................ (7,940,335) --
--------------------------------
Net increase (decrease) in net assets................... (231,351,924) 80,053,235
Net assets:
Beginning of year.......................................... 353,049,395 272,996,160
--------------------------------
End of year................................................ $ 121,697,471 $353,049,395
================================
Undistributed net investment income included in net assets:
End of year................................................ $ 3,776,668 $ 3,114,240
================================
</TABLE>
See Notes to Financial Statements.
15
PAGE
TEMPLETON CHINA WORLD FUND, INC.
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING CHANGES
Templeton China World Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 as a closed-end, non-diversified investment company. The
Fund seeks to achieve long-term capital appreciation by investing primarily in
equity securities of "China companies." The following summarizes the Fund's
significant accounting policies.
a. SECURITIES VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
c. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as
16
PAGE
TEMPLETON CHINA WORLD FUND, INC.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING CHANGES (CONT.)
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS (CONT.)
information is available to the Fund. Interest income and estimated expenses are
accrued daily. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
On October 23, 1997, the Board of Directors of the Fund authorized management to
implement an open-market share repurchase program pursuant to which the Fund
from time to time at the discretion of management may purchase up to an
aggregate of 2 million shares of the Fund's Common Stock.
At August 31, 1998, there were 100 million shares authorized ($0.01 par value).
During the year ended August 31, 1998, 1,064,199 shares were repurchased for
$7,940,335. For the year ended August 31, 1997 there were no share transactions;
all reinvested distributions were satisfied with previously issued shares
purchased in the open market.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton Asset
Management, Ltd. (TAML) and Franklin Templeton Services, Inc. (FT Services), the
Fund's investment manager and administrative manager, respectively.
The Fund pays an investment management fee to TAML of 1.25% per year of the
average weekly net assets of the Fund. The Fund pays an administrative fee to FT
Services of 0.25% per year of the average weekly net assets of the Fund, of
which 0.20% is paid to Princeton Administrators, L.P., for sub-administrative
services.
Legal fees of $14,305 were paid to a law firm in which a partner is an officer
of the Fund.
17
PAGE
TEMPLETON CHINA WORLD FUND, INC.
Notes to Financial Statements (continued)
4. INCOME TAXES
At August 31, 1998, the Fund has deferred capital losses occurring subsequent to
October 31, 1997 of $51,009,096. For tax purposes, such losses will be reflected
in the year ending August 31, 1999.
At August 31, 1998, the net unrealized depreciation based on the cost of
investments for income taxes purposes of $230,701,044 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 5,791,773
Unrealized depreciation..................................... (114,545,508)
-------------
Net unrealized depreciation................................. $(108,753,735)
=============
</TABLE>
Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatments of wash sales.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1998 aggregated $66,413,451 and $91,335,934, respectively.
18
PAGE
TEMPLETON CHINA WORLD FUND, INC.
Independent Auditor's Report
THE BOARD OF DIRECTORS AND SHAREHOLDERS
TEMPLETON CHINA WORLD FUND, INC.
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Templeton China World Fund, Inc., as of August
31, 1998, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton China World Fund, Inc. as of August 31, 1998, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
/s/McGladrey & Pullen, LLP
New York, New York
September 29, 1998
19
PAGE
TEMPLETON CHINA WORLD FUND, INC.
Annual Meeting of Shareholders, February 17, 1998
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 East Broward Boulevard, Ft. Lauderdale, Florida, on February 17, 1998. The
purpose of the meeting was to elect three Directors of the Fund, to ratify the
selection of McGladrey & Pullen, LLP, as the Fund's independent auditors for the
fiscal year ending August 31, 1998, and in their discretion, to authorize the
proxyholders to vote upon other such matters that may legally come before the
meeting or any adjournment of the meeting. At the meeting, the following persons
were elected by the shareholders to serve as Directors of the Fund: Andrew H.
Hines, Jr., Charles B. Johnson and Charles E. Johnson.* The shareholders
ratified the selection of McGladrey & Pullen, LLP, to serve as the Fund's
independent auditors for the fiscal year ending August 31, 1998. No other
business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. The election of three (3) Directors for the term set forth below:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
TERM EXPIRING 2001: FOR SHARES WITHHELD SHARES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Andrew H. Hines, Jr......................................... 12,590,200 61.77% 1,278,266 6.27%
Charles B. Johnson.......................................... 12,606,337 61.85% 1,262,129 6.19%
Charles E. Johnson.......................................... 12,566,941 61.65% 1,301,525 6.39%
</TABLE>
2. The ratification or rejection of the selection of McGladrey & Pullen, LLP, as
independent auditors for the Fund for the fiscal year ending August 31, 1998:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12,957,702 63.57% 239,140 1.17% 671,624 3.30%
</TABLE>
*Harris J. Ashton, Nicholas F. Brady, S. Joseph Fortunato, John Wm. Galbraith,
Edith E. Holiday, Betty P. Krahmer, Gordon S. Macklin and Fred R. Millsaps are
Directors of the Fund who are currently serving and whose terms of office
continued after the Annual Meeting of Shareholders.
20
PAGE
TEMPLETON CHINA WORLD FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") with
the following features: -- Shareholders must affirmatively elect to participate
in the Plan; Stock dividends and capital gains distributions will be reinvested
automatically; ChaseMellon Shareholder Services, Investor Services, P.O. Box
3338, South Hackensack, NJ 07606-1938, 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, the participant will receive the dividends entirely in stock
at a price equal to the net asset value, but not less than 95% of the then
current market price of the Fund's shares. If the market price is lower than net
asset value or if dividends and/or capital gains distributions are payable only
in cash, the participant will receive shares purchased on the New York Stock
Exchange or otherwise on the open market. -- A participant has the option of
submitting additional payments to Mellon Securities Trust Company (the "Plan
Agent"), in any amounts of at least $100, up to a maximum of $5,000 per month,
for the purchase of Fund shares for his or her account. These payments shall be
made by check or money order payable to "Mellon Securities Trust Co." and sent
to ChaseMellon Shareholder Services, Investor Services, P.O. Box 382009,
Pittsburgh, PA 15250-8009, Attn: Templeton China World Fund, Inc. The Plan Agent
shall apply such payments (less a $5.00 service charge and less a pro rata share
of trading fees) to purchases of Fund shares in the open market. -- The
automatic reinvestment of dividends and/or capital gains does not relieve the
participant of any income tax which may be payable on dividends or
distributions. -- The participant may withdraw from the Plan without penalty at
any time by written notice to the Plan Agent sent to ChaseMellon Shareholder
Services, Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938.
Upon withdrawal, the participant will receive, without charge, stock
certificates issued in the participant's name for all full shares held by the
Plan Agent; or, if the participant wishes, the Plan Agent will sell the
participant's shares and send the proceeds, less a service charge of $5.00 and
less trading fees. -- Whenever shares are purchased on the New York Stock
Exchange or otherwise on the open market, each participant will pay a pro rata
portion of trading fees. Trading fees will be deducted from amounts to be
invested.
SHAREHOLDER INFORMATION
Shares of Templeton China World Fund, Inc. are traded daily on the New York
Stock Exchange under the symbol "TCH." Information about the net asset value and
the market price is published each Monday in the Wall Street Journal, weekly in
Barron's and each Saturday in The New York Times and other newspapers. Daily
market prices for the Fund's shares are published in the New York Stock Exchange
Composite Transactions section of newspapers.
For current information about dividends and shareholder accounts, call
1-800-416-5585.
The daily closing net asset value may be obtained when available on a two
business day delay basis by calling Franklin Templeton Fund Information after 7
a.m. Pacific Time any business day at 1/800-DIAL BEN(R) (1-800-342-5236).
If any shareholder is not receiving copies of the Reports to Shareholders
because shares are registered in a broker's name or in a custodian's name, he or
she can request that his or her name be added to the Fund's mailing list, by
writing Templeton China World Fund, Inc., 100 Fountain Parkway, P.O. Box 33030,
St. Petersburg, FL 33733-8030.
21
PAGE
TEMPLETON CHINA WORLD FUND, INC.
Tax Designation
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates the following amounts as capital gain dividends for the fiscal year
ended August 31, 1998:
<TABLE>
<S> <C>
28% Rate Gain............................................... $ 65,888
20% Rate Gain............................................... 1,348,571
----------
Total....................................................... $1,414,459
==========
</TABLE>
22
PAGE
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PAGE
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Templeton Fund Information at
1-800/DIAL BEN(R)(1-800/342-5236). Please read the prospectus carefully
before investing or sending money. To ensure the highest quality of service,
telephone calls to or from our service departments may be monitored, recorded
and accessed. These calls can be determined by the presence of a regular beeping
tone.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH
Franklin Global Health Care Fund
Mutual Discovery Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Global Infrastructure Fund
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government Income Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Templeton Americas Government Securities Fund
GROWTH
Franklin Biotechnology Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet Investment Fund*
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 Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
FUND ALLOCATOR SERIES
Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
INCOME
Franklin Adjustable Rate Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Investment Grade Income Fund
Franklin Short-Intermediate U.S. Government Securities Fund
Franklin U.S. Government Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FRANKLIN FUNDS SEEKING TAX-FREE INCOME
Federal Intermediate-Term Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS SEEKING TAX-FREE INCOME
Alabama
Arizona**
Arkansas***
California**
Colorado
Connecticut
Florida**
Georgia
Hawaii***
Indiana
Kentucky
Louisiana
Maryland
Massachusetts+
Michigan**
Minnesota +
Missouri
New Jersey
New York**
North Carolina
Ohio +
Oregon
Pennsylvania
Tennessee***
Texas
Virginia
Washington***
VARIABLE ANNUITIES ++
Franklin Valuemark(R)
Franklin Templeton Valuemark Income Plus (an immediate annuity)
*These funds are now closed to new accounts, with the exception of retirement
plan accounts.
**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. The Franklin Valuemark Funds are managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
09/98
PAGE
TEMPLETON CHINA WORLD FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
TRANSFER AGENT
Chase Mellon Shareholder Services
450 West 33rd Street
New York, New York 10001
1-800/416-5585
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up, and that the Investment Manager may make errors in selecting
securities for the Fund's portfolio. Like any investment in securities, the
value of Fund's portfolio will be subject to the risk of loss from market,
currency, economic, political and other factors. The Fund and its investors are
not protected from such losses by the Investment Manager. Therefore, investors
who cannot accept this risk 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.
TLTCH A98 10/98 [RECYCLE LOGO] Printed on recycled paper
