<PAGE>
Templeton World Fund
[PHOTO OF MARK HOLOWESKO
APPEARS HERE]
Mark Holowesko
Director of Global
Equity Research
- ------------------
Mark G. Holowesko is the president and portfolio manager of Templeton World
Fund, as well as several other Templeton funds. He joined the Templeton
organization in 1985 in Nassau, Bahamas, and serves as director of equity
research worldwide, as well as an officer and director of Templeton Worldwide,
Inc. Mr. Holowesko received a B.A. in Economics from Holy Cross College and an
M.B.A. from Babson College. He is a Chartered Financial Analyst, Chartered
Investment Counselor, and a founding member and director of the International
Society of Financial Analysts.
- --------------------------------------------------------------------------------
Your Fund's Objective:
The Templeton World Fund seeks long-term capital growth through a flexible
policy of investing in stocks and debt obligations of companies and governments
of any nation.
- --------------------------------------------------------------------------------
October 16, 1995
Dear Shareholder:
We are pleased to bring you the 18th annual report of the Templeton World Fund,
which covers the period ended August 31, 1995.
The past fiscal year was marked by extreme volatility in emerging markets and
unexpected advances in developed markets. Stock markets of most developed
countries posted double-digit returns despite the high degree of uncertainty
prevalent in many overseas markets at the beginning of 1995. Much of this
uncertainty was precipitated by the devaluation of the Mexican peso in December
1994, which led to a decline of more than 70% (in U.S. dollar terms) in the
Mexican equity market. The ensuing negative impact on financial markets, which
was
1
<PAGE>
coyly coined "the Tequila Effect," was not limited to Latin America. Investors
in Asian securities soon discovered that their stocks were declining in value
due to professional money managers' generally poor opinions of most emerging
markets. However, most major developed markets, particularly those in the United
States, the United Kingdom, and Germany, showed surprising strength. One
exception was Japan, which suffered from a deteriorating real estate market and
the resulting impact on its banks.
Cyclical stocks performed very well throughout the reporting period because of
economic growth worldwide. This was especially true of the paper, chemicals and
metals sectors. Other strong performers included financial services and
technology stocks. Although we lacked exposure to the technology sector, our
holdings in these other strong areas helped the performance of the Fund.
Responding to various economic and financial conditions worldwide, we reduced
our holdings in certain developed markets, particularly Germany and the U.S.,
and bought securities in emerging markets, which we felt were better bargains.
The extraordinary potential of emerging markets is often overshadowed by the
sheer size of financial markets in developed countries. Although developed
countries constitute only a small portion of the world's
- --------------------------------------------------------------------------------
Templeton World Fund
Geographic Distribution on 8/31/95
Based on Total Net Assets
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
United States Stocks 30.7%
European Stocks 28.8%
Short-Term Obligations &
Other Net Assets 11.9%
Asian Stocks 8.6%
Latin American Stocks 6.7%
Australian & New Zealand Stocks 6.1%
Fixed-Income Securities 4.8%
Other Stocks 2.4%
</TABLE>
population, they consume a majority of goods and services worldwide. Consider
also, that Asia's total Gross National Product (GNP) is amazingly close to the
GNP of the U.S. alone, yet Asia has 3.1 billion people, compared with only 260
million in the U.S. As the world's developing markets evolve, these countries'
per-capita wealth should increase, which will affect consumption patterns and
raise standards of living. We already see this happening in Asia, where GNP has
been increasing significantly faster than in the U.S.
Looking forward, the world's financial markets should, hopefully, continue to be
volatile. I say "hopefully,"
2
<PAGE>
- --------------------------------------------------------------------------------
Templeton World Fund
Top 10 Holdings on 8/31/95
Based on Total Net Assets
<TABLE>
<CAPTION>
% of Total
Name, Industry, Country Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Merrill Lynch & Co. Inc.; Financial Services,
United States 2.6%
- --------------------------------------------------------------------------------
Telefonos de Mexico SA, L;
Telecommunications, Mexico 1.7%
- --------------------------------------------------------------------------------
HSBC Holdings PLC; Banking,
Hong Kong 1.5%
- --------------------------------------------------------------------------------
U.S. Treasury Note, 6.375%, 1/15/00,
Government Bond, United States 1.3%
- --------------------------------------------------------------------------------
U.S. Treasury Note, 6.375%, 1/15/99,
Government Bond, United States 1.3%
- --------------------------------------------------------------------------------
Georgia-Pacific Corp.; Forest
Products & Paper, United States 1.3%
- --------------------------------------------------------------------------------
U.S. Treasury Note, 6.0%, 10/15/99,
Government Bond, United States 1.3%
- --------------------------------------------------------------------------------
Citicorp; Banking, United States 1.3%
- --------------------------------------------------------------------------------
Ford Motor Co.; Automobiles, United States 1.3%
- --------------------------------------------------------------------------------
Asea AB; Electrical & Electronics, Sweden 1.3%
- --------------------------------------------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 13 of this report.
because the more volatile the market, the more share prices tend to fluctuate.
The more share prices fluctuate, the less likely the market will reflect the
"true" value of a company, and the easier it becomes for us to find potential
bargain-priced stocks for your Fund. Many investors are frightened by
volatility, but we welcome the opportunity it provides us. There are, of course,
special risks involved with global investing related to market, currency,
economic, political, and other factors. Developing markets involve similar but
heightened risks, in addition to risks associated with the relatively small size
and lesser liquidity of these markets. These risks are discussed in the Fund's
prospectus.
In closing, we would like to mention that although Sir John Templeton has not
been involved in investment management of the Templeton Funds since October
1992, we were saddened by his recent decision to step down as Chairman and
Director of the U.S.-registered Templeton funds. The Fund's Board of Directors
have elected John Wm. Galbraith, former vice chairman of Templeton, Galbraith &
Hansberger, Ltd. to succeed him. The investment manager will continue to use the
investment philosophies and principles established by Sir John.
We thank you for your participation in the Templeton World Fund and welcome any
comments or suggestions you may have.
Sincerely,
/s/ Mark Holowesko
Mark Holowesko, CFA
President
Templeton World Fund
3
<PAGE>
Q
&
A
The Following is an Interview with
Mark Holowesko, Portfolio
Manager of Templeton World Fund:
Did the Fund's portfolio change dramatically over the course of the year? If so,
what are some of the stocks you bought and sold?
Our portfolios generally do not change dramatically from one year to the next,
which reflects our "value" style of investing. We concentrate on a company's
prospects over a full business cycle, traditionally a three to five year period,
and we tend to hold its shares for about that long. This gives us a relatively
low portfolio turnover rate, typically about 20% per year.
This year, we concentrated on capturing some of the value we discovered in
emerging markets, particularly Latin America, after a series of major price
declines. For example, we purchased shares of Telefonos de Mexico SA (Telmex),
Telecomunicacoes Brasileiras SA (Telebras), and YPF Sociedad Anonima. We also
added to several economically sensitive European stocks, such as Volvo AB and
Asea AB. In the U.S., we
<PAGE>
took advantage of a strong market by reducing positions that met our price-
target levels, while adding to the automotive, utility, and real estate sectors.
Specific stocks purchased include General Motors Corp. and Centerior Energy. We
also made significant additions to our health care real estate investment trust
holdings.
What were your best performing stocks and sectors?
The commodity sectors, most notably aluminum and paper, performed well and
provided significant gains for the Fund. Increasing economic activity and
growing demand for commodities in emerging markets led to rising prices for
aluminum and paper, which gave a big boost to the stock prices of companies
operating in those industries. The Fund's positions in stocks such as Georgia-
Pacific Corp., James River Corp., International Paper Co., Dow Chemical Co.,
Aluminum Company of America (ALCOA), Alcan Aluminum Ltd., and Comalco Ltd.
benefited from this trend. Other strong performers included Merrill Lynch & Co.
Inc. (the Fund's largest holding), Nike Inc., BMW, and Singapore Airlines Ltd.
Were there any disappointments? In other words, were there any stocks that did
not perform up to your expectations?
Yes, there were. Every year, about one-third of our stock picks do not live up
to our expectations. This is normally due to some unanticipated event at the
company, a major change in the industry that adversely impacts the company, or
less-than-perfect stock selection on our part. If we can continue to keep our
mistakes to roughly one-third of our selections, we should be able to achieve
the type of returns investors have come to expect. Examples of stocks that did
not perform as well as we had hoped include Celsius Industrier AB, Electrolux
AB, Oriental Press Group Ltd., Sun Co. Inc., Peregrine Investments Holdings
Ltd., and USAir Group Inc. Although these stocks declined in price, we did not
sell them because we continued to believe they represented excellent potential
long-term value.
Q & A
5
<PAGE>
The U.S. stock market performed extremely well during the first eight months of
1995. How do you think it will perform in the future?
We cannot be sure how the U.S. market will perform. No one can. Since 1949,
there have been 10 major bull markets in the U.S., lasting on average 41 months
and raising stock prices an average of 100%. Over the same period, there have
been nine major price declines, one about every 5 1/2 years and lasting an
average 15 months, that have lowered share prices on average by roughly 20%.
Most investors are fully aware of a bull market's potential, but probably do not
realize it would be normal if stock prices dropped by 25% sometime over the next
two to five years.
Is this true for foreign markets as well?
Yes, a similar situation holds true overseas. Last winter's 78% decline (in U.S.
dollar terms) of Mexican stocks was viewed by investors as an abnormal
"meltdown" of values. Yet few investors realize that the Mexican stock market
has experienced six declines of 70% or more. Even in Hong Kong, where $1.00
invested 10 years ago would have grown to $4.00 today, there have been eight
corrections of more than 30% and two in excess of 50%.
How should investors deal with market declines?
First, investors should be aware that just as bull markets, or prolonged share
price increases, are a normal part of stock market activity, so are bear
markets, or prolonged stock price declines. Second, investors should not only
expect market declines and use them to their advantage, but they should
concentrate on those stocks that have already declined in price even if the
overall market has not. Our investments in General Motors and several utility
and real estate stocks, which had already experienced 25% price declines from
their recent peaks, reflect this strategy. To a certain extent, by purchasing
shares of companies whose prices have already declined, but whose business
practices are solid, you may be able to protect yourself during market declines.
Q & A
6
<PAGE>
Emerging markets appear to be recovering after a poor showing in 1994. What is
your outlook for these markets in the near future?
As I mentioned earlier, it is difficult for us to predict how specific markets
will perform. I believe, however, that the risk of investing in these markets
may have declined because so many of them have already experienced major price
corrections. We are also excited about the rising standards of living in many of
these countries and the impact this should have on consumption. Today, about 15%
of the world's population live in countries belonging to the Organisation of
Economic Cooperation and Development, but they consume 75% of most goods and
services worldwide. As the remaining 85% of the world's population grows
economically, consumption patterns of certain goods and services will be
significantly affected. We are already beginning to see this happen, and we have
invested assets of the Fund in seeking to benefit from this trend.
Does the overall market look expensive now, or are you finding a number of
bargain stocks?
On August 31, our bargain list contained roughly 140 names. During the 10 years
I have been with Templeton, this list has fluctuated between 80 and 200 names.
Today, we are finding a "normal" number of good ideas, which is in contrast to
the Fund's above-normal cash level. This cash position is a result of our
selling shares of relatively large companies and buying lower-priced shares of
companies that are a bit smaller in size.
Q & A
7
<PAGE>
Performance Summary
Templeton World Fund Class I shares provided a total return of 9.87% for the
one-year period ended August 31, 1995. Total return measures the change in value
of an investment, assuming reinvestment of dividends and capital gains
distributions, and does not include the current maximum 5.75% initial sales
charge.
We have always maintained a long-term perspective when managing the Fund, and we
encourage shareholders to view their investments in a similar manner. As you can
see from the chart on page 9, the Fund's Class I shares delivered a cumulative
total return of more than 257% for the 10-year period ended August 31, 1995.
As measured by net asset value, the price of the Fund's Class I shares decreased
from $17.06 on August 31, 1994 to $16.76 on August 31, 1995, while the price of
the Fund's Class II shares increased from $15.36 on May 1, 1995 (the inception
date for these shares) to $16.71 on August 31, 1995.
During the reporting period, Class I shareholders received distributions
totalling 28 cents ($0.28) per share in dividend income and $1.455 per share in
capital gains, of which $1.175 represented long-term gains and 28 cents ($0.28)
represented short-term gains. Class II shareholders did not receive
distributions because these shares were not in existence when distributions were
paid. Of course, past performance is not predictive of future results, and
distributions will vary depending on income earned by the Fund, as well as any
profits realized from the sale of securities in the portfolio.
The graph on the following page shows how a $10,000 investment in the Fund, over
the past ten years, has kept your purchasing power well-ahead of inflation, as
measured by the Consumer Price Index (CPI). It also compares the Fund's
performance over the same period, with the performance of the unmanaged Morgan
Stanley Capital International (MSCI) World Index, which tracks 22 equity markets
worldwide. Class II shares are not represented as they have not been available
for a sufficient period of time. Please remember that the Fund's performance
differs from that of the index because the index does not contain cash (the Fund
generally carries a certain percentage of cash at any given time) and includes
no sales charges or management expenses. Of course, one cannot invest directly
in an index.
8
<PAGE>
Templeton World Fund - Class I
Total Return Index Comparison
$10,000 Investment (8/31/85 - 8/31/95)
[GRAPH APPEARS HERE SHOWING COMPARISON BETWEEN TEMPLETON WORLD FUND,
MSCI WORLD INDEX AND THE CPI]
<TABLE>
<CAPTION>
8/85 8/95
<S> <C> <C>
Templeton World Fund/1/ $10,000 $33,665
MSCI World Index/2/ $10,000 $39,400
CPI/3/ $10,000 $14,184
</TABLE>
1. Includes all sales charges and represents the change in value of an
investment over the period shown. Total return assumes reinvestment of dividends
and capital gains. Past performance is not predictive of future results.
2. Index is unmanaged and includes reinvested dividends.
3. Source: U.S. Bureau of Labor Statistics
- --------------------------------------------------------------------------------
Templeton World Fund
Periods ended August 31, 1995
<TABLE>
<CAPTION>
Since Since
Inception Inception
One-Year Five-Year Ten-Year (01/17/78) (05/01/95)
<S> <C> <C> <C> <C> <C>
Average Annual
Total Return/1/
Class I Shares 3.56% 13.39% 12.91% 15.81% --
Aggregate
Total Return/2/
Class II Shares -- -- -- -- 6.68%
Cumulative
Total Return/3/
Class I Shares 9.87% 98.94% 257.26% 1309.38% --
Class II Shares -- -- -- -- 8.79%
</TABLE>
1. Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the current maximum 5.75% initial sales charge for Class I Shares.
See note below.
2. Aggregate total return represents the change in value of an investment over
the period indicated and reflects the deduction of the maximum 1.00% initial
sales charge and 1.00% contingent deferred sales charge (CDSC) for Class II
Shares, applicable to shares redeemed within the first 18 months of investment.
Since Class II shares have existed for less than one year, average annual total
returns are not provided. See note below.
3. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 5.75% initial sales
charge for Class I Shares, or the maximum 1.00% initial sales charge and 1.00%
CDSC for Class II Shares, applicable to shares redeemed within the first 18
months of investment. See note below.
Note: Prior to July 1, 1992, Class I shares were offered at a higher sales
charge. Thus, actual total returns to purchasers of shares during that period
would have been different than noted above. Class II shares, which the Fund
began offering on May 1, 1995, are subject to different fees and expenses, which
will affect their performance. Please see the prospectus for more details
regarding Class I and Class II shares.
All total return calculations reflect the deduction of a proportional share of
Fund expenses on an annual basis and assume that all dividends and capital gains
distributions were reinvested when paid. Investment return and principal value
will fluctuate with market conditions, currencies and the economic and political
climates of countries where investments are made, so that your shares, when
redeemed, may be worth more or less than their initial cost. Past performance is
not predictive of future results.
- --------------------------------------------------------------------------------
9
<PAGE>
Templeton World Fund -- Class I
If you had invested $10,000 in the Templeton World Fund at its inception, it
would be worth over $130,000 today. The chart below illustrates the cumulative
total return of an assumed $10,000 investment in the Fund on January 17, 1978,
with income dividends and capital gains distributions reinvested through
August 31, 1995.*
[MOUNTAIN CHART APPEARS HERE SHOWING AN INITIAL INVESTMENT OF $10,000 ON 1/17/78
(INITIAL NET ASSET VALUE OF $9,425) WOULD BE VALUED AT $132,835 ON 8/31/95]
*The amount of capital gains distributions accepted in shares was $71,283. The
total amount of dividends reinvested was $29,959. The performance information
shown represents past performance and is not an indication of future results.
For standardized performance figures, please refer to the Performance Summary on
page 9. Class II shares, which the fund began offering on May 1, 1995, are
subject to different fees and expenses, which will affect their performance.
Please see the prospectus for more details regarding Class I and Class II
shares.
10
<PAGE>
Templeton World Fund
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
CLASS I
----------------------------------------------------------
YEAR ENDED AUGUST 31
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 17.06 $ 15.94 $ 14.42 $ 15.05 $ 14.70
---------- ---------- ---------- ---------- ----------
Income from investment
operations:
Net investment income .33 .26 .30 .41 .46
Net realized and
unrealized gain 1.11 2.50 2.81 .67 1.16
---------- ---------- ---------- ---------- ----------
Total from investment
operations 1.44 2.76 3.11 1.08 1.62
---------- ---------- ---------- ---------- ----------
Distributions:
Dividends from net
investment income (.28) (.26) (.38) (.42) (.52)
Distributions from net
realized gains (1.46) (1.38) (1.21) (1.29) (.75)
---------- ---------- ---------- ---------- ----------
Total distributions (1.74) (1.64) (1.59) (1.71) (1.27)
---------- ---------- ---------- ---------- ----------
Change in net asset
value (.30) 1.12 1.52 (.63) .35
---------- ---------- ---------- ---------- ----------
Net asset value, end of
year $ 16.76 $ 17.06 $ 15.94 $ 14.42 $ 15.05
========== ========== ========== ========== ==========
TOTAL RETURN* 9.87% 18.87% 24.71% 8.13% 12.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(000) $5,868,967 $5,421,691 $4,621,124 $4,046,706 $4,129,635
Ratio of expenses to
average net assets 1.05% 1.04% 1.02% .86% .72%
Ratio of net investment
income to average net
assets 2.18% 1.67% 2.13% 2.76% 3.23%
Portfolio turnover rate 34.05% 30.77% 23.86% 26.60% 22.90%
</TABLE>
*TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Templeton World Fund
Financial Highlights (cont.)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
CLASS II
---------------
FOR THE PERIOD
MAY 1, 1995+
THROUGH
AUGUST 31, 1995
---------------
<S> <C>
Net asset value, beginning of period $15.36
------
Income from investment operations:
Net investment income .03
Net realized and unrealized gain 1.32
------
Total from investment operations 1.35
------
Net asset value, end of period $16.71
======
TOTAL RETURN* 8.79%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $7,623
Ratio of expenses to average net assets 1.82%**
Ratio of net investment income to average net assets 1.37%**
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE DEFERRED CONTINGENT
SALES CHARGE. NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
+ COMMENCEMENT OF OFFERING OF SALES.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Templeton World Fund
Investment Portfolio, August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------
COMMON STOCKS: 81.3%
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Aerospace & Military Technical Systems: 1.5%
Boeing Co. U.S. 300,000 $ 19,125,000
British Aerospace PLC U.K. 6,228,600 63,785,936
Celsius Industrier AB, B Swe. 492,500 7,048,433
-------------
89,959,369
- ----------------------------------------------------------------------------------
Appliances & Household Durables: 1.4%
Electrolux AB, B Swe. 500,000 21,809,691
Email Ltd. Aus. 5,499,100 14,673,525
Sony Corp. Jpn. 850,000 46,422,910
-------------
82,906,126
- ----------------------------------------------------------------------------------
Automobiles: 5.0%
Bayerische Motorenwerke
AG (BMW) Ger. 43,500 24,150,204
Ciadea SA Arg. 1,497,333 6,142,445
Consorcio G Grupo Dina
SA de CV Mex. 397,500 304,697
Consorcio G Grupo Dina
SA de CV, ADR Mex. 28,400 95,850
Ford Motor Co. U.S. 2,463,400 75,441,625
General Motors Corp. U.S. 1,000,000 47,000,000
Peugeot SA Fr. 196,625 25,978,048
Regie Nationale des
Usines Renault SA Fr. 119,400 3,377,338
Volkswagen AG Ger. 160,000 48,937,330
Volvo AB, B Swe. 3,209,400 63,732,641
-------------
295,160,178
- ----------------------------------------------------------------------------------
Banking: 13.1%
ABN AMRO Holding NV Neth. 756,100 29,086,071
*ABN AMRO Holding NV,
trading cpn. Neth. 756,100 758,168
Argentaria Corporacion
Bancaria de Espana SA Sp. 627,275 23,956,684
Australia & New Zealand
Banking Group Ltd. Aus. 12,416,776 50,398,441
Banco Bilbao Vizcaya Sp. 1,145,000 34,645,790
Banco Central Hispano Sp. 827,000 17,242,904
Banco Popular Espanol Sp. 111,500 17,157,949
Banco Portugues de
Investimento SA Port. 354,380 5,230,272
Bank of Ireland Irl. 2,175,000 12,554,307
BankAmerica Corp. U.S. 300,000 16,950,000
Bankinter SA Sp. 350,000 30,417,796
Barclays PLC U.K. 1,200,000 13,406,157
C.S. Holding, br. Swtz. 250,000 20,488,402
Canadian Imperial Bank
of Commerce Can. 500,000 12,288,214
Chase Manhattan Corp. U.S. 1,000,000 57,500,000
Chemical Banking Corp. U.S. 600,000 34,950,000
Citicorp U.S. 1,150,000 76,331,250
</TABLE>
13
<PAGE>
Templeton World Fund
Investment Portfolio, August 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Banking (cont.)
Ergo Bank SA Gr. 128,760 $ 5,919,185
HSBC Holdings PLC H.K. 6,512,303 87,492,509
National Australia Bank
Ltd. Aus. 6,784,488 58,236,824
National Bank of Canada Can. 2,982,000 24,706,572
National Westminster
Bank PLC U.K. 2,542,962 23,220,785
Philippine National Bank Phil. 30,545 324,069
Royal Bank of Canada Can. 1,217,958 27,098,488
Shinhan Bank Co. Ltd. Kor. 111,430 2,568,136
*Shinhan Bank Co. Ltd.,
new Kor. 657 14,717
Standard Chartered PLC U.K. 3,782,900 25,357,075
Svenska Handelsbanken, A Swe. 1,250,000 19,515,736
Westpac Banking Corp. Aus. 11,049,582 41,526,980
-------------
769,343,481
- -----------------------------------------------------------------------------------
Broadcasting & Publishing: 0.8%
News Corp. Ltd. Aus. 2,636,060 13,592,330
News International PLC Aus. 2,884,000 14,633,006
Oriental Press Group
Limited H.K. 18,000,000 7,266,503
Sing Tao Holdings Ltd. H.K. 3,564,000 2,117,866
South China Morning Post
(Holdings) Ltd. H.K. 18,958,000 10,469,636
-------------
48,079,341
- -----------------------------------------------------------------------------------
Building Materials & Components: 1.1%
*Owens Corning Fiberglas
Corp. U.S. 1,283,000 50,357,750
Pioneer International
Ltd. Aus. 5,298,756 13,780,486
-------------
64,138,236
- -----------------------------------------------------------------------------------
Business & Public Services: 0.1%
Wheelabrator
Technologies Inc. U.S. 42,100 657,813
- -----------------------------------------------------------------------------------
Chemicals: 3.3%
Akzo Nobel NV Neth. 431,573 50,881,290
Bayer AG Ger. 108,725 28,092,229
DSM NV Neth. 720,000 59,551,504
European Vinyls Corp.
EVC International NV Neth. 415,080 17,632,387
Lyondell Petrochemical
Co. U.S. 824,600 22,676,500
Rhone-Poulenc SA, A Fr. 666,000 13,653,894
-------------
192,487,804
- -----------------------------------------------------------------------------------
Construction & Housing: 0.2%
Kaufman & Broad Home
Corp. U.S. 760,200 10,167,675
- -----------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
Templeton World Fund
Investment Portfolio, August 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Data Processing & Reproduction: 0.3%
*Quantum Corp. U.S. 800,000 $ 19,200,000
- -----------------------------------------------------------------------------------
Electrical & Electronics: 2.2%
Alcatel Alsthom SA Fr. 275,000 27,562,915
Asea AB, A Swe. 836,000 74,420,006
Hitachi Ltd. Jpn. 366,000 4,005,318
Philips Electronics NV Neth. 579,360 25,984,058
-------------
131,972,297
- -----------------------------------------------------------------------------------
Energy Equipment & Services: 0.5%
Koninklijke Pakhoed NV Neth. 270,000 8,105,743
Sun Co. Inc. U.S. 700,000 18,637,500
-------------
26,743,243
- -----------------------------------------------------------------------------------
Energy Sources: 5.8%
Repsol SA Sp. 900,000 28,237,123
Saga Petroleum AS, A Nor. 1,438,750 18,155,280
Saga Petroleum AS, B Nor. 825,347 10,029,138
Shell Transport &
Trading Co. PLC U.K. 1,873,000 21,375,241
Societe Elf Aquitane SA Fr. 709,000 51,892,264
Texaco Inc. U.S. 750,000 48,562,500
Total SA, B Fr. 858,540 50,405,819
Transportadora de Gas
del Sur SA, B, ADR Arg. 387,800 4,023,425
USX-Marathon Group Inc. U.S. 1,400,000 28,875,000
Valero Energy Corp. U.S. 1,899,550 43,452,206
YPF Sociedad Anonima Arg. 1,400,000 24,933,714
YPF Sociedad Anonima,
ADR Arg. 600,000 10,575,000
-------------
340,516,710
- -----------------------------------------------------------------------------------
Financial Services: 4.5%
Axa SA Fr. 307,900 17,046,430
Dean Witter Discover &
Co. U.S. 484,186 24,693,486
Federal National
Mortgage Assn. U.S. 660,000 62,947,500
Merrill Lynch & Co. Inc. U.S. 2,621,800 151,081,225
Peregrine Investments
Holdings Ltd. H.K. 8,000,000 11,419,713
-------------
267,188,354
- -----------------------------------------------------------------------------------
Food & Household Products: 1.8%
Burns Philp & Co. Ltd. Aus. 236,700 503,500
C.P. Pokphand Co. Ltd. H.K. 7,515,000 2,960,955
Cafe de Coral Holdings
Ltd. H.K. 762,000 181,124
Embotelladora Andina SA,
ADR Chil. 546,650 18,927,756
</TABLE>
15
<PAGE>
Templeton World Fund
Investment Portfolio, August 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Food & Household Products (cont.)
Goodman Fielder Ltd. Aus. 3,770,600 $ 3,429,338
Grupo Embotellador de
Mexico SA, B Mex. 187,500 1,180,279
*Grupo Embotellador de
Mexico SA de CV, GDR Mex. 1,684,000 20,629,000
Hillsdown Holdings PLC U.K. 13,423,076 39,781,025
Vitro SA Mex. 4,174,200 12,572,491
Vitro SA, ADR Mex. 510,600 4,723,050
-------------
104,888,518
- -----------------------------------------------------------------------------------
Forest Products & Paper: 5.4%
Assidomaen AB Swe. 500,000 10,476,869
Boise Cascade Corp. U.S. 651,900 27,950,213
Carter Holt Harvey Ltd. N.Z. 1,379,700 3,142,191
Crown Vantage Inc. U.S. 61,600 1,493,800
Enso Gutzeit OY, R Fin. 854,900 7,402,491
Fletcher Challenge Ltd.,
N.Z. N.Z. 18,379,152 49,989,820
Fletcher Forestry, Aus. N.Z. 307,231 381,034
Fletcher Forestry, N.Z. N.Z. 8,719,788 10,780,511
Georgia-Pacific Corp. U.S. 867,800 78,102,000
International Paper Co. U.S. 526,350 43,094,906
James River Corp. U.S. 447,300 15,543,675
Metsa Serla OY, B Fin. 472,400 18,622,370
PT Pabrik Kertas Tjiwi
Kimia, fgn. Indo. 2,215,500 4,887,492
Repola OY Fin. 1,245,200 23,805,649
St. Joe Paper Co. U.S. 400,000 24,500,000
-------------
320,173,021
- -----------------------------------------------------------------------------------
Health & Personal Care: 0.7%
Ciba-Geigy AG Swtz. 60,000 42,474,791
- -----------------------------------------------------------------------------------
Industrial Components: 0.7%
Goodyear Tire & Rubber
Co. U.S. 1,083,100 43,324,000
- -----------------------------------------------------------------------------------
Insurance: 5.5%
Ace Limited Bmu. 800,000 24,600,000
Allstate Corp. U.S. 648,924 21,982,301
American Bankers
Insurance Group Inc. U.S. 530,000 18,417,500
American International
Group Inc. U.S. 375,000 30,234,375
Baloise-Holding Swtz. 11,000 22,000,913
Cigna Corp. U.S. 312,546 30,238,826
International
Nederlanden Group Neth. 410,000 22,773,625
*International
Nederlanden Group,
trading cpn. Neth. 410,000 478,396
Kemper Corp. U.S. 1,176,299 56,462,352
London Insurance Group
Inc. Can. 300,000 5,892,757
</TABLE>
16
<PAGE>
Templeton World Fund
Investment Portfolio, August 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Insurance (cont.)
National Mutual Asia
Ltd. H.K. 7,322,000 $ 5,249,593
Travelers Inc. U.S. 743,384 35,682,432
W.R. Berkley Corp. U.S. 800,000 34,300,000
*Zurich Reinsurance
Centre Holdings, Inc. U.S. 473,100 13,956,450
-------------
322,269,520
- ----------------------------------------------------------------------------------
Leisure & Tourism: 0.1%
Grand Hotel Holdings
Ltd. H.K. 1,020,000 349,180
- ----------------------------------------------------------------------------------
Machinery & Engineering: 0.1%
Saurer AG Swtz. 20,000 6,473,298
- ----------------------------------------------------------------------------------
Merchandising: 2.1%
Argyll Group PLC U.K. 5,079,983 27,745,687
Cifra SA, B Mex. 15,000,000 19,123,506
K Mart Corp. U.S. 1,250,000 17,031,250
Limited Inc. U.S. 1,900,000 35,150,000
Sears Roebuck & Co. U.S. 700,000 22,662,500
Ventures Stores Inc. U.S. 200,000 1,175,000
-------------
122,887,943
- ----------------------------------------------------------------------------------
Metals & Mining: 5.2%
Alcan Aluminum Ltd. Can. 1,105,628 36,126,925
Alcan Australia Ltd. Aus. 961,600 2,421,329
*Alumax Inc. U.S. 838,200 28,603,575
Aluminum Co. of America U.S. 368,000 21,022,000
*ARBED SA Lux. 131,200 17,751,457
*Asturiana del Zinc SA Sp. 875,000 9,278,823
De Beers Consolidated
Mines Ltd. S.AF. 578,800 14,841,026
Elkem AS, A Nor. 273,900 3,328,275
Goldfields Ltd. Aus. 203,076 506,770
Maanshan Iron & Steel
Co. Ltd., H Chn. 11,701,000 1,949,915
Outokumpu OY, A Fin. 1,797,732 33,508,671
*Outokumpu OY, wts. Fin. 824,300 216,004
Pechiney SA Fr. 600,000 14,392,536
Pechiney SA, invt. ctf. Fr. 450,000 29,147,560
Pohang Iron & Steel Co.
Ltd. Kor. 177,190 16,813,800
Renison Goldfields
Consolidated Ltd. Aus. 2,500,000 10,429,116
Reynolds Metals Co. U.S. 660,352 39,456,032
*Union Miniere NPV Bel. 350,000 22,895,138
-------------
302,688,952
- ----------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
Templeton World Fund
Investment Portfolio, August 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Multi-Industry: 4.0%
BTR Nylex Ltd. Aus. 11,000,000 $ 29,186,491
Cheung Kong Holdings
Ltd. H.K. 6,798,000 33,722,155
CNT Group Ltd. H.K. 5,000,000 293,890
Dairy Farm International
Holdings Ltd. H.K. 30,277,539 28,158,111
*DESC Sociedad de
Formento Industrial SA,
B Mex. 2,035,100 8,302,559
Jardine Matheson
Holdings Ltd. H.K. 2,844,797 20,482,538
Jardine Strategic
Holdings Ltd. H.K. 14,861,294 46,664,463
Pacific Dunlop Ltd. Aus. 14,000,000 33,042,446
Swire Pacific Ltd., A H.K. 4,327,000 32,420,359
Swire Pacific Ltd., B H.K. 4,175,500 4,962,485
-------------
237,235,497
- -----------------------------------------------------------------------------------
Real Estate: 2.2%
American Health
Properties Inc. U.S. 443,400 9,643,950
Beacon Properties Corp U.S. 200,000 4,300,000
Carr Realty Corp. U.S. 158,800 3,056,900
Federal Realty
Investment Trust U.S. 300,000 6,562,500
General Growth
Properties U.S. 500,000 10,062,500
Hang Lung Development
Co. Ltd. H.K. 14,722,000 22,821,858
*Hang Lung Development
Co. Ltd., wts. H.K. 854,500 132,464
IRT Property Co. U.S. 537,600 5,174,400
Meditrust Inc. U.S. 650,000 21,368,750
National Health
Investors Inc. U.S. 230,000 6,641,250
Nationwide Health
Properties Inc. U.S. 200,000 7,825,000
Rouse Co. U.S. 1,120,000 23,660,000
Tai Cheung Holdings Ltd. H.K. 5,407,618 4,680,409
Universal Health Realty
Income Trust U.S. 100,000 1,637,500
-------------
127,567,481
- -----------------------------------------------------------------------------------
Recreation, Other Consumer Goods: 0.1%
Gibson Greetings Inc. U.S. 338,300 4,863,063
- -----------------------------------------------------------------------------------
Telecommunications: 4.7%
Compania de
Telecomunicaciones de
Chile SA, ADR Chil. 43,400 3,168,200
STET (Sta Finanziaria
Telefonica Torino) SPA Itl. 7,278,650 22,249,745
STET (Sta Finanziaria
Telefonica Torino) SPA,
di Risp Itl. 1,682,000 4,119,923
Telecom Argentina Stet
France SA, ADR Arg. 582,600 25,343,100
Telecom Italia Mobile,
di risp Itl. 14,742,450 14,798,022
Telecom Italia Spa, di
Risp Itl. 14,742,450 18,917,153
Telefonica de Argentina
SA, B, ADR Arg. 1,200,000 29,700,000
</TABLE>
18
<PAGE>
Templeton World Fund
Investment Portfolio, August 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Telecommunications (cont.)
Telefonica de Espana SA Sp. 4,411,500 $ 59,795,487
Telefonos de Mexico SA,
L Mex. 13,007,000 21,225,766
Telefonos de Mexico SA,
L, ADR Mex. 2,350,000 76,962,500
-------------
276,279,896
- -----------------------------------------------------------------------------------
Textiles & Apparel: 0.3%
Daehan Synthetic Fiber
Co. Ltd. Kor. 15,580 1,994,853
*Fruit of the Loom Inc.,
A U.S. 700,000 16,450,000
-------------
18,444,853
- -----------------------------------------------------------------------------------
Transportation: 3.7%
American President Cos.
Ltd. U.S. 911,400 26,772,375
Anangel-American
Shipholdings Ltd., ADR Gr. 38,900 588,363
*Bremer Vulkan Verbund
AG Ger. 350,000 19,359,673
British Airways PLC U.K. 2,694,800 17,812,574
Cathay Pacific Airways
Ltd. H.K. 15,376,000 23,140,473
IMC Holdings Ltd. H.K. 7,214,000 5,144,204
Malaysian International
Shipping Corp. Bhd.,
fgn. Mal. 6,123,000 17,576,915
OMI Corp. U.S. 736,600 5,708,650
Peninsular & Oriental
Steam Navigation Co. U.K. 1,800,000 15,500,869
*Qantas Airways Ltd.,
ADR, 144a Aus. 484,200 7,928,775
Shun Tak Holdings H.K. 16,706,000 14,027,774
Singapore Airlines Ltd.,
fgn. Sing. 2,031,000 17,151,302
Singapore Bus Service
(1978) Ltd., fgn. Sing. 679,100 4,731,239
Stolt Nielsen SA U.S. 521,500 14,927,938
*Swissair Schweizerische
Luftverkehr AG Swtz. 33,875 21,366,032
Transportacion Maritima
Mexicana SA de CV, L,
ADR Mex. 370,900 3,199,013
*USAir Group Inc. U.S. 400,000 3,250,000
-------------
218,186,169
- -----------------------------------------------------------------------------------
Utilities--Electrical & Gas: 4.8%
American Electric Power
Co. Inc. U.S. 900,000 30,712,500
British Gas PLC U.K. 3,450,000 14,828,234
Centerior Energy Corp. U.S. 2,000,000 21,500,000
Cia Energetica de Minas
Gerais, ADR Braz. 7,000 157,726
Compania Sevillana de
Electricidad Sp. 4,551,663 28,851,635
Electricidad de Caracas Venz. 12,058,989 9,293,582
Entergy Corp. U.S. 1,200,000 28,800,000
Iberdrola SA Sp. 4,461,317 34,254,890
Long Island Lighting Co. U.S. 1,550,000 26,350,000
Niagara Mohawk Power
Corp. Com USD1 U.S. 2,000,000 24,000,000
</TABLE>
19
<PAGE>
Templeton World Fund
Investment Portfolio, August 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Utilities--Electrical & Gas (cont.)
Shandong Huaneng Power Chn. 1,000,000 $ 8,375,000
Texas Utilities Electric
Co. U.S. 1,100,000 38,225,000
VEBA AG Ger. 400,000 15,286,104
--------------
280,634,671
- -----------------------------------------------------------------------------------------
Wholesale & International Trade: 0.1%
Sime Darby Hongkong Ltd. H.K. 5,380,000 6,533,006
--------------
TOTAL COMMON STOCKS (cost $3,734,850,907) 4,773,794,486
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS: 1.8%
- -----------------------------------------------------------------------------------------
American Health
Properties Psychiatric
Group, pfd. U.S. 44,340 720,525
Bayerische Motorenwerke
AG (BMW), pfd. Ger. 20,000 7,847,411
Cemig-Cia Energetica de
Minas Gerais, pfd. Braz. 393,000,000 8,855,172
Petrobras-Petroleo
Brasileiro SA, pfd. Braz. 59,611,000 5,661,397
Reynolds Metals Co.,
conv., pfd. U.S. 45,615 2,446,104
Telebras-
Telecomunicacoes
Brasileiras SA, pfd. Braz. 545,400,000 23,573,225
Telebras-
Telecomunicacoes
Brasileiras SA, pfd.,
ADR Braz. 1,000,000 43,500,000
Telesp-Telecomunicacoes
de Sao Paulo SA, pfd. Braz. 71,373,000 11,723,283
USAir Group Inc., B,
conv., pfd. U.S. 101,000 3,030,000
--------------
TOTAL PREFERRED STOCKS (cost $86,488,683) 107,357,117
- -----------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY**
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
BONDS: 5.0%
- -----------------------------------------------------------------------------------------
ARBED SA, 2.50%, conv.,
7/15/03 Ger. 2,250,000 1,333,447
Government of Australia:
7.00%, 8/15/98 Aus. 20,000,000 14,659,842
6.25%, 3/15/99 Aus. 20,000,000 14,180,741
7.00%, 4/15/00 Aus. 20,000,000 14,245,684
Jardine Strategic
Holdings Ltd., 7.50%,
conv. U.S. 9,050,000 9,728,750
Softe SA, 4.25%, conv.,
7/30/98, 144a Itl. 5,400,000,000 3,747,057
U.S. Treasury Notes:
6.375%, 1/15/99 U.S. 78,000,000 78,816,660
6.00%, 10/15/99 U.S. 78,000,000 77,890,020
6.375%, 1/15/00 U.S. 78,000,000 78,987,480
--------------
TOTAL BONDS (cost $293,237,003) 293,589,681
- -----------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Templeton World Fund
Investment Portfolio, August 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
- --------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 11.8% (cost
$693,163,503)
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Treasury Bills,
5.25% to 5.41% with
maturities to
10/26/95 U.S. 696,604,000 $ 693,282,276
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.9% (cost
$4,807,740,096) 5,868,023,560
OTHER ASSETS, LESS LIABILITIES: 0.1% 8,566,918
--------------
TOTAL NET ASSETS: 100.0% $5,876,590,478
==============
</TABLE>
*NON-INCOME PRODUCING.
**CURRENCY OF COUNTRIES INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
Templeton World Fund
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (identified cost
$4,807,740,096) $5,868,023,560
Cash 453,081
Receivables:
Investment securities sold 47,704,657
Capital shares sold 5,086,405
Dividends and interest 17,497,944
--------------
Total assets 5,938,765,647
--------------
Liabilities:
Payables:
Investment securities purchased 52,251,004
Capital shares redeemed 3,804,648
Accrued expenses 6,119,517
--------------
Total liabilities 62,175,169
--------------
Net assets, at value $5,876,590,478
==============
Net assets consist of:
Undistributed net investment income $ 103,788,712
Net unrealized appreciation 1,060,283,464
Accumulated net realized gain 581,193,216
Net capital paid in on shares of capital stock 4,131,325,086
--------------
Net assets, at value $5,876,590,478
==============
Class I:
Net asset value per share ($5,868,967,398 / 350,194,730 shares
outstanding) $ 16.76
==============
Maximum offering price
($16.76 / 94.25%) $ 17.78
==============
Class II:
Net asset value per share
($7,623,080 / 456,227
shares outstanding) $ 16.71
==============
Maximum offering price
($16.71 / 99.00%) $ 16.88
==============
</TABLE>
STATEMENT OF OPERATIONS
for the year ended August 31, 1995
<TABLE>
<S> <C> <C>
Investment income:
(net of $10,824,086 foreign taxes withheld)
Dividends $140,143,015
Interest 32,812,620
------------
Total income $172,955,635
Expenses:
Management fees (Note 3) 33,261,874
Administrative fees (Note 3) 4,292,710
Distribution fees (Note 3)
Class I 10,215,632
Class II 11,211
Transfer agent fees (Note3) 4,775,000
Custodian fees 1,889,948
Reports to shareholders 1,409,623
Audit fees 65,000
Legal fees (Note 3) 23,000
Registration and filing fees 124,000
Directors' fees
and expenses 93,000
Other 34,639
------------
Total expenses 56,195,637
------------
Net investment income 116,759,998
Realized and unrealized
gain (loss):
Net realized gain (loss) on:
Investments 627,121,399
Foreign currency transactions (4,606,416)
------------
622,514,983
Net unrealized depreciation on investments (213,111,140)
------------
Net realized and
unrealized gain 409,403,843
------------
Net increase in net assets resulting from
operations $526,163,841
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
Templeton World Fund
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended August 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 116,759,998 $ 83,368,825
Net realized gain on investment and foreign
currency transactions 622,514,983 479,395,263
Net unrealized appreciation (depreciation) (213,111,140) 300,256,449
-------------- --------------
Net increase in net assets resulting from
operations 526,163,841 863,020,537
Distributions to shareholders:
From net investment income
Class I (90,201,924) (75,645,206)
From net realized gain
Class I (466,541,300) (398,442,723)
Capital share transactions (Note 2)
Class I 478,006,976 411,635,037
Class II 7,471,394 --
-------------- --------------
Net increase in net assets 454,898,987 800,567,645
Net assets:
Beginning of year 5,421,691,491 4,621,123,846
-------------- --------------
End of year $5,876,590,478 $5,421,691,491
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
Templeton World Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton World Fund (the Fund) is a series of Templeton Funds, Inc. (the Com-
pany) which is an open-end, diversified management investment company regis-
tered under the Investment Company Act of 1940. The following summarizes the
Fund's significant accounting policies.
a. Securities Valuations:
Securities listed or traded on a recognized national or foreign stock exchange
or NASDAQ are valued at the last reported sales prices on the principal ex-
change on which the securities are traded. Over-the-counter securities and
listed securities for which no sale is reported are valued at the mean between
the last current bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
and approved in good faith by the Board of Directors.
b. Foreign Currency Transactions:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign curren-
cies are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customar-
ily enters into a foreign exchange contract to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of for-
eign currencies, currency gains or losses realized between the trade and set-
tlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities resulting
from changes in the exchange rates.
c. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
d. Security Transactions, Investment Income, Distributions and Expenses:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign securi-
ties is recorded as soon as information is available to the Fund. Interest in-
come and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
24
<PAGE>
Templeton World Fund
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
Effective May 1, 1995, the Fund offered two classes of shares: Class I shares
and Class II shares. Shares of each class are identical except for their ini-
tial sales load, a contingent deferred sales charge on Class II shares, distri-
bution fees, and voting rights on matters affecting a single class. All Fund
shares outstanding before May 1, 1995 were designated as Class I shares. At Au-
gust 31, 1995, there were 2.7 billion shares of capital stock authorized ($1.00
par value) of which 1.2 billion shares have been classified as Fund shares.
Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
CLASS I
------------------------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 26,269,051 $ 403,189,144 27,805,398 $ 442,853,907
Shares issued on
reinvestment of
distributions 33,988,482 502,706,371 28,659,050 425,220,395
Shares redeemed (27,844,607) (427,888,539) (28,680,400) (456,439,265)
----------- ------------- ----------- -------------
Net increase 32,412,926 $ 478,006,976 27,784,048 $ 411,635,037
=========== ============= =========== =============
<CAPTION>
CLASS II
--------------------------
FOR THE PERIOD
MAY 1, 1995
THROUGH
AUGUST 31, 1995
--------------------------
SHARES AMOUNT
----------- -------------
<S> <C> <C> <C> <C>
Shares sold 471,609 $ 7,727,629
Shares redeemed (15,382) (256,235)
----------- -------------
Net increase 456,227 $ 7,471,394
=========== =============
</TABLE>
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton,
Galbraith & Hansberger Ltd. (TGH), Templeton Global Investors, Inc. (TGII),
Franklin Templeton Distributors, Inc. (FTD), and Franklin Templeton Investor
Services, Inc. (FTIS), the Fund's investment manager, administrative manager,
principal underwriter, and transfer agent, respectively. The Fund pays monthly
an investment management fee to TGH equal, on an annual basis, to 0.75% of the
average daily net assets of the Fund up to $200 million, reduced to 0.675% of
such average daily net assets in excess of $200 million, and further reduced to
0.60% of such net assets in excess of $1.3 billion. The Fund pays TGII monthly
its allocated share of an administrative fee of 0.15% per annum on the first
$200 million of the Company's aggregate average daily net assets, 0.135% of the
next $500 million, 0.10% of the next $500 million, and 0.075% per annum of such
average net assets in excess of $1.2 billion. For the year ended August 31,
1995, FTD received net commissions of $1,962,439 from the sale of the Fund's
shares and FTIS received fees of $4,775,000.
Under the distribution plans for Class I and Class II shares, the Fund reim-
burses FTD quarterly for FTD's costs and expenses in connection with any activ-
ity that is primarily intended to result in a sale of Fund shares, subject to a
maximum of 0.25% and 1.00% per annum of the average daily net assets of Class I
and Class II shares, respectively. Under the Class I distribution
25
<PAGE>
Templeton World Fund
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
plan, costs and expenses exceeding the maximum may be reimbursed in subsequent
periods. At August 31, 1995, there were no unreimbursed expenses. Class II
shares redeemed within 18 months are subject to a contingent deferred sales
charge. Contingent deferred sales charges of $658 were paid to FTD for the year
ended August 31, 1995.
An officer of the Company is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received fees of $23,000 for the year ended August 31,
1995.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
year ended August 31, 1995 aggregated $1,707,071,260 and $1,924,889,336, re-
spectively. The cost of securities for federal income tax purposes is
$4,806,610,540. Realized gains and losses are reported on an identified cost
basis.
At August 31, 1995, the aggregate gross unrealized appreciation and deprecia-
tion of portfolio securities, based on cost for federal income tax purposes,
was as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $1,216,841,567
Unrealized depreciation (155,428,547)
--------------
Net unrealized appreciation $1,061,413,020
==============
</TABLE>
26
<PAGE>
Templeton World Fund
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Templeton World Fund
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton World Fund series of Templeton Funds,
Inc. as of August 31, 1995, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for the periods
indicated in the accompanying financial statements. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and fi-
nancial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of Au-
gust 31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Tem-
pleton World Fund series of Templeton Funds, Inc. as of August 31, 1995, the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted ac-
counting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
September 29, 1995
27
<PAGE>
TEMPLETON WORLD
FUND
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-354-9191
Sales Information
1-800-292-9293
This report must be preceded or accompanied by a current prospectus of the
Templeton World Fund, which contains more complete information including
charges and expenses. 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, as well as investment decisions by the
investment manager which will not always be profitable or wise. 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.
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 determined by the presence of a regular beeping tone.
[LOGO OF RECYCLED PAPER APPEARS HERE]
TEMPLETON
WORLD
FUND
Annual Report
August 31, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
TL102 A95 10/95
