<PAGE>
Templeton World Fund
[PHOTO APPEARS HERE]
Mark Holowesko
Chief Investment Officer
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 chief investment officer
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 former 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.
- --------------------------------------------------------------------------------
April 15, 1996
Dear Shareholder:
We are pleased to bring you the semi-annual report of the Templeton World Fund
for the period ended February 29, 1996.
During the six months under review, economic stability, low interest rates and
moderate inflation characterized most global economies. Seeking to capitalize on
these favorable investment conditions, individual and institutional investors
rushed to purchase equity securities, which ultimately led to higher stock
prices across a variety of markets in both developed and developing
countries.
No market epitomized this demand for equities more than the U.S., where inflows
of capital into mutual funds
1
<PAGE>
reached record levels. Despite potentially troublesome concerns about the
federal budget and debate over tax reform, news of all-time market highs
appeared nearly every week, further encouraging new investments and pushing U.S.
stock prices and market multiples even higher.
Unlike many bullish U.S. investors, we held firmly to the Templeton approach as
we monitored various factors, particularly leveraged stock purchases that were
approaching historically high levels. Because we were attracted to lower-priced,
less-volatile stocks that offered higher yields, we purchased shares of real
estate investment trusts (REITs) and utility companies. We bought the REIT
shares at relatively low prices, which reflected the poor performance of
residential and commercial real estate markets since 1990. In our opinion, the
real estate market has the potential to recover because economic growth should
lead to increased demand for office space, and lower interest rates and higher
employment rates should cause the value of residential properties to appreciate.
Utilities stocks presented us with attractive yields, while trading at
uncharacteristically low prices due to increased fear of deregulation and
competition.
- --------------------------------------------------------------------------------
Templeton World Fund
Geographic Distribution on 2/29/96
Based on Total Net Assets
[PIE CHART APPEARS HERE]
United States Stocks 30.2%
European Stocks 28.7%
Asian Stocks 10.4%
Latin American Stocks 6.5%
Australian & New
Zealand Stocks 5.9%
Other Stocks 2.5%
Fixed-Income Securities 4.8%
Short-Term Obligations &
Other Net Assets 11.0%
Although several European equity markets performed well during the period,
political unrest and labor discord kept many investors wary of this region. We
felt, however, that these concerns were already reflected in European stock
prices and that value opportunities still existed. Therefore, we increased our
exposure to Spain and France even though labor concerns in each country appeared
to be dominating the headlines. Unlike many other investors, we also purchased
European cyclical stocks, which were out of favor due to their poor performance
during last year's recession. Many companies that
2
<PAGE>
survived the recession have been utilizing their free cash flow to reduce debt
and lower operating and labor costs. We believe that, with restructured balance
sheets, these European cyclical companies should be well-suited to successfully
weather the highs and lows of current and future business cycles.
Latin American equity markets continued to recover from the "Tequila Effect,"
which depressed stock prices following Mexico's December 1994 currency
devaluation. We attempted to take advantage of lower Mexican equity prices in
1995 by establishing new positions and adding to existing ones. We reaped the
rewards of this strategy as Mexico's Bolsa index rose more than 37% in U.S.
dollar terms in the last three months of the reporting period alone. During this
same time, the peso appreciated versus the dollar, which also benefited many of
the Fund's Mexican holdings. While Mexico has not recovered entirely from this
crisis, there is evidence that the government's austerity program has been
successful in restoring investor confidence after significant amounts of capital
fled the country only one year ago.
Our Latin American stock purchases, however, were not limited to Mexico. The
Fund's overall Latin American
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Templeton World Fund
Top 10 Holdings on 2/29/96
Based on Total Net Assets
% of Total
Name, Industry, Country Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Merrill Lynch & Co. Inc.;
Financial Services, United States 2.4%
- --------------------------------------------------------------------------------
Ford Motor Co.; Automobiles,
United States 1.5%
- --------------------------------------------------------------------------------
Telefonos de Mexico SA, L;
Telecommunications, Mexico 1.5%
- --------------------------------------------------------------------------------
Citicorp; Banking, United States 1.4%
- --------------------------------------------------------------------------------
Sony Corp.; Appliances & Household
Durables, Japan 1.4%
- --------------------------------------------------------------------------------
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%
- --------------------------------------------------------------------------------
U.S. Treasury Note, 6.00%, 10/15/99;
Government Bond, United States 1.3%
- --------------------------------------------------------------------------------
Telefonica de Espana SA;
Telecommunications, Spain 1.2%
- --------------------------------------------------------------------------------
Volvo AB, B; Automobiles,
Sweden 1.1%
- --------------------------------------------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 13 of this report.
exposure almost doubled since late February 1995, which enabled us to
participate in stock-price appreciation across a variety of markets in this
region. One example is Brazil, where strong economic growth and government
reform benefited our holdings of large utility and telecommunications companies.
These companies have huge asset bases and serve a growing number of customers,
but their stocks have been trading at a substantial discount to book value
largely because of the government's involve-
3
<PAGE>
ment within these industries. As privatization becomes more prevalent, such
companies should become more efficient, enabling them to take better advantage
of the region's growing demand.
Due to the significant growth potential and value opportunities that we believe
exist in Asia, we increased our exposure there from 8.6% to 10.4% of total net
assets. We continued to discover potential bargains as military turmoil in the
straits of Taiwan, and Hong Kong's upcoming reversion to China, depressed equity
valuations to levels we felt were unjustifiably low. With more than 3.1 billion
people experiencing rising standards of living and consumption levels far below
those of many developed countries, we believe that Asia represents a region of
almost unfathomable demand potential.
This discussion reflects the strategies we employed for the Fund during the six-
month period, 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, 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 equity market has
increased 700% 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.
We thank you for your continued investment in the Fund and would like to
reaffirm our dedication and commitment to searching the world for the best
possible securities for the Fund's portfolio.
Sincerely,
/s/ Mark Holowesko
Mark Holowesko, CFA
President
Templeton World Fund
* Source: Bloomberg. Based on quarterly percentage change over 15 years ended
March 31, 1996.
4
<PAGE>
[Q & A LOGO APPEARS HERE]
The Following is an Interview
with Mark Holowesko, Portfolio
Manager of Templeton World
Fund:
What is your criteria for choosing stocks?
We use what is commonly called a "bottom-up, value" style of investing. "Bottom-
up" investing means that we do not attempt to guess the future direction of
economies, currencies or stock markets, as many investors try to do. For
instance, investors may believe that U.S. stocks will appreciate, so they
purchase shares of companies they think will benefit from the direction of the
overall market. We, on the other hand, try to determine which companies should
perform well, regardless of the direction of the markets. "Value" investing
describes the process we use as we attempt to determine the true worth of a
company's stock, regardless of its market price. This involves rigorous analysis
of a company's balance sheet, income statement, and the prospects for the
company's goods or services in the marketplace.
5
<PAGE>
How do you think the recent rally in the U.S. stock market will affect foreign
markets?
In the short term, volatility in the U.S. market will probably affect many
markets, particularly those closely tied to the dollar. High returns in the U.S.
market have temporarily directed investor attention away from international
markets, which has led to lower returns in those markets. However, over the long
term, the fundamental value of individual companies is what drives stock
performance, and we believe that these selloffs generally present opportunities
to find good value at low prices.
What effect do you think Hong Kong's upcoming reversion to China will have on
the Hong Kong market?
Although the outcome of this change is uncertain, knowledge of the situation is
widespread, and we believe that any uncertainty surrounding it has already been
reflected in stock prices. Considering the large amounts of money and investment
capital that flow from Hong Kong to China, the sharing of technical expertise
between the two countries, and the magnitude of Chinese investments in Hong
Kong, it is difficult to believe that China would intentionally destroy such a
prized possession.
What is your feeling about Japanese stocks? Are you shying away from them, or is
it possible to find bargain-priced stocks there?
Currently, we are not buying many Japanese stocks. We believe they are
overvalued, and although price/earnings ratios have decreased since 1994, they
continue to be high. Furthermore, returns on Japanese equities in 1995 were 40%
lower than their average return for the prior 15 years.
This market becomes even less attractive when one focuses on the effects of last
year's banking crisis,
[Q & A LOGO APPEARS HERE]
6
<PAGE>
which forced two of Japan's largest thrifts into bankruptcy and resulted in more
than $700 billion in unrecoverable loans. Japanese depositors have been
withdrawing significant amounts from local banks, and many citizens are moving
their savings from banks to post offices. The Japanese post office can invest
only in Japan's government bonds, or other related securities, which diminishes
the liquidity of the "real" economy.
Nevertheless, we do own shares of some Japanese companies that we believe are
strong and that remain in the forefront of technological innovation. Among these
is Sony, a company that, despite Japan's troubles, continues to exhibit strength
in new product development and constant evaluation of its operations. Based on
the strengths we see in some companies, as well as our belief in the likelihood
of an eventual bailout of the Japanese banking system, we feel comfortable with
our current Japanese holdings.
[Q & A APPEARS HERE]
7
<PAGE>
- --------------------------------------------------------------------------------
Performance Summary
Class I Shares
The Templeton World Fund Class I Shares reported a total return of 7.11% for the
six-month period ended February 29, 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. While we
expect market volatility in the short term, 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 to the
right, the Fund delivered a cumulative total return of more than 212% for the
10-year period ended February 29, 1996.
As measured by net asset value, the price of the Fund's Class I Shares decreased
from $16.76 on August 31, 1995 to $15.54 on February 29, 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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Templeton World Fund
Class I Shares
Periods Ended 2/29/96
Since
Inception
One-Year Five-Year Ten-Year (1/17/78)
<S> <C> <C> <C> <C>
Cumulative
Total Return/1/ 23.89% 99.66% 212.86% 1,409.67%
Average Annual
Total Return/2/ 16.77% 13.47% 11.42% 15.78%
</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 maximum 5.75% initial
sales charge.
All total return figures assume reinvestment of dividends and capital gains when
paid. Prior to July 1, 1992, Fund shares were offered at a higher initial 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.
8
<PAGE>
Performance Summary
Class II Shares
The Templeton World Fund Class II Shares reported a total return of 6.73% for
the six-month period ended February 29, 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 price of the Fund's Class II Shares
decreased from $16.71 on August 31, 1995 to $15.44 on February 29, 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.
- --------------------------------------------------------------------------------
Templeton World Fund
Class II Shares
Periods Ended 2/29/96
<TABLE>
<CAPTION>
Since
Inception
Six-Month (5/1/95)
<S> <C> <C>
Cumulative
Total Return/1/ 6.73% 16.11%
Aggregate
Total Return/2/ 4.61% 13.80%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the indicated periods. It does not include the 1.0% initial sales charge or the
1.0% Contingent Deferred Sales Charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Aggregate total return represents the change in value of an investment over
the indicated periods. It includes the 1.0% initial sales charge and 1.0% CDSC,
applicable to shares redeemed within the first 18 months of investment. Since
Class II Shares have been in existence for less than one year, average annual
total returns are not provided.
All total return figures 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.
9
<PAGE>
Templeton World Fund
Class I Shares
If you had invested $10,000 in the Templeton World Fund at inception, it would
be worth over $140,000 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 February 29,
1996.*
[Mountain chart appears here showing an Initial Investment of $10,000 made on
1/17/78 (Initial Net Asset Value of $9,425) would be valued at $142,279 on
2/29/96]
*The amount of capital gains distributions accepted in shares was $82,070. The
total amount of dividends reinvested was $30,915. 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 8. 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 -- CLASS I (For a share outstanding throughout
the period)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
----------------------------------------------------------
SIX MONTHS
ENDED
FEBRUARY 29, 1996
(UNAUDITED) 1995 1994 1993 1992 1991
----------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 16.76 $ 17.06 $ 15.94 $ 14.42 $ 15.05 $ 14.70
---------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations:
Net investment income .14 .33 .26 .30 .41 .46
Net realized and
unrealized gain .89 1.11 2.50 2.81 .67 1.16
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations 1.03 1.44 2.76 3.11 1.08 1.62
---------- ---------- ---------- ---------- ---------- ----------
Distributions:
Dividends from net
investment income (.37) (.28) (.26) (.38) (.42) (.52)
Distributions from net
realized gains (1.88) (1.46) (1.38) (1.21) (1.29) (.75)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (2.25) (1.74) (1.64) (1.59) (1.71) (1.27)
---------- ---------- ---------- ---------- ---------- ----------
Change in net asset
value (1.22) (.30) 1.12 1.52 (.63) .35
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
period $ 15.54 $ 16.76 $ 17.06 $ 15.94 $ 14.42 $ 15.05
========== ========== ========== ========== ========== ==========
TOTAL RETURN* 7.11% 9.87% 18.87% 24.71% 8.13% 12.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000) $6,238,158 $5,868,967 $5,421,691 $4,621,124 $4,046,706 $4,129,635
Ratio of expenses to
average net assets 1.01%** 1.05% 1.04% 1.02% .86% .72%
Ratio of net investment
income to average net
assets 1.84%** 2.18% 1.67% 2.13% 2.76% 3.23%
Portfolio turnover rate 12.30% 34.05% 30.77% 23.86% 26.60% 22.90%
Average commission rate
paid (per share) $ .0172
</TABLE>
*TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
**ANNUALIZED.
11
<PAGE>
Templeton World Fund
Financial Highlights (cont.)
- -------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE -- CLASS II (For a share outstanding
throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED MAY 1, 1995+
FEBRUARY 29, 1996 THROUGH
(UNAUDITED) AUGUST 31, 1995
----------------- ---------------
<S> <C> <C>
Net asset value, beginning of period $ 16.71 $ 15.36
------- -------
Income from investment operations:
Net investment income .23 .03
Net realized and unrealized gain .73 1.32
------- -------
Total from investment operations .96 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 (1.27) 1.35
------- -------
Net asset value, end of period $ 15.44 $ 16.71
======= =======
TOTAL RETURN* 6.73% 8.79%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $30,082 $ 7,623
Ratio of expenses to average net assets 1.84%** 1.82%**
Ratio of net investment income to average
net assets 1.00%** 1.37%**
Portfolio turnover rate 12.30% 34.05%
Average commission rate paid (per share) $ .0172
</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.
12
<PAGE>
Templeton World Fund
Investment Portfolio, February 29, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
COMMON STOCKS: 82.6%
- --------------------------------------------------------------------------------
Aerospace & Military Technical Systems:
1.2%
Boeing Co. U.S. 325,500 $ 26,406,188
Celsius AB, B Swe. 492,500 13,534,630
General Motors Corp., H U.S. 616,400 35,288,900
--------------
75,229,718
- --------------------------------------------------------------------------------
Appliances & Household Durables: 2.0%
Electrolux AB, B Swe. 569,600 27,973,689
Email Ltd. Aus. 5,499,100 14,545,103
Sony Corp. Jpn. 1,450,000 84,993,815
--------------
127,512,607
- --------------------------------------------------------------------------------
Automobiles: 5.8%
Bayerische Motorenwerke AG (BMW) Ger. 43,500 24,388,651
*Ciadea SA Arg. 1,497,333 6,741,033
*Consorcio G Grupo Dina SA de
CV Mex. 363,100 133,538
*Consorcio G Grupo Dina SA de
CV, ADR Mex. 18,400 29,900
Ford Motor Co. U.S. 3,063,400 95,731,250
General Motors Corp. U.S. 1,200,000 61,500,000
Peugeot SA Fr. 229,625 34,345,474
Regie Nationale des Usines
Renault SA Fr. 419,400 12,304,829
Volkswagen AG Ger. 160,000 60,964,823
Volvo AB, B Swe. 3,241,000 69,381,407
--------------
365,520,905
- --------------------------------------------------------------------------------
Banking: 12.5%
ABN AMRO NV Neth. 756,100 35,134,332
Argentaria Corporacion Bancaria
de Espana SA Sp. 700,000 31,554,712
Australia & New Zealand Banking
Group Ltd. Aus. 12,416,776 61,033,590
Banco Bilbao Vizcaya Sp. 1,145,000 44,584,562
Banco Central Hispano Sp. 1,100,000 24,615,260
Banco Popular Espanol Sp. 111,500 20,312,033
Bank of Ireland Irl. 1,220,000 8,468,457
BankAmerica Corp. U.S. 300,000 21,375,000
Bankinter SA Sp. 350,000 37,605,526
Canadian Imperial Bank of
Commerce Can. 500,000 14,852,207
Chase Manhattan Corp. U.S. 649,700 48,402,650
Chemical Banking Corp. U.S. 600,000 42,975,000
Citicorp U.S. 1,150,000 89,700,000
Den Norske Bank Nor. 639,600 2,077,856
HSBC Holdings PLC H.K. 3,849,903 61,750,633
National Australia Bank Ltd. Aus. 6,784,488 65,089,345
National Bank of Canada Can. 2,982,000 24,182,491
National Westminster Bank PLC U.K. 2,542,962 26,925,526
</TABLE>
13
<PAGE>
Templeton World Fund
Investment Portfolio, February 29, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Banking (cont.)
Royal Bank of Canada Can. 1,217,958 $ 27,855,401
Shinhan Bank Co. Ltd. Kor. 668,837 16,369,007
Svenska Handelsbanken, A Swe. 1,250,000 24,074,074
Westpac Banking Corp. Aus. 11,049,582 52,201,552
--------------
781,139,214
- -------------------------------------------------------------------------------
Broadcasting & Publishing: 0.9%
News Corp. Ltd. Aus. 3,499,072 17,654,113
News International PLC Aus. 2,884,000 13,478,494
Oriental Press Group Limited H.K. 18,000,000 7,974,492
Sing Tao Holdings Ltd. H.K. 3,564,000 1,855,554
South China Morning Post
(Holdings) Ltd. H.K. 18,958,000 13,364,692
--------------
54,327,345
- -------------------------------------------------------------------------------
Building Materials & Components: 1.0%
*Owens Corning U.S. 1,283,000 52,121,875
Pioneer International Ltd. Aus. 3,020,756 8,959,762
--------------
61,081,637
- -------------------------------------------------------------------------------
Business & Public Services: 0.1%
Wheelabrator Technologies Inc. U.S. 42,100 668,338
WMX Technologies Inc. U.S. 256,900 7,321,650
--------------
7,989,988
- -------------------------------------------------------------------------------
Chemicals: 2.9%
Akzo Nobel NV Neth. 431,573 47,999,160
DSM NV Neth. 720,000 67,307,295
European Vinyls Corp. EVC
International NV Neth. 415,080 13,438,477
Kemira OY, 144A Fin. 404,400 3,647,812
Lyondell Petrochemical Co. U.S. 824,600 22,161,125
Rhone-Poulenc SA, A Fr. 998,920 24,908,351
--------------
179,462,220
- -------------------------------------------------------------------------------
Construction & Housing: 0.2%
Kaufman & Broad Home Corp. U.S. 760,200 11,688,075
- -------------------------------------------------------------------------------
Data Processing & Reproduction: 0.7%
International Business Machines
Corp. U.S. 250,000 30,656,250
*Quantum Corp. U.S. 800,000 13,700,000
--------------
44,356,250
- -------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
Templeton World Fund
Investment Portfolio, February 29, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Electrical & Electronics: 3.9%
Alcatel Alsthom SA Fr. 500,000 $ 44,345,920
Asea AB, A Swe. 569,800 57,233,244
Hitachi Ltd. Jpn. 5,800,000 58,502,236
Motorola Inc. U.S. 992,600 53,848,550
Philips Electronics NV Neth. 740,360 30,805,236
--------------
244,735,186
- -------------------------------------------------------------------------------
Energy Equipment & Services: 0.5%
Koninklijke Pakhoed NV Neth. 270,000 6,953,775
Sun Co. Inc. U.S. 700,000 20,387,500
--------------
27,341,275
- -------------------------------------------------------------------------------
Energy Sources: 6.2%
Norsk Hydro AS Nor. 127,500 5,436,463
Repsol SA Sp. 900,000 32,863,433
Saga Petroleum AS, A Nor. 1,438,750 17,527,644
Saga Petroleum AS, B Nor. 825,347 9,216,925
Shell Transport & Trading Co.
PLC U.K. 1,873,000 24,222,920
Societe Elf Aquitane SA Fr. 809,000 55,815,792
Texaco Inc. U.S. 735,000 58,616,250
Total SA, B Fr. 858,540 56,662,056
Transportadora de Gas del Sur
SA, B, ADR Arg. 1,400,000 17,325,000
USX-Marathon Group Inc. U.S. 1,400,000 25,900,000
Valero Energy Corp. U.S. 1,899,550 44,876,869
YPF Sociedad Anonima Arg. 1,400,000 27,312,282
YPF Sociedad Anonima, ADR Arg. 700,000 13,562,500
--------------
389,338,134
- -------------------------------------------------------------------------------
Financial Services: 4.3%
Axa SA Fr. 351,885 22,735,133
Dean Witter Discover & Co. U.S. 484,186 26,024,998
Federal National Mortgage Assn. U.S. 1,729,600 54,698,600
Merrill Lynch & Co. Inc. U.S. 2,621,800 151,081,225
Peregrine Investments Holdings
Ltd. H.K. 8,000,000 13,659,470
--------------
268,199,426
- -------------------------------------------------------------------------------
Food & Household Products: 2.1%
Archer Daniels Midland Co. U.S. 655,900 12,626,075
Burns Philp & Co. Ltd. Aus. 8,233,300 18,378,323
C.P. Pokphand Co. Ltd. H.K. 6,641,000 3,500,508
Cafe de Coral Holdings Ltd. H.K. 762,000 226,701
Embotelladora Andina SA, ADR Chil. 511,050 18,397,800
</TABLE>
15
<PAGE>
Templeton World Fund
Investment Portfolio, February 29, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Food & Household Products (cont.)
Goodman Fielder Ltd. Aus. 3,352,393 $ 3,562,204
*Grupo Embotellador de Mexico
SA, B Mex. 562,500 830,438
*Grupo Embotellador de Mexico
SA de CV, GDR Mex. 1,684,000 14,524,500
Hillsdown Holdings PLC U.K. 15,076,376 39,619,351
Panamerican Beverages Inc., A Pan. 263,300 10,663,650
Vitro SA Mex. 4,174,200 7,388,449
Vitro SA, ADR Mex. 510,600 2,680,650
--------------
132,398,649
- -------------------------------------------------------------------------------
Forest Products & Paper: 5.5%
Aracruz Celulose SA, ADR Braz. 1,130,100 8,193,225
Assidomaen AB Swe. 634,514 14,241,314
Boise Cascade Corp. U.S. 399,800 14,092,950
Carter Holt Harvey Ltd. N.Z. 1,795,100 3,842,629
Enso Gutzeit OY, R Fin. 2,331,800 16,570,334
Fletcher Challenge Ltd. N.Z. 18,379,152 42,188,353
Fletcher Forestry, Aus. N.Z. 307,231 425,102
Fletcher Forestry, N.Z. N.Z. 11,327,537 15,784,054
Georgia-Pacific Corp. U.S. 1,050,000 66,281,250
International Paper Co. U.S. 1,052,700 37,502,438
Kymmene Corp. Fin. 188,300 5,261,281
Metsa Serla OY, B Fin. 486,000 15,076,233
*Mo Och Domsjoe AB, B Swe. 278,123 13,720,735
Norske Skogindustrier AS, A Nor. 36,000 1,085,184
+PT Pabrik Kertas Tjiwi Kimia,
fgn. Indo. 18,248,816 18,512,721
Repola OY Fin. 1,523,000 30,457,990
St. Joe Paper Co. U.S. 375,400 22,899,400
Stora Kopparbergs Bergslags AB,
B Swe. 1,200,000 15,466,667
Svenska Cellulosa AB, B Swe. 337,800 5,705,067
--------------
347,306,927
- -------------------------------------------------------------------------------
Health & Personal Care: 0.9%
Ciba-Geigy AG Swtz. 60,000 53,594,662
- -------------------------------------------------------------------------------
Industrial Components: 0.9%
Goodyear Tire & Rubber Co. U.S. 1,202,600 57,123,500
- -------------------------------------------------------------------------------
Insurance: 4.8%
Ace Limited Bmu. 800,000 37,400,000
Allstate Corp. U.S. 422,124 18,098,567
American Bankers Insurance
Group Inc. U.S. 530,000 19,080,000
American International Group
Inc. U.S. 375,000 36,234,375
Baloise-Holding Swtz. 13,446 26,017,281
</TABLE>
16
<PAGE>
Templeton World Fund
Investment Portfolio, February 29, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Insurance (cont.)
Cigna Corp. U.S. 312,546 $ 37,036,701
Ing Groep NV Neth. 410,000 27,220,434
London Insurance Group Inc. Can. 300,000 6,123,118
National Mutual Asia Ltd. H.K. 8,818,000 8,554,631
Travelers Inc. U.S. 743,384 49,713,805
W.R. Berkley Corp. U.S. 719,000 32,534,750
Zurich Reinsurance Centre
Holdings, Inc. U.S. 57,200 1,816,100
--------------
299,829,762
- -------------------------------------------------------------------------------
Machinery & Engineering: 0.1%
*Saurer AG Swtz. 20,000 8,423,686
- -------------------------------------------------------------------------------
Merchandising: 2.3%
Argyll Group PLC U.K. 4,310,083 19,482,915
*Cifra SA, B Mex. 16,470,000 19,434,902
Dairy Farm International
Holdings Ltd. H.K. 30,848,487 30,077,275
K Mart Corp. U.S. 1,250,000 8,750,000
Limited Inc. U.S. 2,200,000 38,500,000
Ventures Stores Inc. U.S. 200,000 1,125,000
W.H. Smith Group U.K. 4,185,600 26,873,116
--------------
144,243,208
- -------------------------------------------------------------------------------
Metals & Mining: 5.1%
Alcan Aluminum Ltd. Can. 1,107,217 33,797,178
*Alumax Inc. U.S. 838,200 30,279,975
Aluminum Co. of America U.S. 368,000 20,884,000
*ARBED SA Lux. 131,200 14,626,001
*Asturiana del Zinc SA Sp. 1,200,000 11,584,602
De Beers Consolidated Mines
Ltd. S.AF. 578,800 18,384,093
Elkem AS, A Nor. 273,900 3,294,021
Maanshan Iron & Steel Co. Ltd.,
H Chn. 11,701,000 2,088,680
Outokumpu OY, A Fin. 1,866,722 29,980,575
*Outokumpu OY, wts. Fin. 824,300 38,991
*Pechiney SA, A Fr. 1,195,440 48,495,349
Pohang Iron & Steel Co. Ltd. Kor. 372,160 28,562,941
Reynolds Metals Co. U.S. 740,752 38,241,322
RGC Ltd. Aus. 2,298,353 11,736,600
*Union Miniere NPV Bel. 350,000 25,760,834
--------------
317,755,162
- -------------------------------------------------------------------------------
Multi-Industry: 2.9%
Cheung Kong Holdings Ltd. H.K. 6,798,000 47,263,902
CNT Group Ltd. H.K. 5,000,000 300,741
</TABLE>
17
<PAGE>
Templeton World Fund
Investment Portfolio, February 29, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Multi-Industry (cont.)
*DESC Sociedad de Formento
Industrial SA, B Mex. 2,035,100 $ 7,898,120
Jardine Matheson Holdings Ltd. H.K. 2,844,797 22,758,376
Jardine Strategic Holdings Ltd. H.K. 15,061,094 51,207,720
Pacific Dunlop Ltd. Aus. 14,000,000 33,177,131
Swire Pacific Ltd., A H.K. 1,358,100 11,857,837
Swire Pacific Ltd., B H.K. 3,614,500 5,213,064
--------------
179,676,891
- -------------------------------------------------------------------------------
Real Estate: 3.0%
American Health Properties Inc. U.S. 443,400 10,309,050
Beacon Properties Corp U.S. 408,100 10,712,625
Carramerica Realty Corp. U.S. 200,000 4,925,000
Credit Foncier de France SA Fr. 5,000 72,703
Federal Realty Investment Trust U.S. 300,000 6,750,000
General Growth Properties U.S. 870,000 20,010,000
Hang Lung Development Co. Ltd. H.K. 15,150,000 28,317,208
*Hang Lung Development Co.
Ltd., wts. H.K. 854,500 232,114
Highwood Properties Inc., REIT U.S. 463,800 13,914,000
Hong Kong Land H.K. 7,172,000 15,563,240
IRT Property Co. U.S. 537,600 4,905,600
Meditrust Inc. U.S. 850,000 28,262,500
National Health Investors Inc. U.S. 230,000 7,503,750
Nationwide Health Properties
Inc. U.S. 200,000 8,400,000
Rouse Co. U.S. 1,120,000 22,540,000
Tai Cheung Holdings Ltd. H.K. 5,407,618 4,826,420
Universal Health Realty Income
Trust U.S. 100,000 1,912,500
--------------
189,156,710
- -------------------------------------------------------------------------------
Telecommunications: 4.5%
Alcatel Cable SA Fr. 18,825 1,528,466
STET (Sta Finanziaria
Telefonica Torino) SPA Itl. 7,278,650 22,236,202
STET (Sta Finanziaria
Telefonica Torino) SPA, di Risp Itl. 4,506,432 10,162,468
Telecom Argentina Stet France
SA, ADR Arg. 582,600 25,197,450
Telecom Italia Spa, di Risp Itl. 20,773,202 28,654,625
Telefonica de Argentina SA, B,
ADR Arg. 1,200,000 31,350,000
Telefonica de Espana SA Sp. 4,411,500 72,524,155
Telefonica de Peru, B Pen. 147,165 311,695
Telefonos de Mexico SA, L Mex. 13,007,000 19,816,617
Telefonos de Mexico SA, L, ADR Mex. 2,350,000 71,675,000
--------------
283,456,678
- -------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
Templeton World Fund
Investment Portfolio, February 29, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Textiles & Apparel: 0.3%
Daehan Synthetic Fiber Co. Ltd. Kor. 15,580 $ 1,515,096
*Fruit of the Loom Inc., A U.S. 700,000 17,762,500
--------------
19,277,596
- -------------------------------------------------------------------------------
Transportation: 3.3%
American President Cos. Ltd. U.S. 911,400 19,139,400
Anangel-American Shipholdings
Ltd., ADR Gr. 38,900 447,350
*Bremer Vulkan Verbund AG Ger. 350,000 5,310,608
British Airways PLC U.K. 1,366,800 10,660,290
Cathay Pacific Airways Ltd. H.K. 17,915,000 32,790,134
IMC Holdings Ltd. H.K. 7,214,000 3,732,554
Malaysian International
Shipping Corp. Bhd., fgn., Mal. Mal. 647,000 1,802,511
Malaysian International
Shipping Corp. Bhd., fgn.,
Sing. Mal. 5,476,000 15,549,327
*OMI Corp. U.S. 693,400 5,373,850
Peninsular & Oriental Steam
Navigation Co. U.K. 1,800,000 14,425,154
Qantas Airways Ltd., ADR, 144A Aus. 484,200 8,806,388
Shun Tak Holdings H.K. 16,706,000 12,317,350
Singapore Airlines Ltd., fgn. Sing. 2,531,000 25,449,795
Singapore Bus Service (1978)
Ltd., fgn. Sing. 478,300 4,030,428
Stolt Nielsen SA U.S. 521,500 9,191,438
*Stolt Nielsen SA, ADR U.S. 260,750 4,693,500
*Swissair Schweizerische
Luftverkehr AG Swtz. 33,875 32,631,881
*Transportacion Maritima
Mexicana SA de CV, L, ADR Mex. 212,000 1,722,500
--------------
208,074,458
- -------------------------------------------------------------------------------
Utilities--Electrical & Gas: 4.6%
American Electric Power Co.
Inc. U.S. 990,600 42,471,975
British Gas PLC U.K. 4,352,000 15,804,600
Centerior Energy Corp. U.S. 2,032,800 17,024,700
*CEZ Csk. 27,700 994,973
Cia Energetica de Minas Gerais,
ADR Braz. 7,000 177,710
Compania Sevillana de
Electricidad Sp. 4,551,663 34,895,409
Electricidad de Caracas Venz. 13,504,890 8,501,756
Entergy Corp. U.S. 1,200,000 34,050,000
Iberdrola SA Sp. 4,961,317 48,897,740
Long Island Lighting Co. U.S. 1,550,000 27,125,000
New York State Electric & Gas
Corp. U.S. 400,000 9,450,000
Niagara Mohawk Power Corp. U.S. 2,790,600 20,929,500
Shandong Huaneng Power Chn. 1,000,000 9,625,000
Texas Utilties Electric Co. U.S. 51,400 2,075,275
VEBA AG Ger. 400,000 18,860,992
--------------
290,884,630
- -------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
Templeton World Fund
Investment Portfolio, February 29, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- ------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------
Wholesale & International Trade: 0.1%
Sime Darby Hongkong Ltd. H.K. 5,380,000 $ 5,567,269
--------------
TOTAL COMMON STOCKS (cost $4,066,927,495) 5,174,691,768
- ------------------------------------------------------------------------------
PREFERRED STOCKS: 1.6%
- ------------------------------------------------------------------------------
American Health Properties
Psychiatric Group, pfd. U.S. 44,340 676,185
Bayerische Motorenwerke AG
(BMW), pfd. Ger. 20,000 7,892,767
Cemig-Cia Energetica de Minas
Gerais, pfd. Braz. 411,765,636 10,453,558
*Everen Capital Corp., pfd. U.S. 40,254 1,026,473
Petrobras-Petroleo Brasileiro
SA, pfd. Braz. 94,633,000 10,522,786
Reynolds Metals Co., conv.,
pfd. U.S. 45,615 2,212,328
Telebras-Telecomunicacoes
Brasileiras SA, pfd. Braz. 545,400,000 28,467,692
Telebras-Telecomunicacoes
Brasileiras SA, pfd., ADR Braz. 500,000 26,250,000
Telesp-Telecomunicacoes de Sao
Paulo SA, pfd. Braz. 80,000,000 13,241,940
--------------
TOTAL PREFERRED STOCKS (cost $70,829,136) 100,743,729
- ------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Templeton World Fund
Investment Portfolio, February 29, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
- ------------------------------------------------------------------------------
BONDS: 4.8%
- ------------------------------------------------------------------------------
ARBED SA, 2.50%, conv.,
7/15/03 Ger. 2,250,000 $ 1,301,286
Government of Australia:
7.00%, 8/15/98 Aus. 20,000,000 14,977,258
6.25%, 3/15/99 Aus. 20,000,000 14,583,566
7.00%, 4/15/00 Aus. 20,000,000 14,693,341
Jardine Strategic
Holdings Ltd., 7.50%,
conv., 5/07/49 U.S. 9,050,000 10,701,625
Softe SA, 4.25%, conv.,
7/30/98, 144A Itl. 5,400,000,000 4,319,389
U.S. Treasury Notes:
6.375%, 1/15/99 U.S. 78,000,000 79,681,680
6.00%, 10/15/99 U.S. 78,000,000 78,828,360
6.375%, 1/15/00 U.S. 78,000,000 79,828,320
--------------
TOTAL BONDS (cost $292,681,176) 298,914,825
- ------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 11.1% (cost
$695,757,305)
- ------------------------------------------------------------------------------
U.S. Treasury Bills,
4.53% to 4.98% with
maturities to 5/09/96 U.S. 699,932,000 695,748,644
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS: 100.1% (cost
$5,126,195,112) 6,270,098,966
OTHER ASSETS, LESS LIABILITIES:
(0.1)% (1,858,638)
--------------
TOTAL NET ASSETS: 100.0% $6,268,240,328
==============
</TABLE>
*NON-INCOME PRODUCING.
**CURRENCY OF COUNTRIES INDICATED.
+SEE NOTE 5.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
Templeton World Fund
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996 (unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (identified cost
$5,126,195,112) $6,270,098,966
Cash 1,057,184
Receivables:
Investment securities sold 19,995,605
Capital shares sold 9,649,010
Dividends and interest 18,291,945
--------------
Total assets 6,319,092,710
--------------
Liabilities:
Payables:
Investment securities purchased 41,156,106
Capital shares redeemed 4,070,282
Accrued expenses 5,625,994
--------------
Total liabilities 50,852,382
--------------
Net assets, at value $6,268,240,328
==============
Net assets consist of:
Undistributed net investment income $ 27,651,552
Net unrealized appreciation 1,143,903,854
Accumulated net realized gain 191,174,241
Net capital paid in on shares of capital stock 4,905,510,681
--------------
Net assets, at value $6,268,240,328
==============
Class I:
Net asset value per share ($6,238,157,957 / 401,300,493 shares
outstanding) $ 15.54
==============
Maximum offering price
($15.54 / 94.25%) $ 16.49
==============
Class II:
Net asset value per share ($30,082,371 / 1,948,474
shares outstanding) $ 15.44
==============
Maximum offering price
($15.44 / 99.00%) $ 15.60
==============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended February 29, 1996 (unaudited)
<TABLE>
<S> <C> <C>
Investment income:
(net of $3,068,841 foreign taxes withheld)
Dividends $ 59,010,844
Interest 26,446,767
------------
Total income $ 85,457,611
Expenses:
Management fees (Note 3) 18,487,126
Administrative fees (Note 3) 2,368,333
Distribution fees (Note 3)
Class I 5,399,892
Class II 80,816
Transfer agent fees (Note 3) 2,065,000
Custodian fees 1,090,000
Reports to shareholders 770,000
Audit fees 27,000
Legal fees (Note 3) 3,000
Registration and filing fees 48,000
Directors' fees and expenses 38,000
Other 85,192
------------
Total expenses 30,462,359
------------
Net investment income 54,995,252
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments 279,895,811
Foreign currency transactions (983,863)
------------
278,911,948
Net unrealized appreciation on investments 83,620,390
------------
Net realized and unrealized gain 362,532,338
------------
Net increase in net assets resulting from
operations $417,527,590
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
Templeton World Fund
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 29, 1996 YEAR ENDED
(UNAUDITED) AUGUST 31, 1995
----------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 54,995,252 $ 116,759,998
Net realized gain on investment and for-
eign currency transactions 278,911,948 622,514,983
Net unrealized appreciation (deprecia-
tion) 83,620,390 (213,111,140)
-------------- --------------
Net increase in net assets resulting
from operations 417,527,590 526,163,841
Distributions to shareholders:
From net investment income
Class I (130,856,054) (90,201,924)
Class II (276,358) --
From net realized gain
Class I (667,509,731) (466,541,300)
Class II (1,421,192) --
Capital share transactions (Note 2)
Class I 751,219,604 478,006,976
Class II 22,965,991 7,471,394
-------------- --------------
Net increase in net assets 391,649,850 454,898,987
Net assets:
Beginning of period 5,876,590,478 5,421,691,491
-------------- --------------
End of period $6,268,240,328 $5,876,590,478
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
Templeton World Fund
Notes to Financial Statements (unaudited)
- -------------------------------------------------------------------------------
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 Fund seeks long-term capi-
tal growth through a flexible policy of investing in stocks and debt obliga-
tions 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 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 invest-
ments.
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 Reve-
nue 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 secu-
rities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to sharehold-
ers, which are determined in accordance with income tax regulations, are re-
corded 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 report-
ing period. Actual results could differ from those estimates.
24
<PAGE>
Templeton World Fund
Notes to Financial Statements (unaudited) (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 con-
tingent deferred sales charge on Class II shares, distribution fees, and voting
rights on matters affecting a single class. At February 29, 1996, there were
3.2 billion shares of capital stock of the Company 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
------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 1996 AUGUST 31, 1995
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 18,076,110 $ 278,948,411 26,269,051 $ 403,189,144
Shares issued on
reinvestment of
distributions 49,118,220 722,597,796 33,988,482 502,706,371
Shares redeemed (16,088,567) (250,326,603) (27,844,607) (427,888,539)
----------- ------------- ----------- -------------
Net increase 51,105,763 $ 751,219,604 32,412,926 $ 478,006,976
=========== ============= =========== =============
<CAPTION>
CLASS II
------------------------------------------------------
FOR THE PERIOD
MAY 1, 1995
SIX MONTHS ENDED THROUGH
FEBRUARY 29, 1996 AUGUST 31, 1995
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 1,459,799 $ 22,526,927 471,609 $ 7,727,629
Shares issued on
reinvestment of
distributions 96,187 1,407,573 -- --
Shares redeemed (63,739) (968,509) (15,382) (256,235)
----------- ------------- ----------- -------------
Net increase 1,492,247 $ 22,965,991 456,227 $ 7,471,394
=========== ============= =========== =============
</TABLE>
25
<PAGE>
Templeton World Fund
Notes to Financial Statements (unaudited) (cont.)
- -------------------------------------------------------------------------------
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund 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 mil-
lion, 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 six months ended February 29, 1996, FTD received net
commissions of $753,943 from the sale of the Fund's shares and FTIS received
fees of $2,065,000.
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 ac-
tivity 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
plan, costs and expenses exceeding the maximum may be reimbursed in subsequent
periods. At February 29, 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 $2,954 were paid to FTD for the
six months ended February 29, 1996.
An officer of the Company is a partner of Dechert Price & Rhoads, legal coun-
sel for the Fund, which firm received fees of $3,000 for the six months ended
February 29, 1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
six months ended February 29, 1996 aggregated $690,783,514 and $654,363,955,
respectively. The cost of securities for federal income tax purposes is
$5,126,295,425. Realized gains and losses are reported on an identified cost
basis.
At February 29, 1996, the aggregate gross unrealized appreciation and depreci-
ation of portfolio securities, based on cost for federal income tax purposes,
was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $1,352,225,399
Unrealized depreciation (208,421,858)
--------------
Net unrealized appreciation $1,143,803,541
==============
</TABLE>
5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" as invest-
ments in portfolio companies in which the Fund owns 5% or more of the out-
standing voting securities. Investments in "affiliated companies" at February
29, 1996 amounted to $18,512,721.
26
<PAGE>
THE FRANKLIN TEMPLETON GROUP
Literature Request - Call today for a free descriptive brochure and prospectus
on any of the funds listed below. The prospectus contains more complete
information, including fees, charges and expenses, and should be read carefully
before investing or sending money.
Templeton Funds
Americas Government
Securities Fund
Developing Markets Trust
Foreign Fund
Global Infrastructure Fund
Global Opportunities Trust
Greater European Fund
Growth Fund
Growth and Income Fund
Income Fund
Latin America Fund
Real Estate
Securities Fund
Smaller Companies
Growth Fund
World Fund
Franklin Funds Seeking
Tax-Free Income
Federal Tax-Free
Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
High Yield Tax-Free
Income Fund
Insured Tax-Free
Income Fund***
Puerto Rico Tax-Free
Income Fund
Franklin State-Specific
Funds Seeking Tax-Free
Income
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan***
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee
Texas
Virginia
Washington**
Franklin Funds
Seeking Capital Growth
California Growth Fund
DynaTech Fund
Equity Fund
Global Health
Care Fund
Gold Fund
Growth Fund
International
Equity Fund
Japan Fund
Pacific Growth Fund
Small Cap Growth Fund
Franklin Funds Seeking
Growth and Income
Balance Sheet
Investment Fund
Convertible Securities Fund
Equity Income Fund
Global Utilities Fund
Income Fund
Natural Resources Fund
Premier Return Fund
Real Estate Securities Fund
Rising Dividends Fund
Strategic Income Fund
Utilities Fund
Franklin Funds Seeking
High Current Income
AGE High Income Fund
Global Government
Income Fund
Investment Grade
Income Fund
U.S. Government
Securities Fund
Franklin Funds Seeking
High Current Income and
Stability of Principal
Adjustable Rate
Securities Fund
Adjustable U.S. Government
Securities Fund
Short-Intermediate U.S.
Government
Securities Fund
Franklin Funds for
Non-U.S. Investors
Tax-Advantaged High Yield
Securities Fund
Tax-Advantaged International
Bond Fund
Tax-Advantaged U.S.
Government Securities Fund
Franklin Templeton Global
Currency Funds
German Government
Bond Fund
Global Currency Fund
High Income Currency Fund
Hard Currency Fund
Franklin Money
Market Funds
Money Fund
Federal Money Fund
Tax-Exempt Money
Fund
California Tax-Exempt
Money Fund
New York Tax-Exempt
Money Fund
IFT U.S. Treasury Money
Market Portfolio
Franklin Fund for
Corporations
Corporate Qualified
Dividend Fund
Franklin Tax-Deferred
Annuity
Franklin Valuemark
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
Fund Information: 1-800/342-5236
Shareholder Services: 1-800/632-2301
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.
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and a high yield
portfolio (CA).
**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.
<PAGE>
- --------------------------
TEMPLETON WORLD FUND
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 preceded or accompanied by the 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.
- --------------------------
[RECYCLED PAPER LOGO APPEARS HERE] TL102 S96 04/96
TEMPLETON
WORLD
FUND
Semi-Annual Report
February 29, 1996
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
