-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hUH2cPsu+atA1r5jW1/c6UvsNM4i3LiBApecwcnF2HV4Dv4/t+6UAeQ5hv2k96Vz zhKACIO9yxAPI7owjI7f9Q== 0000919893-95-000003.txt : 19950609 0000919893-95-000003.hdr.sgml : 19950609 ACCESSION NUMBER: 0000919893-95-000003 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950306 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEMPLETON DRAGON FUND INC CENTRAL INDEX KEY: 0000919893 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 650473580 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: 1940 Act SEC FILE NUMBER: 033-76050 FILM NUMBER: 95518649 BUSINESS ADDRESS: STREET 1: 700 CENTRAL AVE CITY: ST PETERSBURG STATE: FL ZIP: 33701 BUSINESS PHONE: 8138238712 N-30B-2 1 THIRD QUARTER REPORT Templeton Dragon Fund (PHOTO) Dr. Mobius has been living overseas since earning his Ph.D. in economics and political science at Massachusetts Institute of J. MARK Technology in 1964. During his extensive travels, he has acquired MOBIUS, a thorough knowledge of the business practices and customs that PH.D. are unique to developing nations. Together with his team of President Templeton analysts, Dr. Mobius currently oversees more than $6 Templeton billion in emerging markets investments for the Templeton Group Dragon of Funds. In 1994, Morningstar, Inc. named him "1993 Closed- End Fund, Inc. Fund Manager of the Year." - ------------ The Following Letter was Written by Dr. Mobius After a Recent Trip to China. Dear Shareholder: Guangzhou is the capital of Guangdong Province. This province borders Hong Kong and is influenced by the wealth of that British Colony, which is soon to be re- absorbed into the Chinese political structure. I'm sure that the leaders in Beijing have mixed emotions about Guangdong, as they have about Hong Kong. Ac- cording to some historians, it is in Hong Kong and Guangdong Province that Sun Yat Sen, the father of modern China and the leader in the struggle to overthrow the Ching Dynasty, began his crusade to rid China of the Ching dynasty. He was born in a village called Tsui Hang (green luck) located near the Portuguese Colony of Macau, which, like Hong Kong, will also be given back to China. Dur- ing a recent visit to Vancouver, Canada, we came across the Tsui Hang Village Restaurant, a branch of a successful chain of that same name based in Hong Kong. The first page of the restaurant's menu mentioned the significance of that name and how Sun Yat Sen received donations from Chinese in Canada and the United States to carry on his battle to create a modern China, which he finally succeeded in doing in 1 1911. Today, Guangdong is probably the richest province in China due to its proximity to Hong Kong and to the many Chinese who emigrated to the four cor- ners of the earth and whose descendants still send back money. The Cantonese (Guangdong-wah) dialect reflects the down-to-earth nature of the people here and their practical bent that makes them very good businessmen. We recently visited Guangzhou Shipyard (GS) and found the entrepreneurial spirit alive and well despite the government ownership background of this com- pany. It was a pleasant surprise to see how such a company could begin to transform itself from a bloated and inefficient state-owned enterprise to an aggressive and profitable establishment. Currently, it is working not only on ship building but also container manufacturing and production of steel struc- tures for export. Like other companies in China, it enjoys tax concessions be- cause of its export activities. According to company officials, while there is normally a 17% value added tax (VAT) on products sold in China, the company pays no VAT on exports. The chairman and managing director of GS is a "professor of engineering", an indication of high academic accomplishment, and a potent qualification in China when combined with business acumen. We were delighted by the openness and clarity of the presentation given by him and his staff. When we discussed the company's accounting system, we found that they published their accounts according to Chinese accounting standards as well as Hong Kong accounting standards because they are listed on the Hong Kong Stock Exchange. We discov- ered a number of differences regarding the treatment of foreign exchange gains and losses. For example, under Hong Kong's accounting principles, such gains and losses are booked immediately during the year in which they are incurred, but under Chinese accounting, such gains and losses can be amortized over a period of not less than five years. For GS, the Chinese accounting results for the first half of 1994 showed a lower gain of RMB 41 million as compared with the Hong Kong accounts, which showed a gain of RMB 86 million. Chinese ac- counting results, in this case, were thus more conservative. Unlike most other Chinese companies we have visited, GS allowed us to take pictures of the plant and operations and answered all of our questions. Cur- rently their profit breakdown is: ship building 65%, ship container manufac- turing 20%, ship repairing 2%, and other operations such as fibreglass ship manufacturing and mechanical engineering 13%. Management said that their larg- est profit margins could come from steel fabrication and that they planned to expand that activity. Recently they 2 obtained a contract to build a main structure of a new bridge across the Pearl River near Hong Kong and Macau. News of that contract was noticed by an Ameri- can company, which contacted GS and proposed a joint venture to construct steel structures for bridges, buildings and power plants (which should be a major growth area for China). This US$12 million joint venture will be 51% owned by the U.S. firm and 49% by the Chinese firm. GS has obtained considerable know-how and equipment from the U.S., Japan, Italy and Germany. While inspecting their huge rolling machines capable of bending 100 mm steel, we were told that the largest machine was from West Germany while a more sophisticated machine had just been imported from Italy. However, most of the equipment in the ship container manufacturing operations was from the U.S. The ship container plant turns out 35,000 large steel containers per year in an assembly line operation. With the continuation of their large container export business plus expansion of steel fabrication (the most profitable busi- ness) and new orders for ships (fourteen ships backlog, of which eight are for export), management expects that within a few years 40% of profits will come from shipbuilding, 30% from containers and 30% from steel structures. GS is 42.6% owned by the government but it differs markedly from other compa- nies in China with large government ownership which have taken on the charac- teristics of government bureaucracies. The remaining shareholders include Chi- nese individuals (25.6%), and Hong Kong and other foreign investors who pur- chased the company's "H" shares listed on the Hong Kong Stock Exchange (31.8%). GS is a good illustration of the transformation of government enterprises in China, and of how such companies can benefit from more open world trade and an infusion of investment capital and modern technology. It should be remembered, of course, that investing in emerging markets involves special considerations, which may include risks related to market and currency volatility, adverse so- cial and political developments, and the relatively small size and lesser li- quidity of these markets. Sincerely, /s/ J. Mark Mobius J. Mark Mobius, Ph.D. President February 15, 1995 3 Templeton Dragon Fund, Inc. Investment Portfolio, December 31, 1994 (unaudited) - --------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS: 18.8% - ------------------------------------------------------------------------------- Appliances & Household Durables: 0.2% Semi-Tech (Global) Co. Ltd. H.K. 957,000 $ 1,614,068 Shanghai Narcissus Electric Appliances Co. Ltd., B Chn. 556,000 126,768 Shanghai Vacuum Electron Devices Co. Ltd., B Chn. 438,000 90,228 ------------ 1,831,064 - ------------------------------------------------------------------------------- Automobiles: 0.4% Jardine International Motor Holdings Ltd. H.K. 2,896,000 3,050,391 - ------------------------------------------------------------------------------- Banking: 2.5% HSBC Holdings PLC H.K. 1,598,000 17,244,976 JCG Holdings Ltd. H.K. 3,322,000 1,728,084 ------------ 18,973,060 - ------------------------------------------------------------------------------- Broadcasting & Publishing: 0.1% Leefung-Asco Printers Holdings Ltd. H.K. 71,000 10,552 South Sea Development Co. Ltd. H.K. 3,138,000 219,001 ------------ 229,553 - ------------------------------------------------------------------------------- Building Materials & Components: 0.3% K Wah International Holdings Ltd. H.K. 6,410,000 1,342,061 Shanghai Yaohua Pilkington Glass, B Chn. 1,131,000 1,108,380 ------------ 2,450,441 - ------------------------------------------------------------------------------- Chemicals: 0.1% Shanghai Chlor-Alkali Chemical Co. Ltd., B Chn. 1,819,000 491,130 Shanghai Pechemical Co. Ltd., H Chn. 1,284,000 365,079 Zhuhai Sez Lizhu Pharmaceutical, B Chn. 386,000 199,548 ------------ 1,055,757 - ------------------------------------------------------------------------------- Construction & Housing: 0.6% Hopewell Holdings Ltd. H.K. 5,405,000 4,470,695 - ------------------------------------------------------------------------------- Electrical & Electronics: 0.2% G.P. Batteries International Ltd. Sing. 600,000 1,650,000 Gold Peak Industries (Holdings) Ltd. H.K. 607,000 239,270 Great Wall Electronic International Ltd. H.K. 3,000,000 236,510 ------------ 2,125,780 - ------------------------------------------------------------------------------- Electronic Components & Instruments: 0.1% S. Megga International Holdings Ltd. H.K. 7,692,000 864,884 - -------------------------------------------------------------------------------
4 Templeton Dragon Fund, Inc. Investment Portfolio, December 31, 1994 (unaudited) (cont.) - --------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONT.) - ------------------------------------------------------------------------------- Financial Services: 0.5% Peregrine Investments Holdings Ltd. H.K. 2,066,000 $ 2,429,803 Sun Hung Kai & Co. Ltd. H.K. 4,190,000 1,678,708 ------------ 4,108,511 - ------------------------------------------------------------------------------- Food & Household Products: 1.0% C.P. Pokphand Co. Ltd. H.K. 3,986,000 932,428 Dairy Farm International Holdings Ltd. H.K. 4,319,000 4,632,982 Fairwood Holdings Ltd. H.K. 10,132,000 982,100 Vitasoy International Holdings Ltd. H.K. 2,252,000 778,559 ------------ 7,326,069 - ------------------------------------------------------------------------------- Health & Personal Care: 0.1% China Pharmaceutical Enterprise & Investment Corp. Ltd. H.K. 759,000 84,361 - ------------------------------------------------------------------------------- Industrial Components: 0.1% Shanghai Tyre & Rubber Co. Ltd., B Chn. 917,000 348,460 - ------------------------------------------------------------------------------- Machinery & Engineering: 0.5% Guangzhou Shipyard International Co. Ltd., H Chn. 3,154,000 1,131,160 Shanghai Erfangji Textile Machinery Co. Ltd., B Chn. 4,155,000 831,000 Shanghai Industrial Sewing Machine Corp. Chn. 2,674,700 1,069,880 Shanghai Steel Tube Co. Ltd., B Chn. 2,276,000 630,452 ------------ 3,662,492 - ------------------------------------------------------------------------------- Merchandising: 0.7% Dickson Concepts (International) Ltd. H.K. 3,736,000 2,438,359 Fortei Holdings Ltd. H.K. 250,000 19,709 Le Saunda Holdings Ltd. H.K. 878,000 76,027 LI & Fung Ltd. H.K. 1,234,000 805,389 Linkful International Holdings Ltd. H.K. 1,965,000 172,691 Wo Kee Hong Holdings Ltd. H.K. 6,995,000 1,609,189 ------------ 5,121,364 - ------------------------------------------------------------------------------- Miscellaneous Materials & Commodities: 0.1% Luoyang Glass Co. Ltd., H Chn. 681,000 259,638 - -------------------------------------------------------------------------------
5 Templeton Dragon Fund, Inc. Investment Portfolio, December 31, 1994 (unaudited) (cont.) - --------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONT.) - ------------------------------------------------------------------------------- Multi-Industry: 3.6% Jardine Matheson Holdings Ltd. H.K. 1,144,800 $ 8,174,501 Jardine Strategic Holdings Ltd. H.K. 2,042,000 6,703,302 Lai Sun Garment International Ltd. H.K. 1,610,000 1,945,525 Shenzhen Gintian Industrial Co. Ltd., B Chn. 132,000 58,856 Stelux Holdings Ltd. H.K. 6,008,000 1,785,900 Swire Pacific Ltd., B H.K. 3,825,000 3,757,027 Wheelock & Co. Ltd. H.K. 2,550,000 4,234,895 ------------ 26,660,006 - ------------------------------------------------------------------------------- Real Estate: 6.3% Cheung Kong Holdings Ltd. H.K. 2,911,000 11,850,921 China Overseas Land & Investment Ltd. H.K. 7,691,000 1,411,466 Hang Lung Development Co. Ltd. H.K. 6,630,000 9,425,525 Hang Lung Development Co. Ltd., wts. H.K. 535,000 80,207 Lai Sun Development Co. Ltd. H.K. 11,436,000 1,418,877 New World Development Co. Ltd. H.K. 3,332,000 8,892,511 Shanghai Jinqiao Export Processing Zone Development, B Chn. 2,078,000 1,454,600 Shanghai Lujiaxui Finance & Trade Zone Development Stock Co. Ltd., B Chn. 300,000 243,000 Shanghai Outer Gaoqiao Free Trade Zone Develop. Co., B Chn. 1,571,000 926,890 Shenzhen Properties & Resources Development (Group) Ltd Chn. 290,000 110,565 Shenzhen Vanke Co. Ltd., B Chn. 494,000 233,034 Sun Hung Kai Properties Ltd. H.K. 1,385,000 8,269,725 Tian An China Investments Co. Ltd. H.K. 9,480,000 1,899,063 ------------ 46,216,384 - ------------------------------------------------------------------------------- Recreation, Other Consumer Goods: 0.3% Fu Hui Jewellery Co. Ltd. H.K. 5,996,000 356,467 Shanghai Forever Bicycle Co. Ltd., B Chn. 1,252,000 260,416 Shanghai Phoenix Bicycle Co. Ltd., B Chn. 802,000 413,030 Shanghai Wingsung Stationery Co. Ltd., B Chn. 200,000 90,000 Shenzhen China Bicycles Co. Ltd., B Chn. 500,000 219,709 Yue Yuen Industrial (Holdings) Ltd. H.K. 4,444,000 878,749 ------------ 2,218,371 - ------------------------------------------------------------------------------- Telecommunications: 0.1% Shanghai Posts & Telecommunications Equipment Co., B Chn. 50,000 27,900 - -------------------------------------------------------------------------------
6 Templeton Dragon Fund, Inc. Investment Portfolio, December 31, 1994 (unaudited) (cont.) - --------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONT.) - ------------------------------------------------------------------------------- Textiles & Apparel: 0.4% Goldlion Holdings Ltd. H.K. 8,777,000 $ 2,087,196 Laws International Holdings Ltd. H.K. 5,002,000 853,330 Shanghai Lian Hua Fibre Corp., B Chn. 80,000 30,400 Top Form International Ltd. H.K. 2,395,000 191,909 Tungtex (Holdings) Co. Ltd. H.K. 1,000,000 116,317 ------------ 3,279,152 - ------------------------------------------------------------------------------- Transportation: 0.1% Chiwan Wharf Holdings Ltd., B Chn. 500,000 193,861 - ------------------------------------------------------------------------------- Utilities Electrical & Gas: 0.4% Hong Kong Electric Holdings Ltd. H.K. 410,000 1,120,711 Shandong Huaneng Power Chn. 127,000 1,222,375 Wing Shan International Ltd. H.K. 4,374,000 638,788 ------------ 2,981,874 - ------------------------------------------------------------------------------- Wholesale & International Trade: 0.1% East Asiatic Co. Ltd. H.K. 1,594,000 247,212 ------------ TOTAL COMMON STOCKS 137,787,280 - ------------------------------------------------------------------------------- PRINCIPAL IN LOCAL CURRENCY - ------------------------------------------------------------------------------- SHORT TERM OBLIGATIONS: 82.1% - ------------------------------------------------------------------------------- U.S. Treasury Bills, 4.75% to 5.45% with maturities to 2/23/95 U.S. $604,264,000 600,570,917 - ------------------------------------------------------------------------------- TOTAL INVESTMENTS: 100.9% 738,358,197 OTHER ASSETS, LESS LIABILITIES: (0.9%) (6,746,841) ------------ TOTAL NET ASSETS: 100.0% $731,611,356 ============
7 Templeton Dragon Fund, Inc. Financial Highlights, December 31, 1994 (unaudited) - --------------------------------------------------------------------------------
NET ASSET VALUE TOTAL NET ASSETS PER SHARE -------------------------- ---------------- Net Asset Value: Beginning of period, October 1, 1994 $759,550,724 $ 14.06 Net investment income $ 5,159,548 $ 0.10 Distribution from net investment income (5,130,673) (0.10) Net loss on security and foreign currency transactions (27,968,243) (0.51) ------------ ------- Net decrease in net asset value (27,939,368) (0.51) ------------ ------- End of period, December 31, 1994 $731,611,356 $ 13.55 ============ =======
- --- This report is sent to the shareholders of Templeton Dragon Fund, Inc. for their information. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities men- tioned in the report. 8 Templeton Dragon Fund, Inc. - -------------------------------------------------------------------------------- TRANSFER AGENT Mellon Financial Services Securities Transfer Services 85 Challenger Road Over- peck Centre Ridgefield Park, NJ 07660 800-526-0801 SHAREHOLDER INFORMATION Weekly comparative net asset value and market price information about Templeton Dragon Fund, Inc. shares is published each Monday in The Wall Street Journal, weekly in Barron's and each Saturday in The New York Times and other newspapers in a table called "Publicly Traded Funds". The Fund's New York Stock Exchange trading symbol is TDF. For current information about the net asset value, call 1-800-357-0738. If any shareholder is not receiving copies of the Reports to Shareholders be- cause shares are registered in a broker's name or in a custodian's name, he or she can write and request that his or her name be added to the Fund's mailing list, by writing Templeton Dragon Fund, Inc., 700 Central Avenue, St. Peters- burg, FL 33701. 9 - -------------------------- TEMPLETON DRAGON FUND, INC. 700 Central Avenue St. Petersburg, Florida 33701-3628 Investors should be aware that the value of investments made for the Fund may go up as well as down and that the Investment Manager may make errors in selecting securities for the Fund's portfolio. Like any investment in securities, the Fund's portfolio will be subject to the risk of loss from market, currency, economic, political and other factors. The Fund and Fund investors are not protected from such losses by the Investment Manager. Therefore, investors who cannot accept the risk of such losses should not invest in shares of the Fund. - -------------------------- [LOGO OF RECYCLED TLTDF PF 12/94 PAPER APPEARS HERE] TEMPLETON DRAGON FUND, INC. Third Quarter Report December 31, 1994 [LOGO OF FRANKLIN TEMPLETON APPEARS HERE] -----END PRIVACY-ENHANCED MESSAGE-----