N-Q 1 tch-nq_507.txt TEMP CHINA WORLD FUND QUARTERLY INVESTMENTS 5/31/07 FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY Investment Company Act file number 811-07876 Templeton China World Fund (Exact name of registrant as specified in charter) 500 East Broward Blvd., Suite 2100, Fort Lauderdale, FL 33394-3091 (Address of principal executive offices) (Zip code) Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906 (Name and address of agent for service) Registrant's telephone number, including area code: 954/527-7500 -------------- Date of fiscal year end: 8/31 ----------- Date of reporting period: 05/31/07_ ---------- Item 1. Schedule of Investments. Templeton China World Fund QUARTERLY STATEMENT OF INVESTMENTS MAY 31, 2007 -------------------------------------------------------------------------------- CONTENTS Statement of Investments ................................................. 3 Notes to Statement of Investments ........................................ 7 [LOGO](R) FRANKLIN TEMPLETON INVESTMENTS Franklin o TEMPLETON o Mutual Series Quarterly Statement of Investments | 1 This page intentionally left blank. Templeton China World Fund STATEMENT OF INVESTMENTS, MAY 31, 2007 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------------- COUNTRY SHARES VALUE ----------------------------------------------------------------------------------------------------------------------------------- COMMON STOCKS 98.3% AIR FREIGHT & LOGISTICS 0.7% Shenzhen International Holdings Ltd. ..................................... China 55,132,000 $ 5,719,160 Sinotrans Ltd., H ........................................................ China 1,238,000 556,508 ------------- 6,275,668 ------------- AUTO COMPONENTS 1.6% Cheng Shin Rubber Industry Co. Ltd. ...................................... Taiwan 7,357,897 8,419,207 Norstar Founders Group Ltd. .............................................. China 15,182,000 6,610,761 ------------- 15,029,968 ------------- AUTOMOBILES 2.5% a Brilliance China Automotive Holdings Ltd. ................................ China 4,968,000 1,157,968 China Motor Corp. ........................................................ Taiwan 4,446,715 3,903,579 Chongqing Changan Automobile Co. Ltd., B ................................. China 2,382,380 2,669,701 Dongfeng Motor Corp., H .................................................. China 22,584,000 11,569,227 Geely Automobile Holdings Ltd. ........................................... China 26,675,000 4,475,270 ------------- 23,775,745 ------------- COMMERCIAL BANKS 13.6% a,b Bank of China Ltd., H, 144A .............................................. China 41,306,000 20,260,745 China Construction Bank Corp., H ......................................... China 24,835,000 14,885,161 b China Construction Bank Corp., H, 144A ................................... China 30,832,000 18,479,536 Chinatrust Financial Holding Co. Ltd. .................................... Taiwan 14,035,842 10,643,192 HSBC Holdings PLC ........................................................ United Kingdom 1,819,506 33,671,685 a Industrial and Commercial Bank of China, H ............................... China 14,891,000 7,799,929 a,b Industrial and Commercial Bank of China, H, 144A ......................... China 22,778,000 11,931,153 Mega Financial Holding Co. Ltd. .......................................... Taiwan 18,334,000 11,099,743 ------------- 128,771,144 ------------- COMMUNICATIONS EQUIPMENT 0.7% D-Link Corp. ............................................................. Taiwan 3,000,373 6,285,025 ------------- COMPUTERS & PERIPHERALS 4.9% Acer Inc. ................................................................ Taiwan 4,008,559 7,401,910 Asustek Computer Inc. .................................................... Taiwan 11,719,294 28,912,440 Compal Electronics Inc. .................................................. Taiwan 1,990,000 1,807,174 Lite-On It Corp. ......................................................... Taiwan 4,721,160 4,287,417 Lite-On Technology Corp. ................................................. Taiwan 3,125,877 3,690,304 ------------- 46,099,245 ------------- DISTRIBUTORS 2.3% China Resources Enterprise Ltd. .......................................... China 5,548,000 20,356,570 Test-Rite International Co. Ltd. ......................................... Taiwan 2,162,468 1,230,646 ------------- 21,587,216 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES 3.1% China Telecom Corp. Ltd., H .............................................. China 53,807,833 28,942,651 ------------- ELECTRIC UTILITIES 2.4% Cheung Kong Infrastructure Holdings Ltd. ................................. Hong Kong 6,307,548 22,416,462 -------------
Quarterly Statement of Investments | 3 Templeton China World Fund STATEMENT OF INVESTMENTS, MAY 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- COUNTRY SHARES VALUE ----------------------------------------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ELECTRICAL EQUIPMENT 1.9% BYD Co. Ltd., H .......................................................... China 1,579,500 $ 9,568,069 Phoenixtec Power Co. Ltd. ................................................ Taiwan 8,006,055 7,282,638 Yorkey Optical International Cayman Ltd. ................................. China 2,339,000 775,842 ------------- 17,626,549 ------------- ELECTRONIC EQUIPMENT & INSTRUMENTS 3.2% AU Optronics Corp. ....................................................... Taiwan 8,135,000 12,558,953 Delta Electronics Inc. ................................................... Taiwan 857,521 2,803,459 Synnex Technology International Corp. .................................... Taiwan 9,007,680 11,697,577 a Yageo Corp. .............................................................. Taiwan 7,044,000 3,155,780 ------------- 30,215,769 ------------- FOOD & STAPLES RETAILING 5.1% Dairy Farm International Holdings Ltd. ................................... Hong Kong 10,219,776 40,879,104 President Chain Store Corp. .............................................. Taiwan 2,844,088 7,739,776 ------------- 48,618,880 ------------- FOOD PRODUCTS 0.9% People's Food Holdings Ltd. .............................................. China 2,517,000 3,061,683 Uni-President Enterprises Corp. .......................................... Taiwan 2,410,950 2,291,625 Xiwang Sugar Holdings Co. Ltd. ........................................... China 5,454,000 3,143,194 ------------- 8,496,502 ------------- HOTELS, RESTAURANTS & LEISURE 1.2% The Hongkong and Shanghai Hotels Ltd. .................................... Hong Kong 4,269,954 6,966,845 NagaCorp Ltd. ............................................................ Vietnam 16,609,000 4,190,378 ------------- 11,157,223 ------------- HOUSEHOLD DURABLES 0.1% Samson Holding Ltd. ...................................................... China 1,398,000 719,742 ------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 3.7% a Datang International Power Generation Co. Ltd., H ........................ China 11,586,320 15,075,882 Guangdong Electric Power Development Co. Ltd., B ......................... China 12,006,120 11,378,314 Huadian Power International Corp. Ltd., H ................................ China 8,346,000 4,393,025 Huaneng Power International Inc., H ...................................... China 3,692,776 3,802,354 ------------- 34,649,575 ------------- INDUSTRIAL CONGLOMERATES 2.2% Citic Pacific Ltd. ....................................................... China 1,589,092 6,614,179 Shanghai Industrial Holdings Ltd. ........................................ China 4,944,253 14,563,710 ------------- 21,177,889 ------------- INSURANCE 0.5% a China Life Insurance Co. Ltd., H ......................................... China 1,476,000 4,565,065 ------------- INTERNET & CATALOG RETAIL 0.1% a,c Acorn International Inc., ADR, Reg S ..................................... China 19,000 560,310 ------------- IT SERVICES 0.1% Travelsky Technology Ltd., H ............................................. China 870,000 707,516 ------------- MACHINERY 1.6% China International Marine Containers (Group) Co. Ltd., B ................ China 6,002,079 13,580,003 Yungtay Engineering Co. Ltd. ............................................. Taiwan 2,524,000 1,581,559 ------------- 15,161,562 -------------
4 | Quarterly Statement of Investments Templeton China World Fund STATEMENT OF INVESTMENTS, MAY 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- COUNTRY SHARES VALUE ----------------------------------------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) MEDIA 0.1% Next Media Ltd. .......................................................... Hong Kong 80,000 $ 25,614 b Next Media Ltd., 144A .................................................... Hong Kong 3,510,000 1,123,804 ------------- 1,149,418 ------------- METALS & MINING 0.5% Aluminum Corp. of China Ltd., H .......................................... China 3,452,000 4,571,249 b Zhaojin Mining Industry Co. Ltd., H, 144A ................................ China 333,500 619,309 ------------- 5,190,558 ------------- OFFICE ELECTRONICS 0.1% Kinpo Electronics Inc. ................................................... Taiwan 3,103,500 1,169,625 ------------- OIL, GAS & CONSUMABLE FUELS 22.1% a China Coal Energy Co., H ................................................. China 770,000 994,019 a,b China Coal Energy Co., H, 144A ........................................... China 1,161,000 1,498,775 China Petroleum and Chemical Corp., H .................................... China 56,549,395 63,152,123 China Shenhua Energy Co. Ltd., H ......................................... China 11,031,000 32,351,459 CNOOC Ltd. ............................................................... China 36,015,000 34,085,633 b CNOOC Ltd., 144A ......................................................... China 978,000 925,607 PetroChina Co. Ltd., H ................................................... China 44,221,903 57,880,442 Yanzhou Coal Mining Co. Ltd., H .......................................... China 14,604,000 18,815,394 ------------- 209,703,452 ------------- PAPER & FOREST PRODUCTS 0.8% Nine Dragons Paper Holdings Ltd. ......................................... China 2,962,000 6,198,414 Shandong Chenming Paper Holdings Ltd., B ................................. China 1,929,100 1,914,697 ------------- 8,113,111 ------------- PHARMACEUTICALS 0.3% Tong Ren Tang Technologies Co. Ltd., H ................................... China 1,056,000 2,702,109 ------------- REAL ESTATE 2.0% Cheung Kong (Holdings) Ltd. .............................................. Hong Kong 1,360,690 17,617,888 Henderson Investment Ltd. ................................................ Hong Kong 859,756 1,852,016 ------------- 19,469,904 ------------- REAL ESTATE MANAGEMENT & DEVELOPMENT 0.7% a,b Country Garden Holdings Co., 144A ........................................ China 1,960,000 1,686,820 a,b Rickmers Maritime, 144A .................................................. Singapore 4,523,000 4,673,560 ------------- 6,360,380 ------------- ROAD & RAIL 0.3% MTR Corp. Ltd. ........................................................... Hong Kong 1,262,606 3,078,778 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 5.1% Novatek Microelectronics Corp. Ltd. ...................................... Taiwan 818,000 4,110,428 Realtek Semiconductor Corp. .............................................. Taiwan 2,154,550 5,511,109 Samsung Electronics Co. Ltd. ............................................. South Korea 5,510 3,177,418 Sunplus Technology Co. Ltd. .............................................. Taiwan 1,766,972 3,840,430 Taiwan Semiconductor Manufacturing Co. Ltd. .............................. Taiwan 15,538,762 32,079,418 ------------- 48,718,803 ------------- SOFTWARE 0.1% a Kongzhong Corp., ADR ..................................................... China 131,000 694,300 -------------
Quarterly Statement of Investments | 5 Templeton China World Fund STATEMENT OF INVESTMENTS, MAY 31, 2007 (UNAUDITED) (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------- COUNTRY SHARES VALUE ----------------------------------------------------------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) SPECIALTY RETAIL 0.2% a,b Belle International Holdings Ltd., 144A .................................. China 714,000 $ 726,957 I.T. Ltd. ................................................................ Hong Kong 7,486,000 1,438,085 ------------- 2,165,042 ------------- TEXTILES, APPAREL & LUXURY GOODS 0.5% Tack Fat Group International Ltd. ........................................ Hong Kong 6,352,000 1,041,271 Victory City International Holdings Ltd. ................................. Hong Kong 5,563,441 2,351,262 Weiqiao Textile Co. Ltd., H .............................................. China 425,500 946,004 ------------- 4,338,537 ------------- TRANSPORTATION INFRASTRUCTURE 4.2% Cosco Pacific Ltd. ....................................................... China 3,921,449 10,295,417 a Hainan Meilan International Airport Co. Ltd., H .......................... China 985,000 605,510 Hopewell Holdings Ltd. ................................................... Hong Kong 6,526,000 28,583,584 ------------- 39,484,511 ------------- WIRELESS TELECOMMUNICATION SERVICES 8.9% China Mobile Ltd. ........................................................ China 8,778,770 82,072,949 Taiwan Mobile Co. Ltd. ................................................... Taiwan 2,496,930 2,562,311 ------------- 84,635,260 ------------- TOTAL COMMON STOCKS (COST $573,037,539) .................................. 929,813,494 ------------- ---------------- PRINCIPAL AMOUNT ---------------- SHORT TERM INVESTMENT (COST $17,334,568) 1.8% U.S. GOVERNMENT AND AGENCY SECURITY 1.8% d FHLB, 6/01/07 ............................................................ United States $17,337,000 17,337,000 ------------- TOTAL INVESTMENTS (COST $590,372,107) 100.1% ............................. 947,150,494 OTHER ASSETS, LESS LIABILITIES (0.1)% .................................... (758,504) ------------- NET ASSETS 100.0% ........................................................ $946,391,990 -------------
SELECTED PORTFOLIO ABBREVIATION FHLB - Federal Home Loan Bank a Non-income producing for the twelve months ended May 31, 2007. b Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Fund's Board of Trustees. At May 31, 2007, the aggregate value of these securities was $61,926,266, representing 6.54% of net assets. c Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Fund's Board of Trustees. At May 31, 2007, the value of this security was $560,310, representing 0.06% of net assets. d The security is traded on a discount basis with no stated coupon rate. 6 | See Notes to Statement of Investments. | Quarterly Statement of Investments Templeton China World Fund NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) 1. ORGANIZATION Templeton China World Fund (the Fund) is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end investment company. 2. SECURITY VALUATION Securities listed on a securities exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Over-the-counter securities and listed securities for which there is no reported sale are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Government securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund may utilize independent pricing services, quotations from bond dealers, and information with respect to bond and note transactions, to assist in determining a current market value for each security. The Fund's pricing services may use valuation models or matrix pricing which considers information with respect to comparable bond and note transactions, quotations from bond dealers, or by reference to other securities that are considered comparable in such characteristics as rating, interest rate and maturity date, option adjusted spread models, prepayment projections, interest rate spreads and yield curves, to determine current value. Foreign securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. If no sale is reported at that time, the foreign security will be valued within the range of the most recent quoted bid and ask prices. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the foreign security is determined. The Fund has procedures to determine the fair value of individual securities and other assets for which market prices are not readily available or which may not be reliably priced. Methods for valuing these securities may include: fundamental analysis, matrix pricing, discounts from market prices of similar securities, or discounts applied due to the nature and duration of restrictions on the disposition of the securities. Due to the inherent uncertainty of valuations of such securities, the fair values may differ significantly from the values that would have been used had a ready market for such investments existed. Occasionally, events occur between the time at which trading in a security is completed and the close of the NYSE that might call into question the availability (including the reliability) of the value of a portfolio security held by the Fund. The investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services. All security valuation procedures are approved by the Fund's Board of Trustees. Quarterly Statement of Investments | 7 Templeton China World Fund NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED) 3. INCOME TAXES At May 31, 2007, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows: Cost of investments .................................... $591,442,641 ------------- Unrealized appreciation ................................ $363,280,724 Unrealized depreciation ................................ (7,572,871) ------------- Net unrealized appreciation (depreciation) ............. $355,707,853 ============= For information on the Fund's policy regarding other significant accounting policies, please refer to the Fund's most recent semiannual or annual shareholder report. 8 | Quarterly Statement of Investments Item 2. Controls and Procedures. (a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant's filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant's management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Within 90 days prior to the filing date of this Quarterly Schedule of Portfolio Holdings on Form N-Q, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant's management, including the Registrant's principal executive officer and the Registrant's principal financial officer, of the effectiveness of the design and operation of the Registrant's disclosure controls and procedures. Based on such evaluation, the Registrant's principal executive officer and principal financial officer concluded that the Registrant's disclosure controls and procedures are effective. (b) Changes in Internal Controls. There have been no significant changes in the Registrant's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Quarterly Schedule of Portfolio Holdings on Form N-Q. Item 3. Exhibits. (a) Certification pursuant to Section 30a-2 under the Investment Company Act of 1940 of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and Galen G. Vetter, Chief Financial Officer. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Templeton China World Fund By /s/JIMMY D. GAMBILL ----------------------- Jimmy D. Gambill Chief Executive Officer - Finance and Administration Date July 26, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/JIMMY D. GAMBILL ----------------------- Jimmy D. Gambill Chief Executive Officer - Finance and Administration Date July 26, 2007 By /s/GALEN G. VETTER ----------------------- Galen G. Vetter Chief Financial Officer Date July 26, 2007