<PAGE> 1
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
Shareholder Services
1-800-632-2301
Fund Information
1-800-342-5236
This report must be preceeded or accompanied by the prospectus of 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.
[RECYCLE LOGO] TL102 A96 10/96
[GLOBE GRAPHIC]
TEMPLETON
WORLD
FUND
Annual Report
August 31, 1996
[FRANKLIN TEMLPLETON LOGO]
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TEMPLETON WORLD FUND
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 15, 1996
Dear Shareholder:
We are pleased to bring you the 19th annual report of the Templeton World Fund,
which covers the period ended August 31, 1996.
During the past fiscal year, global economic growth strengthened as many
governments kept interest rates relatively low and allowed money supplies to
grow. This combination of stronger growth and more liberal monetary policies led
to mixed results worldwide. Lower interest rates eased the burden of interest
payments, enabling many Latin American countries saddled with high foreign debt
to restructure their fragile economies and improve their weak banking systems.
In the more developed nations, however, particularly the United States, lower
interest rates and easy credit drove personal debt to historically high levels.
Throughout the reporting period, strong corporate profit growth benefited the
stocks of many companies, and global equity markets posted strong gains, with
large upswings in many emerging market nations and
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- --------------------------------------------------------------------------
TEMPLETON WORLD FUND
Geographic Distribution on 8/31/96
Based on Total Net Assets
<TABLE>
<S> <C>
European Stocks 33.8%
Asian Stocks 10.3%
Latin American Stocks 8.4%
Australian &
New Zealand Stocks 5.7%
United States Stocks 26.5%
Other Stocks 2.6%
Fixed-Income Securities 10.5%
Short-Term Obligations
& Other Net Assets 2.2%
</TABLE>
above-average advances in most developed countries. In the U.S., corporate
profits improved as a result of high export demand and a stronger domestic
economy. Corporate restructuring in Europe led to reduced costs, allowing
companies to use excess profits to reduce debt. In Asia, however, Japan's stock
market was basically flat, while several emerging markets suffered declines.
Consistent with our history of low turnover, we made no significant changes to
the Fund's geographic weightings over the course of the fiscal year. For
example, our exposure to Latin America increased from 6.7% to 8.4% of total net
assets, Europe from 28.8% to 33.8%, Asia from 8.6% to 10.3%, while our U.S.
exposure decreased from 30.7% to 26.5%. On an individual country basis, most
changes to the Fund were subtle. Shifts in industry exposure were also
relatively minor, with the most significant increases occurring in the
telecommunications, real estate, and forest products industries. We reduced the
Fund's exposure to the banking, financial services, and insurance industries
because we believed valuations were approaching high levels.
Although our overall country and industry weightings remained relatively stable,
we made substantial changes to the Fund's individual holdings. Within the
aerospace sector, we sold a long-standing position in British Aerospace and
purchased shares of GMH, the aerospace division of General Motors. GMH holds a
dominant position in the satellite industry and offers interesting prospects for
future growth.
In the appliances and household durables sector, we substantially increased our
holdings of Sony Corporation because we believe that it may be among the
2
<PAGE> 4
greatest beneficiaries of a trend in the consumer electronics field to merge
multiple products and software. In our view, the Digital Versatile Disc being
introduced over the next several months should help boost Sony's profits in the
future.
On the telecommunications front, we initiated positions in Nokia, Motorola, and
AT&T Corp., while also adding to some existing European and Latin American
holdings. We also increased our exposure to the forest products industry by
adding to some of our Nordic holdings such as Assidomaen AB, Enso OY, and Metsa
Serla OY. In our opinion, these stocks were selling at very low valuations
relative to the companies' future earnings and the replacement value of their
plants and equipment.
TEMPLETON WORLD FUND
Top 10 Equity Holdings on 8/31/96
Based on Total Net Assets
<TABLE>
<CAPTION>
% OF TOTAL
COMPANY, INDUSTRY, COUNTRY NET ASSETS
<S> <C>
Ford Motor Co.
Automobiles, United States 1.6%
Citicorp
Banking, United States 1.5%
Sony Corp.
Appliances & Household Durables, Japan 1.4%
General Motors Corp.
Automobiles, United States 1.4%
Telebras-Telecomunicacoes Brasileiras SA
Telecommunications, Brazil 1.3%
Motorola Inc.
Electrical & Electronics, United States 1.3%
Telefonica de Espana SA
Telecommunications, Spain 1.3%
HSBC Holdings PLC
Banking, Hong Kong 1.2%
Georgia-Pacific Corp.
Forest Products & Paper, United States 1.2%
Ciba-Geigy AG
Health & Personal Care, Switzerland 1.2%
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 12 OF THIS REPORT.
As in all reporting periods, we held some positions that helped and some that
hindered the Fund's performance. In general, the rebound in emerging markets had
a positive effect. The stock of Cheung Kong Holdings Ltd., a Hong Kong-based
conglomerate, appreciated by 41%. And Telecomunicacoes Brasileiras SA
(Telebras), Brazil's largest telephone company, rose more than 70%. The Fund's
holdings of some large U.S. companies, including Boeing Co., Travelers Inc., and
GMH also posted large gains. Our positions in financial companies such as
Citicorp (U.S.), HSBC Holdings PLC (Hong Kong), ABN AMRO NV (Netherlands), and
Westpac Banking Corp. (Australia) also appreciated considerably during the
fiscal year. Holdings that did not meet our expectations included Niagara Mohawk
Power Corp., a U.S.
3
<PAGE> 5
utility company; Quantum Corp., a U.S.-based disc drive manufacturer; and Burns
Philp & Co. Ltd., an Australian food processor.
This discussion reflects the strategies we employed for the Fund during the 12
months under review, and includes our opinions as of the close of the period.
Since economic and market conditions are constantly changing, our strategies and
our evaluations, conclusions and decisions regarding portfolio holdings may
change as new circumstances arise. Although past performance of a specific
investment or sector cannot guarantee future performance, such information can
be useful in analyzing securities we purchase or sell for the Fund.
There are, of course, special risks involved with global investing related to
market, currency, economic, social, 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. While
short-term volatility can be disconcerting, declines of as much as 40% to 50%
are not unusual in emerging markets. For example, the Hong Kong market has
increased 535% in the last 15 years, but has suffered six declines of more than
20% during that time.* These risks are discussed in the Fund's prospectus.
As always, we thank you for your participation in the Fund and look forward to
serving your investment needs in the years to come.
Sincerely,
/s/ Jeffrey A. Everett
- ----------------------------
Jeffrey A. Everett, CFA
Portfolio Manager
Templeton World Fund
* SOURCE: BLOOMBERG. BASED ON QUARTERLY PERCENTAGE CHANGE
OVER 15 YEARS ENDED JUNE 30, 1996.
4
<PAGE> 6
PERFORMANCE SUMMARY
CLASS I
The Templeton World Fund Class I shares reported a total return of 11.73% for
the one-year period ended August 31, 1996. Total return measures the change in
value of an investment, assuming reinvestment of dividends and capital gains
distributions, and does not include the maximum 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 table on page 6, the Fund delivered a cumulative total return of
more than 202% for the 10-year period ended August 31, 1996.
As measured by net asset value, the Fund's share price decreased 55 cents, from
$16.76 on August 31, 1995 to $16.21 on August 31, 1996. During this time,
shareholders received distributions of 36.5 cents ($0.365) per share in dividend
income and $1.88 per share in capital gains, of which $1.77 represented
long-term gains and 11 cents ($0.11) represented short-term gains. 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 page 6 compares the Fund's performance over the past ten years,
with the performance of the unmanaged Morgan Stanley Capital International
(MSCI) World Index. It also shows how a $10,000 investment in the Fund has kept
your purchasing power well ahead of inflation, as measured by the Consumer Price
Index (CPI). Please remember that the Fund's performance differs from that of
the index because, among other things, the index is not managed according to any
investment strategy, includes no sales charges or management expenses, and does
not contain cash (the Fund generally carries a certain percentage of cash at any
given time). Of course, one cannot invest directly in an index.
5
<PAGE> 7
TEMPLETON WORLD FUND - CLASS I
Total Return Index Comparison
$10,000 Investment (8/31/86 - 8/31/96)
World Fund Class 1
Date Templeton World MS World GD C P I
- ---- --------------- ---------------- -----
9/1/86 $ 9,426 $10,000 $10,000
9/30/86 9,074 9,605 10,046
10/31/86 9,509 9,443 10,055
11/30/86 9,522 9,845 10,064
12/31/86 9,375 10,044 10,073
1/31/87 10,075 11,226 10,137
2/28/87 10,597 11,599 10,173
3/31/87 10,908 12,319 10,219
4/30/87 10,577 13,043 10,274
5/31/87 10,552 13,064 10,310
6/30/87 11,105 13,059 10,346
7/31/87 11,907 13,323 10,373
8/31/87 12,117 14,113 10,428
9/30/87 12,021 13,869 10,482
10/31/87 9,509 11,516 10,509
11/30/87 9,127 11,239 10,519
12/31/87 9,696 11,728 10,519
1/31/88 10,049 12,016 10,546
2/29/88 10,531 12,716 10,574
3/31/88 10,608 13,102 10,619
4/30/88 10,615 13,270 10,674
5/31/88 10,684 13,007 10,711
6/30/88 11,121 12,992 10,757
7/31/88 11,113 13,238 10,802
8/31/88 11,052 12,513 10,847
9/30/88 11,465 13,046 10,920
10/31/88 11,723 13,916 10,956
11/30/88 11,530 14,403 10,965
12/31/88 11,606 14,536 10,983
1/31/89 12,401 15,065 11,038
2/28/89 12,130 14,973 11,084
3/31/89 12,392 14,880 11,148
4/30/89 12,778 15,225 11,220
5/31/89 12,999 14,854 11,284
6/30/89 12,941 14,689 11,311
7/31/89 13,991 16,352 11,338
8/31/89 14,179 15,959 11,357
9/30/89 14,261 16,413 11,393
10/31/89 13,739 15,868 11,448
11/30/89 13,911 16,504 11,475
12/31/89 14,229 17,037 11,493
1/31/90 13,259 16,245 11,612
2/28/90 13,320 15,551 11,666
3/31/90 13,363 14,615 11,731
4/30/90 12,839 14,407 11,749
5/31/90 13,975 15,927 11,776
6/30/90 14,089 15,816 11,840
7/31/90 14,316 15,963 11,885
8/31/90 12,848 14,472 11,994
9/30/90 11,581 12,948 12,095
10/31/90 11,335 14,160 12,168
11/30/90 11,746 13,931 12,194
12/31/90 11,966 14,225 12,194
1/31/91 12,737 14,748 12,268
2/28/91 13,711 16,115 12,286
3/31/91 13,721 15,643 12,304
4/30/91 13,943 15,768 12,323
5/31/91 14,454 16,128 12,360
6/30/91 13,779 15,134 12,396
7/31/91 14,454 15,852 12,414
8/31/91 14,521 15,804 12,450
9/30/91 14,666 16,221 12,505
10/31/91 14,853 16,487 12,524
11/30/91 14,425 15,772 12,560
12/31/91 15,529 16,923 12,569
1/31/92 15,616 16,613 12,588
2/29/92 15,822 16,329 12,633
3/31/92 15,463 15,564 12,698
4/30/92 15,877 15,783 12,715
5/31/92 16,519 16,414 12,733
6/30/92 16,203 15,868 12,779
7/31/92 16,236 15,911 12,806
8/31/92 15,692 16,300 12,842
9/30/92 15,692 16,154 12,878
10/31/92 15,411 15,719 12,923
11/30/92 15,679 16,004 12,941
12/31/92 16,033 16,136 12,932
1/31/93 16,242 16,193 12,995
2/28/93 16,611 16,580 13,041
3/31/93 17,286 17,545 13,086
4/30/93 17,642 18,361 13,123
5/31/93 18,170 18,787 13,141
6/30/93 18,022 18,633 13,160
7/31/93 18,538 19,020 13,160
8/31/93 19,569 19,895 13,196
9/30/93 19,471 19,531 13,224
10/31/93 20,413 20,072 13,278
11/30/93 19,977 18,940 13,288
12/31/93 21,422 19,870 13,288
1/31/94 22,717 21,183 13,324
2/28/94 22,131 20,912 13,369
3/31/94 21,285 20,015 13,414
4/30/94 21,721 20,638 13,433
5/31/94 21,926 20,693 13,443
6/30/94 21,435 20,637 13,488
7/31/94 22,444 21,034 13,525
8/31/94 23,262 21,669 13,579
9/30/94 22,649 21,103 13,615
10/31/94 22,861 21,709 13,625
11/30/94 21,790 20,771 13,643
12/31/94 21,609 20,977 13,643
1/31/95 21,426 20,666 13,697
2/28/95 22,097 20,972 13,752
3/31/95 22,524 21,987 13,797
4/30/95 23,424 22,759 13,843
5/31/95 24,171 22,957 13,871
6/30/95 24,552 22,955 13,898
7/31/95 25,757 24,107 13,898
8/31/95 25,559 23,574 13,934
9/30/95 26,169 24,265 13,962
10/31/95 25,243 23,886 14,008
11/30/95 25,899 24,720 13,999
12/31/95 26,266 25,447 13,989
1/31/96 27,305 25,913 14,071
2/29/96 27,376 26,076 14,116
3/31/96 27,746 26,514 14,190
4/30/96 28,468 27,142 14,245
5/31/96 28,767 27,169 14,272
6/30/96 28,750 27,311 14,281
7/31/96 27,728 26,349 14,308
8/31/96 28,556 26,658 14,335
1. INCLUDES ALL SALES CHARGES AND REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE PERIOD SHOWN, ASSUMING 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 - CLASS I
Periods Ended 8/31/96
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year Ten-Year (1/17/78)
<S> <C> <C> <C> <C>
Cumulative
Total Return (1) 11.73% 96.65% 202.95% 1,474.66%
Average Annual
Total Return (2) 5.32% 13.13% 11.06% 15.59%
Value of $10,000
Investment (3) $10,532 $18,533 $28,556 $148,413
</TABLE>
1.CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN INVESTMENT OVER
THE INDICATED PERIODS, AND DOES NOT INCLUDE THE MAXIMUM 5.75% INITIAL SALES
CHARGE.
2.AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN VALUE OF
AN INVESTMENT OVER THE INDICATED PERIODS AND INCLUDES THE INITIAL SALES CHARGE.
3.THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE
FUND OVER THE SPECIFIED PERIODS AND INCLUDE THE INITIAL SALES CHARGE.
ALL CALCULATIONS ASSUME REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS WHEN PAID.
PRIOR TO JULY 1, 1992, CLASS I SHARES WERE OFFERED AT A HIGHER SALES CHARGE.
THUS, ACTUAL TOTAL RETURN TO PURCHASERS OF SHARES DURING THAT PERIOD WOULD HAVE
BEEN SOMEWHAT LOWER THAN NOTED ABOVE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE WITH MARKET CONDITIONS, CURRENCIES AND THE ECONOMIC AND POLITICAL
CLIMATES 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.
- -------------------------------------------------------------------------------
Under section 854(b)(2) of the Internal Revenue Code, the Templeton World Fund
hereby designates 26.97% of its ordinary income dividends paid by the Fund
during the fiscal year ended August 31, 1996, as income qualifying for the
corporate dividends received deduction.
- -------------------------------------------------------------------------------
6
<PAGE> 8
PERFORMANCE SUMMARY
CLASS II
The Templeton World Fund Class II shares reported a total return of 10.88% for
the one-year period ended August 31, 1996. Total return measures the change in
value of an investment, assuming reinvestment of dividends and capital gains
distributions, and does not include sales charges.
As measured by net asset value, the Fund's share price decreased 67 cents, from
$16.71 on August 31, 1995 to $16.04 on August 31, 1996. During this time,
shareholders received distributions of 35.41 cents ($0.3541) per share in
dividend income and $1.88 per share in capital gains, of which $1.77 represented
long-term gains and 11 cents ($0.11) represented short-term gains. 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 page 8 shows how a $10,000 investment in the Fund since inception
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. Please remember that the Fund's performance
differs from that of the index because, among other things, the index is not
managed according to any investment strategy, includes no sales charges or
management expenses, and does not contain cash (the Fund generally carries a
certain percentage of cash at any given time). Of course, one cannot invest
directly in an index.
7
<PAGE> 9
TEMPLETON WORLD FUND - CLASS II
Total Return Index Comparison
$10,000 Investment (5/1/95 - 8/31/96)
World Class 2
Date Templeton World MS World GD C P I
- ---- --------------- ------------------ -----
5/1/95 $ 9,897 $10,000 $10,000
5/31/95 10,200 10,087 10,020
6/30/95 10,354 10,086 10,040
7/31/95 10,857 10,592 10,040
8/31/95 10,767 10,358 10,066
9/30/95 11,018 10,662 10,086
10/31/95 10,617 10,495 10,120
11/30/95 10,888 10,862 10,112
12/31/95 11,038 11,181 10,105
1/31/96 11,469 11,386 10,165
2/29/96 11,492 11,457 10,198
3/31/96 11,633 11,650 10,251
4/30/96 11,923 11,926 10,291
5/31/96 12,050 11,938 10,310
6/30/96 12,035 12,000 10,316
7/31/96 11,596 11,578 10,336
8/31/96 11,839 11,713 10,356
1. INCLUDES ALL SALES CHARGES AND REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE PERIOD SHOWN, ASSUMING 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 - CLASS II
Periods Ended 8/31/96
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/1/95)
<S> <C> <C>
Cumulative
Total Return (1) 10.88% 20.63%
Average Annual
Total Return (2) 8.81% 13.43%
Value of $10,000
Investment (3) $10,881 $11,839
</TABLE>
1. CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN INVESTMENT OVER
THE INDICATED PERIODS AND DOES NOT INCLUDE THE 1.0% INITIAL SALES CHARGE AND THE
1.0% CONTINGENT DEFERRED SALES CHARGE, APPLICABLE TO SHARES REDEEMED WITHIN THE
FIRST 18 MONTHS OF INVESTMENT.
2. AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN VALUE OF
AN INVESTMENT OVER THE INDICATED PERIODS AND INCLUDES ALL SALES CHARGES.
3. THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE
FUND OVER THE SPECIFIED PERIODS AND INCLUDE ALL SALES CHARGES.
ALL CALCULATIONS ASSUME REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS WHEN PAID.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS,
CURRENCIES AND THE ECONOMIC AND POLITICAL CLIMATES 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.
Under section 854(b)(2) of the Internal Revenue Code, the Templeton World Fund
hereby designates 26.97% of its ordinary income dividends paid by the Fund
during the fiscal year ended August 31, 1996, as income qualifying for the
corporate dividends received deduction.
8
<PAGE> 10
TEMPLETON WORLD FUND --
CLASS I
If you had invested $10,000 in the Templeton World Fund at inception, it would
be worth more than $148,000 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, 1996.*
World Mountain
Initial + Initial +
Dividends Capital Total
Date Reinvested Gains Value
- ---- ---------- --------- ------
1/17/78 $ 9,425 $ 9,425 $ 9,425
12/31/78 11,395 11,405 11,452
12/31/79 14,406 14,388 14,675
12/31/80 17,349 16,973 17,734
12/31/81 17,785 17,405 18,837
12/31/82 21,081 20,021 22,487
12/31/83 27,120 26,233 30,130
12/31/84 26,241 27,017 31,561
12/31/85 33,382 34,640 41,519
12/31/86 36,327 40,184 48,726
12/31/87 33,236 41,021 50,394
12/31/88 38,712 48,297 60,317
12/31/89 46,883 57,755 73,950
12/31/90 38,148 47,435 62,190
12/31/91 46,167 61,438 80,706
12/31/92 44,659 63,289 83,330
12/31/93 55,556 85,391 111,333
12/31/94 52,041 86,978 112,308
12/31/95 57,768 106,848 136,511
8/31/96 62,804 116,165 148,413
* The amount of capital gains distributions accepted in shares was $85,609. The
total amount of dividends reinvested was $32,248. 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 6. Class II shares, which the fund began offering on May 1, 1995, are
subject to different fees and expenses, which affect their performance. Please
see the prospectus for more details regarding Class I and Class II shares.
9
<PAGE> 11
TEMPLETON WORLD FUND
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE--CLASS I
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 16.76 $ 17.06 $ 15.94 $ 14.42 $ 15.05
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income .41 .33 .26 .30 .41
Net realized and unrealized gain 1.29 1.11 2.50 2.81 .67
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.70 1.44 2.76 3.11 1.08
---------- ---------- ---------- ---------- ----------
Distributions:
Dividends from net investment income (.37) (.28) (.26) (.38) (.42)
Distributions from net realized gains (1.88) (1.46) (1.38) (1.21) (1.29)
---------- ---------- ---------- ---------- ----------
Total distributions (2.25) (1.74) (1.64) (1.59) (1.71)
---------- ---------- ---------- ---------- ----------
Change in net asset value (.55) (.30) 1.12 1.52 (.63)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 16.21 $ 16.76 $ 17.06 $ 15.94 $ 14.42
========== ========== ========== ========== ==========
TOTAL RETURN* 11.73% 9.87% 18.87% 24.71% 8.13%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of year (000) $6,483,146 $5,868,967 $5,421,691 $4,621,124 $4,046,706
Ratio of expenses to average net assets 1.03% 1.05% 1.04% 1.02% .86%
Ratio of net investment income to average net assets 2.66% 2.18% 1.67% 2.13% 2.76%
Portfolio turnover rate 22.05% 34.05% 30.77% 23.86% 26.60%
Average commission rate paid (per share) $ .0130
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS.
10
<PAGE> 12
TEMPLETON WORLD FUND
Financial Highlights (cont.)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE--CLASS II
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1995+
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period $ 16.71 $ 15.36
------- -------
Income from investment operations:
Net investment income .45 .03
Net realized and unrealized gain 1.11 1.32
------- -------
Total from investment operations 1.56 1.35
------- -------
Distributions:
Dividends from net investment income (.35) --
Distributions from net realized gains (1.88) --
------- -------
Total distributions (2.23) --
------- -------
Change in net asset value (.67) 1.35
------- -------
Net asset value, end of period $ 16.04 $ 16.71
======= =======
TOTAL RETURN* 10.88% 8.79%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of period (000) $58,619 $ 7,623
Ratio of expenses to average net assets 1.84% 1.82%**
Ratio of net investment income to average net assets 2.14% 1.37%**
Portfolio turnover rate 22.05% 34.05%
Average commission rate paid (per share) $ .0130
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE CONTINGENT DEFERRED
SALES CHARGE. NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
+ COMMENCEMENT OF SALES.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 13
TEMPLETON WORLD FUND
Investment Portfolio, August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 83.4%
- --------------------------------------------------------------------------------------------------------------------------
AEROSPACE & MILITARY TECHNICAL SYSTEMS: 1.0%
Boeing Co. U.S. 325,500 $ 29,457,750
General Motors Corp., H U.S. 616,400 34,441,350
--------------
63,899,100
- --------------------------------------------------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES: 2.0%
Electrolux AB, B Swe. 569,600 33,114,529
Email Ltd. Aus. 2,486,691 6,255,381
Sony Corp. Jpn. 1,452,800 91,192,784
--------------
130,562,694
- --------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES: 6.0%
Bayerische Motorenwerke (BMW) Ger. 43,500 25,162,010
*Ciadea SA Arg. 1,647,063 7,333,609
*Consorcio G Grupo Dina SA de CV Mex. 363,100 263,376
Ford Motor Co. U.S. 3,063,400 102,623,900
General Motors Corp. U.S. 1,800,000 89,550,000
Peugeot SA Fr. 256,625 29,390,828
Regie Nationale des Usines Renault SA Fr. 619,400 13,735,226
Volkswagen AG Ger. 144,000 53,421,631
Volvo AB, B Swe. 3,241,000 69,005,866
--------------
390,486,446
- --------------------------------------------------------------------------------------------------------------------------
BANKING: 11.7%
ABN AMRO NV Neth. 756,100 41,299,771
*ABN AMRO NV, trading cpn Neth. 756,100 819,621
Argentaria Corporacion Bancaria de
Espana SA Sp. 800,000 33,041,742
Australia & New Zealand Banking Group Ltd. Aus. 12,416,776 64,925,475
Banco Bilbao Vizcaya Sp. 1,145,000 48,114,240
Banco Central Hispano Sp. 1,100,000 22,364,689
Banco Popular Espanol SA Sp. 131,844 22,856,120
Bank of Ireland Irl. 1,220,000 8,962,045
BankAmerica Corp. U.S. 300,000 23,250,000
Bankinter SA Sp. 153,363 17,336,421
Banque Nationale de Paris Fr. 177,400 6,389,448
Canadian Imperial Bank of Commerce Can. 500,000 16,680,674
Chase Manhattan Corp., new U.S. 170,188 12,657,733
Citicorp U.S. 1,150,000 95,737,500
Den Norske Bank Nor. 4,087,900 13,137,298
HSBC Holdings PLC H.K. 4,549,903 78,553,126
National Australia Bank Ltd. Aus. 6,784,488 66,173,633
National Bank of Canada Can. 2,982,000 25,170,534
National Westminster Bank PLC U.K. 3,942,962 40,784,592
</TABLE>
12
<PAGE> 14
TEMPLETON WORLD FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
BANKING (cont.)
Royal Bank of Canada Can. 1,217,958 $ 30,574,676
Shinhan Bank Co. Ltd. Kor. 769,207 18,168,965
Svenska Handelsbanken, A Swe. 1,250,000 25,576,268
Westpac Banking Corp. Aus. 11,049,582 54,280,305
--------------
766,854,876
- --------------------------------------------------------------------------------------------------------------------------
BEVERAGES & TOBACCO: 0.1%
*Swedish Match AB Swe. 3,241,000 9,298,663
- --------------------------------------------------------------------------------------------------------------------------
BROADCASTING & PUBLISHING: 0.8%
News Corp. Ltd. Aus. 4,636,060 20,903,968
News International PLC Aus. 2,884,000 17,110,650
Sing Tao Holdings Ltd. H.K. 3,564,000 1,797,556
South China Morning Post Holdings Ltd. H.K. 18,958,000 13,361,927
--------------
53,174,101
- --------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS: 0.7%
*Owens Corning U.S. 1,027,300 37,368,038
Pioneer International Ltd. Aus. 3,020,756 8,721,945
--------------
46,089,983
- --------------------------------------------------------------------------------------------------------------------------
BUSINESS & PUBLIC SERVICES: 0.3%
Wheelabrator Technologies Inc. U.S. 42,100 626,238
WMX Technologies Inc. U.S. 500,000 15,812,500
--------------
16,438,738
- --------------------------------------------------------------------------------------------------------------------------
CHEMICALS: 3.2%
Akzo Nobel NV Neth. 431,573 50,135,761
Bayer AG Ger. 900,000 32,141,771
DSM NV Neth. 720,000 66,341,463
European Vinyls Corp. EVC International NV Neth. 415,080 12,223,675
Kemira OY, 144A Fin. 421,000 4,611,842
Lyondell Petrochemical Co. U.S. 824,600 18,759,650
Rhone-Poulenc SA, A Fr. 998,920 26,174,988
--------------
210,389,150
- --------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & HOUSING: 0.4%
Dragados y Construcciones SA Sp. 800,000 10,097,863
*Fletcher Challenge Building Ltd. N.Z. 4,594,788 10,121,657
Kaufman & Broad Home Corp. U.S. 736,500 9,022,125
--------------
29,241,645
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 15
TEMPLETON WORLD FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
DATA PROCESSING & REPRODUCTION: 1.3%
*Enator AB, B Swe. 167,800 $ 3,636,066
International Business Machines Corp. U.S. 550,000 62,906,250
*Quantum Corp. U.S. 1,000,000 15,375,000
--------------
81,917,316
- --------------------------------------------------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS: 4.2%
Alcatel Alsthom SA Fr. 549,055 42,499,790
ABB AB, A Swe. 569,800 61,520,004
Hitachi Ltd. Jpn. 5,800,000 53,275,656
Motorola Inc. U.S. 1,586,500 84,679,438
Philips Electronics NV Neth. 940,360 31,770,067
--------------
273,744,955
- --------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES: 0.5%
Koninklijke Pakhoed NV Neth. 270,000 7,609,756
Sun Co. Inc. U.S. 1,100,000 25,987,500
--------------
33,597,256
- --------------------------------------------------------------------------------------------------------------------------
ENERGY SOURCES: 5.7%
*Fletcher Challenge Energy Ltd. N.Z. 4,594,788 10,629,326
Norsk Hydro AS Nor. 345,333 15,838,863
Repsol SA Sp. 900,000 29,227,082
Saga Petroleum AS, A Nor. 1,438,748 21,771,836
Saga Petroleum AS, B Nor. 825,346 11,395,094
Societe Elf Aquitane SA Fr. 809,000 58,914,785
Texaco Inc. U.S. 435,000 38,606,250
Total SA, B Fr. 858,540 63,149,756
Transportadora de Gas del Sur SA, ADR B Arg. 1,400,000 16,800,000
USX-Marathon Group Inc. U.S. 1,150,900 24,025,038
Valero Energy Corp. U.S. 1,899,550 40,127,994
YPF Sociedad Anonima Arg. 1,400,000 29,416,768
YPF Sociedad Anonima, ADR Arg. 700,000 14,787,500
--------------
374,690,292
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: 3.2%
Axa SA Fr. 425,685 23,888,962
Dean Witter Discover & Co. U.S. 955,286 47,764,300
Federal National Mortgage Assn. U.S. 1,729,600 53,617,600
Merrill Lynch & Co. Inc. U.S. 1,221,800 74,835,250
Peregrine Investments Holdings Ltd. H.K. 8,000,000 11,277,077
--------------
211,383,189
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 16
TEMPLETON WORLD FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS: 2.1%
Archer Daniels Midland Co. U.S. 1,603,245 $ 28,457,599
Burns Philp & Co. Ltd. Aus. 8,472,814 12,533,550
C.P. Pokphand Co. Ltd. H.K. 6,641,000 2,254,462
Cafe de Coral Holdings Ltd. H.K. 762,000 211,872
Embotelladora Andina SA, ADR Chil. 104,400 3,523,500
Goodman Fielder Ltd. Aus. 2,361,937 2,447,622
*Grupo Embotellador de Mexico SA, B Mex. 562,500 964,392
*Grupo Embotellador de Mexico SA de CV,
GDR Mex. 1,684,000 16,629,500
Hillsdown Holdings PLC U.K. 15,923,076 45,868,125
Panamerican Beverages Inc., A Mex. 288,900 12,206,025
Vitro SA Mex. 4,174,200 8,147,466
Vitro SA, ADR Mex. 510,600 3,063,600
--------------
136,307,713
- --------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER: 6.0%
Aracruz Celulose SA, ADR Braz. 1,800,000 15,975,000
Assidomaen AB Swe. 800,000 19,932,501
Boise Cascade Corp. U.S. 399,800 13,493,250
Bowater Inc. U.S. 375,000 13,500,000
Carter Holt Harvey Ltd. N.Z. 2,514,400 5,643,041
*Enso OY, R Fin. 2,554,000 21,811,247
Fletcher Challenge Ltd. Forestry
Division, Aus. N.Z. 307,231 415,591
Fletcher Challenge Ltd. Forestry
Division, N.Z. N.Z. 11,327,536 15,644,471
*Fletcher Challenge Paper Ltd. N.Z. 9,189,576 17,704,967
Georgia-Pacific Corp. U.S. 1,050,000 78,093,750
International Paper Co. U.S. 453,800 18,152,000
Metsa Serla OY, B Fin. 2,430,000 18,198,992
Mo Och Domsjoe AB, B Swe. 600,000 17,350,336
Norske Skogindustrier AS, A Nor. 308,870 9,516,591
+PT Pabrik Kertas Tjiwi Kimia, fgn. Indo. 18,248,815 18,116,351
St. Joe Paper Corp. U.S. 375,400 23,087,100
Stora Kopparbergs Bergslags AB, A Swe. 248,000 3,482,752
Stora Kopparbergs Bergslags AB, B Swe. 1,652,000 23,074,890
Svenska Cellulosa AB, B Swe. 440,000 9,335,055
*UPM-Kymmene Corp. Fin. 2,242,290 51,382,105
--------------
393,909,990
- --------------------------------------------------------------------------------------------------------------------------
HEALTH & PERSONAL CARE: 1.2%
Ciba-Geigy AG Swtz. 60,000 75,750,000
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 17
TEMPLETON WORLD FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS: 1.2%
Goodyear Tire & Rubber Co. U.S. 1,202,600 $ 54,868,625
Sandvik AB, A Swe. 121,000 2,758,990
Sandvik AB, B Swe. 879,000 20,042,583
--------------
77,670,198
- --------------------------------------------------------------------------------------------------------------------------
INSURANCE: 4.1%
Ace Ltd. Bmu. 632,200 29,476,325
American Bankers Insurance Group Inc. U.S. 530,000 25,175,000
American International Group Inc. U.S. 375,000 35,625,000
Baloise-Holding Swtz. 14,445 30,695,625
Cigna Corp. U.S. 162,546 18,875,654
Ing Groep NV Neth. 1,025,000 31,913,580
*Ing Groep NV, trading cpn. Neth. 1,025,000 512,346
London Insurance Group Inc. Can. 300,000 6,774,583
National Mutual Asia Ltd. H.K. 8,818,000 7,355,461
Partnerre Ltd. Bmu. 306,000 8,644,500
Travelers Inc. U.S. 888,876 38,554,997
W.R. Berkley Corp. U.S. 719,000 32,714,500
--------------
266,317,571
- --------------------------------------------------------------------------------------------------------------------------
MACHINERY & ENGINEERING: 0.1%
Sasib SPA, di Risp Itl. 7,000 12,422
*Saurer AG Swtz. 19,187 7,482,930
--------------
7,495,352
- --------------------------------------------------------------------------------------------------------------------------
MERCHANDISING: 2.8%
*Cifra SA, B Mex. 16,470,000 25,717,745
Coles Myer Ltd., A Aus. 5,000,000 17,403,136
Dairy Farm International Holdings Ltd. H.K. 32,382,096 25,581,856
K Mart Corp. U.S. 650,000 6,500,000
Kwik Save Group PLC U.K. 1,751,906 10,804,273
Limited Inc. U.S. 2,200,000 40,700,000
Safeway PLC U.K. 4,310,083 23,014,386
W.H. Smith Group U.K. 4,207,600 33,503,661
--------------
183,225,057
- --------------------------------------------------------------------------------------------------------------------------
METALS & MINING: 4.7%
Alcan Aluminum Ltd. U.S. 1,607 50,420
Alcan Aluminum Ltd. Can. 1,105,628 34,905,638
Aluminum Co. of America U.S. 368,000 22,862,000
Arbed SA Lux. 131,200 14,888,554
*Asturiana del Zinc SA Sp. 1,200,000 8,723,787
Companhia Siderurgica Nacional ADR Braz. 691,280 15,949,738
De Beers Consolidated Mines Ltd. S.AF. 578,800 18,025,025
</TABLE>
16
<PAGE> 18
TEMPLETON WORLD FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
METALS & MINING (cont.)
Elkem AS Nor. 273,900 $ 3,888,410
Maanshan Iron & Steel Co. Ltd., H Chn. 11,701,000 2,118,513
Outokumpu OY, A Fin. 1,870,922 35,343,425
Pechiney SA, A Fr. 1,195,440 50,043,596
Pohang Iron & Steel Co. Ltd. Kor. 384,700 29,822,233
Reynolds Metals Co. U.S. 740,752 39,630,232
RGC Ltd. Aus. 1,205,405 5,530,518
Rustenburg Platinum Holdings Ltd. S.AF. 15,200 254,886
*Union Miniere NPV Bel. 350,000 26,918,662
--------------
308,955,637
- --------------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY: 3.3%
Alfa SA de CV, A Mex. 170,900 749,413
*Alfa SA de CV, A 144A Mex. 871,000 3,819,420
Cheung Kong Holdings Ltd. H.K. 6,798,000 47,693,695
CNT Group Ltd. H.K. 5,000,000 446,169
*DESC Sociedad de Formento Industrial SA,
B Mex. 245,800 1,270,737
*DESC Sociedad de Formento Industrial SA,
C Mex. 6,650 34,555
Inversiones y Representacion Arg. 3,981,475 11,034,976
Jardine Matheson Holdings Ltd. H.K. 2,154,834 13,575,454
Jardine Strategic Holdings Ltd. H.K. 15,061,094 48,195,501
Nokia AB, A Fin. 950,000 40,352,779
Pacific Dunlop Ltd. Aus. 14,000,000 30,344,740
Swire Pacific Ltd., A H.K. 1,358,100 12,074,927
Swire Pacific Ltd., B H.K. 3,614,500 5,048,380
--------------
214,640,746
- --------------------------------------------------------------------------------------------------------------------------
REAL ESTATE: 3.7%
American Health Properties Inc. U.S. 443,400 9,699,375
Beacon Properties Corp U.S. 750,000 20,437,500
Carramerica Realty Corp. U.S. 200,000 4,900,000
*Credit Foncier de France SA Fr. 140,103 1,901,976
Federal Realty Investment Trust U.S. 300,000 7,050,000
General Growth Properties U.S. 900,000 22,612,500
Hang Lung Development Co. Ltd. H.K. 15,150,000 28,605,238
Highwood Properties Inc., REIT U.S. 548,700 16,323,825
Hong Kong Land H.K. 7,172,000 16,280,440
Inversiones y Representacion, GDR Arg. 372,092 10,279,042
IRT Property Co. U.S. 537,600 4,972,800
Meditrust Inc. U.S. 850,000 29,112,500
*Naeckbro AB Swe. 125,000 1,727,106
National Health Investors Inc. U.S. 230,000 7,705,000
Nationwide Health Properties Inc. U.S. 400,000 8,900,000
</TABLE>
17
<PAGE> 19
TEMPLETON WORLD FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
REAL ESTATE (cont.)
Rouse Co. U.S. 1,120,000 $ 28,980,000
Summit Properties Inc., REIT U.S. 349,700 6,688,012
Tai Cheung Holdings Ltd. H.K. 2,873,618 2,211,190
Union du Credit Bail Immobilier Unibail Fr. 96,139 9,833,638
Universal Health Realty Income Trust U.S. 100,000 1,887,500
--------------
240,107,642
- --------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: 5.3%
AT&T Corp. U.S. 550,000 28,875,000
British Telecommunications PLC U.K. 1,725,800 10,117,846
Cpt-Telefonica del Peru SA, ADR B Per. 90,000 2,103,750
Cpt-Telefonica del Peru SA, B Per. 3,395,194 7,931,283
*SPT Telecom AS Csk. 57,268 7,514,246
STET (Sta Finanziaria Telefonica Torino)
SPA Itl. 7,278,650 23,140,843
STET (Sta Finanziaria Telefonica Torino)
SPA, di Risp Itl. 6,682,000 16,071,109
Telecom Argentina Stet France SA, ADR Arg. 1,088,900 42,330,988
Telecom Italia Spa, di Risp Itl. 24,742,450 39,781,754
Tele Danmark AS, B Den. 492,540 24,286,812
Telefonica de Espana SA Sp. 4,411,500 81,939,185
Telefonos de Mexico SA, L Mex. 13,007,000 21,133,695
Telefonos de Mexico SA, L, ADR Mex. 1,350,000 44,381,250
--------------
349,607,761
- --------------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL: 0.3%
Daehan Synthetic Fiber Co. Ltd. Kor. 15,580 1,464,339
*Fruit of the Loom Inc., A U.S. 759,500 21,076,125
--------------
22,540,464
- --------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: 3.3%
Anangel-American Shipholdings Ltd., ADR Gr. 38,900 340,375
APL Ltd. U.S. 911,400 21,531,825
British Airways PLC U.K. 1,366,800 11,224,794
Cathay Pacific Airways Ltd. H.K. 24,875,000 41,337,698
IMC Holdings Ltd. H.K. 7,214,000 4,104,960
Malaysian International Shipping Corp.
Bhd., fgn. Mal. 5,476,000 16,927,658
*OMI Corp. U.S. 358,800 2,870,400
Peninsular & Oriental Steam Navigation Co. U.K. 1,800,000 14,459,242
Qantas Airways Ltd., ADR, 144A Aus. 484,200 8,110,350
Shun Tak Holdings H.K. 16,706,000 9,830,236
Singapore Airlines Ltd., fgn. Sing. 3,331,000 35,269,969
Singapore Bus Service (1978) Ltd., fgn. Sing. 414,300 2,745,415
</TABLE>
18
<PAGE> 20
TEMPLETON WORLD FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (cont.)
Stolt Nielsen SA Nor. 521,500 $ 8,800,313
Stolt Nielsen SA, ADR Nor. 260,750 4,595,719
*Swissair Schweizerische Luftverkehr AG Swtz. 33,875 30,967,396
--------------
213,116,350
- --------------------------------------------------------------------------------------------------------------------------
UTILITIES-ELECTRICAL & GAS: 4.1%
*British Energy Ltd. U.K. 87,100 133,270
*British Energy Ltd., 144A U.K. 12,451,700 19,052,079
British Gas PLC U.K 8,352,000 26,797,233
Centerior Energy Corp. U.S. 1,632,800 12,450,100
*CEZ Csk. 154,120 6,115,402
Cia Energetica de Minas Gerais, ADR Braz. 7,000 210,754
Compania Sevillana de Electricidad Sp. 4,551,663 36,544,209
Consolidated Electric Power Asia Ltd. H.K. 782,600 1,442,231
Electricidad de Caracas Venz. 13,504,889 10,962,844
Entergy Corp. U.S. 1,200,000 30,450,000
Iberdrola SA Sp. 4,961,317 44,787,603
New York State Electric & Gas Corp. U.S. 400,000 8,600,000
Niagara Mohawk Power Corp. U.S. 2,090,600 17,247,450
Shandong Huaneng Power Chn. 1,000,000 9,375,000
Thames Water Group PLC U.K. 2,500,000 21,741,167
VEBA AG Ger. 400,000 20,961,584
--------------
266,870,926
- --------------------------------------------------------------------------------------------------------------------------
WHOLESALE & INTERNATIONAL TRADE: 0.1%
Sime Darby Hongkong Ltd. H.K. 5,380,000 5,670,482
--------------
TOTAL COMMON STOCKS (cost $4,346,692,574) 5,453,954,293
- --------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 3.9%
- --------------------------------------------------------------------------------------------------------------------------
American Health Properties Inc., pfd. U.S. 44,340 609,675
Bayerische Motorenwerke (BMW), pfd. Ger. 20,000 8,284,623
Cemig-Cia Energetica de Minas Gerais, pfd. Braz. 411,765,636 12,397,332
Cia de Inversiones en Telecomunicaciones
SA, 7.00%, pfd. Arg. 1,010,619 49,015,022
Fiat Spa, pfd. Itl. 13,000,000 20,557,779
Jardine Strategic Holdings Ltd., 7.50%,
conv., pfd. H.K. 9,050,000 9,864,500
Lojas Americanas SA, pfd. Braz. 147,900,000 2,561,165
Nacional Financiera SA, 11.25%, conv., pfd. Mex. 1,000,000 35,250,000
Petrobras-Petroleo Brasileiro SA, pfd. Braz. 94,633,000 11,312,943
Reynolds Metals Co., conv., pfd. U.S. 45,615 2,172,414
Telebras-Telecomunicacoes Brasileiras SA, pfd. Braz. 545,400,000 40,515,275
</TABLE>
19
<PAGE> 21
TEMPLETON WORLD FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
Telebras-Telecomunicacoes Brasileiras SA,
pfd., ADR Braz. 600,000 $ 44,625,000
Telesp-Telecomunicacoes de Sao Paulo SA,
pfd. Braz. 80,000,000 15,349,043
Volkswagen AG, pfd. Ger. 22,000 6,110,079
--------------
TOTAL PREFERRED STOCKS (cost $203,594,705) 258,624,850
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY**
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
BONDS: 10.5%
- --------------------------------------------------------------------------------------------------------------------------
Arbed SA, 2.50%, conv., 7/15/03 Ger. 2,250,000 1,296,162
Everen Capital Corp., 13.50%, 9/15/07 U.S. 32,850 36,792
Government of Australia:
7.00%, 8/15/98 Aus. 20,000,000 15,825,779
6.25%, 3/15/99 Aus. 20,000,000 15,499,866
7.00%, 4/15/00 Aus. 20,000,000 15,641,464
Government of Italy, 5.00%, 6/28/01 Itl. 14,845,000 14,882,112
Metro Pacific Capital, 2.50%, conv.,
4/11/03 U.S. 11,000,000 13,365,000
Softe SA, 4.25%, conv., 7/30/98, 144A Itl. 5,400,000,000 4,930,691
U.S. Treasury Notes:
7.00%, 9/30/96 U.S. 60,000,000 60,075,000
6.875%, 10/31/96 U.S. 60,000,000 60,131,400
7.25%, 11/30/96 U.S. 60,000,000 60,234,600
7.50%, 12/31/96 U.S. 60,000,000 60,375,000
6.125%, 3/31/98 U.S. 130,000,000 129,776,400
6.375%, 1/15/99 U.S. 78,000,000 77,939,160
6.00%, 10/15/99 U.S. 78,000,000 76,890,840
6.375%, 1/15/00 U.S. 78,000,000 77,488,320
-------------
TOTAL BONDS (cost $683,017,991) 684,388,586
- --------------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 2.3% (cost $149,124,556)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills 4.96% to 5.16% with
maturities to 11/21/96 U.S. 150,086,000 149,187,376
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 100.1% (cost $5,382,429,826) 6,546,155,105
OTHER ASSETS, LESS LIABILITIES: (0.1)% (4,390,364)
-------------
TOTAL NET ASSETS: 100.0% $6,541,764,741
-------------
-------------
</TABLE>
* NON-INCOME PRODUCING.
** CURRENCY OF COUNTRIES INDICATED.
+ SEE NOTE 5.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 22
TEMPLETON WORLD FUND
Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
Assets:
Investments in securities, at value
(identified cost $5,382,429,826) $6,546,155,105
Cash 241
Receivables:
Investment securities sold 5,094,512
Fund shares sold 2,884,081
Dividends and interest 28,756,714
--------------
Total assets 6,582,890,653
--------------
Liabilities:
Payables:
Investment securities purchased 32,221,779
Fund shares redeemed 2,305,548
Accrued expenses 6,598,585
--------------
Total liabilities 41,125,912
--------------
Net assets, at value $6,541,764,741
==============
Net assets consist of:
Undistributed net investment income $ 138,172,809
Net unrealized appreciation 1,163,725,279
Accumulated net realized gain 330,330,274
Net capital paid in on shares of
capital stock 4,909,536,379
--------------
Net assets, at value $6,541,764,741
==============
Class I
Net asset value per share
($6,483,145,578 / 399,844,596
shares outstanding) $ 16.21
==============
Maximum offering price
($16.21 / 94.25%) $ 17.20
==============
Class II
Net asset value per share
($58,619,163 / 3,655,403
shares outstanding) $ 16.04
==============
Maximum offering price
($16.04 / 99.00%) $ 16.20
==============
<S> <C> <C>
STATEMENT OF OPERATIONS
for the year ended August 31, 1996
Investment income:
(net of $12,916,916
foreign
taxes withheld)
Dividends $177,132,480
Interest 53,151,282
------------
Total income $230,283,762
Expenses:
Management fees (Note 3) 38,564,076
Administrative fees (Note
3) 4,924,652
Distribution fees (Note 3)
Class I 11,984,253
Class II 309,734
Transfer agent fees (Note
3) 4,635,000
Custodian fees 2,272,268
Reports to shareholders 1,375,000
Audit fees 57,000
Legal fees (Note 3) 17,000
Registration and filing
fees 400,000
Directors' fees
and expenses 58,000
Other 123,284
------------
Total expenses 64,720,267
------------
Net investment
income 165,563,495
Realized and unrealized
gain (loss):
Net realized gain (loss)
on:
Investments 420,777,830
Foreign currency
transactions (2,733,737)
------------
418,044,093
Net unrealized
appreciation on
investments 103,441,815
------------
Net realized and
unrealized gain 521,485,908
------------
Net increase in net assets
resulting from operations $687,049,403
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 23
TEMPLETON WORLD FUND
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 165,563,495 $ 116,759,998
Net realized gain on investment and foreign currency transactions 418,044,093 622,514,983
Net unrealized appreciation (depreciation) 103,441,815 (213,111,140)
-------------- --------------
Net increase in net assets resulting from operations 687,049,403 526,163,841
Distributions to shareholders:
From net investment income
Class I (130,871,491) (90,201,924)
Class II (283,110) --
From net realized gain
Class I (667,509,078) (466,541,300)
Class II (1,422,754) --
Capital share transactions (Note 2)
Class I 728,142,909 478,006,976
Class II 50,068,384 7,471,394
-------------- --------------
Net increase in net assets 665,174,263 454,898,987
Net assets:
Beginning of year 5,876,590,478 5,421,691,491
-------------- --------------
End of year $6,541,764,741 $5,876,590,478
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 24
TEMPLETON WORLD FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton World Fund (the Fund) is a separate series of Templeton Funds, Inc.
(the Company) which is an open-end, diversified management investment company
registered under the Investment Company Act of 1940. The Fund seeks long-term
capital growth through a flexible policy of investing in stocks and debt
obligations of companies and governments of any nation. The following summarizes
the Fund's significant accounting policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange 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 currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
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
foreign currencies, currency gains or losses realized between the trade and
settlement 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
securities is recorded as soon as information is available to the Fund. Interest
income 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.
E. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles 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 expense during the reporting
period. Actual results could differ from those estimates.
23
<PAGE> 25
TEMPLETON WORLD FUND
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
The Fund offers two classes of shares: Class I shares and Class II shares.
Shares of each class are identical except for their initial sales load, a
contingent deferred sales charge on Class II shares, distribution fees, and
voting rights on matters affecting a single class. At August 31, 1996, there
were 3.2 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, 1996 AUGUST 31, 1995
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 34,417,668 $ 540,260,882 26,269,051 $ 403,189,144
Shares issued on reinvestment of
distributions 49,118,786 722,606,074 33,988,482 502,706,371
Shares redeemed (33,886,588) (534,724,047) (27,844,607) (427,888,539)
------------ -------------- ------------ --------------
Net increase 49,649,866 $ 728,142,909 32,412,926 $ 478,006,976
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
CLASS II
---------------------------------------------------------
FOR THE PERIOD
MAY 1, 1995
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 3,291,659 $ 51,600,312 471,609 $ 7,727,629
Shares issued on reinvestment of
distributions 96,166 1,407,255 -- --
Shares redeemed (188,649) (2,939,183) (15,382) (256,235)
------------ -------------- ------------ --------------
Net increase 3,199,176 $ 50,068,384 456,227 $ 7,471,394
============ ============== ============ ==============
</TABLE>
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Company are also directors or officers of Templeton
Global Advisors Ltd. (TGAL), 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 TGAL 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,
1996, FTD received net commissions of $1,549,642 from the sale of the Fund's
shares and FTIS received fees of $4,504,000.
Under the distribution plans for Class I and Class II shares, the Fund
reimburses FTD quarterly for FTD's costs and expenses in connection with any
activity that is primarily intended to result in a sale of Fund shares, subject
to a maximum of 0.25% and
24
<PAGE> 26
TEMPLETON WORLD FUND
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
1.00% per annum of the average daily net assets of Class I and Class II shares,
respectively. Under the Class I distribution plan, costs and expenses exceeding
the maximum may be reimbursed in subsequent periods. At August 31, 1996, 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 $22,962 were paid to FTD for the year ended August 31, 1996.
An officer of the Company is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received fees of $17,000 for the year ended August 31,
1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1996 aggregated $1,953,081,762 and $1,255,259,169,
respectively. The cost of securities for federal income tax purposes is
$5,382,530,139. Realized gains and losses are reported on an identified cost
basis.
At August 31, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income tax purposes, was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $1,359,720,315
Unrealized depreciation (196,095,349)
--------------
Net unrealized appreciation $1,163,624,966
==============
</TABLE>
5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" as investments
in portfolio companies in which the Fund owns 5% or more of the outstanding
voting securities. Investments in "affiliated companies" at August 31, 1996
amounted to $18,116,351. For the year ended August 31, 1996, dividend income
from affiliated companies was $58,367.
25
<PAGE> 27
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, 1996, 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 financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights 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
August 31, 1996, 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
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton World Fund series of Templeton Funds, Inc. as of August 31, 1996, the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
/s/ McGladrey & Pullen, LLP
[McGladrey & Pullen, LLP]
New York, New York
September 27, 1996
26
<PAGE> 28
NOTES
-----
<PAGE> 29
LITERATURE REQUEST
- --------------------------------------------------------------------------------
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. 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.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH INCOME
Franklin Global Health Franklin Adjustable Rate
Care Fund Securities Fund
Franklin Templeton Franklin Adjustable U.S.
Japan Fund Government Securities Fund
Templeton Developing Franklin's AGE High
Markets Trust Income Fund
Templeton Foreign Fund Franklin Investment Grade
Templeton Foreign Smaller Income Fund
Companies Fund Franklin Short-Intermediate U.S.
Templeton Global Government Securities Fund
Infrastructure Fund Franklin U.S. Government
Templeton Global Securities Fund
Opportunities Trust Franklin Money Fund
Templeton Global Franklin Federal Money Fund
Real Estate Fund
Templeton Global Smaller FOR NON-U.S. INVESTORS:
Companies Fund
Templeton Greater Franklin Tax-Advantaged
European Fund High Yield Securities Fund
Templeton Growth Fund Franklin Tax-Advantaged
Templeton Latin America International Bond Fund
Fund Franklin Tax-Advantaged U.S.
Templeton Pacific Government Securities Fund
Growth Fund
Templeton World Fund FOR CORPORATIONS:
GLOBAL GROWTH AND INCOME Franklin Corporate Qualified
Dividend Fund
Franklin Global Utilities Fund
Franklin Templeton German FRANKLIN FUNDS SEEKING
Government Bond Fund TAX-FREE INCOME
Franklin Templeton
Global Currency Fund Federal Intermediate-Term
Templeton Global Bond Fund Tax-Free Income Fund
Templeton Growth and Federal Tax-Free Income Fund
Income Fund High Yield Tax-Free
Income Fund
GLOBAL INCOME Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Franklin Global Government Income Fund
Income Fund Tax-Exempt Money Fund
Franklin Templeton Hard
Currency Fund FRANKLIN STATE-SPECIFIC
Franklin Templeton High FUNDS SEEKING
Income Currency Fund TAX-FREE INCOME
Templeton Americas
Government Securities Fund Alabama
Arizona*
GROWTH Arkansas**
California*
Franklin Blue Chip Fund Colorado
Franklin California Growth Fund Connecticut
Franklin DynaTech Fund Florida*
Franklin Equity Fund Georgia
Franklin Gold Fund Hawaii**
Franklin Growth Fund Indiana
Franklin MidCap Growth Fund Kentucky
Franklin Small Cap Growth Fund Louisiana
Maryland
GROWTH AND INCOME Massachusetts***
Michigan*
Franklin Asset Allocation Fund Minnesota***
Franklin Balance Sheet Missouri
Investment Fund New Jersey
Franklin Convertible New York*
Securities Fund North Carolina
Franklin Equity Income Fund Ohio***
Franklin Income Fund Oregon
Franklin MicroCap Value Fund Pennsylvania
Franklin Natural Resources Fund Tennessee**
Franklin Real Estate Texas
Securities Fund Virginia
Franklin Rising Dividends Fund Washington**
Franklin Strategic Income Fund
Franklin Utilities Fund VARIABLE ANNUITIES
Franklin Value Fund
Templeton American Trust, Inc. Franklin Valuemark(SM)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities. 10/96.1
