N-Q 1 tch-nq_0508.txt 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: 05/31/08 ---------- Item 1. Schedule of Investments. Templeton China World Fund QUARTERLY STATEMENT OF INVESTMENTS MAY 31, 2008 CONTENTS
Statement of Investments ........... 3 Notes to Statement of Investment ... 7
(FRANKLIN TEMPLETON INVESTMENT LOGO) FRANKLIN TEMPLETON INVESTMENT Franklin . TEMPLETON .Mutual Series Quarterly Statement of Investments | 1 This page intentionally left blank. Templeton China World Fund STATEMENT OF INVESTMENTS, MAY 31, 2008 (UNAUDITED)
COUNTRY SHARES/UNITS VALUE --------- ------------ --------------- COMMON STOCKS AND OTHER EQUITY INTERESTS 97.9% AIR FREIGHT & LOGISTICS 0.1% Sinotrans Ltd., H ................................. China 3,586,000 $ 960,347 --------------- AUTO COMPONENTS 1.5% Cheng Shin Rubber Industry Co. Ltd. ............... Taiwan 5,679,499 9,710,940 Norstar Founders Group Ltd. ....................... Hong Kong 15,182,000 4,046,354 (a, b) Zhejiang Glass Co. Ltd., Reg S .................... China 2,482,000 2,076,761 --------------- 15,834,055 --------------- AUTOMOBILES 1.7% (a) Brilliance China Automotive Holdings Ltd. ......... China 7,580,000 1,175,239 Dongfeng Motor Corp., H ........................... China 26,316,000 13,150,919 Great Wall Motor Co. Ltd., H ...................... China 2,496,500 2,504,753 Jiangling Motors Corp. Ltd., B .................... China 834,210 834,830 --------------- 17,665,741 --------------- COMMERCIAL BANKS 11.6% Bank of China Ltd., H ............................. China 23,700,000 12,086,569 (c) Bank of China Ltd., H, 144A ....................... China 41,306,000 21,065,308 China Construction Bank Corp., H .................. China 71,326,000 63,519,093 Industrial and Commercial Bank of China, H ........ China 12,691,000 9,480,604 (c) Industrial and Commercial Bank of China, H, 144A .. China 22,778,000 17,015,932 --------------- 123,167,506 --------------- COMMUNICATIONS EQUIPMENT 0.7% D-Link Corp. ...................................... Taiwan 922,880 1,532,444 ZTE Corp., H ...................................... China 1,265,600 6,194,859 --------------- 7,727,303 --------------- COMPUTERS & PERIPHERALS 4.7% Acer Inc. ......................................... Taiwan 3,195,787 6,630,634 Asustek Computer Inc. ............................. Taiwan 12,302,275 35,475,858 Compal Electronics Inc. ........................... Taiwan 2,923,545 3,249,184 Lite-On IT Corp. .................................. Taiwan 6,201,748 5,169,398 --------------- 50,525,074 --------------- CONSTRUCTION & ENGINEERING 0.1% Baoye Group Co. Ltd., H ........................... China 1,206,000 764,934 --------------- DISTRIBUTORS 1.8% China Resources Enterprise Ltd. ................... Hong Kong 5,108,000 16,919,325 Dah Chong Hong Holdings Ltd ....................... Hong Kong 7,318,563 2,344,431 (c) Dah Chong Hong Holdings Ltd., 144A ................ Hong Kong 502,000 160,811 --------------- 19,424,567 --------------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.9% China Netcom Group Corp. (Hong Kong) Ltd. ......... China 2,146,000 7,438,213 China Telecom Corp. Ltd., H ....................... China 31,835,833 23,129,747 --------------- 30,567,960 --------------- ELECTRIC UTILITIES 2.5% Cheung Kong Infrastructure Holdings Ltd. .......... Hong Kong 6,669,548 26,962,948 --------------- ELECTRICAL EQUIPMENT 0.5% BYD Co. Ltd., H ................................... China 3,484,600 5,509,849 ----------------
Quarterly Statement of Investments | 3 Templeton China World Fund STATEMENT OF INVESTMENTS, MAY 31, 2008 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE --------- ------------- --------------- COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED) ELECTRONIC EQUIPMENT & INSTRUMENTS 4.0% AU Optronics Corp. ................................. Taiwan 7,039,956 $ 13,518,567 Delta Electronics Inc. ............................. Taiwan 900,397 2,569,814 Synnex Technology International Corp. .............. Taiwan 9,020,064 23,578,959 Wasion Meters Group Ltd. ........................... Hong Kong 2,172,000 1,085,416 (c) Wasion Meters Group Ltd., 144A ..................... Hong Kong 3,884,000 1,940,955 --------------- 42,693,711 --------------- ENERGY EQUIPMENT & SERVICES 0.1% Anhui Tianda Oil Pipe Co. Ltd., H .................. China 1,545,000 483,048 (a) Honghua Group Ltd. ................................. China 1,793,000 889,125 --------------- 1,372,173 --------------- FOOD & STAPLES RETAILING 6.9% Beijing Jingkelong Supermarket Chain Group Co. Ltd., H .. ............................ China 430,000 310,205 Dairy Farm International Holdings Ltd. ............. Hong Kong 11,326,776 62,976,874 President Chain Store Corp. ........................ Taiwan 2,560,088 9,680,563 --------------- 72,967,642 --------------- FOOD PRODUCTS 1.3% China Foods Ltd .................................... China 7,378,000 3,564,114 China Huiyuan Juice Group Ltd. ..................... China 717,500 549,787 China Mengniu Dairy Co. Ltd ........................ China 516,000 1,616,591 People's Food Holdings Ltd. ........................ China 3,602,000 3,017,105 Uni-President Enterprises Corp. .................... Taiwan 1,255,167 1,772,608 Xiwang Sugar Holdings Co. Ltd. ..................... Hong Kong 8,826,000 3,438,026 --------------- 13,958,231 --------------- HOTELS, RESTAURANTS & LEISURE 0.5% NagaCorp Ltd ....................................... Cambodia 16,609,000 5,235,404 --------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 2.8% Datang International Power Generation Co. Ltd., H ....... .................. China 22,334,640 16,226,828 Guangdong Electric Power Development Co. Ltd., B ... China 11,628,220 5,855,681 Huadian Power International Corp. Ltd., H .......... China 4,180,000 1,371,159 Huaneng Power International Inc., H ................ China 7,296,776 6,189,572 --------------- 29,643,240 --------------- INDUSTRIAL CONGLOMERATES 2.6% Citic Pacific Ltd. ................................. Hong Kong 1,589,092 6,821,273 Hutchison Whampoa Ltd. ............................. Hong Kong 224,000 2,421,055 Shanghai Industrial Holdings Ltd ................... China 4,944,253 18,277,556 --------------- 27,519,884 --------------- INSURANCE 0.2% China Life Insurance Co. Ltd., H ................... China 565,000 2,269,643 --------------- IT SERVICES 0.1% Travelsky Technology Ltd., H ....................... China 870,000 691,166 --------------- LEISURE EQUIPMENT & PRODUCTS 0.2% Yorkey Optical International Cayman Ltd. ........... Hong Kong 7,845,000 1,708,888 ---------------
4 | Quarterly Statement of Investments Templeton China World Fund STATEMENT OF INVESTMENTS, MAY 31, 2008 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE --------- ------------- --------------- COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED) MACHINERY 1.3% China Infrastructure Machinery Holdings Ltd. ....... Hong Kong 2,485,000 $ 2,897,606 China International Marine Containers (Group) Co. Ltd., B ............................. China 5,972,080 8,455,894 Shin Zu Shing Co. Ltd. ............................. Taiwan 438,000 2,577,953 --------------- 13,931,453 --------------- MARINE 0.1% (a) Sinotrans Shipping Ltd. ............................ Hong Kong 1,795,000 1,053,420 --------------- MEDIA 0.2% Next Media Ltd. .................................... Hong Kong 268,000 116,758 (c) Next Media Ltd., 144A .............................. Hong Kong 3,510,000 1,529,176 --------------- 1,645,934 --------------- OFFICE ELECTRONICS 0.1% Kinpo Electronics Inc. ............................. Taiwan 2,881,570 961,708 --------------- OIL, GAS & CONSUMABLE FUELS 26.9% China Petroleum and Chemical Corp., H .............. China 64,539,395 65,000,852 China Shenhua Energy Co. Ltd., H ................... China 9,112,500 40,633,889 CNOOC Ltd. ......................................... China 42,221,000 73,576,484 PetroChina Co. Ltd., H ............................. China 51,061,903 73,411,055 Yanzhou Coal Mining Co. Ltd., H .................... China 15,486,000 33,733,374 --------------- 286,355,654 --------------- PAPER & FOREST PRODUCTS 0.2% Nine Dragons Paper Holdings Ltd. ................... China 1,932,000 2,104,252 --------------- PHARMACEUTICALS 0.2% Tong Ren Tang Technologies Co. Ltd., H ............. China 1,349,000 1,987,840 --------------- REAL ESTATE MANAGEMENT & DEVELOPMENT 1.9% Cheung Kong (Holdings) Ltd. ........................ Hong Kong 1,131,690 17,386,744 Soho China Ltd. .................................... China 2,867,500 1,800,409 (c) Soho China Ltd., 144A .............................. China 712,000 447,041 SPG Land Holdings Ltd .............................. China 949,000 456,005 --------------- 20,090,199 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 4.7% MediaTek Inc. ...................................... Taiwan 433,000 5,410,275 Novatek Microelectronics Corp. Ltd. ................ Taiwan 1,676,895 6,506,325 (a) Semiconductor Manufacturing International Corp. .... China 41,952,000 2,580,272 Taiwan Semiconductor Manufacturing Co. Ltd ......... Taiwan 16,677,442 35,973,373 --------------- 50,470,245 --------------- SPECIALTY RETAIL 0.4% GOME Electrical Appliances Holdings Ltd ............ Hong Kong 2,616,000 1,595,572 I.T. Ltd. .......................................... Hong Kong 6,232,000 1,876,579 Sa Sa International Holdings Ltd. .................. Hong Kong 2,760,000 1,142,308 --------------- 4,614,459 --------------- TEXTILES, APPAREL & LUXURY GOODS 0.4% Tack Fat Group International Ltd. .................. Hong Kong 8,352,000 717,029 Victory City International Holdings Ltd. ........... Hong Kong 5,724,015 1,598,928 Weiqiao Textile Co. Ltd., H ........................ China 2,146,500 2,271,865 --------------- 4,587,822 ---------------
Quarterly Statement of Investments | 5 Templeton China World Fund STATEMENT OF INVESTMENTS, MAY 31, 2008 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE --------- ------------- --------------- COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED) TRANSPORTATION INFRASTRUCTURE 4.1% Cosco Pacific Ltd. ................................. China 5,335,449 $ 10,104,551 Hopewell Holdings Ltd. ............................. Hong Kong 7,059,000 29,894,153 (c) Rickmers Maritime, 144A ............................ Singapore 4,523,000 3,722,087 --------------- 43,720,791 --------------- WIRELESS TELECOMMUNICATION SERVICES 10.6% China Mobile Ltd. .................................. China 7,432,770 109,241,014 Taiwan Mobile Co. Ltd. ............................. Taiwan 1,720,687 3,191,015 --------------- 112,432,029 --------------- TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS (COST $588,329,921) ............................. 1,041,126,072 ---------------
PRINCIPAL AMOUNT ------------- SHORT TERM INVESTMENT (COST $18,827,019) 1.7% U.S. GOVERNMENT AND AGENCY SECURITY 1.7% (d) FHLB, 6/02/08 ...................................... United States $ 18,300,000 18,300,000 --------------- TOTAL INVESTMENTS (COST $607,156,940) 99.6% 1,059,426,072 OTHER ASSETS, LESS LIABILITIES 0.4% ................ 4,337,699 --------------- NET ASSETS 100.0% .................................. $ 1,063,763,771 ===============
SELECTED PORTFOLIO ABBREVIATION FHLB - Federal Home Loan Bank (a) Non-income producing for the twelve months ended May 31, 2008. (b) 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, 2008, the value of this security was $2,076,761, representing 0.20% of net assets. (c) 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, 2008, the aggregate value of these securities was $45,881,310, representing 4.31% of net assets. (d) A portion of 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 (Fund) is registered under the Investment Company Act of 1940, as amended, as a 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, 2008, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows: Cost of investments.......................... $607,780,303 ------------ Unrealized appreciation...................... $483,254,519 Unrealized depreciation...................... (31,608,750) ------------ Net unrealized appreciation (depreciation)... $451,645,769 ============
4. NEW ACCOUNTING PRONOUNCEMENTS In September 2006, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 157, "Fair Value Measurement" (SFAS 157), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Fund believes the adoption of SFAS 157 will have no material impact on its financial statements. In March 2008, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161), which expands disclosures about derivative investments and hedging activities. SFAS 161 is effective for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Fund is currently evaluating the impact, if any, of applying the various provisions of SFAS 161. 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 Galen G. Vetter, Chief Executive Officer - Finance and Administration, and Laura F. Fergerson, Chief Financial Officer and Chief Accounting 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/GALEN G. VETTER ----------------------- Galen G. Vetter Chief Executive Officer - Finance and Administration Date July 25, 2008 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/GALEN G. VETTER ----------------------- Galen G. Vetter Chief Executive Officer - Finance and Administration Date July 25, 2008 By /s/LAURA F. FERGERSON ----------------------- Laura F. Fergerson Chief Financial Officer and Chief Accounting Officer Date July 25, 2008