UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-07876
(Exact name of registrant as specified in charter)
(Address of principal executive offices) (Zip code)
(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: 11/30/16_
Item 1. Schedule of Investments.
TEMPLETON CHINA WORLD FUND
| Statement of Investments, November 30, 2016 (unaudited) | ||||
| Country | Shares | Value | ||
| Common Stocks 99.9% | ||||
| Auto Components 0.3% | ||||
| Weifu High-Technology Co. Ltd., B | China | 273,527 | $ | 697,875 |
| a,b Xinyi Automobile Glass Hong Kong Enterprises Ltd., Reg S. | Hong Kong | 16,250 | 2,933 | |
| Xinyi Glass Holdings Ltd | Hong Kong | 130,000 | 96,873 | |
| 797,681 | ||||
| Automobiles 7.4% | ||||
| Chongqing Changan Automobile Co. Ltd., B | China | 2,812,457 | 4,242,317 | |
| Dongfeng Motor Group Co. Ltd., H | China | 8,239,478 | 8,381,237 | |
| Jiangling Motors Corp. Ltd., B | China | 3,502,646 | 9,194,020 | |
| 21,817,574 | ||||
| Banks 6.7% | ||||
| BOC Hong Kong (Holdings) Ltd | Hong Kong | 370,800 | 1,391,118 | |
| China Construction Bank Corp., H | China | 19,354,926 | 14,422,839 | |
| Industrial and Commercial Bank of China Ltd., H | China | 6,391,725 | 3,914,201 | |
| 19,728,158 | ||||
| Beverages 0.8% | ||||
| Yantai Changyu Pioneer Wine Co. Ltd., B | China | 884,899 | 2,444,822 | |
| Chemicals 0.9% | ||||
| Green Seal Holding Ltd | China | 580,925 | 2,619,319 | |
| Construction Materials 2.6% | ||||
| Asia Cement China Holdings Corp | China | 12,893,271 | 3,158,261 | |
| BBMG Corp., H | China | 4,350,000 | 1,676,841 | |
| Huaxin Cement Co. Ltd., B | China | 3,919,226 | 2,821,843 | |
| 7,656,945 | ||||
| Distributors 1.2% | ||||
| Dah Chong Hong Holdings Ltd | China | 8,501,663 | 3,397,793 | |
| Electric Utilities 1.6% | ||||
| Cheung Kong Infrastructure Holdings Ltd | Hong Kong | 578,348 | 4,831,652 | |
| Electronic Equipment, Instruments & Components 0.9% | ||||
| Simplo Technology Co. Ltd | Taiwan | 948 | 2,796 | |
| Synnex Technology International Corp | Taiwan | 2,678,648 | 2,734,256 | |
| 2,737,052 | ||||
| Food & Staples Retailing 6.3% | ||||
| Beijing Jingkelong Co. Ltd., H | China | 3,409,471 | 707,692 | |
| Dairy Farm International Holdings Ltd | Hong Kong | 1,765,876 | 12,361,132 | |
| President Chain Store Corp | Taiwan | 731,059 | 5,482,313 | |
| 18,551,137 | ||||
| Food Products 4.4% | ||||
| Uni-President China Holdings Ltd | China | 15,444,280 | 10,772,000 | |
| Uni-President Enterprises Corp | Taiwan | 1,338,394 | 2,283,949 | |
| 13,055,949 | ||||
| Health Care Equipment & Supplies 0.4% | ||||
| Ginko International Co. Ltd | Taiwan | 130,000 | 1,182,484 | |
| Health Care Providers & Services 1.9% | ||||
| Shanghai Pharmaceuticals Holding Co. Ltd., H | China | 2,174,500 | 5,438,668 | |
| Independent Power & Renewable Electricity Producers 0.4% | ||||
| Huaneng Renewables Corp. Ltd., H | China | 4,092,000 | 1,318,885 | |
Quarterly Statement of Investments | See Notes to Statements of Investments. | 1
TEMPLETON CHINA WORLD FUND
STATEMENT OF INVESTMENTS (UNAUDITED)
| Country | Shares | Value | ||
| Common Stocks (continued) | ||||
| Industrial Conglomerates 4.0% | ||||
| CK Hutchison Holdings Ltd | Hong Kong | 278,690 | $ | 3,395,350 |
| Hopewell Holdings Ltd | Hong Kong | 2,295,000 | 8,328,993 | |
| 11,724,343 | ||||
| Insurance 4.4% | ||||
| AIA Group Ltd | Hong Kong | 1,543,500 | 9,412,374 | |
| China Life Insurance Co. Ltd., H | China | 1,185,000 | 3,445,056 | |
| 12,857,430 | ||||
| Internet & Direct Marketing Retail 0.3% | ||||
| a JD.com Inc., ADR | China | 30,937 | 831,277 | |
| Internet Software & Services 12.8% | ||||
| a Alibaba Group Holding Ltd., ADR | China | 80,400 | 7,559,208 | |
| a Baidu Inc., ADR | China | 41,630 | 6,950,129 | |
| Tencent Holdings Ltd | China | 931,800 | 23,269,322 | |
| 37,778,659 | ||||
| IT Services 2.1% | ||||
| a Chinasoft International Ltd | China | 638,000 | 319,142 | |
| TravelSky Technology Ltd., H | China | 2,771,841 | 5,810,590 | |
| 6,129,732 | ||||
| Leisure Products 0.1% | ||||
| Merida Industry Co. Ltd | Taiwan | 67,800 | 296,149 | |
| Marine 1.2% | ||||
| COSCO Shipping Energy Transportation Co. Ltd., H. | China | 4,154,000 | 2,442,096 | |
| a Sinotrans Shipping Ltd | China | 5,447,300 | 1,186,860 | |
| 3,628,956 | ||||
| Media 0.4% | ||||
| Poly Culture Group Corp. Ltd., H | China | 448,300 | 1,125,872 | |
| Oil, Gas & Consumable Fuels 7.8% | ||||
| China Petroleum and Chemical Corp., H | China | 25,776,478 | 18,011,682 | |
| CNOOC Ltd | China | 1,578,400 | 1,990,157 | |
| PetroChina Co. Ltd., H | China | 4,412,403 | 2,997,900 | |
| 22,999,739 | ||||
| Paper & Forest Products 5.7% | ||||
| Nine Dragons Paper Holdings Ltd | China | 19,117,000 | 16,784,108 | |
| Pharmaceuticals 1.5% | ||||
| Tong Ren Tang Technologies Co. Ltd., H | China | 2,299,700 | 4,382,047 | |
| Real Estate Management & Development 0.8% | ||||
| Cheung Kong Property Holdings Ltd | Hong Kong | 158,690 | 1,086,364 | |
| China Overseas Land & Investment Ltd | China | 410,000 | 1,184,032 | |
| 2,270,396 | ||||
| Semiconductors & Semiconductor Equipment 10.1% | ||||
| GCL-Poly Energy Holdings Ltd | China | 6,545,000 | 877,555 | |
| Taiwan Semiconductor Manufacturing Co. Ltd | Taiwan | 5,019,330 | 28,760,917 | |
| 29,638,472 | ||||
| Textiles, Apparel & Luxury Goods 5.4% | ||||
| Anta Sports Products Ltd | China | 5,362,355 | 15,727,814 | |
|2
TEMPLETON CHINA WORLD FUND
STATEMENT OF INVESTMENTS (UNAUDITED)
| Country | Shares | Value | ||
| Common Stocks (continued) | ||||
| Transportation Infrastructure 2.8% | ||||
| COSCO Shipping Ports Ltd | China | 4,542,464 | $ | 4,755,311 |
| Sichuan Expressway Co. Ltd., H | China | 8,590,000 | 3,565,993 | |
| 8,321,304 | ||||
| Wireless Telecommunication Services 4.7% | ||||
| China Mobile Ltd | China | 1,256,270 | 13,710,123 | |
| Total Common Stocks (Cost $164,773,904) | 293,784,540 | |||
| Other Assets, less Liabilities 0.1% | 248,952 | |||
| Net Assets 100.0%. | $ | 294,033,492 |
See Abbreviations on page 6.
aNon-income producing.
bSecurity 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. This security has been deemed liquid under guidelines approved by the Fund’s Board of Trustees. At November 30, 2016, the value of this security was
$2,933, representing less than 0.1% of net assets.
|3
TEMPLETON CHINA WORLD FUND
Notes to Statements of Investments (unaudited)
1. ORGANIZATION
Templeton China World Fund (Fund) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles.
2. FINANCIAL INSTRUMENT VALUATION
The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Fund’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an 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. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities 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. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Investments in open-end mutual funds are valued at the closing NAV.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, the VC 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 Depositary Receipts, futures contracts and exchange traded
|4
TEMPLETON CHINA WORLD FUND
NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED)
funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
3. INCOME TAXES
At November 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
| Cost of investments. | $ | 165,626,702 | |
| Unrealized appreciation | $ | 141,243,494 | |
| Unrealized depreciation | (13,085,656 | ) | |
| Net unrealized appreciation (depreciation) | $ | 128,157,838 | |
4. CONCENTRATION OF RISK
Investing in securities of "China companies" may include certain risks and considerations not typically associated with investing in U.S. securities. In general, China companies are those that are organized under the laws of, or with a principal office or principal trading market in, the People’s Republic of China, Hong Kong, or Taiwan. Such risks include fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, these securities may not be as liquid as U.S. securities.
5. INVESTMENTS IN AFFILIATED MANAGEMENT INVESTMENT COMPANIES
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. During the period ended November 30, 2016, the Fund held investments in affiliated management investment companies as follows:
| % of | |||||||||
| Affiliated | |||||||||
| Number of | Number of | Fund Shares | |||||||
| Shares Held | Shares | Value | Outstanding | ||||||
| at Beginning | Gross | Gross | Held at End | at End | Investment | Realized | Held at End | ||
| of Period | Additions | Reductions | of Period | of Period | Income | Gain (Loss) | of Period | ||
| Non-Controlled Affiliates | |||||||||
| Institutional Fiduciary Trust Money Market | |||||||||
| Portfolio | 2,513,332 | 10,029,115 | (12,542,447 | ) | – | $ – | $ – | $ – | –% |
6. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:
|5
TEMPLETON CHINA WORLD FUND
NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED)
6. Fair Value Measurements (continued)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of
the date of the underlying event which caused the movement.
At November 30, 2016, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 1 inputs.
For detailed categories, see the accompanying Statement of Investments.
7. SUBSEQUENT EVENTS
The Fund has evaluated subsequent events through the issuance of the Statement of Investments and determined that no events have
occurred that require disclosure.
| ABBREVIATIONS |
| Selected Portfolio |
| ADR American Depositary Receipt |
For additional information on the Fund’s significant accounting policies, please refer to the Fund’s most recent semiannual or annual shareholder report.
|6
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 changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting 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 Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Mark H. Otani, 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.
By /s/LAURA F. FERGERSON
Laura F. Fergerson
Chief Executive Officer –
Finance and Administration
Date January 26, 2017
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/LAURA F. FERGERSON
Laura F. Fergerson
Chief Executive Officer –
Finance and Administration
Date January 26, 2017
By /s/MARK H. OTANI
Mark H. Otani
Chief Financial Officer and
Chief Accounting Officer
Date January 26, 2017
Exhibit 3(a)
I, Laura F. Fergerson, certify that:
1. I have reviewed this report on Form N-Q of Templeton China World Fund;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
1/26/2017
S\LAURA F. FERGERSON
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Exhibit 3(a)
I, Mark H. Otani, certify that:
1. I have reviewed this report on Form N-Q of Templeton China World Fund;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
1/26/2017
S\MARK H. OTANI
Mark H. Otani
Chief Financial Officer and Chief Accounting Officer