UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

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
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Date of fiscal year end: 8/31
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Date of reporting period: 2/28/07
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ITEM 1. REPORTS TO STOCKHOLDERS.

[GRAPHIC OMITTED]

FEBRUARY 28, 2007
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER | INTERNATIONAL
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
TEMPLETON
CHINA WORLD FUND Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.

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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS

Franklin o TEMPLETON o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE(R)

Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.

SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.

FRANKLIN. Founded in 1947, Franklin is a
recognized leader in fixed income investing and
also brings expertise in growth- and value-style
U.S. equity investing.

TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched
what has become the industry's oldest global fund.
Today, with offices in over 25 countries,
Templeton offers investors a truly global
perspective.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.

TRUE DIVERSIFICATION Because our management groups work independently
and adhere to different investment approaches,
Franklin, Templeton and Mutual Series funds
typically have distinct portfolios. That's why our
funds can be used to build truly diversified
allocation plans covering every major asset class.

RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well
as the reliable, accurate and personal service
that has helped us become one of the most trusted
names in financial services.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]

Not part of the semiannual report

Contents

SHAREHOLDER LETTER ........................................................ 1

SEMIANNUAL REPORT

Templeton China World Fund ................................................ 3

Performance Summary ....................................................... 8

Your Fund's Expenses ...................................................... 11

Financial Highlights and Statement of Investments ......................... 13

Financial Statements ...................................................... 22

Notes to Financial Statements ............................................. 25

Shareholder Information ................................................... 33

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Semiannual Report

Templeton China World Fund

YOUR FUND'S GOAL AND MAIN INVESTMENTS: Templeton China World Fund seeks
long-term capital appreciation. Under normal market conditions, the Fund invests
at least 80% of its net assets in securities of "China companies," as defined in
the Fund's prospectus.

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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
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We are pleased to bring you Templeton China World Fund's semiannual report for
the period ended February 28, 2007.

PERFORMANCE OVERVIEW

For the six months under review, Templeton China World Fund - Class A delivered
a +21.89% cumulative total return. The Fund outperformed its benchmark, the
Morgan Stanley Capital International (MSCI) Golden Dragon Index, which posted a
+20.63% cumulative total return for the same period. 1

Also, for comparison, the Standard & Poor's/International Finance Corporation
(S&P/IFC) Investable China Index posted a +33.87% cumulative total return for
the six months ended February 28, 2007. 2 In line with our long-term investment
strategy, we are pleased with our long-term results, which you will find in the
Performance Summary beginning on page 8. For example, for the 10-year period
ended February 28, 2007, the Fund's Class A shares delivered a +145.75%
cumulative total return, compared with the MSCI Golden Dragon Index's +44.46%
cumulative total return for the same period. 3 Please note that index
performance information is provided for reference and that we do not attempt to
track the index, but rather undertake investments on the basis of fundamental
research.

1. Source: Standard & Poor's Micropal. The MSCI Golden Dragon Index is an
aggregate of the MSCI Hong Kong Index, the MSCI China Free Index and the
MSCI Taiwan@65% Index. The MSCI Taiwan Index has an inclusion weight at
65% of its market capitalization in the MSCI Index series.

2. Source: Standard & Poor's Micropal. The S&P/IFC Investable China Index is
a free float-adjusted, market-capitalization weighted index designed to
measure the performance of equity securities in China.

3. Source: Standard & Poor's Micropal. As of 2/28/07, the Fund's Class A
10-year average annual total return not including sales charges was
+9.41%, compared with +3.75% 10-year average annual total return for the
MSCI Golden Dragon Index.

The indexes are unmanaged and include reinvested dividends. One cannot invest
directly in an index, nor is an index representative of the Fund's portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 17.

Semiannual Report | 3

GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 2/28/07

[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]

China 55.0%
Taiwan 19.9%
Hong Kong 14.2%
U.K 3.6%
South Korea 0.8%
Vietnam 0.3%
Bermuda 0.3%
Short-Term Investments & Other Net Assets 5.9%

ECONOMIC AND MARKET OVERVIEW

In 2006, China's economy grew at its fastest annual pace since 1995, which
raised expectations for additional tightening measures. Gross domestic product
(GDP) grew an annualized 10.4% in fourth quarter 2006 compared with fourth
quarter 2005 (year-over-year), bringing the year's overall growth to 10.7%. 4
Strengthening export growth led the trade surplus in 2006 to increase 74% to
US$177.5 billion. 5 During the six months under review, China signed a
free-trade agreement with the Association of Southeast Asian Nations (ASEAN)
bloc and signed a series of trade, energy and cooperation agreements with India
and South Africa. The country's strong economic growth environment supported
foreign investment, and foreign direct investment increased 4.5% in 2006 to
US$63 billion. 4

Hong Kong experienced another strong year in 2006, with GDP growing 6.8%. 6 Key
contributors to growth included private consumption, fixed investment
expenditures and exports. Retail sales rose 11.6% while exports grew 13.7% in
2006. 6 Unemployment improved, ending January 2007 at 4.4%, which was lower than
the 4.9% in July 2006. 6

Taiwan's GDP grew 4.6% in 2006, exceeding the government's 4.0% target as fourth
quarter 2006 GDP grew a higher-than-expected annualized 4.0% year-over-year
largely due to a rebound in domestic demand. 7 Inflation of 0.6% and
unemployment of 3.9% were within government targets in 2006. 7 The country's
trade surplus widened in 2006 to US$21.3 billion, up from US$15.8 billion in
2005. 7

China's was one of the strongest performing equity markets globally during the
reporting period as strong fund flows and continued investor interest in one of
the world's fastest growing economies pushed stock prices higher. Robust
investment, export and consumer demand further supported performance. Hong
Kong's and Taiwan's equity markets performed in line with their emerging market
counterparts with double-digit returns during the period. Investor demand for
China-related stocks, a strong economic environment and stabilizing interest
rates drove stock prices in Hong Kong. In Taiwan, despite political instability,
many investors seemed to find valuations attractive and increased their holdings
there. During the period, many equity markets reached all-time highs; however,
toward period-end, global markets declined

4. Source: National Bureau of Statistics of China.

5. Source: General Administration of Customs of China.

6. Source: Hong Kong Census and Statistics Department.

7. Source: Directorate General of Budget, Accounting and Statistics,
Executive Yuan, Taiwan.

4 | Semiannual Report

significantly, triggered by a nearly 9% fall in China's A shares. 8 For the six
months ended February 28, 2007, the MSCI China Index returned +32.59%, while the
MSCI Hong Kong Index and MSCI Taiwan Index returned +14.46% and +16.43% in U.S.
dollar terms. 9

INVESTMENT STRATEGY

Our investment strategy employs a bottom-up, value-oriented, long-term approach.
We focus on the market price of a company's securities relative to our
evaluation of the company's long-term earnings, asset value and cash flow
potential. As we look for investments, we consider specific companies, rather
than sectors, while doing in-depth research to construct an action list from
which we make our buy decisions. Before we make a purchase, we look at the
company's potential for earnings and growth over a five-year horizon.

MANAGER'S DISCUSSION

Relative to the MSCI Golden Dragon Index, the Fund's overweighted position and
stock selection in the telecommunication services sector and underweighted
position and stock selection in the technology hardware and equipment sector
were major contributors to performance. 10 Telecommunication stocks that helped
performance included China Mobile and China Telecom. China's growing usage of
telecommunication services has improved the sector's outlook. In addition,
adoption of new technologies, such as the implementation of 3G (third generation
wireless technology), may lead to industry restructuring, which could unlock
hidden value, in our analysis. In the technology hardware and equipment sector,
the Fund's lack of exposure to High Tech Computer and Chi Mei Optoelectronics
contributed to relative performance, as the stocks declined in value during the
period. Consistent with our strategy, we chose not to own these stocks due to
what we believed were the companies' unattractive fundamentals.

TOP 10 EQUITY HOLDINGS
2/28/07

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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
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China Mobile Ltd. 9.4%
WIRELESS TELECOMMUNICATION SERVICES,
CHINA
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PetroChina Co. Ltd., H 6.0%
OIL, GAS & CONSUMABLE FUELS, CHINA
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China Petroleum and Chemical Corp., H 5.2%
OIL, GAS & CONSUMABLE FUELS, CHINA
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Dairy Farm International Holdings Ltd. 4.5%
FOOD & STAPLES RETAILING, HONG KONG
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HSBC Holdings PLC 3.6%
COMMERCIAL BANKS, U.K
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Taiwan Semiconductor Manufacturing
Co. Ltd. 3.5%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, TAIWAN
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CNOOC Ltd., ord. & 144A 3.4%
OIL, GAS & CONSUMABLE FUELS, CHINA
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Asustek Computer Inc. 3.3%
COMPUTERS & PERIPHERALS, TAIWAN
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China Shenhua Energy Co. Ltd., H 3.2%
OIL, GAS & CONSUMABLE FUELS, CHINA
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Hopewell Holdings Ltd. 2.9%
TRANSPORTATION INFRASTRUCTURE,
HONG KONG
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8. Source: Shanghai Stock Exchange.

9. Source: Standard & Poor's Micropal. The MSCI China Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in China. The MSCI Hong Kong Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in Hong Kong. The MSCI Taiwan Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in Taiwan.

10. The telecommunication services sector comprises diversified
telecommunication services and wireless telecommunication services, while
the technology hardware and equipment sector comprises communications
equipment, computers and peripherals, electronic equipment and
instruments, and office electronics in the SOI.

Semiannual Report | 5

Stock selection among utilities and capital goods sector companies also had a
positive impact on relative Fund performance. 10 No exposure to Hong Kong &
China Gas and Hutchison Whampoa helped relative results as these stocks
underperformed the MSCI Golden Dragon Index during the period. In addition,
overweighted positions in BYD, Datang International Power Generation, Guangdong
Electric Power Development and China International Marine Containers benefited
relative performance because each stock experienced strong price appreciation
during the period.

Detractors from relative Fund performance included stock selection in the banks
sector, mainly due to the Fund's overweighted position in HSBC Holdings, which
is not part of the MSCI Golden Dragon Index and experienced a stock price
decline during the period. 11 Based on our analysis, we continued to hold the
stock at period-end due to the company's strong market position and our belief
that it could benefit from growing global banking services demand over the long
term.

The Fund's underweighted exposure to the insurance and diversified financial
services sectors also hindered relative results. In particular, the Fund's only
insurance sector holding, China Life Insurance, China's principal life insurance
company, outperformed the MSCI Golden Dragon Index; however, the Fund was
underweighted in the stock relative to the index, which hindered relative
results. The Fund's lack of exposure to Hong Kong Exchanges and Clearing, owner
and operator of Hong Kong's stock and futures exchange, hurt performance as its
stock significantly outperformed the index. We limited these investments
following our strategy because we considered their valuations expensive. At
period-end, we held no stocks in the diversified financial services industry.

During the reporting period, the Fund increased its exposure to some Taiwan and
Hong Kong holdings. Taiwan's advanced technological standards led us to add
selected computer hardware and semiconductor companies to the portfolio. Based
on our analysis, we believe strong export demand for Asian electronics products
should support these industries, and a new generation of products could help
drive another wave of earnings growth. Key Taiwanese investments during the
period included adding to our positions in Asustek Computer, one of the world's
largest manufacturers of personal computer motherboards, and Taiwan
Semiconductor Manufacturing, a leading global integrated circuit producer. We
also initiated a position in AU Optronics, which is among

10. The utilities sector comprises electric utilities, while the capital goods
sector comprises construction and engineering, electrical equipment,
industrial conglomerates and machinery in the SOI.

11. The banks sector comprises commercial banks in the SOI.

6 | Semiannual Report

the world's largest TFT-LCD (thin film transistor-liquid crystal display)
manufacturers.

In Hong Kong, we added to Hopewell Holdings and initiated a position in MTR
Corp. Hopewell invests in infrastructure projects, property developments and
investments, hotel operations and management, restaurant operations and food
catering, and construction and project management. MTR is Hong Kong's mass
transit railway operator. Another significant purchase was adding to our
position in HSBC Holdings, one of the world's largest banking and financial
services organizations.

We initiated exposure to Cambodia during the period with our purchase of
Nagacorp, which manages and operates the only licensed casino in Phnom Penh,
Cambodia's capital city. The Fund also realigned its exposure to China H (Hong
Kong-listed companies) and Red Chip (Hong Kong-listed companies with significant
exposure to China) shares as it added investments in several banking, coal and
automobile manufacturing companies. Conversely, the Fund trimmed its airline,
insurance, wireless telecommunications services, and integrated oil and gas
holdings to realize gains. Additional sales during the reporting period included
Singapore's DBS Group Holdings, one of Southeast Asia's key banking groups, and
Yuanta Core Pacific Securities, the leading securities firm in Taiwan. We also
reduced our position in Taiwan-based Delta Electronics, an electronics
manufacturer.

Thank you for your continued participation in Templeton China World Fund. We
look forward to serving your future investment needs.

/s/ Mark Mobius
[PHOTO OMITTED]
Mark Mobius
Portfolio Manager
Templeton China World Fund

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF FEBRUARY 28, 2007, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.

Semiannual Report | 7

Performance Summary as of 2/28/07

Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table does not reflect any taxes that a
shareholder would pay on Fund dividends, capital gain distributions, if any, or
any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.

PRICE AND DISTRIBUTION INFORMATION

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CLASS A (SYMBOL: TCWAX) CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) +$5.34 $31.10 $25.76
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DISTRIBUTIONS (9/1/06-2/28/07)
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Dividend Income $0.2623
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CLASS B (SYMBOL: TCWBX) CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) +$5.42 $30.95 $25.53
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DISTRIBUTIONS (9/1/06-2/28/07)
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Dividend Income $0.0593
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CLASS C (SYMBOL: TCWCX) CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) +$5.34 $30.82 $25.48
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DISTRIBUTIONS (9/1/06-2/28/07)
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Dividend Income $0.1172
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ADVISOR CLASS (SYMBOL: TACWX) CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) +$5.31 $31.24 $25.93
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DISTRIBUTIONS (9/1/06-2/28/07)
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Dividend Income $0.3686
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8 | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE 1

CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC)
DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1%
CDSC IN FIRST YEAR ONLY; ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY CHARGE A
2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.

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CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -------------------------------------------------------------------------------------------------------------

Cumulative Total Return 2 +21.89% +27.95% +231.07% +145.75%
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Average Annual Total Return 3 +14.88% +20.60% +25.56% +8.76%
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Value of $10,000 Investment 4 $11,488 $12,060 $31,203 $23,161
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Avg. Ann. Total Return (3/31/07) 5 +23.23% +25.26% +9.36%
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Total Annual Operating Expenses 6 2.06%
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CLASS B 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -------------------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +21.50% +27.13% +220.40% +131.66%
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Average Annual Total Return 3 +17.50% +23.13% +26.06% +8.76%
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Value of $10,000 Investment 4 $11,750 $12,313 $31,840 $23,166
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Avg. Ann. Total Return (3/31/07) 5 +25.90% +25.75% +9.36%
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Total Annual Operating Expenses 6 2.70%
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CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 2 +21.49% +27.13% +220.61% +128.78%
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Average Annual Total Return 3 +20.49% +26.13% +26.24% +8.63%
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Value of $10,000 Investment 4 $12,049 $12,613 $32,061 $22,878
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Avg. Ann. Total Return (3/31/07) 5 +28.90% +25.94% +9.23%
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Total Annual Operating Expenses 6 2.71%
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ADVISOR CLASS 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 2 +22.09% +28.43% +237.05% +155.57%
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Average Annual Total Return 3 +22.09% +28.43% +27.51% +9.84%
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Value of $10,000 Investment 4 $12,209 $12,843 $33,705 $25,557
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Avg. Ann. Total Return (3/31/07) 5 +31.21% +27.20% +10.44%
- -------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 6 1.71%
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND
PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | 9

Performance Summary (CONTINUED)

ENDNOTES

THE GOVERNMENT'S PARTICIPATION IN THE ECONOMY IS STILL HIGH AND, THEREFORE,
TEMPLETON CHINA WORLD FUND'S INVESTMENTS IN CHINA WILL BE SUBJECT TO LARGER
REGULATORY RISK LEVELS COMPARED TO MANY OTHER COUNTRIES. IN ADDITION, SPECIAL
RISKS ARE ASSOCIATED WITH INTERNATIONAL INVESTING, INCLUDING CURRENCY
FLUCTUATIONS, ECONOMIC INSTABILITY AND POLITICAL DEVELOPMENTS. INVESTMENTS IN
DEVELOPING MARKETS INVOLVE HEIGHTENED RISKS RELATED TO THE SAME FACTORS. ALSO,
AS A NONDIVERSIFIED FUND 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. THE FUND MAY ALSO EXPERIENCE
GREATER VOLATILITY THAN A FUND THAT IS MORE BROADLY DIVERSIFIED GEOGRAPHICALLY.
THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS B: These shares have higher annual fees and expenses than Class A
shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.

ADVISOR CLASS: Shares are available to certain eligible investors as
described in the prospectus.

1. Effective after the close of business on 8/8/03, Templeton China World
Fund, Inc. (Closed-End Fund), was converted into an open-end fund in a
transaction whereby the Closed-End Fund transferred all of its assets,
subject to its liabilities, to the Fund in exchange for Advisor Class
shares. Total return information is based upon the Closed-End Fund's
performance (as calculated using net asset values, not market values),
which has been restated to reflect all charges, fees and expenses
currently applicable to the Fund and each class. The Closed-End Fund was
offered without a sales charge and Rule 12b-1 fees. On 8/11/03, the Fund
began offering Class A, B and C shares. For periods prior to 8/11/03,
performance quotations are based upon the Closed-End Fund's performance
restated to take into account all charges, fees and expenses applicable to
the Fund and each class, including that class's current, applicable,
maximum sales charges and Rule 12b-1 fees. Beginning on 8/11/03, actual
class performance is used reflecting all charges, fees and expenses
applicable to the Fund and each class.

2. Cumulative total return represents the change in value of an investment
over the periods indicated.

3. Average annual total return represents the average annual change in value
of an investment over the periods indicated. Six-month return has not been
annualized.

4. These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.

5. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

6. Figures are as stated in the Fund's prospectus current as of the date of
this report.

10 | Semiannual Report

Your Fund's Expenses

As a Fund shareholder, you can incur two types of costs:

o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and

o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.

The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.

ACTUAL FUND EXPENSES

The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.

You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:

1. Divide your account value by $1,000.

IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."

IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.

Semiannual Report | 11

Your Fund's Expenses (CONTINUED)

PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.

- ------------------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 9/1/06 VALUE 2/28/07 PERIOD* 9/1/06-2/28/07
- ------------------------------------------------------------------------------------------------------------------------

Actual $1,000 $1,218.90 $11.17
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.93 $10.14
- ------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,215.00 $14.72
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,011.50 $13.37
- ------------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,214.90 $14.72
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,011.50 $13.37
- ------------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,220.90 $ 9.25
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,016.46 $ 8.40
- ------------------------------------------------------------------------------------------------------------------------

* Expenses are equal to the annualized expense ratio for each class (A:
2.03%; B: 2.68%; C: 2.68%; and Advisor: 1.68%), multiplied by the average
account value over the period, multiplied by 181/365 to reflect the
one-half year period.

12 | Semiannual Report

Templeton China World Fund

FINANCIAL HIGHLIGHTS

-------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2006 2005 2004 2003 h
-------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .................. $ 25.76 $ 21.67 $ 17.97 $ 14.89 $ 14.30
--------------------------------------------------------------------
Income from investment operations a:

Net investment income (loss) b ....................... (0.05) 0.29 0.43 0.21 0.12

Net realized and unrealized gains (losses) ........... 5.65 4.12 3.46 3.24 0.40
--------------------------------------------------------------------
Total from investment operations ...................... 5.60 4.41 3.89 3.45 0.52
--------------------------------------------------------------------
Less distributions from net investment income ......... (0.26) (0.32) (0.19) (0.40) --
--------------------------------------------------------------------
Redemption fees ....................................... -- d -- d -- d 0.03 0.07
--------------------------------------------------------------------
Net asset value, end of period ........................ $ 31.10 $ 25.76 $ 21.67 $ 17.97 $ 14.89
====================================================================

Total return c ........................................ 21.89% 20.65% 21.85% 23.80% 4.13%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ..................... $396,327 $262,346 $111,193 $ 43,179 $ 3,166

Ratios to average net assets:

Expenses ............................................. 2.03% e,f 2.06% e 2.08% e 2.14% e,g 3.03% i

Net investment income (loss) ......................... (0.31)% f 1.10% 1.86% 1.09% 38.74% i

Portfolio turnover rate ............................... 7.28% 12.96% 9.66% 30.82% 19.99%

a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the
timing of sales and repurchase of the Fund shares in relation to income
earned and/or fluctuating market value of the investments of the Fund.

b Based on average daily shares outstanding.

c Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.

d Amount rounds to less than $0.01 per share.

e Benefit of expense reduction rounds to less than 0.01%.

f Annualized.

g Ratio of expenses to average net assets, excluding payments by affiliate
were 2.30%.

h For the period August 11, 2003 (effective date) to August 31, 2003.

i Represents annualized ratios for a 21 day period and therefore are not
representative of the Fund's income and expense for the entire fiscal
year.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 13

Templeton China World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2006 2005 2004 2003 h
----------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ....................... $ 25.53 $ 21.47 $ 17.84 $14.88 $14.30
-----------------------------------------------------------------
Income from investment operations a:

Net investment income (loss) b ............................ (0.13) 0.08 0.24 0.16 0.08

Net realized and unrealized gains (losses) ................ 5.61 4.15 3.51 3.16 0.43
-----------------------------------------------------------------
Total from investment operations ........................... 5.48 4.23 3.75 3.32 0.51
-----------------------------------------------------------------
Less distributions from net investment income .............. (0.06) (0.17) (0.12) (0.39) --
-----------------------------------------------------------------
Redemption fees ............................................ -- d -- d -- d 0.03 0.07
-----------------------------------------------------------------
Net asset value, end of period ............................. $ 30.95 $ 25.53 $ 21.47 $17.84 $14.88
=================================================================

Total return c ............................................. 21.50% 19.87% 21.12% 22.95% 4.06%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .......................... $17,685 $15,269 $12,264 $8,630 $ 362

Ratios to average net assets:

Expenses .................................................. 2.68% e,f 2.70% e 2.73% e 2.79% e,g 3.68% i

Net investment income (loss) .............................. (0.96)% f 0.46% 1.21% 0.44% 38.09% i

Portfolio turnover rate .................................... 7.28% 12.96% 9.66% 30.82% 19.99%

b Based on average daily shares outstanding.

c Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.

d Amount rounds to less than $0.01 per share.

e Benefit of expense reduction rounds to less than 0.01%.

f Annualized.

g Ratio of expenses to average net assets, excluding payments by affiliate
were 2.95%.

h For the period August 11, 2003 (effective date) to August 31, 2003.

i Represents annualized ratios for a 21 day period and therefore are not
representative of the Fund's income and expense for the entire fiscal
year.

14 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton China World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2006 2005 2004 2003 h
----------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ................ $ 25.48 $ 21.49 $ 17.85 $ 14.88 $14.30
-----------------------------------------------------------------------
Income from investment operations a:

Net investment income (loss) b ..................... (0.14) 0.13 0.29 0.12 0.11

Net realized and unrealized gains (losses) ......... 5.60 4.10 3.46 3.21 0.40
-----------------------------------------------------------------------
Total from investment operations .................... 5.46 4.23 3.75 3.33 0.51
-----------------------------------------------------------------------
Less distributions from net investment income ....... (0.12) (0.24) (0.11) (0.39) --
-----------------------------------------------------------------------
Redemption fees ..................................... -- d -- d -- d 0.03 0.07
-----------------------------------------------------------------------
Net asset value, end of period ...................... $ 30.82 $ 25.48 $ 21.49 $ 17.85 $14.88
=======================================================================

Total return c ...................................... 21.49% 19.91% 21.10% 23.02% 4.06%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................... $156,391 $107,886 $45,738 $20,603 $ 652

Ratios to average net assets:

Expenses ........................................... 2.68% e,f 2.71% e 2.68% e 2.75% e,g 3.68% i

Net investment income (loss) ....................... (0.96)% f 0.45% 1.26% 0.48% 38.09% i

Portfolio turnover rate ............................. 7.28% 12.96% 9.66% 30.82% 19.99%

b Based on average daily shares outstanding.

c Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.

d Amount rounds to less than $0.01 per share.

e Benefit of expense reduction rounds to less than 0.01%.

f Annualized.

g Ratio of expenses to average net assets, excluding payments by affiliate
were 2.91%.

h For the period August 11, 2003 (effective date) to August 31, 2003.

i Represents annualized ratios for a 21 day period and therefore are not
representative of the Fund's income and expense for the entire fiscal
year.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 15

Templeton China World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

---------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED AUGUST 31,
ADVISOR CLASS (UNAUDITED) 2006 2005 2004 2003 i 2002
---------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ................ $ 25.93 $ 21.78 $ 18.03 $ 14.90 $ 10.64 $ 9.52
----------------------------------------------------------------------------
Income from investment operations a:

Net investment income b ............................ 0.02 0.33 0.42 0.24 0.43 0.21

Net realized and unrealized gains (losses) ......... 5.66 4.18 3.56 3.27 4.08 0.98
----------------------------------------------------------------------------
Total from investment operations .................... 5.68 4.51 3.98 3.51 4.51 1.19
----------------------------------------------------------------------------
Capital share repurchases ........................... -- -- -- -- -- 0.11
----------------------------------------------------------------------------
Less distributions from net investment income ....... (0.37) (0.36) (0.23) (0.41) (0.32) (0.18)
----------------------------------------------------------------------------
Redemption fees ..................................... -- e -- e -- e 0.03 0.07 --
----------------------------------------------------------------------------
Net asset value, end of period ...................... $ 31.24 $ 25.93 $ 21.78 $ 18.03 $ 14.90 $ 10.64
============================================================================
Market value, end of period c ....................... -- -- -- -- -- $ 9.10
============================================================================

Total return (based on market value per share) -- -- -- -- -- 20.27%

Total return (based on net asset value per share) d . 22.09% 21.08% 22.31% 24.21% 43.95% --

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................... $295,817 $245,331 $190,844 $161,599 $181,913 $173,204

Ratios to average net assets:

Expenses ........................................... 1.68% f,g 1.71% f 1.73% f 1.79% f,h 2.10% h 1.66%

Net investment income .............................. 0.04% g 1.45% 2.21% 1.44% 3.66% 2.01%

Portfolio turnover rate ............................. 7.28% 12.96% 9.66% 30.82% 19.99% 44.62%

b Based on average daily shares outstanding.

c Based on the last sale of the New York Stock Exchange.

d Total return is not annualized for periods less than one year.

e Amount rounds to less than $0.01 per share.

f Benefit of expense reduction rounds to less than 0.01%.

g Annualized.

h Ratio of expenses to average net assets, excluding payments by affiliate
for the years ended August 31, 2003 and 2004, were 2.63% and 1.95%,
respectively.

i On August 8, 2003, the Fund converted from a closed-end fund to an
open-end fund whereby the shares of the closed-end fund were exchanged for
Advisor Class shares. Based on historical information, the information
included is for operation of the Fund as a closed-end fund, and does not
reflect expenses applicable to an open-end fund.

16 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton China World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED)

- ------------------------------------------------------------------------------------------------------------------------------------
COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------

COMMON STOCKS 94.1%
AIR FREIGHT & LOGISTICS 0.5%
Shenzhen International Holdings Ltd. ................................. China 55,132,000 $ 3,810,431
Sinotrans Ltd., H .................................................... China 1,238,000 478,525
-------------
4,288,956
-------------
AUTO COMPONENTS 1.8%
Cheng Shin Rubber Industry Co. Ltd. .................................. Taiwan 7,357,897 7,044,978
Norstar Founders Group Ltd. .......................................... China 15,182,000 6,318,385
Weifu High-Technology Co. Ltd., B .................................... China 1,212,987 1,412,779
Xinyi Glass Holding Co. Ltd. ......................................... China 1,408,000 670,382
-------------
15,446,524
-------------
AUTOMOBILES 2.3%
a Brilliance China Automotive Holdings Ltd. ............................ China 8,878,000 2,181,690
China Motor Corp. .................................................... Taiwan 4,446,715 4,120,887
Chongqing Changan Automobile Co. Ltd., B ............................. China 5,297,380 5,647,845
a Dongfeng Motor Corp., H .............................................. China 7,980,000 4,688,049
Geely Automobile Holdings Ltd. ....................................... China 26,675,000 3,363,549
-------------
20,002,020
-------------
COMMERCIAL BANKS 12.4%
a,b Bank of China Ltd., H, 144A .......................................... China 41,306,000 19,772,490
China Construction Bank Corp., H ..................................... China 1,003,000 564,846
b China Construction Bank Corp., H, 144A ............................... China 30,832,000 17,363,249
a,b China Merchants Bank Co. Ltd., H, 144A ............................... China 1,535,500 3,120,879
Chinatrust Financial Holding Co. Ltd. ................................ Taiwan 14,035,842 10,708,642
HSBC Holdings PLC .................................................... United Kingdom 1,782,790 31,139,686
a,b Industrial and Commercial Bank of China, H, 144A ..................... China 22,778,000 12,565,202
Mega Financial Holding Co. Ltd. ...................................... Taiwan 18,334,000 12,126,134
-------------
107,361,128
-------------
COMMUNICATIONS EQUIPMENT 0.6%
D-Link Corp. ......................................................... Taiwan 3,914,373 5,458,342
-------------
COMPUTERS & PERIPHERALS 5.1%
Acer Inc. ............................................................ Taiwan 4,008,559 7,218,973
Asustek Computer Inc. ................................................ Taiwan 11,501,294 29,002,120
Lite-On It Corp. ..................................................... Taiwan 4,721,160 3,930,614
Lite-On Technology Corp. ............................................. Taiwan 3,125,877 4,315,556
-------------
44,467,263
-------------
CONSTRUCTION & ENGINEERING 0.1%
a,b China Communications Construction Co. Ltd., H, 144A .................. China 687,000 849,397
-------------
DISTRIBUTORS 2.0%
China Resources Enterprise Ltd. ...................................... China 5,548,000 16,367,562
Test-Rite International Co. Ltd. ..................................... Taiwan 2,162,468 1,226,390
-------------
17,593,952
-------------

Semiannual Report | 17

Templeton China World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
DIVERSIFIED TELECOMMUNICATION SERVICES 2.9%
China Telecom Corp. Ltd., H ................................................ China 53,807,833 $ 24,930,483
-------------
ELECTRIC UTILITIES 2.6%
Cheung Kong Infrastructure Holdings Ltd. ................................... Hong Kong 6,307,548 22,126,924
-------------
ELECTRICAL EQUIPMENT 1.7%
BYD Co. Ltd., H ............................................................ China 1,579,500 6,428,703
Phoenixtec Power Co. Ltd. .................................................. Taiwan 7,745,055 7,875,267
Yorkey Optical International Cayman Ltd. ................................... Hong Kong 2,339,000 891,048
-------------
15,195,018
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS 3.0%
AU Optronics Corp. ......................................................... Taiwan 6,303,000 8,471,135
Delta Electronics Inc. ..................................................... Taiwan 1,431,521 4,567,779
Synnex Technology International Corp. ...................................... Taiwan 9,007,680 9,975,481
a Yageo Corp. ................................................................ Taiwan 7,044,000 2,870,758
-------------
25,885,153
-------------
FOOD & STAPLES RETAILING 5.3%
Dairy Farm International Holdings Ltd. ..................................... Hong Kong 10,219,776 39,252,652
President Chain Store Corp. ................................................ Taiwan 2,844,088 6,719,706
-------------
45,972,358
-------------
FOOD PRODUCTS 0.7%
People's Food Holdings Ltd. ................................................ China 2,791,000 2,464,097
Uni-President Enterprises Corp. ............................................ Taiwan 2,410,950 2,310,454
a Xiwang Sugar Holdings Co. Ltd. ............................................. China 2,550,000 1,279,390
-------------
6,053,941
-------------
HOTELS, RESTAURANTS & LEISURE 1.1%
The Hongkong and Shanghai Hotels Ltd. ...................................... Hong Kong 4,269,954 7,049,964
a Nagacorp Ltd. .............................................................. Vietnam 10,077,000 2,618,207
a,b Shanghai Jin Jiang International Hotels (Group) Co. Ltd., H, 144A .......... China 314,000 197,327
-------------
9,865,498
-------------
HOUSEHOLD DURABLES 0.1%
Samson Holding Ltd. ........................................................ China 1,418,000 861,528
-------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 3.6%
Datang International Power Generation Co. Ltd., H .......................... China 11,586,320 11,715,187
Guangdong Electric Power Development Co. Ltd., B ........................... China 14,842,143 10,581,042
Huadian Power International Corp. Ltd., H .................................. China 16,098,000 5,645,457
Huaneng Power International Inc., H ........................................ China 3,692,776 3,190,313
-------------
31,131,999
-------------

18 | Semiannual Report

Templeton China World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
INDUSTRIAL CONGLOMERATES 2.4%
Citic Pacific Ltd. ......................................................... China 1,589,092 $ 5,338,939
LG Corp. ................................................................... South Korea 121,110 4,006,398
Shanghai Industrial Holdings Ltd. .......................................... China 4,944,253 11,580,529
-------------
20,925,866
-------------
INSURANCE 0.5%
China Life Insurance Co. Ltd., H ........................................... China 1,476,000 3,957,738
-------------
INTERNET SOFTWARE & SERVICES 0.0% c
a Sohu.com Inc. .............................................................. China 1,500 34,590
-------------
IT SERVICES 0.1%
Travelsky Technology Ltd., H ............................................... China 435,000 796,163
-------------
MACHINERY 1.4%
China International Marine Containers (Group) Co. Ltd., B .................. China 5,001,733 10,761,302
Yungtay Engineering Co. Ltd. ............................................... Taiwan 2,524,000 1,450,613
-------------
12,211,915
-------------
MEDIA 0.2%
Next Media Ltd. ............................................................ Hong Kong 80,000 30,513
b Next Media Ltd., 144A ...................................................... Hong Kong 3,510,000 1,339,145
-------------
1,369,658
-------------
METALS & MINING 0.5%
Aluminum Corp. of China Ltd., H ............................................ China 3,452,000 3,304,829
a,b Zhaojin Mining Industry Co. Ltd., H, 144A .................................. China 333,500 710,274
-------------
4,015,103
-------------
OFFICE ELECTRONICS 0.1%
Kinpo Electronics Inc. ..................................................... Taiwan 3,103,500 1,151,548
-------------
OIL, GAS & CONSUMABLE FUELS 19.1%
a China Coal Energy Co., H ................................................... China 770,000 718,447
a,b China Coal Energy Co., H, 144A ............................................. China 1,161,000 1,083,269
China Petroleum and Chemical Corp., H ...................................... China 56,549,395 45,236,042
China Shenhua Energy Co. Ltd., H ........................................... China 11,031,000 28,011,294
CNOOC Ltd. ................................................................. China 36,015,000 29,040,266
b CNOOC Ltd., 144A ........................................................... China 978,000 788,599
PetroChina Co. Ltd., H ..................................................... China 44,221,903 51,562,316
Yanzhou Coal Mining Co. Ltd., H ............................................ China 10,058,000 9,242,994
-------------
165,683,227
-------------
PAPER & FOREST PRODUCTS 1.3%
Nine Dragons Paper Holdings Ltd. ........................................... China 2,962,000 6,141,532
Shandong Chenming Paper Holdings Ltd., B ................................... China 6,705,000 5,226,280
-------------
11,367,812
-------------

Semiannual Report | 19

Templeton China World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

- ----------------------------------------------------------------------------------------------------------------------------------
COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------------------

COMMON STOCKS (CONTINUED)
PHARMACEUTICALS 0.2%
Tong Ren Tang Technologies Co. Ltd., H ............................... China 1,056,000 $ 1,932,754
------------
REAL ESTATE 2.5%
Cheung Kong (Holdings) Ltd. .......................................... Hong Kong 1,360,690 16,687,809
Henderson Investment Ltd. ............................................ Hong Kong 2,641,756 4,822,808
------------
21,510,617
------------
ROAD & RAIL 0.4%
MTR Corp. Ltd. ....................................................... Hong Kong 1,245,000 3,287,382
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 4.9%
Realtek Semiconductor Corp. .......................................... Taiwan 3,182,550 5,033,280
Samsung Electronics Co. Ltd. ......................................... South Korea 5,510 3,327,726
Sunplus Technology Co. Ltd. .......................................... Taiwan 3,528,717 3,968,509
Taiwan Semiconductor Manufacturing Co. Ltd. .......................... Taiwan 15,538,762 30,516,533
------------
42,846,048
------------
SPECIALTY RETAIL 0.2%
I.T. Ltd. ............................................................ Hong Kong 7,486,000 1,467,412
------------
TEXTILES, APPAREL & LUXURY GOODS 0.4%
Tack Fat Group International Ltd. .................................... Hong Kong 6,352,000 933,972
Victory City International Holdings Ltd. ............................. Bermuda 5,059,441 2,201,700
Weiqiao Textile Co. Ltd., H .......................................... China 191,000 268,907
------------
3,404,579
------------
TRANSPORTATION INFRASTRUCTURE 4.4%
Cosco Pacific Ltd. ................................................... China 3,921,449 10,489,855
a Hainan Meilan International Airport Co. Ltd., H ...................... China 3,717,000 2,356,440
Hopewell Holdings Ltd. ............................................... Hong Kong 6,526,000 25,140,967
------------
37,987,262
------------
WIRELESS TELECOMMUNICATION SERVICES 9.7%
China Mobile Ltd. .................................................... China 8,778,770 81,573,089
Taiwan Mobile Co. Ltd. ............................................... Taiwan 2,496,930 2,341,211
------------
83,914,300
------------
TOTAL COMMON STOCKS (COST $537,764,537) .............................. 815,354,458
------------

20 | Semiannual Report

Templeton China World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

- ---------------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------

SHORT TERM INVESTMENTS 6.9%
GOVERNMENT AND AGENCY SECURITIES 6.9%
d Federal Home Loan Bank, 3/01/07 ........................... United States $ 34,698,000 $ 34,698,000
d Federal Home Loan Mortgage Corporation, 4/30/07 ........... United States 25,000,000 24,786,875
------------
TOTAL SHORT TERM INVESTMENTS (COST $59,475,522) ........... 59,484,875
------------
TOTAL INVESTMENTS (COST $597,240,059) 101.0% .............. 874,839,333
OTHER ASSETS, LESS LIABILITIES (1.0)% ..................... (8,618,739)
------------
NET ASSETS 100.0% ......................................... $866,220,594
============

a Non-income producing for the twelve months ended February 28, 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 February 28, 2007
the aggregate value of these securities was $57,789,831, representing
6.67% of net assets.

c Rounds to less than 0.1% of net assets.

d The security is traded on a discount basis with no stated coupon rate.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 21

Templeton China World Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2007 (unaudited)

Assets:
Investments in securities:
Cost ................................................................................................ $ 597,240,059
=============
Value ............................................................................................... $ 874,839,333
Cash ................................................................................................. 15,225
Foreign currency, at value (cost $217,336) ........................................................... 215,972
Receivables:
Investment securities sold .......................................................................... 1,364
Capital shares sold ................................................................................. 3,621,666
Dividends ........................................................................................... 179,554
-------------
Total assets .................................................................................. 878,873,114
-------------
Liabilities:
Payables:
Investment securities purchased ..................................................................... 802,117
Capital shares redeemed ............................................................................. 10,196,879
Affiliates .......................................................................................... 1,465,863
Accrued expenses and other liabilities ............................................................... 187,661
-------------
Total liabilities ............................................................................. 12,652,520
-------------
Net assets, at value ....................................................................... $ 866,220,594
=============
Net assets consist of:
Paid-in capital ...................................................................................... $ 580,488,146
Distribution in excess of net investment income ...................................................... (2,255,575)
Net unrealized appreciation (depreciation) ........................................................... 277,596,347
Accumulated net realized gain (loss) ................................................................. 10,391,676
-------------
Net assets, at value ....................................................................... $ 866,220,594
=============
CLASS A:
Net assets, at value ................................................................................. $ 396,327,416
=============
Shares outstanding ................................................................................... 12,743,010
=============
Net asset value per sharea ........................................................................... $ 31.10
=============
Maximum offering price per share (net asset value per share / 94.25%) ................................ $ 33.00
=============
CLASS B:
Net assets, at value ................................................................................. $ 17,685,119
=============
Shares outstanding ................................................................................... 571,448
=============
Net asset value and maximum offering price per share a ............................................... $ 30.95
=============
CLASS C:
Net assets, at value ................................................................................. $ 156,391,426
=============
Shares outstanding ................................................................................... 5,073,845
=============
Net asset value and maximum offering price per share a ............................................... $ 30.82
=============
ADVISOR CLASS:
Net assets, at value ................................................................................. $ 295,816,633
=============
Shares outstanding ................................................................................... 9,469,288
=============
Net asset value and maximum offering price per share a ............................................... $ 31.24
=============

a Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.

22 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton China World Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2007 (unaudited)

Investment income:
Dividends (net of foreign taxes of $218,682) ..................................... $ 5,376,521
Interest (net of foreign taxes of $176) .......................................... 1,179,721
-------------
Total investment income ................................................... 6,556,242
-------------
Expenses:
Management fees (Note 3a) ........................................................ 4,795,355
Administrative fees (Note 3b) .................................................... 763,276
Distribution fees (Note 3c)
Class A ......................................................................... 583,519
Class B ......................................................................... 86,406
Class C ......................................................................... 678,283
Transfer agent fees (Note 3e) .................................................... 467,165
Custodian fees (Note 4) .......................................................... 191,034
Reports to shareholders .......................................................... 52,622
Registration and filing fees ..................................................... 80,732
Professional fees ................................................................ 24,238
Trustees' fees and expenses ...................................................... 20,593
Other ............................................................................ 10,295
-------------
Total expenses ............................................................ 7,753,518
Expense reductions (Note 4) ............................................... (1,169)
-------------
Net expenses ........................................................... 7,752,349
-------------
Net investment income (loss) ........................................ (1,196,107)
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ..................................................................... 21,184,373
Foreign currency transactions ................................................... (29,124)
-------------
Net realized gain (loss) .................................................. 21,155,249
-------------
Net change in unrealized appreciation (depreciation) on:
Investments ..................................................................... 122,365,124
Translation of assets and liabilities denominated in foreign currencies ......... 2,561
-------------
Net change in unrealized appreciation (depreciation) ...................... 122,367,685
-------------
Net realized and unrealized gain (loss) ........................................... 143,522,934
-------------
Net increase (decrease) in net assets resulting from operations ................... $ 142,326,827
=============

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 23

Templeton China World Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED
(UNAUDITED) AUGUST 31, 2006
------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income .................................................................... $ (1,196,107) $ 5,720,891
Net realized gain (loss) from investments and foreign currency transactions .............. 21,155,249 23,578,156
Net change in unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies ............................... 122,367,685 57,215,114
---------------------------------
Net increase (decrease) in net assets resulting from operations .................... 142,326,827 86,514,161
Distributions to shareholders from:
Net investment income:
Class A ................................................................................ (2,804,101) (1,807,042)
Class B ................................................................................ (35,883) (97,993)
Class C ................................................................................ (513,956) (561,314)
Advisor Class .......................................................................... (3,495,591) (3,160,482)
---------------------------------
Total distributions to shareholders ....................................................... (6,849,531) (5,626,831)
=================================
Capital share transactions: (Note 2)
Class A ................................................................................ 76,345,541 121,293,954
Class B ................................................................................ (875,502) 593,315
Class C ................................................................................ 24,623,206 50,823,588
Advisor Class .......................................................................... (183,815) 17,173,947
---------------------------------
Total capital share transactions .......................................................... 99,909,430 189,884,804
---------------------------------
Redemption fees ........................................................................... 1,858 20,792
---------------------------------
Net increase (decrease) in net assets .............................................. 235,388,584 270,792,926
Net assets:
Beginning of period ....................................................................... 630,832,010 360,039,084
---------------------------------
End of period ............................................................................. $ 866,220,594 $ 630,832,010
=================================
Distributions in excess of net investment income/undistributed net investment income
included in net assets:
End of period ............................................................................. $ (2,255,575) $ 5,790,063
=================================

24 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton China World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton China World Fund (the Fund) is registered under the Investment Company
Act of 1940, as amended, (the 1940 Act) as a non-diversified, open-end
investment company. The Fund offers four classes of shares: Class A, Class B,
Class C, and Advisor Class. Each class of shares differs by its initial sales
load, contingent deferred sales charges, distribution fees, voting rights on
matters affecting a single class and its exchange privilege.

The following summarizes the Fund's significant accounting policies.

A. 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

Semiannual Report | 25

Templeton China World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. SECURITY VALUATION (CONTINUED)

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.

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, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Fund's Board of Trustees.

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 on the
Statement of Operations.

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 denominated assets and liabilities other than investments in securities
held at the end of the reporting period.

C. FOREIGN CURRENCY CONTRACTS

When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.

26 | Semiannual Report

Templeton China World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. INCOME TAXES

No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.

Foreign securities held by the Fund may be subject to foreign taxation on
dividend and interest income received. Foreign taxes, if any, are recorded based
on the tax regulations and rates that exist in the foreign markets in which the
Fund invests.

E. 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.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recognized as soon as the Fund is notified
of the ex-dividend date. Distributions to shareholders are recorded on the
ex-dividend date and are determined according to income tax regulations (tax
basis). Distributable earnings determined on a tax basis may differ from
earnings recorded in accordance with accounting principles generally accepted in
the United States. These differences may be permanent or temporary. Permanent
differences are reclassified among capital accounts to reflect their tax
character. These reclassifications have no impact on net assets or the results
of operations. Temporary differences are not reclassified, as they may reverse
in subsequent periods.

Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class. Differences in per share
distributions, by class, are generally due to differences in class specific
expenses.

F. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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 expenses during the reporting period. Actual results could differ from those
estimates.

G. REDEMPTION FEES

A short term trading redemption fee will be imposed, with some exceptions, on
any Fund shares that are redeemed or exchanged within seven calendar days
following their purchase date. The redemption fee is 2% of the amount redeemed.
Such fees are retained by the Fund and accounted for as an addition to paid-in
capital.

Semiannual Report | 27

Templeton China World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

H. GUARANTEES AND INDEMNIFICATIONS

Under the Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. Currently, the Fund expects the
risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At February 28, 2007, there were an unlimited number of shares authorized
(without par value). Transactions in the Fund's shares were as follows:

------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------

CLASS A SHARES:
Shares sold ........................... 4,024,574 $ 121,141,343 6,990,835 $ 168,972,851
Shares issued in reinvestment
of distributions ..................... 87,166 2,378,714 69,862 1,477,583
Shares redeemed ....................... (1,551,562) (47,174,516) (2,008,744) (49,156,480)
------------------------------------------------------------------------
Net increase (decrease) ............... 2,560,178 $ 76,345,541 5,051,953 $ 121,293,954
========================================================================
CLASS B SHARES:
Shares sold ........................... 51,520 $ 1,478,499 149,296 $ 3,566,089
Shares issued in reinvestment
of distributions ..................... 1,165 31,211 4,065 85,646
Shares redeemed ....................... (79,310) (2,385,212) (126,627) (3,058,420)
------------------------------------------------------------------------
Net increase (decrease) ............... (26,625) $ (875,502) 26,734 $ 593,315
========================================================================
CLASS C SHARES:
Shares sold ........................... 1,359,436 $ 40,527,390 2,715,102 $ 65,435,922
Shares issued in reinvestment
of distributions ..................... 14,909 397,619 21,093 443,585
Shares redeemed ....................... (534,172) (16,301,803) (630,397) (15,055,919)
------------------------------------------------------------------------
Net increase (decrease) ............... 840,173 $ 24,623,206 2,105,798 $ 50,823,588
========================================================================

ADVISOR CLASS SHARES:
Shares sold ........................... 506,829 $ 15,359,159 1,597,171 $ 38,646,324
Shares issued in reinvestment
of distributions ..................... 56,101 1,551,535 56,892 1,207,251
Shares redeemed ....................... (555,528) (17,094,509) (955,594) (22,679,628)
------------------------------------------------------------------------
Net increase (decrease) ............... 7,402 $ (183,815) 698,469 $ 17,173,947
========================================================================

28 | Semiannual Report

Templeton China World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Fund are also officers and/or directors of the following
subsidiaries:

- ---------------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- ---------------------------------------------------------------------------------------------

Templeton Asset Management Ltd. (TAML) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent

A. MANAGEMENT FEES

The Fund pays an investment management fee to TAML based on the average weekly
net assets of the Fund as follows:

- -------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- -------------------------------------------------------------------------
1.250% Up to and including $1 billion
1.200% Over $1 billion, up to and including $5 billion
1.150% Over $5 billion, up to and including $10 billion
1.100% Over $10 billion, up to and including $15 billion
1.050% Over $15 billion, up to and including $20 billion
1.000% In excess of $20 billion

B. ADMINISTRATIVE FEES

The Fund pays an administrative fee to FT Services of 0.20% per year of the
average daily net assets of the Fund.

C. DISTRIBUTION FEES

The Fund's Board of Trustees has adopted distribution plans for each share
class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under
the 1940 Act. Under the Fund's compensation distribution plans, the Fund pays
Distributors for costs incurred in connection with the servicing, sale and
distribution of the Fund's shares up to a certain percentage per year of its
average daily net assets of each class as follows:

Class A .................................................... 0.35%
Class B .................................................... 1.00%
Class C .................................................... 1.00%

D. SALES CHARGES/UNDERWRITING AGREEMENTS

Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the period:

Sales charges retained net of commissions paid to
unaffiliated broker/dealers ............................ $383,346
Contingent deferred sales charges retained .............. $ 30,385

Semiannual Report | 29

Templeton China World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $467,165, of which $287,058 was retained by
Investor Services.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended February 28, 2007, the
custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At August 31, 2006, the Fund had tax basis capital losses of
$9,687,834 expiring in 2009.

At February 28, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments .................................... $598,310,593
============

Unrealized appreciation ................................ $283,099,062
Unrealized depreciation ................................ (6,570,322)
------------
Net unrealized appreciation (depreciation) ............. $276,528,740
============

Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of foreign currency transactions and
passive foreign investment company shares.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions and passive foreign investment company shares.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended February 28, 2007, aggregated $125,120,828 and $51,849,157,
respectively.

30 | Semiannual Report

Templeton China World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. 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. At February 28, 2007 the Fund had 55.0%, 14.2%, and
19.9% of its net assets invested in China, Hong Kong, and Taiwan, respectively.

8. REGULATORY AND LITIGATION MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support payments to
securities dealers who sell fund shares ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators and governmental
entities. Specifically, the Company entered into settlements with the SEC, among
others, concerning market timing and marketing support.

On June 23, 2006, the SEC approved the proposed plan of distribution for the
marketing support settlement, and disbursement of the settlement monies to the
designated funds, in accordance with the terms and conditions of that settlement
and plan, was completed in September 2006. The Fund did not participate in that
settlement.

The plan of distribution for the market timing settlement is currently under
review by the SEC staff. After publication of notice of the plan and a 30-day
comment period, the proposed plan of distribution will be submitted to the SEC
for approval. Following the SEC's approval of the plan of distribution, with
modifications as appropriate, distribution of the settlement monies will begin
in accordance with the terms and conditions of the settlement and plan.

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above, as well as to allegedly excessive commissions and
advisory and distribution fees.

Semiannual Report | 31

Templeton China World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. REGULATORY AND LITIGATION MATTERS (CONTINUED)

The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Fund it is committed
to making the Fund or its shareholders whole, as appropriate.

9. NEW ACCOUNTING PRONOUNCEMENTS

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the
related interest and penalties. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission extended the implementation date to no later than the last net asset
value calculation in the first semi-annual reporting period in 2007. The Fund is
currently evaluating the impact, if any, of applying the various provisions of
FIN 48.

In September 2006, 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.

32 | Semiannual Report

Templeton China World Fund

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/527-7678 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.

QUARTERLY STATEMENT OF INVESTMENTS

The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.

Semiannual Report | 33

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Literature Request

LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL

Mutual European Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund 1

GLOBAL

Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH

Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1

VALUE

Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund

BLEND

Franklin Balanced Fund
Franklin Blue Chip Fund 1
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund

SECTOR

Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Global Real Estate Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund

ASSET ALLOCATION

Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund

TARGET FUNDS

Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

RETIREMENT TARGET FUNDS

Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund

INCOME

Franklin Adjustable U.S. Government Securities Fund 4
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund 5
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund 4
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 4
Templeton Global Bond Fund
Templeton Income Fund

TAX-FREE INCOME 6

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 7

LIMITED-TERM FUNDS

California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS

California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC

Alabama Michigan 7
Arizona Minnesota 7
California 8 Missouri
Colorado New Jersey
Connecticut New York 8
Florida 8 North Carolina
Georgia Ohio 7
Kentucky Oregon
Louisiana Pennsylvania
Maryland Tennessee
Massachusetts 7 Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust 9

1. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.

2. The fund is only open to existing shareholders and select retirement
plans.

3. The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.

4. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

5. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy
remained the same.

6. For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.

7. Portfolio of insured municipal securities.

8. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).

9. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

01/07 Not part of the semiannual report

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FRANKLIN TEMPLETON One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906

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SEMIANNUAL REPORT AND SHAREHOLDER LETTER

TEMPLETON CHINA WORLD FUND

INVESTMENT MANAGER

Templeton Asset Management Ltd.

PRINCIPAL UNDERWRITER

Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES

1-800/632-2301

Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. Like any investment in securities, the value of
the 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. The prospectus
contains this and other information; please read it carefully before investing.

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
identified by the presence of a regular beeping tone.

188 S2007 04/07

ITEM 2. CODE OF ETHICS.

(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.

(d) N/A

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a
copy of its code of ethics that applies to its principal executive
officers and principal financial and accounting officer.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a) (1) The Registrant has an audit committee financial expert serving on
its audit committee.

(2) The audit committee financial experts are David W. Niemiec and Frank
A. Olson, they are "independent" as defined under the relevant
Securities and Exchange Commission Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. N/A

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees that would require disclosure
herein.

ITEM 11. 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 Shareholder Report on Form
N-CSR, 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 Shareholder Report on Form N-CSR.

ITEM 12. EXHIBITS.

(a)(1) Code of Ethics

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 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: April 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: April 26, 2007

By /s/GALEN G. VETTER
---------------------------
Galen G. Vetter
Chief Financial Officer
Date: April 26, 2007